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More on the Wait-It-Out Plan

Easing up

I just noticed this article from Friday’s latimes.com:

http://www.latimes.com/business/realestate/la-fi-home-prices-20140912-story.html

An excerpt:

Silva said some of his clients are receptive to the idea of cutting prices to sell their homes. But some sellers — those with less motivation to move now — are pulling their homes off the market, said Steve Shrager, an agent with Coldwell Banker in Studio City.

Sellers who can’t get the price they want are choosing to rent their home, or try to sell again in another year.

“They feel the price can’t go anywhere but up,” Shrager said.

Buyers are choosier too, he notes. Though price growth has leveled off, many buyers still aren’t seeing bargains. And while the selection of homes has expanded, some aren’t finding any property they really want.

Some, he said, are choosing to stay put, or maybe try the market again next spring.

“I don’t want to use the word correction, but we’re in a bit of an adjustment period right now,” Shrager said.

Waiting for the spring selling season is fairly normal behavior for both buyers and sellers, Thomas said. But after a decade of boom, bust and boom again, many aren’t sure how to react to a normal market.

“People are not used to this,” he said. “That’s why you get some panic. Eventually these houses will sell. You just have to be patient.”

Most sellers and listing agents will opt for the wait-it-out plan, mostly because they are avoiding the price-might-be-wrong conversation.

Sellers and listing agents don’t know how wrong the current price is, and they don’t WANT to know.  All they want is for some nice young family to come along and love the house and price the way they do, and pay full boat.

But the wait-it-out plan doesn’t take into consideration the potential for selling for less, later – and delays the eventual conversation about how much less.

Look how it’s working for this guy – another excerpt:

Patience and price cuts are paying off for Joseph David, an investor and rehabber who listed a blue three-bedroom Craftsman in Highland Park in late June at $624,990. When it went on the market, his agent got a lot of phone calls. Dozens of people showed up at open houses. But none of them pulled the trigger.

“We got a lot of response, but we didn’t get any offers,” David said. “There were a lot of looky-loos.”

Before long, he knocked a bit off his asking price. Then earlier this month, he cut it more sharply, to $549,000.

Interest picked up dramatically. His agent started to get a lot more phone calls, making David confident he’ll get that offer soon.

The investor here is likely to end up at $100,000 under his initial list price, and leave him wondering if he should wait too, rather than taking such a “loss”.  But it was never worth $624,990, because the market in late June was healthy enough that he would have gotten offers if the price was close to being right.

The biggest problem is that sellers and listing agents are way too optimistic in the beginning, and are unwilling to adjust fast enough to get in the game.

Here is my list-price rule-of-thumb for sellers:

If you are getting offers, your list price must be within 5% of being right.

If you are getting showings but no offers, your price must be 5% to 10% wrong.

If you’re not having any showings, your price is more than 10% wrong.

Here’s an alternative plan for those sellers caught in this dilemma.  Reduce your price once by as much as you can endure (5% to 10%), and if it doesn’t sell by Halloween, then wait until next year.

To just cancel the listing now without a price reduction doesn’t give you any price-discovery data to use when listing next year.  Don’t be surprised if next-year’s comps will suggest starting at the lower price, and leave you wondering if you should have just bit the bullet in 2014.

Posted by on Sep 15, 2014 in Jim's Take on the Market, Thinking of Selling?, Why You Should List With Jim | 4 comments

Inventory Watch Mid-September

Sort of old news. But Victoria’s Secret PINK launched a collection of San Diego Chargers merchandise for all of those female football fans out there. (via VS Makes Groupie Gear look fab in PINK! « POSHGLAM.com)

Great – the Chargers knock off the champs, and now everyone going to be watching football on Sundays, instead of buying houses!

The UNDER-$800,000 Market:

Date
NSDCC Active Listings
Avg. LP/sf
DOM
Avg SF
November 25
95
$376/sf
47
1,988sf
December 2
79
$371/sf
50
2,047sf
December 9
72
$383/sf
43
1,954sf
December 16
81
$378/sf
42
1,948sf
December 23
77
$374/sf
49
1,937sf
December 30
76
$373/sf
51
1,950sf
January 6
74
$370/sf
49
1,995sf
January 13
71
$381/sf
44
1,921sf
January 20
72
$384/sf
41
1,877sf
January 27
75
$399/sf
40
1,891sf
February 3
78
$409/sf
41
1,876sf
February 10
82
$395/sf
38
1,927sf
February 17
85
$387/sf
35
1,929sf
February 24
90
$383/sf
37
2,008sf
March 3
82
$397/sf
39
1,942sf
March 10
88
$377/sf
37
2,008sf
March 17
89
$366/sf
34
2,038sf
March 24
79
$369/sf
34
2,031sf
March 31
78
$367/sf
39
2,069sf
April 7
87
$373/sf
32
2,054sf
April 14
97
$380/sf
31
2,000sf
April 21
87
$377/sf
32
2,062sf
April 28
107
$379/sf
29
2,044sf
May 5
114
$376/sf
27
2,046sf
May 12
108
$385/sf
31
2,012sf
May 19
107
$385/sf
0
0sf
May 26
105
$375/sf
34
0sf
Jun 2
102
$376/sf
36
0sf
Jun 9
102
$377/sf
37
0sf
Jun 16
104
$369/sf
35
0sf
Jun 23
111
$380/sf
34
0sf
Jun 30
119
$376/sf
36
0sf
Jul 7
122
$387/sf
36
0sf
Jul 14
127
$388/sf
34
0sf
Jul 21
135
$381/sf
36
0sf
Jul 28
144
$382/sf
37
0sf
Aug 4
148
$379/sf
39
0sf
Aug 11
135
$375/sf
42
0sf
Aug 25
135
$374/sf
43
0sf
Sep 1
126
$377/sf
46
0sf
Sep 8
130
$375/sf
46
0sf
Sep 15
134
$369/sf
45
0sf

Read More

Posted by on Sep 15, 2014 in Inventory | 6 comments

Keep Trying to Sell, Or Cancel?

As we slide into the “off-season”, sellers are left with the dilemma: Should they keep loitering on the MLS, or cancel the listing and wait for better times.

Here are both sides of the coin:

STAY ON THE MARKET

1. You’ve Come This Far – It is a hassle to keep the house in showing condition, and to work around the appointments – especially with those pesky agents who give little or no notice.  Let’s get this over with!

2.  Your Agent Has Worked For It – You’d like to see the sale happen for your agent’s sake too, because they’ve been at it for weeks or months.

3.  Other Listings Will Cancel – You might have the local market to yourself in 20-40 days, hang in there.

4.  Price Reduction is Mandatory – If you’ve been on the open market for more than 30 days, everyone who is interested in your home has seen it by now. There won’t be many buyers starting their search in fall, so to re-ignite the possible enthusiasm you’ve already built, lower the price 10%.  Don’t scoff – if nobody bought it during the selling season, it’s because your price was too optimistic – and know that 10% might not be enough.

It’s nothing personal; your house is probably worth the money – just not today, apparently.  If you absolutely refuse to lower the price, then you might as well cancel and hope something will be different next year.

CANCEL LISTING, AND TRY AGAIN NEXT YEAR

1.  Agents are Dogs – Once you cancel your listing, you will be hounded by other agents incessantly until you list the home, or die.

2.  More Competition – With the much-higher pricing available, we’ve been expecting a surge of new listings – and you only need a few neighbors to spoil your chances.

3.  Buyers Will Remember You – The new buyers in town will see your previous attempts to sell on Zillow – you’re not going to fool anyone – and they will hold the price failure against you unless reduced.

4. Higher Prices Next Year – The only reason to wait is if you think prices will be higher – and you won’t raise yours!  It’s an important distinction – you’re choosing to wait for prices to catch up with your current list price.

When you look at both sides of this coin, I guess you can say they are pointing in the same direction!

Would it hurt to wait? Yes it could, because if there is a surge of new listings around you, the chances of getting this year’s money is remote (which is probably 5% to 10% below your current list price).

There is an unsettling relationship between the amount of inventory, and buyers’ willingness to step up.  Notice the history of the number of NSDCC detached-home listings below.  After three years of lower counts, in 2006 there was a 16% increase of new listings between Jan 1 and August 31, and it was enough of a surge that not even Angelo’s no-down, no-doc loans could save us:

Year
# of New Listings Between 1/1 – 8/31
2002
4,377
2003
4,037
2004
3,920
2005
3,976
2006
4,602
Year
# of New Listings Between 1/1 – 8/31
2011
3,923
2012
3,335
2013
3,685
2014
3,555
2015
???

The 2003-2005 era was similar to today – a long winning streak of reduced inventory and rising prices. Will 2015 be the year of the inventory surge? If so, you’ll be glad you sold this year.

Posted by on Sep 14, 2014 in Jim's Take on the Market | 4 comments

Subprime Again?

HT to daytrip for sending this in:

http://www.nytimes.com/2014/09/14/magazine/are-subprime-mortgages-coming-back.html?ref=magazine&_r=1

An excerpt:

This lending freeze is not just preventing people like the Sleimans, who have struggled to document their income, from chasing their dreams. It’s bad for the overall economy too.

Laurie S. Goodman, an expert in housing finance at the Urban Institute, a think tank in Washington, D.C., recently calculated that lenders would have made an additional 1.2 million loans in 2012 had they merely loosened standards to the prevailing level in 2001, well before the industry completely lost its sense of caution.

As a result, fewer young people are now buying first homes, fewer older people are moving up and less money is changing hands. Instead of driving the economic recovery, the housing business is dragging behind. “An overly tight credit box means fewer individuals will become homeowners at exactly the point in the housing cycle when it is advantageous to do so,” Goodman and her co-authors wrote in their study, published in The Journal of Structured Finance. “Ultimately, it hinders the economy through fewer new-home sales and less spending on furnishings, landscaping, renovations and other consumer spending.”

“We’ve locked down mortgage lending to the point where it’s like we’re trying to avoid all defaults,” said William D. Dallas, the chairman of Skyline Home Loans, who has three decades of experience in the industry. “We’re back to using rules that were written for Ozzie and Harriet. And we’ve got to find a way to help normal people start buying homes again.”

Navy Fed is doing their part, and these aren’t VA loans.  Rate is around 5.50%:

Nvfd

Posted by on Sep 13, 2014 in Mortgage News | 6 comments

More on August Sales

Dataquick released the August sales yesterday, and at first glance you might think we should be looking for lifeboats – this is the second month in a row that Dataquick has reported SD sales dropping more than 18%:

http://www.dqnews.com/Articles/2014/News/California/Southern-CA/RRSCA140911.aspx

aug 14

But August, 2013 was probably the last month that buyers were able to lock in a mortgage rate in the 3s, before rates jumped at the end of June.

If you look at San Diego’s 2014 monthly sales, they look consistent and remarkably strong considering that prices have been going up every month.  Here are the MLS counts for all property types in the county:

Jan = 2,116

Feb = 2,271

Mar = 2,778

Apr = 3,321

May = 3,255

Jun = 3,182

Jul = 3,043

Aug = 2,806

If sales fall off the next few months, the blame will be on the holidays, and sellers will expect a vibrant selling season again next spring.

Posted by on Sep 12, 2014 in Sales and Price Check | 8 comments

Robot Real Estate

kdryden

Here’s another company who intends to disrupt traditional real estate:

http://techcrunch.com/2014/09/08/allre-lets-you-buy-and-sell-your-house-online-without-a-real-estate-agent/

A few thoughts:

1. They have launched their transaction management business in San Diego.  But they’ve been having trouble with their website this week, and you have to register just to take a look.  With Zillow and others giving you free and anonymous access, consumers expect to roam around before committing their email address.  Specifically, buyers and sellers will want to see the homes-for-sale inventory.

2.  Timing is everything.  If they could have caught the early frenzy when there wasn’t as much scrutiny of pricing, consumers would have been more willing to take a chance on a new-fangled system.  People will still be curious, but pricing is the issue with all for-sale-by-owners.  They aren’t as motivated, and without any guidance, they will price high.  But buyers today don’t know if prices are going up or down, and they will want to be conservative about price – creating a significant gap from the start.  The chances of buyers and sellers coming together on price today - even with an agent – aren’t that good.

3.  Her first pitch is for participants to save the commission.  But only one party can save the commission, not both.  For sellers to save the commission, their price has to be so attractive that buyers pay the full price.  But buyers want to save the commission too, so they subtract 6% from the seller’s price just to get started.

4.  She dwells on the fact that her service is free to get around RESPA.  Two points: A) They are appealing to the money-savers, who aren’t going to tolerate paying higher fees for the other services provided.  B) When a customer has a problem or concern, and they can’t get help from her – who is going to make the deal?

5. She does concede that consumers may need an agent, and if so, they can find one and work out a pay structure on the side.  But she is missing the big game-changer that a new-fangled company could provide: realtor help if/when needed, at a reasonable cost.  Consumers don’t mind paying a reasonable fee to get adequate help, and if she just provided that one last step she might pull it off.  But instead, she chides the industry with her snarky comments like she is a ‘recovering realtor’, which alienates realtors everywhere.

6. She said that she was a realtor for ten years, but the BRE says that she obtained her California real estate salesperson’s license in 2007 – who knows, maybe she had a license in another state?  According to the San Diego MLS, she has sold 40 homes in her life, which means she hasn’t handled a big sales pipeline.  A company built on skimming fees needs to generate a large volume of sales, and they are trusting that a computer can do the job that they have never done themselves.

7. The ‘scorched-earth’ mentality means game-on.  Note that she wouldn’t name the title and escrow company yet – why?  Because that title and escrow company already has a book of business with traditional realtors, and they are probably concerned about alienating them.  The mortgage company, Prime Lending, is crazy to think that being associated with this effort won’t affect their normal realtor business, and likewise for whoever the other affiliates are.

Other attempts to disintermediate the real estate business have stumbled.  The old IPayOne was probably the best combination, because they did provide realtor help when needed but they skimped on quality and eventually closed down.  Redfin has been around for years now; has name recognition, a great website, discounted commissions, and 44 team members in SD - yet according to the MLS, they only have a 1.6% market share this year.  Why?

Because the consumers’ perception of realtors tells them to go with someone else 98.4% of the time.

The company that will bust the real estate cartel is the one that provides great-quality help for less cost.  But if that happened, traditional realtors could adjust their commissions accordingly, and then it’s a nothing-burger.

Posted by on Sep 11, 2014 in Commission War, Jim's Take on the Market, Listing Agent Practices, The Future | 5 comments