Listings of San Francisco condos are currently surging at levels not seen in almost a decade as the coronavirus continues to play havoc with the city’s real estate market.
New real estate figures from July now point to a glut of new condos on the market, according to Compass Real Estate Analyst Patrick Carlisle. He told me that condo inventory in the MLS is the highest it’s been since 2011.
“My guess is that it has to do with Covid-19 and shelter in place, and that condo projects, especially the newer high-rises, feel much more densely populated than house-dominated neighborhoods: having to deal with elevators, hallways and other common areas is less appealing,” he said. “And the amenities that many condo buildings have offered in recent years don’t have much appeal when one wishes to avoid the company of strangers: pools, gyms, party rooms and so on.”
Carlisle told me that he has heard anecdotally that the condos selling best are often smaller, older, two- to four-4 unit buildings with separate entrances, backyards and decks or those that have dedicated, private outside space in the larger complexes.
Within the city itself, supply and demand conditions have diverged dramatically between house and condo markets, he said, with the latter being far weaker and rapidly climbing into “buyer’s market” territory.
In terms of price, on a three-month rolling basis, San Francisco median house sales prices are as high as they’ve ever been while the median condo sales price is down to $1.25 million compared with a high last October of $1.3 million.
With condo listings at their highest point in eight years, and the inventory of condos spiking way up as the market softens, correct pricing becomes increasingly critical for sellers, Carlisle said.
Sotheby’s Executive Vice President Jeff Gibson told me that outdoor space is the key driver right now and that it has been increasingly difficult to get potential buyers to look at high-rise condos with elevators, windows that don’t open and no outdoor space. “We aren’t even getting showings on them,” he said. “Buyers aren’t interested at looking at them.”
Gibson said that it’s also a hassle for a buyer to see a property under Covid restrictions, so they usually do a lot of vetting before they cross the threshold. Gibson agreed with Carlisle in that many smaller condo buildings are attracting much more attention from buyers right now.
So will the market correct itself or will the bottom fall out of condo prices in the city?
Gibson said the Covid problem would be solved by a vaccine whereas the problems the market was forced to overcome during the financial crisis a decade ago were much greater given their underlying structural economic failure.
“I think the market will find itself,” Gibson told me. “S.F. has never had too much inventory since I moved here in ’87. That’s not changing. The height of the climb might level out a bit but I don’t see it falling, I see it flattening.”
Meanwhile, home sales have been bouncing back better in outlying Bay Area counties than in San Francisco, as buyers continue the trend of seeking more outdoor space at home. However, Gibson told me that in the city right now, one of the hottest areas for home appreciation is the avenues in the Sunset and Richmond districts.
“Those houses are trading up significantly from where they were a year ago,” he said.