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2021 Changed San Francisco Real Estate As We Know It, Maybe Forever

2021 was a crazy year for real estate around the nation, but it was especially spectacular in San Francisco, where real estate has always been a little wild. Records were broken and established all throughout the Bay Area, and as we look forward to 2022, it seems that real estate in the Bay Area will never look the same as it did before the epidemic.

Before we look at the situation locally, it’s worth noting that 2021 was a historic, record-breaking year on a nationwide level. According to Redfin, the median price of a house sold in 2021 will be the highest of all time. “The number of properties for sale plummeted to an all-time low, [and] there was record demand for second homes,” Redfin said as one of the causes behind the surge. There was a never-before-seen national demand for real estate, thanks to historically low borrowing rates, a new work-from-home (or anywhere, forever) economy, expanding IT companies, and a volatile stock market.

That desire was voracious in San Francisco. The average house in the United States sold for over $400,000, up 24.4 percent year over year. In San Francisco, though, the price was $1.5 million.

But it wasn’t just the metropolis; the whole Bay Area was engulfed in chaos. According to Norada Real Estate Investments, the median sales price in the nine-county area of Alameda, Contra Costa, Marin, Napa, San Francisco, San Mateo, Santa Clara, Solano, and Sonoma was $1.3 million ($733 per square foot). According to the California Association of Realtors, this is a rise of 18.2 percent over last November, making it the greatest year-over-year gain in the state. House prices in the Bay Area were also up 2% from the previous month (October 2021).

According to Redfin statistics, record-low inventory throughout the nation is driving up prices. In June, there were just 1.38 million properties for sale, down 23 percent year over year and a new low. Inventory was also down in San Francisco, despite the fact that the seven-by-seven-square-mile city’s inventory has always been limited.

Homes rushed off the market in record speed and at record offer prices, owing to the shortage. According to Redfin statistics, the average property sold in only 15 days nationwide, setting a new record as the lowest median days ever and down from 39 days in June 2020. Homes in San Francisco sold in an average of 16 days, with 72.9 percent of those sold for more than the asking price.

The high demand for housing has resulted in unprecedented (and worrisome) bidding wars, the likes of which the nation has never seen before. Redfin data
The high demand for housing has resulted in unprecedented (and worrisome) bidding wars, the likes of which the nation has never seen before.

This heated demand outpaces the rest of the country’s record-breaking offer prices: 56.5 percent of properties in the United States sold for more than list price in 2021, up 29.6 percent from 2020.

Demand for second houses has almost doubled since the epidemic, up 91 percent from pre-pandemic levels throughout the nation. This demand resulted in record prices in locations like Tahoe, Santa Cruz, and Hawaii in the Bay Area.

Luxury residences were valued for their ability to provide a safe haven. In the second quarter of 2021, the median selling price of luxury residences in the United States increased by 26.5 percent to $990,000, a new high. That pattern is paralleled in San Francisco, where a strong spike in ultra-expensive property sales began in 2020 and continued through 2021.

Over the last two years, luxury residences have seen a tremendous increase in demand in San Francisco. Image courtesy of Compass.
Over the last two years, luxury residences have seen a tremendous increase in demand in San Francisco. Image courtesy of Compass.

It’s unlikely that 2022 will be substantially different. Demand is unlikely to fall even if interest rates rise. “A major trend began in 2020 and persisted through 2021, and I anticipate it to continue in 2022. That trend is the value of a property, independent of its cost. Whether they consider themselves to be wealthy or not, more individuals are putting a higher value on their primary house than ever before “Alex Clark, Realtor and Founder of The FrontSteps Real Estate, shared his thoughts.