Market Musings: Unraveling the pandemic exodus from San Francisco

A funny thing happened on the way to the apocalypse — everyone decided to leave San Francisco. Or did they?

A funny thing happened on the way to the apocalypse — everyone decided to leave San Francisco. Or did they? Well, that depends on what you read.

For example:

Socketsite, the last local real estate blog standing following the semi-demise of Curbed SF this month, recently reported that in San Francisco, residential real estate inventory had hit a nine-year high, running 101 percent above where it was last year and a whopping 200 percent above where it was in 2015.

Meanwhile, industry titan Compass released its June market report. The headline? “San Francisco real estate market rebounds dramatically.” Contained within is the news that the median price of a single-family home in San Francisco hit an all-time high in June, landing at $1.8 million after staying static between February and May. That’s right: Prices didn’t drop during the early months of the pandemic. Inventory did.

… and then apparently came roaring back to historic levels.

Out in the greater real estate-adjacent world, the hot news is that COVID-related work changes have inspired sea changes in the way we live. Pottery Barn has replaced its living room and bedroom sets with home offices and outdoor furniture, and everyone in San Francisco who can is shoving each other out of the way in their rush to flee The City and move to Napa, Tahoe, anywhere but here. Mixed messages are coming at us from all directions in these anxious times. Real estate is not immune.

It’s not that these people are lying. All of the above is true. But it’s all headlines. Just headlines. And if there’s anything I hope we’ve learned during this most challenging of years, it’s that you can’t stop at the headlines. Do so at your own peril.

Headline: “Inventory skyrockets in San Francisco.” It’s true! Why? First, because a slew of homes originally ready to come out of the gate in spring — real estate’s traditional “busy season” — instead went into COVID hibernation as agents and sellers decided it wasn’t worth the trouble to try to sell homes to buyers who weren’t allowed to see them in person. Part of what we’re seeing, inventory-wise, is delayed busy season,“Summer is the new spring,” and all that.

But wait! There’s more. Looking closer at Socketsite, we see that condominiums, which comprise more than 70 percent of overall listings in San Francisco, are up 122 percent — 122 percent! This shows that yes, a certain sub-demo of San Franciscans is eager to get out of town. Younger, more mobile, historically more likely to flip their properties than single-family homeowners, they’re the ones looking toward Denver and seeing four bedrooms, a yard and room for that Pottery Barn home office.

It’s sort of a perfect storm for the condominium market. Condos had already been trending downward slowly, losing 6 percent of their median value in the past year. A glut of listings can’t help but accelerate this trend. Condos make up 70 percent of all listings, but only 52 percent of June sales in San Francisco were condos.

So how can Compass be touting a “recovery” when it’s crisis time in condoland? It’s the high end, Compass says. But wait: Aren’t all the rich people moving to Healdsburg? You’re telling me they’re actually moving into The City, snapping up eight-figure mansions and waving to condo owners as they pass each other on the bridge?

Sort of but not really. It’s not the ultra high end doing this. MLS District Seven, which includes headliners Pacific and Presidio Heights, the Marina and Cow Hollow, has actually lost 10 percent of its media value so far this year. Instead, it’s homes selling in the tier below that are propping up the median: $2.5 million to $4 million has become San Francisco’s sweet spot.

Forget the Heights; June’s booming real estate market was in the Valleys: Noe, Cole and Eureka (and Ashbury Heights, Clarendon Heights and even Glen Park). Homes in San Francisco’s District Five, which includes all of these neighborhoods, saw their median value jump by 10.9 percent in June (year-over-year), by far the biggest gain among city districts.

Headline: “Noe Valley drives San Francisco median growth.” Is it misleading? No, but it’s incomplete because we don’t know if that record-setting median will survive what happens to the condominium market over the next few months, whether what appears to be an entry-level exodus will reach up into higher price points or if someone will discover plutonium buried under 24th Street. What we do know, though, is when it comes to real estate — or anything else, for that matter — it pays to keep reading past the headlines.

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. The Market Musings real estate column appears every other Wednesday.

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