There’s Nonetheless a Window of Alternative for San Francisco Rental Patrons

After the coronavirus pandemic temporarily halted years of glowing price momentum, San Francisco is now regaining its reputation as a figurehead for overheated real estate markets on the coast.

But as the luxury market rebounds, a window of time remains for buyers of high-end condominiums – a segment that is appreciating more slowly than the feverishly sought-after single-family home market – meaning now is the time for savvy investors to strike a deal.

“This is an opportunistic time for buyers in the San Francisco housing market,” said Krysen Heathwood, senior managing director of Compass Development Marketing Group, the broker’s new development arm.

“The value in this segment is great because prices have not yet risen as much as for single-family homes – not yet. With that in mind, condominium prices have almost returned to their 2019 and early 2020 prices, demonstrating the desire for this type of product, ”she said.

High-end condominium prices are rising more slowly

Overall, San Francisco luxury home prices rose 20% year over year in July to a median of $ 6.27 million, according to data provided by realtor.com to Mansion Global. (Mansion Global is owned by Dow Jones. Both Dow Jones and realtor.com are owned by News Corp.)

However, a closer look at the composition of this jump reveals a discrepancy in the real estate segment.

While list prices for single-family homes rose a dramatic 30% year over year to a typical $ 10.65 million in July, condo prices fell 2.4% to $ 3.86 million over the same period.

“Given the current prices, this is a very good opportunity,” said Selma Hepp, Deputy Chief Economist at CoreLogic.

Like many of the world’s most populous cities, the high-end condominium market in San Francisco has been hit hard by the coronavirus pandemic. Uneasiness about sharing spaces, limited square footage, and a lack of green spaces quickly put apartment living out of favor.

But “even before Covid, the market for luxury apartments in San Francisco was volatile,” said Ms. Hepp. “It really depended on what was happening internationally, it depended on the stock market. So it’s not really about the pandemic – of course it plays a big role – but it’s not just about the pandemic. “

The general slump in condominium demand that the pandemic brought about; fewer international buyers; a shortage of empty nests that will be scaled down to the city during the pandemic; and slower IPO activity over the past year, which resulted in fewer newly minted buyers, all contribute to the comparatively sluggish rise in condominium prices, Ms. Hepp said.

And while there is less competition than usual in the city’s housing market, “it’s definitely picking up pace from where we were last summer,” she added.

Although prices can be sluggish, the demand is there

As buyers return to the cities, fueled by strong housing market fundamentals and the introduction of the coronavirus vaccine, high-end property sales this year have grown significantly year over year.

“People just didn’t want to be in big buildings,” said Robert Callan of Sotheby’s International Realty – San Francisco Brokerage. “They wanted more space, a lot of people just moved into bigger houses.”

But “people keep coming back,” he said. “If you’re a city dweller, somehow come back here,” he said.

Overall, San Francisco saw 2,543 luxury home sales – defined as those in the top 5% of the market – from April to May, up 154% year over year, according to realtor.com data.

Spacious condominiums made up the largest proportion of these deals. There were 1,333 luxury condominium sales from April through May, up 162% from 2020, the data showed.

“The entire market is now recovering,” said Mr. Callan. “I’ve seen a lot of second home buyers buying condos, buying pied-à-terres in San Francisco, and simply moving from a smaller apartment to a larger one – especially if they want the service.”

“We have people moving from the suburbs to the city and into a luxury building,” he added. “You want to be among people.”

The renewed popularity of city life – a fluctuating metric due to ongoing decisions about returning to the office – has, according to Ms. Hepp. has already begun to drive up rental prices, especially for luxury apartments

“It is encouraging to see rental prices recover,” she said, and those gains will quickly be reflected in condominium prices.

“A general look at economic fundamentals suggests that it is still a very optimistic place for homebuyers,” added Ms. Hepp, noting that Corelogic had projected California house prices to drop at 7am by June 2022. 5% will rise, far exceeding their national forecast. of 3.2%.

“California is still where inventories are so low, and the presence of venture capital activities and startups – it’s still the epicenter in the US,” she said. “You may not see the growth rates we’ve seen in previous years, but you will get your money back.”