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Drought and Real Estate

Terry from Canada sent in this question:

I’m just wondering with the ongoing drought in California, do you see the possibility that if the drought continues and California really does run out of water will there have to be a mass migration out of the state in the future?

We have seen and heard about the desalination plant being built in Carlsbad that will add 50 million gallons of drinkable water per day, which is 7% of what the San Diego region uses now.

The cost is projected to be 20% to 25% higher than the current rate of water purchased from the MWD, so even if the drought reverses itself in the near future, the cost of water is going up.

Will that alone cause an exodus?  Probably not, but every little bit counts, and it could be the final straw for people on the edge.

The trend of our area being for affluent people will continue though.  How will they cope?

It’s not like there isn’t any water – there just isn’t any water here.

Folks who are on propane know how it works – private companies will provide the water, and make it convenient.  They will bring you the tank, hook it up for you, and then come back regularly to fill it for you.

12,500-gallon tank

The 12,500-gallon tanks like the one above cost about $10,000, and if a household can get by with 200 gallons per day they would only need to fill their tank every other month.  If you live in on a smaller lot, you can opt for a pint-size tank and get more deliveries.

http://www.utsandiego.com/news/2014/nov/04/environment-water-conservation-residential/

If you had one of these big tanks, it would only cost you about $100 today to fill it – that’s why you don’t see them…yet.  But if the drought continues, having water delivered is a possibility.

How much would you pay for water? $500 per month?  $1,000 per month?  The county has already cut back usage by 30% in recent years, and more conservation is on the way.

But people will stay as long as they can bear it, so I doubt any mass exodus from the coastal regions will happen in the short term.

Drone view of the plant:

Posted by on Apr 6, 2015 in Jim's Take on the Market, Local Flavor | 15 comments

Inventory Watch

Mortgage rates on Friday dropped back to 3.62% (avg. jumbo was 3.57%!), which should help fuel the final Spring Kick of the selling season. The end of the school year is within sight, and there are lots of lookers. My listing on Monroe in Old Carlsbad was shown steadily for the first three weeks on the market, but no offers. Then we got three over Easter weekend!

Click on the link below for the complete NSDCC active-inventory data:

Read More

Posted by on Apr 6, 2015 in Inventory, Jim's Take on the Market, Spring Kick | 0 comments

Sandicor vs. Zillow

This missive was emailed to San Diego Realtors from our MLS company:

Dear Brokers, as you may know, the relationship between Zillow and ListHub ends on Tuesday April 7th. If your listings are going to Zillow by some means other than ListHub, this does not affect you. However, if you have been using ListHub, your listings will no longer be going to Zillow on the 7th.

Sandicor has been in the process of implementing a replacement syndication system and negotiating an agreement with Zillow that would offer substantial benefits and protections for you and your listings along with protections for Sandicor, in the event you elected to send your listings to Zillow. While our syndication system is being put into production, our negotiations with Zillow have not resulted with an acceptable agreement between us.

Please know that the terms of the agreement were developed by a fifteen member Broker Group, representing a wide variety of brokers, from a 2 person office to our largest brokerages. All were unanimous in the terms developed, which included protections for the listing data, brokers / agents and Sandicor. The terms are very similar to other licensing agreements we have with IDX vendors and other vendors.

Unfortunately Zillow was not agreeable to those terms and appeared to be unwilling to consider much beyond their terms. We revised the agreement such that we felt we addressed some of Zillow’s issues, at which point we were told they didn’t have the legal resources available to discuss it any further. We then tried to negotiate an interim agreement, which also was not successful.

While Zillow does not have the resources to negotiate with us at this time, we have not given up and will endeavor to work on an agreement that is acceptable to all parties.

While our 15-member team probably believes that Zillow will come around as soon as they can drum up a few more lawyers, the tone has already been set.

If the MLS wants direct uploads, then we’ll have to comply with Zillow’s rules.  Other MLS companies are already toeing the line:

http://www.prnewswire.com/news-releases/record-setting-number-of-multiple-listing-services-sign-direct-agreements-with-zillow-group-in-past-week-including-two-of-the-nations-largest-300060695.html

All that has to happen is for Zillow to hold out, and either our negotiators will cave and allow them to pimp our listings however they feel necessary, or we will be forced to manually input the listings onto Zillow – where Z will pimp our listings.

Either way, they will pimp our listings.

Zillow owns us now, and this is the MLS death march.

The MLS only provides a basic product for agents to use, while Zillow builds a dynamic, engaging product for consumers.  There is no impetus for change – those who control the MLS don’t see a need to compete with Zillow.  Realtor.com is supposed to be competing, but they haven’t done much yet.

Who cares?  The realtors who don’t have listings should care.  They are the ones who will get squeezed out slowly, as Zillow helps to convert the industry to single agency.

News Corp doesn’t care about realtor.com, they care about News Corp.  The best hope to keep the MLS relevant is to privatize it.  Here is more on that from the Notorious ROB:

http://www.notorious-rob.com/2015/04/02/constituents-customers-competition-the-root-of-all-issues-of-the-mls/

Posted by on Apr 4, 2015 in Commission War, The Future | 3 comments

Fannie’s 20-Day First Look

fannie

Fannie Mae has been over-pricing their REOs by at least 10% since 2012, and have been getting away with it because buyers think that because it’s a foreclosure, they are getting a deal, and because Fannie provided ‘HomePath’ financing where no appraisal was required.

They instituted a seven-day First Look Program, where only the owner-occupying buyers were allowed to purchase, which helped to whip up the excitement in unsuspecting buyers, many of whom were purchasing their first home.

But in October, 2014, the HomePath financing was terminated, and apparently the REO portfolio needs to be goosed again.

Here the ‘new’ 20-day First Look Program is rolled out by our N.A.R. goons, and presented as a great new idea to help buyers and preserve neighborhoods.  But in reality, it’s extending the period that Fannie can take advantage of unsuspecting buyers:

Posted by on Apr 3, 2015 in Ethics, Jim's Take on the Market, Market Conditions, Mortgage News, No-Foreclosure as Banking Policy | 0 comments

Appraiser Squeeze

In the post last week about real estate crowdfunding, reader Jiji said we’re close to bubble territory, and I suggested this:

It will take a few ingredients to come together:

1. Alternative financing.
2. Desperate buyers who were previously shut out (self-employed, foreclosed, BK, etc.)
3. Appraisal shenanigans.

Crowdfunding could be the source of alternative financing, and we know plenty of folks have been forced to the sidelines in recent years by big money and insider trading.

This article talked about the pressure on appraisers:

http://www.housingwire.com/blogs/1-rewired/post/33410-did-little-known-arizona-law-start-the-appraiser-death-clock

One of their readers, an appraiser,  offered this expanation:

One need only to go back to the beginning of the “appraiser death clock”. It all started with Andrew Cuomo and his suit against the GSE’s that resulted in the HVCC and was carried forward by Dodd-Frank (the one’s responsible for the “bubble”) that invented the AMC’s.

Many of the AMC’s are wholly owned subsidiaries of the big banks who seized the opportunity to turn the appraisal process into a profit center by paying “cram down” fees to appraisers who can’t make a living on the current fee structure.

Take for example Bank of America who charges the customer $550 for the appraisal and then assigns it to Landsafe AMC (their subsidiary) who pays the appraiser $305 for the appraisal and keeps the rest to cover operations and a big chunk towards profit. Or JP Morgan Chase who charges the customer $460 for the appraisal and then assigns it to Clear Capital AMC who pays the appraiser $250.

Because the appraiser has to do two appraisals just to keep up with their prior income status, they started “cutting corners” which produced poor quality appraisals, thus Fannie steps in and instigates Collateral Underwriter, a program that uses the appraisers own data against them to spot poor quality appraisals and “weed out” the poor quality appraisers.

This will create a shortage of appraisers which will either cause an increase in the appraisal fee or legislation to do away with the appraisal process altogether. After all, automated valuation models and “Google Earth” can do the same job as the appraiser. Appraisers we placed in the process to act as an independent third party to “PROTECT THE PUBLIC TRUST”.

Why are the ranks of the appraiser shrinking? Just ask yourself? Would you obtain a 4 year college degree, undergo over 350 hours of specialized appraisal courses and be directly supervised by a “certified appraiser” for 2,000 hours work experience, and subject yourself to the most constraining set of professional standards, just to make $25 to $40 per hour.

As an appraiser with 53 years of experience of real estate valuation, in my opinion, the answer is a resounding NO.

Let’s place the blame where is squarely belongs with the “big banks” who we bailed out and to Mssr’s Cuomo, Dodd and Frank, oh and let’s not forget Mr. Clinton under who’s administration this all started.

There are other good comments in the article too.  Will appraisers get squeezed out of the equation? Will they go to work on realtors next?

Posted by on Apr 3, 2015 in Jim's Take on the Market, The Future | 6 comments