Real Estate in High Demand
According to Norada Real Estate Investing, a Better Business Bureau A+ accredited business, as of late July 2021:
“The real estate market in the Bay Area is growing, with the median price topping $1 million for the fourth month in a row. Demand outstripped supply in June, resulting in homes selling at an exceptionally quick rate. The Bay Area housing market is distinguished by high demand, cheap mortgage rates, and a scarcity of available inventory. Due to increased demand from the state’s high-income residents who can take advantage of low-interest mortgage rates, home prices are skyrocketing.”
- Housing prices in the majority of Bay Area communities will continue to climb until 2022.
- The median sales price of the Bay Area, which includes all nine counties of Alameda, Contra Costa, Marin, Napa, San Francisco, San Mateo, Santa Clara, Solano, and Sonoma, was $1,350,000 ($729 per Sq Ft).
- This is a 35% increase over last June.
- San Francisco housing market made a large recovery in sales from the steep declines in March and April. The median sold price hit a new monthly high in June ($1,800,000).
According to Bay Area Market Reports as of July 2021:
Comprehensive analysis of San Francisco home prices, values, conditions and trends in the residential real estate market showed, “The second quarter of 2021 continued to see extremely high buyer demand competing for a limited inventory of listings for sales. Condo sales volume hit a new high. Luxury home sales also hit a new peak. However, market activity did begin to slow in June, down from spring selling season highs, which is a typical seasonal trend.”
Population Migration Trends
Last couple years, people leaving the Bay Area have outnumbered people moving within the U.S. On the other hand, a large foreign migration to the Bay Area from outside the states has grown since 2010. See chart from Compass below.
The New York Times said, “Nearly every year for several decades, thousands more residents have left Silicon Valley and San Francisco than moved in, according to state data. Often, this movement is offset by an influx of immigrants from other countries — which was limited during the pandemic.”
Poverty in the Bay Area
The economic boom in the Bay Area for many means rapidly increasing living costs without any increase in income.
Office & Business Spaces- Abundance of Inventory
CNBC reported in May 2021, that, “By the end of the first quarter of 2021, the amount of vacant sublease space in San Francisco had soared to 9.7 million square feet, up from about 3 million in late 2019, and accounted for 40% of all available commercial space in the city, according to commercial real estate firm Avison Young.” Starting to see a reenter phase- activity is picking up. Tenant demand is at the highest since before the pandemic began, indicating that more companies are shopping for space.
Storage Units Thrived (as reported in July 2020 from hoodline)
Affordable Self Storage hasn’t seen customer demand like this since the 2008 recession. Storage is a “good indicator” of the general health of the economy — and not in a good way. “During turmoil, we do good business,” one employee said. Filling up the units are:
- Business owners
- Tech company employees reconfiguring their lives
- Students temporarily displaced from campus housing
Hoodline reached out to a dozen moving companies in San Francisco to see if their demand was also accelerating. It seems customers have to reserve a slot several weeks in advance to get service. A MakeSpace moving company representative confirmed the company had seen demand jump in recent months (July 2020).
Living with Parents
As reported by CalMatters (a nonpartisan, nonprofit journalism for California’s Capitol) in October 2019 (almost two years old as of August 2021) had these data points to share:
- Statewide, roughly 37% of Californians ages 18 to 34 live with their parents, according to the U.S. Census Bureau data.
- In expensive cities like San Diego and San Francisco, rates are lower as young adults tend to share housing to defray housing costs.
- Stay-at-homers are in affluent suburbs near the coast.
- Or lower-income areas often farther inland and with a high concentration of Latino households.
- More than 40% of California stay-at-homers are enrolled in school of some sort, often community college.
- The vast majority who are not in school are working at least part time.
Tech Workers Coming Back
As reported by The New York Times on July 15, 2021, news that tech workers were done with the Bay Area, complaining about the high cost of living, homelessness, crowding, and crime, was overblown. Things are not quite back to normal as represented by:
- Ridership on Bay Area Rapid Transit remains low.
- Half of San Francisco’s small businesses are still closed.
- Office vacancy rates are high.
- The city’s downtown is still largely empty on weekdays.
But recent data shows signs that tech workers are coming back.
- In San Fran’s Financial District, average apartment rental prices dropped more than 20 percent in 2020 (according to city data).
- In the same area, big price gains were seen in the first five months of 2021.
- Median San Francisco home prices recently hit $1.9 million, according to the California Association of Realtors. That’s higher than before the pandemic.
- Bumper-to-bumper traffic has returned to the region’s bridges and freeways.
- Tech commuter buses are reappearing on the roads.
- Rents are spiking in neighborhoods where tech employees often live.
Big Tech Expansion
- Google said in March it will spend $1 billion on California developments this year, including two office complexes in Mountain View.
- Google is also building a mixed-use development that includes a 7.3-million-square-foot office space in San Jose.
- Twitter is opening a 30,000-square-foot office in San Jose’s Santana Row this fall.
- Twitter is also opening a building in Oakland next year, said Jennifer Christie, the company’s chief human resources officer.
According to BridgePoint Funding, specializing in residential mortgages for C.A. residents, slightly higher mortgage rates are expected in 2022.
- Rates in early 2021 fell to their lowest level of all time.
- But then slowly began to rise again, and expected to climb higher between now and next year.
- Freddie Mac made this prediction: “We forecast that mortgage rates will continue to rise through the end of next year. We estimate the 30-year fixed mortgage rate will average 3.4% in the fourth quarter of 2021, rising to 3.8% in the fourth quarter of 2022.”
- Could mean a cooling effect on the Bay Area housing market in 2022, with home prices rising slower.
First Tuesday Journal, providing data-driven news and analysis for California real estate professionals for over 30 years, predicts:
- San Francisco’s rapid home price increases reverse direction going into 2022 due to the continuing recession and expiring foreclosure moratorium.
- Remote work trend has caused residents to flee the metro area for less expensive, nearby suburbs, reducing homebuyer competition in the city.
- “The housing market will begin to recover from the 2020 recession in San Francisco and across the state around 2024, the timing of which will largely depend on the existence of further government stimulus, job creation and/or moratorium extensions.”
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