We launched our Aviara listing with open houses on the weekend of September 17 & 18. Newer one-story homes built by Davidson might be the most popular homes around – if you can find one for sale.
Remarkably, there were two other sales of this floor plan this year. In March, there was a sale across the street that closed for $2,110,000, and another around the corner sold for $2,050,000 in June. Both made our $1,800,000 list price look attractive.
A few days later, we opened escrow at $2,100,000 cash.
Allegedly, the buyer was a recent widow in her 40s with two kids who was being represented by her mother who was in her 70s – who admitted to not being an active realtor for years. No problem, we will help you along the way to make sure we all get to the finish line.
Their home inspector mentioned a stain on a baseboard, and that a mold test would be in order.
Once that thought is out in the open, people will think the worst.
They hired a mold inspector who conducted the standard air sampling where they compare the mold counts in the air outdoors to samples taken inside. Those results came back clear – no mold. He also collected swab samples from under the toilets and sinks, and the one area did test positive:
The only mold found was on a single baseboard behind a toilet that measured 2+ on a scale of 1-4.
I told the buyer and the buyer’s agent that we regularly deal with mold remediation and have one of the best solutions available. Not only do we have a certified mold-remediation contractor, but we also have the county’s best mold tester who will give you great confidence that the problem has been eradicated.
The agent seemed to take it worse than the buyer, which led to their confession.
It turned out that the daughter was buying the house for her mother, the agent!
I knew I had a problem because people in their 70s aren’t as familiar with today’s more-complex set of variables of home buying. Back in the old days, we didn’t do home inspections, let alone have home inspectors who instill fear in buyers who are already skittish. I don’t mind suggesting further inspections, but have some bedside manner, for pete’s sake. Describe them in a way that you don’t scare the crap out of the buyers. In the days that passed between the home inspection and the actual mold results, you can bet that the buyer/agent imagined the very worst.
Her final statement? “I can’t handle the stress”.
The next day she sent over the signed cancellation form, with no explanation.
We completed the remediation, and now I get to convince another buyer that there isn’t a problem today.
How many other homes for sale have minor mold under a sink or toilet? Many? Most? Yet, the majority of homes sold don’t get tested for mold, so buyers never know what they are buying, or what lies ahead. But not here! We’ve done full remediation and it tested 100% clean!
I tell potential home buyers to keep looking because you never know when you will find the right house – which is the most important part of the equation. Most will convince themselves that it will be easier to find the right house if prices came down, and besides, the current crop isn’t that interesting.
To keep it simple, let’s just calculate how mortgage rates have changed the equation:
Purchase Price: $2,000,000
Loan Amount: $1,600,000
30-yr jumbo rate: 3%
Monthly pmt: $6,746
Buyers who expect the sellers to make up the entire difference with a lower sales price will have to wait until they can find a home that meets this description:
Purchase Price: $1,400,000
Loan Amount: $1,120,000
30-yr jumbo rate: 6%
Monthly pmt: $6,715
If home prices come down 30%, it will enable buyers to buy the same house for the same monthly payment – and with a $120,000 smaller down payment too. If it happened over the next five years, it means we only need to drop about 6% per year, and we’ve already dropped more than that in 2022.
Or let’s say you want to roll back to pre-pandemic pricing.
NSDCC homes that sold in February, 2020 closed at a median of $509/sf, and last month the median was $793/sf which means we’d need a 36% decline to get back to pre-pandemic pricing.
How are you going to play it?
Are you going to wait until you actually see homes selling for 30% to 36% off to get back into the game?
Are are you going to wait until rates come back to 3%?
Or do we acknowledge that the buyers who have more horsepower are going to jump back in sooner, and there’s not much chance of prices dropping the full 30% to 36%? The highly-motivated affluent folks will probably be satisfied with 20% off, and they will derail a full decline. It’s what happened in 2012.
Can you live with 20% off?
Because if you can, then you need to stay in the game.
If the #1 variable is buying the right house, then #2 is timing.
I think the affluent will be looking next spring, and if they find a suitable house, they are going to buy it. By then, some of the statistical pricing gauges will be showing 10% to 20% declines, either nationally or in isolated markets. Because the local pricing isn’t that nuanced and buyers just want a house, they will decide that’s close enough and go ahead with the purchase.
To support my suspicion, I’ll note that during the frenzy, it was the same mentality, just in reverse.
When people found the right house, they just paid whatever it took – even if it meant paying $500,000 to $1,000,000 over the list price! Nothing else mattered besides getting the right house.
Most buyers won’t believe their eyes, and the volume will be thin. But sellers will appreciate any momentum and be encouraged to price their home for about what they thought they could get, with not much discount. Buyers who want discounts will be relegated to scouring through the dent-and-scratch bin, or hope that moving during the off-season might be more fruitful. Great for them.
The Padres won the game they needed to win last night!
There are games on Friday and Saturday night at Petco Park, and you may be wondering if you should attend. The answer is YES, because we never know if we’ll get another chance.
It’s almost like today’s housing market. People are passing on opportunities to buy today because they think there’s always tomorrow.
I’ll tell my story.
I became a season-ticket holder in 1998, and in my very first season, the Padres went to the World Series!
I told Donna that this was the greatest decision we’ve ever made, and she can plan on going to the playoffs almost every year, and we’ll have several World Series to come!
Look how that turned out. Two playoff appearances in 2005 and 2006 and we lost six out of seven games – that’s it (plus 2020 with no fans).
Yes, it is going to be very expensive (StubHub charges a 28% fee), plus there will be fights in the stands, and riots in the streets. You won’t want to miss it!
I plan on being there. I’ll let you know how it goes!
For those of you who were here in 1984, this is a reminder of the craziness in Pacific Beach after we beat the Cubs to go to the World Series:
Here’s the 7,509sf home on La Jolla Farms that just sold for $18,450,000 cash, which was a whopping 6% below the list price. The market time was 12 days.
You can tell in this photo that the backyard was tired, but the rest of the one-story house looked fine. Even though there had not been any similar sales on this street since Alicia Keys paid $20,800,000 for an architectural gem back in 2019, it shows that when the affluent sees a house they like, they pay the man:
Sent to me by bulk email, and probably sent to all agents. The HOA fee is $913/month:
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Instead of using the median sales price as a gauge, let’s look at the history of the median $/sf to help bring the size of the homes into the equation.
Thoughts:
I remember 2018 and 2019 being fairly flat and a bit of a struggle. Rates had been in the 3% to 4% range during the 2015-2017 period, and once they got back into the mid-to-high 4s in the summer of 2018, pricing hit the skids. Luckily, rates dropped under 4% in late-2019 which caused us to be optimistic about the selling season of 2020 – and you can see that pricing got off to a good start.
The Pandemic Stall caused a blip in April, 2020, but we recovered and charged into 2021. You could say that local pricing took off like a rocket, rising 25% in five months:
Jan 2021: $559/sf
Jun 2021: $697/sf
Today we are under where 2022 started, and it could get worse. However, the median for the 38 sales closed this month is an impressive $823/sf, which is 4% higher than last month.
But we have a long way to go!
Speaking of a long way to go, Rob Dawg wanted to stir it up, like most Dodger fans. We have been subject to endless taunting since making the playoffs, including Charlie Steiner suggesting that the Padres rivalry with the Dodgers would be like a nail having a rivalry with a hammer.
Just you wait!
Bob Melvin has engineered the greatest rope-a-dope since Muhammad Ali. Sacrificing the first game last night with Clevinger vs. Urias was ingenious, because Kershaw is washed up and due for a dud – and Darvish has been lights out.
The Padres win tonight, and then come home to the raucous crowd who hasn’t seen a playoff game in 16 years, and Petco Park will be rocking for Snellzilla. Then we got No-No-Joe for Saturday’s game and the Dodgers will have to bring back Urias early on three days rest and he won’t have enough.
This is the last chance to get on the Padres bandwagon!
Every year, there are new and evolving home design fads that should “scare” you to death. Last year, there were moss-covered accent walls (gasp!), acrylic furniture (shriek!) and Tuscan-style kitchens (yelp!). This year, it’s the “cloffice”—a pandemic-era closet-turned-office—and many others.
With Halloween around the corner, Styled Staged & Sold presents its annual countdown of the top 10 home trends of 2022 that are haunting our nightmares:
The number of NSDCC detached-home sales in September is up to 133 today, which is pretty good. There are only 138 pendings currently, but 34 sales have already closed in October so there is a decent chance that we’ll have 100+ sales this month too!
The drastically-lower YoY sales will give participants the idea that the market conditions keep deteriorating, but to me, it is a sign that sellers are holding out on price.
If we can just average 100 sales per month in the fourth quarter, I’d consider it a successful end to 2022!
It’s natural for most buyers to want to see what happens in springtime, and I think we can all predict what’s coming. The 2023 home sellers aren’t going to believe that the old comps don’t matter any more – and they will price their home within 5% of the peak pricing.
We are at the point where the inventory should continue its gradual descent and wind up around 235 active listings at the end of the year (if the percentage drop goes the same way it did last year).
Though the Padres will be having an unusual impact on the local market…..hopefully for the next month!
