A Strong July Helps Close the Sales Gap.

August 4, 2020

A Record Breaking July.

The San Mateo County residential real estate market set a sales record last month by posting nearly $1.1B in sales, which represents the biggest July sales month on record. While this is certainly a noteworthy milestone considering that we're still in the middle of a crippling pandemic, it also underscores how much the county-wide lockdown has altered the real estate calendar.

In a typical year, July and August are two of the slower sales months in the Bay Area since many people tend to their vacations anytime from June until late August.  But this year has been anything but typical, and yet the real estate market is behaving much as it normally would — only with a 2 month shift in the calendar.  In other words, the sales figures that we are seeing in July are really more representative of what we would see in April or May, which are traditionally much busier months.

Regardless of the rationale, this upsurge in business is welcome news to sellers and buyers alike as it demonstrates how well the real estate market can still function even in challenging times like this.

The Numbers.

Despite the stellar July sales figures, the total sales volume in San Mateo County in 2020 is still lagging behind 2019, which is to be expected when a market goes dark for 2 months.  For the first 7 months of 2020, nearly $4.8B of residential real estate sold through the multiple listing service, compared to $5.5B for the same period last year.  Obviously, it will take a couple of more months like July to close that gap this year, if it can be closed at all.

The chart above literally looks as if someone hit a massive reset button in the month of March and the calendar just skipped back to January and started over, except just slightly stronger this time. July was a very active month for pending sales too, so I fully expect that the August numbers will be exceed the 2019 results when they are posted next month.

Home prices have held their ground surprisingly well considering the disruption in the market.  Even though overall sales are down from 2019, the average price of a home in San Mateo County is still holding higher than last year, and at record levels for certain months.

It's almost hard to fathom that despite all of the challenges that have been thrown at the economy and the local real estate market, the average price of a residential property in San Mateo County is still sitting just shy of $2,000,000.  This figure includes not only single-family residences, but also condos and townhouses.  The average price of a single-family residence in the county in the month of July was just under $2,200,000.

What's Driving the Resurgence?

We tend to lose sight of the fact that Silicon Valley dances to its own drumbeat, and is often immune from the economic woes that plague other parts of the country.  Much of what you see and hear on the news at the national level is not nearly as pervasive in the Bay Area.  There are three factors that are fueling the rebound in our local market:

  1. Low Unemployment.   Although the region has seen layoffs and furloughs, unemployment here is still low compared to other regions in the country, as many tech workers are still gainfully employed and simply working from home.
  2. Record Low Interest Rates.  Even the “fence sitters” are jumping back into the market to take advantage of the record low mortgage interest rates that are being offered.  You don't have to look terribly hard to get a 30-year fixed loan at under 3% right now.
  3. COVID-Induced Displacement.  I like to say that the “3 D's” fuel the activity in our local real estate market: Death, Divorce, and Displacement.  Thankfully, I have not seen an uptick in untimely deaths as a reason for more homes being put on the market. But the stress that COVID has put on households is definitely having an impact.  People who are now forced to work and school their kids from home are rapidly finding that they need more space, which is fueling an up-sizing boom.  Others who have discovered that they can now work from home permanently are simply pulling up stake and moving out of the Bay Area entirely in search of more desirable living conditions.  I have already moved 3 families out of state this year for just that reason.  There is also a noticeable migration out of the populated urban areas to the suburbs.  And finally, it has been well documented that the shelter-in-place has significantly increased the divorce rate across the country — and a single divorce can spawn as many as 3 transactions.

Looking ahead, August of 2020 looks poised to set a record for all previous Augusts.  Many of the July pending sales will close in August, and based on the behind-the-scenes activity with stagers and inspectors, there seems to be a lot more inventory poised to hit the market.  If buyers are still buying, August will be another big month.

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