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Category Archive: ‘Forecasts’

Nothing Price Won’t Fix

sv

A pullback in Silicon Valley? It could happen anywhere!

http://www.bloomberg.com/news/articles/2016-05-17/silicon-valley-mansions-linger-on-market-in-real-estate-slowdown

Excerpts:

A custom-built home in the heart of California’s Silicon Valley had its price cut by $500,000 last week after sitting on the market since the end of March — a move that would’ve been almost unfathomable a year ago and a signal that frenzied demand has peaked.

The six-bedroom, five-bath house in Palo Alto — located blocks from Stanford University and the homes of Google co-founder Larry Page and Steve Jobs’s widow, Laurene Powell Jobs — is now listed for $7.5 million. It joins a growing inventory of high-end homes in the area that are taking longer to sell.

“We’ve recently noticed a slowdown,” Jack Woodson, who works at Alain Pinel Realtors in nearby Menlo Park, said on a tour of the house in the Old Palo Alto neighborhood. “Buyers are taking more time to decide about making offers.”

Silicon Valley, the most-expensive U.S. housing market, is seeing a pullback by the wealthiest homebuyers after a four-year real estate boom marked by bidding wars and multimillion-dollar prices. Stock-market turmoil, a drop in foreign investors and concerns of a technology-industry slowdown are cooling demand at the high end, even as interest remains robust for more moderately priced properties.

In Palo Alto, an ultra-wealthy city that’s home to many Google and Facebook Inc. executives, homes costing more than $5 million were on the market for a median of 16 days in April, compared with 11 in the same month in 2015 and 10 in 2014, according to data from Irvine, California-based John Burns Real Estate Consulting. The 11 active listings in that price range as of May 14 have been on the market a median of 30 days.

“The seemingly inexhaustible well of very high-end buyers has proven exhaustible after all,” said Dean Wehrli, a senior vice president at John Burns. “The peak is behind us, and that’s becoming clearer and clearer to builders and buyers.”

“We’re probably moving toward normalization,” said Katharine Carroll, vice president at Pacific Union Real Estate in Palo Alto. “Buyers see that they have a few more options. They don’t feel the urgency that they have to decide on something right away and put an offer in. They can kick the tires a little bit more.”

http://www.bloomberg.com/news/articles/2016-05-17/silicon-valley-mansions-linger-on-market-in-real-estate-slowdown

Posted by on May 17, 2016 in Forecasts, Jim's Take on the Market, Market Buzz, Market Conditions | 1 comment

Buffett Says No Bubble

warren

For the vast majority of Americans who just skim the real estate headlines, a quote from Warren Buffett should keep the party rolling.  But does he qualify as a cheerleader now that he owns one of the biggest realtor companies? And this photo they used – is that a perp walk?

http://fortune.com/2016/04/30/warren-buffett-there-is-no-bubble-in-real-estate/

An excerpt:

Warren Buffett says now is a good time to buy a house, though not as good as it was four years ago. Still, Buffett says he thinks the chances of housing prices collapsing are very low.

“I don’t see a nationwide bubble in real estate right now at all,” says Buffett.

Buffett made remarks at the annual meeting Berkshire Hathaway, which took place on Saturday in Omaha. “In Omaha and other parts of the country people are not paying bubble prices for real estate,” says Buffett.

Earlier in the day in response to a question about banks, Buffett said he did think derivatives are a “ticking time bomb.” But when it comes to housing and mortgage loans, Buffett said, while real estate was certainly a problem in 2008, he didn’t think that would be the source of the next problem for the financial system. “I don’t think we will have a repeat of that,” says Buffett.

Posted by on May 2, 2016 in Forecasts, Jim's Take on the Market, Market Conditions | 1 comment

Price Forecasts Move Higher

risingprices

The hustle to move up the housing ladder is something people did when they were younger – and prices cheaper.  Those move-ups have gotten you here, and hey, it’s not so bad – especially if it means that to replace your home, it costs two or three times more than you paid! 

Expect the housing-inventory stalemate to continue, regardless of how high prices get – people have no better place to go, they don’t want to bother moving, and taxes plus expenses are outrageous.

http://www.realestateeconomywatch.com/2016/04/price-realities-are-blowing-away-forecasts/

This was supposed to be a year of “moderating” prices and a “return to normalcy.”  Instead, upward price pressures have not abated, and red-faced economists are scrambling to crank up their forecasts as price trends at the outset of the buying season knock their protections into a cocked hat.

The culprit? Most forecasters predicted three years of rising prices would encourage more owners to sell, and supplies of homes for sale would catch up with demand, which is increasing as a result of the improving economy and continued low interest rates.

Posted by on Apr 25, 2016 in Forecasts, Jim's Take on the Market, Market Conditions, Sales and Price Check | 1 comment

San Diego Undervalued

The crew over at CL came out with their year-end report today, which included their forecast for 2016.  They consider the San Diego-Carlsbad metro area to be undervalued…..just like San Francisco and Boston(?). They also expect that prices in our area will rise 7.8% in 2016, after going up 6.7% last year:

core1

From MND:

http://www.mortgagenewsdaily.com/02022016_corelogic_hpi.asp

Once again a report on home price changes indicates that appreciation has not yet slowed.  CoreLogic issued a report on its Home Price Index for December of Tuesday which indicates a pick-up in monthly increases.

The index shows prices nationwide, including distressed sales, rose 0.8 percent from November to December compared to a 0.5 percent change from October to November. On an annual basis there was a 6.3 percent gain, the same as the November 2014 to November 2015 pace.

“Nationally, home prices have been rising at a 5 to 6 percent annual rate for more than a year,” said Dr. Frank Nothaft, chief economist for CoreLogic. “However, local-market growth can vary substantially from that. Some metropolitan areas have had double-digit appreciation, such as Denver and Naples, Florida, while others have had price declines, like New Orleans and Rochester, New York.”

Posted by on Feb 2, 2016 in Forecasts, Jim's Take on the Market, Sales and Price Check | 1 comment

San Diego Is Hot

seattle

Zillow came out with their Hottest Housing Markets of 2016, and San Diego didn’t make the list:

http://www.zillow.com/blog/hottest-markets-2016-190331/

They based their ‘hotness’ on a combination of employment, recent income growth, and the expected increase in the Zillow Home Value Index.

They expect that the San Diego HVI will rise 2.7% this year, and I think our employment and income numbers should at least be steady:

sdzhvi

Zillow isn’t considering retirees into their algorithms – especially the rich folks who want great weather to live out their life.  Any of them who have grandkids in the Southwest will give us a look, and when they compare to Los Angeles or the Bay Area, they will like our prices much better.

The towns in the Zillow Top Ten have expected HVI increases of 4% to 5%.

At the end of 2016, let’s see how San Diego compared to their list of ten.  I say that we beat at least half of them – in spite of fewer sales than we had in 2015.

Posted by on Jan 13, 2016 in Forecasts, Jim's Take on the Market, Local Flavor, Market Conditions, Sales and Price Check | 3 comments

Price Increases to Slow

sf

A forecast of 2% to 3% price appreciation for SD in 2016. From HW:

http://www.housingwire.com/articles/35996-is-the-west-coast-about-to-finally-witness-a-slowdown

An excerpt:

“The West, which has largely outpaced the rest of the nation in terms of growth in the last several years, is beginning to see market slowing across some of its major metropolitan statistical areas,” the report said.

The Clear Capital report said that Western markets began to slow in the latter half of 2015, with San Francisco, Los Angeles, and San Diego currently seeing QoQ growth rates under 1%.

Meanwhile, other cities like San Jose and Denver are hovering slightly higher at around 1.3% and 1.5% QoQ, respectively, the report said.

If Clear Capital is right in its annualized predictions, these current levels would project to roughly half of the performance seen in 2015.

http://www.housingwire.com/articles/35996-is-the-west-coast-about-to-finally-witness-a-slowdown

Posted by on Jan 11, 2016 in Forecasts, Jim's Take on the Market | 1 comment

NSDCC Sales in 2016

ratess

There will still be late-reporters, but let’s review the annual NSDCC sales.

Year
NSDCC Annual Sales
Median Sales Price
2012
3,154
$830,000
2013
3,218
$952,250
2014
2,849
$1,025,000
2015
3,011
$1,095,000

What can we expect for sales this year?

Rates have dropped back under 4% this week, which will help.  But sellers will be expecting higher prices in 2016, which will dampen the buyers’ enthusiasm.

My guess for 2016?

Rates at or below 4% = 5% fewer sales.

Rates above 4% = 10% fewer sales.

If rates get into the mid-4s, then my guess is for 25% fewer sales.

The lack of quality inventory will contribute greatly too.  Buyers don’t mind paying a little more if they get something extra for it.

But we need to become accustomed to a regurgitated inventory.

It’s likely that we will continue to see sellers try to get their inflated price year after year, rather than lowering the price until it sells.  Of the 88 new NSDCC listings this year, 61% of them were on the market in 4Q15.  It is a higher-end phenomena too – virtually all listings over $2,000,000 were refreshed.

Posted by on Jan 7, 2016 in Forecasts, Jim's Take on the Market, North County Coastal, Sales and Price Check | 0 comments

2015 Wrap Up

CSISD

This year will be over in hours!

How did we do?

The San Diego Case-Shiller Index is 6.2% higher than it was 12 months ago (October to October readings), which beats just about everyone’s expectations.

But the tony north-coastal region (La Jolla to Carlsbad) had already experienced healthy price gains since 2012.  At the beginning of 2015, lower mortgage rates (3.5% to 3.75%) fueled a surge of sales at higher pricing, but then things mellowed out the rest of the year – just like Rob Dawg predicted!

graph(1)

graph(2)

If it weren’t for the blip in November, it would be clear that the first quarter of 2015 was the best time to sell, price-wise.  If we do get more inventory this year, the same will probably be true – more houses for sale combined with higher mortgage rates = more of a buyer’s market.

Posted by on Dec 31, 2015 in Forecasts, Jim's Take on the Market, North County Coastal, Sales and Price Check | 4 comments

Zillow San Diego Forecast 2016

la jolla 2016

Most national forecasts are predicting a 3% to 4% appreciation rate for 2016, which has to be a safe bet.  If it comes in anywhere from -2% to +8%, you can say that you were close.

Zillow has enough algorithms that they are willing to make predictions for each local area.  They have conflicting numbers, depending on where you look on their website – these are from the Home Values section:

http://www.zillow.com/home-values/

You can see that Zillow was less optimistic last year too.  Most were predicting that mortgage rates would be in the mid-4s by now, so the lower rates in 2015 helped fuel higher-than-expected prices.  Could rates stay right where they are? Maybe, but both Zillow and I think the euphoria will die down next year:

Zillow Price-Appreciation Predictions

Town
2015 Prediction
2015 Actual
2016 Prediction
“Market Temperature”
Carlsbad
+2.7%
+4.8%
+1.9%
Cool
Carmel Valley
+0.3%
+5.4%
+1.4%
Cold
Del Mar
+5.5%
+1.1%
+1.4%
Very Cold
Encinitas
+0.6%
+8.3%
+2.4%
Warm
La Jolla
+2.7%
+6.6%
+2.3%
Very Cold
RSF
+0.4%
+11.1%
+3.7%
San Diego
+1.7%
+6.4%
+2.1%
Warm
Solana Beach
+2.7%
+6.4%
+2.2%
Cold

For some reason, Zillow is also labeling each market from Warm to Very Cold.  The labels don’t seem to correspond to the predictions, so I don’t know their intent – are they just trying to tell you to put on a sweater?

How will buyers feel about getting worked over for that last 2% to 3% when they see they are in a ‘Very Cold’ market?

Posted by on Dec 28, 2015 in Carlsbad, Carmel Valley, Del Mar, Encinitas, Forecasts, Jim's Take on the Market, La Jolla, Market Buzz, Market Conditions, Rancho Santa Fe, Solana Beach, Zillow | 2 comments

2016 Starts Now

start

Zillow is already one of the primary real estate portals for consumers.  Though there are rumblings from realtors about mounting a challenge, it’s unlikely that anything will topple the Z-brand in the short-term.

As a result, we increased our Zillow advertising this month.

Not only do we expect that more consumers will be using the tools there – but it also seems inevitable that Zillow will develop additional ways to promote their agent-customers too.

I’m not a big believer in anecdotal evidence in the real estate business.  There are too many random events – and sales – created out of dumb luck that you can ever draw many definitive conclusions.

But after not getting any new Zillow inquiries during the previous 3-4 days, I received THREE buyer inquiries on Christmas Day!

There has to be pent-up demand in the marketplace.  It doesn’t guarantee that buyers will pay higher prices, or even buy at all.  But I’m guessing that the streets will be full of lookers in the coming weeks.  On Wednesday – just two days before Christmas – I ran into the second 4-offer bidding war of the week!

I think the heightened activity will cause sellers to add even more icing on the cake – leaving a beleaguered buyer pool with tough choices.  Either bite the bullet and pay the highest price ever, or wait and see.

It will show up differently in different areas.

In neighborhoods where we see a surge of still-somewhat-reasonably-priced listings, the market will look like it’s on fire as waiting buyers gobble them up.  Other areas will look more stagnant than ever (like RSF, which has 25% of the NSDCC active inventory but only 8% of the closed sales over the last 30 days).

My advice to buyers and sellers?

Don’t over-think it – get in, get out, and get on with life!  Don’t let the desire of grinding out the last couple of percentage points get in the way of moving.

Posted by on Dec 26, 2015 in Bidding Wars, Forecasts, Jim's Take on the Market, Market Conditions, North County Coastal | 2 comments