Aging-In-Place & ADUs

Around the coast, the housing stock is finite – there isn’t any more room to build new houses.  Whether they knew it or not at the time, everyone has bought their ‘forever’ home and aging-in-place has become the natural trend. The higher prices and rates have locked out the majority of possible home buyers, but there still aren’t enough homes to sell – evidenced by the relatively low inventory.

A month ago, there were 466 houses for sale between Carlsbad and La Jolla, and today we’re down to 422 active listings – in an era where other areas are reporting a surge in inventory.  There is a real push to build granny flats to create more housing, but that isn’t going to help the resale market. In fact, the building of ADUs will actually make the real estate market WORSE by keeping more seniors aging-in-place, and limiting the resale inventory.

Higher rates and prices will only continue the shift of homeownership being for the elite – only.

From the AARP:

The COVID-19 pandemic has altered how people think about their lives and homes – which has collided with exponential growth in the number of older heads of households and renters. These trends highlight the urgent need to rapidly increase and improve age-friendly and affordable community and housing options.

AARP’s 2021 Home and Community Preferences survey found that over three-quarters (77%) of adults age 50 and older want to remain in their homes as they age. This desire is consistent across the lifespan with 63% of adults overall saying the same. The numbers of older adults wanting to remain in their homes as they age has remained relatively consistent for more than a decade and was not impacted by the pandemic.

Increasing the number of multigenerational households, providing more options like accessory dwelling units (ADUs) or “in-law units”, and encouraging renovations that support aging-in-place are all critical to support this desire.


Post-Frenzy Coffee Bet

The last coffee bet began in 2006 when it was obvious to me and others that the market bubble was popping, so let’s examine the data back to those years to see if we can learn anything that might be helpful when trying to predict the future:

NSDCC Listings and Sales between January 1st and August 31st:

Number of Listings
Number of Sales
Median Sales Price

The most recent non-pandemic years, 2018 and 2019, were eerily identical, which suggests that the same market conditions can prevail for years in spite of rates (which varied from 4.03% in January, 2018 to 4.87% eleven months later, and then back down to 3.72% in December 2019).

The most stunning data point is how the number of listings has plummeted this year, even though sellers could have sold for all-time high prices. Record pricing used to motivate more people to sell, not fewer!

Agents sitting on unsold properties will ‘refresh’ their listings every month or two, and those days are back so we’ll probably have at least the same amount of 2023 listings just due to the extra 10% to 20% of refreshers. But the inventory is going to be bleak no matter what happens, so that alone will drive the market in 2023 and beyond. Here is a visual:

The thing I remember most from the last downturn was how the market turned earlier than expected. There was a blog post from April, 2009 entitled Coffee Bet 2 where I thought prices would go down another 25%, when that month ended up being the actual trough for the SD Case-Shiller Index.

Even with the buyers who over-analyze and stay on the sidelines for 2-5 years, there will be others – mostly those out-of-towners who don’t have a house here yet – who will buy when they find the right house.

Sales will likely be dreadfully low, and I think NSDCC pricing will be FLAT in 2023.

During the selling seasons, there will be some spectacular sales of those family estates with big yards and pool on culdesacs…..and prices trend higher!  But then as the inventory diminishes over the rest of the year, the pricing either goes flat or we give it all back in the second half of the year – like what happened in 2018 and 2019…and what will probably happen in 2022 too:

Here are NSDCC markers for this year:

January 2022:

Median List Price: $2,219,888

Median Sales price: $2,250,000

August 2022:

Median List Price: $2,200,000

Median Sales Price: $2,150,000

If it weren’t for those crazy three months before rates went up last spring, the 2022 data would probably have already looked fairly flat anyway, so it’s really not risky for me to guess that it will continue. There will be crazy-high sales, and stunningly-low sales too, but in the end, we’ll be living in Plateau City.

In the first coffee bet of 2006, I used the Davidson Starboard tract as a marker, and coincidentally I have a listing there now.  The neighborhood is arguably the best in the area, and La Costa Oaks South homes in general, are among the newest and most desirable homes in SE Carlsbad.

Let’s look up at the end of 2023 and see how the LCOS median sales price compares – even with it being inflated by early-2022 sales.  These closings are from the last six months:

Even if the median sales price deteriorates somewhat in the next 15 months, I predict that my sale will be the lowest Plan 2 sale in the interim, and there won’t be any LCOS sales below $2,000,000 between now and the end of 2023 (the $1.875M sale was FSBO).

The ultra-low number of listings in 2023 will throttle any big price changes in either direction.

My NSDCC pricing guess for 2022 was +/- 5%, and is close, and next year will probably be similar too.

I’m sticking with ZERO change in pricing next year – which isn’t a sexy number but will reflect the general malaise and discomfort among the participants we hope for lower rates but know they won’t change enough to make much difference anyway.

NSDCC List Price vs. Sales Price

Want proof that Jay Powell has tamed the housing frenzy, and reversed the trend of buyers having to pay well over the list price to win a house? Here are examples of the list and sold prices of August home sales between La Jolla and Carlsbad – note the relationship to the days-on-market (DOML):

So far, we’ve had 154 August closings reported, which means we should get up to 175 or so by the time every sale is inputted.

I’ll do the final count later, but of the 154 sales, there were 23% that sold over their list price. But it is much more reasonable and sustainable if buyers only have to pay $25,000 to $50,000 over the list price for the creampuffs, rather than $400,000 to $800,000!

Sellers shouldn’t be bummed either, because their huge gains are priced in now.

Early 2022 Was The Culprit

Yesterday’s Case-Shiller Index for San Diego was 425.26, which is 11% higher than it was in January.

But check how the trend increased between January and now.

Prices rose as fast as ever in early 2021 (yellow above).  If they would have mellowed out along my red line, then we would have experienced slightly-increasing prices for the last year. But noooo! Instead, the early-2022 buyers – egged on by their realtors – insisted upon paying ridiculous amounts over the list price to win a house.  Hopefully that practice is done.

The only reason the June reading was 11% higher than January was because it came down a bit.  The San Diego Case-Shiller Index rose 11.2% between January and April, 2022, which was an annual clip of 33.6% – which nobody would have believed was sustainable after rising 43% since the pandemic started.

If the SD Case-Shiller just goes back to where it started in January, it will be a 10% drop from today, which will sound like a disaster. But the annual appreciation will be zero, which is not only reasonable, but sustainable for a while.

Is anyone going to mind if we start 2023 where we started 2022, price-wise?  If mortgage rates can stay in the 5s, and hopefully the low-5s, we should be fine!

“San Diego Prices Drop 5.6%”

From cnbc – an excerpt:

Some local markets are seeing even steeper declines over the last few months. San Jose, California, saw the largest, with home prices now down 10% in recent months, followed by Seattle (-7.7%), San Francisco (-7.4%), San Diego (-5.6%), Los Angeles (-4.3%) and Denver (-4.2%).

Home prices were still 14.3% higher in July compared with July 2021, which is more than three times the historical annual price growth, but the majority of that growth took place over the first five months of 2022, before the big spike in mortgage interest rates.

The average rate on the popular 30-year fixed mortgage began this year right around 3%, according to Mortgage News Daily. It climbed slowly month to month, pulling back slightly in May but then shot more dramatically to just over 6% in June. It is now hovering around 5.75%.

“We’ve been advising for quite some time that the dynamic between interest rates, housing inventory and home prices was untenable from an affordability perspective, and at some point, something would have to give,” said Andy Walden, vice president of enterprise research and strategy at Black Knight.

“We’re now seeing exactly that, with July’s data providing clear evidence of a significant inflection point in the market,” he added. “Further price corrections are likely on the horizon as we move into what are typically more neutral seasonal months for the housing market.”


Did you see it? Probably not, because homes selling for 5.6% below comps would be about 10% under list.

Did you feel it? I’d say yes, it’s in the air. But sellers are very reluctant to go along, and the number of sales are the proof (half of last year). Having more actives listings sitting around not selling are suspicious, but if they don’t sell then we really don’t know for sure. Sellers will be much more likely to cancel their listing at this point, than reduce their price.

Are we going to hear more like this? You better believe it! Wait until Tuesday’s Case-Shiller!

What are you going to do about it? The only question that matters!

Obviously, the majority of buyers will be happy to wait longer, hoping this be the first of many drops.  But for those who sense an opportunity, there will be an occasional deal – but you will have to earn it. Home sellers aren’t going to list their home for 5% to 10% below comps – they never have, and never will.

Those who stay in the game and make offers on several properties might be able to score a deal.

Inventory Shortage To Get Worse?

Buyers who worry that their money doesn’t get them much these days will be bummed to hear that it’s probably not going to change.

The changes in the market forces are conspiring together to create less inventory, and a couple of big blows this year could really drive down the number of houses for sale in 2023.

Look at the trend so far:

Number of NSDCC detached-homes listed between January 1st and July 31st

NSDCC Total Number of Listings

Why don’t people want to sell? Or why do those who might sell, talk themselves out of it so quickly?

  1. Having to pack everything up.
  2. Difficulty of finding a suitable replacement home.
  3. Paying six-figures in capital-gains tax.
  4. Have to leave town to make it worth it

Added to the list this year:

  • Getting a higher mortgage rate.
  • “Bad time to sell”

We know that over 80% of the existing mortgages have a rate that’s lower than what you can get today. Even if you could sell your home for top dollar, the thought of paying a higher interest rate is enough to stop potential sellers in their tracks.

But the last one is the killer.

Once sellers get the feeling that the market has cooled off and they might not be able to sell their home for their fantasy price, then it is WAY TOO EASY for them to suspend all thoughts of selling, and decide to wait until “the market gets better”.

Jay Powell thinks that raising rates will cause home prices to come down, but he didn’t talk to any homeowners about it.  It’s only going to continue the trend of fewer homes coming to market, and keep pricing high.

The 2023 Selling Season could be an all-time dud, just because there will be so few homes available.

Dead or Simmering Market?

Sales are down, and listings are sitting longer, so it would be easy to assume the market is dead.

Buyers want it to believe the market is dead so they don’t have to act. They are seeing everything though doom-colored glasses, which reinforces that it’s a great time to play it safe.

I’ve been saying that buyers are on vacation, and I said it a little stronger on the video last night.  But I’m sure there are some who think I’m just talking my book, and then gravitate back to the fence where it is really comfortable right now.

How can we tell if the market really is dead, or just taking a break?

The best way is to monitor the Zillow views and saves – and hope Zillow doesn’t manipulate those too.

Here is a cross-section of new listings this week:

According to the listing agent, they received TEN offers here. They accepted one, and has a backup too:


On Sunday morning, this listing right around the corner from the one above hit the MLS, which probably caused the losers from Palenque to rush over for a look.


This is in a neighborhood that is notorious for small yards (they are detached condos officially), but this yard looks decent – check the views and saves here after just 4 days on the market:


Oh, yeah Jim but those are starter homes – what else do you have?

How about this new listing in Olde Carlsbad, which is not only a very eclectic area (i.e., lower comps nearby) but there is freeway noise and buses roll down Highland daily.  Yet the agent had so much action on this new listing that she raised the price – substantially:


Carmel Valley is known for its newer homes, and no one would be surprised if those dodge the bullet.  But this was built in 1985!


It’s not just the cheapies either:


Look at the number of Zillow views and saves!

Just based on those, there is a strong undercurrent of buyers who are monitoring the market closely – and with school starting, this has to be the worst week of the summer for distractions!  We may coast through the rest of 2022, but don’t be surprised if the frenzy conditions bounce back in 2023!

My listing – how can I have this much action and not be optimistic:

Zillow Local Pricing Forecasts

The latest Zillow 1-Year Forecasted Values are still expecting a fairly strong appreciation rate over the next year – these estimates are the same or higher than last month! I can see a path to how this could happen.

The Spring Selling Season gets frenzied up for 3-4 months where buyers and sellers all jump in at the same time, and then the market goes flat for the rest of the year…..kinda like this year!

NW Carlsbad, 92008:

SE Carlsbad, 92009:

NE Carlsbad, 92010:

SW Carlsbad, 92011:

Carmel Valley, 92130:

Del Mar, 92014:

Encinitas, 92024:

La Jolla:

Rancho Santa Fe, 92067:

They do have website-viewer data that nobody else has, and hopefully they are using it to track the activity and make predictions.

Frenzy Monitor – End of Summer

The reason for breaking down the active and pending listings by zip code is to give the readers a closer look at their neighborhood stats. We’ve considered a 2:1 ratio of actives-to-pendings to be a healthy market.

Most areas today have the same or better stats as they did last month. The number of active listings hit their peak in August last year, as usual, and it’s likely that the count of unsold listings will drop slowly over the rest of 2022 (and the pendings follow). Prepare for 2-3 months of NSDCC sales being under 100!

NSDCC Actives and Pendings

Taking out the high-enders La Jolla and Rancho Santa Fe, the actives-to-pendings is 2.4-to-1 (291:121), which isn’t bad, all considered.

Mid-February, and the 2023 Selling Season, is only six months away!

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