What is Next for the Bay Area's Housing Market?

Prior to 2020 Bay Area exodus really did not prove to be a fact.  Some 3% of the population moved prior to 2020  While many talked the story about moving for various reasons.  The climate, job opportunities far outweighed the cost of living. (More to follow)

March 2020 the Pandemic created many changes in housing.  The ability to work from home created an attitude of staying in the Bay Area.  The first attitude to be affected was the rental market.  Rents in San Francisco plummeted.  The move helped areas outside the Bay Area to see demand and increases in home prices.  Besides San Francisco San Jose dropped in rental prices as did other communities within the Peninsula.  The result was not in the lower income housing rental.  They remained the same as the ability to move severely restricted an exodus as the ability to find work anew made the lower income families to stay put.

What has resulted was the decline in the luxury end of the market.  Laurence Du Sault in the January 15, 2021 article from the Bay Area News Group wrote of the deals that abounded in the Luxury Rental market.  "Three months free rent on a 2-bedroom apartment with a pool in West San Jose.  A Lake Merritt studio in Oakland at a 50% discount for the first six months.  Two months of "complementary rent plus a $2000 Mastercard gift card on a Luxury High rise renting for $4375 per month in San Francisco's Potrero Hill neighborhood".  Another deal is a Russian Hill apartment with two months free rent and no security deposit.

Since March 2020 rents in San Francisco dropped 26.7%, Santa Clara County rents declined 17.8% and in Oakland down 14.2%.

A rental market as beaten up as this one certainly gives thought to bottom must be near.  It also bears watching if the exodus to other areas in the State of California and outside states stop with it. 

As the Luxury Market rental market has taken hits, the Affordable Housing market has not seen any weakness; in fact, it seems as strong as it has always been.

So where did all the renters go?  By this time in 2020 the real estate market was looking to be a bright year ahead.  It turned out to be a good year in the Bay Area Housing Market.  Buyers sought more space, especially private space.  Single family homes in the suburbs soared!  San Mateo County was the only county that the average home price decline 3% for 2020.  Experts are now seeing more demand for single family homes as rents decline and renters seek the home that can provide mobile work space with lovely backyards for Zoom calls.

Still thinking of leaving?  What are the best states to move to?

Jonathan Lansner of the Southern California New Group put a list together.  

He looked  at Cost of Living: Housing, Services, Goods.  No surprise California was the priciest place to live.  He looked at Opportunity and created a bottom line of what is the paycheck worth?  California came in second: Massachusetts #1, California #2, New York #3, Washington #4, Connecticut #5 and New Hampshire #6.  California's high grade is why 97% of residents did not move from 2017-2019.

Here is Jonathan's scorecard ot the Top 10 states to move to.

1. Texas, 2. Arizona, 3. Washington State, 4. Nevada, 5. Oregon, 6. Florida, 7. Colorado, 8. New York, 9. Idaho, 10. North Carolina.

Now before you call U-Haul and book your move here is what the future looks like in 2021.

Proposition 19 with all the negative commentary over the inherited values lost to heirs really provided a big help to a majority of tax savings for Seniors and Disabled home owners.  No matter where they move in California they take their tax base with them, no matter how much they pay for their new home! So if you are considering moving look elsewhere in the state; and as of April 1, 2021 your tax base goes with you.  Talk to your tax man, determine the new tax base in the county you are moving to and determine your savings.  This could be a better alternative than moving out of state.

In closing, the ability to have a new low interest rate mortgage now may only be a small window of opportunity.  The Federal Reserve "constant maturity",  yield of the 10- year bond  versus the Freddie Mac average 30-year fixed is flashing an aberration.  The recent 10-year surge to over 1% did not increase mortgage rates.  The mortgage bench mark fell to 2.65%, the 17th record low since the pandemic up ended the economy.  That is below the 2.88% rate when the 10-year bottomed in August.  This aberration emphasises to look to buy something in California.

Zillow is forecasting a yearly increase of 10.8% in zip code 94062, 10.2% increase in 94061, 11.8% increase in 94070, 10.3% increase in 94063, 12.1% increase in 95070, 10.8% increase in 95125, 9.7% increase in 94303, 9.9% increase in 94027, 11.8% increase in 94020, 9.7% increase in 94025, 10.2% in 94301, 10.2% in 96734, and 9.7% increase in 94065.

Buyers take note.  Low mortgage interest rates that are out of synch with the 10-year treasury bond and forecasts of higher home prices.  Presents a great opportunity!

Scientist are now saying the Winter Crisis for COVID 19 has crested and lower rates are forecasted.  The numbers all favor a return to normalcy and a strong real estate market in our Bay Area.