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Jim Klinge
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701 Palomar Airport Road, Suite 300
Carlsbad, CA 92011

Category Archive: ‘Market Buzz’

It’s Different This Time

Our YoY home sales are in decline, and it makes you think, ‘Here we go again”.

We know that sales are the precursor, and historically prices are the last to go.  But with so many different variables this time around, could it actually be different this time?

Let’s consider the changes:

During the last two local declines (1992-1996 and 2007-2009), banks were the main culprits.  They were visibly foreclosing and dumping homes, which affected the whole marketplace. Regular home sellers were burdened with the lower comps, and had to give them away if they wanted to move.

But now they’ve changed the accounting rules for banks, and they don’t have to dump everything they own.  In fact, they can do whatever they want now.

Remember this McMansion in Carlsbad?

BofA first began the foreclosure process in 2011, but didn’t get around to actually foreclosing until July, 2017 – six years later!  Then they off-loaded it to an investor in March, without having to put it on the open market.  Bernanke told bankers in 2011 not doing anything that would harm the economy, and they took him up on it!

I think it’s safe to say that no matter how bad any future recessions might get, we don’t have to worry about a flood of foreclosures ever again.


Ok, so if the banks don’t/won’t foreclose and dump, then what about the institutional investors?  They are smarter and more nimble – certainly they will be selling once they sense the top!

Not so fast – according to the WSJ, investor buying is on the upswing:

An excerpt:

Wall Street is betting that more well-off Americans will want to be renters.

Financiers who loaded up on homes after the housing bust for pennies on the dollar are buying yet more—despite home prices in many markets being at all-time highs.

Their wager: High prices, higher mortgage rates and skimpy inventory are making homeownership harder. Well-to-do families who might have bought a single-family home in another era are willing to rent a house now, especially if it means access to a good school system.

The number of homes purchased by major investors in 2017 was at least 29,000, up 60% from the previous year, estimates Amherst Capital Management LLC, a real-estate investment firm that made nearly 5,000 of those purchases.

This year, investors have raised billions of dollars from bond buyers, pension funds and even wealthy Chinese individuals to purchase more homes. They have been particularly aggressive buyers in places like Atlanta, Phoenix, and other metro areas with good schools and faster-growing economies.

Cash to acquire and renovate homes has become so abundant lately that some rental investors can’t spend it fast enough. Without enough homes to buy, some investors are now building their own in popular residential markets like Miami and Nashville, Tenn.—upending a traditional pattern of Americans buying starter homes and moving up.

“The American dream no longer includes homeownership,” said Jordan Kavana, chief executive of Transcendent Investment Management LLC, a south Florida firm that has been a big acquirer of rental homes. “You will earn your equity in other ways, not your home.”

Link to Full Article

The big-time Wall Street investors are betting on the affluent taking over the real estate market, and turning the country into a renter’s society.  It may only affect 10% to 20% of the market for now, but that might be enough to keep it all propped up.


Local flippers and ibuyers are providing another floor.  Any homeowner that will sell for 10% under value today will have a host of choices to pick from.  If you play it right, and have a great realtor help you, it could turn it into a retail sale quite easily!


The biggest threat?  While there are still people underwater, today’s market has to be the most equity-rich in history.  If sellers had to dump in order to sell, they could – and still make a profit.

But for there to be an extended trend of declining prices, there would need to be a series of sellers in the same neighborhood that were all in the same boat.  For now, we only see an occasional dump, and it doesn’t need to be more than 10% off to attract a crowd.

With the vast majority of recent buyers having to qualify for their mortgage, and use a regular down payment in order to buy their house, you have to like the prospects of them fighting to hold on to it, no matter what.  Back in the last bust, too many people got in with little or no down payment, and got stuck with exotic financing that exploded on them.  Those days are gone.

We’re most likely going to live in Stagnant City, with fewer sales in most areas.  But it’s not the end of the world.

Get Good Help!

Posted by on Jul 9, 2018 in Flips, Foreclosures/REOs, Jim's Take on the Market, Market Buzz, Market Conditions | 8 comments

Local Predictions for 2018 – Update

We’re halfway through 2018 – let’s check on the predictions.  Here is where Rob Dawg, Franklin Jones, Ash, and myself guessed what would happen this year:

My thoughts in December for 2018, plus extra stats:

I guessed earlier that NSDCC detached-home sales will drop 5% in 2018 – but that would still give us around 3,000 houses sold, which is a healthy amount, given that rates and prices are both expected to be higher.  The median sales price, full of imperfections, should keep rising, and I’ll guess +5% in 2018.

Those same factors, plus a few more boomer liquidations, could also create a bull rush frenzy, with intense wrangling for decently-priced houses listed under $1,500,000.  With more inventory, we could approach 3,200 sales again (3,084 NSDCC houses sold in 2017) .

The higher-end market is challenging too, but in the opposite direction.  Today there are 374 NSDCC houses for sale listed over $2,000,000, and we sold about 50 per month in 2017.

We ended the year with 62% of the houses for sale between La Jolla and Carlsbad being priced over $2,000,000, with a median list price of $2,495,000 overall.

We had 10% fewer listings in 2017 than in 2016, but 2% more sales!

Where are we now?

First-half NSDCC sales are down 11% year-over-year.

Median list price today is $2,295,000, which is down 9%, compared to December 27, 2017.  Of the 935 houses for sale, 55% of them are priced over $2,000,000.

The 2017 NSDCC median sales price was $1,225,000, and the median sales price has been $1,325,000 for the first half of 2018, an 8% increase.

We’ve sold 317 houses over $2,000,000 in 2018, or about 53 per month.

Although we had 10% fewer listings last year than we had in 2016, we have had 9% more listings this year than in the first half of 2017.

Nine percent more listings, but 11% fewer sales?  Expect that buyers will become increasingly picky – there are plenty of houses to go around!

Posted by on Jul 5, 2018 in Inventory, Jim's Take on the Market, Market Buzz, Market Conditions, North County Coastal, Sales and Price Check, Thinking of Buying?, Thinking of Selling? | 3 comments

“Bizarro Desert Wonderland”

Were you thinking you could always move to the desert? H/T daytrip:

Link to Full Article

Mark Grden was looking for peace and quiet when he bought his house a half-mile from the main entrance to Joshua Tree National Monument in 1998. And for years, he found it.

“I used to sit out on the porch and watch bobcats creep past under skies filled with stars, bats and owls,” he said. “Neighbors knew each other and kept an eye on each other’s property.”

But over the past two decades, this otherworldly landscape has gone from a destination for hikers and rock climbers to an international attraction luring 3 million visitors per year — overwhelming the area’s craggy campsites, low-slung motels and Grden’s once-sleepy community.

“Now, I’m surrounded by Airbnbs filled with vacationing strangers who seem to think anything goes out here,” he said, shaking his head.

Read More

Posted by on Jun 5, 2018 in Jim's Take on the Market, Market Buzz, Real Estate Investing, Thinking of Buying?, Thinking of Selling?, This Is America | 6 comments

California Migration

Lower-income folks are leaving, and affluent people are coming – H/T Richard:

Over a million more people moved out of California from 2006 to 2016 than moved in, according to a new report, due mainly to the high cost of housing that hits lower-income people the hardest.

“A strong economy can also be dysfunctional,” noted the report, a project of Next 10 and Beacon Economics. Housing costs are much higher in California than in other states, yet wages for workers in the lower income brackets aren’t. And the state attracts more highly-educated high-earners who can afford pricey homes.

There are many reasons for the housing crunch, but the lack of new construction may be the most significant. According to the report, from 2008 to 2017, an average of 24.7 new housing permits were filed for every 100 new residents in California. That’s well below the national average of 43.1 permits per 100 people.

If this trend persists, the researchers argued, analysts forecast the state will be about 3 million homes short by 2025.

What does it mean?

California homeowners spend an average of 21.9% of their income on housing costs, the 49th worst in the nation, while renters spend 32.8%, the 48th worst. The median rent statewide in 2016 was $1,375, which is 40.2% higher than the national average. And the median home price was — wait for it — more than double that of the national average.

One coping strategy: California residents are more likely to double up. Nearly 14% of renter households had more than one person per bedroom, the highest reading for this category in the nation.

Coping can also mean leaving.

In a separate analysis, found that the number of people searching real estate listings in the 16 top California markets compared to people living there and searching elsewhere was more than double that of other areas — and growing.

And in those areas — counties including Santa Clara, San Mateo and Los Angeles — the growth in views of listings on was virtually unchanged compared to a year ago this spring, while views of listings in other U.S. areas were 15% higher.

Link to Full Article


Posted by on May 4, 2018 in Jim's Take on the Market, Market Buzz, Thinking of Buying?, Thinking of Selling? | 7 comments

HPI Percentage Change From Peak

More news today on the surge in home pricing, with Diana happy to point out that half of the nation’s 50 largest markets are now considered overvalued, meaning home prices are at least 10 percent higher than the long-term, sustainable level.

“The dream of homeownership continues to fade away for the average prospective buyer. Lower-priced homes are appreciating much faster than higher-priced properties, making the affordability crisis progressively worse,” said Frank Martell, president and CEO of CoreLogic. “CoreLogic’s Market Condition Indicators now indicate that half of the top 50 markets in the country are overvalued because home prices in those areas have risen so much faster than incomes. This is clearly an unsustainable condition that can only be remedied by aggressive and coordinated public/private sector actions.”

Looking ahead, the CoreLogic HPI Forecast indicates that the national home-price index is projected to continue to increase by 5.2 percent on a year-over-year basis from March 2018 to March 2019.


The concern about overvalued areas is probably coming from the other states whose prices are substantially above the last peak.  Or in other words, it’s always been crazy in California, and we’re used to it! Click on image:

While this map makes it look like California is lagging behind Texas and others, we probably had a higher peak, relatively.  Most of the subprime lenders with no-doc and neg-am loans were in California, and sales and prices were very bubblicious. This time it’s different!

Link to Website

Posted by on May 1, 2018 in Forecasts, Jim's Take on the Market, Market Buzz | 0 comments

San Diego Bubble Meter

The local NSA Case-Shiller set a new record this week too. From the U-T:

The San Diego County median home price soared to its highest point ever, $550,000, in March, said real estate tracker CoreLogic. Home prices increased 6.8 percent in a year, which experts attribute to a lack of homes for sale and a strong economy. The previous home peak was $545,000 in June. So that has led us to ask our panel of experts the following question this week.

Question: Are we approaching housing bubble territory?

Phil Blair, Manpower

NO: As high as our housing prices are now they seem reasonable when compared to the Silicon Valley and Seattle markets. San Diegans are struggling to get into the housing market but those in it are riding the prices up and the for-sale inventory continues to stay very low, meaning houses are selling at these current prices.

Kelly Cunningham, San Diego Institute for Economic Research

YES: Approaching bubble territory, but not yet reaching peak of price. The current median price of homes sold is “only” 6.7 times San Diego’s median household income. This is the same ratio reached in 2004, 1½ years before the ratio peaked at 8 times San Diego’s median household income at end of 2005. The primary reason prices are rising is demand for San Diego housing still far exceeds supply at the same time home construction lags.
David Ely, San Diego State University

NO: Rising interest rates will slow the pace of home price appreciation. However, conditions do not seem favorable for a collapse in home prices in the near term. Relative to the housing needs of the area, the supply of housing has been growing slowly. And, mortgage lending practices are not as relaxed as they were a decade ago so a fall in home prices is less likely to arise from an increase in foreclosures.

Gina Champion-Cain, American National Investments

NO: Even as interest rates increase, demand remains high and public policy designed to prevent creation of housing stock will ensure inadequate supply. These conditions will breed appreciation but not a bubble. Bubbles require rampant speculation fueled by irresponsible lending, neither of these conditions are present. The absence of “stated income” loans has shifted the under qualified consumer to rental living which removes those previously vulnerable mortgages from the market further reducing bubble risk.

Alan Gin, University of San Diego

NO: Housing prices are high and that is causing an affordability problem. But the increase is the result of economic fundamentals, not speculation. The local economy, particularly the labor market, is strong, which is increasing the demand for housing. The supply is much lower than in the last bubble, with residential units authorized by building permits at only about 10,000 a year, compared to 15,000+ in the mid-2000s. The only worry is a rise in interest rates, which would dampen demand.

James Hamilton, UC San Diego

NO: While San Diego house prices are back to the peak in 2006, the median income in San Diego today is 27 percent higher. In terms of the ratio of house prices to income, we’re back to 2002 values. Higher incomes and lower interest rates help keep homes affordable, and I don’t see the speculative component that we had in 2006. But higher interest rates and changes in tax law could bring home prices down.

Gary London, London Group of Realty Advisors

NO: The housing market may be peaking again after 10 years of buildup, but it is not bubbling. In fact, lender requirements are very stringent, eliminating the prior crash causation factors. It is housing scarcity that is causing the price increases: We are building at the rate of less than one-half the housing units required in the region, creating a shortage that is expected to reach 170,000 units by 2030. Add to that the reluctance of sellers to sell, resulting in very low listing levels, and the millennial demand for the almost extinct single-family home, and you have a perpetual shortage and bid up of pricing.

Norm Miller, University of San Diego

NO: While we are certainly unaffordable for many households that does not equate to a bubble, which by definition will collapse. Naïve analysts look only at price/income ratios, but we learned last cycle that the key to the collapse was the use of others people’s money via high loan-to-value (LTV) mortgages and a large percentage with second mortgages underwritten with loose standards. Currently, there is enough equity to suggest no pending collapse of the market. If significant subprime lenders enter the market again or we loosen up standards or interest rates jump 100 basis points, then that will put us in bubble land.

Jamie Moraga, IntelliSolutions

NO: Currently the demand is strong for homes in San Diego and our supply is low. Most homes don’t even stay on the market for a few days before they are in escrow. Prices are driven by both economic and income growth in addition to the ease of mortgage loans. Should we see an economic downturn and unemployment and interest rates start to rise, then that’s usually when we would see more delinquencies, foreclosures, and homebuyers deciding to hold off on making a home purchase.

Austin Neudecker, Rev

YES:. I am no real estate expert, but any market at a peak gives me pause for consideration. I would guess that low-interest rates are a contributing factor, and as the rates increase, prices may see an impact. Also, with recent layoffs (e.g. Qualcomm), San Diego needs to attract/build more companies with high-paid workers, yet we are still at historically low (official) unemployment (which is increasingly misleading as a metric).

Bob Rauch, R.A. Rauch & Associates

NO: A housing bubble is when housing prices, fueled by demand (any home buyer would be increasing demand by one house), speculation, and market exuberance, “run up.” At that time, speculators enter the market and increase demand for housing. If we believe that demand will decrease or stagnate, or if lots of new housing supply is built, then there could be a sharp drop in prices.

Lynn Reaser, Point Loma Nazarene University

NO: San Diego home prices are only now finally recovering to the prior highs reached a dozen years ago in early 2006. Demand is strong, powered by expanding jobs, incomes, and wealth. New supply has been inadequate, constrained by regulatory costs and other factors despite some positive steps by policymakers. As a result, San Diego has seen a net out-migration to other parts of the country of about 15,000 residents and home prices continue to climb.

John Sarkisian, Motion Ventures

NO: There is a shortage of housing that will continue to drive the cost of housing higher in the near future. Unlike the last cycle, housing prices are being driven by fundamental economics and not by creative financing products. It has been 10 years and prices are not significantly higher than before the last correction.

Chris Van Gorder, Scripps Health

NO: Bubbles are a function of speculation and reckless lending practices and I see no evidence of either in the current housing market. It is the lack of supply that has driven home prices higher, due primarily to the scarcity of land and a burdensome regulatory environment. These are issues that will not be resolved in the near term. That said, the impact of the recent tax reform bill and rising mortgage rates will likely slow the rate home price increases.

Link to U-T Article

Posted by on Apr 27, 2018 in Bubble-Era Pricing, Market Buzz, Market Conditions | 0 comments

San Diego Case-Shiller Index, February

The February reading of the non-seasonally-adjusted San Diego Case-Shiller index reached a new all-time high!

San Diego Non-Seasonally-Adjusted CSI changes:

January ’17
January ’18

The previous high reading was 250.34 in November, 2005.

“Year-over-year prices measured by the National index have increased continuously for the past 70 months, since May 2012. Over that time, the price increases averaged 6 percent per year,” noted David Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “With expectations for continued economic growth and further employment gains, the current run of rising prices is likely to continue.”

Posted by on Apr 24, 2018 in Jim's Take on the Market, Market Buzz, Same-House Sales | 11 comments

Mortgage Rates Hit 4-Year Highs

Sellers should pay heed to the mortgage-rate gods……and do a little better on price, just in case.  Rates will be pushing 5% before long.

From the MND:

Mortgage rates moved markedly higher today, officially leaving them at new 4-year highs.  The only other time they’ve earned that distinction this year was in February–NOT last week as all the major surveys claimed.  To be clear, they were certainly close last week, but the surveys didn’t account for some of the worst individual days in February.  Does any of this really matter?  No, not so much.  Here’s what matters:

The average lender is quoting very well-qualified borrowers with huge downpayments something north of 4.5% on conventional 30yr fixed mortgages today.  Let’s call it 4.625%.  Up until Friday, that number hadn’t been over 4.5% except for on a few of those ill-fated February days.

Also important is the message that such a move sends.  Simply put, the bond market (which underlies rates) could be telling us that it’s getting back into the same gear seen last Fall and in early 2018.  In general, that’s characterized by pervasive, relentless movement toward higher rates.  The saving grace is that the underlying causes for that movement had already hit markets to some extent in late 2016.  So it remains to be seen how much more pain will be priced into rates before more investors feel bonds make sense to own (when more investors buy bonds, rates move lower, all other things being equal).

Today’s Most Prevalent Rates (at little-to-no origination or discount points)

  • 30YR FIXED – 4.625%
  • 30YR JUMBO – 4.65%
  • FHA/VA – 4.25%-4.5%
  • 15 YEAR FIXED – 4.0%
  • 5 YEAR ARMS –  3.625%-3.875% depending on the lender

Posted by on Apr 23, 2018 in Interest Rates/Loan Limits, Jim's Take on the Market, Market Buzz | 1 comment