West Coast Urban and Suburban Condo Markets Are on Different Planets

SAN FRANCISCO—Polaris Pacific recently introduced a weekly real-time market trend dashboard that measures changes to the condominium sector of eight core West Coast markets and provides data to navigate the complexities created by COVID-19 on these markets. Updated every Tuesday, the COVID-19 Dashboard provides real-time statistics and insights that reveal a vantage point on the ongoing effects of the pandemic.

“Polaris Pacific’s goal was to develop a tool that provides real-time data on the condominium segment of the markets in which we operate in order to help our clients and the public at large make informed and educated decisions during this unprecedented time,” said Garrett Frakes, managing partner of Polaris Pacific. “Our experience with COVID-19 indicates that the various segments of the housing market are acting in radically different manners. Broad-measure tools like Case Schiller have worked in the past to assess the total housing market, but are not working effectively in the current situation. The weekly data that we are providing highlights how various markets operate independently of one another and how local pandemic conditions affect sales.”

The core cities monitored in the dashboard include San Francisco, Los Angeles, San Diego, Silicon Valley, Oakland/Emeryville, Phoenix, Seattle and Denver.

“COVID-19 has upended the typical methods of evaluating sales data and trends in urban areas,” Frakes tells GlobeSt.com. “Urban West Coast markets are not correlating to low-density suburban markets in any significant manner. The purpose of the COVID-19 Dashboard is to shed light on condominium housing specifically. There has been and will continue to be significant investment into this category. The Polaris Pacific team and our clients need current data to make decisions on the direction of the assets with which we are involved.”

Since shelter-in-place ordinances began in February 2020, most markets have suffered a decline in transaction volume. While median sales prices in many markets have remained close to the pre-COVID levels, the reductions in sales volumes are a leading indicator of potential price declines. This summer, most West Coast markets experienced a sales volume rebound, however volumes remain volatile as cities battle varying coronavirus caseloads.

“The biggest surprise that we have seen is the resilience of certain markets relative to others,” said Paul Zeger, partner of Polaris Pacific. “Phoenix is a prime example. Arizona experienced a serious COVID-19 caseload spike in June and July, yet the condominium market conditions there remained healthy. Silicon Valley also fared well during this crisis, which is a testament to the need for housing in that region. The other welcome surprise is the relative optimism that most have relative to 2021 and beyond. This is reflective in the number of closings at various new communities. Very few buyers are reconsidering purchase decisions currently.”

Following a dramatic dip from the end of March through June, sales volumes in San Francisco seem to have stabilized at a volume level below 2019. During May, June and July 2019, San Francisco condos were going for 7.5 to 8% above list price on average.

For these same months in 2020, homes sold for just 0.6 to 1.4% above list price. Reduced demand was the driving force behind this as fewer buyers in the market led to fewer opportunities for bidding wars.

San Francisco transactions in the $800,000 to $1.4 million range had the most activity in the down months of the pandemic, while the $2 million and higher range is still struggling to get back to par, says the COVID-19 Dashboard.