John M. Lee: Sunset Real Estate Year in Review

The real estate market in 2004 was filled with excitement and overbidding.

The year started off with a bang, with median prices peaking in the second and third quarters. The Sunset Home Sales Comparison Table shows the final results in 2004 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 2004, there were 579 sales versus 571 for 2003 and 588 for 2002, an increase of 1.4 percent from 2003 and decrease of 1.5 percent from 2002. The number of sales has been fairly constant for the past three years, with no real compelling reasons for sellers to move from the area except normal ones.

Throughout all of 2004, it seemed 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 a normal slower start after the New Year but sales progressed throughout the rest of the year.

The amount of marketing time needed to sell a home decreased to 27 days in 2004 versus 31 days in 2003, and 27 days in 2002, a decrease of four days, or 11.6 percent, from 2003. This reflects the fact that homes were selling very quickly. Buyers were ready to buy and lenders were able to close escrow very fast, despite heavy loan volumes.

The annual median price comparison shows a strong 17.6 percent increase over a year ago, versus a 7.3 percent increase from 2002 to 2003. The average sales price rose 18.8 percent in the Sunset during the year.

What is in store for the year 2005?

Most economists are calling for more of the same as we are clearly out of a 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 downturn. But, keep in mind that employment is a lagging economic indicator and that as companies make more money (better economy), then they will start hiring, causing the employment numbers to look better. Another telltale sign is that downtown office spaces are starting to get leased out again, showing that businesses are moving back into the City and that they believe that the economy is on the way back up.

On the federal level, the Federal Reserve Bank has started raising short-term interest rates because Chairman Alan Greenspan believes rate cuts have served their purpose, increasing spending to boost our economy. Now that the economy is healthier, it can withstand some higher interest rates. Overall, I believe that he's done an outstanding job in moderating the United States through this period.

The mortgage rate has not gone up much and is not anticipated to go up much this year. This will prove to be good news for the real estate market.

Locally, the demand has always and will continue to be strong, and supply is so limited. As you can see, with about 570 to 590 homes selling in the Sunset District annually, demand outnumbers supply, creating the situation where we have seen multiple offers and sales above the asking price. I don't see any reason that will change in 2005.

My prediction for 2005 is that we will have a strong real estate market, a shortage of inventory and moderate appreciation rates.

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