The San Francisco Bay area has always been considered a land of opportunity, and according to local agents from Sotheby’s International Realty, that opportunity extends to its current real estate market. Although conditions are ideal for a number of reasons, it might be challenging for many buyers to realize that as they scroll through the headlines.
For example, while Sotheby’s International Realty Silicon Valley agent Arthur Sharif acknowledges sales in the hot area surrounding Stanford University are off, he is quick to point out that people aren’t considering the context. “Last year was an anomaly where we were playing catchup from past years, and it’s not fair to compare today to that outlier market,” he says.
Dev Parikh, who specializes in the East Bay, which includes towns like Oakland and Berkeley, also assures his buyers that the news doesn’t tell the whole story. He characterizes the data as pointing to a market that’s normalizing, rather than slowing. “We have seen consistent growth since approximately the 2010 time frame. Today, we continue to see demand, including from buyers coming in.”
Sotheby’s International Realty agent Lauren Fraser concurs. “The headlines aren’t always favorable to San Francisco…it used to be they reported homes were selling for $1 million over asking price, and now they are saying people are fleeing San Francisco, but neither is correct,” she says. “Our goal is to reassure buyers in what they consider to be an unsure market.”
The Bay Area Buyer
So who is today’s typical Bay Area buyer? The pandemic revolutionized our world, and the effects are evident in real estate as much as anywhere, notes Sotheby’s International Realty agent Josh Burns.
“We are seeing the work-from-home concept as a crucial driver because it’s allowing clients to expand their searches and look farther out of San Francisco, where they can get more for their money,” Burns says.
One common trend spurred by virtual work is local clients selling smaller homes and buying larger ones to take advantage of the space so they can work even when kids are home or they have out-of-town guests visiting. Beautiful outdoor space is another advantage as buyers prioritize decks and patios.
As before, single-family homes remain the most desirable option, and customers want to be educated on communities and the school districts. “I often work with families who are relocating and are interested in pre-pandemic commute patterns to help gauge how they might emerge post-pandemic,” says Burns.
An Influx from All Over
San Francisco-area buyers hail from all over. As Burns noted, many are locals looking to expand their search to more affordable areas. Sharif sees young people who were living in Palo Alto and Menlo Park finding themselves priced out as they have families and want bigger properties, which sends them to explore opportunities in the next ring that includes San Carlos, Belmont, Sunnyvale, Cupertino and Mountain View.
Parikh is seeing a consistent influx of buyers from up and down the coast, such as San Diego and Los Angeles to the south and Portland and Seattle to the north, along with many semi-local residents who find that the East Bay offers a good value proposition compared with Silicon Valley or San Francisco.
While the outflow of Bay Area residents might have been exaggerated early in the pandemic, Fraser does know some who moved out, but finds they are now considering buying back in. However, they aren’t necessarily looking to move their entire home base back. “They are considering it a second home location where they can split time,” she says, adding that many of them gravitate toward condominiums in luxury buildings. Burns also saw some clients depart early in the pandemic, primarily to Rocky Mountain communities or family homes on the east coast, and now is seeing them re-engage because this is where they want to be long term.
Sharif frequently works with engineers from Boston or finance professionals from New York, and says even international buyers are coming back.
Market Opportunities Not to Miss
Parikh mentions the uncertainty planted by rising interest rates, but says so far it hasn’t negatively affected Bay Area real estate. Instead, the local market is seeing a disproportionate amount of buyers compared with sellers, which is all part of the historic inventory shortage.
“I don’t foresee a drastic increase in inventory or decrease in buyers,” he says. “We will still see people selecting specific neighborhoods because of the value they get and the quality of schools. The prime properties which are properly listed, shown and priced are selling fast.” When properties linger because they don’t meet those criteria, it’s an opportunity for a prospective buyer to negotiate more actively.
Particular pockets of action include investment in and around the University of California, Berkeley, campus as well as properties anywhere between Oakland and Berkeley, which has robust public transit options. “Anything near a BART transportation station or that is easily accessible is very desirable,” Parikh says.
And he notes that even though these East Bay neighborhoods have gone up in price, the underlying reason for the appreciation is because of the good value proposition they offer.
“Some buyers are hesitating because they see the market is changing, but we see it as an opportunity to get into a market that’s been very competitive.”
Sharif’s clientele’s moves aren’t tied as much to interest rates as the NASDAQ because stock appreciation is often where they get their down payment. For that reason, he finds the buying season starts in January as their bonuses and stock options are revealed. “Our busy time kicks off around the Super Bowl and wraps up near Memorial Day as they head off to summer elsewhere,” he says.
Many of the Sotheby’s International Realty brokers see continuing strength, based on the lack of inventory. “Our prices will remain high because there’s nowhere to build,” Sharif says. “To one side we have the San Francisco Bay, and to the other, the Santa Cruz mountains. The limited amount of land curbs development as many towns don’t want multi-family properties.”
Burns sees the current trend toward caution as positive.
“Buyers are being more patient. I don’t see them rushing out to lock in low interest rates but instead they are looking for the perfect house for their needs,” says Burns.
He also sees a return to the reason people used to buy a home in the first place. “Early in the pandemic buyers would sell quickly for significant gains, but we need to transition to a more right-sized environment. A house shouldn’t be viewed just as a financial gain on a bank statement, but rather where you raise a family and engage with neighbors and community, and I believe we’re getting back to these quality of life issues.”
Fraser believes it’s an ideal time to enter the market. “While interest rates are edging higher, they’re still manageable, especially now. In combination, we are starting to see some price reductions and the values buyers are seeing offset their concern over interest rate shifts. It’s a great time to be buying a home.”
Is now the right time for you to take advantage of this rare right-sized market? Visit Sotheby’s International Realty.