John M. Lee: Sunset Real Estate Year in Review

The real estate market in 2003 was extremely interesting. The year started off with a bang, with prices continuing to increase the rest of the year.

The Sunset home sales comparison table shows the final results in 2003 as compared with prior years.

The data was gathered from the San Francisco Association of Realtors' Multiple Listing Service and consist of single-family home sales in the Sunset, Parkside, and Golden Gate Heights areas.

In 2003, there were 571 sales, versus 588 for 2002 and 480 for 2001, a decrease of 2.9 percent from 2002 and an increase of 16.3 percent from 2001. Homes were selling at about the same pace as last year, but significantly higher than 2001. The Sept. 11, 2001 terrorist attacks stalled the real estate market at the end of 2001 and we lost about a quarter of the year.

At the beginning of 2002, there was strong pent-up demand, plus prices were down 8 - 10 percent from the peak of 2001, thus buyers started buying in 2002 and it never ended. Also, interest rates were declining to 30 to 40 year lows in 2003, making homes more affordable for many people. Accordingly, homes sold at a brisk pace the first half of the year.

Throughout all of 2003, it seems that if a property was in good condition and priced right, it was sold within a matter of days, most often with multiple offers and selling above the asking price. There was perhaps a slight slow-down during the start of the Iraq war, but because the results were overwhelmingly favorable for the United States, it never affected the real estate market.

The amount of marketing time to sell a home increased to 31 days in 2003, versus 27 days in 2002 and 30 days in 2001, an increase of four days, or 13.2 percent, from 2002 and an increase of one day, or 3.3 percent, from 2001. What is amazing about this statistic is that this "day on market" number includes the typical 10 to 14 days of marketing time and the escrow period, which is normally about 30 days. This means that homes were selling very quickly and lenders were able to close escrow very fast, despite heavy loan volumes from the refinance market.

The median sales price increased 7.3 percent to an all time high for the Sunset, $621,000. In fact, the median sales price for the fourth quarter was $621,000. The increase was 8.2 percent for the previous year, much the same and a sustainable increase.

What is in store for 2004? Most economists are calling for more of the same as we are clearly out of the recession and starting into a growth cycle. It has not been felt in this area as much as in the other parts of the nation because our unemployment rate is still high, mostly as a result of the high tech melt down. But, keep in mind that employment is a lagging economic indicator and that as companies make more money, they will start hiring and employment numbers will start to look better.

Also, 2004 is a presidential election year, meaning President George Bush will do everything in his power to maintain and sustain a strong economy. He remembers all so well, that "It's About the Economy, Stupid" and why his father lost the election to Bill Clinton.

As well, Federal Reserve Bank Chairperson Alan Greenspan has already said that interest rates will not be increased significantly any time soon.

Locally, the demand has always and will continue to be strong, as supply is ever so limited. We have seen multiple offers and sales prices more than the asking prices as the norm in 2003 and I don't see any reason why that would change in 2004.

When we started 2003, we had three significant unknowns that could have impacted the real estate market negatively; the threat of further terrorism was very real, there was an imminent war with Iraq and there was a lot of uncertainty with rising interest rates. These events have all passed and our future looks brighter than ever for the upcoming year.

My prediction for 2004 is that we will have a good real estate market, a shortage of inventory and moderate-to-good appreciation. So if you are contemplating in buying or selling property, this might be a great year to do so.

John M. Lee is a top-selling broker at Pacific Union's California Street office. If you have any questions regarding real estate, call him at (415) 447-6231 or e-mail him at johnlee@isellsf.com.