What will it be like when there are no more new homes to buy in Carmel Valley? Pardee has been building houses steadily for 30+ years, and they will be down to their last 103 lots, once they are done here – and they’ve sold 33 of 44 so far. These are priced from $1.8 to $2.5M.
Toll hopes to sell two per month at Palomar (the image above), and they sold five in October! Altogether they’ve sold 36, which puts them ahead of schedule. They are priced from $2.5 to $3.8M.
Thanks to the OCR for this article – link at bottom:
Sounding the latest alarm over the devastating impacts sea level rise is expected to have on the California coast, a new report from the state Legislative Analyst’s Office details the critical need for action over the next decade and notes that most preparations so far are only in beginning stages.
Between $8 billion and $10 billion of existing property will be underwater by 2050 and another $6 billion to $10 billion will be at risk at high tide, according to a study cited in the report.
“The certainty of rising seas poses a serious and costly threat,” according to the Legislative Analyst’s Office, a nonpartisan governmental agency that provides policy advice to the state Legislature.
For every dollar spent preparing in advance of disasters, $6 in post-disaster losses are avoided, according to a federal study cited by the Legislative Analyst’s Office. With the state estimating a half-foot or more of sea level rise by 2030 — and as much as 7 feet by 2100 — the report says it’s crucial to take extensive measures over the next 10 years or so.
With the housing market stabilizing from the drama of the early years of home price recovery and the subsequent slowdown during 2019’s home shopping season, we have a rare moment of calm to reflect on what housing might look like in the year to come.
If current trends hold, then slower means healthier and smaller means more affordable. Yes, we expect a slower market than we’ve become accustomed to the last few years. But don’t mistake this for a buyer-friendly environment – consumers will continue to absorb available inventory and the market will remain competitive in much of the country.
But while the national story is a confident one, housing in some manufacturing-heavy markets may see adversity. The struggle could be even more stark, since similarly affordable housing markets with a more balanced job profile may be 2020’s rising stars.
There are several 50,000-foot reasons why we expect this gentle downsizing to continue:
Many of today’s younger, millennial home buyers have expressed a preference for denser, more urban homes that are more walkable to shared amenities.
Younger buyers are struggling to afford large homes built in prior decades
Eco-consciousness is also growing broadly.
Today’s older homeowners are expressing a desire for smaller, less maintenance-heavy and more accessible (read: fewer stairs) homes as they age and move into newer homes. In 2019, 56% of new construction home buyers were 40 or older, according to the 2019 Zillow Group Consumer Housing Trends Report.
Home builders are constrained by a shortage of buildable land in desirable areas. Prices on key building materials including lumber and steel are increasingly volatile. And competition for skilled construction labor is fierce, pushing wages up.
Each of these trends points to a continuation of this downsizing of new homes – smaller homes are inherently more dense, walkable and affordable; smaller homes are efficient and eco-friendly; smaller homes require less maintenance and are more accessible; smaller homes enable builders to do more with less.
There will always be demand for large, suburban homes on big lots – but on net, we expect attitudes to shift away from that and toward a lifestyle with a smaller footprint.
Mortgage Rates Will Stay Low, Keeping Housing Demand High
Mortgage rates fell markedly in 2019, and are expected to remain near their current, relatively low levels for the bulk of 2020. Softening GDP growth and investment, continued global weakness due in part to the U.S.-China trade conflict, and below-target inflation will continue to hold rates in check. Barring marked improvements in these indicators, the Fed will have no reason to return to rate hikes.
If low mortgage rates persist, this will keep home purchase demand strong and continue to fuel decent price growth in the nation’s most broadly affordable markets. But low rates won’t be enough to reignite high growth rates in the nation’s highest-priced markets, notably on the West Coast and in the Northeast. In these markets, buyers seem to have hit an affordability ceiling where even low rates can’t bring many homes into the typical first-time buyer’s budget range, especially because low rates don’t help overcome the upfront hurdle of high down payment requirements. In those high-priced markets, buyers will continue to fan out in search of more affordable areas.
Looking ahead at 2020, we think home sales will continue to climb, but slowly. Why?
Although a small fraction of overall sales, new homes sales grew significantly in 2019. That has helped buoy builder confidence and lead to some of the most robust permit and starts numbers in a long time.
If builders in 2020 deliver on their promises to build smaller and at more affordable price points, new construction will continue to be attractive to buyers unable to find a match in the competitive and limited existing home market.
Yes, inventory is tight – but when we say that, we’re really talking about the number of homes available to buy relative to demand from buyers. Sales can remain strong while inventory remains tight – and a sudden jump in the number of sales will result in a corresponding drop in inventory.
What really matters is the flow of homes onto the market – the turnover or velocity of home sales, not months’ supply or overall level of available inventory, that constrains home sales numbers.
And we have reason to believe that turnover among a given segment of homeowners will be made more possible now in a way that it wasn’t before. iBuyer business models, like Zillow Offers, are ultimately about lowering sellers’ transaction costs. Economics 101 says that lowering transaction costs and making transactions themselves easier will mean those transactions will happen more often.
Fun will return to home design in the form of bold prints, lively wallpaper and brightly hued walls. After a decade of Scandinavian modern design that dominated retail and social media feeds as Americans embraced neutrals, minimalism and clutter-free living, expect a shift toward playful, creative design. Look for color to be injected in unexpected ways in kitchen cabinetry and appliances, in lighting fixtures and on interior doors and moldings.
Sherwin-Williams agrees! Naval was their color of the year, and now Black Bean:
We’ve never had a soft landing before, but this is how I imagine one would look – mortgage rates drop just enough to have sales and pricing level out:
# of Sales
We could have done better (see 2016), but it could have been much worse too. In 2014, when pricing was substantially lower, we only had 173 sales – which goes to show you that pricing isn’t the only component.
Speaking of pricing, the median sales price has rebounded over the last two months instead of tapering off, like it usually does. It’s over $100,000 higher than last November! (Coastal North includes Oceanside):
It looks like an early surge is likely in 2020, after that….who knows?
Last year, I guessed that our NSDCC sales would drop 20% due to high mortgage rates, and pricing would stay about the same. Rates dropped instead, and both sales and pricing stayed about the same as the previous year.
In 2020, I think we will see sales drop 10%, just because we’re overdue, and guessing that the NSDCC median sales price might go up 2% to 3%.
We’ve entered the World Of Concierge, where all participants – flippers, ibuyers, and realtors/brokerages – are rehabbing, improving, decorating, and staging most homes for sale. The movement has been building for years, and in 2020 we should see full implementation.
It takes some of the sting out of paying full retail, and buyers really don’t mind paying all the money if they get a turn-key home. Because sellers and agents will be going further to satisfy the retail buyer, we should see more of the softer landing that we saw this year that was caused by dropping rates.
Here’s what Rob Dawg said last year:
Median +4%. Late year inflation and demand for even negative cash flow rental properties. Volume down only 12%. Lots of deck chair shuffling will look like volume. Reported volume -10% from 2018.
$2m+ volume will increase. Lots of quality properties aging out and none of the kids or grandkids can afford to take possession out of the communal estate. Add to this the “too many houses” crowd both casual investors and the very rich who have made their money and ready to throw off the carrying costs.
Almost nothing sub $550k will show up on the sales sheets.
Interest rates will range between 4.4% (early, briefly) and eventually 5.6% (in Q4). Inflation and banking regulations conspire.
There may be a technical recession that will be over before it is confirmed. People will argue whether there was a recession.
Here is a metric we haven’t followed. Total dollar volume of sales will be flat to slightly down.
But what do I know?
We both thoughts rates would be a problem in 2019, but what do we know? It’s hard to believe rates could drop lower in 2020, but if they did get into the low-3s it would ignite the market. Those who have been wanting to move up or down but had a mortgage rate in the mid-3s or higher could now justify moving and getting a lower rate. If California residents pass the referendum to enable seniors to take their old tax basis with them when they buy up in price, it could also ignite sales (if you believe the California Association of Realtors).
What’s Your Guess? The closest guesser will get four tickets to a Padres game!
Mr. and Mrs. Dawg did join us for a Padres game this year (vs. the Red Sox).
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