Should you buy a home in SF in 2020?

Save for those benefiting from an IPO windfall or a plump trust fund from a blue-blood lineage, few people can find a way to afford a home in San Francisco. Housing stock is scarce, and home prices are stratospheric: The median price for a two-bedroom sits at $1.35 million.

It’s a crisis that some activist groups, including the YIMBY set and a handful of politicos, have tried to remedy through public policy and reform, while counter cabals would prefer to see it continue as is.

”I am working with more first-time homebuyers who are buying over $2.5 million now and baby boomers looking for second homes in the $2 million range,” says Marco Carvajal, a San Francisco real estate agent. “Around 40 to 60 percent of them are cash buyers.”

With soaring home prices and an influx of well-to-do buyers throwing sacks of cash at sellers, it’s hard for any low- to middle-class buyer to compete for an abode in a city that was once prized for its diversity and “all are welcome” attitude.

Curbed SF asked a handful of people in the housing sector, ranging from luxury realtors to housing activists, for their takes on one simple question: Should you buy a home in San Francisco this year?

We collected the responses below before the outbreak of novel coronavirus in the U.S. How might its spread impact the housing market this year? Read this.

---

Laura Foote

Executive director, YIMBY Action

I think “the right time to buy” frames the question as one of speculating on the housing market. It implies that buying a home should have a rate of return like an investment portfolio. Our society needs to move back to the idea that buying a home is more like a savings account and that housing is where you live.

We need a housing market where we stop asking whether or not it’s the right time, which is just everyone speculating on the housing market. When we have abundant housing, prices decline to close to the cost of construction, and everyone who wants to live in San Francisco can. At that time our cities will be thriving, and housing will not outpace every other investment.

When we apply the “buy low, sell high” framework to housing, we cripple our ability to solve the housing shortage.

---

Corey Smith

Deputy director, Bay Area Housing Advocacy Coalition

Yes, if you’re fortunate enough to be able to afford one.

San Francisco has underbuilt housing at all levels of affordability for the last 40 years, so the only way to be truly housing secure is to buy a home. This lack of housing options leaves renters one bad landlord away from having to leave our city. Renters would be housing secure if they had more housing options in their neighborhood and across the city. This lack of supply also means the least expensive homes in SF are more than $1 million, which makes it hard for young families to buy a starter home in San Francisco.

This also means that the only people that are truly housing secure in San Francisco are 1) the rich and 2) low-income neighbors living in subsidized affordable housing. Unfortunately, they lose their homes if their income increases too much.

---

---

Allison Arieff

Design writer and housing activist, SPUR

If you can afford it, then sure; interest rates are still low, and it’s an investment that will continue to increase in value over time. But the house up the street from me just sold for $1 million over asking.

I don’t think that home prices will get lower any time soon, even when the inevitable recession hits. The reality in SF is that the pool of people who can afford to buy is smaller and smaller and the supply of housing is not growing with demand (duh). I can’t imagine there are people in the city waiting for housing to get cheaper; if they can’t afford it now, they’re most likely leaving the city. So this is the year to support legislation and ballot measures that make housing faster and easier to build. And if you’re a NIMBY, this is the year to stop being a NIMBY, to recognize that if you are lucky enough to live here, why not allow others to as well?

The city needs to streamline the process of building new housing at all income levels so everyone can afford to live here. Don’t forget to vote.

---

Justin Fichelson

Realtor, Bravo’s Million Dollar Listing: SF

Unlike the dotcom bubble and the mortgage debacle, which helped trigger the last major recession of 2008, there are no significant indicators that would suggest a considerable dip in real estate prices in San Francisco anytime soon. A relatively high percentage of the buyers in the city are all cash—and those that aren’t paying all cash are putting at least 20 percent down with the ability to close fast, even with a loan. The market is always cyclical by nature, but SF real estate has historically always gone up more than most other markets.

Here is why I believe that real estate is a great investment in San Francisco:

1) Wealth creation: San Francisco has had an entrepreneurial spirit from its inception (i.e., the Gold Rush); hence, further wealth creation and innovation will occur here. As it is the epicenter of the technology industry, there are a lot of people with an immense amount of wealth. Wealth isn’t just limited to the uber-wealthy founders of major tech companies or successful VCs but also the general workforce, whose salaries and incomes are among the highest in the world.

2) Limited inventory: San Francisco is fortunate to be one of those rare markets in the world in which the real estate market is perpetually constrained in terms of inventory. Several factors contribute to this, but principally the strict zoning laws which prevent new development and high rise construction throughout the city. The strict zoning laws, coupled with the fact that the SF is only seven by seven miles, makes it a very constrained market and keeps supply perpetually low.

As a result, San Francisco is one of the most resilient real estate markets in the world and a great place to invest in real estate in 2020.

---

Crystal Chen

Marketing manager, Zumper

From a data perspective, an average two-bedroom home in San Francisco is about $1.35 million right now. Taking into account a 20 percent down payment on a 30-year loan with a 3.5 percent interest rate, 1.4 percent toward property taxes, and an average of $300 monthly for HOA fees, a mortgage with everything included comes out to a monthly price tag of about $6,700.

Meanwhile, according to our most recent National Rent Report, two-bedroom rent in San Francisco is at a median of $4,550. That’s a monthly difference of over $2,000, assuming one can afford the $270,000 down payment. If not, the monthly mortgage all-in would be even higher. San Francisco rents overall have been plateauing in recent months, with two-bedroom rent actually down about 2 percent year over year. As long as rents are flattening or even decreasing, it seems renting in this city makes more sense than owning—at least in 2020.

---

Issi Romem

Fellow at UC Berkeley’s Terner Center for Housing Innovation; founder MetroSight

If you are financially able to buy a home in the Bay Area—and if your life and family circumstances are in alignment with a home purchase—then this year is a good one to buy. The Bay Area and American cities in general are at an inflection point that may lead to reinvigorated home construction in the coming decades. That process, however, will be gradual and will almost certainly only temper housing price appreciation—not reduce it—which means that as expensive as housing may seem now, it will likely never be cheaper!

There is a risk of recession in the next two to three years, but barring extreme political events, an upcoming recession is likely to have a limited effect on the Bay Area’s housing market. And last but not least, if buying a Bay Area home seems out of reach, stay tuned: The next few years will bring a flurry of innovative financial arrangements that straddle the middle ground between rental and ownership, and some of them could be right for you.

---

---

Jon Jocobo

Vice president, Calle 24 Latino Cultural District

If one has the ability to buy a home, the answer in my opinion is always yes. Stability matters; it helps our community keep its presence and vibrancy. The problem is that buying has become so out of reach for many that it seems only the rich and elite can afford to buy. That’s clearly a problem for us all.

---

Joel Goodrich

Luxury homes real estate agent

I do think that 2020 is a decent time to buy in San Francisco over the short and intermediate term, and a very good time to buy for the longer term.

While no one has a crystal ball, most real estate forecasts are indicating a similar market to the past few years: i.e., stable, but not red-hot. And most predictions for the coming years are that the next economic dip will not be as severe as 2009 or 2001. I am extremely bullish over the next decade.

My hope is that enough affordable housing is built so that lower- and middle-income families and individuals can afford to buy a home and become a stakeholder in the city. Even in a rising market, homeownership should be a realistic goal for most people.

---

Cheryl Young

Senior economist, Zillow

Buying a home is a daunting prospect for any would-be homebuyer, but in one of the nation’s most expensive housing markets, the decision to buy is especially fraught. Potential homebuyers in San Francisco already face slim pickings—for-sale inventory was down 7.5 percent in December from the year prior—so even if you could find what you’re looking for, homebuyers would be wise to ask themselves the following two questions:

Can you afford it? Expect to pay around $6,400 a month for mortgage payments, insurance, and taxes on a typically priced home of $1.35 million in San Francisco, after spending 20 percent on a down payment. Speaking of down payments, after finding the right home, saving for a down payment is the most challenging buying activity for home buyers. According to the Zillow Consumer Housing Trends Report, 22 percent of buyers find saving for a down payment to be difficult or very difficult. In fact, in San Francisco, buyers would have to cough up $269,600 if they were putting 20 percent down on the December median listing price of $1,348,000—that’s not much less than the $282,000 price tag for a typical for-sale home nationally. In 2018, it took the typical household 18.3 years to save for a 20 percent down payment on a median valued home in the San Francisco metro area—that’s eight more years than it was 30 years ago.

How long will you stay in the home? Buying a home carries recurrent costs, like monthly mortgage payments, as well as maintenance issues that arise. One-time costs such as closing and selling fees can further tip the equation between renting versus buying. It will take nearly five years for buying to become cheaper than renting using current for-sale home prices, current rent values, and forecasts for rent and home value growth. If you plan to stay in the home for less than five years, renting may be a better choice. If you think buying a house in San Francisco is a great investment no matter how long you plan to live there, think again. Annual home value changes in the San Francisco metro have been negative since April of 2019.

Interview responses have been lightly edited for length and clarity.