Introduction

Chad Dannecker: I’m Chad Dannecker, coming to you with your mid-May San Diego County housing market update as we head into Memorial Day weekend.

Interest Rates

First off in the news—the big news here really is the mortgage rates. Inflation appears to be roaring its head again. And of course, interest rates, we got down to 5.99% in February and March, and then here we sit today. We spiked up to 6.75% this week, kind of settled back down to about 6.625% today, but that’s going to affect our affordability for sure.

I talk about this because the big news is the CPI index, the Consumer Price Index came in and it was the largest gain in three years. It was 3.8%, and then when you take the core component, which you strip out food and energy, it still came back at 2.8% at an annualized pace. And so it kind of feels like oil is bleeding into everything, right? Because you think of oil, you think of gasoline, you think of plastics, you think of delivery for all the shipping and delivery to get all the goods to different places. So, it’s really showing up right now.

What it really is, it’s just a shift in the affordability dynamic that we had that was better than last year. We were saying, “Hey, everything’s better than last year, right?” Rates were better than last year. And now it’s getting more close to “same as last year.” Depending on different times of the year, because of course, in April of last year, rates were higher than they were this past April. A lot of our numbers we’ll be talking about will be the April numbers, beginning May numbers.

Active Listings Inventory

Active inventory right now: I guess the one good thing to hold values in place is that we’re seeing less homes come on the market. As long as we don’t get too much inventory, that will help protect values if interest rates keep heading up right now. In the last two weeks, active inventory is actually down 2%, which is kind of interesting.

Demand Year-Over-Year

In terms of demand, our pending home sales demand is up 7% year-over-year. It’s really surprising given that mortgage rates have taken a jump recently.

But again, we’ve got to take a look at last year, and rates were up over 7% last year. They hit 7%—they crept up over 7% on three different occasions last year in the spring. So it really kind of slowed our market down, and then it stayed slow for the summer.

Expected Market Time

Expected market time: we’ve got a different dynamic between detached homes and condos and townhomes right now.

• Detached homes: Actually decreased. The days on market decreased from 80 to 75 days.

• Condos and townhomes: It actually increased from 96 to 98 days.

So we’ve got that kind of dual dynamic where single-family homes are outpacing condos and townhomes still. Seems to be kind of an ongoing trend that we’ve seen.

Closed Sales (Market Fact)

There’s kind of an interesting statistic that came out this week, and it was: 57% of homes the last month sold at or above the listing price. I’m going to say that one more time: 57% of homes sold at or above the listing price.

Market Breakdown by Price Range

Real estate is hyper-local. Every market is different depending on the price range, and of course, every market is hyper-local. Something going on in Point Loma might be completely different than what’s going on in Del Mar or what’s going on in Rancho Santa Fe.

(A visual breakdown of San Diego County Market Breakdown by Price Ranges & Market Speed was shared on screen to close out the update).

Overall Trends

• The “Turnkey” Sweet Spot: What we’re finding that’s selling is updated homes that are turnkey—homes that are ready to move into. That could be a full remodel. We see a lot of different companies out there rehabbing homes, and those homes are generally selling quick, and they’re selling at or above list price. We wrote offers on two this week; they both had multiple offers.

• The High-Impact Updates: Even if you are not a contractor that does flips, it’s always a good idea if you can to update your kitchen. New and updated kitchens are a big hit for buyers today; updated bathrooms are a big hit. At the very minimal: painting, new carpet, hard surface flooring if possible in high-traffic areas, new light fixtures, and getting the landscaping cleaned up for curb appeal. All of those go a long way for a fast sale and top dollar.

• Precision Pricing vs. Emotion: Homes that are priced well are selling best, based on the most similar sales comparables. Sellers can’t hide anything from buyers, so we might as well just position your home where it should be positioned in the market. This is not based on feelings. People say all the time, “Well, I feel like my home’s better.” It is an emotional thing, but sometimes emotion can cloud judgment. Overpricing mixed with rising interest rates really is not going to work well.

Conclusion

Chad Dannecker: That’s all I’ve got for you. Have a great holiday weekend, enjoy yourselves, stay safe, and have some fun out there. I’m Chad Dannecker. Catch you later!