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 less restricted by geographic location than they ever have been in the past.
SFGate reports that the Bay is not going through an abnormal population exodus; rather, the area simply is not seeing the usually high number of people moving to the Bay.
Although fewer people moving to the Bay 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 $186,400 and be able to pay $4,660 per month for mortgage, taxes, and insurance. This monthly expense is almost twice the average renter, who now pays less than $3,000 per month.
Unlike many other cities around the country where the cost of a mortgage is similar to the cost of rent, the Bay Area 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.