Wondering how the local market can survive higher mortgage rates? It starts with the cash buyers laying the foundation of comparable sales, and financed buyers deciding if they can keep up.
Thanks to Julie Chang for posting this data – her thread of comments here:
Actives = green, Pendings = blue
Last week, a reader suggested that we highlight the Under-$3,000,000 market.
It is astonishing that in an area of 300,000 people, there are fewer than 100 houses for sale priced under $3,000,000 (and none under $1,195,000).
Our standard for a healthy market is a 2:1 ratio of actives to pendings, and today it’s under 1:1….there are more pendings than actives!
The Under-$3,000,000 market is doing great, and if it weren’t for the buzz around higher rates and the uber-frenzy at the start of 2022, we’d be on our merry way through the spring selling season.
But last year’s first quarter was NOT normal:
If someone you know is thinking of selling their home, tell them to go ahead – the market is fine.
Realtors are known to comfort buyers who have lost a bidding war by saying, “There will be others”.
But will there be?
Especially for those at the entry level of every market….where the action is the hottest.
Above are the NINE houses that sold under a million dollars between La Jolla and Carlsbad in 2022. Those on the list with a street name that starts with Don are mobile homes in Rancho Carlsbad – which by itself might make you scratch your head when you see mobiles selling for as much as $830,000!
It’s early in the new year, and of course everyone thinks that home prices are coming down fast so this problem will be cured shortly (NOT!).
So far in 2023, this is the ONLY listing of a NSDCC detached-home priced under $1,000,000:
Oh, you want a decent home too? It’s even worse for the picky buyers.
Buyers can expect that pricing of decent entry-level homes this spring will start around these numbers:
Carlsbad: $1,250,000
Encinitas: $1,350,000
Carmel Valley: $1,800,000
RSF, Solana Beach, Del Mar, La Jolla: $2,000,000+
And good luck getting your hands on one!
I was going to ignore one more forecast by a financial services company (what do they know about selling homes?), but this is from the squid, plus Derek mentioned it in the comment section.
None of these forecasts provide any evidence or reasons for their conclusions. They are just guessing, apparently, and merely searching for more eyeballs.
They are probably transfixed on the median sales price, one of the worst tools available.
San Diego County Detached and Attached Homes, Median Sales Price
April: $871,000
December: $757,250
Diff: -13%
There you go – the county’s median sales price has dropped 13% so far.
Do you see that much in the market?
I’ll give you a better example:
NSDCC Detached-Homes, Median Sales Price
March: $2,625,000
December: $1,895,000
Diff: -28%
Do you see houses between La Jolla and Carlsbad selling for 28% less than they did in March? Me neither. NSDCC sales dropped in half (207 vs 101), and the homes that are selling are smaller (average square footage is -13%) and more inferior which explains why the median sales price should be dropping. But nobody mentions the additional variables.
We are being dumbed down by the squid, and others.
Sellers should just wait it out.
Link to ArticleIt’s impressive to see so many high-enders go into escrow this quickly – these are the NSDCC homes listed over $4,000,000 than have gone pending since the first of the year:
Not mentioned above is the listing that hit the MLS on January 3rd, went pending on the fifth, and closed on the 17th – and went back on the market the next day for $620,000 more:
https://www.compass.com/app/listing/4532-rancho-del-mar-trail-san-diego-ca-92130/1227253413756497393
It sold for $5,380,000 in 2019, $5,959,000 in 2014, and $5,650,000 in 2013.
Here are the historical counts:
| Year | ||
| 2018 | ||
| 2019 | ||
| 2020 | ||
| 2021 | ||
| 2022 |
Some people haven’t gotten off the couch yet so it’s hard to say if all of the comments are an accurate depiction of what’s happening. But those who are willing to leave an upbeat tweet must feel pretty good about them, knowing that the wrath of real estate twitter will descend upon anything positive.
The full collection:
https://twitter.com/NewsLambert/status/1615840435049762820
The doomers living in mom’s basement want you to believe that the sky is falling.
They’ve never owned a house before, let alone sell real estate for years. Yet, their voice is loud enough that they are winning the battle of opinions about where the market is going – mostly because the entire realtor industry is just standing quietly on the sidelines, instead of providing guidance.
There is one simple correction underway.
The gap is back!
The difference between the fixers and the creampuffs is back, and it is growing, thankfully. The homes that aren’t spruced up are getting hammered on price. It’s probably not that obvious yet because they are the listings that are just lying around not selling. But once they have been on the market for 2-3 months, they are going to get lowballed – and by then, there isn’t much the seller or listing agent can do.
Take your pick. Sell early, or sell low.
The doomers are living in your head now. They don’t take the time to dive deep into the results, or look at an open house. They just group all sales into the same bucket, check the median sales price or the Case-Shiller Index, and declare bloodbath because those too-simple measurements are down a couple of ticks.
It causes buyers to wait for the creampuffs, and ignore the fixers – or lowball them.
I made this observation in the original Coffee Bet in 2006. It was more dramatic and easier to spot back then because the banks didn’t have a problem giving away the dumps, and the downdraft was swift and certain. But these days, the sellers – all loaded with equity – are much more likely to hold out. They saw fixers selling for ridiculous prices during the frenzy, and want to believe that will still happen. But it’s the only change we need to throw the market into tumult, because nobody points out the gap.
Expect that there will be few superior properties for sale, and they’ll sell for a premium. And the rest won’t.
It would be nice if local realtors would adopt this sentiment, and publicize it.
Or at least say something about this:
Get Good Help!
Of course the current conditions look worse when comparing to the hottest real estate market ever. Having bidding wars on 21% of homes for sale sounds great to me.
The discouraging part about Bill’s post today is how the realtors have bought into the negativity.
This is the first downturn to be affected by amateurs on social media, and realtors can either price ’em high and repeat these same negative talking points seen everywhere now, or they can get better at their craft, price their listings attractively, and be part of the solution:
#Houston, TX: “Home prices have most first-time home buyers priced out of home ownership. It’s even worse with the higher interest rates decreasing what the buyers can qualify for.”
#Denver, CO: “Cost of living [and] interest rate [increases] are keeping most buyers from buying.”
#Baltimore, MD: “The market is transitioning. Inventory is still low and the number of buyers looking is less due to rising interest rates. Buyers are qualifying for less, so they are pulling back. [I am] seeing less as-is sales, more home inspections, and negotiations overall.”
#Sarasota, FL: “I’ve had numerous buyers looking but the prices are much higher than they want to spend. Many pulled back waiting for the market to go down.”
#LosAngeles, CA: “Skyrocketing interest rates are pushing buyers out of the market (they can no longer afford homes that were in their price range just a few months ago) and making homes more difficult to sell for sellers and their agents.”
#Phoenix, AZ: “Buyers are very nervous about making a decision.”
#NewYork: “Open house attendance is weaker than usual, and sales take longer.”
#Minnesota, MN: “Still seeing a fair number of cash sales as competition to financed sales.”
#StLouis, MO: “Things are slowing down slightly, but I have found that the good properties are still moving quickly with multiple offers and going above ask.”
#Barre, VT: “Our local market in Lamoille County is very flat and challenging. Local working families are outpriced by the prices and interest rates. The neighboring resort town has slowed but there are still cash buyers for the million plus market.”
#OrangeCounty, CA: “Interest rates have put the brakes on the market.”
I did sign up to be on their realtor-comments list!
https://open.substack.com/pub/calculatedrisk/p/interest-rates-have-put-the-brakes
The biggest fear for the North San Diego County coastal region is a meltdown in Bay Area prices.
It’s been estimated that 50% or more of the buyers who were bidding up homes here during the frenzy are from the Bay Area, and Silicon Valley in particular. If prices were to drop 23% to 30% there, it would impact how much they would be willing to spend on replacement homes here.
This is only one example but we can say that this sold at the peak of the market, or close.
This was my uncle’s girlfriend’s house, and when I was there in November to pay my last respects, I told them that my guess at the current value was high-$2,000,000s.
They hired a good agent who spruced it up and staged it, and they listed for $3,195,000 on March 2nd.
A month later, it closed for $3,710,000 for 1,763sf.
How does it look today?
Today’s zestimate is within 1% of the sales price in April, which had been bid up $515,000 over the list price at the time. What are the comps that Zillow says they used to determine the value?
Four recent closings:
It is only one example, and certainly, not everyone from Los Altos is moving here. But just looking at those four recent sales, it seems like that area is holding up pretty good.
https://www.zillow.com/homedetails/1200-Brucito-Ave-Los-Altos-CA-94024/19620416_zpid/
For those who are willing to investigate the sales data in our local areas, here are the detached-home sales from the last 90 days. Poke around a little, and I doubt you’ll believe that we’re getting ‘creamed’.
NW Carlsbad 92008 sales – last 90 days
SE Carlsbad 92009 sales – last 90 days
NE Carlsbad 92010 sales – last 90 days
SW Carlsbad 92011 sales – last 90 days
Encinitas 92024 sales – last 90 days
La Jolla 92037 sales – last 90 days
Rancho Santa Fe 92067 sales – last 90 days
Del Mar 92014 sales – last 90 days
Solana Beach 92075 sales – last 90 days
Carmel Valley 92130 sales – last 90 days
The highlights: three RSF sales over $10 million in the last 90 days; nine sales above $5,000,000 in La Jolla (and 60 sales overall!), 81 sales in Encinitas – more than one every business day; and of the 182 sales in Carlsbad, 46 of them were $2,000,000 and higher.
Are you looking for an experienced agent to help you buy or sell a home?
Contact Jim the Realtor!
CA DRE #01527365, CA DRE #00873197
