Bay Area home sales fall by half in May compared to last year
The coronavirus pushed Bay Area home sales off a cliff in May.
The number of existing, single-family home sales that closed last month fell 51.1% compared with the same month last year and the median price dropped 2.5%, according to the California Association of Realtors.
Between April and May, sales fell 6.7% and the median price dropped 1.5% to $965,000, said the report, which excludes condominiums, newly built homes and homes that were not advertised on a Multiple Listing Service.
"May is going to be where you see the full brunt" of the COVID-19 crisis, said Jordan Levine, the association's deputy chief economist. Because it generally takes 30 to 60 days for a sale to close after an offer is accepted, a lot of May sales went into contract in April, when the Bay Area was still under a strict lockdown. Since then the rules have eased a bit, the stock market has rebounded and it's a little clearer which sectors of the economy are most affected.
Statewide, sales fell 41% year-over-year in May, following drops of and 11.5% in March and 30.1% in April.
"It was the first time we saw three back-to-back months of double-digit declines," Levine said.
Pending sales — the number of homes going into a contract — is a more forward-looking indicator than sales. They rebounded 67% between April and May statewide, and by a similar percentage in the Bay Area.
"We saw the pit for pending sales in mid-April," Levine said. The sales rebound continued through the end of May but "the last couple weeks we have seen slower growth in pending sales."
Normally, sales peak in the spring and tail off in the summer but this year "our summer will be more like spring and summer combined, or two springs combined," said Brian Witchel, an agent with Corcoran Global Living in Marin.
Considering the drop in May sales, the 2.5% drop in prices year over-year, which followed a 0.8% drop in April, seems fairly tame.
One reason prices haven't dropped more is that there are fewer fundamental problems in the housing market than there were during the financial crisis, which was fueled by shoddy mortgage underwriting. And most of the job losses this year have been in service industries, where employees are more likely to be renters than buyers in the expensive Bay Area, Levine said.
"On the inventory side, sellers took a much bigger step back than buyers," Levine said. So even though there are fewer buyers, they are competing for a much smaller number of homes.
Sellers who did not have to move have been reluctant to put their homes on the market during the pandemic.
In the Bay Area, open houses, for brokers and the public, are not allowed. One-on-one showings are allowed only if a virtual showing is not feasible, and then only by appointment with strict social distancing and health rules enforced. Before early May, agents could not even show a home unless the occupants had moved out. Now they generally can, but the occupants must be gone at the time of the showing. Even if their homes can be shown, many owners are reluctant to have strangers coming through.
Finally, low mortgage rates have made buyers eager to make a deal, perhaps more than sellers.
Among Bay Area counties, median prices rose the most year-over-year in Solano (8.1%) and Marin (7.1%). They fell the most in Napa (-7.2%) and San Mateo (-6.6%), according to the report.
Month to month, prices rose the most in Marin (9.9%) and Sonoma (2.6%) and dropped the most in Napa (-10.3%), Alameda (-7.3%) and San Francisco (-4.2%).
Anecdotally, agents in the Bay Area suburbs say they've had a surge of interest from potential buyers coming from San Francisco, as the coronavirus has made working from home at least part time a more viable option long-term. Many are looking for larger homes with space for one or two offices, a yard and — since they're spending more time at home — a pool.
"Every year a certain amount of people move from San Francisco to Lafayette, Moraga, Orinda. It's the natural flow, they get to their early 30s, have a child or aspirations of a child. This year we are getting this year's people and next year's," Compass agent Paddy Keohe said. "San Francisco is one of the most beautiful cities but between COVID and restaurants and bars closing down, that romantic feature is gone," he said. "Now (they're) working from home in a two-bedroom apartment and it's like, 'Get me out of here.'"
Nicole Allen and her husband have been looking to move from their one-bedroom apartment in San Francisco's Marina district to Berkeley, the Oakland Hills or Rockridge.
"The biggest thing for us is how much more you can get for your money outside the city. We are looking for something with more space, a yard, flex room, something where you can raise a family and not feel completely crammed for a couple years," she said. "With companies updating their work-from-home policies, we are more excited about the prospect of being outside of the city. We wouldn't necessarily have to take BART every day."
Chris Meadors, a Compass agent in Napa, said, "The only phone calls we have received in the last three months" are from people wanting to move from San Francisco to someplace like Napa County. He and his partner "have put five deals in contract with that exact buyer at a couple different price points in the last month," he said. Second-home buyers are acting "with more urgency" than usual, he added. They want to know "How fast can I move in? I want to use the pool the July 4 weekend."
Paul O'Neil, a Corcoran agent in Marin, started working with three clients wanting to move from San Francisco since before the coronavirus hit.
"They were on the fence for a while, all of a sudden they are active," he said. All can work from home more than they used to. As a result, some are willing to look at homes farther from the city, for example in Fairfax rather than Mill Valley.
Tim Johnson, a Compass agent in San Francisco, said "it's a little early" to say whether this is more than a seasonal trend, since summer is when families with children often move from the city to suburbs before schools reopen. He said families are also looking for bigger homes within San Francisco, with room for offices and home schooling.
"That tends to drive people toward larger accommodations rather than out of the city," he said.
Paul Barbagelata of BarbCo Group in San Francisco has heard of people wanting a second home "in the Wine Country, Tahoe, or a place where ... there is fresh air, some elbow room and they won't go crazy" sheltering in place, he said. But "I have not personally experienced any fallout yet" from people moving out of the city entirely. "By September or fall we will have a better understanding if there is a flight to the suburbs or not."
In a report earlier this month, Compass Chief Market Analyst Patrick Carlisle noted that San Francisco "was more deeply and more quickly affected by COVID-19 and shelter-in-place" than other local markets. It saw larger initial drops in activity. Even with the remarkable rebound of buyer demand in May, its recovery is, so far, lagging other counties on a year-over-year basis."
In a chart, he plotted the number of homes going into contract last month compared with May 2019. Among Bay Area counties, the highest was Sonoma at 100%, which means Sonoma's activity was about the same as last year. The next highest were Solano (98%) and Marin (88%). The lowest were San Francisco (62%) and Alameda (68%).
But, he added, "one cannot come to conclusions in the middle of a crisis. In 1989, right after the earthquake, there was talk about turning the entire Marina district into a park. After 9/11, it was said in New York City that no one would want to live in condo penthouses anymore."