I went to the grand opening today of these $2,000,000 tract homes and thought because of the rain that I might be the only one there. Wrong! There were hundreds of people – and this isn’t Carmel Valley – not even close:
Category Archive: ‘Market Buzz’
We’re going to start a contest for Padres tickets in the new year, so let’s get a read on how things wrapped up in 2018.
We know that NSDCC sales were down 10%, and the median SP was up 8%. Sales of detached homes in San Diego County were down 11%, and the median sales price was up 7%.
If sellers were feeling a sense of panic about the market – and prices – we would be seeing more new listings hit the market.
Have there been more listings than usual lately?
NSDCC Listings, 4th Quarter
The other comparisons we’ve done have shown that the 2018 stats have mostly been similar to previous years. But once we have the complete total for new listings, it looks like the 4Q18 number is likely to be at, or above, all of the recent years. It’s already 12% above last year, and the MLP is actually lower.
There were fewer December listings, but that means the October/November count was higher than ever. With soggy conditions in place already, did potential sellers this month decide to wait for a 2019 launch?
Will we see a surge of new listings in early 2019?
They should ditch the Park Hyatt Motor Lodge, bring back the Four Seasons, and have lunch today with Toll Brothers (who built 672 homes at the 200-acre Robertson Ranch). If they can build 500 homes on the roughly 200 acres of golf course, the dirt would be worth close to what the new owners paid for the whole package. They will have picked up a 327-room luxury resort with average room rate of $250-$300 per night….for practically nothing.
Hat tip just some guy. An excerpt from the U-T story:
The upscale Park Hyatt Aviara resort, which was taken over by its lender more than a year ago following missed payments, is now under new ownership.
Xenia Hotels & Resorts, a Florida-based real estate investment trust that owns 41 hotels across 17 states, including the Andaz in downtown San Diego, announced last week that it paid $170 million for the 327-room resort and golf course.
The selling price is considerably below the $251 million paid by former owner Broadreach Capital Partners in 2007 to acquire a controlling interest.
Xenia CEO Marcel Verbaas acknowledged the price’s appeal in a news release.
“Our ability to purchase the resort at a price substantially below replacement cost and well below those of comparable resorts in the region provides a significant value creation opportunity for the company,” Verbaas said.
Xenia executives declined to discuss the sale or their plans for upgrading the 222-acre resort but hinted in the news release that there will be upcoming improvements.
“We see substantial opportunities to enhance financial performance at the resort through our asset management initiatives as well as a comprehensive capital plan to elevate the resort above its prior competitive positioning,” Verbaas said. “We look forward to working with Hyatt to improve the asset physically and operationally which we believe will improve the resort’s regional and national appeal and result in strong growth in revenues and profitability.”
Although it’s been almost 1 ½ years since the Park Hyatt was taken over by its lender, CW Capital Asset Management, a sale probably took longer because the property includes a golf course, speculates broker Alan Reay.
Increasingly, more and more golf courses are closing, and in California they can be expensive to operate given the dry conditions and the cost of water, said Reay, CEO of Atlas Hospitality.
“Most properties in San Diego are back at the peak levels of 2007 or above so it’s interesting that this property did not get back to that level, and one of the main reasons for that is the golf course,” he said. “Whenever we’re working on a hotel with a golf course associated with it, most buyers are not interested. It’s not what it used to be.”
“I think they’ll definitely get room rates up if they make improvements, but the big question is what do you do with the golf course,” Reay said. “In many instances, we’re seeing golf courses sold off and then people do residential or a different development on that.”
A good example of today’s market conditions. At first, you would think a bank-owned house in the prime Derby Hill community in Carmel Valley would garner a lot of attention, and sell quickly. But this one isn’t tricked out with extras, and it’s not a canyon lot either.
Like most sellers, they added a little mustard to their list price – but they were on the market for 55 days before finding the buyer:
Yesterday, Bill featured the C.A.R. release about September sales that included the president’s comment that buyers are ‘self-sidelining’ in anticipation of lower prices ahead. White included his obligatory blame on the tax reform, which he was so adamantly against even though his case was based on faulty evidence – and it passed anyway.
Bill also included the chart above that showed inventory explosion in CA:
Let’s review our NSDCC stats to see how we are behaving:
Our current NSDCC inventory is 25% higher than last year, but it just highlights what a great year we had in 2017 – when the TL/TS ratio was similar to the full-tilt frenzy we had in 2013.
This year looks a lot like the more-normal years of 2014-2016, when the sledding was much tougher. As long as our current stats are staying in-line with previous years, we should be fine.
Expect more of the same – buying and selling homes is going to be difficult.
Get Good Help!
Here’s the interesting excerpt from this article – the other alternatives that older adults might consider:
Communities become a source of support and engagement for residents, particularly for older adults, who have an even stronger desire to age in place. The AARP survey finds many adults age 50 and older are willing to consider alternatives such as home sharing (32%), building an accessory dwelling unit (31%) and villages that provide services that enable aging in place (56%).Link to Article
Though Manhattan has been a buyers’ market for two years, let’s take these with a grain of salt – the slowdown is due to the highlighted sentence in the last paragraph. Hat tip to GW for sending this in:
New York City’s home sellers, tired of waiting for buyers, slashed prices on almost 800 listings in a single week this month, the most in at least 12 years.
In the week through Sept. 9, there were 774 homes in Manhattan, Brooklyn and Queens that got a price cut, the most for any seven-day period in data going back to 2006, according to a report Friday by listings website StreetEasy. The previous weekly record was in March 2009, during the global recession, when 713 properties were reduced.
Sellers with older listings are adjusting expectations just as a wave of newer properties hits the market — customary in New York after Labor Day. In that same September week, Manhattan got 662 additional listings, the third-highest total for any week in StreetEasy’s data.
“It’s a big gut-check for sellers,” said Grant Long, senior economist at StreetEasy. “We’re at a period in the sales market where sellers have been incredibly ambitious with the prices they’re asking. They’re having to come down and bring prices to where demand actually exists.”Link to Article
Hat tip to Rob Dawg who sent in this example of what’s happening in most markets – lower-end prices are holding, and it’s softer in the higher-end markets.
But because the higher-end sellers typically have more horsepower, and aren’t going to ‘give it away’, prices could just stagnate, instead of dropping.
You could call it a levitating market too, and many will think that it’s just a matter of time before pricing turns south.
Here are reasons why prices are sustainable:
- We have newer agents representing the buyers. Even if they have nine years experience, they’ve never seen anything but a seller’s market. If their buyers don’t like the price, they just pass on the house, instead of making a low offer.
- Rarely is a seller motivated enough that they might consider a lowball offer. You’re lucky if you get a call back, let alone a counter-offer.
- Agents are looking to provide less service, not more. The trend is to capture the consumer’s contact info, send it to the call center, and have dialers hound them until they buy or die.
- Buyers are so used to pressing a button to transact everything else that they don’t even know they need good help. All buyers and newer agents know how to do is to find a decent house and process the order.
- With traditional, discount, and disrupter agents all offering less expertise, the fixers stand virtually no chance of selling – they are too much of a turnoff to buyers who are essentially do-it-yourselfers. It’s too easy to skip them.
- If fixers aren’t selling, then just the good-to-excellent homes have a chance, and buyers are typically willing to pay close to list for those.
- If there were a couple of sales in the neighborhood that were lower, the vast majority of potential sellers would quit, rather than panic. When their motivation is already suspect, it won’t take much for them to wait until some mystical time in the future when they can sell for that extra 5% to 10%.
- Buyers who go straight to the listing agent are in effect, unrepresented, and will just end up paying retail.
- Off-market properties would only sell if they get their price.
- Sellers who can’t get their price can always rent for astronomical prices, and try again next year.
Combine those together and it’s easy to see how prices will stall, or could even drift upward with only the creampuffs selling. The inventory counts won’t matter either, because if they grow, it will just mean a sea of OPTs lying around, nothing more.
With a healthy economy and no foreclosures, there isn’t any pressure on sellers to dump and run. Besides, where are they going to go in such a hurry?
It will be a binary market – buyers will say yes or no. Pricing should stay about the same, but if buyers were to dig in, then sales could be affected. Keep an eye on the sales count – they are the precursor, and they’ve been holding up nicely the last couple of months (at least between La Jolla and Carlsbad).
We’re going to be fed a solid diet of ivory-tower analyses from now on, because when you look at the history, it sure seems like home prices are due to come down. What these authors fail to consider is how the Bank of Mom and Dad has made the current pseudo-bubble possible, and will continue to do so. Plus, for prices to go down, you must have sellers who are willing to dump on price. None have been that motivated, at least not yet.
This article can’t even get the facts straight – the last bust was caused by exotic neg-am financing exploding in our faces, and ill-informed homeowners bailing out. In addition, you can draw the trendline anywhere you want, and these authors drew it where it would produce the most drama – see above – yet their worst-case scenario is only back to 2013 prices. We’d survive that.
This most recent cycle we are emerging from in 2018 has its roots in the early 2000s, when home values began outpacing incomes at a rapid pace.
In 2006, home prices peaked in step with the Millennium Boom. By that time, home sales volume was already falling as buyers sensed prices were too high to continue during the inevitable recession, which arrived in 2008. From 2006 to 2007, prices dropped 16%, followed by a further 26% in the following year.
All in all, California home prices fell 44% from their 2006 peak to their bottom in 2009.
In some ways, this steep fall was a correction to all the excess experienced in the housing market during the early- and mid-2000s. In another sense, the fall was simply the market’s way of bringing home prices back in line with incomes.
There is a name for this reliable force that pulls home prices toward incomes: the mean price trendline.
Through the volatility of housing booms and busts, price increases continue to return to the same rate of annual income change, related to the consumer price inflation (CPI), which is typically 2%-3% per year. In California, this mean price change is closer to 3.5% annually over the past several decades.
How does income impact home prices?
Quite simply, home values can only go as high as incomes allow.
Homebuyers reliant on financing are limited to a maximum mortgage payment of 31% of their monthly income. This translates to the ability to purchase a home costing roughly five times their annual income.
Still, there is some wiggle room in the equation. After incomes, interest rates have the next biggest impact on home prices. When interest rates are falling — as occurred in the 2000s — buyer purchasing power is extended, as homebuyers’ mortgage payments go further. When interest rates rise — as is occurring in 2018 — buyer purchasing power falls and homebuyers are limited to paying less with the same income.
During housing bubbles, home prices become temporarily untethered from this rule and the mean price trendline. During the bust that follows the boom, prices fall, returning once again to the trendline.
2018 is primed for the next downturn
Here’s how the situation stands in mid-2018:
- home prices are roughly 9% above a year earlier;
- home sales volume is 1% above a year earlier (basically flat);
- interest rates are nearly a full percentage point higher than a year earlier, translating to a 7% reduction in purchasing power for the average California homebuyer.
Further, the Federal Reserve (the Fed) plans to continue their efforts to increase interest rates in an effort to cool down the economy and induce a moderate business recession by 2020. Not only do higher interest rates discourage potential homebuyers from entering the market, but they cause homebuyers to offer less when they make an offer to purchase.
In response, first tuesday expects home prices to fall by mid-2019, bottoming once they hit the mean price trendline around 2020. Meanwhile, incomes will continue along at their current measured pace, pausing briefly in 2020-2021 in response to the recession.Link to Article
Should buyers wait a while to see what happens to the housing market?
Are we just seeing the usual end-of-selling-season malaise when where all of the motivated sellers have succeeded, and just the OPTs are stacking up?
Or has the market shifted…..for good? Is this the peak?
I think it depends on your needs:
- Only buying a premium property – then stay in the hunt. In the last downturn, the prices of the premium properties held up well – most had less than a 10% decline in value, and that’s before people started hoarding real estate (not selling for any reason).
- Only buying a single story – then stay in the hunt. The one-story market is red-hot, with demand far out-stripping supply, especially in the newer-home or view categories.
- Willing to buy a fixer – be patient. Buy when you see the appropriate gap of 5% to 10% between the creampuffs and the ones that bark at traffic. If the home is in original condition, the gap should be larger.
- Only want to steal a property – very unlikely in the near-term. Sellers aren’t that motivated, and only a small minority might consider selling for less than 5% of list.
We should be in a stagnant state for months, as everyone waits to see what happens next spring. But I think buyers will be similarly picky then too.
We’ll see the same or similar psychology take over the whole country at the same time – which is the way it always happens. What needs to adjust is the sellers’ trend to expect more than what the last guy got.
Here is a discussion guided by our friend and realtor Tom Stone about the market in Sonoma County (follow the link) – and check the comment section too, where Tom mentions the solution. Hat tip Eddie89!Link to Full Article on Wolf Street