We have entered the second half of 2015 with a full head of steam – in the first half of 2015, NSDCC detached-home sales were up 5% YoY!
Is there a natural cooling off in the second half? Not really.
Second-half sales have been influenced by mortgage rates recently. We had a resurgence in the second half of 2012 when both rates AND prices were declining – sales were 14% higher than in the first half. Once we bounced back over 4% in mid-2013, sales cooled down until rates dipped back into the threes in January of this year.
Here are the half-year stats, starting with a reflection back to 2007, the previous high point of the median sales price:
# of Sales
Median Sales Price
Median Days on Market
Lately, rates AND prices have been trending upward, which suggests market slowing, plus the inventory is picked over!
Currently, two-thirds of the NSDCC houses for sale have been on the market for more than 30 days, and unless those sellers get aggressive about pricing, sales are likely to taper off as rates and prices stay flat or rise for the rest of 2015.
I heard an interesting comment the other day on broker caravan.
The listing agent said, “Maybe we’re all undervalued?”, as he sat on his $6,000,000 listing with nobody else in attendance.
If you judge it by the weather, he could have a point. If we have the best weather in the U.S.A., then we should have the highest-priced real estate.
It probably means that rich folks from around the world who are retiring will be giving strong consideration to the San Diego area. Retirees are going to be drawn to where the grandkids live first, and if the ‘kids are in the general Southern California vicinity, then San Diego might be considered for retirement.
Either that is happening, and/or our employment base is stronger than ever.
Two days ago, we saw that the NSDCC sales this year between January 1st and June 15th were 7% higher than last year.
NSDCC is the coastal area between La Jolla and Carlsbad that has a population of around 300,000 people. Carlsbad makes up about a third of the population and sales in the area, and realtors and buyers alike consider it a quality lower-priced alternative to the affluent Encinitas-La Jolla stretch.
Here is the breakdown of those January 1st-June 15th sales:
Category by Area
Carlsbad # of New Listings
Carlsbad # of Closed Sales
Carlsbad Median SP
La Jolla-Enc # of New Listings
La Jolla-Enc # of Closed Sales
La Jolla-Enc Median SP
The number of sales in Carlsbad corresponded with a similar increase in listings. But look at the higher end market – the year-over-year sales were 8% higher, in spite of 2% fewer listings! The median price increased nicely too.
This is an affluent area, and real estate is booming – could it be undervalued?
Have you seen how some of the list prices have gone ballistic lately?
You can see above how the red ‘Sold’ price-per-sf trend line has been increasing moderately, but the 90-day average list pricing has taken off over the last few months (in blue).
What is causing the recent enthusiasm among sellers?
The inventory is still low – lower than last year. But there are more sales happening in 2015, in spite of fewer choices and higher prices!
These are San Diego charts, but the same in true in NSDCC, where we had 1,259 sales between January 1st and June 15, 2014, and this year there were 1,349 sales – which is a 7% increase in NSDCC sales year-over-year.
In 2013 we had 1,497 sales.
Here are the active listings and sales counts below:
Though this chart doesn’t show all of 2013, it is incredible to see that today’s inventory is back around those levels when we were in the full frenzy!
It’s a slightly different mix – we’ve had fewer NSDCC listings this year than in 2013. But the frenzy fever looks very similar on paper!
How long can it last? Have you seen an occasional neighborhood that has for-sale signs piling up? Coastal tract houses in the $1M to $2M range are particular susceptible. There are 367 houses for sale in that range currently, which isn’t exactly panic time, because there were 127 that closed in the last 30 days!
But those were the plums – the best available. What happens to the rest?
I know it seems like summer just started, and we’ll probably keep getting enough happy news to keep the party rolling (like Case-Shiller next Tuesday).
But those are reflecting ancient history now. By the time we get to August, the inventory will be so picked over that we should hit stall speed!
We’ve used the ratio of active-listings-to-pending-listings as a measure of the overall ‘health’ of the market, with a 2:1 ratio being about right. This is how it looked earlier this year, on February 23, 2015:
The overall Actives-to-Pendings ratio in February was 1.69 to 1.
It is the same 1.69:1 today!
Here are the current stats – areas with more pendings than actives are in bold:
Those with smaller sample sizes can vary wildly, yet most of these look fairly consistent. As usual, Carmel Valley is really rocking – the 80 pendings have an average list price of $1,265,778! Encinitas deserves recognition too for having 180 solds already this year with a median sales price of $1,087,000!
The Inventory Watch should be where we’ll see any indicators of market trouble. But today’s inventory is 6% less than a year ago, with only the $800,000 – $1,400,000 category higher (244 vs 240 listings).
A growing inventory would mean sales are slowing, but we’re selling more houses this year than last year. In the first four months of 2014, we sold 838 NSDCC houses, and we’ve already closed 824 this year with four days to go plus late-reporters!
The 2015 average cost-per-sf is higher too: $432/sf vs. $415/sf last year.
Click on the link below for the complete NSDCC active-inventory data:
With all the recent action mentioned in the previous post, it makes you wonder how much the market is fueled by frustration over the selection of homes for sale. Yes, it is the “season”, but is the lack of inventory causing buyers to grab anything, at any price?
More inventory would help satisfy the demand, and help us discover if there is a ceiling to these prices. But adding just a few more houses for sale would only fire up the frenzy.
Here are the number of NSDCC houses listed between Jan. 1 and April 15th:
Number of New NSDCC Listings, Jan 1 to Apr 15
Note how the hot frenzy in 2013 was fueled by having more homes for sale. If we just had an extra 100-200 decent houses for sale now (especially under $2,000,000), they would likely get gobbled up.
Usually around tax day, the real estate market goes into a bit of a funk, and this year it was compounded by the disconnect between our MLS and Zillow – any new listings have to be manually inputted to Zillow, which isn’t obvious to most agents.
In spite of all that, there have been some remarkable new pendings in the last week. A few examples:
1. The neighbor down the street had a smaller lot and no guest apartment but had a more wide open view looking south – yet they struggled for 124 days before finding a buyer who paid $1,349,000 (closed on April 2nd). Then this house lists for $1,599,000 and goes pending the first week:
4. This is a teardown on a 9,771 sf lot with some ocean view in Leucadia listed for $1,299,000. You could buy a brand new house down the street for the same money (or less), yet it only took 26 days for this to go pending:
5. The seller of this house paid $1,575,000 two years ago, which was $80,000 over the list price then. Two weeks ago, they listed it on the range $1,629,000 – $1,699,000, and received eight offers at or above the high end of the range. My clients offered $1,760,000 cash and lost – rumor has it that the sales price is around $1,800,000:
8. In Del Mar, Solana Beach, RSF, and La Jolla there were 17 new pendings, and almost all were lower-enders. The auction happened on Friday night and I didn’t see any last-minute advertising like there was on the other auctions. But it’s pending too:
If you get the feeling that the 2015 market has been a lot like 2014, it’s because it has been, statistically. Using the NSDCC data gathered below, here are the new actives and new pendings from the first 15 weeks of each year, and the number of house sales closed in the first quarter:
1Q Avg $/sf
Are we at a pause before climbing higher? Plateau City? Or are we at the crest of the roller-coaster??
Click on the link below for the complete NSDCC active-inventory data:
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