A frequent question is, “How long will it last?”.  It depends on how long the demand lasts, which at this point appears to be deep and wide.

There are sectors of today’s buyer pool that are still waiting for their shot:

1. Low-Down-Payment buyers.

You can be well-qualified and have no trouble getting any mortgage you want – conventional or FHA/VA.  But if your offers include a smaller down payment and you end up in a bidding war, you are going to lose.

Listing agents tell the sellers that it is safer to take a cash, or big down payment deal, even if it means taking less money overall.

As a result, the low-down buyers are still waiting in the wings.

Here are the percentages of detached-home sales each quarter that were financed using FHA/VA/CalVet loans in San Diego County, and NSDCC:

graph (30)

You can see how tough it is on those with low down payments!

2.  Move-Up Buyers

Many move-up buyers are still waiting, but for different reasons.

If you want to use the equity in your current house to buy the next, good luck making an offer contingent on selling your home.  Those offers go behind the low-down-payments, and you won’t even get a call back.

But if you can figure out how to finance the next purchase without selling, then you still have to find a home good enough to make it worth it, AND be willing to pay enough to win the bidding war.

My rule-of-thumb is that you have to spend 50% more on the new home to make it worth the hassle and expense of moving.  A 50% bump causes these buyers to be pickier than those who don’t own locally yet, and whose desperation level is a tad higher – the “homeless” buyers are inclined to pay more than those who are somewhat comfortable with their current house.

3.  Empty-nesters

According to the census, there are roughly 368,539 people in San Diego County over 67 years old.  Today, there are 1,553 single-story homes for sale – in the county!

Every year that goes by, more baby boomers are thinking about down-sizing, and all deserve to be in a single level.  But they will have to wait, and eventually many will give up and do the stay-in-place aging just because the supply is so limited.

4.  Buyers Who Are Too Busy

You have to devote a major search effort to find the right home, and to make you comfortable enough to bid high enough to win.  The speed at which homes are selling is increasing!

Here is the graph of national stats:


In San Diego it’s faster – 30% of April sales found a buyer in the first week, and 49% found a buyer in the first two weeks!

We will have a very active market place for some time to come – my guess is for at least 1-2 years, and probably longer.  Prices will ebb and flow, but demand and sales should be very strong.

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