Your home’s value is improving! According to Zillow, the value of virtually every San Diego property is going up:
It doesn’t do much good unless you’re selling, or planning to sell. Speaking of sellers, in April, there were 78% of them sold for a gain in San Diego:
The last time the market took off, it was for different reasons (easy money, shorter-term thinking, and more move-ups), but the market psychology should be similar this time around – because buyer exhaustion is inevitable.
Here is how it looked then – during the first part of 2003 you could feel the market bubbling up, and by summer it was evident in the closings.
From June, 2003 to May, 2004, average pricing rose from $331/sf to $469/sf, which is a 42% increase:
Here’s the SD Case-Shiller graph, which reports three months late and documents the whole county, which lagged behind the coast:
Case-Shiller Home Price Index: San Diego, CA data by YCharts
The big difference this time is that while it feels like a frenzy with prices increasing, the overall stats are far more moderate than last time. Comparing last July’s $366/sf to last month’s average of $420/sf, the increase is 15%:
This frenzy is focused on the quality properties, which apparently doesn’t float all the boats higher this time (or at least not as high), and the fraud is keeping a damper on the statistical increases too.
If a frenzy can stay red hot for about a year, then we should be wrapping up this version shortly – probably in the next couple of months. Future pricing trends should fall more in line with the averages (sub-10% annually), with an occasional outburst.
An example of how the market is moving – more higher-end sales:
Sellers are enjoying the party.
The recent frenzy has been frustrating for buyers – should you wait-and-see?
The history of the median sales price shows that there is usually some softening around Dec/Jan – that is, up until this year:
The demand feels extremely deep because there are so many lookers and offers – but not everyone is willing to pay these prices. It is probable that the demand is truly deep at 90% of today’s prices – back where prices used to be.
Will buyers keep stepping up?
Most likely, as long as the list prices stay within reason, and there are few choices. San Diego inventory is down 1/3 year-over-year, which is given sellers free reign to push list prices higher.
You can see below that sellers might be reaching their ‘jump the shark’ moment, with both the inventory bottoming, and the list prices on the higher-end rocketing skyward (+16% since December):
This is a great time to sell – even better if you have neighbors who have closed for high prices in the last 30 days!
How are we doing, compared to the ‘peak’ years?
To capture the latest frenzy, let’s use the March 1st to April 30th period, and reflect back to see how the numbers stack up compared to previous years:
Today, both sales and pricing are increasing at the same time – similar to the 2003-2004 era, which was the hottest market in recorded history.
This year we had the fourth-highest sales count, and an average cost-per-sf similar to 2004. Average pricing is only 14% behind the peak year of 2006!
With sales being a leading indicator, it appears that pricing should continue to climb.
For those who prefer a bar graph, here are the same numbers:
An excerpt from HW:
Any homebuyer on the market right now will tell you the crowd of buyers and multiple offers are creating a challenge.
Those in search of distressed homes owned by the U.S. Department of Housing and Urban Development are not immune to this supply-and-demand situation. In fact, recently one HUD home in San Diego attracted 100 offers within 10 days.
“In this market, because it’s so competitive we’re seeing buyers just happy to get a house. They are being less selective on location and condition,” said Whissel, broker/owner of Whissel Realty.
But in its latest news report, RealtyTrac reported that an uptick in homes owned by HUD may create opportunities for patient buyers.
Experts project that over the next two years, as lenders steadily work through a backlog of foreclosures delayed by foreclosure-processing reviews, the supply of these HUD homes will increase significantly.
In the western part of Riverside County in California, HUD-owned home sales are increasing significantly.
“HUD sales have increased due to the hold back of bank-owned homes for robo-signing reviews, and, most recently, the Homeowner Bill of Rights,” said HUD local listing broker Nat Genis.
Genis added, “Inventory is there, just not being released during the banks/servicers review of the loan/mortgage documents.”
Read more here:
http://www.housingwire.com/news/2013/04/29/hud-homes-add-inventory-starved-market?utm_source=feedly
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For those hoping for more inventory, it’s good to see that the recent foreclosure activity around San Diego appears to have been going in the right direction over the last couple of weeks:
Rich is the king of graphs, and here are two from his latest at Piggington:
The median-price-per-square-foot since the 2009 trough:
OK, you can probably ignore the huge spike in the condo psf, as the condo series tends to be all over the map. But how about that (much more reliable) detached home psf — up 4% for the month, and 18% year-over-year.
JtR: Here is the big change – how quickly good listings are getting snapped up, which is keeping the county’s active inventory down to about 4,000 OPTs:
See his TEN other graphs, including the Case-Shiller predictions, here:
http://piggington.com/march_data_rodeo_housing_market_smoking_hot
Many of the ivory-tower types are hoping to make sense of the now nationwide housing-inventory shortage, and predict the next tsunami.
http://www.businessinsider.com/us-housing-inventory-shortage-2013-2
The housing inventory is at, or below, where it was in 2003-2005, the peak of the boom era. Around here, the prices are at, or above, what they were during the same period.
Yet people don’t want to sell. Why not? A simple explanation:
The housing needs of baby-boomers have peaked.
In the mid-1990s, boomers were 30 to 50 years old, and coming into their best income-producing years as the previous housing bust was bottoming.
Then we hit the jackpot with the Taxpayer Relief Act of 1997, which allowed those who had lived in their house for two out of the last five years to sell and pocket their gains tax-free (up to $500,000 per couple).
Combine that generous tax relief with baby boomers hitting their peak consuming age, and you have the greatest real-estate boom in history between 1997 and 2005 – this graph shows how tight the inventory was then:
But in spite of the mortgage industry goosing the market with exotic financing, the boom couldn’t last forever at those prices/monthly payments.
Some of the drop-off was caused by baby-boomers already being satisfied. By 2013, boomers are settling down at 50-70 years old:
We will probably see the inventory shortage last another 5-10 years, until the elderly or their families start the Baby-Boomer Liquidation sales.
There are 77 million boomers working through the cycle, which will likely be strung out for as long as possible – when was the last time you saw a baby-boomer jump up and say, “I feel like moving today!”? Instead, baby-boomers will age-in-place while enjoying their golden years.
For many the golden years won’t be as golden as they thought, but they will delay selling the family home as the last resort.
It will probably be a fortunate thing that the lenders/government allowed defaults to drag out – we will need their REO and short-sale listings now!
Expect the tight inventory to continue until the voracious housing demand is curbed by mortgage rates rising sharply, or by the next recession.
Homesellers should consider the pricing resurgence as a temporary opportunity, and not think that we’re back on track and expect big gains every year. By looking at this graph, it appears that the recent gains are almost entirely attributed to lower mortgage rates.
Here is a look at how the change in rates have impacted this house value index. There was an inflection point in early 2012 where the combination of dropping rates and low home prices reached its ideal mix, and now values have bounced back some to compensate.
But if the rates dropping into the low 3s are what caused the turn-around, then there won’t be much propulsion to keep it going from here except Shiller’s idea of “animal spirits”:
(click on image to enlarge)
Americans are payment shoppers, and don’t mind paying a higher sales price as long as the payment stays about the same. This alone should keep a throttle on rising prices.
Here is an indicator to measure how the market gets started in 2013 – count the new listings.
We have seen how the inventory impacts the buyer mentality. When homes-for-sale are plentiful, buyers are more relaxed and deliberate. When there is a shortage of inventory, the anxiety heightens, and bidding wars ensue.
The first quarter of 2012 looked like the previous two years. But you can see below how the new listings dropped starting in April, and probably contributed to sales jumping in August as nervous buyers scrambled.
Fewer new listings in April-to-July = stronger sales in August-to-October:
NSDCC Detached-Home Monthly Sales Counts:
The shortage of new listings look like they could have been a temporary event – because since August the number of new listings have been fairly similar to previous years. It should be irresistible for potential sellers to flood the market with OPTs in 1Q13. If they do, buyers will grow cautious, and sales could hit the skids.
We’ll know what to expect just by counting the new listings. The January & February 2012 two-month total was 794 houses listed, when in the previous two years it was around 900, only a 12% dip approximately. But the 2012 April-to-July new listings were about 18% lower than the previous year – that’s when we’ll see how 2013 will turn out!
Are you looking for an experienced agent to help you buy or sell a home?
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