Author: Brian K. Miller
SAN FRANCISCO – Increased demand and limited supply will trigger price movement in new Bay Area condominiums priced under $729,000, according to a new report by Pacific Marketing Associates, a provider of sales and marketing services for urban residential real estate developers in the Bay Area. PMA founder Paul Zeger says several factors are pushing average sales prices up in that mid-range market.
“If you want new construction, demand will soon outstrip supply, but other factors such as interest rates and availability of home loans will also have an effect,” Zeger said. “Year-over-year sales are up for the second straight month in many markets, such as Contra Costa County and specifically, Walnut Creek, along with price increases from Oct. 2009 to Nov. 2009 of 8.5 percent.”
Inventory of new condos priced less than $729,000 is not being refilled, he says, so current sales are depleting inventory rapidly, and are likely to raise prices for remaining product. To back up his thesis, Zeger points to three projects in the East Bay, all of which it represents.
One such property is 555YVR, an 87-unit boutique condominium development next to downtown Walnut Creek and the BART station. One-third of the units were under contract when closings began there in October and sales are expected to accelerate in January when the property will be able to offer FHA loans. The average price-per-square-foot is $467 at 555YVR versus $310 on average for all condos in Walnut Creek.
In Oakland, The Ellington, a 146-unit, 14-story condominium in Jack London Square, is more than 30% sold or in contract and Vue46 in Emeryville reports 8-10 deals a month and seeing completion for some homes for the first time in more than 18-months.
In addition to those three properties, PMA’s current Bay Area assignments include One Rincon Hill, Soma Grand, 555 Bartlett and Union in San Francisco; Axis, City Heights and the 88 in San Jose; and Altaire in Palo Alto.
The latest quarterly report on the market by Polaris Group suggests the East Bay residential markets have stabilized after experiencing some of the steepest price declines and highest foreclosure rates in the region. Condominium resale transactions jumped by 40.7 percent during the August-to-October 2009 time period versus the same three months in 2008, according to the report. The median resale price over the past three months was $285,000, which is 12% ($37,500) lower than the same period one year earlier.
“The surge in pending resales should convert to closed transactions, further reducing inventory levels and stabilizing prices,” states the report.
As of the start of November, 12 communities containing 1,669 units were offering homes for sale. Approximately 66% of the units have been sold or are under contract to be sold, leaving a standing inventory of 571 units. The average number of days a home remains on the market remains elevated at 57 days year-to-date. Octobers’ reading of 37 days was the lowest reading since September 2007.
“For new condominium sales, recent inventory reductions, substantial price cuts and low interest rates have combined to create an environment where buyers are once again willing to make purchase commitments,” states the report. “Nevertheless, conditions are far from favorable for new home developers, as homebuyers remain opportunistic and price sensitive.”