A hearty THANK YOU goes out to Rob Dawg for minding the store this week. A spirited discussion throughout, with 185 comments left!
The most intriguing was the last post, where he noted – like Rich did – the divergence between average list and sold pricing on a $-per-sf basis.
A few commentors suggested that the upper-end market was the likely culprit. Here’s a check:
Carlsbad to La Jolla New Listings over $1,500,000 entered between April 1 – May 15:
| Year | # of listings | LP Avg. $/sf | % closed | SP Avg. $/sf |
| 2003 | ||||
| 2004 | ||||
| 2005 | ||||
| 2006 | ||||
| 2007 | ||||
| 2008 | ||||
| 2009 |
Because only one of the 2009 listings has closed so far, I used the overall number closed, 42, between April 1 – May 15 of this year.
The ‘percentage closed’ helps show the struggle this market is having. At the peak about half of these listings were closing, but now there are 5-6 new listings coming on the market every day, and only about one closing per day.
The backlog of high-end listings doesn’t seem to phase the sellers/agents either.
Currently there are 883 ACTIVE listings over $1,500,000 between Carlsbad and La Jolla. The list prices on average are $887/sf, and average market time is 118 days.
But check this – in April there were 30 closings, the same one-a-day pace, but their list prices averaged $568/sf, and closed at an average of $510/sf. So the 12 properties that have closed in May that averaged $959/sf have skewed the chart’s 2009 number quite a bit higher.
The backlog didn’t seem to faze them either.
Nice Job Rob Dawg, and welcome back Jim.
So 2009 list prices are 25% over 2006’s and 15% over 2007’s in this segment. Who are these people? Are they dumb investors? Are they foolish real estate agents (probably washed up now) who believed their own garbage that real estate only goes up? Are these people who upgraded in 2006 or later, after riding the bubble up in lower areas and refuse to learn their lesson?
Whatever the case, these people believe the high-end is immune. Some people won’t realize there’s a downturn until it smacks them in the face.
Welcome back. Don’t worry about that dent on the fender of your blog, it’ll rub right out.
Question on topic. Why do Realtors take these listings? Is it just swinging for the fences hoping for the 3% on $2m that keeps them from starving this quarter?
But this happens in ALL markets. ALL of them. It’s human nature because you now have a sunk cost, and a damn big one here.
And lets not forget something has been ‘wrong’ in SD for some time so the reality of value could seem foreign, and then the issue becomes sell or walk away.
If I can walk away with no risk I can destroy a market ala the banks and perhaps La Jolla sellers. Welcome to welfare capitalism amuk..
“Why do Realtors take these listing?”
Because they are hoping the sellers will stay with them when they lower their prices.
If you get one out of five listing that remain. That 3% on $1.5 million will cover the expenses of the other four. Plus, it keeps your name out in the market.
I’ve mentioned before that many of the most expensive listings on the coast are flips. IMHO, there might even be a small number of people trying to tie up these homes, but I don’t know enough about that part. They are “special,” you know.
It’s worth noting that all this time, SP/LP ratio for closings has remained between 95% and 100% for most zips. Even the ones where LP is 25% higher than SP for houses *still left* on the market.
This is the “bottom of the barrel” phenomenon where at a supermarket the last scraps of fruit and canned goods are all bruised and dented. In this case what’s “left on the market” is not an indication in the least of the condition of what was sold. In fact, quite the opposite.
Again, the same zips where LP is 25% higher than SP show SP/LP ratios of about 95% for closings. I.e. the houses that actually sold discounted little or nothing. The houses that didn’t sell were on average 25% overpriced. This is not a surprise when those sellers have no equity left to drop. The moment you dip into negative equity, all incentive is left and you’ll sell at “market price” however low that may be.
Realtors not only take overpriced listings, they are sometimes a factor in the overpricing as they literally bid against each other for listings by claiming that they will be able to deliver a higher sales price. Many privately admit to blowing smoke to get the listing.
Their hope is that an out of town buyer (or investor from China!) will unsuspectingly pay the retail price. The fall back plan, as others have noted, is begging for price reductions while following the market down and hoping that the dead listing leads to a live listing from someone else in the neighborhood.
It really is cynical and unprofessional, which is why the industry, with the notable exception of brokers and agents like Jim, has such a lousy reputation with the public.
I always hate those indications of “sold at 95% of List Price”–well maybe the LAST list price. How manay reductions were there? How many days of market did it linger? It would definitely put some perspective on the market for sellers if they showed sold price as a percentage of ORIGINAL lits price.
Sold price as a percentage of (most recent) list price tells you pretty much nothing, except if you get close to market price, it will sell!
It is very interesting hearing everyones theories on why there is such a Divergence.
the great thing about a Divergence as large as this is that it shows a major correction is inevitable at the high end range. Nothing seems to amuse me as much as the high end So Cal buyer.
much unlike the Sheep at the lower and mid levels -those who forget what happenned ten days ago (recession? what 20 offers? sheep must buy buy buy)
the Cali high end guy is lost in their world of fantasy immunity. Thinking what happens on the other side of the five cannot possibly reach their little world of royalty is quite comical.
the mighty must fall. and fall hard they will.
Oh maybe their is a large pent up demand which will be swallowed up by some clown who says “I have always wanted to live in La Jolla and I cant believe this one is only $798 a square foot- its a steal”.
Check out what La jolla was selling for in the year 2000. Can you say sub 300 a sq ft? you will – just wait about 18-24 months.