This film was taken on May 25th, a month after mortgage rates hit 5%.
I can’t wait to hear from the doomers who swear that because sellers had to take a whopping $50,000 haircut off the list price to sell this house to cash buyers who closed in two weeks (with sellers who wanted to occupy until August 1st), that this comp means the market is in trouble.
Would you pay almost $3,000,000 for this house, plus free rent?
Here are two more charts from Bill that indicate how the San Diego market is bucking the national trend.
Compared to last year, our inventory keeps going down!
I don’t know what property types are included in Bill’s counts, but let’s use the SDMLS count for number of detached and attached homes sold in 2021, which was 39,671 / 12 = 3,305 average number of sales per month – but 2021 was a huge year.
What was the average in a fairly normal year? The 2019 average was 2,904 sales per month.
In San Diego County, we can expect 2,900 to 3,300 home sales per month.
Look how many active listings there were last month (well into the 5%-rate era):
The market is being starved out. Other areas in the country are getting surges of inventory, but we’re not. Without a major surge, sellers can wait this thing out, and hope that buyers come around.
https://calculatedrisk.substack.com/p/1st-look-at-local-housing-markets-753
You probably had to be a 70’s kid to appreciate Jim Seals, who died at age 80 today. Here’s one of their classics:
Hat tip to CB Mark for sending this in!
A few years ago, some friends appeared on a house-hunting reality TV show. They had a blast, but afterward, they revealed something that surprised me:
It was all staged. They’d already purchased a house when they filmed the episode, and that house wasn’t featured on the show at all. The houses they did look at weren’t even for sale.
Like any normal person, I accept that so-called “reality” TV is scripted to a certain extent, but I’d previously assumed there had to be some truth to those real estate shows: that the information they presented was somewhat reliable, and that you might be able to pick up at least some basics about real estate and home renovation from watching them.
The actual reality is: Nope.
Whether it’s a house-hunting show, a home renovation show, or a house-flipping show, the only thing you can rely on is that you’re probably being lied to. Buying or selling a house is more complicated than looking at three homes and having a conversation over a glass of wine, buying a fixer-upper probably isn’t a bargain, and the Property Brothers are not going to spend weeks in your house personally hanging drywall and grouting tiles.
But it’s worse than mere fakery—a lot of the information these shows give out is completely wrong. If you base your life decisions on what you see in real estate shows, you’re going to be very sorry. Here’s why.
Read the full article here:
https://lifehacker.com/real-estate-reality-shows-are-lying-to-you-1849028260
There was a slight decline in the percentage of sales closed over the list price in May, but it matched the peak month in 2021, and historically speaking, it still sounds wild that nearly two out of three buyers are paying more than the list price when we are at these crazy-high price points.
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Here is how it breaks down by price range – the big decline was in one category:
NSDCC Average and Median Prices
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The average and median sales prices are dropping, but so are the list prices so it’s expected. The median sales price could dip another 13% and still be in positive territory for 2022!
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Realtors are saying that the market is slowing, and Marc D. suggested that we define what that means:
A slowing market is when fewer active listings are priced to sell.
It is a result of…..
Fewer buyers – Higher mortgage rates priced out some or most of the buyers hoping to finance their purchase. They are simultaneously hoping for prices to come down to compensate, and/or in the process of making other adjustments like considering smaller homes, widening their target zone, or offsetting higher rates with bigger down payments or an adjustable-rate mortgage. All of which take time, so more buyers than ever are in the wait-and-see mode, which means…..
Fewer sales – as more buyers move to the sidelines, it’s disrupting the incredible sales flow we’ve enjoyed over the last two years where virtually every home that came to market has found a buyer with relative ease. A new listing that previously had an 80% to 90% chance of selling in the first week now has a 10% to 20% chance of selling that quickly (example: there are 345 NSDCC active listings today, and there were 33 new pendings in the last 7 days), which means…..
Longer market times – with more unsold homes lying around, it gives buyers the impression that the ‘slowing market’ could mean lower prices are coming, which makes them more cautious. The longer a home is on the market, the more pressure is on the seller to do more improvements, or lower the price. Or they can also choose a third option and just wait in line and hope that they are moving slowly up into the group of 10% to 20% of active listings that have a chance of selling this week. This option is dependent upon the newest listings being more optimistic on price than those unsold currently, but because they have more recent data available on the perils of over-pricing, the newer listings should be sharper on price, not worse.
A slowing market means we have transitioned from the one-time-in-history event where every home sold quickly, to the old reliable sellers-waiting-in-the-queue, hoping for their lucky day to come.
With only 10% to 20% of the actives selling each week, it is inevitable that the unsolds will start stacking up as both sides wait longer for their lucky day. For some sellers, that day will never come, and they will cancel their listing instead.
Knowing that sellers will still insist on getting their price or close, how can buyers and sellers both know how close a home is to selling?
List-Price Accuracy Gauge
The best thing a seller can do is to lower their price so they at least get out of the bottom tier – you need to have showings to have a shot at selling. The market is still hot (see map at the top), there just aren’t as many active listings that are worthy of the attention of buyers. The sellers are still in control of the marketplace, and it will be their reaction to wrong pricing that determines the outcome – as measured by the sales count.
Back in the day (3-5 years ago), there were 10:1 actives to pendings in the high-end markets like Rancho Santa Fe, an area where sellers have always been content to wait as long as it takes. I’ll never forget the RSF listing agent who proudly asserted that her one-year anniversary of her listing was coming up! Some people don’t mind being on the open market and not selling – they are only motivated to move if they get their price, which is fine. Hope you get lucky!
Sellers will be hanging around for weeks or months, hoping the mythical market conditions improve and that lucky couple with 2.2 kids shows up, rather than go to work on their pricing. As their lease comes due or the start of school gets closer, the waiting buyers will anxiously decide whether they will step up and make an offer, or keep waiting for the mythical two-in-the-bush that might be a better value.
This is the Big Standoff whose intensity will be measured by the number of sales that find the sweet spot of being within +/- 5% of the latest pricing trend. The vast majority of sellers won’t sell for less, and buyers will be very reluctant to pay more than 5% above comps.
While the market may be calming down, there are still properties selling for well over the list price!
Once we got past the Memorial Day weekend, the unsold listings continued their climb. Here’s how the first week in June compares to previous years:
NSDCC Listings, First Monday in June:
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These are the stats from an ultra-low inventory environment, which we’ve never seen before. I’m sure there are sellers out there who haven’t had a showing yet. Consider the current market conditions, and act accordingly!
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This listing hit the open market on April 18th, which was long after mortgage rates had gotten into the 5s. It went pending in the first ten days, but then it fell out of escrow three weeks later. By then, the doomer talk had escalated and reviving the market urgency would typically be more of a struggle.
They stuck with the $3,995,000 list price though, and another buyer snatched it up the next day and closed in two weeks at a slight discount of $3,850,000 cash:
There might be some turbulence in the marketplace being caused by the incessant doomer talk, but I haven’t seen any quality homes having to sell at a big discount yet.
