Bigger, Greener Homes Enter San Francisco Housing Market as New Builds Become Harder to Find
San Francisco’s housing market is one of the most atypical in the country – expensive and very low-volume when it comes to new-built single family homes. The median value of an owner-occupied San Francisco housing unit is slightly over $1 million, while the median monthly mortgage is almost $3,500, according to the latest available data from the US Census Bureau.
2019 saw a major increase in new builds in San Francisco, but few were single family homes
Last year was very productive in San Francisco, in terms of construction of new homes. About 4,700 new units were added to the housing stock, 82% more than in 2018, according to San Francisco’s Planning Department data. Almost 1,500 of them were affordable housing units, a 126% increase compared to 2018 and a sign that local initiatives and programs meant to improve affordability are finally starting to pay off.
Only 1.6% of San Francisco’s housing units built in 2019 were single family homes
Out of those 4,700 new homes, 92% were in 20+ unit buildings while only 1.6% were single family homes. Translated into hard numbers, this percentage means that, last year, only about 75 single family homes were built in San Francisco.
Not surprisingly, one of the main reasons behind the low volume of new single-family home construction is the lack of available land. The number of plots for sale in the city at any given moment could be literally counted on your fingers. The scarcity and high cost of land rather justify development of multifamily projects as both employment and demand for housing are on the rise. Under these circumstances, it’s only natural that new-build single-family homes in San Francisco qualify as luxury products.
2020 will likely see a decline in new housing projects
There are clear signs that San Francisco’s homebuilding industry will be significantly less active in 2020 – and the coronavirus only adds to that trend. According to data from San Francisco’s Planning Department, only about 2,900 units were authorized for construction in 2019, down 52% from 2018. Seeing as the entire process, from authorizing to actually building housing units, usually takes longer than 12 months, it’s safe to assume that the city’s housing construction activity will register a notable slowing down in 2020.
These numbers precede the current COVID-19 crisis, which will obviously have its own effects on the homebuilding front. The full impact is still hard to estimate, but the drop in transactions on the real estate market, determined by the lockdown and people’s uncertainties about the economy, could dampen new construction even further.
Emphasis on size, smart tech and green features in San Francisco homebuilding
Developers that are still building single family homes in San Francisco had to realign expectations and adjust operations to comply with this new reality. Homebuying in SF requires a certain degree of affluence and these particular buyers manifest a new set of wishes: they seek smarter and better-designed homes with clean lines and open spaces, plus eco-friendly amenities that can help increase residents’ quality of life.
In response to these demands, developers have started building bigger in SF. The average home size is currently about 3,470 square feet, according to our research of PropertyShark data.
There’s also an increase in interest for green features, and developers are delivering. Gaia Homes, a homebuilding company active in San Francisco, decided to readjust their business in order to cater to this new market that’s highly educated and highly revolutionary. “Our founders previously built traditional stick-built homes before deciding that the housing market needs a more sustainable and efficient design and construction approach,” said Vanessa Liu, director of design at Gaia Homes. “Our homes are net-zero and net-positive energy homes equipped with solar panels and smart home automation features.”
Some of the hottest features required by today’s buyers are those that reduce the environmental impact of the building, as well as smart home technologies. “Today’s buyers are savvier than before. They are aware of the environmental impacts of home construction. They are interested in powering their homes using renewable energy sources such as solar energy. Solar panels and solar batteries are in high demand. Smart home automation is also a sought-after amenity. Home automation features of a smart home may include smart thermostat, energy and water usage dashboard, automatic lighting, smart door lock and security system, and smart home devices,” added Vanessa Liu.
In terms of spatial needs, today’s buyers seek a more contemporary design with open floor plans, larger door and window openings, and plenty of access to the outdoors. Storage space is another factor taken into account by buyers on the market for a new home.
“In metropolitan areas, most homes provide adequate storage options,” Liu explained. “However, it’s not uncommon to see buyers rent a separate storage unit for their surplus or seasonal equipment, such as ski equipment, gardening tools or camping gear.”
As the new trend in interior design is to have airy homes, uncluttered by bulky pieces of furniture, a need arises for storage away from home. This trend, combined with an increase in spending power, has generated substantial demand for self storage in San Francisco. The local self storage market has the priciest storage options in the country, with street rates averaging $194 per month, according to Yardi Matrix data.
COVID-19 crisis brings more attention to designated office spaces at home
As with most other industries, real estate is already experiencing changes due to the COVID-19 outbreak. The pandemic has forced millions of Americans to work from home either temporarily or permanently. School shutdowns also mean that our younger population is spending more time at home than before. These lifestyle changes have created a shift in how people use their physical spaces and how they decide which home to buy.
“We speculate that many buyers are eyeing a dedicated office area for the post-COVID-19 world which could still involve a significant amount of work from home and video conference calls. Also, homebuying has always been an emotional and big-ticket game. It is linked to macro-level pressures on employment, wages, job mobility, the stock market, and consumer confidence. All these factors are uncertain during the COVID-19 fears,” concluded Vanessa Liu of Gaia Homes.
Real estate in San Francisco is, however, expected to fare better than other sectors, particularly because the industry is prepared to take most of its operations online. Many developers and property managers are already offering virtual and self-guided tours, and most consulting meetings, negotiations and transactions can be done online. The overall impact of the pandemic is obviously yet to be seen.
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