We joke about how sellers are reluctant about lowering their price, but it has been a solid strategy over the last 10-12 years. Here is a prime example (see above).
P.S. They had no showings last year, and decided the timing wasn’t right. Boy, howdy!
Today’s rate at closing – highest since 2011!
From yesterday’s article, which also ran in the SDUT today:
“There are so many strange things going on right now,” said Edward Seiler, the associate vice president for housing economics at the Mortgage Bankers Association.
It has been 40 years since rates have risen like this alongside similar home price growth and high inflation. This time around, the United States also has a severe housing shortage. And then there’s a new and uncertain dynamic — the sudden rise of working from home, which has the potential to change what home buyers want and where they live.
“Nobody really knows what’s going to happen over the next year,” Mr. Seiler said. That makes it hard to predict when rates might start to act as a brake on rising prices.
Nobody?
I have to take a swing at that one!
There are many variables that could slow the increases in home prices, and higher rates are just the latest excuse. Prognosticators said that last year’s velocity was the reason the home prices would cool in 2022 – no one could imagine that they could go up as fast as they did in 2021 – yet NSDCC the median sales price has INCREASED 21% BETWEEN DECEMBER AND MARCH!
But will rising rates be the final blow, and home prices start to decelerate?
Let’s try to predict the path of mortgage rates in 2022. How much worse could it get?
Mortgage rates are loosely tied to the 10-year T-bill, which has risen 0.824% this year:
The Fed is expected to raise their benchmark rate 1.5% this year (6 x 0.25%), so the 10-year yield has another 0.676% to go to reflect the anticipated 1.5% increase in 2022.
Mortgage rates have mirrored the 10-year, plus 1.75%, for decades.
Today’s 30-year fixed mortgage rate is 4.84% so let’s add the additional 0.676% = 5.516%. Because mortgage lenders are like gas stations – quick to overshoot rates on the way up, and sluggish on the way down – we will probably see 6% mortgages this summer as lenders continue to get out in front.
Let’s note that today’s 10-yr yield is 2.452% plus 1.75% = 4.202% which means today’s mortgage rate is about 0.6% overshot too high.
To further demonstrate the current mortgage-rate overshoot, here was the rate on January 3rd:
The 10-year has gone up 0.824% YTD, and mortgage rates have risen 1.43% YTD.
We are due for pullback, but the mortgage lenders will more likely just let it ride, knowing that more Fed increases are coming. They will panic (again) and mortgage rates will probably be touching 6% in a couple of months, but we should settle into a range of 4.75% to 5.5% by the end of the year – which isn’t much different than it is today. It coincides with the January’s 3.41% plus 1.5% = 4.91%.
Will higher rates than today affect home prices? It depends on the sellers – they get a vote.
If relatively nobody wants to sell at these prices, they sure won’t want to sell at lower prices! Rather than lowering the price, they will blame their realtor for their home not selling, and try again next year.
They’re not going to give it away!
There isn’t going to be a surge on inventory, because it would have happened by now. But I’m sure there are buyers running to the sidelines in droves, wanting to believe it’s going to be different, later. There will be fewer offers on homes for sale, and some may not get any! All we have to do is monitor the two metrics, the days-on-market, and the actives vs pendings, to know the trend.
But there are additional variables that will keep prices in this range:
We are pulling into Plateau City.
Even if the buyer psychology crashes, and only the desperate buyers stay in the game for the next few months, we can easily predict what will happen in the second half of 2022. Because both sellers and buyers who didn’t transact in the first half of 2022 will pack it in for the rest of the year, sales will plummet in the last half of 2022. It’s what happens in the early stage of a market shift, because sellers can’t believe they missed the peak and would rather wait, then lower. It will takes several failures before sellers re-consider their price accuracy – and some never will.
The NSDCC median sales price in December was $2,165,000. In March, it was $2,625,000.
I expect that the December, 2022 median sales price will be within 5% of $2,625,000 (plus or minus).
Then in 2023, the market will be flooded with lookers, who will be hoping for lower prices than what they remember from summer. But sellers will be packing a little extra on their price, just in case.
What do you think?
Before commenting, spend 15 seconds to watch this response to a ~$3 million off-market listing:
The mainstream media is taking their shots at explaining the current market.
Here is the attempt by the NYT – link should be unlocked:
Link to ArticleHere’s a former realtor who says if it weren’t for the investors, we’d be back to normal:
Economists like to focus on demand, but as long as the supply is scarce, prices will hold or keep going up.
It is natural to have more closings during the last week of the month, and the dip in the pendings count wasn’t as bad this month as it was last month. This is where you will see the first signs of any concern on behalf of buyers about interest rates, etc.
Everyone was talking about them at open house over the weekend. But we’re still going to sell my listing for well over the list price today!
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Hoping for a big finish today – I’ll be there 12-3pm!
A tasteful beach house for sale with big ocean view!
The 2022 inventory is off to a slow start – and I don’t expect it to improve much, in spite of record pricing:
| Year | ||
| 2018 | ||
| 2019 | ||
| 2020 | ||
| 2021 | ||
| 2022 |
The 682 listings this year was 31% lower than in the first quarter of last year, and about half of what we had prior to the pandemic. No wonder that the median list price was 36% higher, year-over-year!
Well, the way it’s been going, it was bound to happen!
At least this house was fully remodeled, had a guest house (with double-tap kegerator!) and large pool all laid out nicely on a half-acre lot in the Ranch. This is the one I featured previously with the dozens of attendees at the open houses.
Here are the comps for the neighborhood – what was a trend in the upper-$2,000,000s in the second half of 2021 sure popped up in a hurry to $4 million+. The pending sale had “several offers and is way over list”, according to the listing agent:
It can’t be said strongly enough how important the visual impact is to selling houses in the Frenzy of 2022.
The action is so fast, and with major life-changing decisions being made in minutes, that it is smart for sellers to take advantage and maximize the appeal before going on the open market. You have to sell the buyers online, then again when they arrive in person, and then clinch it when they go home and look at it again online. Photos AND videos are the ideal answer!
https://www.compass.com/app/listing/13010-brixton-place-san-diego-ca-92130/1014498506376282745
Here are the before-and-after photos of our latest listing:
If you are thinking of selling, consider that the combining our tune-ups with my open-bidding process is the best way to ensure a top-dollar sale! Let’s discuss it! Call or text me today at 858-997-3801.
Check out our new listing in Carmel Valley!
13010 Brixton Pl., Carmel Valley 92130
3 br/2.5 ba, 1,804sf
YB: 1989
LP = $1,750,000
Location is everything! Enjoy this end-of-culdesac gem that is just steps from Torrey Pines High School (so close you won’t need to buy your kid a car!) and an easy stroll to Del Mar Highlands & One Paseo! Totally renovated with newer kitchen & baths, Pella Pro-line designer wood windows, new paint & carpet, new light fixtures, and new landscaping! No rentback needed at closing either – just bring your toothbrush and move right in! Wow!
I’ll be there 12-3pm this weekend for open house – stop on by!
P.S. This is my 10,000th blog post!
The consumers’ fascination with the zestimates has never been greater! With home prices detached from comps, the zestimate is the only other measuring stick for both buyers or sellers – right or wrong!
