There has always been some sort of relationship between inventory and sales.

When inventory is tight, sellers have the advantage because buyers get frenzied up and just pay the price to win one.

With a smaller increase in inventory, the frenzy can soak up the supply – sales can increase too because more demand gets satisfied.

But there comes a point when a larger increase in the inventory causes the buyers to back off, and sales stall.

It is a delicate balance because buyers want more choices, but when it feels like not much is actually selling, buyers regain control of the market.  They adopt the wait-and-see approach – even with homes that appear to be well-priced.  They want someone else to go first!

Let’s examine the local data to see how we’re doing.  There isn’t a direct relationship between new listings and sales in the same time period, because many if not most of the sales were listings from the previous quarter or quarters.  But we can use the ratios to compare the velocities:

San Diego County Detached-Homes, 1st Quarter

So far, so good. When we look at the whole county year-over-year, there has been a very similar relationship between new listings and sales in the first quarter.  Let’s check around the northern coast:

North San Diego County Coastal Region, 1st Quarter

We are getting a little queasy now – there were 8% more new listings to consider, and sales dropped off 13% but we know that 2015 was a strong year so tough to keep up.

Let’s break down the NSDCC stats by price to find the trouble:

North SD County Coastal Region, 1st Quarter, UNDER $1,400,000

No big problems there – the Under-$1.4M sales declined, but so did the number of new listings so the ratio was about the same as the previous two years.

But that means the higher-end market isn’t enjoying the same benefits:

North SD County Coastal Region, 1st Quarter, OVER $1,400,000

Yikes, the number of new listings over $1,400,000 zoomed 30% higher than last year, and sales dropped 18% – an example of how too many choices are causing buyers to pause (the identical 178 sales in 2014 and 2016 was a fluke).

The higher-end market could be stalling just because of the additional choices.  If there were only 5% or 10% more listings (like last year), it probably wouldn’t be that noticeable – but the +30% is leaving a mark.

The extra listings may not even be ‘over-priced’ on paper (or by zestimate), but with so many active listings stacking up, the buyer’s confidence in the wait-and-see program is rewarded – and also causing their ‘picky-ness’ to increase rapidly.

There are 186 pendings listed over $1,400,000, so the market isn’t dead.

But last year at this time we had 564 active listings priced over $1,400,000, and today there are 695 listings – a 23% increase.

Having 30% more new listings overall this year but only 23% more active listings today means we were able to soak up some of the extra supply.  But the rest are lingering.

How should these sellers proceed?  Be sharper on price, and if you’re not getting offers in the first 2-3 weeks on the market, then do bigger price reductions faster.

You don’t want to look up in July and wonder what happened.  You know now.

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