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:
It looks like the counts of active and pending listings are on their way back to normal.
The impact depends on the price point though. The low-end market is evaporating, and if we had a surge of 25-50 new listings, they probably wouldn’t last long:
On July 22, 2019, we had 94 active listings and 84 pending listings priced under $1,000,000.
Last year at this time we had 34 active listings and 73 pendings priced under $1,000,000.
Today we have 5 actives, and 16 pendings priced under $1,000,000.
Once a homeowner starts believing that their home is worth a million-something, it would take years to convince them otherwise.
As long as there are more pendings than actives, the market is doing just fine.
Oh well – that was last week’s thought.
As you can imagine, it’s the high-end market that is loaded with actives. This week an agent commented on what a delightful experience he had showing higher-end homes in Rancho Santa Fe, where listing agents were happy to book appointments at the buyers’ convenience, didn’t go crazy about having to submit financials just to see a home, and were paying regular commissions. A few of the homes had been sitting around for months!
My guess is that most of the disappointed sellers will pack it up and wait until next year, rather than consider selling for today’s top dollar – which might be slightly less than they thought (but 10% to 30% more than it was 2-3 years ago).
How’s the action in the more reasonably-priced categories?
There are 100 active listings, and 191 pendings priced under $2,000,000 today.
Statistically, the frenzy should continue to be impressive – it’s been red-hot for so long that it could cool off 25% and still be a vibrant marketplace. It will depend on the flow of homes coming to market, which we’ve had an uptick over the last two weeks – and the pendings have surged right with them (see above).
As the vacation season kicks in, the frenzy may become a little more manageable – only because there could be fewer buyers vying for each new listing. But the environment won’t change until we get a flood of inventory, which isn’t happening yet:
NSDCC New Listings Between March 1st and May 31
Year
Number of New Listings
Median List Price
Avg. Mortgage Rate in April
2017
1,499
$1,399,000
4.05%
2018
1,437
$1,475,000
4.47%
2019
1,494
$1,499,925
4.14%
2020
1,140
$1,598,150
3.31%
2021
1,164
$1,949,000
3.06%
Yes, mortgage rates in the 3s are 25% lower than when they are in the 4s, but on a million-dollar loan the drop only saves you $558 per month – and the bump in pricing gobbles up all of it, and more.
It’s the cumulative effect of many variables that will keep the frenzy conditions alive. The only thing that will cause the frenzy to die is a surge in inventory – and that isn’t happening yet, and may never happen.
BTW, that’s a 22% increase YoY in the median list price.
It’s not going to be easy for people to judge the frenzy conditions, and as a result, there is going to be overshoot. Even the agents get in a frenzy groove and keep expecting that every house will get multiple offers and a bidding war – and the superior homes probably deserve it.
It is extremely unusual to have more pending listings than actives – I can’t remember a time when it has ever happened before, and certainly not at these record prices.
You can tell your grandkids that you remember when!
This week, we did have the lowest number of new pendings since January, and if these two lines cross again and and we go back to 1:1 or even 1.5:1, it won’t be panic time! A ratio of 2:1 is ‘normal’.
Today’s median list price for the active listings is $3,795,000, and for the pendings it’s $1,950,000.
There is plenty of interest in home-buying but the number of showings has been dropping in the state. It may be due just to pricing – today there are only TWO homes for sale between Carlsbad and La Jolla that are priced under $1,000,000. One is a short-sale, and the other should be marked pending any day.
Even if the NSDCC weekly count doubled from the 69 we had in the last week, the May 2021 listings total will barely get to 400, which is well under last year’s covid count:
NSDCC May Listings
Year
NSDCC Total Listings, May
Median List Price
2017
507
$1,370,000
2018
522
$1,399,450
2019
502
$1,450,000
2020
484
$1,579,716
2021
269
$2,050,000
The YoY increase in the median list price is 30%!
With half of the homes selling over list, the increase in the 2021 pricing is going to be an all-timer!
The only people that matter are those who stay in the game.....because you can't win if you don't play. Burned by Hot Housing Market, Some Buyers Back Off https://www.nytimes.com/2021/07/23/realestate/housing-market-burnout.html?smid=tw-share
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