Different This Time

In last Saturday’s blog post, I mentioned three reasons why San Diego real estate was undervalued, and pondered that there are new market forces in play that we haven’t seen before.

While people will scoff at the idea that it could be different this time and insist that the market will always revert to the mean, there are new factors to consider that will have impact on the eventual outcome:


No foreclosures

Ultra-low rates locking in homeowners to their forever home.

Boomers are older than ever, and are aging-in-place (too old to move).

Holding real estate has never been so sexy.

Longest expected length of ownership ever.


Population is more affluent than ever (SD County has 100,000+ millionaires, fifth in USA).

Work From Home has expanded the choices for buyers, increasing the demand in desirable areas.

Hoarding real estate is cool (high rents, kids to inherit).

Current homeowners have more equity than ever to use when buying again.

There are more people than ever in the homebuying ages.

We probably only needed supply OR demand to change by 5% or 10% to make a difference. But it seems like BOTH have changed more than that….in opposite directions, which has really stirred it up.

It used to be that when home prices were hitting new highs, sellers would come out of the woodwork to take advantage. But not this time – which is different!

Long-Time Frenzy

The frenzy conditions have been building for years – see this old blog post from 2017 (above).

We were discussing it all through the second half of last year that the 2021 Frenzy was going to be huge, and the signs were so obvious that even Ray Charles could see them!

But the foundation of people buying their forever home with a low-rate mortgage has been on-going since the last crisis bottomed out in 2009.

San Diego really should enjoy frenzy conditions longer than most areas – maybe longer than any area!

Interestingly, a check of our buyers, and buyers of our listings over the last 18 months shows that about 80% of them were local residents. We’ve had people move here from the Bay Area, Chicago, and NYC, but for the most part it has been move-uppers and move-downers.  Results may vary!

Frenzy Monitor

To gauge the frenzy intensity, let’s monitor the number of active and pending listings per area.

If the count of unsold homes starts to rise, we will know that pricing is becoming an issue.

NSDCC Actives and Pendings

Town or Area
Zip Code
Actives/Pendings, Feb 2nd
Actives/Pendings, May 12th
Carlsbad NW
Carlsbad SE
Carlsbad NE
Carlsbad SW
Carmel Valley
Del Mar
La Jolla
Solana Beach
All Above

We have 10% fewer active listings today than we had in the first week of February?


I’ll keep running this chart through the summer to help track the frenzy.

San Diego Has Been Undervalued

For months the talking heads have cited the ultra-low rates, the shortage of new homes being built, stock market, millennials, covid, etc. as reasons why the real estate market has exploded.

Let’s add a few no-so-obvious reasons.

Did we fully recover from the last downturn? We know that because Bernanke and the banks unilaterally changed the rules to rescue the MBS investors, we never hit the true bottom.  The short-sales muddied the water further because there were so many that were never exposed to the open market and sold instead at artificially-low prices by unscrupulous realtors.  In 2010-2014, we saw it here on the blog where many commenters expected the downturn to last for at least a few more years, and even the Frenzy of 2013 didn’t convince everyone we were out of the woods. Low (but not ultra-low) rates made it interesting, but there wasn’t enough confidence for buyers to flood the streets desperating seeking a home to buy – though in hindsight, they probably wish they did.

The lower-end inventory has been decimated by rental conversions and aging-in-place. Because the rents have exploded, any of those homeowners who didn’t have to sell their existing home had to consider hoarding their prized possession that was probably the best investment they ever made and turn it into a rental instead. The high costs of senior care is causing many if not most to age-in-place, and besides, one of the kids or grandkids can take over and assume the low tax basis. While pricing is flying on the lower-end today, it’s a recent occurrence that the appreciation has been 2% to 3% per month. If there had been more listings in recent years, we would have had prices rising faster, sooner. In the chart above, the rest of the categories look fairly uniform – it’s the lower-end that has changed drastically and having the most impact on the frenzy upstream.

The builders never got the memo about open bidding. Still to this day, it is first-come, first serve.  Pardee is down to their last 20-30 houses ever in Carmel Valley, they were taken over by Tri-Pointe, and they have nothing left to lose. You know there has to be 50-100 people waiting on their buyers’ list yet they only release 2-4 homes per phase. Toll Brothers sold two of their models for $4,000,000+, yet Pardee is keeping their production homes attractive priced in the mid-$2,000,000s. If they just opened up the bidding at each release to ALL the buyers on the list, they would pick up an extra $500,000 easily – just because if you are number 50+ on the list, you’re not going to get another chance. But they don’t do it, which is keeping a lid on pricing.  Because most everyone is buying their forever home, there won’t be enough turnover in the next few years to generate the momentum needed to find the real top-dollar value.

There are three examples of what has been undercutting the trajectory of home pricing.

When we have BOTH sales and pricing on the rise exponentially like we do now, it demonstrates what is possible when you take off the inhibitors. We are probably running a little hot today – can we be so undervalued that this frenzy could keep going for months or years?

Perhaps – especially if there are new market factors we haven’t considered before!

$1 Million Over

Hopefully this will come as a relief to home buyers here – hat tip just some guy:

When a house in Berkeley sold for more than $1 million over its list price in late March 2021, it was covered in media outlets across the Bay Area, including this one.

While the Berkeley sale was particularly sensational — it sold for double its list price and received 29 offers — these individual stories are becoming more common in today’s real estate market, according to recent data and anecdotes from real estate professionals.

And that’s especially true in the East Bay. “People are not surprised when a home goes $1 million over,” said Josh Dickinson, the founder of real estate agency Zip Code East Bay. “When my clients see a house for $1.9 million they’re almost conditioned to think it’ll go over $3 million in Piedmont or North Berkeley.”

While he acknowledges that overbidding has always been common in the Bay Area, this past year has been far more frantic, with additional bids per home and more aggressive offers.

“I think I could pull up the MLS and pull up a dozen [listings] that went more than a million over this year so far,” Dickinson said. “Most of them had the ‘it factor,’ but some of them were just in the right place at the right time.”

He said the “it factor” could include amazing views and a backyard (both in one property is rare) or room for a home office or two. For a recent home he sold in Berkeley, it was only the second time in 93 years the property had ever come to market after it was designed by a notable architect. Dickinson said given the history of the home and its lush and expansive backyard, he knew it would sell quickly, but he was nevertheless surprised when it sold for more than $1.2 million over the list price.

“Even we don’t know as savvy agents. We don’t know when the thing is going to go bonkers,” he said. “We just try to let the market do its thing.”

While an attractive financial offer is key, in true Bay Area fashion there are also plenty of offers that come in with extra pizzazz. Dickinson said one of the bids on the Berkeley home included free one-week stays at an Airbnb in Tuscany for the next 10 years. It’s not the offer the sellers accepted, but it certainly piqued their interest, he said.

Dickinson has also seen plenty of offers over the years that include stock options from major tech companies and a few that have included a glut of airline miles.

When the offers are that high, the accepted bid is often cash. A five-bedroom home in the Elmwood neighborhood of Berkeley closed in April 2021 for $3.15 million, all cash, with a listing price of $1.995 million. According to MLS data, since March there have been at least 20 properties that have sold for more than $800,000 over the listing price in the East Bay and six of those, (three in Berkeley, three in Oakland, one in Piedmont), went for $1 million or more over the asking price.

“The market still heavily favors the sellers, but there’s a lot of optimism for the buyers,” Dickinson said, adding, “There was a house in Berkeley this week that only got four offers. And that gives me hope.”

Link to Full Article

Listing Agents Handling Multiple Offers

The frustration among buyers on how listing agents handle their multiple offers is continuing to mount.  Because there isn’t any guidance from the industry, listing agents just make it up as they go – and in most cases, they just pick their favorite without any thought of other solutions available.

Here are more ways I’ve seen sellers leave money on the table lately:

Listing agents selling homes during their Coming Soon period, denying any other buyers.

Counter buyers for their highest-and-best, but then accept one within minutes before other responses are received.

Only countering some of the offers.

Off-market deals, which are great for the winning buyer, but bad for seller and other buyers.

The worst part is that sellers don’t have a clue – they are just happy to sell for more than expected.

When I’ve suggested my method to agents, they have trouble grasping the concept – that’s how deep the current snatch-and-grab mentality is ingrained in agents to make a quick deal.

What’s the solution?  List your home with me!

Non-Contingent Offers

It’s getting to the point where it is so competitive that buyers will be tempted to make offers without contingencies to improve their chances of winning.  But let’s face it, they would do so reluctantly.

Sellers should be very cautious about taking an offer with no contingencies.

You will be making a deal that would have maximum buyer’s remorse.  If the buyers change their mind, and they insist on fighting for the deposit, it will tie up the property so you can’t sell it to anyone else.

Are you going to chase them around for 6-12 months to try to get their deposit and risk missing the peak – and screw up your plans for moving too?

Hope For More Inventory?

Zillow is optimistic that we will see more homes being listed for sale:

In prior years, inventory has generally increased in March, and the return to some seasonal normality is a positive sign that the market is reaching a more steady state and could see inventory rise more steadily going forward. With home values skyrocketing, vaccination rates rising, and employees getting long-term guidance on where they can work, we expect an increasing number of homeowners to enter the market and list in coming months. That will come as welcome news to home shoppers enmeshed in bidding wars and watching homes get plucked off the market weeks faster than usual.

But their graph shows an interesting trend.  Our inventory had already been dropping since the middle of 2019, and is probably why the beginning of 2020 felt hotter than usual:

If we are nearing two years’ worth of declining inventory, than it wasn’t just a Covid-related event – which means the low-inventory environment will persist after Covid is gone.

If baby-boomers control our destiny and continue to age in place, then it may last for years to come.

But does it impact sales?

Here’s how this month’s numbers compare to the full month of April, 2019:

NSDCC Listings and Sales in April

Number of Listings
Number of Detached-Home Sales

We have already exceeded the number of sales for all of April, 2019 with a few days left to go!

These are the optimal frenzy ingredients of all-time!

If we do see more homes coming on the market, they should all get gobbled up and cause even crazier market conditions as buyers could have a new listing to consider every week, instead of every month. It might even put a dent in the pricing trend that has been going straight up:


San Diego Case-Shiller Index, Feb

San Diego had positive gains straight through the Covid-19 era:

San Diego Non-Seasonally-Adjusted CSI changes

Observation Month
M-o-M chg
Y-o-Y chg
January ’19
Jan ’20
Jan ’21

The index should continue to rise more than 2% month-over-month over the next few readings.

Wifey did this for me because I left this morning before the new number was released. We’re heading for more than 20% appreciation this year!  San Diego jumped into the #2 slot for the whole country too! From cnbc:

The cities with the largest gains continue to be Phoenix, San Diego and Seattle. Prices in Phoenix gained 17.4% year over year, followed by San Diego with a 17% increase and Seattle with a 15.4% increase. Nineteen of the 20 cities reported stronger price gains in the year ended February 2021 versus the year ended January.

Even as vaccines are distributed more widely and Americans start to emerge back into the economy, the desire for larger living spaces with more outdoor amenities appears not to be waning.

“This demand may represent buyers who accelerated purchases that would have happened anyway over the next several years,” said Lazzara. “Alternatively, there may have been a secular change in preferences, leading to a permanent shift in the demand curve for housing. Future data will be required to analyze this question.”

Max Sales Efficiency

Yesterday we saw that more than half of the NSDCC houses sold over the last couple of months have closed for a price that’s higher than their list price.

Another difference from previous years is the efficiency.

Typically, there are only around 55% to 60% of the listings that actually sell each year – mostly due to agents re-freshing their listings repeatedly, sellers changing their mind, and wrong pricing.

What a huge difference in the Covid Era.

We have fewer homes for sale, but more of them are selling:

NSDCC Listings Between December 1st and January 31st

Number of Listings
Number of Listings Pending or Sold By March 12th

Before Covid was declared, we had come into 2020 with low rates and renewed optimism, and the market was active as participants were finding their way, price-wise. There were 48% of the early listings that found a buyer before Covid kicked in on March 12th.

This year, the higher-end market is healthy, but the Under-$2,000,000 is blistering hot:

NSDCC Listings Under $2,000,000 Between December 1st and January 31st

Number of Listings Under $2M
Number of Listings Pending or Sold By March 12th


When you are telling your grandkids about THE GREATEST REAL ESTATE FRENZY OF ALL-TIME, come back to this page!

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