San Diego County Housing Report:
Last Call for 2021
October 5, 2021
Housing will shift to the Holiday Market in just 7-weeks and buyer and seller activity will plunge to its lowest levels of the year.
End of Year Expectations
Seven more weeks until the slowest season of the year starts, the Holiday Market.
Before the blink of an eye, everyone will be gathering for a day of gratitude, family, feasting, and football. That is correct, Thanksgiving is less than two months away. From there, it will be turkey leftovers, calendars filled with holiday parties, Amazon, UPS, and FedEx trucks will be parked in front of every door, and families will gather again and swap gifts with the ones they love. The holiday season is around the corner.
From now through the week before Thanksgiving, it is the LAST HURRAH before housing transitions from the Autumn Market to the Holiday Market, the slowest time of the year for real estate in terms of supply and demand. The holidays are filled with distractions. As a result, the hunt for a home takes a back seat for many buyers and fewer homeowners take advantage of selling their homes regardless of how incredibly hot the rest of the year will be for real estate. The overall speed of the market cools slightly, and the market time increases a little bit.
The supply of homes available to purchase will plunge as many unsuccessful sellers throw in the towel to enjoy the holidays and hold off until the Spring Market. It is hard to imagine that there are that many homeowners lingering on the market, unable to sell, given how hot housing is right now. Yet, there are 553 sellers today, 20% of the current active inventory, who have been exposed to the market for more than two months. Also, November and December are when the
fewest number of homeowners opt to list their homes for sale during the year. The five-year average number of homes coming on the market from 2015 to 2019 (intentionally omitting 2020 due to the skew from COVID) for November is 3,287 homes, 38% less than the annual height in May of 5,269. In December it drops to 2,250 homes, 57% less than the height in May. With both sellers throwing in the towel and fewer homeowners coming on the market, the inventory plunges. From 2015 to 2019 the inventory dropped, on average, by 21% by year’s end.
With the inventory dropping, there are fewer available options for buyers to choose from. Many buyers also place their home shopping desires on hold while they enjoy the holiday season. As a result, demand, the number of new escrows over the prior month, plunges. From 2015 to 2019 demand sank by 33% to its lowest levels of the year by year’s end.
As demand plunges a little bit more than the inventory, the Expected Market Time (the amount of time between pounding in the FOR-SALE sign and opening escrow) increases slightly. Today’s ultra-low, insanely hot 26 day Expected Market Time may eclipse 30 days by the time everyone rings in a New Year. This means that for those buyers and sellers that do participate in the real estate market during the holidays, they can expect housing to continue to soar at an insane pace with a ton of showings, bidding wars with multiple offers, and homes selling for above their asking prices. It will continue to be a white-Hot Seller’s Market.
Until the start of the Holiday Market in mid-November, it remains the Autumn Market. Autumn is when both the inventory and demand drop slightly. There are still quite a few more homes that come on the market during October compared to the average between November and December, 53% more. Demand will remain elevated. Today’s incredibly low 3% mortgage rate continues to fuel demand. Rates are not expected to change much for the remainder of the year as well.
ATTENTION BUYERS: The incredibly crazy, Hot Seller’s Market persists and that will not change for the remainder of the year, even with demand plunging during the holidays. Remember, it is not just demand that is plunging, the number of available homes to purchase will be plunging as well. To wait until later in the year for a “deal” during the “slowest time of the year for real estate” simply does not make sense. The temperature of housing will not feel much different in December compared to today.
ATTENTION SELLERS: It really is the last call to cash in on the 2021 housing market and find success. Sellers who are clearly overpriced will run out of time and run into an end of the year with drastically fewer participating home buyers due to the holidays. The time to be accurately priced and taking full advantage of maximum market exposure is right now, today.
The current active inventory dropped by 9% in the past two weeks.
The active listing inventory shed 272 homes in the past couple of weeks, down 9%, and now sits at 2,668 homes. The 9% drop in inventory is the largest drop this year. It is hard to imagine that the inventory could drop much more than where it is today, yet it certainly will. It will slightly drop from now through mid-November. From there, as housing transitions into the Holiday Market, the inventory will plunge to its lowest point of the year on New Year’s Day. This will be on the backs of fewer homes coming to market and unsuccessful sellers that throw in the proverbial towel.
Last year to start October, there were 3,958 homes on the market, 1,290 additional homes, or 48% more. The 3-year average from 2017 to 2019 (intentionally omitting 2020 due to COVID skewing the data) is 7,009, an extra 4,340 homes, or 163% more, more than double compared to today. There were a lot more choices back then.
From September 1st through September 15th, there were 413 fewer new FOR-SALE signs in San Diego County compared to the 3-year average from 2017 to 2019, 19% less. Every single missing sign just adds to the inventory crisis.
Demand Demand dropped by 4% in the past couple of weeks.
Demand, a snapshot of the number of new pending sales over the prior month, decreased from 3,277 to 3,131 in the past couple of weeks, shedding 146 pending sales, down 4%. Demand typically drops about 4% during this time of the year. Dropping demand goes hand in hand with fewer homes coming on the market along with many families halting their home buying search because the kids are now in school. Moving during the school year can be very disruptive, so families hold off until the Spring Market to search for a home so that they can ideally move during the summer months. Expect demand to continue to slowly drop and then pick up speed and plunge from mid-November through the end of the year, the Holiday Market.
Last year, demand was at 3,637, 16% more than todaydue to a delay in the Spring Market because of COVID.
With a significant drop in both supply and demand, the Expected Market Time (the number of days to sell all San Diego County listings at the current buying pace) decreased by a day, now at 26 days, an extremely insane, Hot Seller’s Market (less than 60 days) where there are a ton of showings, sellers get to call the shots during the negotiating process, multiple offers are the norm, and home values are rising rapidly. Last year the Expected Market Time was at 33 days. The 3-year average from 2017 through 2019 was at 73 days, much slower than today, but still a Slight Seller’s Market.
Luxury End The luxury market improved slightly over the past couple weeks.
In the past two weeks, the luxury inventory of homes priced above $1.25 million shed 79 homes, down 9%, and now sits at 775, the lowest level since last March. Luxury demand decreased by 6%, shedding 33 pending sales, and now sits at 522. With the supply of luxury homes priced above $1.25 million falling faster than demand, the overall Expected Market Time decreased from 46 to 45 days, an extremely Hot Seller’s Market for luxury.
Expect the luxury market to slightly cool as housing transitions further into the Autumn Market.
Year over year, luxury demand is up by 58 pending sales, or 13%, and the active luxury listing inventory is down by 455 homes, or 37%. The Expected Market Time last year was at 80 days, extremely hot for luxury, but nearly double the time to sell compared to now, indicating just how hot the luxury market is today.
For luxury homes priced between $1.25 million and $1.5 million, in the past two-weeks, the Expected Market Time decreased from 29 to 23 days. For homes priced between $1.5 million and $2 million, the Expected Market Time decreased from 33 to 31 days. For homes priced between $2 million and $4 million, the Expected Market Time increased from 55 to 59 days. For homes priced above $4 million, the Expected Market Time increased from 164 to 201 days. At 201 days, a seller would be looking at placing their home into escrow around April 2022.
San Diego County Housing Summary
• The active listing inventory shed 272 homes in the past two-weeks, down 9%, and now totals 2,668, its largest drop of the year. From September 1st through the 15th, there were 19% fewer homes that came on the market compared to the 3-year average between 2017 to 2019 (2020 was skewed due to COVID-19), 413 less. Last year, there were 3,958 homes on the market, 1,290 additional homes, or 48% more.
• Demand, the number of pending sales over the prior month, decreased by 146 pending sales in the past two weeks, down 4%, and now totals 3,131. Last year, there were 3,637 pending sales, 16% more than today, due to a delayed Spring Market.
• The Expected Market Time for all of San Diego County decreased from 27 to 26 days in the past two weeks, a Hot Seller’s Market (less than 60 days). It was at 33 days last year, similar to today.
• For homes priced below $750,000, the market is a Hot Seller’s Market (less than 60-days) with an Expected Market Time of 20 days. This range represents 42% of the active inventory and 54% of demand.
• For homes priced between $750,000 and $1 million, the Expected Market Time is 25 days, a Hot Seller’s Market. This range represents 22% of the active inventory and 23% of demand.
• For homes priced between $1 million to $1.25 million, the Expected Market Time is 25 days, a Hot Seller’s Market. This range represents 7% of the active inventory and 7% of demand.
• For luxury homes priced between $1.25 million and $1.5 million, in the past two-weeks, the Expected Market Time decreased from 29 to 23 days. For homes priced between $1.5 million and $2 million, the Expected Market Time decreased from 33 to 31 days. For homes priced between $2 million and $4 million, the Expected Market Time increased from 55 to 59 days. For homes priced above $4 million, the Expected Market Time increased from 164 to 201 days.
• The luxury end, all homes above $1.25 million, accounts for 29% of the inventory and only 17% of demand.
• Distressed homes, both short sales and foreclosures combined, made up only 0.4% of all listings and 0.2% of demand. There are only 8 foreclosures and 2 short sales available to purchase today in all of San Diego County,
10 total distressed homes on the active market, down 2 in the past two-weeks. Last year there were 29 total distressed homes on the market, similar to today.
• There were 3,624 closed residential resales in August, 1% less than August 2020’s 3,646 closed sales. August marked a 3% decrease from July 2021. The sales to list price ratio was 101.8% for all of San Diego County. Foreclosures accounted for just 0.4% of all closed sales, and short sales accounted for 0.2%. That means that 99.4% of all sales were good ol’ fashioned sellers with equity.