Remember when we were impressed that our Case-Shiller Index was going up 3% to 5% per year?
How do you like +27.2% YoY?
The month-over-month increase was the lowest since January, so it will interesting to see if pricing starts to plateau. With inventory so low, the pricing statistics could continue upward.
San Diego Non-Seasonally-Adjusted CSI changes
Phoenix, San Diego, and Seattle reported the strongest price increases of the 20 cities. Prices in Phoenix increased 29.3% year-over-year. In San Diego they rose 27.1%, and in Seattle they were up 25.0%. All 20 cities reported higher price increases in the year ending June 2021 versus the year ending May 2021.
“The last several months have been extraordinary not only in the level of price gains, but in the consistency of gains across the country,” said Craig Lazzara, managing director and global head of index investment strategy at S&P DJI. “In June, all 20 cities rose, and all 20 gained more in the 12 months ended in June than they had gained in the 12 months ended in May.”
Prices in just about every city in the 20-city index, except for Chicago, are at all-time highs, he said, as are the national composition and the 10- and 20-city indices.
Peter Boockvar, chief investment officer at Bleakley Advisory group, said prices are rising at “a really out of control pace that is unsustainable and unhealthy.”
Home sales, however, have started to cool. Signed contracts on existing homes dropped in July, according to the National Association of Realtors. Prices usually lag sales by about six months, so that could be a sign that price gains will stop accelerating as they have been for over a year.
“According to new Ally Home data, 45% of buyers say they have delayed purchasing a home due to market conditions, with 29% citing high home prices and 20% indicating homes selling too quickly as factors in this delay,” says Glenn Brunker, president of Ally Home.
For those who might be thinking about my idea of renting your home for a year so you can defer the capital-gains tax when you exchange it for other(s), know that California is a tenant-friendly state. Just the denying of a tenant has potential consequences! We can refer you to a local property manager to assist you.
It is already legal to add an ADU and a junior ADU to a property zoned single-family. Another bill has passed the California Senate that allows up to four units total – and to be able to create two parcels, which means they could be sold separately – if the owner agrees to occupy the property for at least three years. Here’s a thorough article on the subject with examples:
Senate Bill 9 would technically allow as many as two duplexes, two houses with attached units, or a combination — capped at four units — on single-family lots across California, without local approval.
The bill would allow more building where it’s now illegal, with the intent of reducing California’s fast-rising home prices and increasing access to homeownership through a greater variety of options, according to state Senate leader Toni Atkins, a Democrat from San Diego who introduced the bill and similar versions in the past.
The bill returns to the Senate for expected concurrence on the amendments before heading to Gov. Gavin Newsom’s desk.
A group calling itself Californians for Community Planning Initiative immediately filed a proposed constitutional amendment for the November 2022 ballot to reassert local control over zoning and land-use decisions in opposition to the bill.
But some analysts say the linchpin of the Senate’s housing package would probably have a negligible impact on the California housing crisis, at least in the short-term. As for the nightmare scenario described by opponents? There simply isn’t enough evidence to back that up, either.
That’s because a change to zoning means very little in reality, starting with the number of units that would actually get built, these analysts say.
This is a repeat of the 2br house featured on my tour a few weeks ago, with the resulting sales price.
The agent admitted they priced this 2br house low on purpose to attract a crowd, and it worked. The list price was $699,000, and it sold for $1,100,000 cash. Meanwhile, the two other listings around the corner priced at $1,149,000 and $1,200,000 are still unsold.
Sellers are resistant to price attractively, but look how well it works when you Get Good Help!
I said the other day that it will become hard to sell. But wait – isn’t the demand overwhelming? Yes, but it’s a price thing.
It will be harder to sell…..at your price.
Think of the pressure on sellers now.
It was bad enough when the seller’s ego had to endure the actual or perceived pressure from friends and family about getting your price. It was probably more subconscious, than conscious, and nobody really had to say a word.
Sellers just think that their family, friends, and neighbors are all watching, and they want to show them. As a result, once a home goes on the open market, the seller’s ego wants all the money.
But then over the last year, sellers have been in this bonanza zone where bidding wars erupted out of nowhere and sellers got more money than they ever thought was possible. Way more than their ego needed, and sellers couldn’t wait to tell everyone how great it turned out.
But as the frenzy settles down, will sellers be able to cope without a tale to tell? Will their ego survive not having a bidding war?
In their mind, their opinion of their home’s value is built on top of the frenzy sales, plus a little extra.
Are sellers motivated enough to price sharply from the beginning, and/or lower their price early and often when it counts?
Hence, the frenzy environment has to continue, just so sales will happen.
Agents who have been in the business for 12 years or less only know a strong sellers’ market. They will continue to offer half-baked listings with 60-80 photos, no video, and a crazy price – and expect buyers to pay it. Throughout their history, buyers always have.
Sellers will now expect 5% over comps AND a bidding war to push it higher! Anything to the contrary will not go over well, and sellers and listing agents will be slow to react.
First you’ll see listings not selling, and inventory starting to stack up. Then sales won’t be as brisk as they have been over the last year.
Sales will suffer, before pricing does.
Keep an eye on sales. They are your leading indicator.
This is how the frenzy will end, it’s just a matter of when.
This is the second collection of clips I did for our Instagram Reels. Because they were done with a handheld camera, there is a little too much face here. It might be better to watch it from across the room!
P.S. Are you getting these types of insights from other agents?
If not, maybe we should talk about how else I can help you!
The reason for breaking down the active and pending listings by zip code is to give the readers a closer look at their neighborhood stats.
The total number of active listings has dropped 14% over the last two weeks, with Carlsbad SE taking the brunt of it as the actives got cut in half (46 to 23) while the 92009 pendings shot up by 32% (34 to 45). Don’t sleep on this market – there is still plenty of interest in buying quality homes.
Look how steady each area has been:
NSDCC Active and Pending Detached-Home Listings
In the previous FM, I said that the March-May period had to be the hottest of all-time, but we had 400+ pendings from June 22nd to November 30th last year – with a peak of 491 pendings on September 7th.
We can also track the average market times too. Any upward trends here would indicate market slowing, but there could be several reasons, like the listing agents letting a few more days to elapse before concluding the biding war(?). Or buyers being more deliberate (which is more likely):
While the market was once speeding along at 125 MPH, now it’s a steady cruise around 80 MPH. Everything settling down little by little, with an occasional hot new listing that really stands out.
Why realtors don't get - or deserve - any respect. Our leaders publish articles that make no mention of how much prices have come down. Instead, they pretend it didn't happen. Rates at 5.65%? You can do way better than this - let's get real. @NAR_Research