fbpx

Zillow Local Forecasts

What’s your prediction on local home-price appreciation over the next year?

Here’s what Zillow thinks – they sent these to me over the last three weeks:

La Jolla:

Del Mar:

Carmel Valley:

Rancho Santa Fe:

Encinitas:

SE Carlsbad:

SW Carlsbad:

NW Carlsbad:

NE Carlsbad:

Even after the market perked up last year, their guesses were still in the single digits on November 1st:

https://www.bubbleinfo.com/2020/11/01/zillow-2021-forecasts/

In January, they did revise upward and predicted that all of the local areas would hit 10% to 12%:

https://www.bubbleinfo.com/2021/01/11/zillow-increases-appreciation-forecast/

This year, their forecasted-value increases range from 0.4% to 11.5% – quite a spread!

Post-Frenzy Forecast

The prognostications are coming in about the direction of home prices.

It’s easy to predict that the market won’t be as hot as it’s been (or will it?).

The Burns forecast will be as good any of the guesses, and don’t be surprised if all of them end up predicting a goose egg over the next 1-3 years as we pull in Plateau City. Sellers shouldn’t mind much, because they picked up a whopping 31.6% increase during the 2020-2021 Greatest Real Estate Frenzy of All-Time.

There will be some potential sellers – probably those who don’t need to move, have plenty of time, and aren’t going to give it away – who are waiting for the market to top out.

You can’t blame them.  It’s been a hellava party over the last year, and they don’t want to leave any money on the table.  They will be the sellers who provide the extra inventory that will help moderate the pricing.

But I’m going to take the OVER.

There are two things that can cause moderation; sales and pricing.

It’s likely that one of these two things will happen:

  1. Either sales will drop due to ultra-low inventory, and prices keep rising, or
  2. Inventory does increase a bit, which boosts sales – but causes prices to flatten.

The 31.6% increase in pricing did put a dent in the affordability, but homes were already expensive and available only to the affluent anyway.  They will still have the horsepower to pay a little more in 2022 and 2023, but they will be more picky than ever about what they are willing to buy.

I’m taking #1, and guess that sales will drop, but sellers who can find a buyer will be getting a premium.

They are predicting that the BHVI will go up 5% next year, and 3% in 2023.

I think the BHVI will rise 10% next year, and 6% in 2023 – and agree with their 0% in 2024.

San Diego Home Pricing By Tier

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

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

The last paragraph (above) might be the worst misread in the history of forecasting. I’m not sure why they are sticking with it.

Mortgage servicers have stated that they will modify the delinquent mortgages and extend them for another 40 years if necessary – making it a great time to be a deadbeat.

Wouldn’t any of their “plummeting sales volume”, be supportive for pricing?

If we had fewer sellers than we have today, then prices would go up.  Demand would have to evaporate for both sales volume and prices to go down.

As for their revisionist history about the 2008 recession, real estate market performed better in the higher-end areas during the last crisis.  We’ve had a 10-year trend of buyers purchasing their forever home since then, which will deter any wholesale dumping of properties.

So who is going to dump now?  Seniors?  Their heirs?  Nothing suggests that today.

NSDCC Monthly Listings & Sales

The Covid Frenzy has had remarkable shift in market efficiency like we have never seen.

Historically, we have had so many listings that 35% to 40% of them didn’t sell.

This year we had 977 listings hit the market in 1Q21, and 80% of them have already closed escrow!  Of the remaining listings that haven’t sold, two-thirds of them were cancelled, withdrawn, or expired which usually means that the sellers either changed their mind or refreshed their listings.  Of the 977 listings, only 47 of them remain as active (unsold) listings, with a median list price of $6,900,000!

Yet, the extremely active marketplace isn’t causing more people to sell.

The total number of 2021 listings is 8% behind the covid-impacted 2020!

NSDCC Listings and Sales

Month
2018
2019
2020
2021
2021 L/S
Jan
426/149
418/150
353/182
285/187
1.52
Feb
358/162
361/174
360/184
311/224
1.39
Mar
446/258
498/211
368/206
381/252
1.51
Apr
469/270
494/265
288/156
382/357
1.07
May
522/273
502/297
484/143
404/301
1.34
Jun
476/299
435/282
448/274
357/340
1.05
1H Totals
2,697/1,411
2,708/1,379
2,301/1,145
2,120/1,661
List/Sales
1.91
1.96
2.01
1.28

There were 357 new listings last month, and 340 sales?!?!  The lack of inventory or the rapidly-rising prices aren’t slowing down sales!  If only there were more houses to sell under $2,000,000!

If sales were to retreat, it would seem obvious that it would be due to the lack of supply.  There have been more losers of bidding wars than winners, and that demand has yet to be satisfied.

But we are going to hear more doomer talk in the media. Here we have Larry predicting that more homes will be listed in the latter half of 2021 – which would cause MORE sales – yet check the headline:

An excerpt:

What happened: All regions saw an uptick in pending sales, led by a 15.5% surge in the Northeast. The South saw the smallest increase, with a 4.9% uptick.

The big picture: The uptick in pending sales could be sustained, Yun argued, because of the strong stock market and rising home prices. He predicted that more homes will be listed in the latter half of the year, which would help to slow the pace of home-price growth.

Still, economists generally anticipate that the second half of 2021 will see a slowdown in real-estate transactions. To get an idea of where home sales are headed, look no further than the data for mortgage applications.

“Sales lag mortgage applications, and the 26% plunge in the latter between December and April is now working its way through the sales numbers,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, wrote in a research note. He went on to argue that “sales will soon hit bottom, given the flattening in mortgage demand over the past couple months.”

The latest mortgage-applications data from the Mortgage Bankers Association would back up that prediction. The trade group’s index that measures the volume of applications for loans used to purchase homes was down 17% from a year ago as of the week ending June 25, and had declined 6% from the previous week.

Hit bottom? Bottom of what?

The ‘26% plunge’ in mortgage applications between December and April didn’t slow sales – they are higher in every market.  But determined to find some doom, he surmises that the lower number of purchase applications will catch up to sales some day?

It doesn’t occur to the ivory-tower types that the market was going ballistic last summer, and this week’s mortgage apps being 17% lower than last year is not alarming.  We had 350 NSDCC sales last August, and another 361 sales in September – both record highs!

Yet the media publishes this garbage without a thought.  They could unwittingly cause a slowdown just when more homes might be coming to market – which would goose sales higher, not lower.

Second-Half Predictions

As we enter the middle of 2021, many are wondering if we’ll see big changes in the housing market during the second half of this year. Here’s a look at what some experts have to say about key factors that will drive the industry and the economy forward in the months to come.

Realtor.com

“. . . homes continue to sell quickly in what’s normally the fastest-moving time of the year. This is in contrast with 2020 when homes sold slower in the spring and fastest in September and October. While we expect fall to be competitive, this year’s seasonal pattern is likely to be more normal, with homes selling fastest from roughly now until mid-summer.”

National Association of Realtors (NAR)

Sellers who have been hesitant to list homes as part of their personal health safety precautions may be more encouraged to list and show their homes with a population mostly vaccinated by the mid-year.”

Danielle Hale, Chief Economist at realtor.com

“Surveys showed that seller confidence continued to rise in April. Extra confidence plus our recent survey finding that more homeowners than normal are planning to list their homes for sale in the next 12 months suggest that while we may not see an end to the sellers’ market, we might see the intensity of the competition diminish as buyers have more options to choose from.”

Freddie Mac

We forecast that mortgage rates will continue to rise through the end of next year. We estimate the 30-year fixed mortgage rate will average 3.4% in the fourth quarter of 2021, rising to 3.8% in the fourth quarter of 2022.”

Lawrence Yun, NAR

“Higher home prices and higher mortgage rates are simply squeezing away those homebuyers that are right at the margin.”

Top Markets in 2021

Zillow Survey Predicts Austin will be the Nation’s Hottest Housing Market, Leading a Sunbelt Surge
More affordable metros are replacing expensive coastal areas as top drivers of home value growth
— A panel of economists and real estate experts expect Austin to outperform the national market by the largest margin, followed by Phoenix, Nashville, Tampa and Denver
— Expensive coastal markets New York, San Francisco and Los Angeles are most likely to underperform, though Zillow expects growth in every market
— Key tailwinds include an improved economic outlook underpinned by progress on coronavirus vaccines, while affordability and available supply are potential drags

SEATTLE, Jan. 19, 2021 /PRNewswire/ — Austin will be America’s hottest housing market in 2021, leading a list of mostly Sun Belt cities expected to continue heating up faster than the nation’s large coastal markets, according to a new Zillow® survey of experts.

The booming Texas destination heads a lineup of sunny and relatively affordable metro areas — PhoenixNashvilleTampa and Denver — that are most likely to outperform the nation in home value growth, according to a panel of economists and real estate experts recently surveyed by Zillow.

The Zillow Home Price Expectations Survey, sponsored by Zillow and conducted quarterly by Pulsenomics LLC, asks a large panel of economists, investment strategists and real estate experts for their predictions about the U.S. housing market. The Q4 survey also asked about their expectations for 2021 home value growth in 20 large markets compared to the nation.

An overwhelming 84% of those surveyed said Austin values would out-perform the national average, compared to just 9% who believe it would fare worse. Phoenix came in second with 69%, followed by Nashville (67%), Tampa (60%), and Denver (56%). Page views on Zillow for-sale listings in Austin by out-of-town searchers were up 87% in November compared to 2019. 

The top-five metros are all affordable options compared to expensive coastal areas that have led home appreciation ranks in recent years, providing relative value for Millennials looking to take advantage of low mortgage rates to buy their first home. The top five are also, for the most part, sunny locales. Four of the five counties holding the largest cities in these MSAs all rank in the top-third of counties in the contiguous U.S. for average daily sunlight, according to NASA data analysed in The Washington Post. Davidson County, home to Nashville, ranked just below the midline.

“The pandemic has not upended the housing market so much as accelerated trends we saw coming into 2020,” said Zillow senior economist Jeff Tucker. “These Sun Belt destinations are migration magnets thanks to relatively affordable, family-sized homes, booming economies and sunny weather. Record-low mortgage rates and the increased demand for living space, coupled with a surge of Millennials buying their first homes, will keep the pressure on home prices there for the foreseeable future.”

An improved economic outlook thanks to COVID-19 vaccine roll-outs and better treatments was pegged as the most likely tailwind for the housing market in 2021, followed by sustained strength in first-time home buying among Millennials. It proved a powerful demand driver in 2020 and is expected to persist for years to come.

Link to Zillow Article

Zillow Increases Appreciation Forecast

In November, Zillow busted out of the pack of prognosticators and predicted around 7% appreciation for NSDCC zip codes over the next 12 months.  They have revised again – now predicting that our North San Diego County coastal areas will appreciate at least 10%:

La Jolla:

Carmel Valley:

Del Mar:

Encinitas:

SE Carlsbad:

NW Carlsbad:

NE Carlsbad:

SW Carlsbad:

Where will they be next month?

It doesn’t really matter how they got to these predictions, or if they are realistic.  They are broadcasting these to the masses, and with their reach, their forecasts alone can influence the market!

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

San Diego #1 in USA

Either we are undervalued, or we’re getting more popular….and maybe both!

The price of a San Diego home could increase by more than 8 percent this year, more than anywhere else in the nation, according to a forecast released Tuesday.

Real estate analysts CoreLogic said the price of a single-family home in San Diego County will increase 8.3 percent from November 2020 to November 2021. That means the median price of house in San Diego could be around $776,000 by the end of the year.

CoreLogic said main reason is a lack of homes for sale that will push up prices as buyers fight it out. A secondary factor is income growth for highly skilled positions in San Diego County.

It isn’t out of the ordinary for San Diego homes to increase a lot in a year — in fact, single-family homes here were up 9.5 percent last year — but the forecast is noteworthy because CoreLogic predicts most markets will see price appreciation slow in most markets.

The only regions that the real estate analysts say will come close to climbing as much as San Diego will be: Miami, predicted to increase 3.2 percent; Los Angeles, up 3.2 percent; and Washington, D.C., up 2.9 percent. CoreLogic said the total national increase should be around 2.5 percent.

“San Diego is just one of those markets that has had a lot of income growth and not enough supply to meet demand,” said Selma Hepp, CoreLogic deputy chief economist.

She said San Diego is an example of what has been seen a lot across the nation: High-wage workers who have been able to work from home have seen fortunes increase during the pandemic while low-wage workers lost income because their jobs were among the first shuttered during shutdowns.

“Income inequality is being exacerbated by all of this,” Hepp said.

Link to full U-T Article

Frenzy Duration

We’ll be all frenzied up for the next few months – when will it cool off?

The real estate market will likely mirror the course of the pandemic.

You’ve probably heard the comparison to the Roaring 20s – the boom that kicked off when World War 1 and the Spanish Flu of 1918 were over and automobiles and telephones fueled the new economy.  Just the relief of seeing the coronavirus beginning to clear should cause more people to get out and about….but getting back to normal could mean less real estate frenzy.

Mortgage rates will reflect the improvement, and rise accordingly.

Don’t expect rates to budge the moment he takes the oath of office, but a Biden administration could eventually impact the direction of mortgage rates.

“Expect tax rates to rise, the Fed to offset increasing inflation with higher rates, and the economy to slow,” Guy Baker, founder of Wealth Teams Alliance, tells The Mortgage Reports.

And there’s this, from Rick Sharga, executive vice president at RealtyTrac: “Biden has called for more government investment in affordable housing, which could be funded in part by proceeds from fees attached to home sales backed by government agencies like Fannie Mae, Freddie Mac, and the FHA.”

Baker, Sharga and other experts polled by The Mortgage Reports in October predicted 30-year rates would rise to an average 3.51% in 2021 under a Biden administration.

When home buyers hear that rates are going up, they will be tempted to hit the brakes and wait until sellers start lowering their prices to compensate.  Think sellers will lower their prices? Me neither, and the market will probably stall out for months or years, much like it did after the Rocking 2013 Frenzy.

My guess is that we have six more months of frenzy in the bag.

But there will be enough other distractions that the super-hot market will fizzle out by July/August.

Or the first day that mortgage rates hit 3.50%, whichever comes first!

What do you think?

Pin It on Pinterest