Pricing Index for New Condos in San Francisco Hits a 3-Year LowJuly 17, 2017
While sales activity for new condos in San Francisco dropped 27 percent from May to June with the start of a typical summer slowdown in play, the number of purchase contracts signed last month (53) was 66 percent higher on a year-over-year basis, according to sales data from The Mark Company.
That being said, the total volume of new contract signings over the past twelve months remains 10 percent lower than the over same twelve months the year before despite having had an average of 46 percent more inventory from which to choose.
And while the current inventory of new construction condos available to purchase in San Francisco (877) is now running 27 percent lower on a year-over-year basis, and a decrease in inventory typically pushes prices up, the Mark Company’s pricing index for new construction condos in San Francisco dropped 7.8 percent in June to a three-year low and is now running 15.9 percent lower on a year-over-year basis and 20.2 percent below its August 2015 peak.
According to the Mark Company, the weakness in the new construction market “is mostly confined to a trio of new large developments South of Market: Lumina, The Harrison, and One Mission Bay” (which happen to represent the three largest developments with sales offices open in San Francisco).
Or as we first reported a few months ago and shouldn’t come as any surprise: Year-Old Lumina Condos Now Listed at a Loss.
Comments from Plugged-In Readers
At Lumina, 80 condos remain unsold after two years of their periodic releases, many of these are 4-5 million and above, many of these remain unlisted even today, waiting for inferior units to be sold. Only one of the penthouses has sold, despite a recent price drop on 36A, after a reshuffling of the floor plans in the taller tower’s highest levels, 5 penthouses remain. Considering recent record breaking sales at The Pacific, etc in a similar price range, the money is definitely out there, but it would seem that ultra-high end buyers are savvy enough to smell blood in the water around SOMA and are holding out.
I also wonder how much the issue is overbuilding luxury condos in neighborhoods (Transbay, Mission Bay) without an existing fabric of businesses and activities. I’d bet that if Lumina was on the west side of Second Street, they would have sold much faster. As it is, this area is like FiDi lite—a handful of street-level businesses that close on weekends and no grocer, hardware store, dry cleaning, coffee shops, parks, etc. that give an urban area some life. I’d bet once the Transbay Terminal is finished and more retail opens, these condos will sell.
If you’re thinking that the opening of a bus terminal – specifically a commuter bus terminal that does the majority of its business during ten 2-3 hr periods each week – is going to spur grocery, hardware and coffee shops, you’re likely to be disappointed; dry cleaners are perhaps a better bet, to the extent that they can create a fabric (pun partly intended).
Indeed the “temporary” terminal will have been open almost a decade by the time it closes – i.e. a pair of five-year leases – so if such is attractive I would think the area would have show evidence of retail growth already; that it seems not to have done so suggests the many condo residents don’t need – or at least don’t patronize – stores nearby.
Nah, not the passengers specifically—I’m just imagining the park and retail/restaurant components around it (including several hotels) will boost the neighborhood’s street life.
I mostly agree with your assessment. We looked at rental units in the comparable rental skyscrapers in this area and decided against them because there wasn’t anything to do, opting for Mid-Market with its burgeoning dining scene, and easy access to Hayes Valley. The types of people who buy and rent in the buildings here won’t really care too much about things like hardware, dry cleaning, and even to an extent groceries…these are people who deliver those products (although a trendy high-end grocery store I think would still get used). But you’re right on about coffee shops, parks, and restaurants/bars that are forward-thinking, reasonably priced, and trendy. Philz is a great start. If they can get some solid neighborhood haunts (think Adriano Paganini type projects, alongside a couple good beer/wine/craft cocktail bars) in the retail components of the under construction Folsom towers, then they’ll be solid. Right now they’re stuck between Financial District and uninspired bridge-and-tunnel/game day focused restaurants by AT&T Park.
Supply and demand. Everyone knows more condos will be built in SOMA for the foreseeable future, so it’s hard to create a sense of scarcity around these. They will appreciate more slowly than the general SF market. There will always be something brand new on the market in SOMA. Not so for the Pacific. The Millennium tried to be THE SOMA address and we know how that turned out. I’d expect buildings with historical elements or unique location (South Park) might buck this, but hard to command a premium when you’re a commodity. Also, rising rates and flat to slipping employment, not to mention the prospects for VC/IPO market conditions, don’t bode well for the condo market.
Speaking of The Pacific, the price for the 1,360-square-foot, two-bedroom unit #603, which was originally listed at $3,095,000 before being raised to $3,150,000, has just been reduced to $2,995,000 ($2,202 per square foot).
The two-bedroom unit below (#503), which had been priced at $2,895,000 sold for $2,800,000 ($2,113 per square foot) in May.
maybe it’s not blood in the water but urine?
New condos are down 20.2% since August 2015? Down 7.8% just in the last month? You believe that and, as the old saying goes, I have a bridge to sell you.
Meanwhile, the used condo market hums along. See, for example, 1587 15th St. #206, just closed for $965,000 after selling in April 2015 for $890,000. Some minor work on the tiny kitchen and bath. So call it about a 5% gain since that 2015 peak, or a 25% difference from this oft-discredited secret Mark Company index. Or, more modestly, 142 Russ St. #4 – $1,725,000 in November 2015 and $1,745,000 in July 2017, a 1.1% gain (21.3% above this “index”). Anyone looking for 20% off 2015 price bargains, or even a 1% off bargain, is going to be sorely disappointed (although I’m sure the rare anecdote can be dug up and selectively posted ). On the flip side, if any realtor tells you SF condo prices are only going up, up, up from here, take that with an equal grain of salt.
Good stuff! I just look at it from an overall perspective, between the SFH and condo markets. With the condo market, more product is on the assembly line and coming onto the market with each passing day. And that supply is not being absorbed fully. With the SFH market, pretty much nothing new is being built (at least in the Fab 7×7). That is why I just think the SFH market has more potential to give one a decent return since supply is stagnant. Sure, more expensive typically and more hands-on maintenance necessary with SFHs but what do you want? You get a space that is unique and all for yourself and for you to do as you please.
you realize a 5% gain is really most likely a loss when you factor in your remodel costs noted, your sales fees, and whatever else (interest expense if not full cash), and fully load the purchase and carrying costs. Especially when you compare that against a passive S&P or Nasdaq ETF that would have returned much more over that timeframe.
Im not really sure why anyone buying in 2015 would sell 2 years later as the days for a fast flip where you actually make some money are past now. So I dont really see how your two anectodes argue against the articales claim of falling prices. is it 20%, doesnt seem like it, but its definitley flat to falling, there are just to many dowside examples to offest the upside ones.
Yep, not a good result for the 2015 buyer. But the 2017 buyer paid more, not 20.2% less. That is the relevant point.
So you cite two specific addresses to make your point, then say “I’m sure the rare anecdote can be dug up and selectively posted.” SS’s data is based on every sale. I’ll take their data.
SS’s data is not “based on every sale.” It’s a secret, black box index that nobody knows anything about – what went into it or the methodology that then spit out the result. It is no more reliable than you posting that the “Panhandle Amigo index”, or me posting that the “anon index”, indicates a 20% price gain in the last month(!!). This “index” like those two hypothetical indexes really deserves nothing more than to be ignored.
If Panhandle Amigo and “anon” both ran new construction marketing and sales firms, and based their indexes on data collected by way of signed contracts and sales office feedback, we might agree. But obviously we don’t. Regardless, we might suggest focusing more on the relative trend(s) than an absolute point in time.
It’s good to know that a remodeled unit in the Mission can still fetch more than prior said work being done and that a scarce three-bedroom loft with above-average finishes can fetch a total of 1.1 percent more than two years ago.
But now back to the new construction market and topic at hand. For example, the Lumina one-bedroom #D20H which was purchased from the sales office for $1,375,000 early last year and is now available for $1,229,000 today. That’s a “disappointing” 10.6 percent less. And if prices haven’t actually dropped, that’s (at least) $146,000 in instant equity up for grabs!
Well, here is another from the new construction market at hand: 718 Long Bridge St #910, a 2BR in Mission Bay. Sold new in December 2015 for $1,420,000, and just sold again in July 2017 for $1,775,000, up 25%. I suppose it’s theoretically possible that new condos are down 20% since 2015 while condos that were new in 2015 have appreciated a fair amount. But the far more likely explanation is this Mark Company index is worthless. That has been well established at this point.
You’re right. This two-bedroom at the Infinity dropped 23.9 percent over the past two years, so the index is obviously understating the magnitude of the decline! Or is it possible that an index is more like a weighted average?
Is it more like a weighted average? Please provide whatever information you might have. I suspect you have no idea because the Mark Company provides no information whatsoever about its methodology, or the data to which it applies that secret methodology. But please share what you know.
Perhaps you’re right and they took the one or two anecdotes you’ve been able to find (like this 3-month old one to which you repeatedly refer) of a pretty significant decline in the last two years and “weighted” that at pretty close to 100% while “weighting” the many contrary examples close to 0%. This “index” is a joke, and you really should stop citing to it if you don’t want to lose all credibility.
Note Bloomberg’s article from Sunday: “San Francisco’s VC Boom Is Over“
This is a very good link and within that article is another very good link to an article talking about the housing mentality here and if SF can define its self as a global economic west coast USA capital. It’s a how it was vs how the future should be article and how to accommodate demand relative to other areas, given the talent draw we get here, which I think is all fantastic.
One interesting factoid I found in it all:
SF proper density is only half of Brooklyn! Not even Manhattan. Not that that should be the benchmark or goal, but just interesting perpective…and clearly negates some posters views expressed here that SF is built out/cannot absorb more capacity. I always scratched my head on that idea, that SF proper was maxed out.
No way. We just need massive mass transit beyond current progress, and much more water capacity transit to bridge the gaps.
Meanwhile, NASDAQ hits yet another record high today. Whether the boom is over or not, the bust certainly is not yet underway.
That Nasdaq Composite is a complete joke! DAVIDs TEA stock has dropped 61 percent over the past year but the index is supposedly up 24 percent? Yeah, right…
But in all seriousness, the fact that new condo market has been lagging (feel free to completely ignore the pricing index and simply focus on sales/absorption) while the NASDAQ hits a new high, reads more like a cause for concern than bravado.
For all those not following along the ongoing snarky subthread between the editor and ‘anon’, I’ll just add a clarifying fact that will make the above sarcasm obvious to the casual reader.
The common stock for DAVIDsTEA Inc is not part of the NASDAQ Composite Index or the NASDAQ-100 index and even if it was, with a market cap of less than $138 M the fact that DTEA hit a 52-Week low during today’s trading wasn’t going to exert any influence on the level of either index. Hahaha. Get it?
You all can go ahead and keep talking your own “books”. Fact of the matter is, a recession will hurt all segments, although not equally. With prices so high – and with little likely downside – I hope all RE owners have either: ample liquidity and/or a non-tech job. Otherwise, other than providing a place to live, who the hell really cares? It’s all on paper and will be tough to move when/if you have to.
What do you mean by “little downside”? If this price index fell 20% in a strong market, what do you expect will happen in a down market/recession, with additional supply coming online?
I heard a realtor recently talking about her own “North of California Street” property index at an open house in the Marina. She claimed condos and homes north of California street are always strong and gaining in value for the last 25 years because the housing stock is “unique” compared to high rise condo “luxury” boxes.
That’s a rather interesting claim, especially considering the price per square foot for those unique homes north of California Street fell around 10 percent from 2008 through 2009, with the average decline closer to 20 percent at the upper end of the market.
And the average price per square foot for those luxury boxes in SoMa? It dropped around 20 percent during that period as well.
I’d be far more impressed if you found a realtor at an open house who was saying that prices are falling and you should wait to buy.
north of california is considered money; south is consider poor
I’m dubious about the Mark figures. Of course next month the prices could go up 2% and the “drop” be ameliorated. My guess is new condo product is down 8% – 10% and not 20%. Part of this is a reflection of the price softening of the top third tier of the market. If it was truly a 20% drop then some of these high-end condo projects would be canceled and we are not seeing that.
The bottom line is SF and the Bay Area will likely track the national average house appreciation for a prolonged period now.
Another factor is this area is not a neighborhood – the sidewalks are windswept and generally empty on weekends. It’s very difficult to “create” a neighborhood. The Hub development will fall victim to this. This is not The Pearl. Ironically, a scaled back Central SOMA plan that widened sidewalks, offered street art and water features, rehab’s many of the existing structures and avoided block 30 story towers or a block of 3 12 story towers (the 6th street proposals) could become a real neighborhood over time. There does not seem to be the interest in pursing such a goal – unfortunately.
Agree about the neighborhood vibe (see my comments above), and also think the over-concentration of office space could really harm the burgeoning neighborhood around Central SoMa. Folsom and Howard have some pretty great architecture and alleyways, and need to be redesigned for walkable/bikeable residents (rather than as street-level expressways for the bay-bridge). There are already plenty of vacant retail / restaurant spaces on the ground floors that would hold more neighborhood services as there is a growing influx of residents. I think mixed office/housing projects around Transbay make more sense than the huge office complexes in Central SoMa (though building up up up around Caltrain is a win).
Agree about the Central SOMA and not doing massive office complexes there. 48K jobs would amount to about 11 million feet of office space in the Central SOMA and that is equivalent to 11 Salesforce towers. The streets would come to a standstill and be turned into expressways to the Bay Bridge – as is going to happen to Hawthorne.
Take advantage of the alleyways and create an intimate pedestrian experience in the SOMA. Restrict new structures to maybe 80% of the lot and encourage developers to use that space to widen the sidewalks and turn them into greenways with art and water features and sidewalk cafes. Retain many of the existing structures – they are not historic but the scale is perfect and many are far more interesting architecturally than what has been going up in the area.
There will be lots of pushback on the Central SOMA plan and its hard to see it standing as proposed. The housing/jobs imbalance must be significantly reduced.
New neighborhoods can grow from existing hoods that are respected. The Pearl, Pike’s Place and some surprising stuff being done in LA with medium scale residential/office development. Starting from scratch as they did in the Transbay district usually does not work as it hasn’t there.
Part of the “neighborhood problem” (or lack of neighborhood) can be blamed on the planning department. A certain amount of ground floor retail should be mandated, otherwise the area will be as exciting as going to the Financial District on the weekend.
I believe it is mandated, there’s just nothing to encourage building owners to actually find tenants so these spaces stay empty for years (see corner spaces at Mosso, Nema, etc.)….does look like a grocery is finishing their build-out at Lumina though.
[Editor’s Note: The Market Bails on Lumina Lease but Replacement Grocer Named]
Why would you add that editor’s note from 3/2016? Is that the latest info you could find?
For more hopeful information, please note that woodlands market is opening there and the buildout is almost complete, they are pushing hard for end of July but it will likely be august. It is highly anticipated by local residents( and there are a lot in that area these days)
Woodlands Market? Do you mean the purveyor we first reported, profiled last year, and provided a link to above for those who might not know exactly which “grocery is finishing their build-out at Lumina” as already established above?
15CD at the Infinity is quite interesting.
The original owner bought an adjacent 2br and 1br for like 2mil, remodeled and sold it a 3 br for over 3mil. Remodeled again its at 5.4mil. Maybe the way to make $$$ in Soma is with 3brs.
A bit of background on the original merger of the two units, which were acquired for a total of $1.929 million in 2008/9: Having Merged Their Units, the Permanent Residents Are Moving On.
The combined unit, which sold as a three-bedroom for $3.295 million in 2013, was subsequently gutted, reconfigured as a two-bedroom, and completely remodeled with high-end finishes.
And while 301 Main Street #15CD is now back on the market with a $5.495 million price tag (which includes the furnishings, sans art), don’t be surprised if a sale at asking would actually represent a relatively minor gain (if one at all).
Well my absolutely not new condo is going on the market at the end of the month. So I hope the market doesn’t completely crater between now and the end of the year.
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