It’s been obvious that the entire real-estate-selling business has been deteriorating towards single agency. I see it every day on the street, and I’ve posted evidence of the shift regularly.
The trend is moving quickly now on multiple fronts.
The DOJ is going to decouple commissions, which will prohibit sellers from offering to pay the buyer’s agent. The buyers can include it in their offer, but it likely won’t get that far. The buyer-agents who are left will want a written agreement to get paid by the buyer if the seller won’t pay. How many agents will be able to demonstrate why they are worth it? Not many, but maybe the buyers won’t ask too many questions.
Homes.com is spending millions and billions on advertising their website to compete with Zillow. Their twist? They funnel all the leads back to the listing agent, instead of farming them out to the highest bidders like Zillow does. I’ve been called by several phone jockeys from Homes.com to sign up for their enhanced listing packages, and I’ll sign up. Robert Reffkin responded positively to the Homes.com program, and you can see how Gary Keller feels about it above.
Agents are giving up on representing buyers because it’s too hard and doesn’t pay enough. Most of the unsold listings are grossly over-priced and the occasional deal gets multiple offers within minutes. Agents have to spend months or years working with their buyers before they get lucky, only to then get a reduced commission from the listing agent. Now I have to convince the buyer to pay the commission too? Great, thanks.
Listing agents are advertising for buyers to avoid paying the buyer’s-agent commission by coming directly to the listing agent instead. Realtor cannibalization is what we deserve. (link)
This house priced at $1,985,000 in Rancho Penasquitos received 15 offers and likely sold for 15% to 20% over list (an offer that was 12% over with free rentback wasn’t enough).
I remember when $2,000,000 got you a decent house in Carlsbad!
We won’t see a hundred new listings hit the market in one day….it will be two here, three there, four over here, etc. and pretty soon the buyers will think about stepping back to see where it might go.
While a surge in inventory next year would help to change the market dynamics, there isn’t any hard evidence of it happening yet:
How many would be considered a surge? If the number of new listings rose 10% or even 20%, would anyone notice? Probably not.
Using these November numbers, and adding an extra 20% would only get us back to last year’s total – which we thought was bleak then. but now I’d take it!
It would take a real bump to get buyers to step back and say, ‘hold on, I’m going to wait and see where this goes for a month or two’.
Let’s guess that it would take at least a 25% increase in new listings for buyers to pause.
I was asking around yesterday, but nobody had anything definite to report about their new-listings flow for next year. One agent thought that we’re going to see a lot of short sales though (???).
The San Diego Case-Shiller index has the largest YTD increase in America, and is the only higher-end market with a 50%-plus increase since March, 2020!
A whopping 53.75% increase in three-and-a-half years!
Could rates get so high that it turns into a cash-only market? It’s heading that way.
Of the 118 closings this month between La Jolla and Carlsbad, 45% were all-cash, and it’s competitive. My buyers made a cash offer that was $101,000 over list on this one and didn’t make the final round. There were 13 offers.
Interest rates are based on trading levels in the bond market. Bond traders began their day looking at significantly weaker levels (i.e. higher yields/rates) versus last Friday, but for no apparent reason. Actually, it would be more fair to say “for no new reason.”
Reasons for the rising rate momentum are apparent and ongoing. Decades-high inflation required decades-high rates to fix. The higher rates are supposed to be damaging the economy more than they have. Until that damage shows up, rates have a green light to continue higher.
As more and more market participants abandon their preconceived notions regarding an imminent rate reversal, the upward momentum takes on a certain glacial quality. In other words, it’s self-sustaining, often resulting in days like today where rates look like they’re acting on some obvious catalyst despite the absence of any such news.
Mortgage rates were already new 7.4% by the end of last week and today’s increases bring the average lender closer to 7.5%. This is the highest since late 2000. Lower rates are still available for certain scenarios and discount points, but many scenarios are also seeing higher rates.
This is the house that received THIRTY offers last month.
My thoughts:
The supply of houses priced under $700,000 is scarce, with overwhelming demand.
This is all you’re going to get from now on, and it won’t get better. I feel sorry for the kids.
My buyers offered $700,000 with 20% down and didn’t get a counter.
The listing agent didn’t round-trip it and the winner paid $730,000 and financed the purchase. How do you know if others would have made a better offer if you don’t include them?
Today’s local Case-Shiller reading for November is the fifth in a row that reflects the much-higher mortgage rates. The index has dropped 9% since May – don’t be surprised if in the future we see a similar trend of enthusiasm in springtime, and doldrums in the off-season:
San Diego Non-Seasonally-Adjusted CSI changes
Observation Month
SD CSI
M-o-M chg
Y-o-Y chg
Jan ’21
301.72
+1.4%
+14.3%
Feb
310.62
+2.9%
+17.1%
Mar
320.81
+3.3%
+19.1%
Apr
331.47
+3.3%
+21.6%
May
341.05
+2.9%
+24.7%
Jun
349.78
+2.6%
+27.2%
Jul
355.33
+1.6%
+27.8%
Aug
357.11
+0.5%
+26.2%
Sep
359.88
+0.8%
+24.9%
Oct
363.80
+1.1%
+24.2%
Nov
367.62
+1.1%
+24.3%
Dec
374.48
+1.8%
+25.9%
Jan ’22
383.92
+2.5%
+27.2%
Feb
401.45
+4.6%
+29.2%
Mar
416.64
+3.8%
+29.9%
Apr
426.08
+2.3%
+28.5%
May
428.32
+0.5%
+25.6%
Jun
425.26
-0.7%
+21.6%
Jul
414.03
-2.6%
+16.5%
Aug
402.62
-2.8%
+12.7%
Sep
394.18
-2.1%
+9.5%
Oct
391.34
-0.7%
+7.6%
Nov
385.37
-1.5%
+4.9%
If the index keeps dropping over the next few months (likely), it should mean that it will get down to the late-2021 numbers. Will that be enough to impress buyers that prices are reasonable now? Or will they just go out and buy because it’s springtime?
First of all, the calendar was perfectly set up for an extended holiday vacation and for everyone to not come back to work until this week. Mortgage rates are double what they were a year ago so nobody can afford a house, plus it’s been raining cats and dogs.
It would be natural to assume that the real estate market is ‘frozen’, and at best we will have a sluggish start.
Yet the early action between La Jolla and Carlsbad has been sizzling:
NSDCC Listings Marked Pending Since Jan. 1st:
What is impressive is how long these listings have been on the market – the median DOM is 55 days! Wouldn’t buyers lay off those for a few weeks to see where this is going?
Did the sellers dump on price?
Why would they dump on price with the selling season is right around the corner? Surely they would let it run at least 2-3 weeks into January before giving it away, wouldn’t they?
The doomers are hoping to drive the real estate market into hysterics, just for fun. It’s easy for buyers and sellers to get caught up in it too, and think the sky is falling.
Let’s identify the terms, what doomers want you to believe, and the truth:
Inventory Surge
Doomers: Sellers are hitting the panic button.
Truth: If we are taking about a surge in active listings, it is because the list of aspirational sellers (those who will only move if they get their price) is growing longer. They aren’t the market makers; they are only helping those that are.
Price Reductions
Doomers – Home prices are falling.
Truth: Sellers mis-priced their home from the beginning, and now they are hoping that if they knock off a couple of bucks, it will make a difference.
Affordability/Revert to Mean
Doomers – Home prices must come down so regular people can afford to buy.
Truth – Around here, homes haven’t been affordable for the common man in years, yet home prices have accelerated. The NSDCC market is only for the affluent now.
Higher Rates Will Crush the Market
Doomers – Home prices and rates go hand in hand. When rates go up, prices must come down.
Truth – The bumps in rates are only giving the affluent a reason to pause, in hopes of a price correction.
More Open Houses
Doomers – Realtors are panicking.
Truth – More realtor trainees are trying their luck.
Home Sales Dropping
Doomers – Market is being crushed.
Truth – More sellers are holding out for their price.
Sales Crushed
Doomers – Zero
Truth – If the NSDCC monthly sales stay in the 100-200 range, we will be fine. Those are January counts, and the usual market seasons have been topsy-turvy since March 2020 so it will give the demand more time to get pent-up.
Prices Crushed
Doomers – 50% off
Truth – Sellers determine what they can live with, and their ego plays a bigger role than you might imagine. Nobody has to sell any more, so expect resistance to selling for lower than the last sale. Only the extremely-motivated sellers will sell for a big discount today – it will take years for that to become commonplace.
