Summary

• Although the San Francisco Bay Area has experienced one of the largest COVID-19 real estate market slowdowns in the US, June featured an array of positive market indicators 
• There was a significant increase in home sales in June compared to May 2020
• The median price of detached homes continues to increase year-over-year; mixed results for apartments and townhomes
• Sales of existing single-family homes increased 81.9% month-to-month, still failing to reach June 2019 levels (21.7% lower)
• A months-long downward trend in housing inventory continued in June

Real estate activity in California and the Bay Area surged in June after two disappointing months in April and May due to COVID-related social and economic restrictions. Sales of detached homes increased by 42.4% month-over-month according to a monthly report released by the California Association of Realtors (C.A.R.). The report went on to show that while sales of detached homes fell 12.8% year-over-year in June, they posted an impressive improvement over May’s numbers, a month in which sales of detached homes fell by 41.4% compared to 2019. C.A.R said the month-to-month increase was the largest since the organization began reporting monthly sales in January 1979. 

The good news for California real estate in June was not limited to sales activity, as a surge in home sales helped prop up home prices as well. The statewide median price of homes set a new record-high after falling below $600,000 in May, according to the C.A.R report. The median price of a single-family home in June was $626,190, representing a 6.5% month-to-month increase and a 2.5% year-over-year increase respectively. With respect to condos, the median price in California was $486,250, an increase of 4.6% compared to May 2020 and 1.3% compared to June 2019. 

“A new record high in the statewide median price suggests that there is stronger housing demand for more qualified, affluent buyers in this extremely favorable lending environment,” commented Leslie Appleton-Young, Senior Vice President and Chief Economist of C.A.R. “It also highlights both the affordability and supply issues created by the uneven impact of the coronavirus pandemic as the more affordable segments of the state’s housing market are recovering at a slower pace,” she added.    

Lower levels of inventory are also being highlighted as a reason why prices have remained stable or increased in spite of COVID-19’s effects on the market. Figure 1 shows that the Unsold Inventory Index (UII)—which indicates the number of months it would take to sell the supply of homes on the market at the current rate of sales—has decreased significantly across certain California regions from May to June 2020 for both detached and attached properties. The decline suggests market activity was dynamic in June, and that active listings sold at a higher rate than they did in May. As evidenced by the chart, more than 30% of the supply of inventory in California’s real estate market was removed in June. 

Figure 1. Unsold inventory index across California regions, June vs. May 2020

“Housing supply continued to trend downward on a year-over-year basis, with active listings falling more than 25 percent for the seventh consecutive month,” said C.A.R. in a press release. “A sizable year-over-year drop in active listings of 43 percent, coupled with a robust gain in closed sales, led to a decline in C.A.R.’s Unsold Inventory Index (UII) in June.”

The data analytics team at ROOMVU, a Vancouver-based real estate marketing and analytics company, took a deeper look at market activity regarding single-family homes and condos in different Bay Area counties to explore how they were affected by June’s market rebound. ROOMVU has recently performed similar analyses in other North American housing markets including Colorado, Toronto, and Vancouver. 

Sales of detached and attached properties increased in June compared to May across different Bay Area counties. Condos and apartments (attached properties) experienced the most dramatic month-to-month changes in sales activity. On a county-level, sales of detached and attached properties in Sonoma doubled and tripled respectively in June from May. However, sales activities failed to reach June 2019 levels in all counties save for Sonoma and Solano which actually posted year-over-year growth. 

Figure 2. Number of Sales percentage change – June vs. May 2020

As shown in Figure 4, the median price of a single-family home increased in almost all counties on a month-to-month basis apart from in Marin, where prices remained decreased slightly. Solano County experienced the largest YoY change at 10.9%, while Alameda County posted the most modest increase at 1.7%. 

Figure 3. Median prices of single-family homes for June vs. May 2020

Much like the decline observed across California, inventory levels (UII) of single-family homes decreased month-to-month in all Bay Area counties (Figure 4). Sales activity in June was high for detached properties in the Bay Area, eating up a larger portion of available inventory compared to May. Supply in Sonoma County fell at the fastest rate, where a 54% drop in its UII occurred, compared to San Francisco County where the UII dropped by 22%. On a year-over-year basis, UII in San Francisco was 45% higher still in June 2020, while it was lower in Sonoma.

Figure 4. Unsold inventory index of single-family homes for June vs. May 2020

With respect to condos and townhomes, median prices increased in all Bay Area counties except for Marin and Santa Clara where a minor decline—less than 2%— occurred in June compared to May. Attached properties in Napa experienced the highest month-to-month increase in prices at 25%. Conversely, prices in Alameda County increased by just 1.5%. However, prices in these counties did not reach those of June 2019 except for Marin, Napa and Solano, where prices did indeed improve. San Francisco posted the largest rise in median prices of attached properties at 12.5%.

Figure 5. Median prices of attached properties in June vs. May 2020

UII ratings were lower in all Bay Area Counties from May to June 2020 with respect to condos and townhomes, as presented in Figure 6. Sonoma’s UII decreased by 66% in June, with Marin showing the second highest decrease. Nevertheless, UII was higher overall on a year-over-year basis in June, notably in San Francisco County where its UII rating was 176% higher in June 2020 compared to 2019. In comparison to last year, both the median price and number of sales of attached homes were lower in June of this year. 

Market analysts say the news is not all bad for San Francisco’s real estate market. According to Wolf Richter of WOLF STREET, there is now a glut of homes for sale in the City by the Bay. “Active listings surged to 1,344 homes in the week ended July 5, up 65% from the same week last year, and the highest number since the housing bust, amid a 145% year-over-year surge in new listings,” wrote Richter. “1,344 active listings would be the highest since 2011, during the final stretch of the San Francisco Housing bust, based on MLS data provided by local real-estate site SocketSite,” he added. 

Figure 6. Unsold inventory index of single-family homes for June vs. May 2020

Conclusion

Although the COVID-19 pandemic has had enormous effects on nearly every segment of the economy—the real estate market included—June 2020 data showed strong signs of a market rebound compared to May 2020, while not yet matching June 2019 levels. Given record-high levels of unemployment leading to financial uncertainty, a dampening of market activity is to be expected. 

The pandemic has, however, produced some interesting trends, such as an increased interest in moving to the more affordable outer suburbs now that employers have implemented work-from-home policies—policies that might continue into the foreseeable future. 

As Wolf Richeter pointed out in his article, “There is a lot of discussion about the low levels of inventory for sale, as potential sellers have pulled their homes off the market or not wanting to list their homes at the moment.” But with June numbers showing positive results—most notably in increases in median prices—sellers may start to feel more confidence about their prospects.