You may or may not have seen the recent flurry of articles addressing whether there is or is not a “burst” in the San Francisco condo market (particularly Downtown).
These articles were inspired by a newsletter that another real estate brokerage published last week, albeit a pretty inflammatory interpretation of it. Stories like these always spark a flurry of interest and engagement, but they often lack balance. They’re created to make waves, but not always provide insight.
When I saw the original news article my thought was that it was missing a part to the equation – the “demand” side. I don’t think it’s fair to attempt to consider the economics of Bay Area condos without including both supply and demand in the analysis.
Yes, the supply of condominium units and developments have dramatically increased, but the demand for them appears to be meeting the supply with additional room to spare. It may well be that the high-end of new condo development will reach a saturation at some point because so much focus is being given to this segment of the market by developers. That being said, Leslie Appleton-Young, Chief Economist for the California Association of Realtors, has indicated that the Bay Area is set to take on a significantly greater work force over the next 10 years. So many, in fact, that there is no way for our development efforts to keep up (especially given the recent political obstacles that have been used to delay or reject new condo construction permits here in the City).
San Francisco will continue to host one of the most significant housing crises in history and the market is nowhere near “bust”. It makes for enticing news, but it’s no where near the reality of the situation.
I expect the conflicting news will continue. For as long as I’ve been in the real estate business there have been doom sayers itching for an opportunity to declare that the sky is falling.
I’ve looked up and the sky seems to be exactly where it’s supposed to be.