Real Estate

Real State: John M. Lee – Sunset District

2022 Sunset RE in Review

The Sunset District’s single-family median home prices finally took a dip after rising 10 years in a row with median prices declining by .3% and the number of sales by 10.7% in 2022.

But these numbers do not tell the whole story as the market was a tale of two halves. The Sunset 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 Sunset, Parkside and Golden Gate Heights areas.

In 2022, there were 460 sales versus 515 for 2021 and 428 for 2020, a decrease of 10.7% year-over-year and an increase of 7.5 % over 2020. The median sales price decreased .3% to $1.7 million from 2021 to 2022 while it went up 12.9% from 2020 to 2021. The amount of marketing time to sell a home is about 11-13 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 median prices dropped from $1.85 million to $1.5 million, a decrease of about 19%. To put that into perspective, we are back to 2020 median prices, so we lost about two years of appreciation.

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

Our unemployment rate has come down from the high reached at the peak of the COVID-19 pandemic 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, then slowed down starting in about 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 choose 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 that 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 Sunset 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 to the 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.

Sunset Home Sales Comparison

(By Quarter)

2020

# of SalesAverage PriceMedian PriceDays on Market
76$1,529,807$1,477,50014
771,569,1171,505,00012
1191,640,5501,525,00013
1561,629,8991,550,00013
4281,604,1521,510,50013
13.5%*1.9%*.7%*-7.1%*

2021

# of SalesAverage PriceMedian PriceDays on Market
92$1,702,355$1,550,00010
1401,831,7291,750,00010
1521,912,9231,775,00011
1311,844,5121,700,00012
5151,835,5231,705,00011
20.33%*14.4%*12.9%*-15.4%*

2022

# of SalesAverage PriceMedian PriceDays on Market
971,885,6231,800,00011
1531,976,7691,900,00012
1231,651,5981,500,00014
871,620,3911,505,00015
4601,800,2061,700,00013
-10.7%*-1.9%*-.3%*18.2%*
*Percent change from previous year.

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