Year-to-Date Summary for North SD County Coastal Region (La Jolla to Carlsbad)
While it feels like prices have been going up, on average it looks like the NSDCC pricing has merely extended the trend around $380/sf that began in early 2009. It appears that buyers were encouraged further this year when mortgage rates dipped under 4% in late-2011, as sales spiked in early-spring. But there hasn’t been a break out of the pricing range, at least not yet:
Sellers deserve credit for their willingness to sell their house for what the market will bear, because on average it wasn’t for much more money than they could have gotten over the last couple of years.
Will it continue through the rest of the year, or have most, if not all, the motivated sellers been cleared out? Second-half sales over the last three years around NSDCC have been eerily similar, but they didn’t have a major election to distract them. I think we can expect sales to taper off steadily the rest of the year, just like the last three years:
What about the distressed sales? Especially the possibility of them undermining any price improvement? Thankfully the number of regular sales has been growing faster than either the REOs or short-sales, keeping the share of distressed sales steady at 18%, just like last year:
How “normal” is the current market? If you gauge it by the number of sales, it is as normal as possible. In the NSDCC region, we have averaged 1,995 detached closings between Jan 1st and Aug. 31st over the last 13 years. In 2012 we had 2,028 closings – the closest to the 1,995 average of any of the 13 years – and it’s also the median:
What about pricing – it hasn’t normalized, compared to wages, incomes, unemployment, blah, blah. Maybe not, but the Fed’s policy of keeping rates ultra-low has changed the game. More investors are buying real estate just for the yields, and owner-occupiers are buying houses for $285,000 more than they were in 2001, but making the same payment:
2001 – $540,000 sales price with 20% down and 7.5% rate = $3,797/mo. PITI
2012 – $825,000 sales price with 20% down and 3.625% rate = $3,801/mo. PITI
As a result, pricing has at least stabilized, and if we can erase the boom-boom era of 2004-2008 from this graph, and draw a trend line from before to after, it wouldn’t look that out of line:
The impact of lower inventory? I think it’s just taken out the OPT fluff that we’ve had previously:
Total Detached New Listings, Jan. 1st to Aug. 31st
2009 – 3,748
2010 – 3,977
2011 – 3,923
2012 – 3,327
The inventory drop of 15% doesn’t change much; it’s how all the good buys go flying off the market in this efficient, internet-driven marketplace that has the real impact. The good buys go to the market-educated, well-funded, and most nimble buyers, leaving the junk and over-priced turkeys to the casual observers. No changes are expected to that program.
