Bay Area Real Estate Update: Coronavirus

Real estate markets (like most private markets) often lag the public markets. We have seen a remarkable drop and rise as the Fed has backstopped most risk assets, including CMBS and many real estate debt instruments.

What is of note is that the Fed is also supporting non-investment grade notes, which could have impacts beyond the traditional real estate backing that the Fed has done in 2008 and before.

Below, I am sharing some insights from the current trends we are seeing in residential real estate in the Bay Area as of early April 2020. Given how fluid the situation is, and the general 3-5 week lag between real estate markets, I expect to update the picture as we get more information.

Summary:

We are seeing some softness from the seller side throughout the Bay Area. Given how quickly the public markets returned to strength, this may be a temporary pause in supply. I will update this as I see more. It may be an opportune time for sellers to get more attention for listings and for buyers to get a good deal if they are vigilant and closely tracking the market.

Trend 1: Lower listings in San Francisco

We can see a big drop in new listings halfway through March. I suspect owners are waiting to list and see what happens with the markets, and there is a correlation between the stock market and listings (given that a lot of assets are tied up in options etc.)

Trend 2: Deals on hold

A second interesting trend I am seeing is that deals are being paused. Contracts are being elongated and contingencies are coming back into the market. This is all normal given the new state of affairs, and may start to tip the market to be more buyer friendly.

Trend 3: Similar trends throughout the Bay Area

I am seeing similar listing and price trends throughout the Bay Area. Here I break out the data by geography to better understand the magnitude and concentration of the drop. It looks uniform.

Trend 4: Higher-priced listing dynamics

We are seeing higher-priced homes being pulled from the market as those owners are waiting for a better time to sell. At the same time, one strategy that has played out well for clients is to track these homes over time. It also gives more air time to those confident sellers in the market.

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