by Kathleen Pender, Aug. 17, 2020
The coronavirus continued reshaping the Bay Area housing market last month, as demand for homes was weakest in San Francisco — especially for downtown high-rise condos — and strongest in the North Bay as buyers sought more space and widespread working from home continued.
July existing single-family home sales were strongest year-over-year in Sonoma and Marin counties, each up roughly 36%, and in Napa, up 28% from the prior year, according to a California Association of Realtors report issued Monday. They were weakest in San Francisco, up 1.4%, and Alameda, up 6.5%, the report said. Overall, Bay Area existing single-family home sales were up 14.8% year over year and up 26.1% from June.
“The contrast between San Francisco and some of the more suburban markets is dramatic,” said Patrick Carlisle, chief market analyst for the Compass brokerage firm.
After falling sharply in April and May as strict shelter-in-place orders nearly froze the market, Bay Area home sales surged in June and continued rising, but not as sharply, in July. Relaxed rules on showings, record-low mortgage rates and less economic uncertainty coaxed buyers out of hibernation.
The median price for paid for an existing, single-family home in the Bay Area rose to $1,050,000 in July, matching its all-time high set in May 2018, according to the Realtors Association. That price was up 5% from June and up 10.5% from July of last year.
Prices rose the most year-over-year in Marin (23%), Contra Costa (18.9%) and Napa (14.2%) counties. They rose the least in San Francisco (4.1%), Santa Clara (6.3%) and Solano (7.5%).
The report excludes sales of condos, newly constructed homes and properties that were not advertised on a Multiple Listing Service. Condos make up a much larger chunk of sales in San Francisco than other counties.
“San Francisco condos are definitely hurting,” Carlisle said. The single-family-home market in San Francisco “is basically similar to last year, but that is not digging it out of the hole made in April, May and June as far as sales. Other markets are doing, generally, from pretty well to stupendously crazy heated insanity.”
King, who works mainly in Petaluma, said, “We are inundated with people from outside of Sonoma County coming up here, from San Francisco, the South Bay, East Bay. I just put into contract someone moving from London,” to be near family, he said. The London buyer is paying almost $200,000 over asking price for a place in Petaluma. What buyers want most “is more space,” he said.
“On the flip side, I have three sellers moving out of state, to be near family or to find a lower cost of living,” King added. He has two clients moving to Idaho, two to Tennessee and one to Nevada.
In a report last week, Carlisle ranked 12 markets by the change in the percentage of active listings going into contract in June and July compared to the same period of last year. By this measure, the “hottest markets” were Monterey, Santa Cruz, Sonoma and Napa. The coolest market was San Francisco condos, followed by San Francisco homes.
“The largest condo market in San Francisco — the greater South Beach, SoMa, Mission Bay, Civic Center area, dominated by large complexes and high-rise buildings, including continuing new construction projects — is seeing the weakest conditions,” Carlisle wrote.
In July, there were 1,169 condos for sale throughout San Francisco, said Gabrielle Bunker, a principal agent with Redfin. That’s nearly twice the number, 617, that were for sale last July. The number of single-family homes for sale in San Francisco was 597, up nearly 30% from 466 last July.
These numbers exclude some new-construction condos, because many developers don’t put them on a Multiple Listing Service, or may only list a few for a whole project.
“Because of the pandemic, people are not loving these high-rise, high-density environments,” Bunker said. Before, people were willing to put up with congestion south of Market because they were close to the Caltrain station. Now, with most offices closed, many are no longer commuting to Silicon Valley and Caltrain is fighting for survival.
Most of Bunker’s clients moving out of the city need more space for kids or proximity to family for childcare. The need for childcare is acute in high-priced areas where couples were more likely to have two jobs.
Joe Giovanetti is putting his condo in the Castro on the market this week. He and his wife had planned to stay in the unit, where they’d lived for three years, for at least two more. “We love it because of all the conveniences of the city. We lived next door to a charming flower shop,” he said.
Giovanetti could work remotely before the pandemic, and his wife actually prefers being in an office. The only reason they’ve moved to San Diego is because their daycare center shut down and they need his wife’s parents to watch their two-year-old son. They’re subleasing a place from a couple who moved to the East Coast to be closer to family.
Deborah Odier, a Coldwell Banker agent in San Francisco, said there are “well over 100 condos, (tenants in common units) and flats” in San Francisco that are being marketed as ‘coming soon.’” August “is a gearing up month. September is when people launch inventory for the fall market.”
Although “it looks like there is an excess in the condo market, there will be plenty of condos still highly marketable.” Some neighborhoods are still desirable and “not everybody can afford a single-family home.”
Shanna Wagnor and her husband Sean Lewis put their two-bedroom, two-bathroom condo up for sale last week. They’ve purchased a larger home with a yard in Piedmont, to have more space, better schools eventually for their baby daughter Emery and to be closer to family in the East Bay. “We made multiple offers before we got this one,” Wagnor said.
She now works remotely for a San Francisco tech company. He works in finance and travels a lot. “Because of the pandemic, the commute doesn’t matter. A lot of the things in the city we love, the restaurants and cafes, are all closed at the moment,” she said.
Although the condo market has softened, theirs “feels more like a home,” Wagnor said. “Our agent said Pacific Heights ZIP codes should still have some draw.”
Paul Zeger, a principal with Polaris Pacific, which markets new condos for developers, said that when the pandemic hit, “we had about 250 homes in San Francisco in escrow ready to be delivered as soon as construction is finished. Just about all of them are going forward.” The number of buyers singing new contracts, however, has slowed.
In California, “you can only hold 3%” of the purchase price as a deposit,” he said. Buyers who back out could lose their 3%. The fact that most buyers have not is a sign “they have a high level of confidence in the marketplace” over the long term.
Adam Gavzer, a Compass agent in San Francisco, said he hasn’t seen many price cuts on new San Francisco condos, but developers “don’t publish their pricing very much.” They prefer to “negotiate on incentives, like upgrades, credits toward (homeowners association) dues, payments towards closing costs, credit for parking or storage for a year or two. I haven’t had a lot of buyers for those towers.”
He has been trying to sell two existing condos in South Beach for about two months. “I am experiencing a slowdown of phone calls and emails regarding them. Yes, there is a trend away from communal living as people are concerned about infection. There’s a shift toward single-family homes or moving to the East Bay, South Bay, North Bay. There’s a strong appetite for outdoor space,” he said. If they’re looking at condos, they want one a balcony or terrace.
Gavzer just cut the price on 650 Delancey St., #417, to roughly $1.5 million from $1.6 million. “That prompted a bunch of calls. We had a couple of showings,” he said. One buyer was ready to write an offer but “when they revisited his finances, he couldn’t afford it.”
He said the condo market “feels kind of stuck right now. If you are a seller, you’re being told you might have to discount. The reality is, you feel like you’re not getting full market exposure without an open house and broker tour. So why should I take a discount. Buyers feel, if I’m willing to purchase at this time with the risk that the market might go down, I want to build that into my purchase (price). You have this frozen market right now in condos while people try to figure this out.”