Housing Costs Surge Throughout San Francisco

SAN FRANCISCO, CA – It’s no secret that California real estate is quickly outperforming its middle-class and low-income residents. In San Francisco County, average house prices rose with the state, increasing by $ 100,500 in one year, according to a recent report.

California real estate prices plummeted last April amid coronavirus closings, falling more than 30 percent. But a year later, average house prices across the state rose above $ 800,000 for the first time, according to a report by the California Association of Realtors.

Last April, the average home price in San Francisco was $ 1,699,500. It rose to $ 1,755,000 that March and to $ 1,800,000 a month later.

Why is this happening?

According to Oscar Wei, the association’s chief economist, a shortage of homes for sale in California fueled the price hike in April. Prices were further boosted by increased demand from the state’s high-income residents, who benefited from low mortgage rates during the pandemic, Wei told Patch.

“It’s been going up and up pretty quickly,” Wei said of the average home price. “Supply is definitely one of the main factors. … In terms of active listings, for example, [supply] about 50 percent lower than in the previous year. “

Property sales collapsed in the first uncertain months of the pandemic. But higher-income Californians, whose jobs were unaffected by the coronavirus-related closings, began surfing the market again in the second half of 2020, Wei said.

Sales rose the most in the San Francisco Bay Area and along the Central Coast, where many residents moved after realizing they can live anywhere while working from home, Wei said.

“Bay Area businesses started making people work from home, so some people actually started buying homes in areas other than the Bay Area and taking advantage of the affordability of housing in some other areas.” said Wei.

Meanwhile, 30-year fixed-rate mortgage rates fell to a record low of 2.6 percent, from 6.5 percent in 2006 and 2007, Wei said.

“We have never seen that before,” said Wei. “That’s why people rushed into the market.”

According to Investopedia, low interest rates often lead to shifts in the real estate market.

The real estate company released a report on Monday that found that home sales rose as expected in March and April year over year, when the spring pandemic shutdown triggered a decline in home sales, the association said. This year, monthly home sales have risen for three months in a row.

Prices rose across California.

• The average price of an existing single-family home in the Los Angeles area rose to $ 725,000 in April, up from $ 45,000 from the previous month. The average home price in the LA area was $ 550,000 just a year ago.
• The average home price in the San Francisco Bay Area rose from $ 1.225 million in March to a staggering $ 1.328 million in April.
• Orange County saw the average home price jump from $ 1.025 million in March to $ 1.1 million in April. In April 2020 it was $ 861,000.

San Bernardino County bucked the trend by seeing the average home price fall to $ 405,000 in April from $ 412,000 in March.

Nationwide, home sales rose 2.6 percent in April to 458,170 from 446,410 in March, the association said. That was an increase of 65.1 percent compared to the 277,440 apartments sold in the previous year on an annual basis.

The metrics are bad news for low-income Californians and even middle-class residents looking to buy a home.

“Rising house prices not only threaten the already low home ownership rates and make buying difficult for those who do not yet own a home, but also calls into question the sustainability of this market cycle,” said Jordan Levine, Vice President and Chief Economist.

Nationwide housing affordability hit its lowest level since mid-2018, the association reported last week. The proportion of homebuyers who can afford to buy an existing single-family home in California at a mid-price fell from 35 percent in the first quarter of 2020 to 27 percent in the first quarter of 2021, the association said.

Wei predicted that the housing shortage could keep house prices high for the remainder of 2021. And the state is unlikely to see a big enough leap in housing development to fill the gap, Wei said.

With the economy reopening, cheaper homes could come back on the housing market, Wei said. But interest rates can also rise.

“At some point, interest rates will rise, especially as the economy picks up again,” he said. “The pace of growth will likely be a little slower in May or June.”

The California Association of Realtors has more than 200,000 members and is headquartered in Los Angeles. Read the full report here.

The city intelligence service contributed to this report.