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The
South of Market (SoMa), South Beach, Yerba Buena& Mission Bay Condo
Market
The
Paragon Market Report
More condos sell in San Francisco’s South of Market (SoMa), South Beach,
Yerba Buena and Mission Bay neighborhoods than anyplace else in the city: This
is where by far the greatest number of new condos has been built in the last 20
years. The market here heated up very rapidly in 2012, especially as the number
of brand new condos on the market has dwindled (contributing to the severe
inventory crunch). This area is one of the world centers for high-tech and
bio-tech businesses and homebuyers, and the ferocious demand competing for the
very limited inventory have caused prices to jump dramatically.
Luxury condos here, in high prestige buildings, typically with spectacular
views, sell for among the highest dollar per square foot values in the city. The
largest sale reported to MLS in 2012 was $7,850,000 for a unit at the
Millennium.
Since opening our doors in 2004, Paragon has represented buyers and
sellers in over 775 transactions totaling almost $700 million in sales in these
neighborhoods. We’ve closed more than 170 sales of $1,000,000 plus, and almost
two dozen of $2,000,000 or more. This is an area we know and love well.
**************************************Sales by Price
Range
Long-Term Trends in Values
The following charts track average sales price and average dollar per square
foot for non-distressed condo sales by year since 1995, specifically for the
South Beach/Yerba Buena and SoMa neighborhoods. Remember that average
sales price is different from median sales price (which is used more
often), but is just another way to look at long-term market trends.
Here, we’ve limited the analyses to sales under $1,800,000: though this area
has a large luxury component, the very high-end sales generally distort the
averages for the vast majority of sales.
Sales Over, Under and At List Price
As the market gets hotter, the percentage of listings selling for over asking
price increases.
Median Sales Price Trends for 2-Bedroom Condos
A comparison of Median Price trends for 2-BR condos in 5 of the city’s
neighborhoods. All 5 have been showing median price appreciation, but none more
so than the South Beach and Yerba Buena neighborhoods.
Number of Listings Sold
Very strong unit sales numbers in recent quarters and they would have been
significantly higher if there were more listings available to buy. Distressed
condo sales are rapidly declining as the market recovery has gained
momentum.
Percentage of Listings Accepting Offers
An excellent statistic for measuring buyer demand against supply of
inventory. The percentage is now at the highest point in memory.
Condos for Sale
The inventory of condos listed for sale through MLS is far below that of
previous years and is seriously inadequate to meet market demand.
The New-Development Condo Market
The vast majority of new-condo construction over the past 15 years has been
in this greater area: it’s been estimated that over 10,000 were built here in
the first 10 years of the century. The 2008 financial crisis caused new condo
construction to crash in SF, which led to large declines in new-condo listings
and sales. Now, new construction is recovering in a big way — many big new
projects are planned by some very well-known developers — but it will probably
take about 2 years, more or less, before we see a large quantity of newly built
condos coming on the market.
Months Supply of Inventory (MSI)
The lower the MSI, the stronger the demand as compared to the supply of homes
for sale. MSI readings this low — below 2 months – is considered to be
indicative of a strong “Seller’s Market.”
Condo Sales $1,000,000 & Above
The number of condos selling for $1m and above is at its highest point in
years: Sales increased in the 4th quarter even as inventory fell. Demand for
higher-end condos in the best buildings is quite competitive now.
Distressed Condo Listings & Sales in the Greater SoMa Area
Because so many large developments were built here in the last 15 years, this
area had more distressed condo sales (bank-owned property sales and short sales)
than any other area of the city. However, the number of distressed listings and
sales has been rapidly declining with the market turnaround and looks to
disappear completely in the near future.
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MEDIAN SALES PRICE is that
price at which half the sales occur for more and half for less. It can be, and
often is, affected by other factors besides changes in market values, such as
short-term or seasonal changes in inventory or buying trends. Though often
quoted in the media as such, the median sales price is NOT like the price for a
share of stock, i.e. a definitive reflection of value and changes in
value, and monthly fluctuations are generally meaningless. If market values are
truly changing, the median price will consistently rise or sink over a longer
term than just 2 or 3 months, and also be supported by other supply and demand
statistical trends.
AVERAGE SALES PRICE is
calculated by adding up all the sales prices and dividing by the number of
sales. It is different from median sales price, but like medians, averages can
be affected by other factors besides changes in value. For example, averages may
be distorted by a few sales that are abnormally high or low, especially when the
number of sales is low.
DAYS ON MARKET (DOM) are the
number of days between a listing going on market and accepting an offer. The
lower the average days on market figure, typically the stronger the buyer demand
and the hotter the market.
MONTHS SUPPLY OF INVENTORY
(MSI) reflects the number of months it would take to sell the existing
inventory of homes for sale at current market conditions. The lower the MSI, the
stronger the demand as compared to the supply and the hotter the market.
Typically, below 3-4 months of inventory is considered a “Seller’s market”, 4-6
months a relatively balanced market, and 7 months and above, a “Buyer’s
market.”
DOLLAR PER SQUARE FOOT
($/sqft) is based upon the home’s interior living space and does not
include garages, unfinished attics and basements, rooms built without permit,
lot size, or patios and decks — though all these can still add value to a home.
These figures are usually derived from appraisals or tax records, but are
sometimes unreliable or unreported altogether. All things being equal, a house
will sell for a higher dollar per square foot than a condo (due to land value),
a condo higher than a TIC (quality of title), and a TIC higher than a multi-unit
building (quality of use). Everything being equal, a smaller home will sell for
a higher $/sqft than a larger one. (However, things are rarely equal in real
estate.) There are often surprisingly wide variations of value within
neighborhoods and averages may be distorted by one or two sales substantially
higher or lower than the norm, especially when the total number of sales is
small. Location, condition, amenities, parking, views, lot size & outdoor
space all affect $/sqft home values. Typically, the highest dollar per square
foot figures in San Francisco are achieved by penthouse condos with utterly
spectacular views in prestige buildings.
Median and average statistics are generalities subject to
fluctuation due to a variety of reasons (besides changes in value): how they
apply to any specific property is unknown. Averages may be distorted by sales
substantially higher or lower than the norm, especially when sample size is
small. The only way to value a particular property is by performing a specific
comparative market analysis based on its location, quality and amenities.Sales
not reported to MLS – such as many new-development condo sales — are not
included in this analysis (except in the specific chart on the SF
new-development condo market). All figures should be considered approximate and
are derived from sources deemed reliable, but may contain errors and omissions,
and are subject to revision. (c) Paragon Real Estate Group, February 2013
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