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Inventory Watch

After staying around 400 since the middle of September, the number of active listings finally plunged by 6% as the holiday season finally set in.  Yet, the number of pendings rose by 9%!

There were also more new pendings than new listings this past week.

The list prices are probably as low as they will be for the next six months. It would take a very sluggish spring selling season for pricing to collapse in the second half of 2023.  Until then, sellers will be confident that they will beat the odds and sell for at least as much as they can get today.

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More Than 10% Off

I said on the Frenzy Cruise that I’d also recognize the NSDCC sales that closed well under their list price.  It’s good for potential sellers to see how buyers will lowball homes that have been on the market for a while – and encouraging for buyers to know that they might be able to get a deal if they play the game wisely.

These are sales from November, with percentages off their original list price:

-17%

-14%

-23%

-19%

-15%

-10%

-23%

-10%

-16%

-32%

-16%

-20%

-11%

-15%

-15%

-13%

-26%

-17%

-23%

-12%

-20%

-14%

-13%

-29%

-19%

-16%

-22%

-12%

-14%

-14%

-18%

-28%

There have been 94 NSDCC closings in November (so far), and 34% have been discounted by a double-digit percentage off the original list price – which isn’t too bad, given the negativity everywhere.  It happens at all price points too.

Two conclusions from the clusters in graph below:

  1. Once a home has been on the market for 30-40 days, sellers are ready to deal.
  2. Sellers who go beyond 100 days on the market are really taking a chance.

 

There were 13 of the 32 sales who ‘refreshed’ their listing, or had it on the market this year with a different agent – those DOM are not reflected here. There were quite a few at the -8% and -9% too.

Five of the 32 were round-tripped.

Because it is unethical to deliberately list a home for sale at an unrealistic price, it means that in a third of the cases, the listing agents just flat-out got the price wrong by a double-digit percentage.  Can you imagine if doctors, lawyers, stockbrokers, plumbers, or burger-flippers were wrong a third of the time?

Get Good Help!

Slowing in San Diego

Our friends at JB have been on the forefront of market tracking for years now. They have staff that travels around the country to gather data from builders in particular, and have built a tremendous network.

I don’t mind being labeled as ‘slowing’ because…..well, I guess it beats falling!

Their definition of Slowing:

Markets in the Slowing phase face alarming affordability levels, decelerating (or even declining) home price appreciation, and rapidly slowing sales—making capital investments less attractive. Several of these slowing markets were among the first to recover from the initial COVID panic in April 2020.

    • In-migration and job growth, fueled by the proliferation of work-from-home policies, set these markets apart as higher wage workers relocated due to the relative affordability—most notably DallasJacksonville, and Raleigh-Durham.
    • Current employment is well above prior peak levels in all of these markets. While strong job growth from high-wage sectors has buoyed these markets, it has also been the primary driver of their now strained affordability, with a significant number of locals now completely priced out of ownership.
    • YOY home price growth is decelerating rapidly, and construction volumes are pulling back from very high levels.

    Their business focus is tilted towards builders and new homes, but their analyses about the general market conditions are applicable to the resale market too.

    https://www.realestateconsulting.com/the-light-current-housing-cycle-landscape/

    Each area will have several variables that makes it unique, but we are a society that wants to label everything with one word. I have one word for you – auction. If an auction company took over real estate, we wouldn’t need opinions, analyses, or realtors!

Thank You!

Thank you for the tremendous support!  You generously bought 65 pies and donated another $3,300 to the cause. It will allow Mama’s Kitchen to provide 2,017 medically-tailored meals to San Diegans who are vulnerable to malnutrition due to critical illness.

A special thanks to Brian for donating $1,000!

We are eternally grateful for your support.

Turkey Talking Points

Yesterday I was delivering pies throughout North County, and visiting with our great supporters – who were mostly past clients.  Predictably, the conversation turns to real estate, and observations about what’s going on in the market, now and in the future.

In case the subject comes up at your Thanksgiving, here are things we discussed:

  • Sales are down, but they aren’t zero.  There are roughly 400 houses for sale between La Jolla and Carlsbad, and the vast majority have been languishing on the market.  But at least 100 of them find a way to close escrow every month – and they tend to be the spectacular homes that are priced attractively.
  • Sales are being hampered by the light inventory.  The number of listings are 40% lower than in 2019, and next year I expect there will be the same or fewer homes for sale as sellers decide to wait until the “market gets better”.

  • Mortgage rates in the 5s are tolerable, and above that is problematic. Higher rates don’t only make homes less affordable – they also cause buyers to have a psychological expectation that sellers should come off their price.  The higher rates go, the more standoff there will be between buyers and sellers.
  • To get deals, the buyers have to cause them – and they are happening. We saw how two sales near my latest listing knocked off more than 10%, and here’s another one from yesterday:
  • I am re-examining one of my favorite seller slogans from many years ago; I’m Not Giving It Away.  Back when potential sellers had little, if any, equity, they would fight like crazy just to make sure they came out of escrow with at least enough for a steak dinner.  But everyone has gobs of equity now….and those who need to move bad enough are giving up decent chunks of it.  It means we could have a much faster decline in pricing than ever before.
  • I am still convinced that by March/April, the spring selling season will kick in and homes will be selling briskly for all the money. It’s likely that we’ll get off to a slow start as both sellers and buyers wait for someone else to go first, but by the end of March or April we will see bidding wars again.
  • Realtors are woefully ill-equipped to handle these conditions.  They have no strategies for a soft market and are very reluctant to price aggressively or reduce a list price properly.  Here is a discussion of typical agent comments.

The blog is picking up momentum, which hopefully means more people are looking to get better-educated about the market conditions, which is encouraging:

Thank you for being here!  I appreciate all of you and Happy Thanksgiving!

Try out Grandma Klinge’s pumpkin bread (mastered by Natalie) from the Compass cookbook:

Mortgage Rates Today

Today’s rates with no points

The Spring Selling Season could get a real boost if mortgage rates stay in the 5s.

The Fed has been telegraphing their intentions for months now, and at this point, there can’t be anyone who thinks the Fed won’t keep raising their Fed Funds rate – at least for their next two meetings. Mortgage lenders have to be pricing in the anticipated future increases, yes?

After some tepid inflation news last week, mortgage rates came down a 1/2%, and they have stayed there, which makes me think that there was already too much buffer priced in – and there has to be some extra left knowing that the Fed has more work to do.

But just in case, go out and buy a house today so you can get a 5-something rate!

In Escrow

I’ve been on a fortunate lucky streak this year, and it’s not going to last forever so if you don’t mind, I’m going to enjoy it while lasts. More than anything, I want to give hope to sellers and buyers that you can make smart and friendly transactions these days.

The negativity should be questioned!

Frenzy Monitor – November

The reason for breaking down the active and pending listings by zip code is to give the readers a closer look at their neighborhood stats. A healthy market is when there are two actives to every pending.

There are a couple areas (in red) where the number of pendings have dropped significantly. But in six of the more-expensive areas, there are the same number of pendings now as there were last month:

All we have to do is muddle through the next three months!

In 2020, we had 400+ pendings from June 22nd to November 30th – with a peak of 491 pendings on September 7th.

Inventory Watch

There have been 80 NSDCC closings in November, which should mean we should get to at least 100 sales for the month. But with only 108 pendings today, the monthly sales in December and January sales will probably be under 100.  Even though there are 393 active listings, sellers haven’t been too interested in adjusting their pricing strategies, and most will just wait it out until some unknown date in the future.

Another lady was walking by on Wednesday when we were doing the photos of the new listing. She confirmed that we were selling the house, and replied, “It’s a TERRIBLE time to sell”.

She came back yesterday, and when she heard that I already had three offers, she said, “Well I guess it’s good to get out, because I heard that PRICES ARE GOING TO GO DOWN FOR FIVE YEARS!”

The future is somewhat unpredictable, so let’s just look at how sellers have been operating in 2022.

How do the sellers feel about getting more aggressive about their list prices?  If prices were going to decline for the next five years, there should be some evidence already.

Here are the weekly averages of LP/sf by price range in 2022:

Generally speaking, at least 3/4s of the sellers would rather stick to their price and not sell.

I don’t expect that trend to change.

If it were to change, it would be in the off-season when the stragglers who didn’t sell in the spring/summer are motivated enough to accept a lowball deal.  But you won’t see it much in the list prices, it will only happen for those who are willing to make low offers.

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