While Kris is up in San Francisco hanging around the Inman Tech Conference seeking to find the proverbial better mousetrap, not to mention all the vendor freebees, I’m handling the more mundane tasks, such as analyzing current real estate theory and trying to determine which, if any, patterns may be shifting.
Global warming is thought to have caused melting of the ice pack, excessive rain in certain, typically dry areas and drought in areas where there should be rain, record high temperatures and protracted heat waves. Some of these shifting patterns have been well documented, while others remain speculative. But we know something is happening.
Similarly, we are experiencing shifts in our San Diego real estate market. The most obvious is the downturn in sales and prices after the unprecendented run-up since 1997. But might these trend shifts portend a pattern shift, as well? Traditionally (but not exclusively), the peak spring/summer sales season tapers off in many communities after August, with many, if not most buyers wanting to get settled prior to the new school year starting or in time for their summer vacation. The number of closed escrows usually drops off in September.
I looked back five years (per SANDICOR) in San Diego overall and Scripps Ranch in particular to confirm this and to get a better picture of the actual results. From 2002 through 2006 the average annual drop in closed escrows from August to September was 12.5% in all of San Diego County and 18% for Scripps Ranch.
So far my theory is validated. Here is where I will speculatively depart from the normal pattern, my own little global warming of real estate theory. Conditions today, including the general slow down in sales, the drop in sale prices and higher inventories are, in part a function of buyer paranoia. Buyers are out there and in surprisingly strong numbers. They are just sitting and waiting. We know this from both personal experience and from abundant anecdotal evidence. If I had a dollar for every time I was told by a perspective buyer at an open house that they are just waiting for the “right time” to buy, I could retire (almost).
Hence the potential pattern shift. Evidence and experience suggests many potential buyers have been specifcally waiting for the end of the peak selling season in hopes of scoring a better deal. The “Canary in the Mine” will be the number of closed escrows in September (and possibly October). My bet is that there will be a substantial narrowing of the gap in the actual number of closed escrows (vs. August). If this does occur, it may represent a significant shift in the previously established pattern of sales in San Diego. Stay tuned. I’ll keep you posted..