Housing Market and Stock Market Forecasts

San Francisco Housing Forecast

San Francisco Housing Market

Like Manhattan and New York City, San Francisco has one of the hardest hit housing markets in America.

San Francisco homebuyers, landlords and and residents are wondering when the carnage will stop. The pandemic shutdown, stay at home, and work from home mandate along with high California taxes and downtown commercial property losses are making the City of San Francisco and the Bay Area a wasteland for apartment and condo owners.

 

The demand has shifted from apartments to houses that offer more space, social distance, and safety. Housing experts aren’t sure how this will play out in 2021, although a few are predicting much lower home prices.

Given the lack of housing available, and current home price rises, combined with a post pandemic economic recovery, lower prices seem unlikely.

 

The more likely scenario is that the first half of 2020 will mirror the fall season stats as revealed below.

What could make the glut of apartments on the market worse during 2021?

Techsodus is adding to the pain by removing workers from the Bay Area and thus increasing apartment and condo inventories on the market for sale.

It is strange that both house prices and condo prices in San Francisco County have risen as you can see in the many charts below.  At the same time this summer and particularly fall season, apartment vacancies have grown wildly, leading to plummeting rent prices in the city.

A Glut of Apartments in the Bay Area

Apartment owners and renters are selling and migrating out of San Francisco.  The high prices and a gloomy attitude about Silicon Valley’s tech sector business prospects have fueled the exodus.  Realtors sound a little pessimistic in their recent report, below, and we are wondering how big this mountain of vacancies and supply can reach.

 

A glut of apartments has appeared and doesn’t look to go away anytime soon. The departure of some high profile tech companies from the Bay Area to Texas is setting a worrying trend. Oracle, Charles Schwab, Macy’s and Tesla are all on the move out of California, a trend being dubbed the Techsodus. Oracle’s CEO Larry Elliman is moving his business to Austin, but is moving his home to Hawaii.

Techsodus Trend Won’t End Anytime Soon (recovery may be 3 to 5 years away).

California Weekly Housing Data to December 5th

The latest data from CAR below shows new listings are rocketing across the state and we have to believe much of that is in San Francisco. Closed sales are up considerably as well. The weekly surge from 55.9% to 64.0% was the largest since mid-September.

Since the Coronavirus outbreak, more than two of five REALTORS® (43.6%) saw a change in buyers’ preferences in the property type they want to change. Of those changes, 39% of REALTORS® who responded said their buyers are opting for a bigger home; 35% said buyers are opting for a property with more rooms; 37% said buyers are less concerned about the commute time to work; 37% said buyers are opting to live in a suburb rather than a city; 26% said buyers are opting to live in rural areas rather than cities or suburbs. from Car.org market minute report for December.

Weekly Data California Real Estate. Screenshot courtesy of California Association of Realtors.

Let’s Look at the November Housing Market Data for November

Compass’s Q3 median home sales prices report shows how pricey houses are in the Bay Area.

Median Home Prices Bay Area Cities. Screenshot courtesy of Compass Market Reports.

And much of the sales are coming from the luxury class.

Luxury Home Sales Bay Area California. Screenshot courtesy of Compass Market Reports.

House, Condo and Loft Prices are Rising in SF County

San Francisco Average Home Prices by Property Type

 

San Francisco County average home sales price by property type. Screenshot courtesy of SFAR.

 

San Francisco County New Home Listings November

San Francisco County new home listing timeline 2020. Screenshot courtesy of SFAR.

San Francisco November Median Sales Price by Property Type

San Francisco County November Median Sales Prices. Screenshot courtesy of SFAR.

Months of Housing Supply November for San Francisco

San Francisco County new Home supply by months. Screenshot courtesy of SFAR.

 

San Francisco County median percent of list price received. Screenshot courtesy of SFAR.

 

The year to year prices just tell us how far prices have come down and how buyers have avoided buying. But as the economy looks good, and stock markets soar, and as they weigh out the repercussions of the 2020 election, many are saying things look good.

 

Bay Area and California Governments Bitterly Criticized for Mismanagement

How big is the need for new affordable housing in the Bay Area? It’s a textbook case of supply and demand where demand is huge and development is stunted and where current homeowners have no intention of moving, even after retirement. This recent news about a Palo Alto commissioner quitting her job below, because it’s too expensive in Palo Alto, says it all for everyone in the Bay Area and City of San Francisco. This woman and her family are moving 40 miles away to Vera Cruz.

“We rent our current home with another couple for $6,200 a month,” she wrote. “If we wanted to buy the same home and share it with children and not roommates, it would cost $2.7 million and our monthly payment would be $12,177 a month in mortgage, taxes, and insurance. That’s $146,127 per year — an entire professional’s income before taxes.” – experpt from a news report in Bizjournal.

Here’s the source of the problem in California communities:

The Legislative Analyst’s Office found that California’s coastal metros take about two and a half months longer, on average, to issue a building permit than in a typical California inland community or the typical U.S. metro,” the report admits. The result is housing gridlock.  From a post in sfchronicle.com.

San Francisco home prices are $1 million above the average detached home price of a home sold across the US.  The forecast for San Francisco is an extreme version of the Los Angeles market and San Diego housing market 

Housing Affordability Sucks in California

Why? The housing affordability rate has dropped 21% in 6 years.  Key drivers of unaffordability are immigration, high tech business success, and development bottlenecks. In San Francisco, people have to pay whatever the market demands. And renters haven’t been looking really to buy. Only 16% bother to contact a realtor.

New Home/Condo Development in SF

Looks like developers are gearing up for even greater supply. As this graphic from SF Planning, a good number of units were being constructed. Of course, the pandemic has slowed construction and delivery, and they’re are being offered at discounted prices.

Screenshot courtesy of sfplanning.org

 

Overall, the US homes forecast and the Los Angeles housing predictions and outlook are positive. The introduction of Donald Trump and republican government policies to loosen up restrictions on mortgages and perhaps development land could ease prices, but it may take quite a while. If the economy improves, there could be an additional rush of new workers to the area. Employment outlook: SF now has 547,000 employed people compared to 448,000 during the dot com boom era an increase of 99,000. Lots of high earning renters and buyers.

Need a home loan? Use the mortgage calculator to find out how much you should borrow.

This recently published chart from Zillow reveals the California cities of San Diego, Los Angeles, San Jose, Sacramento, and San Francisco are the most expensive and least affordable places to buy a home.  Combine the stressful commute times in LA, and the Bay Area, and you have a population feeling on edge, uncertain of their long term future. The word rent is one of the foremost ones in the vocabulary of Californians. Only 30% own their own home.

Will the Average Bay Area Salary Drop in 2021?

Fueling the frenzied demand for San Francisco apartment rentals is a growing affluent and young population whose incomes are rising. San Francisco has the highest apartment rentals prices in the US.

As a result, the Southern California and Central Valley regions will see moderate sales increases, while the San Francisco Bay Area will experience a decline as home buyers migrate to peripheral cities with more affordable options.”

 

San Francisco Real Estate Forecast

The plunge of the California and San Francisco/Bay Area real estate market is one of the most severe of 2020.  From early 2020, we’ve gone from record high and continuing job growth, huge multinational high tech firms with boatloads of cash, a changing mood toward land and housing development, to record out migration, small business bankruptcy, and record rent defaults and rising mortgage defaults.

The outlook for San Francisco’s housing market in 2021 is a little subdued for sales.  Lower house supply combined with business exodus is going to hurt the Bay Area.  This might be an opportunity for wealthy buyers to grab up apartments and condos with a better long term outlook.

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