Did you see the recent Goldman Sachs article “predicting a 25% decrease from peak to trough” in prices in San Diego (among other markets) like in 2008? Many of my clients reached out to ask my thoughts on it, and I wanted to pass on my response! I think you'll all come to the same conclusion I do after reading them: the article is unfounded, clickbait nonsense attempting to create fear & panic.
Inventory numbers:
In December there were 2,961 ACTIVE Detached & Attached listings in San Diego, of which 1,263 were new listings. This is the lowest number of new listings for sale since before the MLS started reporting it in 2004! Clearly, inventory is at historic lows.
What does this mean? SELLERS ARE NOT SELLING. Why? Because they feel their home is worth more than what the market will pay, they have a low interest rate they don’t want to lose, or they don’t want to pay higher taxes.
When prices decrease these days, sellers have options because many have a significant amount of equity and their interest rates are lower than today’s rate. UNLIKE in December 2008, where there were literally over 19,000 listings for sale, the number of homes for sale today is only 15% of what it was at that time! And sellers had mortgages they couldn’t afford. Today is very different due to the changes in lending laws that make the process to get a home loan much more stringent.
Market Action Index Report:
Altos Research provides a Market Action Index report, which provides a number between 0-100.
Buyers’ Market = Under 30
Seller’s Market = Above 30
Today, detached homes in San Diego are at index level 49 (for the 7 day average) and 46 (for the 90 day average), which is close to being equal. When the 7 day and 90 day numbers cross over, it means the market is picking up. Today it’s teetering on a strong seller’s market and gaining steam.
In July, October, and November 2022, San Diego was on the edge of “buyers market” territory at 29 and 37 (for the 7 day average) and 46 and 66 (for 90 day average).
Of course some of this is seasonal, as it's ALWAYS the slowest time of year to buy/sell during the fall. With that being said, the cheapest prices are also always during this time - November/December.
Median Price per Square foot:
Detached homes peaked in May 2022 at $710/Sq. foot (for the 7 day average).
In December that figure was $641/Square foot (7 day average). That represents a 10% decrease from the peak to the low. In January 2020, that number was $477/SF.
Let’s keep this statement in perspective: In 3 years to the month, the average price per square foot has increased 26%. Compared to last year at this time, price per square feet is virtually identical. Right now, the data is saying that San Diego homes are holding steady and starting to increase.
What is selling and hot today?
As someone who helps buyers and sellers every day in 92127 and beyond, I can say with confidence that I am seeing bidding wars on homes that are remodeled or show well. The homes that are not selling are the homes that fit into one of these categories:
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Outdated or just ugly
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Homes that have online pictures that include personal clutter (toothbrush, dishes, tv is on, kids toys, etc)
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Non-staged homes
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Non-professionally photographed homes
Using a professional photographer makes a big difference. These photos are the first impression a buyer will get of your home. Imagine potential buyers browsing through hundreds of homes on their smartphone, swiping to the next one in a matter of seconds. Why would they waste time on a home with crappy pictures?
Staging also makes a big difference, and yes it’s worth the cost! Studies have proven this time and time again. Among professional Realtors, it’s well known that staged and professionally photographed homes will have a significant advantage over homes that aren’t.
Here is an example that underscores this point. The first home is staged, decluttered, and professionally photographed. The second home is not:
Our Listing that shows well (staged, cleaned, decluttered): Sold in 7 days close to asking
Not our listing in the same complex - lights off, not staged, non-professional pictures: Hasn’t sold yet and is listed for higher than the model match above!
In todays’ market these details matter. Why am I sharing this? Because if you don’t think your house will sell for what you are hoping for, you are either not speaking to the right agent or unwilling to do what it takes to sell in today’s market.
Notice we haven’t talked about setting the asking price yet. Price is of course very important, but the highest and most accurate price can only be achieved once the other pieces are put into place. Once that’s done your agent can look at recently sold comps to determine the best asking price for your home.
One thing to note here is that not all recently sold comps are created equal. Just because a home is nearby yours and has similar square footage, number of bedrooms and baths, doesn’t mean it’s a good comp. You must also consider how recently the homes were remodeled, how nice are the upgrades, is there a view, a pool, or even a road noise nuisance? Realtors have a knack for making these adjustments based on numerous previously sold homes and showings.
Rate News: These rates are coming back to earth!
Friday 1/27 rates are as follows:
30 year Fixed: 6.2%
5/1 ARM: 6.25%
15 Year fixed: 5.26%
30 year FHA: 5.77%
30 Year Jumbo: 5.7%
30 Year VA: 5.38%
Back to the Goldman Sachs Article
Rates are slowly declining, as noted above, which is what all the experts that I follow have been predicting for quite a while. Bond buyers are slowly coming back. Goldman Sachs is unwinding their bond short as they reported a bad quarter and had a huge miss. They crushed 2 quarters in a row and each time said it was their Bond desk/Bond trades that made the difference and bonds were not doing well at that time.
The conclusion people smarter than I am have made is that Goldman Sachs was shorting bonds. They also still have to buy back bonds and they likely don’t want to have to buy them back at high prices. This could be a reason for such an unfounded article about San Diego and other markets.
The article has nothing to back up its statement about San Diego prices decreasing. Also, if you read the article closely, they were saying from peak to trough, prices would decline 25% in San Diego among other markets. We have already declined 10% this year as noted in my analysis above, so they think it will decrease an additional 15%? This is not likely based on fundamentals.
There is an unusually low number of homes on the market for sale and buyers have to be well qualified to buy them, so how can 2023 be a repeat of 2008? People who are in their homes now can afford them and don’t need to fire sale them. It doesn’t add up folks.
In conclusion, the article is at its best click bait and at worst designed to freak people out. Instead, reach out and call your trusted Real Estate Market or Mortgage expert. We are the ones in San Diego working with Buyers and Sellers daily and we know what is actually going on!
Thanks for reading! Reach out to learn more about your market area or any and all things real estate.
Heather
