Trump and Real Estate

by | Nov 14, 2024 | 2025, Forecasts, Local Government, Market Buzz | 9 comments

Realtor.com, owned by News Corporation, has thoughts on how Trump will affect the real estate market:

On the campaign trail, Trump had blamed rising home prices on a surge of illegal immigration during the Biden administration. He also claimed that he would somehow lower mortgage rates if elected, although presidents do not control mortgage rates.

Here’s a look at some of Trump’s signature policy proposals, and what impact they might have on the housing market.

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NSDCC October Sales, Prelim

by | Oct 31, 2024 | 2025, Jim's Take on the Market, Market Buzz, Market Surge, North County Coastal, Spring Kick

NSDCC Monthly Detached-Home Sales, 2024

Last October, there were 140 NSDCC sales with a median sales price of $2,182,500 ($810/sf).

This month’s final count should be 160+ sales and a median sales price that’s +10% above last October!

Statistically, the political circus hasn’t caused ANY drop off in sales or pricing!

It probably means the momentum will be hot going into January too!

Does It Take Longer To Sell?

by | Jul 10, 2024 | 2024, Market Buzz, Market Conditions, Market Surge, Why You Should List With Jim | 4 comments

I was on a national sales call yesterday where agents from coast-to-coast were complaining about how bad their market is currently. I kept thinking, “It’s nothing price won’t fix!”

Instead, the common fallacy that ‘it just takes longer to sell a home‘ will prevail.

It’s been a belief among sellers and agents for decades. Could it be wrong? Yes.

Of the 21 NSDCC closings over the last 30 days that sold for $5,000,000+, the median time that it took to find the buyer was 34 days. Of the 17 homes in escrow today that are priced over $5 million, the median market time is 31 days.

Why does the belief keep lingering? It’s because it’s easier to digest than “Your price is wrong”.

How does the market really work? The house that sells today is the one that is the best deal for sale.

All a seller has to do is price their home to be the best deal on the market. They can do it from the beginning and get into escrow in the first week or two, or they can wait for weeks or months before getting their price right. Some get lucky when strong demand clears out all the better deals in a hurry, causing the over-priced-turkey to look competitive quickly. It’s just dumb luck though, rather than a deliberate strategy, because it can go the other way too when newer listings at lower prices leave the OPT high and dry.

This is the type of market where some listings will never sell. They price too high from the beginning, never adjust, and they just help to sell the better-priced listings down the street or around the corner. The market can just fade away, or like we will see in 2025, a flood of new inventory can set a new standard for pricing in the neighborhood.

Some days there is enough demand that the best few deals will all sell at once. A surge like that usually happens when there aren’t other distractions like 4-day weekends, Easter, graduations, vacations, etc. We’re due for a wave of demand here over the next 2-3 weeks. But will any of the current homes for sale be considered a good enough deal? it can happen that NONE of the active listings look like deals – especially this time of year when everything is so picked over.

All that a seller has to do is price the home so it is the best deal available, and it will be the next to sell.

We started with an aspirational price here (my recommended LP was $2,200,000). But we adjusted quickly, and once the price got down to $2,250,000, we found the buyer within two weeks (more on this one later):

Anyone can do it!

Overvaluation Risk

by | Jun 2, 2024 | Forecasts, Jim's Take on the Market, Market Buzz

Our home values have been detached from “key economic factors” for years. More interesting would be studies that analyze what would happen to areas that are full of the older tract homes (1980s and before) that haven’t been improved much and are dumped onto the market for sale by money-grabbing heirs who just want fast cash. There could be a pricing downdraft of 10% to 15% in very short time – like a month or two.

Southern California home prices may seem insanely high, but two yardsticks of their underlying values suggest they’re not as crazy as elsewhere in the nation.

Let’s be clear. These measurements don’t say local homes are affordable. Nor does this math conclude what buyers are paying is normal. Rather, these studies show the overvaluation of Southern California homes compared with historical patterns is not massive on a national scale.

The first study is from Fitch Ratings, a Wall Street credit-quality tracking company. It compared pricing patterns in 50 U.S. metropolitan areas at year-end 2023 with key economic factors such as employment, interest rates and rents.

The other review is by two professors from Florida Atlantic University. Their price momentum model contrasted home prices in 100 metros for March 2024 with how costs gyrated over the long haul.

Fitch found one local problem spot: San Diego.

Its home prices, up 6.2 percent last year, were calculated to be 15 percent to 19 percent too high at 2023’s end, by this math. That’s the second-highest level of risk in the study.

Contrast that to Los Angeles and Orange counties, where prices rose 4.9 percent last year. Those homes were 5 percent to 9 percent overvalued at year’s end — the same risk score as the Inland Empire, where prices rose 2.1 percent last year.

The FAU professors pegged Inland Empire homes as the region’s most overvalued. The IE’s $579,000 typical house was 25 percent above its expected value in March 2024 — but that was only the 45th-largest overvaluation of 100 metros tracked nationally.

Homes in San Diego, worth $947,000, were 24 percent too high, by this math — the No. 50 overvaluation nationally. And in L.A.-O.C., with home prices running $947,000, overvaluation was 14 percent — the No. 85 overvaluation nationally.

Bottom line

The gaps between the two scorecards are a perfect example of what I’ve long said: The creation of any national ranking is part statistical science and part art. Just eyeball the most overvalued markets.

Fitch found seven metros were 20 percent to 24 percent overvalued: Memphis, Tenn.; Raleigh, N.C.; Indianapolis; Milwaukee; Nashville, Tenn.; Buffalo, N.Y.; and Birmingham, Ala. FAU’s top seven were: Atlanta (41 percent too high); Detroit (40 percent); Cape Coral, Fla. (39 percent); Tampa, Fla.; and Las Vegas at 38 percent, then Knoxville, Tenn., and Palm Bay, Fla., at 37 percent.

Or look at the differing levels of overvaluations.

Fitch graded all U.S. homes as 11% overvalued, with 44 of the 50 metros it tracked seen as overvalued by 5 percent or more. FAU’s median U.S. overvaluation was more than double — 24 percent with 97 of 100 metros tracked overvalued by 5 percent or more.

Or look at two Bay Area markets.

Fitch sees both San Francisco and San Jose as risky as San Diego — 15 percent to 19 percent overvalued.

But FAU professors have San Jose with their 15th-lowest risk (14 percent too high) and San Francisco with the third-smallest (2 percent too high).

Quotable

Contemplate the deviation in the national outlooks of the studies, too.

Fitch wrote that it “expects nominal national home price growth to decelerate from 5.5 percent in 2023 to 0 percent to 3 percent in 2024, which signifies the slowest pace since 2019. This forecast is based on the interplay between multiple factors, such as affordability challenges and a tight supply of homes, with the latter the more dominant factor in sustaining positive home price growth.”

FAU professor Ken Johnson wrote: “Home prices have become so out of line from their long-term trends that the risk of correction is rising. While it’s unlikely prices will plummet dramatically, price performance could go flat for the future, or home prices could see a slight decline even.”

Lansner is the business columnist for the Southern California News Group.

Number of Millionaires

by | Feb 11, 2024 | Market Buzz | 2 comments

How does the market keep levitating?

The number of U.S. dollar millionaires has risen sharply since the beginning of the 21st century.

In 2000, there were 14.7 million millionaires worldwide, a fourfold increase in twenty years (300 percent). If we compare this figure with the fight against extreme poverty, the number of people below the global poverty line – which today stands at $2.15 a day – has declined at a much slower rate. At the turn of the century, there were 1.7 billion people living in extreme poverty, compared with around 700 million today, a drop of around 60 percent.

The United States is home to by far the largest contingent of dollar millionaires: 22.7 million in 2022, representing 6.7 percent of the country’s population. Next on this list is China with 6.2 million (0.4 percent of the population), while France completes the podium with 2.8 million (4.2 percent of the population).

https://www.statista.com/chart/30671/number-of-millionaires-and-share-of-the-population/

NSDCC SP:LP Ratios

by | Dec 10, 2023 | 2024, Market Buzz, Market Conditions, Spring Kick | 4 comments

Mortgage rates have come down 1% in the last few weeks, and the casual observers are hoping it means that the Big Turnaround will commence in the Spring of 2024.

But for a full-fledged frenzy to break out, home prices would have to drop too.

We’ll never learn much from the median sales prices by themselves. But the SP:LP ratios demonstrate the off-season trend of buyers driving harder bargains, which is the solution for lower prices too.

We’re probably not going to see the whole market drop in price (i.e., big dips in the median sales prices) because the superior properties should hold their value better with the impatient buyers.

But those who don’t need the perfect house will likely have better luck next year with getting a deal. We only flirted with an over-list frenzy briefly this year, and in 2024 we not see many, if any, 100% months.

Seller vs Buyer Markets

by | Nov 15, 2023 | Market Buzz, North County Coastal, Sales and Price Check

A columnist reflected on history to help measure whether it’s a seller’s market, or a buyer’s market. I like it!

House-hunting’s transformation includes several market trends including people moving less often, consumers accessing detailed market info, near-instant cash buyers and tighter lending standards. Maybe the buyer/seller-market math should morph, too.

From 1990 through 2006, just before the bubble burst, California was a “buyer’s market” in 49 percent of all months and a “seller’s market” 17 percent of the time — using the traditional 6-month/3-month template and Realtor data.

Looking at the past 12 post-crash years — assuming you’d want to match that pattern — a buyer’s market would be 3.25 months-plus of supply and a seller’s market would be 2.25 months or less.

This evolving gap in homebuying supply is another reminder of today’s steep house-hunting challenges.

Link to the Full Article with data

Currently there are 359 active detached-home listings between La Jolla and Carlsbad, and last month there were 140 sales. The 359/140 = 2.56, which, by the new definition, is pretty close to a seller’s market!

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