Condo Prices are Increasing in Major West Coast Cities. Here’s Why.
- Mar 16, 2015
San Francisco—The value of new construction condominiums is up in downtown Los Angeles, San Francisco and downtown Seattle, according to The Mark Company Trend Sheets.
The Mark Company reported the value of new construction condominiums in downtown Los Angeles inched up 1 percent in February, and was 26 percent higher than a year earlier. In San Francisco, the value of newly built condos rose 4 percent over the previous month, and climbed 19 percent vis-à-vis February 2014. And in downtown Seattle, the value of new construction condos was up 6 percent over the previous month and was 13 percent higher year over year.
“Low inventory levels continue to play a major role in San Francisco, Downtown Los Angeles and Downtown Seattle, pushing prices upward as we move into the traditionally busy spring months,” The Mark Company president and founding partner Alan P. Mark told MHN.
In San Francisco, despite the influx of more than 1,600 units in 2014, there remain only 708 units available in the currently selling inventory for new construction condominiums.
In Downtown Seattle, only 118 new condominiums remain for sale, with 105 of them available at Insignia. In Downtown Los Angeles, just 311 new condominiums remain, with 310 of them also within one project that is already called 90 percent reserved.
“For the new product coming to market this year, absorption rates have also increased,” Mark said. “This low inventory is paired with high demand from eager and often cash-ready buyers, driving offers well above the asking price. Other factors, such as the average interest rate hovering below four percent and extremely competitive rental markets, continue to drive condo prices higher in the West Coast markets.”
The spring season historically sees the largest increase in month-over-month comparisons in The Mark Company’s Condominium Pricing Index, he added. In addition, for the first time, the average price per square foot of a new condominium in San Francisco was in excess of $1,200 per square foot.
That number is far higher than that of the last housing boom in 2006-2007.
The vast majority of West Coast condo buyers are employed in the tech, biotech, healthcare and finance industries, Mark noted.
“These high-growth and lucrative industries bring a great deal of capable and opportunistic buyers to the market,” he said. “This strong job market, combined with historically low interest rates, has primed the housing market for continued growth. As the technology industry continues to gain momentum in markets such as San Francisco, an increasingly young demographic is buying in the city, no longer priced out by older generations. In addition, we see an increasingly high percentage of international buyers vying for a piece of the market and pumping capital into all areas of new real estate developments.”