March 28 Snapshot
Not every home sells 20% above its list price. In San Diego County, the sales to list price ratio for detached homes so far in March is 104.7%. That means that the average closed sales price was only 4.7% over the asking price. An unbelievable 72.2% of all closed detached homes sold above their list price during the first few weeks of March. The median days on market is 6 days, less than a week. It would probably be even faster, but there are just too many offers to sift through.
The simple economic principle of supply and demand does not adequately capture today’s dilemma. There just is nothing available for buyers to purchase right now. Anything that does hit the market is greeted with a deluge of showings and plenty of offers. There really is nothing spectacular about the number of buyers looking to purchase today. That is not the issue. The issue is that there are only 1,556 homes available today in the middle of March, when there are typically around 5,900 (the six-year average between 2014 to 2019). Even with a similar number of buyers searching for a home today compared to past years, there are far fewer choices.
The active listing inventory increased by 47 homes in the past couple of weeks, up 3%, and now sits at 1,702 homes, and is the lowest level by far for this time of year since tracking began 10 years ago. Spring has officially arrived. More homes come on the market during spring than any other time of year. These homes will be a welcome relief to buyers sitting on the sidelines eagerly waiting for additional inventory. With mortgage rates remaining at elevated levels with duration, fewer buyers will be willing to stretch as the year progresses, allowing the active inventory to finally climb on the backs of overpriced listings that will accumulate over time. For this to occur, mortgage rates must remain high for months.
Last year, the inventory was at 2,294, 35% more, or an additional 592 homes. The biggest complaint last year was that there were not enough homes on the market, yet there were more homes available compared to today. The 3-year average prior to COVID (2017 through 2019) is 5,598 , an extra 3,896 homes, or 229% more, more than triple today’s level. There were a lot more choices back then.
For February, there were 3,194 new FOR-SALE signs in San Diego County, 711 fewer than the 3-year average from 2017 to 2019, 18% less. Every single missing sign magnifies the inventory crisis.
Demand, a snapshot of the number of new escrows over the prior month, increased from 2,599 to 2,785 in the past couple of weeks, adding 186 pending sales, up 7%. The current demand level is still the lowest reading for this time of the year since tracking began 10 years ago. It is simply a lack of available homes to purchase and a lack of homes coming on the market. Today’s higher interest rates will start to make an impact on the housing market if they persist for several months. According to Mortgage Daily News, mortgage rates hit 4.72% as of today, March 22nd, its highest reading since December 14, 2018. If rates remain elevated, buyers will not be as willing to stretch. Overpriced homes will ultimately sit until they recalibrate their expectations and lower the asking price. This change takes time and will not be noticeable in the data for another couple of months. Expect demand to peak between April and May and then slowly fall for the remaining of the year.
Last year, demand was at 3,315, 19% more than today, or an extra 530. The 3-year average prior to COVID (2017 to 2019) was at 3,227 pending sales, 16% more than today. In San Diego County, current demand readings have obviously been muted by a lack of available homes and not enough coming on the market.
With demand rising faster than inventory levels, the Expected Market Time (the number of days to sell all San Diego County listings at the current buying pace) decreased from 19 to 18 days, the lowest level ever reached since tracking began a decade ago. At 18 days, it is an 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. Last year the Expected Market Time was at 21 days, similar to today. The 3-year average prior to COVID was at 52 days, substantially slower than today, but still a Hot Seller’s Market (between 40 and 60 days).