Mid-Year Real Estate Update

As I write this column, the first half of 2024 is just about over. Each year has its own challenges and this year we have been dealing with rising inflation, stubborn interest rates, the seemingly never-ending battle with crime, homelessness, drugs in San Francisco, and contentious mayoral and presidential races. So, what is the status of our local real estate market now?

I analyzed the single-family home markets in the Richmond and Sunset districts and compared them against the data in San Francisco because these two markets generally track very closely together.

For the first six months of 2024, 90 single-family homes sold in the Richmond, as compared to 61 in 2023, a 47.5% increase. The median price declined from $2.33 million in 2023 to $2,087,500 in 2024, a decrease of 10.4%. The median number of days on the market decreased from 15 to 13. Thus, we had a substantially higher number of sales, lower prices and a slightly shorter amount of marketing time in the Richmond.

In the Sunset, 168 homes sold during the first six months of 2024 versus 150 in 2023, an increase of 12%. The median price went from $1,517,500 in 2023 to $1,600,000 in 2024, an increase of 5.4%. The median days on the market went from 13 to 12 days. In the Sunset, we have more homes selling, an increase in prices and a slightly shorter marketing period.

In San Francisco as a whole, the number of single-family home sales increased by 13.3%, the median price went up by 7.5% and the marketing time went from 14 to 13 days. So, the trend is similar to the Sunset District.

We can conclude that the first half of 2024 in the real estate market is better than last year; sales are more robust and pricing held its own. The Richmond prices are somewhat skewed because of the lower number of sales. The stock markets are at or near all-time highs. Interest rates, though high as compared with a few years ago, have remained steady. It feels like inflation is under control with the Feds finally signaling that an interest rate cut is on the horizon.

As mentioned many times before, real estate is a lagging economic indicator, meaning all the other indicators will turn positive before the real estate market does. It tends to lag by about six months to a year. So now with some of the leading economic indicators turning positive, we are looking at an improving real estate market. We normally get the best prices during spring, with prices trending somewhat lower through summer. This timing feels about right.

The mortgage interest rate has remained at about 7%, but it feels like the buying public is getting accustomed to this rate and used to the thought that locking in at this rate is OK and they can refinance the loan in the future if rates were to drop. And since we have been at this rate for about two years, the prices have adjusted to reflect this new norm.

What has helped this market is that people who bought a home or refinanced in the last few years at 3 to 5% are holding on to historically low mortgage rates and are reluctant to sell. If homeowners need to make a change, many choose to keep the property and rent it out. This leads to a lower listing inventory and buyers having to compete to purchase, thus keeping prices high.

Buyers often wonder why prices are so high in San Francisco. They feel that with rising interest rates, prices should go down. But real estate pricing is more complicated than that. Obviously, interest rates are a factor, but so are affordability, listing inventory, supply and demand, and various other components. Yes, prices are high, but real estate in San Francisco is always expensive. When my parents purchased a set of flats in the Inner Richmond in the ’70’s, they paid $75,000 and thought that was really expensive. We will always feel that way about San Francisco real estate prices.

Normally, the percentage of people who can purchase a home in San Francisco is about 10 to 15%. These are typically your high-earning households. If we look at the demographics of this group, it will be a better indication of where the market will go next. The stock market is at an all-time high, meaning the net worth of people who invested in stocks is probably higher. Unemployment is low, meaning people have jobs and are earning more money than before and can afford to buy at today’s prices. This trend of slow improvement will continue for the rest of the year as President Joe Biden has a vested interest in keeping the economy strong going into the election, which bodes well for our market.

As always, if you are thinking about buying and selling, I would strongly recommend that you consult with a Realtor, accountant and perhaps an attorney prior to making any major real estate decisions.

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 johnlee@isellsf.com.