Geez, Jim, you sure are optimistic about 2022 sales and pricing. How come?
I mentioned a couple of sales in last week’s video, and here is other evidence:
When this house in Carmel Valley hit the open market, there was a model-match with pool located a block away that had just listed for $1,899,000. This house listed for $1,995,000 and was at the end of the culdesac so it had the big pie-shaped lot:
https://www.compass.com/listing/12893-ralston-circle-san-diego-ca-92130/921928562713599849/
We offered $2,150,000 with 30% down payment, 21-day escrow and waived the appraisal – and lost. They received 14 offers, and they only countered the ‘serious’ ones.
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The last two sales of this model were $2,700,000 and $2,760,000 in July, and all three were listed by the same agent (one was her own house). So her list price of $3,198,000 on Thanksgiving weekend seems a bit aggressive, but it looked nice:
https://www.compass.com/listing/3566-calle-palmito-carlsbad-ca-92009/922551469697457585/
Showing appointments were scheduled for Saturday and Sunday…..but they took an offer on Saturday, and cancelled the Sunday showings!
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We offered $1,050,000 and 21-day escrow for this fixer on a canyon in Clairemont that listed for $995,000. We got boxed out on this one too – no counter-offer or bidding war. They accepted $1,100,000:
https://www.compass.com/listing/4012-mt-brundage-avenue-san-diego-ca-92111/913237322679108673/
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Here are a few others that have closed in December:
This is a half-acre lot, but $1,710,000 is a boatload of money for Calavera Hills in NE Carlsbad:
https://www.compass.com/listing/3803-crownpoint-court-carlsbad-ca-92010/910821249707960161/
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This was a fixer built in 1986 on an acre in Olivenhain sold for 43.5% OVER THE LIST PRICE:
https://www.compass.com/listing/1256-rancho-encinitas-drive-encinitas-ca-92024/905698553849537033/
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I could list these separately, but they look better together – all selling for big pops over their list prices:
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This sold for $590,000 OVER THE LIST PRICE:
https://www.compass.com/listing/5646-chelsea-avenue-la-jolla-ca-92037/918937162309409297/
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The biggest reason why the frenzy should continue in 2022 is because those who have lost out on properties in 2021 will be even more determined next year – and be your competition.
Get Good Help!
https://investorplace.com/hypergrowthinvesting/2021/12/welcome-to-the-first-inning-of-the-10-year-housing-boom/
An excerpt:
It’s not driven by greedy banks giving out bad loans with high mortgage rates. Lending practices have been cleaned up. The 30-year Fixed Mortgage rate averages 3% these days – half of what it was in 2004-2005. And mortgage debt service payments as a percent of disposable income have plunged to record lows of below 4%.
So, while today’s housing market is hot, it’s hot for an entirely different set of reasons than why the housing market of 2004-2005 was red-hot.
In stark contrast to that housing market, the drivers underpinning today’s hot housing market are durable – and will last for another decade, at least. Those drivers include:
A demographic-related surge in homebuying demand. Millennials and baby boomers are colliding to create the biggest homebuying demand surge we’ve seen in decades. Millennials have developed a reputation for postponing big life events, such as getting married, having kids, and buying homes. Now, they’re doing all of those things, as they’ve mostly reached an age and income where doing so makes logical and financial sense. This translates into tens of millions of new homebuyers entering the market over the next decade, at the same time that tens of millions of boomers are reaching that age where they are looking to downsize. This coupling is creating a huge homebuying demand surge that should last throughout the 2020s.
Ultra-low financing costs. The 30-year Fixed Mortgage rate hovers around record lows of 3% today. Interest rates are likely to remain lower for longer as the Fed has created a U.S. economy and market that is almost reliant upon low rates. They won’t pull the rug anytime soon. So long as financing costs remain low, home prices can continue to go up without putting too much pressure on homebuyers.
Very tight housing supply. Coming out of the 2008 Housing Market Crash, homebuilders were hesitant to build a ton of new homes because consumers were hesitant to buy new homes. This hesitancy lasted a decade, throughout which homebuilders didn’t build that many homes, creating an enormously supply-constrained market that won’t resolve itself quickly. According to Stephen Kim, a housing analyst at Evercore ISI: “The industry would need to sustain a two-million-starts pace for a decade to bring the industry out of its current underbuilt situation.” To that end, this market will be defined by low-supply and high-demand for the next decade – a recipe for strong home price appreciation.
A revitalized view of the importance of a home. Covid-19 changed the world. One of the most pronounced changes was a revitalized view of the importance of the home, since the home is now where many of us work (thanks Zoom), workout (thanks Peloton), watch movies (thanks Netflix), and more. So long as consumers continue to do those things – and we believe they will for a long, long time – people will continue to place increased value on their homes.
Folks, this isn’t a bubble. The housing market is in the first innings of a decade-long bull market.
Coastal SD county real estate is undervalued. Folks that have lived here from the 70s, 80s, 90s, 00s, 10s are not moving away. They’ve locked in a historically low interest rate on their refi and will likely die in their house and give to their heirs. Only the cream of the crop can move into the area and buy now. Cash out your stock gains from the past decade, cash out your real estate gains from anywhere else in the country to finance your down payment here and still lock in a great 30 yr rate. The party will continue here into 2022. If WFH culture persists after COVID, expect this area to outpace even more.
Those waiting on the sidelines for a “crash”, will continue waiting for a long, long time. “the markets can remain irrational longer than you can remain solvent.” ~ John Maynard Keynes
I hope politicians don’t decide to “fix” this.