The San Diego Real Estate Blog

North County Inventory Low - Multiple Offers Frequent

There's yet another market change a foot in North San Diego County and the Encinitas & Carlsbad area.  After 12 months of getting use to 25,000 homes for sale in San Diego County the inventory has shrunk to the point where sales are rapid and buyers frequent. The inventory now sits at about 16,000 homes as we come into the prime selling season here in Southern California.

January 1st marked the start of the open flood gate for buyers. Agents all over are experiencing buyers coming into open houses and commenting that they think the market has gone about as low as it's going to go in this cycle. Interestingly, I couldn't agree more based on the decreased inventory and frequent multiple offers. I recently had a sale with 5 offers!  I stood in front of our buyer sale posting board in our office tonight with several people gathered around, pointing out the many multiple offer sales that had occurred this month.  The decreased inventory and increased number of buyers may be the cause of homes starting to move more briskly and with many offers.

Lag time on market conditions is an important thing to watch for buyers and sellers. Consumers in general live in the "8 month ago" mode. Home prices, on a per square foot basis, dropped almost 10% in North San Diego County in 2006. Today you can get a bigger house for the same price as what sold 12 months ago.

For the buyers lag time is important to understand too. I've got many buyers who tell me "Hey, things are moving slowly and I can take all the time in the world to make a decision and shop." In reality, market time has decreased dramatically. Things are selling faster and with multiple offers so be careful. I've had several buyers lately who failed to make decisions quickly and the home they had their eye on went into escrow before they had a chance to make an offer. The 8 month ago mode of 90 days + market time is a reversing trend. 

As we approach the prime selling season I'm sure we're going to see some inventory changes. There's plenty of sellers who weren't realistic about their market price at the end of 2006 and they took their homes off the market toward year's end. I think we're going to see some of those return in addition to the usual increase in inventory that happens as we approach summer. If inventory remains steady and the number of buyers keep increasing (like has been happening) at least we'll see some stability come to what in 2006 was a falling market.  Forecasters see 2007 as a year of stability and 2008 exhibiting signs of appreciation. Add the Fed into the mix with a possible rate decrease and we might be poised for an interesting and active market.

The Pendulum is Swinging

There's some definite signs that a market swing is underway here in North County San Diego. It's been transitioning for some time (downward and in the buyer's favor) but indicators in the market show signs of balancing, solidifying and favoring the sellers.  Here's what I see on the street level.

I just put a very desirable condo into escrow in Carlsbad that had 5 offers on it. We haven't heard much about multiple offers in our area for well over 16 months because the inventory has been plentiful and the buyers have been few. There were 25,000 homes on the market in San Diego County 12 months ago and now we're approaching 15,000. That's an indication that the inventory is being used up fairly rapidly. Since January 1st I've had an open house every weekend and it's amazed me to see at least 15 to 20 sets of people come through all talking about how they'd been on the fence for 2 years and we're ready to get back into the market. Buyers are feeling that the drop we've been experiencing since mid 2005 has dropped about as far as it's going to go. I agree.

There's an abundance of buyers out there. I'd say there are at least 3 to 4 times more than there were in June of 2006 maybe more.

I was talking to a client of mine who is the equity line manager for Citibank and she's got some good insight into what's happening with interest rates. I've heard this before and yes it's speculative, but the rumor has always been that the Fed is expected to lower interest rates around April or May. Wow, could you imagine what that's going to do to home prices? If the inventory continues to shrink at it's present rate, considering we're coming into the prime home selling season, and buyers continue to increase, a drop in interest rates will not only solidify home prices in Southern California but I'd expect they'll inch upward. Supply and demand.

The market is neither good nor bad....it's just the market. We do know, however, there's always a good time as a seller or a buyer to jump in and this appears to be one of those times.

San Diego Price Drop Due to Condo Conversions

The Southern California home price median set a monthly record in December of $495,000 up 3.3 percent over December 2005, even as the number sales slipped in all six counties, Data Quick Information Systems said yesterday.

As reported earlier this week, the December median price inSan Diego County fell 6.4 percent to $483,000, from December 2005, the only county in the region besides Ventura to see a year-over-year price drop. The Ventura median price fell 5.9 percent, to $593,000.

San Diego's home-price record of $518,000 was set in November 2005 and has now dropped 6.8 percent, due in large part to a flood of lower-priced condo conversions, industry analysts say. DataQuick said the overall price drop in San Diego County was closer to 4 percent adjusted for seasonal sales factors and the changing mix of housing types for sale.

The typical real estate cycle produces a price peak and then a downturn before reaching a plateau from which future increases take place. "We need to remember that prices have gone up 100 percent in Southern California the last four years," says DataQuick President Prntice Hall. "Most of that increase is here to stay," he adds.

From January 2002 to last month the median home price of a single family re-sale home has doubled.

Download SalesChartDec.pdf

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San Diego County MLS Data Suggests Selling More Difficult Than You Might Think

Data recently available on the Sandicor MLS system of San Diego County shows that fewer than 1 in 3 homes sell during the first listing period. That’s a rather amazing statistic but, when you figure that the majority of sellers aren't realistic about what the market will bear and concentrate on what their neighbor got months ago in a different market, it's accurate. The reality is that in order to sell at top market value, based on the competion, there’s lots of compromises that will need to be made in conjunction with a Herculean effort from their real estate professional. Sellers can set the selling price but it's the buyers who set the market price. Here’s some of the factors that cause the other 2/3 of sales to withdraw from the market, turn into rentals or simply give up all together.

First and foremost, if your real estate professional is not with a fairly high powered company, the likely hood of your securing higher quality and a greater number of buyers may be deminished. Sometime agents and companies are working at low commission rates and unfortunately you get what you pay for. (What might you expect, for example, if you went to a discount dentist out of the country?) To often people concentrate on what they’re going to save rather than what they’re going to make and the result is disappointing. If you attract “high quality” buyers visiting your listing, you’ll more likely get top dollar. The negotiation skill level of the agent has lots to do with it too. If the agent can’t even negotiate his own commission, can you imagine what he’ll be thinking when your first contract situation turns difficult? Ask the agent if he has a Certified Negotiation Specialist designation and check his or her attitude up front.

Larger real estate companies are known for their advertising power. It stands to reason that a company with many offices in San Diego County, not to mention one who is #1 in listings taken and sold, shall command better advertising rates and a larger volume of them simply because they can. Ask if someone (ad coordinator) is directly responsible for double checking copy, pictures, prices and listing status in all media areas including multiple web sites, newspapers, magazines and the MLS (multiple listing service.) Ask to see charts indicating the number of hits per week etc.

The quality of printed materials is an indicator of how good your ads will look . The sign that goes in your front yard is, as well, a direct reflection on the quality of your home. If your home looks good to a buyer on the outside they’ll think it’s worth looking going in. Know how many real estate agents put only 1 picture into the MLS for a listing? Lots. There is space to put 12 pictures plus a virtual tour so why not use it? In the case of Realtor.com my company is required to put at least 6 pictures in their listings because statistics show that listings with pictures are viewed 250% more often that those without. In CaliforniaMoves.com, featured pages are available that are zip code specific. When your zip is searched your home comes up front and center. Another technology available is called Lead Router. Any web inquiry made on a listing is texted to the agent's cell phone with contact information and the nature of the inquiry within 15 seconds. If I can’t respond quickly it goes to 75 other qualified agents in my office that can handle the inquiry.

So, if you want to be part of the the 30% that sell, use a company and agent that’s going to do extraordinary things and put out great efforts for you. Getting noticed by the right buyer means doing almost everything possible to get there. The only other piece of the puzzle is your motivation. You have to ask yourself, do I want to just “list” my house or “sell” my house? If you want to sell it, do what’s necessary to get the job done efficiently and with your profit picture in mind. When your market time is working against you, it pays to be efficient and come out of the gate in a gallup.