Hot San Francisco North Bay residential real estate market enters 2021 stronger than ever

Anchored by record-low interest rates, minimal inventory, love of home during a pandemic and millennials entering the arena at great levels, the North Bay residential real estate market continues to be on fire.

The median price for a single-family home in Marin County has surged to $1.45 million in December — up by more than $30,000 in one month and over $100,000 in comparison to 2019’s $1.31 million, according to multiple listing service data compiled by the California and North Bay associations of Realtors. The county due north from San Francisco just eclipsed $1.19 million in 2016.

The San Francisco Bay Area real estate has been hot for years, climbing at record paces in more recently suburban areas that provide more square footage to set up a remote office and more room to breathe that’s out of denser urban environments, real estate economists and agents insist.

Sonoma County’s median of $720,000 went up by $5,000 between November and December and marked an 8% increase between 2020 and 2019. This is the highest exponential growth since the decade ending in 2000 recorded a remarkable increase of 27%.

To the east, Napa County real estate has also been on the rise, with median prices last December coming in as $842,000, up $18,000 in one month, the North Bay Association of Realtors reported.

Homes selling for more than $2 million showed substantially robust growth, up 60% in the North Bay.

“As we look back on 2020, there was a seismic shift in choices people were making on where they wanted to live,” said Healdsburg Compass real estate agent Carol Lexa, who is also the North Bay Association of Realtors past president. “Move-in ready homes sell the fastest.”

Lexa noticed about halfway into 2020 more San Francisco and San Jose residents opting out of the metro areas to live in the Wine Country.

“The pandemic drove people north because there’s more space and access to natural environments, which are so easy to get to here,” Lexa said, singling out regional parks that people flocked to when they became rare enclaves for gathering.

Pools became all the rage as gathering hot spots at home.

And if the home doesn’t come with one, the buyer will have one installed.

Phones at Johnson Pools have rung off the hook with prospects seeking the ultimate back yard amenity.

Matt Perez Chica, who operates the Windsor pool contractor, said his business is completely booked for this year’s building season that runs between April and October. He’s now scheduling into 2022.

“People are moving to Sonoma County. Dot comers want to get out of the South Bay, and they’re nesting,” he said.

Perez Chica can barely keep up with the demand. He’s juggling 55 prospective leads and hiring many people. The contractor has doubled its staff in about a year to keep up.

Beyond the value of home selling in the Wine Country, the number of homes sold has soared as well.

According to BAREIS data, total sales volume for its slice of Wine Country — encompassing Sonoma and Napa counties — exceeded $6 billion.

Moreover, 6,443 single-family homes and condominiums closed in that part of Wine Country last year. That’s about 600 more than the prior year.

“And we probably will have another two years of this,” said Erin George, who works out of the Sotheby’s Sonoma office and serves as the incoming North Bay Association of Realtors president.

George has noticed a mounting group of millennials on the prowl for homes. The demographic, categorized as ages 22 to 38 last year according to Nielsen Research, has traditionally been known to put off home buying, marriage and child rearing. They’re all about “the experience,” and that experience may be changing.

“People are not able to go on vacation,” George pointed out.

Many of these people have saved that money and spent it on housing now, despite a pandemic that has caused double-digit unemployment.

In California overall, routinely slower December compared to summer months showed record growth for home prices. After dipping below $700,000 the previous month, California’s median price returned to that benchmark and surpassed it in the last month of 2020 at $717,930.

“Home prices, which usually peak during the summer, were unseasonably strong in December,” California Association of Realtors Vice President and Chief Economist Jordan Levine said in a statement.

Across the nation, Zillow reports that home prices have also risen over 10%.

“And fundamentally, they’re showing no signs of slowing down,” Zillow spokesman Matt Kreamer said.

Zillow economists are not surprised by the ongoing “Great Reshuffling” in the Bay Area that witnessed a flight from urban to suburban housing climates.

Its research shows home values grew 5.6% in urban areas of the Bay Area metro section, but the suburbs cashed in on 7.9% of the growth.

The Seattle-based housing research firm shared reasons for this, one that its economist Chris Glynn referred to as the perfect storm of factors.

Millennials are now buying, interest rates are historically low and the inventory cannot seem to keep pace with demand. The low inventory was exacerbated during the pandemic by a reluctance for home sellers to list their houses.

Still, despite that trend, there were 334 new listings recorded in the North Bay in the last four weeks, yet 446 homes sold.

Glynn said the average number of days on the market in the San Francisco Bay Area was 14 in December. That’s 10 days faster than the same month in 2019.

“The market is not allowing the inventory to recover, and homes are flying off the market,” Glynn said.

Hence, this contributes to the skyrocketing demand.

As hints of 2008’s surging appreciation that led to a housing collapse with the Great Recession come up, Glynn said conditions are much different now.

For one, the historically low interest rates have allowed homeowners to spend less on their mortgages. What’s more, those who are buying may slap down more cash since they earn higher salaries, he explained.

“By that metric, I don’t see a ‘bubble.’ We will continue to see appreciation in 2021, along with the acceleration of this ‘Great Reshuffling,’” he said.