December 28, 2021 Snapshot

dec 28 market snapshot > Market Insights - California Real Estate Expert Robert Wolf - California Real Estate Expert Robert Wolf >

The shock of going into a pandemic may have disrupted the housing market in 2020 for a few months, but there was no disruption in 2021. Demand surged despite COVID’s winter wave, summer delta wave, and the current omicron wave. If anything, it has kept a lid on mortgage rates. The only thing that will slow the speeding housing freight train at this point is rising rates; yet, as long as COVID
continues to be a threat, rates will have a hard time rising much from their current record lows. Housing is one of the strongest sectors of the economy, yet the overall U.S. economy has been on the mend as well. Retail sales have soared. Unemployment has dropped substantially. Job openings are surging. The number of homeowners in forbearance dropped below 600,000 by the end of December,
and the vast majority of the nearly 7 million exits are either performing or paid off their mortgages in full. The economy has dramatically improved. Inflation may have risen to highs not seen in decades, but mortgage rates have not budged, indicating that investors are confident that the inflation pressures will subside and eventually retract sometime in 2022. The low interest rate environment will
continue and will be a tailwind that will continue to fuel the incredible run on housing. As a result, the local housing market is going to be HOT in 2022. Here is the forecast:

  • Active Inventory – the year will begin around 1,300 homes, the lowest start by far since tracking began in 2012. It will be 47% less than the 2,465 start to 2021, the prior record low. With very few available homes to purchase, housing will be extremely hot on January 1. The theme for 2022 will be the same as 2021, not enough homes for buyers to purchase. Instead, they will all be in escrow. Expect the active inventory to peak around August eclipsing 5,000 homes, well below the over 7,300 home peak prior to COVID.
  • Demand – with an anemic inventory and the historically low mortgage rate environment, buyer demand will be extremely strong from the start of the year through the Summer Market. With tremendous buyer competition, buyers will be willing to stretch above the asking price; so, expect appreciation around 8 to 10% for the year. Demand will be at its strongest, and most appreciation will occur from January through July, and then will downshift during the Autumn and Holiday Markets.
  • Housing Cycle - the housing market will follow a normal housing cycle. The strongest demand coupled with plenty of fresh inventory will occur during the Spring Market. This will be followed by slightly less demand and a continued new supply of homes in the Summer Market. From there, demand will drop further along with fewer homes entering the fray in the Autumn Market. Finally, all the distractions of the Holiday Market will be punctuated with the lowest demand of the year and few homeowners opting to sell.
  • Closed Sales - the number of successful, closed sales will decrease 3 to 6% compared to 2021, with around 38,700 (2021 had the most sales since 2005).
  • Luxury Market – luxury housing will continue to be exceptionally hot, yet sales will drop slightly from 2021’s record year. The Spring Market will be the strongest for luxury and will become a bit more sluggish with more Wall Street volatility during the second half of the year.
  • Interest Rates – look for mortgage rates to continue to remain at historically low levels until the pandemic improves dramatically, most likely during the second half of the year. Yet, rates will have a hard time surpassing 3.5%. Even with Federal Reserve reversing their MBS (mortgage-backed securities) purchases and raising the Federal Funds Rate (short term rates), and heightened inflation, long term mortgage rates will continue to bounce between 2.75% to 3.5%. If mortgage rates remain at these low levels, housing will be insane.
  • Distressed Inventory – do not expect a wave of foreclosures. The number of active forbearances will dwindle to nearly none. As home values have surged, very few homeowners are under water, which is one of the main reasons the vast majority of forbearance exits are either performing on a monthly basis or paid off their loans. The foreclosure moratorium resulted in very few foreclosures in 2021, so expect slightly more in 2022. Nonetheless, the total numbers will be very low and undetectable in the broader housing market.

The bottom line: 2022 will continue where housing in 2021 left off, INSANELY HOT. It will be an Insane Seller’s Market (an Expected Market Time below 40-days) from the start of the year through the Summer Market. Multiple offers and bidding wars will be the norm for homes priced below $2 million. Once again, the market will heavily favor sellers and buyers will have to pack their patience to isolate their piece of the American Dream and take advantage of record low mortgage rates. From mid-August on, the beginning of the Autumn Market, housing will evolve into a Hot Seller’s Market (an Expected Market Time between 40 and 60 days) with a bit less activity, not quite as many multiple offers, and fewer homes selling above their asking prices.

December 15, 2021 Snapshot

dec15 market > Market Insights - California Real Estate Expert Robert Wolf - California Real Estate Expert Robert Wolf >

Everyone is acutely aware that home prices have been soaring for the past year-and-a half. They have far exceeded the runup in values prior to the Great Recession. This has many people on edge, wondering how values can continue to rise beyond their current record highs. In focusing just on prices, it is no wonder they fear an end to the pandemic housing run.

Read more ...December 15, 2021 Snapshot

November 30, 2021 Snapshot

nov30mkt > Market Insights - California Real Estate Expert Robert Wolf - California Real Estate Expert Robert Wolf >

Merge extremely strong demand with an anemic supply of available homes to purchase, a record low, and housing will continue to soar for not only the remainder of this year, butthrough 2022 as well. Today’s Expected Market Time has dropped to 20-days, one day higher than its lowest on record established on April 1st. At 20-days, it is an insanely HotSeller’s Market. Anything below 60-days is considered a Hot Seller’s Market. When it drops below 40-days it has reached the level of an insane market. At 20-days, housing is nearly indescribable. It is where every home is greeted with a ton of showings, sellers get to call all the shots during the negotiating process, multiple offers are the norm, and home values are rising rapidly.

Read more ...November 30, 2021 Snapshot

November 15, 2021 Snapshot

nov15 market snapshot > Market Insights - California Real Estate Expert Robert Wolf - California Real Estate Expert Robert Wolf >

With an expected market time of only 23 days, the San Diego County housing market is hotter than it has ever been for this time of year. 

The active listing inventory shed 121 homes in the past couple of weeks, down 5%, and now sits at 2,243 homes, the lowest level for November since tracking began in 2012. For perspective, last year there were 3,671 homes at this time, 64% more, in 2019 there were 6,266 homes, 179% more, and in 2018 there were 8,285 homes, 269% more. That is correct, in 2018 there were close to four times the number of homes compared to today. It is hard to articulate just how acute the supply crisis has been this year, but it has underscored the incredible rise in home values and foreshadows continued appreciation to come. With the start of the Holiday Market, expect the inventory levels to plunge and drop below 1,800 homes by year’s end, at least another 20% lower than today. That will be on the back of fewer homes coming to market and unsuccessful sellers pulling their homes off the market and waiting until next year. The 3-year average from 2017 to 2019 (intentionally omitting 2020 due to COVID skewing the data) is 6,681, an extra 4,438 homes, or 198% more, nearly triple compared to today. There were a lot more choices back then. For October, there were 1,004 fewer new FOR-SALE signs in San Diego County compared to the 3-year average from 2017 to 2019, 23% less. Every single missing sign just exacerbates the inventory crisis.

Demand, a snapshot of the number of new escrows over the prior month, decreased from 3,005 to 2,964 in the past couple of weeks, shedding 41 pending sales, down 1%. At this point the limited supply of available homes is eating into the potential number of escrows. True demand, the number of buyers in the marketplace, is a lot higher than tracked demand based upon escrow activity. True demand is impossible to gauge, but the throngs of showings for just about every home that hits the market combined with the sheer volume of multiple offers generated illustrates that there is a vast pool of buyers looking to secure a home. Expect demand to continue to plunge with the start of the Holiday Market simply due to a dropping supply of homes. From now until New Year’s Eve, demand will sink to its lowest levels of the year. It will rise again in January after celebrating the start to 2022. Last year, demand was at 3,395, 15% more than today due to a four-month delay in the Spring Market because of COVID. The 3-year average prior to COVID (2017 to 2019) is 2,715 pending sales, 8% less than today. With a larger drop in supply compared to demand, the Expected Market Time (the numberof days to sell all San Diego County listings at the current buying pace) decreased from 24 to 23 days, an extremely insane, Hot Seller’s Market (less than 60 days) where there are a ton of showings, sellers get to call the shots during the negotiating process, multiple offers are the norm, and home values are rising rapidly. The lowest level of the year occurred on April 1st, at 19 days, not much different than today. Last year the Expected Market Time was at 32 days. The 3-year average prior to COVID was at 75 days, much slower than today, but still a Slight Seller’s Market.

November 8, 2021 Snapshot

Nov 8 market snapshot > Market Insights - California Real Estate Expert Robert Wolf - California Real Estate Expert Robert Wolf >

The active listing inventory shed 256 homes in the past two-weeks, down 10%, and now totals 2,364. In September, there were 15% fewer homes that came on the market compared to the 3-year average between 2017 to 2019 (2020 was skewed due to COVID-19), 635 less. Last year, there were 3,775 homes on the market, 1,411 additional homes, or 60% more.

Demand, the number of pending sales over the prior month, decreased by 102 pending sales in the past two weeks, down 3%, and now totals 3,005. Last year, there were 3,637 pending sales, 21% more than today, due to a delayed Spring Market.

With a large drop in the supply and smaller drop in demand , the Expected Market Time for all of San Diego County decreased from 25 to 24 days in the past two weeks, a Hot Seller’s Market (less than 60 days). It was at 31 days last year, similar to 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 19 days. This range represents 41% of the active inventory and 52% of demand.

For homes priced between $750,000 and $1 million, the Expected Market Time is 21 days, a Hot Seller’s Market. This range represents 22% of the active inventory and 25% of demand.

For homes priced between $1 million to $1.25 million, the Expected Market Time is 20 days, a Hot Seller’s Market. This range represents 7% of the active inventory and 8% of demand.

For luxury homes priced between $1.25 million and $1.5 million, in the past two-weeks, the Expected Market Time decreased from 30 to 29 days. For homes priced between $1.5 million and $2 million, the Expected Market Time increased from 28 to 32 days. For homes priced between $2 million and $4 million, the Expected Market Time increased from 48 to 51 days. For homes priced above $4 million, the Expected Market Time increased from 182 to 234 days.

The luxury end, all homes above $1.25 million, accounts for 31% of the inventory and only 15% of demand.

Distressed homes, both short sales and foreclosures combined, made up only 0.4% of all listings and 0.2% of demand. There are only 7 foreclosures and 3 short sales available to purchase today in all of San Diego County, 10 total distressed homes on the active market, down 1 in the past two-weeks. Last year there were 30 total distressed homes on the market, similar to today.

There were 3,532 closed residential resales in September, 6% less than September 2020’s 3,753 closed sales. September marked a 3% decrease from August 2021. The sales to list price ratio was 100.8% for all of San Diego County. Foreclosures accounted for just 0.4% of all closed sales, and short sales accounted for 0.3%. That means that 99.3% of all sales were good ol’ fashioned sellers with equity.

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