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The Slow Unwind

Even though real estate is local, the homebuyer psychology tends to be similar across the country – mostly because people are people, and have similar reactions to every variable.  When they see mortgage rates go from 3% to 5.5% in less than six months, it’s only natural to want to pause and see where this goes.

But the desperation among buyers – especially those who are out-of-towners and don’t own a home here yet – hasn’t changed, due to the low inventory.  It is unsettling to see so few of the quality homes coming to market, and they want/need to stay in the game so they don’t miss out.  It would take a flood of new listings to change that, which isn’t happening. At least not yet.

Let’s have the statistics help guide us on current market conditions.

1. We have considered the local real estate market to be ‘healthy’ when the active listings to pendings has been 2:1 ratio. Here are the detached-home listings between Carlsbad and La Jolla:

Monday:

Actives: 262

Pendings: 207

Thursday (today):

Actives: 262

Pendings: 202

The current ratio is very healthy, and the actives aren’t exploding.  Last year at this time there were 330 active listings, so only having 262 homes for sale in an area with a population of 300,000+ people isn’t bad. The only startling part is that there aren’t more homes for sale!

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2. Let’s talk absorption rate, another measuring stick for the health of the market.  The historic norm for a healthy market has been a 6-months’ supply of homes for sale.  In recent years, a 3-month supply has seemed to be more realistic, just because the supply has been limited.

What is it today?

There were 225 sales in April, so the 262 active listings is only a 1.2-month supply.  We would need 675 active listings to have a three-month supply, which sounds impossible in the current environment.

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3. How about the market time of the current pendings?  Is it taking longer to find a buyer these days?  Yes.  The median days-on-market for homes sold in the early months of 2022 has been nine days.  The current pendings have a median days-on market of 12 days, which isn’t alarming and still extremely low.

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4. Have the number of actives and pendings been consistent in 2022?

Yes, especially the pendings:

So while there is talk about a shift in the market, it may just be a pause. Statistically, the market looks steady – there isn’t a surge of unsold homes, and there are still plenty going into escrow every week.

If there aren’t as many buyers looking, and there aren’t crazy numbers of offers, then it’s just going back to a more-normal market. Not normal yet, but heading that way.

The list prices have been on a rampage, and it’s probably time for them to stop going up so much every month. It was going to happen sooner or later, and that day has probably arrived – finally!

Can’t Buy What’s Not For Sale

The talking heads are saying that higher rates are slowing sales, and I say it’s the lack of inventory.

If higher rates were the cause, we would see more active listings piling up.

This chart shows how the pendings have dropped off from last year – especially those in yellow:

The active-listing counts aren’t any higher – there are just fewer listings overall.

NSDCC Frenzy Monitor

Let’s see which areas are picking up steam early in the selling season:

We used to think that a normal and healthy market has a ratio of 2:1 actives to pendings, so it’s stunning to see five areas that have 3x the number of pendings as actives! And SE Carlsbad has more than 4x!

The trend of the average days-on-market can give us a feel for the market direction too:

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

Last year, the high pending count was 386 on May 12th – and this year’s peak will likely be in May too.

It looks like I made an error on the Del Mar A/P counts in the last reading.

San Diego County Actives & Pendings

Tom asked on our Facebook page about getting the actives and pendings data for San Diego County.  Here is the InfoSparks data from the SDAR Resources page on the MLS – they are interactive so scroll over the graph lines for the exact counts:




The first graph charts the number of active listings on the last day of the month, the second graph shows the number of new listings in each month, the third graph shows the number of properties that were marked ‘pending’ in each month, and the fourth is the actual sales counts each month.

My initial reactions to each graph:

Active Listings: The frenzy let up in June/July, but it’s back now – and the last few months have been brutal for buyers. On the last day of November, 2019 we had 4,068 actives, and last month we had 1,420.

New Listings: Hard to grasp the cumulative effect so I calculated annual number of listings. In 2021 we have had 16% fewer listings than in 2018.

Pending Sales: This November’s count was almost identical to last year – which was the all-time high!

Sold Listings: The total number of sales for the year is 9% ahead of last year, and we’re not done yet!

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!

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.

Our Big Three – Carmel Valley, Encinitas, and SE Carlsbad – continue to carry substantially more pendings than active listings, but both La Jolla and Rancho Santa Fe have similar pending counts, which is incredible given their much-higher price points:

NSDCC Actives and Pendings

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:

The $1,500,000 – $2,000,000 range has been the hottest all year, but their average DOM is at its high – while the rest are well below theirs!

Inventory Watch

As long as there are more pendings than actives, the market is doing just fine.

Oh well – that was last week’s thought.

As you can imagine, it’s the high-end market that is loaded with actives. This week an agent commented on what a delightful experience he had showing higher-end homes in Rancho Santa Fe, where listing agents were happy to book appointments at the buyers’ convenience, didn’t go crazy about having to submit financials just to see a home, and were paying regular commissions.  A few of the homes had been sitting around for months!

My guess is that most of the disappointed sellers will pack it up and wait until next year, rather than consider selling for today’s top dollar – which might be slightly less than they thought (but 10% to 30% more than it was 2-3 years ago).

How’s the action in the more reasonably-priced categories?

There are 100 active listings, and 191 pendings priced under $2,000,000 today.

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(more…)

NSDCC Frenzy Monitor

To help get a sense of the frenzy conditions, let’s monitor the number of active & pending listings per area.

If the active (unsold) listings start to rise, we will know that pricing is becoming an issue.

But so far, the demand for detached homes between Carlsbad and La Jolla is solid, and buyers are enduring prices that are 20% to 30% higher than last year:

NSDCC Actives and Pendings

Town or Area
Zip Code
Actives/Pendings, Feb 2nd
May 12th
May 26th
Cardiff
92007
11/16
9/12
10/11
Carlsbad NW
92008
17/19
19/30
19/23
Carlsbad SE
92009
9/38
19/60
13/57
Carlsbad NE
92010
1/12
5/13
6/13
Carlsbad SW
92011
2/17
8/16
4/17
Carmel Valley
92130
26/43
20/65
23/63
Del Mar
92014
43/13
34/26
34/26
Encinitas
92024
39/45
33/54
32/56
La Jolla
92037
101/46
82/40
87/47
RSF
92067
96/35
83/54
72/53
RSF
92091
3/7
1/6
Solana Beach
92075
11/10
6/9
7/8
NSDCC
All Above
356/294
321/386
308/380

The 92009, 92011 and 92130 (SE Carlsbad, SW Carlsbad, and Carmel Valley) are scorching hot, with 4x, 4x and 3x as many pendings as actives!  But Rancho Santa Fe is the most impressive of all. There have been times when there were 10x as many actives as pendings in 92067 – today it’s 1.4x!

With the 30-day closings, there shouldn’t be any drastic changes here – let’s examine the trends over time.

We can also track the average market times too. Any upward trends here would indicate market slowing:

I’ll run this every couple of weeks.

NSDCC Actives & Pendings

Previously we experienced a healthy market when actives outnumbered pendings 2:1. Then as the market heated up, we got used to the 1:1 ratio. Now we have areas where the ratio is more than 1:2!

NSDCC Detached-Home Active and Pending Listings

Town or Area
Zip Code
Actives
Pendings
Cardiff
92007
10
14
NW Carlsbad
92008
15
24
SE Carlsbad
92009
20
48
NE Carlsbad
92010
4
11
SW Carlsbad
92011
4
19
Carmel Valley
92130
25
38
Del Mar
92014
32
25
Encinitas
92024
36
48
La Jolla
92037
95
45
RSF
67+91
87
50
Solana Beach
92075
8
9
NSDCC
All Above
336
331
West RB
92127
24
63
Scripps Ranch
92131
6
25

What can buyers do?

Going inland doesn’t help – the 92127 and 92131 are hotter than ever.

Just go up in price – La Jolla is nice this time of year!

We will re-visit these numbers in the coming months.

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