At every open house, people want to know, “How much lower?”
It is relative to the usual factors – how long on the market, seller motivation, etc. – but what over-rides everything else is timing. It is early in the selling season now, and every seller is optimistic.
Even if the house has been on the market for months – or repeatedly ‘refreshed’ over several years – every seller thinks this is a new beginning.
If you look at the recent averages, big discounts are rare – buyers are lucky to get 5% off, especially in the first half of the year.
Here is the history of discounts off list price in North SD Coastal:
Houses sold under $1,400,000 have barely knocked off 2% to 3% from the list price over the last three years. Those between $1.4 and $2.4 had a great year in 2015 – above 95%. But every price range does better in spring.
Our Spring Selling Season usually gets moving after the Super Bowl is complete, but is anyone excited to see Carolina vs. Denver?
The sports media will do their best to generate some juicy story lines, but San Diegans won’t have much at stake with this matchup.
Let’s just get on with the Spring Kick!
The count of new NSDCC listings in the last week was 102, which is the highest count since early July – so sellers are cooperating! Mortgage rates have dipped, pricing has moderated (Case-Shiller tomorrow), ‘Coming Soon’ signs are everywhere, the forecast for rain is favorable, and they are practically giving away gasoline!
Want to guess when the best time will be to sell your house in 2016?
Let’s reflect on recent history.
The Big Frenzy of 2013 was super-charged by mortgage rates dropping into the low-3s during 4Q12. The low point for the 30Y conforming rate was 3.31% during the week of Thanksgiving.
It skewed the sales history of early 2013 higher, but then rates started rising which tempered the market. By the time we got into 2014, rates had to decline most of the year just to keep the market afloat. Those two histories are unlikely to be duplicated in 2016.
Rates were back into the 3s by the end of 2014, which helped 2015 get off to a good start – and now rates have muddled through the rest of this year.
Because of the highly-publicized Fed hike this month, home buyers have to be thinking that it’s time to buy – before rates go higher. The Fed has threatened to raise rates throughout 2016, which should cause buyers to be very active early on.
As a result, let’s compare our 2016 market expectations to 2015 – the recent sales history that will be most-likely to repeat.
These are the weekly counts of NSDCC detached-homes that have closed escrow, based on when they were marked pending. Starting in mid-October, I included the listings that are currently marked pending too, figuring that they have released their contingencies and should be closing soon.
Once the Super Bowl is over, the motivated buyers really get busy. You can see that February, 2015 was one of the best months of the year to find a buyer.
This year is wrapping up nicely, with the 4Q15 action being better than 3Q15. It should provide a solid foundation for early 2016.
Let’s consider the difference between wanting to sell, and having to sell.
If you really needed to sell, you probably got it done in 2014 or 2015. Prices were hitting all-time highs, and the motivated sellers weren’t going to wait around any longer.
The 2016 sellers are more likely to be the lesser-motivated, “if-I-get-my-price” sellers. It will be irresistible for them to tack on that extra 5% to 10%, just in case, and by the end of spring we could see the OPTs stacking up. I thought it might happen like that in 2015, but it didn’t so who knows. But one of these years the buyers will have had enough.
We’ve been enjoying a statistical exuberance that is somewhat misguided.
The latest Case-Shiller Index was the March reading, which includes sales data from the previous two months too. Our recent local data has been looking strong as well, with both April and May sales and prices higher year-over-year.
But rates were lower when those buying decisions were made. Rates are heading north now, and arehigher than they have been all year:
The reports of good news will keep coming all month, and sellers will stay optimistic – and be reluctant to lower their price in the midst of the euphoria. But the prime spring selling season is complete, and the summer sales should be impacted if rates keep rising.
Back in 2013 when rates started rising, some buyers rushed to purchase – but that was 10% to 20% ago, price-wise. They are going to be more tempted to wait it out this time.
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:
Fannie interviews 1,000 people every month, and then leaves it up to their ivory-tower guy to explain it to the masses. Here’s my conclusion from my own personal survey: buyers are being cautious due to prices going up so fast.
Consumer attitudes toward housing appear to have stalled somewhat amid a recent dip in confidence regarding personal finances and income growth, according to results from Fannie Mae’s March 2015 National Housing Survey™.
Among those surveyed, the share who expect their personal financial situation to improve over the next year fell to 41 percent last month, while those who said their household income is significantly higher than it was 12 months ago fell to 22 percent.
Additionally, the share of respondents who said they would buy a home if they were to move decreased 5 percentage points to 60 percent – a new all-time survey low.
On the bright side, the share of consumers who believe now is a good time to sell a home reached a new survey high of 46 percent, narrowing the gap with those reporting it is a good time to buy, perhaps signaling a more balanced housing market.
“Consumers are being patient prior to entering the housing market. Our March survey results emphasize how critical attitudes about income growth are to consumers’ outlook on housing,” said Doug Duncan, senior vice president and chief economist at Fannie Mae. “We’ve seen modest improvement in total compensation resulting from a strengthened labor market. However, income growth perceptions and personal financial expectations both eased off of recent highs, consistent with Friday’s weak jobs report. Simultaneously, the share of consumers expecting to buy on their next move has declined. We believe the recent setback in consumer sentiment should be short lived if early signs of income growth bear out and occur in proportion to expected interest rate increases. Meanwhile, the wait for housing expansion continues.”
Mortgage rates on Friday dropped back to 3.62% (avg. jumbo was 3.57%!), which should help fuel the final Spring Kick of the selling season. The end of the school year is within sight, and there are lots of lookers. My listing on Monroe in Old Carlsbad was shown steadily for the first three weeks on the market, but no offers. Then we got three over Easter weekend!
Click on the link below for the complete NSDCC active-inventory data:
On top of today’s announcement that February pendings were up 3.1%, our local NSDCC market has kicked it up a notch lately. We had 84 new pendings last week, and 81 this week – we averaged 60 per week in February!
Click on the link below for the complete NSDCC active-inventory data:
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