Another Investor said yesterday:
Prices are going up in Phoenix, why wouldn’t they go up in San Diego? No foreclosure inventory, and as you say, buyers are everywhere. When buyers become resigned to paying something closer to the new listing prices or going home empty-handed, they will buy at the higher prices. As long as they can afford the payments, that is.
Overpriced turkeys are always out there. The nice property that lists five percent higher than the most recent sales will draw bids when buyers see there is nothing else out there. Prices move up when buyers are more confident and sellers are not desperate. Barring a significant increase in interest rates, I think you will see at least a five percent increase in your market this year.
I agree that we could see a five-percent increase in prices around NSDCC this year, even though the measuring of price changes is imperfect. If the SD Case-Shiller Index rose 5% this year, it would only get us back to 2010 readings, because it dropped about 5% in 2011.
Why won’t prices go up much?
1) Buyers stay picky when they plan to live there long-term. The inferior properties aren’t enjoying an across-the-board appreciation like they did in the peak era, and still need to be aggressively-priced to find a buyer.
2) There should be a flood of short-sale listings over the next few months, unless the N.A.R. can petition Congress to extend the exemption to taxing debt relief that expires at the end of the year. I haven’t seen any official announcement from N.A.R. about them working on this. They didn’t have the juice last time, and the Fannie/Freddie conforming loan limits reverted back to the previous lower amounts, until Congress caved and bumped our FHA limit back to $697,500.
3) There isn’t much competition from investors around the higher-priced areas of NSDCC.
4) For every higher-priced sale, there is a fraudulent short-sale in the other direction.
5) The increase in activity might just be from lower prices, and the statistics will bounce around:
SD County Detached Sales for Jan and Feb:
|Year||Sales||Avg $/sf||DOM||SP/LP||Avg. SP|
NSDCC Detached Sales for Jan and Feb:
|Year||Sales||Avg $/sf||DOM||SP/LP||Avg. SP||Median SP|
The DOM and SP/LP categories are worth keeping an eye on, because they, like sales, are leading indicators. I don’t think buyers have to worry about prices getting away from them, but the agonizing wait for the right house, at the right price, may take longer than we thought.