Our market was slumping towards the end of 2018, so no surprise that the numbers this year look so good. But the pace since 2013 is remarkable, and for last month’s sales to only be down 10% vs. 2013 is incredible, given how strong our market was then:
NSDCC Detached-Home Sales, October:
Diff since 2013
The statistics should remain solid for the rest of the year, though the local Case-Shiller Index will probably be slightly negative. It’s 2020 that will be less predictable!
Our proprietary model using Google search trends shows a bottoming & re-acceleration in resale and new home sales growth YOY into year end. Lower mortgage rates, better affordability, and an easy comp vs. last year’s dreary 4Q help these YOY stats.
You would think that the sales slump at the end of 2018 would make this year’s comparison look rosy, but it looks like we’ll be lucky just to match the 2018 sales around Coastal North SD County. We need 62 more sales reported for October, 2019 just to match last year – which had been 5% lower than the year before:
I was talking to Nick yesterday about the current market conditions, and how home sale have been affected by the low mortgage rates recently.
You can see in the graph above that over the last five years we’ve been accustomed to rates in the threes, so it seemed obvious that when rates almost hit 5% that a market slowdown was in order.
Likewise, wouldn’t sales pick up as rates came back down?
But interestingly, in another statistical quirk, sales this year are the same as last year:
NSDCC Detached-Home Sales, August 15th – October 15th
# of Sales
Sept 30yr Rate
Last year when sales were plunging 8% (again), it was easy to blame it on the higher rates. But as rates settled down this year, the best we can say is that sales have flattened out.
Higher pricing is offsetting the lower rates.
Buyers expect rates in the threes. Rates would have to get into the 2s to create a surge now.
Not many homes for sale provide a compelling value to buyers (either the house or price is wrong).
The lower rates this year have provided that mythical soft landing that no one thought was possible. It is giving sellers and agents a sense of security that higher prices are supportable. But wouldn’t rates have to keep going down further for prices to go any higher?
If rates and pricing stayed about the same, the market should plateau along.
But can sellers resist adding that extra 5% on top of the last sale comp? Probably not.
We’ll need an Election Year Miracle for prices to keep rising in 2020!
I agree with Rich about pricing, and we are too deep into the year for it to change much now. There will be occasional deals, but for the most part, sellers will just wait until spring rather than give it away.
Talking heads would look at these MSPs and declare, “Home prices were UP 6% last month!
But it’s the median sales price that increased – not every home’s value:
NSDCC Detached-Home Sales, September:
Sept. # Sales
The actual median cost-per-sf was down 4% year-over-year (the middle number of all the $/sf for each house), which demonstrates that there will usually be stats going in either direction – and don’t make too much of them! What matters most is what’s going on in your area.
I’m just glad we had more sales than last September, but with mortgage rates being 20% lower than last year, having an extra six sales isn’t exactly spectacular.
I noted on Instagram today that a couple of new listings in Carlsbad went pending before they got to broker preview today. While the sales and pricing statistics may look flat, sellers shouldn’t give up on selling when rates are still in the 3s.
These are the listings from the last seven days that already found a buyer – these aren’t giveaways:
The big bidding war in Leucadia also closed…..at a whopping 30% over list price – in this market!
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:
Jan-Jun # Listings
Jan-Jun # Sold
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.
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