Fewer homes for sale in Bay Area: Prices on rise as inventory drops dramatically

Experts say home values are rising locally while rents are dropping in a market sent reeling by the pandemic. 

The pandemic is scrambling a traditionally predictable local housing market as recent reports show rents dropping throughout the region while home sale values are projected to continue trending higher.

Rents in San Mateo have dropped by 1% since last month and are down by nearly 2% since March when the shelter-in-place order was issued, according to online rental data Apartmentlist.

Additionally, the 1.8% drop in rents from the year prior marks the lowest rate for San Mateo in July since the company started tracking data, according to the website founded in 2011. According to the August rent report, the median rent for a one-bedroom unit is $3,506 for a one-bedroom apartment and $4,405 for a two-bedroom.

The rent dip trend trickles down the Peninsula from San Francisco, where online rental marketplace Zumper claims one-bedroom rents have dropped by 2% from the month prior. The median one-bedroom rent in San Francisco is $3,200, according to the site.

Similarly, rents in San Francisco for both one- and two-bedroom units fell by about 11% from the same time last year, while rents for one-bedroom units in San Jose dropped by 9% from the year prior and one-bedroom units fell by about 5%.

The trend spreads nationally, according to Zumper, which claims a majority of the 10 most expensive cities became less expensive over the month, including New York City, Boston, Los Angeles and Oakland.

Meanwhile, rents in less expensive cities across the country are increasing, leading to a compression which the Zumper report claims is fueled partially by the rise in remote work amid the pandemic.

“The result of the above two effects is a ‘squeezing’ of the price distribution of rentals across the country as historically expensive cities become cheaper and historically cheaper cities become more expensive,” said the report. “This effect has continued to accelerate this month as COVID-19 persists on and more Americans are opting for cheaper places to live while working from home or away from their offices.”

But the reverse trend is occurring in the local home sales market where prices are expected to continue to push higher.

“Home price appreciation continues at a solid pace reflecting fundamental strength in demand drivers and limited for-sale inventory,” said Frank Martell, president and CEO of housing database CoreLogic, in a prepared statement.

National home prices increased by about 5% in June from the year prior and up 1% from May, a record gain for the month tracked by the site since 2013.

There is some flexibility in the local market, which saw home prices in San Francisco essentially stay flat for the month — unusual activity for a market accustomed to regular appreciation.

Projections expect the diminished growth to be only temporary though, as CoreLogic projections call for home prices in San Francisco to grow by 2% over the rest of the year.

The resiliency of the market amid a pandemic is an encouraging sign for homeowners, said Frank Nothaft, chief economist with CoreLogic in a prepared statement.

“Mortgage rates hit record lows this spring, which enhanced affordability for home buyers. First-time buyers, and millennials in particular, have jumped at the opportunity to achieve homeownership,” he said.

More locally, real estate company Compass said the home value market is showing even greater strength.

“Despite the ongoing health and economic crisis precipitated by COVID-19, the real estate market made a dramatic recovery from the steep declines in March and April,” said the Compass report targeting San Mateo County for July.

To that end, median sale prices in San Mateo County ticked up to $1.7 million at the end of the second quarter, up about $100,000 from the previous quarter, according to the report.

Furthermore, the average amount of time a market a listing stays dropped to 25 days at the end of the second quarter, down about four days from the end of the previous quarter, said the report.

Speaking broadly about the state of the national real estate market, Martell expressed great optimism.

“Given the economic outlook, housing remains a bright spot for the foreseeable future,” he said.

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