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Carlsbad
(760) 434-5000

Carmel Valley
(858) 560-7700
jim@jimklinge.com


Category Archive: ‘Frenzy’

Pricing By Zip

Isn’t it amazing that prices have kept rising without frenzy help?

We’ve had the frenzy hangover this year. Inventory is still tight, sellers confident, and buyers don’t have much choice except to pay what it takes – or to stand by.  But sales are softer – and the number of NSDCC active listings today is 7% higher than last year.

Here are the two pricing measurements for each zip code for detached-home sales between May 1st and July 31st.  Every zip code between Carlsbad and La Jolla shows a positive year-over-year increase in BOTH pricing metrics!

Town
Zip Code
Avg $/sf
Median SP
Cardiff
92007
$532/$582
$1.017/$1.075
Cbad NW
92008
$381/$434
$690,000/$721,000
Cbad SE
92009
$295/$316
$769,000/$831,000
Cbad NE
92010
$288/$321
$600,000/$668,500
Carlsbad SW
92011
$316/$347
$827,500/$855,000
Carmel Vly
92130
$373/$398
$1.025/$1.100
Del Mar
92014
$729/$805
$1.463/$1.630
Encinitas
92024
$427/$461
$860,000/$915,000
La Jolla
92037
$690/$742
$1.64/$1.75
RSF
67+91
$476/$502
$2.13/$2.27
Solana Bch
92075
$520/$733
$1.05/$1.56
NSDCC
All Above
$457/$513
$960,187/$1,010,000
NSDCC
% chg
+12%
+5%

I had to average the averages for the NSDCC $/sf, so they are probably high.

Rob Dawg said in his 2014 forecast that he thought we’d see all the annual gain happen in the first half of the year. It’s the post-frenzy soft landing!

Posted by on Aug 21, 2014 in Frenzy, North County Coastal, Why You Should List With Jim | 0 comments

Escalation Clause

escalationIn the spirit of fair play, this isn’t right.  But in a market where buyers get tired of losing, you can’t blame them for trying alternatives.  Agents should have a standard policy/strategy on how to handle the escalation clause – get good help!

From the Boston Globe:

http://www.bostonglobe.com/business/2014/04/13/buyers-turn-new-bidding-tactic-hot-home-market/7fWqb00kcwY9Zaq0NgE3TK/story.html

Katrine and Stephen Campbell were up against stiff competition from 10 other bidders for the Reading home they wanted to buy. So the couple tried an aggressive strategy to give them an edge: Instead of making a specific offer, they promised to top whatever turned out to be the high bid by an additional $5,000.

The increasingly popular tactic, known as an escalation clause, worked. The Campbells bought the four-bedroom house late last year for $597,000 — or $18,000 above the original list price, including the extra $5,000.

“We must have looked at 50 places before making a bid on a house,” said Katrine Campbell. “We made only one offer — and we got it. The escalation clause gave us an edge.”

In a sign of how competitive the Boston-area housing market has become, the maneuver is becoming part of the area’s bidding war landscape, brokers and other real estate executives say. Some report there hasn’t been this much escalation clause activity since the last house-buying frenzy 10 years ago.

There are several kinds of escalation clauses, but all involve an agreement to top the high bid on a home by a set amount of money — often $5,000, and sometimes more.

Potential buyers who offer such arrangements usually insist on a brief amount of time, an hour or less, to follow through or to back out once a top bid has been established.

Skeptics say the clauses are potentially risky and a needless ploy that could backfire by alienating some sellers. It can also lead to disputes about whether buyers or sellers have complied with escalation clause terms, they say.

“It’s a tactic that’s not going to appeal to everyone,” said Peter Ruffini, a regional vice president at Jack Conway Realty in Norwell and president of the Massachusetts Association of Realtors.

“It sounds a little risky to me. It sounds sort of like issuing a blank check to sellers.”

Read More

Posted by on Apr 15, 2014 in Ethics, Frenzy, Market Buzz, Market Conditions | 4 comments

Lower-Level Frenzy

The media will soon be touting the year-over-year drop in home sales.

Around here it is mostly due to the lack of decent homes for sale – and if you want a decent home for a decent price, good luck.

But the glass-half-full view notes how remarkable sales have been, given the dramatic rise in pricing:

First Qtr.
NSDCC Det. #Sales
Avg. $/sf
SD Co Det. #Sales
Avg. $/sf
1Q11
553
$372/sf
4,541
$235/sf
1Q12
557
$362/sf
5,077
$226/sf
1Q13
672
$396/sf
5,535
$258/sf
1Q14
577
$504/sf
4,503
$313/sf

Buyers are determined and resilient in their quest to purchase a home, which is causing prices to maintain upward momentum today, 18 months after the frenzy started:

SDCo list and sold ppsf april 2014

In the past, escalating prices have caused a surge of new listings.  But today sellers are happier to stay put, regardless of price.

The low inventory is disguising the drop in sales – it still feels frenzy-like because buyers out-number the sellers.  The blue line is the number of homes for sale today in San Diego County, and the red line is the 90-day moving count of homes sold.  It’s not a common metric, but it shows the sales trend well:

SDCo #listings-sales

With sales dropping, prices would normally stall right about now.

But this is the new normal.

Buyers don’t see many houses for sale, and as a result, they still feel the frenzy vibe and desperation.  With inventory so low, future sellers are going to be more optimistic about hitting the jackpot, and price accordingly (too high).

The graph above shows how sales took off in April, even though inventory wasn’t keeping up.  We are in the prime selling season now - this is when buyers want to buy a house!

Any new listing with a decent price should get gobbled up in the next 30-60 days.  But many, if not most, sellers will come out too high, and risk missing the opportunity – and potentially face a OPT glut by summer.

It’s a fancy dance between inventory and sales, but if we do get a surge of reasonably-priced listings, the sales momentum should take off again.

Stay tuned!

Posted by on Apr 8, 2014 in Frenzy, Jim's Take on the Market | 2 comments

Saturday Open House Report

orangeThere were enough open houses in the area that the streets of Encinitas were crawling with people today.  Thankfully, my listing was the cheapest!

I appreciate the big turnout for Padres-tickets contest too, and for 47 of the 48 guesses being higher than list price - thanks for your faith and confidence!

Here’s my open-house report, check back tomorrow:

Posted by on Apr 5, 2014 in Bubbleinfo TV, Encinitas, Frenzy, Jim's Take on the Market, Why You Should List With Jim | 0 comments

Lost 10 In A Row


MANHATTAN BEACH (CBSLA.com) — According to real-estate website Trulia’s first-quarter “Bubble Watch,” the top two overvalued housing markets in the country are Orange and L.A. counties.

Climbing prices, combined with low inventory, is causing worry for some would-be home buyers, concerned about the possibility of another bubble.

Danielle and Robert Merrill told CBS2?s Serene Branson they have put in offers on 10 homes in the past five months, from Mar Vista to Santa Monica, but lost out on them all.

“It feels like it’s climbing at an unbelievable rate and it seems that prices have really jumped way up,” Danielle said. “It’s emotional. Every time a property comes on, and with this market you jump on the day it comes on the market.”

“It’s been a difficult process because the inventory is so low prices are just going up and up and up,” Robert said.

According to the California Association of Realtors, the median home price in L.A. County was $390,000 for February 2014 – up 15.2 percent from the same period last year.

In Orange County, the median home price last month was $677,000, up 11.6 percent.

The numbers show affordability has also dropped.

Only 30 percent of L.A. County residents can afford a median price home, down from 44 percent last year. In Orange County, it’s down to 20 percent from 34.

Real-estate agent Jeremy Shelton, of Shorewood Realtors, pointed to a three-bedroom Manhattan Beach home that sold over the asking price.

“Inventory is tragically low,” he said. “This came on a week-and-a-half ago. We had three offers right off the bat.”

Shelton said it’s a seller’s market, and he predicts modest increases before prices level off.

“Much like 2006, 2007, we have limited inventory. Prices are therefore going higher. There are a lot of qualified buyers, which is the key in the market now – unlike we had in 2007. So yeah, we are seeing a frenzy,” he said.

It’s a tough reality for buyers like the Merrills, who have been beat by so many all-cash, no contingency offers they’re taking a break before jumping back in.

“We’ve been through such an emotional ride with the market not knowing where it’s going to go from here,” Danielle said.

http://losangeles.cbslocal.com/2014/04/01/socal-residents-worry-about-possible-housing-bubble-as-prices-climb-inventory-drops/

Posted by on Apr 2, 2014 in Frenzy, Market Buzz, Market Conditions | 11 comments

Sales As The Leading Indicator

Livinincali left this comment Thursday:

If history is any guide you’d expect sales volume to start dropping before seeing any movement down on price. The sales volume numbers back in winter of late 2012, 2013 were seasonally higher than they have been and that marked the beginning of the price appreciation.  Now it seems as the sales volume have fallen off a bit and price appreciation has moderated.  If sales volume continues to be soft expect appreciation to be minimal this year.  It seems like some segments of the market are still hot but it doesn’t feel like the frenzy of last year around this time where everything in the county was hot.

Historically, sales are the leading indicator, and prices have always followed.

Many are very committed to the fundamentals, and that in itself could help propel the actual market activity – a self-fulfilling prophecy.  A loan rep in the OC named Logan has sparred with me about it on Twitter, and he has included the Trulia economist in the conversation – which is fine by me because they share the same view that history will repeat itself, regardless.

twitterwar

Logan is entitled to one man’s opinion.  But Trulia stories get published everywhere now, and could carry considerable influence with home buyers.  They are a mainstream-media source for market data, and have a responsibility to dig for the truth.

The Twitter war above got started over this article, which is now being published by media outlets everywhere:

http://www.latimes.com/business/realestate/la-fi-home-prices-20140326,0,4729002.story#axzz2xIS4jHJV

Suggesting that bubbles are forming in areas where prices rising faster than those incomes is shallow and incomplete.  Let’s consider additional facts.

Do reports of fewer sales have to be contributed to stagnant incomes, un-affordability, employment, economics, DTI, etc., that will drive prices down, or are there other explanations?

1.  It was predicted here six months ago that people would be comparing 2014 sales to the ultra-hot frenzy months of 2013, and claim the sky is falling.  You could say that the low rates of 2013 alone were driving people to buy; now that higher-and-steady rates aren’t driving the market, sales look pretty similar to recent years – IN SPITE OF HIGHER PRICES.

Detached-Home Sales Between Jan. 1 – March 15:

Year
NSDCC Sales
Avg $/sf
SD Co. Sales
Avg $/sf
2010
360
$377/sf
3,428
$237/sf
2011
412
$376/sf
3,476
$234/sf
2012
450
$367/sf
3,987
$226/sf
2013
518
$389/sf
4,423
$255/sf
2014
459
$500/sf
3,518
$312/sf

Take out the 2013 frenzy-driven era, and sales look similar, or better, than previous years, even though pricing is substantially higher.

2. A preliminary sign of a market top would be more homes not selling, and inventory rising. If inventory was rising steadily, AND sales were flat or declining, then a call for lower prices would be obvious.  But the inventory is about the same as last year:

SD inventory

A big difference that is critical to the equation is that 2013 sellers were caught off-guard at rapid rebound in pricing.  But the word is out now, and the 2014 sellers are VERY WELL AWARE of the improved market/higher pricing.  Yet sales are strong.

3.  This year’s sellers are more elective.  They didn’t have to sell last year, and waited until they could get even more money this year – and they are only selling if they get their price.  Yet sales are strong.

4.  Every seller wants more, not less.  It is the sellers’ creed – tack on a little extra to what the last guy got.  Yet sales are strong.

5.  If prices did falter, sellers just wouldn’t sell.  The ego of a seller is powerful, and selling for any less than ‘their price’ is ‘giving it away’.  Sellers will avoid that at all costs, and just cancel their listing instead.  You’ll know that pricing is heading downward when you see inventory dry up further.  Yet sales are strong.

6.  There is absolutely NO threat of distressed sales undermining the market.  Of the 1,180 NSDCC listings this year, 12 have been short-sales, and one has been an REO.  Yet sales are strong – stronger than when buyers could have gotten a deal.

7.  Multiple offers are everywhere. I can only speak about the north-coastal region of San Diego County, but everywhere I go, there are multiple offers – even on houses that aren’t that great.  You will see bidding wars dry up before sales start to drop.  Yet sales are strong.

8.  We have never seen the inventory sustain at levels this low.  There is an awareness and appreciation about one’s home that is superseding price – people aren’t interested in moving, no matter what they could get for it. The Z-man said yesterday that the low inventory is due to 20% of the country being underwater.  Did he interview each one of those people?  They could have short-sold anytime over the last few years if they wanted to move – but they didn’t.

In summary, buyers are ready, willing, and able to buy homes today – at these prices, and these mortgage rates.  There would be as many – if not more – sales this year, than in 2013, if there were just more decent homes to sell at today’s prices.

Homes that aren’t selling today are the ones priced outrageously – anything close to the right price is selling. Hopefully it means there is a price ceiling - and we have arrived at the unaffordable plateau for now.

Sellers are insisting that we stay at these prices, or higher – they aren’t backing down. For now, buyers are agreeing.  I haven’t seen any house sell for less than the comps this year – have you?

Until the bidding wars dry up, and then sales start to falter when compared to non-frenzy months, then prices should hang around these levels.

Posted by on Mar 29, 2014 in Frenzy, Jim's Take on the Market, Market Buzz, Market Conditions, North County Coastal, Sales and Price Check | 13 comments

Dear Frustrated Buyer

Buyers are grabbing up everything in sight – what do you do?

dealing with insanityBe patient, commit to a price point, subtract up to $100,000 for repairs/improvements, know what/where you are willing to compromise, and buy the next good one!

It’s only sticks and stucco, you’re the one who makes it a home.

Let me help you!

Posted by on Mar 24, 2014 in Bubbleinfo TV, Encinitas, Frenzy, Jim's Take on the Market, Klinge Realty, Real Estate Investing, Why You Should Hire Jim as your Buyer's Agent | 4 comments

Bidding Wars

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bidding warsWhen there are multiple offers on one of my listings, I am happy to divulge the pertinent information to all parties – because transparency benefits the seller.  But most listing agents act like they are guarding Fort Knox, and won’t give any guidance on what it will take to win.

What do you do?

I ask these questions of the listing agent:

1.  “How many offers are there?”  To warm them up, start with an easy math question.

2. “How will you handle?  Will you request highest-and-best from each buyer, or just take the highest offer?”  In almost every case the agent hasn’t given it a thought, and is caught off-guard.  All that matters is how they feel about highest-and-best, and gauge whether they might just sign an offer.

3.  “Have you, or anyone in your office, written an offer?”  I have won a bidding war when the listing agent wrote an offer with their own buyer, but it takes guile and guts to pull it off.  But first, you need to know if that is the case.  P.S. If they hesitate, the answer is yes.

Secondly, rank the property.  Is it in the 95+ percentile of homes you have seen?  If so, big-cash and/or desperation could turn this bidding war into a freak show.  Determine an offer price that makes you uncomfortable, and then add some mustard.

If it is a nice home, but has some warts – then use this as a guide:

Posted by on Mar 9, 2014 in Bidding Wars, Frenzy, Why You Should Hire Jim as your Buyer's Agent, Why You Should List With Jim | 2 comments

Frenzy – It’s Baaaack

Can you feel it?  The frenzy, creeping in on you?

Those watching closely may have noticed how the market has ’picked up’ over the last week or two.

We’ve had more buyers than sellers for a while now, so that alone doesn’t constitute a frenzy.  In a low-inventory environment, you should have multiple offers on every quality property.

It’s the velocity.

Here are signs of frenzy-building:

1.  It’s been hot.  A year ago, the frenzy was just becoming obvious – but at this point, the market has been hot for the 18 months.

Both buyers and sellers are expecting a frenzy now.

NSDCC Feb.
#Sales
Median SP
Median DOM
2011
166
$844,000
60
2012
184
$795,000
69
2013
184
$900,000
25
2014
172
$906,500
24

All three indicators from last month are pointing to more frenzy.

2.  How fast listings go pending.  With listing agents riding high on their horse, you typically see them play around for 7-10 days before a new listing gets marked pending.  It seems like more listings are going pending faster – and it’s about the same as last year (though this year’s haven’t all closed):

NSDCC 2/22 to 3/7
# Pendings with DOM<6
# New Pendings
%
2013
42
136
31%
2014
35
119
29%

3.  The percentage-paid-over-list-price.  It’s been standard to see homes sell for 5% to 10% over list price, but it can get crazier.

This was a fascinating – though extreme – example.  A great-looking house with fantastic view, but it is right on La Costa Ave. and located in an area with terrible soil quality:

http://www.sdlookup.com/MLS-140009811-2662_Galicia_Way_Carlsbad_CA_92009

Look how steep the hill is – it looks like it could slide down the hill any day:gal

From the remarks: This property is for cash buyer, builder, or investor. Home has compaction and soil issues. Only shown to qualified buyers.

The soils problem must be serious, given their initial list price of $500,000.  Yet it sold for $685,000 cash, or 37% over list price and closed in ten days.

It must have been worth it to someone, and probably worth close to that for many, but it is the percentage that gets me.  With the problems, wouldn’t you try to buy it for 10% or 20% over list?

4.  It’s March.  The wait-and-see buyers haven’t had any indications of inventory flooding the street – in fact, we’ve had fewer new listings this year than last (between Jan. 1 and March 5th):

Year
# New Listings
LP Avg $/sf
2013
886
$494/sf
2014
858
$541/sf

Buyers are getting antsy – for them, there aren’t any signs of relief.

It is a great time to sell – contact Jim the Realtor to get started today!

(858) 997-3801 cell or jim@jimklinge.com.

Posted by on Mar 8, 2014 in Frenzy, Jim's Take on the Market, Market Buzz, Market Conditions, North County Coastal | 8 comments