Real Estate

Real Estate – Richmond District Year in Review – John M. Lee

2019 Richmond District Real Estate Review

By John M. Lee

The Richmond District single-family home prices rose for the eighth year in a row with median prices appreciating by 5 percent in 2019 and a 122 percent increase from the low of 2011. The Richmond home sales comparison chart shows the results in 2019 as compared with prior years.

 The data were gathered from the San Francisco Association of Realtors’ Multiple Listing Service and consist of single-family home sales in the Richmond, Lake, Presidio Heights, Jordan Park, Laurel Heights, Lone Mountain and Sea Cliff areas.

 In 2019, there were 173 sales versus 190 for 2018 and 160 for 2017, an 8.9 percent decrease from 2018 but an 8.1 percent increase from 2017. The annual median price comparison shows a 5 percent increase year over year as compared to a 6 percent increase from 2017 to 2018, and a 2.8 percent increase from 2016 to 2017. 

The amount of marketing time to sell a home was about 14 days for 2017, 2018 and 2019, all indicating a very good market. These are results of buyer demand in excess of seller supply, a stable economy, low unemployment rates and fairly high consumer confidence – all positive signs for the real estate market. 

 During 2019, the major stock indexes were up about 30 percent at the writing of this article, rising steadily during the year with a few minor hiccups along the way. The consumer confidence index was positive throughout the year with consumers feeling good about the direction of our economy. Our unemployment rate has been steady throughout the year staying at about 4 percent, a level that represents full employment in the eyes of most economists. 

The interest rate has decreased from about 4.5 percent to 3.5 percent by the end of the year for a 30-year fixed rate mortgage, very low rates by historical standards. The foreclosure of homes is still virtually nonexistent. The prices of homes have risen substantially above that of the last peak in our real estate cycle so that almost everyone has equity in their properties.

 The real estate market lags the general economy, meaning it will follow the other markets up or down. The general sequence is that, as the economy improves, more people will have jobs and receive higher wages and they feel more comfortable about getting into long-term commitments, like mortgages and purchasing homes. This fuels the real estate market and starts our up cycle. Our market bottomed in 2009 and with each cycle, there are two to three years when we get substantial double-digit appreciation. We have passed that point and are currently seeing the slowing of appreciation. 

 Locally, the demand in San Francisco and the Richmond District will continue to be good, but price appreciation has slowed down from double digits to a more sustainable rate. There were some properties listed toward the end of the year that were withdrawn from the marketplace because they did not sell, especially among the higher-priced homes in the neighborhood. The decrease in interest rates and gains in the stock market increased affordability and helped with the price appreciation in 2019.

 At the beginning of 2019, there was much talk about how the upcoming initial public offerings (IPO) from tech companies were going to drive housing prices way up. In fact, there were people who claimed that houses could double. One person even boldly predicted that the median prices in San Francisco would be at $5 million. Needless to say, those people are nowhere to be found now and are keeping a low profile. In fact, most of the companies that went IPO are selling at prices below their offering price. There are employees who made money on the IPO but the housing effect has not been as pronounced as these “experts” projected.

 My prediction for 2020 is that we will have a decent real estate market but not as strong as the last eight years. It will continue to be a seller’s market with a shortage of good inventory and a leveling 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 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 and also and take advantage of the still low mortgage rates before they move up. 

Wishing you all a happy new year and all the best 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 john.lee@compass.com.

 


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