Loan Fraud Pushed Home Values

While the PPP fraud was rampant across the country, the ultra-low mortgage rates and lack of inventory were more to blame for inflating home values recently – at least around here:

Anecdotal evidence suggests that many recipients of fraudulent PPP loans used the funds they received to purchase expensive houses, cars, and luxury items.13 In this section, we examine whether recipients of PPP loans flagged as potentially fraudulent are more likely to purchase houses than non-flagged recipients. We first examine house purchases using property records from PropertyRadar for a random sample of 250,000 individual PPP borrowers.

The sample was collected in February 2023 and consists of individual borrowers who received PPP loans during all three rounds of the PPP with data on house purchases through the end of 2022. Round 3 of the PPP ended in June 2021, so we observe at least 18 months of post-PPP house purchase activity for all individuals in the sample. We match names purchasing houses in the PropertyRadar data to names of PPP borrowers, limiting the sample to names that are unique.

Link to 150-page report

New Year Requests of Agents

This is my 748th blog post of the year! (641 published and 107 drafts)

Let’s note how drastic things have changed since rates went up:

NSDCC Detached-Home Sales, December

2012: 297

2013: 223

2014: 255

2015: 259

2016: 241

2017: 225

2018: 196

2019: 229

2020: 290

2021: 183

2022:  95

The best forecasting tool is the number of sales.

Look at how crazy-high the number of sales were in 2012 and 2020.  In both cases, the demand had been building up and it really cut loose late in the fourth quarter – in spite of the holidays – to close a third more sales than normal (the average count of the other nine years is 212 sales).  Then the two biggest frenzies in history broke out in the following spring.

The number of December sales can help us predict what is coming – and it doesn’t look good for 2023!

We will get our 100 sales once everyone reports their closings, but it’s HALF of the average count.

This year was terrible for many, if not most, agents, and about the best we can say is that we survived.  It’s going to get worse in 2023 because there aren’t enough sales to go around.  The conditions next year will force many agents into early retirement – why keep paying your dues if there’s not much hope?

You can’t ignore the current predicament and keep doing the same things you’ve done the last 5-10 years.  You gotta do better. The industry has to do better.

Here are my 2023 requests of agents:

  1. Publish relevant data that’s easy for consumers to digest. Come up with something juicy that makes a difference, instead of the usual agent blather we see on social media. Printing the number of sales is good, but also add your opinion on what it means – the audience wants hear your interpretation of the data and they will spend a minute or two to get it.
  2. Make it easy to show your listings. If you employ the same hurdles from the frenzy days – like insisting that I send my buyers’ financials just to schedule a showing – then you should pay us more commission to compensate for the hassle.
  3. Will you provide buyers and agents with a walk-through video of your listings please? Let’s preview the homes in advance by video, which will save your time if it isn’t a fit. Adding helpful tips or witty remarks are great, but they are not required. Put the video link in the listing remarks – which is still allowed by the MLS.  I don’t see many Matterport 3D tours or any video tours, do you? Let’s upgrade!

We will be having HALF the normal number of sales in the early months of 2023. If we’re not doing it better, then these conditions will persist, and could go on for years.

Every day, we are getting closer to the end.  Let’s give it everything we got!

End of 2022

This year was one of the best ever for us. We had our highest sale ever ($7,750,000), our highest average sales price ever ($1,870,835) and more people on my next-year’s client list than ever before – thank you!

The local market between La Jolla-to-Carlsbad fared pretty well too, all considered.

I suggested that there wouldn’t be any sales under $2,000,000 in the Davidson Starboard tract, and there wasn’t (the only one to close escrow since our $2,250,000 sale was across the street at $2,150,000).

I hoped we would have at least 100 NSDCC sales per month, and it looks like that will happen (we have 93 closed this month, as of today). Relatively-speaking, prices have held up too – but sales have plunged, which means sellers aren’t budging much, at least not yet.

Annual Detached-Home Sales Between La Jolla and Carlsbad

# of Sales
Median LP
Median SP
Median $/sf
Median DOM

I will finalize the 2022 numbers next year, but you get the idea – we’re not going to hit 2,000 sales this year, after having almost 3,200 sales in each of the last two years.

Long-time reader GeneK left this comment last night:

The youngest boomers won’t hit retirement until 2030, and most of them will probably live another 20 years or so after that. How long will it be before that estate-sale marketplace takes hold, and will there be a retirement-sale marketplace for a while before that happens?

The housing stock between La Jolla and Carlsbad are generally older homes, with the exception being Carmel Valley. As a result, most of them are owned by the baby boomers, and they don’t want to move!  Because they are comfortable with aging-in-place, the inventory of homes for sale will likely be very limited for the next 5-10 years – no matter what the prices are.

The median $/sf went up 25% this year, after going +29% last year!

San Diego Case-Shiller Index, October

The local index peaked in May, so today’s local Case-Shiller reading for October is the fourth in a row that reflects the much-higher mortgage rates:

San Diego Non-Seasonally-Adjusted CSI changes

Observation Month
M-o-M chg
Y-o-Y chg
Jan ’21
Jan ’22

It looks like we may have seen the worst of it?

If so, and the monthly declines are tempered over the next couple of readings, it should mean that the index will be in the 380-390 range as we roll into the spring selling season – or about where it was a year ago.

It sure seems to be going better than most people thought it would!

More Than 10% Off

I said on the Frenzy Cruise that I’d also recognize the NSDCC sales that closed well under their list price.  It’s good for potential sellers to see how buyers will lowball homes that have been on the market for a while – and encouraging for buyers to know that they might be able to get a deal if they play the game wisely.

These are sales from November, with percentages off their original list price:

































There have been 94 NSDCC closings in November (so far), and 34% have been discounted by a double-digit percentage off the original list price – which isn’t too bad, given the negativity everywhere.  It happens at all price points too.

Two conclusions from the clusters in graph below:

  1. Once a home has been on the market for 30-40 days, sellers are ready to deal.
  2. Sellers who go beyond 100 days on the market are really taking a chance.


There were 13 of the 32 sales who ‘refreshed’ their listing, or had it on the market this year with a different agent – those DOM are not reflected here. There were quite a few at the -8% and -9% too.

Five of the 32 were round-tripped.

Because it is unethical to deliberately list a home for sale at an unrealistic price, it means that in a third of the cases, the listing agents just flat-out got the price wrong by a double-digit percentage.  Can you imagine if doctors, lawyers, stockbrokers, plumbers, or burger-flippers were wrong a third of the time?

Get Good Help!

Frenzy Monitor – November

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. A healthy market is when there are two actives to every pending.

There are a couple areas (in red) where the number of pendings have dropped significantly. But in six of the more-expensive areas, there are the same number of pendings now as there were last month:

All we have to do is muddle through the next three months!

In 2020, we had 400+ pendings from June 22nd to November 30th – with a peak of 491 pendings on September 7th.

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