Bay Area homebuyers hoping for a “pandemic discount” may want to readjust their expectations. Even with home listings recovering to pre-pandemic levels, homes prices in most Bay Area counties show no signs of softening.
With mortgage interest rates hitting new historical lows at the end of May and with an economy expected to weather the COVID-19 recession better than any other region in the country, Bay Area home prices are forecast to beat the national trend.
So what should we expect to see as Shelter-In-Place restrictions continue to relax?
Persistent Stability
A new report by real estate database Corelogic shows a high probability of home price declines nationally on the order of 1.3%, which would be the first in nine years. That’s especially true in areas where the local economy is dependent on tourism or the oil and gas industry. But that’s not the case for the San Jose metropolitan area of Santa Clara and San Benito counties, for example, where CoreLogic expects home prices to be 6% higher next April than they were two months ago, making it one of the most resilient markets in the nation.
“The very low inventory of homes for sale, coupled with homebuyers’ spur of record-low mortgage rates, will likely continue to support home price growth during the spring.”
— Frank Nothaft, CoreLogic’s chief economist
Just how resilient the housing market in the Bay Area has been over time can be best appreciated by observing median home price appreciation in Santa Clara County since the 1990s. Even someone who purchased a home at the pre-2008 recession peak would have seen the investment appreciate 51%, or 4.63%, annually.
An Undeterred Workforce
With close to 20% of the Bay Area’s workforce employed in tech companies, most of which are able to work from home without disruption, the area’s unemployment levels have fared better during the pandemic than the state and country as a whole.
The unemployment rate rose to 16.1% in California in April, the highest rate in state history. But the Bay Area reported some of the lowest unemployment rates in the state, according to data from the California Employment Development Department. Marin County had the lowest unemployment rate of any county in the state at 11.1%, with San Francisco, San Mateo, and Santa Clara close behind.
As Shelter-In-Place restrictions began to ease in May, economic activity reflected a dramatic turnaround with Bay Area employers adding 41,700 jobs—a significant reversal from April when the region lost a staggering half a million jobs—according to seasonally adjusted figures released by the state’s Employment Development Department. The increase in May was the largest one-month gain recorded in data stretching back three decades, an indication that the Bay Area has already taken a huge step towards economic recovery.
A Solid Industry Core
“The Bay Area is in many ways most equipped to deal with this because of the kinds of industries there, such as tech,” said economist Christopher Thornberg, a founding partner with Beacon Economics. “Those industries are better able to adapt.”
The Bay Area is also known as the world’s capital of venture funding and startups. Activity in this marketplace is a reliable bellwether of future economic growth. Despite the pandemic, the number of investment deals during the first quarter of 2020 is on par with those in Q1 2019, according to a joint report released in late April by PitchBook, the National Venture Capital Association, Silicon Valley Bank, and Carta. Early-stage investment in Q1 2020 was just as strong, with over 600 deals, and late-stage deals also carried on 2019′s record-breaking momentum. “It’s become a common belief that companies formed during a recession end up being some of the most successful,” PitchBook analysts wrote in their April report.
Can We Help?
While we are nowhere near the end of the pandemic and forecasts point to a prolonged recovery, the Bay Area housing market shows no signs of structural weakness. Buyers who have remained on the sidelines hoping for a pandemic-induced price drop should consider the market’s proven resilience, the area’s economic strength, and current historical low interest rates as an opportune moment for purchase. Whatever your needs, Julie and her team are ready to help.
Please contact Julie at 650.799.8888 or Julie@JulieTsaiLaw.com to schedule a free consultation.
