The Bay Area’s daunting real estate math post-COVID

Frustrated apartment seekers don’t imagine that; There’s really only one home for sale for every 1,206 South Bay households making $100,000 to $125,000 a year.

That’s according to a new report from the National Association of Realtors, which compares household income to the number of homes for sale in each price bracket to weigh housing supply against potential demand. From households making $50,000 a year to those raking in $500,000, the San Jose and San Francisco metro areas top the list of the most inaccessible cities in the country, and the competition is in lower price ranges the strongest.

“Even though people can afford to buy, there are no houses for them,” said Nadia Evangelou, the association’s senior economist and director of forecasting.

Bidding wars, no viewings, and cash offers aren’t new to the Bay Area. But the combination of record-high prices and record-low inventories during the pandemic has meant that homeownership has become out of reach for more households, the report says.

In the longer term, economists warn that the severe housing shortage could widen the gap between the wealthiest households and middle-class residents looking to put down roots, and prompt more aspiring homebuyers to leave the area entirely.

Concerns about rising inequality are amplified when the data is disaggregated by race. Black homebuyers have less than half the purchasing power of white counterparts in the San Francisco-Oakland-Hayward metro area, Evangelou said, due to the area’s wide racial income disparity.

As new housing and tax proposals fuel debate at public meetings in the Bay Area, other recent reports have also varied sharply as to who is best positioned to reap the benefits of skyrocketing real estate values. Last month, major reform proposals for the home appraisal system were presented to federal financial regulators following racial bias lawsuits in places like the North Bay. And an analysis of federal home loan data found that most nonwhite home applicants still face longer loan approval chances and higher closing costs.

“Black and Hispanic borrowers bought less valuable homes than white and some Asian borrowers,” noted the National Community Reinvestment Coalition’s credit report, “and they paid more for it.”

In everyday life, not every household in a certain income bracket is looking for an apartment at the same time. It is also far from the first time concerns have been raised about housing supply and demand imbalances. But the new home affordability report, titled “Double Trouble,” compared active home listings, local income data and projected home budgets in each price bracket to understand how rising home prices combined with falling inventories impacted affordability during the pandemic.

For middle-income U.S. households earning $75,000-$100,000 annually, the number of affordable housing on the market has fallen from more than 656,000 in December 2019 to 245,300 in December 2021. Among the cities where there are still relatively many apartments: Daytona Beach, Des Moines , Atlanta, Miami and Houston.

One of the more surprising findings, Evangelou said, is that housing during the pandemic in the greater San Francisco-Oakland-Hayward area actually became a little more accessible — at least in theory. While rising local incomes and falling interest rates together should have helped more people reach homes, she said those gains were offset by a sharp drop in the number of places available in many price brackets.

“If there are no houses to buy out there,” Evangelou said, “then what can you do?”

While real estate agents will make more frequent commissions when more homes come up for sale, general concerns about the Bay Area’s shortage of affordable homes have already sparked a wave of state and local proposals to increase housing construction. These include last year’s SB 9, which allows for up to four apartments on lots previously designated for single-family homes, and has already sparked creative appeals from affluent communities like Woodside, which have long been reluctant to redevelop.

Tensions also threaten to boil over in San Francisco, where the city is being sued for rejecting a major new development at a SoMa parking lot, and state regulators last week warned local politicians about local permitting processes that hinder state housing goals. Meanwhile, renter advocates across the city and beyond are urging state and local politicians to consider taxing vacant existing housing or further limiting evictions as renters struggle to recover from the pandemic.

At a time of deep divisions over where housing construction should go, Evangelou said the decision to build more entry-level housing — or not — will have long-term economic ramifications.

“Home ownership is one of the main sources of wealth creation,” Evangelou said. “We want everyone to have the same opportunities.”

Lauren Hepler is a contributor to the San Francisco Chronicle. Email: [email protected] Twitter: @LAHepler

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