Another new year of real estate turbulence is upon us – around and around we go, where it stops, nobody knows!
But that won’t stop us from trying to predict what will happen. Here’s the recent SD history below – leave your predictions in the comment section, and click the ‘Forecasts’ button (at bottom) for last year’s thoughts:
| SD County Det. | 2007 | 2008 | 2009 | 2010 YTD |
| Total listings, year | 46,056 | 42,567 | 34,241 | 35,874 |
| Total closings, year | 15,713 | 19,103 | 22,571 | 19,492 |
| 4Q Closings | 2,965 | 5,450 | 5,839 | 3,463 |
| 4Q $$-per-sf | $329/sf | $233/sf | $243/sf | $260/sf |
| 4Q SP:LP | 95% | 98% | 100% | 100% |
| 4Q Avg. DOM | 71 | 62 | 59 | 69 |
The sales numbers could be substantially higher, if it weren’t for the bumbling incompetence among listing agents. Too many think that ‘waiting for months for a buyer to come along’ makes for an effective marketing plan, rather than lowering the list price early and often in order to find what the market will bear while there is urgency. But more of them will be getting lucky in 2011, because the competition for the quality buys will be even more ferocious next year.
The average cost-per-sf for detached sales in SD County rose 9% in 2010. I think it’ll increase another 9% in 2011, fueled by the red-hot lower price ranges. But sales will struggle, possibly 20% fewer sales overall, because buyers will want to hold out for the best. The bar is rising on what buyers are willing to tolerate, but they’ll spend the money on a top-quality house.
Here is the chart for North SD County Coastal detached:
| NSDCC Det. | 2007 | 2008 | 2009 | 2010 YTD |
| Total listings, year | 5,406 | 5,289 | 5,045 | 5,169 |
| Total closings, year | 2,479 | 2,037 | 2,222 | 2,302 |
| 4Q Closings | 444 | 433 | 642 | 420 |
| 4Q $$-per-sf | $476/sf | $407/sf | $408/sf | $383/sf |
| 4Q SP:LP | 94% | 95% | 95% | 97% |
| 4Q Avg. DOM | 75 | 72 | 82 | 83 |
(Add 10%, or so, to the 2010 sales for the late-reporters, and remaining December sales).
Why would sales slow down considerably?
Because greedy or desperate sellers will be listing early and often, and tacking on the extra 5% to 10% to their already-inflated list price dream. Please refer to Rich’s excellent graph/commentary on the relationship between active inventory and sales – here – and how pricing stalls once inventory exceeds six months’ worth. This is where the buyers’ intolerance comes in – more OPTs will infuriate the dedicated buyers, because the selections will look worse than those in 2010. But in the end, I’ll guessing we’ll buck the trend in Rich’s link, and the pricing metrics will shows year-over-year increases. Here’s why – many of the same themes we’ve seen here for the last two years:
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Buyer Exhaustion – The frustrated buyers might be tempted enough to pay more, but only for a top contender.
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Mortgage rates – stay in the 5% to 6% range, and buyers shrug them off.
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No Foreclosure Tsunami – at least one foreclosure moratorium, and more defaulters hold out for their principal-reduction dream.
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MERS – government forced to cut deal, instead of enduring another banking crisis.
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More and more out-of-area buyers come here who think our real estate is cheap, and buy it up – while locals shake their head.
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No tax-credit cheese this year.
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Spousal pressure. The kids are getting older, and the “good-buy” inventory has never been so thin.
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More hype – Prudential just called us a “blistering hot sellers’ market under $1,000,000”.
I think more potential buyers will stick their toe in the water in 2011, and they’ll find out quickly how difficult it is to find, let alone buy a good house, at a good price.
Buyers are tired of waiting, but will hold out the best they can. The bigger the inventory grows, the easier it’ll be for them to wait.
i predict if i read this post in its entirety my head will hurt long before 2011!!! go JTR 😉
oh yeah, and go BIDU!!
SM sent this in, more commentary on other agents:
http://huntingtonhomes.ocregister.com/2010/12/13/should-real-estate-agents-be-fined-for-doing-this/123548/
In December 2009 worm predicted:
We shall see if the average home is one million dollars in Carmel Valley Christmas of 2010. I will guess at least a 15% cut.
4Q10 in 92130 = 67 sales, $1,040,228 average.
More for consideration:
http://www.latimes.com/business/la-fi-luxury-housing-market-20101213,0,68034,full.story
A bullish 9% in 2011. I like it.
I’d suggest that homes over $1MM tend to have DOM over 180 quite commonly and still sell. My assumption is that everyone has an 8% discount, (on average), built into the list price.
So why not go ahead and ask for it instead of monkeying around with short sales?
I predict americans will continue to go deeper in debt.
I think interest rate will go up slightly forcing prices to go down slightly.
Deadbeats will continue to live in their houses for free.
My take is rates stay fairly constant through mid/late summer, then a steady rise will begin. Unsure if its slow and steady or a steeper incline. Just see upward pressure on too many items combined with a nervous (historically high) bond market which is becomming increasingly full of self-doubt vs. 1 yr ago.
Thus if you gotta get a sale done, get it done by the spring as I’d bet prices will be lower than expectations this time next year.
ps: speaking of coastal ncc in specific.
From article at #5:
Holding firm on an asking price keeps up the illusion that the house is worth more, Hurwitz said. “Some sellers are dreaming.”
Southern California’s posh neighborhoods are littered with examples of properties stuck at outdated prices. The most noticeable on the landscape is Fleur de Lys, a 12-bedroom estate in Holmby Hills that was listed at $125 million for 940 days before being pulled off the Multiple Listing Service late last year. The French Beaux Arts mansion on 5 acres is still being marketed on agents’ websites.
By comparison, its competition — the nearby $150-million Spelling estate — has been on the market only since March 2009. There has been no price drop on this 56,500-square-foot manse either, however.
The moneyed market of the Palos Verdes Peninsula is no different. Linda D’Ambrosi of Keller Williams had the listing on a turn-key ocean-view house that lingered on the market for more than a year with nary a price cut. Home prices on the peninsula are down 12.9% from their 2008 peak.
“The seller,” she said, “just couldn’t come to terms with today’s value.”
I’d bet prices will be lower than expectations this time next year.
ps: speaking of coastal ncc in specific.
I could see that happening too – the NSDCC trend has been downward. To continue, it would take sellers getting smart and list-pricing their home more aggressively, which might be forced on those who are motivated/desperate.
The 9% increase in SD pricing will be due to the lower-end pricing being under tremendous pressure from competition. Those buyers are more sensitive to rate increases, and will lose many bidding wars before finally paying enough to win one.
Also, watch out for macro-economics. The European debt crisis (Greece, Italy, Spain) which caused the European Union to shore up those countries’ debts (read: Germany), has now culminated in a significant austerity campaign. (See the news about Britain’s moves and the riots that ensued?).
This will come to our shores with the newly elected Congressmen who campaigned on reigning in the ‘runaway government spending’. We will have our own austerity program which will cause a significant pullback in anything related to government spending (which is more than most realize), and ripple through commodity markets which are arguably overheated. When oil, gold, and domestic equities pull back, watch the optimistic home sellers twist in the wind as everyone gets another dose of sobriety.
The next six months are going to be a ride!
“Also, watch out for macro-economics.”
Took the words out of my mouth, CB Mark.
Of course, that works both ways. If the market softens, could there be more stimulus ?
From the reports, it would seem that we won’t see more Congressionally authorized stimulus spending. Even with the current makeup of the House and Senate, further such activity got little traction.
Further attempts by the Fed to get around this by buying Treasuries (read: printing money) will likely be met with a howl from the new Congress, and thus might be politically suicidal for any proponents. Fasten your seatbelt!
There is no real solid job here in OC. Even big companies are not hiring full time employee. They only want contract workers. In a nut shell, the house price will be lower and lower for the next few years until there is a real solid job market and employer are fighting for employee. Without that, there will be no confidence in housing
I predict that housing prices in ncc will remain artificially inflated due to the banks holding on to inventory for as long as they want (as jim has mentioned). There is really no incentive for a bank to sell a REO if it can wait 5-10 years to make a profit. Can anyone think of a negative assuming prices remain high due to lack of good quality selection (caused by the banks holding REOs)?
In essence, we have given the keys of the housing kingdom to the banks! I have placed two short sale offers and the banks are still squabbling about who will take the bigger loss. This effectively eliminates the shadow inventory threat in my opinion.Thus, it’s probably a good time to buy. The problem is, I can’t find a single house that is nicer than my rented house on mango dr. right now (in my price range), so I will continue to rent…..
I have to say I’m impressed with the sales price. The condo is nicely upgraded and probably deserves some premium but at $420/sqft it’s quite a bit more than some other comps. This seems to be a top end complex where the sellers benefited somewhat from the smallest/cheapest place beating out the other bigger units. I see list prices of about $350/sqft on the bigger units in this same complex.
This trend is something that I’ve been seeing in the 2009/2010 sales. Where the smaller places have seemed to hold up better in terms of price/sqft than the bigger places. You could find $200/sqft all day in the late 1990’s on the 1970-1980 built 1000-1400 sqft homes but now those places are all still selling for excess of $300/sqft because they hit that magic $300-400K buying range for starter homes.
Seems like buyers have been willing to compromise on SqFt to get into a home in a desirable location.
The extra dollars that have been printed must come home to roost sometime, when they do house rices muat/will rise.
Looks like 30 year rates just hit 5% again today. Wonder if we’ll see a panic by potential buyers to hurry up and get in before rates go higher. Obviously refinancing activity is completely dead at this point.
Being a potential buyer, I am panicking to stay OUT of the market to see how much downward pressure is created on prices.
ditto to del mar renter
double ditto to del mar & positive. though i suppose it’s more accurate to say my price-range just dropped.
RE #4 ‘…predicted Ave CV home down 15% from 1M’
What a year! Feels like I couldn’t have been more wrong! Still surprised by it too. I feel I was a little ‘cheated’ as I was expecting a more fluid foreclosure market and a large reduction in shadow inventory (which I think is still out there), but the facts are what they are! Per the “Holiday Sales = Multiple Offers” post, looks like for Dec about 1 sells for every 6 listed.
Prediction for 12/2011…doesn’t feel to me like much change is on the horizon…either way, i’ll be paying attention! Thanks JtR for keeping me honest!
How accurate are the Zillow estimates and other websites to actual appraisals? Do buyers/sellers use these as a guideline?
We are moving back after being overseas for four years and are feeling a bit lost.
the line between the rich and poor has been drawn,the rich are getting richer and people still have there heads in the ground.
“A House is Worth What It Will Sell For” BUT the automated appraisal has over simplified and ruined apraisals. Everthing sells per SQ FT in an area no matter what the amenities. Problem #1
Replacement values have gone up. People aren’t fools. Problem #2
The banks are sitting on their money. A bird in the hand is better than 2 in a bush. Problem #3