SF condo prices drop almost 10%, inventory up by a third in last year

Condo prices in San Francisco continue to fall, even as the Bay Area’s overall housing market has seen an uptick due to a major lack of listings. 

But there has been no such inventory shortage for condos in San Francisco, where the average months of remaining inventory was 5.6 at the end of 2022, according to Polaris data, the highest in just over a decade. The new report attributes the rise in inventory to the increase in interest rates, with sellers trying creative financing options  and backroom bargaining to get deals over the finish line. 

“Should inflation metrics continue their downward trend, we can expect a favorable response from the mortgage markets,” according to the report. “And despite sales having seen a downturn in most markets compared to last year, sales should rebound as more buyers and sellers return to the market in the fall.”

The most recent three-month moving average from June shows San Francisco condo inventory at 3.8 months, which is down from 2022’s high point but still a third more than the 2.9-month moving average from one year ago. That is by far the highest average in all nine Western markets where Polaris tracks data, with most markets showing under two months in inventory. Locally, the Oakland-Emeryville market had 2.4 months of inventory and Silicon Valley was faring the best of the three with 1.4 months of inventory.

Silicon Valley also had the lowest price drop compared to San Francisco and the East Bay. It was down 5.7 percent year-over-year this summer, compared to a nearly 10 percent fall in San Francisco and 13.5 percent in Oakland-Emeryville.

In San Francisco, condo prices dropped the least in the city’s high-amenity luxury towers, according to Polaris. Low-rise condo buildings fell below $1,000 per square foot in June, a 15 percent year-over-year drop. Mid-rises were just over $1,200 per square foot, a 9 percent annual decline. High-rises were just $1,400 per square foot, the smallest drop at a 7.5 percent change.

New construction escrows and pending resales in San Francisco were both about half of the historical average from 2015 to 2023, although the average resale price was close to the historical average at $1,170 per square foot. 

The Sunset was the neighborhood with both the biggest drop in prices and the biggest uptick in activity, with prices down 13 percent and sales up nearly 50 percent compared with last spring.

The vast majority of recent condo development is located in District 9, which covers SoMa and South Beach, Rincon Hill and Mission Bay, as well as more inland locations such as the Inner Mission and Bernal Heights. Prices in the district were down 9 percent and transactions fell more than 40 percent year over year. 

About 165 new condos are currently under construction in the district and nearly 3,000 entitled, though it remains to be seen how many will actually be built given the current lending environment. The city recently approved a drop in fees and inclusionary housing requirements to get the pipeline moving again.

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