Welcome to San Diego Blog | January 14, 2020
San Diego County Housing Report | Bone-Dry
For years, there have not been enough homes on the market, and the start to 2020 is especially pronounced.
Low Supply: The active inventory is extremely low to start the year, down 29% compared to the start of 2019.
Life is a time crunch. Inevitably, important errands are left to the last minute. It’s happened to everybody at one time or another. With Valentine’s Day on the horizon, it will happen again. Many will head to the grocery store on February 13th and make a beeline to the greeting card aisle, only to find twenty other procrastinators hurriedly looking for the best card. Squeezing between the crowd reveals a half-empty shelf wit the best cards undoubtedly already taken. The whole ordeal is frustrating.
Similarly, buyers, this year are just as frustrated. The San Diego County housing shelves are half empty. It is tough being a buyer looking for a home in today’s market. The year started with 4,442 homes, the third-lowest start in decades behind 2013 and 2018. There were 6,254 homes to start in 2019, 41% more than January 1, 2020. There were a lot more choices a year ago, but not today.
The trend of the supply problem dates to the beginning of the Great recession, 2008. Ever since then, fewer and fewer homeowners have placed a FOR SALE sign in their front yard. This trend is hardly a blip on the radar screen, instead, it has continued for twelve consecutive years. Last year may have seemed like a better year with more homes to choose from, but that was caused by diminished demand due to higher interest rates. Homes that typically would have sold in prior years lingered on the market until interest rates dropped to historic lows, dropping from 4.5% at the start of 2019 to below 3 by the end of May.
Price is determined by supply and demand. When the same number of buyers are interested in buying a home, yet the supply of homes drop considerably, it essentially becomes a bidding war where the highest bidder wins. As a result market value and prices climb. With the return of historically low mortgage rates and low supply of homes, the bidding wars are starting to come back, and so is the return of appreciation.
Advice for Buyers: be realistic from the start. Don’t hesitate in submitting an offer on a home that interests you. No home will be perfect of meeting 100% of what you are looking for, but if you find a home you like that meets 70% of what you are looking for, don’t walk, run. Odds are there may be another buyer that is also interested. Buyers do not have to overpay for a home to win, however, they may need to pay slightly more than recent comparable sales. Make competitive offers with pricing and terms to give you a real shot to win. And most of all, be patient. It may take a few swings and misses to finally knock it out of the park.
Advice for Sellers: be realistic in pricing. Too many overly optimistic sellers initially overprice their homes. Homes do not rapidly appreciate overnight. San Diego County homes are projected to increase 5% over the next 12-months. That is 365 days, not 30 days. Price accordingly. A wise strategy is to price a home at its FAIR MARKET VALUE or slightly under. The better the price = the more activity a home generates. Multiple interested parties create multiple offers that drive sales prices up.
San Diego County Housing Market Summary:
- The active listing inventory dropped by 145 homes in the past two weeks, down 3% and now totals 4,744, the lowest level since January 2018. Last year, there were 6,674 homes on the market, 1,930 more than today, or an extra 41%.
- Demand, the number of pending sales over the prior month, decreased by 213 pending sales in the past two weeks, down 10 %, and now totals 1,838. Last year, there were 1,619 pending sales, 12% fewer than today.
- The Expected Market Time for all of San Diego County increased from 72 days to 77, a slight Seller’s Market (between 60 to 90 days). It was 124 days last year, substantially slower than today.
- For homes priced below $750,000, the market is a hot Seller’s Market (less than 60 days) with an expected market time of 57 days. This range represents 54% of the active inventory and 73% of demand. View all homes under $750k here – View Listings.
- For homes priced between $750,000 and $1 million, the Expected Market Time is 74 days, a slight Seller’s Market. This range represents 13% of the active inventory and 14% of demand. View all homes between $750k – $1m here – View Listings.
- For homes priced between $1 million to $1.25 million, the expected market time is 110 days, a Balanced Market. View all homes between $1m – $1.25m here – View Listings.
- For luxury homes priced between $1.25 million and $1.5 million, in the past two weeks, the Expected Market Time increased from 122 to 143 days. View all homes between $1.25m and $1.5m here – View Listings
- For luxury homes priced between $1.5 million and $2 million, the Expected Market Time decreased from 165 to 158 days. View all homes between $1.5m- $2m here – View Listings
- For luxury homes priced between $2 million and $4 million, the Expected Market Time decreased from 289 to 268 days. View all homes between $2m – $4m here – View Listings.
- For luxury homes priced above $4 million, the Expected Market Time increased from 696 to 723 days. View all homes above $4m here – View Listings.
- The luxury end, all homes about $1.25 million accounts for 27% of the inventory and only 9.5% of demand.
- Distressed homes, both short sales, and foreclosures combined, made up only 0.8% of all listings and 1.3% of demand. There are only 25 foreclosures and 13 short sales available to purchase today in all of San Diego County, 38 total distressed homes on the active market, up 1 from two weeks ago. Last year there were 56 total distressed homes on the market, slightly more than today.
- There were 2,800 closed residential resales in December, 40% more than December 2018’s 1,768 closed sales. December marked a 10% increase compared to November 2019. The Sales to list price ratio was 97.9% for all of San Diego County. Foreclosures accounted for just 0.5% of call closed sales, and short sales accounted for 0.2%. That means 99.3% of sales were sellers with equity.
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Robert Gmur | Robert@WelcomeToSanDiego.com | 949-310-5195 | www.RobertGmur.com