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Category Archive: ‘Market Conditions’

Multiple Offers Down

2015-01-19 12.35.48

We have demand – the pending-home index is rising! From C.A.R.:

Pending home sales posted higher on a year-over-year basis for the first time since January 2013 and as expected, declined from the previous month due primarily to a seasonal slowdown toward the end of the year, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) said today.

Additionally, with the specter of a better economy, greater job growth, and increasing household formation, C.A.R.’s new Market Pulse Survey found that many REALTORS® expect market conditions to improve in 2015, as does C.A.R.

• In the fourth quarter of 2014, the vast majority (87 percent) of REALTORS® expected market conditions to either improve or stay the same over the next year.

• More REALTORS® (61 percent) closed a transaction in the fourth quarter of 2014, compared to the first quarter (53 percent).

• In an indication of stabilizing home prices, fewer homes (24 percent) sold above asking price in the fourth quarter of 2014, compared to 46 percent in the first quarter.

• Homes selling below asking price rose from 19 percent in the first quarter of 2014 to 48 percent in the fourth quarter, indicating home sellers’ expectations moved more in line with buyers’ expectations toward the end of the year and competition between sellers attempting to appeal to affordability-strapped home buyers increased.

• More than half (58 percent) of properties received multiple offers in the fourth quarter of 2014, down from 69 percent in the first quarter.

Posted by on Jan 24, 2015 in Jim's Take on the Market, Market Conditions | 6 comments

SD Lower Tier Is Hotter

SD Tiered

The ivory-tower opinion below is blaming speculators for a mini-bubble, but around here I’d say that over 90% of the home sales were regular, organic real estate transactions in 2013.  Prices may fall in the coming months (slightly), and if they do, it will be because buyers are being patient and picking off only the best buys.

Home prices displayed mixed signals in Los Angeles, San Francisco and San Diego in the single month of October 2014. Prices dipped in San Diego, remained roughly level in Los Angeles and rose slightly in San Francisco. Low-tier property prices are still on average 10% higher than one year earlier. Mid-tier and high-tier prices are 6% higher.

As in 2010, today’s price movement is the tail end of a mini-bubble, set into motion some 18 months earlier. This price rise was produced by short-lived speculator interference in 2013 (not a tax stimulus, as in 2009). This pricing activity is under pressure from insufficient personal incomes, rising fixed-rate mortgage (FRM) rates and new construction.

Prices are expected to fall in the coming months, likely bottoming in mid-2016 and retreating toward the mean price trendline. The cooling of speculative fever and continually rising mortgage rates will prolong the falling trend in sales volume, pulling prices down in turn. Remember, real estate prices track and run with bond prices due to interest rate movement. A lag time of up to 12 months exists due to expectations of continued recent price movement — the sticky price phenomenon.

The graph tells the story – the higher-end market is ‘soft’, and only those with precision pricing are selling.

Posted by on Jan 8, 2015 in Forecasts, Market Conditions, Sales and Price Check, Same-House Sales | 2 comments

LOW Rates, Better Terms

mortgage rates

Not only did jumbo 30-year fixed rates hit the lowest I have ever seen yesterday, but more creative terms are coming out too.

These terms were sent to me yesterday by a local lender:

Just priced a 30 year fixed 1.2 million loan and it’s 3.625 with no points.

We have a 95% purchase money with loan amount up to $850,000.  The 5/1 is 2.75%, 7/1 is 3.00% and the 10/1 is 3.25%.

AND we have a 30 year fixed jumbo up to 1.5 million at 90% with no mortgage insurance.  The rate is 5.125 with no points.

The fantastic rates and terms available should help buyers get off the fence, and buy a little more house than they could have 6-12 months ago.

This will help the low-down folks too:

Posted by on Jan 7, 2015 in Interest Rates/Loan Limits, Jim's Take on the Market, Market Conditions | 1 comment

JtR Year in Review

Jim Updated Left Color

Here are a few stories from 2014:

A. I should have known it was going to be a wacky 2014 when the second offer I wrote in January wound up in a bidding war that could have been very entertaining, but instead flopped.  The listing agent decided to entertain cash offers only, even though there was nothing wrong with the house, she didn’t represent the eventual buyers, and they did a standard 30-day escrow.  By eliminating the seven financed offers, she left at least $50,000 on the table, and probably more.

B.  There was one case early in the year where the seller thought the market was moving higher, and wanted more money.  Our buyer had been performing as planned and was ready to close on time, but at the final walk-through he made it clear that he wasn’t moving out.  The listing agent threw in his entire commission and bailed, so I had to step in to make it right.  I met with the seller and got him to agree to vacate within 5 days after closing, and after that it would cost him $500 per day.  He left as agreed!

C.  On one of my listings, we entered into an agreement within the first 10 days on the market.  The buyers visited the house several times, but on the last day of their contingency period, they backed out due to road noise.  But the road noise didn’t change during those couple of weeks, so there’s no telling if that was the real reason, but it shows how sellers are in limbo during the contingency period.

D.  I had three potential sellers decide not to sell because they didn’t meet the 2-out-of-5-year residency period and qualify for tax-free gains up to $500,000.  I am careful to discuss that before listing – I had another sale this year where I represented the buyers, and the sellers figured it out after opening escrow that they didn’t qualify and got taxed instead.

E.  I lost two sales due to government inflexibility on zoning.  In one case the county would only allow one house to be built on 15.8 acres due to it just being down-zoned to a minimum of 8-acre parcels.  The other was a city not allowing any residential development on a parcel that had residential across the street and around the corner.

F.  There were three instances where I asked a listing agent if the seller might consider a price that was well under the list, and they scoffed at such an offensive idea.  Of course, they later sold them for my price or under – and in one case the agent called me to tell me that her seller did consider an offer under a million (list was $1.2M), and she just opened escrow.  Don’t you call me before opening escrow to create a bidding war?

G. I saw one seller get offered $390,000, which was within the advertised range on a condo she owned since the 1990s, and is paid off.  She refused to go any lower than $400,000, and the buyer walked (not mine).  Doesn’t there have to be a way to make that work!

It will probably be just as zany in 2015 – Get Good Help!

Posted by on Dec 29, 2014 in Jim's Take on the Market, Market Conditions | 4 comments

Surge of Boomers Retiring

Did everyone have a nice day off?  Great, let’s get back at it! From John Burns:

More people were born in the 1950s (41 million) than in any other decade, and they are dropping out of the workforce in droves. Those born in the 1950s will begin turning 65 in 2015. In fact, in the last 10 years, we have transitioned from roughly 2.5 million US residents per year turning 65 to 3.5 million per year, and that number will trend up to almost 4.5 million by 2025 before it starts trending down again.

boomers graph

This seismic shift will have a huge impact on the economy, as the traditional working age population of 20-64 will transition from growing 1.0 percent per year for decades to growing 0.25 percent per year. 20- to 64-year-olds earn and spend the most, so you can almost guarantee that the economy will grow more slowly than it has in the past.

While the economic growth will  be slower than usual, and the burdens on Social Security will skyrocket, entrepreneurial opportunities will abound to serve an unprecedented surge in retirees who, by the way, also happen to be the most affluent retirees ever.

My big idea for 2015 is to plan for a slower growing pool of workers and to take advantage of the surge in retirees, no matter what your  business.

Here is a nice clip from CNBC discussing the success home builders are having targeting retirees, even in non-traditional retirement markets such as Atlanta:

Posted by on Dec 26, 2014 in Boomers, Market Conditions | 10 comments

Credit Loosening?

The politicians, talking heads, and NAR pitchmen think that tight credit is to blame for a lackluster housing recovery, but those of us on the street know the local market has been red hot with demand.  The strict underwriting is more of an annoyance that anything, with underwriters requesting every document they can imagine in order to minimize the threat of buybacks.

Has it loosened up?  Will low rates and looser credit spearhead another big year in 2015?  I think so.

Here is an excerpt from this article to demonstrate the loosening:

Let’s see what some random companies, small and big, have been up to lately to gauge lending trends.

Banc Home Loans has expanded its Jumbo guidelines. Its “Program 55″ highlights include  up to 85% LTV no MI (to $2M), Loan amounts to $5 million, Minimum 660  FICO to $1.5M, 1st time home buyer- loan amounts to $2M, and Primary  Residence: Cash Out Refinance now to 75% LTV (Cash-out up to $1  million).

Caliber’s enhanced Fresh Start Program was rolled out. The two biggest features are bank statement option for self-employed  borrowers, and no seasoning or mortgage payment history required for  Short Sale, DIL, Foreclosure or Bankruptcy.

BluePoint Mortgage has Jumbo IO products with 89% LTV up to $1,500,000 with NO MI Loans up to $3,000,000 and 80% IO to $2,000,000, Up to $500,000 Cash Out, Second Home and NOO options, Cash out for second homes and NOO.

Carrington Mortgage Services, LLC announced the national availability of “The Carrington Loan,” offering  borrowers a more transparent, simplified home loan process with no  closing costs or upfront financing fees. The Carrington Loan can  facilitate home purchases for borrowers in the sub-640 FICO score range.

Wells Fargo Funding improved its refinance adjusters for all non-conforming products as of  November 10th, adjuster improvements are listed on the daily rate  sheets. In addition, its minimum down payment requirement has been  removed from its conventional conforming loans.

Stearns Wholesale is now offering new FHA FICO options 600-619 FICO score program.

Next year should bring in more demand from those who have been shut out previously from getting a mortgage, and those types aren’t known for patient decision-making.  It might feel more like 2006 all over again?

Posted by on Dec 12, 2014 in Market Buzz, Market Conditions, Mortgage Qualifying | 7 comments

Lots of Showings, But…


The demand is strong enough that every seller is getting a few looks, especially in the beginning.  Hopefully your agent has your listing on Zillow, but even if they don’t, buyers are going there to evaluate.  You’ll see their viewer count of your home is rising, and you’ve had plenty of visitors – but no offers.

What’s wrong?

It could be one, some, or all of the items below, but no matter what the problem is, you can fix it.

    • Photos are lying.  Once inside the house, buyers discover the truth about floor plan, condition, small rooms, etc., and are disappointed.

    • Something is wrong that buyers can’t see in the photos or Google Maps.  Bad smell, barking dog, surly neighbors, noise, etc.

    • Agents are using your house to sell the one down the street.  If there are competing listings nearby, the best buy will be the next to sell, and then buyers will expect that yours should be worth less.

    • Your furniture is ugly.  Buyers aren’t known for having great vision, and the anti-staged look is hard to ignore.

    • Your listing agent has a bad reputation.  There are agents who have burned every bridge they ever crossed.  Other agents might show the house just to satisfy their buyer, but won’t go too far to sell them on it.

    • Price is wrong by 5% to 10%. It doesn’t matter if you have ‘comps'; those are guideposts, not guarantees.

Why are buyers being so fussy?  Because you are asking them to pay a lot more for your house than you did.  If you want to entice them, then fix what’s wrong, or just lower the price to compensate.

If you don’t care if you ever sell, then just wait.  It’ll happen someday.

Posted by on Dec 10, 2014 in Jim's Take on the Market, Listing Agent Practices, Market Conditions | 0 comments

Did She Say Lower Prices?


From PropertyRadar (ForeclosureRadar):

“Earlier this year we accurately predicted that 2014 would be a year of lower sales volume and flat prices because home prices rose too far too fast,” said Madeline Schnapp, Director of Economic Research for PropertyRadar.

“That’s exactly what’s happened and hopefully by next spring, prices will be more in line with what prospective homebuyers can afford.”

Read full report here:

Posted by on Nov 19, 2014 in Market Conditions, Thinking of Buying?, Thinking of Selling? | 3 comments

Zestimate Accuracy


Hat tip to swm for sending in this article about sellers blaming zestimates for why they can’t fetch their higher price:

The owner of one New York home writes that a low zestimate is “hindering the marketability” of her home.

Zillow said its zestimates are just that, estimates, “not an appraisal” and are within 5% of the sale price just over a third of the time.

Zestimates are calculated using a formula that considers attributes like a home’s size, tax records and recent nearby sales.

Zillow argues a zestimate is also as likely to be high as it is to be low.

“So, that has become a problem because I understand that Zillow has a price, but in reality it’s not that. It’s what the market will bear,” Sievers said. “We will have to bring them back into reality and say, ‘hey, you know, there is a lot of different variations to a house and why a house would be higher or lower.'”

Posted by on Nov 16, 2014 in Jim's Take on the Market, Market Conditions | 3 comments