What Will the Fall Bring Us?
I don’t know about you, but I am hoping that the rest of 2020 will go by quickly and we can put this year behind us and return back to our normal lives that we are accustomed to!
Normally in September I write about what we can expect in our fall real estate market because it marks the start of our second selling season of the year in San Francisco.
Our two best seasons are in the spring, from February to June, and then in the fall after Labor Day, from September to Thanksgiving. Our summers are normally slow because many people take vacations which means that buyers, sellers and agents are out of town, thus delaying the buying or selling decision until they get back. There are also many weekend events, such as the SF Marathon and Outside Lands concert during the summer that takes the focus off of real estate.
However, this year with the COVID-19 pandemic, people stayed in town and because of the uncertainty, real estate activity dropped in April and May. But starting in June, buyers and sellers came back onto the market, and we have had a very busy summer.
Many factors contributed to the abundance of activity in this market. Interest rates dropped to historically low levels, boosting buyers’ purchasing power. The stock market came roaring back, up about 50% since the initial drop after our shelter-in-place orders, creating more wealth for those who invested at that time. More people are working remotely and finding that they need more space and need to move. Others are moving from more densely populated neighborhoods or living arrangements and choosing to go to a neighborhood with single-family home.
What will the fall bring? I think it will be more of the same as people realize that the pandemic is not going away any time soon and has not caused any issues in the real estate market. Initially, most people thought that real estate prices would drop and that it was best to take a wait and see position. But as time went by, it was evident that the demand was still there for San Francisco real estate and the prices did not go down as feared. My feeling is that this will continue for the rest of this year.
You might be thinking: “What about all the people that are leaving San Francisco?” There have been numerous articles in the press about a mass exodus of people who have decided that San Francisco is too expensive, too dangerous, has too many homeless, is too progressive, and a multitude of other reasons.
Zillow reported in mid-August that the number of homes for sale in the City is up 96% from a year earlier, which drew national headlines and gives the impression that everyone is panic selling and fleeing from San Francisco. Yes, while this number is factually accurate, one has to look further to understand what is going on.
Normally, August is a really slow month in our real estate market; few sellers put their property on the market. So, the number of homes on the market in August of 2019 was very low. This year, in the beginning of the pandemic, some sellers withdrew their listings and others were hesitant about putting properties on the market, which lead to a lack in inventory. However, in the past few months, because the prices did not drop and properties were moving, sellers decided to do what they had originally intended to do, which led to more than the normal amount of inventory coming onto the market. I am happy to report that many of these listings went into contract, meaning there is also pent-up demand to absorb this inventory.
San Francisco is seven miles by seven miles, and we are pretty much all built out. They are not making any more land. So, our inventory is almost always tight and demand is pretty good. What we are seeing currently is an anomaly that we have never seen before and might never see again in our lifetime.
What does this mean for the consumer? The best advice is to work with a top-notch real estate professional who is on top of the market to provide you with the insights necessary to reach your goals in this changing marketplace.
For sellers, these are still the highest sales prices we have ever seen in San Francisco. With plenty of buyers out there, if priced correctly, you should receive multiple offers and get the highest possible price. For buyers, I recommend proceeding with caution. Currently prices are the highest they have ever been, but the opportunity to obtain a historically great interest rate is still there. In the near future, even if prices come down, the interest rates will go up which might neutralize any financial differences. I urge buyers to consider all factors before purchasing.
For people who are looking to trade up, this market is presenting an opportunity to reposition your real estate portfolio for the long-term as you can lock in on a low interest rate now and pay it back with tomorrow’s inflated dollars!
This will be an interesting fall selling season and should give us a taste of how strong our real estate market is.
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 firstname.lastname@example.org.
Categories: Real Estate