Wouldn’t you think that local home sales should be sputtering right about now? Mortgage rates have sky-rocketed, relatively (now around 5%), and come on, it’s the holidays – there can’t be anyone buying homes, can there?
Plus, with the homebuyer tax credit having inflated sales during the end of 2009, and the first half of 2010 (allegedly), the year-over-year counts should look bleak for the next few months.
But out on the street, the battle continues.
Here are the North San Diego County Coastal detached closings between November 14th and December 14th; the lower amounts mean wilder percentage swings, so apply your grain-of-salt, plus there will be a few late-reporters to add to this year’s tallies.
Note how Carlsbad and Encinitas look solid, especially in the Actives/Solds-last-30-days category, and both La Jolla and RSF are hanging tough:
| Town or Area | Zip Code | ’09 sales | ’10 sales | ’09 $/sf | ’10 $/sf | ACT #/ppsf | A/S |
| Cardiff | 92007 | $483 | $480 | 42/$534 | 14.0 | ||
| N. Carlsbad | 08+10 | $265 | $274 | 112/$453 | 4.30 | ||
| SE Carlsbad | 92009 | $254 | $256 | 161/$272 | 4.35 | ||
| SW Carlsbad | 92011 | $283 | $287 | 75/$340 | 5.77 | ||
| Del Mar | 92014 | $561 | $888 | 140/$1,070 | 15.55 | ||
| Encinitas | 92024 | $350 | $537 | 141/$456 | 5.22 | ||
| La Jolla | 92037 | $661 | $553 | 214/$958 | 11.26 | ||
| RSF | 67+91 | $442 | $419 | 234/$688 | 14.63 | ||
| Solana Bch | 92075 | $621 | $580 | 39/$788 | 4.88 | ||
| Carmel Vly | 92130 | $339 | $329 | 167/$372 | 5.76 | ||
| Total | Above | $385 | $404 | 1,324/$616 | 7.30 |
The number of sales measures the quantity of sellers who were willing to sell for the price the market would bear. When sales go down, people (MSM) are quick to assume that something is wrong with demand.
But just look at the difference in cost-per-sf between Actives and Solds: $616/sf to $404/sf!
I think the lower sales count describes the increasing difficulty with buying a home today, especially the right home, at the right price. You want to think that home prices would be soft, and nary a buyer around the holidays.
In the last week, I’ve seen four different houses that had multiple offers on them!
In mid-December!
The demand is healthy, yet very specific – if a house misses on quality or price, it sits. But the sellers, and the listing agents, want to think they are close just because they see a few people come by. But who knows? It’s only when there are offers that sellers know they must be close on price. Buyers know they’ve found a good buy when there are multiple offers, so rejoice!
It’s almost like when houses are priced right they sell and when priced wrong they sit.
It must eat at sellers to the core knowing the only reason their house isn’t selling is because of their own greed.
Shadash – nah, they just keep chanting that “demand just isn’t there.”
They perpetually leave off the second half of the sentence “demand just isn’t there at the existing price point.”
If houses one zip code over from me were $100k less, I’d have been a buyer a few months ago, not a refinancer. Demand is not there for the current pricing. There are plenty of buyers, just not at these prices.
The high $/psf definitely supports the idea that only the best (i.e. highest quality) houses are selling.
It’s always bothersome when realtors say things like “FOUR WITH MULTIPLE OFFERS!” So of the hundreds listed in a given area, four are selling with multiple offers. For Jim it’s offset by the amount of time he talks about all the houses that are sitting and his general honesty but for most realtors it sure would be nice if there were actually some consequence to the things they said and did.
I remember you used to compute active/pending ratio. I am wonder if you can keep publish that number along with active/sold or just simply replace it?
If you look at the totals, sales were down a little more 10% YoY. Just glancing at the individual zip codes gives you the impression that sales were basically flat. A 10% decline in number of sales is probably significant and inline with what you’d expect given the circumstances. It does appear that sellers might be getting a slightly better price than last year at the expense of not getting a sale done.
Nothing out of the ordinary yet. Still waiting to see how this coming spring does. Will the buyers come up in price or will the sellers finally decide to come down to the buyers price point. I suppose if rates continue upward we might see the sellers chasing the buyers price down, but it’s difficult to gauge what a buyer is going to do from the outside. We have a little insight into the seller from the list prices.
Pendings don’t mean squat in this era of short sales going in, sitting for months, then falling out. Just look at Steve Thomas’ drivel.
I for one am very happy that JtR (aka daMan) is reporting sales.
livinincali,
Interest Rates have been slowly climbing up. If the trend continues over time buyers will be be able to pay less and less for a house.
I have a theory that in southern california a large percentage of buyers all make roughly the same amount of money. This creates a “sweet spot” for those looking to sell houses because these buyers will all be able to stretch themselves to afford X amount of house.
At the moment with Interest rates at 4%-5% this means 350k-550k is likely the sweet spot for sellers/buyers.
* Buyers with larger downs will obviously be able to purchase more.
If interest rates continue to go up to say the 5%-6% (or higher) the “sweet spot” lowers from 350k-550k down to 250k-450k.
FreedomCM,
Are you confused about pending with contigent?
Yeah, and that “sweet spot” is in Mira Mesa or Santee. Dream on.
Bummer that prices are going to continue their fall, isn’t it.
The indicators may fall, but that’ll bring out more buyers. Wait until they see how hard it is to get a deal.
This Laguna Beach agent was featured on Inman News today for her videos:
http://www.youtube.com/user/USHomeTours#p/u/0/5i2PT3lV0CM
The problem with the pendings is so few of them are coming out the other end – the cancelled-escrow ratio has to be near all-time highs.
Jim,
That agent’s approach is a fad, a passing wind. Real consumers want real information, not entertainment. If I wanted entertainment, there are plenty of cats playing piano on youtube, I don’t have to be bored by bad acting and poorly scripted skits in below-average homes.
chuck
Re:”Cancelled-escrow ratio has to be near all-time highs.”
Thanks Jim. It would be interesting to see how high the ratio of “fall-out-of-pending” now vs, say, one year ago.
We generally focus on North County Coastal here, but I did spend a little time to do the analysis of how the buyer pool might be affected as rates go up. This probably applies more to the first time buyer in the national market but most people in NCC probably have been move up buyers at least a couple of times, so at some level a first time buyer is often necessary to facilitate a move up buyer.
Int Rate | $150K Loan | 35% Gross | Ann Salary | % w/Income
4.25 | 887.9 | 2536.857143 | 30442.28571 | 65.75
5 | 955.23 | 2729.228571 | 32750.74286 | 62.29
6 | 1049.32 | 2998.057143 | 35976.68571 | 59.88
7 | 1147.95 | 3279.857143 | 39358.28571 | 54.6
8 | 1250.64 | 3573.257143 | 42879.08571 | 51.62
Basically it works out to a 1% rise in interest rates for a $150/K loan reduces the buying pool by about 3% of households. If rates were to go from 4.25% to 6% we have a situation where about 6% of the population could no longer afford the $150/K loan at a 35% Gross Income ratio. YOu could up the ratio or the down payment to get them in a house but loan lending with low teaser payments and >50% gross income ratios were the problems that got us into this mess.
livinincali – nice analysis. thank you!
This market (prices and interest rates) is way too volatile. You can lose your 50k down payment on a 500k house in the span of one month.
Anyone else with me on this?
It’s true if rates go up so does the cost of a mortgage but your missing the big picture; rates going up mean inflation which means incomes also are going up.
This would carry over to real estate as well which although there is a loss in actual value it would be perceived by most as a healthier real estate market. Even when prices stay flat or actually rise slightly with inflation.
Mozart,
Although you’re right about inflation. Incomes don’t generally “just rise” in reaction to it.
* Off topic but if inflation was/is around the corner I would hate to be a senior citizen living on a fixed income. Watching as every month you’re able to buy less and less with the same amount of money.
“It’s true if rates go up so does the cost of a mortgage but your missing the big picture; rates going up mean inflation which means incomes also are going up.”
With such a high unemployed pool of labor and globalization effects we may not see many forces in play that would drive wages up. We’re already in the process of trying to bust public unions so that we can lower the costs to taxpayers. I just don’t see the mechanism for increasing wages because of inflation although I can see rising gas prices and food prices as a result of Fed printing presses.
Increasing wages in the late 1970’s early 1980’s did eventually get us out of the stagflation mess but we aren’t using those strategies now, we’re just trying to kick the can down the road with money printing. How is the middle class going to get the wage increases when the attitude by most upper management is you’re lucky to have a job and if you don’t want it I’m sure we can find a cheaper replacement.
If we do somehow find a way to increase wages than I’d agree but I don’t see it yet. Maybe the mobile internet space will bring some higher salaries for those willing to take on the task of gaining that knowledge.