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Over List, November

Momentum going into 2022 is strong, given that the Over List percentage has gone up the last two months:

NSDCC Detached-Home Sales, % Closed Over List Price

January: 38%

February: 43%

March: 53%

April: 55%

May: 54%

June: 59%

July: 64%

August: 55%

September: 41%

October: 45%

November: 48%

The higher-end market had some bounce-back too:

Percentage Of Sales Over List Price by Price Range

Price Range
March
April
May
June
July
Aug
Sept
Oct
Nov
$0 – $1.0M
76%
79%
89%
88%
89%
88%
64%
78%
71%
$1.0M – $1.5M
68%
78%
84%
75%
74%
74%
37%
64%
64%
$1.5M – $2.0M
66%
66%
72%
66%
82%
73%
61%
58%
56%
$2.0M – $3.0M
54%
32%
34%
66%
56%
56%
36%
38%
46%
$3M+
16%
22%
22%
17%
26%
19%
24%
7%
22%

The November sales were down 35% from last year, but the red-hot market of late-2020 is to blame.  This year, the sales were more in line with previous Novembers:

NSDCC November Sales

2017: 217

2018: 199

2019: 212

2020: 306

2021: 199

NSDCC Average and Median Prices

Month
# of Sales
Avg. LP
Avg. SP
Median LP
Median SP
Feb
224
$2,298,797
$2,257,334
$1,719,500
$1,758,000
March
252
$2,295,629
$2,260,524
$1,800,000
$1,825,000
April
357
$2,396,667
$2,403,962
$1,799,900
$1,828,000
May
300
$2,596,992
$2,581,715
$1,900,000
$1,994,500
June
348
$2,509,175
$2,537,953
$1,900,000
$1,967,500
July
311
$2,421,326
$2,442,738
$1,795,000
$1,855,000
Aug
268
$2,415,075
$2,438,934
$1,897,000
$1,950,000
Sept
278
$2,479,440
$2,445,817
$1,899,000
$1,987,500
Oct
248
$2,754,470
$2,705,071
$1,899,000
$1,899,500
Nov
199
$2,713,693
$2,707,359
$1,999,000
$2,100,000

The median sales price went up 11% in one month, and is $101,000 higher than the median list price!

The median sales price is 19% higher than it was in February, which was ten months ago.

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More on 2022

Brian and Yunnie got together for a preview of 2022. Yun touted his usual vagueness and Brian touched on a sensitive subject that long-time blog reader Chris and I discussed yesterday. 

The shuffle of older agents leaving the business and being replaced by new-age realtors who only know automated order-taking will make the end of the frenzy somewhat predictable.  Because the agents who have gotten into the business over the last 12 years have never experienced a ‘downturn’, it won’t be detected by most until the market has softened considerably.  Agents will carry on, and the last thing sellers will do is lower their price enough to sell. Plateau City should arrive by next summer, where sellers and listing agents unwittingly let listings sit for months while waiting for someone to bail them out. Sales drop, and prices stay about the same.  It will be excruciating.

“People rushed to buy homes during the pandemic, so two straight years of spectacular performance,” Yun said, pointing to a 7% increase in home sales from 2020 to 2021—from 5.7 million to 6 million, respectively.

While home sales have shined over the past two years since the start of the pandemic, Yun said 2022 is poised to be slightly different.

“I think the sales activity will be shaved modestly,” Yun said, suggesting a 2% reduction in sales next year as mortgage rates increase.

A silver lining on the horizon will be improvements in inventory, with the industry “turning the corner” on the dire shortage of housing supply for sale, according to Yun.

“New construction of single-family homes has been moving steadily higher,” he said, indicating that the market may see more inventory in the spring market next year than in 2021.

Yun also indicated that more people are likely to list their homes now that federal support and mortgage forbearance programs are either ended or are slated to end next year.

Even with a much-needed injection of inventory, Yun noted that agents should prepare for the rising mortgage rates to push activity forward next year as buyers try to secure the lowest rates possible before they climb to 3.7% by the end of 2022.

Buffini’s general advice to agents was to focus on the fundamentals and take advantage of the upcoming business in the winter and summer.

“I know people are working as hard as they can, but there is an old phrase that even a turkey can fly in a hurricane,” Buffini said. “When the wind starts to slow down, if you’re a turkey up at 200 feet, you’re going to be Thanksgiving dinner.

“There are going to be a bunch of people getting out of the business, and we are going to be left with even less experience in the industry,” he concluded.

https://www.rismedia.com/2021/12/15/buffini-bold-predictions-2022-challenges-inexperienced-agents/

CalExodus

In San Diego County, the excessive frenzy conditions have been driven by newcomers who don’t have a house here yet, and who figure that they just have to pay what it takes to get one.

It is those buyers that out-bid the locals. As those numbers dwindle, the frenzy will subside: 

News reports, anecdotes, and preliminary research have speculated about whether there has been an exodus from California during the COVID-19 pandemic. The implications of population changes, such as federal representation and federal funding allocations, are significant.

This policy brief uses the University of California Consumer Credit Panel (UC-CCP), a dataset containing residential locations for all Californians with credit history, to track domestic residential moves into and out of California at a quarterly frequency through the end of September 2021. This brief updates our spring 2021 analysis that used data through December 2020.

https://www.capolicylab.org/pandemic-patterns-california-is-seeing-fewer-entrances-and-more-exits/

The Frenzy and Rising Rates

A reader on Twitter wondered how rising rates will affect the 2022 frenzy.

Here’s what is expected today:

Under Chair Jerome Powell, the Federal Reserve is poised this week to execute a sharp turn toward tighter interest-rate policies with inflation accelerating and unemployment falling faster than expected.

The Fed today will likely announce that it will reduce its monthly bond purchases at twice the rate that Powell had outlined just six weeks ago. Those bond purchases are intended to lower longer-term rates, so winding them down more quickly — likely by early spring — will lessen some of the economic aid the Fed supplied after the pandemic erupted last year.

Fed officials are also expected to forecast that they will raise their benchmark short-term rate, which has been pegged near zero since March 2020, two or three times next year. Rate hikes would, in turn, increase a wide range of borrowing costs, including for mortgages, credit cards and some business loans. Just three months ago, the Fed had penciled in barely one rate increase in 2022.

Let’s note where the mortgage rates are today:

Some of the Fed hike might already be priced in, but these rates are still very attractive.  I think that any rate starting with a 3 will be attractive to buyers.

But let’s consider the history. Any time rates threaten to go up, or actually do start to rise, it causes buyers to hurry up and find a house – just to be able to lock in a lower rate. It means that we could be heading for the Ultra-Peak Frenzy, where rising rates actually create MORE frenzy!

Buyers who think sellers should lower their price to compensate for higher rates will be in for a long wait.  Sellers won’t believe it, and unless they are desperate (which very few are), they will blame the market/rates/agent before considering a lower price.  Many will try over and over again, and it might take them 2-3 selling seasons before they succumb.

Would rising rates cause more sellers to hurry up? Doubtful, but I hope so! It would be great just to get back to normal inventory (which is about double where it has been during the last half of 2021).

Inventory Watch

Are you looking ahead to the Frenzy of 2022?

It’s looking a little somber right now.

Buyers will be scouring the market early, in hopes of getting a fast start in January.

But we only have 43% of the active listings today that we had last year at this time, which means the sellers who list their home for sale over the next 30-45 days will have the market to themselves.

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December Momentum

As hot as our market is right now, it sure seems like we will get off to a fast start in 2022!

The first house mentioned in this video is linked here. The LCV home was listed for $1,695,000 and closed for $2,000,000 for a 2,438sf tract house built in 2000 on a 9,198sf lot. The sale closed on October 21st:

Frenzy Monitor

The reason for breaking down the active and pending listings by zip code is to give the readers a closer look at their neighborhood stats.

Our Big Three zip codes – where you can still buy a decent house for $2,000,000 – are still having more pendings than actives (highlighted below), but let’s note how strong the pending counts are in La Jolla and Rancho Santa Fe too:

The median list price in La Jolla today is $5,422,500, and in RSF it is $7,700,000!

We can also track the average market times too.  Upward trends here would indicate market slowing:

All four categories have improved recently, and the high-end $3,000,000+ average market times have been in the tightest range over the last few months!

Some may call this the off-season, but the only reason that the numbers aren’t any better is because the number of new listings is so low.  Brace for impact in 2022!

Inventory Watch

Virtually all of the ivory-tower crowd thinks that pricing will settle down in 2022.

They should take a good look at how 2021 is wrapping up.

Admittedly, the San Diego market is at the extreme end, with our inventory enduring the biggest YoY dropoff anywhere in the country.  It’s been that way around here for months, and the NSDCC stats for November show how explosive the pricing can be when buyers are starved for quality homes for sale:

Year
NSDCC November Sales
Median LP/sf
Median SP/sf
LP:SP
2019
212
$1,391,500
$1,347,500
97%
2020
306
$1,597,000
$1,589,950
100%
2021
195
$2,000,000
$2,100,000
105%

The median sales price is 32% higher than it was 12 months ago, and 56% higher than it was two years ago!

We thought that the last half of 2020 was the frenzy of all-time, mostly because there was ample inventory that enabled home buyers to set monthly sales records.

But the second half of 2021 has been experiencing a radical pricing frenzy, with the November LP:SP ratio at a whopping 105%!  The median sales price is $100,000 higher than the median list price? Wow!

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(more…)

San Diego Case Shiller Index, September

‘Deceleration’ at +24.9% YoY compared to when our market was just ramping up for the year-end frenzy of 2020? I’ll take it!

San Diego Non-Seasonally-Adjusted CSI changes

Observation Month
SD CSI
M-o-M chg
Y-o-Y chg
Jan ’20
264.04
+0.2%
+5.1%
Feb
265.34
+0.5%
+4.6%
Mar
269.63
+1.6%
+5.2%
Apr
272.48
+1.1%
+5.8%
May
273.51
+0.4%
+5.2%
Jun
274.91
+0.5%
+5.0%
Jul
278.00
+1.1%
+5.4%
Aug
283.06
+1.8%
+7.6%
Sep
288.11
+1.8%
+9.4%
Oct
292.85
+1.6%
+11.5%
Nov
295.64
+1.0%
+12.3%
Dec
297.52
+0.6%
+13.0%
Jan ’21
301.72
+1.4%
+14.3%
Feb
310.62
+2.9%
+17.1%
Mar
320.81
+3.3%
+19.1%
Apr
331.47
+3.3%
+21.6%
May
341.05
+2.9%
+24.7%
Jun
349.78
+2.6%
+27.2%
Jul
355.33
+1.6%
+27.8%
Aug
357.11
+0.5%
+26.2%
Sep
359.88
+0.8%
+24.9%

“If I had to choose only one word to describe September 2021?s housing price data, the word would be ‘deceleration,’ says Craig Lazzara, managing director at S&P Dow Jones Indices. “Housing prices continued to show remarkable strength in September, though the pace of price increases declined slightly.”

Extremely tight inventory, as well as heavy investor activity in the housing market, is keeping prices elevated. While the gains are falling, it is unlikely that prices will drop dramatically as they did during the housing crash. The fundamentals of supply and demand still favor an expensive market.

“The market has cooled since the beginning of the year, when dozens of competing bids, contingency waivers and price escalation clauses made home shopping a struggle, especially for first-time buyers. A growing number of homeowners are preparing to list in the next six months, hinting at an uncharacteristically active winter season,” said George Ratiu, manager of economic research at Realtor.com.

Real Estate Soliciting

Excerpts from this article about real estate soliciting – it’s going to get crazier! Hat tip to just some guy:

Jennifer Folden-Nissen’s three-bedroom, Victorian-style house in Duluth, Ga., isn’t for sale. But that hasn’t stopped a guy calling himself Henry from phoning her at least once a week. She says the pitch is always the same: “I want to buy your house. I’m willing to pay cash. Today.”

She says it’s sort of like having to deal with an insistent car salesman. “I just let him leave voicemails,” she says. But even those are pushy. “Call me back, call me back, call me back, call me right now — I’m out front of your house.”

Folden-Nissen works at the local fire department, and she’d call home and ask her husband to see if the guy was outside. But nobody ever was.  Then she started to get postcards from the same guy — with no stamp, so apparently hand-delivered — with photos of her own home on them.

“It was a little freaky because some of it was just like, OK, is the guy really outside?” she says. “And why is he taking pictures of my house if I haven’t given him the time of day?”

“They have just gotten increasingly worse in the past six months, six or seven calls every day,” says Lauren Barber, who lives in Columbus, Ohio.

“If you know anything about Columbus, it’s growing and it’s hot,” she says. “People want to live here.” Barber bought her house about 10 years ago for $155,000. She says now it’s worth more than twice that.

Investors can go on the internet and buy lists of phone numbers for people whose homes have risen in value, maybe more than the owners’ realize.

Barber works in human resources, so she says she has to answer her phone. “It could be one of our employees calling me with a question.” She says she tries to block the homebuyer calls, but they always seem to somehow call from a different local-looking number.

She says one of them even called her mother’s house, on purpose, to ask if Barber would sell.

“Like, really, you’re going to call my mom and ask her if I’m going to sell my house to you? It was just the most absurd and amazing thing,” she says. “But I told you no. Stop calling me. Don’t bother my mom.”

https://www.npr.org/2021/11/20/1056912546/hey-i-want-to-buy-your-house-homeowners-besieged-by-unsolicited-offers

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