By Mike Bodeen · 17 August 2020
REAL (ESTATE) NEWS
What’s happens in Silicon Valley, (San Francisco Bay Area) is apparently not staying in the Bay Area for many workers now being impacted by the Covid 19 virus. Since the pandemic became local, tens of thousands of tech employees have been relocated to work mobile from their homes. For local real estate there, this could be the proverbial game changer.
According to a recent article about this exodus in the Wall Street Journal (8-15-2020), many of these workers, at Google, Facebook, Twitter, etc have been directed to work from home. Facebook, which has 52,000 employees, expects to shift to a substantially remote workplace over the next decade. According to the article 40% of Facebooks’s employees were interested in permanent remote work.
“Facebook, which has 52,000 employees, expects to shift to a substantially remote workplace over the next decade. According to the article 40% of Facebooks’s employees were interested in permanent remote work.”
For years there’s been talk of a potential exodus from the San Francisco Bay Area, spurred by the exorbitant cost of living and long, slogging commutes. But before coronavirus, leaving the area meant walking away from some of the best-paying and most prestigious jobs in America.
There are signs the exodus is finally happening. Silicon Valley, America’s signature hub of innovation, may never be the same.
According to the article, two things suggested to Justin Thompson and his wife that they weren’t alone in deciding to move out of San Francisco this summer. After five years of renting an apartment, the couple had decided to buy a three-bedroom home in Phoenix, Arizona. First, their landlord offered to reduce their rent by $250 a month if they’d finish their lease through October. (They declined.) And second, when Mr. Thompson went in for a dental checkup and said it would be his last, his dentist was not surprised. “He said, ‘I have people coming in almost daily telling me the same thing,'” said Mr. Thompson…
San Francisco Numbers
96% – The increase in the number of property listings in San Francisco in the first week of August, compared to the same week last year, according to Zillow.
11% – The decline in the median rent for a one-bedroom apartment in San Francisco in July, compared to the same month a year prior, according to Zumper.
42% – The percentage of Bay Area tech workers who said in a survey they would move to a less expensive city if their employer asked them to work remotely full time, according to Hired.
In a WSJ editorial the same day the Journal reported in the editorial section on California’s next tax increase, potentially raising high earner’s tax rate to a combined 53.8% on wage income and 40.6% on capital gains. California seems to be doing everything it can to help people pack and leave.
We have mentioned in the past that Bay Area pricing was not sustainable. With a quality of life digression, higher taxes, high cost of living, etc., it would only be time for the financial whiplash to occur. The pandemic has perhaps sped up the inevitable, especially as workers can negotiate offsite work. In California, half of Lake Tahoe is in Nevada, (which has no state income tax) Live and work in Tahoe? Not too shabby.
We also predicted that something like this could absolutely devastate the Bay Area real estate market. It doesn’t take much reduction in demand to create negative appreciation. This puts stress on sellers wanting to sell if there’s not enough equity in their home to sell.
The almost unthinkable result could be that if these residents want to sell and relocate, to say, Phoenix or Scottsdale, that they might not be able to sell their home to cover the mortgage balance. As a Realtor professional, would I recommend a seller take an offer with a contingency to sell their home in San Francisco? Hmm.