An ongoing San Francisco condo market slowdown could be short-lived, thanks to modest supply growth and low interest rates.

During previous building cycles, entitled projects were split roughly evenly between condos and apartments, but the vast majority of developed sites went apartment last decade, according to Polaris Pacific partner Paul Zeger.

As of June, S.F. had 842 unsold new condos on the market, representing a 61.9% increase from last year but a decrease from prior years like 2016, when there were 1,037 such residences, and 2017, when there were 881, according to Polaris Pacific research.

Paired with slashed interest rates, relatively low supply is likely to help reinforce condo prices, experts like Zeger and Compass Development West Coast Regional Director Sandra Eaton said.

Even so, available inventory has been "ballooning" in recent weeks, according to Vanguard Properties Director of Investment Sales Alex Kolovyansky. He said he estimates a drop of roughly 5% to 10% in value as current and would-be condo owners instead look to single-family homes in Bay Area suburbs and even places like the Lake Tahoe area, where demand is soaring.

“Until we end up in a scenario where companies say you need to get back to work and be in the metropolitan areas, you’re going to have a waning demand, or at least not as strong as it used to be," Kolovyansky said.

Since pandemic-induced shutdowns kicked off in March, sales activity has been inconsistent. It rose in May after real estate was deemed an essential business but slowed again in June during protests, and then recently began picking up, Eaton said.

"The ebb and flow has been real and will likely continue to bump up and down throughout the year," she said. "Overall, sales have continued, albeit at a capricious pace."

Zeger said the recent activity has been driven primarily by lower-end, entry-level condos but also higher-end product. Low interest rates have opened the buyer pool to even more of the city's tech-heavy workforce, with entry-level condos starting at under $1M, according to Zeger.

Meanwhile, activity for higher-end condos, like those in developer Paramount Group's One Steuart Lane and the new Four Seasons Private Residences, is driven by older buyers that see an investment opportunity, he said.

“We see a lot of people who have raised their families and made a lot of money now moving into very high-end product in San Francisco," Zeger said.

Median prices for new S.F. condos are currently just over $1,312 per SF, but condos in One Steuart Lane are going for about $2,700 per SF, according to Vanguard Properties. Its latest June report shows about 10% of the waterfront project as in contract since hitting the market in February.

More middle-market product in the $1,800 per SF to $2,000 per SF range is more likely to struggle, according to Zeger, especially for projects that broke ground near the end of the cycle with high construction costs and high pricing expectations.