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

Category Archive: ‘Market Conditions’

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

Dangers of Overpricing Your Home

Ryan has been running a fantastic real estate blog for years and has double the audience that we have here, so check him out at:

He gave me permission to run his latest post, and #1 is true – once sellers tell all their friends and family that they are selling, it’s like the list price becomes a fact, rather than a hopeful target:

Overpricing is a problem. You’d think in such a “hot” market that it wouldn’t be an issue, but it is. I’m not trying to dog sellers, but let’s talk about some of the most common pricing mistakes right now. I hope this helps.

1) Getting married to the list price: Sometimes it’s like sellers get married to a lofty list price and become unwilling to budge – even when buyers are refusing to pay that much. It’s as if sellers get paralyzed and cannot move beyond a clearly unrealistic price. My advice? Listen to the market and budge on price as needed.

2) I need this amount to move: I’ve encountered a few sellers recently who priced based on how much money they needed to move. But the market doesn’t care about personal finances or plans. The market only cares about paying a reasonable price for the property.

3) Headlines: At times sellers hear sensational headlines like, “Values are increasing more rapidly than ever,” so they price according to a headline rather than similar sales in the neighborhood market.

4) Out of touch with picky buyers: Buyers these days tend to be more picky than ever about what they purchase, but I’m not sure sellers are really in tune with how finicky buyers are about price, location, and condition. You’d think buyers would be so desperate to get into contract and pay anything because of a housing shortage, but they’re actually quite patient in many cases because they want to wait for the right property and feel like they’re paying a fair price. My advice? Price for real buyers in the neighborhood market rather than that one mythical “unicorn” buyer who is going to pay more for some reason.

5) Sales instead of comps: The most common pricing mistake I see is pricing according to a sale down the street that really isn’t comparable. So a seller says, “I know that house is totally remodeled with a pool, but someone’s going to pay the same amount for my house.” My advice? Price according to similar homes that are actually getting into contract rather than dissimilar properties. Be careful about hijacking price per sq ft figures too.

6) The fallacy of summer: We hear that summer is the hottest real estate season, but the spring season is actually the hottest in many markets throughout the country. By the time summer rolls around the market is actually beginning to cool because it’s been hot for almost two quarters already. During summer listing volume is just about to peak for the year, and that means it starts to take longer to sell, prices often begin to soften for the season, and buyers gain more power to negotiate. My advice? Be realistic about prices today.

7) Zillow: I can’t tell you how often I’ve heard, “But Zillow says my house is worth X amount.” I know, Zillow says stuff like, “We’re only a starting point and a ballpark figure.” Yet in my experience sellers rely heavily on the Zestimate and very often treat it like a definitive ending point rather than a ballpark. Remember, Zillow doesn’t know anything about condition, upgrades, smell, etc… Sometimes Zillow nails the value, but other times it’s off by a substantial amount – even in a tract neighborhood. My advice? Take “The Big Z” with a grain of salt.

8) Other: What else are you seeing out there?

I hope this was interesting or helpful. In light of the market beginning to cool for the season, I thought scratching out these thoughts might be helpful and even save sellers some money (and heartache).

Questions: Which mistake do you see most often? Any stories or insight to share? I’d love to hear your take.

Link to His Comment Section

Hat tip to Ben who alerted me to this post!

Posted by on Jul 8, 2018 in Jim's Take on the Market, Market Conditions, Thinking of Selling?, Why You Should List With Jim | 10 comments

Frenzy Jello is Jigglin’

After getting LeBron, I couldn’t go a whole week without a reference to the soon-to-be World Champion Los Angeles Lakers!

But seriously, the frenzy is over.

As the year got started, there was a weird phenomenon where the hotter listings were getting shown the first day on the market, but offers weren’t coming in for a few days.

The frenzy causes buyers to react.  You’ve already lost a bidding war or two, and you’re on the edge of your seat. You’re going to get the next one, and when you see it – boom, fire an offer without thought.

Buyers are thinking now.

They are thinking about any reason NOT to buy.  For those who have only been around since 2009, this is what a normal market looks like.

Buyers should be careful and cautious – YES!

Buyers shouldn’t think it’s going to be different any time soon. It won’t.

Seller optimism has never been so high, and every new listing is still shooting for the moon.  There aren’t going to be many sellers who are so motivated that they are going to voluntarily give up a chunk of equity without a fight.

Back in the old days, foreclosure was a threat. Not any more – sellers who can’t or don’t want to make their payments can go months or years without paying, so those folks aren’t going to give it away.

The only place you might see an actual dumping on price is where several sellers in one neighborhood are unusually motivated and are experiencing a race to get out.  But that will be extremely rare – sellers who see others dumping nearby will just give up and wait, rather than give it away.

There has been some tightening of the reverse-mortgage HUD guidelines that could prevent that option from being a lifeline.  But there are private lenders working to get in the game to pick up the slack.

One of the biggest hurdles are the agents.  The ones that don’t recognize the shift will just carry on like they always have.  They will put unrealistic prices on listings, and then not know how to adjust, or if they get lucky and get a lower offer, they will berate and insult the buyer’s agent and blow the deal.  Expect more ‘back-on-markets’, and they will be due to ‘no fault of the property’ (it was the listing agent instead).

No need for panic though, this is natural:

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!

Because of the new components (reverse mortgages and no foreclosures), the start of the next cycle may be extended and in slow motion.  It should feel like Stagnant City, or be labeled a ‘plateau’ of pricing. But we’re here!

Get Good Help!

Posted by on Jul 6, 2018 in Forecasts, Jim's Take on the Market, Market Conditions | 4 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

Inventory Watch

If we were to compare a simple set of data points to describe the general condition of the NSDCC market today, it would be these:

The UNDER-$1,000,000 Market:

NSDCC Active Listings
Avg. LP/sf
Avg. DOM
# of Pendings
Apr 2
Jul 2

The lowest-end of the market – the place that should be the hottest – has almost doubled the number of houses for sale over the last 90 days (and this is the selling season!).

During the same period, their average list pricing has declined 5%, and the number of pendings has dropped 20%. A casual observer might conclude that the market is in freefall, but it’s just sorting itself out.  We are seeing what the ibuyers are finding out – sellers are willing to take less, and still call it a win.

While sellers would love to get a crazy-high, new-record price for their home, prices have gone up so much recently that even if they have to take less, it is still a substantially-higher profit over just a few years ago.

Last year, there were 314 closed sales between April 2nd and July 2nd, but this year the current count is only 217 – so not every seller is in recognition.

Get Good Help!

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Posted by on Jul 2, 2018 in Inventory, Jim's Take on the Market, Market Conditions | 4 comments


For an industry that has been stagnant and mostly unaffected by disintermediation/disruption over the last couple of decades, you get the feeling that change might be afoot now.

It’s asking a lot, but what we really need is transparency.

We are at the fork-in-the-road where agents and consumers alike want and need to choose between the traditional model of selling homes, or one of the newfangled disrupter ways.

But the services being offered are blurry.  The disrupters call themselves realtors, and say they provide the same full service.  Big teams say because they’ve sold so many homes that their way is the best.  Individual agents get caught in the middle somewhere.

If every agent described exactly what they do to earn their fee, then at least the consumers might be able to compare apples-to-apples.

Every agent has their 100-point marketing plan, a fabulous support team, and is in the Top 1%.  Let’s go beyond those basics.

To make it easier for consumers, let’s boil it down to the most important part of the equation – what is the one critical question to ask an agent?

‘Who and where are you at the point of sale?’

The frenzy has simmered down, and we’re back to the regular hand-to-hand real estate combat in the streets.  This is when buyers and sellers need real and effective guidance on when to make the deal.

If you choose a discounter, inexperienced agent, or get stuck with an assistant, you will get a tepid response.  Their lack of experience at guiding you to make the right decision when everything is on the line will cause them to be conservative, and not commit.  You will be left to your own devices.

When you choose a great agent, he delivers facts and opinions for you to use to make the right decision on the spot – that is real guidance.

This is where consumers need the real help, but the industry fails miserably because when you need us most, we’re not there.  We don’t insist on having top-quality help in place at crunchtime.

It hasn’t mattered in the full-blown frenzy – buyers just pay the price or higher, and everyone is happy.  You don’t need much help then.

But now that sales are receeding, and more homes are lying around not selling, real help is needed to figure out what to do.

Sellers are always prone to add a little mustard to their price, and without proper guidance on when to accept a lower offer or when to reduce their price, they can miss the selling window and chase the market down.  Buyers can pay too much and regret it later, or not enough and miss out on a good match.

Get Good Help!

Posted by on Jun 27, 2018 in Jim's Take on the Market, Listing Agent Practices, Market Conditions, Realtor, Realtor Training, Realtors Talking Shop | 2 comments

Aging Boomers = Fewer Moves

It looks like the low-inventory era will be here for a while….

The statistics about the waves of baby boomers turning 65 each day are old news to anyone who works in a senior-focused industry.

But a new report from Harvard University adds a new twist to measuring the coming wave of American seniors: In 2035, households with members aged 65 and older will account for a full third of the homes in the country.

That’s one of the conclusions from a new report published by the Joint Center for Housing Studies (JCHS) at Harvard, which releases an annual look at the complexion of the U.S. housing market. And this year, the researchers specifically pointed out the ways elders will dominate the market for decades to come.

At present, 65-and-olders represent about one in four U.S. households, up from one in five just 10 years ago — thanks to a gain of 7 million senior households over that span. And in a little over 15 years, that number will grow to one in three.

“The aging of the U.S. population has also boosted the number of older households because the baby-boom generation is so much larger than the preceding generation,” the JCHS observed.

Homes headed by those 65 and older were also the only age group that had a higher rate of homeownership in 2017 than they did in 1987.

That growth is coming at the expense of the younger millennial generation, which despite reaching the age that their predecessors were when they began buying homes and starting families, still lags behind.

“In fact, household headship rates among young adults are still declining, albeit more slowly than after the recession,” the JCHS wrote in its report. “Indeed, 26% of adults aged 25-34 were living with parents or other relatives in 2017, while 9% were doubling up with non-family members — both shares all-time highs.”

In addition, adults of all ages are far less likely to move than in years past. While the greatest declines in household mobility have been concentrated among the young, the 65-and-older set has also become increasingly more entrenched in their existing properties.

“Many of the growing number of older households are staying in their homes longer than previous generations at their ages, rather than downsizing or moving to rentals,” the JCHS observed.

Demographic shifts also play a role: Even though the move rate for Americans aged 65 and older dropped by just a percentage point, the sheer volume of aging baby boomers means that change represents “significantly fewer residential moves.”

“There is no doubt that the number of older adults will reach an unprecedented high over the next two decades,” the Harvard team concluded. “With this growth will come different demands, challenges, and stresses on the housing stock.”

Link to Article

Posted by on Jun 22, 2018 in Boomer Liquidations, Boomers, Jim's Take on the Market, Market Conditions | 9 comments

Boomers Moving Out

This story is about the same as Carlsbad folks moving to San Jacinto, where you can buy brand-new houses in the $300,000s.  But boomers want to stay within range of their kids and grandkids, so any boomer-flight could be muted.

Link to Full Article

If you’re touring a model home this weekend in Sacramento, chances are the other couple over there, the ones checking out the quartz counters and sizing up the master closet, are not locals.

Emigres from the San Francisco Bay Area will comprise one-third of house hunters in the capital region this summer, real estate analysts predict.

Call it the coastal wave. It started a year ago, and it may be about to peak.

Bay Area residents are inundating Sacramento home developer websites, clicking through floor plans, watching promotional videos and signing up for email blasts, according to Kevin Carson of the New Home Company. His firm is building in El Dorado Hills, downtown Sacramento and Davis.

“I believe this summer, when the kids get out of school, we are going to see a real increase in Bay Area sales,” he said. “We haven’t really seen the wave hit yet.”

Michael Strech, head of the North State Building Industry Association, said he’s checked with other builders and guesses the one-third figure may be conservative at some new subdivisions.

The reasons are obvious: The median price of a Bay Area home hit $850,000 in April, according to CoreLogic, a real estate data company. That’s a $100,000 increase in one year.

In San Francisco, the median price hit $1.3 million. That often buys no more than a 1,600-square-foot house.

In contrast, the April median sales price for a resale home in Sacramento County was $357,000. And the median for a new home was $433,000.

In an eye-opening Bay Area Council survey this month, 46 percent of Bay Area residents said they want to move out of the region within the next few years. They cite the high cost of living, high housing costs, traffic congestion and homelessness.

By comparison, Sacramento’s sparkling new hillside subdivisions and moderately priced midtown condos are hot properties.

Retiree Marie Diaz, 59, of San Jose is among the emigres. She and her former spouse are selling their home for $2 million after a divorce.

Diaz said she found she can’t afford another Bay Area house with her portion of the proceeds.

“Prices here are outrageous,” she said. “I can’t afford to live in this area. I’d be in an apartment.”

She bought a home under construction in El Dorado Hills for $525,000. It has the same square footage as her old home, with an outdoor “California room” and a nearby community clubhouse where she will play bingo and bunco and do yoga.

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Posted by on Jun 21, 2018 in Boomer Liquidations, Boomers, Jim's Take on the Market, Market Conditions, Where to Move | 4 comments