April 2021 Market Report for North San Diego
If you haven’t been watching, the home market has been crazy since Christmas but market growth is showing signs of slowing down. Cash buyers able to offer crazy prices are drying up. There are still plenty of buyers purchasing with loans, but home values need to stabilize to justify the new higher prices. By stabilize I mean homes may sell at the current high prices or 5% over asking price rather than selling at 15% more than asking price. Moving from a crazy market to a strong seller's market.
A lot of things had to happen to sustain the crazy market we’ve been in. Bidding wars where homes sell for nearly 20% more than the asking price takes a perfect storm to sustain. Since Christmas we’ve had a really low supply of specific homes and a large pool of ultra-motivated and extremely qualified buyers competing for those homes. Anything shifts and the frenzy begins to fall apart. When I say fall apart I don't mean that the market falls, I mean that the crazy escalation returns to earth. Buyers may soon find themselves in a regular seller’s market. A market where home prices stabilize (albeit much higher than before Christmas) and dozens of offers turn into a hand full of offers and homes sell for within 5% of a reasonable asking price.
Why do I say this? Because I’ve begun to see it. Less qualified buyers competing for homes, limits to available cash to cover appraisal shortfalls, buyers only willing to pay 5% more than asking price and buyers pushing back on 2 month free rent backs for the sellers. However there is a delay between expectations and reality. Around Christmas time buyers expectation was that the market would behave logically with steady but reasonable price growth as it has for the fall. The didn't match reality. Suddenly demand surged with dozens of offers. Likewise after 4 months of bidding wars buyers are now conditioned to offer 15% over asking price but the reality is that this is likely changing too.
The message from the numbers is that anything that came on the market last month got snapped up. Successful offers on homes cranked up to 333 (pending sales on North County Inland) while active listings are at their lowest point ever at 132.
A lot of things had to happen to sustain the crazy market we’ve been in. Bidding wars where homes sell for nearly 20% more than the asking price takes a perfect storm to sustain. Since Christmas we’ve had a really low supply of specific homes and a large pool of ultra-motivated and extremely qualified buyers competing for those homes. Anything shifts and the frenzy begins to fall apart. When I say fall apart I don't mean that the market falls, I mean that the crazy escalation returns to earth. Buyers may soon find themselves in a regular seller’s market. A market where home prices stabilize (albeit much higher than before Christmas) and dozens of offers turn into a hand full of offers and homes sell for within 5% of a reasonable asking price.
Why do I say this? Because I’ve begun to see it. Less qualified buyers competing for homes, limits to available cash to cover appraisal shortfalls, buyers only willing to pay 5% more than asking price and buyers pushing back on 2 month free rent backs for the sellers. However there is a delay between expectations and reality. Around Christmas time buyers expectation was that the market would behave logically with steady but reasonable price growth as it has for the fall. The didn't match reality. Suddenly demand surged with dozens of offers. Likewise after 4 months of bidding wars buyers are now conditioned to offer 15% over asking price but the reality is that this is likely changing too.
The message from the numbers is that anything that came on the market last month got snapped up. Successful offers on homes cranked up to 333 (pending sales on North County Inland) while active listings are at their lowest point ever at 132.
New houses were coming back to the market strong in March but held back a bit in April.
Never-the less March buyers whose homes closed in April paid on average 106.1% of asking price. (That's a record!) Experience in the market shows that many desirable homes sold for 15% or more than asking price.
So where are we at now. Many desperate buyers have managed to purchase something and so now there is less cash competing for homes than there was just 2 months ago when cash buyers were beating out buyers with loans. The lack of cash in the transactions sets the stage for a slowdown in price increases. Why? Because most financed buyers don’t have extra cash to cover a home appraisal that comes in low. (And that’s what’s been happening.) When an appraiser on a new home purchase sees an equivalent home that sold last month for $100,000 lower they tend to site the old price as the appraised value for the new purchase too. That means the buyer can’t borrow as much from the bank and has to make up the difference in cash. Now is the time for financed buyers to make a successful purchase as Interest rates rates dropped back to just below 3% at the end of April after 3 months of incremental increases.
Many offers now being received are simply poor and unprofessional. Maybe the buyers are weary or maybe that's all that is left in the buyer pool. With a professional agent and thoughtful offer presentation you will be amazed what you can accomplish. Give a buzz and we’ll talk about the 5 ways to make a winning offer.
If you are selling, don’t get ahead of the market. It's easy to see homes increasing by $100,000 every month and assume you should list yours for even more than the last home. Remember that buyers pay more when they compete with one another. They will not pay more when competing with you as a seller. Price too high and you will discourage competition and end up with poor offers or no offers at all. Once you miss the boat as a new listing, it’s an uphill battle. So take some time to really analyze the market at the moment, price right and use the market to get you the best price and terms! Give a buzz and I’ll give you the scoop.
If you are selling, don’t get ahead of the market. It's easy to see homes increasing by $100,000 every month and assume you should list yours for even more than the last home. Remember that buyers pay more when they compete with one another. They will not pay more when competing with you as a seller. Price too high and you will discourage competition and end up with poor offers or no offers at all. Once you miss the boat as a new listing, it’s an uphill battle. So take some time to really analyze the market at the moment, price right and use the market to get you the best price and terms! Give a buzz and I’ll give you the scoop.
