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The Squeeze on Buyer-Agents

We are witnessing the demise of buyer-agents.

The squeeze is coming from several directions, and all are rooted in the fact that there isn’t enough business to go around. Thankfully, half of the realtors are of retirement age, and will drift away naturally.

The pending class-action lawsuits will likely de-couple the commissions, and sellers won’t be paying a bounty to buyer-agents like they have since the beginning of time. Agents who can justify their value and services can always contract with buyers, and we’ll see where that goes. But it won’t go very far.

There are also forces within the industry that are deliberately putting the squeeze on.  Opendoor has developed a nice little package of exclusive listings presented to buyers at a 2% savings if they don’t mind just placing their order online:

https://datadoor.io/articles/game-of-homes-opendoor-exclusives

Because the people who put this together have never been realtors, it never occurs to them that paying a buyer’s agent has value. Homebuyers who get good help are going to feel more comfortable paying more the home, and conversely, with no help, they will want to pay less to compensate.

Is the tease of a 2% discount enough? We will see.  But it’s another example of the pressure to squeeze out the buyer-agents, and Opendoor thinks they are passing the savings along to the buyers.  But does any seller want to have buyers floating around, hoping to figure out the buying details on their own and cope with buyer’s remorse? No! It’s why the I-Pay-One companies never last because they don’t get it – buyers need and want help.

Instead, what has developed during a raging seller’s market is the thought that eliminating buyer-agents is a good thing.  The message is clear – we don’t respect what you do, we don’t think we need you, and we don’t care what you think about it.

Redfin has no respect either.

On homes that they own – and can pay any rate – they are down to 1.75%:

They are giving buyer-agents the double middle-finger salute, and they don’t care what you think about it. Another option would be for them to pay a healthy commission and earn some respect for themselves, but that doesn’t occur to them either.

It would be worth it to champion the value that buyer-agents bring to the table, but nobody appears interested in that angle.  Instead, they think the cost-cutting somehow justifies it, without considering – if it results in buyers paying less, then did you get anywhere?

Attractive Pricing Works

I mentioned the strategy we employed on Avenida Sierra.

After a low-priced new listing came on the market at $1,350,000 the day before we were going to launch, we lowered our list price from $1,595,000 to $1,395,000 to ensure that we were as attractive as any of the six competing listings (four of which had hit the market in the previous week).

Because the $1,350,000 was only seven doors up the street, we had to go head-to-head. You can’t just shrug it off – if we would have launched at $1,595,000, all we would have done is help them sell!

How did it turn out?

We received multiple offers, and I ran our sales price up to $1,550,000!

It is easier to go up on price, than down!

We are the only listing that has been marked pending too:

I raised the list price to reflect the sales price, and send a message to others that more is possible!

June Listings and Sales, Preliminary

We knew at the beginning of June that we wouldn’t get to 200 sales, just by the number of pendings:

NSDCC June Listings and Sales

Year
# of Listings
# of Sales
L/S
2015
527
340
1.55
2016
513
312
1.64
2017
416
360
1.56
2018
476
299
1.59
2019
435
282
1.54
2020
448
274
1.64
2021
386
357
1.08
2022
301
170
1.77

Our precipitous drop in the number of listings has to be considered when examining the current market conditions – and not only are there fewer listings than ever, but the quality of the homes coming to market is on the lower end. People are hanging on to the best homes!

After rates and prices have doubled, if you are going to buy a home now, you want to hold out for a good one! Yet we have fewer quality choices than ever before.

California Dream For All

More on one of the proposals to spend the state’s budget surplus.  It doesn’t make the homes any cheaper, so home buying will still be limited to the affluent who can afford the payments:

First-time buyers often rely on family gifts to afford the down payments on their homes. Now California Legislators want the government to fill the role of generous relative.

Lawmakers are proposing creating a billion-dollar fund in this year’s state budget that would provide California’s first-time buyers either all of the money they need for a down payment, or very close to it, in exchange for partial ownership stakes in those residences.

Atkins said the California Dream for All program is aimed at creating opportunities for lower- and middle-income buyers in a rapidly rising market, including those who have faced racial and economic barriers to homeownership.

“The California Dream for All program will give more people the chance to break free from the cycle of renting,” Atkins said last month. “This has the ability to change people’s lives.”

The proposal is the subject of negotiations between the Legislature’s Democratic supermajority and Gov. Gavin Newsom, also a Democrat, on how to spend a projected budget surplus of $97.5 billion. The legislature passed a budget on Monday that includes the proposal, though negotiations with Newsom continue on a final overall spending plan.

A spokesman for the governor declined to comment on the proposal, citing the ongoing negotiations. It was not included in the governor’s original budget nor in his May revised budget.

The housing proposal – which would call for issuing revenue bonds of $1 billion a year for 10 years to create the fund — is the largest in a slew of proposals intended to promote homeownership this year. The proposal also includes $50 million in the budget this year, and $150 million per year after that to pay for the administrative costs of the program and the interest costs of the revenue bonds.

The program envisions helping some 7,700 borrowers a year, according to estimates made by the program’s designers based on home price projections. A start date for the proposed program has not been indicated.

Read the full article here:

https://calmatters.org/california-divide/2022/06/california-down-payment-help/

JtR in Village Park!

Check out our new listing!

1938 Park Dale Lane, Encinitas

2 br/2 ba, 1,080sf

YB: 1978

HOA = $325/mo.

LP = $849,000

You can still buy a Village Park home in the $800,000s! This one feels like a detached-home too, and is surrounded by greenbelts. One-story, new flooring and paint, private backyard, 2-car garage, air-conditioning, laundry room, plus the primary bedroom suite has a fantastic travertine shower and huge walk-in closet! A house across the street is listed for $1,900,000 – this is the right neighborhood! Walk to the Park Dale Lane Elementary School and the Village Park Recreation Club too – enjoy all the benefits of the Village Park clubhouse, pool/spa, & tennis courts in this dog-walker’s paradise with flowing green belts throughout the area. Wow!

https://www.compass.com/app/listing/1938-park-dale-lane-encinitas-ca-92024/1079135454154740505

Open House 10am-1pm on Wednesday, June 29th!

San Diego Case-Shiller Index, Apr

My guess is we’ll be 400+ at the end of the year, or about the same as February.  A flat-pricing environment is the easiest of all the choices for buyers and sellers – just sell for the same amount as the last guy.

San Diego Non-Seasonally-Adjusted CSI changes

Observation Month
SD CSI
M-o-M chg
Y-o-Y chg
Jan ’20
264.04
+0.2%
+5.1%
Feb
265.34
+0.5%
+4.6%
Mar
269.63
+1.6%
+5.2%
Apr
272.48
+1.1%
+5.8%
May
273.51
+0.4%
+5.2%
Jun
274.91
+0.5%
+5.0%
Jul
278.00
+1.1%
+5.4%
Aug
283.06
+1.8%
+7.6%
Sep
288.11
+1.8%
+9.4%
Oct
292.85
+1.6%
+11.5%
Nov
295.64
+1.0%
+12.3%
Dec
297.52
+0.6%
+13.0%
Jan ’21
301.72
+1.4%
+14.3%
Feb
310.62
+2.9%
+17.1%
Mar
320.81
+3.3%
+19.1%
Apr
331.47
+3.3%
+21.6%
May
341.05
+2.9%
+24.7%
Jun
349.78
+2.6%
+27.2%
Jul
355.33
+1.6%
+27.8%
Aug
357.11
+0.5%
+26.2%
Sep
359.88
+0.8%
+24.9%
Oct
363.80
+1.1%
+24.2%
Nov
367.62
+1.1%
+24.3%
Dec
374.48
+1.8%
+25.9%
Jan ’22
383.92
+2.5%
+27.2%
Feb
401.45
+4.6%
+29.2%
Mar
416.64
+3.8%
+29.9%
Apr
426.08
+2.3%
+28.5%

Home price increases slowed ever so slightly in April, but it is the first potential sign of a cooling in prices.

Prices rose 20.4% nationally in April compared with the same month a year ago, according to the S&P CoreLogic Case-Shiller Index. In March, home prices grew 20.6%. The last slight deceleration was in November of last year.

The 10-city composite annual increase was 19.7%, up from 19.5% in March. The 20-city composite posted a 21.2% annual gain, up from 21.1% in the previous month.

In a change from the last five months, when most of the 20 cities saw month-to-month price gains, only nine cities saw prices rise faster in April than they had done in March. Cities in the South continued to see the strongest monthly gains, including Charlotte, North Carolina; Tampa, Florida; Atlanta, Dallas and Miami.

“April 2022 showed initial (although inconsistent) signs of a deceleration in the growth rate of U.S. home prices,” Craig Lazzara, managing director at S&P DJI, wrote in a release. “We continue to observe very broad strength in the housing market, as all 20 cities notched double-digit price increases for the 12 months ended in April. April’s price increase ranked in the top quintile of historical experience for every city, and in the top decile for 19 of them.”

Tampa, Miami and Phoenix continued to lead the pack with the strongest price gains. Tampa home prices were up, with a stunning 35.8% year-over-year price increase, followed by Miami, with a 33.3% increase, and Phoenix, with a 31.3% increase. Nine of the 20 cities reported higher price increases in the year ending April 2022 versus the year ending March 2022.

Cities with the smallest gains, although still in double digits, were Minneapolis, Washington and Chicago.

Not only are these price gains for April, but the index is a three-month moving average. The average rate on the 30-year fixed mortgage just crossed the 5% mark in April after rising from around 3% in January. By June it had crossed 6%.

“We noted last month that mortgage financing has become more expensive as the Federal Reserve ratchets up interest rates, a process that had only just begun when April data were gathered,” said Lazzara. “A more challenging macroeconomic environment may not support extraordinary home price growth for much longer.”

The housing market is already cooling, with slower sales and reports of price drops among some sellers. The supply of homes for sale has also increased steadily, as more listings come on the market and homes already on it sit longer. Active inventory last week was 21% higher than it was the same week one year ago, according to Realtor.com.

“For buyers and sellers, the road ahead will require more flexibility in pricing, brushing up on negotiation skills, and acknowledging that market conditions today are different than even six months ago,” said George Ratiu, senior economist at Realtor.com.

https://www.cnbc.com/2022/06/28/home-price-increases-slowed-slightly-in-april-says-sp-case-shiller.html

(The San Diego seasonally-adjusted index was 424.53 in April)

Inventory Watch

It’s exciting now!

There is one thing we know for sure:

Generally speaking, home sellers are not adjusting their expectations about price.

The standoff will last another few weeks, and then the unsuccessful sellers will pack it in for the year.

Don’t be surprised if the 2023 pricing looks a lot like it does today!

The NSDCC inventory is still well below normal, but nobody cares about that. This is Bill’s take:

https://calculatedrisk.substack.com/p/housing-inventory-will-tell-the-tale

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Open House Wrap

Huge turnout for my open house – more than 70 people!

There were four open houses in the neighborhood each day, so the buyers were able to make plenty of comparisons. My guess? The two homes offering the best values will sell this week!

Avoiding A Price War

My new listing at 3534 Avenida Sierra, priced at $1,395,000, is one of six for sale in Lomas Serenas – four of which have listed in the last week.  When you have a competition like this, you want to be the first one to sell and avoid a potential price war which could erupt in 30-60 days if the market doesn’t respond.

We will be back for open house today, 12-3pm!

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