We know that the perception is more important than the reality, especially for potential sellers. If they see some media coverage that is slightly positive, maybe more will come to market this year, instead of waiting for some vague unknown day in the future when the market gets ‘better’.
Zillow economists now believe they’re done issuing downward revisions. In fact, they think the national housing market correction could be nearing its bottom.
Heading forward, Zillow economists expect U.S. home values as tracked by the Zillow Home Value Index (ZHVI) to rise 0.5% between January 2023 and January 2024.
Among the 400 largest housing markets tracked by Zillow, the company expects 238 markets to see positive home price growth between January 2023 and January 2024, while it expects six markets to remain flat and 156 markets to notch a home price decline over the next 12 months. Simply put: Zillow expects only 39% of major markets to post a home price decline over the coming year.
Just what we need – a new model that comes to the same wrong conclusion……
A new model of forecasting home prices based on consumer demand predicts that prices for housing will decrease by 5% nationally and 12% in San Diego County by the end of this year. The model, which highlights online search activity, was recently published in a new study from the University of California San Diego’s Rady School of Management.
The model’s predictions have a proven accuracy rate of up to 70% and are unique to other price predictors — such as Zillow, Goldman Sachs and Redfin —because those consider a variety of factors like interest rates, wage growth, unemployment and housing supply. Whereas the housing search index created by Allan Timmermann of the Rady School and collaborators at Arhus University in Denmark, focuses on consumer demand by tracking the rate at which prospective buyers use the internet to search for homes.
“It is one of the purest measures of potential demand that you can get because the first thing you do when you’re looking for a house or interested in buying a house, is to go to the internet and look at what is available,” said Timmermann, a distinguished professor of finance at the Rady School. “Those in the market for a home leave a big footprint with their online search activity because of the time it takes – often several months – to find something that is the right fit.”
Cities like San Diego have housing prices dropping more than the national average because it’s where the market overheated the most during the pandemic, Timmermann said.
I was going to ignore one more forecast by a financial services company (what do they know about selling homes?), but this is from the squid, plus Derek mentioned it in the comment section.
None of these forecasts provide any evidence or reasons for their conclusions. They are just guessing, apparently, and merely searching for more eyeballs.
They are probably transfixed on the median sales price, one of the worst tools available.
San Diego County Detached and Attached Homes, Median Sales Price
There you go – the county’s median sales price has dropped 13% so far.
Do you see that much in the market?
I’ll give you a better example:
NSDCC Detached-Homes, Median Sales Price
Do you see houses between La Jolla and Carlsbad selling for 28% less than they did in March? Me neither. NSDCC sales dropped in half (207 vs 101), and the homes that are selling are smaller (average square footage is -13%) and more inferior which explains why the median sales price should be dropping. But nobody mentions the additional variables.
We are being dumbed down by the squid, and others.
The graph above is boring this time of year, so I added my predictions in the lighter colors. I’m figuring that the Fed will be relentless and the higher rates in the second half of the year will cause the pricing gap between sellers and buyers to be tougher to bridge.
It’s because there will be some decent sales in April and May that keep sellers optimistic that the perfect buyers are coming tomorrow….or next week….or well, heck, let’s just wait until 2024.
Here is the graph from last year:
For our contest participants, there are 120 new listings this month – and we’ve had 36 new listings every week for the last three weeks. It means our contest should wind up around 170-180 listings?
My guess was that the NSDCC annual sales would be +5%, and pricing +15% in 2022.
It was a tough year for prognostications!
NSDCC YoY Statistics
The smaller square footage takes a little bit of the sting out of it, but anyone who guessed right about the 2022 statistics was just plain lucky.
I was close on the annual price increase, but it doesn’t mean much after considering what the median sales price was last month – which is now back to the mid-2021 range.
I would have been way wrong on the sales prediction, even if the frenzy would have continued. The sales between January and May – when the frenzy was still raging – were down 28% YoY. It shows how insane the market was in 2021, and how unlikely it will be that we will ever seen anything like it again.
But have you seen ANY superior homes selling for a discount yet? Me neither, and one reason is because there are so few for sale. Once we wade into the spring selling season, we’re going to see how the market has divided in two segments – superior vs. inferior properties – and how the affluent buyers will pay the price for the top-quality homes.
The big question is what the realtors will do.
Any agent can sell a creampuff – the homes that are well-located, upgraded, tuned-up, easy-to-show, and priced attractively. But how many properties are in that category? Maybe 5% to 10% max? The overall market, and the changes in these dumb statistics that everyone thinks mean something, will be made in the trenches by the listing agents.
Will they game up and provide excellent salesmanship that keeps homes selling for about the same prices? Or will they be like prancing bullfighters and just get out of the way as the buyers come barreling through with their demands for discounts?
When we look at these stats next year, we will know the answer.
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
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!
As the national leader of real estate, Zillow is attempting to guide people with data, thankfully. Their Home-Value Index has been decent, and I’ll take the -7% for San Diego….which means our premium areas haven’t felt much decline at all.
Their comment on current conditions isn’t ground-breaking but at least it offers some hope:
Activity in the housing market has slowed to a crawl this winter but the stage is set for a spring thaw: buyers can count on the usual springtime flood of new listings, and less frenzied competition than the last two spring selling seasons in the New Year. But if home shoppers really want to experience some deserted open houses, there’s no time like the present, because this lull won’t last long.
Here are their latest predictions about our local areas, all of which have values that are higher YoY:
Rancho Santa Fe
Let’s enjoy our stay in Plateau City – we may be here for a while!
With the radical change in market conditions, the annual statistics are going to look dramatically different from the more recent activity – look at these differences in home sales between La Jolla and Carlsbad.
NSDCC 2022 Annual Sales, and Sales Since Nov 1st:
Jan 1-Dec 20
Nov 1-Dec 20
I’m predicting a +5% change in the current NSDCC median sales price of $1,890,000 which gets us back to almost $2,000,000. Combine the softer pricing with current seller disappointment and the damage has been done – the 2023 local inventory should be so low that it helps to create a floor in pricing.
WASHINGTON (December 13, 2022) – Lawrence Yun, NAR chief economist and senior vice president of research, forecasts that 4.78 million existing homes will be sold, prices will remain stable, and Atlanta will be the top real estate market to watch in 2023 and beyond. Yun unveiled the association’s forecast today during NAR’s fourth annual year-end Real Estate Forecast Summit.
Yun predicts home sales will decline by 6.8% compared to 2022 (5.13 million) and the median home price will reach $385,800 – an increase of just 0.3% from this year ($384,500).
“Half of the country may experience small price gains, while the other half may see slight price declines,” Yun said. “However, markets in California may be the exception, with San Francisco, for example, likely to register price drops of 10–15%.”