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NSDCC First-Half Report

The number of NSDCC first-half sales are 15% higher than the 2017-2019 average number of sales, and

THE MEDIAN SALES PRICE IS +32% YoY:

NSDCC Sales, Jan 1 to June 30

Year
# of 1H Sales
Median SP
# of Sales Over $2M
Over $2M/Total Sales %
2017
1,585
$1,225,000
292
18%
2018
1,411
$1,325,000
311
22%
2019
1,379
$1,300,000
298
22%
2020
1,145
$1,400,000
267
23%
2021
1,674
$1,850,000
737
44%

In 2009, there were 756 NSDCC sales for the entire year, and only 76 of those were over $2,000,000.

In 2021, we’ve had 737 sales over $2,000,000 in the first six months!

San Diego Home Pricing By Tier

https://journal.firsttuesday.us/san-diego-housing-indicators-2/29246/

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The last paragraph (above) might be the worst misread in the history of forecasting. I’m not sure why they are sticking with it.

Mortgage servicers have stated that they will modify the delinquent mortgages and extend them for another 40 years if necessary – making it a great time to be a deadbeat.

Wouldn’t any of their “plummeting sales volume”, be supportive for pricing?

If we had fewer sellers than we have today, then prices would go up.  Demand would have to evaporate for both sales volume and prices to go down.

As for their revisionist history about the 2008 recession, real estate market performed better in the higher-end areas during the last crisis.  We’ve had a 10-year trend of buyers purchasing their forever home since then, which will deter any wholesale dumping of properties.

So who is going to dump now?  Seniors?  Their heirs?  Nothing suggests that today.

NSDCC Monthly Listings & Sales

The Covid Frenzy has had remarkable shift in market efficiency like we have never seen.

Historically, we have had so many listings that 35% to 40% of them didn’t sell.

This year we had 977 listings hit the market in 1Q21, and 80% of them have already closed escrow!  Of the remaining listings that haven’t sold, two-thirds of them were cancelled, withdrawn, or expired which usually means that the sellers either changed their mind or refreshed their listings.  Of the 977 listings, only 47 of them remain as active (unsold) listings, with a median list price of $6,900,000!

Yet, the extremely active marketplace isn’t causing more people to sell.

The total number of 2021 listings is 8% behind the covid-impacted 2020!

NSDCC Listings and Sales

Month
2018
2019
2020
2021
2021 L/S
Jan
426/149
418/150
353/182
285/187
1.52
Feb
358/162
361/174
360/184
311/224
1.39
Mar
446/258
498/211
368/206
381/252
1.51
Apr
469/270
494/265
288/156
382/357
1.07
May
522/273
502/297
484/143
404/301
1.34
Jun
476/299
435/282
448/274
357/340
1.05
1H Totals
2,697/1,411
2,708/1,379
2,301/1,145
2,120/1,661
List/Sales
1.91
1.96
2.01
1.28

There were 357 new listings last month, and 340 sales?!?!  The lack of inventory or the rapidly-rising prices aren’t slowing down sales!  If only there were more houses to sell under $2,000,000!

If sales were to retreat, it would seem obvious that it would be due to the lack of supply.  There have been more losers of bidding wars than winners, and that demand has yet to be satisfied.

But we are going to hear more doomer talk in the media. Here we have Larry predicting that more homes will be listed in the latter half of 2021 – which would cause MORE sales – yet check the headline:

An excerpt:

What happened: All regions saw an uptick in pending sales, led by a 15.5% surge in the Northeast. The South saw the smallest increase, with a 4.9% uptick.

The big picture: The uptick in pending sales could be sustained, Yun argued, because of the strong stock market and rising home prices. He predicted that more homes will be listed in the latter half of the year, which would help to slow the pace of home-price growth.

Still, economists generally anticipate that the second half of 2021 will see a slowdown in real-estate transactions. To get an idea of where home sales are headed, look no further than the data for mortgage applications.

“Sales lag mortgage applications, and the 26% plunge in the latter between December and April is now working its way through the sales numbers,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, wrote in a research note. He went on to argue that “sales will soon hit bottom, given the flattening in mortgage demand over the past couple months.”

The latest mortgage-applications data from the Mortgage Bankers Association would back up that prediction. The trade group’s index that measures the volume of applications for loans used to purchase homes was down 17% from a year ago as of the week ending June 25, and had declined 6% from the previous week.

Hit bottom? Bottom of what?

The ‘26% plunge’ in mortgage applications between December and April didn’t slow sales – they are higher in every market.  But determined to find some doom, he surmises that the lower number of purchase applications will catch up to sales some day?

It doesn’t occur to the ivory-tower types that the market was going ballistic last summer, and this week’s mortgage apps being 17% lower than last year is not alarming.  We had 350 NSDCC sales last August, and another 361 sales in September – both record highs!

Yet the media publishes this garbage without a thought.  They could unwittingly cause a slowdown just when more homes might be coming to market – which would goose sales higher, not lower.

NSDCC May Listings & Sales

We’re still waiting for that flood of inventory!

NSDCC May Listings and Sales

Year
# of Listings
Median LP
# Sales
Median SP
Avg. $/sf
Median $/sf
2017
507
$1,370,000
345
$1,200,000
$525/sf
$418/sf
2018
522
$1,399,450
273
$1,325,000
$592/sf
$480/sf
2019
502
$1,450,000
297
$1,365,000
$598/sf
$502/sf
2020
484
$1,579,716
143
$1,395,000
$565/sf
$488/sf
2021
396
$2,000,000
301
$1,989,000
$769/sf
$655/sf

Last month’s sales didn’t set a record, but they were very strong given the shortage of inventory which was about 25% under the usual number of May listings.

Check the YoY price increases for May:

Median Sales Price: +43%

Average $$/sf: +36%

Median $$/sf: +34%

No matter how you measure it, pricing is through the roof!

Median Sales Price vs. “Home Prices”

Hey Jim – did you say home prices went up 9% in one month?

No, the NSDCC median sales price went up 9%, and there’s a difference.

Here’s a look at the mix of homes between La Jolla and Carlsbad that sold in their respective months:

Month, Year
Total # of Sales
Avg SF
Median SF
# Sales Under $1M
# Sales Over $3M
May, 2019
297
2,980sf
2,686sf
71
26
May, 2020
143
2,981sf
2,759sf
30
11
April, 2021
357
3,339sf
2,881sf
14
71
May, 2021
295
3,542sf
3,029sf
9
79

More of the larger homes are selling.

The NSDCC Median Sales Price in May increased 9% over April, but the median size went up 5% too.

It’s probably too simple to calculate 9% – 5% = 4% but the local annual appreciation has been at least 30% lately so a month-over-month increase of 3% to 4% in the hottest months of the year seems reasonable.

Though the May sales will be down 10%, the number of sales over $3,000,000 went up 11% in one month!

Prime Mid-Range

For us data geeks, here are some raw numbers to ponder.

Between La Jolla and Carlsbad, there are three prime zip codes – 92009 (SE Carlsbad), 92024 (Encinitas), and 92130 (Carmel Valley) – that are the dominant target zones for buyers of the mid-range home (which today is $1.2M to $2.0M).

According to the Census, there are a total of 35,146 one-unit single-family residences in these three zips, so let’s use this mid-range group to consider the trends:

Number of Listings & Sales, May 1 to Apr 30

Year
# Listings
# Sales
L/S
Median SP
2009-10
710
366
1.9
$770,000
2010-11
748
448
1.7
$739,500
2011-12
771
427
1.7
$775,000
2012-13
1,272
769
1.7
$820,000
2013-14
2,216
1,488
1.5
$895,250
2014-15
2,157
1,467
1.5
$949,000
2015-16
2,366
1,506
1.6
$989,550
2016-17
2,252
1,564
1.4
$1,072,500
2017-18
1,833
1,400
1.3
$1,160,000
2018-19
2,092
1,340
1.6
$1,241,250
2019-20
1,835
1,334
1.4
$1,260,000
2020-21
1,906
1,606
1.2
$1,440,000
All
20,163
13,715
1.5
$1,075,000

My thoughts:

The most-recent inventory count is in line with previous years – it is the number of sales that are so astonishing. The big winners are those inferior homes that are getting scooped up in the frenzy, for which buyers are overpaying just to win something.

In an area of 35,146 houses, there are 86 for sale today (0.2%), with a median list price of $2,124,500. No wonder the inferior homes are getting scooped up.

Buyers on the lower-end have to feel like they are getting closer to being priced out every day.

Of the 13,715 recent sales, 10,000 of them were probably forever homes – or forever rentals – and unlikely to come back onto the market for 10-20 years (at best). The lean inventory will continue just because we won’t have the turnover we’ve had in past decades when it was easier to move around.

Home Price Growth

Even though San Diego is the highest-priced metro on the list, I think we are prime for upward movement.

Those metros who have -40% or worse on their YoY inventory won’t have enough sales to keep the price momentum going much longer.

We have the right mix of -22% inventory and +18.8% in pricing to be #1 in the country by September!

NSDCC Monthly Sales

The NSDCC inventory has been a perfect match for the heightened demand of 2021.  With roughly 20% fewer homes for sale, the scarcity has energized buyers to grab anything that’s close to being a good match – while the pickier buyers wait patiently.

This month’s detached-home sales will likely set another new record, and set the stage for the summer market when California should be at 100%.  Will that means more sellers will feel safe enough to put their home on the market?  If so, it should really juice the frenzy further and cause sales to soar.

The demand appears steady – price-wise, if sellers can stay in their shoes, it should be a crazy summer too!

We had 347 sales last month. Could we hit 400 sales in May?  It’s possible!

30% Appreciation in 2021?

Our seasonally-adjusted Case-Shiller Index rose more in one month than any other U.S. metro area!

The increase in the three-month annual percentage was nearly 22%, and it doesn’t include March and April which have been hotter.

The San Diego index was still positive during the initial Covid months (but muted), so it’s safe to say that the year-over-year percentage increase for the next few readings will be substantially higher than February’s.

Could San Diego end up with 30% appreciation in 2021?

It looks feasible today!

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