San Francisco continues to be a tale of two cities when it comes to real estate. Single-family homes remain in demand, while condos and lofts remain less appealing in the eyes of buyers, at least for now. If you see headlines that tell you home prices in San Francisco are declining, keep in mind that’s only in reference to condos and lofts.
In September, for example, the median price for a single-family home was $1,665,000, up 8.8 percent over last year. The median price for a condo or loft during the same period was $1,205,000, down 9.1 percent from last year. When you compare these figures to one another, there’s a big difference in their trajectories.
The real estate company Compass in San Francisco put it this way in a recent report: “The inventory of condo listings on the market has been soaring, and price reductions are heavily concentrated in the condo market. Hundreds are still selling each month and that number has been rebounding in the last couple months — but increases in supply continue to outpace demand. Within the condo market, the high-rise segment appears to be the weakest, almost certainly due to pandemic-related reasons.”
IS THE MARKET SHAKY?
So perhaps because you mostly hear about faltering prices, you’re beginning to think that the city’s real estate market is a bit shaky. And then in mid-October the Chronicle published a report quoting a Realtor.com survey that San Francisco rent prices have plunged as much as 31 percent — the steepest decline in the United States.
Does this mean the city’s real estate market is toast? Not according to Barbara Stein Friedman with Corcoran Global Living, with whom I talked recently. “The new corporate shift in thinking that enables people to ‘work from home’ has certainly brought change to the San Francisco real estate market. Some folks are leaving the city for other more affordable locales. This has clearly affected the rental market.
“But it also means that those who work in Silicon Valley can live in San Francisco and not have the daily long commute,” she added. “All in all, San Francisco continues to offer a wonderful lifestyle, and its real estate is an excellent and highly desirable asset.”
Friedman said she expected that October would be a very active month for real estate. There are still a lot of buyers who are looking at today’s market as an opportunity to purchase a home.
Volume of Sales
For the first time in years, buyers feel that they have an expanded selection of properties from which to choose. According to Friedman, they are able to submit offers with contingencies, and, in many cases, they are able to negotiate the purchase price. For nearly a decade prior to the pandemic, San Francisco had been a strong seller’s market. Today things are vastly different.
While it is true there were a lot of listings on the market in September, there were also a lot of sales. In fact, 233 single-family homes were sold in September, up 83.5 percent over the previous year. During that same month, 271 condos or lofts were sold, up 58.5 percent over 2019. The market is doing very well, thank you.
Historic low interest rates are contributing to this surge in sales. Banks, lenders, and appraisers are all working very hard as they put together purchase and refinancing loans because of this enormous demand. Fortunately for buyers, purchase loans take priority over refinancing loans.
CHANGES IN THE MARKET
All of this said, you are still going to hear about massive shifts taking place in high-density, low-affordability markets — specifically New York and San Francisco.
According to mortgagenewsdaily.com, Robert Dietz, chief economist of the National Association of Homebuilders, wrote recently that the declining demand for urban rentals may be hastening the expansion of home construction in low-density markets — think suburbs. Now that about 20 percent of the workforce will be able to spend the majority of their time working at home and about 10 percent will be allowed to totally telecommute, changes are inevitably coming.
Dietz predicts that the introduction of a coronavirus vaccine will slow these changes and return some strength to urban core rental demand, but this recession will leave lasting impacts on where Americans live and work.
San Francisco is a city dominated by renters. According to data from the city, historically, two-thirds of households are renters. Their thinking, sensibilities, and behavior will always generate the big headlines and prompt the most analysis.
Hearing about rentals, sales, homes, condos, single-family homes, residential properties, and commercial properties all at once is commonplace, and it can become a bit confusing. They are all very different. Just know that in spite of everything you may hear, San Francisco single-family homes are still in big demand. And, as Barbara Stein Friedman will tell you, sales are humming along quite nicely.