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Are you looking for an experienced agent to help you buy or sell a home? Contact Jim the Realtor!

Jim Klinge
Cell/Text: (858) 997-3801
klingerealty@gmail.com
701 Palomar Airport Road, Suite 300
Carlsbad, CA 92011


Most recent articles

Housing Prices to Revert to Trendline?

We’re going to be fed a solid diet of ivory-tower analyses from now on, because when you look at the history, it sure seems like home prices are due to come down.  What these authors fail to consider is how the Bank of Mom and Dad has made the current pseudo-bubble possible, and will continue to do so.  Plus, for prices to go down, you must have sellers who are willing to dump on price. None have been that motivated, at least not yet.

This article can’t even get the facts straight – the last bust was caused by exotic neg-am financing exploding in our faces, and ill-informed homeowners bailing out.  In addition, you can draw the trendline anywhere you want, and these authors drew it where it would produce the most drama – see above – yet their worst-case scenario is only back to 2013 prices. We’d survive that.

http://journal.firsttuesday.us/home-prices-run-away-from-incomes-for-now/64911/

This most recent cycle we are emerging from in 2018 has its roots in the early 2000s, when home values began outpacing incomes at a rapid pace.

In 2006, home prices peaked in step with the Millennium Boom. By that time, home sales volume was already falling as buyers sensed prices were too high to continue during the inevitable recession, which arrived in 2008. From 2006 to 2007, prices dropped 16%, followed by a further 26% in the following year.

All in all, California home prices fell 44% from their 2006 peak to their bottom in 2009.

In some ways, this steep fall was a correction to all the excess experienced in the housing market during the early- and mid-2000s. In another sense, the fall was simply the market’s way of bringing home prices back in line with incomes.

There is a name for this reliable force that pulls home prices toward incomes: the mean price trendline.

Through the volatility of housing booms and busts, price increases continue to return to the same rate of annual income change, related to the consumer price inflation (CPI), which is typically 2%-3% per year. In California, this mean price change is closer to 3.5% annually over the past several decades.

How does income impact home prices?

Quite simply, home values can only go as high as incomes allow.

Homebuyers reliant on financing are limited to a maximum mortgage payment of 31% of their monthly income. This translates to the ability to purchase a home costing roughly five times their annual income.

Still, there is some wiggle room in the equation. After incomes, interest rates have the next biggest impact on home prices. When interest rates are falling — as occurred in the 2000s — buyer purchasing power is extended, as homebuyers’ mortgage payments go further. When interest rates rise — as is occurring in 2018 — buyer purchasing power falls and homebuyers are limited to paying less with the same income.

During housing bubbles, home prices become temporarily untethered from this rule and the mean price trendline. During the bust that follows the boom, prices fall, returning once again to the trendline.

2018 is primed for the next downturn

Here’s how the situation stands in mid-2018:

  • home prices are roughly 9% above a year earlier;
  • home sales volume is 1% above a year earlier (basically flat);
  • interest rates are nearly a full percentage point higher than a year earlier, translating to a 7% reduction in purchasing power for the average California homebuyer.

Further, the Federal Reserve (the Fed) plans to continue their efforts to increase interest rates in an effort to cool down the economy and induce a moderate business recession by 2020. Not only do higher interest rates discourage potential homebuyers from entering the market, but they cause homebuyers to offer less when they make an offer to purchase.

In response, first tuesday expects home prices to fall by mid-2019, bottoming once they hit the mean price trendline around 2020. Meanwhile, incomes will continue along at their current measured pace, pausing briefly in 2020-2021 in response to the recession.

Link to Article

Posted by on Aug 17, 2018 in Boomer Liquidations, Boomers, Forecasts, Jim's Take on the Market, Market Buzz | 0 comments

Quick Kitchen Updates

Sellers need to do more updating and improving to get their home sold these days, but you don’t want to go crazy. Here are a few quick ideas from Bob Vila:

10 Kitchen Updates You Can Do in a Day

You don’t have to live with your ugly cabinets one minute longer!

There are plenty of ways to give them a quick refresh without having to purchase replacements. Make a large-scale change by painting your units a bright color, or go for a mix-and-match effect by applying a few coats only to the top cabinets. Consider removing a door or two to create trendy open shelving, or use chalkboard paint on the doors or expanses of wall for a dose of cottage charm.

Link to Full Article

Posted by on Aug 17, 2018 in Jim's Take on the Market, Remodel Projects, Repairs/Improvements, Thinking of Selling?, Tips, Advice & Links | 0 comments

Premium for One-Story Houses

It’s easy for me to pop off about how hot the one-story market is when I already had this video in the can.  Here are a few examples of how much over list price people have paid – I’m not making fun of them, just pointing out the struggle if you are a buyer in this specific coastal one-story SFR market.

In 2018, the one-story Carlsbad houses have been selling for an average of $446/sf, and the others are averaging $381/sf – which is a 17% difference!

Posted by on Aug 16, 2018 in Bubbleinfo TV, Carlsbad, Jim's Take on the Market | 2 comments

Should Buyers Wait?

Should buyers wait a while to see what happens to the housing market?

Are we just seeing the usual end-of-selling-season malaise when where all of the motivated sellers have succeeded, and just the OPTs are stacking up?

Or has the market shifted…..for good? Is this the peak?

I think it depends on your needs:

  1. Only buying a premium property – then stay in the hunt. In the last downturn, the prices of the premium properties held up well – most had less than a 10% decline in value, and that’s before people started hoarding real estate (not selling for any reason).
  2. Only buying a single story – then stay in the hunt.  The one-story market is red-hot, with demand far out-stripping supply, especially in the newer-home or view categories.
  3. Willing to buy a fixer – be patient.  Buy when you see the appropriate gap of 5% to 10% between the creampuffs and the ones that bark at traffic.  If the home is in original condition, the gap should be larger.
  4. Only want to steal a property – very unlikely in the near-term.  Sellers aren’t that motivated, and only a small minority might consider selling for less than 5% of list.

We should be in a stagnant state for months, as everyone waits to see what happens next spring.  But I think buyers will be similarly picky then too.

We’ll see the same or similar psychology take over the whole country at the same time – which is the way it always happens.  What needs to adjust is the sellers’ trend to expect more than what the last guy got.

Here is a discussion guided by our friend and realtor Tom Stone about the market in Sonoma County (follow the link) – and check the comment section too, where Tom mentions the solution. Hat tip Eddie89!

Link to Full Article on Wolf Street

 

Posted by on Aug 16, 2018 in Jim's Take on the Market, Market Buzz, Thinking of Buying?, Thinking of Selling?, Why You Should Hire Jim as your Buyer's Agent, Why You Should List With Jim | 2 comments

List-Price Increments

 

We see people changing their price by $1,000 or $5,000, and it makes you wonder what they are doing.  They can’t actually believe that it will do any good, can they?

Here’s why they do it. Realtors tend to live off their MLS hotsheet, which is the day’s summary of listing activity.  Every time a listing has a price change, it gets back onto the hotsheet, which reminds agents that it’s still for sale, and to consider showing it again.

But that’s the only reason.  Nobody will be too impressed with a price change unless it is substantial, like 5% of the list price.

Back when houses sold in the $100,000s and $200,000s, a price change of $5,000 or $10,000 was 5% or more. But now that 94% of the NSDCC houses for sale are listed over $900,000, buyers get annoyed if you only change the price by a couple of bucks.

I used to think of pricing in easy-to-digest quarters.  For example:

$999,000,

$1,029,000,

$1,049,000,

$1,079,000

$1,099,000.

But now that we have fewer comps, more listings not selling, and overall buyer exhaustion, we might as well cut to the chase. Besides, it’s hard to know where the values are when they can change +/- $50,000 in an afternoon.

Let’s make it simple and just use two price points (half and full million):

$999,000

$1,049,000

$1,099,000

Today’s pricing is slushy enough that moving in $50,000 increments is a good way to keep a listing fresh and compelling!

Posted by on Aug 15, 2018 in Jim's Take on the Market, Listing Agent Practices, Thinking of Selling?, Why You Should List With Jim | 4 comments