Luxury Home Lull? September 2017 San Diego County

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It’s time for an update on the San Diego real estate market.  The market has been hot, characterized by strong demand and limited supply.  This has been true especially with homes priced under $1 Million.  From there, the temperature cools down just a bit until reaching the $1.5Million mark. From there the sales are spotty, and buyers of luxury homes in San Diego are arguably grabbing the only deals to be had in today’s market.

For an example of the HOT markets under $1 Million, take a look at Rancho Penasquitos zip code 92129.  In August 2017 the median sales price officially became 100% of the list price.  Folks, that’s unusual.  This means that overbidding has become the norm in 92129. The handful of people who negotiate to 1% below the list price are apparently getting a bargain!

The story is different in the luxury home category.  Perhaps it is unfair to call this a lull of luxury home sales in San Diego County.  In 2017 there have been around 1,100 luxury homes, or roughly 90 to 100 sell each month.  And currently there are around 1,000 luxury homes for sale in San Diego County, houses priced over $1.5 Million.  So in September 2017 there is around a 10 month supply of luxury homes for sale in San Diego County.  But as a rule of thumb, anything more than a six-month supply translates to a “Buyer’s Market”.  When there is less than a six-month supply it becomes a “Seller’s Market”.    Research and anecdotal evidence both point to this as a Buyer’s Market for San Diego luxury homes.

But it is also true that in the San Diego luxury home market, prices are less important than the properties to some buyers.   Five percent of the luxury homes sold in San Diego County this year have sold over $5 Million.  That’s 50 properties, six or seven per month, that have sold in 2017 over $5 Million each.  So there is a market for luxury homes.  The question is, which luxury homes are selling and which are not?

Sale prices in Rancho Santa Fe 92067 are consistently coming in somewhere between 10% and 15% below the list prices.  This doesn’t mean that the homes are overvalued, but it does show that there is a smaller number of qualified buyers in the upper price range.  So they are able negotiate better deals.  And in this Realtor’s opinion, that means that luxury homes in San Diego are the most undervalued segment of the real estate market in Fall 2017.

Here’s the latest from Barclay’s Research.  You can find their complete article here: https://barclays.qualtrics.com/CP/File.php?F=F_6u7CMdJRX5VIRsF

 

The consensus is that the upper-end buyers are taking their time analyzing the current market conditions.  There is very little sense of urgency in the market above $1.5 Million in San Diego County. But there is also a sense that values are holding steady and gradually increasing across the spectrum of home prices.  This includes luxury homes.

Luxury homes are likely the most undervalued of the home categories in 2017.  Average incomes are increasing and market returns have been strong in recent quarters. There is a lot of equity floating around in Fall 2017.  This is likely to continue to translate into higher home prices in San Diego County.  The market leaders are the homes in the best school districts, such as Rancho Penasquitos 92129, and Carmel Valley 92130.  As those neighborhoods continue to experience rising prices and overbidding of the limited number of homes for sale, the equities will eventually spill over into Rancho Santa Fe 92067.  Luxury home prices can’t stay low when mid-level home prices are so quickly catching up to them.  Just expect longer market times for luxury homes, and do what is necessary to make your property stand out above the crowd.