Who knows the future of San Francisco’s condo market? Well, nobody, that’s why we’re all stuck guessing, or at best predicting.
Earlier this year, real estate group Paragon’s reports about blunting demand in the condo market engendered some cries of a bursting bubble (although Paragon themselves never technically said any such thing).
More recently, they have suggested a "soft landing," as demand and prices fall in a decidedly non-catastrophic way. There are, after all, more new condos on the market now than there have been in years, and more on the way than have been entitled in a generation.
But Paragon competitor Polaris Pacific says nuts to that. In a Q2 analysis released this week, Polaris predicts a "rosy future" for San Francisco condos, pointing out that we still only have three and a half months worth of stock if present demand holds, and that the 940 new condos on the market right now only seem like a lot because San Francisco is Bizarro World and we’re used to building next to nothing.
"A thousand units of inventory may feel unusually high, but it’s not," Miles Garber, Polaris’ VP of research, said in a press release.
A thousand is actually just about normal, as Polaris reckons it. The company points out that although condo demand has turned lukewarm this year, prices are still going up.
Meanwhile, Paragon looks back in languor at the previous bubble with their own August report, examining the boom and bust from 2007-2011.
Whether or not this is meant to be mere historical context or a veiled allusion to the possibility of stormy times ahead depends on how pronounced your own ominous sense of dread already is.
Before the bust, San Francisco’s peak median home price was $895,000. Note that such a figure had the same spending power of just over $1 million today. Within four years that stat shed 21 percent of its non-inflation adjusted value, bottoming out at $699,000 in 2011.
But that was actually pretty gentle. Contrast with Napa County, which plunged nearly 50 percent. Contra Costa County’s 2007 median was reduced by almost two thirds. Oakland’s home prices have been an insane trapeze act, swinging from $585,000 in 2007 down to $232,000 in 2011, and now up to roughly $632,000.
Now, San Francisco prices are sitting at well over 150 percent of what they were at the previous peak, according to Paragon figures. Marin County, previously home of the region’s most valuable real estate, dropped 27 percent during the crash and now ranks third place, despite bouncing back to 116 percent of its old high.
Meanwhile, the medians in places like Napa County, Sonoma County, and Contra Costa still sit well below their old highs, as the region’s inertia has shifted decidedly south over the last nine years.
- Bay Area Market Survey, August 2016 [Paragon]
- Condo Prices Finally Peak [Curbed SF]
- SF Has More Condos Than Anytime In Years [Curbed SF]
- SF Condo Bubble Deflates [Wolf Street]