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Just the fact that so many more higher-end sales are closing these days is noteworthy, the NSD County Coastal sales of detached $1,000,000+ homes have increased 55% on a year-over-year comparison (and if you take out La Jolla, the others increased a total of 79%!)

Let’s chart the $1,000,000-plus market. Here are the number of active and pending detached listings, the 2009 and 2010 closed sales between Jan. 1 and March 10th, and the number of trustee sales YTD of SFRs that have a Foreclosureradar value of at least $1,000,000:

Sales are healthier, how does pricing compare?

Price will fix anything!

The new year is barreling down on us, and before you know it we’ll be in the ‘spring-kick’ season. How is it looking so far?

I want to update the previous stat check from a week ago – it wasn’t balanced due to fewer business days/more weekends.  Let’s compare the first 15 days of January, that way every year will have two weekends included, instead of the previous Jan. 1-11 comparison.

We can refer to the 2003-2007 period as the ‘steroids era’ of mortgage lending, and consider those stats hyped up.  All years are included below:

January 1-15

You can see a historic timeline just in these numbers. In 1997, Bush passed the $500,000 tax exclusion for couples who owner-occupied for two-out-of-five years, and by 1999, the specuvestors were flipping houses. They lost some steam after 2001 because the thrill was gone after the second move, and buyers were drying up, right in line with the usual 10-year real estate cycle – in fact, a downturn was overdue.

About then there was an audible gasp from the Calabasas area, and the next thing you know CFC was flooding the streets with neg-am mortgages – and by 2003 the market took off like a rocket. So let’s call the 2003-2007 period the ‘steroids era’ of mortgage lending, and not use those numbers for comparison.

Instead, let’s look at the 1999-2002 era as at least being more normal than any year since (but in reality we haven’t had a normal year around these parts since 1985!). In 1999, the flipper tax exclusion helped to boost sales, plus the interest-only mortgages were the loan du jour – and both are still available today. In addition, we have much lower rates, and higher loan limits today, so let’s at least call the 2010 market, ‘semi-juiced’, and compare to the 1999-2002 era which had some juice to it too:

So we’re not quite back to turn-of-the-decade numbers, but there is a slight resemblance with the number of sales. Could we call it ‘close-enough’, just because the ultra-low inventory is impeding sales? What are other factors? The number of sales should be higher once the late-reporters wrap up, that usually adds 10%. Currently there are multiple offers on every decent-priced listing today, and if it weren’t for the graft and corruption among agents, there would be more sales at higher prices, probably at least 70-90 sales for this period. But the price has to be right – look at the disparity between active and pending listings in North SD County Coastal:

1,124 Actives: LP=$680/sf, 121 DOM

289 Pendings: LP=$375/sf (x 95% = $356/sf SP), 71 DOM

There shouldn’t be any fear of additional foreclosures, in fact; the more, the better. They are the best chance of finding more reasonably-priced homes that you can buy!

How is the 2010 market comparing with previous starts?

North SD County Coastal Detached Homes (from Carlsbad to La Jolla), during Jan. 1-11:

The lower number of listings is contributing to the constricted-inventory conditions, and the average list-price-per-sf is reflecting exuberance on behalf of the early listers – we’ll see how they do.

The very-low number of closings makes it look like things fell apart towards the end of 2009, but was there a big rally to close before year-end?

North SD County Coastal Detached, DECEMBER:

Yep, there was a push to close at the end of 2009 – the industry is starved for transactions.

Over 2009 it looks like we just stumbled along in North SD County Coastal region, in spite of being 18% off peak pricing. Here are the yearly totals:

North SD County Coastal Detached, YEAR

If there were more well-priced properties, we could sell twice as many homes. Back in the day, everything was selling, even the crappy deals. Today the buyers are much more discerning, and if the price ain’t right, no sale.

As we wind up 2009, here are more sales statistics.  You don’t see much extra benefit from the tax credit in the November closings – there was only 10% increase in SFR sales, Y-O-Y, and 29% increase in condo sales.  Did more pending sales get pushed into December or beyond?

Or without the tax credit, would sales have declined Y-O-Y?

What can we expect for 2010? Let’s review the stats (2009 numbers are up-to-this-morning):

Even though we’ve had 20% fewer listings this year, detached closed sales have already surpassed last year’s total. It looks like the intensity is rising, but is it? We saw on video a bunch of high-enders get marked pending recently, has the whole market been cooking?

Here are the number of detached homes that were marked pending each month:

This month’s decline of new pendings could have been due to buyers rushing to buy in the previous months due to the tax credit, or just sheer exhaustion of seeing few deals and lots of junk all year.  Plus, 92% of this month’s new pendings are still pending, where most of the previous months have already closed.  The final tally for December is likely to be under 900.

While there’s been a flurry of activity since the first quarter of 2009, it looks like we lost some momentum right here at the end.  But if there were more good homes for sale at attractive prices, sales would be better.  The latest tsunami warning from B of A is to expect an upsurge in REO listings around April 1st, which will likely be another cruel April Fool’s Day joke. As long as the inventory is restrained, the market’s urgency is likely to stay like we’ve been seeing it – full of frustration and anxiety!

Local Boy wondered how Carlsbad was holding up – here’s a snapshot of the fourth quarter detached stats for North SD County Coastal region. The area category called ‘High’ is RSF, Del Mar, Solana Beach, and La Jolla. The 2008 stats were based on Oct. 1st to Dec. 18th:

With roughly 10% declines in pricing, sales have increased 28%, 40%, 38%, and 74%, respectfully. It appears there will be some momentum rolling into 2010!

It has been a wild 6-7 months – ever since March when mortgage rates dropped under 5%, the buyers have been very active.  Many here thought that worsening economic news would temper buyer enthusiasm, but lately it’s ramped up instead.

Why?

In our first installment we noted the biggest reason – prices are lower than they used to be, and apparently there are motivated buyers that want/need a house bad enough that prices must be low enough for them.

We also noted how the internet has empowered people to search for homes, and serves as a gut check when people see properties they like, go flying off the market – the anxiety starts rising.

The realtor shenanigans being deployed don’t seem to turn off the motivated buyers, if anything they appear to get more anxious the next round, and bid stronger.  Their realtor should control the situation, but they get anxious too, and tell the client to keep bidding higher.

Then you have people who just buy because they want to buy real estate, and in many cases don’t put any more thought into it.

In summary, tread carefully, but keep looking!

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The CAR president sent a letter to realtors this week that Kris quoted on her blog:

The upshot is that, statewide, we can expect the median home price to rise 3.3 percent to $280,000 in 2010, while sales will moderate to a more sustainable pace, posting a 2.3 percent decrease next year. 2010 should mark the beginning of a “new normal” for California’s housing market, and likely will feature a steady stream of sales driven by distressed properties in the low end of the market, coupled with moderate home-price appreciation.

I commented that the guy is talking out his ear, and that 2010 sales in San Diego would be 20% higher than 2009 – maybe we’re different here? (I don’t think so).  I know that might sound somewhat bullish, but I’m not enthusiastic about prices increasing. 

I think as prices go lower, next year’s demand will get even hotter, as long as the Fed doesn’t mind throwing another trillion or two at MBS market.

Here’s why.  Increasing sales counts will be fueled by the lower-end, but even the higher end buyers should be delighted to see more REOs coming to market, giving some relief to the stand-off.

Look at this chart of SD attached and detached sales, and cost-per-sf:

If we just see the same number of closings in 4Q09 as we had in 4Q08, this year’s total will be 34,392, a 15% increase Y-O-Y. But with the tax credit motivating additional November sales, this year’s count should end up even higher. Here is how monthly sales look on average, using the nine months of 2009:

Buyers have already been reading in the MSM that prices have been going up for 4-5 months straight, and when they hear that sales are spiking, it’ll provide more anxiety. If they don’t extend the tax credit, I think we’ll still see more sales, buyers have the fever. If they do extend, look out!

The lower prices go, the more sales there will be!

Rob Dawg said to keep an eye on seasonality, and I think we can all concur that the real estate market around the holidays is “different” than other months.

I took out RSF and La Jolla, and ran stats on Carlsbad-to-Carmel Valley detached.

Let’s compare 3Q to 4Q:

If you take out 2002 and 2006, the average decline in sales is -26% between 3Q and 4Q.

Last year was the only year where there were double-digit declines in both sales and average cost-per-square foot. What does that mean?

It was my experience that there was a lousy selection of homes for sale (accounting for lower pricing), and/or terrible pricing that left most sellers waiting.

The numbers for July and August of 2008/2009:

Sales: 292/268
$/sf: $388/$340

After the late-reporters we should see that we’re on the same track for sales this quarter as 3Q08, but running around -12% on pricing. Assuming that a trickle of REOs are coming to keep sales about ‘normal’ (-20% or so for 3Q-to-4Q), and we should see them keep pricing 10% to 15% under 4Q08.

If it goes like that, it’ll be setting up a boisterous first half of 2010, with buyers hearing about more people “stealing one from the bank”.

After the display of quarterly sales, reader ’propertysearch’ asked about the pricing curve.

The cost-per-sf measurement is an imperfect tool when analyzing individual homes, there tends to be a complexity of other factors that weigh into the buying decision.  But here it charts the trend fairly well of the quarterly detached home sales from Carlsbad to Carmel Valley:

Was last quarter just a blip in the downward trend, or is the trend looking for the floor?

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How much do the higher-end homes skew the chart?

Of the 506 houses that closed last quarter, 130, or 26% were over $1,000,000.

Below $1M = $309/sf

Above $1M = $533/sf

Maybe I should split them, and do two charts?

The foreclosure tsunami appears to be on its way – new defaults, re-defaults, and foreclosure numbers are rising, and there’s still the backlog of those who are attempting to loan mod that will eventually get denied.

According to foreclosureradar, there are 4,047 bank-owned properties in San Diego County, and 20,215 outstanding NODs and Notices of Trustee Sales. 

Will the impending flood of REOs depress sales and prices further?

I don’t think so.

I think an increase of foreclosures would IMPROVE the coastal market, turning it into a frenzy-like condition.  The lack of well-priced inventory up and down the coast has been very frustrating for summertime buyers, and they’d love to have a shot at buying a well-priced “bank deal”.

The banks are listing their REOs for close-to-retail too, so sales prices would only crash if they did literally flood the market with new REO offerings.

Here are a few examples for evidence that when a decent REO comes on the market.

There were 28 detached north-coastal REOs that closed escrow in the last 60 days, and their average SP/LP was 100%. Fifteen of them sold for OVER LIST PRICE:

It’s safe to say that sales will definitely improve if REOs flood the market – if the bank-sellers need to lower the price to find a buyer, they will. But frustrated buyers just want to buy a house, and if they have to pay list price, or higher, just to get a “bank deal”, they’ve been doing it. It would take a blunder by the banks – unloading hundreds of REOs at a time – to cause prices to plummet.