Mid-year real estate update

John M. Lee

As I write this column, the first half of 2010 is just about over. We have had a tumultuous stock market, doing extremely well the first quarter and very volatile as of late. But what about the real estate market? Let us look at some data and really decide for ourselves where the market is at currently and try to figure out where it will be going.

I examined the single-family home markets in the Richmond and Sunset districts, because these two markets generally track very closely together, and compared them against the data for San Francisco as a whole.

For the first six months in 2010, 79 single-family homes sold in Richmond, versus 54 in 2009, an increase of 46.3 percent! The median price went from $955,000 in 2009 to $1,020,000 in 2010, an increase of 6.8 percent. The average number of days on the market decreased from 64 days to 59 days.

The same volume trends, while not as dramatic, were also apparent in the Sunset, where prices stayed more or less the same. There were 138 homes sold during the first six months in 2009, versus 176 in 2010, an increase of 27.5 percent. The median price went from $735,000 in 2009 to $736,500 in 2010, a negligible increase. The number of days on the market went from 54 in 2009 to 51 days in 2010, a 5.6 percent decrease in marketing time.

As a comparison, in San Francisco as a whole, the number of single-family home sales increased by 18.1 percent and the median price rose by 5.8 percent over the first six months.

Thus, it is evident from the data that all indicators are pointing in a positive manner after the first six months of 2010. The number of sales is up throughout and median sales prices are higher than in 2009. So, it appears that the market bottomed out in 2009 and we have started on the upside of a new real estate cycle, as I predicted in last year's mid-year review.

Nationally, sales numbers are indicating that the housing industry has bottomed out and are starting to trend upwards. The recovery, however, will be a steady one, with appreciation between 0 - 5 percent per year, depending on neighborhood.

Although the recent stock market volatility and the European debt crisis continues to rattle investors and potential homebuyers, the crisis effectively pushed mortgage rates back to historically low levels, increasing affordability. The near-term employment outlook is also improving as indicated by recent surveys of Bay Area employers, and this rebound in job growth should support continued home sales, even as government incentives are slowly being phased out.

Foreclosures and distressed sales might keep some downward pressure on pricing. However, I believe the banks learned from their mistakes and currently have a strategy in place whereby they will not be flooding the market with foreclosed homes, thus artificially dropping prices.

So, my advice is that if you are thinking about buying and staying in the property for the next five years or more, this is a great time to purchase as prices are good and interest rates are down, resulting in higher affordability. If you get locked into a 30-year fixed rate loan now, chances are that when you look back a few years from now, you will realize what a tremendous rate you received. If you are thinking about trading up, it is a great time to do it because though you are selling at slightly lower prices than a few years ago, you are also purchasing at a much lower price, and you will come out ahead on the trade. If you are thinking of a straight sale, you will be getting a higher price than what you would have received the last couple of years.

As always, I would strongly recommend that you consult with a realtor, accountant and, perhaps, an attorney prior to making any real estate decisions.

John M. Lee is a top-selling broker at Pacific Union specializing in the Richmond and Sunset districts. If you have any questions regarding real estate, call him at (415) 447-6231 or e-mail: johnlee@isellsf.com.