Bay area Housing 2020- Crash or no crash

Rental Property Investor · San Jose · Member since 2020 · 45 posts · 35 votes

Just wanted to get a sense of what people are seeing in Bay area and what they think will happen after a few month. Also wanted to see if I am being too negative on bay area and forecasting a 10-15% price drop.

The reason I see a 10 to 15% drop by April 2021 is

1. The virus and unemployment

2. Start-up layoffs

3. H1B ban for next 2 years effectively

4. Tech work from home or anywhere going main stream.

The area I am using as bench marks are

1. San Fran

2. Mountain view

3. Fremont

4. Walnut creek.

Very different demographics in all four and they together represent the Bay area as a whole quite good with the issues highlighted above.

I will write in more details when people write about their opinion on the points I raised.

I hold no solid stance one way or the other, just want people who are actually investing there give their side of the analysis, so I see if I am thinking correct.

Rents have dropped over 10% for two months now, are property prices next ?

7 Reply

317 views

Most Popular Reply

Tracey Robinson

Member since 2020 · 16 posts · 26 votes

“ Bay Area “ is very different in terms of properties, quality of life, amenities, etc depending on exactly where you are talking about. So what will happen to prices in San Francisco may differ from what happens in Mill Valley, Walnut, Creek, Menlo Park etc.
I predict a substantial price drop in San Francisco, especially in the condo market for multiple reasons. Tech heavy presence in SF will go down as people switch to working remotely and leave . Quality of life in SF continues to decrease with high burden of homelessness, filth, crime ( car breaks in for example ) which will also prompt people to leave. Covid has caused numerous restaurants and businesses to go bankrupt and shut down, the things that drew people to city life are no longer available, that will also cause an exodus, especially with no real end to the SF lockdown in sight.
The surrounding suburbs probably will see an increase in price, in part due to some people’s desire to flee the city for more personal space, and freedom from some of the negatives that have become all too common in SF in the last few years.

13 Reply

See this reply in the discussion

95 Replies

Jump to latestLatest

Sort by

Account Closed
Lender · Milpitas, CA · Member since 2016 · 376 posts · 248 votes
6y
Hey @Brian Singh! We're currently in uncharted territory. We've seen property values remain steady throughout SIP as inventory has dropped more than demand. Some of my successful flipper friends are being more conservative with their approach and are discounting the ARV by 10-15%.
Have some landlords been impacted by the drop in rents? Sure, but a majority of landlords in the Bay Area have owned their homes for decades and have a lot of built in equity/low monthly payments on the properties. So they won't be needing to firesale their homes anytime soon.
Long story short, I expect prices to remain steady during this time and may even go up as the stock market continues to rise, and as mortgage interest rates continue to remain low.
6 Reply
Brian Singh
OP
Rental Property Investor · San Jose · Member since 2020 · 45 posts · 35 votes
6y
Interesting.
This property looks like a typical buy and sell in two year investment to save cap gains. Its been updated and in menlo park so any facebook employee would be crazy to not buy it. Lets track this one and see where it ends. This will give us a good data point on Work remotely scenario.
Last time in 2018 it got an offer in a week. This round not sure if the seller can break even on a perfect property.

1 Reply
David Freeman
Investor · 94107 · Member since 2020 · 5 posts · 1 vote
6y
Curious about this as well. I think the key point here is whether most real estate owners in SF have high equity ownership. If so, they should be able to manage lower rental rates. Large developments on the other hand could suffer, especially if they are leveraged.
0 Reply
Derrick Dill
Investor · Hawaiian Gardens, CA · Member since 2015 · 308 posts · 386 votes
6y
I'm currently house hunting in 850k range. Got outbid by 50k, cash with 4 offers on the table excluding mine. It's VERY competitive still. Ridiculously rich people are still ridiculously rich
5 Reply
Justin Thorpe
Member since 2020 · 437 posts · 675 votes
6y
@Brian Singh
It seems to me you are an investor from Las Vegas. I am curious then what your prognosis for the LV market will be which I would imagine to be in the deepest of recessions already.
As for the Bay RE, local tech industry is doing very well as you can see from the stocks of digital, tech and biotech companies most of which are based in the Bay Area. Just to name a few Apple, Facebook, Salesforce, Docusign, PayPal, Zoom etc. Interestingly the tech layoffs that have occurred (AirBnB, Intuit, godaddy, lyft, uber) have largely impacted employees outside the Bay Area and not local employees as much.
Also if you read the news the IPO market and the tech M&A markets are very strong to enable startups to exit.
I won’t bring up the tight supply and low interest rates as drivers because they are quite universal and apply to most markets in the US. There is overseas investment that also helps the bay market and that is picking up steam.
5 Reply
Tracey Robinson
Member since 2020 · 16 posts · 26 votes
6y
“ Bay Area “ is very different in terms of properties, quality of life, amenities, etc depending on exactly where you are talking about. So what will happen to prices in San Francisco may differ from what happens in Mill Valley, Walnut, Creek, Menlo Park etc.
I predict a substantial price drop in San Francisco, especially in the condo market for multiple reasons. Tech heavy presence in SF will go down as people switch to working remotely and leave . Quality of life in SF continues to decrease with high burden of homelessness, filth, crime ( car breaks in for example ) which will also prompt people to leave. Covid has caused numerous restaurants and businesses to go bankrupt and shut down, the things that drew people to city life are no longer available, that will also cause an exodus, especially with no real end to the SF lockdown in sight.
The surrounding suburbs probably will see an increase in price, in part due to some people’s desire to flee the city for more personal space, and freedom from some of the negatives that have become all too common in SF in the last few years.
13 Reply
Brian Singh
OP
Rental Property Investor · San Jose · Member since 2020 · 45 posts · 35 votes
6y
@Justin Thorpe . For las vegas market. The situation is bad as the jobs have just dissipated and you cant work from home for those jobs.

However , the market has not crashed and median prices have actually risen. Go figure.

However, later in the year is when we will see a bad price correction. Since there is no foreclosure or eviction, things are on Ice. One sign that things are not good that we see now is , inventory it has increased 50% vs pre covid.

the pent up demand is starting to vane so when foreclosures start, $ 600 extra employment end. We should start to see the real market dynamics. In general $1 million and above market is freezing . Below 250k shelter is doing all right.

The virus is here until a vaccine come, we now know , no work around that except get it and recover.

@Tracey Robinson . Thanks for the input , I picked walnut creek as a suburb as you mentioned .

I pick this house as its on the median of the market so no outliers . It looks the same as menlo park. It seems right now prices in bay area have corrected to 2017 level. So anyone who bought a house after 2017 is losing money.

Most listing I see are have same prices drops in walnut creek too. This one sold for 450K in 2018.

2 Reply
Account Closed
New to Real Estate · Antioch, CA · Member since 2020 · 36 posts · 19 votes
6y
Agree with @Tracey Robinson's opinion on the Bay Area. Be aware that the markets you've listed are "Class A neighborhoods" and not necessarily representative of surrounding cities. I live in the eastern edge of the East Bay and work in San Francisco and can tell you first hand that Walnut Creek is very different from cities like Pittsburg, Antioch, Brentwood, etc., and San Francisco is its own little bubble compared to Daly City, South SF, etc. All of the above issues stated about SF are true. Whether we see property prices come down remains to be seen. My neighbor just sold their home last month for $500,000 and I live in a Class C+/B- neighborhood.
0 Reply
Darius Ogloza
Investor · Marin County California · Member since 2018 · 1k+ posts · 2k+ votes
6y
We appear to be seeing the effect Tracey speaks of here in Marin where everything under $1 million (dumpsters included "skylights anyone?") is selling within 3-5 days, typically all cash, no contingencies, and 8-15% over list price. As flippers, we have bid on 8 properties and, finally, won a fixer a few days ago by going 10% over list. Fewest number of offers reported to us in these transactions was 5. Ross Valley (particularly San Anselmo) is smoking hot. Whether this continues until next spring, no one knows but we are betting that it does. Being cooped up in an 800 square foot 1 bedroom with two kids and no yard or daycare has spooked a of of city dwelling millennials it seems.
1 Reply
Brian Singh
OP
Rental Property Investor · San Jose · Member since 2020 · 45 posts · 35 votes
6y
Thanks everyone for the info. This is very interesting .
@Account Closed Can you elobrate why walnut creek is falling vs nearby antioch which you say is going up, both seem close by in google map , I am quite sure there is some local info you know that would explain it.

0 Reply
Account Closed
New to Real Estate · Antioch, CA · Member since 2020 · 36 posts · 19 votes
6y
@Brian Singh
I actually don't know if Walnut Creek is falling or the reasons, though I speculate it has to do with the economic fallout from COVID. It's historically been a very expensive and desirable city to live in. Basically any high income employees that wanted the breathing room of the suburbs/mixed-use with vibrant commercial activity and didn't mind the 30-40 min commute into downtown SF would live in Walnut Creek or Pleasant HIll. "LaMorinda" (Lafayette, Orinda, Moraga) is also a very affluent region but I would consider that to be very established neighborhoods where you'd find a lot of old money.
I didn't mean to imply that Antioch was an appreciating market, actually the opposite is true. I do see some price declines but many working class folk are attracted to the lower price point with large enough homes and space to raise a family.
Yes, the cities are geographically close but consider that for a very long time transit connections into the employment centers of San Francisco and Oakland were lacking in the far East Bay until the opening of the Antioch and Pittsburg eBART stations in 2018 that really drove prices up.
1 Reply
Joyce Riley
Member since 2020 · 6 posts · 10 votes
6y
The key is, rents have already decreased by 10%. In a down market rents will drop first because rental prices can adjust much faster. This is one of the first signals the real estate prices are preparing to drop. You will not see the effect on real estate sales for up to six months due to the stimulus and low interest rates. Nervous sellers withdrew from the market due to fears of covid so inventory dropped which made prices rise (supply and demand). Also, the length of escrow is 45 days and statistics will lag behind due to the time it takes for sales to occur and be recorded. I believe prices will drop due to unemployment and lack of qualified buyers. Another sign of decreasing real estate prices to come are that condo sales volume and prices are down.Condo prices and sales drop before single family.

Stock market drops and volatility are much more effected by emotions on a day to day basis. It's much faster and easier to sell stock than a house. Stocks are dropping in value due to corporate losses in industries such as travel, and entertainment, for example. When the stock market drops severely and a recession occurs, housing prices follow but not as severely. Look back to the Great Recession of 2007-09 when the stock market dropped by about 50%, housing dropped by 20-30%

We also have to consider the price point. Luxury homes will drop much more because there will be fewer buyers. In Honolulu, luxury homes have dropped several hundred thousand dollars while there is still currently a vigorous competition for anything priced under $1 million in a nice neighborhood. Middle class people will have to have a place to live even through covid.

And lastly, as others mentioned there will be an exodus from densely populated areas to those that are perceived as safer and a better value if more people can work from home.

A recent study in Honolulu found that 45% of households have had their income drop since covid and 25% are having trouble paying their bills. 13% have food insecurity.

So, now that I have shared that I believe this is going to get worse, I will say I believe real estate is a safer investment than stocks at this time and is always going to go up as a long term investment.
7 Reply
Sasha Tetera
Investor · San Francisco · Member since 2019 · 11 posts · 8 votes
6y
@Brian Singh Bay Area market is diverse and consists of various pockets.

To @Tracey Robinson point - I see people moving out from the SF downtown highrises into SFH as people seek privacy & more space. SFHs have always been in high demand so I anticipate prices steady there as compared to the highrises.

I don't think prices in the suburbs will be affected much here are a couple of reasons:

Exceptional school districts (ex: Milpitas) @Account Closed also some of the new construction is now being converted into rentals, limiting inventory even further. A friend is listing a 2br townhome $50K above the expected price.
People who were renting condos in SF for $4000/month now would buy a house across the bridge, therefore, driving up prices & demand.
Let's wait and see, we live during interesting times!
1 Reply
Justin Thorpe
Member since 2020 · 437 posts · 675 votes
6y
I have been doing the rounds of SF and the city has regressed fast in these past 3 months. The downtown now reminds me of the downtown in the late 90s when people used to think twice before walking there at night. Of course it’s nearly empty during the day and I have not been there at night where I can imagine it to be worse. There is more filth and there are 10x more homeless people and tents are everywhere and encroaching the high end condo developments in the Rincon Hill area, making that place less interesting to be around. Now remember this is right on the Embarcadero waterfront and it’s usually an amazing area to be at, but not now!
I shudder to think what happens in another 3 or 6 months, if the mainstream population has no reason to venture to these areas like jobs, restaurants and entertainment. That will start to set the stage for a housing market decline at least in SF. For the rest of the bay, we will know when Bay Area companies report earnings in 2 - 3 weeks, that will tell us if they are doing as well as stock prices suggest.
All that said, investors will jump in droves when prices soften. People will take a long term view and snap properties are good prices. There is always a hard floor for Bay Area properties. The local economy is too large and too diverse.
6 Reply
Armel BayotPro Member
Rental Property Investor · Walnut Creek, CA · Member since 2019 · 116 posts · 38 votes
6y
There'll be NO crash in the Bay Area. SF might pull back a little bit with people moving to the suburbs . Walnut Creek will remain stable as a lot of homeowners there are geriatrics who owned their properties for years. Mountain View, Fremont wont crash as well due to the booming tech companies like TESLA , FB, etc. I think overall with the low current rate, low inventory , high demand to the suburbs, prices will be stable / might go up by 2021.
2 Reply
Anthony MorrowPro Member
Rental Property Investor · Concord, CA · Member since 2020 · 37 posts · 11 votes
6y
@Edward Tang just to reiterate your point real estate in antioch is a sellers dream as they are getting multiple offers above asking price. Antioch has resumed building SFH 3bd/2ba at 650K-850k. I just saw the undated MLS and 10 houses I was viewing is now pending. I put an offer in on a 5ba/3ba house in the 94509 area for 450k and seller has had multiple offers.
1 Reply
Brian Singh
OP
Rental Property Investor · San Jose · Member since 2020 · 45 posts · 35 votes
6y
So the 2020 and 2021 strategy for bay area
Rentals- Losing money so not worth
Buy long term and hold- Not worth it , wait till prices drop stops or goes down to 2014 level.
BRRR and flips. Buy at 2015 prices and hope it apprises at 2017 level.
What do you all think ?
0 Reply
Brian Garlington
Realtor · Oakland, CA and a Real Estate Investor with Multi-Family Units and a Self Storage Facility · Member since 2016 · 2k+ posts · 2k+ votes
6y
The Bay Area Market will not crash like 2006-2010.....There may be a dip......but no crash.....As for rents......no landlord in their right mind would reduce rents out here. I certainly haven't. Sets a very bad precedent because then the tenants are running the landlords at that point.
0 Reply
Matt Ellis
Contractor · Aptos, CA · Member since 2020 · 32 posts · 11 votes
6y
Wow, this is great. I just joined BP 2 hours ago in hopes of finding investors here in CA and the first post I see is about Bay Area.
My guess is that after this first round of forbearance at 180 days is over there will be a large amount of property owners that will not have been able to secure refinancing and will go into foreclosure. Then There will be another wave in the following 180 days.
Looking forward to learning from all you pros out there
2 Reply
Juan Pardo
Member since 2020 · 201 posts · 118 votes
6y
Originally posted by @Armel Bayot:
There'll be NO crash in the Bay Area. SF might pull back a little bit with people moving to the suburbs . Walnut Creek will remain stable as a lot of homeowners there are geriatrics who owned their properties for years. Mountain View, Fremont wont crash as well due to the booming tech companies like TESLA , FB, etc. I think overall with the low current rate, low inventory , high demand to the suburbs, prices will be stable / might go up by 2021.

For some of those companies the stock prices are totally disconnected from the actual earnings.

For instance, last week the market capitalization of Tesla surpassed Toyota's. However, Toyota does sell millions of cars per year. Tesla sells less than 0,5 million cars per year worldwide. It does not make any sense.

As for the tech industry, one of the risks is that the European Union levies a tax on them, the so-called "Google Tax".

2 Reply
Tracey Robinson
Member since 2020 · 16 posts · 26 votes
6y
@Brian Singh As far as the Bay Area I don’t see any good plays at this time. Even if the prices dropped in SF 30 % I wouldn’t be tempted to go back in personally - I feel lucky to have sold in April. SF is one of the worst run cities in the country and from what I read I see the quality of life there declining further ( crime, homelessness, cleanliness ) unless there is a radical change in city politics, which I don’t see on the horizon.
I think there are many more cities / areas around the country that are better to invest in at this time.
2 Reply
Justin Thorpe
Member since 2020 · 437 posts · 675 votes
6y
Contrary to what some posters have said about WFH trends negatively impacting SF rentals, I think it could actually be a huge positive. Before Covid-19, hundreds of young pros commuted to the South Bay from SF daily burning up to 3 hours a day. Now they may not have to, at least for a few months. So they may well choose to stay put.
That also means the young guns who chose to live in the suburbs to avoid long commutes may now start thinking of moving to the city vs live in a less exciting environment.
To me what breaks the back of SF is 2 things.
First is if office culture, nightlife/social life does not come back. SF then becomes is a lot less desirable option to live for youngsters. This happens if Covid sustains and is not defeated.
Second, the homeless population, filth and growing crime will drive away people. That’s where the city administration needs to step up.
In the end it is in a sad way amusing how the US psyche (me included) are looking to a life where Covid continues to be part of our daily life when countries much smaller than ours have defeated Covid through the right measures, of course with the cooperation of their population.
The key lies in defeating Covid. If Covid stays it takes down many an American institution with it including large cities, college towns, casino towns, theme park towns etc. Sure it may line up the pockets of a few brokers who sell RE in outer suburbs but that will blow away quickly and it is not the real game.
3 Reply
Amit M.
Rental Property Investor · San Francisco, CA · Member since 2013 · 1k+ posts · 1k+ votes
6y
My response from a similar post:

“I think the recent work from home hysteria is a fallacy. Conceptually, working from home has NOTHING to due with covid 19. If it’s so awesome, why wasn’t it adapted en mass years ago? Yahoo a couple years back even rolled back WFH. It’s a trend that will have some effect yes, but it’s being way over hyped. For two main reasons: 1- I’m not sure it will really provide long term benefits to the tech firms jumping on the bandwagon now 2- I’m not sure how many employees will ultimately like it, after the forced-Covid-novelty wears off. i.e. it’s hard to get all those cool tech co benefits like free gourmet food, gyms, awesome office spaces, etc., etc. piped over a zoom meeting ;)

As for WFH effect on the Bay Area, keep in mind that when people work from home, their direct environment becomes MORE, not less important. Would you rather be home based in the Bay Area with tons of things to do nearby, good weather, lots of nature, etc. or someplace with little culture, extreme temperatures, bland immediate environment, etc., etc. There is a reason many people, who can afford to do so, aspire to live in CA and especially the Bay Area. Working from home isn’t going to radically change those aspirations.”

WRT downtown condos, those are usually not the best investments anyways. No upside as you pay a premium. They do crash harder (as in 2008-09), so I guess some people made money by buying them on the dip. But if you invest in residential S.F. neighborhoods, add value, and also buy in gentrifying areas (as I have) you can do very well.

Lastly, as for S.F. quality of live, etc. Yes it's at a downturn now and there is some flight, but that will blow over in 1-2 years, and young folks will return en mass. There are still people coming in now with new professional jobs, it's just not as crazy as before. Same thing happened in lower Manhattan after 9/11. Market was soft for 1-2 years, and then back on. Cities like NYC and SF have intrinsic qualities that just can't be found in the surrounding burbs.
Will there be another leg up on this chart by 2030? I bet there will.
5 Reply
Brian Singh
OP
Rental Property Investor · San Jose · Member since 2020 · 45 posts · 35 votes
6y
@Amit M. Sounds like you you saying is 2020 and 2021 is not a good time to invest in bay area as prices will fall as per the chart , it goes till 2017 I am assuming because prices have gone back to 2017 level. As we did in our research above anyone who bought a house 2018 and after has lost money in bay area.

Prices dropped for 4 years last round so 2022 end maybe time to look back at bay area.

Thus what I am concluding from this amazing inputs is that

1. Bay area market is not worth investing in till 2022.

2. FOMO and YOLO bay area culture cannot sustain both startup and house prices. Its back to basics there.

As for the urban legend stories of housing dissapearing in 10 mins , it seems a bay area FOMO thing. I am looking at MLS and I see both good homes staying until they reach 2017 price level and housing flying. It could be "not so smart" home buyers making emotional decisions.
Once inventory piles on in september , it be interesting to see if we still hear the stories.
Its all about supply and demand. Supply will increase , demand not so sure for bay area till 2022.
1 Reply
Justin Thorpe
Member since 2020 · 437 posts · 675 votes
6y
@Brian Singh
The key to me lies in not viewing the Bay Area as one market with one blanket strategy but to pick the areas you feel you want to play in and look for value creation opportunities.
My last purchase was in 2017 and I doing great on that asset but I can bet money has been made by those who bought the right assets in 2018.
As for FOMO thingy, I’d rather watch what’s going on with Bay Area jobs and employment in the tech business. I mean let’s face it thanks to the stock market run up in tech, Bay Area employees are now sitting on their biggest net worth in decades thanks to RSUs and stock options.
Also, just today Postmates a unicorn startup got acquired for 2.5Billion. Last week, Personal Capital, another startup got acquired for $1 billion. There are at least half a dozen IPOs coming in the next 6 weeks. All that cash is going to flow into RE and it might look like FOMO to those who are not equipped to participate.
2 Reply

Join the conversationCreate a free account to reply, vote on answers and follow this thread.