I get more optimistic every day about next year’s market.
Here’s why, plus a few other ramblings:
I get more optimistic every day about next year’s market.
Here’s why, plus a few other ramblings:
Hat tip to daytrip for sending in this latimes.com article about the surge of high-end home sales across the Southland:
Luxury home sales in Southern California are hitting levels not seen in decades. The number of homes bought for $2 million or more in recent months is the highest on record. Sales worth $10 million or more are on pace this year to double their number from the heights of the housing bubble.
“It’s pretty mind-blowing, to be honest,” said Cindy Ambuehl, an agent with the Partners Trust in Brentwood. “The luxury market has been completely on fire.”
Low interest rates, a strong stock market and waves of cash sloshing in from overseas are boosting demand for high-dollar homes. A record 1,436 homes worth $2 million or more were sold in the six-county Southland in the second quarter, according to CoreLogic DataQuick.
How are we doing locally? It’s worth noting that the supply of higher-end homes has been surging too (assuming the ‘refreshing’ of listings has been fairly constant over the years).
Below you can see how the market has been shifting upward:
NSDCC Detached Homes Listed/Sold By Price Range
|2011 New Listings/Solds|
|2012 New Listings/Solds|
|2013 New Listings/Solds|
|2014 New Listings/Solds|
These are 12-month stats so you need to extrapolate to compare 2014 accurately (add about 10% to these current counts). You can see how the Under-$1M folks have been left shaking their head – they have about a third fewer homes to consider since 2011!
U.S. home resales jumped to their highest level in more than a year in October and outpaced the sales level a year ago for the first time in 2014, further evidence the housing market is on a recovery path.
The National Association of Realtors (NAR) on Thursday said existing home sales rose 1.5 percent to an annual rate of 5.26 million units, the highest rate since September of last year. Sales rose 2.5 percent compared to a year ago, the first time since October 2013 that nesales have risen above the prior-year levels.
Economists polled by Reuters had forecast sales falling to a 5.16 million-unit pace, from an upwardly revised rate of 5.18 million units in September.
“This is the first time in the year where we have seen a year over year annual gain, which means that existing home sales have made that successful U-turn,” Lawrence Yun, NAR’s chief economist, told reporters.
I thought things were going pretty good nationally, and if we could get looser credit then everything would be fine. Now I guess a ’successful U-turn’ means….good or bad?
Yunnie deserves a break; he has done a much better job than David Lereah. In July, Yun did say that he expected a slight uptick in sales during the second half of the year:
Locally this year we haven’t beat any of last year’s monthly sales counts. Here are the NSDCC Detached-Home Sales for 2013 and 2014:
Last year was so hot due to low rates and prices that it’s doubtful we will see those numbers anytime soon. But we have been close enough!
We saw this week that the local seasonally-adjusted Case-Shiller Index has been trending negative since April. Here we see how the recent gains have been driven by the lower-end properties:
The difference could simply be a percentage thing – a home’s value that goes from $300,000 to $400,000 has risen 33%, while a $700,000 home that goes up to $800,000 has only increased 14%.
But the underlying story is that the upper-end home values haven’t done much over the last 18 months.
Read more here:
As in 2010, today’s price movement is the tail end of a mini-bubble, set into motion some 18 months earlier. This price rise was produced by short-lived speculator interference in 2013 (not a tax stimulus, as in 2009). This pricing activity is under pressure from insufficient personal incomes, rising fixed-rate mortgage (FRM) rates and new construction.
Prices are expected to continue to fall in the coming months, bottoming in 2015 and retreating toward the mean price trendline. The cooling of speculative fever and continually rising mortgage rates will prolong the falling trend in sales volume, pulling prices down in turn. Remember, real estate prices track and run with bond prices due to interest rate movement. A lag time of a couple of months exists due to remaining perceptions of past real estate price movement — the sticky price phenomenon.
Yesterday we wondered if there was a possible threat of a baby-boomer liquidation sale in the coming years, and we had a load of comments – thanks for participating!.
Can we get a feel for what’s happening now? Here’s a check of the 67 NSDCC houses that have sold between $750,000 and $1,000,000 in the last 30 days.
These are the years when the sellers purchased:
Only a couple sold for less than the price they paid, and there were 3 short sales too (no REO listings). The newer homes in Carmel Valley bolstered the more-recent stats too.
About 36% of the sellers bought their home prior to 2001, and are probably baby-boomers (or older). Most will at least be empty-nesters by now, and could be candidates for the ‘downsize and travel’ crowd. If their numbers increased, they would most likely be offering older fixers upon which flippers can feast, and eventually be sold to those looking for a substitute for new homes, which are in short supply.
Here’s an excerpt from the Dataquick sales release for September:
Irvine, CA—Southern California home sales hit a five-year high for a September, rising slightly above a year earlier for the first time in 12 months amid gains for mid- to high-end deals. The median sale price fell below an 80-month high reached in August and for the first time in more than two years none of the Southland counties posted a double-digit year-over-year price gain, CoreLogic DataQuick reported.
A total of 19,348 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties last month. That was up 2.9 percent from 18,796 sales in August, and up 1.2 percent from 19,112 sales in September 2013, according to CoreLogic DataQuick data.
On average, sales have fallen 9.4 percent between August and September since 1988, when CoreLogic DataQuick statistics begin. Last month marked the first time sales have risen on a year-over-year basis since September last year, when sales rose 7.0 percent from September 2012.
September home sales have ranged from a low of 12,455 in 2007 to a high of 37,771 in 2003. Last month’s sales were 18.3 percent below the September average of 23,695 sales.
The median price paid for all new and resale houses and condos sold in the six-county region last month was $413,000, down 1.7 percent from $420,000 in August and up 8.1 percent from $382,000 in September 2013. The August 2014 median was the highest for any month since December 2007, when it was $425,000.
Southland sales were 2.9% higher in September than August, when on average there is a 9.4% decline? Considering how high prices are, that’s good. We didn’t do as well locally. Here are the stats for NSDCC detached-home sales:
Sales were down 12% year-over-year, and 6% lower than August.
This may be a preliminary look, but there won’t be many more late reporters. Agents are supposed to mark their sales closed within 48 hours, and we’re a week out. But even considering the typical end-of-summer slowdown, it looks like sales are plunging.
Today, the MLS shows a paltry 234 detached-home sales last month, the lowest August total of the last four years:
While we enjoyed some frenzy-like months during the 2014 selling season, it looks like we’re heading back to the far-more mundane pace of 3-5 years ago.
For sellers who tacked on an extra 5% to 10% to your list price: If it doesn’t work, at least adjust downward fast enough that the urgency stays higher, and you beat the holidays – Halloween is only seven weeks away!
Isn’t it amazing that prices have kept rising without frenzy help?
We’ve had the frenzy hangover this year. Inventory is still tight, sellers confident, and buyers don’t have much choice except to pay what it takes – or to stand by. But sales are softer – and the number of NSDCC active listings today is 7% higher than last year.
Here are the two pricing measurements for each zip code for detached-home sales between May 1st and July 31st. Every zip code between Carlsbad and La Jolla shows a positive year-over-year increase in BOTH pricing metrics!
I had to average the averages for the NSDCC $/sf, so they are probably high.
Rob Dawg said in his 2014 forecast that he thought we’d see all the annual gain happen in the first half of the year. It’s the post-frenzy soft landing!
It was quite a day today, but hey, they’re all great days! I think we are as busy as we’ve been all year, and for one reason.
Logic and common sense are returning to the market.
They are being fueled by Zillow and Trulia, because they are providing a baseline – some place to start the investigation. Every person I meet has already looked at Zillow first!
Zillow is pouring it on too - they are spending $75 million this year on advertising! I hear them every day on sports talk radio, and with all their headlines, they have become the household name for real estate.
What’s next for consumers?
I hope the combined effect of higher prices, thin inventory, and low rates causes more people – both buyers and sellers – to use the tools, and be more methodical about their decisions. Work with agents who bring extra value – especially those who employ effective sales strategies.
When the frenzy was cooking, buyers just wanted to grab a house, and they fired at will.
Many of the prices paid didn’t have much relation to the easily-found comparable sales. But the gamble paid off – they are in, and have probably gained some equity.
But now that prices are up 20%, people are being more cautious and deliberate – which is a great sign for the future of the local market.
The logic setting in can be seen in our actitve-to-pending ratio:
NSDCC Detached-Homes (Carlsbad-La Jolla)
|Price Range||A/P Ratio|
Make no mistake – the lower end is still on fire. The higher-end folks tend to price their homes to sit. There are 323 houses for sale listed over $3,000,000, and the average market time is 153 days (eating up the entire selling season and still not sold).
But forget the statistics.
Today was monumental for many due to the first day of school – and we are no different. Kayla’s sister Natalie started her senior year of high school today, captain of the dance team and in charge of her destiny:
There has been three categories of listings lately:
1. New listings that sell at or around list price the first week on the market.
2. Those that sell months later as price reductions finally intersect a rising market. In a slowing market (like we have now) pricing loses momentum quickly as buyers get more confident.
3. Those that don’t sell.
It’s going to get more obvious to sellers as showings slow to a crawl or less – if they want to sell this year, they need to lower their price. But hey, great news – those who are willing to sell for a price at the comps – or slightly under - should find takers.