Have you been searching for homes all summer, and still haven’t bought one?
Do you feel like the inventory has been mostly garbage that you wouldn’t buy at any price? Then once or twice a month you see a nice buy that turns into a bidding war and you don’t win it? It happens, and unfortunately it might keep happening so be resilient.
This is the time of year when buyers want to give up.
It’s easy to get discouraged because you aren’t seeing as many new listings come to market these days – it’s hard to pay attention when days or weeks can pass without seeing a decent house.
Here are reasons why you should hang in there:
Competition is waning. Some of the people we’ve been competing against have bought houses, but most importantly, more buyers have given up on 2020, and will wait for 2021.
Inventory is dry, but you only need one.
You can still get a mortgage rate that starts with a 2.
It will be worse next year.
Looking at houses has never been more annoying. Agents have gone nuts with their demands for masks, gloves, booties, bank statements, preapproval letters and your first-born just to see a house. Many aren’t even nice about it – they have plenty of showing requests, so their attitude is if you don’t like it, kiss off.
If it bothers you that much, just wait a couple of weeks – they get more accommodating the longer the house is on the market. But know that these demands have become a tactic to screen out buyers so they don’t have to work as much. I heard a listing agent complain recently about having to process paperwork for 52 showings – you know many just stop answering their phone.
While it is a hassle, you must see the best homes in person in case it’s a winner and you want to grab it.
What can you do to make the search more bearable?
Here are a few tips:
Revise your auto-searches. They are ‘upgrading’ the MLS this weekend, and our realtor auto-searches will need to be re-inputted. It will be a good time to re-visit yours to make sure they weren’t affected, and while you are there, bump your price up. It’s the best way to see better quality!
Use the 3D tours to save time. You’ve heard me say that Matterport 3D tours are terrible for sellers because agents rely on them to do the selling. But the 3D tours are fantastic for buyers – be patient with them and remember that you will find something wrong with every house.
Use Google Street Views to cruise the neighborhoods. How many times to you roll up to a new listing and the immediate neighbors make you want to keep driving? Avoid those time-wasters by viewing the neighborhood online.
Accept the fact that every house will need $25,000 to $50,000 in improvements/upgrades. You will have to compromise somewhere – don’t give up on a house just because you find a defect. Money will fix everything except location – rejoice when you find something to fix!
Be prepared to make strong offers. Know the comps, have a solid preapproval letter, and shorten contingency timelines – which I hate to do but it’s one of the addictions now.
The market isn’t going to go down. Today’s inventory is almost entirely full of the homes that have been passed over for weeks or months. Longer market times and price reductions only mean that those are dogs, not that the market is suffering. You want to buy a premium property anyway, and those will always be in fashion.
Keep the goal simple: Buy the right house, at the right price.
Be picky, rely on your tools, keep a laser focus and remember that it only takes one.
The 2021 selling season should be the craziest market in the history of the world.
My theory: The covid-19 pandemic has jumbled the usual timing of the elective movers, and we are experiencing a not-natural compression of reasons to move.
We will have our Big Three (death, divorce, and job transfer) causing their usual sales. Making the difference will be the elective buyers and sellers who expedite their plans.
There are always a group of buyers and sellers who contemplate moving for 1-5 years before they get around to it. But the current environment (covid+ultra-low rates+unemployment+prices+politics) has captured their attention, and it will pull forward buyers AND sellers from 2022-2023.
Plus we will have some buyers AND sellers who ordinarily wouldn’t have even thought about moving until 2022-2023 who are realizing sooner that they should move in 2021.
Not all of them, but some of them.
It won’t take many.
We have been very fortunate to have a steady consistent flow of listings and sales over the last few years. The number of listings between January and August varied by less than 1% between 2017 and 2019.
The pandemic changed that though, and look at results. Listings dropped off significantly YoY (-11%) yet sales are only down 4%. Oh happy day, we’re surviving the covid – for now!
NSDCC January-August
Year
Number of Detached-Home Listings
Number of Detached-Home Sales
2015
3,811
2,160
2016
3,930
2,085
2017
3,560
2,135
2018
3,586
1,969
2019
3,604
1,928
2020
3,206
1,851
But we know that more than half of boomers delayed their plans of selling in 2020.
All we need is for the compression of moving motivations to cause 500-800 more listings in the 2021 selling season and it will be a whole new ball game – unlike anyone has seen recently!
Historically, buyers are known to freeze up quickly when they see more homes hitting the market. But all we need there is 300-400 more buyers to jump at the chance of securing their forever home at ultra-low rates, and ending their unsettling insanity of 2020.
With all the bidding wars, there are probably 300-400 unsatisfied buyers in the marketplace today.
Next year’s selling season could be the Frenzy of All-Time!
Let’s note that searching for homes and actually moving are two different things – which goes for the previous Zillow article too about searches being equal to last year.
Above are the North Coastal interactive graphs broken down by price (which includes Oceanside, which doubles the inventory of homes for sale under $1 million vs. NSDCC). Our total sales in 2020 should be about the same as they were last year, which is a reminder that 30% to 40% of the listings every year don’t sell – the more-casual sellers didn’t bother to list at all this year.
Interesting that the higher-end pendings are currently setting records for any time of year. The elite are taking advantage of the low rates and are on the move!
The chart above shows the June page views, which was probably the peak hysteria for those who were considering a drastic change. I think the heightened activity and sales could have just been from all the people who had been thinking about a move over the last 2-3 years, and they finally got on their horse. If we end up with about the same number of sales as last year, which looks probable, then sales were merely redistributed from April/May to late summer. Maybe a few more people left for the suburbs, but this report makes it look like it’s not a mass exodus.
From Zillow:
Are people fleeing the cities for greener suburban pastures?
Some faint signals may have emerged in certain places, but by and large, the data show that suburban housing markets have not strengthened at a disproportionately rapid pace compared to urban markets. Both region types appear to be hot sellers’ markets right now – while many suburban areas have seen strong improvement in housing activity in recent months, so, too, have many urban areas.
Zillow’s Economic Research team analyzed a variety of Zillow data points in order to illustrate this trend. Data related to for-sale listings are generally the best indicator of real-time housing market activity, and in all but a few cases, suburban markets and urban markets have seen similar changes in activity in recent months: about the same share of homes selling above their list price, similar changes in the typical time homes spend on the market before an offer is accepted, and recent improvements in newly pending sales have been about the same across each region type.
Other indicators also help drive home this conclusion. Changes in annual home value growth rates from just before the pandemic to now have been about the same for urban and suburban markets. In some regions where there is a divergence, the discrepancy can be explained by trends that were unfolding before the pandemic. Page view data also show that suburban home listings have not grown in relative popularity in the past few months. For-sale suburban homes attract more than three times as much of Zillow’s traffic as urban listings do, but that was the case last year as well. Interest in detached single-family homes (or similar) has not seen a marked increase in the past year, either.
We kind of assumed they would have to keep rates low, but now it’s official:
The Federal Reserve announced a major policy shift Thursday, saying that it is willing to allow inflation to run hotter than normal in order to support the labor market and broader economy.
In a move that Chairman Jerome Powell called a “robust updating” of Fed policy, the central bank formally agreed to a policy of “average inflation targeting.” That means it will allow inflation to run “moderately” above the Fed’s 2% goal “for some time” following periods when it has run below that objective.
The changes were codified in a policy blueprint called the “Statement on Longer-Run Goals and Monetary Policy Strategy,” first adopted in 2012, that has informed the Fed’s approach to interest rates and general economic growth.
“Many find it counterintuitive that the Fed would want to push up inflation,” Powell said in prepared remarks. “However, inflation that is persistently too low can pose serious risks to the economy.”
We hear the term, ‘tight inventory’. What does it mean?
Fewer homes for sale?
Fewer of the lower-priced homes for sale?
Homes selling faster?
The best buys are flying off the market in the first day or two?
NSDCC detached-home statistics for Jan 1st – Aug 15th:
Year
# of Listings
Median LP
# of Sales
Median SP
Avg DOM
Median DOM
2016
3,727
$1,399,000
1,912
$1,150,000
43
22
2017
3,349
$1,425,000
1,994
$1,229,500
45
19
2018
3,390
$1,497,500
1,819
$1,320,000
40
18
2019
3,411
$1,550,000
1,789
$1,300,000
43
22
2020
2,991
$1,659,000
1,643
$1,400,000
41
18
20vs19
-12%
+7%
-8%
+8%
-5%
-18%
The average and median Days-On-Market metrics are within the normal range, so generally-speaking, homes aren’t selling faster than before.
We’ve had fewer homes for sale (-12% YoY), but sales are only down 8% which isn’t bad. The drop in sales between 2017 and 2018 was slightly more at 9% so we’ve endured this previously.
The overall volume is only down 0.4% YoY ($3,000,850,233 vs $2,988,471,818) – so those on commission (realtors, lenders, escrow, and title) shouldn’t be too concerned with ‘tight inventory’.
Who should be concerned?
Buyers on the lower-end of every market.
We have eleven NSDCC houses for sale priced under $900,000 (in an area of 300,000 people):
Two of those aren’t on the market yet (coming soon!), and a third has a contingent buyer.
Tight inventory = buyers are getting squeezed up on price.
My video on Monday touched on the different groups of buyers and sellers that should be very active in the 2021 selling season. Let’s break it down further, shall we?
SELLERS
Boomer liquidations – When we first started talking about boomer liquidations, people in their 60s scoffed and shrugged it off. Now they are in their seventies, and the burdens of homeownership have never been so apparent. Stuff needs to be fixed regularly, and that dang property tax bill keeps coming twice a year. If you didn’t mind leaving town, a homeowner’s equity position has never been so solid, and you could go to most towns in America and buy a house for cash and live happily ever after. It’s a temptation that aging boomers will find harder to resist in 2021.
Health considerations – Covid isn’t going away, and for those who are physically challenged, selling their house here and moving to a healthier location will feel like a life-or-death decision – they need to do it. Cashing out their equity is a nice bonus too, and provides enough grease to make it easier to leave San Diego. Let’s note that there are good doctors everywhere, and while the transition may be uncomfortable for the first couple of months, you’ll adjust.
Grandkids – Obviously, it is harder for the kids to get a foothold here than the parents who came 10-30 years ago – home prices have doubled. If the kids pack it up and take the grandkids somewhere that is affordable, it is inevitable that the grandparents will follow. They don’t have much time left, and they want to spend it with family. The grandkids may be the #1 factor in real estate decisions for the next few years.
Move-Uppers – For those who want to stay local, the best time to move up is when you can sell your existing home for more money than ever, AND get a lower interest rate. My rule-of-thumb for move-uppers is that you have to spend 50% more on the next house to make it worth the move – if you only spend 10% more, you only get an extra bedroom, and it’s not worth moving. There aren’t many in this group who finance – you still need a big cash infusion to make it work. Here’s an example:
If you bought your home for $500,000, with a loan of $400,000 at 4%, the payment is $1,910 per month. If you sell now for $1,000,000, and use $600,000 for your down payment to purchase a $1,500,000 house, the payment is $3,794 per month at 3%.
Most who are used to paying $1,910 per month will want to inject more capital into the equation.
Last Movers – You are of the age where you have one more move left in you, and it’s probably due to hanging on to the 2-story family homestead for a little too long. The kids have been gone for a while, and you’ve been rattling around in a house that should be passed on to the next generation before you fall down those stairs.
BUYERS
First-timers or Out-of-Towners – If you don’t own a house here yet, your motivation is substantially higher than those who do own and are just trying to re-position. It’s why current homeowners struggle to understand why homes keep selling for record amounts – because heck, they’d never pay that much. But first-timers and out-of-towners are more desperate to get in, and will pay an extra few bucks to finally get something.
Downsizers – Rarely do locals downsize in the same town – keeping the old house makes to much sense, and why we have such low inventory. But San Diego County is well-positioned to be a landing ground for those selling for big bucks in L.A./O.C./Bay Area and coming here where our prices look like a bargain. This may be the largest group of buyers, judging by how fast prices go up.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Next year’s selling season won’t be as predictable as they’ve been recently.
We are overdue for a surge of sellers.
It may be disguised in the overall stats as a blip, but if you have three houses on your street go up for sale, and two others on the next street over, don’t be surprised if buyers freeze up and wait it out. If you live in a neighborhood where most of the residents have been there for 10, 20, or 30 years, there only needs to be one from each of my five seller categories above to cause a glut of homes for sale within a week or two. If any of them are desperate for money and undercut the pricing to get out, it will affect all.
Next year will be exciting because each seller and buyer group could grow 10%+ without notice. Remember the graph that said 57% of boomers are delaying the sale of their home? Add a possible covid bump in the usual number of deaths, divorces, & job transfers and we could experience a surge of inventory that nobody sees coming.
If you are thinking of selling……are you willing to get out in February or March will all-time record money, or are you going to wait until June or July and try to milk it for another 5% because you can? And risk not getting out at all because those ‘lowball’ offers based on 2020 comps are insulting and unacceptable?
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