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Category Archive: ‘Market Buzz’

Leaving Town

As home prices continue to escalate, the less-affluent folks are considering other options.  Will the imbalance catch up with us eventually?  If so, when?

Hat tip to daytrip for sending this in:


An excerpt:

Jonas Peterson enjoyed the California lifestyle and trips to the beach while living in Valencia with his wife, a nurse, and their two young kids. But in 2013, he answered a call to head the Las Vegas Global Economic Alliance, and the family moved to Henderson, Nev.

“We doubled the size of our house and lowered our mortgage payment,” said Peterson, whose wife is focusing on the kids now instead of her career.

Part of Peterson’s job is to lure companies to Nevada, a state that runs on gaming money rather than tax dollars.

“There’s no corporate income tax, no personal income tax…and the regulatory environment is much easier to work with,” said Peterson.

Some companies have made the move from California, and others have set up satellites in Nevada. California, a world economic power, will survive the raids, and it will continue to draw people from other states and around the world. Its assets include cutting-edge tech and entertainment industries, major ports, great weather and dozens of first-rate universities.

But the Golden State is tarnished and ever-more divided by a crisis with no end in sight, and this year’s legislative efforts to spawn more housing for working people lacked urgency and scale. Slowly, steadily, and somewhat indifferently, we are burdening, breaking and even exporting our middle class.

Read full article here:


Posted by on Dec 11, 2017 in Jim's Take on the Market, Market Buzz, Market Conditions | 12 comments

Shiller On Tax Reform

Shiller is sticking with the irrational exuberance that plays into housing decisions – and I agree:

The co-creator of the much-watched S&P/Case-Shiller home price index doesn’t think the mortgage interest deduction really matters to the housing market.

“It’s not big,” said Yale economics professor and Nobel laureate Robert Shiller.

He also doesn’t think home prices will fall if the cap on the amount of mortgage debt (currently $1 million of debt) one can deduct interest payments on is cut in half. About 2.9 million borrowers have mortgages with an outstanding balance higher than $500,000, according to Black Knight.

“The general idea is it would push prices down if people are rational,” which Shiller says they are not when it comes to housing. He is the author of the bestselling book “Irrational Exuberance.”

He does, however, think that if homeowners can no longer deduct their property taxes, or if the amount they can deduct is limited under the new tax plan, that would be a big deal — at least to rich people.

“That is going to be a substantial hit to people who are paying a lot of property taxes, and it might be a consideration that you make before you buy a big mansion in some high property tax state,” said Shiller.

While economists, housing advocates and housing industry lobbyists argue the effects of the Republican tax plan and worry about the possibility of higher interest rates, Shiller, who has studied the economics of housing dating back to the 1800s, sees very little rhyme or reason to any of it. The human factor — the emotional aspect of most people’s single largest investment, a home — is far greater than the market stimuli that are accorded such importance.

“I tend to think it’s not as great as you imagine because people are people, and I don’t find that historically home prices have relied at all predictably to changes in things like interest rates,” said Shiller, pointing to the huge boom in housing in the last decade. Interest rates didn’t move at all during that time.

That boom, instead, was fueled by a complete crater in any type of lending standard in the mortgage market. People were offered loans at almost no cost, so they took them — and never believed that home prices could fall. In the early 80’s during a huge spike in interest rates to double digits, home prices fell slightly, but people kept buying homes.

“Things happen that have no explanation,” said Shiller.

Click to play video below:

Robert Shiller on GOP tax plan and home prices from CNBC.

Posted by on Dec 7, 2017 in Jim's Take on the Market, Market Buzz, Market Conditions | 5 comments

Tax Reform – Unintended Consequences?

Reader Tim sent this in:

Jim/All – do you have any thoughts on unintended consequences of the tax bills (as constituted)? You think there could be an impact from eliminating interest deduction on equity withdrawals with regard to the cash buyer market? Also wondering if increasing the time homeowners need to be in their home ultimately reduces velocity, which gums up the market further.

My initial thoughts:

  1. If the Senate plan gets approved, then we should see some real scrambling for Hawaiian shirts as realtors get back in the game this week.  The senators’ plan allows for those who have lived in their house for less than five years to close escrow in 2018, as long as their contract to sell is signed this month.  But are people paying close attention?  If so, we should see a Santa frenzy over the next three weeks.
  2. If those who were planning to sell in 2018 or 2019 end up delaying their sale to qualify for the five-out-of-eight rule, we might see fewer homes for sale – especially in 2018 (the impact will lessen in each of the next three years as people catch up). But other sellers could pick up the slack, or buyers just take what they can get. In San Diego County we have had 7% fewer listings in 2017, but about the same number of sales as last year – the lower inventory didn’t cause sales to drop.
  3. Home equity lines no longer deductible?  No impact on buying or selling – the money extracted by your HELOC must be used for home improvements to be deductible.  I’m sure everyone abides by the rule (?).
  4. I think the misinformation is a real threat – what are the real facts?  When realtor presidents can’t get their head straight about the tax-reform details, and instead spew vague threats about values dropping 10% to 15%, it might cause buyers to pause. We’ll probably know in February or March – if sales start popping, buyers will forget and, instead, get back into the fight.
  5. An intended consequence is that the stock market will go ballistic, and if that happens, real estate will be fine.

What do you think?

Posted by on Dec 6, 2017 in Jim's Take on the Market, Market Buzz, Realtor | 13 comments

Senate Approves Tax Reform

The Senate’s version of the tax reform bill didn’t include any changes to the mortgage-interest deduction, which keeps the limit at mortgages under $1,000,000.  But the House limit was $500,000, and they still have to reconcile the two versions, so it’s not done yet.

The ability to deduct property taxes up to $10,000 was included at the last minute by the senators.

The 2-out-of-5 year residence requirement to avoid taxes on profits from selling your home will be changing to 5-out-of-8 years, but the effective date isn’t exactly clear yet.  The Senate version included any sales contract signed in 2017 would qualify, even if they close in 2018, but we’ll see about the final reconciled version – which should come in the next couple of days.

The N.A.R. should declare victory, and assure us that our property values won’t be going down 10% to 15% now.

Posted by on Dec 2, 2017 in Jim's Take on the Market, Local Government, Market Buzz | 28 comments

San Diego Pendings Count

I’m not sure how the C.A.R prognosticators can look at these Y-o-Y numbers and still forecast higher sales for next year – unless they think the supply will inflate with thousands of desperate realtors having to sell their own homes?


The North County Coastal region (La Jolla to Carlsbad) is doing well, considering that December begins tomorrow – only a 17% drop since summer:

August 22nd: 373 pendings, 194 at 20+ days on market

November 30th: 309 pendings, 196 at 20+ days on market

There is no telling how many homes will come to market next year, or if there will be buyers willing to pay the usual Comps+5% pricing.

Get Good Help!

Posted by on Nov 30, 2017 in Jim's Take on the Market, Market Buzz, North County Coastal, NSDCC Pendings | 1 comment

Rich’s SD Housing Graphs

Our friend Rich Toscano has his latest San Diego housing analysis here:

In spite of record prices, the inventory has been setting recent lows:

Yet, sales have been mostly better than every year since the Frenzy of 2013!

Fewer homes for sale but more sales?

Are sellers doing better to improve their homes before selling, or are buyers so desperate that they are buying crap they wouldn’t have bought during the last couple of years just purely because of the scarcity?

Full report here:

Posted by on Nov 27, 2017 in Jim's Take on the Market, Market Buzz, Market Conditions, Rich Toscano | 1 comment

Multi-Gen On The Rise

If you look at the new homes being built around here, you’d think multi-generational living was the builders’ primary target!


Donna Butts remembers one of the moments that sold her on the idea that there was a sustained rise in the number of multigenerational households. As executive director of Generations United, a nonprofit that promotes intergenerational living, she was called to do an interview on the topic for a Louisiana radio station a few years ago. The host seemed wedded to stereotypes: He’d never want his mother-in-law to move in, since she’d be intrusive and annoying, and adult kids living with their parents were strictly a sign of spoiled millennials.

He was convinced, that is, until he opened the phone lines.

“So, he starts taking calls and everyone has a great story about living with a grandparents or a child under the same roof, and how it’s made their lives better,” Butts says, laughing. “At one point, seeming desperate to prove his point, he asks a guy point blank if having his parent live with his family harms his love life. He just replied, ‘Well, now I have a live-in babysitter, so no.’”

Butts says that this way of thinking—what she calls the ‘John Wayne, go-it-alone mentality’—is withering in the United States. Multigenerational living, when more than one generation lives under one roof (not counting young children or teens), has hit record levels in the U.S. In 2014, according to Pew Research Center data, 60.6 million people, or 19 percent of the U.S. population, lived in multigenerational homes, including 26.9 million three-generation households.

Read full article here:

Posted by on Nov 25, 2017 in Jim's Take on the Market, Market Buzz, The Future | 2 comments

The Big Stagnation, Part 2

In September, I touched on the Big Stagnation:

Just talking about the GOP tax changes could slow down the market.  Because the N.A.R. and others are suggesting publicly that home values could drop 5% to 10%, won’t potential home buyers wait to see if it happens?

The demand will still be there; it will just be more picky than it is today.

The move-up market is where we could see real impact from the proposed tax changes.  If potential move-uppers don’t move, they would keep their mortgage-interest deduction and lower property taxes.  If they do move and get a loan over $500,000, they’ll enjoy paying on a new mortgage for 30 years with no MID, and pay higher property taxes.

They won’t calculate the exact cost of losing the MID (it’s not that much) – and instead, it will be the last straw and they will just quit thinking about moving because they’re disgusted with politicians.

We will also lose a few who need to stick around longer to qualify for the tax-free gain on the sale of their house, due to the change of having to own/occupy the house for five out of the last eight years to qualify.

End result: Fewer people willing to move up, which would have a significant impact on the higher end market.   True, the move-up buyers won’t be listing their lower-priced house for sale either, which would create a net-zero change, and potentially make the inventory tighter, which would be better for the remaining sellers.

But there hasn’t been a shortage of homes for sale listed over $1,000,000 (there are 1,395 homes for sale today in San Diego County priced over $1,000,000, and 327 sold in October).

Higher-end sellers will have to wait even longer for the trickle of buyers to reach them.  Plus, if a neighboring seller or two dumps on price to unload theirs, the lower comps could add another six months to the selling timeline, or longer.  The sellers who claim to be in no rush will be tested!

The environment will be compounded by the lack of experience in dealing with this type of market by everyone involved. For the last seven years, if you wanted to buy a house, you had to pay the sellers’ price….or more.  Will that continue?  Yes, for those selling a perfect house at the perfect price.  But it will be too easy for buyers to pass on the clunkers or OPTs.

S-t-a-g-n-a-n-t  C-i-t-y.

The lower end should stay red hot, but it won’t be trickling up as much.

And that’s not considering the possibilities of higher interest rates, earthquake or other natural disaster, nuclear war, or recession!

Posted by on Nov 7, 2017 in Boomer Liquidations, Boomers, Jim's Take on the Market, Local Government, Market Buzz, Market Conditions | 6 comments

San Diego #10 Unaffordable

This chart from real estate firm Point2Homes ranks cities by their “median multiple” — the median home price divided by median household income.  Take Vancouver, which tops the unaffordability list and has a median home sale price 17.3 times higher than the median household income:

A median multiple of greater than 5.1 is rated as “severely unaffordable,” which a disturbing number of major metropolitan areas qualify as, for reasons ranging from the huge influx of foreign investment in Vancouver to San Francisco’s severe housing shortage.

Posted by on Oct 27, 2017 in Jim's Take on the Market, Market Buzz | 2 comments