We at The Mark Company would like to take a moment to address a series of recent articles about the challenges currently facing the San Francisco residential real estate market. Despite what you may have heard, the San Francisco housing bubble has not burst. Let’s look at the big picture to understand the trends that are driving the current market and how they will continue to impact the market for 2016 and beyond.

Alan Mark, President of The Mark Company, offers some key points below on why not to panic and tips on how to succeed moving forward.

One: Oversupply is not an issue.

Despite over 62,500 residential units in the pipeline, San Francisco is far from being oversupplied today, tomorrow or within the next five to 10 years. There is a critical need for housing in San Francisco and chronic undersupply of new product. Of the over 35,000 approved residential units, over 28,000 are contained within large, master-planned communities with no timeline for delivery or guarantee that they will come to fruition. Given that the City is and always will be a highly-desirable place to live with limited land and lengthy entitlement processes, inventory is unlikely to ever truly meet demand.

In addition, for sale condominiums make up only 20 percent of the under construction pipeline. We’ve seen developers back off from delivering condominiums in favor of rentals, only to rush back to a condominium scenario when the market shows signs of improvement. Even with potential product in the pipeline, San Francisco will most likely not have 1,500 units on the market at any given time through this decade. A number of towers that are planned, but not fully entitled, will take three years to build when they do start construction. Furthermore, entitlements for future projects are in limbo as the required percentage of inclusionary affordable housing is being challenged.

Lastly, the Bay Area created approximately 120,000 jobs over the past year alone and has outperformed the country for the past four years. People are moving to San Francisco in droves and need housing. Sky-high rental prices make owning the better option.

Two: Low inventory will continue to drive pricing and demand.

The trend of very low inventory has bolstered demand and pricing. New condominium inventory remains historically low in San Francisco despite the addition of seven new developments during the past six months. To put it into perspective, there were fewer than 650 new construction condominium units available in San Francisco at the end of this quarter. Even with the recent addition of 298 units at The Harrison, we are facing a 70 percent decrease compared to the peak of over 3,000 units reached in 2007.

While approximately 860 new construction condominium units are scheduled to enter the market later this year, buyer demand is expected to remain strong. This is evidenced by three developments recently launched by The Mark Company. Both located in Hayes Valley, 450 Hayes placed over 80 percent of its homes into contract within one month at an average price over $1.2 million, while 388 Fulton put 26 homes into contract during its first month. Featuring custom design by Ken Fulk, The Harrison launched in early April and welcomed over 170 onsite visitors its first week on the market, proof of pent-up demand for luxury product in one of the City’s most in demand neighborhoods of Rincon Hill.

Three: Fever pitch pricing to stabilize, but not diminish.

The market has recalibrated to a level that seems waning, but is actually close to where we were at this same time last year. The Mark Company’s San Francisco Condominium Pricing Index for March increased every month during the first quarter. Absorption remained steady and even slightly better than Q4 2015. These key facts help us point toward a normalizing market, not one on the verge of another recession.

Four: Don’t panic. Do re-strategize.

While we don’t believe another downturn is on the horizon, having strategies in place to address even the slightest of market corrections is critical to long-term success. A shifting market has unique pockets of opportunity for specific product types, buying groups, neighborhoods and price points. Identifying and capitalizing on these opportunities can have a huge impact on whether or not your project stays on track. Critical to our strategy is realistic pricing, a strong understanding of the competition and deep insight into what makes buyers tick.

Low inventory and high demand are the factors that have kept the market strong and will continue to keep it strong. The Mark Company believes that the outlook for the rest of the year remains positive, with solid real estate fundamentals driven by positive job growth and continuing demand by homebuyers to live in urban cores.

We invite you to also check out Alan Mark’s exclusive Q&A on the subject with GlobeSt.com.

We will continue to closely monitor the state of the market and how it affects our residential developments selling today and in the future. We encourage you to sign up to receive our Trend Sheet and Monthly Reports. Please get in touch should you wish to discuss further.

About The Mark Company

The Mark Company is one of the nation’s premier urban residential marketing and sales firms. Founded by Alan Mark in 1997, The Mark Company provides a full range of core consulting services including analytics, design, marketing and sales for urban high-rises and suburban attached properties throughout the Western United States. The firm is a trusted partner to global leaders in residential development and finance, providing buyer-driven sales and marketing strategies that produce industry-leading results. The Mark Company has represented more than 10,000 residences and generated over $5 billion in sales for some of the nation’s most notable and successful developments including The Infinity in San Francisco, Evo in Los Angeles and The Martin in Las Vegas. Current projects include 181 Fremont Residences and The Harrison in San Francisco and Cavalleri in Malibu. A subsidiary of Pacific Union International, one of the San Francisco Bay Area’s top-performing resale brokerages, The Mark Company benefits from an enriched leadership team, enhanced technology and added global reach through its affiliation with Christie’s International. For more information, please visit www.themarkcompany.com