2020 - Roller Coaster Year - A Summary
2020 was certainly a tumultuous year. With the COVID-19 pandemic and associated lockdowns and changes in work and social habits, we all had to adapt. Piled on top of that were the tremendous racial equity protests and a bitter national election, including the surreal attempts at overturning the results. In general, San Francisco's real estate market weathered these disruptions fairly well, but certainly we are in a very different place than we were a year ago.
First, a summary of what happened in real estate. The Spring market was just getting started when the first lockdown occurred in March. Immediately, most activity ceased and most properties were removed from the market. The market started to creep back in April but somewhat normal activity was not apparent until the Summer. And what a Summer! Sales, and prices, were generally up especially for single family homes and the neighborhoods, all at the expense of the downtown high-rises and other dense areas. But the Fall saw a dramatic increase in inventory and stagnant or declining prices, although buyer interest did not significantly wane. Interestingly, in December there were many more properties than normal still on the market and many more sales than normal probably because people could not travel or attend holiday parties and so kept up with their house searches. Keep this abnormal December in mind, however, as it means this year's statistics cannot be directly compared with last year. Let's take a look at where we are statistically.
For all residential properties, the median sale price was $1,330,210 in December (2.3% higher than last year), but about $170,000 down from June's peak prices. Since the rest of the Fall sales were also significantly down from June, this is a downward trend (even though it can, of course, be reversed in the coming Spring).
Single family homes were up 9.2% in December to $1,583,500, but again that number is well below the $1.8m peak in June. Although it is a steady increase from previous end of year numbers, it does seem low given the tepid Fall market and that there were a significant number of sales.
Condo/TIC/coop median prices reversed November gains and were down 8.2% to $1,100,000. This is the same median price as May 2020 at the end of the lockdown drop-off, and lower than any December since 2016.
What does all this mean? It is fair to say that condo prices generally have fallen (with the caveat that this is a median, and certain types of condos in some parts of the city have actually increased in value). Single family homes are holding out better, but certainly no one will call 2020 a banner year. Does this mean that prices will further decline in 2021? Not necessarily, as past prices are not always predictive. But other statistics are troubling
Inventory: After the enormous increase in inventory beginning in the Summer and continuing through September, the number of active listings on the market did drop significantly at the end of the year. In December it stood at 1300, less than 1/2 September's total. But that inventory level is usually normal for September (generally the highest inventory month). That is, after the Fall selling season, we still had as many properties as are normally on the market at the beginning of that season. Of course, the seasonality of the market has been profoundly disrupted, but that is still a lot of property to sell through rolling into the Spring.
New Listings: On a brighter note, new listings did drop in December to a close-to-normal December level of about 250. And sales rose dramatically, almost double the level of last December. These brisk sales do raise some hope that prices will stabilize or rise in the Spring. But the carryover in inventory (since the drop in December is somewhat attributable to people taking properties off the market to return in the Spring) is significant.
Overbids: San Francisco home buyers are used to bidding over the list price for property. But that practice has certainly slowed, with the median overbid standing at about 0% since May. This may be attributable to agents pricing properties closer to the expected sales price (perhaps because the lack of open houses prevents a "frenzy" atmosphere) but I think it is more likely that increased inventory stymies the intense competition - and resultant overbidding - we are used to.
What do I expect for the Spring market? January's statistics do not depart from this story, although January is not a good month for statistical analysis due to very low numbers of sales. I think it would be foolish to think that we will not have above average inventory as we move into the Spring. So buyers will have choices and, in general, buyer psychology has shifted towards a measured approach where all aspects of the property (location, amenities, "feel" and price) must align with reasonable expectations. That is, buyers are less likely to compromise. But this is all a relative shift. San Francisco only briefly moved into "buyer's market" territory at the beginning of the Fall and is now back in clear seller's market territory with only 3 months of supply. But the supply will likely increase again and both buyers and sellers can expect that prices will not significantly increase (or decrease). In most of the United States, we would call this a stable market. Here, it feels like a down market because we are so used to wildly constrained supply and concomitant overbidding.
Anecdotally, most agents are reporting they have buyers in droves. Attractive properties, even condominiums, are receiving multiple bids and selling quickly and over asking. This may be due to buyers continuing to shop while they wait for a "normal" life to return, as well as the psychological need to get into a comfortable home as we face probably another 6 months or more of COVID-19 restrictions, at some level. I would expect buyer interest to continue, and for sellers to take note and bring their properties out to capture sales - and prepare those properties to appeal to the right set of buyers. As always, it will be important to be on top of the market week by week as more inventory comes online and to track how everyone is reacting in these turbulent times.
Finally, I always like to remind my readers that none of the above is directly applicable to your situation. Different properties in different neighborhoods may or may not follow the overall trends. You need an experienced, full-time agent to advise you on the current value of a property and how to but it or how to position it for the best sale. I'm always free to talk - call me!
Neighborhood Statistics
What happened in the different neighborhoods? First, a look at the Bay Area more generally. 2020 saw fairly significant increases in prices outside the city. The East Bay became somewhat of a frenzy with multiple overbids and very fast sales. Marin and the Peninsula saw similar craziness. All of this was, no doubt, driven by the realization by some that they would not have to commute, at least for awhile, and that they would really like a yard and more space. But the city did not suffer as much as some of the more dramatic news coverage would indicate. To be sure, rental rates were way down, more than 20% on average. No doubt this affected 2-4 unit building sales. And properties with "problems" that made them not attractive to people looking for a better "home" also suffered. But none of these general trends are true everywhere. That is why we look at the neighborhoods, to try to glean some knowledge of where the market might go next.
The most interesting statistic is how different areas are showing a different long-term trend. Most of the city peaked in terms of median price in 2019. But some areas saw all-time record sale prices in 2020, including apartment-heavy District 6 (Lower PacHts, Hayes Valley, Western Addition, NOPA), reaching $1,475,000 median price in April 2020. Maybe people were looking for the predominantly older apartments with more space indoor and out. This theory is supported by District 10's record high median of $1,122,000 in August 2020, no doubt because people want a house with a yard.
Not surprisingly, denser areas with more condos saw very high inventory increases peaking in October 2020. Three were above 75% over normal (in December) - District 6, 7 (Marina, Cow Hollow, PacHts) and 9 (SOMA, Mission, Bernal). Over the year, District 9 had, by far, the biggest increase in inventory. The lowest inventory is in the house heavy districts of 1 (Richmond), 2 (Sunset), and 4 (West of Twin Peaks).
Another trend of 2020 was the convergence of several very different neighborhoods in terms of price. District 1 (Richmond), 4 (West of Twin Peaks) and 5 (Haight, Castro, Noe Valley) are all now at basically the same median price. This reflects a downward trend for District 5 and upward for the other two. We will see if this turns around the District 5 re-establishes itself as clearly the second most expensive area (after District 7).
The most significant price decreases are certainly in District 9 (SOMA, Mission, Bernal) and 8 (Russian/Nob/Telegraph Hills, North Beach, Civic Center). The latter saw the steepest decline in December, down more than 15% to a new low of $965,000 median price. Both these areas are filled with apartments and close to downtown jobs - that now are mostly work from home jobs - plus access to now-closed restaurants and nightlife.
The diverse psychologies that seems to be slowly taking hold here at the beginning of the year are as follows. A lot of people who are committed to living in the city are furiously searching for bargains, even in the areas (like SOMA) that suffered most during 2020 and are certainly not "back" yet. At the same time, the trend of looking for space and separation from neighbors is continuing (as it did throughout last year). Both these notions are driving demand and a sense of urgency, especially because interest rates are also historically low. The big unknown is how many people will return to working downtown and when. Some are trying to get ahead of that trend, because once Salesforce and other large employers announce a policy requiring return to the office, the brutal commutes will again encourage downtown (and nearby) living. When will that be? Hard to tell, but I constantly look for signs of resurgence.
More statistics on my website: www.danslaughtersf.com. (Note that the statistics cited above are rolling 3-month averages to account for the relatively small number of sales in a particular district per month.)
GROUNDHOG DAY IS HERE!
After 2020, we could all use a great prediction for this year, and why not just wish for a mild Winter? So Groundhog Day is welcome this year. Seems achievable!
The holiday is rooted in the Christian celebration of Candlemas, when people would bring their candles to churches to be blessed. But even earlier traditions - the Roman Februa candle cult and Celtic traditions - may have inspired the practice. Eventually, the holiday was seen as predictive - if the day was sunny then Winter would continue, but if cloudy then Winter was over. Still later, Germans began watching hibernating bears, and then later hedgehogs or badgers, to make the prediction - introducing the idea that if the animal could see his shadow it would be a long Winter. German-Americans continued this tradition, substituting the groundhog since there are no hedgehogs in North America. Now the world's attention is focused on Punxsutawney, PA and as a completely unscientific (and silly) approach to predicting the weather, it somehow seems appropriate in these crazy times. Let's see how the groundhog does (virtually, of course). Check it out here.