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California has long captured the nation’s imagination with its promises of the rich life, from the days of the gold rush to the rise of Hollywood and its star-making machine, to today’s booming tech sector. With its breathtaking shoreline and strong economy, the state has become indelibly known as a place abounding in opportunities—for those eager to seize them.

Lately, however, California’s luster seems to be dimming.

A severe housing shortage, exacerbated by the coronavirus pandemic, had led to the most expensive home prices in the nation. Wildfires this summer have devastated the northern part of the state. In the midst of a deep recession, many Californians are being priced out of their communities. Others are questioning why they’re shelling out so much money each month to live there—especially with companies in places like Silicon Valley allowing employees to work from home, wherever in the world that home may be.

It’s all converging at once to test the state’s true appeal. Despite the odds, can the Golden State’s real estate market remain, well, golden?

“Nobody in their right mind would bet against California,” says real estate professor Christopher Leinberger of George Washington University, in Washington, DC. However, “the Golden State can’t be golden forever with the ridiculousness of the home prices.”

California’s home list prices reached a record high in August—and have experienced the second-loftiest increases in the nation, according to the latest data from realtor.com®. (Only Utah saw bigger price gains.) Nine of the 10 most expensive metropolitan areas in the nation are in the state. (We included only the 300 largest metros, which encompass the main city and surrounding suburbs, towns, and smaller urban areas.) The state’s median price tag was $720,050 in August—up a jaw-dropping 23.7% from a year earlier.

That’s more than 10 times California’s median household income of $70,489 in 2018, according to the latest U.S. Census Bureau data.

The price hikes are due to the dearth of homes for sale. The shortage has been going on for years, but it’s been compounded by the COVID-19 crisis. Shut in their abodes for months on end, Americans are seeking larger homes for working and schooling their children. But there simply aren’t enough properties to satisfy demand, with the number of new listings down nearly 11.1% from August of last year on realtor.com.

Leslie Appleton Young, chief economist of the California Association of Realtors®, attributes some of that rapid run-up in prices to rich, white-collar workers who can now telecommute buying up luxury properties in more remote locations. In July, sales of homes priced at $3 million and up increased by about 76.6% year over year, she says. Homes priced at $1 million and up now make up about 20% of the state’s sales.

“The challenge is, you have the next generation of home buyers, [but] it’s very difficult to buy in California,” she says. “We’re losing people who simply can’t afford to be here.”

Many Californians were already being priced out

The lack of affordable housing is partly responsible for the nearly 3.25 million Californians who left the state from 2014 through 2018, according to the latest U.S. Census data. It’s also led giant tech companies like Google and Facebook, whose well-paid employees are partly responsible for the acceleration of prices in the San Francisco Bay Area, to pledge to build affordable housing in the area.

Looking at migration patterns in the U.S., “people have been leaving California and the Bay Area in higher numbers than they have been arriving,” says Patrick Carlisle, chief market analyst in the Bay Area for real estate brokerage Compass. “That outflow was being balanced by foreign immigration for years.”

More recently, however, that inflow of foreigners has declined.

Before the pandemic, Gov. Gavin Newsom boasted California had the fifth-largest economy—in the world. But COVID-19 has dealt the state’s economy a blow. California had a 13.3% unemployment rate in July, the sixth-worst in the nation, according to the U.S. Bureau of Labor Statistics.

“The housing supply in California is the No. 1 priority,” says Dowell Myers, a housing demographer at the University of Southern California, in Los Angeles. If the situation doesn’t improve, the lack of housing “will stifle employment growth and undercut the economy,” he says.

The quality of life could deteriorate enough to spur more folks to leave and deter others from moving in, he says.

Wealthier tech workers can still afford to drop nearly $1.2 million on a median-priced home in Silicon Valley’s San Jose metropolitan area, according to realtor.com’s August list prices.

But many others realize they can pay a fraction of that to live in other hip cities with growing tech hubs, like Austin, TX, with a median list price of roughly $400,000; Salt Lake City, at $490,000; and Nashville, TN, at $396,000. Even other West Coast tech hubs like Seattle and Denver are significantly cheaper, with median prices of $625,000 and almost $540,000, respectively.

Departing residents are “much more of a threat than a fire or an earthquake” to the state, says Myers. Although it attracts well-educated, high-earning millennials from other states as well as foreigners, California might see these higher-earning transplants leaving after a few years.

“They feel like they can’t possibly live where they want to live and buy a house,” says Myers. ”California could hold more of the recruits if it had cheaper housing.”

George Washington University’s Leinberger blames NIMBY (“not in my backyard”) attitudes, which have stymied the creation of new housing throughout the state. While many residents support new construction, they don’t want it in their own communities. They worry that creating more dense housing, such as apartment, condo, and townhome complexes as well as smaller homes, could lower their own property values. They also say it would tax the existing infrastructure, like schools and local services, and exacerbate traffic issues.

Even well-meaning local regulations can drive up building costs and lead to long delays that can stretch over a decade between an application being submitted and a shovel going into the dirt.

“This is a self-inflicted wound,” says Leinberger of the housing shortage.

Could the pandemic prompt more people to leave California?

Although there has been a steady stream of Californians leaving their home state for years, the pandemic could accelerate that trend.

With more white-collar workers able to work remotely, some are heeding the siren song of more affordable homes, lower taxes, and a cheaper cost of living outside California’s borders. Others are remaining in state, but forsaking the expensive cities and moving into less-expensive areas.

“In the short term, California is going to see more people leaving due to the high cost of living combined with the ability to work remotely,” predicts realtor.com Senior Economist George Ratiu.

“People are willing to pay a premium to live there,” says Ratiu. “Perhaps that premium is being reevaluated by a lot of younger people.”

California could see winning and losing real estate markets

While some of California’s housing markets may be forced to slow down, others will likely keep accelerating.

“California’s a big place. You’re going to have winners and losers within the state,” says Mark Zandi, chief economist of Moody’s Analytics. “The housing markets in those urban cores are struggling. That will continue throughout the pandemic.”

In the Bay Area, sales for single-family homes in San Francisco and larger residences in the more suburban counties have been brisk while condo sales within the city limits have dropped off as a result of the pandemic, says Bay Area analyst Carlisle. That’s driven by wealthy, white-collar workers who are able to work remotely.

In addition to the surge in interest in expensive, sprawling homes north of San Francisco, in Marin County and  Napa and Sonoma, buyers with means are trading their rentals and smaller homes in high-priced, urban areas for larger homes in more affordable, inland communities in California. Some are leaving the state altogether for hip cities with strong job markets.

However, many more are staying put. Southern California, including Los Angeles and San Diego, could fare better than Northern California’s Bay Area as it’s a little less expensive, says Matthew Gardner, chief economist of Windermere Real Estate. Residents who work in the entertainment and other Southern California industries may be less able to work from home as the Bay Area tech workers.

“We’re not talking about cities being abandoned,” says Carlisle. “Shifts in markets are shifts in degrees. Except for something like the housing bust of 2008, [markets] slow down.”

And no matter what trials it’s currently going through, California is still, well, California.

“It’s hard to envision a large exodus,” says Appleton Young. “We are [still] the tech hub, we’re the entertainment hub, we’re rich in natural resources and natural beauty.”

Article source: https://www.realtor.com/news/trends/future-of-california-real-estate-can-the-golden-state-survive/

You may have heard people are fleeing California — fed up with fires, smoke, and tiny apartments during a pandemic — especially those who can work remotely. But real estate experts agree: The notion of a mass California exodus has been overhyped.

Yes, rents have dropped in pandemic-era San Francisco, but less so in the East Bay and other areas of the region that allow people more space — suggesting most people are moving within the Bay, not out of it. And in terms of home sales, the market remains robust, even reaching new heights. The median price for a single-family home in the Bay Area reached a record high of $1,068,000 in August, up 18.7% over a year earlier. That increase reflects both actual appreciation and a shift toward higher-dollar transactions that skew the median figure.

“I don’t agree with the notion of a mass exodus,” said Noe Valley-based real estate agent Jessica Branson, who previously worked as an editor at CNET. “In San Francisco, there are a lot of smart people who are also at least somewhat hedonists. When they think about what’s next, it’s like: Where else am I going to go?”

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When you look at the actual numbers statewide, there was a slight drop in state population from 39.96 million in July 2019 to 39.78 million in January 2020. California is still the #1 U.S. state in population, 10 million ahead of second-place Texas.

“People around the world are dying to be in California,” Tarek El Moussa of the HGTV real estate show Flip or Flop told me by phone this week. “It’s probably the most popular place on the planet. People all around the world watch TV every day, dreaming of being in Hollywood. Demand is strong for ‘A markets’ like L.A. and San Francisco.”

Business has been good overall, Branson said. The selection for would-be buyers might be somewhat more limited in some parts of town, she said, but she’s also been closing at well over asking price.

“One of my properties went for $700,000 over the list price recently,” she said. “A lot of things have gone crazily over list price.”

Overall, people are moving away from crowded, fashionable neighborhoods like Cow Hollow or Presidio Heights out to the Avenues where they might get a backyard. Think: Inner Sunset, Outer Sunset, Richmond, West Portal.

“There is a migration in San Francisco from east to west,” said Sam Dogen of Financial Samurai. “There’s more space, it’s less dense, and the air is better here.”

There is also movement from the city to the East Bay, where space is greater.

“I sold a property in Kensington that had an incredible view, looking right across the bay at the Golden Gate Bridge right there,” said Bay Area realtor Jim Furlong of Bailey Properties. “Lots of parts of Oakland and Berkeley are beautiful neighborhoods with great transportation to the city.”

People who were previously living in apartments or condos want to live in houses. People in three-bedroom houses want to live in a four-bedroom house if they can. The extra room could be a home office, or a guest room. It’s a natural progression, and often a money-saver.

“We moved out west in the city in 2012 and lowered our cost of living by 40% moving from the Marina to Golden Gate Heights because we didn’t have to work downtown and we wanted an ocean view and more peace and quiet,” Dogen said.

The experts seem to agree that for at least the next several months, through early next year, the market is likely to remain strong. What happens after that will depend on a number of factors, including who wins the November elections, whether the fallout of those elections proves disruptive, and where interest rates are (though the forecast is for continued low rates).

“The market is week by week here, you really have to see what’s happening,” Branson says.

A market correction has to kick in at some point, that much is a given — but even as confident a prognosticator as Tarek El Moussa has given up on trying to predict exactly when the downturn is coming.

“Prices are going to come down [eventually],” he told me. “We’ve been on an appreciating real estate market since 2010 across the board. Whenever a downturn hits, I believe the A markets will get hit harder than the B markets. San Francisco and L.A. will be hit harder.”

El Moussa says he believes the market may not start to settle out until 2022 or beyond, and even then, there are other factors we can’t predict. Global warming clearly has stressed the resources of a state already given to raging wildfires, earthquakes, and other natural disasters. And then there is the ongoing homelessness crisis. For the San Francisco housing market to remain strong for years to come, it’s hardly a reach to suggest that significant progress on social problems will be necessary.

Despite it all, El Moussa points out California remains a dream destination to many people and the allure of California will remain strong, even with the need to address urgent problems.

“The housing market is not going to come tumbling down,” said realtor Jim Furlong, who has sold houses from Berkeley to Monterey. “If anything, our pocket of the world, with Silicon Valley and San Francisco as the high-tech center of the world, will continue to have pressure on the market. And Monterey and Santa Cruz counties are very special areas, a Mediterranean climate, the only beach town in Northern California, you don’t get that anywhere else. People will live in a garage just to stay here — that’s true in San Francisco and it’s true all over the Bay Area. They’re not going anywhere.”

Article source: https://thebolditalic.com/bay-area-realtors-say-the-california-exodus-is-overblown-fba07d99cc7

Having effectively plateaued over the past couple of weeks at above recession-era levels, the number of homes on the market in San Francisco, net of all new sales and contract activity, has ticked up to 1,600, which is twice as many homes on the market than there were at the same last year (750) and the most homes on the market at the start of September in the over 15 years, a trend which shouldn’t catch any plugged-in readers by surprise.

The number of condos on the market, which tends to be a leading indicator for the market as a whole, currently totals 1,210, representing 150 percent more inventory than at the same time last year, while the number of single-family homes on the market totals 390, which is currently 46 percent higher on a year-over-year basis and poised to jump as listings which failed to sell in the spring, and were subsequently withdrawn from the MLS in the summer months, return anew.

At the same time, with the list price for 29 percent of the homes on the market having been reduced at least once, which is 18 percentage points higher than at the same time last year, there are 450 percent more reduced homes on the market in the absolute, a number which is poised to rise as well.

We’ll keep you posted and plugged-in.

Article source: https://socketsite.com/archives/2020/09/number-of-homes-for-sale-in-san-francisco-poised-to-jump.html

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  Man and woman thinking about housing

  
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Man and woman thinking about housing

Man and woman thinking about housing

Photo: Takasuu / Getty Images/iStockphoto

Q: “Where are Bay Area movers going to, and why?”

A: We’ve seen an increase in the number of people choosing to “make the jump” and relocate, often to states like Washington or Colorado that promise similar lifestyles but a much lower cost of living as compared to the Bay Area. A confluence of factors and events has resulted in an increase in people moving out of the Bay Area.

A growing percentage of those are choosing to relocate altogether, usually for oft-cited reasons such as less expensive housing, better public schools, shorter commutes or more space.

One recent development enabling this trend is the rise of remote work due to the COVID-19 pandemic, and the number of companies announcing that employees will be able to continue working remotely even once they might otherwise return to a traditional workplace.

The significant increase in property values across the Bay Area means homeowners can’t realize this windfall unless they move outside the area altogether. In addition to the differences in real estate costs, other geographies promise a lower overall cost of living when factoring in considerations such as education and taxes.

Lisa Wolfe, Compass, 415-990-8769, lwolfe415@gmail.com.

A: We have found in Marin, that more and more homeowners are looking to relocate from San Francisco, due in large part to the pandemic. That is not too surprising, as so many people are now working from home, and living in a less dense area has become much more appealing.

A lot of people have been cooped up in their homes for a long period of time now, and with many people able to work remotely, and perhaps permanently, the need to be in the city has lessened.

Some of the reasons our clients have cited to relocate include Marin’s good schools, weather, outdoor activities, gorgeous views, and having more overall outdoor living space in their new home.

The thought also seems to be when things go back to normal, they can still be within driving distance of the city.

The Marin market continues to be very strong, despite the news and negativity about an exodus out of the Bay Area.

Kathleen Daly, Coldwell Banker, 415-519-6074, kdaly@cbnorcal.com; Lisa Lange, Coldwell Banker, 415-847-7770, lisalange@coldwellbanker.com.

A: This is a very interesting question and our answer is twofold. Yes, there are Bay Area residents who are leaving for the dream of more space, big back yards and lower living expenses. There are also many Bay Area residents moving within the Bay Area itself.

While San Francisco’s inventory continues to stack up it is important to note that sales over the past month have been very robust. We are seeing a great deal of “trading up” happening with renters becoming first time home buyers, and owners of condominiums making the leap into the single family home of their dreams. Outdoor space is important across the board and homes and condominiums with yards are the first to sell.

Some sellers are leaving the Bay Area, and in fact several of our clients have left the country. We have had a number of expat clients return to their homes in Great Britain and France. We are also seeing some families looking for more space making the move to places like Sonoma and Orinda where large yards are the norm. With interest rates continuing to hover around 3% now is great time to buy, sell or trade up.

Mike Shaw, Vanguard Properties, (415) 308-4281, mshawsf@gmail.com; Bernie Katzmann, Vanguard Properties, (415) 906-6000, katzmannsf@gmail.com.

Article source: https://www.sfgate.com/realestate/article/Sound-Off-Where-are-Bay-Area-movers-going-to-15603917.php

The inventory of available homes in San Francisco is the highest it’s been in six or seven years, said Patrick Carlisle, chief market analyst for the Bay Area at Compass, a venture-backed real estate brokerage company. Buyers have become more picky. Homes are getting two, three or four bids, instead of eight before the virus hit, said Robert Collett, an agent with Berkshire Hathaway HomeServices Drysdale Properties.

Part of the reason for the high inventory is because people held off from listing San Francisco homes in March and April — normally the spring home buying season — after Mayor London Breed announced the city’s shelter-in-place order. As a result, more homes than usual have come up for sale in the following months.

But there’s also a lifestyle shift, suggested by the red-hot market in the suburbs. Many of the things people love about the city, including its clubs and museums, are unavailable at the moment. Consequently, the densest parts of the Bay Area, typically the most in demand, are currently the softest, said Carlisle.

“More rural and suburban counties and markets have gone absolutely nuts — Sonoma, Monterey, Marin,” Carlisle said. “I’ve heard Tahoe is absolutely out of control.”

Lake Tahoe is a getaway spot several hours northeast of the city where people historically keep vacation homes. One broker there, Breck Overall, said he and his partner Jeff Hamilton did a year’s worth of transactions in two and a half months. Normally the busiest time of the year is the Fourth of July, when traffic from the town of Truckee to the lake is bumper to bumper.

“That’s what it’s like almost every day,” Overall said. “It’s not letting up.”

People are also moving to Marin County, which San Franciscans can reach by crossing the Golden Gate Bridge.

Rick and Victoria Dade, who had lived in the city for more than two decades, recently abandoned a newly constructed home in the Marina District for Marin. As playgrounds shuttered and parks limited occupancy across San Francisco, their living situation proved untenable for an elementary- and middle school-kid eager for open space. Rick owns a commercial general contracting company, called R3 Builders, that services San Francisco and other parts of the Bay Area, including Oakland. Victoria works for a video technology company, Sonic Foundry, based halfway across the country in Madison, Wisconsin.

While their children’s age was the primary driver behind the move, the Dades said their family was after a lifestyle change. 

“We had always thought that we would possibly move to Marin, and we just hadn’t been ready to do it,” Rick Dade said. “And, as you see reports about people leaving the city for the suburbs, it can almost become a self-fulfilling prophecy.”

CNBC spoke with several former San Francisco homeowners who have moved out of the city in recent months. Like the Dades, the majority did not cite the Covid-19 pandemic as a key factor in their decision-making, but rather pointed to the pandemic as an accelerating force. In other words, people who were already planning to move to the suburbs simply expedited their plans.

Those trends dovetail with recent data. In a survey of 1,350 people conducted between January and June by moving company Hire A Helper, only 15% said they had relocated because of Covid-19.

Andrew Miramontes, who works in sales for European wine importer Weygandt Metzler, had been renting in San Francisco since 2015. When the calendar turned to 2020, he and his wife Erin started looking for homes outside the city to better suit their family’s needs, including their young daughter’s quest for more room to walk. The Miramontes extolled the city’s arts and culinary scene, but said that once the pandemic hit, the city’s deteriorating infrastructure, coupled with shutdowns for the foreseeable future and an uncertain economic recovery, accelerated their plans.

“Unfortunately, San Francisco, and the space that we had, was not going to allow for what we saw for ourselves,” Miramontes said. “We were forced to put eyeballs outside of the city.”

A few months after San Francisco enacted its shelter-in-place order, Miramontes and his wife honed their search, focusing on Marin and Sonoma counties. In five days they met with a realtor, viewed five homes, and submitted an offer on the home they would eventually buy in Novato — about 30 miles north of San Francisco in Marin County.

Article source: https://www.cnbc.com/2020/09/27/san-francisco-housing-suburbs-red-hot-but-city-still-in-demand.html