Survey of Market Conditions

The experts were surveyed on what they think about the market – a sample question:

Fleming: “Our research has found that in past recessions, house prices show their “downside stickiness,” meaning they remain flat or their growth slows during economic downturns, but often do not decline much with one exception – the Great Recession. Because of the downside stickiness of home prices, and the supply and demand imbalance that exists in the market today, we anticipate nominal house price appreciation to actually accelerate this summer. House prices are going up!”

Marr: “As mortgage rates decline, prices rise. Demand fell, but so did supply, which muted any impact to home prices. Right now, they are continuing to grow at the same pace as before the pandemic. Growth may slow as the economic impacts grow, but the consensus is that home prices will continue to rise over the year.”

Tucker: “Overall, Zillow is forecasting a slight decline in home prices through October, followed by a slow recovery through 2021.”

McLaughlin: “We think price growth is going to slow, and even possibly turn negative, by the beginning of next year, as lower aggregate demand emerges and legislation that protects homeowners from foreclosure expire. However, we do expect price grow quite strongly by the end of next year, growing between 4-6% on a year-over-year basis.”

Teta: “Some pockets around the country may do well – like suburban areas around big cities if large numbers of people decide to move because of concerns that it’s too risky to stay in densely populated places where the virus has spread so rampantly. That could sew a silver lining into the market. But it may be more likely that the price boom of recent years is in serious jeopardy.”

Link to Forbes article

NSDCC 2Q Sales & Pricing

When the coronavirus broke out, I guessed that the second quarter sales would fall 60%, and the median sales price would drop 5%.

NSDCC 2Q Sales & Pricing

Year
# Sales
Median Sales Price
Average Sales Price
2017
988
$1,250,000
$1,581,847
2018
845
$1,325,000
$1,693,876
2019
844
$1,322,500
$1,676,090
2020
567
$1,390,000
$1,748,200

Sales dropped 33%, but the median sales price is 5% HIGHER than it was in 2Q19!

Happy Birthday Mom!

Coronavirus Price Premium?

When the coronavirus shut down the economy coast to coast, it was natural to assume that the real estate market would take a hit. Being in quarantine would certainly cause sales to plummet, and with 20% to 30% unemployment, prices would follow, right?

All that was left was to guess how much prices would go down.

But a funny thing happened on the way to the apocalypse.

The Fed poured $7 trillion+ into the economy, and mortgage rates hit all-time lows, which provided just enough levitation support that those aggravated by the quarantine shrugged off the virus and started buying homes again.

But sellers didn’t get the memo, and our supply has suffered – but not prices:

NSDCC Listings Between Jan 1 and June 15

Year
Number of Listings
Median List Price
2016
2,748
$1,425,000
2017
2,511
$1,426,900
2018
2,481
$1,500,000
2019
2,526
$1,560,000
2020
2,054
$1,695,000

With fewer comps and less competition (listings down 19% YoY), the list prices have been rising!

The lower rates are helping figuratively, more than literally – the ego loves the thought of getting the lowest rate in history.  Compared to last May, the actual benefit is $60 per month per $100,000 of loan, which adds up but jumbo rates are higher and we’ve already been used to having really low rates so today’s record lows aren’t the only thing fueling the comeback.

The spring season was already shaping up to be very positive, so the compression of the entire session into the next 2-3 months is what’s driving the demand.  As long as people are feeling relatively safe, we should be seeing elevated statistics just because of the compression – which may give sellers a false sense of security that any price will work.

The lack of competition is a seller’s best friend:

The motivated buyers – which now include the additional demand from folks who now have to work out of the house, instead of an office – are seeing so few of the new listings that meet their needs that if they see a hot one, they pay whatever it takes – and bidding wars are back.  Here’s a sample of home sales in Carmel Valley and Southeast Carlsbad between $1,200,000 and $1,500,000 that have closed escrow in the last 30 days (during the corona):

Click to enlarge

Ten of the 24 sales closed OVER list price, and the average SP:LP ratio is 100%!

While this is the modest end of the range for both areas, homes in the $1,200,000 to $1,500,000 range still cost a ton of money – yet virtually no discount on price, even during the coronavirus!

NSDCC May Sales & Pricing

Two articles were lost due to the change in blog hosts, so I’m re-posting this one!

We had two fewer business days than previous years, and we didn’t have a late flurry to get close to my estimate of 175 sales:

NSDCC May Sales & Pricing

Year
# of Sales
Avg $$/sf
Median SP
Median $$/sf
2016
334
$498/sf
$1,216,250
$415/sf
2017
346
$515/sf
$1,222,500
$431/sf
2018
274
$591/sf
$1,325,000
$480/sf
2019
296
$598/sf
$1,365,000
$501/sf
2020
139
$568/sf
$1,399,000
$488/sf

The 139 sales is a 53% drop YoY.  Pricing looks a little soft too, but rates under 3% should fix that.

June should do a little better, and with showings now higher than last year, July should be closer to normal.

NSDCC May Sales & Pricing – Preliminary

Last month, the NSDCC sales ended up being down 42% year-over-year, and the average cost-per-sf was down too by almost 6%. But the median sales price was up a tick.

The stats this month will suffer by having two fewer business days, which will cost us about 25 sales – but that won’t affect the price comparisons much.

NSDCC May Sales & Pricing – Preliminary

Year
# of Sales
Avg $$/sf
Median SP
Median $$/sf
2016
334
$498/sf
$1,216,250
$415/sf
2017
346
$515/sf
$1,222,500
$431/sf
2018
274
$591/sf
$1,325,000
$480/sf
2019
296
$598/sf
$1,365,000
$501/sf
2020
112
$564/sf
$1,363,250
$482/sf

Let’s estimate the final number of sales by adding 47 to the count above – that’s how many closed in the last two days of May, 2019.

Adding the 47 to the 112 +10% for others not reported yet equals roughly 175 sales for this month, which is another 41% drop from the previous year.

The median sales price won’t change much in the final tally, and the $$/sf might move a couple of bucks in either direction – so we are looking at a max of a 5% correction in pricing. Sales in June should be a little stronger, and prices about the same.

The most alarming numbers are the sales in 2016 & 2017, which were double of what we’ll have this month.

SD April Sales Down 26% MoM

I guessed that NSDCC sales would be down 60% in 2Q20, but April was the low point (sales were down 42% YoY), and May won’t be better but June could finish strong.  Quotes from the UT article which is linked at bottom:

“Sellers have taken a bigger step back than buyers,” said Jordan Levine, deputy chief economist at the California Association of Realtors.  He said low inventory means many buyers in markets like San Diego are forced to fight it out for a limited number of properties — and continue to push prices up.

Levine said he did not expect a major drop in prices like during the Great Recession because the fundamentals of the market were strong going into this crisis. That is, there weren’t a lot of shaky home loans that couldn’t be paid back and banks that were over-leveraged. Also, he said governments and banks are more determined to keep people in their homes now than during the recession, when a lot of foreclosed homes flooded the market.

“Institutions realize it is better to try and help folks hang on to these homes and make it through the crisis,” he said, “and that will ultimately be a lot cheaper and less damaging to the economy.”

At least some analysts and business owners say this might be a good time to buy or sell. Take Josh Stech, the CEO of the San Francisco-based company Sundae. His business buys distressed homes quickly from homeowners and only focuses on houses that need significant work.

Stech said it may actually be a good time to sell. He predicted there would be a big increase in new listings as stay-at-home orders are lifted so buyers would have more options. Also, he said there would be at least some foreclosures coming out of the economic shock of the past few months, also increasing supply.

“The recommendation I’ve been giving people is not what I’ve been reading,” he said. “My perspective is if you are thinking of selling in the next year or two, this is the time to sell. I would say you will get a better price today than the next year or two.”

On the buying side, he also said low interest rates are likely not to be this great forever, so there is also opportunity from that side on the market. At the same time, he said mortgage credit requirements are only getting tougher. The mortgage rate for a 30-year, fixed-rate loan was 3.31 percent in April, said Freddie Mac, down from 4.47 percent at the same time last year.

Home prices were up annually across Southern California by 4.3 percent. Riverside County had the biggest jump, rising 5.8 percent for a median of $412,500.

It was followed by San Bernardino County, up 5.4 percent for a median of $353,000; San Diego County up 4.3 percent for the median of $594,500; Los Angeles County up 3.8 percent for a median of $630,000; Orange County up 2.7 percent for a median of $755,000; and Ventura County up 2.6 percent for a median of $600,000.

Link to UT Article

NSDCC April Sales & Pricing

Last month’s sales count is stalling out. Right now the year-over-year change is -42%:

NSDCC April Sales & Pricing

Year
# of Sales
Avg $$/sf
Median SP
2017
279
$535/sf
$1,282,131
2018
272
$569/sf
$1,285,225
2019
265
$583/sf
$1,375,000
2020
153
$547/sf
$1,390,000

Pricing looks ok but most decisions were done prior to virus impact. The ones with wrong prices (or wouldn’t re-negotiate) are the ones that dropped out.

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