Yesterday, the C.A.R. released the statewide January results, with more speculation from our so-called leaders:
California home sales fall to lowest level in more than 10 years
– Existing, single-family home sales totaled 357,730 in January on a seasonally adjusted annualized rate, down 3.9 percent from December and down 12.6 percent from January 2018.
– January’s statewide median home price was $538,690, down 3.4 percent from December and up 2.1 percent from January 2018.
– Statewide active listings rose for the 10th straight month, increasing 27 percent from the previous year.
– The statewide Unsold Inventory Index was 4.6 months in January, up from 3.5 months in December.
“California continued to move toward a more balanced market as we see buyers having greater negotiating power and sellers making concessions to get their homes sold as inventory grows,” said C.A.R. President Jared Martin. “While interest rates have dropped down to the lowest point in 10 months, potential buyers are putting their homeownership plans on hold as they wait out further price adjustments.”
The statewide median home price declined to $538,690 in January. The January statewide median price was down 3.4 percent from $557,600 in December and up 2.1 percent from a revised $527,780 in January 2018.
“While we expected the federal government shutdown during most of January to temporarily interrupt closings because of a delay in loan approvals and income verifications, the impact on January’s home sales was minimal,” said C.A.R. Senior Vice President and Chief Economist Leslie Appleton-Young. “The decline in sales was more indicative of demand side issues and was broad and across all price categories and regions of the state. Moreover, growing inventory over the past few months has not translated into more sales.”
Obviously, they haven’t done a survey of the North San Diego County’s coastal region! Between La Jolla and Carlsbad, we had about the same number of January sales last month as we did in January, 2018, so we’re faring much better than the -12.6% statewide. We are further into February so let’s pick up the sales from the first half, and break it down by price category too:
NSDCC Detached-Home Closed Sales, Jan 1 to Feb. 15th
Price Range
2014
2015
2016
2017
2018
2019
PEND
ACT
Under $1M
129
96
107
93
71
65
76
64
$1M to $1.5M
62
71
82
88
77
91
87
163
$1.5 to $2.0M
29
33
24
41
36
34
50
126
Over $2.0M
46
50
43
41
51
52
60
453
Totals
266
250
256
263
235
242
273
806
The only two signs of trouble:
The Under-$1M market is disappearing.
If you want to buy a house priced over $2,000,000, you sure have plenty to consider! Those sellers are happy to wait it out too, so no rush.
Other than those, we have remarkable balance, and it doesn’t look like ‘potential buyers are putting their homeownership plans on hold’ around here!
With deductible mortgage interest now capped at $750,000 by the I.R.S., buyers who are concerned about write-offs will want to keep their new loan balance in the $700,000s.
The strict equation is $750,000/80% = $937,500.
If buyers find a house priced higher, they could come up with more cash to make up the difference, or they could get a jumbo loan at roughly the same interest rate and live with the non-deductible interest paid on the loan amount above $750,000.
It makes the ideal purchase price in the $1,000,000-$1,100,000 range.
If the tax reform is a big concern for buyers as some have suggested, the homes priced in the $1,100,000 – $1,500,000 might feel it. Buyers above that range weren’t expecting as much benefit anyway, and probably won’t be as impacted – but theoretically there are fewer buyers the higher we go.
Out of curiosity, let’s keep an eye on the NSDCC stats.
Today’s NSDCC Actives and Pendings:
$700,000-$1,100,000: 121/72 = 1.68
$1,100,000-$1,500,000: 157/75 = 2.09
$1,500,000-$2,500,000: 243/81 = 3.00
$2,500,000 and higher: 399/44 = 9.07
The market has been healthy up to $1,500,000 roughly, and like Rob Dawg said yesterday, potential buyers may not know the exact impact of the tax reform until they start on their 2018 tax returns in spring.
In the past, we’ve considered a ratio of 2:1 to be about normal. Given this market and time of year, these look pretty good, except for the high-end which has always had excess supply. (more…)
Let’s examine by zip code where the market might be slowing recently. These are the detached-home sales for the second quarter, plus the current number of pendings in each area:
Area
Zip Code
Sales 2Q16
Sales 2Q17
Sales 2Q18
Pendings Today
Cardiff
92007
25
30
11
9
Carlsbad NW
92008
49
67
67
20
Carlsbad SE
92009
161
181
148
64
Carlsbad NE
92010
49
51
47
26
Carlsbad SW
92011
80
91
60
26
Del Mar
92014
55
45
47
8
Encinitas
92024
144
141
110
51
La Jolla
92037
113
105
104
42
RSF
92067
76
79
55
43
Solana Bch
92075
19
33
21
10
Carmel Vly
92130
173
153
166
55
All Above
All
944
976
836
354
If the numbers for 2Q18 are remarkably under the first two columns, and the number of pendings are so low that the 3Q18 doesn’t look promising either, then you can figure that the market is soft, and getting softer in that zip code (Cardiff, Carlsbad SW, & Encinitas).
Historically, we have considered our market to be relatively ‘healthy’ when the actives-to-pendings ratio is around 2.0 – but that thought originated when prices were about half of what they are today!
But all in all, we’re in pretty good shape today.
The active inventory hasn’t exploded, and as long as the supply stays in check, the sellers aren’t going to panic. Do the buyers have the willingness and ability to wait it out, with no assurance it will ever get better? Or will the lack of solid evidence keep the ball rolling, albeit at a slower pace?
Here are the stats for the NSDCC detached-home market (La Jolla to Carlsbad):
Reading Date
Actives
Pendings
A+P
A/P
Oct 28, 2015
970
358
1,328
2.71
Feb 1, 2016
788
254
1,042
3.10
Mar 23, 2016
900
399
1,299
2.26
June 21, 2016
1,052
428
1,480
2.46
Aug 17, 2016
1,060
395
1,455
2.68
Dec 4, 2016
886
327
1,213
2.71
Apr 21, 2017
842
427
1,269
1.97
July 16, 2018
973
357
1,330
2.73
NSDCC Actives Median Price = $2,288,045
NSDCC Pendings Median Price = $1,395,000
Only 10% of the actives are under $1,000,000, and 35% are over $3,000,000 (which are the same ratios as the last reading in April, 2017).
Here are the Actives/Pendings ratios for each area:
Area
Zip Code
June
Aug
Dec
Apr
Act/Pend Today
Cardiff
92007
2.3
3.5
1.1
1.0
2.5
Carlsbad NW
92008
2.0
2.3
1.3
1.2
2.9
Carlsbad SE
92009
1.6
2.0
1.9
1.0
1.3
Carlsbad NE
92010
0.7
0.9
1.3
0.9
1.1
Carlsbad SW
92011
1.6
1.5
1.3
1.1
2.4
Del Mar
92014
3.2
2.5
4.9
3.3
9.4
Encinitas
92024
1.3
1.8
1.8
1.6
2.0
La Jolla
92037
4.8
4.4
4.4
3.7
4.4
RSF
92067
8.2
6.3
6.3
5.2
4.6
Solana Bch
92075
2.9
3.9
2.7
1.5
2.0
Carmel Vly
92130
1.5
1.8
1.8
1.1
1.9
All Above
All
2.5
2.7
2.7
2.0
2.7
These stats are going to bounce around, so there isn’t anything here that gets me overly concerned.
Del Mar has always been a smaller, expensive subset (just eight pendings today), La Jolla is in line with their recent past, and RSF is as good as it’s been in years. Everything else is around the regular 2.0 ratio for a normal market.
The pending counts have been dropping precipitously since June 11:
NSDCC All: -15%
Under-$1,000,000: -29%
While a lower number of pendings can be due to more closings from the fat part of the selling season, it not like we’re setting any sales records either. The NSDCC June sales are down 20%, year-over-year, just like they were in May.
Here are the new actives and pendings for the last six weeks, and how they compare to previous years:
Week
2015 A/P
2016 A/P
2017 A/P
2018 A/P
Feb
83/64
80/72
66/73
87/57
Mar
99/68
123/52
102/66
84/62
Mar
93/76
101/75
99/59
107/67
Mar
101/84
90/75
93/82
88/59
Mar
89/81
94/64
82/60
99/55
Apr
80/58
112/72
104/70
87/66
Totals
545/431
600/410
546/410
552/366
The new pendings this year are about 10% below the last couple of years, and the common explanation you see in the media points to the lack of inventory.
But we’re having about the same number of listings between La Jolla and Carlsbad, they are just high-enders – the median LP currently is $2,495,000.
Let’s look closer at the individual neighborhoods, and compare annual sales and pricing between 2016 and 2017:
Town
Zip Code
2016 Sales
Avg $$/sf
Med SP
2017 Sales
Avg $$/sf
Med SP
Cardiff
92007
82
$711
$1,407,500
76
$711
$1,300,000
NW C-bad
92008
220
$465
$897,400
189
$429
$875,000
SE C-bad
92009
498
$343
$900,000
531
$363
$981,000
NE C-bad
92010
162
$343
$731,250
168
$367
$804,402
SW C-bad
92011
280
$393
$935,000
275
$413
$999,000
Crml Vly
92130
540
$409
$1,144,500
486
$441
$1,218,400
Del Mar
92014
162
$966
$1,787,500
163
$814
$1,800,000
Encinitas
92024
499
$530
$1,185,000
446
$568
$1,212,250
La Jolla
92037
354
$829
$1,918,250
328
$846
$2,172,500
RSF
67+91
251
$512
$2,272,500
284
$494
$2,240,000
Solana B
92075
86
$708
$1,310,000
98
$786
$1,500,000
NSDCC
All Above
3,103
$1,160,000
3,075
$1,225,000
SanMarcosSo.
92078
529
$291
$679,000
530
$316
$730,000
PB/MB
92109
226
$673
$1,082,500
225
$755
$1,195,000
West RB
92127
561
$343
$900,000
615
$366
$1,050,000
East RB
92128
533
$347
$660,000
513
$371
$725,000
RP
92129
450
$338
$720,000
374
$380
$759,500
Scripps R
92131
333
$340
$830,000
320
$367
$910,000
The velocity is slowing a bit from previous years. Of the 17 areas:
Ten had fewer sales in 2017.
Three had a lower cost-per-sf in 2017.
Three had a lower median sales price in 2017.
Rancho Santa Fe had the cost-per-sf and median sales price dip slightly, but the annual sales were up 13%. NW Carlsbad had sales, cost-per-sf, and median SP all go down.
The current market conditions are very positive, especially on the lower-end of North San Diego County’s coastal region.
Of the houses listed under $1,500,000, there are 151 actives and 167 pendings, which is fantastic. The market of houses listed over $1,500,000 is more sluggish, with 493 actives and 102 pendings.
I’m not sure how the C.A.R prognosticators can look at these Y-o-Y numbers and still forecast higher sales for next year – unless they think the supply will inflate with thousands of desperate realtors having to sell their own homes?
The data keeps pointing to a slowdown, and like a Yu Darvish hanging curveball, once it’s in flight, there’s not much you can do. Few sellers need to sell bad enough that a substantial price reduction will be considered – and there isn’t enough competition to cause any fear. For buyers who keep reading about the threat of rising rates, it can be very frustrating.
• Pending home sales have declined on an annual basis for eight of the last nine months so far this year. After a solid run-up of closed sales in May, June, and August, continued housing inventory issues and affordability constraints may have pushed the market to a tipping point, suggesting the pace of growth will begin to slow in the fall.
• C.A.R.’s Market Velocity Index – home sales relative to the number of new listings coming on line each month to replenish that sold inventory, or market indicator of future price appreciation – suggests that there continues to be upward pressure on home prices through the fall. Home sales continue to outstrip new listings coming online to restock sold units.
• The Market Velocity Index dipped from 53 to 52, implying that there were 52 percent more homes sold than new listings, meaning the supply of homes available for sale continued to drop.
However, fewer homes are coming to market, in spite of record pricing:
NSDCC # of Houses Listed Between August 1 – September 30th:
2016: 848
2017: 738
Diff: -13%
All SD County # of Houses Listed Between August 1 – September 30th:
2016: 6,006
2017: 5,346
Diff: -11%
NSDCC # of Houses Listed In September Only:
2016: 413
2017: 337
Diff: -18%
All SD County # of Houses Listed In September Only:
2016: 2,836
2017: 2,473
Diff: -13%
With fewer homes to sell, the percentages of pending and closed sales have nowhere to go but down – and we’re doing fine, considering the inventory. The declines in the pending and closed sales are in line with, or better than the decline in new listings.
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