Back on October 22nd, I said that I thought we’d be seeing zero appreciation in 2014, mostly due to overly optimistic sellers rushing to market with their over-priced turkeys. The resulting glut, combined with rising rates, would cause buyers to cool off, and regain some negotiating power.

I’ve been looking for supporting evidence since – but can’t find any!

Instead, there is mounting evidence pointing to the contrary – that the local real estate market in 2014 will be set ablaze again in the coming weeks.

Here are the reasons:

1. Rose Bowl Parade – There will be 70 million people watching the Rose Parade on Wednesday, so let’s consider the predicted high temperatures around the country for January 1, 2014:

DesMoines, Iowa: 14 degrees

Chicago, Illinois: 25 degrees

New York City: 33 degrees

San Diego, CA: 68 degrees

Pasadena, CA: 76 degrees

Usually it is cold for the parade, but this year’s heat wave should cause millions to jump in their car and move to California – and pay whatever it takes to stay.

sdchargers2.  The Chargers pulled off one of the all-time miracles in NFL history, which must mean fate is on their side.  Traveling to Cincinnati, Denver, and New England is nothing we can’t handle, and then boom, we’re in the Super Bowl, where it will probably be snowing.  But with Dennis Gibson cheering from the sidelines, the Bolts come through again – all while TV cameras are showing bikinis on the beaches back home – boosting homebuyer demand from more snowbirds.

3.  Higher prices aren’t bringing more sellers to market….yet.  The feared glut of inventory has yet to materialize, and what’s worse is the count of new listings for November-December is 19% lower this year than in 2012.  Even if the first two points above don’t matter much, the inventory count will determine our fate, and so far it looks like our low inventory is continuing.

4.  Higher rates aren’t mattering much.  The buyer pool has been too rich with cash to let mortgage rates get in the way.  Yellen has said that she will keep rates low, so if we top out around 5%, buyers should keep buying.

5.  Thin trading skews the numbers.  With the banks sticking with their no-foreclosure policy, there is no pressure on over-encumbered sellers to keep waiting it out. Even those who have positive-but-thin equity will be more tempted to let it ride another year, hoping to doube or triple their winnings.  Inventory, and sales, could drop further.

6.  Prices can keep going up as sales fall.  NSDCC detached-home sales should be about 7% fewer this year than in 2012, which reminds me of the 2003-2004 change.  Sales in 2004 dropped 8% from 2003, and plunged another 13% in 2005 Y-O-Y, even though prices kept going up through 2005.

7.  Buyers appear more fearful of rising prices than anything.  The last few months has seen buyers scrambling to lock up anything they can get their hands on, and it appears to trump all concerns.  For a house not to be selling, it has to have soemthing really wrong with it – looks at Richard’s La Costa listing. He has five offers, and it’s going to sell for at least full price.

Someone told me last week that any buyer who listened to me about being cautious in 2013 is now 20% behind in pricing, and is still fighting heavy competition.  With relatively-low rates virtually guaranteed for 2-3 years, it appears to be a solid bull market locally.

Push back my zero-appreciation to 2015, because I think we’re going to see another +10% in NSDCC prices in 2014.

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