We will be entering the 4th Quarter of 2013 tomorrow and I thought it would be a good idea to take a look at what has happened so far this year.
We had a wild and crazy ride during the first half of the year. The San Diego real estate market came roaring back in a big way.
- Low interest rates fueled the return of buyers. Housing prices spiked in June and July and we saw a rise of 18% in the average sales price from the previous year.
- Inventory basically fell of the map. Previously we had gotten as high as 15 months of inventory available, in May and June we dropped to only a 2 months supply.
- Multiple offers ruled the day. Some homes had as many at 25 offers from buyers putting in offers on just about anything in hopes of getting a home. Think auction mentality but at 1/4-1/2 a million dollars.
- Sellers finally had their day after years of begging for offers. Removing buyer protections became common with buyers kicking in thousands of dollars in over bids to complete transactions.
Interest rates rose quickly in June and the market took a major turn.
- Some buyers were no longer able to qualify for loans.
- The refinance loan market dried up.
- Sales leveled off and in some areas actually fell.
- Investors, who had been the ones to prop up the market during the dark days, left the market.
The 4th Quarter in real estate is usually our slowest period. Where are we now?
- The inventory of existing homes for sale is now at 3.7 months.
- Small pockets of new construction are reappearing. Some small builders are doing in-fill building of 8-20 homes at a time in established neighborhoods.
- There has been a small drop in interest rates but analysts expect interest rates to be back at 5% by June, 2014.
- The lower end of the market is still seeing multiple offers but more like 2-4 offers per home.
- The higher end of the market, $700,000 and above, has softened and days on market for homes in this range has risen to 52.
- The sales price vs listing price has dropped below 100% which means there is a little room for negotiations again.
Fortunately no housing bubble has appeared in San Diego. Instead the market has evolved to more stability and is showing signs of a historic balance.