2021 was a wild year for real estate across the country, but in San Francisco, where real estate has always been a bit wild, the remarkable year was striking. Records have been broken and set across the region, and as we head into 2022, it seems Bay Area real estate will never look the same as it did before the pandemic.
Before we look locally, it’s worth noting that 2021 was an exceptional record year nationwide. According to Redfin, home selling prices in 2021 hit their highest median price ever. The factors driving this increase were multiple: “The number of homes for sale fell to an all-time low, [and] There has been record demand for second homes,” Redfin reported. Combined with historically low interest rates, a new work-from-home (or anywhere, forever) economy, burgeoning tech industries, and a volatile stock market, there has been unprecedented national demand for real estate.
In San Francisco, that demand was insatiable. A typical US home sold for almost $400,000, up 24.4% year-on-year. In San Francisco, on the other hand, that price was $1.5 million.
But it wasn’t just the city proper—the whole Bay Area was in an uproar. The average selling price for the nine counties 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 Norada Real Estate Investments. . That’s an 18.2% increase from last November and the highest annual gain in California, according to the California Association of Realtors. Bay Area home prices were also up 2% from the previous month (October 2021).
Squeezing those prices is a record low inventory statewide, Redfin data shows. Just 1.38 million homes were for sale in June, down 23% from a year earlier, which is an all-time low. Inventory has also been falling again in San Francisco, although historically inventory in the seven-by-seven-square-mile city has always been in short supply.
Possibly related to this shortage, homes have been flying off the market in record time at record asking prices. Nationally, the average home was sold in just 15 days, another historical marker than the lowest median days ever and less than 39 days in June 2020, Redfin data showed. In San Francisco, homes sold in an average of 16 days — and 72.9% of those homes sold above list price.
Demand for homes has fueled record-breaking (and troubling) bidding wars the likes of which the country has never seen.
That hot demand is beating record-breaking asking prices in the rest of the country: 56.5% of homes in the US were above list price in 2021, up 29.6% from 2020.
Across the country, demand for second homes has nearly doubled from before the pandemic, up 91% from before the pandemic. In the Bay Area, this demand has led to record prices in places like Tahoe, Santa Cruz and Hawaii.
The desire for refuge placed an emphasis on luxury real estate. The median selling price of US luxury homes rose 26.5% to $990,000 in the second quarter of 2021, another record in the US. Reflecting this trend in San Francisco, a sharp surge in overpriced home sales began in 2020 and continued to rise into 2021.
Luxury real estate has enjoyed an incredible surge in popularity in SF over the past two years. Image via compass.
2022 probably won’t be much different. Even if interest rates rise, demand is unlikely to fall. “There is one main trend from 2020 that has continued into 2021 and I expect that trend to continue in 2022. This trend is the importance of home, regardless of price. Luxury or not, more people care more about their primary residence than ever before,” said Alex Clark, real estate agent and founder of The FrontSteps Real Estate.
Anna Marie Erwert writes from both the tenant and new buyer perspective, having (finally) achieved both statuses. She focuses on national real estate trends and specializes in the San Francisco Bay Area and Pacific Northwest. Follow Anna on Twitter: @AnnaMarieErwert.