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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.

With inventory of homes being half of what it was two years ago, buyers and agents are having to consider short sales – besides, they are EVERYWHERE now.

Here are the detached listings that have been marked pending or contingent this month:

If the banks cut loose, and there were dozens of REOs to choose from, the short-sales would fall out of favor immediately. Plus, also note how many listings are not selling (896) – there were only 598 closed sales in these same zips for the entire second half of 2008!