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More Appreciation in 2021?

People are leery when the squid speaks, but they could be right about additional price gains in 4Q21.

Here’s why:

  1. We had a 15% increase in the NSDCC median sales price between September, 2020 and January.
  2. There will be fewer sales this year, which typically provides more volatility.
  3. Frustrated buyers will pass on the fixers, and wait ’til next year instead.
  4. With the sales mix having a bigger percentage of superior homes, pricing should get a boost.

My #1 reason?  We’ve experienced intense frenzy conditions, and it has gotten to the point where the comps don’t seem to matter any more. Buyers just want a house, and they will pay whatever it takes!

Frenzy Volume

Rob Dawg suggested that the total volume of the frenzy must be remarkable.

Both sales and pricing are higher, and the higher-end markets have never had it so good.

NSDCC Total Sales Volume, First Three Quarters of the Year

Year
# of Sales Under $2M
Dollar Volume
# of Sales Over $2M
Dollar Volume
2017
1,938
$2,241,780,605
459
$1,465,970,635
2018
1,712
$2,094,987,871
464
$1,562,253,960
2019
1,686
$2,079,217,390
478
$1,626,984,079
2020
1,661
$2,135,713,260
554
$1,974,229,362
2021
1,403
$2,066,211,128
1,148
$4,102,211,128

Remarkable indeed! The affluent have commandeered the market.

Over List – September

Here is where the cooling-frenzy shows up.

The number of buyers who are willing to pay over list price is dropping:

NSDCC Detached-Home Sales, % Closed Over List Price

January: 38%

February: 43%

March: 53%

April: 55%

May: 54%

June: 59%

July: 64%

August: 55%

September: 41%

To have 41% of the sales close over list price would be remarkable….if it weren’t for the last six months!

Percentage Who Paid Over List Price by Price Range

Price Range
March
April
May
June
July
Aug
Sept
$0 – $1.0M
76%
79%
89%
88%
89%
88%
64%
$1.0M – $1.5M
68%
78%
84%
75%
74%
74%
37%
$1.5M – $2.0M
66%
66%
72%
66%
82%
73%
61%
$2.0M – $3.0M
54%
32%
34%
66%
56%
56%
36%
$3M+
16%
22%
22%
17%
26%
19%
24%

The average sales prices have been virtually identical for the last three months, and the median sales price is back up to where it was in May:

NSDCC Average and Median Prices

Month
# of Sales
Avg. LP
Avg. SP
Median LP
Median SP
Feb
224
$2,298,797
$2,257,334
$1,719,500
$1,758,000
March
252
$2,295,629
$2,260,524
$1,800,000
$1,825,000
April
357
$2,396,667
$2,403,962
$1,799,900
$1,828,000
May
300
$2,596,992
$2,581,715
$1,900,000
$1,994,500
June
348
$2,509,175
$2,537,953
$1,900,000
$1,967,500
July
311
$2,421,326
$2,442,738
$1,795,000
$1,855,000
Aug
268
$2,415,075
$2,438,934
$1,897,000
$1,950,000
Sept
278
$2,479,440
$2,445,817
$1,899,000
$1,987,500

Compared to last September, the average sales price was +25%, and the median sales price was +33%!

Sales should taper off the rest of the year, but not sure if pricing will follow!

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Affluent Frenzy

The 3/4 Report!

NSDCC Detached-Home Listings and Sales between Jan 1st and September 30

Year
# of Listings
# of Sales
Median Sales Price
# of Sales Over $2,000,000
2017
3,888
2,385
$1,230,000
459
2018
3,977
2,166
$1,320,000
464
2019
3,947
2,148
$1,320,000
478
2020
3,677
2,207
$1,424,000
554
2021
3,072
2,519
$1,880,000
1,140

We usually have roughly 3,900 listings in the first three quarters of each year, until covid hit. This year, there were 21% fewer listings, yet sales have soared – up 14% above 2020 sales.

The median sales price is up 32% YoY, and the sales over $2,000,000 have MORE THAN DOUBLED last year’s previous record count!

Frenzy Monitor

The reason for breaking down the active and pending listings by zip code is to give the readers a closer look at their neighborhood stats.

It’s interesting to see that the total number of actives and pendings are so similar – as close as they were in late-June as the max frenzy was unwinding. The big split in the counts on August 11th made it look like the frenzy was coming apart, but they’ve gotten back in line nicely since:

But with fewer homes for sale combined with the time of year, we probably won’t see much change.  Let’s call it low-grade frenzy conditions for now.

The average days on market is creeping upward, but still no big concerns. There will always be sellers who would rather wait for the lucky sale, than adjust their price – and longer average market times indicate more sellers doing the former. Though we should note that the hottest range ($1.5 – $2.0) must have a lot of dogs lying around:

San Diego County has experienced the worst YoY change of active listings IN THE NATION. Three thousand houses for sale in a county of 3.3 million people? Yikes!!

And that was the August report.  Today in San Diego County:

ACTIVES: 1,760

PENDINGS: 2,600

Wow!

San Diego County Median Sales Price, History

While we’re talking about the median sales price of detached-homes in San Diego County, let’s review the last ten years. There usually is some dropoff towards the end of the year:

The last frenzy in 2013 saw the median sales price increase 26% between January and September.

The Greatest Frenzy of All-Time started with closings in May, 2020 that had a median sales price of $660,000. It peaked in June/July at $875,000, which is a 33% increase and lasted five more months than in 2013. I’m happy with it, the fun was great while it lasted, and now here we are.

Well, at least until 2022.

There was some hesitancy in the market at the end of 2013, but it took off again in 2014.

Look at the difference though (the graph is interactive).

The increase was only +7% between September, 2013 and June, 2014 before it decelerated again – and the median sales price in November was back to where it was in the previous September!

Sellers should appreciate the big boost we’ve had, and the uncertainty of the future.  Don’t attempt to time the market for max return – it’s great where it is today.

Out-of-State Price Premiums

One factor that will slow down the exodus is the increased difficulty of moving out of state – it’s not easy, or cheap, to buy a home outside of California any more. But fewer people leaving will mean less inventory – and could ramp up the frenzy in 2022.

The researchers used open-source data from Zillow or other providers to score the top 100 overvalued or undervalued metro areas in the nation, ranking the cities by a percent premium homebuyers are paying in today’s market based on a history of past pricing.

Here’s how the top 10 rankings landed, according to the research:

  • Boise, Idaho, where homes are selling at an 80.6% premium.
  • Austin, Texas, at a 50.7% premium.
  • Ogden, at a 49.7% premium.
  • Provo, at a 46.2% premium.
  • Detroit, at a 45.6% premium.
  • Spokane, Washington, at a 45.2% premium.
  • Salt Lake City, Utah, at a 42.4% premium.
  • Phoenix at a 42.3% premium.
  • Las Vegas at a 41.9% premium.
  • Stockton, California, at a 38.5% premium.

The typical value of homes in Boise was over $523,300 as of the end of August, up more than 46% over the past year, according to Zillow.

Link to Full Article

Forbearance Expirations

Hat tip to GW and AK who sent me an article by Fortune, that references this article:

https://www.zillow.com/research/forbearance-exits-inventory-2021-29931/

An excerpt:

With expiration of a broad federal foreclosure moratorium on July 31, hundreds of thousands of U.S. homeowners are expected to exit forbearance in coming months. A significant share of these homeowners will likely end up listing their home for sale, contributing meaningfully to overall inventory levels and allowing homeowners in forbearance to benefit from home price appreciation and use the equity gained for a future down payment, according to a Zillow analysis.

Unlike 2008, when financial conditions and a souring housing market pushed many homeowners into involuntary foreclosure, strong equity growth and a robust sellers market are likely to ensure that even distressed homeowners have more options and the housing market is likely to be insulated from widespread disruption.

The largest wave of forbearance exits is expected in September and October of 2021, and Zillow projects that forbearance exits will lead to an additional 0.40 months of housing supply in August – October of 2021, a 15% increase relative to 2.6 months of supply in June. For context, this additional 0.40 months of supply roughly means an extra 211,700 homes for sale, which would represent 13.1% of all predicted sales over the next three months.

I hope those in forbearance do list their home for sale – call me today!

The NSDCC market is starved for inventory – look at the differences:

September 14, 2020:

654 active listings

481 pending listings

September 13, 2021:

316 active listings

304 pending listings

Last year we had more than twice the number of active listings as we have today! We can handle more!

But the foreclosure laws in California were significantly modified and nobody is going to get foreclosed – so don’t wait around for that to happen. The most likely scenario is for the lenders to continue the free-rent program for another year or two, and only lightly suggest a potential sale to those not paying their mortgage – which will only sprinkle an occasional new listing upon us.

Why Sell Your Home Now

School is back in session and the holidays are right around the corner – it’s the time of year that potential home sellers start looking forward to the next selling season, instead of moving in September/October.

Are you thinking of waiting until 2022? Here are my reasons for selling now, instead of later:

1. The Shine Is Off The Frenzy.  Those who are pulling back on their enthusiasm:

JBREC – Two of three buyer categories are down slightly (above chart).

CoreLogic – they only predicted a gain of +9.1% in San Diego pricing over next 12 months, which is way less than the +23.7% since last July. Don’t be surprised if +9% becomes the new +3% of predictions – it’s a lot higher than the previous safe bets without being double-digit.

Zillow Offers – backtracking 5% on price commitments made 2-3 weeks ago.

Navy Fed – suspended the issuing of home-equity loans ‘temporarily’.

Refi appraisals – heard of several appraisals coming in low as market softness creeps into their minds.

2. Interest rates – They have nowhere to go but up, and it’s just a matter of when. Once they start, home buyers will want something in return from sellers.

3. Boomer liquidations – There probably won’t be a mass exodus, but all you need is 2-3 on your street.

4. Fewer Fix-Ups – The current inventory is so thin, sellers are getting away with murder now. If there was an index that measured how close sellers got to selling ‘as-is’, we’d be setting records today.

5. Safe – You know what you can get today, and let’s admit – it’s a lot higher than it used to be. Cashing out now instead of risking any of the above getting worse in 2022 is the safe bet. How much are you hoping to hold out for next year? Another 2% or 3%?

When is the best time to sell? When everyone else isn’t!

Underpricing to Create a Bidding War

Why you should Get Good Help!

Kim Rohrer was looking forward to leaving the leaky windows in the two-bedroom Berkeley rental duplex that she shared with her husband and two small children.

The couple recently found a three-bedroom, two-bathroom chalet-style house in Berkeley listed for $799,000, which seemed relatively affordable for the area.

The house needed significant work, including plumbing upgrades, but the couple wasn’t deterred. “It was like a dream house,” said Ms. Rohrer, who works in human resources for a tech company. (Her husband works at the University of California, Berkeley.)

The couple offered well above the asking price: $850,000. They knew there would likely be multiple offers but they also needed to save some money for the necessary repairs. They didn’t get the house.

They didn’t even come close. The home sold for $1.4 million — nearly double its asking price. “It’s terrible,” she says of her house hunting experience so far. “Completely terrible.”

(more…)

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