Before buying an investment property anywhere, you have to know that specific real estate market’s current condition and its expected condition. This blog will analyze these factors for the San Francisco housing market 2020.
San Francisco Housing Market 2020: Expected Performance
Let’s start the San Francisco housing market forecast with a brief summary of basic real estate investment criteria. The data below has been gathered by Mashvisor’s investment property calculator. This tool provides the help you need when studying the performance of any US housing market. Before we dive into the San Francisco housing market, let’s take a look at some of the numbers for San Francisco real estate market trends:
San Francisco Housing Market Figures
- Median Property Price: $1,630,031
- Price per Square Foot: $1,051
- Real Estate Listings: 457
- Average Days on Market: 66
- Price to Rent Ratio: 30
- Traditional Rental Listings: 1,132
- Traditional Average Rental Income: $4,466
- Traditional Cash on Cash Return: 0.7%
- Airbnb Rental Listings: 7,661
- Airbnb Average Rental Income: $6,403
- Airbnb Cash on Cash Return: 1.7%
- Airbnb Occupancy Rate: 72.7%
- Walk Score: 71
What Do the Numbers Mean?
These numbers tell us things we already have a grasp on- namely, buying rental property in San Francisco is expensive right now. Furthermore, the average home sales price has increased by 4% since last year and is forecast to keep rising in 2020 (although recent reports show that the risk of a San Francisco housing bubble is down from previous years). The fact that the price per square foot is so high ($1,051) compared to San Diego for example, which has a price between $300-500 per square foot, is not shocking. San Francisco is known for its high cost of living and having a fairly tight inventory. These market trends are sure to continue into the next year.
Although it comes with a high cost, the San Francisco housing market rate of return can match that. Although the city average cash on cash return is low, the neighborhoods listed below will bring much better returns. So if you can afford to invest in a San Francisco real estate rental property, it will be a good investment in 2020. But let’s dive a little deeper beyond the data.
San Francisco Housing Market Predictions for 2020
The San Francisco Real Estate Market Will Continue to See High Competition & Development
Despite talk of a San Francisco housing market crash, the market actually remains to be very competitive. Although building permits in the area have stalled lately, some positive San Francisco real estate market trends are that the Bay Area still booms with signs of construction proving its development is still to come.
While the area suffers from a severe lack of housing, officials are looking to meet the need by 2025, with 3.5 million units. That means there could be up to 3.5 million San Francisco houses for sale in the near future. As a start, it is estimated that this year the overall Bay Area will add over 4,750 units by the end of 2019 in cities like Oakland, Milpitas, and San Francisco. This is a result of the growing technology sector and Google’s expansion in the area that will continue to make it an attractive real estate market for renters and ultimately a good place to invest in real estate.
To get ahead of the game in San Francisco real estate investment, you need to get your hands on those new units. To find the best real estate investments in San Francisco, search here. With the proper real estate investment resources, you can create good, profitable opportunities in this growing market.
Related: 5 Tips for Investing in the California Housing Market
A Strong and Stable Housing Market Is Forecast for 2020
San Francisco was ranked in the top twenty for “real estate prospecting, citing a growing local economy, young workforce, and a long-term sustainable market” by the Urban Land Institute. An overall strong economy with job opportunities that attract youth continues to prove San Francisco property to be a steady real estate investment for 2020.
Home Prices Will Level in 2020
The Bay Area housing market home prices have leveled off after an increase from 2012 and will continue this trend in 2020. The average San Francisco house prices for an existing home rose to $928,000 in May 2018 but decreased to $875,000 in summer 2019.
With the decline of interest rates, the San Francisco housing market has become more of a buyer’s market, making it perfect for new real estate investors who have the budget. According to Redfin, homes in the Bay Area typically only receive 2 offers. They also sell for up to 8% above the list price and go pending within 21 days. So while there is competition, these are still good signs for anyone looking at San Francisco investment property.
Related: Buying Investment Properties in San Francisco
Airbnb Regulations and Rent Control Will Create a More Restrictive Market
San Francisco real estate investors suffer from the rules and Airbnb regulations in place in the area. For example, in order to register an Airbnb, you have to be a permanent resident of San Francisco, meaning you reside there for at least 275 days of the year. In this case, non-owner occupied rentals do not comply. The 90-day rule limits your owner-occupied short-term rental to 90 days a year unless you are present.
Related: The San Francisco Real Estate Market for Short-Term Rentals: New Airbnb San Francisco Laws in 2018
Other existing San Francisco Airbnb laws include insurance coverage of $500,000 and the Transient Occupancy tax, where hosts must pay the 14% hotel tax. To add to that, hosts have to get a business registration certificate and a short-term residential rental certificate. There seems to be no change in these Airbnb rules and regulations on the horizon.
There will, however, be a new law that comes into effect in 2020 that involves rent control. It will limit rent increases to 5% a year. The idea is that the rent control will help with the San Francisco housing crisis since many tenants suffer from unbelievably high rental prices and are one rent increase away from being homeless. While this may seem bad for real estate investors and landlords, the 5% rent increase goes on top of the local rate of inflation. Creating a stable rental environment in the area will implement economic equality and thus better the overall quality of living. At the end of the day, this is something that benefits everyone.
Best Neighborhoods in San Francisco for Real Estate Investing in 2020
If you are looking to invest in the San Francisco housing market, we have listed some of the best neighborhoods to do that based on expected performance in 2020.
Silver Terrace
- Median Property Price: $955,400
- Price per Square Foot: $646
- Average Days on Market: 37
- Monthly Traditional Rental Income: $3,763
- Traditional Cash on Cash Return: 1.7%
Ingleside
- Median Property Price: $878,972
- Price per Square Foot: $618
- Average Days on Market: 20
- Monthly Traditional Rental Income: $3,518
- Traditional Cash on Cash Return: 1.7%
Potrero Hill
- Median Property Price: $1,512,182
- Price per Square Foot: $809
- Average Days on Market: 84
- Monthly Traditional Rental Income: $5,030
- Traditional Cash on Cash Return: 1.6%
Golden Gate Heights
- Median Property Price: $1,560,000
- Price per Square Foot: $826
- Average Days on Market: 36
- Monthly Traditional Rental Income: $5,682
- Traditional Cash on Cash Return: 1.4%
Glen Park
- Median Property Price: $2,764,269
- Price per Square Foot: $1,057
- Average Days on Market: 95
- Monthly Traditional Rental Income: $4,446
- Traditional Cash on Cash Return: 1.1%
Corona Heights
- Median Property Price: $1,830,667
- Price per Square Foot: $884
- Average Days on Market: 36
- Monthly Traditional Rental Income: $5,530
- Traditional Cash on Cash Return: 1.1%
Western Addition
- Median Property Price: $938,000
- Price per Square Foot: $861
- Average Days on Market: 44
- Monthly Traditional Rental Income: $4,180
- Traditional Cash on Cash Return: 1.1%
Before choosing to invest anywhere, especially in the San Francisco housing market, be sure to carry out extensive research. Mashvisor’s tools, like the investment property calculator, are perfect to assist you when you choose to invest in San Francisco real estate.
To start looking for and analyzing the best investment properties in your city and neighborhood of choice, click here.