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MCM Original

A remarkably original mid-century modern on an acre in Del Mar.

It listed for $2,400,000 on February 26th, then the price was raised to $2,900,000 on March 8th when marked pending. The final sales price was $2,800,000:

New-Listings Comparison

The market’s direction will be determined by inventory, and San Diego is #1 on Bill’s list for the biggest percentage drop year-over-year.  Also consider how the San Diego metro compares to others that had a similar number of new listings in April:

Metro Area
April Listings
Metro Population
People Per New Listing
Boston
3,386
4.9 million
1,447
San Diego
3,513
3.3 million
939
Portland
3,684
2.5 million
678
Columbus
3,620
2.1 million
580
Jacksonville
3,472
1.6 million
461

Our market is starved for inventory, so you really can’t blame sellers for pushing it, price-wise. Buyers may back off some, and not as many listings will sell. But when the success rate of listings-that-sell has been an unusually-high 80% to 90%, we can afford some additional failure.

We’re going to have fewer sales. Panic selling? Probably not.

https://calculatedrisk.substack.com/p/final-look-at-local-housing-markets-a11

Inventory Watch

The overshoot part of the frenzy is unavoidable.

The pricing of the new listings was calculated on sold comps from when the frenzy was hotter and sellers were getting big pops over the list prices.

Back then, you didn’t have to spruce ’em up as much, you got away with sloppy pricing, and the listing agents insisted on 60-day rentbacks for free, ‘coming soon’ teasers for weeks, and showing times based on when the listing agent felt like fitting it into their schedule.

The pricing part has been correcting – it’s the rest of the package that needs adjustment:

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365 Marine Street, La Jolla

It is a true honor to have listed for sale my favorite home of all-time!

365 Marine St., La Jolla

3 br/3.5 ba, 2,894sf

YB: 2018

LP = $6,950,000

This custom contemporary was designed and carefully-crafted for over three years to be the ultimate beach house just 100 yards from the sand! The main living area has floor-to-ceiling glass panels that open dramatically to create the perfect indoor-outdoor experience with breath-taking 180-degree ocean views over Marine Street beach! The interior is loaded with so many custom features that they make this home downright sexy! Ample off-street parking and an easy walk to the village too. Architect Mark Morris said in his 20+ years of designing super-custom modern-contemporary homes in the area, this is his favorite project of all-time. The ultimate in modern contemporary design – it’s a trophy property!

https://www.compass.com/app/listing/365-marine-street-la-jolla-ca-92037/1050797924033993089

Ask Jim

The Other Bob (TOB) suggested a blog post where he and others could ask questions.

Let’s do it!

Leave your questions in the comment section, and I’ll do my best to answer promptly. The comment section is moderated, so you will see your comment once I have a chance to review and approve.

We are busy launching my best listing of all-time today, so it promises to be the biggest day in the nearly seventeen years of Bubbleinfo.com history!

For those who would like to review the history of this blog, the 10,094 posts are poorly organized here. You’ll see that I went back to the first three years and marked nearly every blog post as private (868 posts). Hopefully, the whole history will be re-visited, organized, and turned into an action thriller some day:

https://www.bubbleinfo.com/archives/

The Slow Unwind – Fewer Sales

There is rampant speculation that home prices must come down to compensate for higher rates.  But there is another solution.

Fewer sales.

We learned a couple of lessons during the peak covid days:

  1. Sellers don’t have to sell – they can wait it out.
  2. When they do, the market can survive with fewer sales.

Look at the NSDCC sales in the past months of May:

2018: 273

2019: 297

2020: 143

2021: 300

2022: 126 so far

We might not hit 200 sales this month, and while the doomers and mainstream media will be talking about how the demand has been crushed and there is no hope, will the sellers panic?  Even if they aren’t receiving offers? Or not having any showings at all?

Have you seen anyone dump on price yet? Not really.

Are today’s sellers willing to keep reducing their price until they find what the market will bear?  Doubt it – and after two price reductions (three tops) they will give up, rather than keep lowering the price. They can blame on ‘the market’, or on their realtor, and decide to try again next year.

Anybody who needs the money can borrow against their hefty equity positions or get a reverse mortgage.  If they can’t make their payments, they can float for 6-12 months while their lender decides if they want to get back into the foreclosure business, which is California means you have to offer the borrower a loan modification before you can foreclose.  It will be months, and probably years, before we see any real foreclosure activity – if any.  If they have to, the non-payers can drag it out at least until next year, live for free, and just sell for less then.

Sellers might get a little antsy, but it will take more than that to give up hope of cashing in that big ticket.  They have been dreaming for months about what they are going to do with all that money, and they aren’t going to give up on those dreams easily.

Price-wise, we will hang out in Plateau City.

There will be an occasional big sale that keeps everyone optimistic – this will be the next one in South Carlsbad which was on our private site at $3,100,000 but hit the open market at $2,880,000, which should really rev the engines this weekend:

https://www.compass.com/app/listing/2864-camino-serbal-carlsbad-ca-92009/1045075166600199825

But most listings will languish, which is ok. It’s how we used to do it, and we survived!

The Slow Unwind – The Pricing Gap

The new market conditions will bear some resemblance to the past, but to believe that real estate sales will be ‘getting back to normal’ some day would be full of false hope.  Rob Dawg said it long ago – we need to abandon all previous assumptions.

Let’s start with the two things most likely to change:

  1. Buyers are going to stop paying over the list price.
  2. Buyers are going to stop making offers the minute a house hits the market.

The frenzy conditions that sellers have enjoyed over the last two years will now be in question, and take some finesse to navigate. If buyers are reluctant to pay over the list price, it means that they may even want to pay less than the list price. Then for some listings, there might not be any buyers – at least none willing to pay close to list.

What’s worse is that buyers and their agents won’t be comfortable making low offers, so they just won’t offer at all. Sellers who get no offers will only know that their price is wrong – they won’t know how wrong. Plus, they might not even get any showings, let alone offers.

What variables will make the difference between selling, and not selling?

Comps aren’t going to matter much. Just because there are high sales nearby doesn’t mean that tomorrow’s sellers are going to automatically get the same money or more – especially if the new listing has a defect or unusual feature.

The differences between schools is getting fuzzy.  We have become a little too reliant on the online school reviews, and there are going to be parents who spread negative stuff around – and unfortunately, there might be some truth to it.  No school is perfect, and the best education is a good upbringing at home.  If that’s the case, then why pay larger-than-ever premiums to be in the ‘best’ school district?  Some buyers will be attracted to the better home values further out in the suburbs.

Work-From-Home is here to stay. If you WFH and already considering private schools or taking a chance on the lesser-known public schools, then the need to pay a big premium to be closer to downtown won’t be as urgent and the outskirts will benefit. Plus, there is a new car-pool lane on the I-5! The homes that have multiple spaces to accommodate the work-from-home buyers will benefit.

The easy cure for higher prices & rates is buying a smaller house. Before buyers think about sacrificing on location, they will consider buying a smaller home – and most people can find a way to live with 3,000sf to 4,000sf. As a result, the big bombers aren’t going to get the same $/sf for square footage over 4,000sf unless they have larger yards with a pool. It means we should see 4,500sf and 5,500sf homes selling for about the same price – which is different than it’s been.

Smaller yards should get penalized. While a smaller house might work, those with tiny yards won’t be as appealing post-frenzy.  At these prices, buyers will be reluctant to compromise on the most-important stuff, and having a decent yard is high on the list.

The homes that have everything going for them should continue to be popular and sell for a premium.

The rest? The price gap between the dogs and the creampuffs should widen, and market times extend dramatically as sellers and agents will be slow to react.

Sellers will be smart to spruce up their home more than they had planned, make sure their price is attractive, and hire a great realtor!

Get Good Help!

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