San Francisco’s lackluster, post-COVID recovery has hurt the downtown condo market, with owners increasingly willing to sell at a discount amid ongoing technology layoffs and office closings, according to in a new report from real estate brokerage Compass.
Median condo sales prices in the greater downtown and South of Market districts — which include Civic Center, SoMa, Mission Bay, Yerba Buena and South Beach — are down 16.5% from a year ago, according to the report. Since December of last year, the median condo sales price has dropped from $1.475 million to $1.23 million in the neighborhood.
The drop in median prices in downtown neighborhoods is twice that of other parts of the city. Outside of downtown, the median price of condos fell 7% last year, while single-family homes fell 7.5%.
While real estate brokerages tend to be rosy in their marketing materials, the Compass report doesn’t paint the current situation. It concludes that the decline in demand is due to the “triple problem of economic, demographic and quality of life issues.”
“I know that market share has weakened but I don’t know how things have changed,” said Patrick Carlisle, chief market analyst for Compass. “A little shocking.”
The problems are both macro and micro.
At the national level you have a decline in the stock market, an increase in interest and inflation. Meanwhile downtown San Francisco is lagging other cities in office occupancy, and the lack of foot traffic is crippling small businesses and making the streets less safe. The high-rises that have sprung up on South of Market Street over the past 20 years are meant to serve the hundreds of thousands of workers who flood into the city every morning. With far away jobs, the demand for housing has decreased.
“San Francisco has gone from the hottest office market in the world to the weakest,” Carlisle said.
Two recent sales reports of Lumina, a two-tower luxury complex in South of Market, show how the market is shifting, according to an analysis by Socketsite, an online publication that tracks land in San Francisco.
The first includes a 1,791 square foot, three bedroom, three bathroom unit on the 32nd floor of the tower at 338 Main St. That unit sold for $3.25 million in May of 2016 and then sold again in August of 2019 for $3.5 million. In September of this year it hit the block again with a list price of $3.15 million, before selling in November for $2.68 million, a drop of 23.4% since 2019.
Meanwhile, a two-bedroom unit in the same tower was sold for $2.6 million, which, if it sold at that price, would represent a 21% decrease from the 2016 price of $3.295 million.
While the current market presents an opportunity for buyers, the increase in interest rates to a 20-year high offsets any savings that can be obtained through a lower price point, Carlisle said. But for buyers with money for a down payment, or those willing to gamble that they can refinance at a lower interest rate down the road, there are opportunities.
“This is a good time for buyers to negotiate more aggressively,” he said. “When you see a unit you like just ignore the asking price and decide what you’re willing to pay for it. There are many sellers who just want to move on. If they can close a deal, they will, even if it falls short of expectations. “
Realtor Kevin Birmingham of Park North Real Estate said the report is consistent with what he’s seen around the city. He just sold a condo in the Twin Peaks area for $695,000. It closed at $680,000. The seller is expected to get $800,000.
Because of this, many sellers are looking to rent out their units. “The listing was withdrawn and went straight to the rental market,” Birmingham said.
Gregg Lynn of Sotheby’s International Realty, which focuses on the luxury condo market, said that the optimism of 2021 – when San Franciscans are vaccinated and begin to feel comfortable in the crowds – gives way to uncertainty.
Some families who bought before the pandemic expected to split their time between San Francisco and wine country or Tahoe found they didn’t have much reason to go to the city. Some buy condos downtown to be close to their children and grandchildren, so that their children can leave the city.
“Many of our clients don’t use their condos as much as they think they will,” he said.
JK Dineen is a staff writer for the San Francisco Chronicle. Email: [email protected] Twitter: @sfjkdineen
