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SF Condo Demand May Have Peaked (Finally), Even as Housing Demand Soars

Report suggests that the SF condo boom could be deflating.

San Francisco’s housing market may be splitting down the middle. Houses up and condos down could be the foreseeable future, as fashionable high- and low-rise condo buildings of the sort sprouting all over South Beach, SoMa, and Mid Market begin to satisfy demand. Meanwhile, comparably few single-family homes are appearing, agitating the public’s desire for more.

That’s the vibe according to Paragon Real Estate’s first quarter report released yesterday. "Houses, especially those below $2 million, are still often selling in a frenzy of bidding: Recent reports of houses selling with 5, 10 or more competing offers are not uncommon," says Paragon.

On the other hand, while the thousands of new condos on the market are indeed selling (how could they not?), "demand-per-listing ratio is declining, multiple offers are less common, and more listings are expiring without being sold." Which, of course, makes perfect sense, given that this is exactly what’s supposed to happen sooner or later if you keep selling people the same thing.

Thousands of more units are on the way — including many in high-profile buildings that haven’t even broken ground yet — so it’s only reasonable to assume that this trend will continue.

But those who put money into those impending buildings shouldn't be emptying the liquor cabinet in despair just yet: Even though Paragon notes that condo prices are down a bit from their peak nine months ago, they’re still selling for an average of $1.1 million. Not exactly small change, and nearly double the average of four years ago.

Luxury houses — i.e., those selling for over $2 million — are down a bit too, but demand for single-family homes under $2 million ranges from "solid" to "downright rabid," depending on the indicator you use.

Do keep in mind that "the data of one quarter is not definitive," and there are plenty of other things that can monkey with trends. Silicon Valley has clammed up of late about the death of new IPOs, the loss of a few once-prominent startups, and the discouraging vibes around giants like Twitter, for example.

Housing prices in the Bay Area chart very closely to the performance of the NASDAQ, which is up since the beginning of the year, but went through a big dip during basically all of February.