A continuation of the great COVID migration

You may remember what I wrote about a few weeks back: the belief that people are fleeing big cities during COVID and moving elsewhere. While we determined that specific claim was a little bit exaggerated, the pandemic still definitely has an impact on real estate.

One interesting thing I read was that there are actually way more people in the U.S. looking to BUY a new home than there are owners looking to SELL right now. That has led to low inventories across many cities and suburbs. Overall, the tight market is more being driven by low mortgage rates and that COVID migration.

The Wall Street Journal says all of this, plus that Americans are holding on to their homes longer than usual, which is costing would-be homebuyers. This all contributes to the low inventories and record-low sales (which, in turn, helps contribute to high prices). According to Redfin, the typical homeowner had remained in place for 13 years, up from 12.8 years in 2019, and way ahead of 2010’s 8.7 years.

One factor to consider, too, is that with so many people now working remotely, many home buyers are in the market for more space. If their home is going to double as a workspace now, it makes sense to look for a larger home. With that though, potential sellers are being scared off by the day-to-day of having strangers enter their homes during a pandemic. All of this adds up to a crazy COVID market!

I recently put an offer in for a client listed at $1,075,000 in San Ramon. There were 19 offers, the seller gravitated to offers that removed all their contingencies. The home (4 beds, 2 baths, 1447 sq. ft.) had been renovated prior to going on the market is pending at $1,310,000 and it appraised! Hopefully we start to see more equilibrium between a sellers and buyers market, but for now, hold on, it is a wild ride for buyers, but great for sellers.

The great COVID migration

You may have read conflicting articles about the mass “COVID migration,” in which big cities are seeing people flee to more affordable areas in the midst of the pandemic. As far as I can tell, those claims are a little bit exaggerated, even if the Bay Area as a whole is still seeing people leave.

man in blue shirt and gray pants standing beside man in blue shirt

For example, this Bloomberg article tells us that fewer people are leaving big cities overall since the beginning of stay-at-home orders, even if interest in moving is rising again. That said, some big cities (namely New York City and San Francisco) are getting more out-migration than most…and many of those people are migrating towards other large cities like Seattle and Los Angeles!

This does seem to mean that some suburbs and more affordable large cities will likely see home values rise soon. Even if young adults are leaving certain cities, they typically are not doing it because of that city itself, but because they want to try another big city out!

And though it may be true that large corporations, including some based in Silicon Valley, are leaving California for cheaper pastures like Texas, there’s very little indication that it has anything to do with desirability in our state as a whole. While cost is definitely a factor, the rise in remote working during COVID has definitely prompted people to leave the Bay Area at a higher rate.

person using laptop attach to vehicle near green leaf plant during daytime

So what does this all mean for you? If you live in a San Francisco condo, it means prices have dropped about 10% per sq. ft. Rents have also dropped, but the younger folks still gravitate to the city, so if you don’t have to sell right now, maybe wait. If you have been renting at the cities high rent rates and shelter in place means you are about to strangle your family as you need more space, then people are looking to the east bay where prices less that is a relative term – they are less then buying in the city and you get more space. The people who are moving out of the city to Walnut Creek or Sacramento, are driving prices up willing to pay in cash over the appraised value, because it seems relatively cheap or cheaper for them. If you currently have a condo in the east bay, they are sitting much longer. This is because rates are so low, and with no HOAs to pay, people qualify for a house, maybe not in the city they originally wanted i.e. Walnut Creek, but can get on in Concord or Brentwood. This is happening all over the United States. Austin TX, for a second year in a row has the hottest housing market in the country. I have seen friends that are retiring move out of California to TN, ID and Nevada. Having said all that the Bay Area remains a very attractive area to home buyers, and even with a slight uptick in move-out traffic, I don’t expect that to change anytime soon! As a side note, I do think California will need to get friendlier towards attracting and keeping business’s in the bay area and address the rising homeless population especially in San Francisco.