Every once in a while, a sliver of truth slips into the mainstream media articles.
After the usual negativity spewed throughout the front-page UT article about the local Case-Shiller Index declining at one of the worst rates of any town in America, this quote appears at the bottom:
Zillow senior economist Nicole Bachaud wrote in an analysis of the report that sellers’ hesitancy to put homes up for sale might mean prices won’t change that much.
“Would-be sellers are sticking their ground and holding tight to the inventory they currently own,” she wrote. “As a result, prices might not continue to plunge down as much as some projections anticipate.”
Nicole has been with Zillow since 2019 and a senior economist since August. Kudos to her for stating what all other economists are ignoring, like Mark Zandi and the other clowns who have decades of experience and keep telling people that real estate will be crushed any minute now.
I have a real problem with the common belief that we can’t predict the future.
I guarantee you that our local inventory in 2023 will be the lowest on record, and will be the major driver of market activity. How do I know? In all other previous downturns, the banks drove the market by dumping foreclosures for whatever the market would bear. But today, all we have is forever-home owners who are locked into a low-rate mortgage.
I will present evidence too. To demonstrate how potential home sellers are reacting to higher rates, consider the number of NSDCC listings that hit the market between September 1st and November 30th, which was when mortgage rates rose into the 6-plus range. Once homeowners think it’s a bad market, they DON’T PANIC, and instead, they wait it out.
NSDCC New Listings Between September 1st and November 30th:
2007: 1,140
2008: 1,146
2009: 1,064
2010: 1,112
2011: 1,094
2012: 921
2013: 998
2014: 1,004
2015: 1,072
2016: 1,052
2017: 939
2018: 1,099
2019: 990
2020: 1,072
2021: 644
2022: 523
The last time everyone thought it was a terrible time to sell was in the 2008-2009 era – and even then we had 1,000+ listings.
We have NEVER been in this environment before with so few choices. The ultra-low inventory is going to continue into 2023 and even if the Fed eases up and mortgage rates end up in the 5s, potential sellers are going to wait until the coast is clear, and everyone is talking about bidding wars again. GUARANTEED!
As a result, home prices will remain elevated.
In other words, the NSDCC inventory next year will be about HALF the normal count.
I HAVE A BEACH HOUSE AND 9 RENTAL HOMES IN SAN DIEGO. I AM NOT SELLING ONE OF THEM BECAUSE THE CAPITAL GAINS TAX WILL TAKE ALMOST EVERYTHING. I’M NOT SELLING MY BEACH HOUSE BECAUSE I HAVE A 30 YEAR FIXED @ 2.2%. So for now, I’m just ramping up my rents slowly and chillaxing.
Until prices CRASH in less-desirable areas, very few will sell in the highly desirable areas. There must be a large financial benefit to give up living in coastal SD county for other areas. North county coastal SD is still undervalued compared to places like the SF Bay Area.
9 RENTAL HOMES IN SAN DIEGO. I AM NOT SELLING ONE OF THEM BECAUSE THE CAPITAL GAINS TAX WILL TAKE ALMOST EVERYTHING.
Curious – is your long term capital gains rate 90%?
LOL – thanks FreedomCM. Fed and state capital-gains tax combined should be around 33% of the net profits.