Coronavirus deeply affected the housing market in San Francisco during the months of April and May, with real estate experts predicting a fall not seen since the 2008 financial crisis. Officials feared the worst.
But real estate has proven to be much more stable than it was during 2008, and things started to return to a normal level in the month of May.
However, it’s still important to understand the current trends before making a major investment in real estate. Here is a quick look at the future of San Francisco property prices under the current pandemic.
Current trends in property prices
One of the most important current trends is that real estate supply levels have begun to flatten throughout the city.
Supply levels sunk at the beginning of March as people were unwilling to sell during the pandemic and continued to sink during the month. However, we have seen this curve flatten in April and May, indicating that the number of active listings hit its floor likely falling as low as it will go. Indeed, there has been an uptick in inventory as of late.
The most important thing to note is that there are still plenty of people out there willing to sell their property. While COVID hit hard, it didn’t break the strong San Franciscan real estate market.
Listings under contract have also increased in the months since shelter-in-place laws went into full effect. During the last week of March, listings under contract hit a low with only 11 single family homes under contract.
Now, the market has settled, moving to nearly three times that amount in May. This still isn’t yet back to pre-COVID levels, but it’s much better than the downturn in March. This upturn indicates that people are learning to adapt to life under COVID-19, using technology to aid them in listing their homes.
The last trend that we’ve seen in the past month is that sellers have avoided selling with price cuts during the crisis. While buyer demand was low, sellers helped sustain the market by refusing to sell lower than market value during the month of March. There are recent indications however that show a crack in that strength as more sellers are doing price cuts as we progress through the summer months.
Housing fundamentals were strong before the crisis and will help stabilize the market and navigate these tricky times. Going forward, we can expect more growth in the market with buyer demand ready to pick up as fears of a price drop lessen.
For the first time in over a year, the sale-to-list ratio dropped. San Francisco houses are usually listed lower than what they sell for, but this changed in the last few months. This indicates that sellers are making (small) concessions for the first time in over a year.
One thing to note about this though is that the sample size is small as fewer houses were sold in March and April, so this number could be an outlier. We’ll need to keep track of this trend to see if it continues in the ensuing months.
COVID-19 has hit the real estate market hard, but solid fundamentals have sustained the initial blow and even regained some lost ground. We’ll continue to keep track of any developing trends and will report on them as soon as we can.
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