May 2020 housing charts

Submitted by Rich Toscano on June 22, 2020 - 9:12pm




















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Submitted by gzz on June 24, 2020 - 11:45am.

My prediction: low rates and low inventory are offset by a 2nd covid wave and recession, prices end year up 2% year over year.

I am still a long term bull: rents, income, population growth, very low new construction all point to long term gains. I also believe low rates will continue even after the recession ends. So I could see 2021 being a 8 to 14% gain year.

The wave of refis and people whose mortgages have 25 years left at 4% saving $500 a month by replacing it with a 30 year at 3% will further reduce the desire of people to sell.

The majority of new SFH construction now in San Diego is in the Otay or Escondido areas, very distant locations.

Submitted by sdrealtor on June 24, 2020 - 2:49pm.

Moving over to this new thread its update time. In addition to data based updates I will try to conitnue with an anecdote from the field.

New listings dropped back down to the low level of 2 weeks ago. Not good news for homebuyers.

Pendings dropped also but not nearly as much and its was another net loss of -7 homes on the market. That makes four connsecutive weeks of falling inventory around my 3 zips.

New homes getting listed are seeing hundreds if not over a 1000 views on Zillow day one. I saw a house listed in South Carlsbad 92009 get around 1500 views the first 24 hours. Its like shooting fish in a barrel for sellers out there now.

So what isnt changing? Price reductions are minimal and closings are still sluggish from a COVID hangover due to RE shut down in Late March to mid April but should start passing soon.

As I predicted this week my long awaited UT article came out with a headline screaming sales were down over 40% y-o-y! Im sure some folks stopped there to rejoice. It was just irresponsible click bait as anyone who read the article was treated to the truth. Inventory is way down, multples offers abound and prices are trending up.

Here's an anecdote from the field. Clients looking in 4S had nothing new to look at last weekend while they have had 2 or 3 each of the past few weeks. There was one sitting on the market overpriced that we were waiting to get reduced. It was priced well above 4 nicer homes that sold with multiple offers. This week it got reduced to the top end of the range of those 4 homes. That was still too high but they had no competition. Those 4 will all close above asking and higher than this one as they should but not much higher. It ended up with 3 offers and should close about $50K above what it should relative to those 4 and the comps. The agent was an grizzled old vet like I have become and was willing to talk openly with me. He knew it was high and knew he was taking advantage of the situation. The house had some real unfixable flaws that would impact it more in a down market. Cant say Im sad my clients didnt get it as I wouldnt want to be listing agent on it in a tougher market. I always prefer my clients get the better homes even if they are slightly more as they hold their value better in down markets. You never know what the market will be like when you are selling. It is good to have a better house with less flaws if its not a great market. Think of that as downside protection.

And gzz? Im gonna go against you and say 5%+ y-o-y. I have a sense based upon what Ive seen go into escrow. And there are still tons of buyers chasing homes out there.

See ya next week...

Submitted by gzz on June 24, 2020 - 5:39pm.

Thanks for the report SDR. My forecast assumes the 2nd wave of Covid gets worse and causes further economic damage. I certainly hope I am wrong, and I've been too bearish thus far.

I looked at some downtown buildings for the first time in a while, and noticed a fair number of listings are still at or a little below peak 05 to 07 prices.

That's interesting as my zip 92107 has been above those prices for quite a while. Here's one listed well below the 2005 price:

https://www.sdlookup.com/MLS-200023923-2...

HOAs seem a lot higher in many buildings than I remember. Still a bargain compared to NYC HOAs.

I'd guess the explanation is the prior bubble inflated downtown more than other areas, and also supply not being as constrained.

Some NYC HOA examples picked completely at random and selling for around 1 million even:

$7500 a month, but 4-bedrooms in UES:
https://www.zillow.com/homedetails/190-E...

$2500/mo, 1 bedroom
https://www.zillow.com/homedetails/784-P...

$1800/mo, 1 bed UWS
https://www.zillow.com/homedetails/50-W-...

$550/mo, 1 bed LES (but price is $1800/sf)
https://www.zillow.com/homedetails/253-E...

1400/mo, 1 bed, tribeca:
https://www.zillow.com/homedetails/275-G...

With monthly charges so high, you can see why at one point co-ops would sell for $1.

Submitted by sdrealtor on June 25, 2020 - 8:00am.

Downtown has gotten a steady flow of new units. OB not so much. Downtown never boomed like other areas in SD and has always lagged in appreciation

Submitted by sdrealtor on July 2, 2020 - 12:53pm.

I owe y'all an update!

New listings dropped back down a couple but basically unchanged and nowhere near what we need. More bad news for homebuyers.

Pendings popped up a bunch! A staggering net loss of -17 homes on the market. That makes five connsecutive weeks of falling inventory around my 3 zips and its getting worse.

Price reductionms minimal and mostly adjusting overpriced listing closer to market.

Closed sales bumped up around 60% over last week. Its the end of the month which usually leads to a bump but moreso the data pouring in from the rapid recovery we've seen the last 60 days.

Rates are hitting new lows almost daily and people want more space. Market is firing on all cylinders and my prediction of 5%+ y-o-y when we get to 12/31 is looking pessimistic.

Good news from the field is I got my clients in escrow on a beautiful home by identifying what I beleive to be a pricing flaw in the market between 4S Ranch and Del Sur. Used that to negotiate on both price and terms to my clients advantage in a way that I believe will pay off well in the long run. Only time will prove me right or wrong but I really like my odds.

One side note. Its has been nice to see more and more visits and posts by old timers on the forums the last week or so. The exorcism of all political ranting, all the time seems to be bearing green shoots. Keep at it!

See ya next week....

Submitted by spj on July 2, 2020 - 4:36pm.

The short term increase in value for detached homes seems to reflect:
- Stable or growth of high income roles in the region giving confidence and ability to move away from density
- Generally constrained supply as others have explored extensively
- Exceptionally constrained supply of homes containing granny flats or the ability to build them for adult children taking in their aging parents

The short term flat condo prices seems to reflect:
- Significant losses of low and middle income roles in the region. Anecdotally, my HOA has several units that are pandemic-length-of-time behind on their dues and the last time this happened was the 2008 recession. I think this is an important indicator to watch.
- Slowing of expansion by VRBO owners due to pandemic. Anecdotally, a multi-VRBO owner I know has used the pandemic to renovate his properties instead of expanding

I'm hopeful with the city's proposed plan to build so much new housing, but long term I think there just isn't enough land to support the detached demand which will lead to continued skyrocketing prices.

Submitted by sdrealtor on July 2, 2020 - 7:22pm.

What this post reflects is someone that's already been kicked off this blog twice who should Just leave. You've been kicked off twice. Have some dignity Brian and just go away

Submitted by Coronita on July 2, 2020 - 7:37pm.

spj wrote:
The short term increase in value for detached homes seems to reflect:
- Stable or growth of high income roles in the region giving confidence and ability to move away from density
- Generally constrained supply as others have explored extensively
- Exceptionally constrained supply of homes containing granny flats or the ability to build them for adult children taking in their aging parents

The short term flat condo prices seems to reflect:
- Significant losses of low and middle income roles in the region. Anecdotally, my HOA has several units that are pandemic-length-of-time behind on their dues and the last time this happened was the 2008 recession. I think this is an important indicator to watch.
- Slowing of expansion by VRBO owners due to pandemic. Anecdotally, a multi-VRBO owner I know has used the pandemic to renovate his properties instead of expanding

I'm hopeful with the city's proposed plan to build so much new housing, but long term I think there just isn't enough land to support the detached demand which will lead to continued skyrocketing prices.

Really BrianSD/FlyerInHi... Just two weeks from the second time ban...and you're already trying to angle this into a city/high density housing versus suburbia slapfest again????

This post adds NOTHING to the data that is being posted. This post is nothing more than a regurgitation of all the opinionated city/hi density housing versus suburban housing slapfest in a failed subtle attempt to reenter this blog unnoticed. There's no data, no sampling from the real world from actual housing sales/closes/etc, just the same anecdotal bullshit pulled out of one's ass to support an agenda for combative and argumentative purposes only.

Nice 5 hour old handle, btw :)

For a moment, it was a nice two weeks because we started seeing a bunch of old timers posting good information again. Just look at the loan rate thread and all the people that started to trickle back.

All you old piggs that participated in this betting pool... I win. I said less than 3 weeks. You didn't believe me. You all owe me lunch after covid :)

Submitted by sdrealtor on July 2, 2020 - 7:43pm.

PayPal sent

Submitted by gzz on July 3, 2020 - 10:36am.

Agree with SPJ except the point about granny flat zoning. State is mandating allowing granny flats on all single family zones.

SD city has already passed the required reg, and any straggler suburbs that try to stop it are going to get hit with huge attorney fee bills on top of damages and injunctions. The state law is not ambiguous.

The YIMBY/renter/developer/construction union block is in the driver seat in Sacremento after about 50 years of anti-density/environmentalist domination. Fortunately for the latter, construction costs are very high still and that's the big brake on development in SD. Skilled labor is expensive, from the construction to the design/legal/finance, so is losing the rental value of the potential tear down for years.

Some lots simply can't have ADUs because of physical configuration issues, but I'd guess about 75% of lots over 5000sf you could add a granny flat or tiny house. The value gain however is minimal because you lose your nice back yard. You really need a flat 8000+ SF lot to have a 2nd unit and a nice back yard that's bigger than a dog run.

In 92106/7, no examples of building of 2nd houses in the back yards of family zones where 2nd units are now allowed because of state mandate, however there's a gradual trend on alley lots to replace the old 2-car garage with a nice new one with a 2/1 apartment on top. By gradual I mean about 10 a year between the two zips with 48k combined population.

The building of 2nd homes on lots that only had one is almost entirely on lots that were zoned for many decades as multifamily. One of the more common ways this happens is to declare the small existing 1-story home the granny flat and build a new 2-story one. Maybe about 6 of these happen a year. Even when multiple units are allowed by zoning, the granny flat regulation makes calling one of the units a ADU cheaper and easier to approve.

Submitted by sdrealtor on July 3, 2020 - 10:49am.

Ive got 11,000 sq ft pie shaped lot with most of it in the back. It has a configuration that would not only accomadate a nice 2BR ADU but also splitting my backyard such that the existing house and the ADU could have nice private yards with sepoarate private access to each (one to right of house and one to left). Back when I bought this place I specifically bought it because of the lot. I was thinking pool that never got built not ADU so I cant take credit for having that much foresight. But in the immortal words of Sir-Mix-A-Lot....Baby Got Back!!

Submitted by spj on July 4, 2020 - 12:18pm.

Apologies,

I didn't intend to restart an old controversial comment thread. I seem to have similar opinions to whomever Brian is, but I promise I am someone different who has come to these conclusions independently. Moving forward I will try to refrain from posting without data.

Again, sorry for the disturbance.

SPJ

Submitted by sdrealtor on July 4, 2020 - 12:34pm.

Please stop apologizing and just go away

Submitted by an on July 5, 2020 - 1:05am.

I'm loving the new ADU regulation. Time to sell condo and far flung areas and buy SFR with big lots with 1031. If only those one come on the market in the SW part of MM. there isn't even 1 for sale right now.

Submitted by sdrealtor on July 5, 2020 - 10:01am.

an wrote:
I'm loving the new ADU regulation. Time to sell condo and far flung areas and buy SFR with big lots with 1031. If only those one come on the market in the SW part of MM. there isn't even 1 for sale right now.

Agree there is quite an opportunity. You can turn a sfr into a triplex. Just need the right spot to do it. Not sure I'd want that on my primary unless it was all family living there. It does redefine the multi generational living opportunity. Outside of space biggest issue is cost as they aren't cheap to build.

Submitted by an on July 5, 2020 - 8:16pm.

sdrealtor wrote:
Agree there is quite an opportunity. You can turn a sfr into a triplex. Just need the right spot to do it. Not sure I'd want that on my primary unless it was all family living there. It does redefine the multi generational living opportunity. Outside of space biggest issue is cost as they aren't cheap to build.

Yep, the key is finding the right spot. Luckily, as a small time investor, I only need a few SFR. I agree that I wouldn't do this to my primary residence, but would be great as an investment. Although the cost isn't cheap, it's still much cheaper than buying a 1/1 condo AND you don't have to deal w/ HOA.

Submitted by sdrealtor on July 5, 2020 - 9:50pm.

That was my thought exactly. Great minds think alike. I figure I can build a very nice 2br/1 1/2 bath 1000 sq ft adu in my backyard for around $250k. A 1 br condo around here goes for $350ish with higher taxes and HOA. I'd only rent it to a friend or have family there with long term plan to live in it myself and rent out the main house. So I'd make it really nice

Submitted by gzz on July 6, 2020 - 5:56pm.

That doesn't sound like too profitable a plan when you consider the value of your time, construction disruptions, and the decreased value of the main house which now shares a lot with an ADU.

A 2 on 1 for 1.3m will also be harder to sell than a SFH for 1.0m. The number of people who want to be landlords on the side just isn't very high.

If there were a lot of profit in putting in 2nd units where zoning allowed them, you'd see flippers doing it. But I can't think of a single instance of the many flips I've seen in 92106/7 where an ADU was added.

These two zips have long had mostly SFH areas zoned for multiple units. Conversion to multiple units usually involves a tear down rather than an addition.

When I talked to a developer about my underbuilt lot, he said it would be simpler to just tear down the existing house than work around it. The water and sewer hookups for example were fine for one house but not for 3 or 4.

One point in favor of ADUs is the various vacation rental rules tend to treat ADUs better than condos.

Submitted by sdrealtor on July 6, 2020 - 8:06pm.

You're only thinking in terms of your area and your situation. I'm exhausted after long day but I'll update this later and explain why it could be bigly profitable and or advantageous

Submitted by gzz on July 6, 2020 - 9:49pm.

SDR, sure the first house with an ADU in a large area that doesn't have any could get a decent premium.

Submitted by sdrealtor on July 7, 2020 - 9:34am.

As I mentioned I think you are looking at this through your eyes only.

1. This is more of an income play than an appreciation
2. Its a fallacy to view the main house as being depreciated. You dont sell them separately you would sell the package and the package would be more valuable.

Here are some examples. I'll use my situation as I think about it all the time. Figure I spend $250K to add 2Br 1/2ba guest house.

I could rent it out all day for at least $2200/month right now. Thats about a 10 cap rate. A 1/1 around here is $350K minimum plus HOA plus higher taxes and rents around $1800. Much better return on this.

If I was closer to beach I could do vacation rentals. A client on a large lot built similar luxury unit down by beach over his garage at similar expense. He can get $400+ a night. Thats a 30 cap rate at 50% occupancy and likely much higher.

One of my kids could move into it and have their own space as a young adult in a beautiful community they grew up in but could not afford. Could give them reduced or free rent.

If i had elderly parents it would cost at least $350K and probably more for a condo they could live in. Higher taxes and HOA also. Here they can live out back independently for much less. People moving from most of the country to be near kids/grandkids have a tough time affording a nice place out here in a nice area. Most could afford to pay to have a nice ADU built and have a great place near family.

I could rent it out and pay it off in about 10 years with rental income. Then I could move into it (which is why Id build it really nice) and rent out the main house. Rent on my house is currently $4500 to 5000 and should be higher in 10+ years. I could live pretty nicely on $5K rental income plus $3K social security with no expenses and not have to touch any of my other investments.

My clients with the unit of the garage built it for themselves long term. They could live in it and rent out main house for close to $10K a month. Pretty sweet life and income as both will be paid off.

In 10 years one of my kids could move into paid off main house with low tax basis with their family. Grandpa would love to be out back and watch grandkids grow up. When Im gone Grandma could move in or they could rent it for income.

In about 20 years if Im still around, Im gonna need some help. Could use it as a caregivers unit and exchange rent for help.

These are just a few scenarios and there are many more. There is currently huge demand for homes with an ADU because the income can help you afford a nicer place than you could afford otherwise, could generate income on an asset you can keep close tabs on or its a great place for family/friends. A home with a nice ADU particularly one where both still had nice private outdoor space would be extremely valuable and moreso than the sum of its parts.

BTW beach was beautiful yesterday. Water warmed up nicely too.

Submitted by sdrealtor on July 7, 2020 - 2:57pm.

Now back to our regularly scheduled program. Update time!

New listings dropped down by 4 and this is 3rd consecutive week new listings have dropped. These are the times when being a buyer sucks more than ever.

Pendings maintained at last weeks level! A staggering net loss of -21 homes on the market. That makes six consecutive weeks of falling inventory around my 3 zips and its getting worse. There are more pending SFR's than actives which means under 1 months inventory.

Price reductions still minimal and mostly adjusting overpriced listing closer to market.

Closed sales same as last week. Again its the data pouring in from the market post shutdown.

Rates are hitting more new lows almost daily. People clamoring for more space.

I dont know that market could be hotter. My prediction of 5%+ y-o-y when we get to 12/31 is a dead mortal lock!

Anecdotally looking into 4S Ranch and Del Sur virtually nothing coming on market in the $1Mish 4BR 2600 sq ft plus range. The homes we wrote offers on a month or so ago are now closing. One closed $75K over asking. The other was a vacant home that closed $7K over with a 14 day all cash offer. Probably could have gotten a little more but they took quick, easy and guaranteed. Got my eyes on 6 others that we lost on and will report as they close.

One more anecdote. Had clients who were mostly urban dwellers the last 20 years moving every 5 years os around 8 corridor and then spent last 5 in the Pacific NW in a downtown high rise in a large city. They are street savy, liberal, loved being in a city and well into retirement. No longer felt safe walking the streets outside their home at night with protests and police free zones. Back to North County they come! In escrow on a nice townhome back where they started 30 years ago. Looking forward to a nice safe, sunny suburban home to ride out their golden years. Cant get back fast enough.

Repeating what I said last week this forum continues to come back to life with oldtimers checking back in and sticking around. Sometimes its as easy as removing a little growth to bring the patient back to life. Hope it stays that way and continues.

See ya next week....

Submitted by gzz on July 8, 2020 - 10:56am.

SDR, San Diego has greatly underperformed Seattle and the Bay Area the past decade, and LA to a lesser extent.

We’ve never been such a great relative value compared to other Western markets since perhaps the 1990s.

The next step I’d like to see is for us to use our two giant well-located stadium properties to attract a major corporate campus.

Seattle just passed a special income tax targeting Amazon, while NYC chased them out of their Brooklyn HQ2 plan.

Submitted by sdrealtor on July 8, 2020 - 12:51pm.

gzz,
Im happy with the pace of things here especially the pace of life. Slow and steady wins the race. No need for a major corporate campus with all the work from homers I suspect we will see a steady flow from the people of the north. Stadium complex is likely gonna be SDSU West which is a great use of it too. The Sports Arena on the other hand is ripe for a complete reimaging.

Ive always felt that we are subject to the ups and downs of economic cycles here but long term we only have one way to go:)

Submitted by Coronita on July 8, 2020 - 12:55pm.

.

Submitted by an on July 8, 2020 - 2:55pm.

sdr, I concur with your numbers. The rent for my area is also around $1700 for a 1/1 and ~$2200 for a 2/2. Although, the number doesn't seem to be a home run when you only add 1 ADU and do it on your primary. But it is a home run IMHO if you do 2 ADU (ADU + junior ADU) and rent all 3 out. Here's an example, a small 3/2 1100 sq-ft with a yard large enough to do 2 ADU in my area is probably around $700k. PITI on it would be ~$3500/month. Rent on it would only be ~$2800/month. However, if you spend ~400k for a 2/2 and a 1/1 ADU, your PITI would be ~$6k/month. However, your rent would be $2800 + $2200 + $1700 = $6700/month. So, you went from negative cashflow of ~$700/month to positive cashflow of about $700/month. That's not too shabby for a super hot market with great tenant pool. The estimated build cost for the ADU should be a bit lower if you use rental grade and use the preapproved ADU plans from the county with the reduced fees.

Submitted by sdrealtor on July 8, 2020 - 3:52pm.

It will be very interesting to watch the whole ADU trend to play out. Either way its all about the long term income not the short term appreciation with them. Thats why flippers dont build them.

Im waiting for Carlsbad to create incentives like Encinitas and SD before I start a real plan. Would also prefer that someone in my neighborhood go first with the HOA also:)

Submitted by an on July 8, 2020 - 5:15pm.

100% agree. It's about long term income.

Lack of HOA is one of the key reason I'm looking in my area. I can't imagine trying to do the whole ADU thing with HOA.

Submitted by sdrealtor on July 8, 2020 - 5:18pm.

They can't stop me but I just want someone else to suss out any pitfalls

Submitted by Coronita on July 8, 2020 - 5:33pm.

an wrote:
sdr, I concur with your numbers. The rent for my area is also around $1700 for a 1/1 and ~$2200 for a 2/2. Although, the number doesn't seem to be a home run when you only add 1 ADU and do it on your primary. But it is a home run IMHO if you do 2 ADU (ADU + junior ADU) and rent all 3 out. Here's an example, a small 3/2 1100 sq-ft with a yard large enough to do 2 ADU in my area is probably around $700k. PITI on it would be ~$3500/month. Rent on it would only be ~$2800/month. However, if you spend ~400k for a 2/2 and a 1/1 ADU, your PITI would be ~$6k/month. However, your rent would be $2800 + $2200 + $1700 = $6700/month. So, you went from negative cashflow of ~$700/month to positive cashflow of about $700/month. That's not too shabby for a super hot market with great tenant pool. The estimated build cost for the ADU should be a bit lower if you use rental grade and use the preapproved ADU plans from the county with the reduced fees.

wait what? 1/1 is now $1700? damnit.....

My 1/1's are $1550 .. And my 2/1 is $1750..

No wonder no one is giving me any grief.

Can I buying one of many of those vacant office buildings in Sorrento Valley and convert it in something like an 8- plexer?

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