bubbleinfo.com

The old adage, “Buy When Everyone Else Isn’t”, is a favorite.

Currently, the reverse is true – it would be a good time to sell.

With ultra-low mortgage rates, buyers are everywhere, looking for deals.  But the inventory had dried up – all the good buys are in escrow, and new listings coming on are pushing higher on list price.

Two examples:

1. There are only a handful of decent 2,800sf-plus houses for sale under $1,000,000 in Carmel Valley.

2. There is ONE house for sale over 3,000sf, and under $795,000 in all of La Costa Oaks, La Costa Valley, and La Costa Greens.

Last year you could find plenty of offerings in both those categories:

Carmel Valley: In 2011, there were 81 houses sold, and 54 listings that cancelled or expired that were over 2,800sf, and under $1,000,000.

LC Oaks/Valley/Greens:  In 2011, there were 33 houses sold, and 16 listings that cancelled or expired that were over 3,000sf and under $795,000.

Are prices going up?

I don’t think so, for two reasons. A) Buyers would rather be patient and wait for more new listings, and B) the inventory leftovers are the inferior properties – better to wait for the plums.  If prices are going up, it will be with isolated sales, and hard to make a blanket statement or one-liner soundbite. 

The sellers of OPTs should do themselves a favor and dump on price, and get in the game – the market is very active!  If you are thinking of selling, call Jim the Realtor at (858) 560-7700, or email jim@jimklinge.com!

Here’s video testimony regarding market conditions around San Elijo Hills/South Carlsbad.

In the 92009, 92011, and 92078 zip codes, there have been 228 houses marked pending this year, not counting contingents (71 of those new pendings have closed already). All that is left are the picked-over listings, and in today’s market, a house has to be really wrong on price to not find a buyer.

Will it mean higher prices? Maybe, maybe not.  There has to be a steady flow of sales to sustain momentum – and this could be a momentary blitz that could sputter if the supply dries up:

The youtube link: http://youtu.be/gdUxiGiPlK0

I was telling someone over the weekend how the local market has been smoking hot lately – at least for those sellers who list their home for a reasonable price.

He responded with a guffaw, and the usual indignation, “That’s not what I’ve been reading”.

Here are the current market statistics – except for the stubborn high-enders, the rest of these categories have more pendings + contingents than active listings.  We haven’t seen that since the height of the frenzy in 2003 – and January sales were up too:

Yes, I’m counting the contingents as pendings now, and it’s for two reasons. 1) They are getting approved quicker, and 2) with few other options, buyers are more likely to stick. If buyers do bail out on one contingent, it’ll be because they found another, so the pending/contingent count would stay the same. The numbers are somewhat bloated due to the short-sale backlog, but if the ACT/PEND+CONT counts were lower than 2:1 it would still be a healthy market.

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We have received four offers on the Lavender REO listing, in spite of two other Lavenders also listing last week, making it 4 of 17 properties for sale on the same street!

Thankfully they came on at higher prices, but none of them have the high-speed location that mine does >>>>>

I have probably received another 15-20 inquires about the listing, even though buyers and agents have full access to satellite photos and video tour.  There is high demand in CV! 

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For those who want more proof, examine these recent pendings/solds in Carmel Valley. 

Most curious is the market time – a few houses that have sat for months have popped off lately, though this first one only lasted four days on market, listed higher than his 2006 purchase price (you’ll need a redfin account to see pendings):

http://www.redfin.com/CA/San-Diego/5200-Great-Meadow-Dr-92130/home/12153395

http://www.redfin.com/CA/San-Diego/4745-Vereda-Luz-Del-Sol-92130/home/6314447

http://www.redfin.com/CA/San-Diego/5035-Ashley-Falls-Ct-92130/home/4480733

http://www.redfin.com/CA/San-Diego/10865-Craven-Ridge-Way-92130/home/4523585

Closed sales:

http://www.redfin.com/CA/San-Diego/5269-Foxborough-Pt-92130/home/12153367

http://www.redfin.com/CA/San-Diego/4715-Dunham-Ct-92130/home/6605312

http://www.redfin.com/CA/San-Diego/10670-Haven-Brook-Pl-92130/home/6315372

The bears can still hope that the high-end will be the next market to implode, and crush everybody below.  It could happen, and as long as you are looking for doom and gloom, don’t forget  Greece, Iran/Israel, Afghanistan, elections, the Padres – there’s plenty of bad news out there. 

But apparently there are a load of buyers who are ready, willing, and able to take advantage of lower rates and prices – and aren’t reading in the right places?

Redfin announced their 3.0 version here.

I think Redfin should roll out a new version every year, because they are the only ones doing the talking – it makes the environment more exciting.  They come off as innovative and cutting-edge, but it’s only because no other major brokerage puts up a fight.

If it weren’t for Redfin, would there be any innovation in the real estate business?

Zip Realty is in the death spiral, Hurt-U-Sell/Assist-2-Sell are non-existent, and the major traditional companies still run full-color newspaper ads or corny Super Bowl commercials and pray that their agents can bring in business the old-fashioned way.

Redfin offers two compelling reasons for consumers to do business with them:

A. Their terrific website, which has to be a great loyalty-builder.

B. Kickbacks.

I think consumers would be happy with one of the above, and Redfin offers both!  Yet, they aren’t a major player in San Diego – in fact, they have barely made a dent.

According to the MLS, Redfin sold 188 homes in SD County last year, or less than 1% of the 33,069 total sales.

They have 22 licensees on the MLS who have local phone numbers, so they have a decent-sized crew here – plus the two compelling offers above. They really should dominate , but they don’t - why not?

Reasons Why Redfin Doesn’t Dominate:

1. They don’t have “killer instinct”, from the top down. 

Glenn Kelman has insisted on ‘playing nice’ with other brokers and agents.  The latest 3.0 version sounds like more of the same; that he wants to operate within the traditional confines of big brokerages.  He has received $46 million of venture capital, which has allowed him to be very patient.  But after 5+ years, we have only seen occasional tweaks or gimmicks – he’s not blowing up the entire industry (which deserves to be blown up).

It’s the same with the local salaried agents – they are graded by their clients, so they will play nice too.  The agent reviews read great on their website, which re-enforces the lovey-dovey sales technique.

2.  Redfin gets an undeserved bad rap with traditional agents. 

Other agents are slow to accept change, and will always consider Redfin agents as part of some renegade discount brokerage.  If it comes down to taking an offer from a Redfin agent, or from an agent or brokerage they feel more comfortable with, Redfin will lose most of the time.

It is undeserved because Redfin agents at least know their way around a deal – they are full-timers who are in the game daily, which you can’t say about most agents.

3.  Soft agents sell what’s left to them by aggressive agents.

The most successful agents work on commission, because they can.  They typically possess superior market knowledge, but most importantly, they have the most effective sales skills.

The top agents sell the best deals, because they have the killer instinct that makes them ultra-competitive – they want to win.  The soft agents sell the leftovers.

4.  Redfin claims to be transparent, but….

When you see that Stephanie Walker has sold 50 deals in the last 12 months, that is her whole team’s total, which on the website looks like it includes 10 other people.

There is no official guidelines in the world for reporting sales, so no big deal, but if transparency is their rallying cry, then they should make it more obvious that 50 is the team’s total, and not one person.

Redfin also claims to have the best agents, but with no industry standard, they just sound like the rest of the fluff spinners.  They deserve credit for making client satisfaction a key component of their program, but to then to twist it further and call your agents the ‘best’, is stretching it.

In summary:  I am a fan of Redfin – their website is top-notch, and I loved when they published the sales statistics on every agent.  I hope it comes back!

All four items above could be remedied, and if done, I think Redfin could take over the real estate world one day.  Glenn, if you are reading this, I could tell you how to do it.  But it will cost you!

P.S. I took the death spiral remark from a comment at this link that also reviews the Redfin change:

http://1000wattconsulting.com/blog/2012/02/redfin-gets-more-traditional.html

Here is another article – with great comments:

 http://www.geekwire.com/2012/redfin-30-price-increases

The second half of this video gets into price reductions during the selling season - the time when sellers run out of excuses for not selling, other than price.  You should try to sell before April, and certainly before May, because once we get into late spring, the backlog of over-priced turkeys will cause the remaining buyers to hesitate further.

My Pricing Rules-of-Thumb:

1. Anywhere, Any Time, Any Market Pricing Gauge:

A. If you are getting offers, then your list price is about right.

B. If you are getting lookers but no offers, your list price is about 5% to 10% wrong (too high).

C.  If you don’t have any buyers looking at the home, it has to be more than 10% wrong on price.

2. Buyers are addicted to the days-on-market statistic, which is out in the open.  They are subtracting about 1% from your original list price for every week the house is on the market.

3. As a result, sellers should lower their price by 5% every 2-4 weeks until they start getting offers.

4.  An exciting price creates urgency and enthusiasm among both buyers and agents.  Without it, your listing goes stale quickly, usually after two weeks – and then lookers dwindle down to just those occasional stops done by agents for comparison to help them sell the better-priced house down the street.

Yesterday CR showed the breakdown of distressed sales year-over-year for different cities here.

Let’s look at our last six months, the period during which short-sale approvals have sped up, and compare to the previous year.

A comparison of NSDCC detached listings sold between August 15th and February 13th:

Here are the currently active detached listings in North SD County Coastal:

The conversion of REOs to short-sales appears to be underway, though the distressed properties are continuing to make up only about 20% of the sales. How many of the currently non-distressed listings will end up sliding into the other two categories? Probably 25% or so?

Don’t be surprised if REO listings dry up, and short-sales surge the rest of the year as we bear down on the expiration of the debt-tax-relief on 12/31/12.  Will Congress extend?  Could it end up being a political football in this election year? It should, so sellers know where they stand.

CR’s bottom call caused many to scoff, and point to various ivory-tower theories to refute it.

This is what he said, which is more of a technical call about home-price indexes:

And it now appears we can look for the bottom in prices. My guess is that nominal house prices, using the national repeat sales indexes and not seasonally adjusted, will bottom in March 2012.

The house-price indexes are good for measuring the general regional or national trend, and reflecting some consumer sentiment.

The naysayers are using either general theories with little or no specific current evidence to support them, or they declare that history always repeats itself so we don’t have to consider relevant facts.

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Let’s examine these theories, and use actual evidence from the street in rebuttal. 

These apply to my local market, but because San Diego is not different, they could apply to other areas.  You can decide for yourself:

1. Wages/Incomes haven’t risen, high unemployment/no jobs, and household formation is lagging.

There are people who are struggling, and I have empathy. 

But in spite of the unemployment/no jobs/no raises, there has still been a healthy demand for houses that are priced correctly (around recent sales), and it is building steam.

Consider my listing at 554 Meadowbrook, which was mentioned on the talk show with Bill.  We ended up having to take the one owner-occupied offer because Fannie gives them special consideration for the first 14 days on market.  But he had a tax lien on him that he couldn’t resolve.

The house went back on the open market, and open to investor offers.  Between Friday and Tuesday there were eleven all-cash offers submitted, and it sold over list price. 

There is nothing about this house that would warrant such a fanatical response – see for yourself:

MLS listing: 554 Meadowbrook   Map: http://g.co/maps/wu3dg

Richard’s video: http://www.youtube.com/watch?v=yUt4hxHt2lE

Could unemployment/no jobs/no wage increases cause people to have to sell their house?  Yes, but there were 11 cash investors that are willing to pay retail or close for this dog, plus another couple dozen phone calls from people who would have paid less and didn’t offer. 

Investors are providing a pricing floor to the market, and either flipping or building their portfolio.  If the market runs out of steam and they can’t flip, they will be stuck renting them, but that is their problem – they are paying cash.

Furthermore, virtually every offer I make on behalf of clients finds itself in a bidding war.  We are like most buyers and only chasing the good buys, but there is competition literally on every single offering.  There could be hundreds of additional sales if sellers would get off their high horse, price-wise.

2.   Shadow inventory/underwaters – Laurie Goodman is still the current record-holder of the highest guess – she expects 10 million more foreclosures.  Four or five million houses sell every year in America, so if a third of those are distressed sales, we could clear out the entire inventory of those underwater in 5-6 years.  But have you noticed how reluctant people are to give up their house?

Let’s note how hot the market is now – San Diego County detached-home listings:

Active detached-home listings:

REO/SS: 1,558

Non-REO/SS: 3,930

Total active detached listings: 5,488

Pending/Contingent detached-home listings:

REO/SS: 3,405

Non-REO/SS: 2,142

Total pending and contingent detached listings: 5,547

There are more listings that are pending/contingent than active!!!

In addition, the REO and short-sale listings are the hot sellers.  We are regularly seeing short sales get approved in 60 days (we got two approved this week) and buyers are more willing to wait, due to the overall low inventory. 

Bring on the distressed properties, buyers are waiting!  The Fed/Gov/Banking troika will ensure that they are dripped out in an orderly fashion.

3.  Overshoot

Overshoot already happened in San Diego, at least at the lower-end where everyone thinks recovery has to start.  I’ll use Oceanside for an example, one of the largest towns in the county and full of regular folks.

Detached-home sales under $200,000:

2008: 101

2009: 214

2010: 80

2011: 79

2012:  6 houses currently for sale under $200,000 in Oceanside, and three of the six are priced at $199,900.

4.  Higher-end hasn’t corrected yet.

These are the houses worth keeping, and owners will try harder to find a way.  There are only 654 properties (in a county of 3 million people) that are on the default lists with loans over $800,000.  Last year we sold 2,248 SD County properties over $800,000 – we can handle more higher-end distressed sellers.

5.  Can’t get mortgage financing.

An bold-face lie spewed by those not in the business, and just scraping for headlines.

6.  When rates go up, everyone is toast.

According to the Fed statement, they won’t be raising their rates until late-2014.  If the bond market went nuts, and mortgage rates jumped more than 2% (we’d handle anything less) the Fed/Gov will find a way to ease the pain.  They’ve given their banking buddies too much help to screw it up now.

7.  The trillions in government debt has to come home to roost.

The USA will conduct a strategic default if/when needed.  Every county does, and at some point, there won’t be any other choice.

We’ve been in these market conditions for almost three years.  Whether we label it ‘bottom’ or not, this is what we have – a trading range of about 10% for any property, with swings in that range based on the quality of the physical condition/sellers/agents.

People should question the application of old theories/history in an environment that is unprecedented.  Consider the upside surprises – the two big ones are how much cash is in play, and how resilient underwater sellers have been so far.

What say you?