Statewide Showings Subside (Slightly)

I’m not alarmed here with a statewide drop-off in showings:

  1. Showings are 37.4% above those in early March.
  2. They are way ahead of last year!
  3. It was going so good that a drop-off was inevitable.
  4. Showings declined this time last year too – might be seasonal.

If you would have predicted this market bounce-back in April, nobody would have believed it!

Pendings Daily and YoY

The graph above shows the raw data – how the pendings started to increase as we got into April.  It seemed like the action began to slow down just recently, and, sure enough, the rolling averages have been in decline over the last week or two in San Diego – and elsewhere.

If you just need some covid relief, then the graph below will make you feel better.  For the last month, the pending sales in San Diego have been comfortably ahead of last year’s counts.

https://www.mikedp.com/

Coronavirus Discount

Our listing downtown has closed escrow!

We hear all this news about home prices being stable, and more people wanting to move to the suburbs.

Where does that leave the higher-end condo market?

There are 33 active listings of 92101 condos priced over $1,800,000, with a average DOM of 82 days.

How many have closed since Coronavirus Day, March 12th?

One – my listing.

Only one closed sale in three and a half months?  I think we can call that a buyer’s market.

ISSUES:

  1. There were no closed comps from the coronavirus era.  Buyers are reluctant to rely on old sales as an accurate reflection of where values are today, when there is NOTHING to back it up from the last 3.5 months.
  2. We had few showings, which means, using my pricing gauge, we were at least 10% wrong on price.
  3. Agents are terrible at quantifying how much the discount should be.  Many if not most have only seen a strong seller’s market over the last ten years, and are now just order-takers. When presented with data to justify our price, not one agent could present a rational counter-argument.

If you remember, I was promoting it here at the end of February because we were close to going on the market.  But with it being early in the (normal) selling season, we decided to do some extra upgrades to ensure victory.

Two weeks later, the coronavirus hit.

Remember the saying, “Time is of the essence” – it’s never been so true!

We hit the open market on April 18th, listed for $2,195,000 – based on a January appraisal of $2,100,000 which included several comps over $2 million.  But the uncertainty of the coronavirus impact was reaching its height, and we only had a couple of showings early on. We lowered the price to $1,999,000, hoping that being under $2-million mark would be the solution.

 

We received the buyers’ $1,800,000 offer on May 18th, and we countered $1,959,000 – and changed the list price too in hopes of capturing the attention of other potential buyers. Two days later, we lowered again – but we had no other showings.  Don’t you hate it when you see a sale that closes for a ton under list price, and you say to yourself, “I might have paid that!”  I prefer to lower the price while in negotiations with a lowball offer, just in case others are watching and waiting.

We were faced with either making the deal at $1,860,000 or waiting it out for the proverbial two in the bush – with no evidence suggesting they would appear any time soon!

We made the deal.

Then we had to endure the protests and rioting downtown, and other condo buildings nearby were boarding up their first couple of floors.  But the price fixed that too!

The sales price ended up being 11% below the appraised value, but after going months into the 100-year pandemic and seeing no other action around us, it was the right move – because somebody had to go first.  There might be other sales higher this year – I hope we helped them out!

Covid-19 Changes At Home

My good friend Nancy Keenan was featured in this Forbes article – an excerpt:

Conducted from April 23 to April 30, the America at Home Study compared responses from 3,001 consumers 25 to 74 years old with household incomes of $50,000-plus; 77% were homeowners, 20% were renters, and 3% live with relatives or friends. At the time the survey was conducted, nearly half (48%) of the respondents or another household member had lost a job or income as a result of COVID-19.

Not surprisingly, the survey team discovered that the popular open concept floorplan is problematic when one room has to have multiple purposes. For one thing, there’s the issue of noise and distraction with so many occupants working and schooling at home. “The challenge as we begin the recovery phase is to dig into what consumers say is missing from their current living space and what they are willing to pay for in their next home,” Slavik-Tsuyuki says.

When asked what they thought the word “home” meant, 91% of respondents said, “a safe place.” Safety as a category encompasses many things such as “hygiene, health and wellness, and flexibility of space,” Slavik-Tsuyuki says.

More than half of respondents said they want germ-resistant counters and flooring; greater technology; energy efficiency; more storage, specifically for food and water; touch-free appliances, faucets and toilets; a better equipped kitchen for cooking.

More than 30% want touchless home entry; home offices to accommodate more than one person; flexible walls to create adaptable space.

Keenan of the Dahlin Group points out that since the 1850s, health crises have changed the way we live. With cholera and Tuberculosis a fear, many cities improved water quality standards, and an acceptance of fresh air to combat disease, meant more homes were built with porches and better ventilation. After the Spanish Flu, built-in tubs became the norm as they were easier to clean than claw foot tubs, and lacquered toilet seats replaced wooden ones; powder rooms near a home’s entry provided a place for visitors to clean their hands. After this pandemic it will be no different.

Keenan says that many of the changes that consumers want can take place immediately and that builders are already refreshing their home designs. She mentions drop zones for clean package delivery, more storage, flexible spaces for home offices, better technology and energy efficiency, connection to the outdoors, full baths in mudrooms, multi-use garages, the potential for movable wall systems and multiple office spaces.

Link to Forbes article

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!

First Buyer Is Best Buyer

In response to the coronavirus, the California Association of Realtors issued several disclosures that need to be signed electronically before showing a home.  In addition, Cal-OSHA has mandated strict policies about wearing PPE, cleaning the home before and after showings, etc.

It’s a whole new level of distractions for agents, and because management has made it clear how important it is to comply (five Compass agents have already been turned in by outside realtors for non-compliance), there’s usually more attention on masks, gloves, and booties than on selling.  Some agents even insist on pre-qual letters and/or bank statements just to see the house.

I’m all for compliance!

But the buyers are going to tire of the additional hassles……unless they are really interested in the house.

Thankfully, the situation is also forcing realtors to be more adept at video production and virtual showings, so buyers are getting a better feel for a home before deciding to see it in person – which also means that the buyers who do go to the trouble of jumping through the hoops are probably real contenders.

Realtors won’t mind no open houses, fewer looky-loos, and only showing homes to legitimate buyers!

But agents better be ready to go.

It’s already happened three times this year where I sold my listing to the first buyer who saw it!

The old broker saying that “your first offer is your best offer” may be more true now than ever.

Benefits of Selling To The First Buyer:

  1. Maximum negotiating power
  2. Fewer repair hassles
  3. Stop the showings
  4. End the uncertainty
  5. Get Your Money Sooner!

With the improved internet tools, buyers are more prepared than ever to buy your home – and they want to get it over with now, before they have to sign another form or wear another booty!

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