fbpx

Fewer Pendings & Sales is Relative

The California Association of Realtors said that the number of pendings has been falling.

They don’t give any other details or interpretations, so what will casual readers conclude?

The market must be coming apart!

Thanks C.A.R.!

But because pendings and sales are directly related to inventory, we must consider the impact of having fewer homes for sale.  Look how dramatically the inventory has dropped recently, and yet we still had a good amount of sales, relatively:

NSDCC Detached-Homes

Year
Total Listings, Jan 1 to May 31
Total Sales, Jan 1 to May 31
Sales/Listings
2018
2,222
1,112
50%
2019
2,273
1,099
48%
2020
1,855
871
47%
2021
1,780
1,322
74%
2022
1,349
946
70%

In 2021, the frenzy was so hot that every house was selling, and the lower inventory wasn’t as obvious because the sales count was tremendous. But now that the number of homes for sale has really dried up, the impact on pendings and sales is more noticeable – at least for those who are willing to look that far.

This year has been really great! The rest of the year will probably be less great. It might even get back to 2018-2019 levels, which is fine – that’s the way it always was.  We could handle worse if we had to.

Detached-Home Graphs, Coastal North

Here are graphs that look generally supportive of the local market.

The SP:LP is still well above 100%, though hopefully it will keep receding. Everyone should be happy with it running around 100% or a little under, like it has throughout the history of real estate:

There are more homes for sale – but still low for the selling-season:

June sales are going to be really low, which is fine. Both buyers and sellers have the right to wait for some future date when it might be different (conditions are not likely to change though).

Rapidly-rising prices have decimated the lower-end markets. We’re left with an affluent, higher-end market where buyers and sellers both tend to wait for something better, later:

Check out my new mortgage-rate widget in the right-hand column – we just hit 5.85%! >>>>>>>>>>>>

Why Are You Moving?


~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

The average length of homeownership has been 10-12 years…..until now?!?

Nearly half of Americans are considering a move to a new home

Of those considering a move, more than 1 in 4 (27%) want to stay within their current area. The main driver behind this sentiment is a desire to reduce living expenses, which is true for 44% of respondents.

Rounding out the top five reasons behind a potential move are:

  • “My current home is too small” (27%)
  • “I’m looking for different features” (27%)
  • “I’d rather live in a different part of town” (12%)
  • “I don’t like the management of the property I’m renting” (11%)

“The economic crisis has adversely affected the finances of many Americans,” said Tendayi Kapfidze, LendingTree’s chief economist. “Even those who have kept their jobs and added to savings, via stimulus and spending less due to staying home, are likely worried about the stability of their financial position.”

https://www.lendingtree.com/home/mortgage/nearly-half-of-americans-are-considering-a-move-to-reduce-living-expenses/
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Median Home Value to Median Income

If there is anyone left who still believes in market fundamentals, here’s a graph that shows how the traditional 3:1 price-to-income ratio is still a decent measuring stick in the rest of America.  But in California, it has escalated to dizzying heights!

San Diego County

Median Household Income: $75,456

Median Sales Price, YTD: $705,000

Price-to-Income Ratio: 9.3

Encinitas

Median Household Income: $113,175

Median Sales Price, YTD: $1,465,000

Price-to-Income Ratio: 12.9

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

With the affluent in full control of the real estate market, expect these numbers to get dizzier!

Million-Dollar Sales Double

Ultra-low rates, record home equity, and societal needs/concerns make the perfect frenzy cocktail:

The pandemic is driving a major boom in the housing market that’s breaking all kinds of records and exposing a very uneven economic recovery between the haves and the have-nots.

The most dramatic increases are happening at the top end of the market — sales of homes costing $1 million and up have more than doubled since last year.

Millions of people are working from home while juggling their kids’ remote schooling. And many who can afford to are buying bigger houses.

Home sales in September were up more than 20% from a year ago, according to the National Association of Realtors. And median home prices hit a record $311,800. That’s about $40,000 more than just a year ago.

“It is great news for homeowners as they are seeing equity rise and rise,” says Lawrence Yun, the chief economist for the Realtors group. But he says prices are rising too fast. Generally, he says, economists like to see home prices climb in line with people’s wages. But in recent years, home prices have been rising much more quickly.

“It will eventually lead to a choking point where first-time buyers simply can not show up to the market,” Yun says. Already the percentage of first-time buyers is decreasing — they represent about 31% of the market. In a healthy market, they represent 35% to 40% of buyers, Yun says.

He worries that if the trend continues, the country will see a further “divergence in society where you have the haves, with homeownership gaining their equity, and those people who would like to become homeowners continually being frustrated, unable to reach that goal of owning a home.”

Read full article here:

https://www.npr.org/sections/coronavirus-live-updates/2020/10/22/926657942/housing-boom-sales-of-million-dollar-homes-double

Survey of Market Conditions

The experts were surveyed on what they think about the market – a sample question:

Fleming: “Our research has found that in past recessions, house prices show their “downside stickiness,” meaning they remain flat or their growth slows during economic downturns, but often do not decline much with one exception – the Great Recession. Because of the downside stickiness of home prices, and the supply and demand imbalance that exists in the market today, we anticipate nominal house price appreciation to actually accelerate this summer. House prices are going up!”

Marr: “As mortgage rates decline, prices rise. Demand fell, but so did supply, which muted any impact to home prices. Right now, they are continuing to grow at the same pace as before the pandemic. Growth may slow as the economic impacts grow, but the consensus is that home prices will continue to rise over the year.”

Tucker: “Overall, Zillow is forecasting a slight decline in home prices through October, followed by a slow recovery through 2021.”

McLaughlin: “We think price growth is going to slow, and even possibly turn negative, by the beginning of next year, as lower aggregate demand emerges and legislation that protects homeowners from foreclosure expire. However, we do expect price grow quite strongly by the end of next year, growing between 4-6% on a year-over-year basis.”

Teta: “Some pockets around the country may do well – like suburban areas around big cities if large numbers of people decide to move because of concerns that it’s too risky to stay in densely populated places where the virus has spread so rampantly. That could sew a silver lining into the market. But it may be more likely that the price boom of recent years is in serious jeopardy.”

Link to Forbes article

Pendings Daily and YoY

The graph above shows the raw data – how the pendings started to increase as we got into April.  It seemed like the action began to slow down just recently, and, sure enough, the rolling averages have been in decline over the last week or two in San Diego – and elsewhere.

If you just need some covid relief, then the graph below will make you feel better.  For the last month, the pending sales in San Diego have been comfortably ahead of last year’s counts.

https://www.mikedp.com/

More New Listings

One key to any potential comeback is having more homes to sell.

The weekly counts above are the net effect of new listings minus new pendings. When we have a good week of net new pendings (like we did this week with +13), it means a positive move by the new listings is even more impressive.  Let’s also note how different this year started.

Last year we averaged 103 new NSDCC listings per week, and today’s count was 79 for the past week, so we’re not far off our normal springtime pace. We can probably expect a very active summer!

Pin It on Pinterest