There is rampant speculation that home prices must come down to compensate for higher rates. But there is another solution.
Fewer sales.
We learned a couple of lessons during the peak covid days:
- Sellers don’t have to sell – they can wait it out.
- When they do, the market can survive with fewer sales.
Look at the NSDCC sales in the past months of May:
2018: 273
2019: 297
2020: 143
2021: 300
2022: 126 so far
We might not hit 200 sales this month, and while the doomers and mainstream media will be talking about how the demand has been crushed and there is no hope, will the sellers panic? Even if they aren’t receiving offers? Or not having any showings at all?
Have you seen anyone dump on price yet? Not really.
Are today’s sellers willing to keep reducing their price until they find what the market will bear? Doubt it – and after two price reductions (three tops) they will give up, rather than keep lowering the price. They can blame on ‘the market’, or on their realtor, and decide to try again next year.
Anybody who needs the money can borrow against their hefty equity positions or get a reverse mortgage. If they can’t make their payments, they can float for 6-12 months while their lender decides if they want to get back into the foreclosure business, which is California means you have to offer the borrower a loan modification before you can foreclose. It will be months, and probably years, before we see any real foreclosure activity – if any. If they have to, the non-payers can drag it out at least until next year, live for free, and just sell for less then.
Sellers might get a little antsy, but it will take more than that to give up hope of cashing in that big ticket. They have been dreaming for months about what they are going to do with all that money, and they aren’t going to give up on those dreams easily.
Price-wise, we will hang out in Plateau City.
There will be an occasional big sale that keeps everyone optimistic – this will be the next one in South Carlsbad which was on our private site at $3,100,000 but hit the open market at $2,880,000, which should really rev the engines this weekend:
https://www.compass.com/app/listing/2864-camino-serbal-carlsbad-ca-92009/1045075166600199825
But most listings will languish, which is ok. It’s how we used to do it, and we survived!
What do you think will be the impact of the new short term rentals regulations that will kick in later this year/early next year?
https://www.sandiego.gov/treasurer/short-term-residential-occupancy
Another example of double taxation. Why the government gets to grab money whenever they want still alludes me.
This is a ridiculously intrusive and unecessary attack on property rights.
Why as citizens do we continue the govt to encroach on our freedoms?
And why limit the number of licenses? Will it be by lottery, FCFS? How does one financially plan for this when the issuance isn’t certain?
I don’t own short term rentals, doubt I’d ever want to, but this sickens me.
What do you think will be the impact of the new short term rentals regulations….
I think landlords will sue. Deciding by lottery on who can and can’t rent out their home isn’t right.
There won’t be any impact on residential resales though – too much capital-gains tax to pay. They will rent long-term instead (30+ days). It could lead to a cottage industry of short-term monthly rentals.
Jim, have you ever thought about maybe making for instance Fridays ask your questions to Jim the realtor via the blog?
So instead of posting an article you can have it set up so people can ask any question they want about real estate and then you can answer it. I have a lot of questions to ask you but I don’t have a format to do it
I’ll try it tomorrow!
Is it very difficult to remove a bad tenant if they have been resident for 30+ days versus the less than 30day renter?