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

Category Archive: ‘Market Buzz’

Lawrence Yun Responds

Yesterday I sent a note to the C.E.O. of the National Association of Realtors to counter the idea that home values will be going down 8% to 12% this year.  I’ve been asking for two months – show us your math.

Here it is – see link below.  They commissioned a study by Price Waterhouse, who used their microsimulation model to determine that demand will drop so severely that home values would tank by 8% to 12%.  The study is dated May, 2017, so it’s not based on the final tax reform legislation – they used samples of what they thought it could be.

Here they note that the mortgage-interest deduction would drop by almost $800 billion when the law that was passed had NO IMPACT on the ability of existing homeowners to deduct the same mortgage-interest as they’ve been deducting all along.

They also drop the Property Tax Deduction to zero – which is wrong too. 

So Lawrence and the N.A.R. are publicizing the negativity based on an old report from six to twelve months ago that used faulty assumptions.


The data point I included in my email was the bidding war in Carmel Valley  this week on a tract-house listed for $1.2 million that garnered 16 offers. Apparently, the tax reform didn’t impact those buyers the way the microsimulation model expected.

Here’s the email from Lawrence:

Hello Mr. Klinge,

Our CEO shared your note with me, as it mentions my name.

Thanks for sending us the market info on the ground from San Diego. We always appreciate member feedback. We have also heard similar condition of multiple bidding and the lack of inventory in CA coastal cities and in many parts of the country. I will use your comments in my presentations about variations in the country: with upper-end market needing to cut prices in CT and IL and still multiple bidding in San Diego.

We regularly conduct a survey of Realtors® for that exact reason of gauging what is happening on the ground. The latest monthly Realtor® feedback, which we call the Realtor® Confidence Index, is attached. Getting a feel for the market from these 3,000 Realtors® greatly helps me and my staff.  I am asking my staff to contact you subsequently to be part of this survey. There is an open-ended question at the end where we delve into issue not mentioned in the questionnaire and comments like yours will be helpful for us to understand what is happening on the ground and to identify “turning points” in the market.

I’m very glad to hear that the tax deductions limit on mortgage interest and property tax appear not to be impacting your market. The strong job market in San Diego is no doubt helping boost home buying confidence. That is not what we are hearing in other markets, however. Here’s a couple news interview of academics. I am attaching a link of Dr. Robert Shiller’s interview with CNBC at a recent NAR event, when he gave talk about the market condition. He, unlike most other economists, does not believe that consumers are always rational. In fact, people are more irrational then rational, in his view. Always interesting to hear his perspective and it’s here:

Most economists would be like Mark Zandi, believing consumers are mostly rational in their behavior, and has called for negative home price impact from limit real estate tax preferences. Here’s Dr. Zandi’s interview with CBS

Our projection is based on Price Waterhouse Cooper research report, which we commissioned. Here below:

After taking into account of current market momentum, the job market, local housing starts, interest rate forecast, we have CA home prices rising by only 1% in 2018. It would be presumptuous to imply this NAR forecast will be the reality for 2018. Indeed, CA may experience for the remainder of the year what you are seeing currently. Given that many members have asked for our views for outlook in 2018, and the below forecast is our attempt at that.

One big issue we have been working on is to boost inventory and housing supply. As such we have been working with University of California Berkeley … to boost housing supply and homeownership in a sustainable way. Here’s the paper and my presentation at the University is attached.

Based on Realtor® feedbacks, we know how critical it is to have more inventory. Therefore, my presentations have focused on this issue. I am attaching 2 powerpoint presentations that talks to the great undersupply in CA.

  • Housing Conference at University of California at Berkeley
  • Homeownership Conference at HUD, with Dr. Ben Carson presiding.

For day-to-day update on the ever changing market conditions, follow us on social media, along with other 100,000 + fellow realtors®. I am sure you will not agree on all things shown, but it is my hope, some of the info can be used in your business.

Finally, if not already, please consider becoming a major RPAC donor. Many very successful Realtors® like to give their time back to the organization by volunteering and by investing in RPAC to help protect private property rights.

Best regards,


Lawrence Yun, Ph.D.

Chief Economist

National Association of REALTORS

Washington, DC 20001


Posted by on Feb 1, 2018 in Forecasts, Jim's Take on the Market, Market Buzz, Realtor | 6 comments

2018 Start

When you look at the 2nd half of 2012, you can see that a surge was building – and in 2013 we had one of the biggest frenzies of all-time. The end of 2017 was less enthusiastic – the worst second half since 2014.  It makes you think that we might get off to a slower start this year:

NSDCC Detached-Home Sales

1st Half Sales
2nd Half Sales
2nd Half MSP

We can do all the analysis we want, but the bottom line is that if buyers see something they like, they just lunge at it these days. I’ve already seen three new pendings today that were outrageously priced, yet it didn’t stop somebody from tying them up.

Posted by on Jan 22, 2018 in Frenzy, Jim's Take on the Market, Market Buzz | 1 comment

Towards the End of Cycle?

Predicting the future is hard. If it weren’t so challenging, we would all be super rich because we could predict winning Powerball numbers.

However, some people do take a crack at it — not predicting lottery numbers — but peering into the future to see what kinds of changes are likely on the horizon.

Christopher Lee, president and CEO of Los Angeles-based CEL & Associates, is one such person. His expertise is real estate, and he recently offered some insights into the future at a meeting of NAIOP San Diego.

For some time, he’s been predicting that we are getting close to seeing the real estate cycle to begin trending downward. We’re in the seventh inning, he’s said.

How does he know this? Real estate follows a familiar pattern, he said. He’s written on the subject in a paper called, “Real Estate Cycles: They Exist … And They Are Predictable.”

He writes: “Most real estate cycles have begun around the third year of a decade (1973, 1983, 1993, 2003) and usually end by the eighth year of that same decade (1978, 1988, 1998, 2008).”

And what year is it?

Yikes! It’s 2018!

That’s not all he sees. He predicts that the number of real estate brokers will fall by as much as 50 percent within a decade. They will be replaced by strategic business advisors.

And why is this? Because more and more people get their real estate information from online sources, such as Google. Brokers aren’t as necessary.

Lee believes the nature of the workforce itself is transforming as well.

“Work is being redefined,” said Lee, noting that we are moving toward an age when freelancers (from Airbnb hosts to Uber drivers) could thrive and where work will start to follow the worker and not the space. Although he expects some 10 million or more jobs to be lost to robotics, he said specialists and niche entrepreneurs with flourish in this new world of real estate.

Read More

Posted by on Jan 15, 2018 in Forecasts, Jim's Take on the Market, Market Buzz, Market Conditions, The Future | 5 comments

Are Bidding Wars Legit?

Another reason we should sell homes by live auctions…..Hat tip SM:

A local developer and prominent real estate agency conspired to prey on Chinese nationals and inflate luxury home prices on the Eastside for their own profit, according to a lawsuit filed in Seattle on Thursday.

Two plaintiffs who bought adjacent newly built homes in Kirkland allege that their broker at Realogics Sotheby’s International Realty was actually working on behalf of the builder selling the homes.

Jie “Gabby” Jiao and the married couple Maoqi Zhang and Wei Fan hired Realogics Sotheby’s broker Connie Blumenthal to buy their first homes in the United States in spring 2015.

Realogics has aggressively targeted luxury homebuyers in China and is one of the top brokerages for foreign buyers in King County, and Blumenthal has a glitzy website where she boasts her connections in Hong Kong and million-dollar home sales locally. The company and Blumenthal call the claims “baseless.”

Both buyers relied heavily on the expertise of Realogics Sotheby’s and Blumenthal to understand the local market. They were told there were multiple offers on the table and that they needed to bid more than $2 million each to buy the homes, west of Big Finn Hill Park, the lawsuit says.

But when they arrived in the area after the deals closed, they discovered the homes weren’t as promised, and later found out there was no evidence that other buyers were interested in the homes — suggesting they had badly overpaid based on their agent’s advice, the suit says.

One of the buyers, Jiao, was so dissatisfied with the home’s condition — among other things, it did not have the promised backyard or bedroom lake views — that she put the house back on the market. Even with her new broker aggressively marketing the home and offering a free Mercedes to a potential buyer, she wound up selling it for $1.67 million last June — a $338,000 loss over a two-year period, despite the region’s red-hot real estate market.

The other buyer’s home is assessed at $1.46 million, or about $745,000 less than the couple paid.

The Chinese nationals’ attorney, Dave von Beck of Seattle, said he found “what looks like collusion” between Blumenthal and the seller of the home, Alex Dudko of homebuilder Unique Design & Construction Co.

After issuing subpoenas in discovery, according to the suit, the attorney found emails and check stubs showing Blumenthal — the buyers’ agent — was actually working directly with Dudko, the seller, at the time of the sale.

One check showed Dudko paid Blumenthal $20,000 after the sales for “services,” according to the suit. The suit calls the payment a “kickback” for Blumenthal bringing the buyers to the developer.

In an email to Dudko around the time one of the sales closed, Blumenthal referred to a “bonus just between you and I.”

“Let’s meet for dinner and margarita’s again when I get back!” Blumenthal wrote to Dudko. “I need a new handbag :)”

Read full article here:

Link to article

Posted by on Jan 5, 2018 in Auctions, Bidding Wars, Jim's Take on the Market, Market Buzz | 9 comments

Slow Start in 2018?

During our recent frenzied market conditions, getting a good price has taken a back seat to winning the bidding war.

Our SD Case-Shiller Index reflects it – the trend has been very positive:

But the most-recent Case-Shiller reading for San Diego was flat – the steady gains we’ve had every month of 2017 came to a abrupt halt. Just an anomoly?

Our 2017 market was similar to the Frenzy of 2013 – we called it ‘frenzy-lite’. After the frenzy topped off in September 2013, prices were flat for 4-5 months.

True, once we got into the spring selling season of 2014, prices resumed their ascent, and the SD Case-Shiller Index has risen 25% since!

What can we expect now?

A. Sellers and agents have heard that inventory is as low as ever, and can’t resist adding a little extra mustard to their list price, just in case.

B. Buyers have heard that the tax reform will cost them more, and possibly cause prices to go down. They will hesitate to pay more – especially for those homes that need work. After looking this long, it’s too easy to wait-and-see for a few more months.

C. The NSDCC inventory today is about 20% lower than it was last year…..and boy, is it picked over. The sales counts for January are going to be disappointing, unless we get a surge of new listings.

D. Pricing momentum is fueled by sales. Fewer sales = less pricing pressure because of the lack of comps.

Somebody has to go first. Who will be setting the market in early-2018?

  1. Frustrated buyers who just want to get a house.
  2. Affluent people who don’t own here yet.
  3. Those who sold recently and are re-investing their windfall.
  4. Those who have grandkids here.

These are the people who will keep paying whatever it takes – to them, a house is more valuable than +/- a few bucks.  They’re not very price sensitive.

We’ll be fine by March/April – as long as there are decent houses for sale!

Posted by on Jan 2, 2018 in Jim's Take on the Market, Market Buzz, Market Conditions, North County Coastal, Why You Should List With Jim | 2 comments

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, Tax Reform | 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, Tax Reform | 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, Tax Reform | 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