Real Estate

Real Estate Market Update

By John M. Lee

We have been under a shelter-in-place order for a little over a month now at the time of this writing. We in the Bay Area appear to have flattened or crushed the curve by most reports. Praises go out to Gov. Gavin Newsom and Mayor London Breed for making the difficult decisions to lead us through this coronavirus crisis.

 Much has happened this past month and everything is still in a state of flux with things around us changing ever so much. Things we have taken for granted, such as going out to restaurants, taking in a movie, attending a sporting event, taking a nice stroll in Golden Gate Park, and even just shopping at Safeway in a stress-free environment are all gone in one way or another. Rules also keep changing; one day wearing masks was not recommended and not necessary, and then, all of a sudden, face coverings were not only necessary but required.

My clients have all asked for my thoughts as to what will happen locally in the real estate market. We still have sellers who want to sell and buyers who want to buy. The appetite for real estate is still there, but everyone has limits as to what they can do at this moment in time.

Here are some April statistics for you in the local Bay Area real estate market. In a month when we are traditionally in our strongest season of the year, the number of listings or properties for sale is down about 50% from March. Our pending sales – the ones that are in contract – are also down around 50%. Our closings for the month of April are down about 38%, but many of those closings went into contract before the shelter-in-place order went into effect. Moving forward, the next couple of months will be even worse.

Right after we had to stay at home starting on March 17, about 25-30% of the listings were pulled off the market.The sellers just want to wait to see what happens to the real estate market before deciding whether to sell or not. It almost doesn’t matter as the market came to a standstill because the properties cannot be shown live and in person anyway. That changed somewhat when real estate was deemed to be an essential business. But the recommendation from most brokers and the trade associations was to only conduct business virtually and not in person. And so the real estate market will not really re-start until the shelter-in-place order is lifted.

If you read the press, predictions are all over the place. The optimistic ones say that there are plenty who want to sell. Now add to it the ones who need to sell, and you will have much more inventory. Buyers have been outbid for properties, and now here’s a chance for them to get in perhaps at a lower price point. Also the interest rates are still at historic lows, which will provide for additional purchasing power. Their conclusion is that real estate will be business as usual by the third quarter.

Others are much more pessimistic, pointing to the fact that 26 million Americans have filed for unemployment since March. To put that into perspective, 8.7 million filed during the financial crisis in 2008. So much of the economy has shut down that bringing everything back to where it was before will be a colossal task. Buyers have lost so much in the stock market, savings, and wages – not to mention confidence in the economy – that they won’t be looking into buying real estate any time soon. Thus, the real estate market will be in the tank for years to come.

Others are in the middle, citing that San Francisco is still a desirable place to live. They say we are all built out, and because we have a limited supply of homes, real estate will always be an attractive investment. 

You see, everyone knows a little about real estate and most are not shy to provide an opinion about it. Nobody ever remembers their predictions except when they are right. Scholars tend to have opposite positions on the market and can come up with an enormous amount of facts and statistics to support their positions. 

Unfortunately there are factors locally and on the international level – issues that are simple or complex, behaviors that are rational or irrational and a multitude of unknowns that interact unpredictably – that determine the direction of the market. What was true in other crises might be totally different this time around.

As a student of the real estate market, here is what I have learned. I believe these should hold true as we go through this market together.

The real estate market is a lagging economic indicator, meaning that it trails the general economy. People need to have jobs before having the income for the down payment and the mortgage. Consumer confidence needs to come up before buyers have the desire to purchase and commit to a long-term investment. Thus the market will not strengthen until the other markets have.

I have written about real estate cycles in the past; every business goes in cycles. Our real estate cycles in the Bay Area run in about 10 year intervals. The market was starting to plateau already, and the coronavirus will be the catalyst and act as the marker that we will remember as the turning point in this cycle.

During the next phase of the market, there will be buying opportunities. I would urge buyers to be patient and not be hesitant if you see something you want to buy. The only true and proven strategy is that if you buy and hold real estate for the long-term in San Francisco, you can be sure that the next up cycle will take pricing higher than the last peak.

John M. Lee is a broker at Compass specializing in the Richmond and Sunset districts. For real estate questions, call him at (415) 465-0505 or email

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