What Will the Fall Bring Us?

Do you feel that each year goes by faster and faster as you get older? I sure do. Just like that, summer is over, schools are back in session and we are into the fall season! 

In San Francisco, we have two main real estate selling seasons –  the spring and then the fall, right after Labor Day. Most people have the misconception that the summer months are our active months because families who are planning for schools are out buying at that time.

 However, in San Francisco that is not the case for several reasons. We do not have a large children population as compared to the rest of the country and school assignments are already out when summer arrives. Many people take vacations, which means that buyers, sellers and agents are out of town, thus delaying the buying or selling decisions until they get back. There are also many weekend events, such as the SF Marathon and Outside Lands concert during the summer that take the focus off of real estate. 

 Now that people are back from their vacations and the weather is getting better, homeowners are putting their properties on the market. With buyers circling, we should be seeing a strong fall market.

 This year, real estate prices have risen once again. The economy is still strong. The stock market – though extremely volatile of late – is up 14-23 percent this year, depending on the index you are following. The 30-year mortgage rates have hovered in the historical lows between 3.9 and 4.25 percent and the unemployment rate remains low. This, with the lack of inventory, continues to fuel the market to record highs.

 The June Market Focus published by the San Francisco Association of Realtors reports that median sales prices are up 8.3 percent for single family homes year over year; new listings are down 13.8 percent; sales are down 4 percent; and marketing time has increased 22 percent. 

 These indicators still point to a strong seller’s market but suggest a market in transition with the lack of sales. Some of the factors that led to the last housing cool down are also evident. While wages are up, it is unable to match or sustain the real estate price appreciation. On the flip side, interest rates are still at historical lows; construction activity is flattening out; and the stock market, which is a leading economic indicator, appears to be searching for direction at the time this is written.

 As a student of the real estate market, I have seen this type of market before and, as surely as the sun will set in the west, this market will level out and eventually decline. The only question is when. 

 Real estate cycles in San Francisco span 10 to 11 years, peak-to-peak and valley-to-valley. We bottomed out in 2009 and normally go up for six or seven years before reaching the peak. So, based on this and our economic indicators, we have had a longer than normal appreciation cycle.  

What does this mean for the consumer? The best advice is to work with a top-notch real estate professional that is on top of the market to provide you with the insights necessary to fulfill your goals in this changing marketplace.

For sellers, these are the highest sales prices we have ever seen in San Francisco. With the shortage in inventory and strong buyer demand, if priced correctly, you should receive multiple offers and get the highest possible price. During any real estate cycle, there are a couple of years of strong appreciation before the rate of increase slows down. We have already seen this cycle for five years and sellers are positioned perfectly to reap the benefits.

For buyers, I recommend proceeding with caution. There were plenty of opportunities to get into the market the last few years. Currently prices have increased, interest rates have stayed low, but the opportunity to obtain a historically great interest rate is still there. In the near future, even if prices come down, interest rates will go up, which might neutralize any financial differences. I urge buyers to consider all factors before purchasing.

For people who are looking to trade up, this market is presenting an opportunity to reposition your real estate portfolio for the long term as you can lock in on a low interest rate now and pay it back with tomorrow’s inflated dollars.

 This will be an interesting fall selling season and should give us a hint of what the real estate market holds for us in 2020.

John M. Lee is a broker at Compass specializing in the Richmond and Sunset districts. For real estate questions, call him at (415) 465-0505 or email johnlee@isellsf.com.