Yesterday we saw that list pricing of San Diego houses had jumped recently, and a reader wanted to scale it down to local markets.
You can see in this Carmel Valley graph that last year the list pricing never picked up any momentum during the prime spring selling season – the average list-price-per-sf was in a downward trend for the first three quarters of the year. But there has been a surge over the last four months, though still well under all of 2010.
Also note that the buyers have stayed under control the last two years – the average sales price stuck right around Carmel Valley’s magical $330/sf , until recently:
Sales during the prime spring/summer selling season weren’t as successful either, staying well below those in 2010. They tapered off early too – the late-summer plunge in sales looked like totals from winter months, even though inventory had been on the rise through June/July.
But it appears that there must have been a lot of market-testers, because the inventory dropped steadily in the second half.
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Here are the same two graphs for SE Carlsbad’s 92009 zip code, which is about the same size as Carmel Valley.
This graph shows how committed buyers were to staying in the tight $240/sf-to-$250/sf range last year, as they watched sellers go nuts with their list-pricing during the spring kick.
Buyers were very patient, just picking off the good buys; and as the inventory of seller/dreamers thinned out heading into the holidays, so did sales:
What will it be this year?
Buyers have waited this long, they aren’t going to pay a lot more than the last guy – maybe a little. If so, they’d still be in line with 2010 pricing on these two graphs.
It’s so awesome that all this data is available for free. People can do honest due diligence about the state of the market rather than hearing realtors parrot “It’s a great time to buy!” all the time.
Carmel valley ands SE carlsbad are interesting markets.
Basically for this spring I expect to see less than normal inventory for spring fling levels with sales basically close to last year.
Keep in mind this is with absolutely lifetime low artificially FED induced interest rates.
If the rates were near historic normalcy-somewhere in the 6-7% range(which I estimate it as about where it should be without all the FED measures) ,the outlook would be much different-More like way slower sales, still low listings and quickly falling $/sqft sales pricing.
However basically , we know that rates wont be going up dramatically until at least 2014- so the cost is clear to keep the satus quo of 2010-2011 – not much change.
2: Didn’t you see the graph from the other day? Lower rates mean lower prices! Better get in before they start rising. I kid.
I guess CR’s recent assertion has everyone thinking rising prices are a foregone conclusion. I wouldn’t expect buyers who have held out this long to pay any more than 5% under the last guy; psychology works both ways. This expectation doesn’t hold for areas that are under $200-ft. It also apparently doesn’t hold for Del Mar.
Slim pickins out there currently. If CV were to somehow unencumber itself from the crazy HOA and ‘ruse it would shoot the moon.
Hi Jim. Thanks for providing some numbers from local markets. You’ve mentioned ratios for Active/Pendings in the part. Is there any “normal” price-per-sqft ratio of List to Sold?
Good question Travis, and I don’t know of any normal ratio, so let’s examine.
CV is an atypical market, so let’s use the 92009 graphs above.
The active-inventory-to-solds has had a close relationship in the past. When the avg. LP $/sf starts rising quickly, buyers back off to roughly the same degree.
As list pricing gets more aggresive, the buyers are willing to pay pretty close to list.
During about half of the last two years the avg LP-to-SP ratio has been very tight – close to matching, and at one point in October the average LP $/sf actually dipped below the sold $/sf.
So I think we can build a LP:SP hypothesis:
1. When it’s under 1.10:1 the market is moving.
2. When the ratio is above 1.10:1, buyers start to back off.
Apply the 10% spread to Carmel Valley and see how it looks. The LPs had been tracking within 10% of the average sold $/sf most of the year, and when the LPs jumped up in 4Q11, the average sold $/sf dipped under $320/sf for the first time in two years.
It also looks like the CV demand is being challenged.
The sold $/sf has been on a steady decline for months, and sales have been struggling too.
I don’t think it is because there aren’t buyers, I think it is solely due to the greedy sellers who insist on packing that extra 10% or more onto their list price. Not only are CV buyers not going for it, they are getting more committed in their resolve – based on these results shown above.
JTR – should we assume that the ‘listed $/sf’ the final reduced listing price (i.e. started at $400/sf but dropped 3x down to 275/sf before going under contract and closing at $250/sf).
This would make the ratio much closer than the reality of a LP/SP ratio. I know several agents who move the LP to be close to the contract price and look like they got 95%+ of their list price to make a good stat at their ‘pricing skills’.
If the final LP/SP ratio in these submarkets is apx 1.10, would the original LP/SP be more in the 1.2+ range???
Yes, most sellers and listing agents start way too high, and it’s only once they lower the list price to within 10% of reality that it’ll sell. Whether they do it pro-actively to stimulate an offer, or after the fact to CYA probably doesn’t matter statistically.
I don’t know how Redfin generates this data either. Are they gathering each list price daily? Weekly? It’s hard to say just by looking at the graph, but they look sensitive so the data must be tighter than monthly.
The shenanigans factor doesn’t get included either, but not sure if, or by how much, it would sway the outcome.
But my rule-of-thumb for sellers still applies:
1. If you are getting offers, the list price must be about right.
2. If you are getting lookers, but no offers, your list price is 5% to 10% wrong.
3. If you aren’t getting any lookers, your list price is at least 10% wrong.
Lower the price in 5% increments until you get in the game.
Thank you, Jim. I hope that potential clients will see your commitment to readers of this blog, and realize that you apply that same commitment (I’d guess more) to your clients.