In spite of all the turmoil surrounding Covid-19, the economy, and our recent election, the housing market in San Francisco remains remarkably unchanged. Indeed, housing is a bright spot for the economy across the nation.
“The easy story has been to say ‘real estate plunges as everyone flees cities,’ but the reality is nuanced,” said Matt Fuller, co-founder of Jackson Fuller Real Estate and a past president of the San Francisco Association of Realtors. But “2020 has been the year of getting off the fence and procrastinating no more.”
According to Fuller, in San Francisco sellers who may have previously thought about leaving have listed their homes and are making the move. Buyers who had long wanted to own in the city see an opportunity and have transitioned from renting to buying.
The ultra-wealthy will continue to live wherever they choose, but San Francisco’s low Covid-19 transmission and death rates, in combination with wildfires elsewhere in the state, have maintained San Francisco’s desirability in the minds of the “modest millionaires” in the market for a home purchase.
Market segmentation continues to exist across the city. Demand for single-family homes remains strongest, but buyers are also cautiously interested in condos located in smaller buildings and boutique developments. Condos in large full-amenity high-rise developments are receiving the least interest.
Inventory remains high. According to Fuller, in October the number of sales across the city was up slightly year-over-year (550 sales in 2019, 608 in 2020) but the big change for buyers was that the number of active homes for sale during the same month went from 739 in 2019 to 1,097 in 2020 — a massive increase.
The median price for a single-family home in October was $1,637,550, down 0.8 percent from last year, and the median price for a condo or loft during the same period was $1,177,000, down 12.5 percent from 2019.
Meanwhile, according to mortgage newsdaily.com, across the nation home purchase activity remained strong in the late summer, reversing the usual seasonal slowdown. Record low mortgages rates continue to bring out buyers, including first timers and those looking to trade up or buy a second home.
“Housing continues to be a bright spot during an otherwise challenging economic time for many U.S. households,” said Frank Martell, president and CEO of CoreLogic. “Those in sectors that weathered the transition to remote work successfully are now able to take advantage of low mortgage rates to purchase a home for the first time or to trade up to a larger home.”
According to a recent realtor.com report, home prices across the nation continued to defy expectations as they sharply headed up — even as the turmoil over a hotly contested presidential election, the coronavirus pandemic, and high unemployment persisted.
During the last fiscal crisis — the Great Recession of 2007 through 2009 — there were many more homes for sale than qualified buyers. The reverse is true this time around. The country is in the clutches of a significant housing shortage at the same time that buyers are clamoring for more spacious houses. Buyers are looking for larger properties to more comfortably work from home, educate their children, and maintain social distance from others.
As a result, prices increased by double digits in roughly two thirds, or 65 percent, of the 181 metropolitan areas studied in the report.
What can we expect going forward in San Francisco? Fuller offers some insight.
“In the past, a strong rental market virtually guaranteed a seller could always rent their home at a profit if they couldn’t get their desired sales price,” he said. “But with rents down, will the inability to cover costs with market-based rents encourage sellers to reduce prices? Or will sellers take a long-term view and a short-term loss, banking on San Francisco’s historic trend of underbuilding homes and overbuilding jobs?”
Unfortunately, there are no easy answers. San Francisco is nearing the end of real estate’s fall listing season, and the city’s inventory of homes — particularly condos — remains high.
Historically, most homes for sale toward the end of the calendar year are taken off the market. Doing this for at least 30 days enables the seller to reset the active-days-on-market count, and then relist in January with a new price, and possibly a new agent.
Will sellers reprice for less or return at the same asking price, based on expectations of more stimulus spending and a Covid-19 vaccine? Only time will tell.
The good news, however, is that in about four weeks 2020 will at last be behind us. This New Year’s Eve may be celebrated with even more enthusiasm than usual, even if in still Covid-safe surroundings.
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