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Carmel Valley
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Category Archive: ‘Why You Should Hire Jim as your Buyer’s Agent’

Tax Reform?

The California Association of Realtors is pushing realtors to object to the Big Six tax reform.  Here are the reasons why:

C.A.R. OPPOSES the Tax Reform Proposal Because:

We must reverse the decline in California’s homeownership rate. For over 100 years Congress has incentivized homeownership with the tax code; currently through the mortgage interest deduction.  Any effort at reforming the tax code should maintain and prioritize this incentive. The current proposal only pays lip service to incentivizing homeownership. The proposed changes will result in only five-percent of taxpayers itemizing their deductions. Therefore, the vast majority of people will no longer receive any tax incentive to purchase a home. So, while the proposal keeps the mortgage interest deduction, the incentive effect of the deduction for Americans to become homeowners disappears.

This is a tax increase on California homebuyers and homeowners. Congress needs to protect taxpayers from double-taxation and maintain the deduction for state and local taxes, including property taxes.  Not allowing the average homeowner in California to deduct their property, state and local taxes would effectively raise their taxes $3,000 a year!  The Federal government would tax families on money paid to the state and to local governments they never used.

That’s all you got?

Tax reforms will come and go. Buy a house to lock down your living expenses, and provide housing stability for generations to come.

Posted by on Oct 29, 2017 in Jim's Take on the Market, Mortgage News, Thinking of Buying?, Why You Should Hire Jim as your Buyer's Agent | 1 comment

Seller & Buyer Testimonial

A key point here is that the local neighborhood experts gave them no chance of selling for the price they wanted, even after making improvements.

It sold for full price, on the first day:

Many thanks to our clients for doing this!

Posted by on Sep 3, 2017 in About the author, Bubbleinfo Readers, Bubbleinfo TV, Jim's Buyer Representation, Jim's Take on the Market, Remodel Projects, Repairs/Improvements, Thinking of Buying?, Thinking of Selling?, Why You Should Hire Jim as your Buyer's Agent, Why You Should List With Jim | 3 comments

The Big Stagnation

 

On the Facebook bubbleinfo, in response to the idea that the bubble won’t be bursting, Matt asked ‘what constitutes the big stagnation when it happens’.

My response:

The Big Stagnation? You’ll know it when you see it.

We used to consider 6 months’ of inventory to be normal, but the new norm is probably 3 months with most of San Diego being 1-2 months today. Rancho Santa Fe is our exception, and has 8 months’ of inventory currently (only because there was a slew of sales last month). I think we can consider stagnation being any market with more than 6 months’ worth of inventory, and/or 100+ average days on market (Avg. DOM in RSF now 129 days).

When the market slows, most of the homes not selling can be explained – bad locations, inferior condition, etc.  Start worrying when you see houses that have it all, including a decent price, not selling.

Other outside influences that might cause the market to stagnate include:

  1. Mortgage rates get back into the 5s. Rates have been under 5% since the end of 2009, which seems like a million miles ago.  Buyers would want to stall their plans for at least six months to see if sellers would compensate by lowering their price.
  2. An occasional bad comp.  This happens today when a lowball sale occurs (usually an inside job), and buyers and sellers wonder if it is real.  Because there is usually scant information about it, the bad comp ends up being a mystery, and we forget after a few months, but another seller has to go first to prove it was an anomaly.
  3. Immigration is halted.  This would have seemed impossible up until a few months ago, but if it happened, we could feel a significant impact on the demand side.
  4. Recession hits locally.  An economic slowdown may not bring more supply right away because those out of work would wait 1-2 years before they believed they couldn’t get another job, and decide to move.  A more immediate impact would be felt on the demand side – we’d be losing buyers right away.

The prime reason for a market stagnation is the resistance that sellers and agents have about lowering their price – they would rather wait and see if it will be different tomorrow.

We might see a 5% or 10% drop without much fanfare, because most every seller around here has gained more than 30% appreciation since 2009 and wouldn’t feel it much.  They might give up a couple of bucks, but if a heavy discount is needed to sell, they will dig in.  It is very likely that the only reason they are selling is to hit the big-money jackpot.

A stagnant market could last for months or years – they tend to last until people subscribe to the fact that price will fix anything!

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Posted by on Sep 2, 2017 in Jim's Take on the Market, Market Conditions, Thinking of Buying?, Thinking of Selling?, Tips, Advice & Links, Why You Should Hire Jim as your Buyer's Agent, Why You Should List With Jim | 2 comments

No Chance of Bubble Bursting

I was asked yesterday about the chances of the bubble bursting.

My answer was, “No chance”.

But these things run in cycles, and eventually won’t the market will cool off?

Yes…..some day…..and when it happens, our market will stagnate, rather than see prices decline.  Sellers would need to be desperate to sell for less, and there are too many other alternatives and stop-gaps in place now to prevent desperation.

A. Reverse mortgages – The H.U.D. backed down the loan-to-value last week, but for anyone who is 62 or older, the reverse mortgage will be a viable – though costly – alternative to selling and moving. The average borrower at current interest rates will be able to borrow roughly 58% of the value of their home, down from 64%, and allows them to take the equity out of the house through lump-sum withdrawals, regular payments, or a line of credit.  The loan does not need to be paid off until the borrower dies, sells the house, or moves.

What about the younger, working folks who don’t qualify for a reverse mortgage and could be impacted by the next recession?

B. The foreclosure rules have changed, and the banks would rather let you slide, than kick you to the curb.  Don’t feel like making your payments for months or years?  No problem, just send in what you can, and they will kick around your loan-mod application until things get better.

Want to sell quick?

C. Discount your price 20% to 30%, and a flipper will cash you out in a week.  But that doesn’t tank prices, because the flipper will apply some lipstick and sell it for retail in the next 2-3 months, keeping the neighborhood values afloat.  Could flippers get stuck with some dogs?  Yes, but they are flush and full of ego – how many do you see already who just keep re-freshing their listing at the same price, and holding out for those six-figure gains?  Plenty.

Don’t want to discount?

D.  There are thousands of realtors who will take your listing at any price and hope for the best.  This is how the market will go stagnant – and Rancho Santa Fe is the example, where today there are 213 houses for sale.  They just wait for someone to come around and pay the seller’s price.

The best reason of all for why our housing market won’t burst are the high rents.  If the next recession hits hard, and distressed homeowners think about cashing out, they need to leave town to make it worth it.  If they want to stay in the same neighborhood, the rents are so high that it makes more sense to stay put.  Remember how the layoffs at Qualcomm caused a big concern around Carmel Valley?  Yet prices haven’t tanked – and the 92130 has 85 active listings and 61 pendings today.

Everyone who financed a purchase in the last few years had to qualify through strict guidelines, and, as a result, the affluent have ruled the market.  They won’t get the jitters if the ride gets bumpy; no, they are in for the long haul.

Stagnant City is the worst that will happen.

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Posted by on Aug 31, 2017 in Jim's Take on the Market, Thinking of Buying?, Thinking of Selling?, Why You Should Hire Jim as your Buyer's Agent, Why You Should List With Jim | 12 comments

One-Story vs. Two-Story

The other day, an appraiser mentioned to me that he had just completed a study comparing the prices of one-story houses vs. two-story.

He had done a similar study ten years ago, and found that the premium being paid for a one-story then was about 5%.

Today, he found that the premium is about 14% – more than double!

We speculated whether it would double again over the next ten years.  When you consider how short the existing supply of one-story homes is today, and that builders are still addicted to the two-story model, it is pretty easy to guess the premium will increase further!

Here’s a sample of houses sold between La Jolla and Carlsbad this year.

NSDCC Houses Between 2,500sf and 3,500sf Sold 2017 YTD

# of Stories
# of Sales
Avg SF
Avg $$/SF
Median SP
One-Story
104
2,918sf
$623/sf
$1,450,000
Two-Story
532
2,973sf
$450/sf
$1,163,173

You can get a better ‘deal’ on a two-story home, but as boomers get older and unload two-story houses, that market could get glutty, and the quality one-story houses be even more sought-after.

Posted by on Aug 28, 2017 in Jim's Take on the Market, Market Conditions, One-Story, Thinking of Buying?, Why You Should Hire Jim as your Buyer's Agent | 7 comments