Follow the rabbit hole of real estate down and you’ll find this year’s winter real estate market has turned upside down. The traditional winter real estate market is characterized by a slowdown in real estate. Sales drop by as much as 30%. Time to sell a property increases by as much as 20%. The winter quarter of the year is often a ‘Buyer’s Market’, as motivated homeowners will reduce their price to make a deal. But this year’s winter market is different. Instead of the often 12+ months of available homes, a scant 2.3 months remain under $1M. This leaves homebuyers to quarrelling over the few remaining homes. Prices are increasing. And homeowners are negotiating hard and getting almost full asking price. In the first part of 2009, the average single family home in Carlsbad was $676,516 at 96% of asking price. The same home today averages $710,000 and is selling for 99% of asking price. Time to sell in the current market is 60 days.
Condo prices are also up roughly 6% from the start of the year. The average Carlsbad condo is a 2 bedroom, 2 bath 1,440 sq.ft sells for $376,000. The average condo takes on average 86 days to sell in the current market. The upward trend in pricing may continue in the short-term, as available inventory is tight and mortgage rates remain in the low 5% range for a 30 year fixed mortgage. But as prices move higher, investor’s yields are pushed lower. And as the expected yield drops below 6%, the risk and headache of property management will push many investors out of the market. A change in the current mortgage rates will put a strain on demand for condos. A $370,000 condo with a mortgage at a current rate of 5.3% has roughly the same monthly payments as a $300,000 condo at 6.5% (the average 30 year fixed rate in 2008).
Scarcity of available real estate is the primary cause of the current market conditions. And new foreclosure property, which could help satiate buyer demand, has been delayed. Venture down to the court steps at 220 W. Broadway in San Diego or 250 E. Main in El Cajon at 10:00am and you can watch representatives of the banks auction off foreclosed property. This is the step before being assigned to an REO agent and put on the MLS. What is surprising are the large number of postponements and cancelled auctions. On a recent November morning, 665 properties were scheduled for auction at in San Diego County, but only 23 made it to the floor for bidding. Many speculate to the reasons behind the postponements, but the results are clear: fewer homes, lower market time and higher prices.
An excerpt from Tyson’s article in the December 2009 issue of The Carlsbad Business Journal.
Wed, Dec 9, 2009
General News