Earlier this week, my friend emailed to ask about a house he'd seen advertised in Piedmont. Jill and I had helped Kevin and his wife, Jennifer, sell their stylishly-renovated Mid-Century last year, at what we believed was the height of the market (they had a jaw-dropping result!!!), and like many others who took advantage of last year's marketplace, they've been on hold, renting and waiting for the market to go down BEFORE they buy again. (Smart.)
"Why is the market still so hot? I would think that with SIP and the impending economic collapse, Buyers would sit out and wait," Kevin said, "Instead, prices seem to be going up!"
When the pandemic hit, the stock market tumbled, tens-of-millions applied for unemployment, SIP orders went into effect, masks became the new fashion accessory, and banks began tightening their qualifications, it seemed all but inevitable that real estate would take a subsequent hit and that Buyers would finally get the break they've long been waiting for.
Uhhh, not so fast . . . .
Instead, supply in the East Bay dropped by more than half, which means that demand is still out-pacing the available housing stock, and while many Buyers can no longer perform, and many others have paused to see where the chips will ultimately land, savvy investors have used their competition's hesitancy to quickly secure loans (rates are historically low), and jump into the marketplace with the understanding that values may still correct once the dust settles. Even with the caveat that the house they purchase in today's world may yet experience a correction in the near future, determined Buyers are absolutely clear that real estate is meant to be a long-term hold. Consequently, they haven't been dissuaded; not one bit.
Is it that high-end Buyers are less affected by the economic downturn? Yes, but they're not immune. As one potential Buyer succinctly put it, "We lost more in the stock market this week than the cost of a new house. Thanks for thinking of us, but we're staying put." (Fair enough.)
Is it that the Bay Area is buffered by the tech market and high-income earners? Yes, but no segment of society has been entirely unaffected. It's not just hospitality and service workers that have been sidelined these past several months; I gotta think that if you're a plastic surgeon whose practice relies heavily on elective procedures (facelift anyone?), you haven't been performing many surgeries lately. (Given the way most of us look on Zoom, fear not, I suspect your business is about to BOOM once surgery centers reopen.) And for those who have gratefully retained their jobs, many of the top brass have taken significant pay cuts until such time when things begin to level off and settle down. ("Settling down" is likely to be months away as I'm certain we haven't begun to fully experience the fallout.)
So what's the story morning glory? (Your guess is as good as mine.)
The best quote I've heard from the "talking heads" during this economic upheaval was this: "Economic predictions exist to make horoscopes look valid." While I'm not an economist OR a reliable prognosticator, I'd double down on what I've been saying since Covid-19 became an unwelcome reality, which is that our homes have never been more important as we have quite literally spent the last three months "sheltering in place." If your home was too small before, it got even smaller once daycare was no longer an option, OR if a baby was on the way, he or she came just the same, OR if your company just relocated to Dallas, you're probably moving - pandemic or not.
That being said, not all homes are created equal, nor are all price points, nor are all marketplaces. Piedmont properties have been selling in mere days, irrespective of the price point, while Crocker Highlands (right next door) has struggled more than we would have expected. Likewise, homes in Montclair - under $1,500,000 - have flown off the shelves, while those above are languishing. And for those Realtors who service price points under $500,000, or who live in much harder-hit areas of the U.S. (and make no mistake, the Bay Area is a rarified bubble), many of my colleagues are now delivering for Door Dash while trying to hang on. (Thankfully, Jill, Sarah and I have never been busier. We appreciate your faith and trust in our team.)
So what's the moral of the story? I guess it's that life continues, evolves, erupts, engages resolves, and is constantly changing - even when it appears that we've been nearly frozen in place and time. The truth is, we haven't. It's amazing to ponder and truly awe-inspiring but people are buying homes in the midst of unprecedented upheaval (!) and that's encouraging, to say the least. It's also incredibly life-affirming. (Thank you for that.)
But what Kevin wanted to know, and what you are probably wondering as well, is if a price correction with respect to Real Estate is on the horizon? Again, your guess is as good as mine. However, common sense would tell us that in an environment with the highest rate of unemployment since the Great Depression, with Coronavirus still very much a factor, with civil unrest and righteous upheaval taking to the streets, with a presidential election come the Fall that's certain to be a carnival, and with ALL the many unknowns that lie ahead, it's hard to imagine that even our extremely-coveted, stunningly beautiful, highly-diverse Bay Area won't suffer some ill effects . . . but right now, today, and in this moment, housing prices are holding steady and the demand has been nothing short of surreal. Next week, that could all change. (Stay tuned.)
In other words, if there's a move on your horizon - for whatever reason - let's talk.
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Julie Gardner, has been writing The Perspective for 18 years and has published more than 670 essays on life and real estate.