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An Insider's Guide to North San Diego County's Coastal Real Estate
Jim Klinge, broker-associate
858-997-3801
klingerealty@gmail.com
Compass
617 Saxony Place, Suite 101
Encinitas, CA 92024
Klinge Realty
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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: ‘Thinking of Selling?’

Rolling Into Stagnant City

A year ago, I guessed our NSDCC sales would be down at least 5% in 2018, and it looks like it will be closer to -10%.  While I’m confident that sellers will refuse to lower their price expectations much in 2019, I doubt that home buyers will just go along as they have in the recent past.

The disconnect will probably mean that the 2019 sales of detached-homes between La Jolla and Carlsbad will drop another 20%, which will change the landscape considerably from the robust sellers’ market we’ve enjoyed over the last nine years.

Homeowners waiting for the top of the market will move closer to the exits, and we will probably have 5% to 10% more listings early next year – with no let up in pricing.  Potential homebuyers who are starved for quality guidance will be conservative and adopt the wait-and-see approach.

It guarantees a slow start to 2019, and a real standoff.

The worst part about the real estate industrial complex is that they provide no help whatsoever on how to deal with market conditions.  They push Yunnie up to the microphone every month to report the latest sales counts, but that’s it.

Consumers and realtors are left to their own devices to figure out what to do.

Buyers will want somebody else go first.

Who will go first?  With the rise in mortgage rates, we have already lost almost the entire move-up market.  My rule-of-thumb is that if you want to stay in your same area, you have to spend 50% more than what your house is worth to make the move.  In other words, if your house is worth a million, the houses you see listed for $1.1 or $1.2 million nearby aren’t enough of an upgrade – you only get, what, one more bedroom?

But if you bought that home for $800,000 with a mortgage rate of 3.5%, the thought of having to spend $1,500,000 with a 5% mortgage rate will send your head spinning:

Purchase Price
Loan Amount
Mortgage Rate
Mo. Payment w/taxes
$800,000
$640,000
3.5%
$3,674
$1,500,000
$1,200,000
5.0%
$7,942

Your home’s appreciation generated the bigger down payment, but you have to pay more than twice as much monthly, and it isn’t fully tax deductible either. How many people NEED to move that bad?

So if the move-up market is comatose, then who’s left?

Those who don’t own a house here yet – the first-timers and newcomers.

They are at a disadvantage from being new the area, and are probably somewhat unfamiliar to the game – so it’s likely that they will be conservative. But the 2019 market will be entirely dependent upon them paying what the sellers want, or close.

I doubt we’re going to see fewer listings next year, so if there are 5% to 10% more listings – all with optimistic prices – and buyers are waiting to see what happens, there will be many more for-sale signs around.  That alone will cause buyers to pause.

Only the vastly-superior homes will be selling, and everyone will struggle to get the price gap right between the creampuffs and dogs.  The fixers will need heavy discounts, but thankfully, there is a floor.  I’ve probably taken 100 inquiries on my Brava listing – the flipper/investor action is still strong, though they are slightly more conservative about next year too.

Realtors could provide the solutions, but will they?

Here are the typical responses to taking a higher-priced listing:

SELLERS:  “Let’s add a little mustard to my list price.”

TOP AGENT: “The market is soft, and virtually all active listings are priced above what the market will bear. An attractive price will help to set us apart, and our expertise will help to clinch the sale in a timely fashion.”

REGULAR AGENT: “Let’s try the value range pricing!”

NEW AGENT: “What the heck, we can always lower the price later!”

Will the home sellers be sufficiently motivated to price their home sharply?  For those who have been waiting for the top of the market, the answer is no.  They are only selling if they can get their price – especially if they plan to move up in the same area.

We’re headed for a showdown – who will blink first?

There will be a healthy market for for the well-location remodeled homes, but the rest will sit a while before they figure it out – and many will not.

Annual sales dropping 20%?

We’ve been here before, and survived it.  We will survive this round too – we don’t have the shock of a market driven by no-qual loans all of a sudden shifting to qualifying-only, like we did in 2008:

Year
NSDCC Detached-Home Sales
Year-over-Year Change
2005
3,014
2006
2,626
-13%
2007
2,479
-6%
2008
2,037
-18%
2009
2,223
+9%
2010
2,461
+11%

Where will prices go? It will be a very soft landing, because without foreclosures and short sales, there won’t be desperate sellers dumping on price – they will wait it out instead.

Heck, they’ve waited this long, what’s a couple more years?

It will be case-by-case though. There will be a few great deals, some retail sales, and a lot of standing around.  Welcome to Stagnant City!

Get Good Help!

Posted by on Nov 21, 2018 in Forecasts, Jim's Take on the Market, Market Conditions, North County Coastal, Thinking of Buying?, Thinking of Selling?, Why You Should Hire Jim as your Buyer's Agent, Why You Should List With Jim | 7 comments

Doom-Doom?

Corelogic reported September sales yesterday, and Doom-Doom Diana rejoiced.

She wrote an article with the headline ‘Southern California suffers its worst housing slump in over a decade’, and reported that sales were down 18%.  Then she tweeted the article with the same soundbite (above).

But further down in her own article was this gem:

“There was one caveat to last month’s sharp annual sales decline — this September had one less business day for recording transactions. Adjusting for that, the year-over-year decline would be about 13 percent, still the largest in four years.”

Link to CNBC article

Even though she knew it was really only the worst in four years, she pushed the worst-in-decade angle.  Rather than commit to honest reporting, she would rather distort the truth in order to attract the maximum eyeballs.

What’s really happening?

It is natural for homebuyers to tap the brakes when rates and prices are going up at the same time.  It’s not because they don’t want to buy.  It because they wonder if prices will come down, and they don’t want to pay too much.

The result? Sales naturally go down.

I’m glad to see that buyers are paying close attention – they should!

People are moving fast and are addicted to soundbites.  We been trained to live in a binary world, and just want to hear if the market is going up or down, like with stocks and bonds.

I’d rather get into the minutiae and ramble on about all the variables. But realistically, who is going to listen when Doom-Doom Diana will give you a sexy hot take in one sentence?

The other tenet that determines the housing market is the seller’s mantra:  “I don’t have to move, I have plenty of time, and I’m not going to give it away!”

Sellers get a vote.

If they aren’t going to sell for less, then we roll into Stagnant City.  In the past, banks had to sell for what the market would bear, and they would lead the market down as they scrambled to get out.

But banks aren’t required to foreclose any more.

Which leaves us with the question: Which seller has to sell for whatever the market will bear today, even if it is substantially below their perceived value?

The answer is ‘None’.  Today’s home sellers might knock off a couple of bucks, but they’re not going to give it away.

So let’s determine a way to gauge the market in an easy binary way, and measure the most important tenet – are sellers capitulating?

Sellers always want more than the last sale nearby.  Here is a simple way to follow the trend to see if sellers are getting what the last guy got – the month-over-month changes in the Case-Shiller Index:

Recently, sellers have been getting about what the last guy got, or a little more.  But if we see a series of negative numbers over the next few months, we know that buyers are winning.

Sellers have loads of equity – more than ever – so you would think they wouldn’t mind giving some of it back to make a deal.  But homes are personal, and the ego is a funny thing.  It would take a full panic for sellers to capitulate.

Posted by on Oct 31, 2018 in Jim's Take on the Market, Market Conditions, Thinking of Buying?, Thinking of Selling? | 9 comments

812 Clicks

I only put this on here because I want you to learn with me, side-by-side.

I spent a couple of bucks on a Facebook ad, and got 812 clicks.

Buyers are interested!

There is a demand right below the surface, and a property that looks under market will get hundreds of buyers to respond. Hire me to handle!

Posted by on Oct 29, 2018 in Jim's Take on the Market, Listing Agent Practices, Market Conditions, Thinking of Selling?, Why You Should List With Jim | 4 comments

Inventory Watch

Now that the media is trumpeting a slower housing market every day, you’d think there might be more sellers hitting the panic button and listing their house for sale this year, rather than wait for the Glut of 2019.

But this week, the number of new listings dropped 32%!  The count from the previous week was 101, but we only had 69 new listings in the past seven days.

The number of pendings is holding up too (+1 this week).

Let’s compare the exact time in question when things started feeling different towards the end of the selling season.

NSDCC Sales between Aug 1st and Oct 15:

Year
Number of Sales
Median LP
2014
588
$1,065,000
2015
637
$1,059,000
2016
676
$1,187,500
2017
652
$1,237,050
2018
598
$1,325,000

In 2014, mortgage rates had been coming down – from 4.43% in January to 4.04% in October – and the median sales price was 24% lower too.  Yet we had more sales in 2018!

By the Spring of 2019, you can bet that any talk of a year-end slowdown will be shrugged off and blamed on the holidays – and that next year’s pricing will be right back to (overly) optimistic.

Buyers – it won’t get better next year!

Get Good Help!

Read More

Posted by on Oct 29, 2018 in Inventory, Jim's Take on the Market, Market Conditions, North County Coastal, Thinking of Selling? | 3 comments

Record Number of Price Cuts

Though Manhattan has been a buyers’ market for two years, let’s take these with a grain of salt – the slowdown is due to the highlighted sentence in the last paragraph.  Hat tip to GW for sending this in:

New York City’s home sellers, tired of waiting for buyers, slashed prices on almost 800 listings in a single week this month, the most in at least 12 years.

In the week through Sept. 9, there were 774 homes in Manhattan, Brooklyn and Queens that got a price cut, the most for any seven-day period in data going back to 2006, according to a report Friday by listings website StreetEasy. The previous weekly record was in March 2009, during the global recession, when 713 properties were reduced.

Sellers with older listings are adjusting expectations just as a wave of newer properties hits the market — customary in New York after Labor Day. In that same September week, Manhattan got 662 additional listings, the third-highest total for any week in StreetEasy’s data.

“It’s a big gut-check for sellers,” said Grant Long, senior economist at StreetEasy. “We’re at a period in the sales market where sellers have been incredibly ambitious with the prices they’re asking. They’re having to come down and bring prices to where demand actually exists.”

Link to Article

Posted by on Sep 21, 2018 in Jim's Take on the Market, Market Buzz, Thinking of Selling? | 0 comments

The Reality of iBuyers

The ibuyer is the sexy new shiny object in the real estate game.  While the idea of a quick and easy sale sounds great, the reality is already much different – and, as the market transitions, their quotes and repair costs should get more conservative (and home sellers be less enamored).

The only local story I’ve heard was one where the ibuyer checked out the property in person, but then didn’t offer, saying it was outside their buying range. You can’t blame them for being picky, and only take the gravy. They will probably stick to the lower-end vanilla properties that are more predictable.

Here’s an article with more examples:

Link to Full Article

An excerpt:

Opendoor, which launched in 2014, says it’s not a house flipper. “We aim for fair market offers, making money on the fees we charge, not the profit on resale,” says Jim Sexton, head of Opendoor’s broker development. The company says it sells 800 homes a month across its 11 markets, with plans to expand to 50 markets by the end of 2020. Currently, it has nearly 3 percent market share in Las Vegas.

Opendoor eyes markets with ample volume, size, and liquidity, Sexton says, adding, “We’re looking for markets that don’t have many barriers to entry, such as hefty transfer taxes or other local or state regulations that make a transaction difficult.”

An Opendoor competitor, Offerpad, operates in eight markets with plans to expand, while Zillow, one of the newest entrants into the direct buying niche with its Instant Offer program, has been successful in Las Vegas and Phoenix, where it expects to buy and sell up to 1,000 homes by year’s end. The new Redfin Now program is available in two California test markets, and Knock, operating in Atlanta and in Charlotte and Raleigh, N.C., enables “trade-in” clients to buy a new home before their existing home is listed.

These companies all claim to speed up and simplify the real estate transaction while removing uncertainty and inconvenience for sellers and buyers. The appeal of the marketing spiel is easy to understand, but how applicable is this model for most consumers? And how likely is it that these companies will become significant players in many markets?

“The market is really driving this model,” says real estate consultant Victor Lund, founder of WAV Group. “The convenience factor, along with an alignment of circumstances are contributing to the growth of iBuyers. Consumers have built up a lot of equity in their homes since the recession, interest rates are low, days on market are low, prices are up, and there’s lots of competition, which puts cash buyers in a better position to buy.” These circumstances create the optimal environment for iBuyers to thrive. Lund believes that once prices slip and homes generally take longer to sell, consumer interest in iBuyers will fade.

Among agents who have interacted with these models, what are they finding? Despite iBuyers’ claims to revolutionize the real estate transaction, some agents are finding their transactions are neither quick nor seamless.

For example, after Ockey’s clients accepted the Opendoor offer, the next step was the inspection. A team of five Opendoor contractors—one for electrical, one for plumbing, one for foundations, and so on—went through the house with a magnifying glass, says Ockey. “They asked us to fix everything you could think of. They wanted bathtubs and toilets replaced if there was even the slightest blemish. They wanted showers retiled and regrouted. It wasn’t little projects; they wanted to remodel the home, and they wanted the seller to pay for it.”

The requested repairs came to about $16,000 on a $300,000 home. Ockey spent weeks negotiating that figure down, which added time and worry to the transaction. “Having representation saved my clients thousands of dollars, but in the end, they made about $10,000 less than they would have selling to a traditional buyer. It’s not horrible, but it’s a lot of money when you only have $20,000 or $30,000 in equity.”

The automated aspects of working with Offerpad didn’t faze Kellie Parten, an agent with HomeSmart Realty in Phoenix, who helped her clients buy a home from the company in May. “It was robotic, but in a positive way,” says Parten. “You can tell that they’re a little bit of a machine, but I didn’t mind because they were very responsive and organized. I never had to ask for something twice.”

Although Parten wouldn’t hesitate to bring a buyer to an iBuyer home, selling to one is a different story. “Offerpad and Opendoor offers on a couple of properties I’ve listed seemed exciting at first, but after you factor in the concessions they request and the additional credits in lieu of repairs after inspections, the net is usually too low and the deals never came together,” she says. One iBuyer recently offered $750,000 on a home that Parten later sold to a traditional buyer for $900,000.

Posted by on Sep 13, 2018 in ibuyer, Jim's Take on the Market, Listing Agent Practices, Thinking of Selling?, Why You Should List With Jim | 2 comments

Typical Home Seller?

Formica counters and first-gen built-in refrigerator

Hat tip to Kerry for sending in the latest on the Oracle’s house in Emerald Bay.  The listing has run a typical path – while ignoring the current condition of the home, and able to make gobs of profit at half the price (the original $11M list price was 7233% above purchase price), they list for the highest imaginable price during last year’s selling season – and let it sit, in spite of the results. Now that the market has passed, they lower the price – but is it too late, and just cause buyers to keep waiting to see if they are right that it’s really a teardown on an awkward lot?

Billionaire investor Warren Buffett is slashing the price of his California beach house to $7.9 million, after putting it on the market for $11 million in February 2017, according to a spokeswoman for the listing agent.

If the property sells for its new asking price, Mr. Buffett will still make an impressive return, having paid just $150,000 for the home in the early 1970s.

The 87-year-old Berkshire Hathaway chairman, the third richest man in the world according to Forbes magazine, spent holidays at the beach house. He said in an interview last year that he bought the house because his late first wife, Susan, loved it. Since she died in 2004, he hasn’t spent much time there, which prompted him to list the property.

He said the Laguna Beach area had changed dramatically since then, becoming more developed. The house was renovated several times through the years but not recently, said the spokeswoman for the listing agent. Mr. Buffett also purchased an adjacent house, which he called “the annex,” to make space for house guests, and connected the two homes with a staircase. The annex was sold in 2005.

Mr. Buffett recalled hiding out in the home’s master bedroom to write Berkshire Hathaway’s annual reports during Christmas holidays, and visiting Disneyland with his children.

The roughly 3,500-square-foot, three-level Laguna Beach home is in Emerald Bay, a high-end gated community with views of the beach. It has six bedrooms. Two of the bedrooms have their own separate entrances for guests. The house fits Mr. Buffett’s famously understated tastes, with gray carpeting and white laminate countertops.

Link to Article

Another intriguing piece is the listing agent.  The seller owns a major real estate brokerage, but he lists this house with an outside company and an agent who has had nine sales since 2009.  But all of his sales are in Emerald Bay, and he weaves a tale of being a third generation realtor.

Telling grandma stories and pining about the past may have been alluring 18 months ago, but now what?

Posted by on Aug 29, 2018 in Jim's Take on the Market, Listing Agent Practices, Thinking of Selling? | 4 comments

Quick Kitchen Updates

Sellers need to do more updating and improving to get their home sold these days, but you don’t want to go crazy. Here are a few quick ideas from Bob Vila:

10 Kitchen Updates You Can Do in a Day

You don’t have to live with your ugly cabinets one minute longer!

There are plenty of ways to give them a quick refresh without having to purchase replacements. Make a large-scale change by painting your units a bright color, or go for a mix-and-match effect by applying a few coats only to the top cabinets. Consider removing a door or two to create trendy open shelving, or use chalkboard paint on the doors or expanses of wall for a dose of cottage charm.

Link to Full Article

Posted by on Aug 17, 2018 in Jim's Take on the Market, Remodel Projects, Repairs/Improvements, Thinking of Selling?, Tips, Advice & Links | 0 comments

Should Buyers Wait?

Should buyers wait a while to see what happens to the housing market?

Are we just seeing the usual end-of-selling-season malaise when where all of the motivated sellers have succeeded, and just the OPTs are stacking up?

Or has the market shifted…..for good? Is this the peak?

I think it depends on your needs:

  1. Only buying a premium property – then stay in the hunt. In the last downturn, the prices of the premium properties held up well – most had less than a 10% decline in value, and that’s before people started hoarding real estate (not selling for any reason).
  2. Only buying a single story – then stay in the hunt.  The one-story market is red-hot, with demand far out-stripping supply, especially in the newer-home or view categories.
  3. Willing to buy a fixer – be patient.  Buy when you see the appropriate gap of 5% to 10% between the creampuffs and the ones that bark at traffic.  If the home is in original condition, the gap should be larger.
  4. Only want to steal a property – very unlikely in the near-term.  Sellers aren’t that motivated, and only a small minority might consider selling for less than 5% of list.

We should be in a stagnant state for months, as everyone waits to see what happens next spring.  But I think buyers will be similarly picky then too.

We’ll see the same or similar psychology take over the whole country at the same time – which is the way it always happens.  What needs to adjust is the sellers’ trend to expect more than what the last guy got.

Here is a discussion guided by our friend and realtor Tom Stone about the market in Sonoma County (follow the link) – and check the comment section too, where Tom mentions the solution. Hat tip Eddie89!

Link to Full Article on Wolf Street

 

Posted by on Aug 16, 2018 in Jim's Take on the Market, Market Buzz, Thinking of Buying?, Thinking of Selling?, Why You Should Hire Jim as your Buyer's Agent, Why You Should List With Jim | 3 comments