Real Estate in the Age of COVID-19
A lot has changed in a month. The COVID-19 pandemic rages on with hospitals in some parts of the country overwhelmed. San Francisco has so far avoided a crisis situation, but we must all keep avoiding unnecessary contacts so we can slow the spread and "bend the curve." The Bay Area issued a "shelter in place" order in mid-March, followed by the state of California and now much of the country. People are working from home, or have been furloughed, and new social distancing rules have altered daily life for everyone. The Fall election has been clarified with Joe Biden as the presumptive Democratic nominee set to face Mr. Trump. The economy has taken a dive and Congress has stepped in with a stimulus package. The news seems to change every day and everyone is frightened and unsure of the future.
Many people have asked me about how the real estate market is adapting to the current environment so first I will explain how we are functioning. After some clarifications issued in the past week from state and local government and our Realtor associations, the rules are mostly clear. Agents (and ancillary professionals such as escrow officers and lenders) have been designated as "essential" workers but the sales process has been altered. Open houses of any kind are forbidden. We are attempting to show property virtually - with videos, 3D tours and FaceTime - for those still in the market. Some agents are allowing one-on-one tours to qualified and serious buyers of vacant properties with strict sanitation requirements (masks, distancing and cleaning before and after), but that practice is not universally approved. Most construction projects, including preparation of properties for sale, have been halted. So the properties on the market are those that were there before the slowdown or were already prepared. Escrows are closing electronically, with adjusted appraisal and inspection protocols. We all expect that some of these rules will change as the weeks go by and the medical situation becomes clearer.
Why would anyone buy or sell now? Some people need to move, either because of a job change or personal situation that cannot wait. Certainly some are also financially in a bind; a good example is a seller who has already bought a replacement property and needs to sell her old house now. Or someone who has lost their job and can no longer afford their mortgage. Home is so integral to our lives - perhaps now more so than ever - that it cannot always wait even for the end of an epidemic.
That said, the market has certainly slowed and many have decided to wait until things are more settled before making a move. Others see this time as an opportunity to obtain a property, taking advantage of super-low interest rates and perhaps a discounted sale price. It all depends on perception of where the market will go from here, a consideration in normal times but now perhaps heightened by fear that we will suffer a prolonged downturn that could drive San Francisco's famously resilient prices down.
No one can predict whether this will be a pause of some months, an abrupt turn in the market or something in between - now or ever. Only time will tell. But I advocate for a calm approach. Take each day or week as it comes, don't watch the news all day, stay aware of the positive things in your life and that of your loved ones and most of all know that this too will pass and we will come out on the other side stronger and happier and still here in our beautiful city.
I am always happy to discuss your situation and the market - or anything else - so never hesitate to drop me a note or give me a call (415.531.2800).
First Quarter Statistics
With the first quarter's sales reported we can look back at how the Spring market was shaping up before the pandemic descended upon us. Keep in mind that sales closed in March reflect contracts signed in late February and early March, so most of these statistics are not particularly useful in understanding how events in the last 3 weeks have changed things.
The median sale price for all properties in March was $1,450,000, up 3.9% year over year and essentially the same as the previous all time high. Taken alone, this would seem to indicate that we were in for a healthy up Spring market. Single family homes performed worse than condos/TICs/coops, but high-end luxury homes are quite seasonal - sales in February and early March are skewed toward smaller and less-expensive properties. The per square foot price was almost at its highest level ever in March. 60% of properties sold for over their list price, not that far off from the 70% rate seen in accelerating markets of the past.
The most interesting statistic is the number of active listings (inventory) which normally ascends steadily throughout the Spring as houses pour onto the market to capture buyers drawn by good weather, receipt of bonuses and tax refunds, and to make moves ahead of the Summer vacation season. But March's inventory plummeted, down almost 50% from last March. The number of sales in March were down also, but "only" by 18% year over year. The prevailing sentiment in the agent community at the start of the SIP order was to pull properties from the market to avoid having them tainted by "days on market" measures. Recently some have been returning as active listings in recognition that the buying public will not view a long market period as a negative in this environment. Nevertheless, I would expect the number of homes on the MLS and the number of sales to decline in April significantly. One side-effect is that off-market offerings (through various agent-only websites or via email and personal agent relationships) have ticked up.
In summary, it appears that the market before the SIP order was doing quite well and set up to see healthy appreciation. That is all in the past, however. Will prices stall or go down once the pandemic fades and the market returns? That is dependent on how much of an economic hit we take, how long it lasts, the government's willingness to prop up the job and stock markets, and how San Francisco in particular fares (since capital generally flees to safety in troubled times, and real estate - especially in areas with stable systems and forward-focused industry - is generally seen as a safe investment). Again, time will tell.
Be Counted!
While most of us are at home binging on TV and carbs, don't forget to fill out your census form (either in writing or online) that you should have received in the mail (or, if not, go here). The census seems dull but it is very important as it is the best measure of who lives in the country and where. It is used to allocate Congressional seats and many government program expenditures. So, if you want your share, participate!
The census is also a legal requirement. It is mandated by the Constitution and federal law and it is illegal to fail to return your census form. And you need not worry about privacy. The information is aggregated before being released and the contents of the individual forms sealed for 72 years. For a fascinating look into the past you can explore the responses to the 1940 census, but nothing after that! So return the form and be counted!
Easter Bunny
And now for something completely different! Everyone knows that Easter's celebrations are tied up with the more general celebration of Spring with its theme of the return of life after the dead winter. But where does the Easter Bunny come from?
Like our other favorite holiday character, Santa Claus, the holiday rabbit derives from a German tradition dating to before the 17th century. The hare brings colored eggs, candy and other presents to good children (like St Nick, the bunny was originally judgmental, passing over "bad" kids). The egg tradition pre-dates Christianity as an obvious sign of fertility; they are decorated with colors to bring the life of flowers inside - another pre-Christian practice in parts of Europe. But medieval Christians also included them in the Easter celebration because they were forbidden during Lent (the 6 weeks before Easter). The bunny's ties to the Spring may have to do with its high reproductive rate.
As with most traditions, the US has made the Easter Bunny into a fairly secularized commercial commodity, with Reese's peanut butter eggs the most popular seasonal candy vying with Peeps, baskets, fake grass, flowers, huge chocolate bunnies and colorful bonnets as symbols of the season. But the Bunny remains supreme; he (along with the Tooth Fairy) is an "essential worker" even during the lockdown. Hop hop!