It’s natural to wonder what is going to happen next.
Today’s hot employment report squashed any hope for lower rates this summer. Home sales are waning. The realtor cartel is a mess. Yet, more listings are hitting the market at all-time high prices without any regard for market conditions.
Home sellers don’t care – they just want their money.
Let’s reflect upon a case we had here at the end of 2022. We know that Carmel Valley has excellent schools and tend to draw the affluent family buyers, which is great for those who can afford $3,000,000+ now.
One of the first neighborhoods built in Pacific Highlands Ranch was a group of what is now considered smaller homes on tiny lots with zero lot lines.
After the mortgage rates took off in 2Q22, the sellers there waited as long as they could – but finally started dumping on price to get out. These are in the order of closing dates – check the first four sales:
When we listed 6065 African Holly, I was determined to stop the bleeding. What good would it do to to list for $1.7 or $1.8 when the last three sales were $1,600,000?
It worked. We got a bidding war started and a cash buyer who was picking up rentals in the neighborhood was the winner, paying $1,660,000.
What’s happened since?
The next four sales sold for about the same, roughly, with three of the four homes taking weeks to find a buyer even though this is PHR entry-level and these are walking distance to Trader’s Joe which has to account for something.
The most interesting fact?
Not one home has listed for sale in the last 12 months!
NO ONE IS MOVING!
The same thing is happening in La Costa Valley, a master-planned community of 1,075 houses built mostly in the late 1990s – and stock full of empty-nesters loaded with equity. In 2024, there have been 12 LCV listings so far, out of 1,075!
I think we could see two things coming down the pike:
As the market slows, fewer people want to sell because they get the idea that the market is ‘bad’.
Estate sales make up most of the inventory.
It would mean that inventory in the newer neighborhoods (less than 30 years old) will dry up like a peach seed, and most of the action will be selling the fixers in the older neighborhoods.
Zillow has every reason to be the nation’s real estate cheerleader since they derive the bulk of their income from realtors. They had been predicting 3% to 6% appreciation locally this year….at least up until two weeks ago.
Something has changed:
Carlsbad NW – 92008
Carlsbad SE – 92009
Carlsbad NE – 92010
Carlsbad SW – 92011
Carmel Valley – 92130
Del Mar – 92014
Encinitas – 92024
La Jolla – 92037
Carmel Valley out in front with a +2% over the next year? Yikes!
It means they think that everywhere else will be flat, at best.
Carmel Valley has had a real shortage of inventory lately, and from what we can tell from the bidding wars on the creampuffs, there are dozens of buyers in the hunt. This closed for $3,100,000 cash, which was $115,000 over list.
Above are the 2024 listings that have already closed escrow in Carmel Valley – it’s very competitive.
We’re heading into a new era where buyer-agents will be appreciated less than ever, if at all.
Consider this – in a bidding war where the sellers listing agent will be choosing between similar offers, won’t having a solid, reputable buyer’s agent on your side be helpful?
Not only will the buyer get strategic advice on making a more-lucrative offer, but the buyer-agent’s reputation will also play a role in the outcome. The listing agent will want to select a deal that has the best chance of closing easily, and their comfort and familarity with the buyer-agent will make a difference here in a tight race!
Michele and I cruise around twice a week looking at the new listings.
I love it because I get to pontificate about the business and give her guidance like a good broker should.
She asks many great questions, and today was no exception. She had read the blog post from 2009 where I said agents should know the hot buys. She asked about the definition of a hot buy.
Today there is an easy formula to identify a hot buy:
If the number of Zillow Saves is 5% or more of the Zillow Views, it is a hot buy.
If the Zillow Saves are 7% to 10% of the Zillow Views, grab your checkbook – because it is sizzling hot.
Of course, now that I’ve divulged my tip, a few agents will manipulate the counts so if the listing agent is a known scumbag, then don’t trust their counts. You know who the scumbags are, don’t you?
We came up with another idea too.
If the house is one-story, newer, and the price is attractive, it’s a hot buy. But then we went one better.
If the house has two of the three (one-story, newer, attractive price), it’s probably a hot buy anyway.
If the list price is attractive, that is enough to power any sale, but if the price is attractive and the house is either one-story or newer it will probably be a hot buy. In 2024, a newer one-story house doesn’t even need to have an attractive price – there are so few of them that they can ask anything they want.
We saw three houses for sale today that will demonstrate my theorem. All are one-story homes that have been improved and should appeal to the maximum number of buyers – especially the seniors who have the money and will only consider a renovated one-story in a good location with some view:
For those who desire a full ocean view from both the family room AND the primary suite and can live with 1,620sf built in 1986 on a smaller lot in Carmel Valley, you can’t do much better than this for $2M:
If you want a fully-renovated one-story house just east of the freeway in Solana Beach that overlooks the golf course, then this would be worth a look:
Want to step it up and buy a brand-new 4,194sf one-story house with ADU in a prime Del Mar location with ocean view – and price is no object? Then this is for you, priced at $16,995,000:
Why would these three list for sale now instead of waiting until next year? Well, I can’t help you with that. It is the most lucrative time ever for buyers to pause during the absolute peak wait-and-see period of all-time.
So if 1-2 of these go pending by the end of the year, it will show that the premium properties are always hot – and I wouldn’t be surprised if they all sell.
As we roll into the Lowball Season, we’re reminded of what happened in Carmel Valley at the end of 2022. Everyone’s home equity was built up fast and easy over the last 3.5 years, and the more desperate sellers might give it back in big chunks if they had to….and with 8% mortgage rates, they might have to.
How did it turn out last year?
The fourth quarter of 2022 was brutal for the entry-level homes in Pacific Highlands Ranch:
The list pricing was fairly optimistic, and after 30+ days on the market, the lowballers came out. By the time my listing hit the market (the last on the list), our list price was revised down to $1,599,000 to ensure we would sell right away – and hopefully for more, which we did, and stop the trend.
Did the pricing bounce back this year?
The first sale of 2023 closed right away for $1,690,000, and it seemed like the comeback was underway. But then the next sale was $1,560,000 – and it has hampered the pricing ever since:
The big threat isn’t going to be foreclosures. It will be the equity-rich sellers who dump on price to get out – and they will impact future sales. A couple of lowballs can turn into a trend!
