Historically it is very rare to have pricing go up 20% in a year. With prices skyrocketing, wouldn’t you expect sales to slow down?
Or wouldn’t buyers at least become more selective when they are forced to pay substantially more, in many cases six-figures more, than they could have paid for a similar product 12-18 months prior?
For prices AND sales to be so strong for an extended period, there has to be virtually no buyer resistance.
Why? Buyers feel more empowered due to the internet, and just want in. They see a house, like the house, and after a cursory review of the comps and a pat on the back from their agent (a professional advisor whose expertise is rarely examined) they buy the house for whatever price it takes to win.
The buyers with a stronger attachment to the old prices/comps get left behind, and are forced to consider paying more later (when they didn’t like last year’s prices) – and have to live with the feeling that it doesn’t pay to be too smart in this environment.
Most realtors were never that good at valuations anyway, so the inexactness of pricing in a fast-moving market is no surprise. But the big jumps in pricing could continue, due to these factors:
“More inventory” means more not selling, not a flood of additional choices. Year-to-date there have been 43,900 listings in San Diego County, and last year there were 42,000 in the same period – not much increase overall. When you hear that there is more inventory, it means that there are more high-enders who are wildly overpriced, and don’t care. There is no inventory of good buys (they sell right away), and a very tight inventory of marginal buys under $1,000,000.
Flippers have gone crazy. In the beginning they were willing to flip for a $50,000 profit, then $100,000, but now they all want at least $200,000+ to be satisfied.
Because traditional realtors are making no effort to differentiate themselves, the new-age internet real estate portals have an open field. They offer gadgets and gizmos, but not resistance.
- Mortgages are getting easier to obtain every day.
- Any resistance is worn down by the difficulty of finding a good buy.
There will always be buyers who are willing to pay top dollar for the exceptional homes. The most fortunate sellers today are those who are selling the inferior homes – rigorous buyers will notice the difference, but those in a hurry and without discipline end up overpaying.
Higher mortgage rates are the only hope for a comeback in buyer resistance.