January 2005
 

 

John M. Lee: Richmond Real Estate Year in Review

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

The year started off with a bang, but median prices peaked in the second and third quarters and then flattened out for the rest of the year. The Richmond 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 Richmond, Lake, Presidio Heights, Jordan Park, Laurel Heights, Lone Mountain and Sea Cliff areas.

In 2004, there were 231 sales versus 247 for 2003 and 228 for 2002, a decrease of 6.5 percent from 2003 and a slight increase of 1.3 percent from 2002. The number of sales has been fairly consistent for the past three years, with no compelling reasons for sellers to move from the area except the normal ones.

Throughout all of 2004, it seems 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 the normal slow start after the New Year, but progressed nicely throughout the year.

The amount of marketing time to sell a home decreased to 30 days in 2004, versus 40 days in 2003 and 39 days in 2002, a decrease of 10 days, or 25.2 percent, from 2003 and a decrease of nine days, or 23.1 percent, from 2002. 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 13.3 percent increase over a year ago, with most of the appreciation occurring in the first half of 2004. There was only a 1.6 percent increase from 2002 to 2003. A more careful analysis showed that more lower priced homes sold in 2004 than higher priced ones, leading to only a slight increase in the average sales price, but a large jump in the median price.  In fact, lower-end homes appreciated more and higher-priced homes less, raising the median price.

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 entering 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 the downtown office spaces are starting to get leased out again, showing that businesses are moving back into the City because they believe the economy is on the way up.

On the federal level, the Federal Reserve Bank has started raising short-term rates because Chairman Alan Greenspan believes  rate cuts have served their purpose, keeping the economy rolling by making cheap capital available. But now that the economy is getting healthier, it can withstand higher interest rates. Overall, I believe that he's done an outstanding job leading the United States through this period. The mortgage rate, which is tied more to long-term interest rates, has not gone up much and is not anticipated to go up much in 2005. This will prove to be good news for the real estate market.

Locally, the demand has always and will continue to be strong because supply is so limited. With about 230 to 250 homes selling in the Richmond District annually, demand outnumbers supply, causing multiple offers and sales over the asking price. I don't see any reason that will change in 2005.

Thus, 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.