The State of San Francisco’s Condo Market
As the pandemic continues and more people evacuate the city, the condominium market finds itself in a very unfamiliar place. The term buyers market isn’t even appropriate, as there is so much supply of available properties for sale that sellers are now competing with each other to sell their homes to the metaphorical handful of buyers in the market.
As of today, District 9 (downtown and surrounding neighborhoods like Mission Bay, Potrero Hill, SOMA, etc,) has 528 condominiums or TIC’s up for sale, a number that in all my years studying this market I have never seen. Since my previous article about The Next 3 Sales in any given building, pushing for listing agents to fight to retain value for the remaining homeowners within buildings/neighborhoods, the trend of sell-at-any-cost has matured.
A conversation I continually find myself having with clients is this: ‘Some sellers are more willing to let go of their property to extract their capital from the asset and re-purpose elsewhere (outside of the city) rather than hold firm and fight to get the best possible price.’ After all, what’s the difference of $100,000 (a relative number for the SF housing market) if you find yourself trying to sell a property for 6-12 months, living on top of other people in the city when you could be living in the East or North Bay with some acreage, a backyard, and space to work from home in comfort.
We are now experiencing an established Buyers Market.
Traditionally, a 4 months supply of inventory (monthly supply is a metric used to measure how long it takes to sell off all inventory at the current pace of sales) is when it starts to tip from a seller’s market to a buyers market. Some districts in SF are seeing upwards of a 12-month supply, most notably the East Cut & Yerba Buena. The luxury condominium market has been hit the hardest. The expectation of continual and aggressive appreciation for turn-key luxury highrises is facing the bleakest summer in history, with significantly fewer buyers in the market than condos available for sale. Of those buyers in the market, they’re savvy enough to understand the ball is in their court and are aggressively targeting sellers in need of offloading their asset, rather than fighting for pre-established sales value.
San Francisco has notoriously been a competitive seller’s market with owners (and agents) so accustomed to putting their property on the MLS, taking a few nice photos and writing a nice description, then sitting back and watching the hordes of buyers flood open houses, taking offers and putting them into a pile to see who wins. Those days are gone. More importantly, agents still using this strategy to sell homes have been rudely awakened to the stagnancy of the market.
The level of creativity required in marketing assets has been elevated. Listings require something special to make them pop in this market, such as a beautifully crafted storyline to make potential buyers fall in love with the idea of the home and see themselves in it throughout the pandemic and beyond. The lifestyle and neighborhood component of marketing is where the magic is today. Adding models into property marketing videos and painting the picture of the exact lifestyle new owners can come to expect when they live in a home is a good start in that creative process, but offering a truly turn-key lifestyle by updating and optimizing space is the ultimate drawing factor.
How To Capitalize:
For buyers in this market, now is the time to be aggressive in your offers. The number #1 thing your agent should be doing for you now is identifying sellers with a need to sell. A little background research on a seller before touring can provide invaluable insight into their need of selling a property. Families looking to escape the city by selling their primary residence are the highest likelihood for people looking to make a deal happen, closely followed by owners needing to off-load a rental asset to increase liquid capital.
The least likely parties to negotiate are developers, for obvious reasons. However, in some cases, it’s more valuable for developers to keep their money moving than it is to seek top dollar for the property.
It’s not all doom and gloom for owner’s trying to sell, as the most desirable properties at all price points are still flying off the shelves. Owners that spend the time and put in the work required to bring their property up to the typical SF buyers palette are still seeing less than 7 days on market and multiple offers.
The most desirable homes in the current market all include outdoor space, particularly patio’s and backyards. After all, everyone is craving any feeling of being outside their home, and layering in a degree of privacy and the ability to not have to wear a mask while being outdoors is a huge bonus, especially for mental health. The preparation and staging of outdoor spaces has never been as important as is it today. Creating an experience for buyers and agents alike when they enter a home is what will drive continuing interest, separate your home from the next, and capture the imagination of buyers looking for a lifestyle change.
The best outdoor spaces I’ve seen touring the city these past few months are catering less for outdoor entertaining (big dining tables) and more for multiple areas to relax in and work from home. Outdoor beanbags and oversized cushions, fire pits, zen gardens, and as much foliage as possible (even fake) can make an outdoor space feel like an extension of the home we are becoming accustomed to being confined to.
The upgrades and presentation required to get attention, traffic, and ultimately sell a home at the top of the current market almost always requires an investment upfront. Many homeowners are shying away from making the necessary upgrades to make a buyer fall in love with their property during this depreciated market, and rightfully so given the economic climate. With all the uncertainty, it’s ironically more imperative for owners to invest upfront to create more definitive Yes in a buyer’s mind and nudge them to conclude that this is the right home for them.
Our concierge program helps to off-set those fears by providing interest-free loans to invest in property upgrades upfront, at no cost to homeowners. See a property we recently renovated that lead to 4x more traffic (2 showings per day since listed) than other listings in the market.
*Numbers taken from a 1-week comparison between 3 similar listings
