Real Estate

Real Estate: John M. Lee – Sunset District

2020 Sunset Real Estate Review Sunset District

By John M. Lee

The Sunset District single-family median home prices rose for the ninth year in a row in 2020 with median prices appreciating slightly by 0.7% and about the same number of sales as the last couple of years. The Sunset Home Sales Comparison Table shows the results in 2020 as compared with prior years.

The Sunset District single-family median home prices rose for the ninth year in a row in 2020 with median prices appreciating slightly by 0.7% and about the same number of sales as the last couple of years. The Sunset Home Sales Comparison Table shows the results in 2020 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 Sunset, Parkside and Golden Gate Heights areas.

 In 2020, there were 376 sales versus 377 in 2019 and 379 in 2018. The median sales price increased 0.7% to $1,510,500 from 2019 to 2020 and 3.4% from 2018 to 2019. The amount of marketing time to sell a home was about 13-14 days for 2018, 2019, and 2020, all indicating a very good market. The buyer demand is still there through the pandemic to absorb the supply. 

 If you look at the chart on this page, it shows that sales slowed significantly in the second quarter when the coronavirus first appeared. Prices also took a dip due to the uncertainty. However, sales activity just got pushed back into the third and fourth quarters, and the median sales prices did pick up year over year in those quarters.

 During 2020, the major stock indexes are up: the DJIA is up about 6%, S&P 500  is up about 16% and NASDAQ is up 40% as of the writing of this column, rising steadily during the year after a major drop at the start of the pandemic in March. The consumer confidence index took a big dive and continued to stay down throughout the year, especially during the latest coronavirus surge. Our unemployment rate has risen to levels not seen since the Great Depression and stands currently at about 9% in California and 7% in San Francisco. The interest rate for a 30-year fixed-rate mortgage decreased from about 3.75% to 3% by the end of the year – very low rates by historical standards. The foreclosure of homes is still virtually non-existent; however, the forbearance rate for mortgages is high which will inevitably lead to foreclosures. 

 Even with all this bad news, our real estate market has held up remarkably well, which points to the economic inequality we have in San Francisco. Our service and hospitality industries have been decimated with the shutdown orders. However, the tech and biotech industries are booming, along with other professions where people can work remotely. With our high prices, typically only these highly paid professionals can afford to purchase homes in San Francisco, and thus our market continued to move along unabated.

 The real estate market lags the general economy, meaning that it will follow the other markets up or down. The general sequence is that as the economy improves, more people have jobs and receive higher wages, and they feel more comfortable about getting into long-term commitments like mortgages and purchase homes, thus fueling the real estate market and starting 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 Sunset 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. The decrease in interest rates and the gains in the stock market increased affordability and helped with the market.

 My prediction for 2021 is that we will continue to have a decent real estate market, but not as strong as the last nine years. It will continue to be a seller’s market with shortage of good inventory and 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 to take advantage of the still-low mortgage rates before they move up. 

Wishing you all a Happy New Year and all the best in 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 john.lee@compass.com.

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