(Not) Frenzy Monitor

The numbers were fairly steady through the May reading…..but the number of unsold listings have jumped in most areas now (with Encinitas and La Jolla at, or near, all-time highs). The current inventory of 507 actives is 23% higher than last July!

Rancho Santa Fe is on its way back to its old pattern of having 10x the number of actives vs. pendings.

The second half of 2024 is probably going to be relatively unsuccessful for the current sellers who have been on the market for 30+ days – they aren’t priced to move now, and it’s unlikely they will adjust enough to be an attractive buy (which would probably take a discount of -10% or more).

If they all have to come back next year….plus those who decided to wait out the political circus….plus the usual sellers, the 2025 inventory could feel like a real surge. I already have three different sellers who are choosing to wait until 2025 to put their home on the market!

NSDCC Total Number of Listings and Median List Price, First Half of the Year:

2019: 2,722, $1,550,000

2020: 2,324, $1,650,000

2021: 2,266, $1,899,000

2022: 1,812, $2,350,000

2023: 1,468, $2,500,000

2024: 1,663, $2,715,000

If the number of listings explodes next year, these price gains are going to need to mellow out.

Inventory Watch

The number of NSDCC active listings blew right through the 500 mark, and the count is now up to 509 unsolds. The number of pendings had stayed above last year’s count primarily because there have been more homes for sale.

But it looks like all the quality homes have been taken now, and pendings’ count started decelerating three weeks ago. There will be very few hot buys listed over the next 4-5 months, so buyers will have to earn it by lowballing the existing inventory if they want to move this year.

My prediction that the political circus would be a big distraction to home sales didn’t include an assassination attempt! But if both candidates make good on their promise to lower the vitriol, it would be good for home sales, especially if mortgage rates keep coming down.

But it will take a massive surge in price reductions this week to create a late-summer rally. It’s going to be too easy for buyers to pack it in for 2024, and hope that next year brings lower prices and rates.

When is the best time to buy? When nobody else is!

(more…)

Hot Buy in Terramar

This is a terrific value for a Terramar beach bungalow! The original bungalow is very habitable now – it has a new roof, new furnace, real hardwood floors, and pool plus a studio with kitchen and bath was built in the back of the garage! There hasn’t been this good of a value on this street in years! 5249 Los Robles just closed for $1,750,000 on July 2nd for 979sf that was a teardown – this new offering is very habitable!

5158 Los Robles Drive, Carlsbad

2 br/1 ba, 1,279sf + studio in back

YB: 1958

7,400sf lot

Listed for $1,750,000!

Sun City, Texas

Georgetown, Texas, is the fastest-growing city in the U.S. It’s largely thanks to baby boomers.

Thousands of them have settled in an enormous planned community called Sun City Texas: 5,421 acres of single-family homes clustered around pools, fitness centers and pickleball courts, reserved mostly for buyers 55 and older. The hottest party is the yearly Mardi Gras parade and ball. The median age is 73.

“We’re not dead yet,” said Suzanne Herndon, 70, who moved to Sun City in 2021.

Cities are often focused on attracting young families, or hip remote workers. But Sun City residents have turned out to be the best economic stimulus Georgetown could ask for. The city’s operating budget is flush. Its rainy day fund is brimming. Stores, restaurants, hospitals and health clinics add hundreds of jobs every year. Of Georgetown’s 96,000 residents, about 17,000 live in Sun City.

Georgetown Mayor Josh Schroeder couldn’t be more pleased. The seniors moving into Sun City are active and eager to spend. “It’s like they’re at college except they don’t have to go to class and they have $3 million in the bank,” said Schroeder, who at a spry 47 isn’t eligible for Sun City. “It’s almost like a cruise ship on land.”

Read full article here:

https://www.wsj.com/us-news/baby-boomers-drive-economy-d4b72e40?st=lmgoj731nhj3u63&reflink=desktopwebshare_permalink

https://www.delwebb.com/homes/texas/austin/georgetown/sun-city-texas-16369

Buyer-Agent Commission Solution

Hat tip to Carl Streicher, mortgage broker, for sending over this handy chart on allowable concessions, also known as seller contributions. This is how the buyer-agent commission can be included as a part buyer’s mortgage package, even if the seller didn’t sign the optional form with his listing.

If the buyer-agent writes the offer with a 3% or 4% seller contribution to the buyers’ closing costs, then the commission can get paid plus cover some or all of the buyers’ other closing costs too. Sellers typically want to offset with a higher price to compensate, which can make the appraisal more challenging, but once the home has been on the market for a few weeks maybe the seller will take less?

This is the reasonable solution that can solve everything.

Prior to the Frenzy, seller contributions were more common, especially with first-time homebuyers who were tight on cash. But concessions all but went away once bidding wars started breaking out everywhere. If there are multiple offers now, the ones without a request for seller concessions will probably float to the top of the pile.

Why am I skeptical?

Three reasons:

  • Sellers will have already been told that they don’t have to pay for the buyer-agent.
  • If there is another offer that doesn’t request a concession, then it will likely be favored.
  • The seller and listing agent will want to negotiate the amount.

You would think that sellers could just focus on the amount of their net proceeds, but some get weird about paying concessions. If the listing agent is experienced/strong and wants to stand by his fellow agents, then he will explain it in a way that the sellers see the obvious benefit – it gets your house sold.

But it’s not a slam dunk. At least not yet, though a solid advertising campaign by NAR and CAR could go a long ways to making it the palatable solution for everyone in America to transact the same old way that we’ve been doing it for 100+ years.

Read the Contract!

This business used to be civil.

It was probably obvious that the contracts were drawn up by the realtor attorneys to protect realtors, but there were adequate protections for buyers and sellers too.

This commission lawsuit has changed everything, and now they only care about the realtor associations.

When Docusign pioneered the electronic signature, it was one of the best advancements in the history of real estate. But it causes clients to whip through the signing process without having to read anything! The attorneys make it worse by originating new forms every year, and currently a seller has to initial or sign 18 pages to list their home for sale, and a buyer who makes an offer to purchase has to sign or initial 28 pages!

The coming changes are going to add another half-dozen pages to each, and you better read them now!

BUYERS – You have to hire an agent to see homes for sale, which means signing a contract. It sounds ridiculous, which it is, but we are going to have to get used to it. The key part is how long the buyer is obligated to the agent.

If you don’t read the contract and just sign it real quick, you could be obligated to pay this agent a commission whether they represent you or not when buying a home. Buyers should only agree to sign any buyer-broker contract if it includes a cancellation clause so you can get out of it if things don’t work out.

SELLERS – The basic listing agreement won’t allow you to pay an incentive to a buyer’s agent. Your listing agent will have to include a optional form and have you agree to pay “concessions” which can go towards any buyer expense. I’m guessing that this form won’t be used much, and instead the listing agents will want to be heroes and tell their sellers that they get to save money now because they don’t have to pay buyer-agents any more – even though it’s going to kill the business as we’ve known it for 100+ years.

It may sound like a good idea to not pay buyer-agents in the beginning, but if your house hasn’t sold for weeks or months, you might reconsider. Paying incentives to get what you want is an American tradition.

AGENTS – You better be committed to getting paid, because everyone is going to be looking to screw you out of a paycheck – especially the other agents. The MLS used to protect buyer-agents because once a commission rate was entered onto a listing, the seller had to pay it. The rate was protected, and it became accepted as part of the package.

But it’s going to be different now, and the buyer-agents who include their commission in their offer to purchase will be under attack. If you make an offer that is less than the list price, the first thing the seller will want to do is pay you less, and I doubt that the listing agent will stand up for you. I can imagine it already from listing agents – “Ok, we accepted your buyer’s price but we’re not going to pay you anything!”

It means that any buyer-agent who wants to be paid will have to get it from their buyer. It will be another huge burden loaded onto the buyers, and only the most motivated will endure paying the same fees to which we have become accustomed.

So hey, maybe agents won’t get paid as much, but selling homes is going to be a mess – unless buyers can find a way to Get Good Help!

Single Agency Is Upon Us

Due to expected scrutiny from the DOJ, the California Association of Realtors has abandoned buyers, and the buyer-agents. If a listing agent wants to include paying an incentive to buyer-agents, not only do they have to convince a seller that it’s a good idea, but then they have to use an optional form and NEVER call it a commission. Beginning on July 24th:

The Residential Listing Agreement will no longer provide for any offer of compensation from the listing broker to the buyer’s broker. C.A.R. confirmed that they will no longer facilitate broker-to-broker compensation agreements. The Cooperating Broker Compensation Agreement is being retired and will no longer be part of the C.A.R. forms library; the same applies to the Anticipated Broker Compensation Disclosure. The message is clear: C.A.R. will not produce/provide any forms related to broker-to-broker compensation.

The newly revised RLA will only include the agreement between the seller and the listing broker as it relates to compensation. The option for the listing broker to charge an additional fee if the buyer comes to the table unrepresented will remain. This option is available to account for the additional work that may be required of the listing agent when buyers elect to self represent.

In transactions where a buyer is unrepresented it is imperative that the listing agent not act as a fiduciary. The Buyer Non Agency Agreement form must be provided to and signed by the buyer. It is important that listing agents are careful with their words and actions, so as not to imply a fiduciary relationship with an unrepresented buyer.

As it relates to concessions that a seller may wish to offer to a buyer, the listing agreement will not specifically reference such offers. However the Multiple Listing Service Addendum includes the concession language. Paragraph five of “MLSA” will inform the seller as to the option of offering a concession to the buyer. The default will indicate that there are no concessions, however, there will be a checkbox in paragraph 5B2 wherein the seller may agree to consider a concession to the buyer to be used toward the buyer’s closing cost. No amount, either flat fee or percentage, shall be stated without the express written consent of the seller.

It is important to remember that concessions may not be designated for commission rather they are a seller to buyer offer extended solely to assist a buyer with closing costs which may include a variety of fees including broker compensation.

First, the National Association of Realtors botched the defense of buyer agency – allowing the world to believe there has been a conspiracy to inflate commissions – which could not be further from the truth. Now the California Association of Realtors has caved to the implied DOJ threat and revised all their forms to cover themselves, instead of fighting for buyers and buyer-agents. They didn’t even try to fight it – they just caved and revised their forms instead and expect agents to adjust.

In addition, the new listing agreement won’t mention any buyer-agent compensation, but it has a paragraph for the listing agent to include more pay for handling the unrepresented buyer without providing any fiduciary duty. The form is promoting single agency!

This is a disaster. Buyer-agents will be expected to convince buyers that they need to commit in writing to paying the buyer on-agent commission before buyers even find a house. They don’t think they need help finding a house – they have access to Zillow.

They will go direct to the listing agent instead.

SINGLE AGENCY IS UPON US – IT IS HERE, STARTING AUGUST 17TH AT THE LATEST.

It will be the worst thing to happen to real estate ever, yet outsiders will claim that they got commissions reduced so it worked and everything is fine.

Sales will plummet the rest of the year – I guarantee it – but we won’t know if it’s due to buyers waiting it out and/or not knowing what to do, the insane political circus that will only get worse, or if home prices and rates are too high. But that is a wicked triple threat!

Tom Waits

I never saw the morning till I stayed up all night

I never saw the sunshine till you turned out the light

I never saw my hometown until I stayed away too long

I never heard the melody until I needed the song

I never saw the white line till I was leavin’ you behind

I never knew I needed you until I was caught up in a bind

I never spoke I love you till I cursed you in vain

I never felt my heart strings until I nearly went insane

I never saw the east coast until I moved to the west

I never saw the moonlight until it shone off your breast

I never saw your heart until someone tried to steal, tried to steal it away

I never saw your tears till they rolled down your face

I never saw the morning till I stayed up all night

I never saw the sunshine till you turned out your love light, baby

I never saw my home town until I stayed away too long

I never heard the melody till I needed the song

Does It Take Longer To Sell?

I was on a national sales call yesterday where agents from coast-to-coast were complaining about how bad their market is currently. I kept thinking, “It’s nothing price won’t fix!”

Instead, the common fallacy that ‘it just takes longer to sell a home‘ will prevail.

It’s been a belief among sellers and agents for decades. Could it be wrong? Yes.

Of the 21 NSDCC closings over the last 30 days that sold for $5,000,000+, the median time that it took to find the buyer was 34 days. Of the 17 homes in escrow today that are priced over $5 million, the median market time is 31 days.

Why does the belief keep lingering? It’s because it’s easier to digest than “Your price is wrong”.

How does the market really work? The house that sells today is the one that is the best deal for sale.

All a seller has to do is price their home to be the best deal on the market. They can do it from the beginning and get into escrow in the first week or two, or they can wait for weeks or months before getting their price right. Some get lucky when strong demand clears out all the better deals in a hurry, causing the over-priced-turkey to look competitive quickly. It’s just dumb luck though, rather than a deliberate strategy, because it can go the other way too when newer listings at lower prices leave the OPT high and dry.

This is the type of market where some listings will never sell. They price too high from the beginning, never adjust, and they just help to sell the better-priced listings down the street or around the corner. The market can just fade away, or like we will see in 2025, a flood of new inventory can set a new standard for pricing in the neighborhood.

Some days there is enough demand that the best few deals will all sell at once. A surge like that usually happens when there aren’t other distractions like 4-day weekends, Easter, graduations, vacations, etc. We’re due for a wave of demand here over the next 2-3 weeks. But will any of the current homes for sale be considered a good enough deal? it can happen that NONE of the active listings look like deals – especially this time of year when everything is so picked over.

All that a seller has to do is price the home so it is the best deal available, and it will be the next to sell.

We started with an aspirational price here (my recommended LP was $2,200,000). But we adjusted quickly, and once the price got down to $2,250,000, we found the buyer within two weeks (more on this one later):

Anyone can do it!

Pin It on Pinterest