What the data says about the pandemic and Bay Area real estate
By The Flyhomes Research Team
We’ve seen articles saying that San Francisco is experiencing a mass exodus, with inventory rising and homes sitting empty as people move away from the city.
Anecdotally, we’ve worked with Bay Area clients who have chosen to move because the pandemic made them want more space and more distance from other people.
We’ve also heard that working from home gives people more flexibility with regards to where they live. Some clients consider moving farther from their offices, then realize the future is uncertain and commuting could become the norm again.
Does the market data support the idea that a mass exodus out of San Francisco is underway?
Based on the data points we analyzed, the San Francisco market is flooded with inventory. In July 2020, newly listed inventory was up by a staggering 110% compared to 2019. Cumulative supply has also been trending high since July.
The atypical data started in February, before stay-at-home orders were in place and the market took a dive in March. Given this, we can’t conclude that the pandemic is the sole reason for high inventory.
The majority of excess inventory is of one home type: condos. In August 2020, 86% more condos were listed than single family homes. It’s normal to see more condo listings in San Francisco, but not to this degree.
Similarly, inventory absorption rate (the ratio of sold listings to newly listed inventory per month) has been lower than typical since February, indicating that homes are sitting on the market. Single-family-home absorption didn’t see a significant downfall; condo absorption has been on a consistent downward trend, falling as low as 31% in July.
When we look at nearby areas, we see growth but can’t say definitively that people are flocking to these areas from San Francisco.
San Francisco Inventory
More homes are on the market. In February 2020, cumulative inventory outpaced the previous two years. It fell at the start of the pandemic in March, then rose and remained high compared to the previous two years from July 2020 onwards.
Many more homes were listed in the summer months than usual. Comparing the number of new listings per month in 2020 to the previous two years reveals unusual fluctuations with percentage changes as high 110% during July 2020 (1,083 listings compared to 517 in July 2019). Before the pandemic, in February 2020, there was a change of 38% (compared to February 2019).
Condo listings exploded. In 2018 and 2019, we saw relative consistency in the number of available single family homes vs condos. But in 2020, many more condos have been listed than single family homes. In February of 2020, condo listings outpaced single family homes by 47%. The height of the unbalance came in August, when 1.86 condos were listed for every single family home.
Homes are being left on the market. Looking at the ratio of sold homes to newly listed homes (inventory absorption rate), we see a dramatic decline in 2020. This ratio was hovering between 71% and 84% for any given month (Jan-Aug) throughout 2018 and 2019. The decline started in February 2020 (64%) and dropped to a low of 38% in September.
Single family homes have been selling consistently, though at a lower rate than usual. Looking at absorption rate limited to single family homes, we see the rate remaining fairly constant at 65%-78% throughout 2020 with a drop to 56% in September. In 2018 and 2019, the rate trended higher at 74%-100%.
Condo sales are fluctuating more wildly, trending downward. The absorption rate for condos tells a more dramatic story than that of single family homes. It fell to 57% in February 2020 and further dropped to 45% in June, falling to 31% in July then rising in August before falling to a new low of 26% in September. In 2018 and 2019, the rate stayed between 68% and 85%.
Fewer total homes have sold in 2020 than in previous years. The cumulative number of sold homes has consistently lagged year-over-year since March 2020. 2019 overall also shows a decline from 2018. Single family homes and condos see similar trends.
Looking into areas where possible inflow of population from San Francisco might have taken place, we studied two markets: Sacramento and Placer County.
- For the Sacramento region, overall listings decreased compared to previous years, but we see an upward trend for median sale price and sold price/list price ratio, which indicates the market has become competitive in recent months. We see a similar trend in Placer County.
- Data points reveal that the pandemic didn’t much impact these two markets.
- Through further market research, we found that the Sacramento real estate market is due for increased competition because of its limited inventory and increased demands (search for lower-priced homes, increase in population, low inventory level). The market will likely witness higher demand in the coming months.
Sacramento and Placer County Real Estate Data
Fewer total homes are on the market. Cumulative inventory (for all property types) in Sacramento and Placer County decreased year-over-year in 2019 and 2020.
Similarly, fewer total homes are selling. Cumulative sold listings have decreased over the past two years. Looking at the monthly numbers, we see 2020 lagging behind as well.
Homes are not sitting on the market. In Sacramento, the ratio of sold homes over newly listed homes (absorption rate) surpassed the previous two years in May 2020 and continued that trend through July, dipping in August and recovering in September. Similarly, in Placer County, the absorption rate surpassed the previous two years in April 2020.
Low supply is leading to competition and raising prices. Throughout 2020, the monthly median sale price of homes in Sacramento has been above 2019 and 2018 levels, and the gap is widening. Placer County sees a similar curve.
Homes are selling above list price more often. In 2020, the ratio of sale price to list price for homes in Sacramento has trended above the previous two years’ ratio throughout the year, with a widening gap in September. Placer County homes generally sell under list price, but they are trending closer to list price or slightly above beginning in June 2020.