Inside San Francisco Real Estate

A fairly common question we come across in everyday business is “How do 1-bedroom condos perform when compared to 2-bedroom condos?“

It’s an interesting question, and we set out to identify some trends.  We looked at all condo sales in San Francisco dating back to 1995, and separated them out by number of bedrooms into four groups:  Studios, 1-bedroom, 2-bedrooms, and 3-bedrooms.  What we found was somewhat revealing about the condo market in general.  *Please keep in mind, we have adjusted the median values for inflation to get a more accurate view of the market.

Can the number of bedrooms keep your property value afloat?

• Studio medians peaked in 2005 and are down 12.84% since.
• 1-bedroom medians peaked in 2005 and are down 9.04% since.
• 2-bedroom medians peaked in 2005 and are down 6.16% since.
• 3-bedroom medians were a bit slower to react, peaking in 2007.  However, the speed at which they are now declining is making up for lost time and they are down 7.35% since 2007.
• Based on the data, 2-bedroom units are holding up the best so far.

The chart below may seem lackluster, but we may have uncovered something.  You’ll notice in both drops (2001-2003 and present) that 3-bedroom units have lagged the rest of the condo market by about a year.  Could it be that people owning 3-bedroom units can see their fate by closely following other types of condos?  We wouldn’t dismiss the possibility now that we’ve seen it happen twice.

Condo medians by # of bedrooms (click to enlarge)

From this chart, we are able to derive another interesting metric.  The peak before the one in 2005 occurred in 2000.  How have the four condo segments appreciated since then?

• Interestingly, studio condos have appreciated the most, at 27.79% since the 2000 peak.
• 3-bedroom units come in second place, appreciating 18.86%.
• 2-bedroom units have appreciated 14.40% since 2000.
• And in last place, 1-bedroom units have appreciated 10.95%.

Just for fun, we mapped out the marketing times for the four condo segments to see what group tends to sell the fastest and which the slowest.  Here’s that chart:

Condo marketing times by # of bedrooms (click to enlarge)

• It appears that studios have become a tougher sell in this slow market.
• Surprisingly, 3-bedroom units have been the quick-sellers during the past few years.
• 1 and 2-bedroom units mirror each other very closely over the entire 14 year history.

*Numbers do not include sales at brand new condominium projects, as developers keep those figures a secret.

Final Thoughts:

Getting back to our original question, our feeling is that 2-bedroom condos are the sweet spot in the market.  They have demonstrated they can hold their values well compared to the other condo types, they have decent appreciation over the long term, and they have displayed slightly better liquidity.  Studios have shown a little more volatility than the other types, but have appreciated nicely over the long haul.  Three-bedroom units tend to lag the market which is most likely a function of their higher prices than the bedroom count.  We’ve noticed the higher end of the market lagging the lower end in other analyses.  One-bedroom condos show some signs of weakness but remain fairly liquid.

Overall, we see benefits of ownership taking place over the long term no matter how many bedrooms you have.  However, all types are taking hits in the short term, signaling tough times for sellers and ample opportunities for buyers.

Coming soon… we’re going to try this same analysis for single family homes.

For more articles covering trends for the entire City of San Francisco, click HERE.