San Francisco’s real estate market is currently a tale of two markets. The single-family market and the condo/TIC/loft market have fared very differently lately. Single-family homes continue to see high demand, multiple offers, and rising prices. Meanwhile, the condo/TIC/loft market is softening, and inventory levels are the highest we have seen in a decade. Buyers have adjusted their expectations faster than sellers in the condo/TIC/loft market. As a result, we are seeing many price reductions in the 10-15% range on these listings. This is especially true for high-rise or shared-elevator buildings. Days-on-market is up significantly too.
Numerous San Francisco employers have extended work-from-home as an employee option through 2021 and possibly longer. As a result, young highly mobile renters are exploring housing options in communities throughout the country. This demographic normally comprises the next round of condo buyers. Now it seems that many may end up buying elsewhere, leveraging their San Francisco salary to acquire a larger property with more amenities. Condo owners who want to stay in the area are finding that they have new needs. Some of which condos are not as well suited to meet. Work from home has increased the need for more interior space in the form of a home office and/or gym. Most condos simply do not have a garage, attic, or porch that can be transformed. Outdoor space is also a premium in a condo setting.
The Federal Reserve Bank has signaled that it will be keeping lending rates for banks near zero for the foreseeable future. Mortgage rates will likely remain in the 3% range during this time. The resulting lower monthly payments are propping up prices by increasing buyers’ purchasing power over this time last year.
As of September 14th, many businesses can resume indoor activity with limited capacity and other constraints due to progress on the COVID-19 front. The City has outlined a path to expand this in the coming weeks if the necessary goals are met. Meanwhile, restaurants, gyms, and other hard-hit businesses have begun to expand outdoor operations. We will continue to watch this in the coming months to see what impact it has on the market.
Note: More information on COVID-19 can be found here: https://www.sfdph.org/dph/alerts/coronavirus.asp