Real Estate

Real Estate: John M. Lee – Richmond District

2022 Richmond RE Review

The Richmond District single-family median home prices finally took a dip after rising 10 years in a row, with prices declining by 8.9% and the number of sales by 9.3% in 2022. But these numbers do not tell the whole story as the market was a tale of two halves.

The Richmond Home Sales Comparison Table shows the results in 2022 as compared with prior years broken up by quarters.

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 2022, there were 196 sales versus 216 for 2021 and 212 for 2020, a 9.3% decrease from 2021 and a 7.5% decrease from 2020. The annual median price comparison shows an 8.9% decrease year-over-year as compared to an increase of 20.2% from 2020 to 2021. The amount of marketing time to sell a home was about 11-15 days for 2020, 2021 and 2022, all indicating a very good market. However, these annual numbers do not tell the whole story.

If you analyze the attached chart, it shows that a majority of the sales occurred in the first half of 2022 and all the appreciation was in the first six months. In the last half of the year, sales slowed, and the median prices dropped from about $2,587,500 in the second quarter to $1,776,000, a decrease of 31%! To put that into perspective, we are back to 2019 median prices, so we lost about three years of appreciation.

This however does not mean that home prices dropped 31%, but that we had more lower-priced homes selling in the Richmond District and not the more expensive ones.

In 2022, the major stock indexes fell about 8 to 31% at the writing of this article, with a downward trend and high volatility throughout the year. The consumer confidence index dipped, then rose slightly at the end of the year.

Our unemployment rate has come down from the high reached at the peak of COVID and is currently at about 4% in California and 2% in San Francisco.

The interest rate has gone up from about 3% at the beginning of the year to 7% at the end of the year for a 30-year fixed-rate mortgage. Inflation was in the 8% range but is currently moderating.

The foreclosure of homes is still virtually non-existent; however, the delinquency rate for mortgages is rising which will inevitably lead to foreclosures.

Our real estate market did very well at the beginning of the year with multiple offers and bidding above asking prices, and then started slowing down in May, coinciding with the rise in interest rates. The Feds, in an effort to slow down inflation, started increasing the fed funds rates by .25% in March, then .5% in May, and then more aggressive increases of .75% from June to November, and another .5% in December for a total of 4.2% in 2022. They signaled at the end of the year that there will be another .75% increase coming up in 2023. The amount of increase translates roughly to about 20-25% less borrowing power for buyers.

An interesting question often asked is, “Why did buyers chose to purchase at the beginning of the year knowing that prices will come down?” The answer lies in that they can lock in at those historically low interest rates for 30 years, thus the reason for the bidding wars at the beginning of the year. Now the market has turned, buyers can pay a lower price for homes, but their monthly payments might be the same or higher.

Locally, the demand in San Francisco and the Richmond District will continue to be OK. It looks like interest rates are plateauing right about here. The refinance market has dried up and purchases are down, so the competition for funds is lower now, which can cause interest rates to actually decrease a bit.

My prediction for 2023 is that we will continue to have a slower real estate market than previous years. It will be a very balanced market with more negotiating power for buyers. Inventory will be pretty tight as owners who do not have to sell will probably elect to hold onto their properties until the market gets better.

Therefore, if you are contemplating buying into the real estate market, there will be opportunities. If you are planning on selling, keep in mind that there is a short supply and, if priced and marketed correctly, you should still get a pretty good price. If you want to reposition your real estate portfolio, this is an excellent time to do it and take advantage of less competition.

Wishing you all a happy new year and all the best in 2023!

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

Richmond Home Sales Comparison

(By Quarter)

2020

# of SalesAverage PriceMedian PriceDays on Market
42$2,291,752$2,075,00013
372,190,6351,940,00015
712,443,9302,280,00014
622,795,9092,077,50012
2122,472,9092,100,00013
22.5%*1.2%*0%*-7.1%*

2021

# of SalesAverage PriceMedian PriceDays on Market
335$2,688,097$2,460,00010
532,420,0942,305,0009
502,981,2362,650,00011
782,844,6402,710,00012
2162,746,7232,525,00011
1.9%*11.1%*20.2%*-15.4%*

2022

# of SalesAverage PriceMedian PriceDays on Market
472,799,5492,350,00013
682,856,0412,587,50011
432,303,7532,175,00014
382,436,0881,776,00014
1962,639,9102,300,00013
-9.3%*-3.9%*-8.9%*-18.2%*
*Percent change from previous year.

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