I had said previously that the frenzy will run out of gas in June.
I’m sticking with it.
There aren’t enough new listings coming to market to keep the buyers’ interest. It is the momentum of seeing hot new listings flying off the market every week that keeps the frenzy cooking.
The inferior homes won’t be attracting the crowds – and multiple offers – like they were at peak frenzy (which will probably end up being the August-March time period). We will see an occasional hot new listing that will get frenzied up and sell for 10% to 20% over list, but the regular listings should feel more normal.
I’ll offer one example from this weekend. There was a new listing of a larger one-story house that had three nearby sales that had closed for higher prices in the last 90 days. But as of last night, the agent had not received any offers.
It’s not the end of the world. It’s probably more of a sign that sellers are selecting a list price that includes all of the covid-frenzy premium that buyers are willing to take.
A more-normal, balanced market is good for everyone. Sellers will still be able to sell for these prices, and buyers who decided to wait it out will slowly re-enter the buyer pool, keeping the demand in place. All we need to do is figure out the prices!
People are curious about where today’s buyers are coming from, and while results may vary for each individual neighborhood, we might be able to get a general sense from data like this.
Not everyone who is looking is an actual home buyer, and not everyone uses this search portal.
But this data backs up the latest idea that people tend to want to stay close to home. Almost three-quarters of those looking at San Diego real estate are local folks, and more than half of the rest are from L.A.
San Diegans are looking at these destinations also – this is interactive is you’d like to explore further:
In last Saturday’s blog post, I mentioned three reasons why San Diego real estate was undervalued, and pondered that there are new market forces in play that we haven’t seen before.
While people will scoff at the idea that it could be different this time and insist that the market will always revert to the mean, there are new factors to consider that will have impact on the eventual outcome:
LESS SUPPLY
No foreclosures
Ultra-low rates locking in homeowners to their forever home.
Boomers are older than ever, and are aging-in-place (too old to move).
Holding real estate has never been so sexy.
Longest expected length of ownership ever.
MORE DEMAND
Population is more affluent than ever (SD County has 100,000+ millionaires, fifth in USA).
Work From Home has expanded the choices for buyers, increasing the demand in desirable areas.
Hoarding real estate is cool (high rents, kids to inherit).
Current homeowners have more equity than ever to use when buying again.
There are more people than ever in the homebuying ages.
We probably only needed supply OR demand to change by 5% or 10% to make a difference. But it seems like BOTH have changed more than that….in opposite directions, which has really stirred it up.
It used to be that when home prices were hitting new highs, sellers would come out of the woodwork to take advantage. But not this time – which is different!
The frenzy conditions have been building for years – see this old blog post from 2017 (above).
We were discussing it all through the second half of last year that the 2021 Frenzy was going to be huge, and the signs were so obvious that even Ray Charles could see them!
But the foundation of people buying their forever home with a low-rate mortgage has been on-going since the last crisis bottomed out in 2009.
San Diego really should enjoy frenzy conditions longer than most areas – maybe longer than any area!
Interestingly, a check of our buyers, and buyers of our listings over the last 18 months shows that about 80% of them were local residents. We’ve had people move here from the Bay Area, Chicago, and NYC, but for the most part it has been move-uppers and move-downers. Results may vary!
I’ve been leaving my buyer & seller tips for dealing with frenzy on our Instagram Reels @klingerealtygroup. Here is a compilation of ideas you might not hear elsewhere:
With the California Department of Public Health allowing open houses now, it would seem that we are getting back to normal. The industry has done open houses for 100 years, so taking a few months off shouldn’t inhibit the practice from coming back.
Or will it? It will.
Why? Because the covid-frenzy has condensed the selling process into a weekend. We only show homes by appointment now, and many listing agents demand that buyers show proof of ability to purchase just to see the home. It makes for a clean and tidy 5-30 qualified appointments over the first couple of days on the market, and then pick a winner. Job over.
Listing agents will resist having to work any harder. Instead, they will adopt the appointment-only plan, and then convince sellers that they don’t want random people wandering around their house.
What are the benefits of open houses? Why would we want them to come back?
REASONS TO HAVE OPEN HOUSES
The main reason to do open houses is to create real or imagined urgency – the fear of missing out. There is nothing better to motivate a buyer than to see other competitors roaming around the house at the same time – it makes them think that they will lose out if they don’t act promptly. Sellers deserve this benefit.
While demanding to show proof of ability-to-buy sounds good, it eliminates those legitimate buyers who do have the ability to purchase, but don’t want to show their financials just to see a house. We want to include these buyers who are currently shut out from the process. I know there will be agents who will scoff and declare that any buyer who is unwilling to show their underwear just to see a house isn’t a serious buyer anyway. But it’s just an excuse – the minute the frenzy is over, you’ll be back to showing homes to anyone with a pulse.
Interacting with buyers in person helps agents keep their chops up.
C.A.R. will be releasing more open-house guidance tomorrow. They will insist on booties and masks, and they might include a modified registration book where attendees state that they don’t have covid.
But don’t be surprised if agents are slow to adopt the old-fashioned open house techniques.
The California Dept. of Public Health has just updated its guidance on open houses, and further updates are pending. The following is now on live on the COVID-19.ca.gov website. C.A.R. will be providing more details regarding this guidance so that REALTORS® are in full compliance, but the following is the information currently on the California State official website:
Shown properties, like open houses – effective immediately
In-person showings of properties, like open houses, are permitted and must follow the indoor gatherings capacity limits in the CDPH gatherings guidance. Check the Attendance section of the gatherings guidance for the capacity limits for each tier.
Open houses will be excellent for transparency and frenzy intel – just how heavy is the demand?
