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The Changing Market

The coronavirus pandemic has changed housing from the Bay Area to the Capital Region

Back Article Jan 14, 2021 By Dave Tanner

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There have been many changes brought about by the coronavirus pandemic. Some will likely disappear quickly when it is over, and many of us can’t wait to meet friends inside a restaurant for a relaxing dinner. But other changes will be with us much longer, and some may be permanent.

One of those long-term changes is housing. Some changes are because the motivating forces behind them are of a lasting nature. Others are because the purchase of a home is far different from the purchase of a dinner; we will not be buying another house again tomorrow. The decisions we make today regarding the purchase of a home will be with us for the foreseeable future.

One of the first housing impacts occurred in the Bay Area. Even before the pandemic sent employees home to work, thousands of people with jobs in the Bay Area lived in the Capital Region. Many rented a room or a small apartment in the Bay Area to live in during the week and returned to their families on weekends. With the onset of more people working remotely to reduce the spread of the virus, many have given up those rentals. This has significantly increased the vacancy rate for rentals in the Bay Area as well as placing downward pressure on the cost of rent ($2,380 for a two-bedroom apartment in San Francisco in November 2020, a 25.5 percent decrease compared to the previous year, according to Apartment List). But rents still aren’t as low as they are in Sacramento ($1,781 for a two-bedroom apartment in October 2020, according to Rent Jungle).

Many employers have found that their operations are not negatively affected by remote operations, and some are even enhanced. When employees are notified they will continue to operate remotely indefinitely, they are free to live anywhere in the world that has access to an internet connection.

The location of the residence is another one of those changes. Many employers have found that their operations are not negatively affected by remote operations, and some are even enhanced. When employees are notified they will continue to operate remotely indefinitely, they are free to live anywhere in the world that has access to an internet connection. A significant number of Bay Area workers have chosen to move to the Capital Region, with some deciding to go further to Reno or near Lake Tahoe, since that still makes it relatively easy to go to the Bay Area for a meeting when needed.

Here are the main trends with homeowners today:

1. In addition to more flexibility on geographical location, buyers are also shunning certain types of properties. Due to the fear of the spreading of infectious diseases, some are steering away from upper-level apartments or condominiums that are served by elevators. They also are avoiding buildings that have interior hallways for front-door access. The threat of the virus and disease causes them to want to be able to isolate from their neighbors. When they step out of their front door, they want to be outside.

2. What many buyers are looking for are larger single-family detached homes with yards spacious enough to be able to enjoy with their families. Some are looking for space to put in a swing set so they don’t have to go to the local park. Some want a pool or space for a pool to avoid going to the fitness center. Buyers are also looking for enough room inside to set up a home office or exercise room. The experience with remote work coupled with remote schooling has demonstrated that the new home needs to have sufficient space to be able to isolate those activities to be a functional and happy home.

3. Some homeowners who don’t move are considering adding on or renovating their property to meet some of those identified needs. Some of the easier fixes are upgrading to a higher speed internet connection or replacing the current air filters in the heating and cooling system with superior filters to remove more of the particulate matter from the air. For those willing to take on more ambitious projects, they may be looking at providing room for the home office or gym, either by adding on or by reallocating existing space. 

How long these trends will continue remains to be seen. We should expect that for the near future, there is going to be pressure for more development in the suburbs to be able to supply the type of housing buyers are seeking. That would normally be of concern regarding the increase in commute miles, but with more people working remotely, the actual number of commute miles should be reduced significantly. Working remotely may turn out to be a benefit for the environment for the long term. 

 

Dave Tanner is CEO of the Sacramento Association of Realtors. Tanner, a longtime Sacramento real estate executive and attorney, has served on the board of directors of SAR, California Association of Realtors and National Association of Realtors.

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