John M. Lee: Separating Fact from Fancy

We entered 2008 in real estate with fear and trepidation as to what might occur. Subprime mortgage problems were dominating the media, price declines and foreclosure news were hitting the newspaper front pages every day, and the economy was going into a recession or was already in a recession.

With these headlines as backdrops, and real estate news being at the forefront in cocktail chats, let's see some real factual numbers to determine where we are at and where we are going.

On the national level, there was finally a small amount of good news released at the end of March. The National Association of Realtors reported that 2.9 percent more homes were sold in February than in January, the first time where an increase in sales was noted since July 2007. However, the median sales price nationally is down about 8.2 percent from a year ago.

In California, the good news is that the number of sales was up 9.5 percent in February as compared to January, making it the fourth month in a row that sales have increased. Typically, California leads the nation in terms of trends, so the hope is that we have seen the bottom and that homebuyers are starting to realize the opportunities they are seeing and sellers are accepting and adjusting to the current price levels.

On the other hand, the California Association of Realtors median sales price in the state was down 26.2 percent as compared with February 2007. Does this mean that prices dropped 26.2 percent across California? I don't think so. What I believe is that more low-end homes sold than high-end homes, thus lowering the median. This also means that segment of the market that was involved in the subprime mortgage mess, namely lower priced homes being sold via "short sale" or by the lenders. And, the liquidity problem we had last year has eased a bit and credit for lower end properties is more readily available. All this would point to the conclusion that our economy is working through the subprime mortgage problem.

How are we doing locally?
From the San Francisco Association of Realtors, the Multiple Listing Service statistics show sales are up an amazing 27.8 percent in February as compared to January 2008, while the median price decreased 1.7 percent, from $843,000 in February 2007 to $829,000 in 2008. So, as a whole we in San Francisco are doing better than California and the rest of the United States.

To bring this home even further, in the west side of town, statistics show that in the Richmond District, the number of sales increased 57.1 percent from January to February, and in the Sunset District, increased 25.6 percent during the same time period. The number of transactions is not large, though, and the results are not statistically significant, but it does show a trend that the number of sales is increasing across the board. Median prices did drop slightly, 1.9 percent in the Richmond and 1.7 percent in the Sunset, comparing February prices in 2008 versus 2007.

Fortunately for us in San Francisco, the downturn in the real estate marketplace has not hit us too badly, and if the uptrend continues, we might be out of this transitional market quite quickly. We in the business know that when newspaper headlines come out, the news has passed because the media are looking back at what happened.

So, what should you do?
I have been speaking to many sellers who have been thinking about selling, but because of all the negative news, decided not to sell at this time. But the statistics in San Francisco are inconsistent with what sellers are reading. We are still seeing multiple offers on properties and able to get good prices because of the lack of good inventory.

Some buyers are hesitant in purchasing because they believe prices will continue to erode and that we have not seen the bottom yet. Again, we are not seeing a dramatic drop and the slight 1.7 percent and 1.9 percent declines in median prices in the west side are not statistically significant.

My advice to sellers and buyers is to do your research. Sellers are still able to get good prices and buyers are able to buy without as much pressure as in past years, making for a fairly balanced market.

John M. Lee specializes in the Richmond and Sunset districts. For questions about real estate, call (415) 447-6231 or e-mail johnlee@isellsf.com.