Real Estate Column: What to Expect in 2009
By Lance Fulford
I’ve been going through the numbers for the last 15 months and after approximately 17 years as an active Realtor, San Francisco homeowner and real estate investor, I’m reminded that although the numbers give us a snapshot of where we are “at this moment” they don’t mean anything unless you put them into context and remember the “big” picture.
As of the end of November, single-family home sales are off by 30 percent even though price/square foot is up by 28.3 percent and inventory has gone from 2.9 months in September of 2007 to 5.6 months at the end of November. The average sales price is off by 2.4 percent. Overall, that’s not bad for single family home owners in our neighborhood.
Condos haven’t held up as well in the most important area, price. Condo prices per square foot are off by 43 percent and the average sold price off by 21.8 percent with average “days on market” up from 42 to 80.
What does all this mean? Where are we going? It tells me “now” is the time to buy while there is an absence of other buyers in the market. The real estate market always has ups and downs but San Francisco is as blue chip as it comes. In the end, it’s all a numbers game based on supply and demand. We will come out of this current economic crisis with, I believe, a national housing shortage because there is no supply being created currently. It’s a repeat on a national level of what happened in California in the 1991–93 downturn only we’ll emerge with substantially lower interest rates than we did at that time so when the back log of demand kicks in owners will be able to ride prices to new highs that are not even imagined currently.
If you think this is crazy then go back and review all of the news articles between 1991-93 and then look at what happened to prices between 1994 and 1998. I’m betting my money on this and looking at all the amazing opportunities on the purchase side of the transaction both here in the City and the greater Bay Area or beyond where bigger differentials are available for the savvy investor.
Based on my greater research and emerging trends, I’m getting the same information through the Linneman Letter (Dr. Peter D. Linneman of the Wharton School of Business) and discussions with other investors and Realtors. My brokerage, Alain Pinel Realtors, is also viewing 2009 as a boon for those sellers able to finance their own transactions thereby reducing their tax burden and giving them a substantially higher return than what is available with the most secure financial instruments and on properties they formerly owned and know intimately.
No, I don’t have a crystal ball. But, I do know that the greatest opportunity for investors happens in down markets. Now is not the time to be running with the herd but time to be looking for great buys in today’s market and preparing for the next cycle. Don’t be overly focused on where we are now but anticipate where we’ll be next.
Lance Fulford, MBA, has been a real estate broker since 1988 and a certified international property specialist candidate and a long-time resident of Eureka Valley. He works for Alain Pinel Realtors. He can be reached at (415) 793-6140.