By Hannah Holzer
A recently published Zillow report has led some news outlets to declare a 2020 San Francisco exodus. One SFGate article ran a headline that read, in part: “The 2020 San Francisco exodus is real, and historic.” Yet some of the city’s Realtors disagree.
Zillow’s “2020 Urban-Suburban Market Report” looked at whether a growing number of residents in the nation’s major cities are trading metropolitan life for suburban areas. It found that housing inventory in San Francisco is up by 96% as compared to this time last year – an increase that appears especially dramatic given that this shift is not evident in other densely populated cities like Los Angeles, Miami and Seattle.
San Francisco Realtor Alexander Clark, however, said Zillow reports like these – and ensuing articles based upon them – are meant for “shock and awe” and often tell a partial story.
Clark confirmed that the number of houses for sale in San Francisco has increased during the pandemic. But he pointed out that July and August are typically the city’s slowest months of the year for home listings, in part because people are on vacation. So, this year, during shelter-in-place, more properties than normal were listed for sale, but Clark said it isn’t as drastic an increase as it has been made out to be.
Summer is traditionally a slow period for the real estate market. While more “for sale” signs are out this summer, like in front of this house in the Sunset District, there were also more July sales in 2020 than in 2019. Photo by Michael Durand.
A similar sentiment was echoed by Century 21 agents located in San Francisco who spoke to HousingWire and expressed serious doubts about a so-called “coastal exodus.” Though more properties are listed, the city’s July 2020 home sales are higher than July 2019 home sales, according to the article. And as working remotely continues to be the new normal for the foreseeable future, some in the Bay Area are moving into bigger homes but staying in the same city.
Depending on what reports are consulted, the current state and future of San Francisco’s housing market ranges from weak to bleak. That might be because it is difficult, if not impossible, to draw accurate generalized conclusions about San Francisco’s real estate market when every neighborhood is different.
“The Outer Richmond and the Central Richmond are doing great, whereas if you go into SoMa (South of Market), (it’s) getting crushed,” Clark said. “If you combine SoMa and the Richmond, you’ll get an average, but that average is skewed.”
A resident of the Outer Richmond himself, Clark is the founder of “theFrontSteps.” As a residential Realtor, he helps his clients buy and sell property primarily around San Francisco as well as in Marin County. He called the city’s current market “crazy.”
The west side of town – the Sunset, Richmond and Parkside – is the most desirable area right now because single family homes are in high demand, he said.
“People are looking to get out of cramped living and have yards and be close to the ocean and close to hiking trails,” Clark said. “You can buy more for your money. Instead of a two-bedroom condo downtown, you can buy a three-bedroom house, and a lot of people are taking that extra bedroom for offices.”
John Lee, a real estate broker with Compass, said the market for westside properties has held up so well that some prices have even gone back up to pre-pandemic levels.
In stark contrast, the market for condominiums, especially downtown, is struggling. Lee said some of the people moving out of those high-density condo buildings are the same ones moving into more spacious single-family homes.
“It feels like they’re discovering the Richmond and Sunset for the first time,” he said.
According to Lee, San Francisco homeowners are more or less staying in the city, but there is a different story when it comes to renters. The option of working remotely has been, for some renters, an incentive to move away. Lee knows of one couple whose San Francisco-based employer told them they could work remotely until June 2021. In response, they decided to stop paying San Francisco rent, put their stuff in storage and move back to Georgia for the time being.
The rental market itself is fluctuating around town, as SFGate reported based on data from Zumper. While SoMa and the Lower Pac Heights neighborhood saw a 19% and 21% year-over-year decrease for one-bedroom rents, respectively, rental prices over the same period climbed in the Outer Richmond and Bayview by 11% and 16%, respectively.
Meanwhile, between tenants not paying rent, business being down and a lack of new investment money, the city’s commercial market is hurting.
“It’s already slow, and I think it will be slow coming out of this,” Lee said.
The commercial real estate market in Potrero Hill and Mission Bay is “robust,” according to one recent report, though commercial vacancies are up throughout the city. Thinking long-term, if remote work is here to stay, it could change the entire face of the commercial real estate industry.
“It’s going to be interesting to see (if) people who can work from home now stay in San Francisco or if they leave,” Clark said. “And if they leave, will they come back?”
Clark jokingly acknowledged that he doesn’t have a crystal ball – his predictions for the future are based on his nearly two decades of real estate expertise. But there is, of course, a great deal of uncertainty.
Moving forward, Clark said he thinks residents of the Sunset and Richmond Districts will see some of their neighbors leave, but those homes will not remain empty. And, because interest rates have dropped, Lee said he expects that home prices on the west side will remain stable throughout the remainder of 2020. Based on the outcome of the presidential election, however, interest rates may increase.
Here is Clark’s biggest piece of advice: “Take every single article about the San Francisco real estate market with a grain of salt.”
“Every property is different,” he said. “You cannot compare a house in Pacific Heights with a house in the Outer Richmond. It’s very important to gather as much data as (you) can.”