The SP:LP ratio has been very consistent for those selling a home under $2,000,000 – you can expect to get pretty close to your asking price. Above $2,000,000 is a different story.
Mortgage rates had averaged 3.99% in 2017. You can see how the lower-end buyers became less concerned about getting a discount as rates started rising in early 2018 (they reached 4.59% in May, 2018):
This is another place that listing agents manipulate the data. When marking their listings as sold, many will lower the list price to match the sales price in order to make it look like they sell their listings for ask.
This is a price survey that ranks the over/under for each metro to the 2.8% value growth expected nationwide. I’ll take the over for San Diego!
The Zillow Home Price Expectations Survey sponsored by Zillow and conducted quarterly by Pulsenomics LLC, asks more than 100 economists, investment strategists and real estate experts for their predictions about the U.S. housing market. The Q4 survey also asked panelists to rate their 2020 expectations for home value growth compared to the nation in 25 large markets.
On average, panelists said they expected U.S. home values to grow by 2.8% in 2020. The share of panelists saying they expected a market to outperform that average was weighed against the share saying they expected it to underperform to create a net score.
Of the 14 markets with positive scores, 11 come from Texas or elsewhere in the Southeast or Southwest. The exceptions are Denver, Minneapolis and Portland. Seattle was the most polarizing market, with an even 40% of panelists each expecting it to overperform and underperform.
Of the 10 markets that earned negative scores, meaning more panelists expected them to underperform than overperform, six were in California. A group of expensive markets in the state — San Francisco, San Jose and Los Angeles — are expected to perform the worst. Cincinnati and Sacramento round out the bottom five.
“Having subjected buyers to a crucible of fierce competition for multiple years, many West Coast markets hit an affordability ceiling that set off declining home values in the most expensive of these,” said Skylar Olsen, Zillow’s director of economic research. “Indeed, this price correction — a clap back from having appreciated with too much exuberance in the recent past — pushes many previously hot markets to the bottom of our experts’ list. At the top of the list are metros still providing relative affordability and thriving, amenity-rich communities that appeal to younger adults willing to make a move. These features, plus the ability to grow and add housing in the future, are attractive propositions for employers and employees alike.”
Many panelists expect home values in San Jose and San Francisco to continue falling in 2020, and some expect more markets in California to join them. Sixteen panelists out of the 42 that selected at least one metro said home values will fall in Los Angeles, and twelve said the same about San Diego and Riverside.
Mortgage rates were the best they’ve been in December since 2012. How were sales?
We had a nice pop in sales compared to 2018, but that’s about it:
NSDCC December Sales
Year
# of Sales
Median SP
Avg. Cost-per-sf
2015
258
$1,094,500
$477/sf
2016
240
$1,150,000
$502/sf
2017
225
$1,215,000
$573/sf
2018
199
$1,460,000
$560/sf
2019
224
$1,405,000
$586/sf
How much momentum are we carrying into the new year from the last couple of months?
The market has felt very active, but looking at the stats, we’ve only beat last year’s count by 13%…..which isn’t saying much, given how much lower rates have been (-20% YoY):
NSDCC November + December Sales
Year
# of Sales
Median SP
Avg. Cost-per-sf
2015
454
$1,107,500
$495/sf
2016
484
$1,199,995
$517/sf
2017
445
$1,215,000
$549/sf
2018
397
$1,375,000
$563/sf
2019
429
$1,350,000
$577/sf
Hopefully, the 2020 sellers are noticing that there haven’t been the big gains in pricing recently – but those who are willing to sell for about the same as what the last guy got should do fine!
We’ve never had a soft landing before, but this is how I imagine one would look – mortgage rates drop just enough to have sales and pricing level out:
Year
# of Sales
Median SP
Avg. Cost-per-sf
Median DOM
2014
173
$985,000
$489/sf
34
2015
196
$1,173,750
$518/sf
38
2016
244
$1,235,908
$531/sf
28
2017
220
$1,208,487
$524/sf
27
2018
197
$1,300,000
$566/sf
29
2019
201
$1,345,000
$569/sf
28
We could have done better (see 2016), but it could have been much worse too. In 2014, when pricing was substantially lower, we only had 173 sales – which goes to show you that pricing isn’t the only component.
Speaking of pricing, the median sales price has rebounded over the last two months instead of tapering off, like it usually does. It’s over $100,000 higher than last November! (Coastal North includes Oceanside):
It looks like an early surge is likely in 2020, after that….who knows?
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:
Year
# Sales
Avg $/sf
Med $/sf
Med SP
Med DOM
2013
266
$495/sf
$383/sf
$957,500
32
2014
244
$467/sf
$387/sf
$978,754
39
2015
223
$473/sf
$406/sf
$1,075,000
25
2016
275
$524/sf
$424/sf
$1,100,000
30
2017
259
$533/sf
$439/sf
$1,194,500
29
2018
238
$568/sf
$484/sf
$1,384,634
37
2019
239
$602/sf
$490/sf
$1,425,000
32
Diff since 2013
-10%
+22%
+28%
+49%
0
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
Year
# of Sales
Avg $$/sf
Median SP
Median DOM
Sept 30yr Rate
2016
579
$517/sf
$1,199,000
28
3.46%
2017
528
$542/sf
$1,225,000
26
3.81%
2018
484
$570/sf
$1,330,000
26
4.63%
2019
484
$604/sf
$1,387,500
27
3.61%
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.
Reasons:
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:
Year
Sept. # Sales
Med SP
Med $/sf
2017
259
$1,265,000
$450/sf
2018
211
$1,320,000
$496/sf
2019
217
$1,399,000
$476/sf
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!
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