Tag Archives: Outer Sunset Real Estate

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.

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.

John M. Lee: Buying a Property ‘As Is’

In today’s real estate market, most sellers are still able to sell their properties “as is.” What exactly does that mean? What are the ramifications to both the buyers and sellers? Is it a good idea?

Even with the slight slowdown in the summer real estate market, there are still multiple bids on many properties, and some buyers are tempted to submit “as is” offers to sellers so they can have an advantage over other buyers.

When a property is sold “as is,” it usually means the seller will not warranty the condition of the property. The buyer buys the property in its current condition, and takes responsibilities for correcting any and all defects. Some properties are sold “as is” because the seller acquired the property through adverse conditions, such as a probate or foreclosure.

In this case, the seller might not have any knowledge about the condition of the property, and thus cannot disclose much, so the property is sold in “as is” condition.

In the past, buying an “as is” property meant purchasing it without the benefit of any inspections. Even as recently as 15 years ago, many houses were purchased without inspections.

However, a contractor and a pest control inspection are commonplace in today’s real estate transactions. As a real estate professional, I would never recommend buying a property without inspections unless the buyer is very sophisticated or intends to tear down the whole building. Instead, if the buyer is willing to purchase the property in its present condition, I would recommend buying it, but subject to inspections. I have seen many hidden defects in homes that looked perfectly fine. Getting an inspection and paying for it is what I call cheap insurance for such a large investment.

I would advise the buyer that if the seller rejects his offer because someone else is willing to buy it without the benefits of inspections, so be it because there is always a bigger fool out there, and it would not be in the buyer’s best interest to purchase in this manner.

Alternatively, on a probate or foreclosure sale, where offers must be “as is” with no inspection contingencies, I would recommend that the buyers obtain their inspections up front before the offer is prepared. Even though it will cost them several hundred dollars, the expense involved is miniscule compared with the investment.

From a seller’s standpoint, I would also advise allowing full inspections for potential buyers. If a seller does not allow inspections, and problems are discovered after the close of escrow, the buyer can always come back and sue the seller for non-disclosure and not allowing the buyer to do his or her own inspections, especially if the seller allowed the buyer to obtain inspections, these defects would have been discovered and would have materially affected the value of the property.

Also, by allowing inspections, the seller has shifted some liability to the buyer.

In today’s real estate environment, many times sellers will spend the money to hire a termite inspector and a contractor to inspect the property prior to putting it on the market. I believe this is a prudent move as all the defects will be disclosed up front and the buyers may then make an intelligent decision on what the property is worth and if they are willing to tackle the work after the close of escrow.

Also, this will eliminate a second round of negotiation that inevitably occurs if the inspections are performed after the offers are accepted and damages are found. In this litigious society, both buyers and sellers cannot be too careful and should take every precaution possible to minimize any surprises that can occur after the close of escrow.

Buying properties “as is” without the benefits of any professional inspections can increase the possibility of problems for both buyers and sellers.

If you have any questions regarding real estate, you can reach John M. Lee at (415) 447-6231 or e-mail him at johnlee@isellsf.com.

John M. Lee: Proposition Not Needed

There have not been any landlord/tenant issues on the ballot for the last few years. And just when everything seems to be quiet, there is a controversial Proposition B on the June ballot. Prop. B reads: “Shall the City change its laws to require landlords who offer to sell buildings of two or more residential units to disclose to all potential buyers the specific legal grounds for any evictions that result in vacant units at the time of sale and whether the evicted tenants were elderly or disabled?”

Similar legislation was passed by the SF Board of Supervisors earlier this year and Mayor Gavin Newsom vetoed it. The Board of Supervisors is now attempting to get it passed by going to the voters.

At first reading, the measure seems innocent because who would not want more disclosures? The more buyers know about the property, the more informed they will be to make a decision. The measure fails because there are already existing mechanisms in place to provide this information.

As well, the wording of the legal text is extremely confusing and open to interpretation and abuse. The current standard of practice for selling properties in San Francisco is to have the disclosure package available to buyers for review prior to submitting an offer to purchase. State law also mandates that if a unit is delivered vacant, the legal reason for termination has to be disclosed.

Evictions are dealt with in these documents, and the buyers have 72 hours from receipt of the disclosure package to walk away from the transaction and terminate the contract – with no penalties whatsoever. This disclosure process and mechanism have worked well and there is no good reason to change the procedure.

The disclosure required by Prop. B would have to be made “in all marketing material and advertising, like a flier describing the property, which is made available to prospective purchasers at each open house and at any tour through the property.”

The problem with the language is that Prop. B does not require the disclosure to be delivered and signed by the purchaser, just that the material be “available.” So, if it’s not delivered to anyone and a prospective purchaser does not have to acknowledge receipt, how is the prospective buyer assured of getting the disclosure?

And how does the seller prove that he or she complied with the ordinance? The mechanics and language of the legal text won’t help buyers and sellers avoid potential problems. Also, who is the prospective buyer? There are times when an agent or a relative is looking at the property for the prospective buyer.

The actual buyer might never see the property before submitting an offer. With photos and virtual tours available on the Internet, we are actually seeing sales where the buyer never steps foot onto the property, so if the information is available at the property and the buyer never sees it, has the seller complied with the ordinance?

I believe that the ordinance is drafted very poorly and if approved, we will be spending much of our taxpayer’s money fighting it in court. There already are mechanisms in place with the real estate process for eviction disclosures.

I am voting “no” on Prop. B. But whatever you decide on this and other issues, please vote on June 6.

John M. Lee is a top selling agent at Pacific Union. If you have any real estate questions, call him at (415) 447-6231.

Landmark Status Sought for Music Concourse

By George McConnell

The SF Landmarks Preservation Advisory Board voted Feb. 16 to continue discussions about granting landmark status to Golden Gate Park’s Music Concourse and the surrounding grid of trees.

Present at the landmarks meeting, held at City Hall, were the SF Planning Department, SF Recreation and Park Department and the neighborhood advocacy groups Friends of the Music Concourse and SPEAK (Sunset Parkside Education Action Committee). At issue in the landmark’s application are the number, size, shape and care of the trees at the Music Concourse and the architectural integrity of the concourse’s bandshell, pathways, benches and fountains.

“We’ll do our best to pull together all the elements during this time,” said Katherine Howard, co-chair of Friends of the Music Concourse.

The landmarking proposal was first presented to the board Jan. 5. The board agreed at the meeting that the concourse should be landmarked and a discussion ensued about the best conditions for preserving the concourse’s grid of trees.

Granting landmark status for a landscape is rare. Washington Square Park in North Beach is the only park to receive landmark status in San Francisco.

When a building is landmarked, any proposed changes must first be reviewed by the Planning Department. Landscapes, however, are not afforded this protection. To guarantee protection, a supplement to the landmark application, termed Attachment G, must be filed.

Landmarking the area would mean that anything that changes the look or feel of the site must go through the Landmark Preservation Board. As part of its landmark application, a list of any future changes that require board overview must be decided on, Howard said.

Friends of the Music Concourse support a modification to the concourse’s landmark application to protect the grid of trees. Some of the additions to the application include: ensuring the size of any replacement trees; making sure the trees match and are kept pruned to match; and requiring a public process whenever a tree is to be removed.  If a tree is removed, a suitable replacement must be planted within a reasonable amount of time.

If landmark status is granted as expected, any future changes will require a permit, or Certificate of Appropriateness, from the advisory board based on public input.

According to Howard, the Recreation and Park Department is ultimately responsible for the area’s maintenance and objects to the codification of maintenance and upkeep procedures.

“We will be meeting with the Recreation and Park Department to arrive at solutions,” she said.

Howard and co-chair Margaret Mori formed Friends of the Music Concourse last summer in response to changes being proposed as part of the concourse renovation project.

Both are landscape architects and members of the American Society of Landscape Architects Historic Preservation Interest Group. The group is comprised of more than 100 volunteers.

Some of the early proposals for the area included removing part or even the entire tree grid and turning the area into a meadow.

Other groups and individuals supporting landmarking the area and the proposed attachment modifications include: Friends of the Urban Forest, Coalition for San Francisco Neighborhoods, San Francisco Tree Council and supervisors Tom Ammiano, Bevan Dufty and Chris Daly.

San Francisco business magnate, Claus Spreckels, donated the Temple of Music, popularly known as the bandshell, to the City in 1900. When the surrounding concourse area was built, hundreds of trees were planted in a grid pattern for the purpose of providing shade for concertgoers.

The concourse area is an example of a French formal garden design, according to Howard, a lecturer in Historic Garden Design at UC Berkeley.

The concourse’s grid of sycamore and elm trees now contains approximately 200 trees that range from 70 to 100 years old. Over the years, trees have been lost due to lack of funding, vehicular damage and other reasons. The Friends of the Music Concourse advocates replacing missing trees to ensure a full grid.

Improvements to the Music Concourse are part of the Park Revitalization Act, known as Proposition J, passed by San Francisco voters in 1998.  Some of the renovation projects from that proposition include adding an 800-space underground parking garage, replacing the M.H. de Young Memorial Museum and the SF Academy of Sciences buildings, and repairing the paved pathways, tunnels and fountains in the area. Renovations to the concourse area are scheduled to be completed in the fall of 2005.

The next meeting of the Landmarks Preservation Advisory Board is scheduled for March 2 in Room 400 at City Hall. For more information, call (415) 710-2402 or visit the website at http://www.musicconcourse.org.

John M. Lee: Real Estate Bubble Revisited

Once again, the topic of a possible real estate bubble has resurfaced in the news. With the median price of a home going up by an average of 20 percent this past year, the major press has been buzzing with the possibility of a bursting real estate bubble.

Recently, there was a front-page article on this topic in the San Francisco Chronicle and local CBS television station had a segment interviewing several people on the topic.

Some sellers said they felt there was a bubble and were now selling their property and a real estate agent who was interviewed said prices are too high and that they will fall.

On the flip side, Paul Erdman, an internationally known and respected economist, does not feel there is a bubble and another leading economist, Professor Edward Leamer from UCLA’s Anderson School of Business, recently reversed his position from being bearish on real estate to stating that there is not a real estate bubble.

So who do you believe and how can you determine if there is a real estate bubble?

First, let’s define what a real estate bubble is. When prices increase rapidly due to speculation or unsound economic principles, it can create a bubble, which can pop, causing prices to fall precipitously, if market conditions change in a negative manner.

This happened in the stock market a few years ago when the Dow Jones Industrial Average (DJIA) declined about 30 percent and the NASDAQ decreased 70 percent from its peak in March of 2000. Because investors were caught up with the Internet frenzy, they paid high prices for stocks without any proven track record and no earnings.

A bursting bubble could, of course, happen in our real estate market, but I do not see that happening.

We discussed the bubble theory in this column in October, 2002, and June, 2003. I felt that at the end of 2002 the chance for a bubble was slight due to economic uncertainty and the possibility of going to war in early 2003. In June of 2003, I felt that the danger of a bubble was over and that there was no bubble on the horizon.

Now, it is two years later and prices have gone up substantially.

The economy is stronger. The war has been fought and (I think) won – the only uncertainty is when we will be pulling out of Iraq. The interest rate has been increased slightly by the Federal Reserve Bank, with little affect on the long-term mortgage rate. Inflation is in check and the dollar is weak against other foreign currencies, meaning more exports and foreign investments in our assets. All these are positive signs to sustain our market.

We had a banner year in 2004; prices appreciated about 15 to 20 percent with good activity. This year, though, our volume of listings as compared to the same period last year is down about 20 percent, meaning less sales and more competition for the same listings. We still have a great amount of buyer demand – with limited supply and constant demand, simple economic theory indicates that prices will go up.

We will see how the market develops this year as time goes by. But all indications thus far lead me to believe that there will be no real estate bubble in San Francisco. There are just not enough available properties to satisfy the demand.

On the other hand, we cannot expect double digit appreciation each and every year because prices would increase faster than what buyers could afford to pay for the properties on the market.

So, the local forecast for this year is for moderate appreciation, somewhere in the neighborhood of 5 percent to 8 percent, with no bubble in sight.

John M. Lee was recently honored at the Pacific Union conference in San Diego for selling the most properties in San Francisco. If you have any questions regarding real estate, call him at (415) 447-6231 or e-mail at johnlee@isellsf.com.

John M. Lee: Real Estate Market Review

In recent memory, every time when I reflected back on the market, I wished that I had purchased more properties in prior years because real estate prices just keep going up and up.

Worries about potential real estate bubbles did not materialize this year. Concerns about the costs of the war affecting interest rates and housing were non-issues. The feds raising the short-term interest rates only minimally affected long-term mortgage rates. Election year status quo fiscal policies helped stabilize the financial markets and the lack of job creation did not enter the real estate picture.

This year proved all naysayers wrong – our San Francisco real estate market did not go down and prices kept going up and up. We started off the year in a heated market and continued throughout.

Usually, our market is up the year of a presidential election and the one after.

There were some concerns that Alan Greenspan would raise interest rates to keep inflation under check mid-year and that mortgage rates would rise. Well, Greenspan did start to raise rates in June and has been raising them a quarter point at every Federal Reserve meeting since.

However, these increases were well forecast in advance and the market factored the changes in gradually. When the increases were officially announced, they were non-events and long-term mortgage rates did not budge; and in some cases decreased.

Currently, 30-year mortgage rates are hovering at around 6 percent, better than the 6.5 percent to 7 percent that was predicted by the end of the year. At these rates, real estate can thrive and do well. Economists are mixed on interest rate forecasts for 2005, but none are predicting a large increase.

The only blemish on the economy was the lack of job creation. It seems like everywhere I went, people were out of jobs and more were getting laid-off. Real estate prices usually rise because of a strong economy and job growth. Unless people have job security, they will oftentimes not commit to a large long-term debt, such as a mortgage. So why is our market so strong? Because real estate prices are a function of supply and demand.

There is very limited supply and large demand in the City. Approximately 65 percent of residents are renters and 35 percent owners. Many renters committed to living in San Francisco for a long time have dreams of home ownership. But there simply are not enough sellers to satisfy the demands, causing prices to keep going up.

Also, with low interest rates the cost of home ownership (after factoring in tax benefits) is not much more expensive than renting for similar properties. If someone can muster the down payment or come up with creative financing, they would be better off owning – taking advantage of tax benefits while accumulating equity. I recently sold a home for some clients who purchased it exactly two years ago. They pocketed $200,000 in profit, tax-free, after paying expenses. They commented on how they lived for free, with appreciation taking care of the mortgage and other housing expenses, and had more money when they moved.

That pretty much summarizes the real estate market for the past few years.

We have had a good run and with interest rates staying in the 6 percent to 7 percent range, we do not have enough supply to satisfy demand, making for what should be another red hot year in the real estate market.

John M. Lee is one of the top brokers at Pacific Union, specializing in the Richmond and Sunset districts. For real estate questions, call him at (415) 447-6231.