Getting More Normal

Here are four of the nine DM houses on the broker tour today.

But I was also in search of more data and opinions on market conditions.  I think we are settling in for an extended run of normalcy – where turn-key sellers of attractively-priced homes with broad appeal will be rewarded, and the rest will struggle to find a buyer without discounting.

It is the way it has always been – but because we haven’t seen much of our old friend Normal in a while, he is hard to recognize!

Frenzy conditions benefit the inferior homes – buyers get caught up in the excitement, and overpay for the fixers.

NSDCC Monthly Sales – June

There was a lot of hubbub yesterday about NAR’s annoucement about their goofy ‘seasonally adjusted annual rate’ of national sales dropping 1.2% from May to June.

Lawrence Yun didn’t mention here that there were 9% fewer business days in June than in May, which would help explain much of the decline.

But for the casual observers, there is more trouble ahead.  Why? Because statistically we’ve had it so good due to the frenzy that there is nowhere else to go but down. The red line shows the elevated sales last year, and the blue line shows how the frenzy continued into 2013:

NSDCC Monthly Sales:

graph (34)

If sales just went back to previous levels, the market would be fine.  But if that happens, and the media compares the next few monthly sales counts to the last 12 months, it will sound like the sky is falling – we’ll be looking for another bailout!

How the sales trend looks on one line (in red), with the average pricing too:

graph (33)

Inventory Watch – Busy

The Under-$1,200,000 market has been fairly steady lately, but those sellers higher up must be feeling a little lonely:

The UNDER-$1,200,000 Market:

Date
NSDCC Active Listings
Avg. LP/sf
DOM
Avg SF
April 29
201
$384/sf
36
2,599sf
May 5
195
$381/sf
36
2,633sf
May 9
207
$387/sf
35
2,624sf
May 18
241
$397/sf
33
2,566sf
May 23
236
$397/sf
34
2,529sf
May 30
230
$391/sf
35
2,591sf
June 5
229
$393/sf
35
2,577sf
June 11
239
$390/sf
34
2,569sf
June 17
246
$389/sf
36
2,577sf
June 24
255
$397/sf
36
2,535sf
July 1
244
$401/sf
38
2,526sf
July 8
256
$398/sf
38
2,530sf
July 15
269
$403/sf
38
2,486sf
July 22
258
$401/sf
39
2,442sf

The OVER-$1,200,000 Market:

Date
NSDCC Active Listings
Avg. LP/sf
DOM
Avg SF
April 29
620
$806/sf
94
5,183sf
May 5
606
$806/sf
93
5,223sf
May 9
628
$808/sf
93
5,150sf
May 18
653
$807/sf
92
5,161sf
May 23
661
$814/sf
92
5,141sf
May 30
659
$805/sf
95
5,222sf
June 5
663
$794/sf
96
5,185sf
June 11
672
$779/sf
96
5,163sf
June 17
661
$787/sf
99
5,164sf
June 24
679
$791/sf
98
5,097sf
July 1
705
$785/sf
94
5,084sf
July 8
702
$779/sf
95
5,100sf
July 15
736
$776/sf
94
5,038sf
July 22
748
$782/sf
96
5,043sf

Below shows a big week of new pendings – the busiest week of summer, in spite of Opening Day and Comic-Con. Apparently the buyers aren’t done yet, as long as there are enough sellers willing to get their price right.

Weekly NSDCC New Listings and New Pendings

Week
New Listings
New Pendings
May 30
70
84
June 5
87
64
June 11
77
69
June 17
73
66
June 24
100
69
July 1
86
64
July 8
81
53
July 15
106
54
July 22
105
89

Panel of RE Leaders

The titans of on-line real estate in a panel discussion about the future:

In the beginning the moderator claimed that Zillow is the MLS in many cities, and their COO didn’t want to have anything to do with it. Either Zillow is planning a sneak attack, or they are going the Redfin way and playing nice with the realtor community. While it seems inevitable that one website could dominate the space, and perhaps become the PublicMLS, for now the three of them seem happy to co-mingle in the space.

The third-party websites (Zillow, Trulia, & Realtor.com) are focused on selling advertising and leads to realtors.  They discuss how they want to give realtors more data about the consumers, such as their recent search parameters and more on their wants and needs. But of course with permission only and let’s guard it carefully.

I thought the Realtor.com president had more to say than anyone else, mostly because he stood up for publishing the sales histories of agents in the name of transparency. It could be that the website that brings that specific data to the public will take the lead. But as long as the Big Three are selling ads to realtors, they may not want to ruffle feathers.

Home Buyer Survey

LOS ANGELES (July 17) – Demonstrating the proliferation of mobile technology into nearly every facet of our lives, more than eight out of 10 home buyers are accessing home information on their smart phones and computer tablets, according to the CALIFORNIA ASSOCIATION OF REALTORS®’ (C.A.R.) “2013 Survey of California Home Buyers.”

“With more and more consumers using mobile devices and mobile technology, such as apps and social media platforms, buyers are increasingly using their smartphones and computer tablets to view comparable house prices, search for properties, take photos, and create videos of homes and amenities, as well as research communities and real estate agents,” said C.A.R. President Don Faught. “As a result, home buyers today are more informed and have a greater sense of control over what could be a daunting process.”

The survey found 85 percent of buyers used a mobile device during the home buying process, with the majority of buyers (70 percent) accessing the Internet from their smart phones and 15 percent accessing it from their tablets.

While the majority of buyers (61 percent) found their home through an agent, the percentage who found their home online more than doubled from 16 percent in 2012 to a record high of 37 percent in 2013.

Almost one-third (30 percent) of buyers rated Realtor.com as the most useful website, followed closely by Zillow at 28 percent. Broker and agent websites were also helpful in the home buying process as buyers increasingly seek local expertise and information.

The use of social media in the home buying process continued to increase, with three-quarters of buyers now using it, compared to 52 percent who used social media in 2011. Buyers primarily used social media for buying tips and suggestions from friends (43 percent), neighborhood information (42 percent), and to view their agents’ Facebook pages (41 percent). The use of social media as a form of communication is expected to grow, with 91 percent of buyers saying they are receptive to receiving information about the home buying process from their agent via social media.

The survey also found that buyers spent nearly six months considering a purchase before contacting an agent, nearly twice as long as last year. They took more time investigating homes and neighborhoods before contacting an agent, spending just over seven months on researching, compared to about 1.5 months last year. Additionally, buyers spent nearly 10 weeks looking for a home with their agent, a week longer than last year. More than eight out of 10 buyers (85 percent) made offers on other homes, and one-third said they settled for the best option given the limited supply of houses.

“The lengthier consideration time and home search illustrates the impact of low housing inventory and increasing home prices,” said Faught. “These factors caused buyers to weigh their options more carefully before making their home purchase.”

Additional findings from C.A.R.’s “2013 Survey of California Home Buyers” include:

• Buyer optimism about the future direction of home prices continued to grow, with the majority of buyers (60 percent) believing prices will go up in five years and 36 percent seeing prices rise in one year, up from 41 percent and 25 percent, respectively, last year.
• Buyers cited price decreases (38 percent), favorable prices/financing (12 percent), and the desire for a better location (10 percent) as top reasons for purchasing a home.
• Reflecting the prevalence of tight lending standards, buyers experienced extreme challenges in obtaining financing. On a scale of one to 10, with 10 being extremely difficult, buyers rated their difficulty in obtaining financing at 8.6 on average, the highest in the survey’s history.
• Higher down payments are the market norm these days, with buyers putting an average of 25 percent down on their home purchase. The average down payment has been greater than the traditional 20 percent since 2009.
• Ninety-one percent of buyers obtained a fixed-rate loan, up from 84 percent in 2011, reflecting low rates and the desire for certainty as the market gets back to basics.

USC Ross Program in SD

USC Ross Minority Program in Real Estate is coming to San Diego!

The USC Ross Program is an executive training program bringing individuals from a wide variety of backgrounds and perspectives together to solve complex real estate challenges.

Whether your interest is in commercial or residential real estate, in community redevelopment or urban planning, the Ross Minority Program will give you the skills for success in a vital and rewarding industry. The San Diego session will be offered over a two-week intensive period from October 7 to 18, 2013.

APPLICATION DEADLINE: September 26, 2013

The link to the website is:

http://www.usc.edu/schools/price/lusk/ross/index.php

For information contact Mary Peralta at meperalt@usc.edu.

Be Sharp on Price

Hat tip to Susie for sending in this great article from SFGate:

Houses  deluged with offers way above their asking price are common stories nowadays. But there remain a significant minority of wallflowers. They could be challenged in some way — awkward layout, unpermitted work, problematic location — or there could be an issue with the pricing.

Here’s a tale of two recent for-sale houses, located side by side in Oakland’s popular Rockridge neighborhood — an easy stroll to BART, coffee, lots of chi-chi shops –  that underscore how real estate remains as much an art as a science.

One triggered a bidding war and sold last month for $146,000 over asking, a 20% premium. Right next door, the other house sat..and sat…and sat, and this month was withdrawn from the market, having failed to win a satisfactory bid.

“When a property is priced below the comparables, such as (the house that sold), it attracts multiple offers and often times sells for well above what the market supports,” he said. “This of course is what drives a rising market. When a property is priced at the top end of the range of value, or above, it does not garner as much interest and ends up sitting.  The longer it sits the more stagnant it gets and will end up selling for less than what the comps indicate as market value or being pulled from the market.”

Read the full article here:

http://blog.sfgate.com/ontheblock/2013/07/19/rockridge-house-incites-bidding-war-next-door-neighbor-remains-wallflower/

Origin of Frenzy

We have seen how the lack of inventory seems to drive the frenzy.  When buyers see fewer choices, they tend to start gobbling.

You can see below how the recent frenzy got started – there was a low level of new listings in early summer, at relatively low pricing:

June 15 – July 15
# of New Listings
LP Avg. $/sf
2006
623
$559/sf
2007
480
$544/sf
2008
478
$557/sf
2009
535
$537/sf
2010
532
$490/sf
2011
454
$430/sf
2012
403
$445/sf
2013
480
$550/sf

This summer we’ve had 20% more listings in the same period, at an average list price that is 24% higher than last year – which should terminate the frenzy conditions, at least for now.

Compare the 2013 numbers to 2007 and 2008!

Right Price is Crucial

Lesson 2 – Take listings at the right price.

Why?

Sellers are reluctant to lower their price – after all, they aren’t going to give it away.  By the time that reality sets in, the buyers’ expectations have fallen further and you will struggle to catch up:

Example: There have been 3,053 NSDCC-detached listings this year – and only 1,676 of them are pending or sold. Yes, 45% of listings have NOT sold during the hottest real estate market in the history of the world.

P.S. The second house shown sold for $2.135 million a year ago.

Home-Flipping Huckster

Have you thought about being a flipper, and paying to learn the craft?

Armando Montelongo Seminars offers long weekends of questionable advice, raucous showmanship and tours of foreclosed homes in some of America’s poorest sections. His secret formula: Go deeply into debt to buy distressed properties, fix them up minimally and sell them quickly. “People throw money at me to become multimillionaires,” Montelongo, a large, stocky guy with shoulder-length black hair, tells the crowd. “This is the means to your end.”

amNo guarantee that end will terminate in six zeroes. Montelongo, the onetime star of A&E’s Flip This House, offers scant proof the formula has turned his “students” into plutocrats. Asked to provide successful seminar alums, Montelongo serves up two–neither has made millions. Billy Godsey declines to detail his finances. Jake Leicht claims he’s made about $180,000 in 16 months buying 18 homes.

The one certain multimillionaire to emerge from Montelongo’s seminars? Montelongo himself.

His formula is simple: First, expose people to his system through a 90-minute free seminar. Then funnel them into a second (cost: $1,497 per couple) and, finally, a third: a three-day extravaganza like the one I attended that runs $40,000 for two.

Montelongo claims his San Antonio, Tex. company will rake in an estimated $100 million in revenue this year from 350,000 people attending one of 3,580 events. That’s up from 57,000 folks at 120 seminars, generating $12 million in sales in 2009, its first year of business. If Montelongo’s numbers are accurate, and his margins are typical for this kind of thing, then he will personally pocket $50 million this year (he owns 100% of the enterprise).

Read the full story here:

http://www.forbes.com/sites/abrambrown/2013/06/26/meet-armando-montelongo-the-home-flipping-huckster-wholl-make-50m-this-year/

Pin It on Pinterest