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San Diego is #1

Going into Thanksgiving. let’s summarize the current market conditions…….

San Diego’s -51.5% (above) is still #1 on Bill’s list of local housing markets for the largest decline in active inventory in October.  The active inventory reflects the velocity of new listings coming to market to replace those going pending every month.

When the active inventory is in decline, it means the supply isn’t keeping up with demand!

How do the raw number of October listings compare to last year?

San Diego’s decline is #1 again:

But how do those October listings compare to previous years?  Wasn’t the end of 2020 the hottest market of all-time? It turns out that new-listings count last October looked a lot like the previous ones, and this year is the most unusual in recent memory:

Yet sales have barely felt the dropoff of supply. The -4.7% YoY drop in sales is a flesh wound, relatively, when you consider that we had more sales than new listings:

Where do people go who have the money to live anywhere? San Diego!

Everybody wants to live here, and nobody wants to leave!

Our market should thrive for years, and could end up being the most expensive real estate in the country.

Seller Optimism Is Up

The frenzy has been making headlines for so long that potential sellers are much more optimistic now.  The 2022 Frenzy could look a lot different (i.e., list prices that start too high with sellers expecting even more). Bold added:

Realtor.com’s survey of 2,583 consumers, which was conducted online by HarrisX in September-October 2021, found that:

The majority of prospective sellers plan to list before the end of the year or in early 2022.

  • Among homeowners who indicated they will enter the market in the next year, 65% expect to within six months, including 19% who have already listed their home.
  • Compared to the spring (76%), more of today’s prospective sellers (93%) have already taken steps toward listing their home, including working with an agent (28%).
  • More than one-third of prospective sellers, at 36% each, have researched the value of their home and others in their neighborhood, as well as started making repairs or decluttering.

Consumers’ top reasons for selling reflect the rising influence of more time spent at home during COVID.

  • Compared to the spring (15%), nearly two-times as many prospective sellers (33%) have realized they want different home features after spending more time at home.
  • With more sellers having children at home this winter (65%) than in the spring (43%), family considerations are a top reason behind homeowner decisions to enter the market: 37% of prospective sellers say their home no longer meets their family’s needs and 32% want to move closer to friends and family.
  • The rise in remote work is also a key driver this winter: 23% of sellers are looking for a home office and 19% no longer need to live near their workplace, up from 6% in March.

Sellers have greater expectations of the current market this winter than in the spring.

  • Over one-third of today’s prospective sellers are eager to take advantage of the current market and think they can make a profit (35%), up from the spring (24%).
  • When asked how the current market impacts the terms they will ask for, top responses included asking for above what they think their home is currently worth (42%) and asking for a quick close (29%).
  • Compared to the spring, more of today’s prospective sellers anticipate that buyers will compete in bidding wars, offer above asking, forgo contingencies like inspections and appraisals and more.

Today’s prospective sellers plan to list in relatively affordable price ranges and are potentially more willing to compromise if their expectations aren’t met.

  • Sellers with homes at the core of the market ($351,000-$750,000) remained the same over March (29%). However, more sellers plan to list in the $500,001-$750,000 price range, which overlaps with recent median listing prices in increasingly popular first-time buyer cities like Riverside, Calif. ($540,000), Austin ($546,000) and Denver ($600,000).
  • More than three-quarters (77%) of prospective sellers would be willing to accept a lower offer to close quickly versus just over half in March (54%).
  • Compared to Spring sellers, a higher number of today’s prospective sellers plan to take alternative routes like moving in with family (19%), as well as temporarily renting their home back from the buyer (29%).

“The right time to sell your home is a deeply personal decision that has to be right for you and your family. For homeowners who do feel ready to sell, getting pricing right from the start is key to a fast and successful home sale in any market – take the goldilocks approach,” said Lexie Holbert, Home & Living Expert at Realtor.com.

https://news.move.com/2021-11-11-Low-Temps,-High-Expectations-Realtor-com-R-Survey-Shows-65-of-Prospective-Sellers-Plan-to-Enter-the-Market-this-Winter

NSDCC Frenzy History

Can we learn from the past frenzy periods?

We didn’t have the huge price increases in 2001-2002 mostly because there was plenty of inventory to go around. It was more of a sales frenzy, which finally started to slow in 2004 as prices exploded.

I left out the 2007-2011 era:

The inventory dipped to an unprecedented low level in 2021, causing buyers to scramble for those homes that were for sale.  We’ve had the most sales since the last frenzy of 2013, and will probably end the year with a total number of sales in the Top Five of All-Time.

Fewer listings make the pursuit more challenging, but this frenzy will continue until prices get high enough to cause sales to slow down.  Keep an eye on the number of sales – our leading indicator!

Zillow 2022 Local Pricing Forecast

Zillow has been vilified for many reasons, but the one thing they have going for them is the viewer data for each area. If their 2022 projections are based on the number of clicks on listings, then their forecast should be a reasonable reflection of the actual demand – a macro look that no one else has.

The Big Question: if they are so confident about the 2022 appreciation, why did they quit home flipping?

Their first move of suspending the program until next year while digesting their inventory was understandable. But why quit altogether? I think it was due to having billions invested in a high-overhead venture that was new to them – and the rich guys hit the panic button, instead of calling me.

I’m sticking with my 2022 NSDCC Pricing Guess of +15%, and agree with Zillow that most areas could see +20%.  But this frenzy is going to come to a screeching halt with no notice (they always do), and it will be when you least expect it.

P.S. ALL of their forecasted value increases here are higher than last month:

NW Carlsbad, 92008:

SE Carlsbad, 92009:

NE Carlsbad, 92010:

SW Carlsbad, 92011:

Carmel Valley, 92130:

Del Mar, 92014:

Encinitas, 92024:

La Jolla, 92037:

Rancho Santa Fe, 92067:

Santaluz/Crosby/4S, 92127:

Coastal Oceanside, 92054:

S. Vista, 92081:

University City, 92122:

The additional last four areas show how overwhelming the demand is for all of north county.

Cantarini Ranch/Sunny Creek

For those who want to purchase a brand-new home in Carlsbad, the Sunny Creek area is the last remaining spot where 100+ homes will be built eventually.

The ‘subject property’ above has listed for $7,500,000 for 19 approved lots:

https://www.loopnet.com/Listing/Sunny-Creek-Rd-Carlsbad-CA/24450629/

But the Big Kahuna is the 104-lot Cantarini Ranch property, which has been in process since 1996.  The detailed history of its development can be found here:

https://cantarini-hollysprings.com/history

It is owned by the Wests, who are the billionaires who also own the West Bistro, and West Steakhouse on Cannon – both of which are rumored to remain closed after the pandemic. The Cantarini Ranch story is a fascinating tale on the trouble people have getting homes built.

NSDCC Market Conditions, 2022

https://www.calculatedriskblog.com/2021/11/2nd-look-at-local-housing-markets-in.html

Our drop in inventory is the most pronounced of any area in the country.

During the previous peaks in pricing, more homeowners would gladly sell for a record price…..and parlay their gains into a bigger home down the street or around the corner.  But that was when you could buy an upgrade for an extra $100,000 or $200,000 – now it takes a million!

What about the long-timers? Those who moved up a couple of times were able to achieve their so-called dream home, and have now become very comfortable.  Even though Prop 9 was intended to encourage the seniors to take their ultra-low property tax basis with them when they downsize, it’s not enough of a benefit to change the trend.

The end result? You need to leave town to make moving worth it. But nobody wants to go!

Of all the towns in America, we probably have it better than anyone….which means we should have the fewest number of people who are willing to leave town.

The logjam in the market is caused by the seniors who are aging in place, instead of downsizing or moving to the retirement home. Those who are over 75 years old are probably staying their current home for the duration.  We need more people who are ages 55-75 to pack it up!

The only hope is that the baby boomers who haven’t saved enough money for retirement are counting on their home equity to get them through. It doesn’t mean they have to move though – they can get a reverse mortgage to tap a decent chunk of their equity – without monthly payments!

But for those NSDCC locals who are willing to leave town in order to liberate their home equity, they will enjoy a hyper-frenzy in 2022.

I don’t think there will be enough of them for us to get back to normal inventory levels.  It could actually get worse in 2022, and inventory go down. Can you imagine a market with less inventory?

Don’t be surprised if we have fewer homes for sale in 2022 – causing the frenzy to blast off:

  1. Virtually every house sells.
  2. Pricing goes ballistic.
  3. Homes are sold differently.

If we do have additional homes come to market, the existing demand will soak them all up.  It will take a flood of inventory to cool off the demand – meaning more than twice the inventory we had this year.

One source of additional inventory might be the retiring realtors who can’t hang with the big dogs, and they turnover their client database to an agent before they leave town.  If you are in that category, let’s talk!

Get Good Help!

Bidding War! Part 5 – Beat This Price

You know there are agents out there thinking, “Jim, you sniveling little baby – why don’t you just get your buyers to offer more money so they can win the bidding war?”

First off, a bidding war is when participants are bidding against each other.

What is practiced around here is blind bidding, where buyers just guess at what offer might win.

Nobody wants to pay more than they have to, or more than they should. With no other influence, buyers will submit their bid based on the comps, or their comfort level.

But when presented with a price to beat, emotion takes over. With the fear of losing the property being a real possibility, buyers are much more likely to go higher than they originally thought, in order to win.

It becomes more about winning and losing, than paying a comfortable price.

There will be an occasional blind bid that swamps the boat, and produces a sales price that others wouldn’t have touched. But how do you know? You don’t.

Conducting an auction-like process where bidders are pitted against each other and know the number they have to beat is the most reliable way to reach top dollar.  The fear of loss is real, and motivates people to do things they wouldn’t have done on their own.

Yet, realtors around here won’t consider! Why not?

Most everyone thinks it’s against the rules, but this is in the contract:

Offers not necessarily confidential: Buyer is advised that seller or listing agent may disclose the existence, terms, or conditions of buyer’s offer unless all parties and their agent have signed a written confidentiality agreement. Whether any such information is actually disclosed depends on many factors, such as current market conditions, the prevailing practice in the real estate community, the listing agent’s marketing strategy and the instructions of the seller.

Agents can include the confidentiality agreement but it doesn’t mean anything unless all parties agree.

In my bidding war on Saturday, the agents were happy to participate.  They enjoyed the transparency, and the chance for their buyers to determine their own fate!

September Comments

I got a chuckle out of the highlighted comment above, but it feels like it!

NSDCC October listings:

2018: 401

2019: 366

2020: 400

2021: 177

Today’s NSDCC counts:

Actives: 249

Pendings: 248

The 2022 selling season could be disappointing at this pace – and the inventory doesn’t have to pick up.

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