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Jim Klinge
Cell/Text: (858) 997-3801
klingerealty@gmail.com
701 Palomar Airport Road, Suite 300
Carlsbad, CA 92011


Category Archive: ‘Market Buzz’

Stucco Valley

A good example of today’s market conditions. At first, you would think a bank-owned house in the prime Derby Hill community in Carmel Valley would garner a lot of attention, and sell quickly. But this one isn’t tricked out with extras, and it’s not a canyon lot either.

Like most sellers, they added a little mustard to their list price – but they were on the market for 55 days before finding the buyer:

Posted by on Oct 26, 2018 in Bubbleinfo TV, Carmel Valley, Jim's Take on the Market, Market Buzz, REOs | 0 comments

Inventory 2018

Yesterday, Bill featured the C.A.R. release about September sales that included the president’s comment that buyers are ‘self-sidelining’ in anticipation of lower prices ahead.  White included his obligatory blame on the tax reform, which he was so adamantly against even though his case was based on faulty evidence – and it passed anyway.

Bill also included the chart above that showed inventory explosion in CA:

https://www.calculatedriskblog.com/2018/10/california-california-housing-market.html

Let’s review our NSDCC stats to see how we are behaving:

Year
Total Listings YoY
Total Sales YoY
TL/TS Ratio
ACT Inventory Mid-Oct
2013
4,277
2,685
1.59
2014
4,108
2,289
1.79
1,091
2015
4,396
2,513
1.75
1,027
2016
4,520
2,469
1.83
987
2017
4,062
2,499
1.63
812
2018
4,163
2,283
1.82
1,013

Our current NSDCC inventory is 25% higher than last year, but it just highlights what a great year we had in 2017 – when the TL/TS ratio was similar to the full-tilt frenzy we had in 2013.

This year looks a lot like the more-normal years of 2014-2016, when the sledding was much tougher.  As long as our current stats are staying in-line with previous years, we should be fine.

Expect more of the same – buying and selling homes is going to be difficult.

Get Good Help!

Posted by on Oct 23, 2018 in Inventory, Jim's Take on the Market, Market Buzz | 3 comments

50% of Boomers Plan to Move

Here’s the interesting excerpt from this article – the other alternatives that older adults might consider:

Communities become a source of support and engagement for residents, particularly for older adults, who have an even stronger desire to age in place. The AARP survey finds many adults age 50 and older are willing to consider alternatives such as home sharing (32%), building an accessory dwelling unit (31%) and villages that provide services that enable aging in place (56%).

Link to Article

Posted by on Sep 28, 2018 in Boomer Liquidations, Boomers, Jim's Take on the Market, Market Buzz | 0 comments

Record Number of Price Cuts

Though Manhattan has been a buyers’ market for two years, let’s take these with a grain of salt – the slowdown is due to the highlighted sentence in the last paragraph.  Hat tip to GW for sending this in:

New York City’s home sellers, tired of waiting for buyers, slashed prices on almost 800 listings in a single week this month, the most in at least 12 years.

In the week through Sept. 9, there were 774 homes in Manhattan, Brooklyn and Queens that got a price cut, the most for any seven-day period in data going back to 2006, according to a report Friday by listings website StreetEasy. The previous weekly record was in March 2009, during the global recession, when 713 properties were reduced.

Sellers with older listings are adjusting expectations just as a wave of newer properties hits the market — customary in New York after Labor Day. In that same September week, Manhattan got 662 additional listings, the third-highest total for any week in StreetEasy’s data.

“It’s a big gut-check for sellers,” said Grant Long, senior economist at StreetEasy. “We’re at a period in the sales market where sellers have been incredibly ambitious with the prices they’re asking. They’re having to come down and bring prices to where demand actually exists.”

Link to Article

Posted by on Sep 21, 2018 in Jim's Take on the Market, Market Buzz, Thinking of Selling? | 0 comments

Pricing Plateau

Hat tip to Rob Dawg who sent in this example of what’s happening in most markets – lower-end prices are holding, and it’s softer in the higher-end markets.

But because the higher-end sellers typically have more horsepower, and aren’t going to ‘give it away’, prices could just stagnate, instead of dropping.

You could call it a levitating market too, and many will think that it’s just a matter of time before pricing turns south.

Here are reasons why prices are sustainable:

  • We have newer agents representing the buyers.  Even if they have nine years experience, they’ve never seen anything but a seller’s market.  If their buyers don’t like the price, they just pass on the house, instead of making a low offer.
  • Rarely is a seller motivated enough that they might consider a lowball offer. You’re lucky if you get a call back, let alone a counter-offer.
  • Agents are looking to provide less service, not more.  The trend is to capture the consumer’s contact info, send it to the call center, and have dialers hound them until they buy or die.

  • Buyers are so used to pressing a button to transact everything else that they don’t even know they need good help.  All buyers and newer agents know how to do is to find a decent house and process the order.
  • With traditional, discount, and disrupter agents all offering less expertise, the fixers stand virtually no chance of selling – they are too much of a turnoff to buyers who are essentially do-it-yourselfers.  It’s too easy to skip them.
  • If fixers aren’t selling, then just the good-to-excellent homes have a chance, and buyers are typically willing to pay close to list for those.
  • If there were a couple of sales in the neighborhood that were lower, the vast majority of potential sellers would quit, rather than panic. When their motivation is already suspect, it won’t take much for them to wait until some mystical time in the future when they can sell for that extra 5% to 10%.
  • Buyers who go straight to the listing agent are in effect, unrepresented, and will just end up paying retail.
  • Off-market properties would only sell if they get their price.
  • Sellers who can’t get their price can always rent for astronomical prices, and try again next year.

Combine those together and it’s easy to see how prices will stall, or could even drift upward with only the creampuffs selling.  The inventory counts won’t matter either, because if they grow, it will just mean a sea of OPTs lying around, nothing more.

With a healthy economy and no foreclosures, there isn’t any pressure on sellers to dump and run. Besides, where are they going to go in such a hurry?

It will be a binary market – buyers will say yes or no.  Pricing should stay about the same, but if buyers were to dig in, then sales could be affected.  Keep an eye on the sales count – they are the precursor, and they’ve been holding up nicely the last couple of months (at least between La Jolla and Carlsbad).

Posted by on Sep 9, 2018 in Jim's Take on the Market, Market Buzz, Market Conditions, North County Coastal, Sales and Price Check | 1 comment

Housing Prices to Revert to Trendline?

We’re going to be fed a solid diet of ivory-tower analyses from now on, because when you look at the history, it sure seems like home prices are due to come down.  What these authors fail to consider is how the Bank of Mom and Dad has made the current pseudo-bubble possible, and will continue to do so.  Plus, for prices to go down, you must have sellers who are willing to dump on price. None have been that motivated, at least not yet.

This article can’t even get the facts straight – the last bust was caused by exotic neg-am financing exploding in our faces, and ill-informed homeowners bailing out.  In addition, you can draw the trendline anywhere you want, and these authors drew it where it would produce the most drama – see above – yet their worst-case scenario is only back to 2013 prices. We’d survive that.

http://journal.firsttuesday.us/home-prices-run-away-from-incomes-for-now/64911/

This most recent cycle we are emerging from in 2018 has its roots in the early 2000s, when home values began outpacing incomes at a rapid pace.

In 2006, home prices peaked in step with the Millennium Boom. By that time, home sales volume was already falling as buyers sensed prices were too high to continue during the inevitable recession, which arrived in 2008. From 2006 to 2007, prices dropped 16%, followed by a further 26% in the following year.

All in all, California home prices fell 44% from their 2006 peak to their bottom in 2009.

In some ways, this steep fall was a correction to all the excess experienced in the housing market during the early- and mid-2000s. In another sense, the fall was simply the market’s way of bringing home prices back in line with incomes.

There is a name for this reliable force that pulls home prices toward incomes: the mean price trendline.

Through the volatility of housing booms and busts, price increases continue to return to the same rate of annual income change, related to the consumer price inflation (CPI), which is typically 2%-3% per year. In California, this mean price change is closer to 3.5% annually over the past several decades.

How does income impact home prices?

Quite simply, home values can only go as high as incomes allow.

Homebuyers reliant on financing are limited to a maximum mortgage payment of 31% of their monthly income. This translates to the ability to purchase a home costing roughly five times their annual income.

Still, there is some wiggle room in the equation. After incomes, interest rates have the next biggest impact on home prices. When interest rates are falling — as occurred in the 2000s — buyer purchasing power is extended, as homebuyers’ mortgage payments go further. When interest rates rise — as is occurring in 2018 — buyer purchasing power falls and homebuyers are limited to paying less with the same income.

During housing bubbles, home prices become temporarily untethered from this rule and the mean price trendline. During the bust that follows the boom, prices fall, returning once again to the trendline.

2018 is primed for the next downturn

Here’s how the situation stands in mid-2018:

  • home prices are roughly 9% above a year earlier;
  • home sales volume is 1% above a year earlier (basically flat);
  • interest rates are nearly a full percentage point higher than a year earlier, translating to a 7% reduction in purchasing power for the average California homebuyer.

Further, the Federal Reserve (the Fed) plans to continue their efforts to increase interest rates in an effort to cool down the economy and induce a moderate business recession by 2020. Not only do higher interest rates discourage potential homebuyers from entering the market, but they cause homebuyers to offer less when they make an offer to purchase.

In response, first tuesday expects home prices to fall by mid-2019, bottoming once they hit the mean price trendline around 2020. Meanwhile, incomes will continue along at their current measured pace, pausing briefly in 2020-2021 in response to the recession.

Link to Article

Posted by on Aug 17, 2018 in Boomer Liquidations, Boomers, Forecasts, Jim's Take on the Market, Market Buzz | 9 comments

Should Buyers Wait?

Should buyers wait a while to see what happens to the housing market?

Are we just seeing the usual end-of-selling-season malaise when where all of the motivated sellers have succeeded, and just the OPTs are stacking up?

Or has the market shifted…..for good? Is this the peak?

I think it depends on your needs:

  1. Only buying a premium property – then stay in the hunt. In the last downturn, the prices of the premium properties held up well – most had less than a 10% decline in value, and that’s before people started hoarding real estate (not selling for any reason).
  2. Only buying a single story – then stay in the hunt.  The one-story market is red-hot, with demand far out-stripping supply, especially in the newer-home or view categories.
  3. Willing to buy a fixer – be patient.  Buy when you see the appropriate gap of 5% to 10% between the creampuffs and the ones that bark at traffic.  If the home is in original condition, the gap should be larger.
  4. Only want to steal a property – very unlikely in the near-term.  Sellers aren’t that motivated, and only a small minority might consider selling for less than 5% of list.

We should be in a stagnant state for months, as everyone waits to see what happens next spring.  But I think buyers will be similarly picky then too.

We’ll see the same or similar psychology take over the whole country at the same time – which is the way it always happens.  What needs to adjust is the sellers’ trend to expect more than what the last guy got.

Here is a discussion guided by our friend and realtor Tom Stone about the market in Sonoma County (follow the link) – and check the comment section too, where Tom mentions the solution. Hat tip Eddie89!

Link to Full Article on Wolf Street

 

Posted by on Aug 16, 2018 in Jim's Take on the Market, Market Buzz, Thinking of Buying?, Thinking of Selling?, Why You Should Hire Jim as your Buyer's Agent, Why You Should List With Jim | 3 comments

Sell Your Home Now, or Later?

So you’ve heard that the market is a little uncertain right now, and you’re wondering if you should just wait a year or two before selling your residence.

If you don’t mind keeping the home forever, then fine, the value will probably go up in the long run. But if you’d rather get your hands on your tax-free equity in the next couple of years, consider this.

In the strong seller’s market we’ve enjoyed over the last nine years, buyers had to pay the price.  There was enough competition that if you didn’t pay the seller’s price, somebody else would.

But lately we’ve seen the competition dwindle.

Let’s don’t call it a buyer’s market just yet.  Let’s call it neutral.

If buyers feel they have more negotiating power, they are going to use it.  They wait more patiently now, critique the comps more closely, and skip the fixers unless the price gap is appropriate.  Sellers of the fixers got away with selling for just a little under the superior homes, but now the 5% to 10% gap is back.

Once the market has turned that corner, it probably won’t just bounce back to being a seller’s market the next spring.

How do you know if you should sell now, or take a chance?

Sell now if you have good comps.

You’re not going to have better comps next year.  Why?

Because once buyers they recognize a slower market, they are going to dig in on price and only pay the same as the comps, or less.  They will wait patiently for the more-motivated sellers who price close to the comps or just under.  Those are the sales that will be setting the market.

So the best-case scenario is to have next-year’s prices be about the same as today.  So you should sell now while you have the certainty.

Posted by on Aug 14, 2018 in Jim's Take on the Market, Listing Agent Practices, Market Buzz, Thinking of Selling?, Why You Should List With Jim | 3 comments

Inventory Watch

I mentioned that Lawrence Yun should talk to some realtors because he could do a better job explaining the dynamics about the inventory.

He keeps saying that there is an inventory shortage, but the number of houses for sale between Carlsbad and La Jolla today is at the high point for year.

They’re just expensive.

In mid-August of 2014 we had 135 NSDCC houses for sale that were listed under $800,000.

Today we have 14!

The number of houses for sale usually peaks in July or August, so the inventory should start to unwind from here as sellers pack it in for the year.

Read More

Posted by on Aug 13, 2018 in Inventory, Jim's Take on the Market, Market Buzz | 0 comments

Who Is Selling?

Who is selling?

Over the last few years we’ve seen that most home sellers are the long-time owners, and that trend is continuing.

On the left are the years when the sellers purchased the home they sold between July 26 and August 3rd of this year:

Year Purchased
12/12/15
3/19/16
6/18/16
12/13/16
4/3/17
6/30/17
8/5/18
0 – 2003
41%
42%
39%
57%
48%
32%
42%
2004 – 2008
23%
29%
24%
19%
15%
12%
14%
2009 – 2011
15%
11%
13%
6%
7%
14%
12%
2012 – 2018
18%
18%
19%
13%
25%
34%
29%
New Homes
2%
1%
5%
4%
4%
7%
5%

The increasing trend of recent purchasers selling might just be from the additional years in the last category.  It was 2012-2015 when this graph began, and now it covers seven years – almost twice as many.

Are those sellers moving up or down?  Or cashing out?

The younger boomers:

  1. Probably moved up a couple of times, not sitting on family homestead.
  2. Are used to moving more.
  3. Are more physically capable of moving.
  4. Have a little less connection to the neighborhood.
  5. Still have some adventure left in them.

But the younger boomers:

  1. Are more likely to still be working.
  2. Are more likely to still have kids at home.
  3. Are more capable of modifying their home.
  4. Don’t need assisted living.

With long-time owners providing the bulk of the inventory, we should expect older homes for sale that need fixing, or at least some updating. Yet the current trend is for buyers getting more picky, not less.

More stats:

Other
12/12/15
3/19/16
6/18/16
12/13/16
4/3/17
6/30/17
8/5/18
# Sales
125
114
144
112
99
99
102
Avg. $/sf
$505/sf
$552/sf
$550/sf
$529/sf
$481/sf
$532/sf
$558/sf
Median SP
$1.08M
$1.129M
$1.291M
$1.274M
$1.11M
$1.25M
$1.34M
Avg DOM
60
38
42
54
43
52
36
0-10 DOM
24%
32%
35%
28%
45%
42%
31%
Lost $$
11
3
7
7
0
1
2
DOM = 0
5
8
7
2
4
3
8

Posted by on Aug 6, 2018 in Boomer Liquidations, Boomers, Jim's Take on the Market, Market Buzz, North County Coastal | 0 comments