San Franciscans are accustomed to ever-higher real estate prices and scant amounts of housing offered for sale. Two years into the pandemic cum endemic, sellers’ motivations, buyers’ demands, and open house experiences continue to evolve.
Between 2020 and 2021, the City’s population dropped by roughly 1.8 percent, 15,435 people, according to California Department of Finance estimates. Common thought is the exodus was driven by the desire for more space, closer proximity to family residing out of state, and the travails of the San Francisco Board of Education, which left students out of the classroom during much of the period. Adoption of remote-first labor policies, along with the flexibility to work from anywhere in the country, or world, helped catalyze outmigration.
“The desire for more outdoor space was a big driving factor,” Wendy Watkins of Corcoran Global Living said. “I had clients leave to be closer to family on the East Coast, some heading to the East Bay where there is a larger inventory of single-family homes, and some fast forwarding their retirement plans of moving to Sonoma, Napa, Tahoe, or even out of country.”
“As San Franciscans adapted to working and schooling at home, the pandemic sharpened demand for single family homes and condominiums with more bedrooms, home office space and outdoor areas,” added Tim Johnson of Compass.
In spite of the exodus, there’s no dearth of interested buyers with deep pockets. San Francisco remains the nation’s most expensive housing market among major American metropolises, thanks in part to the emerging biotech economy. According to Melinda Lee of Corcoran Global Living, the City is closely followed by New York, with San Jose in third place, Los Angeles in fifth. San Francisco also has the most luxury real estate listings, residences offered at more than $1.3 million in excess of median prices.
According to Johnson, demand is particularly strong on Potrero Hill, where single family homes sales more than doubled in 2021 compared to 2019, jumping from 35 to 74 houses. Average sale prices for single family homes was flat between 2020 and 2021, at just under $1,100 per square foot.
After falling in 2020, average prices for condominiums in 2021 rose to $1,271,668, roughly the same as pre-pandemic levels. Condos saw a similar demand burst as single-family homes, with 73 sales in 2019 jumping to 150 in 2021. Transaction volume in Dogpatch and Mission Bay also grew substantially last year.
“The real estate prices in Potrero and Dogpatch continue to hit new highs,” said Watkins. “These are two very desirable neighborhoods, and with low inventory, and the competition for buyers is high. We are seeing most properties, both single family homes and condos, with multiple bids.”
“As homeowners leave the City, property prices adjust according to recent sales in an ever-upward trend; new sales stand on the shoulders of the previous,” Lee said. “This trend will only cool when there’s more inventory to choose from and buyers have more options than bidding on the few houses available in their price range.”
The pandemic prompted realtors to change how they conduct business.
“The days of sitting at office desks, sorting reams of paper contracts and doing in-person interviews have given way to a streamlined, online approach where much of the business is conducted virtually,” said Lee. “Agents are far more mobile; properties are shown virtually in many cases; and communication methods became more fluid.”
“We had to broaden our online presentations and property sites, so potential buyers could view the property’s photos, videos, and floorplan before viewing it in person,” said Susan Olk, also of Corcoran Global Living.
“What it mostly did was cut out neighbors and people just browsing out of curiosity.”
Lee recommended that buyers have a “whistle-clean offer package,” with all disclosures signed, and mortgage preapproval or a fully underwritten lender letter and proof of funds included.
“Cash is king in this environment, which usually means an early close of escrow, and eliminates the need for appraisal. More than 50 percent of accepted offers are now fully non-contingent, with no inspections other than those provided by the seller,” she noted.
Moving quickly is key when inventory changes daily. Watkins has observed a renewed interest in urban living as people acclimate to the new normal.
“We are seeing homes selling in the first week or two, so you need to be available to preview them before they are gone. It’s hard not to fall in love with all of the wonderful homes in our neighborhood!” she said.
Sellers must also remain vigilant, especially with the spring selling season around the corner, including determining how much to invest in home preparation through painting, refinishing floors, landscaping, and staging.
According to Watkins, “Sellers should make sure they have a trusted real estate advisor who understands this fast-paced market and can help prepare the home to maximize sale price.”
Johnson recommended that sellers do their research.
“Before you list your home, learn market values in your neighborhood by visiting open houses. How does your home compare with them?” he advised.
Even with the top dollar sellers are commanding, buyers can also be winners. Olk believes it’s never a bad time to buy in the City.
“In my experience selling for the past 40 or so years, San Francisco prices tend to hold steady or keep going up over the years. Real estate has historically been an excellent investment here over time.”
Photo (top): 794 Rhode Island Street. Photo courtesy of Isabelle Grotte and SF Association of Realtors.
