Welcome to San Diego Blog | August 24, 2019

San Diego Real Estate Report – July 2019

 

No Housing Collapse: The underlying housing fundamentals have stabilized significantly compared to last year’s slide.


Little kids often have a tough time climbing under the covers and swiftly dozing off to sleep. Instead, they look under their bed to make sure there is nothing there. They look in their closet and then close the door tight. They make certain that the nightlight is brightly shining. There are even times when they will ask dad or mom to be absolutely certain that there are no monsters in their room. Finally, they anxiously fall asleep.

For buyers or sellers wondering if there are any monsters lurking around the corner, they can be rest assured that the sky is not falling, there are no surprises on the housing front anytime soon. Reports from the housing trenches are that many buyers expect the market to drop like a rock and that is when they will finally be able to purchase. That simply is not on the horizon. Sitting back and waiting on the sidelines will prove to be a waste of time.

Last year, major cracks in the housing market emerged. The HOT market continued from 2012 through the start of 2018, until the underlying fundamentals quickly eroded. From May through August of last year, the active inventory climbed by 22%, demand dropped by 10%, and the Expected Market Time (the amount of time it would take from hammering in the FOR SALE sign to the opening escrow) rocketed upward by 35%. The Expected Market Time continued to soar by climbing an additional 56% from August through the end of the year, compared to a 17% average from 2012 through 2017.

 

This year, from May to the start of August, the active inventory dropped by 2%, demand has dropped by 4%, and the Expected Market Time increased by only 6%. Housing is not grinding to a halt. The sky is not falling. Typically for this time of the year, the Summer Market, the active inventory rises, demand drops slightly, and the Expected Market time slowly increases. This year, there has not been much change at all.

San Diego County housing has improved dramatically since all the cracks of last year. But that does NOT mean that the market is back on track and will rapidly appreciate as it did before. Take a closer look at demand. It is almost identical to last year. But, do NOT get too excited in comparing the market this year to last year. The numbers are going to look great for the rest of the year compared to 2018. A better comparison is to look at the market when it was hot, improving, and appreciating.

Contrasting this year to 2017 paints a much better picture as to where local real estate is heading. Demand in San Diego County is off by 11% compared to 2017. It is still muted, just not sliding off a cliff like it was last year. The inventory is up by 19% compared to two years ago. The Expected Market Time is at 70 days compared to 52 days in 2017. 

It is time for everybody’s expectations to be adjusted. The market is not as hot as before. Housing is not sliding into the abyss. Property values are not skyrocketing right now, but they are not falling either. Local real estate is not changing that much; what you see is what you get.

Low mortgage rates have saved the day and they are not going anywhere. Instead, they are on the decline, reaching three-year lows. These low rates will cushion the market from stalling.

The Expected Market Time today is 70 days, a touch better than last year’s 75 days. Unlike last year, when it climbed to 122 days by year’s end, it will only rise slightly from here. At 70 days it is a slight Seller’s Market. That is a market that is characterized by not a lot of appreciation, but sellers get to call more of the shots during negotiations. It will most likely move towards a Balanced Market from here, one that does not favor sellers or buyers. The market is hottest in the lower ranges where there are more multiple offers and sales prices are closer to their list prices. As the price climbs above $1 million, the market slows considerably, Expected Market Times climb, multiple offers are NOT the norm, sales prices are not as close to their asking prices, and there are a lot fewer success stories.

The bottom line: while housing is not as robust today as prior years, it is not spiraling out of control and will not result in a housing downturn anytime soon. The sky is not falling.


Written by: Robert Gmur

Categories: Market Conditions, San Diego Real Estate, Sellers, Tips for Buyers, Uncategorized

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