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One-Story vs. Two-Story

Shadash said, “Right now the only thing propping up prices is limited supply.”

Indeed, and it’s how the pricing got here in the first place. The demand for homes in the San Diego coastal regions has been higher then the supply for decades now, and it’s probably not going to change that much – at least, not until more of the existing homeowners want to leave town or they go out feet first.

When selling, those who own the one-story homes will fare better.

It’s already happening – the market is splitting into one-story homes, and everything else:

The buyers who need a big house are comforted in knowing they will pay less per-sf, but their appreciation rate will lag behind.  The only thing that will inhibit an even-greater appreciation rate among the one-story homes is that we are transitioning into a market with more estate sales – which will primarily be fixers.

Either way, the current NSDCC pricing averages and medians are still very positive year-over-year.  Nobody who sells next year should mind selling for more than they could have gotten in 2021.

It’s not that bad!

NSDCC Annual Sales by Price Range

There are concerns that lower pricing will cause recent home buyers to be underwater – and potentially create another bubble to pop.  A factor to consider when assessing the current market conditions is how quickly the affluent buyers have taken over the marketplace between La Jolla and Carlsbad:

NSDCC Annual Detached-Home Sales

Price Range
2017
2018
2019
2020
2021
2022
Under $1M
1,040
706
667
543
120
20
$1M-$2M
1,475
1,505
1,552
1,784
1,621
684
$2M-$3M
384
383
405
518
766
588
Over $3M
232
236
244
385
724
607
Totals
3,131
2,830
2,868
3,230
3,231
1,899

We’re not done with 2022 but there will only be another 80-100 sales to add to this year’s total.

Two thoughts:

  1. The recent buyers had to qualify for financing (if any), and with virtually all of them paying over $1,000,000, they are probably flush and not many will get spooked into selling.
  2. When only the rich can participate, we won’t be having as many sales – with hardly any opportunities for the regular folks who hope to buy under $1,000,000.

Yes, if pricing keep coming down, there will be more sales in the lower-priced categories. But how many more under $1,000,000 next year? Forty? 80? It’s very unlikely that we will get back to the 2021 number, let alone have hundreds of homes selling under $1,000,000.

Not only will the inventory be lower, but the closed sales will probably decline next year too.

NSDCC, Last Six Months

Yesterday a guy said he wasn’t interested in anecdotal evidence and just wanted to see the data.  But we were talking about the buyer demand in 2023, of which we have no data yet.

In addition, the data we do have doesn’t have to repeat itself or be a trend, because every month we have different houses selling.  It’s not like the stock indices that measure the exact same stock every day – in real estate, it’s a new set of variables every month.  It’s a miracle that each month looks as similar as it does!

But for those who want the numbers, here you go!

NSDCC (La Jolla to Carlsbad) Monthly Sales Stats

Date
# of Sales
Median Sales Price
Median SF
Avg DOM
Avg. $/sf
Med. $/sf
Jun
190
$2,350,000
2,710sf
23
$947/sf
$837/sf
Jul
155
$2,300,000
2,798sf
28
$925/sf
$830/sf
Aug
165
$2,150,000
2,642sf
36
$973/sf
$804/sf
Sep
135
$2,040,000
2,600sf
38
$910/sf
$793/sf
Oct
124
$2,212,500
2,909sf
43
$922/sf
$784/sf
Nov
109
$1,860,000
2,581sf
42
$821/sf
$739/sf

For the record, here’s the summary from June to November:

Sales: –43%

Median Sales Price: –21%

Average Days-on-Market: +83%

Average $/sf: –13%

Median $/sf: –12%

The stats are straight off the SD MLS, and I’m not sure how they calculate their Median $/sf because it’s not the median sales price divided by the median sf – but their numbers are close to that.

There has been a steady downdraft in pricing, led by sellers who stay on the market for 30+ days and then take a lowball offer.  As long as listings aren’t fully prepared, aren’t priced attractively, and are hard to show, the downward-pricing trend will continue.

Ideally, you want to sell your home in the first week or two that it is on the market.

Can sellers and agents adapt? Will they?

NSDCC October Listings

Next year, everyone will be talking about how mortgage rates in the 7s or 8s will be causing a lack of affordability, but I have bad news for those who still want to buy.

There probably won’t be many homes for sale.

It will only take one or two headlines about the real estate market being crushed by high rates to cause potential sellers to pack it in until “the market gets better”.

Look how few sellers came to market last month:

NSDCC Detached-Home Listings, October

Year
Number of Listings
Median List Price
2018
401
$1,555,000
2019
371
$1,695,000
2020
400
$1,849,350
2021
228
$2,160,000
2022
174
$2,362,500

Before last year, the lowest October-listings count over the last twenty years was 312 in 2012, and back in the golden years of real estate, there were 452 October listings in 2001, and 510 in 2002!

510 vs. 174?

Yikes!

Hopefully, those who do list their homes for sale next year will be highly motivated, and, lucky for them, having so few competitors will cause their list prices to stay elevated.

Don’t be surprised if the 2023 spring selling season ends up being the Greatest Standoff Ever!

NSDCC October Sales, Preliminary

I’ve been hoping for 100+ sales per month the rest of the way this year.

Currently, the October count is 108, so it should get up to around 120 sales by mid-November.  Here are the monthly sales and pricing for 2022:

NSDCC Detached-Home Monthly Sales & Pricing, 2022

Jan
140
$2,828,988
$2,855,213
$2,234,944
$2,240,000
Feb
158
$3,063,331
$3,108,907
$2,149,500
$2,386,500
Mar
207
$3,247,251
$3,337,348
$2,400,000
$2,625,000
Apr
227
$3,190,161
$3,251,604
$2,350,000
$2,550,000
May
214
$2,941,080
$3,030,794
$2,350,000
$2,480,000
Jun
188
$2,871,956
$2,881,314
$2,297,500
$2,350,000
Jul
152
$2,892,729
$2,833,588
$2,272,000
$2,280,000
Aug
161
$2,953,967
$2,849,332
$2,200,000
$2,150,000
Sep
134
$2,652,892
$2,560,764
$2,134,500
$2,020,000
Oct
108
$3,168,167
$3,042,502
$2,250,000
$2,150,000

I noted last week that the September average and median sales prices were both 23% lower than they were in March. It looks like the final October data could end up being higher.

The average and median sales prices are easily affected by the types of homes that are selling.  The recent environment has had smaller, less-expensive homes selling, while the higher-end market has been languishing.

Let’s include more statistics to fill out the picture:

Month
Sales
Average SP
Avg $$/sf
Avg SF
Median SP
Med $$/sf
Med SF
Mar
207
$3,337,349
$1,028/sf
3,498sf
$2,625,000
$853/sf
2,800sf
Sep
134
$2,560,764
$911/sf
2,887sf
$2,020,000
$790/sf
2,598sf
Oct
108
$3,042,503
$931/sf
3,387sf
$2,150,000
$782/sf
2,840sf

While the October average and median sales prices make it look like we’ve turned the corner, once you analyze the house sizes and $$/sf, you’ll see that buyers are still getting more for their money today.

Unfortunately, none of the talking heads in the media will look any further than the median sales price.

Once their house-hunting vacation concludes in February, all potential home buyers will do is decide if the change in the median sales price supports their mindset about purchasing.

NSDCC Pendings Since 6% Rates

The national bashing of the real estate market continues unabated, and I’m sure there are individual markets that are really feeling it.  But real estate is local, so let’s examine the facts.

To get a sense of what has been happening since rates got into the 6s, let’s review NSDCC homes that have gone pending recently. You don’t have to know the streets or the particular homes – just scroll through the bunch and you’ll get the feeling that frenzy pricing is still lingering. Click on any for the full listing:

NSDCC Median $/SF

Instead of using the median sales price as a gauge, let’s look at the history of the median $/sf to help bring the size of the homes into the equation.

Thoughts:

I remember 2018 and 2019 being fairly flat and a bit of a struggle.  Rates had been in the 3% to 4% range during the 2015-2017 period, and once they got back into the mid-to-high 4s in the summer of 2018, pricing hit the skids.  Luckily, rates dropped under 4% in late-2019 which caused us to be optimistic about the selling season of 2020 – and you can see that pricing got off to a good start.

The Pandemic Stall caused a blip in April, 2020, but we recovered and charged into 2021.  You could say that local pricing took off like a rocket, rising 25% in five months:

Jan 2021: $559/sf

Jun 2021: $697/sf

Today we are under where 2022 started, and it could get worse. However, the median for the 38 sales closed this month is an impressive $823/sf, which is 4% higher than last month.

But we have a long way to go!

Speaking of a long way to go, Rob Dawg wanted to stir it up, like most Dodger fans.  We have been subject to endless taunting since making the playoffs, including Charlie Steiner suggesting that the Padres rivalry with the Dodgers would be like a nail having a rivalry with a hammer.

Just you wait!

Bob Melvin has engineered the greatest rope-a-dope since Muhammad Ali. Sacrificing the first game last night with Clevinger vs. Urias was ingenious, because Kershaw is washed up and due for a dud – and Darvish has been lights out.

The Padres win tonight, and then come home to the raucous crowd who hasn’t seen a playoff game in 16 years, and Petco Park will be rocking for Snellzilla. Then we got No-No-Joe for Saturday’s game and the Dodgers will have to bring back Urias early on three days rest and he won’t have enough.

This is the last chance to get on the Padres bandwagon!

NSDCC September Sales

The number of NSDCC detached-home sales in September is up to 133 today, which is pretty good.  There are only 138 pendings currently, but 34 sales have already closed in October so there is a decent chance that we’ll have 100+ sales this month too!

The drastically-lower YoY sales will give participants the idea that the market conditions keep deteriorating, but to me, it is a sign that sellers are holding out on price.

If we can just average 100 sales per month in the fourth quarter, I’d consider it a successful end to 2022!

It’s natural for most buyers to want to see what happens in springtime, and I think we can all predict what’s coming.  The 2023 home sellers aren’t going to believe that the old comps don’t matter any more – and they will price their home within 5% of the peak pricing.

Recent Sales By Zip Code

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.

Summer Listings & Sales History

Chris asked how the current environment compares to the 2008 downturn.

In the summer of 2008, there were only 601 NSDCC sales between June 1st and August 31st, in spite of there being 1,348 listings that summer. For the next two years, the number of listings far exceeded the number of sales, and in the 2008-2010 period there were twice as many listings as sales. The 2010 ratio was the worst at 2.3 to 1.

This summer we only had 825 listings, and 504 sales, which is a 1.6 to 1 ratio!

The 2022 sales were 16% lower than the previous record in 2008, but there were 39% fewer listings!

We’ve never had so few listings to consider. Now that the Fed is making it so obvious that they intend to cause a recession, more potential sellers – who tend to casually read the headlines only – will delay their decision to move.  Does anybody HAVE to move in 2023?  Every potential seller will give it a second or third thought if they believe it will cost them several hundreds of thousands of dollars.

The NSDCC inventory next year will be the lowest ever – even Ray Charles can see that coming.

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