San Francisco, California rivals New York in terms of rental rates and the overall price of real estate. San Francisco seems to be making the news for all the wrong reasons. The homeless problem and associated public hygiene problem are so bad there is literally an app for that, the reporting of public defecation. This is why the San Francisco housing market resembles New York City of the 1970s, a buying opportunity for those willing to take the chance that the market will soar once the region recovers, though that may require a chance in leadership.
San Francisco is home to nearly 900,000 people. It is the hub of the San Jose-San Francisco-Oakland area; this larger metro area is home to nearly nine million people. It consistently ranks among the most expensive real estate markets in the world, and it is one of the most densely populated cities in the U.S. San Francisco is home to approximately 805,000 people.
The city alternately makes the news for people paying incredibly high rents to live in boxes, the homeless problem, and the tech industry. This makes many wonder why or how anyone could live there. Others would think why you’d want to buy a property now in such an over-valued real estate market. Yet we can give you ten positive signs about the San Francisco housing market 2020. The unemployment rate in the San Francisco-Redwood City-South San Francisco MD was 1.8 percent in December 2019, down from a revised 1.9 percent in November 2019, and below the year-ago estimate of 2.1 percent.
This compares with an unadjusted unemployment rate of 3.7 percent for California and 3.4 percent for the nation during the same period. In the latest quarter, the San Francisco property appreciation rate has been around 0.30%. If it remains steady, the annualized appreciation rate would be around 1.2%, which could trigger good interest in the San Francisco real estate investment opportunities. That is good sign for buyers and investors as far as affordability is concerned as many of them can’t afford to buy a median-priced home San Francisco.
In this article, we shall discuss some more important reasons why you may want to consider buying San Francisco investment properties in 2020. Please note that there are many variables that can potentially impact the value of a home in San Francisco (or any other market) and some of these variables are impossible to predict in advance.
San Francisco Bay Area Real Estate Market News 2020
In a report published by Google, it announced $1B, 10-year plan to add thousands of homes to Bay Area. The company would be making this major investment in what it believes is the most important social issue in the bay area real estate market. This proposition by Google will add thousands of new homes to the Bay Area real estate market over the period of next ten years. About $750 million would be used for repurposing Google’s own commercial real estate for residential purposes. This will allow for 15,000 new homes at all income levels in the Bay area.
Another $250 million investment fund would be utilized to provide incentives to enable developers to build at least 5,000 affordable housing units across the Bay area housing market. As a move to support affordable housing initiative these investments will help Google plans to give $50 million in grants through Google.org to nonprofits focused on the issues of homelessness and displacement of citizens. The company also plans to fund community spaces that provide free access to co-working areas for nonprofits, improving transit options for the community and supporting programs for career development, education and local businesses.
San Francisco Real Estate Market Forecast 2020
What are the San Francisco real estate market predictions for 2020? San Francisco housing market 2020 is shaping up to continue the trend of the last few years as one of the hottest markets in California. San Francisco is currently a buyer’s market – which means there are less no. of qualified buyers and more homes for sale in the market. The latest real estate data from Zillow shows that the current median home value in San Francisco is $1,387,263.
The home prices have risen by 1.7% over the last year. Looking forward in this year, the San Francisco real estate market forecast is that home prices will continue to increase by 4.6%. Since 2015, the median home price in San Francisco has increased from $1.03M to $1.45M.
Here is the San Francisco, CA real estate price appreciation graph by Zillow. It shows us the current home price appreciation forecast of 4.6% till Dec 2020.
The median list price per square foot in San Francisco is $1,090, which is higher than the San Francisco-Oakland-Hayward Metro average of $500. Zillow reports that 3.5% of the listings in San Francisco had a price cut in Dec 2019, which is a good thing for buyers. The median price of current listings in San Francisco is $1,348,000.
Homes are selling below their asking prices as the median price of homes that have been sold out is $1,336,800. It shows sellers were willing to negotiate on prices as they were finding it more and more difficult to sell homes at asking prices. The median rent price in San Francisco is $4,382, which is higher than the San Francisco-Oakland-Hayward Metro median of $3,250.
San Francisco home prices are not only among the most expensive in the state of California but they are also some of the most expensive in all of United States. Here is a snapshot that shows the median home values in the some of the neighborhoods of San Francisco.
San Francisco Housing Market Forecast 2019 – 2021
Here is a short and crisp San Francisco housing market forecast for the 3 years ending with the 3rd Quarter of 2021. The accuracy of this forecast for San Francisco is 77% and it is predicting a positive trend. The LittleBigHomes.com estimates that the probability for rising home prices in San Francisco is 77% during this period. If this price forecast is correct, the San Francisco home values will be higher in the 3rd Quarter of 2021 than they were in the 3rd Quarter of 2018.
Check this page each quarter for updates to the San Francisco Housing Market Forecast.
San Francisco Housing Market Trends
We shall now discuss some of the most recent housing trends in the San Francisco area and compare it with past couple of years. We shall mainly discuss about median home prices, inventory, economy, growth and neighborhoods, which will help you understand the way the local real estate market moves in this region. Trulia has currently 631 homes for sale in San Francisco, CA, including open houses, and homes in the pre-foreclosure, auction, or bank-owned stages of the foreclosure process. The median price of sold homes in San Francisco is $1,400,000 and home are selling for about $1147/sqft.
As per the real estate company called Neigborhoodscout.com, the median house price in San Francisco is $655,688, which indicates that home prices in San Francisco are well above the national average for all cities and towns in the United States. One and two bedroom high rise apartments are the most common housing units in San Francisco. Other types of housing that are prevalent in San Francisco include single-family detached homes, duplexes, row houses and homes converted to apartments. San Francisco has a mixture of renter-occupied and owner-occupied housing units.
Following the housing market decline in 2007, single family rental properties became favorable options for investors, saving in construction or refurbishment prices. The quick turnaround for an owner to rent out their property means cash flow is almost immediate. Single family rental homes have grown up to 30% within the last three years. Almost all the housing demand in the US in recent years has been filled by single family rental units.
Currently, there are 145 single family homes for sale in San Francisco, CA on Zillow. Additionally, there are 350 single family homes for rent in San Francisco, CA. Under potential listings, there are about 2 Foreclosed and 90 Pre-Foreclosure homes. These are the delinquent properties that may be coming to the market soon but are not yet found on a multiple listing service (MLS).
In the past month, 426 homes have been sold in San Francisco, CA on Redfin.com. In addition to houses in San Francisco, there were also 554 condos, 21 townhouses, and 146 multi-family units for sale in San Francisco last month. The median listing price is around $1.55M. According their statistics, the San Francisco housing market is most competitive.
Homes in San Francisco receive 2 offers on average and sell in around 25 days. The average sale price of a home in San Francisco was $1.34M last month, down 0.56% since last year. The average sale price per square foot in San Francisco is $954, up 0.69% since last year. A hot listing in San Francisco can sell for about 17% above list price and go pending in around 13 days.
Here is the latest San Francisco housing market data for the month of Jan 2020 from Redfin.com. The sale to list price ratio shows us that it was a trending more like a seller’s market in the past month.
San Francisco Housing Market Trends
|Median List Price||$1.55M|
|Avg. Sale / List||105.8%|
|Median List $/Sq Ft||$1020|
|Median Sale Price||$1.34M|
|Median Sale $/Sq Ft||$954|
Analyzing real estate data from multiple sources gives us a much broader perspective of the direction in which a market is moving. There are currently 877 homes for sale in San Francisco on Realtor.com. The asking price of single family homes can start from $135,000 and can go up to $40.5M for a luxury property located in Northeast San Francisco neighborhood in the city of San Francisco, CA. The median home price in Northeast San Francisco neighborhood is $1.60M.
San Francisco is also a rental property market. There are currently 834 rental properties in San Francisco and their rent prices range from $640 to $45,000 per month. There are only 3 new construction homes for sale in San Francisco within a price range of $2.3M to $7.25M. The most affordable new construction homes can found in Bernal Heights neighborhood in the city of San Francisco, CA. The median home price in Bernal Heights neighborhood is $1.72M.
According to Realtor.com, in December 2019, the San Francisco housing market was a seller’s market, which means there were roughly more buyers than there were active homes for sale. Ideally a buyer would prefer a sale to asking price ratio that’s closer to 90%. In San Francisco, the sellers have held good leverage in these negotiations in the past month. On an average, they could sell homes for 101.86% of the asking price. A seller would always prefer scenarios which can yield a ratio of 100% or higher.
In December 2019, the median list price of homes in San Francisco, CA was $1.5M, trending up 10.7% year-over-year. The median listing price per square foot was $966. The median sale price was $1.4M. On average, homes in San Francisco, CA sell after 56 days on the market.
The median list price in San Francisco, CA is $1,495,000 on Movoto.com. The median list price in San Francisco was less than 1% change from January to February. San Francisco’s home resale inventories is 497, which increased 0 percent since January 2020. The median list price per square foot in San Francisco is $1,156.
As you can see in the graph, the median price per sq ft in San Francisco rose to its peak value in Dec 2019, when it was $1222. In January 2020 it was $1,156. Distressed properties such as foreclosures and short sales remained the same as a percentage of the total market in February.
San Francisco is a fairly walkable city in San Francisco County. If you are looking to invest in the San Francisco real estate, you should that three most important factors when buying a real estate anywhere are location, location, and location. Location creates desirability. Desirability brings demand. There should be a natural and upcoming high demand for rental properties. Demand would raise the price of your San Francisco investment real estate and you should be able flip it for a lump sum profit.
The neighborhoods in San Francisco must be safe to live in and should have a low crime rate. The neighborhoods should be close to basic amenities, public services, schools and shopping malls. Marina District has a median listing price of $3.2M, making it the most expensive neighborhood in San Francisco. Lower Nob Hill is the most affordable neighborhood, with a median listing price of $995,000.
Some of the popular neighborhoods in San Francisco, California are South Beach, Pacific Heights, Mission District, Presidio Heights, Excelsior, St. Francis Wood, North Beach, West Portal, Outer Sunset, Hayes Valley, Portola, Dogpatch, Bernal Heights, Noe Valley, and Russian Hill.
San Francisco Foreclosures And Bank Owned Homes Statistics
As per the San Francisco foreclosure data by Zillow, in San Francisco 0.1 homes are foreclosed (per 10,000). This is the same as the San Francisco-Oakland-Hayward Metro value of 0.1 and also lower than the national value of 1.2. The percent of delinquent mortgages in San Francisco is 0.2%, which is lower than the national value of 1.1%.
With U.S. home values having fallen by more than 20% nationally from their peak in 2007 until their trough in late 2011, many homeowners are now underwater on their mortgages, meaning they owe more than their home is worth. The percent of San Francisco homeowners underwater on their mortgage is 2.6%, which is lower than San Francisco-Oakland-Hayward Metro at 2.7%.
|Total No. of Foreclosures in San Francisco||162 (RealtyTrac)|
|Homes for Sale in San Francisco||240|
|Median List Price||$1,399,000 (0% rise vs Nov 2018)|
There are currently 162 properties in San Francisco, CA that are in some stage of foreclosure (default, auction or bank owned) while the number of homes listed for sale on RealtyTrac is 240. In December 2019, the number of properties that received a foreclosure filing in San Francisco, CA was 30% higher than the previous month and 7% lower than the same time last year
In San Francisco, the zip code with the highest foreclosure rate is 94124, where 1 in every 2295 housing units is foreclosed. 94132 zip code has the lowest foreclosure rate, where 1 in every 5436 housing units becomes delinquent.
Is San Francisco a Good Place For Real Estate Investment?
Is San Francisco a Good Place to Invest In Real Estate? Investing in real estate is touted as a great way to become wealthy. Many real estate investors have asked themselves if buying a property in San Francisco is good investment? You need to drill deeper into local trends if you want to know what the market holds for the year ahead. We have already discussed the San Francisco housing market 2020 forecast for answers on why to put resources into this market.
Although, this article alone is not a comprehensive source to make a final investment decision for San Francisco but we have collected ten evidence based positive things for those who are keen to invest in the San Francisco real estate in 2020. Investing in San Francisco real estate will fetch you good returns in the long term as the home prices in San Francisco have been trending up year-over-year. Let’s take a look at the number of positive things going on in the San Francisco real estate market which can help investors who are keen to buy an investment property in this city.
1. The Job Market
Why doesn’t everyone just move out of the San Francisco housing market? Some do move, but they have a one and a half to two hour commute each way to work because they still want to work there. They just can’t afford to live there. Moreover, it is the high tech job market that draws so many people to San Francisco and leaves many others struggling to pay the bills. The predicted 2020 job market slowdown won’t result in layoffs, just a drop in job growth to 1.5 to 2 percent a year. Note that the area already has an unemployment rate 1.2 percent below the national average.
2. The Geography
San Francisco sits on a peninsula, surrounded on three sides by water. They cannot build out to meet housing demand. The surrounding cities are densely built up, as well. The only way the San Francisco real estate market could meet demand is by ripping out large swaths of two and three story buildings to build condo towers, but that’s almost impossible given local regulations. The ability to build up is limited in the surrounding suburbs because of the mountains.
3. The Zoning Restrictions
The San Francisco real estate market is, for better or for worse, beholden to a number of competing interest groups. For those with money that own their homes and have the most influence, “not in my backyard” or NIMBY means that voters fight any proposal to replace a 2 or 3 story warehouse with a 20 story apartment or condo building. They want to protect the look and feel of the community, though high rise construction could start to relieve the overcrowding in the San Francisco real estate market.
The horrific stories of developers going through four years of red tape to build multi-family San Francisco rental properties deters others from even trying. Ironically, this creates significant returns for those who buy up San Francisco rental properties and can convert them to multi-family housing.
4. The Environmental Movement
The environmentalist movement and California are intertwined in the public’s mind and for good reason. This is best demonstration of its impact is Marin County. An estimated 85 percent of the county is off-limits to development. This doesn’t mean there are no homes here. It means that there are large estates that cannot be turned into tract homes. Neighbors fight any such project.
This is why George Lucas had to threaten to build hundreds of homes on Skywalker Ranch when they wouldn’t let him expand his studios there. This also explains why the San Francisco real estate market cannot solve its affordable housing crisis by building in the relatively open lands in Marin County.
5. The Redevelopment Opportunities
Warehouses and factories have been converted to lofts in large, established cities around the world. They offer open spaces, high ceilings and proximity to public transit and downtown amenities. San Francisco is no exception to this trend. The difference is the growth in high-density San Francisco rental properties as can only be found in co-living spaces. These can be considered high-end dorms.
People may rent a bunk bed and storage space for their possessions, gaining access to laundry, kitchen and workout facilities. Several people may share a bedroom that rivals a cramped college dorm room. These facilities are booming because they cater to the new college graduates already used to living this way and willing to continue to do so in order to work for Big Tech firms in San Francisco.
6. The Opportunity in the Exodus
The high cost of real estate in San Francisco is impossible for most families to manage. The only reason the housing market hasn’t collapsed due to their exodus is due to all the singles and couples moving in. This provides San Francisco real estate investors the opportunity to buy up single family homes by people leaving the city or the state altogether to rent out to groups of individuals instead. Convert a three bedroom home into three efficiency apartments and charge comparable rents.
7. The Smaller, Secondary Opportunities
The “Yes in My Backyard” faction is advocating for more granny flats, mother-in-law suites and other add-ons to existing housing that could bring tens of thousands of new units to the market. Hunt for properties where this could be built when the regulations change, and you could build and rent out such a unit immediately.
8. The Landlord Unfriendliness
California is on the whole unfriendly to landlords. It is challenging to evict people. It can take a long time to evict someone who occasionally pays the rent. Taxes are high. What does this do to the San Francisco housing market? It leaves open the possibility that you could snap up San Francisco rental properties at a relative bargain price by people who just want to quit, whether they want to sell the properties or leave the state. For example, the laws governing the San Francisco real estate market allow you to buy San Francisco rental properties and evict the tenants to turn the units into condos for sale.
9. The Fact that It Isn’t Oregon
You may read about the growth of Portland and other Pacific Northwest cities as talent and businesses flea the expensive San Francisco real estate market. That’s hardly impacted the San Francisco housing market, though. However, San Francisco has several advantages over its Oregon rivals, and that’s the fact that you aren’t in Oregon. Oregon passed a state-wide rent control law in 2019. This is in addition to many city regulations regarding affordable housing. In Oregon, your ability to raise rents is limited by the state.
Making matters worse, there are many more renters than property owners, so they’ll tighten the allowable rental increases and continue to hamper owners until they’re losing money. And then there is California. You can find a variety of rent control laws in the San Francisco housing market, because every city takes their own approach to the problem. This means that you can find suburban San Francisco rental properties where you could raise rental rates to match the market. Furthermore, rent control laws typically don’t apply to newer single family homes.
10. The San Francisco Luxury Real Estate Market
There are new units being built in the San Francisco housing market. They mostly consist of luxury condos and mega-mansions built for the elite of the Big Tech workforce. Another unintended side effect of regulations on San Francisco rental properties is that it incentivizes the construction of high-end units. Investors could invest in these projects or buy properties in the hopes that they are torn down and redeveloped. This is why burned out husks can sell for hundreds of thousands of dollars and ones with demolition permits can sell for a million or more.
Investing in San Francisco Real Estate or Not: The Conclusion
Maybe, you have done a bit of real estate investing in San Francisco, CA but want to take things further and make it into more than a hobby on the side. It’s only wise to think about how you can and should be investing your money. In any property investment, cash flow is gold. Should you consider San Francisco real estate investment?California has the 6th largest economy in the entire world. This is largely driven by its innovative production, the heavy tech sectors in the state, and more.
San Francisco market is expensive, but that doesn’t mean it is overpriced. There are opportunities, though they come with risks. If the city had better leadership and more people willing to allow redevelopment on a large scale, the city could blossom. A good cash flow from San Francisco investment properties means the investment is, needless to say, profitable. A bad cash flow, on the other hand, means you won’t have money on hand to repay your debt. Therefore, finding a good San Francisco real estate investment opportunity would be a key to your success. If you invest wisely in the San Francisco real estate, you could secure your future.
If you are a beginner in the business of cash flow real estate investing, it very important to read good books on real estate. You must also collaborate and learn from savvy investors who have retired early on in their lives by investing locally in the San Francisco real estate market. As with any real estate purchase, act wisely. Evaluate the specifics of the San Francisco housing market at the time you intend to purchase. Hiring a local property management company can help in finding tenants for your investment property in San Francisco.
If it is your first time to invest in San Francisco real estate, then you would have to be aware of common beginner’s mistakes. Beginners would usually follow the media, buy a property and wait for its value to increase. This could be risky. Real estate investing requires research. We recommend doing your own research or hiring a real estate investment specialist for guidance. You should also join real estate investment clubs in San Francisco and try to make connections with fellow investors. To be effective in the real estate industry, a concrete marketing design is vital. The real-estate market is constantly changing in their methods on how to look for that right property.
Buying or selling real estate, for a majority of investors, is one of the most important decisions they will make. If housing supply meets housing demand, real estate investors should not miss the opportunity since entry prices of homes remain affordable. Choosing a real estate professional/counselor continues to be a vital part of this process. They are well-informed about critical factors that affect your specific market area, such as changes in market conditions, market forecasts, consumer attitudes, best locations, timing and interest rates.
NORADA REAL ESTATE INVESTMENTS strives to set the standard for our industry and inspire others by raising the bar on providing exceptional real estate investment opportunities in the U.S. growth markets. We can help you succeed by minimizing risk and maximizing profitability.
The aim of this article was to educate investors who are keen to invest in San Francisco real estate in 2020. Purchasing an investment property requires a lot of studies, planning, and budgeting. Not all deals are solid investments. We always recommend to do your own research and take help of a real estate investment counselor.
Other Popular Real Estate Markets In California
California real estate market is the focus of many U.S. and foreign real estate investors. Apart from the Los Angeles real estate market, you can also invest in multiple cities of California. Here are the other four big markets in California where a real estate investor should look into for buying investment properties.
San Jose Real Estate Market in California
Another market to buy rental properties in California is San Jose. San Jose is part of Silicon Valley, a place where $100,000 a year or higher salaries from competing tech firms has driven up the cost of real estate. But what about the San Jose housing market itself? San Jose is the third largest city in California, home to roughly a million people. It has the highest cost of living of any area in the U.S., and it is one of the most expensive housing markets in the country. If you want to invest in the San Jose rental properties, you may not need to buy and renovate. Instead, if you know of industrial or commercial properties near major employers they may need to convert to employee housing, you could buy now and hold until it sells. If that doesn’t happen, you could still turn it into co-working space.
San Diego Real Estate Market in California
The San Diego real estate market offers an ideal mix of limited supply, high demand and excellent income potential. If you’re going to invest in California, it needs to be in San Diego. The San Diego real estate market has been ranked among the ten most expensive real estate markets in the country, though it ranks below several other West Coast cities. This creates massive demand for San Diego rental properties by those who simply cannot afford to buy homes. The rental market will continue to grow as the city grows an estimated 500,000 by 2050, adding tens of thousands each year.
Los Angeles Real Estate Market in California
The numbers may not make sense for many investors but if you ask savvy investors based in LA they would like to bet anytime on this expensive real estate market. The Los Angeles real estate market has many points in its favor beyond its sheer size. The strong market fundamentals make the Los Angeles housing market a good place to invest if you’re looking at buying real estate in California.
Los Angeles has an unemployment rate of around 4%. What makes Los Angeles unique is the employment market. Want to work in Hollywood? Move to L.A. Want to work for a production company or in fashion? Come to L.A. If rent is too high, share an apartment or single family home with friends. The Los Angeles housing market has seen a bump in residential construction. This has helped to satisfy some demand from renters. However, due to increasing demand, the new supply hasn’t brought prices down.
Oakland Real Estate Market in California
The Oakland real estate market is a cheaper version of the San Francisco real estate market with similar rental rates and a slightly friendly legal climate. It presents a good opportunity for real estate investors. The Oakland real estate market is second only to San Francisco in terms of rental rates. It is rivaling New York City, Boston and San Francisco in terms of rental prices. One bedroom apartments are averaging $2400 a month. Yet Oakland housing units remain two hundred to five hundred thousand dollars cheaper than San Francisco properties. This means you’ll see far better ROI on Oakland rental properties than San Francisco properties.
*Remember, caveat emptor still applies when buying a property anywhere. The information contained in this article was pulled from third party sites mentioned under references. Although the information is believed to be reliable, Norada Real Estate Investments makes no representations, warranties, or guarantees, either express or implied, as to whether the information presented is accurate, reliable, or current. All information presented should be independently verified through the references given below. As a general policy, the Norada Real Estate Investments makes no claims or assertions about the future housing market conditions across the US.
Environmental / zoning
Rent control /Not Oregon
Exodus of families
Market Data, Trends and Statistics