2019 outlook seems strong.
Call it something in the air: Would-be condo buyers in San Francisco stuck to the sidelines last quarter, as market volatility and the city’s air quality from the Camp Fire likely chilled an otherwise-excellent year for condo sales.
November was a slow month for the downtown market, with 579 closings amounting to a nearly 20 percent year-over-year drop from 2017, according to a report from Compass Real Estate. For the year as a whole, however, sale volumes rose by 6.5 percent. The report focused on San Francisco districts 6-9, where a majority of new condo developments are hitting the market.
Condo prices per square foot rose to $1,252, up 6.6 percent from 2017. (Check out the slideshow above of the most expensive new condo projects, ranked by price per square foot.) Only 641 new condos were on the market in December, down 12 percent from 2017.
Selma Hepp, chief economist at Compass, said the market in 2019 looks to bounce back and conditions are favorable for buyers — especially those in the luxury market, with new high-end developments opening in the Marina and elsewhere.
“The price growth is slower than it used to be, so the sticker shock is maybe a bit less,” Hepp said.
Condos sold on average for $1.4 million last quarter, on par with Q4 of 2017.
The best-performing condo markets were in the Marina and Financial Districts, according to Compass’s Condominium Price Tracker, which determines a moving average that factors in new construction and resale transactions.
In spite of the transaction volume slowdown at the end of last year, analysts see a strong pickup in January that they predict will continue through the year.
“I think there’s a lot of promise in 2019 — especially with IPOs on the way — you might see a lot more minted millionaires going from renting to upgrading (with condos), or as a steady investment,” said Miles Garber, vice president of research at Polaris Pacific, noting the proximity of nascent-public technology companies such as Slack, Uber, Airbnb, among others.
Rising construction costs, Garber said, have prevented some developers from breaking ground on condos that would cater to first-time home buyers.
“The tricky part now is that missing middle, of $1,300-$1,500 per square foot, due to rising construction costs,” Garber said. “But super-luxury projects (above $2,000 per square foot) are still able to pencil.”
The most expensive downtown condo market was District 7, which spans the Marina, Cow Hollow, Pacific Heights and Presidio Heights, where condos closed at $1.6 million on average over 90 deals last quarter.
Condos in District 6, which includes Lower Pacific Heights and Hayes Valley, sold for an average of $1.2 million. District 6 tends to have less expensive condo offerings than units closer to downtown. While there are no currently-selling new developments, a string of high valuations at the end of 2018, the report said, indicates a potential price appreciation for the area.