Real Estate

Real Estate: John Lee

2020 Real Estate Market Review

By John M. Lee

As 2020 comes to an end, we have had a real estate market like no others we have ever had!

With COVID-19 dominating every aspect of our lives, I am guessing and hoping that this is a once-in-a-lifetime event, which makes evaluating the market difficult. Our economy is in a recession and the rental market is as weak as we have seen it. Sales stayed strong in some segments and weak in others. 

What will 2021 bring? The following is a short recap of what happened in our local San Francisco 2020 market and a forecast for the short-term.

 The market came to a standstill for a couple of months after the announcement of shelter-in-place in March. But real estate was re-classified as an essential business shortly after, and the activity came roaring back in May. It remained steady throughout the year with mortgage interest rates actually decreasing from 3.75% to about 3.0% by the end of the year. This is in the all-time-low territory and contributes greatly to the strength of this market.

 We ended 2018 with an increase of 1.6% in the number of sales from 2017 and a median price increase of approximately 8.1%. We ended 2019 with a 3.9% decrease in the number of sales from 2018 and price increase of 2.1%. In 2020, our projected number of sales are about 10.6% below last year and about a 1.4% increase in the median price. The decrease in sales is a direct result of losing sales in March and April and the uncertainty in the marketplace.  

 What do these numbers mean? Have we reached a plateau yet? How come prices did not drop? Will prices continue to rise? 

In a normal world, the answers would be easier to forecast. In a COVID world, the answers are dependent on if we can get the virus under control in 2021. Also, 2021 will be a presidential transition year which will mean new policies and tax implications.

 In a normal market for goods, when sales decrease or level out as we are seeing, prices tend to drop because of lower demand. But the real estate market is more complicated than simple economic theory because there are many other factors that can affect it. What we are witnessing in today’s market is a rotation of buyers selling in high-density markets, like condos, and moving into lower-density environments, like single-family homes or from the city into the suburbs. So, our high-rise condo market downtown is slow with price drops, but our neighborhoods with single-family homes, such as the Richmond and the Sunset, are still appreciating. The outlying areas such as the East Bay, Napa and Sonoma have also been red hot.

 Readers of my columns know that our market bottomed out in 2009, and we have been in a strong recovery mode ever since, resulting in large double-digit appreciation from 2012-2015. The next two years came with slower or normal rate of appreciation. In 2018 however, buyers came off the sidelines thinking that they better buy before the mortgage rates go up much higher. And with the same level of listings (supply), they drove the prices up. 2019 was a year of hesitation with both buyers and sellers. In 2020, we continue with the same trend with much unknown ahead of us.

 At the end of this year, I saw couple of foreclosures which I have not seen for a long time. Both of them were construction projects where the investor read the market wrong and the lender foreclosed. With many more mortgages under forbearance where the borrower is not paying the lender because of the pandemic, will there be more foreclosures in 2021? I would think so. We continue to see a net migration of people out of San Francisco because of high prices and the ability to work remotely, so they do not have to be as close to their place of employment. The good news is that interest rates should remain low for the foreseeable future.

 So where is the market heading in 2021? I believe that we have peaked in our prices and next year we will see a relatively flat market. We are fortunate in San Francisco that despite the problems we have, we are still a desirable place to live and even when prices decrease, it does not drop too much. And over time, it has always come back strong! So, if you are a seller, your window of opportunity to take advantage of these high prices is limited. If you are a buyer, I would recommend proceeding with caution as price appreciation, if any, will not be high the next few years. If you are a real estate investor, now is a good time to evaluate and perhaps reposition your portfolio for the future. Many more are looking at income rather than appreciation.

I enjoyed speaking and exchanging emails with you this past year. Many of you had some great questions and insights about our market and the Richmond and Sunset Districts. I wish you a safe holiday season and a prosperous 2021!

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

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