Dogs Are People Too

When selling, it’s smart to make your home appear to be pet-friendly!

Proximity to good schools has long been a deciding factor for home buyers. An increasing number of house shoppers, however, are looking for schools that specialize in fetching rather than phonics.

Pets, according to real estate agents and industry officials, cannot be ignored when their owners shop for a home. “We sell houses, you make them homes,” said Creig Northrop, of Northrop Realty in Clarksville, Md. “Pets are part of a family.”

As the number of households with children decline and those with pets rise, pet-friendly homes and neighborhoods are in demand. Households with children younger than 18 dropped from 48 percent of the market in 2002 to 40 percent in 2022, according to Jessica Lautz, deputy chief economist and vice president of research at the National Association of Realtors. Families with pets have increased from 56 percent in 1988 to 70 percent in 2022, according to NAR research.

Research by real estate giant Zillow confirmed the effect of the pandemic on pet ownership. It found nearly three-fourths of home buyers and 57 percent of renters in 2021 reported owning one pet, said Amanda Pendleton, Zillow’s home trends expert, up from 64 percent of buyers and 51 percent of renters a year earlier.

“One of those things moving up in importance is walkability, having a place that someone can easily pop outside and walk a dog, important proximity to the vet and dog parks [are] also important because you want to easily be able to take care of anything that your pet may need,” Lautz said. “And those things do come up, and you may not want to put your large dog into the car.”

The American Kennel Club advises house hunters looking for a dog-friendly neighborhood to visit the area early in the morning, while dogs are out with owners for pre-work walks. “Take a look at the breeds, along with their overall well-being,’’ it suggests. “A neighborhood with a variety of breeds speaks to a general dog-savvy population.” Another key, the AKC said, is looking for neighborhood businesses that offer water bowls or a bowl of treats.

Americans are spending more on their pets than ever: $136.8 billion on their companions in 2022, up from $90.5 billion in 2018, according to the APPA.

https://www.washingtonpost.com/business/2023/09/21/home-buying-pets/

San Diego is #1

Homeowners in San Diego are the least likely sellers in the country to lose money if they put their house on the market, according to a new study.

The study, which was conducted by the real estate company Redfin, analyzed real estate data from 50 of the most populous metro areas in the U.S. to get a sense of current market trends.

San Diego had the lowest share of homes sold at a loss — only 1.1%, the study found — over a three-month period that ended in July 2023. Nationwide, the share of homes sold for less money than they were purchased was around 3%.

San Diego is one of the most competitive and expensive real estate markets in the country, according to Redfin, with most homes selling within 12 days of their listing this year.

This year so far, over 5,500 homes have been sold in the San Diego metro area. The average sale for these homes comes in around $901,000 — up 3% from last year — and more than half are sold above asking price.

https://fox5sandiego.com/news/business/san-diego-homeowners-are-the-least-likely-to-sell-homes-at-loss-in-the-nation-study/

Future of the Housing Market

An article published yesterday included some guesses about the future of the real estate market over the next five years. For those who thought it would be the usual expert opinions touting 3% appreciation per year, you won’t be disappointed, though Larry did throw in a possible 10% decline in California:

Yun foresees no major changes in purchase price tags on a nationwide level next year, with fluctuations of only about 5 percent one way or the other. The only exception is California, he says, where the market could see 10 percent declines: “Because it’s so expensive, California is always the most vulnerable to changes in interest rates.” This scenario is already playing out in the priciest areas in the state: For example, San Francisco median home prices are down 9.71 percent since last year, according to Redfin data. Overall, in five years, Yun expects prices to have appreciated a total of 15–25 percent.

McBride predicts home prices will average low- to mid-single-digit annual appreciation over the next five years. This rate of appreciation, he says, is consistent with the long-term average of home prices increasing by a rate that hovers a percentage point above the inflation rate.

https://finance.yahoo.com/news/housing-market-predictions-forecast-next-175441472.html

I think the North San Diego County coastal region will perform much better for the following reasons:

  1. Baby boomers aren’t dying fast enough. The capital-gains tax for long-time homeowners is so burdensome that heirs to the estate will insist on their elders aging-in-place, or renting out the home if their elder goes into a senior facility. This will prevent any concentrations of boomer liquidations, and sprinkle them over the next 20-25 years – keeping inventories low. (Half of boomers are still working!)
  2. The dollar continues to devalue – money isn’t worth what it used to be.
  3. San Diego is a premier destination spot for rich people. The affluent who tire of deteriorating conditions in their current town will be happy to join us – and pay whatever it takes.

The demand will stay strong and the inventory extremely tight. The realtor and lender populations will get cut in half (at least) and the fascinations about the real estate market will continue – but for almost everybody it will be from the sidelines.

The local Case-Shiller Index has risen 54% since March 2020.

I think we will see another +50% in the next five years, and in 2028 there won’t be a month when we have 100+ sales of detached homes between La Jolla and Carlsbad.

What do you think?

Need To Move Out-Of-State

Unless you are among the very affluent, you need to move out-of-state to make it worth selling your home in San Diego. If that looks inevitable, do it while you are younger and can handle the challenge! Start by going through your stuff – your kids don’t want it and will dump most everything you leave behind.

While the median distance moved in the 2022 Profile of Home Buyers and Sellers was 50 miles, one-quarter of buyers traveled over 470 miles to find their new home. Traditionally, buyers have stayed close to their past homes. From 1989 to 2021, the median distance moved was just 10 to 15 miles.

Based on this generational trend, it is not surprising that those who moved more than 470 miles from their past residence were more likely to be repeat home buyers. Just 11% were first-time buyers. This dispels one potential myth that has abounded in the last year: that first-time buyers are the ones making the move to find their first property far from their rental unit. It does happen, but it is more likely a repeat buyer who is making the distance move.

https://www.nar.realtor/blogs/economists-outlook/long-distance-movers-why-did-they-move-and-how

Higher Rates = All-Cash Market?

Could rates get so high that it turns into a cash-only market? It’s heading that way.

Of the 118 closings this month between La Jolla and Carlsbad, 45% were all-cash, and it’s competitive. My buyers made a cash offer that was $101,000 over list on this one and didn’t make the final round. There were 13 offers.

Interest rates are based on trading levels in the bond market. Bond traders began their day looking at significantly weaker levels (i.e. higher yields/rates) versus last Friday, but for no apparent reason. Actually, it would be more fair to say “for no new reason.”

Reasons for the rising rate momentum are apparent and ongoing. Decades-high inflation required decades-high rates to fix. The higher rates are supposed to be damaging the economy more than they have. Until that damage shows up, rates have a green light to continue higher.

As more and more market participants abandon their preconceived notions regarding an imminent rate reversal, the upward momentum takes on a certain glacial quality. In other words, it’s self-sustaining, often resulting in days like today where rates look like they’re acting on some obvious catalyst despite the absence of any such news.

Mortgage rates were already new 7.4% by the end of last week and today’s increases bring the average lender closer to 7.5%. This is the highest since late 2000. Lower rates are still available for certain scenarios and discount points, but many scenarios are also seeing higher rates.

Link to Mortgage News Daily

140,000 More People Expected

They expect another 200,000 homes to be built in SD County? Where? MCAS Miramar?

San Diego officials are expecting an end to the region’s perpetual growth.

Driving the news: San Diego’s population is expected to peak in 2042, and then decline by about 100,000 people by 2060, according to the latest regional forecast by the San Diego Association of Governments.

  • Ray Major, SANDAG’s chief economist, told the agency’s board last month this is the first regional forecast expecting a population decline.
  • “Every other forecast has had huge increases, with the San Diego region growing to 4 million people by 2050 … Now we’re looking at 3.4 million.”

Why it matters: The forecast carries planning implications for major, taxpayer-funded resources like housing, transportation infrastructure, water and energy.

By the numbers: San Diego’s growth machine has been slowing for decades.

  • The region grew by 1 million people from 1980 to 2000. But in the last 20 years, San Diego added half that.
  • Planners now forecast just 140,000 new San Diegans over the next two decades.
  • That’s when the region’s population is expected to peak. By 2060 the region is expected to have just 40,000 more people than it has today.

Between the lines: The region’s death rate is increasing, its birth rate is decreasing, and migration is flat.

  • One in 10 San Diego residents were over 65 in 2000. By 2060, that’ll be one in four residents.
  • That aging population will demand different government services and have different transportation and housing needs, said Cynthia Burke, SANDAG’s senior director of data science.
  • “Our parks are going to need more pickleball courts and fewer play structures,” she said during the July board meeting.

Read full article here:

https://www.axios.com/local/san-diego/2023/08/14/san-diego-population-decline-forecast

Carmel Valley Estate

The 1+ acre lot was probably what sold this one.

Part of a nice flurry of July sales that are inline with the monthly sales counts in March-June. But the median sales price has a month-over-month change of -17%, which will cause the doomers to flip out. But it’s only because there were a bunch of lower-end sales this month.

Your home’s value didn’t drop 17% in the last 30 days!

More On Home Prices & Appreciation

More plain talk from Steve about home prices and future appreciation rates. He is talking to realtors.

What I sent to Steve:

Hi Steve,

I enjoyed your deep dive today and also put it on my blog where local realtors are known to hang out.

You mentioned that you are studying the locked-in effect.

I don’t think it has the effect people think it does, and I’m not sure there is any effect.

Why?

  1. The extreme difficulty of finding a superior home.
  2. The extreme difficulty of winning a superior home, once you find one.
  3. Paying capital-gains taxes on the sale of the previous home – and usually six-figures of taxes.
  4. Higher property taxes for most, even in California.
  5. Start the 30 years over again on the mortgage – which those extra years should be a bigger hurdle than the higher rate for those who analyze the differences in costs.
  6. Then pack up the stuff and uproot everybody and everything from the previous house to start fresh in the new place….and hurry up with the $25,000 to $50,000 in repairs and improvements that literally every buyer has to do when buying a resale home.

We will only know if there is a locked-in effect if rates plunge to 3% again, which is very unlikely. So it’s all just fodder for the twitterverse.

But if rates did plunge – even to 4% – then we’ll find out that homeowners are still reluctant to move.

Then the problem will be re-labeled as the Forever-Home Effect.

Just my 2 cents!

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