The COVID-19 San Francisco Earthquake of 2020

Despite widespread lease defaults by apartment tenants, retail stores, and restaurants, the entire real estate market has not collapsed: [bold added]

Investors are flocking to America’s mega landlords, drawn by signs the companies that emerged from last decade’s foreclosure crisis owning huge pools of rental houses are weathering the economic shutdown far better than feared. Many also expect that the coronavirus pandemic will make suburban single-family homes both more desirable and more difficult to buy for even the relatively well-heeled...

Rental executives say some recent move-ins chose to rent instead of buy given the economic uncertainty. Others have leased houses to get out of apartment buildings, given the contamination risks associated with close living.

There's been anecdotal evidence of fed-up San Franciscans leaving the City for open spaces, and we expect that future tax and payroll data will confirm this suspicion.

A month ago we wrote:

Post-war Levittown, PA (photo: J Reps)

Here is a pretty safe prediction about attitudinal change and consequential action: the urban model is passé. Mass transit is dangerous. The risks of city living are too high for children. The flight to the suburbs and rural areas will accelerate because living there is not only safer but cheaper.

The suburbs boomed after World War II changed the country. COVID-19 is likely to have the same effect.

At the time we hadn't mentioned commercial real estate, but a similar decline appears inevitable. Not only are weaker tenants defaulting, but financially stable companies are realizing that working from home requires much less office space. (Headline: Twitter announces work from home policy will continue indefinitely.)

The great San Francisco earthquake of 1906 destroyed real estate values. The coronavirus earthquake of 2020 will have a like effect, though few are aware that it's happening.