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Category Archive: ‘Market Conditions’

Current Market Trends

sf

Here are the thoughts of a two-percenter agent from the Bay Area about her market, which are probably about right.  Instead of wild bidding wars, there might only be one or two offers per house – which will leave sellers’ egos disappointed, but the market will survive.  Plus, more houses won’t sell – let’s face it, only about 60% of NSDCC listings actually close escrow.  P.S.  Have you noticed that most agents seem to be in the Top 1% or 2%?:

http://www.marketwatch.com/story/san-francisco-bay-area-housing-bubble-not-bursting-but-moderating-2016-05-17

The whole story – I bold-italicized the phrases where I had strong agreement:

Real estate markets are moving toward a “new normal” in the San Francisco Bay area. This is according to the local “feet on the street” stories I hear from top Bay Area Realtors.

The Bay Area housing bubble is not bursting. It is changing to what appears to be a “new normal.” Let’s look at the big picture to understand what we believe are the trends driving the current market and how we think they will continue to impact the market in 2016.

1: This is a high-stress market and it will continue

Buying or selling a home is usually prompted by a life event: death, divorce, marriage, relocation, job change and increase or decrease in family. These life events often bring stress and buying or selling a house adds to this stress. Add in the drama of a notably contentious presidential campaign, toss in the uncertainty of the financial markets and then add the pressure of the fast-paced expensive Bay Area market where decisions and offers need to be made quickly.

Unfortunately, all this is here to stay for a while. Yes, any normal person would be hard-pressed not to feel like they were in a tornado.

2: Low inventory of good homes will continue to drive pricing. However, buyer demand is becoming tempered and more deliberate

Yet another reminder that markets invariably change. While our group of top agents acknowledged the low inventory, they also recognized that buyers were becoming much more selective and deliberate. They look, they think and if they don’t “feel it” they move on. “Who cares if there is an offer date?” “Another day and another home will appear.” “Maybe the home won’t sell and we can buy it for less.” If they don’t see the value they pass.

As a client of mine once said during a previous hot market, “This market is so crazy even a burning house will sell.” Not so any more. Many agents believe sellers are seeing the last days when homes with deficiencies will sell quickly for top dollar. Great homes in great locations, priced fairly and marketed properly are selling. However, we are now beginning to see situations where even these homes only have one offer and sometimes, unfortunately, none.

3: Now more than ever you must play to win

While we don’t believe another downturn is on the horizon, having a Realtor with strategies to address even the slightest of market corrections is critical to success whether you are a buyer or seller. A San Francisco agent in our group told a story of a home with 12 disclosure packets out to potential buyers. When the offer date came his buyer did not make an offer. What happened? The buyer thought the home would sell outside his price range. Sadly for him, the home sold below what he was prepared to spend. The moral to the story is “nothing ventured nothing gained.” We are entering into a shifting market. Don’t be afraid to make an offer.

Finally: The bottom line is we are moving to a ‘new normal’

The “feet on the street” believe that the outlook for the rest of the year remains positive, but moderating, with a continuing but more purposeful demand for Bay Area housing.

Posted by on May 19, 2016 in Jim's Take on the Market, Market Buzz, Market Conditions | 4 comments

Nothing Price Won’t Fix, Part 2

sv1

The Bloomberg story already got picked up by Vanity Fair and realtor.com.  Is this new news, or just what we’ve been seeing around NSDCC for months?  All that matters is what buyers’ perception will be.

http://www.vanityfair.com/news/2016/05/is-the-silicon-valley-real-estate-bubble-about-to-explode

http://www.realtor.com/news/trends/silicon-valley-slowdown/

The realtor.com version:

Silicon Valley is known as one of the world’s most expensive markets. But these days, those shopping for a luxury home in the techie paradise may be able to score a (relative) deal.

Wealthy homeowners are starting to slash prices on the most expensive mansions, which have been sitting on the market a little longer, according to Bloomberg.com. The reductions aren’t quite an everything-must-go fire sale, but they hint that the days of skyrocketing prices may be coming to an end.

That’s due to a topsy-turvy stock market, fewer foreign buyers, and worries that the tech industry could be headed for a slowdown, Bloomberg reports.

For example, the average price of Silicon Valley properties costing more than $3 million was $3.76 million in April—down from $4.12 million a year earlier, according to data provided by the Silicon Valley Association of Realtors®. It rebounded a bit to $3.94 million in the first half of May—but that’s still quite a chunk of change.

Meanwhile, Silicon Valley homes costing more than $3 million stayed on the market a bit longer as well. They were at 30 days in April, a small rise from 26 days a year earlier, according to the association’s data.

“The market is cooling down,” says Realtor® Avi Urban of Keller Williams Palo Alto. He’s seeing interest wane for properties costing more than $4 million.

“It doesn’t mean the market is going to crash tomorrow,” he says. “This is a time where basically we have reached a point where it’s too expensive” for many would-be buyers, and it’s starting to pull down prices.

The median price for all housing types in Silicon Valley’s ritzy Palo Alto is a staggering $2.2 million, according to realtor.com®.

For example, Urban had a two-unit condo property in a prime Palo Alto location in the $2 million range that received only one offer in the first two weeks it was listed. A year ago, he would have expected it to receive more than a dozen bids for 10% to 15% over the asking price.

To compensate, homeowners are lowering the prices of the highest-end residences that aren’t attracting enough potential buyers, says Karen Trolan, president of the Silicon Valley Association of Realtors.

“Everybody gets so excited when the market’s crazy that they push the prices up. They’re testing the market,” Trolan says. And when the homes don’t move, “what they usually do is bring [the costs] down.”

Prices are not dropping much yet, though, on the midddle to low end of the market, say local real estate agents. Stories still abound of a Google employee living in his truck and a San Francisco man residing in a plywood box for $400 a month because they can’t afford the astronomical housing prices. And bidding wars continue to drive up sale prices even higher.

But demand remains high for turnkey, single-family homes and condos at (relatively) affordable price points in good school districts, Trolan says.

“We have a housing shortage here,” Trolan says. “Our homes are still [selling] really well.”

Posted by on May 18, 2016 in Jim's Take on the Market, Market Conditions | 0 comments

Nothing Price Won’t Fix

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A pullback in Silicon Valley? It could happen anywhere!

http://www.bloomberg.com/news/articles/2016-05-17/silicon-valley-mansions-linger-on-market-in-real-estate-slowdown

Excerpts:

A custom-built home in the heart of California’s Silicon Valley had its price cut by $500,000 last week after sitting on the market since the end of March — a move that would’ve been almost unfathomable a year ago and a signal that frenzied demand has peaked.

The six-bedroom, five-bath house in Palo Alto — located blocks from Stanford University and the homes of Google co-founder Larry Page and Steve Jobs’s widow, Laurene Powell Jobs — is now listed for $7.5 million. It joins a growing inventory of high-end homes in the area that are taking longer to sell.

“We’ve recently noticed a slowdown,” Jack Woodson, who works at Alain Pinel Realtors in nearby Menlo Park, said on a tour of the house in the Old Palo Alto neighborhood. “Buyers are taking more time to decide about making offers.”

Silicon Valley, the most-expensive U.S. housing market, is seeing a pullback by the wealthiest homebuyers after a four-year real estate boom marked by bidding wars and multimillion-dollar prices. Stock-market turmoil, a drop in foreign investors and concerns of a technology-industry slowdown are cooling demand at the high end, even as interest remains robust for more moderately priced properties.

In Palo Alto, an ultra-wealthy city that’s home to many Google and Facebook Inc. executives, homes costing more than $5 million were on the market for a median of 16 days in April, compared with 11 in the same month in 2015 and 10 in 2014, according to data from Irvine, California-based John Burns Real Estate Consulting. The 11 active listings in that price range as of May 14 have been on the market a median of 30 days.

“The seemingly inexhaustible well of very high-end buyers has proven exhaustible after all,” said Dean Wehrli, a senior vice president at John Burns. “The peak is behind us, and that’s becoming clearer and clearer to builders and buyers.”

“We’re probably moving toward normalization,” said Katharine Carroll, vice president at Pacific Union Real Estate in Palo Alto. “Buyers see that they have a few more options. They don’t feel the urgency that they have to decide on something right away and put an offer in. They can kick the tires a little bit more.”

http://www.bloomberg.com/news/articles/2016-05-17/silicon-valley-mansions-linger-on-market-in-real-estate-slowdown

Posted by on May 17, 2016 in Forecasts, Jim's Take on the Market, Market Buzz, Market Conditions | 1 comment

Sunday Report

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Another steady stream of lookers today at open house, and roughly the same as yesterday which makes for a total of 120+ visitors for the weekend.

Most came with knowledge – online presence is critical!

Though no one complained about the price, everyone is being very deliberate in their investigation – and being somewhat conservative.  It seems that being able to embrace the full set of variables is what matters.

Buyers making logical decisions – it feels like a normal market!

One good offer is in, and a potential for 1-2 more!

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Posted by on May 15, 2016 in Jim's Take on the Market, Listing Agent Practices, Market Conditions, Open House | 0 comments

Handling Multiple Offers

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Our listing on Cherokee closed yesterday.

It was the 2,527sf three-story house that backed to the I-15 freeway – the one where we had 200+ people attend the open house.

The final tally at the Zillow page was 3,745 views, and 77 people had saved it as a favorite home, which are both extremely-high counts. (Josh was the seller)

2022-cherokee-ln-004_web

Yesterday, we marveled at how the bidding war ended up.  The listing had hit the MLS on a Saturday, we had the open house on Sunday, and by Monday we had six offers.

Because not every bidder knew there was competition, we gave everyone the chance to submit their highest and best offer by Tuesday at noon.  I like to keep a tight timeline and promise buyers that we’ll select a winner promptly in order to retain as much urgency as possible.

The list price was $549,000.

At the end of the highest-and-best round, we had a $565,000 financed offer, a $570,000 cash offer, and a verbal $571,000 cash offer (the other three stuck with their $549,000 or $550,000 original offers).

The agent who wrote the $570,000 offer was 80 years old, and was using forms from five years ago.  I actually had to hand-write his original offer for him, but thankfully he was able to scratch out a one-sentence H&B.

Because I had concerns whether he could make it to the finish line, I pressed the $571,000 agent to get his deal in writing.  But he called back with bad news – his buyer, a savvy, multiple-property owner, decided it was too rich.

I called back the $570,000 agent, knowing that I’d be carrying his luggage for the next three weeks.  But he had more bad news – he took his buyer’s family to the house, and they vetoed the sale.

With the other three bidders unwilling to budge, we signed the $565,000 financed offer…..before they changed their mind!

Most people would have been tempted to hold out.  Yes, it would have been sexier to close escrow in 2-3 weeks with a cash buyer. But after 200+ open-house attendees and 50+ showings, are there two in the bush?

Though my phone hasn’t rang like this since back in the REO days, there was no disputing the facts – most people didn’t make any offer, and those that did weren’t in love enough to go crazy.  It was a trend that was likely to continue.

In spite of casual observers telling me we were giving it away, or it was too cheap, the actual results were telling.  The duty of the listing agent is to check the ego at the door, and focus on the facts.

We made the deal at $565,000, and it stuck.

Posted by on May 10, 2016 in About the author, Bidding Wars, Frenzy, Jim's Take on the Market, Listing Agent Practices, Market Conditions, Thinking of Selling?, Why You Should List With Jim | 3 comments

Selling a Tenant-Occupied Property

realtor assualt

Back in the day when things used to be civil, you could sell a home that was occupied by a tenant.

But in today’s environment, it is better to wait until they vacate, and then put the house on the market.  Here’s why:

  1.  The elevated urgency of today’s market causes a whirlwind of activity during the first week.  A rash of showing requests and realtors stopping by without appointments shuts down any tenant cooperation quickly.
  2.  Then the tenants start looking around for a replacement home, and realize how hard and how expensive the next move will be. They are mad, and want to blame the sellers.
  3.  By the time they leave, the condition of the home isn’t what it could have been either, if they had left happily.

Staging is a critical component too, and unhappy tenants aren’t going to leave the home in great condition for the few showings that do take place.

Fewer or lower-quality showings means fewer offers, which isn’t good for the seller.

Our policy today is to vacate the property first, make it look spectacular, and then put it on the open market.

Posted by on May 10, 2016 in Jim's Take on the Market, Listing Agent Practices, Market Conditions, Real Estate Investing | 4 comments

Strategic Price Reductions

We’re about halfway through the spring selling season!

The Zillow Group said that it is best for San Diegans to sell their house in March.  But a few years back, I wrote this article suggesting that May is also a good time, because you can pick up on the momentum of others who have already sold around you:

When to Sell Your Home

But it’s also the time of year when active listings may start stacking up.  What happens when houses aren’t selling? Sure, you can just lower the price, but are there more variables to consider?

We were faced with that problem in Santee with the big-view house.

7249-ocotillo-st-008

Though the single-level floor plan and extensive upgrades were desirable, we weren’t getting any bites while listed for $1,199,000.  A bigger two-story house on the other side of the street had closed for $975,000 on March 1st, and the general perception was that the westerly view was preferred (even though obstructed by roof tops at ground level).

But another factor was that there have only been two houses in the history of Santee that sold for $1,000,000 or more.  One of those was in 2008 – not exactly a usable comp.

The house directly across the street was also listed for sale, at $1,228,000 for a two-story that was 12% larger.   With us at $1,199,000, it was a standoff – neither stood out as the obvious buy.

The key point?

A standoff means somebody has to go first.

When there are multiple houses for sale that are all priced about the same, it’s too easy for buyers to go into paralysis – and wait for the sellers to go first.

So after 30 days on the market, we lowered our list price by $80,000 to $1,119,000.  At $109,000 under the neighbor, we looked like the better buy on paper.  We had been keeping a steady open-house schedule, and the following weekend I found our buyer.

After we went pending, the house across the street did lower his price to $1,149,000, and he found a buyer a couple of weeks later (still pending today).

Who won?

Both sellers won, in my opinion.

We consciously took the more-certain route by being the first to lower our price, and dropped it enough that the gap between us helped to make us look more attractive.  Then once we were pending, someone took comfort in knowing they wouldn’t be the only buyer on the street over a million, and bought his house.

A secondary point is how quick we moved. After 30 days we didn’t have any significant action around our $1,199,000.  Rather than keep waiting and hoping for more weeks or months, we agreed on the more aggressive plan.

If we hadn’t, we’d be sitting around today with about 100 days on the market.  At that point, potential buyers got you – they know your price is wrong, and the first price reduction might get ignored.  Then sellers are chasing down the market as the selling season starts to run out of gas – don’t get in that position!

Get Good Help!

Posted by on May 4, 2016 in Jim's Take on the Market, Listing Agent Practices, Market Conditions, Spring Kick | 0 comments

Buffett Says No Bubble

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For the vast majority of Americans who just skim the real estate headlines, a quote from Warren Buffett should keep the party rolling.  But does he qualify as a cheerleader now that he owns one of the biggest realtor companies? And this photo they used – is that a perp walk?

http://fortune.com/2016/04/30/warren-buffett-there-is-no-bubble-in-real-estate/

An excerpt:

Warren Buffett says now is a good time to buy a house, though not as good as it was four years ago. Still, Buffett says he thinks the chances of housing prices collapsing are very low.

“I don’t see a nationwide bubble in real estate right now at all,” says Buffett.

Buffett made remarks at the annual meeting Berkshire Hathaway, which took place on Saturday in Omaha. “In Omaha and other parts of the country people are not paying bubble prices for real estate,” says Buffett.

Earlier in the day in response to a question about banks, Buffett said he did think derivatives are a “ticking time bomb.” But when it comes to housing and mortgage loans, Buffett said, while real estate was certainly a problem in 2008, he didn’t think that would be the source of the next problem for the financial system. “I don’t think we will have a repeat of that,” says Buffett.

Posted by on May 2, 2016 in Forecasts, Jim's Take on the Market, Market Conditions | 1 comment

Celebrity Realty

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A former sports agent turned realtor:

http://www.bloomberg.com/news/articles/2016-04-29/meet-the-jerry-maguire-of-real-estate

An excerpt:

On the brokerage side, cultivating a list of private listings is key.

“There’s a fair share of purchases and sales that are off-market transactions,” Weiner says. These are high-profile people who might not want their names in the papers or pictures of their homes splashed across the Internet.

Weiner estimates that 20 percent of his transactions are whisper listings, and he employs former executives in the NHL and NFL, a former MLB pitcher, and a fashion model, among others, to maintain an inside track.

He also thinks long term—very long term. These clients may buy and sell over and over again. Weiner’s business is far more about the people than it is about the properties.

“Three years later, they may need you again,” says Weiner. “We don’t just try to make a big buck.”

The typical brokerage model includes a buyer connecting with local agent. “This industry is very hyper-local and fragmented,” says Weiner, so the network includes agents across the U.S., Canada and the Caribbean. The local agent may change, but the agency won’t.

And most of these clients come with teams of their own, teams that need to be included in the unfolding history. “One thing we really work on and have a lot of experience in is working with their advisers, wealth managers, and attorneys,” says Weiner.

In the end, pro athletes and those in the entertainment industry need to plan for what you can never really plan for: the unexpected. You could be traded, your show could be canceled, you could get injured, or your life could erupt in some kind of scandal that suddenly dampens your career.

“It’s not just a transaction. It’s a long-term plan,” says Weiner. “If there’s one thing we really try to instill in their heads, [real estate] is an exit strategy.”

http://www.bloomberg.com/news/articles/2016-04-29/meet-the-jerry-maguire-of-real-estate

Posted by on Apr 29, 2016 in Jim's Take on the Market, Market Conditions | 0 comments

High Rents Keeping Lower-End Hot

rent squeeze

Do you wonder why the lower-end markets are so hot?

I spoke to a potential buyer yesterday who said he wanted to buy because his rent was so high.  He is paying $2,100 per month to rent a 2br apartment in Shadowridge.

He has lived there for less than a year, and the landlord just gave him notice that they are already raising it to $2,400 per month!

Are you kidding? $2,400 per month for a 2br apartment in Vista???

Here are the median monthly house rentals being advertised in the MLS:

Carlsbad: $4,495

Encinitas: $4,500

Carmel Valley: $4,600

Del Mar/SB: $6,400

La Jolla: $8,800

Rancho Santa Fe: $10,250

The landlords will have to endure more turnover, more repairs, and more all-around hassle as they keep pushing rents higher, but they will keep a fire lit under any tenants who can find a way to buy!

These higher rents should keep the lower-end of each market hopping!

Posted by on Apr 28, 2016 in Jim's Take on the Market, Market Conditions | 3 comments