Coronavirus' Impact on San Francisco Real Estate
First and foremost to everyone affected, infected, or soon to be affected, be safe. This is going to get a lot worse before it gets better. The health and safety of everyone is our #1 priority as it should be everyone in our community. This is a global pandemic. As the money markets respond to the potentially lengthy quarantine period ahead, we will devote our resources to sharing information in a field we have expertise in.
It would be remiss of me to not comment or dive deep into something everyone is thinking; what effect is coronavirus having on San Francisco Real Estate?
Most real estate data (sales values, $sq/ft values, total sales volume) are typically all lagging indicators. Sales that are closing this week were likely in contract in January or early February, before the scale of coronavirus was widely felt.
The truest indicator we have to go by is open-house traffic; the number of people that walk through the door at an open house on any given day. After polling most teams in my office for their open house numbers (~30 open houses over 3/7 & 3/8). With regular attendance in the 20-30 group range, foot traffic seems to be about as steady as it is around Spring every year in San Francisco. This is a telling sign that buyers are still in the market.
On a macro level, the recent rate cut by the Fed has sent mortgage rates down to a historic low. Banks are offering loan products in the sub 3% range almost across the board, trying to incentivize borrowing. With pre-approval validity lasting 90 days, it is in every buyer's best interest to get pre-approved now if they intend to purchase in 2020. Take full advantage of the rates available, even if you're going to sit on the fence for a few months.
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What is yet to be known is the duration of the effect on the stock market. Two scenarios make the most sense: a V-shaped recovery curve or a U shaped recovery curve.
The V-shaped curve embodies a rapid bounce back, likely the result of a cure being found or a mitigated fear of the virus' potential effects. When travel fears ease and employees head back into their offices, corporate travel restrictions lift, and the world begins moving at full speed again, this bounce back will likely occur with hedge funds and investors riding the wave back up.
The U-shaped curve implies a slower recovery, with the stock market lingering in a lower-valued state for weeks to months. This recovery will see people hunker down indoors for an extended period of time before venturing back into the world. The local effects will be seen in hotels, retail, dining, entertainment, transportation, and tourism. If the bottom of the 'U' extends longer than a few months, only then will we likely see the effect of lower overall sales volume in San Francisco.
Regardless of which scenario actually happens, there will always be a need for housing. In a city like San Francisco where housing is already limited in supply, the demand for it actually increases as offices implement work from home policies.
It's more than likely that coronavirus won't be the most important factor in the global economy within a few months. It is even less likely that the employment rate in San Francisco will be on the decline due to a pandemic of this nature.
Amid the chaotic last few days in the stock market, reports are indicating the Asian investment that mostly disappeared from San Francisco in 2019/19 is back in full force, seeing SF real estate as a stable place to invest their money. While this increased demand is yet to be represented statistically, it will be interesting to see what sales values in March/April reflect.
My thesis; this short term rocking of the boat won't noticeably affect the stalwart value of San Francisco housing, nor will it affect much in the immediate term. If you are in the position of buying in 2020, get pre-approved while rates are low, and look for opportunity while others are staying indoors.
*Interest rates will be volatile, stay plugged in with a lender if you’re buying/refinancing.