In my previous posting, we looked at how well the single family home market held up during 2020 and continues to do so, particularly at the luxury end. The story for condominiums is more complex, with prices for those located in highly urban neighborhoods like South of Market/South Beach/Mission Bay, still below their previous highs but with levels of activity suggesting that a rebound is either underway or imminent. Read on for details!
Condominiums in the Doldrumiums?
Condominiums and their ilk have comprised a majority of all residential sales for about two decades. The reason is simple: most of the new homes created since then are condos – just look at the SF’s skyline. They also comprise 88% of sales under $1 million (see side bar in pie chart below).
With the concentration of condominiums in downtown SOMA areas, it’s no surprise that, as a category, their prices suffered during the pandemic – for all the reasons discussed in my previous post: lack of outdoor space for socializing; the closure of bars, restaurants, and gyms; and the ability of many young tech workers to work remotely. And, indeed, while condo sales have snapped back since the start of the year, median prices are still where they were pre-pandemic.
That may be about to change, however. As the next chart shows, the number of house and condominium sales have both skyrocketed as San Francisco has opened up again. But condominium sales, in particular, have reached record levels. This may well reflect the perception that condos hit a bit of a bottom and represent a buying opportunity right now.
The other thing worth remembering about condominiums is that the general numbers can disguise very different performance depending on where they are located. Location, location, location is of course always highly determinative of price. But in San Francisco, if you’re buying a condo in the financial district or in the broad South of Market/Mission Bay/South Beach area (I’ll call this “Broad SOMA”), you know you’re going to be getting a modern condo in a mid- to high-rise building with no private garden or outdoor space. Anywhere else in the city, condos can vary greatly, with some having private or shared yards, some having none, and most being located in smaller older buildings.
In my February newsletter, I showed that Broad SOMA condos fared poorly in 2020 relative to previous years. The charts below show how Broad SOMA condos are doing relative to condos located in MLS District 6, a “typical,” residential SF neighborhood, with a decent mix of condo types and buildings, that doesn’t skew too luxurious. The first chart shows that, no surprise, the amount of inventory available as a result of the pandemic hitting went through the roof for both area but is now back down. However, Broad SOMA remains at over 4 months of supply, whereas District 6 is back down to barely above 2 months. This shows that Broad SOMA remains a relatively soft market.
Prices have followed suit. Both areas rebounded sharply in May – July 2021 against the same period in 2020 when the lockdown was hammering the market. However, District 6 condos are now within striking distance of their all-time highs (reached just as the pandemic hit), whereas Broad SOMA condos are about $160,000 off the all-time high they reached back in December 2018.
And let’s not forget that the Covid delta variant may once again scramble the picture for condos, particularly in Broad SOMA. The final chapter has not been written on this story yet.
Luxury Condos – Nice Work if you can Get That Too
Just as luxury homes did particularly well despite the pandemic, so too have luxury condominiums. The number of sales of condos over $2 million reached unprecedented levels in recent months, perhaps reflecting a perception that now is a good time to get in before further price increases. Indeed, year over year price appreciation for condos over $2 million far exceeded that for both entry level and mid-range condos, as the second chart shows.
Let’s finish up with a table of 2BR condo values from neighborhoods across San Francisco. As with homes, if you’d like a specific analysis of values for your neighborhood, please email me, or you can check out the new interactive map at my website.
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