You may remember that July’s numbers were all negative when I reported them on August 11th.
However, we had a slew of late-reporters, and July wasn’t as bad as I thought – the closings over $2,000,000 were only down 14% YoY (instead of -38%).
LINK HERE for corrected July report.
Last month was better – the number of sales over $2,000,000 were +13% year-over-year!
NSDCC Detached-Home Sales, August:
| Year | |||||
| 2017 | |||||
| 2018 | |||||
| 2019 | |||||
| Latest YoY |
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Though there has been a lot of noise and commotion in the real estate business lately, our local market has been relatively solid, given how unaffordable homes are for the masses:
NSDCC Between June 1 – July 31
| Year | ||||
| 2014 | ||||
| 2015 | ||||
| 2016 | ||||
| 2017 | ||||
| 2018 | ||||
| 2019 |
Of these six years, the mortgage rates were the lowest in the summer of 2016, so there doesn’t seem to be a direct connection between rates and sales – the L/C ratio was the worst then.
The number of sales were the lowest this year, and you could blame it on the lack of opportunity – there hasn’t been that many new listings. It’s surprising we had that many sales.
Look how close we have been hugging the median L/C ratio of 1.6 lately!
As long as the supply remains in check, our market conditions probably won’t change much.
I had guessed that sales would drop 20% this year, but with mortgage rates being so cooperative it looks like we’ll be fine.
Detached-home sales in San Diego County’s north coastal region for the first seven months of 2019 are only down 3% year-over-year (1,642 vs. 1,693 in 2018). We’ll have a few more reporting over the next few weeks which should pull us within 1% to 2% of last year.
Mortgage rates spiked during the second half of 2018, helping to cause a 10% drop in NSDCC sales in the last five months of the year, compared to August-December 2017 (1,121 vs. 1,242 in 2017).
It will be hard to under-perform last year with rates about 1% less!
Baby boomers in full control of the market, and very few have a reason to sell. In fact, the list of reasons NOT to sell is so long that you can’t help but have a personal favorite that keeps you in limbo:
1. I don’t need the money.
2. The grandkids are here.
3. My low property taxes have me locked in.
4. My low mortgage-interest rate has me locked in.
5. Everything else is too expensive.
6. I don’t want to leave the city/state.
7. My parents might move in.
8. My kids might move in.
9. My kids need to inherit because they can’t afford a home.
10. I don’t want to pay capital-gains (on more than the $500K).
11. I got a reverse mortgage.
12. I love it here!
13. Waiting for the market to peak.
Yet we don’t have an inventory problem – heck, there are 1,005 houses for sale in North SD County’s coastal region (La Jolla to Carlsbad).
To buy one, you need to have some horsepower – the median list price is $2.25 million. But at least it looks like higher-end pricing has slowed:
First-half stats for homes priced over $2,000,000:
| Year | ||||
| 2013 | ||||
| 2014 | ||||
| 2015 | ||||
| 2016 | ||||
| 2017 | ||||
| 2018 | ||||
| 2019 |
Has the higher-end market peaked? Compare this year to 2013.
It could be that egos are causing homes that are really worth $1.7-$1.9M to slip up into the $2M+ range, which would skew the median prices lower. But the sales have leveled off over the last three years, in spite of more choices. More listings but fewer sales keeps the pressure on pricing.
We saw that the first-half sales were 4% under last year’s count – has it been getting worse lately? Yes, and the high-end is where the trouble is:
NSDCC Detached-Home Sales, July:
| Year | ||||
| 2016 | ||||
| 2017 | ||||
| 2018 | ||||
| 2019 | ||||
| Latest YoY |
We have 546 active listings of NSDCC homes priced over $2,000,000/46 = 12-month supply.
Low rates, more inventory, strong employment, and record Dow hasn’t helped much yet. But we know there’s nothing that price won’t fix!
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Double-digit increases can’t last forever – but could home prices plateau for years? It will probably depend on mortgage rates, and having enough reasonable sellers who are willing to take the same $ as what the last guy got.
From our friends at JBREC:
Price appreciation has slowed across every major housing market, in what we are coining the Great Price Deceleration.
The biggest deceleration occurred in San Jose: Last year, resale prices in San Jose were up 20% YOY! Today, prices are down 6% YOY—a deceleration of 26%. Last year, San Jose was frenzied with less than one month of supply and very strong job growth. Builders were selling homes faster than they could build them. In the second half of 2018, the San Jose market slowed substantially due to affordability issues, but conditions have stabilized this year.
Top California markets, Seattle, and Las Vegas have experienced the most price deceleration. Home buyer affordability remains weak, even with historically low 4% mortgage rates, and homes are sitting on the market longer (especially higher-priced homes). We are seeing more buyer demand in markets such as Seattle, where home builders have adjusted prices.
Markets in the Southeast, Midwest, and Northeast have been far less frenzied this cycle and have had much steadier prices. These markets are typically lower risk in their fundamentals (more affordable, less risk of oversupply, and steady job growth). Raleigh-Durham has experienced the least deceleration in price from last year. Resale prices gained 7% YOY last year, and today they are up 6%, a 1% price deceleration.
Nationally, we expect resale prices to gain 2% through 2022, cumulatively, but there are huge disparities by region and metro.
We explore all top housing markets each month in our Regional Analysis and Forecast report for our paying research clients. If you are interested in becoming a research client, please reach out to our team of expert analysts.
NSDCC Detached-Home Sales Jan 1 to June 30:
| Year | |||
| 2013 | |||
| 2014 | |||
| 2015 | |||
| 2016 | |||
| 2017 | |||
| 2018 | |||
| 2019 |
We saw yesterday that the number of new listings has remained steady, but it seems that buyers keep getting pickier. First-half sales are down 4% year-over-year, and pricing is a little soft too.
But last year’s sales were down too, and if we consider the 2016 count to be the median in the group above, then this year’s first-half sales are 10% under that.
Yunnie is optimistic though:
Yun said consumer confidence about home buying has risen, and he expects more activity in the coming months. “The Federal Reserve may cut interest rates one more time this year, but there is no guarantee mortgage rates will fall from these already historically low points,” he said. “Job creation and a rise in inventory will nonetheless drive more buyers to enter the market.”
We’ll see!
Bill (in Giants jersey) from the Bay Area has been reading the blog for the last ten years!
He won the earlier contest for Padres tickets, so when he and his family were here on vacation, they took in the first game of the series last night – a 13-2 shellacking by the Giants! They got on TV too:
Congrats Bill and family!
The contest was predicting how many new listings we would have in the first two months of 2019. Bill’s guess was 777, which was the third lowest of those submitted – we all thought more sellers would want to cash out at these prices!
Yesterday’s doomer was looking for the right evidence – historically, one of the first signs of trouble is a surge of inventory. We saw it last time in the first half of 2006 when listings jumped 23% as sellers started scrambling to get out:
NSDCC Detached-Home Listings Jan 1 to June 30:
| Year | ||
| 2005 | ||
| 2006 | ||
| 2007 |
But still no surge here locally in 2019.
Our inventory count this year is looking normal – and 24% under the 2006 count:
NSDCC Detached-Home Listings Jan 1 to June 30:
| Year | ||
| 2013 | ||
| 2014 | ||
| 2015 | ||
| 2016 | ||
| 2017 | ||
| 2018 | ||
| 2019 |
In the first half of 2005, we had 400 sales close under $750,000, and this year we had 55.
We had 560 homes list for $2,000,000+ in the first half of 2005, and 238 closings. This year, we had 901 listings over $2,000,000, and 298 closings!
The San Diego ZHVI has been mostly flat for almost two years!
The price exceptions are the superior homes and locations, particularly the one-story and newer homes, which tend to sell for more than ever before. But those cases are dwindling.
What’s saving us is how inventory has remained in check – no panic among sellers in 2019, which is quite a bit different than it was last year:
https://www.zillow.com/research/housing-market-cooling-may-2019-24552/
Last month we had sales and pricing move higher again – the resilience of our market is incredible!
| Year | ||||
| 2012 | ||||
| 2013 | ||||
| 2014 | ||||
| 2015 | ||||
| 2016 | ||||
| 2017 | ||||
| 2018 | ||||
| 2019 |
The velocity has slowed though – maybe the pricing plateau has finally arrived?
Are you looking for an experienced agent to help you buy or sell a home? Contact Jim the Realtor!
CA DRE #01991628, CA DRE #00873197
