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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: ‘Why You Should List With Jim’

Congrats Tom!

Tom’s house in South Oceanside was one of the homes that was picked up in that market surge about a month ago.  The weather was ideal, rates were rising, there was a bit of a lull before the holidays, and we compared favorably to the other houses for sale nearby.  When another market-surge happens, let’s see if we can determine the cause (hopefully there will be others!).

The two others that went pending the same week didn’t fare as well.

  1. The house that did close escrow looked like it had to dump on price to find a buyer – but it wasn’t as bad as it appears.  The owner/agent had it listed for $829,000, and it closed at $750,000, which looks like a dramatic 10% discount. But the buyer had gone direct, and the seller reduced the price by the amount of the commission.  It was noted as such in the confidential remarks, but future buyers won’t see those and will probably consider the $750,000 as the comp price in future valuations.
  2. The other house that went pending fell out of escrow, due to mixed signals that made the buyers uncomfortable, so they cancelled.

These demonstrate how the market has changed.

Previously, the first house would have had more interest, and owner/agents would have been more patient about working the price higher.

In the second example, buyers would have been more likely to put up with some mis-direction, but there is zero tolerance now.

We had Tom’s house listed for $989,000, and we closed at $975,000.

Get Good Help!

Posted by on Dec 4, 2018 in Jim's Take on the Market, Listing Agent Practices, Market Surge, Tom Tarrant, Why You Should List With Jim | 4 comments

San Diego is #1 for Price Reductions?

The local birdcage liner has an article on price reductions, and mentions that San Diego leads the nation this year.  This is how they introduced it:

This isn’t a sign that the bottom is falling out of the market. Instead, after years of rapid price increases, experts say the market is becoming more stable and for the first time in quite a long time, it is shifting in favor of buyers.

That shift is most evident when you look at the number of times sellers have reduced prices. The share of home listings with a price cut grew to its highest level in at least eight years, says a recent analysis from Trulia. San Diego had the most reductions — 20.5 percent — of the 100 biggest metro areas in the United States so far this year. (It tied with Tampa, which also saw 20.5 percent of homes with a price cut.)

The full article (linked here) included examples:

  • 7171 Terra Cotta Road — $545,000. The four-bedroom house (1,804 square feet) in the Bay Terraces area has had four price reductions, starting at $569,000 at the beginning of November.
  • 4225 Florida St., Unit 4 — $395,000. The two-bedroom condo (794 square feet) in University Heights has had three price reductions, starting at $425,000 in mid-October.
  • 3655 Ash St., Unit 2 — $322,100. The two-bedroom condo (824 square feet) in Fairmount Park has had six price reductions, starting at $330,000 in mid-September.

Listing agent April Khamphasouk said the tough thing about selling the house at 2873 Upas St. is that it is basically two homes in one (the property is 1,698-square-feet and has a guest suite above the garage).

She first listed the home for $1.1 million in early October. By mid-October, the price was lowered by $19,000. There were three more price reductions and by Nov.12, the asking price for the home had decreased by $55,900. It is still on the market.

Khamphasouk said the recent price reduction seemed to be greatly increasing interest. Still, she said a lot of the issues in the past month have been related to rising mortgage interest rates.

No mention was made about the Upas property selling for $775,000 in May.  The Terra Cotta house just had a model-match sell for $415,000 nearby, and the Florida St. condo is on the corner of El Cajon Blvd. and next to a paint store.  If these homes represent the types of properties that need to lower their price, then the shock is that only 20% needed a price reduction.

The real news was that nearly 80% of the listings didn’t lower their price!

Posted by on Nov 26, 2018 in Jim's Take on the Market, Market Conditions, Slowdown, Why You Should Hire Jim as your Buyer's Agent, Why You Should List With Jim | 4 comments

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

Which Home Sellers Might Panic?

Is there a chance our home values could drop 20% to 30% like we saw in 2009?

There aren’t enough homeowners who will sell for today’s market value.  If prices drop, wouldn’t there be fewer homeowners interested in selling?

Probably – unless there was a panic.

Who might panic?

Some think it would be the recent home buyers – they were the ones who paid too much, and would panic to get out while they could before losing money.  But this isn’t the stock market – they bought a home for the long-term, and like we saw during the last crisis, people don’t sell just because they are underwater – or heading that way.  They have to live somewhere, and they will hunker down.

It’s the long-time homeowners who could sell for substantially less, because they have a boatload of equity.  If they had to dump on price to sell their home, they could do it, and still make out fine.  But would they?

Will baby boomers wreck the future one more time?

We see articles claiming that 40% of boomers are broke or close, and they all can’t be renters.  But for long-time owners to finally capitulate and dump on price in a panic, other things would have to happen:

  1. They would NEED the money.
  2. Somebody else would have to go first (and second and third).
  3. We’d go back to cyclical real estate.
  4. Realtors encourage dumping.

Need the money?  They need to live some place too, and does anyone really want to move to Hemet?  Selling the long-time homestead and renting doesn’t sound desirable either.  But if older folks can cash out by selling the house and move in with their kids, they might do it – but do the kids want them?  It’s more likely that the aging will stay put, and have nurses live-in or visit, if for no other reason than to avoid the capital-gains tax on profits over $500,000.

Somebody else needs to go first – and it will take a few lower sales nearby to make it obvious that it’s time to panic.  Denial is more than a river in Egypt!

Previously there were real estate cycles.  In the 2000s, the exotic financing stretched out the up-cycle, but then the reversion was shorter than usual too – just a couple of years.  Why?  THEY CHANGED THE RULES, and stopped foreclosing.  This is the key fact – lenders always led the previous down cycles by dumping REOs for whatever they could get, and sucking down home values for all.  But now banks don’t have to foreclose on defaulters, let alone dump houses for whatever the market will bear.  Without banks being the catalyst to start the dumping, who else will do it?

Realtors could get the party started by telling sellers to dump and run.  But in reality, it works in the other direction.  Somewhat-desperate sellers would rather shop around for a realtor who will take the listing at their lofty price, than believe they’d have to sacrifice their hard-earned equity (not!) just to sell.  Desperation is so high among realtors that it’s not hard to find one who will take a listing with a price based on comps +10%.  For most agents, that’s all they’ve ever known, and they don’t read blogs.

Bottom Line: There may be a slew of negative soundbites, but unless homeowners see panic happening right around them, they won’t believe it.  Real estate ignorance is bliss!

Posted by on Nov 20, 2018 in Jim's Take on the Market, Listing Agent Practices, Market Conditions, Realtor, Why You Should List With Jim | 16 comments

Selling Early

Earlier we saw how a fresh new listing gets more traffic, and that buyer interest dies off quickly:

http://www.bubbleinfo.com/2018/11/02/selling-your-home-in-2019/

Yet historically about 3/4s of the sellers insist on testing the market for weeks or months, just to make sure. Buyers don’t mind waiting, because they usually get a better price when they do.

Realtors get criticized for just wanting a quick sale, but the data shows that selling earlier in the listing period means getting closer to the list price.

The first group here are those houses that sold during their first 10 days on the market, and the second group are those that sold after 11+ days:

NSDCC detached-homes sold between September 1st and October 31st:

Year
#Sales DOM 10-
Avg SP:LP
Med SP:LP
#Sales DOM 11+
Avg SP:LP
Med SP:LP
2014
114
99%
97%
366
93%
96%
2015
115
99%
100%
356
95%
98%
2016
148
98%
101%
390
93%
96%
2017
141
99%
101%
377
95%
99%
2018
115
97%
100%
327
94%
97%

Buyers are demanding a slightly larger discount today, plus sales are also down 15% YoY so a few sellers aren’t budging – but they’re not selling either.

It’s probably never been so important to be sharp on price. Just don’t add any extra mustard!

Posted by on Nov 16, 2018 in Jim's Take on the Market, Listing Agent Practices, Sales and Price Check, Why You Should List With Jim | 3 comments

My Best Listing Ever

My new listing in Rancho Santa Fe! Authentic Old-Spanish custom estate with a legal 2-br guest house on 2.3 acres! Oozing with charm and character borrowed from the old California missions, this sensational one-story has open-beam ceilings, custom cabinetry, wine cellar, 4 fireplaces, and plenty of natural light! Newer infinity-edge pool/slide, outdoor party room, 3-stall barn, tack room, 2 arenas, and on horse trail. Secluded on gated flag lot, and on sewer too. Guest house has newer kitchen & HVAC plus a 2-car garage – wow! Trophy property!

LP = $3,995,000:


2br/1ba Guest House

Guest House interior

https://www.zillow.com/homedetails/17442-Via-De-Fortuna-Rancho-Santa-Fe-CA-92067/16731335_zpid/

Posted by on Nov 12, 2018 in Bubbleinfo TV, Jim's Take on the Market, Listing Agent Practices, Rancho Santa Fe, Why You Should List With Jim | 7 comments

The End is Near

click on image for their youtube video

Our broker-cooperation model of sharing listings though the MLS has been the lifeblood of selling homes since the early 1960s.  But it is breaking down right before our eyes.

It’s not going to happen all at once, or even happen out in the open.  Instead, the sharing of listings through the MLS will just quietly go away.

Whether it is the emergence of the PLS, or brokerages developing their own Coming Soon program, or individual agents doing off-market sales out of sight, the sharing of listings is doomed – even though it is what’s best for consumers and agents alike.

Can we just admit it, and carry on like the commercial brokers do?

Everybody for themselves!

The first thing to do is to stop the automatic listing feeds to Zillow/Trulia, and make it broker-optional, which is what’s happening in Las Vegas.

Agents may choose to upload their MLS listings to Zillow and other portals, or maybe not.  But what about Redfin and other brokerages who get their listings directly from the MLS?  Once agents see the benefits of eliminating portals, why would they bother with the MLS at all?

Maybe agents with a hot new listing will just wait a few days or weeks to see if they can find their own buyer first.  Or maybe another agent in the office might have someone?  We already see this happening every day.

The MLS will be the marketplace of last resort.

We should embrace this change, and tell consumers that they have to go to each company’s website – or even each individual agent’s website – to find the hot new buys.  At least they would know the honest truth!

I’m convinced that industry players don’t see this coming.  They don’t see what happens (or they look the other way) when listing distribution is left in the hands of the listing agents themselves.

Yes, thank you for giving us the ability to choose which platforms to use to market our listings – I appreciate having choices. But when you take the automation away, and make it a manual choice for each listing, agents will find it hard to resist the temptation to limit with whom they share their listings.

Posted by on Nov 9, 2018 in Jim's Take on the Market, Listing Agent Practices, Realtor, Realtors Talking Shop, Why You Should List With Jim | 1 comment

Two Out Of Five, For Now

This is a real estate blog, not political, but legislation gets passed that affects real estate decision-making.

Here is what the HW said we can expect from the new HofR:

https://www.housingwire.com/articles/47337-mba-lobbyist-heres-what-a-democrat-led-house-means-to-us

But let’s go back to the tax reform passed in December.

Nobody has brought this up yet, so I’m just speculating.

The original proposal was to change the 2-out-of-5-year residency requirement to five out of the last eight years in order to get up to $500,000 tax-free profit.

This provision was conceded, and all the talk centered around the lowering of the MID and the limits on the SALT deductions.

But when the final bill was passed, they didn’t change the residency requirement to the five-out-of-eight version.  It is still the two-out-of-five requirement today.

If the Democrat-led House of Representatives decides to re-visit the tax reform, there will be a lot of yelling and screaming.  But if they cut deals in the end to pacify everyone, it’s the five-out-of-eight requirement could be one of the concessions – because there wasn’t any resistance to the change last time.

It won’t matter to long-time homeowners, but for those who purchased in the last 2-3 years and were thinking of moving up or out with tax-free profit, this could hamper the plan.

Thinking of selling now, just in case?  Contact Jim the Realtor!

Posted by on Nov 7, 2018 in Jim's Take on the Market, Local Government, Tax Reform, Why You Should List With Jim | 0 comments