Real Estate: John M. Lee

Sunset Year in Review

As predicted, the real estate market in 2011 was bouncing at the bottom of the real estate cycle but saw some encouraging signs for recovery. The results in the Sunset District for 2011 are even more encouraging, showing an increase in homes sold with only a slight decrease in the median price. The Sunset Home Sales Comparison Table shows the results in 2011 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 2011, there were 431 sales versus 393 for 2010 and 365 for 2009, an increase of 9.7 percent from 2010 and an improvement of 18.9 percent from 2009. This indicates that buyers are coming back into the market, realizing good values, and discovering the Sunset once again. The amount of marketing time needed to sell a home increased slightly to 53 days in 2011, from 52 days in 2010 and 51 days in 2009, a negligible increase of 1 day, or 1.9 percent, from 2010 and an increase of 2 days, or 3.9 percent, from 2009. This is basically unchanged the last couple of years, suggesting the market is about the same. The annual median price comparison shows a 6.9 percent decrease year over year as compared to a 3.4 percent decrease from 2009 to 2010.

Thus, the data reveals that the number of sales is increasing, prices are dropping, and marketing time is staying about the same; just about what we expect with a market in transition.

During 2011, the consumer confidence index rose, fell and then rose again toward the end of the year. The stock market also went up and down throughout the year. The good news lies in that our unemployment rate has been decreasing throughout the year and is now hovering at 8.2 percent, a level we have not seen since 2009. The interest rate also decreased to the 4 percent range for a 30-year fixed mortgage. In addition, the early indication from holiday retail sales appear to be doing well, signaling that consumers are spending money, which will drive up the economy. Thus, with the mixed signals we are seeing throughout the year, no wonder the real estate market is doing the same.

As I have 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 improves, more people will have jobs and receive higher wages. They then 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. At the end of 2011 our prices were back to about 2003-2004 levels, our inventory numbers were very low due to seasonality and there was a reluctance by owners to sell at this price level, which bodes well for the upcoming year.

Thus, my prediction for 2012 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. 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 a top-selling broker at Pacific Union, specializing in the Richmond and Sunset districts. For real estate questions, call him at (415) 447-6231.