“Hundreds of homes in Oakland, San Jose and San Francisco sold for at least $100,000 over the asking price between Jan. 1 and Feb. 15,” NBC Bay Area reports. “The breakdown by number of homes sold for six figures over asking has the three Bay Area cities in the top five nationally.”
You can laugh that houses being expensive in the Bay Area is an evergreen headline, and why are we even bothering to report this as news. (And yes, Redfin is a real estate brokerage, and they do have an incentive to normalize the highest possible high home prices.) But the reality is that even here in the Bay Area, house prices did briefly plummet during the pandemic, even if San Francisco has long had a reputation for homes being strategically listed well under what they’re worth to create bidding wars.
The pandemic may not be over, but any decline in home prices is — and in some areas, home prices still went up as people relocated during the pandemic. Redfin notes that “January was the most competitive month on record nationwide” for real estate purchases, thanks to low mortgage rates.
“Mortgage rates are up from where they were at the end of last year, and will likely continue to rise,” Redfin’s chief economist Daryl Fairweather told NBC Bay Area. “And that will make borrowing to buy a home more expensive. I think part of the reason we’re seeing a rush to buy a home is people want to get ahead of those rising mortgage rates, but over time, they will go up and they will start to put a dent in demand.”
NBC Bay Area lists several major cities, and the percentage of homes going for $100,000 or more over asking in the following bullet point list.
Los Angeles: 718 (11.3%)
Oakland: 580 (29.8%)
San Jose: 490 (45.5%)
Seattle: 488 (17.1%)
Anaheim: 365 (14.8%)
San Francisco: 335 (40%)
You’ll notice that Los Angeles, Anaheim, and Seattle have vastly lower percentages of homes going for more than asking price than Bay Area cities have.
Every real estate agent we spoke with agreed that 2022 is still likely to be a seller’s market in the Bay Area. Even as interest rates are projected to go up, the demand for homes will still be greater than the inventory, especially for single family homes, in the region. “In the history of United States real estate, being a seller in San Francisco right now is the single best opportunity you’re ever going to have in your lifetime,” said San Francisco real estate agent Aaron Bellings of Compass. “… I think San Francisco is going to have a banner year. If I was thinking about selling in the next 6 to 12 months I wouldn’t hesitate to put my house on the market.”
He said much of that demand is from buyers that were starting to look in 2021 and still haven’t found a place. “I see the spring being absolutely crazy again. I have buyers right now that are chomping at the bit to get in there and there’s nothing out there for them,” Bellings said. “It’s going to be a strong market.”
Nina Hatvany, a real estate agent in San Francisco for over 30 years, said the amount of quality, single family homes on the market is usually low in the city, but those houses are now in particularly short supply. Plus, between the continuing pandemic and the inevitable hike in interest rates, now is the time to put a home on the market. “It’s definitely a good time to sell,” Hatvany said. “… I would definitely take advantage since we don’t know what the future will bring.”
Khrista Jarvis, an East Bay Compass real estate agent, said the robust seller’s market translates into a tough buyer’s market — especially in the East Bay. “It’s frustrating to be a buyer in this market. There are multiple offers, bidding wars, paying $200,000 over asking is just the norm,” she said. “You have to be super competitive and sometimes make offers several times before you get a house.”
Jarvis said the region continues to be particularly hot for buyers from San Francisco as many are still looking for more space than they can get in the city.
Seasonality has disappeared
The old adage says that if you’re going to put your home on the market, you better wait until after the Super Bowl. And you definitely can’t sell a home during the winter. Today, none of that holds true. “We’re going to go into a very strong season right away,” Jarvis said. “Usually the market waits until spring, but this year it’s going to start really early. Seasonality is out the window. I think it’s just busy all year round now. Even December. I thought I’d get a break for the holidays and that’s just not the case.”
Bellings said there is still some seasonality, just not in the way it exists in other major markets. “We really don’t have an off-season. It really just comes down to whether people are in town to actually look at and bid on the homes put on the market,” he said. “Usually we start to see pick up post-President’s Day, but I wouldn’t be surprised if things start to pick up mid- to late January this year.”
Everyone is watching interest rates
Interest rates are going up, it’s just a matter of when. If the Fed sticks to their plans, prospective buyers and sellers are going to have to keep that in mind in 2022. “It is going to create a sense of urgency,” Bellings said. “I’ve already had buyers reach out to me and say we need to make this happen before the Fed starts hiking rates. People are already starting to feel the pressure even though we don’t know when this is going to happen and how high the rates will go.”
For sellers, that means the time is now. “It would be wise to move quickly if you want to be in the driver’s seat when it comes to selling your home,” said Daryl Fairweather, Redfin’s chief economist. “For the second half of 2022, if mortgage rates increase, that could definitely put the brakes on demand and make it harder to sell a home.”
Even if rates creep up to 4%, that’s still historically low, especially for an area with as much wealth as the Bay Area has. “In other places I would expect the housing market to slow down significantly, but San Francisco is on a different trajectory,” Fairweather said. “There will be more demand for homes than there was this year. … What I think is the Bay Area will look more like the rest of the country in terms of how quickly prices grow, how many homes sell over list price.”
Rent will probably go up
As the home buying market reached new heights over the past year and a half, the rental market in San Francisco, Oakland and San Jose did the opposite. These Bay Area cities are some of the only places in the country where rent has yet to creep back up to pre-pandemic levels, even allowing San Francisco to lose its throne as the most expensive rental market in the country to New York, according to Zumper. Experts have speculated that’s due to the Bay Area’s embracing of remote work amid the pandemic, though many offices won’t stay closed forever.
“General inflation will probably push rent up eventually, but if offices keep getting pushed back that will still keep them down relatively,” Zumper data journalist Jeff Andrews said. “The fundamentals are all pointing to rent going up again.”
He also expects some of the seasonality of the rental market to return this year, after being more volatile since early 2020.
While Zumper found that New York City surpassed SF as the most expensive rental market in 2021, “San Francisco still stands out as the most expensive market on our platform,” said Rob Warnock, research associate at Apartment List. “But, the Bay Area is the last remaining place where there is a discount,” he said. “… That said, I think prices are going to go up again in the early parts of [2022].”
Warnock said since the Bay Area has been one of the places most amenable to remote and flexible work, it also could affect trends across SF neighborhoods. Prices in areas downtown, like SoMa, may still remain at a deep discount while more western neighborhoods like the Sunset may keep their slightly inflated rates.
Space is still a must
“Zoom rooms” and Peloton bikes became must-haves as the pandemic wore on, and none of the agents we spoke with saw that going away anytime soon. “I’m not seeing the desire for home offices or gyms go away at all,” Hatvany said. “It’s become a very locked-in thing. It’s a complete essential in ways that it never was.”
Hatvany has even seen some new “amenities” emerge — like being located near a Slow Street. She said just as parks are great nearby amenities for a home buyer, slow streets now hold the same desirability.
Outdoor space is still crucial for most clients, said Josh Dickinson, the founder of real estate agency Zip Code East Bay, and he’s even seeing more sellers get creative to upgrade that outdoor space. There’s even been a rise in ADU-like spaces, like upgrading a shed in the backyard that can be used as a multipurpose space.
Even with their confident predictions, there wasn’t one person that didn’t mention the feeling of uncertainty that still lies ahead as we continue into the next phase of the pandemic. “I think we’re all just anxious to see what is it all going to look like when we get back to the point where people are going back to the office and all the COVID numbers are declining,” Dickinson said. “It in some ways seems like we’re still a long way from there.”
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“We’ve had a big surge of people moving here from basically the whole West Coast. Seattle, Portland, the whole San Francisco Bay area, L.A. and Orange County. Those people make a lot more money than most people here in San Diego,” said Battiata.
As a renter and a landlord, McHenry Sullivan and Marchionna are on opposite ends of California’s two-year effort to prevent a pandemic eviction crisis. But both are still waiting for answers to months-old applications for $5.2 billion in statewide rent relief — two of thousands of Bay Area residents unsure where to turn as local eviction battles intensify and a March 31 deadline looms for a final layer of emergency state rental programs.
“I’ve been sitting here since early December with everything in limbo,” said McHenry Sullivan, 79. “It’s heartbreaking, and it’s exhausting.”
The tension playing out in living rooms, city halls and county eviction courts follows an unprecedented expansion of America’s housing safety net. First there were broad local, state and federal eviction bans, most of which expired in California last fall. Then came the multibillion-dollar statewide rent relief effort, designed to accept applications and shield those still waiting for approval from eviction through March 2022.
With that deadline fast approaching and politicians so far unresponsive to tenant advocates’ calls for another extension, renters and small landlords report widespread confusion and fear about falling through the cracks. Only a fraction of relief funds has been paid out, fueling concerns that indebted renters will be pushed out of the region or end up homeless.
Susan Marchionna holds an undated family photo. Her three children were raised in the Berkeley home she now rents out, and Marchionna has twice been widowed by husbands who died in the house.
Yalonda M. James/The Chronicle
The situation is even more complicated in McHenry Sullivan and Marchionna’s home county of Alameda, where stronger local eviction bans haven’t prevented messy eviction disputes.
Now, as landlord and tenant groups battle over the future of renter protections, both sides warn that housing could get harder to find as property owners — fed up with California’s piecemeal approach to rent relief and evictions — take rentals off the market or raise income requirements in a bid to insulate themselves from future tenant disputes.
One thing’s increasingly clear: Even in a swath of the East Bay with some of the nation’s strongest protections for renters, there’s no escaping the turmoil redrawing the map of where people can afford to live.
A renter’s exit plan
Until the fall, McHenry Sullivan thought she would be able to keep paying $1,426 a month for the Glenview two-bedroom that she and her husband, John, 82, have rented since 2006. But then the author and speaker’s extended unemployment benefits ended, and the pandemic didn’t. Medical equipment, taxi fare to doctor’s appointments and the countless hours McHenry Sullivan spends caring for her husband and their home, limiting her ability to pursue outside work, all added financial pressure.
September 2021 was the last month the couple paid rent on time. To cover the rent for October, the final payment they’ve made, McHenry Sullivan said she was forced to dip into a life insurance policy, leaving less money for her or her husband if widowed.
McHenry Sullivan has a master’s degree and is comfortable enough with computers to have run her own business for years, but she was stymied by Oakland’s rent relief website, which she said repeatedly malfunctioned when she tried to apply in the fall. She called politicians and ventured to San Francisco for help from one of the few housing clinics offering in-person assistance, then was told to apply for a state program instead. In December, after months of fruitless calls to check her application status, she was told to reapply to the city program.
Tenant advocates say the odyssey through California’s maze of state and local rent relief programs isn’t uncommon for Bay Area renters looking for help. Cities and counties including Oakland, Marin and Sonoma opted to run their own rent relief programs instead of routing all residents to the bigger state program Housing Is Key. Several local programs have already stopped accepting new applications or run out of money, though more federal funding may become available in the coming months.
Susan Marchionna looks at her Berkeley house, which she’s rented out to long-term tenants for the past four years, from the granny unit where she lives in the backyard. She’s considering selling the house while she waits for answers from a state rent relief program for a tenant who has not paid rent in several months.
Yalonda M. James/The Chronicle
Gauging how many renters like McHenry Sullivan have applied for relief but not heard back is hard to do, since state, county and city programs all report data separately. In Alameda County alone, there are four rent relief programs.
Statewide, the California Department of Housing and Community Development reports that more than $2.2 billion in rent relief has been paid to around 40% of the 468,314 households that have applied. But in a report last week, tenant advocates at the National Equity Atlas who did their own analysis of state data contended that only 16% of applicants have received the promised funds.
“We’re trying to make sure we’re helping more people, but the issues still stand,” said Maria Miranda, whose team at Concord nonprofit Monument Impact has helped 1,400 tenants apply for rent relief since April. “There are still people getting eviction notices, being retaliated against in some situations, or being harassed or intimidated.”
With state lawmakers declining to further intervene on pandemic evictions, the uncertainty is pushing tenant advocates in Bay Area suburbs to lobby for permanent new renter protections. At a March 7 city meeting in Concord, a housing committee advanced an anti-harassment measure that would bolster rights for tenant unions and enact financial penalties for landlords who threaten or retaliate against tenants, or who fail to maintain homes.
Landlord groups argued that the measure is overly broad. Homeowner and District 5 City Council candidate Laura Nakamura was among those urging officials to “take it very seriously” that many renters who spoke in support of the measure were single mothers and others struggling to get by.
“We have to ask ourselves,” Nakamura said, “who benefits from this ordinance, and who is burdened by it?”
For now, McHenry Sullivan is thankful that her Oakland landlord has been cooperative. But she and her husband have decided that staying in the Bay Area isn’t sustainable. They’re planning a cross-country move to be with family in Shenandoah, Va.
Before they can start over, McHenry Sullivan knows she has to clear some $7,000 in rent debt amassed in the past six months.
“We’re going to pay it off,” she said, “one way or another.”
A landlord’s last option
Back in the early 1980s, Marchionna was skeptical about giving up Bernal Hill to buy her first house in Berkeley with her husband and their young child. She grew to love the 1906 redwood-frame Edwardian nestled between campus and West Berkeley’s commercial corridors. She gave birth to two children in second-floor bedrooms, loved and lost two husbands who died in the home, and in recent years rebuilt a career there as a part-time editor for a museum.
It was a decade ago, Marchionna said, after her children had moved out and she was looking for extra income, that she started renting out spare rooms on Airbnb. The constant churn became a pain, and she knew the housing crisis was getting worse. So four years ago, she rented the house to a long-term tenant and moved into a 280-square-foot backyard tiny home.
Things went well at first, with the $4,500-a-month rent allowing her to easily pay the mortgage after a few refinancings. But then Marchionna’s job was eliminated by pandemic budget cuts, and her long-term tenant moved out in the fall.
That left a roommate who last year signed a declaration sent to Marchionna saying that he was unable to pay rent due to the pandemic, leaving her to apply for $17,500 in rent relief in January. The rent debt, plus her monthly mortgage and expenses like a $4,500 roof repair bill, have left her looking for a way out.
“My kids have all moved away. I lost my job,” Marchionna told The Chronicle. “All I have is my house.”
Susan Marchionna at her Berkeley home of four decades, which she’s considering selling to escape a drawn-out dispute with a tenant. As the statewide rent relief deadline looms, landlord-tenant disputes are sparking over delays in aid.
Yalonda M. James/The Chronicle
While Marchionna consults with real estate agents, landlord groups contend that some tenants are abusing eviction protections meant to shield vulnerable renters. National Equity Atlas estimates show that 721,000 California renters still owed some $3.3 billion in back rent as of January, but many state rent relief programs rely on renters to self-attest that it was the pandemic that prevented them from paying.
Tenant advocates call cases of alleged squatting outliers. They say that those historically at highest risk of displacement are single mothers, fixed-income seniors and Black or Latino service workers. While landlords may be forced into financial hardship to deal with legal fees, they argue that the stakes are higher for tenants who are less likely to have legal representation and may be left with nowhere to live if evicted.
To Marchionna, the result is that individual property owners like her are left to clean up messy interpersonal disputes in cities where housing shortages have been building for decades.
“The city of Berkeley is trying to get individual homeowners to help solve the housing crisis,” she said, “then demonizing all landlords.”
Real estate listing sites estimate that Marchionna’s home could be worth some $1.3 million. She said agents have advised that the sale price could be significantly reduced if a tenant is still living in the home. It’s a stalemate that has left her regretting ever getting into the rental business, and especially trying to be flexible with would-be tenants.
“I’m the kind of landlord you want to find,” Marchionna said, “and I never want to do it again.”
Lauren Hepler is a San Francisco Chronicle staff writer. Email: lauren.hepler@sfchronicle.com Twitter: @lahepler
