What is the BIG question of the year (select one only):
A. When will the market turn around?
B. Will Steve ever make his statistics more interesting?
If you answered “B”, you are correct! That’s because I already have the answer for “A”. More on that later.
How to make my statistics more exciting?? The easy answer is to just let Kris do them. Unfortunately, she is desperately working on nursing a couple of escrows right now. (This job is sooo easy these days). In her absence, the small world of the San Diego Home Blog will, once again, have to be subjected to my form of an annual statistical (sadistical?) summary of 2007 for Scripps Ranch, plus a few bonus communities thrown in for fun.
But first let’s look at how I did on my predictions for 2007, made last January. I boldly predicted in great detail the following:
– An increase in inventory; and,
– Stabilizing sale prices (assuming no dramatic increase in inventory).
How wimpy was that? Very. This year I will go much further out on a limb with my predictions at the risk of exposing myself to a great amount of criticism and mockery next year. It’s time to see what I’m made of.
Here are the results of 2007 for Scripps Ranch, all per the SANDICOR Multiple Listing Services as of 1/3/08 and all based upon average (not median) sale prices.
Detached: Homes Sold = 274 (vs. 300 for 2006), a 9% decline from the previous year. Average sale price per foot declined 4.5%.
Attached: Homes sold = 169 (vs. 201 during 2006), a 15% decline from the previous year. Average sale price per foot declined 6.8% from 2006 levels.
Obviously, condos took the bigger hit. This is consistent with what we have seen through the years. Condo performance is a leading indicator. As condos go, so goes the market.
Taking a look at the five-year trend for detached homes only, we see the following:
This shows the ol’ price rollbacks and waning buyer demand we have been talking about here for awhile now.
At the commencement of 2007, there were 75 active listings for detached homes in 92131, which at that time represented a 4-month supply based upon the previous year absorption rate. Today, there are 90 active detached listings (Note Wimpy Prediction #1, above). The good news is that the sales rate of the past 12 months puts absorption at (drum roll) 4 months. Same as last year.
We have all heard that a 6-month supply of homes is the normal breakpoint between a buyer’s market and a seller’s market. Not anymore. Today, if you are a seller, you know it’s a buyer’s market. Trust me on this one.
So that’s it, for last year at least. Want more? Okay a small bonus round. Curious about the performance of a few other areas in San Diego? Woo hoo! I’m having some fun now. Kris will be jealous.
Places other than Scripps Ranch (if there are such places)
For all of San Diego County (all zip codes, detached homes): 2007 = 15,264 sales, a 21% decline from 2006. Sales price per foot declined 2% (remember this is from SANDICOR, so I get the “average”, not the “median”). We know from the rabid press coverage of the real estate market in this town that the median price decline was greater. We will bring you the median sales price stats as soon as they are published.
Live (or want to live) in Tierrasanta (92124)? Sales of detached homes dropped from 142 in 2006 to 104 in 2007, a significant 27% decline. The average sale prices per foot declined 4.5% from the previous year.
How about Rancho Bernardo (92128)? Rancho Bernardo suffered a 15% drop in detached sales and a 2.5% drop in the average sales price per foot.
Enough already? I agree. The trend is obvious. Let’s not beat a
dead wounded horse. Let’s look to the future.
Good News: We will look back at 2008 and realize it was the pivot year in the cycle. We have seen more than two years of adjustment to a market that needed it. In 2007 we finally saw market capitulation, which is critical to turning the corner and reaching the next milestone – stabilization.
Bad News: Based upon the number of short/bank-owned sales that are still out there (or coming soon to a market near you), the capitulation cycle is not yet finished, however, with more flushing needed. This continued correction will occur through much of the year.
Good News: This will also provide opportunities for buyers to acquire properties at prices that have not been seen for at least three years.
Good News: Interest rates will remain relatively low throughout the year.
Bad News: The reason interest rates will remain low is that the national economy is likely entering a recessionary period which will also result in a sucky stock market for at least the first half of the year.
Good News: The recession will be relatively short, not lasting more than 6-8 months, and will not greatly impact San Diego’s real estate market since we have been already been impacted for over two years.
For Scripps Ranch, More Good News: The 2007 trend clearly indicates a slowing rate of the deceleration in home sales, thereby suggesting that by the end of 2008 we will achieve stabilization/equilibrium in the marketplace which, by my way of thinking, is right there next to nirvana.
Best News: I have signed up for the course “How to make statistics fun and interesting.”
Disclaimer: The above information is my personal opinion and not necessarily the official position of Kris Berg. Forecasts have not taken into account the potential market impact of May 15, 2008, American Home Buying Day.