The tech economy, rather than the virus, remains the biggest uncertainty in the real estate market | News
Even a pandemic has not been able to slow the Midpeninsula housing market. After closing for nearly two months in early spring 2020 during the first COVID-19 lockdowns, the local real estate market has come back strong with surprising resilience. Last year, it recorded its highest sales volume in a decade.
Low interest rates, a strong tech economy and – surprisingly – all the turmoil of the pandemic has fueled what some realtors have described as a “historic market” in 2021, with single-family homes in all price ranges seeing a increased activity.
A report compiled by Sotheby’s International Realty found home sales across the Bay Area were 30% higher in February 2021 compared to pre-pandemic in February 2020, while 67% of those transactions were above price. requested, against 50% a year earlier. And it was not uncommon for a home listed at $2.5 million to receive more than 20 offers and offer more than half a million dollars more than the asking price, according to local agents.
“The pandemic has definitely brought drastic changes to the real estate market. It has shifted many variables in the market at once. … That’s why 2021 has been very active,” Xin Jiang, realtor at Compass in Palo Alto, said. told this news agency. “It made people reconsider where they want to live and how they want to live.”
Those who choose to work remotely long-term now have the option of relocating to the mountains or next to the ocean, freeing up inventory for those who want to stay on the peninsula and upgrade to a larger home on more land. tall, she said. This has created a lot more movement within the peninsula market.
“It’s a trend that may persist for some time until we find out how much (our lives) can return to ‘normal,'” Jiang said.
The response to COVID-19 has redefined everything from how properties are presented and marketed to the most desirable types of renovations, floor plans and home features, as the pandemic has changed the way people interact with each other in public and private spaces. The expected permanence of working from home and other factors may also cause tech companies to leave the region or shrink their footprint in Silicon Valley, which could affect residential real estate, local officials said.
Silicon Valley real estate agents interviewed by this news agency during the pandemic are unsure whether the housing industry will fully return to pre-pandemic ways once the virus subsides.
Derk Brill, realtor at Compass, said some of the biggest changes have happened around the marketing of properties. With open days suspended, virtual tours and 3D walkthroughs have become the norm.
Buying a home without ever viewing it in person is no longer rare, Paul Cardus, chief executive of the Cupertino-based Silicon Valley Association of Realtors, said in spring 2020. Agents relied on Zoom and Facebook Live to get together and broadcast their communication online, he said.
“The technology that has become mainstream in the wake of the pandemic will likely continue to play an important role in the real estate industry,” said Michael Repka, CEO, chief broker and general counsel at Palo Alto-based DeLeon Realty. “I anticipate this continuing long after the pandemic is over.”
Repka said his company spent around $10,000 at the start of the pandemic to show off individual premium properties in detailed and extravagant videos and live tours for the internet.
“Upscale buyers tend to do extensive online due diligence to target desirable homes for in-person viewings,” Repka said. “This trend was happening before (COVID-19), but the pandemic has made producing sophisticated online videos an even more important selection tool for buyers.”
The priorities of potential buyers have also changed dramatically since the start of the pandemic.
“For the last few years, before COVID, buyers really wanted to be close to work,” Menlo Park real estate agent Brett Caviness said last spring. “They wanted that short trip to Google or Facebook. Now they’re much less city-specific in their searches and more focused on a larger (geographic) area that might work for them.”
Elyse Barca, real estate agent and luxury home specialist at Compass Real Estate’s Menlo Park office, said space has become extremely important for people who need more of it to work from home, educate children to home and exercising and having fun at home.
“When people took refuge in their homes, they became fully aware of the shortcomings of the place where they lived,” she said in 2021.
Arti Miglani, realtor at Compass, agrees.
“The focus has shifted to more outdoor space and quality spaces within a home,” she said.
At the start of the pandemic, she said the migration of people from big cities to the suburbs was very noticeable. Families with young children have chosen to sell their home in San Francisco and move to the suburbs to buy a house or even rent a house. Owners of condos and townhouses have shifted to single-family homes, which has increased the demand for single-family homes.
In the fall of 2020, real estate agents reported a thriving luxury market worth over $5 million in the area as well as strong activity in the local entry-level market for single-family homes priced between 2.5 and 3 million in Palo Alto, Menlo Park and mountain views.
Semi-rural areas such as Woodside, Portola Valley and Los Altos Hills have begun to attract more interest.
Repka said the shift to larger homes in less populated areas seen early in the pandemic is still happening now.
“Consumer demand for real estate has shifted to nicer homes and bigger lots,” he said. “The premium placed on properties with good walking accessibility to restaurants, bars and cafes has declined. Some of the areas that were historically the hottest – such as parts of Palo Alto, Menlo Park and Los Altos near downtown areas – have been a little cooler when compared to houses on larger lots, perhaps in the hills or a little further.”
Brill said many priorities have changed for homebuyers since the pandemic began, but some things have stayed the same.
“COVID-19 has changed what buyers value in a property, whether it’s location, square footage or lot size,” he said last spring. “What hasn’t changed is what buyers traditionally value: good schools and good neighborhoods.”
Financing is another aspect of the real estate market that has changed during the pandemic following the introduction of historically low interest rates by the Federal Reserve in early 2020 to limit the economic damage of the pandemic.
“As interest rates remain low, we have seen a reduction in the percentage of all-cash offers,” Repka said.
He speculated that the rise in financed offers is, in part, related to buyers trying to lock in a low interest rate before they go up.
Miglani said the trade-off for lower rates has been a larger down payment requirement. A down payment was around 25% for owner-occupied homes compared to the historical 20%, and the down payment for investment properties was around 40% compared to 30% previously, she said just after the reopening of the property market in 2020. The requirement, she said, has not proven to be a deterrent to those wishing to take advantage of lower interest rates.
The biggest market uncertainty going forward is not the virus itself, but whether companies will continue to increase their workforce in Silicon Valley or move some operations to other regions with a cost of living. lower and low or no state taxes, according to local realtors.
“Over the past two years (during the pandemic), we have seen a lot of sellers moving to (other) regions. More recently, it has become more common for companies to hire from these other regions as well,” Repka said.
Jiang said if local tech talent continues to migrate out of the region, market demand and home values may start to decline. She said the high cost of living, California’s climate crisis and the unknown outcome of new state laws intended to spur more housing are among the biggest threats to the market as we enter a post-pandemic era. .
“To some degree, our community is forever changed,” she said. “It will be difficult for those who gave up their homes during the pandemic to buy back due to the current upward price trend.
“Furthermore, as the largest pool of beneficiaries of a booming tech economy are Chinese and Indian engineers, the diversity of areas with high house prices will inevitably decrease.”
Palo Alto Online celebrates two years of the COVID-19 pandemic this week. If you missed any parts of our series, check out the More Stories box above.
You want to know more ? Local real estate experts sat down with this news agency to share their views on the state of the real estate market for individual Q&As in the upcoming Spring Real Estate magazine, which will be published on April 15.