As if the pandemic wasn’t enough, smoke from fires throughout the Bay Area, California, and the West Coast blanketed San Francisco in mid-August and early September and didn’t budge for weeks. This was not good news for San Francisco’s real estate market, already reeling from Covid-19 disruptions.
Still, once the smoke cleared, things were pretty much as they were. Single family homes under $5 million continued to sell well, with homes over $5 million less in demand, and condos continued to have problems attracting buyers.
According to the San Francisco Association of Realtors, in August the median sale price for a single-family home was $1,656,000, up 3.3 percent over the previous year. The median sale price for a condo or loft was $1,275,000, down just 0.4 percent from 2019. At the same time, however, there were lots of listings on the market: 619 single family homes, up 19 percent over last year, and 1,271 condos and lofts, up 97.7 percent over 2019 — easily a 10-year high.
NOT SO FAST
David Cohen, founder of City Real Estate, cautions against jumping to conclusions based on these numbers. “A lot of the statistics we see are comparing inventory, August over August. But this August is quite a bit different. This August we had a backlog because we missed three months of showing properties. The increase in inventory is real but it’s not as significant as some publications would suggest.”
Nevertheless, Cohen acknowledges that for the first time in 10 years, it’s a buyer’s market when it comes to San Francisco condos. He says that in mid-September prices for condos were down to 2012 levels in SOMA, and to 2016 prices in Pacific Heights. Transactions are taking longer, because condo buyers are now taking their time. They are looking at properties multiple times, and demanding contingencies. In the hyper-competitive market that defined San Francisco for years, such things were simply not possible.
Cohen is confident that the market will bounce back. “It’s going to take a sunny day, and a vaccine, but people will come back. San Francisco is an international city. We’re not a one-trick pony. We’re not just a tech city. It’s a finance hub. A medical hub. People are going to want to be in San Francisco. They just need to once again have access to all those things that make the city so wonderful. It will all come back. It just might take some time.”
Cohen adds, “People like value. If you see a condo that’s 20 percent less than it was a year ago, and if you have faith that San Francisco will rebound, it’s a good investment.”
Over the past 40 years, there has been a correction in San Francisco every 10 years, according to Cohen. In 1980 interest rates were at 18 percent, and as a result home prices dropped. In 1990, prices fell again in response to the 1989 earthquake and the Gulf War. In 2000, the dot-com bubble burst, and in 2010 we had the mortgage crisis. Cohen says, “After all those dips of 20–25 percent in value, every single one of them was followed by a decade of appreciation, well over previous highs.” Smart money buys at the dip, and holds for a period of time as values appreciate again.
In September NPR published a wonderful piece by Greg Rosalsky that describes Zoom towns, places that are booming as remote work takes off. Think Truckee, Calif., for example, where median home prices are up 23.4 percent over last year.
According to the Rosalsky’s article, “Many Americans — especially 30-somethings who remain employed — are ditching their tiny rental apartments in hip districts of expensive cities and moving to buy houses in more affordable cities or the burbs for a life of shopping at Home Depot and spending their Friday nights eating mozzarella sticks at Applebee’s.”
Cohen says that is happening to an extent. Referrals to agents in other cities have become a bigger part of every real estate agent’s business. He says, however, he is personally not seeing people purchase in these communities for their primary residence, but rather for second homes. They still love San Francisco, but they want to be away right now, and have options for this kind thing down the road. They want more space outside the city.
Ironically, many of these rural and remote areas are more vulnerable to forest fires. It will be interesting to see what kind of impact recent fires have on these markets.
The smoke alone in San Francisco had a big impact on real estate. Homes with beautiful views were not brought to market, because the terrible haze obscured what would normally be a significant selling point. What’s more, a lot of showings were canceled or rescheduled by buyers who had trouble breathing, or simply weren’t comfortable going out in the ghastly air.
Cohen says real estate agents are currently working twice as hard, and making half as much; 2020 continues to be a most challenging year, in so many unexpected ways.
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