People say to me, “I bet you’re loving this market”, expecting that realtors are raking it up these days.
I lost 50+ bidding wars with buyers this year who lost out to others who insanely overpaid with no regard for the comps, or because listing agents were too lazy to give everyone a fair chance. Neither of those are healthy for the market in general, yet no change is on the horizon for 2022.
I found myself in two more bidding wars this week!
The two properties weren’t the superior buys in top condition – instead, both were very average and priced with no regard for the comps. Yet they both had multiple offers over list price during the week between Christmas and New Years?
This is my 698th blog post of 2021, and the best way to review the year is to scroll through the highlights and lowlights here:
This home had a decent floor plan, and just needed a thorough refresh. But it shows how many buyers pass on fixers – heck, a single-level with view and pool in a gated community sold for under list ($2,900,000)!
Tom asked on our Facebook page about getting the actives and pendings data for San Diego County. Here is the InfoSparks data from the SDAR Resources page on the MLS – they are interactive so scroll over the graph lines for the exact counts:
The first graph charts the number of active listings on the last day of the month, the second graph shows the number of new listings in each month, the third graph shows the number of properties that were marked ‘pending’ in each month, and the fourth is the actual sales counts each month.
My initial reactions to each graph:
Active Listings: The frenzy let up in June/July, but it’s back now – and the last few months have been brutal for buyers. On the last day of November, 2019 we had 4,068 actives, and last month we had 1,420.
New Listings: Hard to grasp the cumulative effect so I calculated annual number of listings. In 2021 we have had 16% fewer listings than in 2018.
Pending Sales: This November’s count was almost identical to last year – which was the all-time high!
Sold Listings: The total number of sales for the year is 9% ahead of last year, and we’re not done yet!
This is the probably the best example this month of the type of homes that are getting top dollar – large newer coastal suburban homes that are upgraded throughout. The list price was $2,549,000, and this closed for $2,850,000 cash plus the buyer paid an additional $150,000 for the furnishings:
We know that media types are looking to sell newspapers, and if it bleeds, it leads. The article in the UT this morning about the San Diego Case-Shiller Index starts with this:
San Diego continued to slide down in rankings of the nation’s hottest real estate markets in October.
The article doesn’t mention the lower inventory in 2021, or offer any other explanation. But it does use the D-word, deceleration, in their headline that everyone is using to describe the last few months.
But are home prices really decelerating?
All of the comparisons are judging the year-over-year changes, without any mention of how the 2020 numbers were rising quickly too. If we add the 2020 monthly YoY increases to those from this year, here’s what the combined 2-year increases would look like:
The indices in the last half of 2019 had flatlined, so the graph above is a pretty good visual on how our local index has been marching skyward since the pandemic started.
We can also note that the month-over-month increases are probably a better gauge of current activity – and they have picked up since we had actual deceleration:
Here’s a graph from a different article that also mentioned how price gains are slowing:
If that’s what slowing looks like, I’ll take it!
But let’s not misinterpret the recent index readings and then give potential home buyers the impression that our local market conditions are changing, because they’re not (or at least not yet).
All that matters in 2022 is inventory. Here’s how prices will be affected:
PRICES KEEP MARCHING SKYWARD:
Ultra-low inventory, or
Moderate surge of inventory (less than normal though)
Big surge of inventory (more inventory than in 2019)
Ridiculous over-pricing of inventory (it’s a fine line too!)
PRICES FLATLINE OR GO DOWN:
Massive surge in inventory
Mortgage rates rise above 4%
We should know by March/April which way it’s going to break!
San Diego fell out of the top three cities for annual change – we’re down to #6 for October. But we have the highest home prices of those six cities! Though every region had double-digit YoY gains, a few cities (Boston, Denver, Minneapolis, Portland, San Francisco, and Washington) look like they’ve pulled into Plateau City.
Remember a year ago when we hit +11.5% YoY and thought we’ve never had it so good?
San Diego Non-Seasonally-Adjusted CSI changes
“In October 2021, U.S. home prices moved substantially higher, but at a decelerating rate,” says Craig J. Lazzara, Managing Director at S&P DJI. “The National Composite Index rose 19.1% from year-ago levels, and the 10- and 20-City Composites gained 17.1% and 18.4%, respectively. In all three cases, October’s gains were below September’s, and September’s gains were below August’s. That said, October’s 19.1% gain in the National Composite is the fourth-highest reading in the 34 years covered by our data. (The top three were the three months immediately preceding October.)
“We continue to see very strong growth at the city level. All 20 cities saw price increases in the year ended October 2021. October’s increase ranked in the top quintile of historical experience for 19 cities, and in the top decile for 17 of them. As was the case last month, however, in 14 of 20 cities, prices decelerated – i.e., increased by less in October than they had done in September.
“Phoenix’s 32.3% increase led all cities for the 29th consecutive month. Tampa (+28.1%) and Miami (+25.7%) continued in second and third place in October, narrowly edging out Las Vegas, Dallas, and San Diego. Prices were strongest in the South and Southeast (both +24.4%), but every region continued to log double-digit gains.
“We have previously suggested that the strength in the U.S. housing market is being driven in part by a change in locational preferences as households react to the COVID pandemic. More data will be required to understand whether this demand surge represents an acceleration of purchases that would have occurred over the next several years, or reflects a more permanent secular change.”
In hopes of encouraging more readers to move somewhere (anywhere!), I took a spin around the north-coastal region of California via Zillow. I don’t know anything else about the area other than it is remote – readers who know more can feel free to comment!
@mikesimonsen @Milehighmilede1 Probably worth noting that according to our latest report at @Attomdata, 90% of borrowers in foreclosure have positive equity - many have more than 25% equity. During the last cycle most borrowers in foreclosure were underwater on their mortgages. Big difference.