Dr. Doom said in his podcast here that the California markets have had the most significant price declines, and the Bay Area, LA, and San Diego have ‘gotten creamed’.
He didn’t provide any data to back it up, so let’s look at what we have from the MLS which includes September data so we’re including the most relevant information.
San Diego County, All Property Types:
The San Diego County median sales price was $855,000 in June and July, and last month it was $792,500 – which was a 7% decline from the peak this summer. It was also 2% higher than in August. Is that creamed?
We’re coming off the greatest real estate frenzy of all-time, and now the Fed has caused mortgage rates to double in less than six months. All considered, I think we’re doing great, and better than expected.
These guys who just fling it around on their national platforms are doing undue harm to our market. Don’t listen to them until they get out of their mom’s basement and actually investigate what’s really happening!
I mentioned in my very first blog post seventeen years ago that all it takes to achieve 20% to 25% annual appreciation is for everyone to pay a little more than the last guy. The same principle works in reverse too.
San Diego Non-Seasonally-Adjusted CSI changes
Bob Shiller regularly touts the Case-Shiller futures market but it’s a gambling hall if you ask me. Here’s what those bettors think about our local index:
IF they are accurate about the future of San Diego home pricing, then either you can sell your house now for today’s prices, or wait until 2025 and sell for about the same.
The final accuracy of any guess on appreciation doesn’t matter. We all know that they are just guesses.
What matters is whether home buyers and sellers will make decisions today, based on what they read.
If I keep showing data and forecasts that show pricing isn’t tanking between La Jolla and Carlsbad, would it cause you to ignore the national doom and do something different, like buy or sell now?
Or will people just take it all in, and then do what they planned to do all along – move next spring? Or deliberately wait until 2024 to ‘wait-and-see’ what happens then, hoping for something different?
Because for the market to be ‘different’ , there would need to be a change here:
Very few quality homes for sale at less-than-retail pricing.
Most everyone who bought a home in the last 13 years has tremendous incentives to NOT sell it. Will the IRS waive the capital-gains tax to help the real estate market? Will there be a load of new homes built between La Jolla and Carlsbad? Will higher rates make potential sellers panic?
The answer to those questions is ‘very unlikely’, and things are most likely going to stay the same.
Will ANY data or forecasts have an effect on your moving plans?
The next round of Zillow local guesses started today – here’s the first installment:
If rates would stay around 5% over the next four quarters, the market should digest it and get comfortable with the new era. But how reliable are these experts? After all, they are the mortgage business – shouldn’t their forecasts be pretty close? Well, hmm, no:
I said: 0% appreciation for NSDCC (La Jolla to Carlsbad) in 2023.
Zillow says: +1.5% to +1.9% for NSDCC.
Goldman Sachs says: -1% for San Diego.
Moody’s has San Diego County home prices changing –3.65% between now and the end of 2023, and then -2.9% by the end of 2024.
What do you say?
Hat tip to shadash for sending this in:
Zillow has recalibrated and is predicting a fairly flat 12 months ahead.
Here are the zip codes I’ve received so far, all ranging between +1.5% and 1.9% appreciation over the next 12 months – the rest of the local zip codes should be similar:
Yesterday’s Case-Shiller Index for San Diego was 425.26, which is 11% higher than it was in January.
But check how the trend increased between January and now.
Prices rose as fast as ever in early 2021 (yellow above). If they would have mellowed out along my red line, then we would have experienced slightly-increasing prices for the last year. But noooo! Instead, the early-2022 buyers – egged on by their realtors – insisted upon paying ridiculous amounts over the list price to win a house. Hopefully that practice is done.
The only reason the June reading was 11% higher than January was because it came down a bit. The San Diego Case-Shiller Index rose 11.2% between January and April, 2022, which was an annual clip of 33.6% – which nobody would have believed was sustainable after rising 43% since the pandemic started.
If the SD Case-Shiller just goes back to where it started in January, it will be a 10% drop from today, which will sound like a disaster. But the annual appreciation will be zero, which is not only reasonable, but sustainable for a while.
Is anyone going to mind if we start 2023 where we started 2022, price-wise? If mortgage rates can stay in the 5s, and hopefully the low-5s, we should be fine!
These guys are among the most negative in the business, so if they have San Diego County home prices changing –3.65% between now and the end of 2023, and then -2.9% by the end of 2024, then prices in the better areas will be positive.
The most likely to happen is that we’ll see a few wild sales at the extreme ends, and those will get the headlines. The rest will be +/-5% of the comps. Most will just fumble along – just like during the frenzy – with little or no quality data or advice.
I think we can say that summer is over, and the off-season is here.
How will the rest of 2022 play out, and what will be the effect on the 2023 Selling Season?
We know that the local NSDCC sales counts will be low for the rest of 2022. Last year we had 136 closings between August 1-15, and this year we’ve had 65. If we keep having about half of the 2021 sales, then our total sales between August and December will be 594, or an average of 119 per month!
It could look something like this green line:
We will probably have fewer listings than ever in 2H22, but those sellers should be motivated to sell. If they didn’t need to sell, wouldn’t they be tempted to just wait until spring to go on the open market?
We know that every seller has a load of equity, so if they have to lower their price to sell, they could. But will they? We can speculate that if they only had to lower their price by 5%, then they would make the deal. But going lower than 5% off is where the trouble starts – and the seller’s ego gets a vote.
If sellers continue to hold out on price, and sales follow the green line, it will look like a hard landing – and the 2023 selling season could end up being a dud. It would definitely get off to a slower start, and could sputter through the selling season if the inventory is lackluster and priced at retail, or retail-plus.
How likely is that? Very!
The second-half sellers of 2022 are going to determine our fate for the 2023 Selling Season. Expect next year’s market to be somewhere in the Sputter-to-Frenzy range, guaranteed!
But if you are a buyer, what are you going to do? Wait until 2024?
Let’s re-visit this in January. If sales beat the Green Line, then a more active market in spring is likely!
Here is Bill’s graph of the national sales:
The latest Zillow 1-Year Forecasted Values are still expecting a fairly strong appreciation rate over the next year – these estimates are the same or higher than last month! I can see a path to how this could happen.
The Spring Selling Season gets frenzied up for 3-4 months where buyers and sellers all jump in at the same time, and then the market goes flat for the rest of the year…..kinda like this year!
NW Carlsbad, 92008:
SE Carlsbad, 92009:
NE Carlsbad, 92010:
SW Carlsbad, 92011:
Carmel Valley, 92130:
Del Mar, 92014:
Rancho Santa Fe, 92067:
They do have website-viewer data that nobody else has, and hopefully they are using it to track the activity and make predictions.