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Journal

Inventory Watch

In an area of 300,000+ people, we only have TEN houses for sale priced under $800,000 – and there are only 118 priced between $800,000 and $1,400,000!

Is it greed, or just supply and demand? It would take something to disrupt the market to find out.  Buyers are already wondering about tax reform, and this could be a hurdle too – the Trump/Mueller saga. Protests are already being planned:

http://thereformedbroker.com/2017/12/09/the-market-shock-no-one-is-ready-for/

Read More

Posted by on Dec 11, 2017 in Inventory, Jim's Take on the Market | 11 comments

Appraisers’ Opinion of Appreciation

Appraisers in Southern California get together and evaluate the same 300 homes every six months – here’s how their values compare to those of CoreLogic (San Diego has the closest gap):

LINK

An excerpt:

Elsewhere in the region, here’s how the battle-of-the-index gaps shaped up since 2012 …

Los Angeles County: Appraisers say up 58 percent; CoreLogic says 72 percent.

Orange County: Appraisers say up 44 percent; CoreLogic says 55 percent.

San Diego County: Appraisers say up 50 percent; CoreLogic says 56 percent.

Ventura County: Appraisers say up 45 percent; CoreLogic says 53 percent.

Now, these gaps may partially be a reflection of the often-bemoaned shortage of “affordable” homes to buy.

Southern California’s painfully thin supply of homes at the lower-end of the price spectrum has distorted indexes like CoreLogic’s median. These metrics end up reflecting a buyer’s willingness to pay up for the higher-priced housing that’s on the market. This statistical pattern doesn’t mean all home values are up at the median’s skyward pace.

Yes, it’s not totally shocking these appreciation gaps — man-vs.-machine — exist in the first place. Remember, appraisers get paid to be real estate’s party poopers — protecting overzealous lenders from overlending on overvalued properties.

So by nature, appraisers are … let’s say … skimpy! Still, their cautious viewpoint can’t be easily ignored, since they often have the power to kill a prospective home purchase with a low valuation.

Plus, the collective wisdom of appraisers is especially noteworthy as Southern California’s eye-catching home-price gains continue.

LINK

Posted by on Dec 10, 2017 in Jim's Take on the Market, Sales and Price Check | 4 comments

Shiller On Tax Reform

Shiller is sticking with the irrational exuberance that plays into housing decisions – and I agree:

The co-creator of the much-watched S&P/Case-Shiller home price index doesn’t think the mortgage interest deduction really matters to the housing market.

“It’s not big,” said Yale economics professor and Nobel laureate Robert Shiller.

He also doesn’t think home prices will fall if the cap on the amount of mortgage debt (currently $1 million of debt) one can deduct interest payments on is cut in half. About 2.9 million borrowers have mortgages with an outstanding balance higher than $500,000, according to Black Knight.

“The general idea is it would push prices down if people are rational,” which Shiller says they are not when it comes to housing. He is the author of the bestselling book “Irrational Exuberance.”

He does, however, think that if homeowners can no longer deduct their property taxes, or if the amount they can deduct is limited under the new tax plan, that would be a big deal — at least to rich people.

“That is going to be a substantial hit to people who are paying a lot of property taxes, and it might be a consideration that you make before you buy a big mansion in some high property tax state,” said Shiller.

While economists, housing advocates and housing industry lobbyists argue the effects of the Republican tax plan and worry about the possibility of higher interest rates, Shiller, who has studied the economics of housing dating back to the 1800s, sees very little rhyme or reason to any of it. The human factor — the emotional aspect of most people’s single largest investment, a home — is far greater than the market stimuli that are accorded such importance.

“I tend to think it’s not as great as you imagine because people are people, and I don’t find that historically home prices have relied at all predictably to changes in things like interest rates,” said Shiller, pointing to the huge boom in housing in the last decade. Interest rates didn’t move at all during that time.

That boom, instead, was fueled by a complete crater in any type of lending standard in the mortgage market. People were offered loans at almost no cost, so they took them — and never believed that home prices could fall. In the early 80’s during a huge spike in interest rates to double digits, home prices fell slightly, but people kept buying homes.

“Things happen that have no explanation,” said Shiller.

Click to play video below:

Robert Shiller on GOP tax plan and home prices from CNBC.

Posted by on Dec 7, 2017 in Jim's Take on the Market, Market Buzz, Market Conditions | 5 comments

Tax Reform – Unintended Consequences?

Reader Tim sent this in:

Jim/All – do you have any thoughts on unintended consequences of the tax bills (as constituted)? You think there could be an impact from eliminating interest deduction on equity withdrawals with regard to the cash buyer market? Also wondering if increasing the time homeowners need to be in their home ultimately reduces velocity, which gums up the market further.

My initial thoughts:

  1. If the Senate plan gets approved, then we should see some real scrambling for Hawaiian shirts as realtors get back in the game this week.  The senators’ plan allows for those who have lived in their house for less than five years to close escrow in 2018, as long as their contract to sell is signed this month.  But are people paying close attention?  If so, we should see a Santa frenzy over the next three weeks.
  2. If those who were planning to sell in 2018 or 2019 end up delaying their sale to qualify for the five-out-of-eight rule, we might see fewer homes for sale – especially in 2018 (the impact will lessen in each of the next three years as people catch up). But other sellers could pick up the slack, or buyers just take what they can get. In San Diego County we have had 7% fewer listings in 2017, but about the same number of sales as last year – the lower inventory didn’t cause sales to drop.
  3. Home equity lines no longer deductible?  No impact on buying or selling – the money extracted by your HELOC must be used for home improvements to be deductible.  I’m sure everyone abides by the rule (?).
  4. I think the misinformation is a real threat – what are the real facts?  When realtor presidents can’t get their head straight about the tax-reform details, and instead spew vague threats about values dropping 10% to 15%, it might cause buyers to pause. We’ll probably know in February or March – if sales start popping, buyers will forget and, instead, get back into the fight.
  5. An intended consequence is that the stock market will go ballistic, and if that happens, real estate will be fine.

What do you think?

Posted by on Dec 6, 2017 in Jim's Take on the Market, Market Buzz, Realtor | 13 comments

Cash Sales

For those who might have seen this article and worried about competing with cash buyers, there hasn’t been much difference around here lately.

NSDCC Detached-Home Sales, Jan-Nov

Year
Number of Cash Sales
Percentage of Total Sales, Jan – Nov
2013
754
25%
2014
674
26%
2015
719
25%
2016
729
25%
2017
709
25%

An excerpt:

Meagan Freeman and her boyfriend have been looking for a midprice house in the Seattle area for six months but keep running into a hurdle: cash buyers swooping in and snatching up their properties.

It has happened three times, she said, most recently two weeks ago. The couple bid on a home in an unfashionable suburb they believed was a sure bet in the midst of a dreary Seattle November, when the market typically is slow.

Instead, the 27-year old said, a cash buyer won out yet again.

“It is definitely discouraging,” she said.

Five years after the housing market hit rock bottom, mortgage credit is finally returning to the healthy levels of the early 2000s, before the boom-bust cycle began. But all-cash deals remain well above normal levels, even as prices in many markets have pushed to record highs.

In all, 28.8% of U.S. home sales this year have been all-cash transactions, according to Attom Data Solutions, a data provider. That was down from the peak of more than 40% in 2011 and 2012, when investors were buying homes at a furious pace to turn into rentals. But the percentage of cash deals stands much higher than the 20% or so common in the early 2000s, and it has edged up from 28.6% last year, according to Attom.

Read full article here:

LINK

Posted by on Dec 6, 2017 in Jim's Take on the Market, Market Conditions, North County Coastal | 0 comments

Bel Air Fire

Another fire broke out this morning near the 405 freeway in Bel Air, and it reminded me of the Big One in 1961 when 484 homes were lost.  As a result of this fire, the City of Los Angeles was able to initiate a series of fire safety policies and several laws, including the outlawing of wood shake/shingle roofs.

My Dad sold roofing materials at the time, and his company gave him a copy of this film – and I used to take it to school during fire season:

http://www.lafdmuseum.org/bel-air-fire

https://la.curbed.com/2017/12/6/16742976/bel-air-fire-history-brentwood-nixon

Posted by on Dec 6, 2017 in About the author, Jim's Take on the Market, Local Flavor | 3 comments