San Francisco’s Upcoming Condo/Apartment Buildings and Constructions— 2019 and Beyond
US/China relations have put a strain on the economy at large.
S&P500 has lost all of its gains over the last 2 years.
San Francisco’s real estate prices, after 6 years, finally have “flattened”.
Is a future recession coming?
What does this all mean for real estate?
While we cannot predict what will happen from a macroeconomic perspective, data can inform what to expect in San Francisco and help us answer questions like:
- Has residential real estate supply in SF finally caught up with the demand?
- Is this a good time to buy or sell?
- Is it better a better long-term bet to buy a condo or a single family home?
San Francisco Has a Lot of New Construction
We gathered every new residential construction project in San Francisco that is planned or under construction. Please see the list below, visualized with photos and construction status on the Google Map below:
In the map above, each color icon means the following:
- Green icons: Under construction
- Blue icons: Permit Approved
- Yellow icons: Planned (Permit Submitted)
The number of units somewhere along the line in the SF Planning Department new housing pipeline hit almost 70,000 in Q2 2018. The chart below demonstrates the total number of units which are under construction, permitted, approved or under review.
Observations
1. New developments are very location constrained: SOMA, Van Ness Corridor, South Beach and Dogpatch/Potrero
The main areas for residential construction — of both condos and apartments — are the greater South Beach-SoMa-Potrero Hill district, and the Market Street and Van Ness Avenue corridors. These are the areas where large, previously commercial-use lots can be used for building large projects, and where zoning often allows for much taller buildings.
Given stagnating housing prices, an oversupply in these neighborhoods could hurt condo prices in the city.
2. There is almost ZERO development in traditionally residential neighborhoods: Noe Valley, Presidio Heights, Pacific Heights, Cow Hollow, Russian Hill and North Beach
It is much harder to develop from a permit perspective in traditionally residential neighborhoods. Preserving the neighborhood’s height limits, community standards and permit requirements has made it difficult for developers to build. Also, it is not possible to build large condo buildings in these neighborhoods, which large developers prefer.
Because of these reasons, we see almost no supply change in any of the desirable residential areas in San Francisco.
3. Luxury condo market is being flooded
Most of the new housing inventory added to the city will be luxury condos. Why is this a problem? If demand wanes a little bit, prices can plummet for luxury condos.
Conclusions
1. Traditionally residential and desirable neighborhoods will weather a recession better than SOMA, South Beach, Van Ness and Market St Corridors
We observe a continuing challenge of substantial shortage of supply in the most desirable neighborhoods in San Francisco. San Francisco’s most desirable residential districts: District 2, which consists of Presidio Heights, Marina, Cow Hollow, Pacific Heights and Russian Hill, and District 8, which includes neighborhoods like Mission Dolores, Noe Valley, Corona Heights and Castro, both have little to no residential development.
Most families want to live in these neighborhoods for their residential feel. If a recession hits, we would expect these neighborhoods to weather a recession a lot better than the likes of SOMA and South Beach, because of the lack of supply.
2. Condos in SOMA, Van Ness and Dogpatch might suffer during a recession
Almost all of the added housing supply consists of condos and luxury condos in very specific neighborhoods. Oversupply in a specific asset class at the beginning of a recession always translates to a larger drop in prices during a recession.
3. The price gap between single family residences and condos will increase
The map above shows us that condo supply will significantly increase but single family inventory will stay the same. Because most families in San Francisco prefer a single family home to raise their kids, we should expect to see a bigger price gap between the two types of housing going forward. This price gap should increase even more during a recession, as it did in 2008.
Authors
Deniz Kahramaner is a Luxury Property Specialist at Compass. He formerly led data efforts and was an Advisor at Accompany Inc, which was acquired by Cisco for 270 Million Dollars in May 2018. He holds a BS in Electrical Engineering and an MS in Computer Science from Stanford University. (DRE# 02052865)
Email: deniz@deniz.io
Phone: 650–770–3100
Jeremie Young is a Real Estate Marketing Professional at Pacific Union. He is a marketer by day and a big data analyst who seeks to uncover useful insights in real estate by night. He previously held positions at Redfin and ZeroCater.
