Sunset Year in Review

by John M. Lee

Median home prices in the Sunset District rose for the sixth year in a row last year, with

median prices appreciating by 7.8 percent in 2017, a 97 percent increase since the recent

market low in 2011. (The Sunset Home Sales Comparison table shows the results in 2017

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 2017, there were 390 sales, versus 386 for 2016 and 396 for 2015, a very similar

amount. However, the median sales price increased 7.8 percent to $1,320,000 from 2016

to 2017, and 5.4 percent from 2015 to 2016. While the rate of appreciation has slowed

down from recent double-digit growth, there was still a lack of inventory. The amount of

marketing time to sell a home decreased to 14 days in 2017 from 18 days in 2016, versus

16 days in 2015, all very short times, historically.

This year’s results are from buyer demand in excess of seller supply, despite many

buyers being priced out of the market, low mortgage interest rates throughout the year, a

stable economy, low unemployment rates and higher consumer confidence … all positive

signs for the real estate market, except for the rising interest rate.

During 2017, the major stock indexes did extremely well, rising steadily throughout the

year. As of the writing of this article in late December, the Dow Jones Industrial Average

has risen 24 percent for the year, S&P 18 percent and the NASDAQ 28 percent.

The consumer confidence index is the highest it has been the last 17 years and our

unemployment rate has been steady throughout the year, at about 4 percent, a level

which represents full employment in the eyes of most economists.

The interest rate hovered in the 3.75-4.25 percent range throughout the year for a 30-

year fixed-rate mortgage. However, it did jump about a quarter of a percent the last

quarter when the Feds raised short-term rates. This should not have an immediate

effect on mortgage rates but might in the future. The foreclosure of homes is still

virtually non-existent.

The prices of homes have risen substantially above that of the last peak in our real estate

cycle so almost everyone has equity in their properties.

The real estate market lags the general economy, meaning it will follow the other

markets up. The general sequence is as the economy improves, more people have jobs

and receive higher wages, making them feel more comfortable about getting into

long-term commitments, like mortgages to purchase homes, thus fueling the real estate

market and starting our up cycle.

Our market bottomed out in 2009 and with each cycle, there are two to three years when

we get substantial double-digit appreciation. We are past that point and are currently

seeing the slowing down of price appreciation.

Locally, the demand in San Francisco and the Sunset District will continue to be good,

with price appreciation slowing down to a more sustainable rate. There were some

properties listed towards the end of the year that were withdrawn from the marketplace

because they did not sell, especially in higher priced neighborhoods.

My prediction for 2018 is that we will have a decent real estate market but not as strong

as the last five years. It will continue to be a seller’s market with a shortage of good

inventory and a leveling out in prices.

Therefore, if you are contemplating buying into the real estate market, be careful of

overpaying. If you are planning on selling, keep in mind that there is a short supply and

you should get a good price. If you want to reposition your real estate portfolio, this is an

excellent time to do so to take advantage of the still low mortgage interest rates.

I wish you all the best in 2018!

John M. Lee is a broker for Pacific Union, specializing in the Richmond and Sunset

districts. For questions regarding real estate, call (415) 447-6231 or email

johnlee@isellsf.com.