Mid-year market update

by John M. Lee

As I write this column, the first half of 2017 is just about over. We have had a steadily

rising stock market with the major indexes going up 8-15 percent this year. But what

about the real estate market? Let’s look at some data and decide for ourselves where the

market is at currently and try to figure out where it will be going.

I examined the single-family home markets in the Richmond and Sunset districts

(because these two markets generally track very closely together) and compared them

against the data in San Francisco as a whole.

For the first six months in 2017, 70 single-family homes sold in the Richmond, versus 84

in 2016, a decrease of 16.7 percent. The median price went from $1,860,000 in 2016 to

$1,840,000 in 2017, a negligible decrease of half a percent. The median number of days

on the market decreased from 18 to 13, or 27.8 percent.

So, we had fewer sales, about the same prices and shorter marketing time … giving us

mixed signals about the market.

In the Sunset, 159 homes sold during the first six months in 2017, versus 174 in 2016, a

decrease of 8.4 percent. The median price rose from $1,237,500 in 2016 to $1.3 million

in 2017, an increase of 5.1 percent. The median days on the market decreased

from 17 to 14 in 2017, a 17.6 percent decrease in marketing time. So, in the Sunset we

are experiencing a lower number of sales, higher appreciation and shorter marketing

times … signals of a strong market.

As a comparison to San Francisco as a whole, the number of single-family home sales

decreased by 2 percent and the median price increased by 3.7 percent over the first six

months. I interpret that to mean as compared to the City as a whole, the Richmond is not

performing as well while the Sunset is outperforming. This is consistent with other

data showing that the higher priced areas in San Francisco have been slowing down

whereas the more affordable locations are still going up. This also means that we are a

real estate market in transition as some segments are slowing instead of everything

going up as a whole.

The lower sales numbers are indicating that more buyers are either priced out of the

market or simply sitting on the sidelines. It also means more owners are not

selling their properties for different reasons.

Nationally, all indicators are also mixed, with higher prices and moderate inventory.

The sentiment is that real estate prices have been going up because of strong demand

and not enough supply.

As I wrote repeatedly in the past, we have seen historically low interest rates for a while,

hovering between 3.9 and 4.3 percent this year. This cannot last and surely will go up.

As we go into the summer months, look for a slower pace of home sales and a

moderation of price appreciation. This does not mean it will become a buyer’s market, as

there is not enough inventory to meet demand, but just a good market at a slower pace.

So, my advice is that if you are thinking about buying, there are opportunities as prices

are still moving up and interest rate are low. If you get locked into a 30-year fixed

rate loan now, chances are that when you look back a few years from now, you

will realize what a tremendous rate you have.

If you are thinking about trading up, it is a great time to do so because you can

position your real estate portfolio for the long run. If you are thinking of a straight sale,

you will be realizing the strong price appreciation we had in the last few years.

As always, I would strongly recommend that you consult with a Realtor, accountant and

perhaps an attorney prior to making any real estate decisions.

John M. Lee is a broker at Pacific Union specializing in the Richmond and

Sunset districts.