The Lund Team Real Estate Blog

“Real estate has always been about supply and demand.  When there is no supply, there is no resistance to rates.  When there is supply, there is resistance to rates.”  Samuel Zell, billionaire real estate investor, Interview with Greg Miles – Bloomberg Television August 21st, 2008.   

And Zell followed in the interview to predict a turnaround in the broader real estate market : “I think the direction of the real estate market will change in the first part of next year (2009)”.  (video below)

His contrarian prediction has since proven true.   

And Zell’s larger macro-concept of restricted supply articulates clearly the current real estate market in Carlsbad.  A restricted supply of Carlsbad housing halted the downward trend in pricing in 2009.  In 2008, Carlsbad had 12+ months of sellable homes.  Buyers had a number of choices and were demanding steep discounts off already lower prices.  But as fewer homes came onto the market in 2009.  Sellable inventory shrank to 2.5 months of supply.  Buyers would search for months and find the same few “dog” or undesirable properties.  More desirable homes in the $800’s and under had multiple parties willing to bid near full asking price to be the winning bid.  In mid-2009, the ‘bid’ to ‘asking-price’ went from a 96% average in 2008 to 99%.       

The final three months of the 2009 Carlsbad real estate saw an increase in sales and lower market time when compared to the previous year.    Over 206 homes went under contract and/or sold from October to December.   A 36% increase in sales when compared to the same period in 2008.  The average time to sell a home decreased from near 90 days down close to 60 days.  And even as buying activity is comparatively stronger than the previous year, prices have stayed relatively flat.  Conservative appraisals are keeping housing appreciation low and steady.  Buyers should not feel pressured to buy because of low rates or tax credits.  Buyers should take their time and focus on the area they want to live and find a home that fits all of their needs.   

But if you are waiting for prices to decrease further, it could be a long wait.

Housing bears are hoping for a double dip in housing prices.  This is predicated on the sudden release of large amounts of “shadow inventory” from banks and a sharp increase in mortgage rates.  Banks have shown that, although they do have an unknown number of homes sitting vacant and unsold, their intent is not to flood the market with their own property and compete with themselves.  And mortgage rates will rise when federal stimulus ends and the government withdraws from the secondary mortgage market.  But as of January 15^th 2010, the Federal Reserve plans continued stimulus until the broader economy shows clear signs of sustainability and recovery.  And with recovery comes confidence and income.  And according to Zell, since inventory is expected to remain restricted, buyers will reluctantly pay the higher cost associated with increased mortgage rates.