|Key Topics and Trends in September
The pandemic tested the efficacy of large-scale remote work, causing companies to reconsider the need for massive office spaces. Notably, Pinterest announced in late August 2020 that it paid $89.5 million to terminate its lease on a yet-to-be-built 490,000 square foot office space. The choice reflects Pinterest’s reevaluation of its workforce needs, and its realization that more employees can work from home on a regular basis. Pinterest is showing another “new normal” for companies: hiring employees from different parts of the country without requiring those employees to relocate near the office. As a result, companies and employees are even less restricted by geographic location than they ever have been in the past.
SFGate reports that the Bay Area is not going through an abnormal population exodus; rather, the area simply is not seeing the usually high number of people moving to the area.
Although fewer people moving to the Bay Area sounds like it would lower the demand for homes and, therefore, decrease home prices, the median home price has actually remained stable through August. In order to explain why prices have not changed, we can look to affordability. According to the California Association of Realtors, a median homeowner needs to earn a minimum income of around $300,000 and be able to pay $7,000 per month for mortgage, taxes, and insurance. This monthly expense is more than twice the average renter, who now pays less than $3,000 per month.
Unlike many other counties around the country where the cost of a mortgage is similar to the cost of rent, Silicon Valley maintains a large gap between those that can afford rent versus those that can afford a mortgage. The rental market, which is receiving a lot of press for its steep decline, does not foreshadow a decline in single-family home prices.