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Category Archive: ‘Market Conditions’

Buy Now & Be Happy 2

There has been three categories of listings lately:

1. New listings that sell at or around list price the first week on the market.

2. Those that sell months later as price reductions finally intersect a rising market. In a slowing market (like we have now) pricing loses momentum quickly as buyers get more confident.

3. Those that don’t sell.

It’s going to get more obvious to sellers as showings slow to a crawl or less – if they want to sell this year, they need to lower their price. But hey, great news – those who are willing to sell for a price at the comps – or slightly under - should find takers.

Posted by on Aug 13, 2014 in Bubbleinfo TV, Market Conditions, North County Coastal | 0 comments

Bubble-Burst Less Likely

Someone asked me if I thought the bubble will burst again.  I said no.

Not in the same way that the previous two bubbles have ended – with foreclosures driving down prices across the board.


Because of these reasons:

1. The Foreclosure Process Has Been Compromised - Banks have been handing out loan mods like candy, and keeping defaulters in their houses at all costs. Of the 13,154 houses that have closed escrow this year in San Diego County, only 293 were bank-owned, or 2.2%. Only eight of those were in our La Jolla-to-Carlsbad coastal region, out of 1,730 closed sales YTD (0.5%).

How can banks reverse course, and start foreclosing again? They can’t, and instead the ‘loan-mod’ will become standard banking policy – though vague.

2.  Recent Buyers Were Well-Qualified – No exotic financing this time around.  Everyone who got a regular mortgage over the last six years had to qualify AND use a down payment.  Thanks to recent prices increases, most have tacked on some extra equity too – they aren’t going to panic-sell now.

3.  Those Who Do Panic-Sell – The kids who come to town to liquidate their parents estate will more likely sell to a flipper offering quick cash.  There have always been investors working the obits, but it is a cottage industry now – and they will improve and flip for a retail price.

4. Boomer Liquidation Less Likely, and Multi-Generational is the Substitute – Many of us have discussed the fear of baby boomers needing to tap their equity, and wanting to downsize. Here is an article:

If they need money, the reverse mortgage is still around, and likely to stay.  If aging boomers want to downsize, they need to leave town to have it pencil – because it’s virtually impossible to buy a smaller one-story house in the same area and still save big money.

Plus their kids – who could have afforded a decent house 2-3 years ago - are now left holding the bag. It’s better for the kids to move in with the folks and take care of them, then to buy the crapshack.

5. Sellers are Resilient – If they can’t get their price, they will wait – and agents will wait with them.  It is typical for agents to take six to twelve month listings and hope that’s long enough for the sellers to eventually wear down if nobody comes along.

6. Higher Capital Gains Tax – The sweetheart 15% capital-gains tax went back up to 20% at the end of 2012 – a 33% increase!  Even though they can sell for more now, investors are very reluctant – they hate paying tax! Especially when a spouse can “die correctly” and leave rental properties to the other spouse with a stepped-up tax basis.

I don’t think we’re going to see the roller-coaster ups and downs any more.  It’s much more likely to feel likely a bloated, stagnant slush of goo than an exciting crash.  Thankfully, agents work on commissions, otherwise sales could come to a halt!

Posted by on Aug 10, 2014 in Bubble-Era Pricing, Jim's Take on the Market, Market Conditions | 18 comments

More Guessing

Hat tip to Richard for sending in this article:–report-20-percent-of-homes-to-lose-value#scpshrjmd

The housing market has bounced back dramatically since the 2008 recession, but conditions have started to slow, a new survey says.

Veros reports 20 percent of homes are expected to lose value, while 80 percent are set to gain value.

Still, the housing market is yearning for a boost, instead of simply pent up demand from an unusually cold winter, which hampered economic growth and caused slightly stronger housing numbers toward the end of first quarter and the beginning of second quarter.

SD market

A slowdown in the pace of buying isn’t necessarily something to worry about when it comes to the health of the housing market, as this could bring price stabilization.

“We’ve been seeing major price swings over the last seven years and stabilization will be positive and will provide predictability to the market,” says Dani Babb, Broker/President of The Babb Group Real Estate Inc. “Some appraisers can’t even figure out how to value homes because of the swings.”

Unpredictable prices make conditions difficult for sellers who are trying to score the best price and buyers who may delay purchases if the market is telling them a significant price drop is on the horizon.

Posted by on Aug 7, 2014 in Forecasts, Market Conditions | 1 comment

The Market is Great

SD Case Shiller graph

We’ve seen the local San Diego Case-Shiller Index rise from 144.43 in April, 2009 to the most recent reading of 201.85 in May, 2014.

A whopping 40% increase in just five years.  What a ride!

Yet all we hear from the media is that the housing market is faltering, sales are down, and soon the sky will be falling.  Here are the reasons why it won’t:

1. Even though prices are much higher, there hasn’t been a flood of inventory.  Consider how many sources of inventory that you’d expect to be flooding the market; bank-owned properties, flippers, previously-underwater homeowners, the elderly, etc.

Not only has there not been a flood, but around NSDCC there have been 3% FEWER houses listed in the first seven months of this year than in 2013.

2.  Rates are Holding.  Though sales and prices would probably be affected if mortgage rates did go up, so far they are steady – in spite of wars, improved employment, ebola, etc.  Buyers will live with rates in the fours, and I just had a 30-year jumbo rate quote in the high-3s.

3.  There is lots of activity. The house in yesterday’s article whose broker said she is having no showings must be ridiculously over-priced, because the attractive buys are getting action.  Any seller who could live with 5% to 10% less than the list prices of active (unsold) listings nearby won’t have any trouble selling today.  If prices in general did pull back, it would stimulate a new round of sales – the buyers who feel priced out would love another chance.

4.  No Frenzy Means More Caution.  After prices go up 40%, it’s a lot easier to make a mistake, and buyers are being more selective. A smart market is a healthy market.

The next few months are going to be terrible for sellers who insist on tacking on another 10% or so on top of what we’ve already gained.  But reasonable sellers will have no trouble selling – the market is fine.

Posted by on Aug 6, 2014 in Jim's Take on the Market, Market Buzz, Market Conditions, North County Coastal | 5 comments

Slowing Sales

We are still getting reports that year-over-year sales are declining, and that means something is wrong or bad.  Below they are comparing the counts to last year’s frenzy numbers and are crying wolf.  But what do you expect when the frenzy is over?

Our local stats look great – this year NSDCC has about the same number of July sales as we did two years ago, when prices were 20% lower (some late-reporters still coming too).

NSDCC Sales, July
# of Det. Home Sales
Median Sales Price


From the U-T:

Persistent sales slowdown keeps the local recovery fragile, raising odds of relapse

A time-tested signal of weakness in the housing market is flashing yellow.

When you compare the number of home sales (which are highly seasonal) with those from the same month a year earlier, this key measure has declined in San Diego County for nine consecutive months through June — with five at double-digit rates.

Statewide trends are similar, with 11 straight months of year-over-year sales declines, according to the latest figures from DataQuick, a company that tracks transactions reported to county governments.

“My sellers are in complete shock. We’re getting no calls, no inquiries. It’s like the market just went away,” said Kimberly Dotseth, a San Diego real estate broker. “Buyers think prices are too high.”

An exception is the lower-priced segment of the market, where homes listed for $400,000 or less are still receiving multiple offers and quick sales. This supports the view that high price might be a primary factor discouraging many sales, rather than other factors such as tough lending standards or too few homes on the market.

In the history of housing markets, downturns typically have begun with sales weakness that sometimes ended up forcing down prices, but not always.

This holds back the wider economy, even if home prices don’t fall in the near future — as they have twice since 2006. That’s because low sales activity reduces a giant source of spending for remodeling, decorating and new construction.

Given the trauma of the last decade, the condition of the local housing market is a serious subject.

Read the full article here:

Posted by on Aug 5, 2014 in Jim's Take on the Market, Market Conditions, North County Coastal, Sales and Price Check | 2 comments

Homebuyer Tips 2014

808 Minnesota St UNIT 354, San Francisco, CA 94107

The son of a past client scored a good job in San Francisco a few years back, and is looking at 1-bedroom condos going for $700,000 – $800,000.

They wondered if I had any tips.

Good golly, at that rate I better come up with something!


1.  Get a good realtor.  These high-dollar areas pay big commissions and thus, attract plenty of real estate licensees.  But you need a great agent who knows more than you do, and brings extra value to the equation.  Ask how many times they’ve talked someone out of buying a home recently.

Not only will a great agent make you feel comfortable about the price/value equation, but their market cred will help too – because good agents want to work with good agents.  It happens regularly that my personal relationship with the other agent makes a difference in the outcome.

How do you find a good agent? The best luck I’ve had is searching for agents at Zillow, but you have to read through sales histories and testimonials (in that order) of each agent to find the right fit.  Also check their recent sales history to see if they have been selling similar homes and/or working your area.

I don’t care what company an agent works for, because real estate is an individual sport.  I’m not impressed by the big realtor teams either – I want individual attention.  I reviewed the first two pages on Zillow for San Francisco agents, and found this one:

An agent’s recent sales is the best measure, and not only is she selling 3-4 per month but she also lists her annual production too – and she was consistent during the downturn.  She has been a realtor for 20 years, and has over 300 closings submitted to Zillow.

She has three listings, which, in this market, is about right – if you are good, they should be selling, not sitting.  Plus she has a 1-bedroom listing for $735,000!  I don’t know if she  passes you off to an assistant, but if not, she’s a qualified possibility.

The agents input their own listings and sales history, and Zillow provides a form for them to email to past clients to solicit their testimonials.  But all of her client ratings were the full five stars, which is exceptional.

2.  Buy For the Long-Term.  You may get stuck with this one for a while, so make sure you get what you want and need.  Keep exploring other areas for alternatives you haven’t thought of yet.

3.  Know the Inventory.  You may only have minutes to make decisions, be prepared.  Get auto-notifications of new listings to stay up on the market, and go to open houses – not just to find a home to buy, but also to study the market patterns.  You may not buy this one, but when you see it go pending, know why somebody else found it attractive.  If nothing else, at least be an online expert that follows the data closely – and don’t be surprised if you keep seeing crazy sales; they are almost always attributed to buyer frustration and lousy representation.

4.  Get Pre-Qualified.  Once you select a realtor, get pre-qualified for a mortgage using their recommended lender - they might bring some street cred too.  You either use a 20% down payment or you don’t, and either is fine.  If you don’t want to use a 20% down payment, you can do an 80/10/10 (1st and 2nd loans) that will at least lock you in to a low-rate 1st mortgage for the duration.  If you end up with less than 20% down and only want a first mortgage, you need PMI – private mortgage insurance. But if you get lucky, you can have the seller pay the entire premium up front (around 3%), so it won’t cost you anything monthly.

5.  Know the Contract. With Docusign, the electronic-signature process, signing a contract goes a little too fast.  Instead of reading the contract together with your agent in the corner booth at the local coffee shop, today you just rapid-click on your phone or PC to imprint your initials and signatures and whoosh, off it goes.  Know what you are signing!  The two most important paragraphs are 3K and 14.

6.  Time is of the Essence.  It is likely that most buyers will lose at least one property because they don’t react fast enough.  I just had a case where I called the listing agent of a house that my clients had just decided to buy.  The listing agent told me that she had been working back-and-forth with a buyer and other agent, and had just received a counter-offer that was acceptable to her sellers – and she was about to send it to them for final signature!

In these moments, your agent has to say the right thing.  In this case, not only did I stop the agent from signing a cash offer, I got her to accept my financed buyers’ offer instead!

This is a fast-moving environment and each day the best deals get picked up – if you like a home, chances are somebody else does too.

7.  Consider Fixers.  Be picky about location and floor plan, because you can’t change those.  But most buyers shy away from homes that need work, which can open up opportunities.  Get comfortable with the costs of fixing in advance, and know what you are looking at.  You can get a full evaluation and cost estimate during your contingency period.

8.  Make Offers.  Once your first salvo goes over the bow, the comfort level improves greatly.  Include a love letter that tugs at the sellers’ heartstrings.

9.  What to Offer.  The price to offer is directly related to the time on market.  If it is the first week of the listing and you recognize it to be a good value, you will probably have to pay all the money. But I hate to offer full price, because in the first week the sellers want to dicker, and full price doesn’t give them anywhere to go.  If you know there aren’t any other offers, then come in $20,000, $30,000 or $40,000 under the list price so the math is easy for the seller to split the difference.  If you hear subsequently that there are other offers, re-submit your offer with a higher price so you don’t get forgotten.

10.  Use as a Resource - You may not get any local-SF specific data but general information is available by using the Search feature at the top of the front page here.  For example, I typed in ‘Bidding Wars’ and got this link to a wide-ranging set of blog posts about winning a bidding war:

You and your agent need to be bidding-war experts.  The low-end is what’s moving the fastest, and though $700,000-$800,000 sounds insane for one-bedroom condos, it is what it is.

Plan on devoting time and energy to this project.  The more invested, the better the results!

Posted by on Aug 3, 2014 in Jim's Buyer Representation, Jim's Take on the Market, Market Conditions, Tips, Advice & Links, Why You Should Hire Jim as your Buyer's Agent | 2 comments

Jumbo Rates Still Better

Last June we had the big panic due to the Fed suggesting they were thinking about possibly raising rates.  Within a month, the conforming-mortgage rates jumped from the mid-3%s to the mid-4%s.

We noted here on how the 30-year-fixed jumbo rates dropped below conforming rates, which I don’t think has ever happened before.

From June 30, 2013:

June 30 2013

A year later and the Fed says they are going to end the quantitive easing in October, and start raising rates in 2015. From the

Those projections, which Ms. Yellen noted as an indication of their recent intentions, show officials expect to raise their benchmark rate to 1% by the end of next year. Many officials have affirmed investors’ belief that the Fed won’t start rate increases until about the middle of 2015.

What happened to mortgage rates this time?

Not only was there NO panic, but rates are actually LOWER today then they were last summer – and jumbo still below conforming:

July 18 2014

While the real estate market feels like it is heading for an off-season malaise, there is going to be some real opportunity for buyers who stay in the game.

The motivated sellers who held out with a too-high price hoping to snag a springtime buyer are starting to realize that summer is going to be over before you know it.  August is only 2 weeks away!

If they can live with less – and some of them can – buyers could reap a double benefit of lower home price AND a 30-year-fixed jumbo rate at all-time lows.

Pay a point, and borrow $1,000,000 with a jumbo fixed rate in the high-3%s!

Work with Jim the Realtor:

Posted by on Jul 19, 2014 in Interest Rates/Loan Limits, Jim's Take on the Market, Market Conditions | 0 comments

Pent-Up Normal

A good description of the new normal, without asking too many questions, like: Why did foreclosures dry up?  Shouldn’t we accept 640 credit scores as a minimum standard?   Wouldn’t there be more sales if sellers were more reasonable on price?

While he has written about some of the elements in the past, Mark Fleming neatly summed up the current state of housing’s supply and demand constraints in the latest edition of CoreLogic’s Market Pulse. That issue, the company’s chief economist said, is one of the factors underlying the current faltering housing recovery and contributing to what he calls the new housing normal.

First there is a pent-up supply of housing – that is homes that might be but aren’t available for sale. The shadow inventory, homes in the process of foreclosure (some definitions include homes with the potential of foreclosure) has worried economists since the start of the foreclosure crisis. While the fear has been that these homes, once they become bank owned, might overwhelm the market they have instead come on the market at a fairly measured pace as foreclosure time-lines stretched into years and have provided a source of low-cost homes for both first-time buyers and investors. The inventory is now becoming concentrated in a few judicial foreclosure states and REO (bank-owned homes) are available for sale.

Read More

Posted by on Jul 18, 2014 in Market Conditions | 0 comments

San Diego in June

Rich does a great job every month documenting our local market trends:

Here is one of his 16 graphs for June, showing how the San Diego active inventory is 55% above last year’s pace:


He also noted that pricing increased but sales dropped, which is natural when every seller is asking more, but fewer get/deserve it.

Another interesting point is how the active inventory didn’t drop off the second half of last year, when normally it does. Will more sellers hang around longer this year hoping for the lucky sale?  Probably.

It will look and feel like a stagnant or waning market, unless sellers and their agents reduce expectations.  You may not be far off!  Just keep lowering the price until showings and offers start happening!

See all of Rich’s great analysis here:

Posted by on Jul 17, 2014 in Market Buzz, Market Conditions | 12 comments