Tag Archives: John M. Lee: Mid-year Real Estate Update

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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John M. Lee: Real Estate Year in Review

The real estate market in 2008 finally slowed from previous years, resulting in lower prices and less sales just about everywhere. Even San Francisco started to feel the economic downturn.

Median and average prices in the Sunset, as compared to last year, were lower each quarter and the number of sales also decreased slightly from 2007. The Sunset Home Sales Comparison Table shows the results in 2008 as compared with prior years. The data was gathered from the San Francisco Association of Realtors’ Multiple Listing Service and consists of single-family home sales in the Sunset, Parkside and Golden Gate Heights areas.

In 2008, there were 409 sales versus 427 for 2007 and 498 for 2006, a decrease of 4.2 percent from 2007 and a large drop of 17.9 percent from 2006. This is the lowest number of sales in the Sunset for the past 11 years since I started keeping track of these statistics.

The number of sales decreased because of lower consumer confidence, with bad economic news hitting on a daily basis, and owners not selling because they perceive the market as being very bad and they did not want to make a large financial decision at this time.

The amount of marketing time to sell a home increased to 40 days in 2008, versus 37 days in 2007 and 34 days in 2006, an increase of three days, or 8.1 percent, from 2007 and six days, or 16.7 percent, from 2006. This reflects the fact that homes were selling at a normal pace with some marketing time instead of the panic buying we saw during the peak real estate years.

The annual median price comparison shows a 3.7 percent decrease year over year versus a 2.7 percent increase from 2006 to 2007.

The average sales price decreased 5.6 percent during the year, suggesting that home prices held their own in the Sunset area as compared with the rest of the Bay Area, where some areas experienced 40 percent price declines.

So, how this can we interpret this information? Despite all the bad news – the battering of the stock market, the rise in the unemployment rate, subprime mortgage problems, major bank failures and plummeting consumer confidence ratings – our home prices in the Sunset area held up extremely well because the Sunset is still a desirable area to raise a family, it is convenient to transportation and it has all the amenities that homeowners like to have in a neighborhood.

Thus, even during tough economic times, people are staying in their homes, keeping the real estate demand and supply in balance, leading to stable prices.

What is in store for 2009? I think it will be more of the same with real estate taking slightly longer to sell, and prices being flat or slightly down.

On the national level, the Federal Reserve Banks have been decreasing short-term rates and printing money for the large bailout. We at the real estate industry have been lobbying for part of the bailout money to be used to subsidize new home purchases in the form of lower interest rates to stimulate real estate sales. We believe we will be successful sometime in the first quarter of 2009. Inflation is currently under control and the high number of foreclosures should peak and decrease in 2009. We are hoping for a stock market rebound.

The good news for us in real estate is that mortgage rates have been steady all year and are anticipated to decrease slightly this year.

Locally, the demand in San Francisco and the Sunset District will continue to be desirable and strong, and supply is still ever so limited.

As you can see, with the least amount of homes selling in the Sunset annually for the past decade, demand still outweighs supply and though we do not see the torrid pace of the peak years, our real estate market is still active and should be fine.

Thus, my prediction for 2009 is that we will have a balanced real estate market, where the negotiating power will be fairly split between buyers and sellers, a continuing shortage of good inventory and level prices.

So, if you are contemplating buying for the long-term, or trading up, this will be an ideal year to do so.

John M. Lee is the president elect of the San Francisco Association of Realtors for 2009. If you have any questions, call him at (415) 447-6231.