As we move through the last of the hot weeks, we are seeing a bit of a tempering with our local real estate market.
It's really a sign of two kinds of homes: those that are priced correctly and those that aren't. Gone are the days (at least for now) of pricing a home 5-10% above it's realistic price and somehow getting it. Buyers are getting smart and a bit more financially conservative again.
Any home out there within a certain range of it's realistic price is still selling almost instantly, be it over the first weekend or the first week.
Any home out there that is waaaay above it's market value is sitting around and stagnant. We've seen a proliferation of listings above $1,000,000. As of this writing, there are 13 active homes here. It is easy to get sucked into the mindset that basically any single family home is now over $1,000,000. Yet, the majority still need to be a fully remodeled one. And that fully remodeled one can't be listed for another $200,000 over the true value or it will still just sit.
Buyers are smart!
So where do we go from here? My expectation is still that the remainder of the year will be flat before another increase in the Spring. You can see that prices have really steadied for single family (and condos to a degree) over the past few months.
We do have the end of the eviction moratorium and end of the mortgage deferrals during the pandemic. This has the chance of affecting our market but there doesn't appear to be enough data showing a huge number of these listings smacking the market all at once. If it is a steady drip then we will see a bit of reprieve versus a full scale drop.
While the number of sales looks to have dropped off a cliff, it is actually in line with previous years. We see a general slowing from July through December. We also still have around half the number of active and available homes as prior years around this time, excluding 2020. Thus, there isn't a lot of downwards pressure except that buyers are tired.
Price per square foot continues to increase at a high rate. When we see sales price flatten some, this tells me one of two things: 1. People are buying smaller homes. 2. People are buying more renovated homes that sell for a higher price per square foot.
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Yours in McCormick Ranch real estate,
Randy Arriola, HomeSmart
Can we start by talking about the monsoons? I'm *almost* more excited about the incredible storms we have had than real estate. The Greenbelt has been turned into a river more times in the past month than the prior few years combined. It's incredible!
Getting back to real estate, the recent talk about many of the news outlets has been making it sound like everything is about to fall off of a cliff. Headlines abound about how the market is slowing down and prices are being reduced. Let's look at some data and see if this is really anything to be concerned about.
Let's start with a 5 year chart of annual sales. This is solely for McCormick Ranch is a monthly plot of the number of sales including townhome, condo, patio home, and single family. Between 2016 and 2019, you can see a huge surge from February through July. Then, the second half of the year is a bit quieter. 2020 was overall swapped with a quieter first half and a busy second. 2021 has reverted to the norm with a busy first half. Thus, we should expect to see a quieter second part of the year based on history.
If we look at sales prices, there is a bit of a flattening for single family but all of the other categories are going up. As you can also see, patio home and townhome have been almost identical lines over the past year. There is a lot of crossover between these styles of homes. It has been an incredible run up for single family homes so a bit of an easing isn't necessarily a bad thing.
Conversely, price per square foot continues its upwards trajectory. Even single family is up over the past few months. This tells me that home prices are continuing to increase. But, many of the single family homes that have sold over the past few months have been smaller in size but selling at a greater premium. A fully renovated home is a great example of this.
Overall, what I am seeing is that homes that are move in ready are still selling for top dollar with a lot of interest. But, there is also a limit to this. If you list a home at 10% over the top market value it will just sit. Buyers are smarter than this and realize where the value will lie. Smart pricing is still one of the top components of selling a home quickly and for the maximum amount.
Moving forward, I am expecting that homes will continue to sell at a historically quick pace. We likely won't see the same metrics from the crazy spring we had (well, until next February or March). With still just a month of inventory (we have 38 active homes in McCormick Ranch and are selling around 40 a month), it will still be a seller's market for the foreseeable future. Hopefully just to a lesser extent for the remainder of the year.
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Yours in McCormick Ranch real estate,
Randy Arriola
The dog days of summer are here. It's hot but thankfully the monsoons are starting. Hopefully we have a better monsoon season than the previous year.
As we progress through the summer, we are starting to see a little bit of a chink in the armor of this crazy market. Now, to start, do not even get the idea that this is all of a sudden a huge shift in sales and that everything is going to start to drop tomorrow. It is just the slightly slowdown where we aren't see a million offers in the first 43 seconds that the home is listed. Can it turn into a full market shift? Well, of course. But this seems like it is more seasonal than anything.
Let's go back in time a few years. Or 15ish. When we go through an annual sales cycle, we generally see a steady ramp up in sales and prices from January through June. Then, July through October drop about 30% from there (who wants to move when it is 118 degrees?!?). And then we see another 20% from there for November and December. While this isn't exact for every year it is a pretty rough generalization.
Going now to just last year, Covid obviously changed the trajectory for the past 18 months. We saw a busy January and February, a shut down for 3ish months, and then a ramp up for the remainder of the year. Then this year got extremely busy from January through now.
If we look specifically at last year, home prices were up around 18% overall. Yes, this is a lot and more than most years on average. The majority of these increases were in January through March and then from September through December. So far this year we are up 15% making for another huge year.
As such, a flattening out (or a very small increase) for the year is not necessarily such a bad thing. It puts our home gains in line with what is more reasonable for a city with exploding population growth.
Going to the charts, you can see there is a bit of a decrease in the average sales price. I wouldn't read too much into this at this point. We have had a multitude of million dollar sales this Spring and it can affect numbers.
Price per square foot is a better metric of all sales. It is worthless for an individual home but tells more of where prices are headed overall. As you can see, it is still increasing.
Moving forward, we will still continue to see homes sell extremely quickly. But, these will be the ones that are well appointed and/or priced appropriately. Whenever we have an extreme seller's market some sellers decide to overprice their home by 10-20% or more (this can translate into $100-200,000 in our market so not an insignificant amount). It's easy to get greedy and be unrealistic. But buyers are still smarter than that. They are still bound by appraisals and their own personal budgets. These will be the homes that will sit and stagnate.
All that being said, it will be interesting to see what happens over the remaining months.
