Coronavirus and the Bay Area Housing Market

897 cases of the coronavirus have been confirmed in California as of March 18th. 412 of those cases are in the Bay Area. Earlier this week, local officials announced a “shelter in place” order for Bay Area counties, in hopes of reducing the further spread of COVID-19.

Although some “essential services” such as home construction are allowed to continue operations during the Bay Area shutdown, the real estate industry was not extended this exemption. For the time being, the hottest neighborhoods in the Bay Area housing market will be saying goodbye to the hoards of homebuyers viewing homes and parading through open houses.

This is coming at a time when the Bay Area home market was rebounding. In the first two months of 2020, demand for Bay Area homes was high and housing inventory, low. These market trends were driving Bay Area home prices up after growth had slowed down for some time.

The impact on the Bay Area real estate market is slowly unfolding as experts begin to weigh in and share their Bay Area housing market predictions for 2020.

Current State of the Bay Area Housing Market in the Face of COVID-19

Looking at a NAR Flash Survey of members in the California housing market as a whole (March 9th -10th), the majority were reporting that buyer and seller interest in the residential real estate market had not been severely affected across the state:

70% saw no change in buyer interest
83% reported that there was no change in the number of homes for sale
76% reported that sellers were not pulling listings off the market

However, a new survey conducted on March 16th (which does not isolate the California housing market data, but rather just responses from NAR members in US locations with “confirmed or presumed COVID-19 cases”) shows a decrease in interest:

41% saw no change in buyer interest
65% reported that there was no change in the number of homes for sale
56% reported that sellers were not pulling listings off the market

Real estate market data on the Bay Area housing market is not available just yet. However, local real estate agents are revealing a mix of Bay Area housing market trends amid the coronavirus pandemic:

Some sellers are rushing to complete a sale, as they fear a Bay Area housing market crash or downturn.
Other sellers are pulling listings, fearing a near-future drop in Bay Area home prices.
Because of the prevalence of the tech industry, many Bay Area home buyers typically rely on the stock market and the sales of stocks to cover the down payment of a home. With the current situation of the US stock market, these buyers are sitting on the sidelines.
Other buyers who have cash on hand to pay for a Bay Area property or at least cover a down payment are rushing into the real estate market to take advantage of motivated sellers and historically low mortgage rates.

Redfin initially confirmed that there is a slowdown in activity in the Bay Area real estate market. However, recent data from Redfin revealed that listing activation is actually up in the Bay Area by 6% in the last week. Daryl Fairweather, the chief economist at Redfin, says that the demand in the Bay Area real estate market is still high, although she acknowledges that there is a lot of looming uncertainty as no one can predict how long this situation will last.

Other real estate agents have noted that there has been no slowdown in activity in their areas in the Bay Area real estate market. This is possibly due to the fact that many are offering digital alternatives to in-person transactions. From virtual tours to digital closing, many real estate transactions are taking place completely online, allowing for some Bay Area home sales to continue. It seems to be mostly first-time homebuyers whose confidence has been high thanks to the strong local economy in the Bay Area. They have not been deterred by the coronavirus pandemic and, as mentioned, some aren’t letting the opportunity of low mortgage rates pass them by.

Bay Area Housing Market Predictions 2020: Experts Weigh In

How will the Bay Area housing market 2020 fare in the face of the coronavirus?

Although the beginning of 2020 brought with it a positive Bay Area housing market forecast, let’s take a look at whether this has shifted significantly in the eyes of local experts:

The Bay Area Housing Market Crisis May Be Exacerbated

Although it was giving a boost to Bay Area home prices earlier this year, the low housing inventory is an issue in the location. Even with the shelter in place order, residential real estate construction – specifically housing that is labeled as market rate, affordable, and mixed-use – is still underway. Any commercial real estate projects, however, have been postponed.

The fact that home construction has been allowed to continue in the Bay Area real estate market is positive news. In the San Francisco housing market alone, over 10,000 units are currently under construction. But those closer to the work say that even though they have been allowed to continue, they still forecast some possible issues.

Companies and workers are taking all the necessary precautions to minimize the risks of catching and spreading the coronavirus. But even so, if workers were to get sick, it could cause a shortage of labor. Depending on the extent, this could slow down residential construction severely in the Bay Area housing market.

If the coronavirus continues to spread, there could be problems with acquiring building materials. This is despite the fact that the ultra-low interest rates do make these materials much cheaper and reduce the costs of residential construction significantly.

Another issue is that banks are already holding financing for some projects as they wait to see where the current situation leads.

To sum up, the general forecast is that, if the situation continues on this path, the Bay Area’s housing crisis could worsen. However, if the shelter in place order is effective and people remain at home in isolation, it’s more than likely that in around two months’ time, banks will begin to write loans again and construction will continue as planned, helping to ease the housing shortage as we move forward in 2020.

There Will Likely Be a Shift to a Buyer’s Market During This Time

Some local real estate agents predict a drop in Bay Area home sales, an increase in days on market, and a drop in Bay Area home prices. In addition to the fact that some buyers will sit out of the market for now but there are still active listings, it is likely that, during this time, the Bay Area real estate market will fall into a buyer’s market.

If you’re hoping to cash in on the low mortgage rates and take advantage of the buyer’s market in the Bay Area housing market, here is Mashvisor’s rental property investment data on the largest cities in this location for March 2020 to help you make an informed decision:

San Francisco Real Estate Market

Median Property Price: $1,758,948
Price per Square Foot: $1,118
Price to Rent Ratio: 32
Traditional Rental Income: $4,613
Traditional Cash on Cash Return: 0.6%

Top San Francisco Neighborhood: Corona Heights

Median Property Price: $1,707,600
Price per Square Foot: $1,074
Price to Rent Ratio: 18
Traditional Rental Income: $7,874
Traditional Cash on Cash Return: 2.2%

Oakland Real Estate Market

Median Property Price: $832,410
Price per Square Foot: $551
Price to Rent Ratio: 24
Traditional Rental Income: $2,949
Traditional Cash on Cash Return: 1.1%

Top Oakland Neighborhood: Brookfield Village

Median Property Price: $430,314
Price per Square Foot: $453
Price to Rent Ratio: 12
Traditional Rental Income: $2,900
Traditional Cash on Cash Return: 3.7%

San Jose Real Estate Market

Median Property Price: $1,007,585
Price per Square Foot: $646
Price to Rent Ratio: 28
Traditional Rental Income: $3,056
Traditional Cash on Cash Return: 0.8%

Top San Jose Neighborhood: Edenvale – Seven Trees

Median Property Price: $621,898
Price per Square Foot: $480
Price to Rent Ratio: 14
Traditional Rental Income: $3,654
Traditional Cash on Cash Return: 3.5%

Keep in mind that it’s best not to make rash real estate investment decisions during times of turmoil. Instead, approach the real estate market with caution and use data and analytics to make confident, low-risk choices. Mashvisor wants to ensure investors are making the right moves during this time. Use promo code BLOG15 for 15% off all Mashvisor plans.

The Bay Area Real Estate Market Will Not Crash

There is a lot of speculation as to whether the housing market will crash. Looking at the Bay Area housing market trends and the trends across the US as a whole, it is not very likely that the market will crash. Many experts agreed with this forecast for the Bay Area real estate market 2020:

Local real estate agent, Cece Blase, believes that the local industry may fall on hard times and agents will have to up their game in prospecting. At the same time, she commented that low interest rates and low supply will likely keep the Bay Area housing market from hitting a serious downturn during this time.

Chief Market Analyst of Compass, Patrick Carlisle, also commented that if the Bay Area can get through this crisis quickly and the economy manages to recover, then the real estate market will bounce back fast. He wants to remind players in the Bay Area of recent financial crises like oil prices tanking in 2016 and the plunges in the stock market and interest rate of 2018:

If this crisis passes relatively quickly, I believe it will be forgotten quickly. People have short memories. People don’t even remember mid-2015 or 2018 anymore. If it continues for an extended period, getting worse, wreaking widespread economic damage, that is obviously going to impact the real estate market.

Final Words

Essentially, the fate of the Bay Area housing market 2020 will rely heavily on how the local and national economy pulls through. And because the economy was at a strong point and the Fed Reserve is already making moves to support economic activity during this time, it’s possible that the economy will bounce back, encouraging a quick rebound in the market.

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The Effect of the Coronavirus on the Bay Area Housing Market