Thanks to high-income tech jobs, limited housing inventory, and a determination to live in the hottest housing markets in the country, buyers in the Bay Area of California and other similarly hot metro markets are driving up condo prices and driving down the multifamily inventory in that sector. According to Paul Zeger, founder of real estate marketing firm Polaris Pacific, “a modern condominium in a good school district” is replacing the “once-held family dream of a four-bedroom two-bath house.”  Zeger believes that buyers are beginning to realize they must be “realistic” about their options in a market with few opportunities to buy and even fewer affordable options.

The result of this shift in mindset is that the condo market in areas like Silicon Valley has spiraled through the roof in recent months. In April, median sales price for a condo unit in Santa Clara and San Mateo counties was $810,000. This is 20 percent higher than April 2017. In San Francisco, median condo prices hit $1.17 million. At the same time, condo inventory is falling. In San Mateo and Santa Clara, inventory fell 40 percent year-over-year.

Although California is notorious for its expensive and rigorous building-permit process that has lead to something of a stranglehold on new construction, developers are finding that building new condos offers far better returns than single-family developments. At present, San Francisco has 1,760 condo units under construction and another 7,400 approved. By comparison, in 2017, one of the city’s most productive years for new single-family construction ever, there were just over 1,400 new single-family homes added to the city’s inventory.

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  • Carole VanSickle Ellis

    Carole VanSickle Ellis serves as the news editor and COO of Self-Directed Investor (SDI) Society, a membership organization dedicated to the needs of self-directed investors interested in alternative investment vehicles, including real estate. Learn more at SelfDirected.org or reach Carole directly by emailing Carole@selfdirected.org.

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