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Journal

Will The Real Estate Bubble Pop Again?

Our local home prices have risen so quickly that it feels like we’re in ‘bubble’ conditions again – could the bubble burst this time?

The last two times the real estate bubble has popped, it was due to banks having to offload their foreclosed properties for whatever the market will bear.  They flooded the market, and buyers – and prices – backed off.

But that has all changed now.

Look at the new devices being used to avoid a flood of desperate selling:

  1. New accounting rules.
  2. California Homeowners Bill of Rights
  3. Reverse mortgages

The accounting rules were altered so banks could hold their REO properties longer, and the California Homeowners Bill of Rights has, in effect, stopped foreclosing.  Lenders are now required to offer a loan modification to anyone in default, and only if the homeowner can’t or won’t qualify are they at risk of being foreclosed.   With today’s higher rents, there isn’t much relief for those in default to give back their house and go lease one nearby.  Besides, with our higher home values today, they can always sell before getting foreclosed.

Homeowners who need money can get a reverse mortgage too, as long as they haven’t been tapping into their equity already.

We end up with virtually no desperate sellers who need to dump on price.  Someone who wants to cash out quickly can price their home at last year’s comps and look like a deal!

The game is rigged – the Banking Cartel won’t let the bubble pop again!

For the bubble to pop, we would need a dramatic shift in the supply and demand – either a flood of homes hit the market, and/or we run out of buyers.

I thought we’d be seeing more baby boomers unloading their homes due to downsizing or sickness, and while the market consists mainly of those listings, there aren’t enough of them to call it a flood – at least not yet.  Because they are in quality locations, more kids are probably trying to buy out their siblings and take over their parents’ house, rather than sell it.  They could be moving in with the folks too, rather than sending them to assisted living.

Could we run out of buyers? You would think there would be a price point where buyers can’t or won’t go any higher, but there seems to be a steady flow of people with more horsepower.  We saw two weeks ago the prediction that the population of San Diego County is expected to grow by 700,000 people by 2050, which is over 21,000 per year – where are they going to live? Will they be rich? They will need to be!

There hasn’t been enough (has there been any?) sellers so desperate that they had to dump on price – instead, they just keep waiting.  We would need more than a few price-dumpers to start a panic, which could cause the market to flood with supply and burst the bubble.

Some air might escape occasionally, but it is doubtful that a market change could occur without the government finding a way to save the bankers.

People like this guy think the conditions are ripe for a downturn.  But if prices started falling, sellers are more likely to wait, than dump, which would cause our market to stagnate, rather than crash.

Posted by on Mar 27, 2017 in Boomer Liquidations, Boomers, CA Homeowners Bill of Rights, Foreclosures/REOs, Jim's Take on the Market, Loan Mods, Market Conditions, Mortgage News | 0 comments

Inventory Watch

Given that it’s still early in the season, this was a fairly normal week.

There still has to be some wait-and-see in both buyers and sellers – when that turns into action, it should cause a couple of big weeks in the next 2-3 months:

Week
New Listings
New Pendings
Feb 6
101
55
Feb 13
89
55
Feb 20
92
57
Feb 27
66
73
Mar 6
102
66
Mar 13
99
59
Mar 20
93
82
Mar 27
82
60

The lower-end market (Under-$800,000) rebounded nicely, from 19 listings last week to 21 today!

Click on the ‘Read More’ link below for the NSDCC active-inventory data:

Read More

Posted by on Mar 27, 2017 in Inventory, Jim's Take on the Market | 0 comments

Food for Thought

Everyone loves Tony, and he is prolific at using social media to inspire people.  I respect what all three guys said below, and I’ll add: Do something!

LINK

For generations past, home ownership was a significant rite of passage that signaled stability, commitment, and, often, prosperity.

But, in this as in so many other cases, millennials are different.

As of 2015, adults under age 35 made up 19 percent of U.S. households but less than 10 percent of homeowners, according to a report released by Harvard University’s Joint Center for Housing Studies.

Entrepreneur and bestselling author Tony Robbins says that, while millennials might be missing out on the social upsides of home ownership, real estate is not the best investment they could be making.

“One of the weakest performers [is] your own personal real estate, because it doesn’t provide much income,” Robbins says. “It’s an inflation hedge. You do a little better than inflation, and you can have your own home, so there’s a psychological, emotional benefit.”

Instead, millennials in a position to buy property should be considering how to do so in a way that will provide them additional cash flow, he says.

“If you can own real estate, real estate with an income is the one [form of] real estate that’s more valuable,” says Robbins.

Opinions on the imperative of millennial home ownership vary.

Self-made millionaire Grant Cardone tells CNBC that home owners are forced to continue to spend unceasingly, and that he regrets buying a house at age 30.

“Unless you have 20 million bucks in the bank, in cash, you have no business buying a house,” says Cardone.

In personal finance classic “Rich Dad Poor Dad,” author Robert Kiyosaki notes that houses should be viewed as a liability, as opposed to an asset, and points out that it’s not a given that a home will appreciate in value.

“I am not saying don’t buy a house. What I am saying is that you should understand the difference between an asset and a liability,” Kiyosaki writes. “When I want a bigger house, I first buy assets that will generate the cash flow to pay for the house.”

Posted by on Mar 26, 2017 in Jim's Take on the Market, Thinking of Buying?, Tips, Advice & Links | 8 comments

Home Buyers – Prepare for Battle

An article from cbsnews.com – get good help!

http://www.cbsnews.com/news/buying-a-home-in-2017-prepare-for-battle/

An excerpt:

“Home buying is about substantive economics, but it’s also got an element of ‘animal spirits,’” said its President Steve Udelson. “In some of the hottest markets, we’ve seen a double-digit run-up in prices.”

The website surveyed 1,289 prospective buyers nationwide, and its findings suggested that most prospective homeowners already had their feet in the starting blocks for the spring selling season. More than half were willing to go beyond their budget — by an average of nearly $38,000 — to get the property they desired.

And like most competitive athletes, they were hopeful as well as scared. Not surprisingly, about 60 percent of those surveyed feared:

  • Bidding wars driving up the price of their dream home.
  • Losing the “earnest money” they put down when they signed a contract.
  • Becoming “house poor,” that is, unable to afford amenities like a meal out in order to make the mortgage payment.

Read full article here:

http://www.cbsnews.com/news/buying-a-home-in-2017-prepare-for-battle/

Posted by on Mar 26, 2017 in Frenzy, Jim's Take on the Market, Market Buzz, Market Conditions, Thinking of Buying? | 2 comments

Footy McFooty Face

The potential “SoccerCity” development on the site of Qualcomm Stadium has ignited a storm of renderings and fan discussion on whether an MLS team in San Diego can work as a replacement to the departed Chargers football team.

The development by the group promises to construct a 30,000-seat stadium to house a MLS team and San Diego State University sports events, about 5,000 public and student residential units, office and retail space, about 18,000 parking spaces, and development of parkland, including the San Diego River Park.

SDSU is looking into its own options for developing the site as well. The school has said they are in talks with multiple parties interested in developing the Mission Valley site, but have not made any commitments to partner with any specific party at this time.

Voting is underway on Facebook, and here, for a potential name for a San Diego MLS team, with “Footy McFooty Face” leading by a large margin.

http://www.10news.com/sports/footy-mcfooty-face-leads-san-diego-mls-team-name-voting

Posted by on Mar 26, 2017 in Jim's Take on the Market, Local Flavor | 3 comments

Scarcity Club

People ask, “Are we in a bubble?”

If you mean a market where prices have escalated rapidly, then yes!  The SD Case-Shiller Index is +59% in the last eight years – an average of 7% per year!

We’ve seen 7% appreciation per year before – what’s remarkable is how long this hot streak has lasted.  We’ve had eight years of solid appreciation before (1997-2005), but that was fueled by no-qual loans.  This time, buyers are faced with strict underwriting guidelines, but they want a house bad enough that they find a way.  The unusual twist is how exploding prices haven’t caused more long-timers to sell – as a result, we’re as competitive now as ever. This is the strongest market any of us have ever seen!

Causes:

  • Current homeowners don’t need to move.
  • Current homeowners can’t find a better value.
  • Low supply of new homes.
  • Buyers on the fringe fear that they could get priced out.
  • Severe traffic makes buyers reluctant to go farther out.
  • Too many people live here now.
  • Too many realtors now.
  • The rich get richer.

The common theme is scarcity.

For buyers and sellers, it can be a wicked ego-and-greed cocktail mixed with some basic hoarding instincts.  Winning becomes more important than money – and buyers keep paying more for a house in order to join the club!

Posted by on Mar 25, 2017 in Jim's Take on the Market, Market Conditions | 0 comments

BRE on Realtor Teams

Broker supervision is a nice idea but rarely practiced.  We need perp walks!

In September 2015, the California Bureau of Real Estate (CalBRE) issued an advisory which was captioned “Disciplinary Warning to Real Estate Salespersons Who Act, Conduct Themselves, and/or Advertise as ‘Independent’ Real Estate Professionals — and a Simultaneous Caution to Brokers Who Allow or Support Such Practices”.

(http://www.calbre.ca.gov/files/pdf/adv/Independent%20Real%20Estate%20Professionals.pdf)

Licensees of CalBRE are well advised to review that prior advisory since we continue to see some of the same bad practices identified in that writing.

This discipline “advisory” is being issued as a supplement to that prior warning since CalBRE has taken notice of the use by some real estate salespersons of names and designations (and attendant Internet and marketing materials) that suggest to the public – and mislead consumers into falsely believing – that such salespersons are real estate brokers.

A scenario that we have repeatedly seen is the use by a salesperson (who for this illustration we will identify as John Doe) of a fictitious business name that would lead members of the public to incorrectly believe that the business is operated and managed by a real estate broker. In this example, salesperson Doe conducts business using the name Doe Real Estate.  Doe advertises using that business name, and the advertisements are connected to, or accompanied by, a webpage and other materials that extol the virtues of Doe Real Estate.  The public would not think that Doe is a salesperson who must be supervised by another, and would most certainly conclude that Doe Real Estate is a real estate broker or brokerage.  And the above practices are unlawful.

In addition to the above, many salespersons continue to brand and identify themselves as “independent” real estate practitioners, and they practice and advertise as such.  Unless those salespersons are operating as “teams”, in full compliance with the California laws and rules pertaining to teams (e.g., the disclosure of I.D numbers and the name of responsible broker, and the surname of at least one of the licensee members of the team along with the use of the terms “team”, “group” or associates” with regard to the team), that is unlawful as well.

Further, and depending on the specific language employed with respect to the name(s) and designation(s) used by the real estate salespersons, there might be a violation of the law relative to the use of fictitious names.  Please see the prior guidance given by CalBRE on the proper use and licensing of fictitious names.

As was also stated in the prior warning, under California law, with its two-tiered licensing system, real estate salespersons cannot provide – or advertise that they can provide – real estate services independently of their responsible brokers.

Likewise, salespersons must be associated or affiliated with, and be reasonably supervised by (which supervision includes broker review of the advertising used by the broker’s salesperson or salespersons pursuant to Commissioner’s Regulation 2725(e)) a responsible broker in order to engage in real estate licensed activities in California.  The law provides no exceptions.

CalBRE will take appropriate disciplinary action (including the imposition of significant fines, and  – where appropriate – the revocation of licensure) against real estate salespersons who engage in the unlawful activities discussed above, and against real estate brokers who permit their salespersons to engage in such activities.

Save

Posted by on Mar 24, 2017 in Jim's Take on the Market, Realtor, Realtor Training | 0 comments

“Severe Housing Drought”

We are used to headline porn, but this one sounds startling – are we having a Severe Housing Drought?

http://www.cnbc.com/2017/03/23/this-is-whats-behind-the-severe-housing-drought.html

In the article, she says that nationally we have the fewest homes for sale than at any time in the last 18 years.  But are they just selling faster, which would give the appearance of low inventory?  If we have a similar number of houses being listed and they are selling faster, I wouldn’t consider that a drought, let alone a severe drought.

First, let’s compare the total supply and number of closed sales in 2017 to previous years – these are the numbers from January 1st to March 15th:

NSDCC (La Jolla to Carlsbad)

Year
# of New Listings
Median LP
# of Solds
Median SP
Median DOM
2013
1,042
$1,149,000
518
$842,950
31
2014
1,029
$1,295,000
464
$981,500
30
2015
1,043
$1,345,000
459
$1,145,000
31
2016
1,145
$1,489,900
421
$1,105,584
26
2017
987
$1,499,000
431
$1,200,000
24

This year’s number of new listings is 7% below the average of the last four years, but I wouldn’t call that a drought. If I watered my grass 7% less, it wouldn’t die. Besides, 40% of all listings don’t sell, so maybe the fewer listings just means fewer OPTs? The number of closed sales is much lower than previous years, but better than 2016.

How about the rest of the county?

San Diego County

Year
# of New Listings
Median LP
# of Solds
Median SP
Median DOM
2013
6,749
$479,000
4,426
$402,000
30
2014
7,077
$539,000
3,544
$475,000
28
2015
7,129
$569,000
3,582
$500,000
30
2016
7,146
$559,925
3,634
$532,500
24
2017
6,347
$639,500
3,696
$560,000
20

There are 10% fewer listings this year, compared to the average of the previous four years, but sales are HIGHER than any of the last three years. There isn’t a perfect relationship between listings and sales, because some of the closed sales were listed before January 1st. But the trend looks fine.

I don’t keep a record of the number of houses that are pending, but a couple of months ago we were around 300 in NSDCC (between La Jolla and Carlsbad).

Here is today’s count:

Area
# of Active Listings
# of Pendings
Median DOM
NSDCC
795
413
22
San Diego County
3,485
3,070
15

The reason we have a record-low number of homes for sale is because they are selling so fast.  Severe drought isn’t the right adjective – can we call it scorching hot?  Half of the pendings found a buyer in 15 days!

With half of the upcoming closed sales finding their buyer that fast, it means they probably paid the seller’s price, or close.  The other half are sellers who are willing to wait until they get their price!  It means the pricing trend should continue upward.

I think we’re back in the frenzy zone!

Posted by on Mar 23, 2017 in Frenzy, How Hot?, Inventory, Jim's Take on the Market, Market Buzz, Market Conditions, North County Coastal | 0 comments