Our new listing across from Tide Beach Park in Solana Beach has fully-approved plans to build a spectacular Mark-Morris-designed California Modern Contemporary – or just enjoy your beach cottage!
Mark designed the La Jolla house we sold last summer at 365 Marine Street – this plan has similar qualities! Open 12-3pm this Sunday, March 5th.
The local index is 11% lower than its peak in May.
The beauty about this market is that buyers don’t have to fight with the decision to buy now or wait. Because the inventory of quality homes is so thin, having to wait is baked in.
How often do buyers see a home for sale that interests them? Once a month, maybe?
The higher rates go, the more sellers will think it’s a bad time to sell – causing FEWER homes for sale.
It’s a big game of chicken, and you have to wonder if every buyer will get the memo to hold out. If renegade buyers keep paying retail for the premium properties, it spoils the whole idea of prices dropping.
Will higher rates cause better pricing on the homes you are willing to buy?
Don’t ask Jay Powell, because he doesn’t know. He said:
We are well aware that mortgage rates have moved up a lot. And you are seeing a changing housing market. We are watching it to see what will happen.
How much will it really affect residential investment? Not really sure.
How much will it affect housing prices? Not really sure.
Arizona has all climates; from desert heat to snowy mountains, and everything in between. This guy has hundreds of videos that tour every big and little town in the state plus topics of interest:
We have an unusual obsession with home pricing – I say unusual because nobody cares that our measuring devices are deeply flawed and regularly give the wrong impression. With the stakes being so high, you’d think homebuyers would investigate thoroughly – but everyone just wants to grab and go!
You can see in the graph above how the smaller sample sizes cause more volatility – Encinitas only had 19 houses sold in December, and ten closings in January – so the 10% to 15% bounces up and down aren’t good representations of the pricing trend.
This is a better look at the trend – the average and median $$/sf for houses sold between La Jolla and Carlsbad, and this includes the 70 sales so far this month:
The upward trend should continue as more of the premium products come to market this spring.
I predicted that there wouldn’t be a sale under $2,000,000 in the Davidson Starboard tract in La Costa Oaks after we closed the Plan 2 in October. The first new listing there since is coming soon, priced at $2,899,000 and they should get all the money:
I know they paid $1,999,919 in 2019, but there have been others that have closed for a million dollars over their 2019 purchase price. The Plan 3 layout probably isn’t as popular as the Plan 2, and the backyard is filled with a pool. But this street is a culdesac and it has the best south and west views which only come up occasionally for sale. It’s been so long since we’ve had an offering like this that I wouldn’t be surprised if she has 100+ people look at it next week – in spite of all the doom!
After a tremendous performance that could be ranked as good as any show ever, she ended the gig with this ballad to her daughter just nine days after September, 11, 2001. We were there:
This has to be the best ending to a concert video ever. I love how they show the escorting of the talent after the show, an art form that is all about shielding the fans away from any direct contact and getting out alive.
The market could deteriorate into a cash-only environment, where the buyers and sellers who can avoid mortgages altogether are the only players left. If mortgage rates get into the 7s and 8s, the temptation for financed buyers and sellers to wait it out will be overwhelming.
Sellers who are downsizing/leaving town are home buyers who won’t care much about mortgage rates because the only way it makes sense for them to move is to pay cash for their next home. Especially those who are older.
There are plenty in this category, thankfully!
From FATCO:
Of those who owned their home free and clear, nearly 78 percent were owned by homeowners aged 55 or older. Not surprisingly, older homeowners are more likely to own their homes free and clear. As the Baby Boomer generation, which is larger than any generation before it, has aged, the share of homes owned free and clear has increased. This gives some hope that while many existing homeowners remain rate locked-in, there is a large cohort of older homeowners who are not. However, older households are typically less likely to move than younger ones, which is especially true as seniors today increasingly age in place. So, while some portion of the free-and-clear inventory will come to market in the next decade, it will likely trickle in slowly.
Free-and-Clear Homeowners May Hold the Key
As demand for homes starts to inch up as we approach spring home-buying season, a key question is, will there be more inventory for those potential home buyers to buy? Existing-home inventory makes up the bulk of available home inventory, and many existing homeowners refinanced into sub-3 percent mortgage rates over the course of the pandemic. But there’s a large group of homeowners who are not deterred by higher mortgage rates—those without a mortgage on their existing home or those with a small remaining balance. These homeowners may hold the key to unlocking more supply and, in turn, more home sales.
Local sales recently have been purchased all-cash about a third of the time. As sales drop further, the percentage of all-cash sales should end up at half or more of the total sales – and help to provide a floor.
Remember when the inventory tanked in 2020 when everyone was afraid of catching the bug?
Once the pandemic was over, we’d get back to the regular flow of homes for sale, wouldn’t we?
But the intensity seemed to increase as time went on, finally spinning out of control when mortgage rates went up. The resulting debris field is causing fewer people to want, or need, to sell.
For most, staying put seems like the best option, at least for now.
Buyers can probably endure another year on the lease. But potential sellers are getting closer and closer to being too old to move. If there isn’t a clear path to living for another 5-10 years (and hopefully longer) in your new town, you’re probably going to decide to live it out where you are.
The NSDCC YoY change in January was only -17%, so only half as bad as San Diego in general. But the first 15 days of February are -20% YoY, so the local inventory isn’t exactly getting better.
