It’s Really Go Time Now!

Mortgage rates have continued their slide, and lenders should be offering fixed-rate loans with rates starting in the threes again, with little or no points!  The new pendings are flowing, but we still haven’t seen a flood of new listings:

NSDCC Detached-Home Listings and Sales in March

Year
March Listings
Median LP
March Sales
Median SP
2015
497
$1,275,000
298
$1,137,500
2016
532
$1,470,000
252
$1,143,665
2017
505
$1,395,000
258
$1,074,000
2018
446
$1,549,000
259
$1,397,500
2019
396
$1,514,497
153
$1,320,000

The latest numbers are month-to-date, and will increase considerably with four business days to go.  But the March sales will end up well under last year’s count, though the lower rates should help boost sales in April and May.

There are threes on the street:

For those who want to prepare for making an offer and would like to review our contracts, the California Association of Realtors have made available a sample copy with explanations:

https://www.car.org/riskmanagement/Consumer-RPA

Don’t be surprised if it’s a little clunky.

NSDCC Actives/Pendings

It’s March! How are we doing?

We’ve considered a 2:1 ratio of active-to-pending listings to be a sign of a healthy market. Though pricing is much higher than in the recent past, we’re under 3.0 is all but the highest-end areas:

Here are the Actives/Pendings stats for each area:

Area
Zip
ACTIVES
PENDINGS
ACT/PEND
SOLDS Last 30 days
Cardiff
92007
21
11
1.9
3
Carlsbad NW
92008
42
15
2.8
12
Carlsbad SE
92009
72
38
1.9
29
Carlsbad NE
92010
25
11
2.3
12
Carlsbad SW
92011
41
27
1.5
18
Del Mar
92014
78
18
4.3
9
Encinitas
92024
74
43
1.7
23
La Jolla
92037
171
32
5.3
18
RSF
67+91
179
23
7.8
8
Solana Bch
92075
25
6
4.2
5
Carmel Vly
92130
80
37
2.2
31
All Above
All
808
261
3.1
168

The first half of 2018 was very active, so just to stay close would be a win.

Sales in January caught up with last year’s count, and the year-over-year February sales are stronger than expected too – we had MORE sales in 2019! (updated later on March 1st)

NSDCC Closed Sales:

Year
January
February
Median SP YTD
Avg $$/sf YTD
2018
150
164
$1,294,005
$573/sf
2019
150
165
$1,275,000
$540/sf

Pricing is soft, but close enough for now.

January Pendings


Yunnie is getting deep into cheerleader territory now by ignoring the 13th straight decline in the index and woeful 10% year-over-year drop in the west:

The Pending Home Sales Index, a forward-looking indicator based on contract signings, increased 4.6 percent to 103.2 in January, up from 98.7 in December.

Year-over-year contract signings, however, declined 2.3 percent, making this the thirteenth straight month of annual decreases.

Lawrence Yun, NAR chief economist, had expected an increase in January home sales. “A change in Federal Reserve policy and the reopening of the government were very beneficial to the market,” he said.

Of the four major regions, three areas experienced a decline compared to one year ago, while the Northeast enjoyed a slight growth spurt.

Yun also said higher rates discouraged many would-be buyers in 2018. “Homebuyers are now returning and taking advantage of lower interest rates, while a boost in inventory is also providing more choices for consumers.”

Additionally, Yun noted year-over-year increases in active listings from data at realtor.com® to illustrate the potential rise in inventory. Denver-Aurora-Lakewood, Colo., Seattle-Tacoma-Bellevue, Wash., San Diego-Carlsbad, Calif., Los Angeles-Long Beach-Anaheim, and Nashville-Davidson-Murfreesboro-Franklin, Tenn., saw the largest increase in active listings in January compared to a year ago.

Yun says positive pending home sales figures in January will likely continue. “Income is rising faster than home prices in many areas and mortgage rates look to remain steady. Furthermore, job creation will help lift home buying.”

https://www.nar.realtor/newsroom/pending-home-sales-jump-4-6-percent-in-january

NSDCC 2019 Sales

Yesterday, the C.A.R. released the statewide January results, with more speculation from our so-called leaders:

 California home sales fall to lowest level in more than 10 years

– Existing, single-family home sales totaled 357,730 in January on a seasonally adjusted annualized rate, down 3.9 percent from December and down 12.6 percent from January 2018.

– January’s statewide median home price was $538,690, down 3.4 percent from December and up 2.1 percent from January 2018.

– Statewide active listings rose for the 10th straight month, increasing 27 percent from the previous year.

– The statewide Unsold Inventory Index was 4.6 months in January, up from 3.5 months in December.

“California continued to move toward a more balanced market as we see buyers having greater negotiating power and sellers making concessions to get their homes sold as inventory grows,” said C.A.R. President Jared Martin. “While interest rates have dropped down to the lowest point in 10 months, potential buyers are putting their homeownership plans on hold as they wait out further price adjustments.”

The statewide median home price declined to $538,690 in January. The January statewide median price was down 3.4 percent from $557,600 in December and up 2.1 percent from a revised $527,780 in January 2018.

“While we expected the federal government shutdown during most of January to temporarily interrupt closings because of a delay in loan approvals and income verifications, the impact on January’s home sales was minimal,” said C.A.R. Senior Vice President and Chief Economist Leslie Appleton-Young. “The decline in sales was more indicative of demand side issues and was broad and across all price categories and regions of the state. Moreover, growing inventory over the past few months has not translated into more sales.”

Link to press release  

Obviously, they haven’t done a survey of the North San Diego County’s coastal region!  Between La Jolla and Carlsbad, we had about the same number of January sales last month as we did in January, 2018, so we’re faring much better than the -12.6% statewide.  We are further into February so let’s pick up the sales from the first half, and break it down by price category too:

NSDCC Detached-Home Closed Sales, Jan 1 to Feb. 15th

Price Range
2014
2015
2016
2017
2018
2019
PEND
ACT
Under $1M
129
96
107
93
71
65
76
64
$1M to $1.5M
62
71
82
88
77
91
87
163
$1.5 to $2.0M
29
33
24
41
36
34
50
126
Over $2.0M
46
50
43
41
51
52
60
453
Totals
266
250
256
263
235
242
273
806

The only two signs of trouble:

  1. The Under-$1M market is disappearing.
  2. If you want to buy a house priced over $2,000,000, you sure have plenty to consider!  Those sellers are happy to wait it out too, so no rush.

Other than those, we have remarkable balance, and it doesn’t look like ‘potential buyers are putting their homeownership plans on hold’ around here!

NSDCC January Sales

The number of houses for sale between La Jolla and Carlsbad is already 20% higher than last year – but we can live with more unsold inventory lying around.

If sales can hang close (80% or more) to last year’s count, we’ll be fine.

So far, so good!

NSDCC Detached-Home Sales, January:

Year
Number of Sales
Cost-per-SF
Median SP
Avg DOM
2013
185
$379/sf
$845,000
69
2014
182
$501/sf
$1,045,500
60
2015
165
$507/sf
$1,218,000
73
2016
168
$557/sf
$1,093,500
53
2017
162
$519/sf
$1,178,390
55
2018
150
$573/sf
$1,310,000
53
2019
148
$535/sf
$1,324,100
58

Spring Selling Season Starts Now

Click to enlarge

The Big Game is over, so many will turn their full attention towards moving!

We’re off to a good start:

  1. Mortgage rates are about the same as they were last year,
  2. The NSDCC inventory isn’t exploding, and
  3. The NSDCC Pendings have jumped up 19% in the last two weeks!

You can see in the graph above that sales start right away, and March closings are substantially higher than in February.  Also note that by mid-summer, sales were dropping off quickly too.

We should have three hot months this year – at least!

Slowdown? Not So Fast

Just yesterday we see news that the housing inventory is already way higher than it was last year, and certain doom must be ahead.

But we can live with more houses laying around unsold, as long as at least some are selling to help give direction to all.

We can probably break it down to two categories:

  1. Is nothing selling, and doom is on the way?
  2. Or are just the creampuffs selling?

Here’s our first sales count of 2019.

NSDCC Detached-home Sales, January:

2014: 182

2015: 165

2016: 171

2017: 175

2018: 150

2019: 145

(as of 11am on 2/3)

Whoa now – I’ve been talking a 20% decline, and December sales were pointing that way. But by the time all of the sales get recorded onto the MLS, we should match last year’s January count, and probably do better!

It ain’t over ’til it’s over!

San Diego Tiered Pricing Graph

No surprise the trend shows the higher the price, the softer the price increases.

The lower-end market keeps humming along, while the higher-end market isn’t – and the connection between the two is getting fuzzier by the day.

With the struggle of moving up or down being very real, we could see more disconnect between markets.

Let’s keep this in mind when analyzing trends – it’s more complex than ever.

https://journal.firsttuesday.us/san-diego-housing-indicators-2/29246/

Real Estate Cycle

www.sacramentoappraisalblog.com

Ryan posted the history of real estate cycles in Sacramento County, so here are the same years for North San Diego County’s coastal region for comparison.  Human nature tends to flow in the same direction everywhere, and as a result, our history looks a little like his:

Year
Number of Sales
Median Sales Price, Annual
Change
1999
3,236
$475,000
+8%
2000
3,285
$555,000
+17%
2001
2,926
$570,000
+3%
2002
3,717
$630,000
+11%
2003
3,932
$732,500
+16%
2004
3,363
$948,000
+29%
2005
3,014
$1,000,000
+5%
2006
2,626
$985,000
-2%
2007
2,479
$1,000,000
+2%
2008
2,037
$890,000
-11%
2009
2,223
$817,000
-8%
2010
2,461
$830,000
+2%
2011
2,562
$825,000
-1%
2012
3,154
$830,000
+1%
2013
3,218
$952,250
+15%
2014
2,850
$1,025,000
+8%
2015
3,079
$1,090,000
+6%
2016
3,103
$1,160,000
+6%
2017
3,084
$1,225,000
+6%
2018
2,797
$1,325,000
+8%

At the time it seemed like sky was caving in, but looking back we only had two bad years (2008 and 2009) in the last twenty. There was some scuffling around as we found our way in 2006-2007, and 2010-2012, but given that our market had been injected with the most exotic financing ever known to man, and then tanked by foreclosures and short sales, I think we did pretty good to survive it as well as we did.

Now what?

With 90% of the NSDCC active listings priced over $1M, all we need is wealthy people to keep coming here to buy their forever home.  We’re still cheaper than the LA/OC and Bay Area, so we look attractive to downsizers.

Our pricing may bounce around, but without brainless bank clerks dumping properties for any price, who else is going to cause a collapse?  We could run low on the number of buyers – and if we did, all it would do is cause a protracted descent; re: soft landing over years.

Boomer liquidations?

Here’s a conversation I had yesterday with a guy who is 80+ years old and who has lived in his house since the 1960s:

Him: Convince me why I should sell my house.

Me: How are you getting around?

Him: I ride my bike to the store.

Me: Do you need the money?

Him: No.

Me: Have you ever dreamed about buying a house on the lake and fishing the rest of your life?

Him: No.

Me: Are you married?

Him: No.

Me: Did you know that if you did sell, you’d have to pay six-figures in taxes?  How would that make you feel?

Him: What?  I only paid $19,500! I’d never pay that much in taxes!

Me: What happens upon your demise?

Him: My daughter will inherit – she grew up here, and will likely move back in.  But I told her if she doesn’t move in, it’s ok with me to sell it.

Me: Do you have a family trust?

Him: Yes.

Me: Did you know that if she sells the house, she will pay no tax?

Him: You’re kidding? If I sell it, I have to pay the tax man six-figures, but if she sells it, she pays nothing?  Jim, I think we have the answer!

There will be occasional sales where sellers hire bad agents and get taken advantage of, but there won’t be an avalanche of desperate sellers dumping for any price.  It would take a tsunami, earthquake, or terrorist event at the border to cause a drastic shift in housing – which could happen!

Here’s the latest photo of the nuclear waste being stored right on the surf at San Onofre.  All we need is one crack in a storage cask…..

Without a catastrophic event, what’s the worst we can expect?

Maybe 5% drop in pricing in the short-term?

Any more than that, and sellers will just wait it out.

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