A family shuffles cheerily out of the house we’ve all come for, and a couple shuffles in, and the friendly blond real estate agent assures us we’re next. At this point, it feels like we’d take any house, absolutely any house we could get.
Vallejo’s real estate market has been sizzling for months now. The city just across the Carquinez Strait from the East Bay is 40 minutes from San Francisco without traffic, 15 minutes from Napa and Wine Country and less than three hours from Lake Tahoe. It boasts a beautiful waterfront, ferry service to the city and one of the most diverse ZIP codes in the country. And when the pandemic forced many Californians to spend pretty much all day, every day at home, Vallejo’s affordable (by Bay Area standards) homes were suddenly in high demand.
“A lot of the advantages of the city were shut down or diminished this year,” said Jeff Zucker, an economist with Zillow. “But at the same time, a lot of the advantages of being further out, whether it’s affordability broadly speaking, by California standards, or larger homes, by California standards,” were in high demand.
Realtor.com ranked Vallejo the third hottest market in the country in March, based on how quickly homes were selling and how many people were clicking on real estate listings for Vallejo. It was the hottest housing market outside of New Hampshire.
And while Zillow’s own data contradicts realtor.com’s rankings somewhat (Zillow shows homes in Vallejo have an average of nine days to pending, about the same as both Sacramento and San Diego), Zucker said there’s no denying that Vallejo is hot. In December 2019, Vallejo homes spent an average of 28 days on the market. The winter is typically a time of slowdown for housing markets, so listed homes spend longer on the market. But this winter, the average number of days a house spent on the market just kept shrinking, failing to slow after a busy summer and fall.
“People just never stopped the house hunting,” Zucker said, “so the speed at which homes sell just kept accelerating into winter.”
Part of that acceleration is due to people looking for more space during the pandemic, part of it is due to historically low mortgage rates, and part of it is due to millennials in their early 30s finally entering the housing market, Zucker said.
“It’s just this miniature baby boom centered around 1990, and this created … an unusually large group of people poised at the edge to purchase their own home,” Zucker said. (Full disclosure: I am 31 and just purchased my first home, so when he said this I felt like I was having my tarot read.)
And that sense I had that fewer houses were coming on the market? It’s based in reality, said Redfin chief economist Daryl Fairweather.
“Very few listings are coming online,” she told me.
Redfin’s data showed that year-over-year listings were down 18% from 2020 to 2021, and listings also fell 12% in Vallejo from February to March, a time when the housing market would normally be ramping up for spring, its biggest season.
“So it’s not just that people are moving to Vallejo … but the people who own there are holding on. They’re happy there,” Fairweather said.
Like me, East Bay real estate agent Ena Everett has seen Vallejo’s popularity in person. In addition to San Francisco, she said she’s seen buyers coming north of the Carquinez Bridge from Richmond, Oakland and even the South Bay. She’s also experienced her fair share of crowded, waiting-on-the-sidewalks showings, which she said are a combination of high demand and COVID-19 precautions.
“Normally, we would have open houses so buyers were able to be in the house with multiple parties at the same time, which we can’t really do now,” Everett said. “… Also, just having the ability to go out and see houses on your own, that’s been put on hold due to the pandemic.”
All of that competition has been driving up home prices, as well. While home prices were steadily climbing in Vallejo pre-pandemic, they’ve far surpassed other Bay Area metro areas, such as San Francisco and Santa Rosa, Zillow’s data shows. In March 2021, the average home sale price in the San Francisco metropolitan area, which encompasses San Francisco and the East Bay, had increased just 5.4% year over year, while Vallejo’s average sale price rose 10.8% in that time. Only Silicon Valley and Napa saw faster rates of growth.
That matches what economists are seeing throughout the country, said Zucker, where average home prices are spiking in suburbs and exurbs.
“We are seeing that hit, by some measures, the fastest pace of price appreciation … almost everywhere in the country except for San Francisco itself,” Zucker said.
And that price appreciation reflects growing wealth inequality exacerbated by the pandemic. While many people struggled to pay their rent during the pandemic, which prompted federal and statewide eviction moratoriums, other people, many of whom work in tech and could suddenly work from home rather than commute, found themselves flush with extra cash. Sales of second homes are up more than 100%, Fairweather said, and Bay Area homebuyers are pushing out local renters in popular regions like Lake Tahoe.
“The economy is doing so poorly while the housing market is doing so well,” said Fairweather. “That just really illuminates how much wealth inequality there is.”
When it’s finally our turn to see the busy cul-de-sac house, our agent walks us to the door, chatting excitedly, and swings it open to reveal hundreds of square feet of epoxy flooring, black and gray and covering every inch of the place. I’d seen the photos, of course, before we scheduled the appointment, but I thought I could look past the floors. I hadn’t really reckoned with how a floor is in literally every room of the house.
My partner peruses the bedrooms and kitchen and talks excitedly about the yard. This house has so many items on our wishlist — it’s more spacious than our apartment without being enormous or pricey, the extra bedrooms could be turned into offices or guest rooms, it has a tidy little yard where I can garden — but I can’t see beyond the epoxy.
When houses are going fast and many people are interested in a single property, it’s easy to feel the pressure to jump at anything that looks remotely feasible. But Fairweather, who is an expert in the behavioral side of economics, advises buyers in a hot market to take it slow.
“Take a break if you need it,” Fairweather said. “A lot of people get really burnt out losing bidding war after bidding war.”
In a seller’s market, it’s also easy to overbid, which drives up the average sale price in an area, or to immediately get attached to a place and forget about your budget.
“Try not to fall in love too quickly with a home because that can make you feel like you own it already,” she said.
And while there’s no danger of me falling in love with the epoxy floor house, I’m still smarting from a beautiful adobe-style home we saw a week before. The price was right, the house was spacious and beautiful — and the electrical wiring was almost 100 years old and could burn the whole place down at any moment.
After much debating and wringing of hands, we passed on the beautiful adobe, which ended up selling for almost $70,000 over asking price, an amount that, had we paid it, would have meant we had no money leftover to replace the electrical anyway.
Still, with the image of the beautiful adobe in my mind, I’m feeling beatdown and ready to say yes to just about any house, no matter how much I hate the flooring. Luckily my partner sees I’m not really feeling it, and we pass on the epoxy castle.
In the end, it wouldn’t have mattered: The sellers had accepted an offer and the house was off the market within hours of our visit, and we put in an offer on another property we saw that day.
That offer was outbid, but we did eventually find a home in our budget, with a garden and a fireplace, checking off items on our wishlist. And now that I’m one of those new millennial homeowners who had succeeded in one of the hottest real estate markets in the country, I just had to ask: Are we in a bubble?
“In short: no,” Zucker told me. “But prices have risen substantially, they’re rising substantially, and I do think that price appreciation will start to lock more people out of homeownership.”
Many people who lost their homes in 2008 and 2009 did so because of unstable mortgages that assumed buyers would pay the bulk of their mortgage later on down the line. Adjustable rate mortgages and balloon mortgages suddenly saddled people with much higher payments they just didn’t have the money for, Zucker said.
But right now, “we just don’t see that kind of risky mortgage underwriting,” Zucker told me. Many homebuyers, including first-time homebuyers, have been saving for just this moment, building their credit and a stable financial foundation.
“Bubbles burst, and I don’t see this bursting because it’s not driven by speculation,” she said. “It’s driven by people who are just super motivated to own a home and motivated to own a home in a new area like Vallejo.”