San Francisco's residential real estate market saw brisk activity from July through September with a steep increase in both sales and inventory, as a significant jump in buyers was not enough to keep up with the deluge of new condos and homes flooding the marketplace, according to a new report from the brokerage Compass.
The number of sales rose 30.2% compared to the third quarter last year, climbing from 1,151 to 1,499 transactions. But the number of listings is at a 15-year high, with a 10-month inventory for condos in some neighborhoods. Comparing September to the same month last year, the number of price reductions was up 172% for houses and condos combined. Of the price reductions, 80% were of condos.
"The issue is the inventory is increasing so much faster than the sales rate," said Patrick Carlisle, chief market analyst for Compass. "Any time you have this relatively huge overhang of supply, and demand is stable, you are going to see price reductions."
The market was bifurcated: single-family homes did better than condos; large homes were more popular than smaller homes; and many downtown high-rise offerings languished while listings in more suburban neighborhoods tended to trade faster and slightly above asking price.
The contrast between the single-family homes and condos was apparent in price, how long a property sat on the market, and whether the asking price had to be cut to attract buyers. The median sales for single-family homes inched up year over year from $1.57 million to $1.66 million while condo prices lagged, dipping slightly from $1.275 million to $1.25 million. Single-family listings sold at an average of 102.5% of listing price while condos went for an average of 97.5% of listing price.
Even within the condo segment there are differences based on neighborhood. There is a 10-month inventory in the downtown neighborhoods whereas a leafier district that includes Cole Valley, Eureka Valley and Noe Valley has a four-month supply, Carlisle said.
The average size of home that sold in the third quarter was 1,997 square feet, compared to 1,890 in the third quarter last year. The change reflects the reality of the pandemic: Wealthier families are keeping their jobs, staying healthy and enjoying robust stock-market returns while less well-off families are more likely to be struggling with unemployment and sickness.
San Francisco saw a 28% increase in sales of luxury homes — those over $2.5 million — year over year, Carlisle said.
"There is no doubt affluent buyers have been making up a larger percentage of people buying homes," he said. "It speaks to the economic stratification going on."
In contrast, the entry-level buyer pool, dominated by young tech workers, is more likely to be leaving the city to work from home in more spacious or bucolic settings, Carlisle said.
With so many people looking to sell at once, there will likely be a scramble to unload properties before the market goes into hibernation for the holidays, he said. That means that listings have to be priced correctly out of the gate.
"The properties that sell are selling quickly but there is another group of listings that the market is not reacting to and those are going through price reduction," he said. "If you don't grab attention of buyer quickly, you get lost in the shuffle of all the new inventory."
