The NYT has another article lamenting the drop in the number of homes for sale, and offered some reasons, like covid reluctance, sellers skittish about finding their next home, forbearance relief, the lack of building new homes, and people keeping their old home as an investment property when they buy a new one.
But who cares about inventory when we’re having MORE SALES THAN EVER.
It’s true that the number of new listings this year is about 23% behind where it was last year at this time.
The other day I compared just to 2020, but here’s a look at the last ten years:
NSDCC Closed Sales Jan 1 – Feb 15
Year
# of Sales
Median Sales Price
2011
158
$810,500
2012
153
$749,000
2013
197
$845,000
2014
261
$1,007,500
2015
252
$1,200,000
2016
253
$1,125,000
2017
260
$1,200,000
2018
231
$1,300,000
2019
242
$1,288,000
2020
254
$1,394,775
2021
299
$1,695,000
% Change, YoY
+18%
+22%
We haven’t had this big of a jump in number of sales AND median sales price to start the year since the Frenzy of 2013 bled into early 2014 when we had a 32% increase in sales and +19% in median sales price. Back in 2004, we had a 26% increase in the median sales price (from $635,000 to $799,000), but the number of sales dropped from 253 to 209.
This is the new reality – more people chasing fewer homes for sale.
Buyers who might think we’re going to get a pullback because rates have gone up are going to get a good lesson on who’s in charge here. Sellers don’t care about rate hikes, lack of inventory, or your lease expiring. They just want their money, and if they don’t get it today, they will wait until they do.
I hope there comes a time and place when all of us can get back together and tell stories about what it was like along the trail. Here’s the nine-years-and-counting saga of us sticking together:
Selling a house is different every time – it’s truly the wild, wild west.
Because there are no standard rules of engagement on how to sell a home, everyone does it differently. I had an agent accost me on why my offer was so low (it was full price), to which I said that it’s my preference to save my bullets for the highest-and-best round. She responded, “WE NEVER COUNTER”.
You just never know what to expect.
With real estate, every house is different, and so are the players (sellers, buyers, and agents). Mortgage rates go up and down, loan-qualifying affects buyers differently, and resolving the condition of the home is a wild card on every deal. Even if there was a simple way to navigate those, you still have to contend with the emotions and egos of the human beings involved – which can be extreme when dealing with a life-changing decision that might have to last you forever.
Now add the low-supply/high-demand environment, and it’s never been so crucial to get good help.
Yet, Zillow, Redfin, and others want you to believe that they can dumb down the process into a paperwork shuffle. They pitch lower costs, but never consider that a home’s sales price depends on who is selling it – and there is a wide variance in today’s market.
The NAR doesn’t get it either. They are creating a national MLS to compete with Zillow, but unless they spend multi-millions of dollars on advertising (very doubtful) the buyers and sellers won’t know they exist.
What we need is for realtors to stand up and save the model that has worked the best for all parties.
Last year was all fun and games as we got used to the new intensity. But now it’s obvious that the low inventory is causing a sea change among buyers. In the Under-$2,000,000 market, the comps don’t matter any more, and winning at any price becomes the only goal.
Once buyers figure that out, they will appreciate getting good help like never before – and hopefully before it’s too late. If a seller picks the wrong agent, it only means leaving money on the table, which is the cost of real estate ignorance.
The best chance to ensure that the traditional model endures is for realtors to create our own private listing club, and these guys are on to it. They had 700 agents on this call, which is impressive but it’s early and they would need to commit massive resources to reach the entire country. The word-of-mouth among agents could take them a long way, however.
Here’s a peek behind the scenes. Decide if you think they can sell it, or if they might hit the eject button when the heat gets hot – because the outsiders are going to challenge this idea:
The term ‘chasing the market’ usually applies to sellers in a down market when they don’t lower their price fast enough to get ahead of the new listings coming on that are under-cutting them.
The reverse is also true about home buyers in a hot market.
Those in the hunt for weeks or months who have lost several bidding wars are watching each new listing get priced higher and higher, and their frustration mounts as they struggle to get ahead of the trend. Some buyers can get priced out altogether, and others buck up and pay an exorbitant price just to end their misery and get on with life.
It just happened like that in La Costa Oaks.
I had two great comps nearby when when we priced our 7168 Sitio Corazon listing at $1,379,000, with the latest being right across the street. Ours had the master suite downstairs, which isn’t as popular with families with young kids – and the 3,563sf plan has the master upstairs with the rest of the kids’ bedrooms.
It’s very unusual in the low-inventory era to have four sales within five months – especially this close together. You can see what happens – they feed on each other, with the intensity building with each sale.
After my efficient and timely bidding war where I gave all contenders the chance to submit their highest-and-best offers, we ended up with three. Two were $1,450,000, and the winner was a decisive $1,470,000 with no appraisal contingency and a 30-day rentback for my sellers.
Many of the buyers who saw my listing went across the street when 7177 Sitio Corazon hit the market a week later. I told the listing agent and the seven buyer-agents who contacted me that our sales price was $1,470,000, which helped feed the frenzy. With it being the more desirable floor plan and full transparency about how hot the market is, buyers went crazy – and there were eight offers.
The buyers who won with an offer of $1,600,000 were one of my $1,450,000 offers.
They were tired of losing, apparently, and added enough mustard to clinch it – about 10% over list price, and more than 23% above a nearby model-match sale in August!
What’s it like being a home buyer today? It’s a bonanza if you are in the multiple-millions category – there are hundreds of choices! If you want to stay under $1,500,000, the inventory looks bleak:
NSDCC Active Inventory
Town or Area
Zip Code
Actives Under $1.5M
Actives Over $1.5M
Overall Median List Price
Cardiff
92007
1
11
$2,895,000
NW Carlsbad
92008
4
10
$1,872,000
SE Carlsbad
92009
7
9
$1,594,000
NE Carlsbad
92010
2
0
$842,000
SW Carlsbad
92011
5
2
$1,149,000
Carmel Vly
92130
2
21
$3,450,000
Del Mar
92014
0
42
$5,423,000
Encinitas
92024
6
34
$2,737,000
La Jolla
92037
3
95
$4,245,000
RSF
92067
1
100
$5,295,000
Solana Bch
92075
0
12
$5,075,000
NSDCC
All Above
31
336
$3,995,000
Should the lower-end buyers be discouraged? No! There are 92 pending sales listed under $1,500,000 – they just sell fast. The lower-priced you are, the more tuned up you have to be to win a bidding war.
The days of wondering how much of a discount you could get off the list price have been replaced with hoping to limit how much OVER the list price you are willing to pay. For buyers, how much to pay is relative to how well the home fits all of your needs, and how much you love it.
Here’s a gauge of how to determine how much to offer:
For home you only like a lot, try to keep the premium-above-list to 5% or less.
The average winner pays 6% to 7% over the asking price.
The top-rated masterpieces are fetching 10% (or more) above list price!
Any decent property that’s fixed up and priced right should go pending in 7-10 days.
If you are a dare-devil, one strategy to consider is waiting a couple of weeks after a home is listed for sale. If it hasn’t gone pending, then the condition, price, or agent was a problem and by then, the herd has cleared out so you should have a little more negotiating power.
But if you think the new listing is a hot one, then you better get over there right away for a look.
Tips:
Ask if the listing agent has a strategy for determining the winner. Most agents will spread the offers out on the coffee table, and let the sellers pick one. If that’s the case, the terms of price, down payment, waived contingencies, and escrow time will probably be what determines the winner – with influence from #2:
Any compliments you can bestow on the sellers and listing agent in person or with a love letter can go a long way. The love letters have come under scrutiny lately, and I totally agree that sellers and agents will discriminate consciously, or sub-consciously. Just use your first names and no photos.
Know what you are looking at, and don’t overpay for fixers. You may see crowds, but almost all buyers will pass on the fixers. If you aren’t that familiar with spotting needed repairs and identifying costs, then work with someone who is.
Waiving contingencies. It’s uncomfortable, but your competitors are doing it. All four of the Crater Rim buyers who were willing to pay $90,000+ over the list price waived their appraisal contingency.
If you know you are going to buy the house regardless, make your deposit non-refundable and release it to the sellers within seven days after acceptance.
Have your mortgage pre-approved by a well-known and respected lender who will call the listing agent to sell them on your qualifications. If there are cash offers, this is about your only hope to compete.
The listing agent has influence on the selection, and prefers a buyer’s agent they know and trust. The buyer’s agent is smart to provide their own qualifications that demonstrate they can close a deal.
If all else is equal, the homeowners want to sell to someone who will close on time with minimal problems. Someone who makes it easy. Somebody they like. Buyers are smart to make a lasting impression on the sellers or listing agent, because in a close race, how the sellers feel about the buyers will decide it.
Have you been thinking about getting a great realtor to help you buy a home, but feel loyal to your Aunt Bea or a friend who just started in the business? This story is for you.
We received five offers on our new listing over the weekend. The lowest offer was written by a new agent who is in her brokerage’s mentor program, and even her mentor attended the showing which made me feel like this was important. Typically, the mentors are has-beens who can’t hack it any more on the front lines, and instead want to be pseudo-coaches for new agents and get a chunk of their commissions.
I told both the agent and the mentor that we had already received multiple offers over list price, and to make their highest-and-best offer. Once received, I asked specifically, “is this your highest-and-best offer?”
They never responded.
We had three buyers who were willing to pay at least $90,000 over the list price, so I engaged them in a second round to determine the winner.
We accepted an offer that was $100,000+ over the $1,100,000 list price.
Yesterday, the new agent got back to me and said her buyers are willing to match our high offer.
Even though her buyers must have been extremely interested in the house, the advice they received didn’t even put them in contention at the time. And now it’s too late.
Immediate buyer demand requires, and deserves, immediate great advice.
I regularly meet people for the first time at a house in which they have interest – and I proceed to discuss the state of the market, evaluate the condition of the house and repair costs, and then pinpoint the value of the home based on comps and suggest a strategy to win it. There’s a handful of my clients who bought the first house they saw.
Get Good Help!
~~~~~~~~~~~~~~~~~~~~~~~~~
For the skeptical who want proof of the demand, here’s the turnout over the weekend:
We’ve heard for years now that the inventory is low. For the casual observers, it’s a discouraging thought – but it’s not as bad as it sounds. There have been plenty of homes for sale this year, and in 2020 we could post the highest number of NSDCC sales in history…..during a pandemic!
For everyone’s sake, we should be more clear. There have been plenty of homes for sale – they just sell fast, giving the appearance that there isn’t much for sale.
The inventory of ACTIVE listings is low, especially in the more-affordable price ranges.
Look at the median days-on-market of NSDCC homes sold this year:
Price Range
Listings Since 1/1/20
Actives
Pendings
Solds in 2020
Median DOM
Under $1M
597
11
52
529
9
$1M – $1.5M
1,305
30
97
1,044
13
$1.5M – $2.0M
939
63
91
648
23
Over $2M
1,633
352
126
816
38
If you want to buy a NSDCC home for less than $2,000,000 today, you have 104 choices. In an area of 300,000 people!
But don’t despair – we have sold 2,220 homes sold for less than $2,000,000 this year, mostly to buyers who had a strategy of jumping on the new listings quickly.
What can buyers do?
Work with an agent who has a great reputation in the community.
Work with an agent who has bidding-war strategies and works in the off-market space.
Work with an agent who can present a compelling case on why sellers should accept your offer.
Make a cash offer.
Get pre-approved with an impressive and well-known lender.
