It’s bonkers out there.
A real dog-eat-dog world when trying to buy a home in San Diego. Not only are median prices increasing monthly, but the number of offers a buyer must put in can reach over double digits before they find a home.
Despite the whack-a-mole attempt at buying a home, the real estate market is seeing other trends, too. We covered this a bit in our Real Report in June, but we wanted to dig a little deeper into the trend.
In this Wild West, herding cats market, San Diego surpassed 3,000 available homes for sale for the first time in 2021 in June. There were 805 new listings at the beginning of the month and active inventory increased by 6.8% from May to June.
However, new sales are decreasing despite more the number of pending sales increasing each week. In the words of Jerry Seinfeld, what is the deal?
We put our ear to the ground and did a little investigative work and what we found was more buyers are falling out of escrow. Sheesh!
Out of escrow
Our research found a number of reasons buyers were falling through like a bad New Year’s resolution. There was buyer’s remorse, appraisal value and repair issues, and just straight up bad decisions.
Buyer’s remorse was the most popular explanation for falling out of escrow. There is a metric ton of competition in San Diego and it’s just overwhelming.
There are countless media reports and stories of buyer’s taking a step back as they struggle to keep pace with offers $50,000 to $100,000 over the asking price.
Heck, who wouldn’t get a little bent over constantly being outbid by six figures? It’s insane and hard to comprehend, like we’re taking crazy pills or something.
Adding onto the stress is seller power plays. At times it feels like a 6-3 power play in overtime of an NHL playoff game, and buyers are the team with three players.
Just pucks flying at will with no time to get your head straight.
Since this is a seller’s market, and will continue to be for the foreseeable future, seller’s hold an English standard ton of leverage. They can get the buyer to pass on just about any credits.
Heck, a buyer probably can’t even think about credits since a flock of buyers are waiting to take that kill.
Since the market is moving lighting fast, or more like lighting on steroids, appraisals are another reason for buyers falling out of escrow.
Because prices are increasing at scale, appraisers cannot keep up with the workload. This is leading to issues with mortgage loans, since the numbers are so fluid it’s difficult for a lender to lock in a price.
One of the biggest differences are repairs. For years sellers could push off those maintenance issues onto the buyer.
However, that appears to be slowing down. Buyers may believe they are being taken advantage of, so they’re not playing ball.
As we’ve covered, it’s a seller’s market and for years there have been countless reports of homes sales sight unseen or as is. This takes a huge financial burden off the seller.
But since median prices have soared about $800,000, buyers are feeling for that price, the home should be in prime condition.
Hard to argue.
As prices skyrocket, the pressure intensifies on both sides. Obviously, the seller wants to max out their return and the buyer wants a good deal with a turnkey property.
However, it appears the pressure is inflicting pain for both parties. Some buyers are biting off more than they can chew with their home loans, and the sellers aren’t vetting thoroughly enough.
This combination is leading to bad financing and the buyer falling out of escrow. It’s a tough situation, but the combination of the speed of the market, rising prices and urgency put a spotlight on the gaps in the process.
San Diego Home Buyer
While individual buyers may be taking a step back, we’re on the opposite end of the spectrum!
We bring cash (it is king, of course) at closing, conduct our own appraisal, have an in-house construction team for repair, and make good decisions and don’t have remorse.
OK, maybe a little but that has more to do with the Padres struggling to take over the NL West, but we digress.
Our all-cash, fair market offers wipe out any need for a home loan, thus we won’t fall out of escrow.
It’s as if the real estate gods are watching over you and connecting with us. It’s the perfect pairing!