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Inflation-Adjusted Home Prices

On one hand, it looks like the national Case-Shiller Index is up about 40% since the previous peak (above). 

But after adjusting for inflation, Bill shows how home prices are about the same as before:

https://calculatedrisk.substack.com/p/real-house-prices-price-to-rent-ratio

 

You could say that home prices have only been tracking inflation over the last 10-12 years.

Has the frenzy over the last 12 months just added the annual 2% to 3% increase to home pricing that we’ve always assumed over the last decade, but didn’t realize due to inflation? Could be!

NSDCC Year-to-Date

This year, we are ahead of both of the previous years in total sales, in spite of having 14% fewer listings – and prices being 30% to 40% higher!

NSDCC Listings & Sales, Jan 1 to Aug 31

Year
# of Listings Between Jan 1 – Aug 31
# of Sales
S/L %
Median SP
2019
3,585
1,922
54%
$1,310,000
2020
3,245
1,846
57%
$1,409,677
2021
2,805
2,245
80%
$1,875,000

Prices probably need to go a bit higher to slow this thing down!

The NSDCC Weekly Pendings are tracking similar to 2019, so there should still be some gas in the tank:

Priced Out?

Our local home prices have been rapidly escalating over the last year.  First, we ran out of NSDCC houses for sale under $1,000,000, and today there are only 6 for sale priced under $1,100,000!

What are the alternatives for those buyers who want to spend less?

  1.  Buy a house further out.
  2.  Buy a condo/townhouse.
  3.  Get bigger gift from parents or grandparents.
  4.  Keep playing the lottery!

Here’s an example of going just a tad further out. This house is located on the border of Carlsbad, and while it did have ten offers and got bid up $80,000 over list, it closed for $830,000:

Easier to Go Up Than Down On Price

This is a repeat of the 2br house featured on my tour a few weeks ago, with the resulting sales price.

The agent admitted they priced this 2br house low on purpose to attract a crowd, and it worked. The list price was $699,000, and it sold for $1,100,000 cash. Meanwhile, the two other listings around the corner priced at $1,149,000 and $1,200,000 are still unsold.

Sellers are resistant to price attractively, but look how well it works when you Get Good Help!

Sold for 57% above list!

https://www.compass.com/listing/2725-glasgow-drive-carlsbad-ca-92010/842339809239950025/

We Must Have More Frenzy

I said the other day that it will become hard to sell.  But wait – isn’t the demand overwhelming?  Yes, but it’s a price thing.

It will be harder to sell…..at your price.

Think of the pressure on sellers now.

It was bad enough when the seller’s ego had to endure the actual or perceived pressure from friends and family about getting your price. It was probably more subconscious, than conscious, and nobody really had to say a word.

Sellers just think that their family, friends, and neighbors are all watching, and they want to show them.  As a result, once a home goes on the open market, the seller’s ego wants all the money.

But then over the last year, sellers have been in this bonanza zone where bidding wars erupted out of nowhere and sellers got more money than they ever thought was possible. Way more than their ego needed, and sellers couldn’t wait to tell everyone how great it turned out.

But as the frenzy settles down, will sellers be able to cope without a tale to tell? Will their ego survive not having a bidding war?

In their mind, their opinion of their home’s value is built on top of the frenzy sales, plus a little extra.

Are sellers motivated enough to price sharply from the beginning, and/or lower their price early and often when it counts?

Probably not.

Hence, the frenzy environment has to continue, just so sales will happen.

Agents who have been in the business for 12 years or less only know a strong sellers’ market.  They will continue to offer half-baked listings with 60-80 photos, no video, and a crazy price – and expect buyers to pay it.  Throughout their history, buyers always have.

Sellers will now expect 5% over comps AND a bidding war to push it higher!  Anything to the contrary will not go over well, and sellers and listing agents will be slow to react.

First you’ll see listings not selling, and inventory starting to stack up.  Then sales won’t be as brisk as they have been over the last year.

Sales will suffer, before pricing does.

Keep an eye on sales.  They are your leading indicator.

This is how the frenzy will end, it’s just a matter of when.

Year-End Rally?

Mike thought the inventory was going to peak by now, but notes that the number of national listings is still growing. He also says that sales are strong too, which might suggest that we could have a late rally in spite of the delta variant.

If buyers have more choices, it improves their chances of finding a suitable home to purchase!

See more of Mike’s report here:

https://twitter.com/mikesimonsen/status/1429878364232306713

Who knows – our local inventory could keep climbing too, though it’s still below normal:

America’s Frenzy

https://twitter.com/RickPalaciosJr/status/1428727747711361025

The Big Reshuffle is backlogged!

As people wait to relocate throughout the country, it really boils down to how patient you are.

If you want and need to move today, then join the fight.  The key is to find suitable answers on the buy side, and these are the choices:

  1. Sell and rentback for 30-60 days. It’s a gamble, and you will probably be under pressure to pay more than you’d like on the buy side, or be forced to….
  2. Sell and rent a different home. This gives you much more flexibility and patience to buy the right house, at the right price.
  3. Buy first, then sell.  Need ample horsepower, and/or a bridge loan.
  4. Sell your home contingent upon finding a home to buy. Getting the buyer of your home to hang around while you shop for a new home won’t be easy, and may require a discount. But it’s the safest way to make sure you don’t have to move unless you find the right home, at the right price. A good option for sellers when there are homes available for sale that you would buy today.

Those with more patience may decide to wait it out, in hopes of it getting better, later.  But there will always be some juggling of the choices above.

Whatever you do, don’t wait until we pull into Plateau City, when it becomes hard to sell, AND hard to buy.

Way Over List

San Francisco leads the 50 largest U.S. metros in the share of homes sold for 30% over their list price or higher at 7.4%. It’s followed by the hot market of Buffalo, NY, where 6.2% of homes sold for more than 30% over list, and Austin (5.3%). All shares in these markets are up substantially over the first quarter.

The markets with the most homes sold for half a million or more over asking in the second quarter are San Francisco (657), San Jose (283), Los Angeles (99), Seattle (88) and Miami (74).

https://www.zillow.com/research/share-of-homes-sold-way-over-list-doubles-29974/

Can we find the six that sold for $1,000,000 over list?  I went looking for that needle in a haystack, but couldn’t find any.  If you know of the properties that for more than a million dollars over list this year, let us know!  The 2021 numbers are staggering, given the pricing:

San Diego County First-Half Sales, All Property Types

Year
Total Sales
Median SP
Median DOM
Sales Over $3,000,000
2017
19,236
$521,000
22
150
2018
17,922
$554,000
14
156
2019
16,981
$569,000
20
159
2020
15,037
$593,000
14
155
2021
20,263
$702,000
9
485

Record pricing, and record sales at the same time – what a frenzy!

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