We have already closed 202 NSDCC sales this month, which is the most November sales since 2012 – and we still have 349 sales pending!
Pending home sales eked out a 0.1 percent gain in October. The National Association of Realtors® said its Pending Home Sales Index (PHSI) barely managed a second straight month of gains, rising to 110.0 from a downwardly revised 109.9 in September (the previous reading was 110.0, which would have made today’s reading “unchanged,” officially). Even though NAR’s chief economist Lawrence Yun called the increase “minuscule,” it still pushed the index to its highest level since last July. The index was also 1.8 percent higher than In October 2015 when it stood at 108.1.
The PHSI is a forward-looking indicator based on contracts for home purchases. Those signed contracts are generally expected to become closed transactions within two months.
Yun said, “Most of the country last month saw at least a small increase in contract signings and more notably, activity in all four major regions is up from a year ago. Despite limited listings and steadfast price growth that’s now carried into the fall, buyer demand has remained strong because of the consistently reliable job creation in a majority of metro areas.”
Regarding the continuing limited housing supply, Yun explained that the unwelcome but expected seasonal retreat in new listings is arriving at a time when price growth remains around triple the pace of wages and properties continue to sell at a much faster pace than a year ago. As an indication of the imbalance between supply and demand, 40 percent of sales in October sold at or above list price, an increase from 33 percent a year earlier.
“Many of the successful shoppers in October likely had to move fast and outbid others for the few listings available in the affordable price range,” explained Yun. “Those obtaining a mortgage last month were likely the last group of buyers to lock in a rate near historically low levels now that rates have marched to around 4 percent since the election.”
The graph shows 20% of renters in San Diego are making more than $100,000 per year – are those the people you see at open houses every weekend, hoping to find the right house at the right price? Certainly a portion of those renters are in the hunt, which should keep the market going for now.
The share of homes selling above asking price edged up from 27 percent a year ago to 28 percent in October. Conversely, the share of properties selling below asking price dropped to 44 percent from 47 percent in October 2015. The remaining 28 percent sold at asking price, up from 25 percent in October 2015.
For homes that sold above asking price, the premium paid over asking price rose to 9.1 percent, up from 7.7 percent in September and 8.9 percent a year ago.
The 44 percent of homes that sold below asking price sold for an average of 8.9 percent below asking price in October, the lowest since May 2015. The premium paid in both September and a year ago was 12 percent.
Nearly six in 10 properties for sale (59 percent) received multiple offers in October, down from 63 percent in September and 64 percent from October 2015. October marked the seventh straight month of declining multiple offers.
The share of properties receiving three or more offers fell to 30 percent, the lowest level since the beginning of this year. Thirty-five percent of properties received three or more offers in September, and 36 percent of properties received three or more offers a year ago.
Compared to a year ago, there was an increase in the share of homes receiving three or more offers in homes priced $400,000 to $499,000 and $2 million and higher, while the share of low- to mid-priced homes experienced a decrease in three or more offers, particularly in homes priced $300,000 to $399,000, which dropped the sharpest – from 43 percent in October 2015 to 18 percent in October 2016.
About a third (31 percent) of properties had listing price reductions in October, up from 25 percent in September and down from 32 percent in October 2015.
Nearly half (45 percent) of REALTORS® were concerned about high home prices and housing affordability, while 26 percent indicated they were concerned about a lack of available homes for sale. REALTORS® also were concerned about a slowdown in economic growth, lending and financing, rising interest rates, and policy and regulations.
REALTORS®’ optimism of market conditions over the next year has been trending downward for the past few months but is still in positive territory at an index of 54 in October, unchanged from September but down from 57 in October 2015.
San Diego County looks like the best in the state (highest index):
*Note: C.A.R.’s pending sales information is generated from a survey of more than 70 associations of REALTORS® and MLSs throughout the state. Pending home sales are forward-looking indicators of future home sales activity, offering solid information on future changes in the direction of the market. A sale is listed as pending after a seller has accepted a sales contract on a property. The majority of pending home sales usually become closed sales transactions one to two months later. The year 2008 was used as the benchmark for the Pending Homes Sales Index. An index of 100 is equal to the average level of contract activity during 2008.
What is the consensus on the Trump impact on our local real estate market?
After speaking to agents on broker preview the last couple of days, I think we can divide the buyer pool into two camps:
There have never been more reasons to wait-and-see.
But some buyers will want to hurry it up, before anything else happens.
Yellen made it sound like the next Fed move is imminent, which hopefully means next month. There is 1/4% (or more) already baked into the market, so if they do bump the Fed Funds rate, it should have a calming effect on mortgage rates – it did last time. If we can stay around the current 4%, it should motivate people to buy before it goes higher.
But there is also the anxiety that comes with buying or selling that gets aggravated by uncertainty. Have you ever felt more desire to hunker down?? The motivated buyers and sellers want to get it done.
I think we will see a very active selling season – and it already is!
NSDCC October Sales and Pricing
# of Detached-Home Sales
Median Sales Price
Our current momentum should carry us well into 2017. But look at the stumble in 2014 – I’m more worried about 2018.
Maybe – and only if they mess with the buyers’ psychology.
We have been spoiled with rates in the mid-3s for the last six months – including jumbos – and our local market has been cooking. Buyers have been hoping for any break, but if they find the right house at a decent price, will an extra 1/2% on rate stop them?
Probably not – we are lucky to live in a very affluent area, where the majority of houses sell for more than $1,000,000:
NSDCC Detached-Home Sales, Jan-Oct
Total # of Sales
Sales Over $1M
% of Total
Some buyers will dig in just on principle – if they have to pay a higher rate, logically the seller should be more flexible on price. But if the right house is found, and wifey kicks you in the shins and says ‘buy the house’, the extra half-point isn’t going to matter.
Especially in these areas:
Percentage of Detached-Home Sales Over $1M, Jan-Oct, 2016:
Without a flood of inventory, our market conditions should stay the same – the demand for buying houses far out-stripping the supply, with the only thing in the way of sellers selling is their own price reluctance.
The demand could get stronger too. We had hundreds of open-house visitors to the listing on Bluff Ct., and 16 offers – the weekend before the election! There had to be a segment of buyers who have been on hold until the election concluded. If they get back in, the demand could grow further.
If Trump gets the same chance that Obama got to prove himself, and Trump gets off to a decent start, we could see the housing frenzy fire up again early next year around North San Diego County’s coastal region.
A recent trend in home construction points to growing polarization in the market, as more new homes come with three-car garages than ever before.
Twenty-four percent of homes built last year had garages for three or more cars, according to an analysis of Census data by Robert Dietz, chief economist for the National Association of Home Builders. That is up from 16 percent of homes in 2010, and 11 percent in 1992.
But it’s not so much that Americans want larger garages across the board. Instead, Dietz says homebuilders are increasing constructing houses for older, more monied residents, many of whom have teenage drivers and value three-, four-car garage homes.
“We’re seeing a substantial change in the mix of buyers that builders are catering to,” Dietz said. “The key point is that there has been a significant amount of weakness for entry-level, first-time buyers.”
Hippie communes from the 1960s are coming back in many alternate forms, and there are already several options. The U-T featured Outsite, an AirBnb-type of company but for workers who desire temporary living arrangements in exotic areas – including a block from the beach in Encinitas.
The foundation is laid for co-living: this type of accommodation is not a trend or fad that is going to disappear in a few years. Between the plethora of providers currently offering co-living spaces in every corner of the globe, and the massive interest that residents from all professional backgrounds and lifestyles show, co-living has appeal and support that will help establish it as a unique but valuable form of accommodation. Residents may stay anywhere from a few days to a few months, but the concept of co-living has a permanence that will last for years to come.
Co-living solves many of the problems that entrepreneurs, freelancers and remote workers face, such as finding quality space on short notice with minimal commitment. At the same time, co-living provides the added benefits of community, focus and inspiration.
“It’s the best time in the history of our country with mortgage rates that are below 4 percent that [renters] can actually lock in their fixed cost and create wealth for themselves,” she said.
The founder and chief executive of Zelman & Associates is known for calling the housing peak in 2005 and the housing bottom in 2012.
Zelman said this housing cycle is like a “tale of two markets.”
She said the entry-level market is beginning to accelerate, and builders’ trepidation is slowly beginning to fade as more people are beginning to move to the suburbs.
The market would seem to be in agreement with her on that. The SPDR S&P Homebuilders ETF was trading up more than 1.15 percent Monday morning, and on pace for its best day since Sept. 22, when the XHB gained 1.11 percent.
On the other hand, she said the luxury markets in some cities are in the beginning see “a little bit” of a correction.
When asked about whether millennials will ever buy homes, Zelman said they are beginning to buy houses, but mainly those who are starting a family.
“What we’re seeing is that they want to go to the suburbs, millennials are buying and we have nearly 75 million of them just beginning to come through the pipeline,” she said.
Back in the foreclosure era, cash buyers were everywhere, gobbling up all the deals. Many pundits thought that once the investors pulled out, the market would collapse.
But a funny thing happened on the way to the apocalypse.
It turns out, buyers love to pay cash!
They are buying the higher-end properties too, which is understandable – nobody is spending their last million or two on a house. These cash buyers probably had at least 5x the sales price in the bank!
NSDCC Detached-Home Sales, First Nine Months (Jan – Sept.)
The depth of the affluence isn’t surprising, it is the breadth. There have been 1,465 NSDCC house sales that have closed for more than $1,000,000 this year!
It puts pressure on the financed buyers. In virtually all bidding wars, the financed offers are ignored, and just the cash offers get entertained. Financed buyers would be smart to lower their sights and pick off a fixer.
Yikes!!! Mortgage Rates Surge Above 2-Year Highs-Rates spiked abruptly today, bringing them to the highest level.. mndne.ws/2fQQHhY
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