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San Diego Case-Shiller By Tiers


https://journal.firsttuesday.us/san-diego-housing-indicators-2/29246/

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With the supply and demand so out of balance on the lower-end, it’s incredible to see that the high-end is out-performing with faster appreciation.  It looks like big money is throwing its weight around!

Note this guy’s negativity in the second paragraph.

I guarantee you that he is going to be wrong, wrong, wrong.

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!

C.A.R. Forecast 2022

The association is predicting that home sales in California will drop next year, but has a typical guess for the statewide median sales price – expecting a 5.2% rise in 2022:

2022

Their predictions for this year were terrible – they thought pricing would go nearly flat in 2021 (in red box), and instead we had the biggest gain ever (p is projected):

2021

These were my guesses for this year:

MY 2021 PREDICTIONS:

  1. We will have 10% more NSDCC listings than we had in 2020.
  2. We will have 10% more sales.
  3. We will have a 10% increase in the NSDCC median sales price.

Here’s how this year looks through the first three quarters of 2021:

Year
# of Listings (%YoY)
# of Sales (%YoY)
Median Sales Price (%YoY)
2019
3,947
2,148
$1,320,000
2020
3,677 (-7%)
2,207 (+3%)
$1,424,000 (+8%)
2021
3,078 (-16%)
2,535 (+15%)
$1,880,000 (+32%)

NSDCC inventory DROPPED 16%, yet sales ROSE 15% this year!  Pricing is +32%!

A graph showing how more people need to leave town to make it worth moving:

A CAR consumer survey showed, for example, that 35% of home sellers are moving out of state and fewer than 15% were moving to a home in the same county as their last residence. “I think that pressure to migrate out of the state is going to be just as strong, if not stronger, as housing, affordability gets worse,” CAR Chief Economist Jordan Levine said. “I think that this is a housing-driven phenomenon, and we don’t have a lot of relief in terms of housing affordability.”

San Diego Pricing Momentum

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Speaking of Zillow, they also said in this June article that San Diego home prices would rise 24.7% by May.

How are we doing?

There has never been a great measuring stick for home prices, but let’s look at the most common ones:



Yikes – it looks like home prices have been fairly flat over the last 2-3 months, at least according to the standard ways of measuring. Pricing doesn’t have to rise 2% every month to get to their 24.7%, but having upward momentum is critical because once we roll into Plateau City, it gets harder to convince buyers to overpay. They are already cooling their jets:

Get Good Help!

Zillow Forecast By Area

Here are the latest guesses from Zillow that they’ve sent me over the last month.  They agree with me that next year will be rip-roaring!

In parentheses are the percentage increases for the last year:

NW Carlsbad 92008 (+28%)

SE Carlsbad 92009 (+30%)

NE Carlsbad 92010 (+28%)

SW Carlsbad 92011 (+28%)

Carmel Valley 92130 (+26%)

Del Mar 92014 (+23%)

Encinitas 92024 (+27%)

La Jolla 92037 (+20%)

Rancho Santa Fe 92067 (+23%)

West Bernardo 92127 (+30%)

Basically, we’re going to have a 40% to 50% increase in local home values over two years!

Get Good Help!

Showings Are Down

Home buyers don’t have much – if any – control over the process, which leads to frustration and disappointment. They don’t have any way to cause more homes to list for sale, and the only way to eliminate the competition is to out-bid them, which can be even more harrowing.

One solution is for buyers to expand their parameters, but that’s not easy and can lead to another ailment that a client described yesterday as “frozen in indecision”.

Just when you want to give up……it looks like others might have beaten you to it!

Showings throughout the state are lower than they were during the first week of January!

It’s been mentioned that not every agent uses this service, but it is such a large sample size that the trend should be a decent indicator of buyer sentiment – they’re exhausted.

Sure, active listings are half of what they were at this time last year, but the showings are 260% different!

Just like with selling, when is the best time to be a buyer? When no one else is!

We already know what’s going to happen with sales in 2022 – they will be the same as this year, with a possible adjustment of +/- 10%.

But the rest of 2021 could get wacky!

It looks like the competition is dwindling, and any seller who comes to market around the holidays has to be motivated!  Buyers – stay in the hunt!

Home-Price Forecasts for 2022

The YoY change in the San Diego Case-Shiller Index in June was 31% higher than the national 10-city index. If we apply the same 31% to next year’s national forecast of roughly +5%, the San Diego home-appreciation rate in 2022 should be around 6.55% – though, if you ask me, it will more likely be 2x the national rate.

Thanks KCM:

Most forecasts call for home price appreciation to moderate in 2022.

The Home Price Expectation Survey, a survey of over 100 economists, investment strategists, and housing market analysts, calls for a 5.12% appreciation level next year. Here are the 2022 home appreciation forecasts from the four other major entities:

  1. The National Association of Realtors (NAR): 4.4%
  2. The Mortgage Bankers Association (MBA): 8.4%
  3. Fannie Mae: 5.1%
  4. Freddie Mac: 5.3%

Price appreciation is expected to slow in 2022 when compared to the record highs of 2021. However, it is still expected to be greater than the annual average of 4.1% over the last 25 years.

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From Freddie Mac:

High house price growth has been supported by increased demand due to low mortgage rates, disposable after-tax income that has risen during the current recession and a major shortage of housing supply relative to our population. The increase in house price growth will be less transitory than the increase in consumer prices, as the U.S. housing market will continue to struggle with a shortage of available housing for many months to come. But, we do forecast house price growth to moderate in 2022, with full year house price growth of 12.1% in 2021 followed by 5.3% in 2022.

The rapid run up in house prices may be starting to exhaust potential homebuyers.

We’ve seen indications of softening demand in recent home purchase mortgage applications data. And, while sales metrics remain above pre-pandemic levels, the pace of sales has cooled since the first quarter of this year with home sales slowing for the past four consecutive months. That’s reflected in our home sales forecast, which has total home sales declining to 6.9 million in 2021 and 2022 after reaching a seasonally adjusted annual rate of 7.6 million and 7.2 million in the fourth quarter of 2020 and first quarter of 2021, respectively.

San Diego Home Prices To Keep Rising

Hat tip to Rob Dawg for sending in the second forecast that is predicting our home prices will continue to rise:

While home price changes on the local level vary, July gains across all of the top 10 metros surpassed their 2020 levels. However, metro areas where affordability constraints are prevalent continue to persist as prices rise. For instance, in July, home prices in San Diego increased 23.7% year over year and are forecasted to increase an additional 9.1% over the next 12 months.

Full article here:

https://www.corelogic.com/intelligence/u-s-home-price-insights/

Rising Home Prices to Continue

These guys are predicting a very similar market in 2022, and it will depend on the inventory.  If we have the same number of listings (or fewer, which I think is probable), their 24.7% increase is in the bag.

From the U-T:

San Diego home prices will maintain their meteoric rise in the next 12 months, a new study says, with a hefty increase of 24.7 percent to a median home price nearing $1 million.

Home improvement site Porch, which provides research on housing market trends, said the San Diego metropolitan area will experience the third-highest price increases in the nation — led by current data showing how much homes are selling for over asking and wage growth.

It said Austin, Texas, will have the biggest increase at 37.1 percent, followed by Phoenix at 26.2 percent. The San Diego metropolitan area (which includes all of San Diego County) had seen prices rise 15.2 percent in a year as of July. Analysts have said low mortgage rates, scarcity, improved fortunes of stay-at-home workers and millennials aging into homeownership are the biggest reasons why prices continue to surge.

Porch predicts home prices will rise across the United States in the next year for the same reasons and will be led by Western states. It used a variety of sources for its predictions — Zillow, Redfin, the U.S. census, the S&P CoreLogic Case-Shiller Indices — to show where homes were selling over asking prices, how much they had already increased, and where median household incomes were strong.

If Porch’s prediction comes true, the median home price in San Diego County will be $940,933 at this time next year.

“The U.S. real estate market is reaching unprecedented heights,” Porch researchers said in the report.

Nathan Moeder, principal with San Diego real estate analysts London Moeder Advisors, said the Porch forecast was plausible but said a countywide 24.7 percent increase is probably high. However, he said that if you look at specific housing types and location, it’s not that hard to imagine.

Moeder said North County single-family homes could easily be up 25 percent in a year because that is where there is the most high-wage growth is and single-family home construction is considerably down. The Porch study looked at all home types — townhouses, condos, single-family — for its prediction, but Moeder said the single-family market is where we will probably see the most eye-popping results. “You can never be 100 percent correct in a forecast,” he said. “If someone asked me if single-family homes increase 25 percent, I could see that being a plausible scenario because we aren’t building any more.”

San Diego County single-family home construction has still not recovered since the Great Recession, with most regional planners favoring multifamily construction to fit more people in rapidly decreasing available land. Moeder said the problem with that scenario is the majority of the demand is for single-family properties, which means they will continue to go to the highest bidder for the reasonable future.

There were 3,160 single-family homes constructed in 2020, 3,043 in 2019 and 3,389 in 2018, said the Real Estate Research Council of Southern California. Compare that with 9,555 in 2004 and 7,904 in 2005.

Alan Nevin, Xpera housing analyst, also felt the Porch forecast was high, with a 12 to 15 percent increase in the next year more likely. He said things that could slow the growth are a rise in mortgage rates, or a change in loan-to-value terms. He said mortgages that require only 3 percent down for ever-increasing home prices might be seen as increasingly risky. However, Nevin said neither scenario has shown signs of happening yet.

In his latest report for the Greater San Diego Association of Realtors, Nevin wrote there were just 1,373 single-family homes sold for under $500,000 in July 2021 (using a 12-month rolling average). That compares with 3,445 at the same time last year. There were 7,130 condos sold under $500,000, using the same formula, compared with 7,226 at the same time in 2020.

Porch forecast the nationwide home price will increase 15 percent at the same time San Diego metro will jump by 24.7 percent. California metros are all expected to make big strides in the next year. Porch said San Jose would increase 24.5 percent, Riverside by 21.8 percent, San Francisco by 21.2 percent, Sacramento by 18.7 percent and Los Angeles by 18.5 percent.

Predictions for home prices are typically seen as tricky business because changes in mortgage rates, unexpected events (such as COVID-19) and natural disasters can shift the market considerably. The San Diego Union-Tribune’s 12-person panel of business leaders and economists predicted in December 2019 that the median home price at the end of 2020 would be $570,000 at the lowest and $624,500 at the highest. It ended the year at $715,500.

Forecast annual price growth by Porch:

Austin, Texas: 37.1 percent
Phoenix: 26.2 percent
San Diego: 24.7 percent
San Jose: 24.5 percent
Salt Lake City: 23.5 percent
Las Vegas: 23.3 percent
Riverside: 21.8 percent
San Francisco: 21.2 percent
Dallas-Fort Worth: 21.1 percent
Denver: 20.8 percent
Fresno: 19.8 percent
Pittsburgh: 19.8 percent
Tampa, Fla.: 18.8 percent
Sacramento: 18.7 percent
Tucson: 18.6 percent

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