John M. Lee: Real Estate Year in Review

By all measures, the real estate market in 2009 was dismal, resulting in the lowest number of home sales in the past decade as the economic downturn finally hit the San Francisco market.

The median and average prices in the Sunset were lower than last year, but the light might be visible at the end of the tunnel as the numbers in the third and fourth quarters showed remarkable improvement over the first two quarters and surpassed those of 2008 during the same period.

The Sunset home sales comparison chart shows the results in 2009 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 2009, there were 365 sales, versus 409 in 2008 and 427 in 2007, a decrease of 10.8 percent from 2008 and a decrease of 14.5 percent from 2007. This is the lowest number of sales in the Sunset for the past 12 years since I started keeping track of these statistics.

The number of sales decreased dramatically in the first half of the year because of tight credit market. Banks were focused on bailing themselves out of trouble instead of making loans.

The amount of marketing time needed to sell a home increased to 51 days in 2009, versus 40 days in 2008 and 37 days in 2007, an increase of 11 days, or 28 percent, from 2008 and an increase of 14 days, or 38 percent, from 2007. This is a substantial change as properties stayed on the market for a longer period of time and agents had to work harder to sell them.

The annual median price comparison shows a seven percent decrease over last year, as compared to a 3.7 percent decrease from 2007 to 2008. However, upon analyzing the data further, the number of sales for the second half surpassed those of 2008, suggesting that we are coming out of this real estate slump.

So, how can we interpret this information?

Despite all the bad news in 2009, the rising unemployment rate, bailout of major banks, plummeting consumer confidence ratings, and gigantic deficits in government spending, there is some good news as we head into the new year. By all indicators, the real estate market has bottomed out in most of the country and is starting to move up.

The stock market shot up by 60-plus percent from the first quarter and the rate of unemployment has decreased, all indicating that the recession is over and 2010 will be a better year. I think we have seen the bottom of the market and that we are poised for growth next year!

On the federal level, the Federal Reserve Bank has kept mortgage interest rates low and Congress has extended the $8,000 tax credit for first-time homebuyers and even introduced a $6,500 tax credit for buyers trading up, subject to certain limitations. Inflation is currently under control and the number of foreclosures has slowed due to loan modifications and the government's efforts to keep people in their homes.

However, there is a danger that some of these programs might not work and we will see more foreclosed homes on the market in 2010.

Locally, the demand in San Francisco and the Sunset District will continue to be good. As I learned throughout my career, San Francisco real estate is desirable and our market tends to rebound very strongly once negative variables are removed. Prices are back to about 2004 levels and should hold and move up from this point.

Thus, my prediction for 2010 is that we will have a balanced real estate market, where negotiating power will be fairly even between buyers and sellers, a shortage of good inventory, and level to slightly up prices. Therefore, 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 of the San Francisco Association of Realtors. For questions regarding real estate, call him at (415) 447-6231 or e-mail johnlee@isellsf.com.