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Does Tilt Matter?

During the inspection of the fixer in Olde Carlsbad, it was determined that further investigation was warranted due to the slope in the floor.

A geologic engineer came out with his fancy altimeter and found that there was a 5-inch difference between the foundation height from one side of the house to the other.

Here’s how it looked. When you have seen me do this, I have set the ball down and let it go where it goes.  In this case, the buyer rolled the ball in one direction, only to have it make a U-turn and go the other way…..and it picked up speed:

In the course of the discussion, I asked, “What is the worst you have seen?”

The engineer said, “A nine-inch differential.”

I said, “Ok, so this is kinda in the middle”.

To which I added a solution. Install the popular wood-tile, and have the installer add some extra mortar to help make up the difference. It doesn’t have to get to zero – if it was down to 2-3 inches it wouldn’t be as noticeable.

The buyers asked for a $50,000 reduction in price, and the seller agreed.  It could have been worse – cancelling this sale and finding a new buyer who would pay more than $1,050,000 seemed unlikely.

Our sale closed on Tuesday, a couple of days after this closed nearby:

https://www.compass.com/listing/2992-elmwood-street-carlsbad-ca-92008/881820694284113633/

On the same day we closed, the model-match flipper directly behind us RAISED their list price from $1,299,000 to $1,510,000 and went pending:

https://www.compass.com/listing/1801-ratcliff-road-carlsbad-ca-92008/909359166289330529/

Not only does it appear that the tilt didn’t matter much in this case, it also seems like prices in the area just went up 10% to 20% in a month!

Inventory Watch

There have been more new pendings than new listings for four weeks in a row.

This week’s 54 new pendings is the highest weekly amount since the end of August!

There are more pendings than actives today (232 vs. 229) and it’s the week of Thanksgiving!

At this time last year, there were 520 actives and 426 pendings.

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Ivy Again

There have been several sound bites lately about the prognosticator who called the last bubble – and at first glance, the headlines want you to think that she is calling the top again.  But she’s not – all she said was that housing production is going full steam – an excerpt:

“The perception that housing is drastically undersupplied and that a strong demographic picture lies ahead is creating a false sense of security,’’ according to a report by Zelman’s firm entitled “Cradle to Grave.’’ “By our math, both single-family and multi-family production are already ahead of normalized demand and estimates of a housing deficit are grossly exaggerated.’’

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C.A.R. Forecast 2022

The association is predicting that home sales in California will drop next year, but has a typical guess for the statewide median sales price – expecting a 5.2% rise in 2022:

2022

Their predictions for this year were terrible – they thought pricing would go nearly flat in 2021 (in red box), and instead we had the biggest gain ever (p is projected):

2021

These were my guesses for this year:

MY 2021 PREDICTIONS:

  1. We will have 10% more NSDCC listings than we had in 2020.
  2. We will have 10% more sales.
  3. We will have a 10% increase in the NSDCC median sales price.

Here’s how this year looks through the first three quarters of 2021:

Year
# of Listings (%YoY)
# of Sales (%YoY)
Median Sales Price (%YoY)
2019
3,947
2,148
$1,320,000
2020
3,677 (-7%)
2,207 (+3%)
$1,424,000 (+8%)
2021
3,078 (-16%)
2,535 (+15%)
$1,880,000 (+32%)

NSDCC inventory DROPPED 16%, yet sales ROSE 15% this year!  Pricing is +32%!

A graph showing how more people need to leave town to make it worth moving:

A CAR consumer survey showed, for example, that 35% of home sellers are moving out of state and fewer than 15% were moving to a home in the same county as their last residence. “I think that pressure to migrate out of the state is going to be just as strong, if not stronger, as housing, affordability gets worse,” CAR Chief Economist Jordan Levine said. “I think that this is a housing-driven phenomenon, and we don’t have a lot of relief in terms of housing affordability.”

San Diego Pricing Momentum

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Speaking of Zillow, they also said in this June article that San Diego home prices would rise 24.7% by May.

How are we doing?

There has never been a great measuring stick for home prices, but let’s look at the most common ones:



Yikes – it looks like home prices have been fairly flat over the last 2-3 months, at least according to the standard ways of measuring. Pricing doesn’t have to rise 2% every month to get to their 24.7%, but having upward momentum is critical because once we roll into Plateau City, it gets harder to convince buyers to overpay. They are already cooling their jets:

Get Good Help!

San Diego: Buyers More Critical, But Stable

This company surveys new-home and resale agents every month, and this report confirms more of what we’ve been experiencing:

  1. A few more listings (but NSDCC listings are dropping off now).
  2. More listings not selling/buyers getting pickier.
  3. Buyer traffic is steady, and better than expected.

The Home Listings Index dropped from 70 to 37.5, which means the number of listings increased, which is bad for the new-home agents.  But for resale agents, it’s good!

San Diego County Real Estate, August 2021

My favorite pet peeve of the media insisting that ‘home prices’ and market conditions are interchangeable with the direction of the median-sales-price made the front page of the newspaper today.

https://www.sandiegouniontribune.com/business/real-estate/story/2021-09-20/san-diego-home-price-drops

But there is more to it.

Here are other factors they mentioned in the story:

  • The number of listings in August were 47% fewer than in August, 2019.
  • The median sales price for condos hit an all-time high, as more buyers get priced out of single-family homes and are forced to consider other alternatives.
  • The quality of the homes for sale was crap.

The truth?  Due to seasonality – which does play a role as summer closes out – it is better to compare to previous Augusts, not July. But the best indicator of market health is the number of sales:

San Diego County Detached-Home Sales, August

Year
Number of August Sales
Median Sales Price
Median Days on Market
2017
2,445
$610,000
19
2018
2,145
$660,000
19
2019
2,207
$650,000
19
2020
2,380
$739,000
9
2021
2,225
$850,000
10

There have been fewer listings (-16% YTD) than in 2019, yet there were MORE AUGUST SALES!

Never mind that the +15% YoY increase in the median sales price was an all-time high for August, and ignoring that the median market time was nearly identical to August, 2020 (which will go down as the most hysterical frenzy in the history of real estate), just that the number of sales last month were similar to previous Augusts indicates that the market is fine.

Yet the UT headline writer wants you to think there’s a problem.

Get Good Help!

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

Year
June Listings
July Listings
August Listings
3 mo. total
August Sales
Median SP
2018
476
447
433
1,356
275
$1,325,000
2019
435
459
418
1,312
262
$1,354,500
2020
448
487
457
1,392
350
$1,419,812
2021
386
357
307
1,050
267
$1,950,000

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).

Respectfully,

Ryan

http://sacramentoappraisalblog.com/2021/09/09/the-housing-market-is-trying-to-get-back-to-normal/

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