John M. Lee: Sunset Real Estate Year in Review

By just about all indicators, the real estate market is currently bouncing at the bottom of the real estate cycle and is about to recover. The results in the Sunset District for 2010 are encouraging, showing many more homes sold with only a slight decrease in the median price. The Sunset Home Sales Comparison chart shows the results in 2010 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 2010, there were 393 sales, versus 365 for 2009, and 409 for 2008, an increase of 7.7 percent from 2009 and a decrease of 3.9 percent from 2008. This indicates that buyers are coming back into the market, realizing good values and discovering the Sunset once again.Ê

The amount of marketing time to sell a home increased slightly to 52 days in 2010, from 51 days in 2009, versus 40 days in 2008, a decrease of 1 day, or 2 percent, from 2009 and an increase of 11 days, or more than 28 percent, from 2008. This is basically the same as last year, but substantially longer than years past in-part due to tougher lender underwriting requirements for loans and the fact that buyers took longer to make purchase decisions.

The annual median price comparison shows a 3.4 percent decrease year over year as compared to a 7 percent decrease from 2008 to 2009. However, upon analyzing the data further, the second half prices decreased from the first half in-part due to the expiration of federal and state tax credits.

In the first half of the year, some buyers enjoyed the benefits of getting an $18,000 tax credit on sales under $800,000 if they qualified. This had the effect of shifting some sales to the first six months in 2010 and artificially inflating prices. There were some concerns that this would bring home sales to a halt the second half of the year, but that did not materialize as the sales numbers approximately matched those of 2009.

In the second half of the year, we saw our consumer confidence rise to the highest level since 2007, the stock market reaching two-year highs, flat unemployment rates hovering around 9.8 -9.9 percent, and the CPI rising slightly, all positive signs for the real estate market that we are bottoming.

Mortgage interest rates were dropping most of the year until a few weeks ago when it went up about .25 to .5 percent. But, historically speaking, this is still a great rate as 30-year fixed rate mortgages under 5 percent are still available. In addition, the early indication is that holiday retail sales are up, signaling a further economic recovery is on the way.

As I mentioned many times in the past, the real estate market lags the general economy, meaning that it will follow the other markets up. The general sequence is that as the economy gets better, more people have jobs and get higher wages so they feel more comfortable about getting into long-term commitments, like mortgages to purchase homes, thus fueling the real estate market and starting our next up cycle.

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, are proving to hold here, and should be moving up from this point forward.

Thus, my prediction for 2011 is that we will have a balanced real estate market, where the negotiating power will be fairly even between buyers and sellers, a continuing 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 honored to have served as the president of the San Francisco Association of Realtors for 2010 and specializes in the Richmond and Sunset districts. If you have any questions regarding real estate, call him at (415) 447-6231 or send an e-mail to johnlee@isellsf.com.