• Aaron Derbacher

Bay Area Real Estate Housing Boom

As I prepared my clients home in the San Jose Foothills I warned my clients not to expect many offers on their $1.375 million home in Berryessa. We were, after all, in the middle of a pandemic and economic collapse.

We ended up with 7 bids and were forced to set an offer deadline.

Throughout the San Francisco Bay area we have had some of the strictest shelter-in-place rules and earliest cases of Covid-19. Meanwhile, the demand for real estate is soaring in outer suburbs and wealthy havens known for their gorgeous Mountain Views. From affluent Marin County to Napa wine country and south to Monterey’s Carmel Valley. The coronavirus outbreak is leading to a surge of interest from homebuyers looking to spread out.

I remember one day in particular, looking over at my business partner Zack Shields aand telling him, "This is starting to feel like 2018 all over again." He agreed.

Like New York, where Manhattanites fleeing the city have fueled newfound interest in surrounding suburbs, San Francisco's Bay area is flush with people with the means to upgrade to more spacious areas. The tech companies that drive the region’s economy are also signaling a long-term acceptance of remote work, raising the prospect that there’s little need to live close to offices.

But the rush to move also shows the growing divides in a region where real estate is already out of reach for many residents, with the median house price in the Bay Area approaching $1 million. Relocating isn’t an option for lower-income people who have been among the hardest-hit by the coronavirus. In San Francisco, expensive neighborhoods have emptied as residents escape during virus shutdowns, while the Tenderloin, an area known for its large homeless population, has hundreds of tents.

“This is an example of another way the most advantaged, the most affluent have isolated themselves from this latest crisis,” said Patrick Sharkey, a sociology professor at Princeton University who focuses on urban inequality. “It’s a very small segment of the population that has another home that they can go take off to.”

After real estate deals initially fell off with shelter-in-place orders, last month saw a resurgence in interest. The suburban and rural areas around the Bay Area had the biggest rebound, while contracts in San Francisco and Oakland’s Alameda County were well below where they were in 2019, according to data collected by Patrick Carlisle, Compass’s chief market analyst for the Bay Area.

In the high end markets of Santa Clara County, homes are selling within just hours of buyers touring the home. One home in particular caught my attention. This home was sold without ever going on the public market. The buyer bought the home in Los Gatos; All-Cash and closed on it within 6 days of writing the offer.

17770 Tourney Road in Los Gatos, California Sold for $6 million.

The home was listed by Matthew Swenson Golden Gate Sotheby's International Realty

What’s unclear is if this type of demand is a short-term trend to escape the virus, or a signal of a more pronounced shift from dense cities where the sellers originally bought to be close to work. Ed Glaeser, an urban economist with Harvard University, said he expects cities to be resilient so long as the virus proves to be a short-term aberration. “If this becomes a regular thing, then by all means, having a large suburban home is going to become very attractive relative to having urban space,” he said.

In the Bay Area, demand may be more about changing work habits. Tech employees who have spent months working from home may continue to do so for the foreseeable future. San Francisco-based Twitter Inc.has said employees can work away from the office forever, while Facebook Inc. expects as much as 50% of its workforce may be remote in 10 years.

It appears to me and many other agents I have spoken with that homebuyers are expanding to other areas that are far beyond the tech campuses they work at. We have quiet a few clients shifting their attention to Santa Cruz Mountains. What are those homebuyers looking for in their next home you may ask?

Buyers are putting a huge emphasis on home offices, pools, usable backyard space and turnkey style homes. With traffic right now being so minimal we will see how long the housing boom continues.

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