We keep thinking that higher prices will lure more sellers into the game, but the trend continues. Though we are at new-peak prices virtually everywhere in North San Diego Couty’s coastal region, folks are staying put. Here are the number of new listings that hit the MLS between January 1st and March 15th:
| Year | ||
| 2012 | ||
| 2013 | ||
| 2014 | ||
| 2015 |
If greed won’t get people to sell, what will? It appears that we have refined our relationship with real estate – that our house is more important than money.
Build more homes.
Just kidding, but I think that is part of the issue.
Where you going to go?
Plus I think SoCal home owners have been taught that if you don’t need to sell, then don’t sell.
I can think of one home I seriously regret selling.
My fault. Sorry. Prices and transaction costs have gotten so high people like me are skipping step up houses. Starter house then take me away house with no intermediaries.
transaction costs have gotten so high
You paid the same or similar escrow and title fees, so you mean the realtor commissions have gotten so high you’ve decided to do all the work yourself? More power to you, but for most people it is a time-intensive job – more than they want to handle.
Sellers sell when they have a place to go.
Unless the grandkids are somewhere far away, baby boomers generally aren’t selling. My neighborhood is full of original and second owners that are in their 50’s and 60’s. No exodus here. Lots of us would have to write large checks to our uncles, Sam and Jerry, if we sell, because of rolled over bases under the old rules. Besides, we have it made in the housing game. Our property taxes are low, the neighborhood is safe and well maintained and it holds its value. Where would we go that’s better? Hmmm…maybe we should age in place until we have to leave.
In your 30’s or 40’s and doing well in your career? Are you really willing to make the bet on selling that $600k property to buy a $900k or $1MM property? Maybe not, our security blankets are not as thick as they were before the last downturn. Or maybe you are renting and the thought of taking on the mortgage payments, property taxes, HOA and Mello Roos fees isn’t all that appealing.
And Rob Dawg is right, the costs of selling and then buying are very high. It’s not just the commissions, it’s the cost of getting the old house market ready, the other transaction costs of selling, the mortgage fees and closing costs for the new house, and the cost of updating, fixing, decorating and furnishing the new place to get it to be what you want.
My guess is you are not going to see a rush to sell anytime soon. The lack of inventory will keep prices high, so no one will feel any pressure. The population will continue to increase, along with demand. Until the economy turns south, it’s going to be a low inventory, high price market.
No, I’m still greedy, Jim!
As you helped me conclude, we have just adjusted our focus… We will keep our house for now. Save up, buy a rental property instead. Hopefully wash, rinse repeat several times until we can either a. Retire earlier or b. Buy a house significantly “better” than our current. “Better” being a fluid criteria dependent on several factors.
Jim’s painfully honest and insightful opinion on the SD RE market brought us to this adjustment of our goals, and my husband and I are actually really excited about it. Thank you, Jim!
You are welcome BAM!
And Rob Dawg is right, the costs of selling and then buying are very high. It’s not just the commissions, it’s the cost of getting the old house market ready, the other transaction costs of selling, the mortgage fees and closing costs for the new house, and the cost of updating, fixing, decorating and furnishing the new place to get it to be what you want.
I agree that your previous two paragraphs are valid. We are in a mature real estate society where the older half of potential homebuyers have been successful enough to wind up in a good house – and can’t beat it.
But let’s examine the actual costs, just so anyone who might be reading has specifics:
1. Fixing up old house to sell. Not many people do that, and in a hot market you don’t have to do much anyway. 1%
2. Mortgage fees. 1%, and you could do a zero-cost loan and pay nothing.
3. Escrow & Title fees. 1%
4. Realtor fees. $100 to 6%, depending on your level of need. If you Get Good Help, the better service will result in a higher sales price and cover the fee – and maybe more.
5. Fixing up new house. Be picky, and buy a house that doesn’t need much work. 1%
6. New furniture. Only required if you buy a bigger house. Those buying same-size or smaller have enough furniture, but perhaps a few new pieces are in order. 1%
If your realtor pays for himself, then total costs are only 5%. I’m sure that most people are less sophisticated than you, Another Investor, and will assume the costs are outrageous and stop right there.
But with good guidance, the costs don’t have to be a barrier. Those who have seen their home’s value double or triple and really want to move should be able to endure 5% in total costs. But they need to do their homework, and hire a great agent.
Jim, with the commission, it’s 10 percent, at least. On my $1.2MM house, I have to give up at least $120,000 to move. Plus I’m paying much higher property taxes going forward. Will you get me more for my house? I would never use anything other than a really good agent who would maximize my selling price, but the cost hurdle is still there. I think a lot of people look at that number and decide to spend $25,000 updating their kitchen a little and replacing paint and carpet instead.
Is San Diego County still accepting Prop 90 base year value transfers? That’s a marketing angle for the over 55 folks from up here and the more crowded areas of Southern California if that’s still the case. Move to warmer, drier climes without doubling or tripling your property tax bill. Of course, you are going to have to find the buyers those coveted one story homes…
Perhaps with our continuing megadrought (30 years or more?) and increased mandatory water restrictions, may cause more people to leave our area. Hence more inventory.
But then, who would want to buy?
Prices better be coming down for a house in a megadrought location!
We’re desert transplants and we’re ready for it!
Will you get me more for my house?
Maybe, and I don’t think we can say your house is only worth X amount because of the range of variables. If you employ a great agent who does a masterful presentation and makes it easy for buyers to view and investigate the home, and then treats them respectfully as he pits them against other bidders to drive the price up, then the eventual price should go higher.
We should offer net listings, where you get the $1,200,000, and I get the rest. But when I’ve suggested such, sellers don’t like that either – they want all the money, and they don’t want to pay upfront and they don’t want to pay hourly. If I only get paid when it closes then I’m taking all the risk, and there should be a good reward at the end. How many non-realtors would go to work seven days a week with no guarantee of any pay whatsoever?
If you have a perfect house in a great area and know it will sell instantly, and you don’t have a realtor like me who can produce a bidding war outcome that exceeds your expectations, then you should negotiate an appropriate commission rate with the agent you have carefully selected after thorough research. The house already looks great, so save money there, and be a cautious buyer on the other end – make up some of the difference there.
As long as realtors get paid a percentage of the sales price at closing – and only if it closes – then there will always be this dispute, and reason not to sell. It is the same with those who would have to pay taxes on their real estate gains – they won’t sell just because they don’t want to write that big of a check for taxes.
Does prop-90 RE Tax transfer work if the move is within the same county (in SD)?
I think that would be a big consideration for Boomers (and me) who currently have low RE Tax base, I would not move to CV or other High MR community for that very reason (unless I have school age kids, which few boomers do these days).
A Agent that would help with that process would be of great value to boomers thinking of selling/buying.
High MR area’s in SoCal is where I could see a large boomer turnover occurring (they must be asking themselves WHY right about now)
Yes 90 is available within SD County but you have to buy down which is tough if you want to stay in the same general vicinity.
I was thinking maybe a move from say CV or a small match box on the coast to a newer larger single level maybe in Escondido or valley center etc…,
No need to be near the City as much if you are retired.
I could see boomers make that kind of move.
Thanks for the cost breakdown Jim, but I still have a couple of questions:
1. Are transaction costs now (on a % of SP basis of course) really higher then they have been in the past?
2. If so, why are they so much higher now?
I have not heard anyone I know say they will not sell due to a spike in transaction costs, so I am very curious as to the foundation for this philosophy.
Thanks!
No, not higher, and probably a lower percentage on average with the competition among agents.
But Rob has a point that the prices have gotten much higher, which does alter the perspective. Even though you can sell your existing house for more, the thought of paying more to replace it doesn’t pencil as well if you pay higher property taxes and/or wanted to bank some of the proceeds.
Are you looking to buy in La Costa? It’s all over the internet 😆
Let me know if you want me to help.
Thanks Jim – I will PM you re La Costa.
Regarding our house being more important than money, I agree that seems to be what is going on, and I think it is on a sliding scale with the older you are the more you value the house over money. Our neighbor’s kids (in their late 20’s) just accepted an unsolicited “Godfather” offer on their unlisted house. Fast forward 20 years and they may have said thanks but no thanks.
These were the rules when I last dealt with this back in 2007.
55 or older and inside the same County: Prop 60 allows you to transfer your base year value within all 58 counties. If you buy before you sell, you must buy down. If you sell and them buy, in the first year after COE, you can buy up 5 percent. In the second year after COE, you can buy up 10 percent. The base year value window closes two years after COE.
55 or older moving to another County: That’s governed by Prop 90. Prop 90 has the same buy-sell rules, but base year transfer acceptance is optional by County choice. Only a few counties accept base year value transfers. Several counties have exited the program for financial reasons. They do not accept new transfers, but must honor existing transfers. San Diego is one of the few counties in a desirable area that still accepts base year value transfers.
If you have a factored base year value of $200k, sell your house in SF for $1.5MM and buy one in San Diego for $1.2MM, you can transfer the factored base year value of $200k to your new San Diego property. You pay taxes on the $200k, but at the tax rate in your new location. Again, you must be 55 or older.
There are very specific rules you must follow. Talk to the Assessor’s office in both counties before you do anything.