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.

The Current State of the Market

I was asked, “Can you sum it up in one sentence?”

Yes – the inferior homes won’t be selling as fast, or for as much, as the superior homes.

There should be a gap – a sizable gap – between inferior and superior homes. But over the last year, it got squeezed and those who were selling inferior homes really made out nicely. Not only did they sell quickly, they didn’t have to discount much, if at all.

Those are the homes that will be sitting around longer as buyers catch their breath.

But the counts of active listings are so low that it won’t matter much if they creep up a bit:

NSDCC First-Half Report

The number of NSDCC first-half sales are 15% higher than the 2017-2019 average number of sales, and


NSDCC Sales, Jan 1 to June 30

# of 1H Sales
Median SP
# of Sales Over $2M
Over $2M/Total Sales %

In 2009, there were 756 NSDCC sales for the entire year, and only 76 of those were over $2,000,000.

In 2021, we’ve had 737 sales over $2,000,000 in the first six months!

Showings In Decline

Fewer showings than in the first week of January?

Well, the market was cooking right up to Christmas and then fired up quickly again this year, which created a solid 12-month frenzy.

But now there are fewer showings than in 2019 too? How did that turn out?

You can say it was a little flat, price-wise:

Whether it’s due to ‘seasonality’, higher rates, lower inventory, blah, blah, it doesn’t matter.

The remaining buyers left have to be exhausted – losing bidding war after bidding war takes a toll, and by now people want to give up.

Welcome to Plateau City.

There will still be eye-popping sales, just not as many.


Another data point showing the frenzy lift-off in May, 2020

Back to Normal

Random thoughts:

Having 130 NSDCC homes in June sell for $100,000+ over list price should be an all-time record. If we had half that many, it would be astonishing!

But those were decisions made in April and May.

It feels like the market is in the deceleration stage, where fewer homes are worthy of a bidding war.  Sellers and agents who insist on adding an extra 5% to 10% to their list price will need to be selling an exceptional property AND present it perfectly to generate offers.

The inferior homes/locations (the ones who really benefited during the peak frenzy) will be the ones that feel it the most. The gap between the dogs and the creampuffs will widen.

Listing agents who “have comps”, and around $5, can get a cup of coffee.

Open houses will help with the transparency.  Buyers and lookers will be able to experience the upgrades in person, and get a better read on the traffic.  The art of determining the difference between lookers and buyers will be renewed.

There will be eye-popping sales.

We will find peace with these higher prices.  We would have gotten here eventually – it just happened faster than we ever thought possible.

Higher interest rates won’t have a big impact – there’s too much cash in play to soften the blow. One thing you can count on – sellers won’t care about higher rates.  They aren’t in a hurry, they don’t have to sell, and they aren’t going to give it away!

If prices were to come down, it would be slowly and over time.  There will be occasional deals that give hope to lower pricing, but then a couple of high sales will happen right behind them.

The ibuyers might be the only candidates who could influence the market in a panic, but they could rent their homes for a while if they had to. They are big corporate entities who are used to losing money, so no real pressure.  The old accounting rules REQUIRED banks to sell their properties quickly, but those days are long gone.

More potential sellers will give up the thought of moving, and the number of homes for sale could stay restricted – or even go lower. The hope of there being a post-covid surge of sellers will wane.

If there were an occasional surge of new listings, they would all be priced based on recent sales…..or priced higher.  If buyers don’t like today’s prices, having more inventory priced the same won’t help.

The statistics will bounce around more as we pull into Plateau City.

All of the above (except #1) should remind you of how it used to be!


Less Hot

As we roll into the post-frenzy era, we’ll see more national news about the changes – but all we know for sure is that it’s less hot than it was. Note the gray line above.

Fannie Mae said “Consumers are increasingly adamant that it’s a good time to sell, bad time to buy a home” as it released its June Home Purchase Sentiment Index (HPSI). The index, based on the company’s monthly National Housing Survey, shows a growing difference in the number of consumers who hold one or another of those opinions.

The HPSI was largely unchanged in June, dipping from 80.0 in May to 79.7, but questions of whether it is a good time to buy a home or to sell one produced notable results. Only 32 percent of survey respondents said it was a good time to buy, down from 35 percent in May and with an 8 point increase in those who thought it was not.

As a result, the net who were upbeat about buying fell 11 points to -32 percent, 66 points lower than in June 2020. Conversely, the net who said it was a good time to sell rose 20 points in June to 62 percent and was 69 points higher than at the same time last year.

“The HPSI remained flat this month, although its underlying buy and sell components continued to diverge, setting record positive and negative readings, respectively,” said Doug Duncan, Fannie Mae Senior Vice President and Chief Economist. “Consumers also continued to cite high home prices as the predominant reason for their ongoing and significant divergence in sentiment toward homebuying and home-selling conditions. While all surveyed segments have expressed greater negativity toward homebuying over the last few months, renters who say they are planning to buy a home in the next few years have demonstrated an even steeper decline in homebuying sentiment than homeowners. It’s likely that affordability concerns are more greatly affecting those who aspire to be first-time homeowners than other consumer segments who have already established homeownership.”

The percentage of respondents who say home prices will go up in the next 12 months gained one point to 48 percent while the percentage who expect a decline went from 17 percent to 21 percent. There was a 4 point increase in those who expect no change. The net who expected an increase was 27 percent, down 3 points for the month but 18 points higher than last June.

More than half of respondents expect mortgage rates to go up, resulting in a net of -52 percent who expect further declines. This is 8 points lower than May.

Job confidence increased slightly. The number of respondents who said they were concerned about losing their jobs dipped 1 point to 11 percent with a corresponding increase in the share who said they were not. The net who were not concerned rose 2 points to 77 percent.

Duncan continued: “Despite the pessimism in homebuying conditions, we expect demand for housing to persist at an elevated level through the rest of the year. Mortgage rates remain not too far from their historical lows, and consumers are expressing even greater confidence about their household income and job situation compared to this time last year, when the pandemic had shut down wide swaths of the economy.”

The HPSI is up 3.2 percent compared to June 2020.

The National Housing Survey from which the HPSI is constructed, is conducted monthly by telephone among 1,000 consumers, both homeowners and renters. In addition to the six questions that are the framework of the index, respondents are asked questions about the economy, personal finances, attitudes about getting a mortgage, and questions to track attitudinal shifts.

Link to Article

Over List, June

The percentage of buyers who were willing to pay over list reached another all-time high in June:

NSDCC Detached-Home Sales, % Closed Over List Price

January: 38%

February: 43%

March: 53%

April: 55%

May: 54%

June: 59%

There were 37% of the total sales that closed for $100,000+ over list price!

The action was really hot in the $2,000,000s – the other price ranges cooled off slightly:

Percentage Who Paid Over List Price by Price Range

Price Range
$0 – $1.0M
$1.0M – $1.5M
$1.5M – $2.0M
$2.0M – $3.0M

After rising in six-figure amounts the previous month, it looks like pricing might be leveling off too:

NSDCC Average and Median Prices

# of Sales
Avg. LP
Avg. SP
Median LP
Median SP

We’ve been experiencing the hottest real estate market in the history of the world!


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

2021 L/S
1H Totals

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.

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