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
||Number of New Listings
||Median List Price
||Avg. Mortgage Rate in April
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.
But how do you know which is which?
Get Good Help!
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.
Homeownership is for the affluent!
Still no flood of inventory yet.
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
||NSDCC Total Listings, May
||Median List Price
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!
I had said previously that the frenzy will run out of gas in June.
I’m sticking with it.
There aren’t enough new listings coming to market to keep the buyers’ interest. It is the momentum of seeing hot new listings flying off the market every week that keeps the frenzy cooking.
The inferior homes won’t be attracting the crowds – and multiple offers – like they were at peak frenzy (which will probably end up being the August-March time period). We will see an occasional hot new listing that will get frenzied up and sell for 10% to 20% over list, but the regular listings should feel more normal.
I’ll offer one example from this weekend. There was a new listing of a larger one-story house that had three nearby sales that had closed for higher prices in the last 90 days. But as of last night, the agent had not received any offers.
It’s not the end of the world. It’s probably more of a sign that sellers are selecting a list price that includes all of the covid-frenzy premium that buyers are willing to take.
A more-normal, balanced market is good for everyone. Sellers will still be able to sell for these prices, and buyers who decided to wait it out will slowly re-enter the buyer pool, keeping the demand in place. All we need to do is figure out the prices!
I already guessed that the runaway frenzy will start to temper in June. Here are reasons:
- Some of the craziest demand has been satisfied.
- Other buyers will take a break and go on vacation.
- Overly-optimistic pricing by some sellers.
- It’s been red-hot for 10-12 months.
- Newsom says the state will be 100% open by June 15.
Covid-19 has been blamed for why many potential sellers have delayed their plans to sell. But now that the pandemic is wrapping up and sellers have had a +20% gift of appeciation dropped in their lap, you’d think they would be flooding the streets with inventory.
But there’s no flood yet. In May, 2019 we had 502 NSDCC homes come to market, but so far this month we’ve only had 119 new listings.
Could more inventory be coming?
Prop 19 was heralded as the solution to get seniors moving again – but we’re still waiting. They should stop discriminating against younger people and let everyone take their old property-tax basis with them to their next home.
Owners of investment properties should be expediting their plans to trade for newer/better homes before they change the 1031 rules. This article says that investors will still be able to defer taxes on the first $500,000 profit, but Uncle Joe wants to tax the rest. Americans hate the idea of paying taxes, so they will just keep their old property, rather than selling – which means less inventory.
Any potential seller who wants to stay local doesn’t see many homes that would make it worth the hassle of moving. Sure, selling their home sounds great, but we’re to the point where you need to leave town to really cash in – but who wants to do that?
Sellers have the most ideal market conditions of all-time to sell their home, yet they are holding back.
If we do see a slowdown this summer, it won’t be because of a flood of inventory. It will be due to prices having gone completely bonkers – price will fix anything!
In the last week, there were 90 new listings between La Jolla and Carlsbad, which is the highest weekly number of the year. The total number of pendings also hit its YTD high for 2021:
NSDCC Weekly Listings & Pendings
||Number of New Listings
||Number of New Pendings
||Total Number of Pendings
|Jan 4, 2021
The frenzy is at that stage where any additional listings of quality homes at decent prices will fuel more action – making it crazier. But more sellers are pushing their list prices to unimaginable numbers, which could slow the trend.
How do the NSDCC active listings today compare with last year?
NSDCC Detached-Home Active Listings, First Week of May
||# Actives, May 2020
||# Actives, May 2021
|$1.0M – $1.5M
|$1.5M – $2.0M
|$2.0M – $3.0M
Even though pricing has skyrocketed, buyers are grabbing anything they can get their hands on, at any price. Sales last month are 27% above where they were in April, 2019 (336 vs 265).
Two weeks ago we hit a slight dip attributed to the spring break, and the pendings have roared back:
Three Weeks Ago:
Two Weeks Ago:
One Week Ago:
While the +20 pendings over actives is impressive, the 362 is far from an all-time high. The total number of pendings was in the 400s between June 22nd and Nov 30th, with the high being 491 on September 7th.
These average $$/sf are touching new highs though, and the sellers will keep pushing:
NSDCC Detached-Home Active Listings
||# NSDCC Active Listings
||# Sold Last 60 Days
|$1.0M – $1.5M
|$1.5 – $2.0M
|$2.0M – $3.0M
If you can buy a house between La Jolla and Carlsbad for less than $600/sf today, you’re doing pretty good!