Here’s my attempt to give a snapshot of where things stand in the world of real estate at this point, in light of all that is happening in the world and particularly the Covid-19 situation. Apologies in advance for the length here—there’s a lot to digest.
First, some perspective:
To begin, obviously times are tough. The country is at an all-time high for unemployment. Retail has declined and nearly 5 million households are in forbearance on their mortgages. That’s the bad news. But in the realm of real estate one would not necessarily know we’re in a crisis. On a state, county, and local level, the pandemic has not affected home values in any clear way and some uncertainty remains as to where we’re headed. Some signs are positive, others concerning.
After a spell where the market was basically closed down as “non-essential,” leaders soon re-classified RE and imposed rules for access. Realtors responded both by moving speedily into the realm of online virtual tours and by tailoring marketing and showing practices to accommodate the new rules. Prospective buyers can now view properties both online and in person (with appropriate distancing protocols).
Slow Market Rebounds and Adjusts
As to the effect all this has had on the market, well that has actually been rather surprising . . . . Economists predicted big impacts on the entire economy, including housing. And while the employment and personal finance picture has been fraught, Bay Area housing has seen a mixed picture.
As you have probably read, rents are way down in many areas—around 10% in the City according to one recent report—and thousands of tenants have literally walked away from their rentals which will certainly cause rents to fall further. On the other hand, sale prices for homes and condominiums have been relatively resilient, even robust in some markets.
Despite an early downward trend in the number of transactions from early March to the start of May--during which time sales declined by 28% in California according to one source--the data show that real estate prices have not been adversely affected in all areas. In fact, some argue that the lack of available homes for sale has led to increased demand in some markets, i.e. a true seller’s market. Some had speculated that buyers would now be wary of purchasing a home in a fluid or unstable market. After these months of lockdown, however, the evidence indicates that such wariness has not had much of an impact at least in Marin County.
The Numbers - Marin
According to Trend Graphics, the last 3 reported months of activity in Marin have seen an active and robust market. For homes in the $1.5M and below range, sale prices dipped only 1.3% as against the same quarter in 2019, and the price-per-sq.ft. (PSF) also dipped only slightly, down 2.6%. For homes between $1.5M and $2.5M, sale prices were down a bit more: 2.9%; but PSF for these homes was also off by just 2.6%.
On the other hand, the same period saw a significant uptick in prices of homes sold over $2.5M: In that sector, average sale prices were up 4.4% over the same period last year, with an increase in PSF of 4.3%. Average PSF for homes in this group was $1,125. Year over year, Marin’s overall median home price increased from $1.39M in 2019 to $1.50M this year, and jumped a whopping $160,000 from April to May:
So, Do We Call This a Stable Market?
Despite some ups and downs, many experts view the NorCal RE market as far less affected than other regions in the current climate. They explain the phenomenon saying that laws of supply and demand are working to create stability in our region. A large swath of the buyer population belongs to employment categories that can work remotely and maintain income.
While the number of buyers has certainly diminished, inventory in some areas and price ranges is still low (truer in Marin than SF). The result has been that home values are holding relatively steady in view of the overall economy. And some areas are seeing solid value increases. For the buyers who are financially able to continue their home search, interest rates continue to be at historic lows, offering a great opportunity to find the perfect spot to shelter in place.
A Focus on Marin
The other new phenomenon that many identify has been the decided increase in interest in Marin, particularly with buyers looking to relocate from SF: Many such buyers now are expressing a desire for the sort of suburban amenities (yards, decks, access to trails, etc.) that the SF urban experience does not offer as readily.
Stay in Place clearly has had something to do with this shift. With Marin inventory still fairly low, many agents report an increase in multiple-offer situations. On the other hand we also continue to see price reductions and slow movement for some properties that don’t grab buyers for whatever reason.
With regard to fears of what the future may hold, analysts are quick to point out that this is not 2008: The crisis in that time was . . . well, a purely economic one. And it was largely driven by a decade of easy lending that left many homeowners holding overvalued homes in which they held little or no equity. Numerous foreclosures and short sales followed, tumbling housing prices. The current crisis, by contrast, originates in a sudden public health emergency and follows a period of strong economic performance.
Hence, many believe the economy will rebound quickly once successful vaccines and/or treatments are developed and released to the population. Based on this analysis, leading economists predict at worst an overall single-digit price decline in homes nationwide in the long run. And in the Bay Area, this impact will almost certainly be far less severe, as the foregoing data reflects.
Unless one is looking to move again in a short period of time, the outlook for Bay Area real estate is still pretty unassailable. (See below for detailed charts.) For buyers, there is no reason not to scout the market now if one is considering a move, especially now while interest rates will never be beat. SF has some good values available, and Marin—while increasingly in demand—is likely only to increase in desirability and thus value, so this seems like a good time to get in.
The Bay Area continues to be a sought-after place to live, with an inadequate supply of desirable homes and a solid group of qualified buyers looking for that special place to call home. For sellers, Marin is hot and SF also continues to see strong demand at many levels.