The last coffee bet began in 2006 when it was obvious to me and others that the market bubble was popping, so let’s examine the data back to those years to see if we can learn anything that might be helpful when trying to predict the future:
NSDCC Listings and Sales between January 1st and August 31st:
The most recent non-pandemic years, 2018 and 2019, were eerily identical, which suggests that the same market conditions can prevail for years in spite of rates (which varied from 4.03% in January, 2018 to 4.87% eleven months later, and then back down to 3.72% in December 2019).
The most stunning data point is how the number of listings has plummeted this year, even though sellers could have sold for all-time high prices. Record pricing used to motivate more people to sell, not fewer!
Agents sitting on unsold properties will ‘refresh’ their listings every month or two, and those days are back so we’ll probably have at least the same amount of 2023 listings just due to the extra 10% to 20% of refreshers. But the inventory is going to be bleak no matter what happens, so that alone will drive the market in 2023 and beyond. Here is a visual:
The thing I remember most from the last downturn was how the market turned earlier than expected. There was a blog post from April, 2009 entitled Coffee Bet 2 where I thought prices would go down another 25%, when that month ended up being the actual trough for the SD Case-Shiller Index.
Even with the buyers who over-analyze and stay on the sidelines for 2-5 years, there will be others – mostly those out-of-towners who don’t have a house here yet – who will buy when they find the right house.
Sales will likely be dreadfully low, and I think NSDCC pricing will be FLAT in 2023.
During the selling seasons, there will be some spectacular sales of those family estates with big yards and pool on culdesacs…..and prices trend higher! But then as the inventory diminishes over the rest of the year, the pricing either goes flat or we give it all back in the second half of the year – like what happened in 2018 and 2019…and what will probably happen in 2022 too:
Here are NSDCC markers for this year:
Median List Price: $2,219,888
Median Sales price: $2,250,000
Median List Price: $2,200,000
Median Sales Price: $2,150,000
If it weren’t for those crazy three months before rates went up last spring, the 2022 data would probably have already looked fairly flat anyway, so it’s really not risky for me to guess that it will continue. There will be crazy-high sales, and stunningly-low sales too, but in the end, we’ll be living in Plateau City.
In the first coffee bet of 2006, I used the Davidson Starboard tract as a marker, and coincidentally I have a listing there now. The neighborhood is arguably the best in the area, and La Costa Oaks South homes in general, are among the newest and most desirable homes in SE Carlsbad.
Let’s look up at the end of 2023 and see how the LCOS median sales price compares – even with it being inflated by early-2022 sales. These closings are from the last six months:
Even if the median sales price deteriorates somewhat in the next 15 months, I predict that my sale will be the lowest Plan 2 sale in the interim, and there won’t be any LCOS sales below $2,000,000 between now and the end of 2023 (the $1.875M sale was FSBO).
The ultra-low number of listings in 2023 will throttle any big price changes in either direction.
My NSDCC pricing guess for 2022 was +/- 5%, and is close, and next year will probably be similar too.
I’m sticking with ZERO change in pricing next year – which isn’t a sexy number but will reflect the general malaise and discomfort among the participants we hope for lower rates but know they won’t change enough to make much difference anyway.