The number of purchase contracts signed for new construction condos in San Francisco dropped 59 percent from August (96) to September (39) but were still 44 percent higher versus the 27 signed in September 2016, according to sales data from The Mark Company.

And with an average of 23 percent more inventory from which to choose over the past year, the total volume of new contract signings over the past twelve months is now running 16 percent higher versus the twelve months before.

At the same time, the Mark Company’s pricing index for new construction condos in San Francisco slipped another half a percent in September and is now running 6.0 percent lower on a year-over-year basis and 16.3 percent below its August 2015 peak, with a current inventory of around 760 new construction condos available to purchase which is 37 percent lower versus the same time last year but still 16 percent higher versus September 2015.

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Comments from “Plugged-In” Readers

  1. Posted by elmerJFuddMillionaire

    16.3 percent on a million dollar condo purchased in 2015. That would equate to a $163,000 dollar loss or ~13,500 a month over a two year time frame. Wonder how many of these were all cash purchased.

    • Posted by Dave

      Not sure I accept the Mark numbers in totality. What is their methodology and mix? Is it adjusted – perhaps in 2015 at the peak month more higher priced units were purchased, as a segment of the month’s pool, than is subsequent months?

      New condo prices are down, but I’d pin the number at 5/6/7% plus from the peak. Of course overall condo prices have hit new highs recently. Creeping up. But that number is the whole universe of condos and not just new condos. Existing condos are faring better and they make up most of the sales which is why condo prices per CS continue to rise while Mark has them off from their peaks.

      The stalling out of new condo prices and backing off a bit is due to many factors. High HOA fees on new buildings, generally smallish units – one does not get much for their money. The KOIN units, physically, are head and shoulders above anything in Lumina or the Rincon Hill towers and on and on. There are not that many truly luxury condo buildings in SF. 181 Fremont is an exception but it’s units start at close to 4 million and go to 42 million for the penthouse. Lumina, One Rincon Hill and others cater to a different market than does 181 Fremont.

      Beyond that, overall appreciation is tracking national numbers and buyers who intend to occupy their units are being much more cautious about plunking down outrageous amounts for the new units. Investors are fleeing – they don’t want to be the last greatest fool.

      BTW, China has restricted by about 85% money from that country that can be invested in RE in the US and other countries. That is a factor too.

      The Lumina is a special case and the big drops there are somewhat of an outlier. There is still an inventory of brand new unsold units at Lumina which is depressing resale’s. The area around Lumina is devoid mostly of life on weekends. It is not a neighborhood and that is hurting it too.

      No crash, no down 16% since late summer 2015 – just a slow decline/extended plateauing.

      • Posted by elmerJFuddMillionaire

        “No crash, no down 16% since late summer 2015 – just a slow decline/extended plateauing.”

        Sounds like a Realtor quote rationalizing a market top. No more 888 billboards as well and not to mention the “empty unit tax” question targeting foreign speculators of which they all know about by now.

        • Posted by Dave

          Actually, I’m a small scale RE investor who exchanged out of SF/Bay Area real estate in 2014 for Northwest SFHs and some properties in Ohio. The market is indeed at a top here IMO and will be outperformed in terms of appreciation by markets such as Seattle, Portland, Atlanta and Reno.

          Buying in SF makes sense only if it is for a personal residence, one plans on being here for 6 plus years and one does not max out payments vis a vis one’s income.

          • Posted by SFCitizen

            Do you carry earthquake insurance on your properties in Washington and Oregon? If so, how do the rates compare to California?

          • Posted by Dave

            Yes, I have earthquake coverage. it is very expensive in Oregon and especially Washington just as in California. Seattle area had a 6.7 quake in 2001 so it’s a real issue. I have a large deductible and can deduct the premium as a business expense. Many folks up there as well as in California don’t carry earthquake as it’s so pricey. Assuming if a massive quake hits with billions in damage the government will provide financial resources to rebuild. About 20% of homeowners carry earthquake policies in Washington while the number is around 12% in California. .

          • Posted by Dave

            BTW, I am going to drop the insurance on my Vancouver and Washougal homes. Playing the odds. Though Helens is not too far away, there were no major seismic events in Portland or Vancouver when it blew. Mostly swarms of tremors right in the area of the mountain.can be seen from both homes

  2. Posted by unlivable city

    Sample size, anyone? Google this: basic requirements for getting meaningful result of the measures

  3. Posted by anon

    3032 Clement St #201 (3/2) sold new at $1,375,000 in July 2016 and just sold again for $1,545,000 (+12.4%).

    So the obvious trade is buy a new place at a discount of 6% from 2016, then immediately turn around and sell it as “not new” at a 12% gain from 2016, and presto, an instant 18% return! Or, perhaps, these Mark Co. numbers are a silly joke. Down 16.3% from August 2015? Only on zerohedge.

  4. Posted by SFMichael

    The headline here seems misleading. Although it is technically true that sales are down from August to September, this is a normal seasonal change. The increased from September 2016 is much more meaningful.

    A better headline based on the contents of this article would have been ‘New Condo Construction and Pricing Slip in San Francisco’.

  5. Posted by Martin

    One should also point out that the cheapest units in Lumina would get sold first since buyers know these have the greatest chance of appreciation. What’s left is the units in the middle which are neither bargains nor penthouses. A $2.5 million Lumina unit on 20th floor has value only in the eye of beholder vs same sq-ft & floorplan on 5th floor bought 2 years ago for $1.5.

    That got me thinking that it would be interesting the to plot the floor, price per sq-foot and for units in the same building across time. My theory is that both floor and price per square foot increase quickly, but price per sq foot plateaus while floor slowly goes up as developer cuts prices on higher floor remaining units.

  6. Posted by condoshopper

    what other new condos are out there beside “Lumina”? i don’t see any other shiney towers out there that are in the selling phase.

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