Last week there were 386 NSDCC active listings, and today there are 343 – a difference of 57.
Impressively, there were 25 listings that were marked as ‘pending’ in the last week! But it also means that a load of the unsuccessful sellers of 2024 will be back early next year, with most relisting in January.
This year we began with 255 NSDCC active listings.
In 2025, there will be 300+ and dozens of others flooding back into the market.
Who are they?
We are a community dominated by empty-nesters. From last January:
Around 80% of the local homeowners have been here for more than eight years!
Those are the folks who have received $1,000,000+ in home equity since the pandemic.
It’s not hard to imagine that 10% to 20% of them will want to cash out in 2025!
An additional 15% to 20% of inventory next year (on top of the 14% surge in 2024) is in the bag.
Kayla is in town so we were trying to do the more-professional looking videos, which for me means doing a more-formal introduction of myself for those new to our Instagram channel.
On the same day, Robert Reffkin appeared on CNBC and said that research shows that inventory will climb another 15% in 2025 – which is what I said! Many observers will shrug it off and declare that we’re just normalizing back to pre-pandemic levels, but pricing has increased over 60% since then:
Will prices drop to adjust for more inventory?
There probably won’t be much movement on price early in the year, because sellers will be thinking about the spring selling season blah blah and they will be much more comfortable waiting until summer before looking for the panic button. They’re not in a hurry, and they’re not going to give it away!
The one thing we know for sure: Home sellers will want to get what the last guy got. Nobody is going to be listing with a low price in the first 3-6 months of 2025.
The results will all be up to the buyers – are you willing to pay the same prices for homes when active listings are piling up unsold? Everyone will expect you to!
He makes an interesting comparison between June and December.
It looks like this will be the first year in the last eight that could have a higher months-of-supply reading in December than in June. If so, it means there will be more than the usual active (unsold) inventory carrying over into 2025.
It’s been steady between La Jolla and Carlsbad lately, using the average number of actives for the month:
NSDCC Months-Of-Supply
June, 2024: 470/153 = 3.07
October, 2024: 470/165 = 2.85
Last month, there was a flurry of sales that keeps the ratio down for now, but the number of December sales should be quite lower. It looks like we could enter the new year with 400+ unsold listings, and I sugggested here that the healthy months-of-supply (active listings divided by monthly sales) is around 3.0. It looks like it the actual ratio will be closer to 4.0 by the end of the year.
Bill suggests that it will cause soft prices. I agree.
~~~~~~~~~~~~~~~~~~~~~
Lance says the SD inventory is +63% YoY – the highest of any metro on his list. Yikes!
With all the talk about the presidential election being so close, some thought it could take weeks to determine the eventual winner – and only a powerful Trump victory could avert it.
Standoff averted!
No matter how you feel about it, another Trump presidency should be good for home sales.
Why? Because we saw when Covid broke out that uncertainty encourages people to hunker down.
Buyers will be motivated to end their search before rates go much higher – which will be in the mid-7s shortly. If my predicted surge in inventory happens early in 2025, there will be plenty of homes to go around. Some will wait-and-see, but the highly-motivated buyers and sellers (the only ones that matter) will be pushing to make deals as soon as possible.
Who should put their home on the market right now?
The homes with big ocean views. December and January have clear weather and the best time to appreciate the view, unlike April-June when it is gray and gloomy.
Fixers – the homes that need work are easy to skip when the choices are plentiful.
The unicorns – the unusual homes that are hard to value.
Just when it looked like home sales were going to take a break….here we go!
There were 141 NSDCC listings that went pending in October, and 44 of them have already closed escrow! It leaves 133 listings in the pending category so the closed sales in November and December probably won’t set any records, but if there were 100 closings each month then I’d be impressed.
How about the closed sales? Smoking hot, compared to last year:
NSDCC September and October Sales and Pricing, 2023 vs. 2024
It all points to the 2025 Selling Season being robust, to say the least. It is going to start in January, and there might even be sellers who want to get a jump on it and list their home in December!
Here’s one more category (rich people fleeing) to add to my reasons why 2025 is going to bust loose:
A growing number of wealthy Americans are making plans to leave the country in the run-up to Tuesday’s election, with many fearing political and social unrest regardless of who wins, according to immigration attorneys.
Attorneys and advisors to family offices and high-net-worth families said they’re seeing record demand from clients looking for second passports or long-term residencies abroad. While talk of moving overseas after an election is common, wealth advisors said this time many of the wealthy are already taking action.
“We’ve never seen demand like we see now,” said Dominic Volek, group head of private clients at Henley & Partners, which advises the wealthy on international migration.
Volek said that for the first time, wealthy Americans are far and away the company’s largest client base, accounting for 20% of its business, or more than any other nationality. He said the number of Americans making plans to move abroad is up at least 30% over last year.
David Lesperance, managing partner of Lesperance and Associates, the international tax and immigration firm, said the number of Americans hiring him for possible moves overseas has roughly tripled over last year.
A survey by Arton Capital, which advises the wealthy on immigration programs, found that 53% of American millionaires say they’re more likely to leave the U.S. after the election, no matter who wins. Younger millionaires were the most likely to leave, with 64% of millionaires between 18 and 29 saying they were “very interested” in seeking so-called golden visas through a residency-by-investment program overseas.
There has only been a 15% year-over-year increase in the number of homes for sale in 2024, which isn’t that noticeable, especially to the casual observer. Plus, the top-quality homes still get swept off the market quickly, so there aren’t many great listings lying around unsold.
For an frenzy of inventory to be dangerous, it would take so many new listings to hit the market that there aren’t enough buyers to grab all the top-quality homes for sale.
There will always be the half-baked offerings looking to get lucky.
There is only a problem when the great homes aren’t selling (aka switching to a buyer’s market).
Though there has only been 15% more listings this year, the current active inventory is about 30% higher than last year. There is the sign that buyers are being more picky, and that the pressure on pricing is rising. Sellers either need to do more sprucing up, or sharpen their price. Some need to do both.
I have said before that I thought the market had been so dry that the pent-up demand would absorb a 15% to 20% increase in the number of homes for sale. Well, here we are! There have been 6% more sales this year, which didn’t pick up ALL the extra supply – just the best ones for sale.
I think we will call 2024 the year of equilibrium where the supply and demand has been more balanced than in recent years. I’ll resist calling it a ‘normalization’ because nothing feels normal these days! But statistically it looks like a decent balance.
What would happen if/when the flood comes?
If 15% to 20% was reasonably absorbed this year and it balanced the supply and demand, then any increase in 2025 above that would be nervous time.
How much growth above the 2024 homes for sale can the market endure?
I’m going to say not much more, and it’s why sellers should get out while they can in early 2025.
Adding ANY more inventory in 2025 above this year’s number of homes for sale would only get absorbed if rates drop to 6% or lower – which could happen – and the political circus dies down.
If the 2025 NSDCC inventory matches, or slightly exceeds, the 2024 red line below, then we should be fine. If it pops higher – and especially if it pops higher in January – then stagnation could set in as buyers wait-and-see where it goes.
You’ll be able to watch it all transpire right here at bubbleinfo.com!
There are several reasons why I think the local inventory will surge in 2025. It will be due to several causes contributing more houses for sale, and all combined it may look like a flood in some areas.
Been Trending That Way in 2024 – The inventory this year has been +15% more than last year, making it look like we have already hit bottom, and the number of listings will keep growing. It may not get back to the 4,000+ like it was in the pre-covid years, but 3,000+ should be a lock in 2025 (+22% over this year).
2024 Leftovers – We have 100+ of this year’s listings waiting until 2025 to not sell (unless they adjust).
More Baby Boomers Are Dying – According to the CDC, the number of deaths per year in the U.S. has been steadily increasing, in part because of the Baby Boomers’ advancing age. Estimates suggest that Boomers will account for millions of deaths over the next two decades as they continue to reach their 80s and beyond. There were 1.6 million boomers who died last year, and the number will be above two million by the year 2030.
Prop 19 – Those who have already inherited a home from their parents or grandparents since 2020 have had to occupy the property as their primary residence to inherit the lower property tax rate too. But the old family homestead needs work and/or the other siblings want their dough. Renting the house triggers the higher property taxes, so that’s no longer a viable choice. More of these will decide to sell instead.
Politics – The 49% who don’t have the election go their way will threaten to move to cure their ills. Most won’t actually get around to it, but I’m guessing more will move than before.
Jackpot – In 2023, total U.S. credit card debt surpassed $1 trillion for the first time, reflecting a significant increase over pre-pandemic levels. More homeowners in that group will throw in the towel and finally decide to sell the house to lighten the load, and move out-of-state where they can live the rest of their life on their home-sale proceeds.
There is enough demand to soak up all of the additional inventory – but at what price?
Can we learn about what to expect in 2025 by reviewing the other recent metrics available? Here are alternative ways to gauge the market conditions – the most interesting numbers in red:
Number of Sales – Just incredible that out of nowhere the July sales set the high mark for 2023-2024!
Median SP:LP – This month setting a new low for the group, proving that there’s nothing price can’t fix.
DOM – Buyers move quicker in springtime, but the average DOM is steady.
Volume – July was huge!
Average $$/sf – This month is 24% higher than in January, 2023!
In May, 2022 at the peak of the frenzy when rates were still 3%, the average $$/sf was $1,063/sf.
Pardon the casual presentation. I’m used to working with this same basic graph format but it’s limited to 50 datapoints – we’d really like to take these back a few years to see the long-term trends.
But in early 2023, the active listings in the $3M – $4M category were range bound between 1,170/sf and 1,342/sf, so there is some normal optimism in springtime. But not like this pop in 2024 (above). These two subsets are the meat of the market, and aren’t swayed by radical outliers that would tweak the averages.
Starting right after the Super Bowl, there was a huge swing from $1,252/sf to $1,515/sf in the $3M – $4M category, and it has stayed elevated until the last couple of weeks. The reason for pricing to relax a little?
The number of unsold listings are starting to stack up now:
There isn’t any reason for home buyers to think mortgage rates are going to drop significantly this year. If there were one or two Fed cuts, it would only cause mortgage rates to get back into the 6s which isn’t enough to compensate for the sky-high prices that buyers are seeing today.
Then we have the changes from the commission lawsuit, which will have a clunky start over the next few months as buyers grapple with hiring a buyer-agent in writing just to tour a house. All we need is the Padres to go on a run this summer and we will have all the excuses we need for a very sluggish rest of the year.
