San Diego Real Estate Market
As we begin the Fourth Quarter, the San Diego Real Estate Market is experiencing a significant Seller’s Market as low inventory, high demand and lack of new listings continue to be the current trend. The following table was compiled from the local MLS ** to represent Real Estate sales activity for the month of October 2012:
|Current Active Listings||5359|
|New Listings in October 2012||1887|
|Closed Escrows in October 2012||2791|
|Closed Escrows Average Days on Market||65 Days|
|Closed Escrows Average Sales Price||$462,000|
|Closed Escrows Distressed Sales (Bank Owned & REO)||876|
|Non Distressed Sales||1915|
|Distressed Average SP & DOM||$ 333,000 / 111 Days|
|Non Distressed Average SP & DOM||$ 520,000 / 44 Days|
From the data above we can calculate the current inventory will be depleted in 1.9 months. This is assuming no additional listings are placed in the market. The actual new properties for sale taken in October 2012 are only 1887 units. Once again the sales rate of 2791 units sold far outpaces the new listings taken of 1887 units.
Distressed sales continue to be a significant portion of homes sold at nearly 32% of total units sold. As this number declines in the future, we will likely see an increase on the average SP as the underwater homeowner exits the market and more regular sales become the norm.
The way we determine the supply of inventory is by dividing the number of homes on the market in a given month by the number of houses sold that same month.
The National Association of REALTORS (NAR) quantifies a market to be in equilibrium (not a buyer or a seller market) when the supply of homes is at six months. This number is very subjective and really dependent in the region and other factors. Anything above six months is considered as a Buyer’s Market and anything below the six month mark as a Seller’s Market.
I feel that three to six months of inventory could be considered as a market in equilibrium. At these levels, while buyers are not in absolute control of the market, if sellers prepare the house well and price it right, they’ll find multiple buyers at the door; however, all things being equal, it will linger on the market and sellers are more willing to provide subsidies and drop prices.
With inventory levels at a sub two months of sales-rate, we have in San Diego turned the corner from a Buyer’s Market to a very solid Seller’s Market. This could easily change in the near future as economical and political events in the coming months could signify a change to the positive outlook of the current Real Estate market.
Of course numbers without some market observations has very little meaning to the individual Buyer or Seller in San Diego. Following are some of my anecdotal observations in the local Market:
• Low existing housing inventory. Only 1.9% month supply with new listings not supporting the current Monthly Sales Rate. This trend can not be sustained for a long time.
• Not many new developments in areas of high demand. We are seeing some developers start the process of bringing new homes to the market but not sufficient or timely to meet current demand.
• Distressed property sales are still significant at 32% of total sales, but trending lower from earlier this year. This is a healthy sign, as a lower distressed sales number indicates equity Sellers entering the market.
• Home sales prices are rapidly increasing in certain areas. Very important to understand this dynamic if you are ready to buy or sell in those areas.
• Buyer contracts are requiring “non-contingent of appraisal report” addendums. Price inflation is becoming an issue, and certain buyers are getting shut-out from this market.
• Multiple offers in properties in certain areas. Low supply and high demand. Some properties with 20 to 30 offers.
• Seller subsidies have almost disappeared. While buyers used to ask for some sort of assistance (ie – lower price, points paid, closing costs) the buyers must come to the table without any help from the seller.
• High down payments are becoming the norm including many all-cash offers.
In conclusion, the San Diego real Estate Market is currently a Seller’s Market. If you are in the market for a new property, it is imperative to monitor the market for properties that meet your requirements. Understand market dynamics and understand that list price may not accurately indicate final sales price as property valuations are being set by forward demand needs as opposed to recent comparable sales activity.
If you are on the market to sell your property, it may be a good time to review the supply of existing comps and market demand and accurately entertain an offer that maximizes your sales proceeds.
For additional information on this article or more information on the San Diego Real Estate Market, please call us at 619.333.0790.
** Market data compiled from Sandicor – Data as of 11.1.12