Austin, Denver, Portland, Boise. We all know someone, or have heard of someone, moving out of the Bay Area this past year. Between the media headlines and these anecdotal stories, it's a common belief that the pandemic has caused a mass exodus and the Bay Area is being materially depopulated. Naturally, this will cause real estate values to fall.
The Reality Is Quite Different
Net out-migration did increase in 2020. In fact, overall migration increased by 82% last year, but the numbers themselves are still relatively small. Thinking that this is enough to cause a market correction is like worrying that a water bucket overflowing onto the sidewalk will result in an empty bucket. There is no hole in our bucket, dear Liza.
The only location in the Bay Area that has experienced real migratory impact is the city of San Francisco itself, where out-migration increased over 200% last year.
Density. Living in high-density communities with little access to the attractions of an urban lifestyle is singularly unappealing during a pandemic. This did impact real estate, with months of inventory up over 60%, but the biggest impact was due to the renters.
Approximately 57% of San Franciscans rent. Renters have much greater mobility than homeowners, and we see this reflected in an almost 30% drop in SF rental rates last year, while median sales price was down about 3.2%. (For condos that is. SFRs were actually up.)
Where is Everybody Going?
This is the kicker. Nowhere! In fact, 85% of people leaving San Francisco are staying right here in the Bay Area. Almost half are moving to San Mateo or Alameda county. This is not a flight from the Bay Area, it is a flight from density. People are seeking more living space, more rooms, bigger yards, more suburban lifestyles.
Underlying the aggregate numbers are other long-term socio-demographic trends affecting our housing markets.
The pandemic's economic impact disproportionally affected lower-income households. Unfortunately, these households have always had limited access to our high-priced real estate markets. The segments that do drive local real estate - tech, biotech, medtech, and finance - have done extremely well and continue to buy homes. This does exacerbate other serious social problems, but housing remains robust.
Finally, there is foreign immigration. Foreign immigration has always played a large role in California, and Bay Area population growth. It began to drop in 2017 with the changing political climate and, of course, came to a screeching halt when the Coronavirus hit. While it's impossible to say what will happen in the future, but when the pandemic is behind us and with a new political climate, I'm willing to bet that Silicon Valley and its environs will continue to be a strong immigration draw.
Ultimately, while we all love a good data-driven analysis, it's our actual market experience that tells the real story. Home prices were up ~10% last year, and the 2021 Spring selling season hos opened with continued price increases and competitive bidding. Mortgage rates have crept up a bit but are still at historic lows. At least for now, there appear to be more than enough people left to buy every house that hits the market.