I’ll admit it – Tim got me going yesterday with this comment:
Socal has leveled off, and in some areas gone down. I’m a little surprised this website hasn’t commented more on the subject.
I try to present daily doses of market data, but I try to keep it neutral so you can come to your own conclusions. I also want to demonstrate my competency so when you need a realtor, you’ll contact me first.
But because Tim brought it up, I’ll comment more on the subject today.
Buyers are firm in their commitment to be patient, do their homework, and make a smart buy that will suit them for years to come.
How does that translate on the street? The quality-squeeze is getting tighter every day – only the best buys are selling. The homes with inferiorities or are priced 8% or more too high are sitting. Sellers have been very reluctant to lower their price, and some get lucky as prices continue to slowly rise.
These are the same traits of any ‘normal’ real estate market, so to me it seems to be a healthy balance.
You won’t hear me talking about how the market is up or down, hot or cold – that is to simplistic, and there is much more to it. I encourage everyone to keep an open mind, and take in all the data and observations possible.
What’s the best measure? Home sales – are homes still selling? Yes. Are there still outrageously high sales happening? Yes, I’ve seen a few head-shakers this week, which means there are still exuberant buyers in the marketplace, and they are the ones making the market.
For those looking for a downturn, there are two signs to watch for: #1, Are the number of lucky sales trickling down close to zero, and then #2, are there houses that you thought should have sold that aren’t selling. When you see both happening, then both buyers and sellers should be cautious.
Just because there are more homes not selling only means that more sellers who are overly optimistic, and you can easily fix that with price!
I’m not buying Tim’s comment, Socal has leveled off, and in some areas gone down. It is too vague, and hard to measure.
One house in particular to note: 1174 Hymettus in Leucadia. There hasn’t been another house on the street sell for more than $2,000,000, and it listed on 8/15/14 for $4,150,000. It went pending in 5 days! I saw it, and it was spectacular – the house is 6,508sf and built in 2008 on an acre of land at the top of the hill with quality ocean views:
It is an extreme example, but it shows why we all should keep an open mind – this post-frenzy run could keep going, and be harder to follow if sales slow down further.
Get good help!
It only takes a few crazies here and there to blow all of your perfectly rationalized data and conclusions to bits. And from what Jim is saying, it sounds like a few crazies are still out there making a mess of things.
I gave up long ago trying to make sense of things.
We bought in late 2013 and my piece of mind now is knowing that I have been making equity payments since day one and my housing costs are relatively “fixed” for the next 30 years.
Great blog as always JtR and great insight.
I am in Lemon Grove, which is not JtRs typical coverage, but even around here sales activity is and has been very strong and prices have absolutely been pushing up.
Turnkey homes (as expected) are moving VERY quickly and it seems, that a domino effect of listings are popping up as well (likely based on comps and folks that are paid off on mortgage.)
I live in one of the nicer parts of town and not much goes for sale withing blocks of where I am.
The unkempt eyesore of a house down the street went up for sale recently and had 13 offers in 24 hours. 1k sq ft, corner lot listed for 275k.
Will they get that? Probably not. But the amount of offers may dictate some underlying value activity in some areas or price ranges.
> “I also want to demonstrate my competency so when you need a realtor, you’ll contact me first.”
What are you? A stupid Realtor®? No! Contact you second. First contact a more typical Super Agent™ and listen to their outmoded pitch. Then contact JtR for professional help. Hard to appreciate the difference unless first exposed to the remnants of the olde guard.
I am honored to be quoted in the blog and respect your response too. I come here and read because I enjoy the content and respect your opinion on real estate.
I’ll have to respectfully disagree with current market conditions. I do not specialize in the ultra high end area of CV, Del Mar, Encinitas or Luecadia.
Yes my comment was vague in regards to Southern California. Using a 4 million dollar home in a very specialized market as an example of the market is even more so.
We’ll have to agree to disagree and thank you for taking the time to put it into more detail. I owe you a beer!
“I owe you a beer!”
You are getting off easy. Trust me.
Is the conversation a little simpler than this? Rising inventory as a result of fewer sales will bring prices down but we have very limited inventory. The sales will have to slow considerably to see price appreciation level off. The months of inventory can be used to predict the trend. Is this indictor no longer useful?
Jim posted a Case-Shiller just recently in this post.
Does anybody see a time on that chart where a sharp rise in prices didn’t at least level off for a long period of time (i.e. 1980’s) or decline after that increase 1990’s or the recent 2002-2007 bubble. Why does everybody think that we’ll continue to see slow but steady rising prices for the foreseeable future when that hasn’t been the case for the last 40 years.
The typical signals that mark the end of sharp appreciation are here. Sales have slowed down. Price rises have slowed. The quality of the homes selling has risen. Those are the same signals we’ve seen before near the end of an appreciation cycle. Could it take a couple of years for it to turn around. Sure it could, maybe the run isn’t done yet maybe the “mini bubble” (It sure looks like it on a Case-Shiller chart) is going to run a couple more years. That we can’t say but we do know what to expect when it is done running. You’re probably looking at some price declines.
Why insist on “a new normal”. Isn’t that just a catchy phrase for “it’s different this time”. We’re only 2 years into this run, why does it have to be a new normal? Why can’t it just be a period of irrational behavior just like the 4-5 year run of the bubble?
Hi Jim (I will try to keep this short),
I understand as a realtor; your opinion is biased as your income is based on the percentage of the sales price of the home vs a flat rate.
Don’t you think investors in San Diego create a volatile market here and drive up the prices of homes? Do you know what percentage of home sales are investor vs primary home buyers? Of this percentage, what makes for a healthy market? If we hit a downturn, all of the investors stop buying, the value of homes nose dives, this will spin us back into a crash and foreclosure mess. I’d imagine this is bound to happen, which is why I chose to wait to buy.
I can’t find the article, but I think the stat is about only 18% of San Diegans can afford a home with their current salary; as home prices increase (and salary doesn’t increase as the same rate; then we are bound to see a plateau and down turn). I don’t think San Diego’s home affordability is at a healthy number and it’s unrealistic to think San Diego’s real estate can sustain its current pace. However, as investors continue to buy; they skew the real stats of the market. Unfortunately here, as renters get 0 equity from renting the rich get richer off the poor. (Also, a growing gap between the lower class and upper class; and disappearing middle class should be a concerning issue in our country).
As a home buyer looking in the Clairemont Mesa area, I can’t compete with investors here. If a house is priced well; it’s sold within days and many times from a cash buyer (I’ve seen 2 houses get flipped and another one get rented that I had interest in). My offer will almost always be trumped by a cash offer. I am from St. Paul, MN and the investor market there is much smaller and balanced; and the average DOM was closer to 3-6 months compared to probably 30 days here. I can afford a house here (I am not the average buyer); but I am not going to buy if I think there is a down turn coming. My example: I saw my brother buy a house in Pacific Beach in 2004 for 750K. 3 years later, he couldn’t even get 575K for it. Today, comps in his neighborhood are selling between 1 – 1.2 million. Losing 100 – 200K after purchasing a house is just way too much risk to me.
Bottom line, I don’t trust the San Diego market. In St. Paul, rental units were taxed at a higher rate and I really think the San Diego market is incredibly dangerous and risky fueled by inflated and unsustainable real estate prices. I really think San Diego (and California) needs to do more to stabilize the affordability in the state.
I love the people who start off with the instant insult.
Go back to St. Paul.
It’s always fun to come back to my favorite RE blog, and see some fireworks (I was visiting my kids out-of-state). Yes, I need to catch up on Jim’s posts and others’ comments for the last couple weeks, but I have a VERY important Q to ask JtR in the meantime:
How’s the weather in San Diego? I’m looking for cooler temps. I need to know WHEN to send you that promised batch of my world-famous choco chippers? I live out of CA (and it’s 90 today), but will cool into the high 70’s/low 80’s after today.
Now back to our regularly scheduled bubbleinfo and “your host”, JtR…
Sorry – I definitely didn’t intend to be insulting. My intent was to accept your opinion in relationship to my questions. In fact, as a home seller; I’d expect the realtor to get the most value for my home which is incentive for a percentage of the sales price vs flat rate. So yes, I understand this and I wasn’t intending to be insulting.
I enjoy reading your blog and I value your data, feedback, and opinions. So I am disappointed your response was to not answer my questions (and as a realtor) to tell me to go back to St. Paul was probably the last response I’d expect from a realtor.
Again – I am definitely sorry for the insult, that wasn’t my intent. I respect and appreciate your expertise and opinion and that was the intent of the post.
When you state someone is biased because they make their living on commissions, its really not a good start.
And I will chime in with a few of my thoughts.
San Diego’s real estate market has never been comparable to St. Paul’s and never will be. The concerns you are stating now are the same as it was 30 years ago.
Cash purchase does not necessarily mean investor, it just means strength.
San Diego’s affordability has never been “healthy”, except at rare times like in 2009-2011 when ironically, many buyers still would not purchase because fear frequently trumps numbers. A review of California’s market history in general shows that affordability is a very poor predictor of prices to come. Perhaps psychologically, the less affordable housing becomes, the more people want it.
I thought going back to St. Paul was some helpful advice. If the history of volatile price swings here are too much to handle, going elsewhere is a valid choice.
It’s expected to be 81 degrees in Carlsbad straight through the weekend!
You need a Walt like Fountian at FWIW.
Nick, while I appreciate your statements you have to understand that comparing San Diego with MN is apples and oranges. There are very few locations in MN that can compare with La Jolla or Rancho Santa Fe and people in MN simply don’t have the kind of $$$ that’s out here.
I little off topic but if you want to compare apples to apples between MN and another location try northern Germany. It’s weird out there people and the landscape looks exactly like MN. Probably explains why so many Nortic Europeans settled in MN
Nick you are going to have credibility issues here when you compare San Diego to St. Paul.
Citing to your brother’s situation, who bought during a smoking hot inflated market and 10 yrs later is up somewhere in the range of $250K-$400K by your own estimation, does not help your argument. I can think of numerous others in a similar boat who are now 10 years into paying down principal, re-fied in the 3’s a few years ago, and are plus hundreds of thousands of dollars in value. They are in a fantastic position.
Yes we have pronounced price swings from time to time. The trend over the long term is up.