I already guessed that the runaway frenzy will start to temper in June. Here are reasons:
- Some of the craziest demand has been satisfied.
- Other buyers will take a break and go on vacation.
- Overly-optimistic pricing by some sellers.
- It’s been red-hot for 10-12 months.
- Newsom says the state will be 100% open by June 15.
Covid-19 has been blamed for why many potential sellers have delayed their plans to sell. But now that the pandemic is wrapping up and sellers have had a +20% gift of appeciation dropped in their lap, you’d think they would be flooding the streets with inventory.
But there’s no flood yet. In May, 2019 we had 502 NSDCC homes come to market, but so far this month we’ve only had 119 new listings.
Could more inventory be coming?
Prop 19 was heralded as the solution to get seniors moving again – but we’re still waiting. They should stop discriminating against younger people and let everyone take their old property-tax basis with them to their next home.
Owners of investment properties should be expediting their plans to trade for newer/better homes before they change the 1031 rules. This article says that investors will still be able to defer taxes on the first $500,000 profit, but Uncle Joe wants to tax the rest. Americans hate the idea of paying taxes, so they will just keep their old property, rather than selling – which means less inventory.
Any potential seller who wants to stay local doesn’t see many homes that would make it worth the hassle of moving. Sure, selling their home sounds great, but we’re to the point where you need to leave town to really cash in – but who wants to do that?
Sellers have the most ideal market conditions of all-time to sell their home, yet they are holding back.
If we do see a slowdown this summer, it won’t be because of a flood of inventory. It will be due to prices having gone completely bonkers – price will fix anything!
Hi Jim, I actually think things will get even hotter, especially on the lower-end in coastal SD county and OC county. Very anecdotal, but several co-workers have been actively looking for houses, as well as, friends and acquaintances. More so now than the 5 years I have lived here in Carlsbad. There are worries of being priced out forever and missing out on low interest rates. Most have young families and need to find housing that will fit their growing family needs.
I’m sure the environment will be hot, but you can’t buy what’s not for sale.
Let’s speculate on the 2021 sellers:
1st Wave: Those most ticked off by politics and couldn’t leave Cali fast enough.
2nd Wave: The covid-motivated sellers who could find a replacement home and didn’t mind paying the exorbitant price because they made up for it on their sale.
The 1st Wave should be wrapping up, and the 2nd Wave is on-going but numbers are dwindling because they are long-roaders now. When they started three months ago, prices were 10% less. They are exhausted and can’t believe they have to pay more for less now.
3rd Wave: Those less-motivated sellers who will only move it they get their price. Unfortunately for everyone involved, those prices are 10% to 20% ABOVE today’s sold prices, which are 20% above last year’s prices.
The frenzy is going to run out of gas.
Either the additional inventory doesn’t materialize, or the new listings will have so much mustard that the prices will be unrealistic – even for those buyers who are selling too.
You can’t buy what’s not for sale – or priced within 5% to 10% of reality.
Consider what buyers and buyer-agents have to endure as well. The seller side has gotten more cocky each month; with lower commissions to buyer-agents, restricted showings, no structure given on how the bidding war will be handled, and just an overall F-U attitude in general.
This from a $2M+ listing today:
“Sellers prefer Cash, but strong qualified buyers are welcome.”
It’s different this time. Maybe. Time will tell. Hot as I have ever seen it since the last 40 years.
Jim, you probably have a better pulse of seller motivations as you work with many on a daily basis. I think there is a great realignment of house prices in desirable locations nationwide due to many factors: paradigm shift in remote work, DOW 35,000, ultra-low interest rates, BITCOIN, new housing shortage, etc. When I moved to Carlsbad in 2016, I thought, wow this $700k house in this neighborhood in the Bay Area would be $1.5M. Now those Bay Area people can have their salary from the Bay Area and live in Carlsbad, they can cash out their funny money stock gains or bitcoin, and they can drive up coastal SD real estate. These are the types of buyers that will continue to drive up real estate values, on lower volume, in this area. My $700k house in 2016 is now “worth” $1M in 2021, but it’s still undervalued IMO when compared to Bay Area housing and other high income metros. The realignment will continue… I think many sellers probably think this way and that’s why they’re cocky or asking so much. The realignment cannot happen as quickly as stocks due to how comps work with appraisals and financing, but we’re seeing 1.5-2% m-o-m gains right now, probably as fast as it can go up.
Bay Area folk bought our house this year and they think our housing market and bidding wars are very quaint by their standards.
Silicon Valley now encompasses the whole state.
Too bad then Bay Area folks don’t leave their attitudes, Teslas, and politics north of the Grapevine. The North County laid back culture has been replaced with uptight kook wannabes.