Around the coast, the housing stock is finite – there isn’t any more room to build new houses. Whether they knew it or not at the time, everyone has bought their ‘forever’ home and aging-in-place has become the natural trend. The higher prices and rates have locked out the majority of possible home buyers, but there still aren’t enough homes to sell – evidenced by the relatively low inventory.
A month ago, there were 466 houses for sale between Carlsbad and La Jolla, and today we’re down to 422 active listings – in an era where other areas are reporting a surge in inventory. There is a real push to build granny flats to create more housing, but that isn’t going to help the resale market. In fact, the building of ADUs will actually make the real estate market WORSE by keeping more seniors aging-in-place, and limiting the resale inventory.
Higher rates and prices will only continue the shift of homeownership being for the elite – only.
From the AARP:
The COVID-19 pandemic has altered how people think about their lives and homes – which has collided with exponential growth in the number of older heads of households and renters. These trends highlight the urgent need to rapidly increase and improve age-friendly and affordable community and housing options.
AARP’s 2021 Home and Community Preferences survey found that over three-quarters (77%) of adults age 50 and older want to remain in their homes as they age. This desire is consistent across the lifespan with 63% of adults overall saying the same. The numbers of older adults wanting to remain in their homes as they age has remained relatively consistent for more than a decade and was not impacted by the pandemic.
Increasing the number of multigenerational households, providing more options like accessory dwelling units (ADUs) or “in-law units”, and encouraging renovations that support aging-in-place are all critical to support this desire.
“We really didn’t intend selling them,” says Kevin Regan over the phone from the northwest of Ireland.
Converting a slice of airplane into a sleek and durable home office had been a personal project in 2021, but after his sister-in-law put photos of the cabin on social media, requests rolled in and things started to snowball.
Now, Regan and his business partner Shane Thornton — both builders by trade — have started their own company named Aeropod, recycling commercial airplanes into home offices, glamping pods and ready-made accommodation.
They’ve only spent €100 (about $110) so far on advertising (the company’s still “brand new out of the wrapper!,” says Regan) but they’ve already sold 11 pods and are preparing to have more shipped to wherever clients want them.
Airplanes are built to last. Strong, thickly insulated, and made of sturdy aluminum alloys. And with some 15,000 aircraft estimated to be due for retirement in the next 20 years, there’s a steady supply of them available for dismantling and recycling.
There wasn’t an obvious winner at the TinyFest – everyone is asking full retail for their product, and it makes you think that going custom is a better choice. And they all do custom!
The TinyFest comes back to the Del Mar Fairgrounds this weekend, starting at 10am. I’ll be in search of ADUs that can be fully installed at home for a reasonable cost – here was my tour from 2020:
The best thing about 2021 for Kayla? Her new boyfriend Frank, who is a great guy and quite a golfer too!
Natalie signed with a new talent agent and has high hopes for next-level work in the new year. Dancing on a concert tour would be ideal, all while being our marketing director!
I said that pricing will likely seem a lot higher this year.
With few recent sales to guide them, sellers and listing agents will wonder how much can they get away with on price. There are tales of a old blogger guy being wildly successful with his transparent open bidding, but other agents aren’t experienced in conducting a slow-motion auction and don’t have the guts.
Instead, the list prices will be getting packed.
When sellers wonder how high, it will be easier to lump 10%, or more, on top of the initial guess (which was probably +5% optimistic already). The zestimate, or other automated valuation, that is higher and supports the dream will be collected as proof!
But it’s the METHOD of selling that makes the +10% possible.
Bidders are turned against one another and compete for the prize. Their ego takes over and directs the bidding……and the contest is on, with no ceiling.
Will a list price that starts at 10% to 15% higher than comps produce the same results as my slow-motion auctions? Maybe, but only with the homes that are highly upgraded with all the bells & whistles and have a superior location. The real creampuffs.
The early buyers will have to tolerate such sloppy pricing, but for those who are already frustrated from not buying a house in 2020/2021, it won’t matter and they will grab whatever they can. It virtually guarantees that the first 1-3 months of the season will be scorching hot.
But there will come a day when we run out of those buyers, and the frenzy conditions will be over.
I’m sticking with my +15% appreciation, and it all happens in the first half of 2022.
Two new laws that address the housing crisis begin today (above).
Baby boomers are another year older, and more will need help with living. The multi-gen home buyers will grow in numbers, and granny flats will be an ideal solution. Many will buy a suitable property with grandma’s money, and take care of her until the end.
Some multi-gen home buyers will cope with finding an existing single-family home and adding their own granny flat. But the real opportunity will be for those sellers of properties that already have an ADU. Because the supply is low and the need is very high (and because grandma’s money came a little too easily), the prices paid for homes with existing granny flats will be excessive. There will be a separate category of comps too – those with ADUs, and those without, with a pricing differential of 10% minimum.
This could be the year that buyers have to pay for their own agent.
I don’t think many agents can make a case of why they are worth it – or at least demonstrate why they are worth as much as 2% to 3%. It would be cool to develop buyer-agent squads who are experts in their field and are worthy of compensation – and can prove it. But most will just fade away, or open up a shop of discount door-openers who don’t offer much, but get paid up front.
Another political season starts in 2022, which means an increase in the vitriol and hate. The perceived volatility will cause a few people to move to areas which are better suited for their political leanings, especially if there are riots – which is what it would take to get laid-back San Diegans to reconsider a move. It may not cause a surge of additional sellers here, but it could create more demand for homes in those politically-friendly destinations.
The difficulty of buying homes out-of-state is already tough enough, and now they are more expensive – with some now 30% to 40% higher. It could be the game-changer for potential sellers and even be the reason why the inventory has been so tight recently.
We don’t know what it will take to get more homeowners to sell.
In the past, record-high prices did the trick, but today’s prices are setting new records every month – and inventory is in decline. How many current homeowners in San Diego wouldn’t sell at any price? 80%? 90%? That’s a problem, and I’ll say that it’s something we’ve never faced before until the last few months.
At the same time, the number of San Diego County detached-home sales in 2021 will probably rank as the #2 of all-time, behind only those in 2003. There were 28,319 detached-home listings last year, and 25,029 sales, which is incredibly efficient. Virtually everything is selling!
But only 12,936 of those listings came in the second half of 2021, and if we continue at that pace or lower, it will be excruciating for buyers – and send prices to the moon.
The optimum number of listings will probably be in the 30,000 to 35,000 range. Having a small surge in listings will drive the market crazy with activity…..and force sellers and buyers to Get Good Help!
Because ADUs are expensive to build, there’s not much hope that they will solve the housing crisis.
Key Findings
There are an estimated 1.5 million Accessory Dwelling Units (ADUs) in the United States, making up roughly 2% of all homes in the country
ADUs are growing at a rate of 9%, or 100,000 per year
An average cost of an ADU is $180,000, or $260 per square foot
In America’s biggest cities, a home with an ADU is priced 35% higher on average than a home without one
The top states for ADUs are California (30%), Florida (12%), Texas (10%) and Georgia (5%)
The cities with the most ADUs are Los Angeles (12%), Portland (4%) and Houston (3%)
ADU sale listings are growing fastest in Portland (+23%), Dallas (+19%), and Seattle (+18%)
Whether you call them granny flats, in-law suites, or garage apartments – accessory dwelling units (“ADUs”) are on the rise. There are an estimated 1.4 million of them in the United States, with around 110,000 constructed in the last year alone.
In 2020, ADUs were often heralded as one answer to the growing housing affordability crisis. Their proponents argue that ADUs offer an opportunity for homeowners to make extra income, for young people to rent affordably, and for communities to grow slowly and sustainably.
But then the pandemic came and changed everything, and hardly for the better. So where did that leave ADUs in 2021?
Thanks to just some guy for sending this in – a company that is mass-producing ADUs that start as low as $49,500. Elon Musk has been living in one for a few months so you may have heard of these by now:
Governor Newsom signed SB 9 yesterday, but it won’t change much because building an ADU is cost prohibitive. How many people need one bad enough that they would spend $50,000 to $100,000 and go through the hassle? Plus the number of available parcels will limit how many could get built:
On Sept. 16, two days after winning the recall election, Gov. Gavin Newsom signed the bill into law, despite pleas from cities to veto it.
But some analysts say the linchpin of the Senate’s housing package would probably have a negligible impact on the California housing crisis, at least in the short-term. As for the nightmare scenario described by opponents? There simply isn’t enough evidence to back that up, either.
That’s because a change to zoning means very little in reality, starting with the number of units that would actually get built, these analysts say.
Development would be realistic in only about 410,000 parcels in California at most, or 5.4% of land now occupied by single-family houses, according to a new study by the Terner Center for Housing Innovation at UC Berkeley based on the version of the bill without the new amendments.
That could add a total of 700,000 new units across California, if every single homeowner for whom the change made sense chose to develop. “Overall, that’s a sliver of the 7.5 million single-family homes throughout the state,” said David Garcia, policy director for the Terner Center.
One of the new amendments — which requires owners to live in the home for at least three years after they split their lots and build as many as four units — cuts the potential total of new units by 40,000, or 6%.
The analysis was conducted using current land values and development costs, so the number of feasible units could change. But Garcia said that was unlikely in the near-term. The study found that the typical property owner could not afford to build a second unit, much less a third or fourth. Other barriers: The new split lot couldn’t be less than 1,200 square feet, and historic districts, fire hazard zones and some rural areas would be barred from development.
“You would not see the wholesale bulldozing of single-family homes, as we’ve seen characterized in many of the public comments in committee hearings,” Garcia said. “There’s just no financial basis for that fear.”
It is already legal to add an ADU and a junior ADU to a property zoned single-family. Another bill has passed the California Senate that allows up to four units total – and to be able to create two parcels, which means they could be sold separately – if the owner agrees to occupy the property for at least three years. Here’s a thorough article on the subject with examples:
Senate Bill 9 would technically allow as many as two duplexes, two houses with attached units, or a combination — capped at four units — on single-family lots across California, without local approval.
The bill would allow more building where it’s now illegal, with the intent of reducing California’s fast-rising home prices and increasing access to homeownership through a greater variety of options, according to state Senate leader Toni Atkins, a Democrat from San Diego who introduced the bill and similar versions in the past.
The bill returns to the Senate for expected concurrence on the amendments before heading to Gov. Gavin Newsom’s desk.
A group calling itself Californians for Community Planning Initiative immediately filed a proposed constitutional amendment for the November 2022 ballot to reassert local control over zoning and land-use decisions in opposition to the bill.
But some analysts say the linchpin of the Senate’s housing package would probably have a negligible impact on the California housing crisis, at least in the short-term. As for the nightmare scenario described by opponents? There simply isn’t enough evidence to back that up, either.
That’s because a change to zoning means very little in reality, starting with the number of units that would actually get built, these analysts say.
Pacific Legal Foundation obtained public records from San Diego and Riverside Counties (two of the most populous counties in the state) to determine whether local governments are abiding by the new 60-day permit-approval period, which took effect in January 2020.
Unfortunately for California residents, local governments are failing miserably to abide by the new state law.
San Diego County took a median of 187 days to issue an ADU or Junior ADU building permit after January 2020. Permits issued prior to the new law took a median of 112 days to be issued. Only 52% of permits issued prior to the new law fell within the previously required 120-day mark.
Currently, only 5% of permits issued by the county met the state’s 60-day deadline. Many times, the permitting process is held up by excessive fees or approvals needed from other departments within the county. As of July 21, 2021, there are 587 pending applications, of which 90 were submitted prior to 2020. If these permits were issued today, the median wait time would be 255 days after the application was submitted.
The government, and society in general, needs to recognize how dire the housing crisis is for the citizens. We’re going to have continued upward pressure on home prices and rents, and building ADUs is one of the best ways to alleviate the problem. It doesn’t matter if the resistance by local governments is conscious or sub-conscious, the ADU-approval process needs to improve radically to implement the will of the people, and slow down prices.
