After cooling in 2016, the San Francisco real estate market came roaring back in spring 2017, hitting new highs in median sales prices for both houses and condos. Extremely high buyer demand, an inadequate supply of homes available to purchase, low-interest rates and a general economic optimism drove the market to a feverish pitch. The house median sales price in Q2 2017 jumped $100,000 over the previous quarterly peak, while the condo median price increased by $27,500. The number homes selling for over $2,000,000 in the City also hit a new high.
We also saw a large jump in high-end home sales seen at this time of year. More expensive home sales closed in Q2 than in any quarter in the past. Sales of luxury condos surged dramatically this spring to hit their highest number ever in June on a monthly basis, and in Q2 on a quarterly basis. Luxury house sales of $3m+ also barely exceeded the previous quarterly high in sales, but its component months were well below earlier monthly peaks. Note that condo figures do not include new luxury condo sales unreported to MLS.
BUILDING CRANES EVERYWHERE
Approximately 64,000 housing units, 31 million sq.ft. of commercial space & 25 hotels with 4685 rooms are now in the SF new construction pipeline - with 5700 units, 10 million sq.ft. and 5 hotels currently under construction. In the chart below on new housing construction, the main issue for the SF residential sales market is new condo construction and its effect on the supply and demand dynamic. Over 5000 new condos have been built in the past 4 to 5 years, with another 2000 expected to hit the market in the next 2 or 3. This surge of supply has been a substantial factor in the overall plateauing of condo median sales prices in the city since 2015, and some declines in those neighborhoods where new construction has been concentrated. However, it is true that new construction has been shifting much more toward building rental housing than condos intended for sale, which should help relieve pressure on condo prices and continue to exert downward pressure on rents.
San Francisco still has the highest rents in the nation (the light blue columns in the chart above), exceeding even Manhattan (in second place, delineated by the dark blue line), but they have been dropping since recent peaks in late 2015/early 2016. There are two main factors: 1) per Ted Egan, the chief economist of the City of San Francisco, high-tech hiring has been slowing since 2016, and 2) over 8000 new rental units have been built in the past 5 years, with at least 10,000 more expected to hit the market in the next 5. Generally speaking, rents around the Bay Area have either declined, in what had been the hottest markets, or seen their appreciation rates significantly slow, over the past year or so.