We’ve seen the local San Diego Case-Shiller Index rise from 144.43 in April, 2009 to the most recent reading of 201.85 in May, 2014.
A whopping 40% increase in just five years. What a ride!
Yet all we hear from the media is that the housing market is faltering, sales are down, and soon the sky will be falling. Here are the reasons why it won’t:
1. Even though prices are much higher, there hasn’t been a flood of inventory. Consider how many sources of inventory that you’d expect to be flooding the market; bank-owned properties, flippers, previously-underwater homeowners, the elderly, etc.
Not only has there not been a flood, but around NSDCC there have been 3% FEWER houses listed in the first seven months of this year than in 2013.
2. Rates are Holding. Though sales and prices would probably be affected if mortgage rates did go up, so far they are steady – in spite of wars, improved employment, ebola, etc. Buyers will live with rates in the fours, and I just had a 30-year jumbo rate quote in the high-3s.
3. There is lots of activity. The house in yesterday’s article whose broker said she is having no showings must be ridiculously over-priced, because the attractive buys are getting action. Any seller who could live with 5% to 10% less than the list prices of active (unsold) listings nearby won’t have any trouble selling today. If prices in general did pull back, it would stimulate a new round of sales – the buyers who feel priced out would love another chance.
4. No Frenzy Means More Caution. After prices go up 40%, it’s a lot easier to make a mistake, and buyers are being more selective. A smart market is a healthy market.
The next few months are going to be terrible for sellers who insist on tacking on another 10% or so on top of what we’ve already gained. But reasonable sellers will have no trouble selling – the market is fine.
I have seen agents saying market is tanking because we see plenty of price cuts. To me that just means sellers price them wrong.
It sure is hopping here.
http://www.redfin.com/CA/Manhattan-Beach/104-The-Strand-90266/home/6712526
Here’s one in Manhattan Beach that just closed for $16 million – and it’s a teardown!
http://www.bloomberg.com/video/california-s-most-popular-town-for-luxury-homes-RqQ8eBnYRJmZq7p3A3QdVg.html
Yep. The problem that is brewing is we have had a full round of ‘shoot for the moon’ pricing, and Sellers that really want to sell will reduce to reasonable prices to make a deal. Some will see the price reductions and mis-interpret that as a tanking market and head for the sidelines and hope it dives some more (hint, don’t hold your breath on that). The real problem is the new seller. Once everyone is conditioned for price reductions, nobody is going to consider paying asking, even if priced close. So, a seller will be required to do the ‘shoot high and reduce later method’, even if they don’t want to. That will bump up the days on market since offers won’t flow in until the first reduction comes around. I may be ahead of myself a little on the dynamic, but it is coming.
No, I’d say you’re right on the money, and it’s already here.
The listings I’ve had the last couple of months got no interest the first day – not a call. Then the calls would start the second or third day.
It’s that delay that makes me think that buyers and agents are being more deliberate – last year I got calls within the frist hour of listing.