San Francisco’s luxury residential market continues to soften as inventory hit new highs and sales plateaued or declined in April, a new report shows.
The number of homes listed at $2.5 million and more rose 42% to 95 units in April when compared with the same month in 2015, while condos priced $2 million and over rose 44% to 75 during the same period, reported Paragon Real Estate Group. The figures represent MLS listings only and exclude most new projects.
Meanwhile, sales of luxury homes declined 3% to 116 in the first five months of 2016. Most notably, sales of high-end condos declined 25% between January and May.
The more dramatic difference in the condo market, according to Paragon, is attributed to an increased supply—and competition—from new developments and the fact that luxury residences are generally bought as second or third homes, purchases that are often affected by economic uncertainty.
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Despite mounting fears about the global economy since mid-2015 and drier IPO activity in the Bay Area, according to the report, “a staggering amount of wealth yet remains […] and economic optimism can shift quickly.”
“Compared to almost any other in the country, our real estate market remains quite strong as measured by a wide variety of standard and demand statistics, and a substantial percentage of San Francisco homes listings still sells quickly for well over asking prices,” said Patrick Carlisle, Paragon’s chief market analyst and author of the report.
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In the coming months, buyers should not be afraid to make offers below asking price and to attempt negotiations, especially as the competition for listings tends to decline during the summer through mid-winter,according to the company. For sellers, the firm’s advice is to price properties correctly from the get-go and keep track of comparable listings and sales to get to that price.
“If you receive an unacceptable offer, do not be insulted; it almost always makes more sense to issue a counter offer instead of outright rejection,” Carlisle said.