Here is the summary of 2022 predictions from November, 2021:
https://www.bubbleinfo.com/2021/11/02/2022-forecasts/
My guess was that the NSDCC annual sales would be +5%, and pricing +15% in 2022.
It was a tough year for prognostications!
NSDCC YoY Statistics
| Year | ||||||
| 2021 | ||||||
| 2022 | ||||||
| Diff |
The smaller square footage takes a little bit of the sting out of it, but anyone who guessed right about the 2022 statistics was just plain lucky.
I was close on the annual price increase, but it doesn’t mean much after considering what the median sales price was last month – which is now back to the mid-2021 range.
I would have been way wrong on the sales prediction, even if the frenzy would have continued. The sales between January and May – when the frenzy was still raging – were down 28% YoY. It shows how insane the market was in 2021, and how unlikely it will be that we will ever seen anything like it again.
But have you seen ANY superior homes selling for a discount yet? Me neither, and one reason is because there are so few for sale. Once we wade into the spring selling season, we’re going to see how the market has divided in two segments – superior vs. inferior properties – and how the affluent buyers will pay the price for the top-quality homes.
The big question is what the realtors will do.
Any agent can sell a creampuff – the homes that are well-located, upgraded, tuned-up, easy-to-show, and priced attractively. But how many properties are in that category? Maybe 5% to 10% max? The overall market, and the changes in these dumb statistics that everyone thinks mean something, will be made in the trenches by the listing agents.
Will they game up and provide excellent salesmanship that keeps homes selling for about the same prices? Or will they be like prancing bullfighters and just get out of the way as the buyers come barreling through with their demands for discounts?
When we look at these stats next year, we will know the answer.
Going to be tough with all the move up buyers on the sidelines. A segment of the housing market has mostly been removed from the market in San Diego with new homes being in desirable areas . Reset the loan, at least X2 the mortgage payment and buy another old home with unknown problems is going to deter a lot of younger families who want more space. Going to be interesting to see how it plays out.
Agree, and on the flip side of that point is how the inventory could dry up like a peach seed!
My guess is -3% for the SD 2023 median sales price. From the UT:
Home price predictions are all over the map from our panel. As of November, the median home price in San Diego County was $765,000. While some took the stance that prices would be lower — one prediction was $646,000 — some said the price would accelerate to close out 2023 closer to $800,000.
Ray Major: $646,000
Caroline Freund: $760,000
Haney Hong: $800,000
Kelly Cunningham: $700,000
Lynn Reaser: $700,000
Phil Blair: $795,000
Gary London: $700,000
Alan Gin: $720,000
Bob Rauch: $800,000
Kirti Gupta: $750,000
James Hamilton: $720,000
Austin Neudecker: $750,000
Chris Van Gorder: $740,000
Norm Miller: $760,000
Jamie Moraga: $800,000
David Ely: $715,000
From Windermere guy:
https://youtu.be/VxbtOLlJGIs
The Federal Reserve (aka “The Fed”) has a parrot problem, and it’s on a crash course with economic reality… maybe.
The Fed sets policies that impact interest rates in an attempt to keep inflation in check without crippling the economy. After arguably leaving rate-friendly policies intact too long in 2021, they scrambled to put the brakes on inflation in 2022 with aggressive rate hikes (higher rates leave less money to buy other “stuff,” thus hopefully lower inflation by decreasing demand).
For months on end, almost every Fed speaker has parroted a version of the same few thoughts:
Inflation is too high
Rates need to go higher still
Once rates are as high as they can be, we need to keep them there for as long as we can
We don’t mind doing some economic damage if it means controlling inflation
We’d rather do damage and beat inflation than protect the economy and risk another inflation spike
We don’t want to repeat the mistakes of the early 80s.
That last bullet point has obviously been a guiding principle for the Fed–repeated by almost every member. It refers to a Fed rate cut in 1980 following a big drop in inflation. Before that, inflation had spike at an unprecedented level and the Fed hiked rates at an unprecedented level to fight it. In short, it looked like they won. They cut rates accordingly, but it proved to be too soon. Monetary scholars think the subsequent rate hikes to the highest levels ever could have been avoided if the Fed didn’t declare victory so soon.
Fast forward to the present and the Fed is intent on avoiding those mistakes of the past. The market has generally done a good job of believing the Fed’s guidance. Specifically, rates have surged higher, and stocks have languished. But we’re starting to see a divergence, and it was highly evident in the responses to this week’s various economic reports.
Thursday and Friday were the two most important days. A trifecta of upbeat labor market reports pushed rates higher and stocks lower on Thursday. This is the way the pattern plays out because a friendly Fed helps both stocks and bonds by making it cheaper to borrow money. Cheaper borrowing (aka lower rates) means more economic growth, which is why we often see rates falling and stocks rising when the market is trading Fed expectations.
Thursday’s data made markets think the Fed would continue to hike as aggressively as they’ve promised. Things changed abruptly on Friday. The big monthly jobs report showed strong job growth, but importantly, it also showed slower wage growth. Average hourly earnings came in under the median forecast. Moreover, last month’s wage data was revised sharply lower. Taken together, it gives the impression that wage growth has turned a corner.
The wage component is/was important news because Fed Chair Powell specifically referenced wage growth concerns in the last press conference in mid December. If wages aren’t accelerating, it’s one less inflationary concern for the Fed. Markets traded accordingly. Then 90 minutes later, a separate report on the services sector showed massively unexpected weakness. Taken together, the two reports had markets thinking the Fed would end up softening its rate hike stance.
Long story short, the Fed is reading from the same old script where it feels compelled to talk very tough about how it will handle inflation. It justifiably worries that a change in that tone could lead markets to become too exuberant, thus shortchanging some of the work that’s already been done to fight inflation. Remember, it’s all about tamping down economic growth and demand to buy “stuff.” If markets suddenly thought rates were headed precipitously lower, people might start buying enough stuff to keep inflation higher than it should be.
So the Fed will likely continue erring on the side of being a cranky old stick in the mud on rate policy and financial markets will likely continue to nod and smile while continuing to hedge bets with the same sort of logical reactions to data as those seen this week.
As for the mortgage rate response, Friday was the best day in a long time, but the average 30yr fixed rate is still quite high relative to levels earlier this year. In fact, the average lender didn’t even quite make it back to the lows from mid December.
https://www.mortgagenewsdaily.com/markets/mortgage-rates-01062023
Higher rates and scarce inventory bodes well for we landlords. When PITI jumps, rents look more reasonable.