The Problems With Comps

The critical point in this video is when the second seller dropped 7% to make the sale after just three weeks on the market……even though that was 10% under the last sale that backed to power lines.

This is what can happen. Did they have bills to pay? Did the agent press them to take it?  We don’t know, yet we consider every comparable sale equally and base our opinions on price alone.

The seller of the $2,225,000 sale had purchased it in 2013 for $1,109,000 and his mortgage amount was under $300,000. What’s a hundred thousand in either direction to him?

The previous high sale of this model was $2,100,000 in December, 2021.

The high sale before that was $1,750,000 in 2020.

The high sale before that was $1,320,000 in 2019.

Are we binary simpletons? Will the next seller and listing agent consider all of these variables? Or just go with $2,200,000 as the latest sale/current value and hope for the best? Or check the zestimate?? 😆

The next sale could go 10% to 20% in either direction, depending on the agent.

All You Get Now

This is the house that received THIRTY offers last month.

My thoughts:

  1. The supply of houses priced under $700,000 is scarce, with overwhelming demand.
  2. This is all you’re going to get from now on, and it won’t get better. I feel sorry for the kids.
  3. My buyers offered $700,000 with 20% down and didn’t get a counter.

The listing agent didn’t round-trip it and the winner paid $730,000 and financed the purchase. How do you know if others would have made a better offer if you don’t include them?

Spring Selling Season is Here!

When mortgage rates started going up last year, I said all we have to do is survive until springtime – and it looks like we’ve made it!

Not only did our local market not crash and burn, it held up pretty well – and that’s in spite of the higher rates and blistering doomer attack over the last eight months.

The San Diego Case-Shiller NSA stats:

Mar 2020: 268.19

May 2022: 421.29 (+57%)

Nov 2022: 390.22 (-7%)

I don’t know where the -7% is happening, but around the NSDCC, the pricing hasn’t changed much.

The spring season should run hot through May, and by then the mortgage rates AND prices will probably be higher. The second half of 2023 will likely be sluggish, at best.

https://finance.yahoo.com/news/map-heres-where-home-prices-are-dropping-the-most-165428216.html

NSDCC Pendings Since Jan 1

First of all, the calendar was perfectly set up for an extended holiday vacation and for everyone to not come back to work until this week. Mortgage rates are double what they were a year ago so nobody can afford a house, plus it’s been raining cats and dogs.

It would be natural to assume that the real estate market is ‘frozen’, and at best we will have a sluggish start.

Yet the early action between La Jolla and Carlsbad has been sizzling:

NSDCC Listings Marked Pending Since Jan. 1st:

What is impressive is how long these listings have been on the market – the median DOM is 55 days!  Wouldn’t buyers lay off those for a few weeks to see where this is going?

Did the sellers dump on price?

Why would they dump on price with the selling season is right around the corner? Surely they would let it run at least 2-3 weeks into January before giving it away, wouldn’t they?

Get Ready

This is the easier part – charting the next six months.

Either the Fed will pause and delight us all, or their threat of higher rates will make buyers antsy and ready to pounce. The best-looking inventory usually happens in springtime, so all the necessary the ingredients for a selling-season surge should come together nicely.

Motivated Sellers Only

There are three types of sellers:

  1. Sure I’m motivated….if I get my price.
  2. I’ll sell for what the market will bear.
  3. Desperate.

Unless the home is a real trophy property, this isn’t the market that tolerates aspirational sellers.  For those who will only sell if they get their price – you should wait this out….and it could take a while.

The high-priced listings might get showings, but mostly to buyers who are considering the better-priced home down the street. It will take another six months and some boost from a strong spring selling season before the listings priced at retail-plus will start selling again. And that’s probably optimistic.

I still think the 2023 Spring Selling Season will be boisterous, and the sales volume will pick up – but generally-speaking, I agree with Zillow that pricing won’t be rising. Here are Z’s latest predictions:

SE Carlsbad 92009

Del Mar – 92014

La Jolla – 92037

Rancho Santa Fe – 92067

Carmel Valley 92130

Less than 1% annual increases in prime neighborhoods? Yikes!

There is nothing wrong with being in Plateau City.  Sellers just need to recalibrate and be smart about what it takes to sell a home in this environment:

  • Hire a great agent.
  • Spruce up the home.
  • Utilize effective staging.
  • Price attractively (be the best-priced active listing).
  • Make it easy to show.

That’s all – and if you don’t do all five, it’s ok because there’s nothing that price won’t fix!

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An example of #1 is the now-famous property for sale in Del Mar on Border. A buyer thought they could get approvals to build a high-end resort there, but it was put to a vote, and the citizens turned it down. A new buyer is now hoping to turn it into apartments.

It’s been for sale since 2007, or 5,573 days!

https://www.compass.com/app/listing/929-border-avenue-solana-beach-ca-92075/25353758691121345

P.S. If there is anyone who wonders why their Over-$4,000,000 stats don’t match up with mine, it’s because I take this listing out every week so it doesn’t skew the averages.

NSDCC October Listings

Next year, everyone will be talking about how mortgage rates in the 7s or 8s will be causing a lack of affordability, but I have bad news for those who still want to buy.

There probably won’t be many homes for sale.

It will only take one or two headlines about the real estate market being crushed by high rates to cause potential sellers to pack it in until “the market gets better”.

Look how few sellers came to market last month:

NSDCC Detached-Home Listings, October

Year
Number of Listings
Median List Price
2018
401
$1,555,000
2019
371
$1,695,000
2020
400
$1,849,350
2021
228
$2,160,000
2022
174
$2,362,500

Before last year, the lowest October-listings count over the last twenty years was 312 in 2012, and back in the golden years of real estate, there were 452 October listings in 2001, and 510 in 2002!

510 vs. 174?

Yikes!

Hopefully, those who do list their homes for sale next year will be highly motivated, and, lucky for them, having so few competitors will cause their list prices to stay elevated.

Don’t be surprised if the 2023 spring selling season ends up being the Greatest Standoff Ever!

FATCO Repeat Sales Index

The local Case-Shiller index is due tomorrow, and expectations are for a 2% drop from June.  First American has their own repeat-sales index which is already showing a 12% decline in San Diego pricing (above).

https://blog.firstam.com/economics/pandemic-boom-markets-cooling-the-fastest

While the -12% over six months is probably a surprise to people who think pricing is downward sticky, it’s different this time. In the past, the home-equity positions were much smaller, and many sellers had hold out just to have enough for a steak dinner at closing.

None of today’s sellers need to hold out. All of them could sell today for what the market will bear, if they could just get out of their own way. Yes, it’s true that they may have plans for all the money and need to sell for their price, and those sellers should just wait it out.

This could be over before you know it.

Is there a specific marker for home buyers to know when it’s time to buy? Or is it just when prices go down?

Is the -12% enough to get the attention of the highly-motivated buyers – those who don’t own a house yet?

Or will they just look up in March/April and say, “Close enough!”

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