Is the pandemic the last straw for San Francisco residents, fed up with the high cost of owning a home or paying rent in the city? For years, people have been threatening to leave, and there have been lots of stories suggesting that residents were fleeing the city for less expensive locales. But for everyone who left, others — often more affluent — would move in. The big exodus never really materialized.
However, things are now dramatically different. The pandemic has had a profound and unwelcome impact on life in the city.
“I am moving because most of the things I love about living in a city are closed indefinitely due to the pandemic — live music, art galleries, bars. Without these options, the pace of the city really changes,” said Natasha Vo in a recent SFGate.com interview. “I figured I might as well take this opportunity to live in a new place while saving money.”
FIGHT OR FLIGHT?
For years young people had driven the back-to-the-city movement. They cherished San Francisco’s cool, sophisticated urban setting, its abundance of activities, and its walkability. Much of that allure has vanished for the moment, and may not return for some time.
Meanwhile, some leading tech companies are signaling a long-term acceptance of remote work, and this means there is now little need to live close to offices. This broadens the horizon for many.
“There have been several recent articles about wealthy buyers fleeing San Francisco for Marin and other Bay Area counties, and while I have seen some of that, I don’t see everyone bailing out of the city,” said Annie Williams, an accomplished San Francisco real estate agent with Sotheby’s International Realty.
She also notes that these things go in cycles, and once cultural venues, retail stores, and restaurants are fully reopened — and traffic into the city increases as more people return to their offices — San Francisco will probably once again look far more appealing than the suburbs.
The San Francisco Association of Realtors reported that there were 105 single family home sales in San Francisco in May, down 56.1 percent from the previous year. During the same period, there were 95 condo and loft sales, down 67.8 percent. In spite of these extremely low sales numbers, prices remained relatively stable. The median sales price for a single family home was $1.63 million, down 3.3 percent from last May. While the median sales price for a condo and loft was $1.1 million, down 10.9 percent.
“Like the weather, San Francisco real estate has micro-climates,” explained Williams. “Single family homes under $5m continue to fly off the shelf and fare well — especially those that are not in need of major renovations. Condos in downtown high-rise buildings requiring an elevator, and offering no outdoor space, are very slow.”
According to Bloomberg.com, suburban and rural areas around the Bay Area experienced the biggest rebound in real estate sales in May, while contracts in San Francisco were well below where they were in 2019. However, Williams points out that this may be largely due to the fact that the inventory of homes for sale in the city is simply way down, and much of what is available is located in the downtown area — new-construction condos that aren’t selling right now.
During the pandemic, home prices have remained remarkably stable because of this tight inventory of properties for sale. Yet most buyers expect that prices would have dropped over the past few months. Consequently, agents and sellers are changing how they price their listings.
It had been a common practice in recent years to price properties on the low side, and then count on multiple offers to carry it to a higher sales price. That is no longer the case. Today you are more likely to see what agents call “transparent pricing.” The list price is more in line with what the agent and seller believe will be its actual market price — its ultimate sales price.
How about rents in the city? According to SF.Curbed.com, referencing a Zumper report, one-bedroom rents in San Francisco fell 9.2 percent year-over-year in May, the largest drop ever in the history of the company’s monthly reports, and the lowest price point in more than three years. The average rent for a one-bedroom unit in San Francisco was $3,360; compared to $3,700 last year.
A report published by the San Francisco Chronicle said a new survey from the San Francisco Apartment Association found that 7.5 percent of renters have broken their leases over the last three months. Gen Z workers — those 18 to 25 years old — made up the biggest group of tenants breaking leases in San Francisco. If there is an exodus out of the city, it will likely be from among this group.
The pandemic will certainly reshape San Francisco in many perhaps unpredictable ways. Whether that’s good news or bad news, only time will tell. It will be fascinating to see what kind of city emerges when this is all over.
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