Here’s the stats from the 4th quarter of 2019 in San Diego real estate, along with predictions for 2020. Always hand-written with stats direct from our local MLS.
2019 Q4 Summary
Sales Volume Up Seasonally: Down 13% from Q3 2019. Up 12% from Q4 2018
Inventory Record Low!: Down 39% from end of Q3 2019. Down 35% from Q4 2018
Loan Rates Up & Down: Started at 3.67%, went up, then dipped t0 3.74%
Home Values Slightly Down: Median sales price Down about 1% over Q3 2018
Govt./Policy Changes: Tax Reform Bill & Fed Fund Rate Drops
The Above image is a visual summary of my statistics reference from our local San Diego Association of Realtors.
2019 Q4 – The Details
Sales Volume (# of total sales) had been dropping slowly for a couple years until this year. About half way through the year, the trend line changed and sales started going up year over year. When comparing total sales in 2019 with 2018, they were virtually the same. While the trend is currently pointing up, that will depend on whether or not we have enough inventory for buyers to purchase!
Not surprisingly, this shift corresponded almost identically with the drop in home loan rates. With pending sales being high in December (and January), that indicates Q1 2020 sales will be stronger than normal, too.
While Inventory went up most of 2018, 2019 saw inventory trending downward most of the year, seasonally adjusted. Normally there is a large influx of listings in the spring and inventory rises, but that seasonal norm was not very pronounced and inventory dipped really hard in the 2nd half of the year. By the end of the year, we were hitting historic lows not seen since the early 2000’s bubble when there was less overall total housing. As such, our percentage of available housing is even less than it was back then.
With inventory trending down all year, we experienced upward pressure on pricing this year during the usual spring season, but also again with an odd second push in the 4th quarter.
At the route of this inventory decline are 2 things. First, new listings are down 20% over last year’s numbers. Second, Closed Sales volume (i.e. demand) has been up, presumably due to lower rates and higher affordability.
Rates were on the decline all of 2019, in general, but the last quarter was relatively flat overall. Most economists cite the consistent drop in rates for the pick up in sales. Due to dropping rates, affordability has been on the rise. And, ever since the beginning of the year, rates have dropped even further.
Loan rates are hitting historic lows right now! Now is the time to refinance if it fits your situation at all.
The rise in affordability and subsequent sales have kept inventory low. As such, prices stabilized mid-year and have recently started going up again.
Most lenders I’m speaking with are expecting rates to stay at this level in the very short-term before trending up again in the next 3-12 months. Big issues like Brexit, Impeachment & Trade Wars are some of the reasons for keeping home loan rates artificially low, so it will be interesting to see where we go from here.
Home loan rate charts:
Long Term Rate Chart: 1971 – 2020 Short Term Rate Chart: 2019 Full Year
Govt / Policy Changes:
After 8 Federal Funds rate hikes in 2017 and 2018, the Fed was exercising a policy of “patience” in 2019 without any changes, until Q3. Powell announced a rate cut in July, then again in September, then again in November! Although the fed fund rate doesn’t correlate to home loan rates directly, it does spur economic growth and investment. We haven’t seen 3 reductions in a year since the great recession.
The 2018 tax reform is done. It is my belief that the corrections/softness I have seen in the $1-1.5mil price point the last year is highly related to the change in tax law as that price point is the most effected by the changes. I also believe that correction is mostly over. One thing I will add is that many of the democrats running for office are talking about overturning/modifying the Trump tax changes, so we may see our property tax benefit come back if we are lucky!
Median home values were on a path of seasonal ups and downs in 2018 and 2019 until the end of the 3rd quarter of 2019 when they started going up again, against the seasonal norm. It’s not normal for prices to be going up at the end of the year, but if you’ve read the sections above, it’s no surprise with rates & inventory declining simultaneously.
What does the future hold? My theories & predictions are below…
Of course, these are just predictions….that said. I think that our spring selling season is going to be strong – Q1 will see a 2-4% increase in median home values. All listings that enter market at a reasonable price will sell. Those priced competitively will sell quickly with multiple offers. Rates are super low right now and the market is jumping. I expect that we will have some short lulls in pockets of the market that have less demand because while supply is extremely low, so is affordability so the total amount of demand has dropped some. But with a little patience, those properties will sell when the right buyer comes along.
As I write this, the stock market is dropping due to the Fears of the Coronavirus spreading. When the stock market drops, so do rates, but they are already extremely low. With more downward pressure on rates, I think that prices will jump by the end of Q1. Perhaps Q2 will be a little more flat on pricing with the introduction of more inventory and a slight pullback to the last 5-6 bullish months. However, unless the Coronavirus really becomes a Pandemic that effects the world economy, I expect our inventory to remain low and for that to keep prices level after the spring time jump and into the summer. Rates will likely creep up towards the end of the year and as folks focus on the election, I expect sales to drop with a slight pullback on prices, too, at the year’s end.
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Broker / Owner
73 Degrees Realty
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