John M. Lee: Richmond market review

By just about all indicators, the real estate market is currently bouncing at the bottom of the real estate cycle and is about to recover. The results in the Richmond District for 2010 are encouraging, showing many more homes sold with only a slight decrease in the median price. The Richmond Home Sales Comparison Table shows the results in 2010 as compared with prior years.

The data was gathered from the San Francisco Association of Realtors' Multiple Listing Service and consists of single-family home sales in the Richmond, Lake, Presidio Heights, Jordan Park, Laurel Heights, Lone Mountain and Sea Cliff areas.

In 2010, there were 188 sales versus 135 for 2009 and 178 for 2008, an increase of 39 percent from 2009 and an increase of 5.6 percent from 2008. This is the highest number of sales in the Richmond District since 2005.Ê This indicates that buyers are coming back into the market, realizing good values, and discovering the Richmond once again.Ê

The amount of marketing time to sell a home decreased to 66 days in 2010 from 69 days in 2009, versus 43 days in 2008, a decrease of three days, or 4.3 percent, from 2009 and an increase of 23 days, or more than 53 percent, from 2008. This is roughly the same as last year, but substantially longer than years past in part due to tougher lender underwriting requirements for loans and the fact that buyers are taking longer to make purchase decisions.

The annual median price comparison shows a 1.5 percent decrease year over year as compared to a 15 percent decrease from 2008 to 2009. This is a good sign and indicates that we are hitting the bottom in terms of sales prices.

In 2010, we saw the end of federal and state tax credit incentives on sales that went into contract by June 30. Some buyers enjoyed the benefits of getting an $18,000 tax credit on sales under $800,000 if they qualified. This had the effect of encouraging some more sales in the first half of the year.

There were some concerns that this would bring home sales to a halt the second half of the year, but that did not materialize in the Richmond District, as most of our homes did not qualify for the tax credit due to our higher prices.

In the second half of the year, we saw our consumer confidence rise to the highest level since 2007 with the stock market reaching two-year highs, flat unemployment rates hovering around 9.8 - 9.9 percent, and the Consumer Price Index (CPI) rising slightly; all positive signs for the real estate market that we are bottoming.

Mortgage interest rates were dropping most of the year until late December, when it went up slightly by about a quarter to a half of a percentage point. But, historically speaking, this is still a great rate as 30-year fixed rate mortgages under five percent are still available. In addition, the early indication from holiday retail sales are up, signaling further economic recovery is on the way.

As I mentioned many times in the past, the real estate market lags the general economy, meaning that it will follow the other markets up. The general sequence is that as the economy gets better, more people have jobs and get higher wages, so they feel more comfortable about getting into long-term commitments, like mortgages to purchase homes, thus fueling the real estate market and starting our next up cycle!

Locally, the demand in San Francisco and the Richmond District will continue to be good. As I learned throughout my career, San Francisco real estate is desirable and our market tends to rebound very strongly once negative variables are removed. Prices are back to about 2004 levels, are proving to hold here, and should be moving up from this point forward.

Thus, my prediction for 2011 is that we will have a balanced real estate market, where the negotiating power will be fairly even between buyers and sellers, a continuing shortage of good inventory, and level to slightly up prices. Therefore, if you are contemplating buying for the long-term, or trading up, this will be an ideal year to do so.

John M. Lee is honored to have served as the president of the San Francisco Association of Realtors for 2010. He specializes 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.