Let’s go back to the end of 2009, a decade ago when the subset of people obsessed with Twitter was only slightly bigger than the one comprised of San Franciscans who disliked the sitting U.S. president. Whatever you were doing, I was here, writing about local real estate for The Examiner, studying the effects of a three-year recession that had even the most evangelical real estate bulls rubbing their eyes in panicked confusion.
We’d never seen anything like it, not in our lifetimes. Even when the dotcom industry imploded a decade earlier, leaving both sock puppet dogs and ambitious but fantastical b-to-c fulfillment plan strategies strewn by the side of the road, our homes had still managed to turn double-digit annual value growth. In 2007, I was told by a sage-like industry leader that the Bay Area “had never seen a sustained period of loss” in real estate. Two years later, that old pro sounded like a fool. Little did we know then, as we winced at 67 percent value losses in the Bayview and tried to figure out how to crawl out from under a massive pile of foreclosure statements, that we were on the precipice of the biggest and longest-sustained Bay Area real estate boom yet.
On the eve of 2010, the median price for a single-family home in San Francisco was $751,000, still outrageous by national standards but well below its early 2007 peak. As I write this, that number is close to $1.7 million, per the National Association of Realtors, meaning that property values have doubled in San Francisco in the past decade, as, yes, technology has reshaped The City, but not in a single, decade-long sustained blast of growth. All of those scooter-riding zealots are only part of the story. Tech has had its ups and downs over the past 10 years and real estate has continued to thrive. Grumbles about “affordability” have grown louder, and yet someone is still buying these homes.
There are many factors that go into any kind of market. From where I sit, the biggest factor in local real estate’s seemingly endless wacky growth is also the simplest: supply and demand. The 2010s (and the 2000s, and, frankly, the 1990s) were a time of historic inventory shortage in the Bay Area, with San Francisco leading the way. Inventory, presently down some 15 percent year-over-year, has been scarce for so long that its shortage seems a permanent factor in forecasting the local market. It becomes even more crucial when those tech (and other) jobs ramp up, creating a rush to get to whatever available properties hit the market, creating bidding wars that can leave dazed buyers waking up the following day, feeling like they’ve just experienced a real estate version of “The Hangover.”
And yet, the buyers are satisfied, pleased to “get into the market” at whatever cost, confident that their home will continue to gain value… which is exactly how people felt at the dawn of 2007. Why should now be any different?
This brings us to the new decade. Will 2020, a date that suggests clear vision, signal the beginning of a new “market correction?”
According to Patrick Carlisle, a market analyst at Compass, real estate cycles usually run 5-7 years, which puts us well past time for a change, and yes, we did see a slight slowdown in 2019 accompanied by, until winter, a slight increase in for-sale inventory. The much-ballyhooed Uber IPO didn’t move the needle much, real estate-wise, and if you Google “why don’t Millennials buy houses?” you’ll get about 10 million hits in 0.00003 seconds. Despite this, nobody is predicting a pending crash, not for now anyway. Many experts predict a recession in 2021, but it may not impact local real estate anything like it did in 2008.
San Francisco real estate in 2019 is heady, but it’s not the same Wild West that it was in 2007. For one, people aren’t using pre-IPO stock options for down payments, and for the most part, predatory mortgage lending practices are a distant — and bad — memory. Also, as Jeff Andrews of Curbed pointed out earlier this year, the 2008 recession was unique among recessions in that it was actually caused by housing industry shenanigans. Normally, Andrews says, housing fares pretty well during recessionary periods — like it did locally in the wake of the dotcom bust.
The last time experts predicted a real estate crash was 2016. The local median has increased by 30 percent since then. Simply put, it’s hard to predict San Francisco real estate because it behaves in a way matched by no other market, and it’s been doing so for 30 years, long enough for some of us to simply throw our hands up and say, Liz Smith-style, “only in San Francisco, kids, only in San Francisco.”
The Market Musings real estate column appears every other Wednesday. Larry Rosen is a San Francisco-based writer, editor, podcaster and recovering former Realtor. He is a guest columnist and his viewpoint is not necessarily that of the Examiner.