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Category Archive: ‘Forecasts’

San Diego Undervalued

The crew over at CL came out with their year-end report today, which included their forecast for 2016.  They consider the San Diego-Carlsbad metro area to be undervalued…..just like San Francisco and Boston(?). They also expect that prices in our area will rise 7.8% in 2016, after going up 6.7% last year:

core1

From MND:

http://www.mortgagenewsdaily.com/02022016_corelogic_hpi.asp

Once again a report on home price changes indicates that appreciation has not yet slowed.  CoreLogic issued a report on its Home Price Index for December of Tuesday which indicates a pick-up in monthly increases.

The index shows prices nationwide, including distressed sales, rose 0.8 percent from November to December compared to a 0.5 percent change from October to November. On an annual basis there was a 6.3 percent gain, the same as the November 2014 to November 2015 pace.

“Nationally, home prices have been rising at a 5 to 6 percent annual rate for more than a year,” said Dr. Frank Nothaft, chief economist for CoreLogic. “However, local-market growth can vary substantially from that. Some metropolitan areas have had double-digit appreciation, such as Denver and Naples, Florida, while others have had price declines, like New Orleans and Rochester, New York.”

Posted by on Feb 2, 2016 in Forecasts, Jim's Take on the Market, Sales and Price Check | 1 comment

San Diego Is Hot

seattle

Zillow came out with their Hottest Housing Markets of 2016, and San Diego didn’t make the list:

http://www.zillow.com/blog/hottest-markets-2016-190331/

They based their ‘hotness’ on a combination of employment, recent income growth, and the expected increase in the Zillow Home Value Index.

They expect that the San Diego HVI will rise 2.7% this year, and I think our employment and income numbers should at least be steady:

sdzhvi

Zillow isn’t considering retirees into their algorithms – especially the rich folks who want great weather to live out their life.  Any of them who have grandkids in the Southwest will give us a look, and when they compare to Los Angeles or the Bay Area, they will like our prices much better.

The towns in the Zillow Top Ten have expected HVI increases of 4% to 5%.

At the end of 2016, let’s see how San Diego compared to their list of ten.  I say that we beat at least half of them – in spite of fewer sales than we had in 2015.

Posted by on Jan 13, 2016 in Forecasts, Jim's Take on the Market, Local Flavor, Market Conditions, Sales and Price Check | 3 comments

Price Increases to Slow

sf

A forecast of 2% to 3% price appreciation for SD in 2016. From HW:

http://www.housingwire.com/articles/35996-is-the-west-coast-about-to-finally-witness-a-slowdown

An excerpt:

“The West, which has largely outpaced the rest of the nation in terms of growth in the last several years, is beginning to see market slowing across some of its major metropolitan statistical areas,” the report said.

The Clear Capital report said that Western markets began to slow in the latter half of 2015, with San Francisco, Los Angeles, and San Diego currently seeing QoQ growth rates under 1%.

Meanwhile, other cities like San Jose and Denver are hovering slightly higher at around 1.3% and 1.5% QoQ, respectively, the report said.

If Clear Capital is right in its annualized predictions, these current levels would project to roughly half of the performance seen in 2015.

http://www.housingwire.com/articles/35996-is-the-west-coast-about-to-finally-witness-a-slowdown

Posted by on Jan 11, 2016 in Forecasts, Jim's Take on the Market | 1 comment

NSDCC Sales in 2016

ratess

There will still be late-reporters, but let’s review the annual NSDCC sales.

Year
NSDCC Annual Sales
Median Sales Price
2012
3,154
$830,000
2013
3,218
$952,250
2014
2,849
$1,025,000
2015
3,011
$1,095,000

What can we expect for sales this year?

Rates have dropped back under 4% this week, which will help.  But sellers will be expecting higher prices in 2016, which will dampen the buyers’ enthusiasm.

My guess for 2016?

Rates at or below 4% = 5% fewer sales.

Rates above 4% = 10% fewer sales.

If rates get into the mid-4s, then my guess is for 25% fewer sales.

The lack of quality inventory will contribute greatly too.  Buyers don’t mind paying a little more if they get something extra for it.

But we need to become accustomed to a regurgitated inventory.

It’s likely that we will continue to see sellers try to get their inflated price year after year, rather than lowering the price until it sells.  Of the 88 new NSDCC listings this year, 61% of them were on the market in 4Q15.  It is a higher-end phenomena too – virtually all listings over $2,000,000 were refreshed.

Posted by on Jan 7, 2016 in Forecasts, Jim's Take on the Market, North County Coastal, Sales and Price Check | 0 comments

2015 Wrap Up

CSISD

This year will be over in hours!

How did we do?

The San Diego Case-Shiller Index is 6.2% higher than it was 12 months ago (October to October readings), which beats just about everyone’s expectations.

But the tony north-coastal region (La Jolla to Carlsbad) had already experienced healthy price gains since 2012.  At the beginning of 2015, lower mortgage rates (3.5% to 3.75%) fueled a surge of sales at higher pricing, but then things mellowed out the rest of the year – just like Rob Dawg predicted!

graph(1)

graph(2)

If it weren’t for the blip in November, it would be clear that the first quarter of 2015 was the best time to sell, price-wise.  If we do get more inventory this year, the same will probably be true – more houses for sale combined with higher mortgage rates = more of a buyer’s market.

Posted by on Dec 31, 2015 in Forecasts, Jim's Take on the Market, North County Coastal, Sales and Price Check | 4 comments

Zillow San Diego Forecast 2016

la jolla 2016

Most national forecasts are predicting a 3% to 4% appreciation rate for 2016, which has to be a safe bet.  If it comes in anywhere from -2% to +8%, you can say that you were close.

Zillow has enough algorithms that they are willing to make predictions for each local area.  They have conflicting numbers, depending on where you look on their website – these are from the Home Values section:

http://www.zillow.com/home-values/

You can see that Zillow was less optimistic last year too.  Most were predicting that mortgage rates would be in the mid-4s by now, so the lower rates in 2015 helped fuel higher-than-expected prices.  Could rates stay right where they are? Maybe, but both Zillow and I think the euphoria will die down next year:

Zillow Price-Appreciation Predictions

Town
2015 Prediction
2015 Actual
2016 Prediction
“Market Temperature”
Carlsbad
+2.7%
+4.8%
+1.9%
Cool
Carmel Valley
+0.3%
+5.4%
+1.4%
Cold
Del Mar
+5.5%
+1.1%
+1.4%
Very Cold
Encinitas
+0.6%
+8.3%
+2.4%
Warm
La Jolla
+2.7%
+6.6%
+2.3%
Very Cold
RSF
+0.4%
+11.1%
+3.7%
San Diego
+1.7%
+6.4%
+2.1%
Warm
Solana Beach
+2.7%
+6.4%
+2.2%
Cold

For some reason, Zillow is also labeling each market from Warm to Very Cold.  The labels don’t seem to correspond to the predictions, so I don’t know their intent – are they just trying to tell you to put on a sweater?

How will buyers feel about getting worked over for that last 2% to 3% when they see they are in a ‘Very Cold’ market?

Posted by on Dec 28, 2015 in Carlsbad, Carmel Valley, Del Mar, Encinitas, Forecasts, Jim's Take on the Market, La Jolla, Market Buzz, Market Conditions, Rancho Santa Fe, Solana Beach | 2 comments

2016 Starts Now

start

Zillow is already one of the primary real estate portals for consumers.  Though there are rumblings from realtors about mounting a challenge, it’s unlikely that anything will topple the Z-brand in the short-term.

As a result, we increased our Zillow advertising this month.

Not only do we expect that more consumers will be using the tools there – but it also seems inevitable that Zillow will develop additional ways to promote their agent-customers too.

I’m not a big believer in anecdotal evidence in the real estate business.  There are too many random events – and sales – created out of dumb luck that you can ever draw many definitive conclusions.

But after not getting any new Zillow inquiries during the previous 3-4 days, I received THREE buyer inquiries on Christmas Day!

There has to be pent-up demand in the marketplace.  It doesn’t guarantee that buyers will pay higher prices, or even buy at all.  But I’m guessing that the streets will be full of lookers in the coming weeks.  On Wednesday – just two days before Christmas – I ran into the second 4-offer bidding war of the week!

I think the heightened activity will cause sellers to add even more icing on the cake – leaving a beleaguered buyer pool with tough choices.  Either bite the bullet and pay the highest price ever, or wait and see.

It will show up differently in different areas.

In neighborhoods where we see a surge of still-somewhat-reasonably-priced listings, the market will look like it’s on fire as waiting buyers gobble them up.  Other areas will look more stagnant than ever (like RSF, which has 25% of the NSDCC active inventory but only 8% of the closed sales over the last 30 days).

My advice to buyers and sellers?

Don’t over-think it – get in, get out, and get on with life!  Don’t let the desire of grinding out the last couple of percentage points get in the way of moving.

Posted by on Dec 26, 2015 in Bidding Wars, Forecasts, Jim's Take on the Market, Market Conditions, North County Coastal | 2 comments

Zillow 2016 Predictions

zillow

The Z Group is probably smart to talk in generalities and just spew the usual stuff about next year – higher prices, tight inventory, and less affordability.  They even dropped a ‘priced out completely’ about those in the bottom-third-of-incomes category.

One thing they mentioned that the industry needs to stop saying:

“Qualifying for a mortgage can still be extremely difficult.”

The underwriting guidelines are standard, not difficult – one size fits all, and either you fit or you don’t. Buyers can find ways to fit – if you are self-employed, you can stop taking so many write-offs for one year only and get a Freddie Mac loan.

Three Zillow predictions for next year:

  1.  Affordability will be a major issue in the 2016 presidential election.
  2. Rents will set new records in 2016.
  3. The consensus of the 100+ experts they surveyed was 3.5% appreciation

There isn’t much any politician can do about un-affordability except give houses away, which I guess is possible.  It’s hard to believe anybody could make a solid case that they deserve to be elected because of their housing policy, so I doubt it will come up much.

Rents around the coast will probably set new records next year.

The 3.5% appreciation kick is probably the safest number available, especially if they are talking about a national stat.  It will probably range from -5% to +15% depending on the local area, so 3.5% is comfortable.

Posted by on Dec 23, 2015 in Forecasts, Jim's Take on the Market | 3 comments

Higher Rates and Home Prices

sdpricetrends

The impact on mortgage rates from yesterday’s Fed move was priced in already, and it’s doubtful we will see any short-term change in our local real estate market conditions.

But the Fed also indicated that they intend to ‘gradually’ raise their target range for the Fed-funds rate.  At what point will buyers start to react?  How will they react?

The general statistics for San Diego have been greatly enhanced by the lower-end being red hot.  Look at the difference between the blue and green lines in the pricing chart above – the 2015 pricing velocity in the Low Tier has been much greater than with the High Tier, and it’s the lower end that will be more affected by rising rates.

We saw how mortgage rates in the 3s this year helped to turbo-charge the lower end, giving us the illusion that the overall market benefited – see below:

SDyoy

From firsttuesday.com:

The price of low-tier housing in San Diego County skyrocketed after the latter half of 2012, peaking in Q3 2014 and leveling off after. 2015 has experienced another price increase. This is likely due to the boost given by decreased mortgage rates throughout 2015.

Lower mortgage rates free up more of a buyer’s monthly mortgage payment to put towards a bigger principal. Thus, San Diego’s high home prices continue to find fuel — not from speculators as in 2012-2014 — but from increased buyer purchasing power.

Expect home sales volume to fall off after mortgage rates begin to rise in the second half of 2016. Prices will descend 9-12 months later, by the second half of 2017.

I think we will see declining sales next year as sellers try to push higher, and buyers resist.  Lower-end buyers will be stymied by higher rates, and buyers on the higher end will be overwhelmed by the bulging inventory – there were 85 houses sold over $1,500,000 last month, and there are 870 for sale in San Diego County!

Prices?  It will take a long stretch of stagnant before all sellers believe they need to lighten up.

If we saw price declines in the general stats by the end of next year or 2017, to what point will they be coming back?  To 2015 prices?  To 2014 prices? Neither would change the overall market much – houses will still be expensive.

Posted by on Dec 17, 2015 in Forecasts, Inventory, Jim's Take on the Market, Sales and Price Check | 0 comments

NSDCC 1Q16 Forecast

After the last couple of years being fairly steady, it would be easy to expect more of the same in 2016 – tight inventory creating a seller’s market, especially for the superior properties.

Let’s at least examine how 2015 is winding down (now that Christmas is two weeks away!) to get a sense of how the new year will open up.

Thankfully, it looks like the active bin has been clearing out, and we’re down to 846 active listings today, which should set up a fairly clean slate to open 2016:

But let’s compare how the new listings/new solds are behaving. The new listings and sold don’t have a direct relationship, though some of the new listings will have closed escrow quickly enough to be included in the sold category too.

NSDCC New Listings and Solds between September 1 and November 30:

Year
New Listings
Sold Listings
2011
1,071
590
2012
911
827
2013
968
716
2014
976
652
2015
1,026
648

You can see that with higher rates and substantially-higher prices, we’re losing some steam here at the end of 2015 – more listings are hitting the market, but sales are slow to follow.  We know that the new listings in 2016 will be packing an extra 5% to 10% to their price – anyone who has waited this long isn’t going to give it away!

But with an open playing field, won’t sellers demand their (higher) price? I think so, and the first quarter of  2016 should feel a little glutty as all players prefer a wait-and-see approach.

Posted by on Dec 9, 2015 in Forecasts, Jim's Take on the Market | 0 comments