Accelerating the Inevitable

(WSJ graphic)

Signs that the Bay Area had lost its luster abounded before COVID-19.

February, 2018: San Francisco Bay Area Experiences Mass Exodus Of Residents

Joint Venture Silicon Valley’s own study of the out-migration says workers are moving to Sacramento, Austin, and Portland due to a number of factors. But topping the list is the high cost of housing.

Last May, two months into the lockdown, we wrote:

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.

Yesterday the Chronicle reported on the mounting data that California has peaked. (Out-migration is a lagging indicator because circumstances--except for natural disasters--have to become bad enough to overcome the costs of moving.) [bold added]

California suffered the steepest outflow of residents via rental truck among all 50 states in 2020, with San Francisco the epicenter of the Bay Area’s pandemic exodus for DIY movers, new data shows.

California ranked last in the nation for migration growth last year, with the largest net loss of one-way U-Haul trucks crossing its border in 2020....U-Haul used data from more than 2 million transactions annually to analyze migration trends, finding that more people left densely populated areas when the pandemic hit, particularly in the Bay Area and New York City.

Hayes St., SF (October Chron photo)

Your humble Cassandra finds a silver lining in everything: now California and the Bay Area won't have to spend a penny on "affordable housing" because the fleeing people and companies have caused rents to drop precipitously. [bold added]

San Francisco’s housing rental market saw the most dramatic changes among all U.S. cities last year during the coronavirus pandemic, new data shows.

When the pandemic began in March, moving virtually halted across the country. But as job losses rose and workplaces went remote, people started leaving pricey big metro areas in favor of more affordable cities.

The country’s most expensive big city, San Francisco, was the most affected, with rental prices plummeting 26.7% since March, according to 2020 National Rent Report from rental listings website Apartment List. The current median two-bedroom rent is $2,305. [Blogger's note: it was over $3,000 a year ago.]

San Jose landed sixth on the list with a 15.2% drop since March and a median two-bedroom rent of $2,035, and Oakland was eighth on the list, declining 14.2% since March and a median two-bedroom price of $1,952. Apartment List estimates the median contract rent across new leases signed in a given market and month.

Rents in principal cities across the U.S., which are usually the largest or have the greatest economic output in the area, fell 9.3% since January, while rents in surrounding suburban cities increased 0.5% since the start of last year. The report reflected a big exception in the Bay Area: Both principal city San Francisco and its neighbor Oakland saw dramatic declines, though Oakland’s was somewhat smaller.

I talked to a few highly paid young professionals about why they're leaving. To paraphrase Rick in Casablanca:

Rick: I came to San Francisco for the night life.
Capt. Renault: Night life?! We're locked down!
Rick: I was misinformed.

San Francisco ownership and rental values are experiencing their self-inflicted, foreseeable collapse. The coronavirus, as it has in many areas of life, has accelerated the inevitable.