Hootenanny This Saturday
Tickets are $23!
https://bellyupsolanabeach.frontgatetickets.com/event/c4q9vl53ogk51cb5
Rising Mortgage Rates
Mortgage rates have been rising steadily:
2022 has gotten off to a bad start for the bond market and consequently, mortgage rates. The pace has been on the aggressive side with the average lender seeing an increase of more than a quarter of a point in a week and 3/8ths of a point in 2 weeks. The most prevalent 30yr fixed quotes are now in the 3.625% range, up from 3.25% at the end of December.
How many guessers had rates in the mid-3s in the first half of January?
Lawrence Yun, chief economist for the National Association of Realtors, projects that mortgage rates will increase to 3.7 percent in 2022, pushed up by persistently higher inflation.
Danielle Hale, chief economist for Realtor.com, expects the 30-year fixed mortgage rate to average 3.3 percent for most of the year and be at 3.6 percent by the end of the year.
Daryl Fairweather, economist for Redfin, expects rates to rise slowly from around 3% to around 3.6% by the end of 2022, thanks to the pandemic subsiding and lingering inflation. That would mean about $100 more per month in mortgage payments for the median home.
MBA economists predict that the 30-year fixed-rate mortgage will rise to 4 percent by the end of 2022.
Bankrate.com predicts that the 30-year fixed mortgage rate will peak at 3.75 percent during the year and fall back to 3.5 percent by the end of the year. “Long-term rates will move higher in the first half of the year, but by the close of 2022, concerns about slowing economic growth will be unwinding that and bringing them back down,” he said. “This will be higher than where mortgage rates started the year but ending at levels previously unseen before the pandemic began in 2020.
Lending Tree predicts that the 30-year fixed mortgage rate will rise to near 4 percent by the end of the year.
If their predictions are right, then rates should flatline for the rest of the year and be a non-issue.
https://www.mortgagenewsdaily.com/markets/mortgage-rates-01112022
Padres Contest on Inventory Surge
Are we going to get a surge of new listings in the coming months?
Our recent history doesn’t suggest it – the San Diego inventory has been the worst around (thanks Bill):
But let’s consider what used to be normal, and see if we can connect the dots.
NSDCC Number of Listings Between January 1st and June 30th:
| Year | |
| 2017 | |
| 2018 | |
| 2019 | |
| 2020 | |
| 2021 |
The first-half inventory really hit a groove at 2,700 listings for three years straight. But then the impact from covid struck in 2020, and the listings count was 15% lower than the previous years.
But then 2021 was even worse!
If you remember last year, we did a contest for readers to guess the number of listings in January, and everyone came in much higher than the actual listing count. The final total was 288 (Derek did get tickets).
As it turned out, it was an omen for the inventory all year.
Let’s do it again! To keep an eye on what will be the #1 predictor on how the spring season will roll out, let’s guess the number of NSDCC listings this month!
The recent history is below – leave your guess in the comment section.
NSDCC Total Number of Listings, Jan 1-31
| Year | |
| 2017 | |
| 2018 | |
| 2019 | |
| 2020 | |
| 2021 |
If there is a baseball season, the winner will get four tickets to a Padres game! They aren’t front row, but they are pretty good seats:
There may only be a dozen or so guesses, so take part – your chances of winning are good!
My general sense of what will happen, based on the number of January listings:
450 or more listings: Frenzy will be over within 30 days.
400-450 listings: Causes a wait-and-see with some buyers.
300-400 listings: Super-charges the environment to ultra-frenzy conditions!
Under 300 listings: Painfully slow opening to the selling season.
Give it a guess!
Inventory Watch
Last week was the gap week for people returning from the holidays.
It’s GO time now!
To help describe today’s market conditions, here are two notes on today’s inventory:
The NSDCC median list price today is $5,495,000.
There are 22 houses for sale between La Jolla and Carlsbad priced under $2,000,000.
Wow!
Cyclovia Tour
A glimpse of the Cyclovia today in downtown Encinitas, plus a couple of open houses:
Cyclovia Encinitas on Sunday
On Sunday, I will be the Compass host of Cyclovia!
I’ll be handing out swag and talking up the 2022 frenzy – stop by and say hello!
https://encinitasca.gov/Residents/Recreation-Programs/Special-Events/Cyclovia-Encinitas
Our office is on the corner of F Street and S. Coast Highway 101:
Over List, December
Impressive momentum to wrap up the year, with almost half of the buyers feeling the need to pay over list:
NSDCC Detached-Home Sales, % Closed Over List Price
January: 38%
February: 43%
March: 53%
April: 55%
May: 54%
June: 59%
July: 64%
August: 55%
September: 41%
October: 45%
November: 48%
December: 48%
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Have the higher-end buyers figured it out that paying over list could be a ruse though?
Percentage Of Sales Over List Price by Price Range
| Price Range | ||||||||||
| $0 – $1.0M | ||||||||||
| $1.0M – $1.5M | ||||||||||
| $1.5M – $2.0M | ||||||||||
| $2.0M – $3.0M | ||||||||||
| $3M+ |
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
The December sales were a little soft, historically, but the inventory has been decimated:
NSDCC December Sales
2017: 224
2018: 196
2019: 227
2020: 290
2021: 182
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NSDCC Average and Median Prices
| Month | |||||
| Feb | |||||
| March | |||||
| April | |||||
| May | |||||
| June | |||||
| July | |||||
| Aug | |||||
| Sept | |||||
| Oct | |||||
| Nov | |||||
| Dec |
The median list price dropped and the median sales price went up!
The median sales price is 9% higher than the median list price!
The average LP and SP were almost identical for the second month in a row.
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Rate Bump
Mortgage rates in the mid-3s in January should put some pep in the buyers’ step. From MND:
Regular readers know that we’re fond of setting the weekly record straight in cases where day-to-day rate movements paint a drastically different picture than weekly surveys. When it comes to the latter, there’s really only one game in town.
Freddie Mac’s Primary Mortgage Market Survey is not only the longest running weekly survey. It’s also by far and away the most widely cited in financial media. It’s even relied upon by the mortgage industry for certain calculations that affect borrower eligibility.
Unfortunately, the rate that Freddie published today (3.22% for a 30yr fixed) is a drastic departure from reality. 3.375% would be an aggressive rate quote this afternoon, and the average lender is closer to 3.50%! A gap of just over 0.25% might not seem like a lot, but consider that it held inside a range roughly half as big for the entirety of the 4th quarter of 2021! It can take months for rates to rise a quarter of a point and we just did it in a few days.
Frustration Fee
Why do buyers offer $100,000-$200,000 over the list price?
- The sellers and listing agents aren’t demanding it.
- The home isn’t priced $100,000-$200,000 under value.
- Half the homes are selling for list price or under.
- There will be others for sale.
There isn’t a threat of transparency either – every listing agent (besides me) does blind bidding, and then just takes the highest offer. It would be understandable if there were rounds and rounds of open bidding and the buyers’ ego kicked in because they KNEW they had to out-bid everyone else to win.
But with blind bidding, you don’t know anything about the other offers (if any).
The extended frenzy is causing buyers to voluntarily sacrifice hundreds of thousands of extra dollars in trade for the hope of ending their frustration – and if they still lose, then they offer even more next time!
The frustration builds over time, and buyers go through a fairly predictable sequence:
Early-on: I’m not going to play that game – I’m not desperate.
After losing 2-3 houses: These people are nuts.
After losing 4-5 houses: Ok, this is ridiculous. I gotta get this over with.
The biggest problem is that it seems there are always people with more horsepower who started the process earlier and, as a result, are MORE frustrated than you.
Once buyers reach the peak frustration level and end up winning a house, they are left in disbelief with the one universal thought: “Oh, what have I done?”
It becomes obvious that buyers are paying tomorrow’s prices today, but they come to terms with it later because there are enough other reasons to buy this house that paying the frustration fee gets forgotten.
If overpaying is part of the environment, what can a buyer do?
- Get to the peak frustration level quickly, and/or just buy the first house you see.
- If you are going to overpay, then insist on buying a superior home.
- Only buy an inferior home if the defects can be fixed with money.
You will have a 15-minute tour to size up the home and make decisions that will affect the rest of your life.
You’d be crazy to attempt that without a solid, experienced agent to assist you!
Yet, even with all this pent-up frustration among buyers, it doesn’t occur to listing agents to go back to all the other bidders and give everyone a chance to overpay.
Get Good Help!
First Week Frenzy
Just an early-frenzy temperature check here – how many people are out looking at an older condo priced at $1,550,000 in the first week of January? I saw 20+ visitors INSIDE the home. Link to listing
Agent said he already has three people who want to write a full-price offer!
