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(760) 434-5000

Carmel Valley
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jim@jimklinge.com


Most recent articles

Offering Too Low

Part of a realtor’s job is to help manage expectations – not only those of their own clients, but expectations of the other agents and their clients too.

Recently I received an offer on a listing that was 25% under the list price.  They also wanted my seller to carry the financing for 30 years – which is unheard of – and oh yeah, it was contingent upon the sale of the buyers’ home too.

I told the agent (whose email-signature noted they were in the Top 10 statewide for their company) that if I was the seller and that offer was presented, I’d fire my agent.

Just like when we’ve seen a home with range-pricing that is too wide, it becomes impossible to bridge the gap – for three reasons:

  1.  Once a buyer puts a number on paper, their mind starts believing it’s real.
  2.  Buyer’s remorse is real too, and they cool off quickly.
  3.  Sellers are skeptical, and don’t feel like negotiating much.

It may be discussed as just a place to start, but once a buyer submits their price in writing, it becomes a comfortable number.  Going much higher than where they start is usually a function of how fast agents respond.  My rule-of-thumb is two counters max for each side, in less than four days.

In this case, my sellers weren’t desperate, they had already determined that they wanted to sell for at least 93% of list and were willing to wait for it.  I told the buyer’s agent that our price gap was too big, and I nicely asked the agent and buyers to go back to the drawing board.

Three days later, I received a new offer with bank financing, instead of seller-carry, but it still had the original price of 25% under list. It came with the buyers’ love letter; a full-page of reasons why my listing was the perfect fit for the buyers.

Was the love going to make the looming price gap surmountable?

In spite of houses around the county selling for 99% of list this year, we countered with a price that is 4% under our list – not bad, considering the original offer price.  On their counter, the buyers came up to 82% of list, but it took two days to arrive.  I knew the remaining price gap and time left wasn’t looking good.

I always want to respond promptly, because of #2 above – buyers cool off quickly.  We dropped another 2% within a few hours, but it wasn’t enough.  Two days later, the agent emailed that they lost interest – no counter, no love.

Five days gone by (seven days since the original offer), and the initial 25% gap killed our chances.  They knew before writing the offer that it would take at least 93% of list to buy the property, and they still offered – so initially there was some willingness to pay that or close.

If they would have started at 82% of list, and trimmed the time spent to 3-4 days, could we have made it to escrow?  I think so!

Posted by on Apr 18, 2017 in Jim's Take on the Market, Realtor, Realtor Training, Why You Should Hire Jim as your Buyer's Agent, Why You Should List With Jim | 4 comments

The Transparency Crossroads?

Our Zillow rep mentioned that they are investing heavily into virtual reality. (He’s reading the blog now – hey Jason!)

I’m a big proponent of video tours – there is no better way to help remind buyers of what they are thinking of purchasing.  We have seen the 3D tours hit the mainstream, and the virtual reality experience can’t be far behind.

Will we see an evolution of how homes are sold?

For that to happen, we would need a sea change in the realtor community.

Currently, the whole real estate industry is focused on representing sellers, and making buyers comply with their every wish.  There would need to be a buyer revolution for it to change.

I’ve already had sellers object to their home being so transparent. They don’t want buyers to see every nook and cranny, especially if their house is less than perfect.

While the virtual reality devices may provide some whiz-bang effect, don’t be surprised if they are slow to take hold.  Sellers and listing agents would rather tempt you with a select group of photos, and disappoint you with the truth once you arrive.

Zillow and others will push the virtual reality toys, and try to convince buyers that those who possess them are superior agents. But there won’t be widespread use, and it will end up just being another gimmick.

Posted by on Apr 17, 2017 in Jim's Take on the Market, The Future, Zillow | 0 comments

Inventory Watch

Real Spanish-style!

Easter is behind us and taxes are wrapping up – here we go!  There have been a steady stream of new listings, and for the next 3-4 weeks we will be in the prime selling season!

The Under-$800,000 inventory has rebounded nicely too – four weeks ago we had 19 houses for sale, and today there are 35 priced under $800,000!

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
Apr 3
104
70
Apr 10
96
83
Apr 17
99
69

All ahead full!

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

Read More

Posted by on Apr 17, 2017 in Inventory, Jim's Take on the Market | 0 comments

Boomer Liquidation Postponed

This guy saw it like I did – that there would be “the great senior sell-off”, but he had more concern that the millennials wouldn’t be there to pick up the pieces. He is back-pedaling now on when it will happen – and I think he is just guessing. It will happen when it happens, and each neighborhood will be affected differently. Hat tip daytrip!

It’s a dilemma that has preoccupied Arthur C. Nelson, a U of A professor who spoke with former CityLab staff writer Emily Badger in 2013 about what he dubbed “the great senior sell-off.” Nelson postulated that Boomers would soon be selling their homes in droves, but would be hard-pressed to find buyers—mainly because Millennials wouldn’t want to buy them.

Nelson pointed to the affordability issue as well as the fact that about a quarter of Millennials prefer urban housing, such as condos or townhouses, over the detached suburban homes that were the Boomers’ preferred habitat. Younger buyers, he said, will also be looking for starter homes—smaller than the big Colonials and split-levels that line America’s cul-de-sacs. “We can predict the next housing crash,” he said at the time. “That’ll be in about 2020.”

Four years later, Nelson tells CityLab that he believes the sell-off will still occur—but later, in the mid- to late 2020s.

This has to do with people deciding to defer selling their homes, hoping to get a better price later than settling for a lower price now. “Home values in much of the country are still less than those before the Great Recession of 2007 to 2009,” he says. Prior to the recession, the typical homeowner would sell a house about every six years. “It was like clockwork,” says Nelson. “This drove a lot of planning and development projections.”

“It’s not that Boomers are going to ‘age in place,’” says Nelson. “They’re going to be stuck in place, and they’re going to make the best of it.” Those who can afford it will remodel.

Though Jennifer Molinsky, a senior research associate at Harvard’s Joint Center for Housing Studies, agrees that exurbs and rural areas will likely be vulnerable to the Boomer/Millennial housing mismatch, she’s not as pessimistic about the sell-off as a whole.“The Baby Boomers are a large generation,” she says. “Nothing they do is going to happen en masse.” She also believes that the Boomers who don’t age in place will demand an increasing array of housing options that will help spread out sales over time, decreasing the likelihood of a sudden glut of housing.

Read full article here:

https://www.citylab.com/housing/2017/04/who-will-buy-baby-boomers-homes/522912/

Save

Posted by on Apr 16, 2017 in Boomer Liquidations, Boomers, Jim's Take on the Market, Market Conditions | 1 comment

Leaving Town

Interesting that San Diego County is mentioned as an area to which  people are moving! Hat tip to JT for sending this in:

http://www.latimes.com/business/la-fi-leaving-socal-20170414-story.html

Excerpts:

Huntington Beach residents Chris Birtwistle and Allison Naitmazi were about to get married and decided it was time to buy a home.

They wanted to stay in the area but couldn’t find a house they both liked and could reasonably afford — despite a dual income of around $150,000.

So they decided to go inland — all the way to Arizona, where they recently opened escrow on a $240,000 four-bedroom house with a pool, just outside Phoenix. Their monthly mortgage payment will be about $500 less than what they paid for a two-bedroom apartment in the Orange County beach community.

“The only hesitation was [leaving] the great weather,” the 31-year old Birtwistle said. “But we talked about what we can get here and what we can get there for the same price and that was a no brainer.”

Moves out of the area remain far below levels seen during last decade’s housing bubble, when out-migration was nearly triple what it was in 2016 — and real estate agents urged clients to “drive until you qualify.”

But after slowing down in the aftermath of the Great Recession, which devastated the housing market, out-migration is picking up as prices climb steadily higher, according to U.S. Census Bureau data.

To escape high prices, people — often younger and with lower- or middle-class incomes — are looking toward the Inland Empire and nearby states for additional square footage and a lower mortgage payment.

“[Migration] is settling back into longer-term patterns,” said Jed Kolko, chief economist with employment website Indeed.com who analyzed the data.

Others were more blunt.

“The impact is to create an auction situation between the haves and the have-nots,” Christopher Thornberg, founding partner of Beacon Economics, said of the housing shortage. “And the have-nots have to move away.”

Read full article here:

http://www.latimes.com/business/la-fi-leaving-socal-20170414-story.html

Posted by on Apr 14, 2017 in Jim's Take on the Market, Market Conditions | 4 comments

Bubble Check

From our friends at John Burns Consulting, who have been very diligent in their reporting of market conditions over the years:

Once again, we have completed our annual housing bubble check-in. Assessing the criteria that 73 industry executives identified in 2013, we found three qualitative signs of a bubble, two signs of a mini-bubble, and five signs of no bubble. Click here to see our infographic Top 10 Signs of a Market Bubble. Every month, we analyze the quantitative stats in our analysis of 70+ MSAs for our research subscription members. We have concluded that affordability in some markets is the only sign of a bubble that we can find.

Our view on the 10 qualitative stats follows:

3 Bubble Signs

 

  • Reality TV. While home builders aren’t giving away free houses every Sunday night like they were on Extreme Home Makeover (ABC) in 2005, shows like Flip or Flop (HGTV), Home Free (Fox), and Deed (CNBC) have been captivating audiences recently. House flipping has become a big business fueled by hard money loans made by non-banks, and Flip or Flop just announced its expansion to five new cities.
  • Booming real estate careers. NAR membership has rebounded strongly, pushing near-2005 levels despite far fewer transactions than in 2005. On a recent flight to the hot Portland housing market, one of our team members overheard the flight attendants discussing getting their real estate license. See the chart below.

  • Creative mortgages. Headlines around excessive mortgage documentation and fewer loans to low-credit borrowers mask what is really going on in the market. Per AEI, 56% of borrowers put down 10% or less of the purchase price, and 35% have debt service above 42% of their gross income. Lending is clearly not as aggressive as in the 2005–2007 period, which resulted in a 19% default rate. But it is far more aggressive than in the early 1990s, which would have had only a 6% default rate during the last downturn. Today’s loans would have a 12.2% default rate under the 2007 downturn scenario.

Read their full report here:
https://www.realestateconsulting.com/only-a-few-bubble-signs-brewing/

Posted by on Apr 14, 2017 in Jim's Take on the Market, Market Conditions | 0 comments