San Francisco Multi-Unit Market Update | Q4 2021

During the third quarter, the median sales price for two-to-four unit buildings saw a notable reduction of 13.1 percent, while five-plus unit buildings experienced a 23.8 percent decrease when compared to the same period last year. Despite these statistics, the prevailing sentiment in the market is one of enthusiasm. Many prospective buyers are capitalizing on the present landscape and securing deals that haven’t been available for years.

Similar to the residential market, it’s evident that the multifamily market has seen a significant decline in most key metrics compared to the unprecedented demand spike that was experienced in late 2020 and early 2021. The first quarter recorded a 16.5 percent reduced median sales price for two-to-four unit buildings and a 12.1 percent reduction for five-plus unit buildings compared to the same time last year. 

Similar to the residential market, it’s evident that the multifamily market has seen a significant decline in most key metrics compared to the unprecedented demand spike that was experienced in late 2020 and early 2021. The first quarter recorded a 16.5 percent reduced median sales price for two-to-four unit buildings and a 12.1 percent reduction for five-plus unit buildings compared to the same time last year.

Similar to the residential market, the overall trend for multifamily buildings in San Francisco was one of less competition and declining sales in 2022. The economic headwinds that arose and strengthened throughout the year had significant impacts on supply and demand.

Similar to the overall residential market in San Francisco, the apartment building market recorded significant downtrends due to financial market uncertainty and volatility. On the brighter side, rental rates in San Francisco have continued to moderately improve. Rent. com reported that ‘For a studio apartment in San Francisco, CA, the average rent is $3,002. When it comes to 1-bedroom apartments, the average rent in San Francisco, CA, is $3,571. For a 2-bedroom apartment, the average rent is $4,720. The average rent for a 3-bedroom apartment in San Francisco, CA, is $5,862.’

With half of the year now behind us and another quarter of 2022 data available, we can see the multifamily market showings signs of increased demand leading to growth in the sector. It is important to keep in mind that this report uses data from closed sales which are lagging indicators of what occurred in the market weeks and months earlier.

With Q1 now behind us and three months of activity recorded, steady growth in key metrics are emerging for the multi-family segment. Sales numbers of 2-4 unit apartment buildings are up 13.4 percent compared to Q1 of last year.

The multifamily segment of the market rebounded in 2021. Sales numbers of 2-4 unit apartment buildings are comparable to the height of the 2014 peak.

There was substantial growth among key metrics for the multi-unit segment of the market last quarter. Both 2-4 unit and 5+ unit buildings recorded higher numbers than last year for median sale price, price per square foot, and price per unit.

The multi-family segment of the market continued to rebound during the second quarter with the waning of the pandemic. Sales numbers are up considerably across both 2-4 unit buildings and 5+.

One year after the pandemic brought the market to a crawl, lowered median sale prices, and significantly reduced rents, sales numbers in the multi-unit market have rebounded in Q1 and rents appear to be on their way back up as well.

The pandemic, shelter in place, working from home, soaring unemployment, migrations, rent plunges, increased restrictions on evictions, record-low mortgage rates seemingly every week, and a multitude of other factors made for an exceptionally tumultuous year for the multifamily market. Though activity did pick up in Q4.

The multifamily market has been a mixed bag since the start of the pandemic. With working remotely now the new normal, vacancy rates have surged, and rents re-main greatly diminished. Building inventory is up while sales numbers are down. In the 2-4 unit market, the median sale price, price per square foot, and price per unit all remain relatively comparable to last year. In the 5+ unit sector, there were only 20 sales last quarter.

With the effects of the global COVID-19 pandemic putting a strain on our daily lives, economy, and policies, multi-unit buildings, and San Francisco rents, in general, were hit exceptionally hard. Sales dropped significantly following the March shelter-in-place order and ensuing mass unemployment. Despite this, June did see an increase in inventory, sales, and median sale price.

The San Francisco multi-unit real estate market had a strong Q1 in 2020, with both transaction volumes and property values up.

Accurately priced properties are currently selling quickly. Roughly 55% of listings are being sold within the first 60 days of being on the market, with an approximate sale-to-list ratio of 100%.

Accurately priced properties are currently selling quickly, with more than 50% of listings being sold within the first 30 days of being on the market. Over half of buildings listed sold over asking with purchasers paying a combined average of 4.3% over list price.

Accurately priced properties are selling quickly, with more than 50% of listings being sold within the first 30 days of being on the market.

The San Francisco 5+ multi-unit market had a strong finish to the first half of 2019. The median sale price for 5+ Unit buildings came in at just under $3.6 million in Q2, representing a 3.6% increase from Q2 2018.

Economic, political and even environmental volatility were powerful factors in 2018, and promise to continue in 2019

Looking Back on 2018: Generally speaking, last year was a strong one in Bay Area real estate, but varied between a hotter first half and a somewhat cooler second.

Looking Back on 2018: Come summer/early autumn, real estate and financial markets began to shift distinctly cooler.

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