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Are you looking for an experienced agent to help you buy or sell a home? Contact Jim the Realtor!

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


Category Archive: ‘Market Conditions’

Will Home Sellers Panic?

Wolf takes a linear view of the housing market on his blog, which doesn’t always factor in the emotional components involved in the decision-making, which is fine.  His content tends to be more on the alarmist, doomer side – like in this case where is his comparing the changes in year-over-year percentages to really magnify the concern:

https://wolfstreet.com/2018/11/16/housing-downturn-arrives-in-silicon-valley-san-francisco/

I’m all for being on the lookout for seller panic.

What are the two simple signs of panic?

  1. New listings flooding the market.
  2. Many homes selling for radical discounts below recent comps.

Those are the two most obvious signs of seller panic.  Comparing the YoY percentage of active listings is interesting, but doesn’t tell us enough.

Here is the graph of the NSDCC new listings for September-October, and how they compare to previous years.  There are no real signs of panic here, and, if anything, it shows us that comparing to last year is measuring against one of the lowest amounts ever:

What aren’t signs of panic:

  1. A growing inventory of unsold homes.
  2. More price reductions.

We are going to get comfortable with a larger inventory of homes for sale.  The more unsold homes lying around means that sellers aren’t very motivated, because they didn’t price aggressively in the beginning and they still think their price must be right.

On #2, more price reductions don’t tell you much.  Wolf touts a recent surge, but most price reductions aren’t lopping off big chunks – they are usually 1% or 2% off, which are too small to change anything and they will have to keep doing more.  By the time they knock off 5% to 10% from their original and overly-optimistic list price, they will feel like they are giving it away and change course (rent it, reverse-mortgage it, or wait until next year).

Could there be sellers motivated enough to dump on price? Very unlikely.

Let’s consider the sellers who might be motivated – the Big Three:

Death – for those who inherit, this is their lottery.  Not only will they hold out for crazy money, but one of them could probably use a residence so there are other alternatives to giving it away.

Divorce – what was once 100% equity is now 50%, and each spouse will want/need every dollar to split between them.  If they can’t sell for enough to make everyone happy, well then everyone has to live somewhere. One of the spouses could occupy until the market ‘improves’.

Job Transfer – renting instead of selling is always an option, especially for those who think they might want to return some day.

Sellers who aren’t in the Big Three categories are definitely not going to give it away, so the worst that will happen is a slight downward trend in pricing.

Reasons given why the market will tank, and how sellers feel about them:

  1. Affordability – sellers don’t care.
  2. Higher rates – ‘not my problem’.
  3. More inventory – ‘I only have one to sell’.

Sellers get a vote!

Posted by on Nov 17, 2018 in Jim's Take on the Market, Market Conditions, North County Coastal | 0 comments

Months of Active Inventory

Rich’s latest report is out!

The worrisome spike last month did flatten out, but it does make you wonder if we should adjust our sights.

I agree with Rich that the months of active inventory will probably be rising from now on.  But if the coastal market had 3 or 4 months of active inventory, it wouldn’t be a bad thing.  Rancho Santa Fe is 7+ and doing fine.

Click here for the full report:

https://www.piggington.com/october_2018_housing_data

Posted by on Nov 10, 2018 in Graphs of Market Indicators, Jim's Take on the Market, Market Conditions, North County Coastal, Rich Toscano | 3 comments

The ‘Rancho’ Effect

People are feeling a ‘change’ in the market, and wonder what will happen. The rapid escalation of prices has turned real estate into a rich man’s game – and you need serious horsepower to participate!

As the rest of North San Diego County’s coastal housing market feels the ‘Rancho’ effect, we will see more listings coming to market, listings taking longer to sell, and bigger gaps between list prices and sales prices.

In the surrounding lower-priced areas, the action has been much faster – we’re used to the quality homes selling in the first week or two. Let’s compare RSF to Encinitas to demonstrate what we can expect from now on:

Category
Encinitas
Rancho Santa Fe
Population
63,184
3,117
Active Listings
134
172
October Solds
48
23
Actives/Solds
2.8
7.5
Oct Average DOM
40
73
Oct Average SP:LP
95%
87%

We’ll have more homes on the market, slower market times, and bigger gaps between the list prices and sales prices. It’s how they do it in the Ranch!

Posted by on Nov 8, 2018 in Encinitas, Jim's Take on the Market, Listing Agent Practices, Market Conditions, Rancho Santa Fe | 1 comment

Homeownership By Age

This is the Deputy Chief Economist at Freddie Mac:


It is incredible to see the trend change in every category around 2016 – as if there was a societal shift that gave permission to get back in the game.

Maybe that’s when the Bank of Mom and Dad kicked in, and their distribution of wealth made it possible to buy even though prices were soaring?

Or the resurgence from lower-end buyers enabled the move-up market?

What riddle do you see?

Posted by on Nov 6, 2018 in Graphs of Market Indicators, Jim's Take on the Market, Market Conditions | 2 comments

‘Bump in the Road’

Of all the other choices over the last 40 years, I’ll take the last four years as my favorite trend line!

Thornberg has been the most level-headed analyst since the bust:

The annals of postwar Southern California real estate history are full of boom-and-bust cycles, with periods of sharp price appreciation that suddenly skid to a halt. Whether those ups and downs offer any guidance — or hope — for today’s homeowners is a subject for debate.

Some of those who study the housing market predict annual price increases will slow. Others think values could dip. But there is general agreement that a meltdown is not in the offing, given a healthy economy and dearth of home building. The current slowdown, said Christopher Thornberg of Beacon Economics, “is a bump in the road.”

This time around, the risk of a crash from overborrowing is minimal, if not nonexistent, experts said. Reforms after the financial crisis dramatically tightened lending standards. Today, even though lending has eased somewhat, borrowers are more likely to be able to afford their loans.

That’s borne out in the data:

  • Mortgage lending is relatively restrained. Last decade, total mortgage debt consistently grew by double digits. In the second quarter, those debts rose only 3.5% from the same period a year earlier, Federal Reserve data show.
  • Homeowners aren’t as squeezed. Total U.S. mortgage payments in the second quarter accounted for 4.2% of total disposable personal income, the lowest level in at least 38 years. The rate was in the 6% range for most of the mid-2000s bubble, and it hit 7% just before the crash.
  • Borrowers are less risky. The median credit score for those taking out a mortgage in the second quarter was 760, compared to a bubble-era low of 707.

“I don’t think we need to worry this time around about a bursting of a credit bubble,” said Stuart Gabriel, director of the Ziman Center for Real Estate at UCLA. “We can cross that factor off the list.”

Link to latimes.com article

Posted by on Nov 5, 2018 in Forecasts, Jim's Take on the Market, Market Conditions | 0 comments

Inventory Watch

There are times when the general market is in a funk and homes aren’t selling – when it’s easy to think, “Oh this is it, we’re cooked”.

There are also times when the market erupts, and a series of homes that have been languishing for months and/or homes that appear overpriced go pending – which then triggers additional pendings nearby.

Our market is having one of those surges right now!

Not just a couple here and there – we have had dozens of NSDCC homes go pending in the last 10-14 days that have been listed for months, or priced so high you’d think they don’t have a chance.

You sure want to be on the market when that happens!

Richard and I both sold our listings featured here on Friday, and in my case, Tom’s house was the third one listed over $900,000 in South Oceanside to go pending in the last week!

Get Good Help!

Read More

Posted by on Nov 5, 2018 in Inventory, Jim's Take on the Market, Market Conditions, Market Surge, North County Coastal | 0 comments

Selling Your Home in 2019

We have a fundamental problem in the housing market – how it works today.

New listings are distributed within minutes these days, and waiting buyers are on the edge of their seat.  Those who were already frustrated with high prices, higher rates, and coming soons want to get it over with and buy now – and they either jump immediately on the good ones, or they swipe to the next offering.

The graph above show the Zillow views of my one-story listing in La Costa Ridge.  Look how quickly the interest fell off.  The bump on Day 9 was when we lowered the price $100,000, and literally by the next day it was old news.

What’s the problem?

Sellers are unaware.

Once they figure it out, it is natural to resist, and the real estate industry makes no attempt to educate sellers on this dilemma.  Maybe agents aren’t aware either, or are uncertain what to make of it?

It doesn’t matter when prices are rising – sellers can just wait until the market catches up with their price, which has been the preferred method forever. But in a stalled/stagnant/soft market, prices aren’t coming to meet you – and they might be going to other way.  It could be years before they do catch up.

We expect selling a house to be like every other job – put in a good effort for weeks or months, and at the end we will have success.

But selling a house in this environment gets more-frustrating/less-rewarding with the longer it goes on.

Will sellers resist the temptation to add a little extra to their list price, and instead employ sharp pricing to sell early and for a higher amount?

They should, because buyers are dying to beat down the prices of the stale old listings, and their pricing expectations will be dropping far faster than sellers.  It will get harder and harder to put deals together on the older listings.

It’s simply an educational thing for the new market conditions – if you price your home to sit, not sell, you will be sitting much longer than before!

Get Good Help!

Posted by on Nov 2, 2018 in Jim's Take on the Market, Listing Agent Practices, Market Conditions, Why You Should List With Jim | 0 comments

Doom-Doom?

Corelogic reported September sales yesterday, and Doom-Doom Diana rejoiced.

She wrote an article with the headline ‘Southern California suffers its worst housing slump in over a decade’, and reported that sales were down 18%.  Then she tweeted the article with the same soundbite (above).

But further down in her own article was this gem:

“There was one caveat to last month’s sharp annual sales decline — this September had one less business day for recording transactions. Adjusting for that, the year-over-year decline would be about 13 percent, still the largest in four years.”

Link to CNBC article

Even though she knew it was really only the worst in four years, she pushed the worst-in-decade angle.  Rather than commit to honest reporting, she would rather distort the truth in order to attract the maximum eyeballs.

What’s really happening?

It is natural for homebuyers to tap the brakes when rates and prices are going up at the same time.  It’s not because they don’t want to buy.  It because they wonder if prices will come down, and they don’t want to pay too much.

The result? Sales naturally go down.

I’m glad to see that buyers are paying close attention – they should!

People are moving fast and are addicted to soundbites.  We been trained to live in a binary world, and just want to hear if the market is going up or down, like with stocks and bonds.

I’d rather get into the minutiae and ramble on about all the variables. But realistically, who is going to listen when Doom-Doom Diana will give you a sexy hot take in one sentence?

The other tenet that determines the housing market is the seller’s mantra:  “I don’t have to move, I have plenty of time, and I’m not going to give it away!”

Sellers get a vote.

If they aren’t going to sell for less, then we roll into Stagnant City.  In the past, banks had to sell for what the market would bear, and they would lead the market down as they scrambled to get out.

But banks aren’t required to foreclose any more.

Which leaves us with the question: Which seller has to sell for whatever the market will bear today, even if it is substantially below their perceived value?

The answer is ‘None’.  Today’s home sellers might knock off a couple of bucks, but they’re not going to give it away.

So let’s determine a way to gauge the market in an easy binary way, and measure the most important tenet – are sellers capitulating?

Sellers always want more than the last sale nearby.  Here is a simple way to follow the trend to see if sellers are getting what the last guy got – the month-over-month changes in the Case-Shiller Index:

Recently, sellers have been getting about what the last guy got, or a little more.  But if we see a series of negative numbers over the next few months, we know that buyers are winning.

Sellers have loads of equity – more than ever – so you would think they wouldn’t mind giving some of it back to make a deal.  But homes are personal, and the ego is a funny thing.  It would take a full panic for sellers to capitulate.

Posted by on Oct 31, 2018 in Jim's Take on the Market, Market Conditions, Thinking of Buying?, Thinking of Selling? | 9 comments

812 Clicks

I only put this on here because I want you to learn with me, side-by-side.

I spent a couple of bucks on a Facebook ad, and got 812 clicks.

Buyers are interested!

There is a demand right below the surface, and a property that looks under market will get hundreds of buyers to respond. Hire me to handle!

Posted by on Oct 29, 2018 in Jim's Take on the Market, Listing Agent Practices, Market Conditions, Thinking of Selling?, Why You Should List With Jim | 4 comments