As we head into spring, we continue to see low numbers of property listings.
By March, we should see an uptick in listings as we would normally see, but many owners are locked into their properties and there aren’t enough forced Sellers. Read about the lock in effect here:
The addition of having more rainfall than normal may be a cause for delays to properties coming on the market as it has led to delays in pre listing prep work for Sellers who are improving the property before listing. Heavy rain /soggy conditions also never make for great showing conditions.
As of this writing, here are the counts for residential properties for sale in Active or Coming Soon status in San Diego County:
Detached SFR: 1577
Condo, Townhome, Twinhome, Rowhome: 998
2-4 units: 213
Median Prices in San Diego County
When you look at Median pricing, keep in mind there is so little data, especially when you look at your zip code, property type, like characteristics, the data can get heavily skewed by just a few sales.
AVM (automated valuation models) from the retail sites such as Zillow, Redfin, Realtor.com etc are often not representative of pricing and not what Agents nor Appraisers look at. I look at Zestimates for time to time on unlisted properties and see ones with HUGE ranges or ones that are just flat out wrong.
For example, a property I have insight into has a 300k range Zestimate and they do not know this property leaks constantly, has an original roof, and the property updates were DIY homeowner poorly done updates.
We do not know their algorithm or how they select comps. If you are for example near the ocean, we know that views and distance to the ocean matter a lot. Do AVM’s know every single property that has a view? 2 houses next to each other may have different views. Do they know whether the house further from the ocean bought the airspace of the home that sits downslope closer to the ocean so that home can never build up? In some neighborhoods, 1 or 2 blocks over is a completely different type of product or quality.
I look for actual comps and I call them to get color not in the listing. When looking at very low or very high comps, I have called Agents who have shared that the property is in absolute shambles, poor condition, barely anything works including flushing toilets and running faucets, or was in such bad shape it wasn’t lendable. In the case of higher comps, the property has unique characteristics that made it very desirable or perhaps the Seller paid for a large rate buy down and in return Sold for a higher price and the property did appraise which made this possible. Sometimes 1031 exchanges can skew the comparables as a Buyer is desperate to place their 1031 funds and are running out of time.
AVM models do not know interior and lot usability, when the property was last remodeled, the quality of the finishings, site conditions that make the home undesirable, light, and other issues that may impact saleability. The further from cookie cutter, model match comps and new, the worst AVM models tend to be.
Inventory
Remember when you read media that talks about inventory of housing that there are 2 numbers they may be referring to. 1 is Active listings which is total supply. The 2nd is Months of Inventory which reflects BOTH supply and demand.
Also, I cringe every time I see a media distortion of quoting in percentages. When the clickbait headlines say OMG inventory increased 200%, well when you go from 1 to 3 houses it’s not exactly earth shattering is it? I recommend looking at absolute numbers and keeping in mind that real estate is hyper local, hyper product specific.
Months of Inventory
Inventory is defined as: If 10 homes sell per month in 1 zip code, and 30 homes are Active, there is 3 months of inventory. 3 months or less is a SELLERS market, 4-5 is more balanced, 6+ is a BUYERS market
Solds
We continue to see more “normal” market conditions meaning that highly updated, great locations homes, or homes with a lot of potential upside priced in line with the comparables or under sell very well with multiple offers and will often sell for way over what people may be using as comparables.
Homes that are not selling well typically have multiple undesirable conditions:
priced too high
multiple negative immutable factors such as busy road, freeway, noise, near commercial, badly sited, high fire zone
unfavorable conditions including high HOA fees, HOA special assessments, HOA in litigation, difficult to insure or very high insurance costs, bad flips
Seller wants too many contingencies including Seller wants a contingency to locate and Buy another home, also want a lengthy rent back
Tenant occupied
Mortgage Rates
Mortgage rates continue to move up and down with economic conditions, economic data, stock market performance and other macro conditions that move long term rates.
While rates are off their high, they are still not favorable for many Buyers who are priced out due to the combination of high rates and high prices.
We continue to see a higher than historical norm spread between the 30 year mortgage rate and the 10 Year Treasury and as of this writing, the spread is around 280 basis points or 2.8% higher.
Please keep in mind mortgage rate surveys are not quoted with consistency so some Lenders will quote with varying points and fees.
If you are considering Selling your property or Buying, and want to understand further market dynamics, please reach out to discuss as each property in unique as are your circumstances.
Please share this with any friends, colleagues, or family that may be interested in reading about the San Diego housing market! As always, referrals are greatly appreciated!