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San Francisco Real Estate Now Forever Changed
As we enter into 2022, 2021 has left quite a lifestyle change for the world with the west coast real estate industry being no exception.
2021 was a wild year for real estate all across the country, but in San Francisco, where real estate has always been a bit wild, the remarkable year was striking. Records were broken and set all across the region, and as we look to 2022, it seems that real estate in the Bay Area will never look like its pre-pandemic self again.
Before we look locally, we should note that nationally, 2021 was an extraordinary, record-setting year. According to Redfin, 2021 home sale prices hit the highest median price of all time. The factors driving this increase were multiple, “The number of homes for sale fell to an all-time low, [and] there was record demand for second homes,” reported Redfin. Combined with historically low interest rates, a new work from home (or anywhere, forever) economy, burgeoning tech industries, and a volatile stock market, there was a never-before-seen national demand for real estate.
In San Francisco, that demand was insatiable. The typical U.S. home sold for nearly $400,000, up 24.4% year-over-year. Meanwhile, in San Francisco, that price was $1.5 million.
But it wasn’t just the city proper — the whole Bay Area was in a frenzy. The median sales price of the nine-county region of Alameda, Contra Costa, Marin, Napa, San Francisco, San Mateo, Santa Clara, Solano, and Sonoma, was $1.3 million ($733 per square foot), according to Norada Real Estate Investments. That’s a 18.2% increase over last November and it was the highest year-over-year gain in California, according to the California Association of Realtors. Bay Area house prices were also up 2% from the previous month (October 2021).
Pushing these prices is record-low inventory across the country, Redfin data shows. There were just 1.38 million homes for sale in June, down 23% year-over-year, which was a historic low. Inventory was down in San Francisco again as well, though historically, inventory has always been tight in the seven-by-seven square mile city.
Likely related to this scarcity, homes flew off the market in record time at record offer prices. Nationally, the average house sold in just 15 days, another historic marker as the lowest median days ever and down from 39 days in June 2020, the Redfin data showed. In San Francisco, homes sold on average in 16 days — and 72.9% of those homes sold above listing price.
This hot demand outpaces the record-breaking offer prices in the rest of the country: 56.5% of homes in the U.S. went for above list price in 2021, up 29.6% from 2020.
Across the country, demand for second homes almost doubled from before the pandemic, up 91% from pre-pandemic levels. In the Bay Area, that demand translated to record prices in places like Tahoe, Santa Cruz, and Hawaii.
The desire for sanctuary put a premium on luxury homes. The median sale price of U.S. luxury homes jumped 26.5% to a price of $990,000 in the second quarter of 2021, which is yet another record in the U.S. In San Francisco, that trend is mirrored: a sharp increase in uber-expensive home sales that started in 2020 kept climbing through 2021.
2022 probably won’t be much different. Even if interest rates go up, demand is unlikely to go down. “There’s a main trend from 2020 that continued through 2021 and I expect this trend to continue in 2022. That trend is the importance of home, regardless of the price point. Luxury, or not, more people are placing more value in their main residence than ever before,” said Alex Clark, Realtor and Founder of The FrontSteps Real Estate.