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Category Archive: ‘Forecasts’

Housing Jitters

The economists like the housing market, but they are known to play it safe.

How about the consumers?

I’d prefer to survey the active home buyers and sellers in our area to get the best reading on our future.  But here are the sentiments of 1,079 American adults over the age of 18 who were surveyed last month:

Fifty-eight percent of homeowners say that they expect there will be a “housing bubble and a price correction” in the next two years – up 12 percentage points since April.

Looking across the country, residents in hot housing states are particularly jittery. The top five states where residents believe the market is approaching a “housing bubble” include:

  1. Washington (71 percent)
  2. New York (68 percent)
  3. Florida (63 percent)
  4. California (59 percent)
  5. Texas (58 percent)

While experts have long suggested living in a home for more than seven years could lower a homebuyer’s exposure to market fluctuations, only 37 percent of millennials in the survey plan to live in next home they buy for more than six years, making the so-called “rule of seven” less relevant to the next generation of serial homebuyers.

“Beyond the jitters, I see in our survey an increasingly informed nation of homebuyers, who understand the risk of the market,” said Melendez. “To those concerned about a price correction, or waiting to time the market, I recommend a proactive approach. Have an exit plan, then anytime you find a home you love is a good time to buy.”

Read full article here:

LINK

How do you feel?  Leave your thoughts in the comment section!

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Posted by on Aug 17, 2017 in Forecasts, Jim's Take on the Market, Market Buzz, Market Conditions, Thinking of Buying?, Thinking of Selling? | 7 comments

Economists: Appreciation to Continue

Home values continue to climb, passing $200,000 in June for the first time ever. A panel of more than 100 real estate economists and experts expect that trend will continue – while they say, on average, that there’s a 52 percent probability of the next recession starting by the end of 2019.

  • On average, real estate economists and experts say there’s a 52 percent probability of next recession starting by the end of 2019.
  • Most experts expect a geopolitical crisis will trigger the next recession, which a majority believe will have only a moderate impact on U.S. housing.
  • Home values will climb 5.08 percent by the end of 2017, the group said.

The probability jumps to 73 percent for a recession starting by the end of 2020, according to the Q3 2017 Zillow Home Price Expectations Survey (ZHPE), a quarterly survey sponsored by Zillow and conducted by Pulsenomics LLC. The latest survey was conducted in late July and early August.

Most of the panel’s experts (67) think a geopolitical crisis is likely to be a major trigger for the next recession. That would be a rare occurrence. Although the terrorist attacks of Sept. 11, 2001, prolonged a recession, most sustained downturns – including that one – have not started with a geopolitical crisis.

The panel ranked likely triggers as 1, 2 and 3 – and with that weighting, a geopolitical crisis also came out ahead, with a score of 138. It was higher than a score of 111 for monetary policy, 101 for a stock market correction and 55 for political gridlock as other possible recession triggers.

On average, the group expects the next recession to have only a moderate impact on U.S. housing. The group said San Francisco and Miami would be the most affected, followed by Los Angeles, New York, San Diego and Seattle.

https://www.zillow.com/research/experts-recession-late-2019-16334/

Posted by on Aug 17, 2017 in Forecasts, Jim's Take on the Market, Zillow | 0 comments

Four or Five More Years

An excerpt from this article:

http://www.latimes.com/business/la-fi-home-prices-20170725-story.html

Home prices have now been rising for more than five years, the result of a growing economy, rock-bottom mortgage rates and a shortage of homes on the market.  Economists said that absent a recession or a surge in mortgage rates, California home prices could keep climbing at 5% a year for the foreseeable future.

That’s faster than the long-term average of 3% nationwide, but it’s difficult to build housing in California and the economy is strong, said Richard Green, director of the USC Lusk Center for Real Estate.

“It could go on for another four or five years,” he said.

CoreLogic’s report showed that home prices in Southern California rose in every county last month compared to a year earlier, not just in Orange and Los Angeles counties.

In San Bernardino County, the median was up 12.3% to $320,000; in Riverside County, 7.5% to $357,000; in Ventura County, 2.7% to $565,000; and in San Diego County, 9.8% to $543,500. Across the region, sales rose 4.3%.

Chris Thornberg, founding partner of Beacon Economics, said he doesn’t expect a recession and thus doesn’t foresee a time when home prices stop rising.

“Candidly, the only thing that could upset the apple cart in California is if we build a whole bunch of housing and that’s as likely as an alien attack.”

Posted by on Jul 27, 2017 in Forecasts, Jim's Take on the Market, Market Buzz, Sales and Price Check | 0 comments

C.A.R. Economist is Positive

Leslie Appleton-Young, vice president and chief economist, California Association of REALTORS® (C.A.R.), recently delivered her annual “2017 Housing Market Perspectives” presentation to a group of local REALTOR® members.

“It may be a bumpy ride, but I believe there will be enough sales in San Diego County in 2017 for everyone to have a great year,” she said. “San Diego is outperforming the state and California is outperforming the nation. Although 2017 started with a bang with higher consumer confidence, there is still uncertainty and wildcards in such areas as trade, healthcare, immigration, federal funding and interest rates. An economic boost is good for housing in the short run, but some federal policies could exacerbate affordability problems.”

Under President Trump, proposals include an economic stimulus package and tax reform. Appleton-Young said the $550 billion planned in infrastructure investments over 10 years to rebuild highways, bridges, tunnels, airports, schools and hospitals will boost economic growth and create more jobs.

“At full employment, wages will start to rise and wage growth will typically be passed on to consumers, which means the potential for higher inflation,” she said. “Unemployment rates are near an eight-year low. More jobs will mean more housing demand and upward pressure on home prices. Affordability will remain an issue and we shouldn’t expect much in terms of new supply.”

Appleton-Young also said overhauling the current tax code will create more demand for housing at a time when supply already is tight. She said Mr. Trump has proposed reducing the top tax rates for individuals from 39.5 percent to 33 percent and for corporations from 35 percent to 15 percent, as well as eliminating tax brackets from seven to three. Additional planned tax reform measures include a child care deduction, eliminate federal estate and gift taxes and tax breaks to manufacturers for plant and equipment expansion.

“The mortgage interest deduction (MID) will remain intact, although a smaller MID incentive could threaten ownership,” Appleton-Young said. “The MID is good for people’s pocket books. Historically, people don’t save unless they have a home.”

In addition, reforms to Fannie Mae and Freddie Mac are likely under a Trump administration, said Appleton-Young. “Banks will loosen lending standards, increase mortgage options and lower the credit score requirements,” she said.

The Federal Reserve raised interest rates only once in 2016, Appleton-Young said, but rates could increase three or four times in 2017, pushing mortgage interest rates as high as 4.5 percent or 5 percent for a typical home loan. Historically, when mortgage rates increased, the percentage of California households able to afford to buy a home dropped from 34 percent in 2010 to 21 percent by the end of 2016, and monthly mortgage payments increased from $1,740 to $2,609 in the same time period.

Appleton-Young also offered a caution to REALTORS® about posting political statements on social media because some potential clients might reject a REALTOR® based on their political leanings. Good questions to ask before political-related posting: Do I have the correct facts? Does this need to be said? Why do I need to be the person to say this? Could I be misunderstood? What are my motives for saying this? Can this wait until tomorrow when I might be thinking in a clearer manner?

Prior to her group presentation, Appleton-Young met privately with a group of brokers who noted an ongoing trend in higher monthly rents for apartment living. A recent report shows San Diego has the fifth highest apartment rental rate in the state, with a typical one-bedroom unit going for $1,530 a month. The report by Apartment List, an online rental marketplace, found that local rents grew 0.1 percent in January, which is 1.9 percent higher than a year ago. San Diego is still lower than other rents in the state. Rents are highest in San Francisco, where a one-bedroom runs $3,420 a month, followed by San Jose at $2,110, Oakland at $2,000 and Los Angeles at $1,870. The U.S. renter population is about 44 million households or 37 percent of all households in the nation. Apartment List’s data is drawn monthly from millions of listings nationwide on its site.

Also in the brokers meeting, it was noted that U.S. News & World Report recently revealed its “Best Places to Live in the U.S. in 2017” list of top 25 metro areas that offer the best combination of jobs, desirability, cost of living, quality of life and more. San Diego is ranked #22. “What San Diego lacks in affordability, as one of the most expensive metro areas on the list, it makes up for desirability,” the magazine said. “San Diego’s beautiful beaches and laid-back vibe make many Americans wish they lived there.” The top 5 places were: Fayetteville, Ark. (#5); Washington, D.C. (#4); San Jose, Calif. (#3); Denver (#2); Austin, Tex. (#1).

Appleton-Young directs the activities of C.A.R.’s Member Information team. She oversees the analysis of housing market and brokerage industry trends, broker relations and membership development activities. She also is closely involved in the Association’s strategic planning efforts and is a well-known speaker in California’s real estate community. She earned a bachelor’s degree in economics from the University of California Berkeley and a master’s degree from the University of Pennsylvania. C.A.R. is a statewide trade organization with more than 180,000 members dedicated to the advancement of professionalism in real estate.

Posted by on Feb 12, 2017 in Forecasts, Jim's Take on the Market, Market Conditions | 2 comments

Trump and Local Real Estate

The inauguration is almost here – Trump will be your president on Friday!

How will he affect our local real estate market?

His detractors are aghast over his tweets, but Trump keeps them coming.  In spite of their bombastic nature, I think we are already numb to his tweets, or at least getting used to them being part of the landscape.

At this point, I don’t think the Trump Effect will have much, if any, impact on us – positive or negative.  If rates stay under 5% (today’s 30Y is 4.12%), buyers should shrug it off and keep buying.

I also think sellers and agents are getting smarter about price, which will help tremendously.  As you saw in the previous post, they might screw it up a bit once they hit the market, but eventually buyers and sellers should both be happy with a modest appreciation rate of 2% to 4% this year.

The #1 thing that should keep our market stable is the buyers’ focus on getting the right house for the long-term.  Before the 2007 downturn, buyers thought they could always sell for a gain, and, as a result, any house would work for the short-term.  But after our so-called ‘crisis’, we recognize prices can go down – but it only hurts if you sell.

Sales and prices may bounce around, but with the focus on the long-term as a foundation, our market should keep cooking.

Posted by on Jan 17, 2017 in Forecasts, Jim's Take on the Market, Market Buzz, Market Conditions, North County Coastal, Sales and Price Check | 6 comments

Renting vs. Buying

They may be using an algorithm or math formula to calculate the above, but there is more to the discussion.  The attractiveness of renting is different for everyone, regardless of income.

P.S. Rates have settled down nicely, and are at 4.10% today.

Read full article here:

http://www.forbes.com/sites/samanthasharf/2017/01/03/housing-outlook-2017-eight-predictions-from-the-experts/

Posted by on Jan 5, 2017 in Forecasts, Interest Rates/Loan Limits, Jim's Take on the Market | 0 comments

More Topics for 2017

Happy New Year!  Other topics:

Pre-Listing Inspections – If you are buying and selling around the coast, chances are that you’re dealing with an older house.  Not many have been updated and remodeled enough to deserve today’s record-high prices – and at this point, buyers are going to be very demanding.  As an industry, we need to insist on sellers getting a pre-listing inspection so they know what’s coming, for two reasons;  1) It gives them a chance to fix stuff in advance, and 2) buyers aren’t penalized for being the messenger.

It happens regularly that the first glimpse of the true condition of a home is from the buyer’s home inspection.  The long-time owners can’t help but be offended that their pride and joy has been so verbally abused, and they want revenge – they want to stick it to the buyers instead. But these might be the only buyers that will pay this price – let’s not kick them to the curb!

Auctions – I think we are a long way from auctions being the home-selling technique of choice. The current version of inputting an ultra-low opening bid onto the MLS as the list price is misleading – one buyer told me it was a worse teaser than the value-range pricing.  Plus, they might sell it before the auction, which isn’t an auction.

Are you going to auction the house, or not?

I want a yes or no answer – and so do the buyers.

The option to sell early is a way to soft-sell the package to a homeowner, and assure them that they won’t be giving the house away.  But it is a turnoff for buyers, because all they know is that they can’t buy it for the listed price (the opening-bid price) – so what is the real price?  We’ve seen three houses in Rancho Santa Fe be auctioned off with no reserve that closed for more than $10,000,000.  Surely we can have the guts to conduct a no-reserve auction on a more modest home – a pure auction is what’s best for sellers and buyers.

Dual Agency – We dodged a bullet with the Malibu case this year that went to the California Supreme Court, but it won’t be the end of the discussion.  The worst offenders are the listing agents who lowball their own seller – they should lower the price first, to see if there are any other buyers out there.

For-Sale Signs – This is supposed to be the year that realtor signs have the name of their brokerage be at least the same size as the agent’s name.  It probably doesn’t mean more transparency ahead, but I like the intent. Agents who want to appear as their own entity should go get their broker’s license and run a brokerage like everyone else – or make it clear that you haven’t, which is the point of this new regulation.

Mulch is the new Booties – The craze over wearing booties hasn’t waned, but is being supplemented by the desire to throw mulch everywhere. Recently, an agent didn’t want to show her listing because her mulch hadn’t gone in yet.  I don’t mind mulch or booties, but they don’t sell houses – people sell houses – so let’s not get too transfixed on the mulch or booties. P.S. I do mind the red mulch.

Sandicor – Hopefully the judge will decide to sell the San Diego MLS company, Sandicor, to the only realtor association that wants it – GSDAR.  Then agents can join either GSDAR or CRMLS or both. But CRMLS makes it easier for out-of-county agents to bring buyers here so our sellers can take advantage of them.

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Posted by on Jan 1, 2017 in Forecasts, Jim's Take on the Market | 2 comments

More 2017 Predictions – Disrupters

It is assumed that the real estate industry is ripe for disruption.  We see a new whiz-bang website just about every week that was developed by two guys in a garage who think they have the answer – but then are never heard from again.

The reason is advertising.

Zillow got to the top because they were spending $100 million per year to advertise. Anybody who is willing to spend that type of money can dance their way into the hearts of consumers.

Bigger players will be looming in 2017.

1. We talked about Opendoor, the flipping company who buys your house for cash in 3-7 days at a below-market price based on algorithms.  Their fees range from 6% to 12%, which would only appeal to desperate sellers – which have been few and far between in San Diego.  Opendoor is only operating in Dallas and Phoenix, so expanding to the tony coastal regions might take a while.  But they just received $210 million in venture capital, and have 200 employees closing $60 million per month in transactions currently.  They are expanding to 10 unnamed cities, and hope their fast money can attract a homeowner’s first phone call.  But once sellers hear their (low) bottom-line, only a great salesman could convince them to not shop around.

2. Another big-money contender is Quicken Loans, the second-largest retail mortgage lender in the country.  They just announced that they are acquiring a ‘technology platform’ to appeal to more home buyers directly.  LINK

“Finding a reputable agent and a great home go hand-in-hand,” said Ron Frankel, OpenHouse Realty CEO. “I am confident that the work John Kvasnic, OpenHouse Realty’s Chief Product Officer, and his team have done in both arenas will help In-House Realty become the premier destination for those looking to work with the best agents in their community, while also helping them find the home of their dreams. It’s the perfect fit.”

They don’t mention that their recommended agents are paying Agent Ace a referral fee of 35% of their commission.  There is a big difference between the ‘best agents in their community’, and ‘best agents in their community who are willing to pay a 35% referral fee’.  The second group is much smaller, and typically they are the realtors who are getting outworked by the ‘best agents in the community’.  But consumers won’t figure that out until it is too late.

Quicken Loans spent $21.1 million on Google advertising alone in 2014, more than any other mortgage lender.  They could become a major player if they spend enough on advertising – they already spent it in the mortgage space, and are up to the #2 mortgage-lender nationwide (look for their Super Bowl ad).

3. The founder of Uber is another potential disrupter, but only because of their previous smashing success.  Their real estate package follows the course of most outside disrupters who think transparency is something the sellers want – but they don’t.

An excerpt:

When a seller receives a few good offers on a home, the sellers agent will ask for best and last offer by noon tomorrow, for example. If buyers were able to see the terms of all the other offers, as they would when using Haus, then this could drive the price of the home up as buyers enter into a bidding war. Not to mention, unethical sellers or agents could artificially inflate the price of a home through shill bidding, as an offer is not legally binding.

While Haus helps sellers measure the demand on their property, it might also drive away potential buyers who don’t want to get in a bidding war over an already-expensive purchase. Or, on the other side, this might short a seller who would have received a much higher best and final bid from a buyer, but saw that offer drop to barely beat the next-best offer.

Once sellers figure out that disruption/transparency may not be in their favor, selling the old-fashioned way where they hold all the cards will sound like a safer choice.

We already know that the industry is in retreat.  The old-school realtors who think they deserve a five-figure paycheck for completing fill-in-the-blank contracts will think retirement sounds better than ever.  Mid-range and better agents are scrambling to build teams and be Redfin-ish in their conveyor-belt approach, even though the pitfalls are obvious.  It wouldn’t take much to tip the whole thing over at this point.

Zillow feels like an old friend by now, but who knows what they might do?  Amazon or Google could jump in too, and if they did, look out.

Whoever spends the most advertising dollars, wins!

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Posted by on Dec 31, 2016 in Forecasts, Jim's Take on the Market, Listing Agent Practices, Why You Should List With Jim | 1 comment

2017 Predictions

Image result for 2017

Logically, it would make sense to expect that higher rates AND prices would raise the home-selling intensity to a whole new level.

Buyers will expect prices to re-trace somewhat, and will probably think, “Can’t we just go back to 2015 prices?” And sellers will think, “Not Me!”

First, let’s reflect on the 2016 stats – how did we do?

NSDCC Detached-Homes, Jan-Nov

Year
Avg New Listings/Month
Avg Closed Sales/Month
NL/CS
Median SP
2012
386
238
62%
$829,200
2013
423
251
59%
$950,000
2014
413
217
53%
$1,022,000
2015
429
231
54%
$1,098,000
2016
437
252
58%
$1,170,000

We have been striking a fine balance between listings and sales.

Because we only had a few more listings in 2017, the buyers didn’t flinch. Instead, they kept buying!

Every year we have a whole new set of buyers and sellers, yet we expect them to all behave the same as in the previous year. Will it happen again? Yes. Why?

Because that’s the other part of the fine balance. If you are a buyer, either you buck up and pay these prices, or you don’t buy. If you are a seller, you want/need to spruce up your house, get a good agent, and put an attractive price on it, or you will struggle to sell.  Buyers will be pickier than ever!

There will be a few on each side that get lucky and beat the odds, but for the most part, the market conditions are going to remain the same until we run out of rich people, or something catastrophic happens.

I’m not any better at guessing the actual stats than the next guy, but here goes.

JtR Predictions

On January 7, 2016, mortgage rates were 3.98%, and I guessed were would see 2016 sales drop 5%. For the Jan-Nov period, it has been a virtual dead heat – 2775 sales this year vs. 2771 in 2015.  But I might get lucky if our rapidly rising mortgage rates killed a bunch of deals this month, and the YoY sales dip under 2015 by a couple of points.

We have eight business days left, plus late-reporters, so I’ll say no luck for me and predict that the final total of 2016 will match the 3,011 sales from 2015.

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
2016
2,893 (today)
$1,170,000

The current momentum is so strong that I’m going to say the Trump mojo will cause sales to increase enough in the first half of the year that next year’s sales will top those in 2016.

My guess is for 3,100 sales in 2017, and median sales price of $1,200,000. A paltry 3% gain for each category, which is about as safe as it gets!

There will be winners and losers – here are examples:

Posted by on Dec 19, 2016 in Bubbleinfo TV, Forecasts, Jim's Take on the Market | 6 comments