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
Number of Listings
Median List Price
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!
Rates are really low, and the market is responding. We’ve considered it a balanced market when the active listings are running about twice the number of pendings. Here’s how we’re doing so far in 2020, and compared to last February:
NSDCC Detached-Home Active and Pending Listings:
Ratio in Feb 2019
We are at the 2.0 mark, but take out La Jolla and Rancho Santa Fe and we’re at 1.3!
In SE Carlsbad and Carmel Valley – which are about the same size – we have more pendings than actives!
With our tight inventory and ultra-low mortgage rates, it kinda feels like Tesla stock. One minute you’re in the $800s, and the next thing you know, the same house is in the $900s!
What can buyers do?
Don’t buy crap.
Simple enough, right?
But it’s hard to accomplish both, because the best locations have the oldest homes.
Let’s narrow it down further.
If you can afford a decent location, what else can a buyer do to ensure a smart purchase?
Buy a newer home, and/or buy a one-story home.
Newer: Homes built in the last 15 years typically have modern floor plans with a large open great room and lots of windows that allow for ample natural light. When you go to sell it someday, it will still be a desirable home without a load of upgrading or maintenance costs to you.
One-Story: Boomers aging in place guarantee that the scant supply of one-story homes will stay tight, and those that do leak onto the open market will be hotly contested.
Here’s a good example.
This sold for $850,000 two years ago, and after a complete remodel it goes on the market for $1,149,000…..and they get multiple offers. Those who thought they could still buy a nice house in Old La Costa in the $800,000s are really scratching their heads now! But it had the good location, and the sellers added the new look to clinch a nice boost in value.
If you want to stick with a newer house and/or a single-story house, what are your chances?
# Built Since 2005
# One-Story Built Since 2005
0 – $1M
$1M – $2M
$2M – $3M
Buying a newer home or a single-story really looks daunting now, but if you can pull it off, you got it made!
Insisting on a newer home and/or a one-story home will give you maximum assurance that you’ve made a smart buy that will appreciate better than the rest. We can add a few older homes that have been thoroughly remodeled, but they probably still have a floor plan cut up into smaller rooms with low ceilings.
Richard was the listing agent in 2014 when Tamara’s clients paid $620,000 for this 1,296sf Encinitas house built in 1974. At the time, it was tenant-occupied and in its previous condition – I dubbed it a ‘light fixer’:
Last Wednesday I was discussing the current market conditions with Candis while at her listing of a Davidson home on Calle Pera – which we both thought was priced right and should be selling in spite of it being on the market for 50 days.
I mentioned to her that it seemed like home buying comes in waves, or surges now. The market goes quiet for a few weeks, then a bunch of homes will sell at the same time. We agreed that her listing should be the next to go pending….and if/when it does, will several more will go pending too?
Looks like it!
Since Wednesday, we’ve had 63 new pendings, including hers on Calle Pera! You could say that we’re just coming off the holidays, but this isn’t the spring selling season…yet. Or is it?
It’s not just the hot new listings either – only 15 of the 63 new pendings had been on the market for seven days or less. Here are eleven that had been on the market for 100+ days:
When eleven homes go pending that have been on the market for months, it’s not a fluke – those are retail sales happening early! With good weather and no football this weekend, the lucky streak should continue.
Are you waiting to put your home on the market? The reason to list it sooner instead of later is to avoid competition. There probably aren’t many if any other listings around you now, and that could change in a hurry – and have impact on your eventual sales price.
I’m nervous about the competition between two-million-dollar condos in downtown San Diego, so I put our new listing on compass.com as a Coming Soon to gain some awareness among buyers while we do a quick spruce up. It appeared on our website yesterday morning, and since then Compass agents have inputted another 19 new Coming-Soon listings!
Hopefully the early momentum will feed on itself. Let’s go!!
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