John M. Lee: Mid-year Real Estate Update

As I write this column, the first half of 2011 is just about over. We have had a volatile stock market, rising the first quarter and suffering through a six-week decline of late, bringing the indexes right back to where they were at the beginning of the year. But what about the real estate market? Let us look at some data and really decide for ourselves where the market is at currently and try to figure out where it will be going.

I examined the single-family home markets in the Richmond and Sunset districts because these two markets generally track very closely together and compared them against the data in San Francisco as a whole.

For the first six months in 2011, 89 single-family homes sold in the Richmond versus 79 in 2010, an increase of 12.7 percent. The median price went from $1,020,000 in 2010 to $1,000,000 in 2011, a decrease of 2 percent. The average days on the market decreased by one day, from 64 days to 63 days. Thus, sales activity picked up somewhat this year with prices staying about the same.

The Sunset, however, showed a different trend. There were 176 homes sold during the first six months in 2010 versus 193 in 2011, an increase of 9.7 percent. The median price, however, decreased from $736,500 in 2010 to $660,000 in 2011, a decline of 10.4 percent. The average days on the market went from 56 to 67 days in 2011, a 16 percent increase in marketing time. So, in the Sunset sales activity picked up but the median price decreased, primarily due to more lower-priced homes on the market and a longer time needed to sell a home.

As a comparison, in San Francisco as a whole, the number of single-family home sales decreased by 1.6 percent and the median price decreased by 6.8 percent over the first six months of this year compared to last year. I interpret that to mean as compared to the City as a whole, the west side of town is more active in terms of sales activity, with fluctuating prices.

All numbers show that our market bottomed out in 2009, and that we are up from that point, though our prices have flattened out.

Nationally, the numbers are also mixed, a similar trend we are detecting in San Francisco. Some of it is due to the expiration of the tax credits that ended the first half of last year. Another factor that is affecting the market is the continual high unemployment rate. Though we are off from the peak, unemployment is still in the 9 percent range.

The recent financial crisis in Greece and the decline in our stock market also wiped out part of the funds that would have been used as downpayments for properties. Foreclosures have decreased partly because the government has been pressuring lenders to modify loans and approve short sales instead of letting homes go to foreclosure. However, that strategy might only push foreclosure sales back to a later time.

So, my advice is that if you are thinking about buying and staying in the property for the next five years or more, this is a great time to purchase as prices are good and interest rates are down, resulting in higher affordability. If you are thinking about trading up, it is a great time to do it because though you are selling at slightly lower prices than a few years ago, you are also purchasing at a much lower price, and you will come out ahead on the trade. If you are thinking of a straight sale, you will be getting a slightly higher price than what you would have received the last couple of years.

As always, I strongly recommend you consult with a Realtor, accountant and perhaps an attorney prior to making any real estate decisions.

John M. Lee is a top-selling broker at Pacific Union. For questions regarding real estate, call him at (415) 447-6231.

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