It makes it sound like we know something you don’t – that our price is the right price.
Realistically, you can only say you priced it right if a house sells during its first week on the market. The frenzy made every listing agent look like a rockstar when most of the time it was due to the demand being so high that many listings were selling in spite of its agent and price.
How good are agents about price?
In the first half of 2023, there were 1,377 detached-home listings between La Jolla and Carlsbad. Of those, there are 896 that have sold or are now pending, which is 65%. Hmmm.
Let’s just price them attractively, which isn’t as specific as ‘right’. Put a price on it that causes people to want to come take a look, and then when they arrive, be a good enough salesperson to handle the rest.
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One way an agent can stay sharp about pricing is to see homes in person. The frenzy prevented us from doing the broker previews on Tuesdays and Wednesdays, and those were the best way to easily view the new listings.
Buyers go to open houses on the weekends, and shouldn’t we know as much as them?
It’s easy to shrug off the broker previews if you don’t have any waiting buyers for the homes on the list. But seeing homes every week also helps to keep an agent sharper about pricing in general – and also build better relationships among the agents who are on the tour.
I’ll have my Aviara Drive listing on broker preview tomorrow from 10:00am to 1:00pm with food. I told the sellers that my over/under on agent attendance is 15, which doesn’t sound like many when there are 1,000+ agents working in the area.
Anyone who attends tomorrow and mentions the blog will get a bubbleinfo t-shirt – non-agents included!
The average and median sales prices last month were similar to what they were in December, even though the same percentage of buyers paid over the list price.
It might make you think that this market is retreating quickly!
But look at the difference of the number of lower-end sales, and square footages:
The size of the houses weren’t that different, so what’s up?
Buyers aren’t bidding up the prices like they were before. Here’s an example of those right under the median sales price last month:
Instead of overbidding by hundreds of thousands of dollars, buyers in July mostly stayed in their shoes and only offered a little over the list price. Expect that trend to continue!
More plain talk from Steve about home prices and future appreciation rates. He is talking to realtors.
What I sent to Steve:
Hi Steve,
I enjoyed your deep dive today and also put it on my blog where local realtors are known to hang out.
You mentioned that you are studying the locked-in effect.
I don’t think it has the effect people think it does, and I’m not sure there is any effect.
Why?
The extreme difficulty of finding a superior home.
The extreme difficulty of winning a superior home, once you find one.
Paying capital-gains taxes on the sale of the previous home – and usually six-figures of taxes.
Higher property taxes for most, even in California.
Start the 30 years over again on the mortgage – which those extra years should be a bigger hurdle than the higher rate for those who analyze the differences in costs.
Then pack up the stuff and uproot everybody and everything from the previous house to start fresh in the new place….and hurry up with the $25,000 to $50,000 in repairs and improvements that literally every buyer has to do when buying a resale home.
We will only know if there is a locked-in effect if rates plunge to 3% again, which is very unlikely. So it’s all just fodder for the twitterverse.
But if rates did plunge – even to 4% – then we’ll find out that homeowners are still reluctant to move.
Then the problem will be re-labeled as the Forever-Home Effect.
We’ve received ELEVEN offers on our new listing at 7114 Columbine!
The five cash buyers have declined to go any higher, so the six financed offers will be competing today for the win. We sent all of them a highest-and-best counter with a 4pm deadline today. Meanwhile, any other agents who want to show and sell are encouraged to do so – we don’t stop the showings or offers, like most agents do.
Though the local inventory has ticked up a bit, San Diego still has an extreme shortage of homes for sale.
Santa Clara is probably the most interesting metro though. For all the stories about tech layoffs, there sure doesn’t seem to be a mass exodus – inventory is 53.9% lower than last year?
Prices seem to be holding up too. We’ve been using this house as our marker.
It listed for $3,195,000 on March 2, 2022 and was overbid substantially during the red-hot frenzy and closed for $3,710,000.
But look at the recent sales nearby. They look supportive of the overbid sales price paid during the frenzy!
But with their inventory way down, one thing to fear is fewer people moving here from the Bay Area! Could it be that the whole California market is slowing considerably? It could grind to a halt in 4Q23.
The Carlsbad market has been surviving quite well – there are 14% more pendings today than last July.
The other areas are all above the 2:1 ratio of actives-to-pendings (our standard for a healthy market). The number of actives in Encinitas DOUBLED in less than a month!
Last July there were 171 pendings, and it’s the same number today!
The pendings should steadily decline like last year, and by December the count should be around 110.
While the PPP fraud was rampant across the country, the ultra-low mortgage rates and lack of inventory were more to blame for inflating home values recently – at least around here:
Anecdotal evidence suggests that many recipients of fraudulent PPP loans used the funds they received to purchase expensive houses, cars, and luxury items.13 In this section, we examine whether recipients of PPP loans flagged as potentially fraudulent are more likely to purchase houses than non-flagged recipients. We first examine house purchases using property records from PropertyRadar for a random sample of 250,000 individual PPP borrowers.
The sample was collected in February 2023 and consists of individual borrowers who received PPP loans during all three rounds of the PPP with data on house purchases through the end of 2022. Round 3 of the PPP ended in June 2021, so we observe at least 18 months of post-PPP house purchase activity for all individuals in the sample. We match names purchasing houses in the PropertyRadar data to names of PPP borrowers, limiting the sample to names that are unique.
The experts say that the majority of homeowners are locked into their homes by their low mortgage rate, and if/when today’s high rates come down, then the inventory of homes for sale will bounce back.
Boy, are they going to be disappointed.
For the last 10-12 years, San Diegans have been buying their ‘forever home’, whether they knew it or not. They are locked into their home all right, and their low rate is only one of the reasons – with two other facts being more of a burden:
Difficulty of finding a better home at a reasonable price.
Capital-gains taxes in the six figures.
Ultra-low mortgage rate.
If mortgage rates magically came back to the 3% to 4% range, would it make sellers shrug off the first two? If rates came down to the 2% to 3% range? They would still need a very good reason to move, and endure the first two problems.
San Diego is the #1 area that homeowners don’t want to leave! Don’t you get the feeling that we are going to out-perform every other real estate market in America for a long time to come?
Today we have 2,293 active listings of attached and detached homes in the county – population 3.3 million!
A nice combo pack here with two bedroom suites downstairs and private pool. It’s a little light on the premium upgrades but it had enough dazzle to attract multiple bidders. This was a standard tract house when sold new for $422,500 in 2000:
