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Inventory Watch – Fewer But Steady

Remember the agent featured here last week who bemoaned that she didn’t have any offers after the first weekend, when she usually has five? The house went pending two days later.

The UNDER-$1,200,000 Market:

Date
NSDCC Active Listings
Avg. LP/sf
DOM
Avg SF
April 29
201
$384/sf
36
2,599sf
May 5
195
$381/sf
36
2,633sf
May 9
207
$387/sf
35
2,624sf
May 18
241
$397/sf
33
2,566sf
May 23
236
$397/sf
34
2,529sf
May 30
230
$391/sf
35
2,591sf
June 5
229
$393/sf
35
2,577sf
June 11
239
$390/sf
34
2,569sf
June 17
246
$389/sf
36
2,577sf
June 24
255
$397/sf
36
2,535sf
July 1
244
$401/sf
38
2,526sf
July 8
256
$398/sf
38
2,530sf
July 15
269
$403/sf
38
2,486sf
July 22
258
$401/sf
39
2,442sf
July 29
262
$386/sf
39
2,493sf
Aug 5
287
$393/sf
38
2,495sf
Aug 12
300
$391/sf
40
2,521sf
Aug 19
304
$395/sf
41
2,491sf
Aug 26
308
$392/sf
41
2,469sf
Sep 2
304
$395/sf
41
2,453sf
Sep 9
303
$402/sf
40
2,453sf
Sep 16
309
$395/sf
39
2,463sf
Sep 23
311
$398/sf
40
2,431sf
Sep 30
293
$398/sf
42
2,448sf
Oct 7
280
$394/sf
43
2,451sf
Oct 14
278
$398/sf
43
2,432sf
Oct 21
273
$402/sf
47
2,428sf
Oct 28
267
$408/sf
49
2,432sf

The OVER-$1,200,000 Market:

Date
NSDCC Active Listings
Avg. LP/sf
DOM
Avg SF
April 29
620
$806/sf
94
5,183sf
May 5
606
$806/sf
93
5,223sf
May 9
628
$808/sf
93
5,150sf
May 18
653
$807/sf
92
5,161sf
May 23
661
$814/sf
92
5,141sf
May 30
659
$805/sf
95
5,222sf
June 5
663
$794/sf
96
5,185sf
June 11
672
$779/sf
96
5,163sf
June 17
661
$787/sf
99
5,164sf
June 24
679
$791/sf
98
5,097sf
July 1
705
$785/sf
94
5,084sf
July 8
702
$779/sf
95
5,100sf
July 15
736
$776/sf
94
5,038sf
July 22
748
$782/sf
96
5,043sf
July 29
736
$782/sf
100
5,057sf
Aug 5
754
$765/sf
100
5,024sf
Aug 12
750
$767/sf
102
5,032sf
Aug 19
742
$769/sf
104
5,009sf
Aug 26
740
$781/sf
106
4,962sf
Sep 2
736
$773/sf
107
4,928sf
Sep 9
724
$781/sf
108
5,006sf
Sep 16
738
$773/sf
107
4,993sf
Sep 23
736
$776/sf
109
4,953sf
Sep 30
717
$765/sf
111
4,954sf
Oct 7
709
$769/sf
111
4,960sf
Oct 14
719
$780/sf
111
4,965sf
Oct 21
704
$781/sf
111
4,976sf
Oct 28
702
$766/sf
114
4,993sf

Of the 54 new listings this week, only one went pending:

Weekly NSDCC New Listings and New Pendings

Week
New Listings
New Pendings
May 30
70
84
June 5
87
64
June 11
77
69
June 17
73
66
June 24
100
69
July 1
86
64
July 8
81
53
July 15
106
54
July 22
105
89
July 29
71
74
Aug 5
105
64
Aug 12
77
61
Aug 19
88
73
Aug 26
87
77
Sep 2
76
55
Sep 9
85
58
Sep 16
102
61
Sep 23
84
54
Sep 30
73
80
Oct 7
80
61
Oct 14
78
53
Oct 21
70
63
Oct 28
54
40

Market Summary

The basics on where the real estate market is today (no bubble).

He expects the standard 5% to 6% appreciation, and says that the concern over shadow inventory has been ‘overblown’.

He doesn’t mention that he was one of the shadow-inventory alarmists when he was selling subscriptions to RealtyTrac:

Value-Range Pricing Stats

Yesterday reader DaCounseler asked about value-range pricing, and how it shows up on the statistics.

Using two list prices to create a ‘price range’ was added as an option about ten years ago as an alternative to “get the conversation started”.

It does provide one benefit on the MLS.  Agents looking for properties up to $800,000 would see a listing priced on the range $799,000 to $849,000, where if it had just the one price of $849,000, the agent wouldn’t see it.

How is it working?  Here are the stats for the NSDCC detached homes sold in September, 2013:

  • Total homes sold: 259
  • Number of listings that used value-range pricing: 67, or 26%
  • Average SP:LP, using the bottom of range: 101%
  • Average SP:LP, using the top end of range: 94%
  • Number of sales closed under the bottom of the range: 16, or 24%

In September, the average sales price was just barely above the average bottom price of the range. Almost a quarter of the sales prices were under the low end.

Here is the comparison of the sales using the value-range pricing, vs. those using just one price – it looks like the MLS is using the top-end of the range for their statistics:

Sept. 2013
Value-Range Pricing
One List Price
Number of Sales
67
192
Average SP:LP
94%
97%
Avg. SP/sf
$434/sf
$479/sf
Avg DOM
31
52

Those who use the value-range pricing can expect buyers to gravitate to the bottom of the range. The listings with the extra-large ranges have trouble trying to bridge the gap – the recommended gap is 6% to 8%.

Many buyers see the bottom of the range and want to go down from there, and others are turned off altogether. Furthermore, the main listing websites use the top end of the range only. Sellers beware – use the value range with caution!

CV Rolling

There hasn’t been much hesitation around Carmel Valley, though the designated school, Ashley Falls, had to help this sale. An inferior model-match closed for $975,000 in February – but this still went pending within 7 days:

2014: Reasonable Or Frenzy?

How much inventory is too much?

graph (39)

We’ve had 12% more NSDCC listings this year than in the first nine months of 2012, and stoked by ultra-low rates, the extra inventory helped build sales momentum.  Comparing the nine-month totals, sales increased 10% this year, and average pricing is up 15%.

If there is an increase in inventory next year, will it help, or hurt?  Depends on price – will sellers put a reasonable price on them?

What do buyers consider to be ‘reasonable’?

Lately, buyers want to pay about what the last guy paid:

NSDCC
Avg LP/sf
Avg SP/sf
SP:LP
31-60 Days Ago
$489/sf
$468/sf
96%
0-30 Days Ago
$494/sf
$473/sf
97%
Today’s Pendings
$490/sf

This sentiment should continue, because buyers don’t mind paying what the last guy paid.  Any 2014 seller who is willing to take what the last guy got, should have no trouble selling – and we should see brisk activity on those.

The sellers who don’t ‘need’ to move and have been waiting to get max money won’t be able to resist tacking on that extra 10%.  But today’s buyers are staying in line with recent sales, and if that commitment continues, it could lead to a standoff and possibly a glut of unsold homes.

What could cause buyers to ignore the comps next year?

If mortgage rates slip back into the 3%s, the frenzy might pick up again.  Today you can get a conforming loan at 4% with one point – so we are close.

I have vastly under-estimated how much buyers are willing to pay this year, and the disconnect from the comps.  Sellers have benefitted this year, because buyers are just paying whatever it takes to get a house.

Will it continue? It could, so take my zero-appreciation talk with a grain of salt.

Last October we weren’t even sniffing $400/sf yet, and now look where we are.  Could we just be passing through $475/sf too?  Maybe, and adding one percent per month is still 12% per year!

We could be experiencing an off-season breather, and appreciation could take off again next year.  Sellers will be forcing the issue, can buyers restrain themselves?  If rates are in the 3s, it will be easier for buyers to justify paying more.

Psychological Shift, or Seasonal?

Mozart says that the recent hockey-stick change in the data is merely seasonal, and he expects 7.20% more appreciation in the next 12 months around NSDCC – and he has been right before.

This graph would seem to indicate the same – just the usual malaise we see at the end of every buying season that causes lower prices:

StL Fed data

The FHFA Index is out today, and though a bit dated in reflecting August sales which began in June or July, it did show an increase:

http://www.bloomberg.com/news/2013-10-23/u-s-home-prices-rose-8-5-in-year-through-august.html

Their first quote:

“Because markets are tight, we are still going to see solid price increases through next year,” Patrick Newport, an economist at IHS Global Insight in Lexington, Massachusetts, said in a telephone interview yesterday. “Eventually, the growth rate in prices is going to slow down.”

Which was replaced by this quote an hour later:

Competition for a limited supply of available homes has been fueling price gains across the U.S. The increases will slow as higher values draw more sellers to the market, adding to the inventory, according to Paul Diggle, property economist at Capital Economics Ltd. Prices will rise 8 percent this year and 4 percent in 2014, the firm projected.

“Supply is loosening, and clearly that is why it’s going to be a slowdown,” Diggle said by telephone from London. “A lot of people delayed selling at the bottom of the market. As prices rise more, people are in the position to sell.”

The ivory-tower guys agree about appreciation for now, but slowing. The safe bet for all national pundits will be 4% to 8% appreciation in 2014.

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So I might be out on a limb by myself, but I’ll stick with my zero-appreciation for NSDCC in 2014, almost solely due to my expectation of rising inventory. We’ll know if sellers are rushing to market by mid-to-late March.

Frenzy exhaustion is causing buyers to re-calibrate.  If the inventory does rise, it will strengthen the buyers’ resolve to not pay more than the last guy.

San Diego Metro Median Sale Price

The frenzy fever has been broken, but buyers still want to buy – it will just be a price thing. What do you think?

Housing Appreciation 2014 Forecast

Reader ‘Native sd’ asked,

What do you think the appreciation will look like as we plateau?  Given 21% yoy in sd, half of that or 10% in the next 12 months and halved again or 5% for the 12 months after that or a steeper drop off?  Also zillow not only had their zestimate but also their appreciation forecast.  How accurate do you think their forecast is?

We did the same frenzy-to-plateau at the end of Summer, 2004.  Countrywide had kept the market pumping with interest-only loans, and when the market began to stall, they rolled out their toxic neg-am mortgages. Later they just went to no-doc, FICO-only qualifying, and squeezed out another 2-3 years worth of business, while the median sales price levitated between $450,000 and $500,000:

US Median Sale Price

I don’t think the increase is going to continue this time, and predict that the SD median price will stay in a range of $400,000 to $425,000.

In other words, not much appreciation for the next 12-18 months.

Why will pricing slow down? We’re overdue for more inventory.

The one constant in all markets, good or bad, is that sellers hold out for top dollar. Now that prices are stagnating, sellers who decided to wait for more money are inching closer to the launch button.  Their wives are telling them, “you better not screw it up again, like last time.”

I’m guessing that we will endure a flood of inventory next spring.

A flood?  Why?

Here’s who will be coming to the party:

1.  Banks won’t panic, but there will be more spring in their step.

2.  Flippers will panic, but try to hide it.

3.  Previously-underwater folks.

4.  People who did the loan-mod-for-now program.

5.  Legitimate move-up sell-and-buyers.

6.  Early-stage baby-boomer liquidations.

One factor that might keep a growing inventory in check is that the recent purchasers won’t be involved.  The SF FED touched on it yesterday as a possibility, but those on the ground know it to be a fact – today’s buyers are in for the long haul. There won’t be any panic selling by those who purchased in the last 6-36 months, which should help to temper the impact.

My guess for 2014?  Appreciation will be close to zero around NSDCC.

Home Price Reductions

It is natural for home sellers to resist lowering their price.

No matter what the evidence is, we want to believe that there has to be other alternatives.  The blame game usually starts early too, and virtually everyone makes the list:

1. The agent isn’t doing enough.

2. The government.

3. The Fed.

4. The Democrats.

5. The Republicans.

6. The Padres.

7. The Chargers.

8. The wife and kids.

9. The dog.

10.  The ‘market’.

Sellers are usually so resistant that when confronted with lowering thier price, they won’t even ask why.  For those who do, here is the answer:

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