You’ll hear people say that there’s a lack of good inventory for sale.
The total number of attached and detached homes for sale was 23,649 in September, 2007.
Today it’s down to 10,123, counting those pending short sales that are still marked ‘active’ – it’s probably more likely to be in the 8,000 to 9,000 range. SB mentioned that Sandicor has a new status called ‘CONT’ for sales that have offers in contingent on lender approvals, but it’ll take time before agents incorporate it – there was no mandatory requirement to go back through your listings and re-mark them.
Yet there are virtually no good buys lying around – they get snapped up immediately upon listing.
WHAT CAN BUYERS DO? WAIT – FOR THE FOLLOWING:
A. WAIT FOR LISTING AGENTS TO WAKE UP
There are still thousands of homes for sale, but their listing agents are drinking the kool-aid. They read headines that say sales are up, and hear stories around the water cooler about hot deals and multiple offers. They want to believe that it’s just a matter of time before a buyer comes along.
Excuses heard recently from agents trying to justify their list price, and, as a result, not selling:
- “It has six figures in upgrades” (no offers in almost 3 months of trying)
- “Just have to find the right buyer” (1950s home in original condition)”
- “For that money you should be looking at condos” (same agent trying to sell since 9/07)
- “You’re going to have to do better than that, kiddo.”
If a house is on the open market, the only question that matters is, “Have you had offers?”
If the answer is no, then the price is TOO HIGH! Yet even the experienced veteran agents think that their job is to protect their sellers from selling too low, and to wait instead for that magical ‘LUCKY SALE’. “Waiting” works when prices are increasing – but in this market, agents have a fiduciary duty to tell their sellers to lower their price. But they don’t do it.
B. WAIT FOR MORE REOs
Everyone is talking about it, from Bruce Norris to Dan McAllister, from the blogging community to the local grocery bagger.
More REOs coming to market will provide inventory that is hard to find today – properties with the right price, and that you can buy today. In the better areas that have had fewer bank-owneds, a frenzy will break out at the sight of a well-priced REO.
The coming REO listings could get absorbed, with the lack of other realistically-priced listings – everything else on the market is picked over, and buyers want new meat! The recent REOs haven’t been selling cheap either.
You can see them coming too – here are the SFRs on the foreclosure lists: 30 in Rancho Santa Fe, 50 in Del Mar/Solana Beach, 70 in Carmel Valley (29), 130 in Encinitas (25), and 300 in Carlsbad (26). In parenthesis are those valued over $1 million.
If the aren’t enough buyers, the motivated bank-sellers will lower their prices until sold. But they haven’t had to discount many REOs, at least so far. They’ve been very successful listing at 2%-5% under comps – with more REOs in the higher price ranges, that formula may get tested.
C. TRY SHORT SALES
There will probably be more short sales coming to market, than foreclosures – only because it’s still early. If you have time (3-6 months) to wait and see if the bank will approve your terms, then there could be some opportunity. But patience is required.
The banks aren’t rolling over on lowball short sales.
The agent in La Costa Oaks who tried to dump and run at $920,000 had to put the listing back on the market yesterday – for $1,065,000, the bank’s appraised value.
D. EXPAND YOUR TARGET ZONE
If schools are a primary motivator, investigate them carefully. The high schools especially have seen movement – did you know that La Jolla, Torrey Pines, CCA, La Costa Canyon, Carlsbad, and San Marcos High Schools are all rated an “8” at the website www.greatschools.net? I don’t know much about the website’s accuracy, but it wasn’t that long ago that they rated Torrey Pines a “10”.
There are reports of rampant drug use at all SD high schools (my oldest is graduating next week!).
E. PAY MORE
I don’t condone over-paying – most listings I see are 10% to 20% too high, and you have to let them go. But if you are within 1-2% of making a deal, consider the benefit of ending the frustration. It will get more frustrating, not less, should more foreclosures hit your market. The additional competition between buyers will likely push prices beyond the ‘nice buy’ range, and into the ‘retail-ish’ range.
In summary, the longer you wait, the better your chances of seeing more product, but finding the right house at the right price is very difficult. I think that there are many homeowners who are just now defaulting, and will hit the market as short sales or REOs over the next 1-2 years. They should help fuel the supply, but if you can’t find the right house at the right price, it won’t matter much.
Good, down-to-earth advice.
But can’t you get your real estate license revoked for offering such advice?
You the man jim.keep up your awesome work.There is a lot of buyers out at this time of the year.Maybe wait till people are passing around the eggnog.
Terrific advice as always, Jim. As a frustrated wanna-be buyer on the Central Coast, I’m waiting for A and B.
Congrats on your daughter’s upcoming graduation! Our youngest graduated last year, and it truly was an awesome day. Don’t forget the Kleenex!
I think the rarely-mentioned factor in this frenzy is the $8K homebuyer credit. This is creating massive interest on the low end. I’d wait to buy until that expires…especially if you make too much to qualify.
-Erica
Erica’s advice on the eight grand is very good-unless you DON’T make too much to qualify. Eight grand now is probably worth a twenty or thirty grand discount over the life of a thirty year loan-if you qualify, absolutely try to find something before it expires. But the low end should calm down a bit after the credit expires-but not with twenty or thirty grand discounts on a $100-200k property.
That is, investors and people who make too much should wait, people who qualify should at least try to find something now.
Geotpf,
Great math there — next time try comparing apples to apples.
The 8K credit is simply allowing people to overpay an extra 8K, and house prices will come down at least 8K (and probably more due to lack of a stupid incentive) when it expires to compensate. The 20-30 grand “savings” over the life of the mortgage applies equally; however, those that purchase with the credit will have an 8K higher tax basis (plus incur an additional $480 in realtor commission).
Jim,
I’m up at the mountain cabin with only a few minutes of internet but at least here there is inventory and then there is inventory. I looked MLS and saw 70. There are easily 3x that many with signs out front and double that again that in properties that need to be for sale but are trapped in limbo awaiting disposition.
If the Banks weren’t given our tax dollars to stay in business this wouldn’t be happening.
Thanks TARP, it’s good to know that those that bet without responsibility get to stay in business.
Welcome to the USSA
Correct on the $8,000 gift from taxpayers. This is a seller subsidy, not a buyer subsidy.
Any (unearned) money that is offered to a large number of home buyers will push up prices, negating any “benefit” they perceive.
This includes mortgage interest deductions, mortgage credit certificates (if not severely limited), down payment assistance programs, artificially suppressed interest rates, grants, gifts, or other cash incentives. These push prices **UP,** ultimately making homes **less** affordable. The sheeple have been brainwashed into thinking they are actually the beneficiaries WRT “affordable housing” programs and incentives. They couldn’t be more wrong.
i’m a confused SF reader… i thought SD has been coming down in price for a couple of years…. how/why are there so many seller-hold outs? has there not been full capitulation? sounds as if not.
any bottom is marked by capitulation – the moment the biggest ding bat listing agent throws their hands up is the moment the market has bottomed and will be headed up. i had just assumed SD was there, but it sounds like you’re no where near there.
my curiousity stems from the fact that the SF market has only recently seen a price drop (Sept financial crisis was the first real drop). if SD has been coming down for 2+ years (and hasn’t it been since ’06???) then I’m assuming that SF is in for a very long and protracted fall in prices – much longer than I assumed since SD sounds like it may have 2+ years left. in SF we still have realtors here who think this is a minor blip and prices will start soaring again any second.
so any stories on SD’s nicer hoods – what are you folks expecting in the high end markets?
There hasn’t been capitulation because the housing market is being still manipulated. You are in SF and in SF one can earn enough to reasonably afford 800k house. In SD those types of incomes are not so common. What that makes me think is SF will fare better. But I could be wrong maybe the bankers find a way to keep 50k earners in million dollar homes. Or perhaps SD pays much higher than average wages.
Where did my message go? 🙁
Yeah, at least half of the $8K is a seller subsidy which raises the sale price from what it would be.
In any case, when house stays on the market for years what’s really happening is reverse home speculation. They’re not really waiting for a buyer, they’re waiting for sudden appreciation to bail them out. In the stock market, this is what happened to people who held on to stocks all the way down to the bottom of the crash, then sold low out of desperation.
I think Erica’s advice to wait for the 8K to expire is good. However, I get the feeling that they will extend that another year. But then again it doesn’t hurt to wait, its not like prices are going to climb back up anytime for awhile.
$8k buyers bribe (sellers gift), foreclosure moratorium, etc. These are blatant market manipulations and are creating bubble 2.0. Only difference is that these are unsustainable. Maybe it’ll last for a few months, but you can only push so many people off of the fence at once. It’ll ebb.
Wait a minute, I thought the $8K credit wasn’t going to work? Remember, it was too little for this market? Can’t blame that one.
Based upon a number of conversations around the BBQ this weekend I was amazed to hear, after putting my foot in my mouth again and again, how many people are going for short sales or loan mods. The sentiment seems to be that they don’t want to default but the property just isn’t worth what it was. I think we’ll see a big rise in NOD’s but it won’t translate in REO’s.
My guess is that depending on the bank, the nicer homes/condos will be foreclosed on by the banks and put back on the market just below market just like JtR said. Most of the rest will be worked out. All a part of this long bounce along the bottom.
Separately, as for rampant drug use in high schools, that’s just part of growing up now. We did it, my kids probably will too. Weren’t JtR, Rob Dawg and Peter Hong all big punk rockers at some point? I wouldn’t worry about that one so much.
Regarding Jim’s point about high school ratings, I was surprised to learn that NO high school in San Diego have a rating higher than 8 (out of 10) in GreatSchools.net.
In our Colorado town of 130,000, we have THREE HS ranking 9 or 10 on GreatSchools.net. I’m not bragging. To the contrary, I’m horrified: We’re moving with our 2 school aged kids from our quite nice 3,700 sf home here in CO, worth about $210k, to Carmel Valley. Yikes!?!?