The recent active-inventory trend looks a lot more like it did in 2010:
It is still very low, with 6,596 attached and detached listings today. But it is 50% higher than it was earlier in the year, and adding that higher November datapoint to his graph would be the only time in this four-year history that inventory kept going up. If there isn’t the usual holiday listing-cancellation fest, and we have a larger group of picked-overs to start 2014, sellers with an itchy trigger finger might rush their decision to list earlier in spring.
Let’s face it; if there is a flood, it means that it might get up to your ankles. But if buyers hesitate, it could be a whole new ballgame.
Will they be patient?
See Rich’s other graphs by clicking on link below:
RealtyTrac reports that the nature of distressed property sales is evolving. In its most recent report on market and distressed sales, the company noted that changing economics are increasing the reliance on more traditional third party purchases at foreclosure auctions rather than the lender/borrower negotiated sale at less than the outstanding loan balance.
“After a surge in short sales in late 2011 and early 2012, the favored disposition method for distressed properties is shifting back toward the more traditional foreclosure auction sales and bank-owned sales,” said Daren Blomquist, vice president at RealtyTrac.
“The combination of rapidly rising home prices – along with strong demand from institutional investors and other cash buyers able to buy at the public foreclosure auction or an as-is REO home – means short sales are becoming less favorable for lenders.”
Happy Day After Thanksgiving, and welcome newcomers!
In case you are new to the blog and just heard about us from one of your relatives over turkey dinner last night, I’ll recap where I think the market is, and what to expect for early-2014 around North San Diego County’s coastal region (NSDCC):
1. We should be in for less frenzy in 2014.
Last year’s fourth quarter was red hot, which propelled the best spring selling season since 2003, when everything was flying off the shelf at any price.
Here are the October/November comparison of NSDCC sales:
Year
# of Sales under $10M
Avg. $/sf
Avg. DOM
2010
371
$379/sf
82
2011
361
$374/sf
85
2012
538
$398/sf
72
2013
427
$461/sf
52
There will be some late-reporters to this year’s totals, but the 427 closings shows that the demand has stayed strong, though this year’s 15% increase in average pricing should temper the enthusiasm of buyers next year.
Recently, I predicted that pricing would fall flat next year, due to profit-driven sellers flooding the market in spring. But reader Mozart disagreed, and thought we will see 7.2% appreciation in 2014 – and most pundits are predicting somewhere in between.
2. The threat of distressed sales is over.
Because bank-owned listings and short-sales have both dropped substantially this year, it appears that banks have stopped foreclosing (either everyone went back to making their payments, or the lending industry has generously adopted the payment-plan philosophy). Without the pressure of losing your home, no one will feel the need to give their house away.
3. There is opportunity with fixers.
The pursuit of turn-key newer homes has been ferocous, and driven by several factors; A) virtually no new homes for sale, B) buyers’ inability to fix things, and C) higher prices lead to higher expectations. As a result, there is less competition for the older fixers – but stay picky about location!
4. Comps have never mattered less.
A big shock to everyone involved, especially given the abundance of data now available. All year, buyers have been waiving their appraisal contingency, and willingly paying well over appraised value. Big Money is always involved, either an all-cash buy or big down payment, and apparently it has come to the point where people value their real estate more than their money.
5. How real estate is sold won’t change much in 2014.
We are close to some sea changes – auction.com is trying to pioneer the auctioning of residential homes as a retail solution, Zillow is dominating the on-line competition, Redfin got another $50 million in VC money to blow, and Berkshire got into the residential market this year – but the focus of 2014 should be on closing sales and building market share before anyone gets around to changing the process.
Stick around, we’ll be in dogged pursuit of the market here at bubbleinfo.com!
Despite a softening market, competition among buyers remained fairly fierce in October, Redfin reported in its Real-Time Bidding Wars release for the month.
Last month, 55.9 percent of offers written by the Seattle-based brokerage’s agents faced competition from other buyers, a decline from 58.3 percent in September. Bidding wars have been on a downward slope since peaking at 79 percent in February.
October was also the third consecutive month to see a drop in competition compared to the same month last year, Redfin said.
Even with the decline, though, competition last month was higher than expected, given the effects of the government shutdown on consumer confidence.
“While many Americans paused their home-buying and selling plans during the shutdown, overall demand in October was more robust than expected, with home tours and offers rebounding once the government reopened,” said Redfin analyst Rachel Musiker. “This unexpectedly strong demand paired with dwindling inventory likely kept competition from falling even further in October.”
Out of the 22 markets reporting, Boston saw the biggest drop in competition, with 61.3 percent of offers facing bidding wars—down from 70.1 percent in September.
San Diego, meanwhile, experienced the biggest increase in bidding wars, with 63.0 percent of offers competing against multiple bids compared to 56.1 percent the month prior.
For the most competitive areas, interested buyers still have to adopt aggressive tactics, including offering all cash. Mia Simon, a Redfin agent operating in Silicon Valley, tells a story of a bidder vying for a home priced just above $1.4 million:
“There were only three other offers, but they were all above $1.8 million. Although my client’s offer was not the highest overall, it was the highest of the all-cash offers,” Simon said.
“Today’s Silicon Valley home buyers realize that they long missed out on the bottom of the market, but many believe that home prices will rise even more in 2014, so they will do whatever it takes to get a home under contract before the spring,” she added.
At the same time, the less competitive markets are seeing a shift in the buyer/seller dynamic. For example, in Washington, D.C.—where 44.0 percent of Redfin offers went against other bids in October—sellers are working harder to gain attention.
“I’ve recently received a few phone calls from agents whose listings I have shown to my clients,” said agent Philip Gvinter, who works in the nation’s capital. “They’re trying to gauge my clients’ interest in the home, and some simply ask what it will take to get my client to write an offer. It’s been more than a year and a half since I’ve received a call like that.”
They started in the mid-$900,000s back in March, and bounced in and out of escrow twice. Though the price is now down to $864,900, here we are at the week of Thanksgiving and no sale.
Hat tip to daytrip for sending this in, fromcnbc.com:
At a brand new housing development in Irvine, Calif., some of America’s largest home builders are back at work after a crippling housing crash. Lennar, Pulte, K Hovnanian, Ryland to name a few. It’s a rebirth for U.S. construction, but the customers are largely Chinese.
“They see the market here still has room for appreciation,” said Irvine-area real estate agent Kinney Yong, of RE/MAX Premier Realty. “What’s driving them over here is that they have this cash, and they want to park it somewhere or invest somewhere.”
Yong’s phone has been ringing off the hook, with more than 5,000 new homes slated for the nearby Great Park Neighborhood. Most of the calls are from overseas, but prospective buyers are not looking solely for financial returns on the real estate.
“We are seeing a lot of Asians who are buying as an investment, but their kids are going to school here, so kids live in the home. They are looking at it more as an investment in education,” said Emile Haddad, CEO of Fivepoint Communities, developer of the Great Park Neighborhood.
That is Brian Yang’s plan. Speaking from his home in China, Yang said he purchased a home in Irvine this year, but he will wait five years, until his daughter turns 10, before moving his family to the U.S. He has several reasons for taking the leap.
“Education in America is very good and world class, so the first one is for education, and I think the second one is for the property appreciation,” explained Yang.
While American secondary schools and universities are a big draw for the majority of Chinese buyers in California, Yang, and many of his colleagues, are also concerned about China’s political instability, inflation, even pollution. They are paying all-cash for real estate in California, using it as a safe-haven for their wealth. Yang was reluctant to talk about the money, but he admitted, “I feel the same way to some extent.”
For now, Yang is renting out the four-bedroom home, and, he said, getting a 5 percent return on the investment.
A reader suggested that the Inventory Watch needed more categories, and you can see why below. The lower-end is ultra-thin, and the high-end is full with the Wait-and-See sellers. The Over-$2,400,000 market has had 249 closings this year, and there are still 340 active listings, or a 15-month supply.
The $1.4 to $2.4 category is the Carmel Valley premium market, so I started with that and created the other categories from there:
North SD County’s Coastal Region (La Jolla-to-Carlsbad)
The UNDER-$800,000 Market:
Date
NSDCC Active Listings
Avg. LP/sf
DOM
Avg SF
November 25
95
$376/sf
47
1,988sf
The $800,000 – $1,400,000 Market:
Date
NSDCC Active Listings
Avg. LP/sf
DOM
Avg SF
November 25
245
$448/sf
61
2,856sf
The $1,400,000 – $2,400,000 Market:
Date
NSDCC Active Listings
Avg. LP/sf
DOM
Avg SF
November 25
227
$580/sf
81
3,692sf
The OVER-$2,400,000 Market:
Date
NSDCC Active Listings
Avg. LP/sf
DOM
Avg SF
November 25
340
$1,040/sf
159
6,347sf
An interesting twist is continuing. Buyers tend to gravitate towards the new listings, hoping to find a hot buy. But new pricing must be fairly unattractive – of the 183 new listings this month, only 35 have gone pending (19%).
