The continuing global pandemic has had an unprecedented impact on the San Francisco real estate market. In May, 2020 the number of single-family homes sales declined by nearly 60% (239 homes sold in 2019 vs 100 homes sold in 2020). Condos fared even worse with almost a 70% decline (302 units sold in 2019 vs 96 homes sold in 2020). A myriad of factors contributed to this decline, including restrictions on showings (open houses and broker tours to date are still prohibited by SFAR), the inability for sellers to properly prepare and stage their homes, and lenders being flooded by refinancing requests – thus slowing down the loan approval process for new buyer applicants.
Home inventory is at an all time low, as many sellers are holding off on listing their properties for fear of having the ‘days on the market’ factor work against them as homes can’t be properly shown. After many real estate deals initially fell apart with the shelter-in-place order, last month saw a resurgence of buyer interest. The most active segment of the market has been for single family homes priced under $2,000,000. Many home selling at this price point have received multiple offers, with winning bids going for 10% over asking. In the last two months only 30 homes sold in San Francisco over $3,000,000 (at an average of 97% of the listing price) vs. 70 homes sold during the same period in 2019. The average price per square foot for luxury homes fell from $1,400/ ft in 2019 to $1,200/ft in 2020. Newly renovated homes with updated amenities are proving the easiest to sell. Freddie Mac is now offering mortgage rates at historically low levels: 3.20% for a 30-year fixed loan – causing the real estate market to heat up in May and June.
Rents are down 9% from a year ago in San Francisco according to Zumper, a real estate search engine. That trend is will likely accelerate as layoffs increase and work-from-home options become the new norm. Landlords have already started to feel the pinch, and have started cutting rents by up to 15%, as well as offering renters signing perks like the first two month’s rent free or waiving the security deposit. Tenants have started to flee the city in droves as the city falls into further decline. When given the option, who wants to live in a city where crime and drug dealing is rampant, the mentally ill roam freely, sanitation is lacking, homelessness encampments are everywhere, and where car break-ins are a daily occurrence and go unpunished?
Adding to urban flight, cities across the country have begun aggressive campaigns to court workers as a means to boost their local economies. Savannah Georgia is offering a $2,000 incentive to assist with moving expenses, while Vermont and Oklahoma are offering eligible workers up to $10,000 to relocate.
Meanwhile, Marin, Napa & Sonoma counties have experienced a surge in sales activity. Buyers seeking more space are placing an emphasis on features like large backyards, pools, and detached structures for home offices.
While the San Francisco real estate market has historically proven to be resilient, it remains to be seen how the housing market will be affected if the ‘work from home’ option becomes permanent.
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