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Are you looking for an experienced agent to help you buy or sell a home? Contact Jim the Realtor!

Jim Klinge
Cell/Text: (858) 997-3801
klingerealty@gmail.com
701 Palomar Airport Road, Suite 300
Carlsbad, CA 92011


Category Archive: ‘Market Conditions’

California Net Migration

This graph looks funky because it is charting negative numbers, but the latest housing-bubble study by the California Association of Realtors shows that of the people leaving California, the majority have incomes under $100,000.

They concluded that the main reason people are leaving is because of the high cost of housing.

Although California has, in many ways, earned its reputation for being hostile to business and ‘taxing people to death,’ the outmigration patterns by income are instructive and even illuminating. Virtually all of the state’s out-migrants earned less than $100,000 per year. That is true whether measured in raw numbers or as a percentage of each income group, but it is the exact opposite of what we would expect to see if it were taxes that were driving folks away. This is a housing issue, pure and simple.

Link to Study

 

Posted by on Feb 7, 2018 in Jim's Take on the Market, Market Conditions | 9 comments

Rising Mortgage Rates

Mortgage rates have risen almost one-half percent this year, and are around 4.50% with no points today (conforming and jumbo).  Because rates haven’t moved much in recent years, the half-point increase sounds dramatic, and could cause a few people to reach for the panic button.

But there’s no need to panic.

During the Frenzy of 2013, rates went up higher in less than half the time of the current increase:

But home prices didn’t back off – instead, our NSDCC median sales price has risen 40% since July, 2013!

But aren’t we closer to a new market peak now, and higher rates will just be the beginning of the end?  After all, the last two readings of the SD Case-Shiller have declined month-over-month, and those are calculating county-wide sales that are generally lower priced than NSDCC.

While the higher-rates/higher-prices/tax reform/insert-your-favorite-doom will likely cause nervous buyers to pause, the market has always been made by the buyers with less caution and more horsepower.

They might be more selective going forward, which means only the cream-puffs will be selling for retail, or retail-plus – the inventory of those is too tight, and the competition will drive the sales price.

It’s the sellers of homes that are lingering unsold who might want to sharpen their pencil on their list price.  Once you’ve been on the market and not selling for 2-3 months, do you really need to keep pressing for that extra 5% to 10% on top of what the last guy got – and risk not selling at all?

If higher rates do become an issue, it is a problem that is easy to fix, unlike tax reform or higher prices.

Buyers can either opt for a 5-year or 7-year fixed rate to stay under 4%, or ask the seller to buy down the rate.  Sellers who are getting a 5% premium over last year’s prices shouldn’t mind paying 1% or 2% to make the deal.

Posted by on Feb 5, 2018 in Frenzy, Interest Rates/Loan Limits, Jim's Take on the Market, Market Conditions, North County Coastal, Sales and Price Check | 2 comments

Most Competitive – San Diego is #4

A better competitive gauge would be the number of bidding wars per city, but hard to get a count. Hat tip to Jarrell for sending this in:

In a new study, LendingTree ranked the top 100 Most Competitive Housing Markets based on the factors that truly create a competitive market for homebuyers — how many house hunters are putting more money down, have high credit scores and start loan shopping before home shopping.

We looked at 1.5 million purchase mortgage loan requests that came through the LendingTree marketplace in the 100 largest cities in 2017. Then, we ranked each city based on three criteria:

The share of buyers shopping for a mortgage before identifying the house they want. Buyers with financing in place are more appealing to sellers and can compete with cash buyers.
Average down payment percentage. Having a higher amount of money saved for a down payment can enable you borrow more money or be offered a lower interest rate, allowing you to make a stringer offer.
Percentage of buyers who have prime credit (above 680). Borrowers with higher scores have more financing options to make more competitive offers.

Link to Article

Posted by on Feb 3, 2018 in Jim's Take on the Market, Market Conditions | 1 comment

Yun – The Anti-Cheerleader Now

Yunnie and the National Association of Realtors still haven’t released any math or formulas on how they came up with their conclusions, and it appears he is just shooting from the hip.  There is no factual evidence that points to the tax reform causing lower prices and sales – it is theoretical only.

He is the lead voice for the realtor body – and we deserve better.

Lawrence Yun, NAR chief economist, says “Another month of modest increases in contract activity is evidence that the housing market has a small trace of momentum at the start of 2018. Jobs are plentiful, wages are finally climbing and the prospect of higher mortgage rates are perhaps encouraging more aspiring buyers to begin their search now.”

Added Yun, “Sadly, these positive indicators may not lead to a stronger sales pace. Buyers throughout the country continue to be hamstrung by record low supply levels that are pushing up prices – especially at the lower end of the market.”

NAR says home prices increased over 2017 by 5.8 percent, the sixth year in which the increase exceeded 5.0 percent, blaming an uninterrupted supply and demand imbalances throughout the country for the rapid growth. While tight inventories are still expected to put upward pressure on prices in most areas this year, Yun says price growth will probably shrink, and some states could even experience a decline, because of the negative effect the changes to the mortgage interest deduction and state and local deductions under the new tax law.

“In the short term, the larger paychecks most households will see from the tax cuts may give prospective buyers the ability to save for a larger down payment this year, and the healthy labor economy and job market will continue to boost demand,” said Yun. “However, there’s no doubt the nation’s most expensive markets with high property taxes are going to be adversely impacted by the tax law.”

Added Yun, “Just how severe is still uncertain, but with homeownership now less incentivized in the tax code, sellers in the upper end of the market may have to adjust their price expectations if they want to trade down or move to less expensive areas. This could in turn lead to both a decrease in sales and home values.”

Yun does anticipate a slight increase (0.5 percent) in existing sales this year (5.54 million), on top of the 1.1 percent increase last year.  Single-family housing starts are forecast to jump 13.3 percent to 961,000, which will push new home sales up 15.3 percent to 701,000 (608,000 in 2016).

Pending sales were mixed on a regional basis, with the worst performance in the Northeast where the PHSI fell 5.1 percent to 93.9 in December, and is now 2.7 percent below a year ago. Contract signings in the Midwest were also down, but by a more modest 0.3 percent, dipping to 105.0, but remaining 0.3 percent higher than December 2016.

The other two regions saw contract signings increase; by 2.6 percent in the South to 126.9, and 1.5 percent in the West to 101.7.  The Midwest finished the year 4.0 percent above the previous December.

Link to Article

Posted by on Jan 31, 2018 in Jim's Take on the Market, Market Conditions, Realtor, Tax Reform | 5 comments

Inheritances Driving Luxury Market

It’s easy to spoil them….and nearly impossible to un-spoil them!

Hat tip to daytrip for sending this in:

A new generation of affluent homebuyers powered by a surge in inherited wealth is driving the luxury-home market, demanding larger spaces and fancier finishes, according to a report heralding “the rise of the new aristocracy.”

Prospective homebuyers under 50 account for most of those shopping for homes priced at $1 million or more, according to the report. Nearly a quarter of high-net-worth consumers between 25 and 49 said they would look for at least 20,000 square feet when they made their next home purchase; it was just 6 percent for respondents 50 or older. The report is based on a survey of more than 500 consumers with at least $1 million in investable assets, conducted last month on behalf of Luxury Portfolio International, a network of real estate brokerages.

Other home features deemed “essential” by a large share of these new aristocrats include hot tubs, at 45 percent; commercial-grade kitchen appliances, at 52 percent; and multiple-view security cameras, at 54 percent. Proximity to good restaurants was the most important community amenity in the survey results — followed by proximity to family.

Three of five respondents under 50 said they expect to inherit at least $1 million, with an average inheritance of $3.8 million. Thanks to a tax provision passed under George W. Bush, a lot of that wealth is available sooner to today’s heirs. More than 171,000 families gave gifts of at least $1 million between 2011 and 2014, according to the report, a giant leap from about 7,600 families who made $1 million gifts between 2007 and 2010. Another boost will come from the new tax law, which cuts taxes on the rich, and a booming stock market that is translating into demand for luxury homes.

Link to article

Posted by on Jan 30, 2018 in Jim's Take on the Market, Market Conditions | 2 comments

onestorysandiego.com

You’ve probably seen how hot the one-story market has been lately.

Baby-boomers prefer no stairs, and typically insist on a single-level home only. Hence the supply and demand is out of whack, and very frustrating for the potential buyers.  Of the already-low inventory of houses for sale today between La Jolla and Carlsbad, only 28% of them are one-story.

We want to help!

I created onestorysandiego.com to help demonstrate how Richard and I can assist you be more efficient in your search.  The web address forwards to our gallery of video tours of one-story houses only.  You won’t have to worry about rushing out to every new listing – you can tour them in the comfort of your own home, AND hear our audio assessment of the house, and its potential.

Check the results so far:

www.onestorysandiego.com

Once you are established as our client, we will send you custom-tailored videos with your specific wants and needs, plus give you access to a private site to enable you to track the one-story market too.

Contact me today at (858) 997-3801 or klingerealty@gmail.com

Posted by on Jan 29, 2018 in Jim's Take on the Market, Market Conditions, Thinking of Buying? | 2 comments

Interview with Alan

Hear some of the important insights on local real estate trends on a macro and micro level. Hat tip Tom T!

12:05-mark: Alan mentions that there are 35 new-home tracts in Otay Ranch, and at the end of the year there were only three homes for sale.

12:35: Biggest surprise – he could have never imagined how the prices of apartment sales have jumped. There has only been a small handful of other markets in the nation who have experienced the kind of upside that we’ve seen here in San Diego.

14:05: San Diego seems to be the darling of the national investment community, even though we are among the 4th or 5th most expensive apartments in the nation.

The average age of a San Diego apartment is 43 years old.

He has a client who just built 12 units in North Park, and his cost was $500,000 per unit.

If he had one wish, what would it be? Get rid of community planning groups.

Posted by on Jan 26, 2018 in Jim's Take on the Market, Market Conditions | 0 comments

Alan’s Take on 2018

Written by Alan Nevin, director of Economic Research at Xpera Group. His consulting practice focuses on valuations, development strategy studies and forensic services.

Link to Article

I like 2018.

It’s going to be a good year. I guarantee it.

Let’s look at the big U.S. picture:

   – Interest rates will remain low;

  – Oil prices are stable and will remain so;

  – The U.S. will add 2.5 million persons (as usual) and

  – Our nation will add 2 million-plus jobs.

  – And the unemployment rate will be 4 – 4.5 percent, again;

  – The rate of inflation (urban dwellers) will again be less than one-fourth of 1 percent (exclusive of home prices)

  – Finally, job openings will continue to rise. In January 2011, U.S. job openings totaled 2,939,000. Now they are at the 6 million-plus level, a 10-year high mark.

And let us always remember that one of our president’s key concerns is ensuring the continuing rise in value of his family’s hotels, commercial space and apartment projects. He knows that low interest rates, pro-real estate legislation and taxation and a strong economy benefit him and his families (and, of course, others).

Focusing on population: 47 percent of all the population gains in 2018 will be in California, Texas and Florida. Hurricanes, floods, earthquakes, fires, pestilence. Doesn’t seem to make much of a difference: The big three just keep on growing.

And then, there’s the housing market:

This year will be the strongest housing market in a decade in terms of total residential units permitted. And that’s good. However, single-family production is still meager. The 2004-2006 average production of single-family homes nationwide was 1,558,000 units. In 2017, it will be 850,000, about half of the 2004-2006 level. We project the 2018 total to rise to the 900,000-950,000 level, and that’s pretty good. What we are unable to incorporate into our projections is the total number of replacement units destroyed by hurricanes, floors and fire.

The San Diego Economy – 2018

San Diego County’s demographic profile doesn’t change much from year to year:

In 2018 the County’s population will top 3.3 million, up another traditional 30,000 or so. It’s an educated group of folks: 23 percent of persons over 25 have a bachelor’s degree and 14 percent have advanced degrees. Now, admittedly, that doesn’t compare to San Mateo County where their 50 percent with college degrees pales our 37 percent, but it’s pretty good in my opinion.

From an ethnic standpoint, we have a pretty steady mix of Hispanics (30 percent); Asians (12 percent), blacks (6 percent) and non-Hispanic whites (46 percent).

And we’re young (at least some of us). Our median age in the County is 36 and only 13 percent of the population is over age 65.

And we do add jobs rather regularly. In the past five years, we have averaged 30,000 new non-farm jobs annually, and I am delighted to note that the construction industry has added 27,000 jobs in past five years and is now at 81,000 jobs.

I do not anticipate a major uptake in new jobs. Non-farm jobs will most likely increase by 16,000 to 20,000, somewhat less than in past years. A shortage of labor may have something to do with the lack of ebullience in new job formation

In terms of residential construction, it should be a fairly stable year. In 2018, the County’s developers will produce some 4,000 single-family homes and 6,000 multi-family units. Multi-family includes both rental and sale product, everything from townhomes to high-rises.

The 10,000-unit count is largely made possible by the folks in eastern Chula Vista, where the three major landholders (HomeFed, Baldwin and Millenia) will be providing a substantial amount of shovel-ready dirt.

Posted by on Jan 16, 2018 in Forecasts, Jim's Take on the Market, Market Conditions | 0 comments

Towards the End of Cycle?

Predicting the future is hard. If it weren’t so challenging, we would all be super rich because we could predict winning Powerball numbers.

However, some people do take a crack at it — not predicting lottery numbers — but peering into the future to see what kinds of changes are likely on the horizon.

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!

That’s not all he sees. He predicts that the number of real estate brokers will fall by as much as 50 percent within a decade. They will be replaced by strategic business advisors.

And why is this? Because more and more people get their real estate information from online sources, such as Google. Brokers aren’t as necessary.

Lee believes the nature of the workforce itself is transforming as well.

“Work is being redefined,” said Lee, noting that we are moving toward an age when freelancers (from Airbnb hosts to Uber drivers) could thrive and where work will start to follow the worker and not the space. Although he expects some 10 million or more jobs to be lost to robotics, he said specialists and niche entrepreneurs with flourish in this new world of real estate.

Read More

Posted by on Jan 15, 2018 in Forecasts, Jim's Take on the Market, Market Buzz, Market Conditions, The Future | 5 comments