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Category Archive: ‘Market Conditions’

Build More….3x More!

This article adds the numbers.  We need to build at least three times as many homes as we’ve been building to keep up with the growth – and no telling what that would do to prices, if anything:

http://www.cbs8.com/story/36420282/report-changes-needed-to-meet-san-diego-housing-demand

SAN DIEGO (CNS) – As the homeless population grows and rents balloon in San Diego, city officials Thursday announced a series of proposals to help alleviate the housing shortage over the next 10 years.

Numerous changes to city codes and procedures are required to meet the housing demand, according to a report presented to the City Council’s Smart Growth and Land Use Committee.

Some of those changes include rezoning areas around transit hubs to increase density, converting unused industrial zones into residential areas and encouraging smaller unit sizes. Making use of vacant lots and easing some onerous parking requirements are also among the ideas identified in the report.

“This is an exciting step because it gives the city goals for the future, and it gives the city goals to be measured by,” San Diego Housing Commission President Richard Gentry said.

To meet the housing need in San Diego, as many as 220,000 new housing units will need to be built by 2028, the report said. The top annual production rate within the last 5 years has been of 6,400 units. Even with the solutions identified in the report, San Diego would have to bolster its production rate.

“To meet the projected needs for the city for the next 10 years, we will need to produce between 17,000 and 24,000 housing units per year — a dawning task but a worthy goal to be set,” Gentry said.

After the presentation, City Councilwoman Georgette Gomez worried that more units may not necessarily fix the housing crisis facing the region.

“I would love to work with the housing commission to look at the affordability of housing,” Gomez said. “I’m not a firm believer that just creating units is going to get to the actual issues that are in front of us.”

According to a staff report, the annual rate of housing construction has been well under half that of population growth over the past decade, creating a warped supply-and-demand situation that has prompted costs to skyrocket. The result is that half of San Diegans can’t find rental units they can afford and 60 percent can’t afford to purchase a home, according to the report.

“What we are doing is driving our kids and grandkids right out of town,” Councilman Scott Sherman said.

The report identified the communities of Skyline-Paradise Hills, Linda Vista, Otay Mesa, Clairemont Mesa and Navajo as the areas with the largest housing growth potential. As many as 74,000 units could be built all together in those five communities.

If all the suggestions in the report are carried out, that 10-year housing goal could be met or exceeded. Then hope later one is to keep that same production rate through 2028 to keep up with the expected population growth.

http://www.cbs8.com/story/36420282/report-changes-needed-to-meet-san-diego-housing-demand

Posted by on Sep 26, 2017 in Boomers, Builders, Jim's Take on the Market, Local Government, Market Conditions, The Future, Thinking of Building? | 1 comment

More Insanity

Hat tip to Richard for sending this in…..how much more can buyers take?

A house in Sunnyvale just sold for close to $800,000 over its listing price.

Your eyes do not deceive you: The four-bed, two-bath house — less than 2,000 square feet — listed for $1,688,000 and sold for $2,470,000.

“I think it’s the most anything has ever gone for over asking in Sunnyvale — a record for Sunnyvale,” said Dave Clark, the Keller Williams agent who represented the sellers in the deal. “We anticipated it would go for $2 million, or over $2 million. But we had no idea it would ever go for what it went for.”

This kind of over-bidding is known to happen farther north in cities including Palo Alto, Los Altos and Mountain View. But as those places have grown far too expensive for most buyers, future homeowners have migrated south to Sunnyvale, a once modest community that now finds itself among the Bay Area’s real estate hot spots.

Close to tech employment centers, it makes for a convenient commute — and prices there, too, are now pushing the limits of middle-class buyers. The house that sold for $782,000 over asking in Sunnyvale — it’s on Prunelle Court — is about a mile from Apple’s new spaceship campus.

The buyers, who work in tech, had been hunting for a home for a while — but kept getting out-bid, said Mini Kalkat, the Intero agent who represented them: “They lost two before they bid on this one, so we kind of knew what the numbers would be. It’s a crazy market, but there’s a way to maneuver the market.”

The property is one of more than 50 South Bay homes that sold in the last month for at least $200,000 above the listing price. More than half of those deals were made in Sunnyvale. Others were made in Cupertino, Saratoga and West San Jose, according to Alain Pinel agent Mark Wong. He compiles a monthly list of such “over-asking” transactions.

Over-asking sales are at least partly the result of agents’ sleight of hand. It’s become common strategy to list homes under their market value in order to entice Silicon Valley buyers; they are all too willing to fight over the few houses available in this chronically tight market.

Read full article here:

http://www.mercurynews.com/2017/09/12/now-this-is-ridiculous-782000-over-asking-for-a-house-in-sunnyvale/

Posted by on Sep 13, 2017 in Frenzy, Interesting Houses, Jim's Take on the Market, Market Conditions | 8 comments

Tightest Markets

Wondering why you can drive for blocks and not see a for-sale sign?

1 out of 172!

http://nypost.com/2017/09/02/are-we-headed-for-another-housing-collapse/

An excerpt:

NAR’s Fears points to a number of trends: First, homeowners are staying in place longer, limiting the number of existing homes for sale. Low unemployment rates are keeping them from leaving town in search of work. High home prices are inspiring them to remodel rather than relocate within their communities, if they want a different kind of house. First-time buyers who can afford it might buy a home that can accommodate two kids instead of one, precluding a move a couple years after their purchase. Grandparents are staying put to live near their kids, rather than fly off to retirement far away.

Second, new construction is still springing back from the 2008 recession. Home builders have had a hard time keeping up with population growth since then, in most cities. “There was a high cost for dealing with regulation, a high lumber tax on Canadian framing lumber, a decline in the labor pool,” says Fears. But the construction industry has shown signs of life. In July, according to US Census Bureau and Department of Housing and Urban Development data, housing completions were 8.2 percent higher than they were one year ago, though 6.2 percent lower than they were in June.

Even when they do build, developers are restricted by urban planning and geography, in certain states more than others. In Portland, Ore., cities are required by state law to form an urban growth boundary around its perimeter, controlling expansion onto farm and forest lands.

“Since about 2009, a lot of areas inside the boundary have been dormant,” says Victor Bulbes, broker with Keller Williams. “Builders have been reluctant to get back in the game.”

Read More

Posted by on Sep 5, 2017 in Jim's Take on the Market, Market Conditions | 3 comments

The Big Stagnation

 

On the Facebook bubbleinfo, in response to the idea that the bubble won’t be bursting, Matt asked ‘what constitutes the big stagnation when it happens’.

My response:

The Big Stagnation? You’ll know it when you see it.

We used to consider 6 months’ of inventory to be normal, but the new norm is probably 3 months with most of San Diego being 1-2 months today. Rancho Santa Fe is our exception, and has 8 months’ of inventory currently (only because there was a slew of sales last month). I think we can consider stagnation being any market with more than 6 months’ worth of inventory, and/or 100+ average days on market (Avg. DOM in RSF now 129 days).

When the market slows, most of the homes not selling can be explained – bad locations, inferior condition, etc.  Start worrying when you see houses that have it all, including a decent price, not selling.

Other outside influences that might cause the market to stagnate include:

  1. Mortgage rates get back into the 5s. Rates have been under 5% since the end of 2009, which seems like a million miles ago.  Buyers would want to stall their plans for at least six months to see if sellers would compensate by lowering their price.
  2. An occasional bad comp.  This happens today when a lowball sale occurs (usually an inside job), and buyers and sellers wonder if it is real.  Because there is usually scant information about it, the bad comp ends up being a mystery, and we forget after a few months, but another seller has to go first to prove it was an anomaly.
  3. Immigration is halted.  This would have seemed impossible up until a few months ago, but if it happened, we could feel a significant impact on the demand side.
  4. Recession hits locally.  An economic slowdown may not bring more supply right away because those out of work would wait 1-2 years before they believed they couldn’t get another job, and decide to move.  A more immediate impact would be felt on the demand side – we’d be losing buyers right away.

The prime reason for a market stagnation is the resistance that sellers and agents have about lowering their price – they would rather wait and see if it will be different tomorrow.

We might see a 5% or 10% drop without much fanfare, because most every seller around here has gained more than 30% appreciation since 2009 and wouldn’t feel it much.  They might give up a couple of bucks, but if a heavy discount is needed to sell, they will dig in.  It is very likely that the only reason they are selling is to hit the big-money jackpot.

A stagnant market could last for months or years – they tend to last until people subscribe to the fact that price will fix anything!

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Posted by on Sep 2, 2017 in Jim's Take on the Market, Market Conditions, Thinking of Buying?, Thinking of Selling?, Tips, Advice & Links, Why You Should Hire Jim as your Buyer's Agent, Why You Should List With Jim | 2 comments

CA Realtor Survey

On Your Last Transaction……

The percentage of properties selling below asking price remained flat from last year at 36%. The percentage of properties selling above asking price increased from 34% last year to 35%. The percentage of properties selling at asking price increased to 29%.

This is incredible:  For the 35% of properties selling above asking price, the average premium paid over the asking price increased to 9.3% from 6.8% last month and 7.8% last year:

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

The share of properties that received multiple offers was 64%, down from 74% last month and 66% last year.  Also, the proportion of properties with three or more offers decreased to 40%. The average number of offers per property remain at 2.8 offers from a year ago:

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Throughout California, the majority of homes sold are being purchased by people who intend to live in them:

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Owners like being owners – and the rich get richer:

Posted by on Sep 1, 2017 in Jim's Take on the Market, Market Conditions, Realtor, Realtors Talking Shop, Survey | 3 comments

One-Story vs. Two-Story

The other day, an appraiser mentioned to me that he had just completed a study comparing the prices of one-story houses vs. two-story.

He had done a similar study ten years ago, and found that the premium being paid for a one-story then was about 5%.

Today, he found that the premium is about 14% – more than double!

We speculated whether it would double again over the next ten years.  When you consider how short the existing supply of one-story homes is today, and that builders are still addicted to the two-story model, it is pretty easy to guess the premium will increase further!

Here’s a sample of houses sold between La Jolla and Carlsbad this year.

NSDCC Houses Between 2,500sf and 3,500sf Sold 2017 YTD

# of Stories
# of Sales
Avg SF
Avg $$/SF
Median SP
One-Story
104
2,918sf
$623/sf
$1,450,000
Two-Story
532
2,973sf
$450/sf
$1,163,173

You can get a better ‘deal’ on a two-story home, but as boomers get older and unload two-story houses, that market could get glutty, and the quality one-story houses be even more sought-after.

Posted by on Aug 28, 2017 in Jim's Take on the Market, Market Conditions, One-Story, Thinking of Buying?, Why You Should Hire Jim as your Buyer's Agent | 7 comments

The Challenge of Capitalism

An interesting essay on today’s housing crisis – thanks daytrip!

But the pushers of market-friendly solutions, and even most affordable housing activists, miss a central point in the housing debate: we already have enough housing in this country.

The problem is not supply. It’s that the supply is owned by the wrong people.

From downtowns to suburbs, there’s a glut of vacant housing and land owned by the rich. The one neat trick to solving the housing crisis: give the things owned by the rich to the poor.

The richest neighborhoods in many cities are also some of the most vacant. If you walk around Midtown Manhattan or Downtown Brooklyn on a weekday evening and look up at all the residential luxury skyscrapers that have cropped up in the last decade, you might notice they’re relatively dark.

In the stretch of Manhattan between Park and Fifth Avenues and 56th and 59th Streets, 57 percent of apartments were vacant at least ten months a year, according to a New York Times analysis based on data from 2012. Buildings from 60th Street to 63rd Street were also only around 50 percent occupied.

Across the country, even in smaller cities, downtowns are being filled with tall, expensive, and often empty apartment buildings. The apartments in the flashiest of these buildings, like the towers rising along 57th Street in New York (now sometimes called Billionaire’s Row) are often bought by the LLCs of the uber-rich, and they’re used more as investment opportunities than as places to live.

So why do we keep building so much vacant luxury housing? It’s a simple function of how capitalist land markets work.

With demand for housing high and government intervention and spending on affordable housing low, land prices have no reason to drop. If a developer buys a plot of land in, say, Cleveland for $1 million, there’s no reason the lot next to his or hers will be sold for less per square foot, and so whatever developer purchases that land will have to build something that extracts $1 million, plus profits, in rents or sales.

This is not a new phenomenon — it’s one of the central theses of Frederick Engels’ 1872 treatise, “The Housing Question:” if there’s no purposeful depression of prices on land, housing prices have no reason to become cheap. The land at the center of cities will always go up, until they are unaffordable to everyone but the richest.

Read full article here:

https://theoutline.com/post/2153/evict-the-rich

Posted by on Aug 23, 2017 in Market Conditions, The Future, Thinking of Building? | 4 comments

Housing Jitters

The economists like the housing market, but they are known to play it safe.

How about the consumers?

I’d prefer to survey the active home buyers and sellers in our area to get the best reading on our future.  But here are the sentiments of 1,079 American adults over the age of 18 who were surveyed last month:

Fifty-eight percent of homeowners say that they expect there will be a “housing bubble and a price correction” in the next two years – up 12 percentage points since April.

Looking across the country, residents in hot housing states are particularly jittery. The top five states where residents believe the market is approaching a “housing bubble” include:

  1. Washington (71 percent)
  2. New York (68 percent)
  3. Florida (63 percent)
  4. California (59 percent)
  5. Texas (58 percent)

While experts have long suggested living in a home for more than seven years could lower a homebuyer’s exposure to market fluctuations, only 37 percent of millennials in the survey plan to live in next home they buy for more than six years, making the so-called “rule of seven” less relevant to the next generation of serial homebuyers.

“Beyond the jitters, I see in our survey an increasingly informed nation of homebuyers, who understand the risk of the market,” said Melendez. “To those concerned about a price correction, or waiting to time the market, I recommend a proactive approach. Have an exit plan, then anytime you find a home you love is a good time to buy.”

Read full article here:

LINK

How do you feel?  Leave your thoughts in the comment section!

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Posted by on Aug 17, 2017 in Forecasts, Jim's Take on the Market, Market Buzz, Market Conditions, Thinking of Buying?, Thinking of Selling? | 7 comments

‘Basement Generation’

Hat tip to Carlsbad Mark for sending in this article!

LINK

More Americans are renting their homes than at any point since 1965, according to a new study by the Pew Research Center.

The total number of households in the U.S. grew by 7.6 million between 2006 and 2016.  But over the same decade, the number of American households living in a home they own remained essentially unchanged.

Meanwhile, the percentage of Americans renting their homes increased dramatically. It jumped from 31.2% in 2006 to 36.6% in 2016.

And that figure continues to rise …

The latest percentage of renters now stands higher than the 36.2% of 1986 and 1988. It’s now within a whisper of the all-time high of 37.0%, set in 1965.

I believe the root of the rising rental rates is economic hardship.

Only a small percentage of people who rent do so voluntarily. Most get pushed into renting because of financial circumstances.

When Pew surveyors asked renters why they rent, a whopping 65% cited financial circumstances. Only 32% said they rented as a matter of choice.

The three largest groups of traditional renters — young adults, blacks and Hispanics — are still the most likely to rent.

But the rental rates also increased for older adults, whites and college- educated households.

Worse yet, there is a large contingent of Millennials who aren’t even renting.

They choose to live in Mommy and Daddy’s basement. In 2016, an alarming 34.1% of 18- to 34-year-olds lived with a parent.

The “Basement Generation” makes a sad testament about the state of our economy.

But I place most of the blame at the feet of Mr. Magoo (Ben Bernanke) and Mrs. Magoo (Janet Yellen).

Their ridiculously nearsighted, low-interest-rate policies have made it impossible for millions of Americans to afford a home.

Read more here:

LINK

Posted by on Aug 9, 2017 in Jim's Take on the Market, Market Conditions | 1 comment

Low Inventory = Low Sales?

Our head cheerleader keeps saying that the lower inventory is the main reason why there have been fewer home sales nationwide:

Lawrence Yun, chief economist at the National Association of Realtors, says “Closings were down in most of the country last month because interested buyers are being tripped up by supply that remains stuck at a meager level and price growth that’s straining their budget.”

Is that the case between La Jolla and Carlsbad?

Here is the history, with a bubble-look-back to the 2007 stats too:

NSDCC Total Listings and Sales, Jan 1 to July 31:

Year
Total Listings
Total Sales
TL/TS Ratio
Median Days on Market
2007
3,582
1,642
2.18
87
2012
2,950
1,735
1.70
68
2013
3,268
1,967
1.66
40
2014
3,181
1,701
1.87
49
2015
3,387
1,876
1.81
41
2016
3,485
1,793
1.94
45
2017
3,107
1,837
1.69
28

We have had 11% fewer listings this year, but 2% more sales than in 2016!

The higher prices don’t seem to be getting in the way either!

Why does Yunnie keep babbling on with his nonsense?  It’s because the realtor industry never wants to mention how critical the price is to the equation.

Price will fix anything!

All we really know is that more sellers and buyers have been willing to come together on price this year – and in a frenzy-like fashion, similar to 2013!

Posted by on Aug 7, 2017 in Inventory, Jim's Take on the Market, Market Conditions, Sales and Price Check | 0 comments