Inventory Shortage

The NSDCC Monthly Sales were hopped up in April and June of this year, but are now getting back in line with previous years. Is the demand ‘cooling off’, or is it because we don’t have enough homes for sale?

NSDCC Listings & Sales

June Listings
July Listings
August Listings
3 mo. total
August Sales
Median SP

If the number of listings between June-August is usually around 1,350, we are 22% below that this year.

Yet the number of August sales is about normal. But the 37% YoY increase in the median sales price suggests that the demand is not only strong but that we’d have more sales if there were just more listings!

Market Slowing

Great thoughts from Ryan at www.sacramentoappraisalblog.com:

Now let’s talk about slowing.

I’ve had a number of emails lately critiquing my use of the word “slowing,” so I wanted to talk about this openly. I hope that’s cool. If this isn’t your thing, just scroll down. By the way, I’m always good with constructive critique too.

Bro, don’t say slowing: Over the past few months the market has slowed. Or wait, it cooled. No, the temperature changed. I mean, it’s normalizing. Uh, it’s actually stabilizing. Thankfully there isn’t just one way to describe things. I’ve been talking about a seasonal slowing for months because that’s the story the stats are telling. But the word “slowing” almost seems offensive to some, so let’s talk about that.

The market isn’t fragile: The housing market is big and I feel like it’s splitting hairs to argue about whether we should use the word slowing, normalizing, or cooling. Here’s the thing. Use whatever word you feel best represents the market, but it’s probably going to take a few key phrases to do the trick. No matter what, recognize the market is NOT fragile (“fra-gee-lay“) and it doesn’t need you or me to protect it with glowing words. Look, I can think positive thoughts all day long about cryptocurrency, but that doesn’t change the value of bitcoin. In terms of housing, the market is dynamic, multi-layered, complex, and there is no such thing as jinxing the trend by using less-than-glowing words.

Moving fast & slowing: If you aren’t down with the word slowing, that’s fine, but in my mind it’s a reasonable way to describe the market. But to say slowing alone isn’t perfect either as I keep saying because the market is doing two things. It’s moving really fast. And it’s slowing for the season.

Okay, I won’t talk about this again for a while.

My commitment: I will never spin data or sugarcoat things to sound better or worse than they are. My goal is to be neutral while presenting analysis based on the numbers. I’ll come up with helpful word pictures to describe the market too (and sometimes crazy comparisons).




Year-End Rally?

Mike thought the inventory was going to peak by now, but notes that the number of national listings is still growing. He also says that sales are strong too, which might suggest that we could have a late rally in spite of the delta variant.

If buyers have more choices, it improves their chances of finding a suitable home to purchase!

See more of Mike’s report here:


Who knows – our local inventory could keep climbing too, though it’s still below normal:

Frenzy Connected to Inventory

It’s one thing to note that showings are well under the peak frenzy era of August-November.  But today’s showings are also well below what they were in July 2019, which was a fairly flat market then.

Is the demand falling apart?

Or is it due to lower inventory?

Let’s compare the inventory counts for middle of August.

NSDCC Number of Homes For Sale

Price Range
August 19, 2019
August 17, 2020
August 16, 2021

*In 2019 the highest category was Over-$2,000,000 – the categories were split the next year.

The total counts are distinctly different.

In 2019, the market was sluggish, and the local Case-Shiller went flat for the last six months. There were too many homes for sale.

Last year, the increased demand was met with a much tighter supply than in 2019, but looking back we can say it was the optimal amount of homes for sale in order to create the red-hot frenzy!

Now, there aren’t enough homes for sale to keep the momentum going, and the frenzy is being starved out.

CV Winner

Interesting to note that the buyer here didn’t mind paying $351,000 over list awhile being represented by a noted discounter from Northern California – an agent who is a known critic of the realtor cartel but is happy to make a buck off the system 500 miles away from his home.

Another example of how the market is being set (and creating the comps for future sales) by the most euphoric buyers getting little or no local expertise.  If you know too much, you’ll never buy a house!

This will likely be the most paid over the list price for a home in Carmel Valley for August, but there are two others that already closed for $300,000+ over!

San Diego’s Housing Crisis

We are in the midst of a real housing crisis.

The rapidly-increasing home prices are exacerbating the problem too – especially for existing homeowners who had hoped to move up. If you paid $500,000 for your house and now it’s worth $1,000,000, you need to spend $1,500,000 on the upgrade just to make it worth it. But the gap isn’t between $1.0 and $1.5, it’s the whopping million dollars between the previously-comfortable $500,000 and the new price of $1,500,000. Even if you are over 55 and can take your old property taxes with you, the new mortgage amount will be double the previous amount AND last for another 30 years. It’s why more and more of the current homeowners are staying put, which is limiting the inventory now, and in the future.

It’s why I said on the TV show that the current market insanity is likely to continue.

With a finite number of homes and 1,700 new millionaires being created every day in America (we are now up to 18,000,000 millionaires!), the affluent have commandeered the local market.  Apparently, they don’t mind paying these prices, and will throw in another $100,000 or so to win the home, if needed.

We hear regular calls for government to ease up on zoning requirements, but more action is needed because we are out of land.  Bill Davidson, the most prolific home builder in the history of San Diego County, talked about the shortage back in 2012:

On the TV show, I suggested redeveloping the MCAS Miramar or getting the City of Carlsbad to free up some of the dedicated open space to create larger opportunities for builders, because we need thousands of more homes, not dozens, to balance the market and slow down the pricing.

But those ideas have no chance of happening.

It would take a monumental shift in priorities for our society to consider those. If the government were to propose redevelopment on a grand scale, it would take dozens of years to come to fruition. The Kearny Mesa project is a good example, but it will only add 26,000 homes over the next 30 years which probably won’t be enough to slow down pricing – and no single-family residences are planned there.

Any other new projects will face intense opposition.

The NAVWAR site off the I-5 freeway would seem like an ideal redevelopment project, and it could provide housing right where it’s needed. But the opposition is fierce – consider this attorney’s opinion:


Unless we have a game-changing shift in our community’s mindset about redeveloping the infill sites, the hordes of affluent people will dominate the home-buying – and keep pricing at these levels or higher.

Oh but wait Jim, how about those boomers – half of which haven’t retired yet?  Will the boomers who are still working be more likely to need the dough, AND be young enough to endure a move out-of-state?

Maybe, but their kids and grandkids will be lined up to inherit the house, and with that being the only feasible way for them to stay in San Diego, the boomers will find a way to age-in-place instead.

Back to Normal

Random thoughts:

Having 130 NSDCC homes in June sell for $100,000+ over list price should be an all-time record. If we had half that many, it would be astonishing!

But those were decisions made in April and May.

It feels like the market is in the deceleration stage, where fewer homes are worthy of a bidding war.  Sellers and agents who insist on adding an extra 5% to 10% to their list price will need to be selling an exceptional property AND present it perfectly to generate offers.

The inferior homes/locations (the ones who really benefited during the peak frenzy) will be the ones that feel it the most. The gap between the dogs and the creampuffs will widen.

Listing agents who “have comps”, and around $5, can get a cup of coffee.

Open houses will help with the transparency.  Buyers and lookers will be able to experience the upgrades in person, and get a better read on the traffic.  The art of determining the difference between lookers and buyers will be renewed.

There will be eye-popping sales.

We will find peace with these higher prices.  We would have gotten here eventually – it just happened faster than we ever thought possible.

Higher interest rates won’t have a big impact – there’s too much cash in play to soften the blow. One thing you can count on – sellers won’t care about higher rates.  They aren’t in a hurry, they don’t have to sell, and they aren’t going to give it away!

If prices were to come down, it would be slowly and over time.  There will be occasional deals that give hope to lower pricing, but then a couple of high sales will happen right behind them.

The ibuyers might be the only candidates who could influence the market in a panic, but they could rent their homes for a while if they had to. They are big corporate entities who are used to losing money, so no real pressure.  The old accounting rules REQUIRED banks to sell their properties quickly, but those days are long gone.

More potential sellers will give up the thought of moving, and the number of homes for sale could stay restricted – or even go lower. The hope of there being a post-covid surge of sellers will wane.

If there were an occasional surge of new listings, they would all be priced based on recent sales…..or priced higher.  If buyers don’t like today’s prices, having more inventory priced the same won’t help.

The statistics will bounce around more as we pull into Plateau City.

All of the above (except #1) should remind you of how it used to be!


2 Out Of 5 Years Exemption, Revisited

The residential real estate market has no boundaries on pricing.

It’s free enterprise at its finest – no laws, no restrictions, and no limit on where prices can go.

We saw a dramatic example where a model-match tract home on the same street sold for $550,000 more than the last sale the month before!

Many local homeowners can say they’ve picked up another half-million in appreciation in just the last year, which provides one more hurdle to moving.

Their net profit exceeds $500,000, which means they are going to pay capital-gains tax if they move.

Nobody likes to pay tax to Uncle Sam – especially when it might be six-figures!

We’ve seen it with the investment properties, for example. Long-time owners who paid a tenth of the money they can get today who absolutely refuse to sell just because of the taxation. They could still reap hundreds of thousands, or even millions in profit after paying the tax, but it irks them so much to pay the government that kind of money, that they refuse to consider it – and most consider it a shakedown.

It’s the same with residential. If you have to pay the government a big chunk of your profit in taxes, you’re going to think twice.  It may even be the last straw, and end up being what prevents you from moving.

The 2-out-of-5 years exemption was created in 1997 and gives married homeowners as much as $500,000 in net profit, tax-free, when they sell their home.

But in 1997, the median home price in America was around $170,000 – and today it is twice as much.

Shouldn’t we revise the rule to reflect the increase?

I think so.

Let’s double the exemption and make it $1,000,000 tax-free.

Politicians would need to agree that the lack of supply is killing the American Dream for the middle class. Without more homes for sale, the pricing will continue to climb until homeownership is beyond the reach of most people – which it already is in many areas.


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