Tiny-House Village

Aunt Nancy sent this in, and wants to see something like it in SD – hopefully there will be many creative housing solutions for young and old alike:

http://www.fourlightshouses.com/pages/the-napoleon-complex

beautiful trailer park

DENSITY: 16–22 houses-per-acre

SIZE: 40 -70 beautiful tiny houses (RVs), each up to 400s.f., plus sleeping lofts

AMENITIES: A 800 – 1600 s.f. common house, private gardens, 1.5 parking spaces per house, shared outdoor space, private storage units, prominent pedestrian walkways out front with parking out back.

LOCATION: Northern California

ZONING: RV Park

INTENT: To create a contagious model for responsible, affordable, desirable housing.

PROPOSED OPENING: 2015

http://www.fourlightshouses.com/pages/the-napoleon-complex

Tiny House Village

Mortgage Rates and Selling Now

While we’re talking about when to sell, let’s note the impending rise in rates.

While it seems likely that the Fed will hold steady in the short-term, at some point they will make their move.  From the WSJ:

http://blogs.wsj.com/economics/2014/09/19/feds-fisher-would-like-to-see-rate-move-early-next-spring/

An excerpt:

Federal Reserve Bank of Dallas President Richard Fisher said Friday he’d like to the see the U.S. central bank begin to raise rates early next year, in an interview on Fox Business Network.

When it comes to making the first move to lift interest rates off of their current near zero levels, Mr. Fisher said “I personally expect it to occur in the spring rather than the summer, but we will see.”

Mr. Fisher was speaking in the wake of this week’s monetary policy-setting Federal Open Market Committee meeting. At that gathering, the Fed continued to signal that it would be some time before it began to raise rates, although it emphasized any decision would be driven by incoming economic data.

Mr. Fisher dissented against the FOMC’s decision because he believed rates would likely to rise sooner than most of his fellow central bankers believe. Philadelphia Fed leader Charles Plosser also dissented on similar grounds.

Two concerns here for home sellers:

1. The Fed doesn’t control mortgage rates – banks determine their own rates as they see fit.  It is similar to gasoline prices too – anytime there are headlines that give permission for higher rates, the banks are usually happy to oblige.

2. The Fed is paranoid about tipping their hand, so there won’t be advance notice of the actual change in Fed policy. You’re not going to know when rates rise – it will be a surprise.  By the time you get your house on the market, we’ll be at stall speed, because the ensuing panic among sellers should flood the market with listings – and we’ve already been overdue for a “flood”.

Higher rates made buyers jump last summer, but that was when home prices were lower than today. By the time we get to 2015, buyers will be looking for any reason to wait-and-see, and if rates popped a half-percent or more, only the best houses with the most attractive prices will be selling.

Do you think the Fed will have to wait until 2016 or longer?

They just might, but they have been winding down the QE just like they said they would.  If the Fed decided to bump rates one time as a trial or to send a message, it would have all the effect needed – sending home buyers to the cautious pit, and making sellers panic about losing a couple of points off their 20%+ gains over the last two years.

If you have some good comps around you today, and little or no competition, you might as well sell today while it’s predictable.

Sellers Deserve the Truth

Let’s expand on yesterday’s post.

Why does it matter if the media keeps missing the story?  They keep insisting that home sales have slowed due to issues on the buyer-side of the equation.  But that isn’t what you see on the street.

Here’s what we keep hearing over and over:

1.  Credit is tight – hard to get financing.

2. Low inventory – not enough houses for sale.

3. Prices have risen to unaffordable levels.

4. Wages aren’t rising.

5. No high-paying jobs available.

6. Buyers are confused/don’t understand mortgage options.

7. Bubble is forming.

But ready, willing, and able buyers just see over-priced turkeys everywhere they go.  By the time you get to September, all that is left are the most outrageously priced homes, making you want to pack it in until next year.

The media’s one-sided message reinforces why they should quit.

Yes, we have lowly-motivated sellers who will wait for their price. We will always have those listings – I’ve had them myself – and sometimes the market catches up, or you get lucky and somebody overpays.  But it’s clear that the market has flattened, and wait times are longer – and may never bear fruit.

Sellers who want/need to move now, deserve to know the truth.  The reason nobody is looking at your house isn’t because of 1-7 above; it’s because your price is too high.  There are plenty of qualified buyers in the marketplace; they just won’t pay what you are asking – and your price isn’t close enough to have them make an offer.

Here are reasons why sellers should know the truth:

1. The longer you sit on the market unsold, the more likely to be lowballed.

2. The market could get worse next year.

3. Your actual value might be way below what you think.

If the media reported that the problem is optimistic pricing, it would instead make sellers think about sharpening the pencil.  Those who need to move could/would take proactive steps to solve their problem – but instead they just sit and wait.

This is typical for this time of year too – any seller who was close on price has sold by now.  If sellers were properly educated and kept their pricing sharp, we could have a more balanced market throughout the year. Instead, the market goes dormant for 4-6 months, and then both buyers and sellers go nutty during the “selling season”.

Sellers – try a price reduction, they work!

La Costa Film Festival

Some of us nobodys who hope to be in a film festival someday will appreciate this weekend’s La Costa Film Festival, which is underway:

http://lacostafilmfestival.org/2014-film-program/2014-schedule/

It looks like a great collection of films, and The Signal Hill Speed Run is my favorite so far – here is the trailer:

Movies are being shown at the Omni Resort, Cinepolis, and the Dove Library, so you can’t help but find one you like.  There will also be panel discussions and a tribute to Ed Harris, who will be there on Friday night!

Just Say It

I like Sean and enjoy his high-quality website – and their monthly report.  But they fall into the same rut as the ivory-tower guys when they want to blame the changes in market activity on non-players.

The priced-out buyers do not make the market – they don’t have a vote any more.  All that matters is how the players who are in the game are responding.

I feel like I mention this every day – the primary reason why sales are down is because the ready, willing, and able buyers think that most of today’s list prices are ridiculous.

Because the mass media has yet to grasp this important fact, from now on I’ll just use a photo of something stinky, and you’ll know it means the story to follow is missing the point.

Like in this case, it’s not that she’s wrong – many buyers have been priced out, and sent to waiting-game purgatory.

But if the industry would harp on the direct and specific reason why more homes aren’t selling (sellers are too optimistic), then maybe we could cause a sea change in home-selling.

Very few people are No one is telling sellers that their price is too high – and if the media talked about it, then sellers might catch on sooner.

Here is the August report from PR:

http://www.propertyradar.com/reports/real-property-report-california-august-2014

An excerpt:

August 2014 sales were the lowest August sales since 2010. On a regional basis, over the past 12 months sales are down 15.7 percent in the Bay Area, 16.7 percent in Southern California, and 18.8 percent in the Central Valley.

“The bloom is definitely off the California real estate rose,” said Madeline Schnapp, Director of Economic Research for PropertyRadar. “The rapid rise in prices over the past two years has outstripped the ability of many would-be California homeowners to purchase.”

The rapid disappearance of distressed properties available for sale has been a key factor depressing sales. Whereas in August 2013 24.0 percent of sales were distressed properties, in August 2014 distressed property sales comprised only 16.7 percent of the total. In August 2011, 54.7 percent of sales were distressed property sales.

The lack of movement in median prices this past month was due mostly to a shift from less expensive to more expensive homes, not a change in underlying home values.

Petco Seats

The two tickets to see Sir Paul at Petco Park are in Field Box 112, Row 11, where this photo was taken – the stage will be in center field.  The winners will be sitting above the people on the field, and about eye level with Paul!

Petco Row 11

Two other photos taken yesterday – this at Scripps Poway and I-15 at 3:30pm:

105 degrees

The monsoon that hit Sorrento Valley around 5:30pm:

monsoon double rainbow

Join Jim’s Club!

Paul McCartney

To help build the Jim’s Club membership, we’re having a drawing for two tickets to the Paul McCartney show at Petco Park!

For those who would like to receive my monthly newsletter by email, click on the image above, register your email address and check the yes box, and you will be entered into the drawing!

Or click here:

www.bubbleinfo.com/paul

SD Market Trends

SD prices

The graph above shows how San Diego home buyers have been more patient since rates went up last summer.  They finally conceded some ground, pricewise, over the last couple of months to log a 8.8% increase in the median $/sf year-over-year, but it was flatlining for almost 12 months.

The graph below shows how the active inventory increased steadily since spring (blue line), and though it dropped 7% since last month, it is still 3% higher year-over-year.  In spite of my pleas over the last 2 days for sellers to stay on the market, it’s likely that the active inventory will decline sharply through the holidays (like last year):

SD pricing

More on the Wait-It-Out Plan

Easing up

I just noticed this article from Friday’s latimes.com:

http://www.latimes.com/business/realestate/la-fi-home-prices-20140912-story.html

An excerpt:

Silva said some of his clients are receptive to the idea of cutting prices to sell their homes. But some sellers — those with less motivation to move now — are pulling their homes off the market, said Steve Shrager, an agent with Coldwell Banker in Studio City.

Sellers who can’t get the price they want are choosing to rent their home, or try to sell again in another year.

“They feel the price can’t go anywhere but up,” Shrager said.

Buyers are choosier too, he notes. Though price growth has leveled off, many buyers still aren’t seeing bargains. And while the selection of homes has expanded, some aren’t finding any property they really want.

Some, he said, are choosing to stay put, or maybe try the market again next spring.

“I don’t want to use the word correction, but we’re in a bit of an adjustment period right now,” Shrager said.

Waiting for the spring selling season is fairly normal behavior for both buyers and sellers, Thomas said. But after a decade of boom, bust and boom again, many aren’t sure how to react to a normal market.

“People are not used to this,” he said. “That’s why you get some panic. Eventually these houses will sell. You just have to be patient.”

Most sellers and listing agents will opt for the wait-it-out plan, mostly because they are avoiding the price-might-be-wrong conversation.

Sellers and listing agents don’t know how wrong the current price is, and they don’t WANT to know.  All they want is for some nice young family to come along and love the house and price the way they do, and pay full boat.

But the wait-it-out plan doesn’t take into consideration the potential for selling for less, later – and delays the eventual conversation about how much less.

Look how it’s working for this guy – another excerpt:

Patience and price cuts are paying off for Joseph David, an investor and rehabber who listed a blue three-bedroom Craftsman in Highland Park in late June at $624,990. When it went on the market, his agent got a lot of phone calls. Dozens of people showed up at open houses. But none of them pulled the trigger.

“We got a lot of response, but we didn’t get any offers,” David said. “There were a lot of looky-loos.”

Before long, he knocked a bit off his asking price. Then earlier this month, he cut it more sharply, to $549,000.

Interest picked up dramatically. His agent started to get a lot more phone calls, making David confident he’ll get that offer soon.

The investor here is likely to end up at $100,000 under his initial list price, and leave him wondering if he should wait too, rather than taking such a “loss”.  But it was never worth $624,990, because the market in late June was healthy enough that he would have gotten offers if the price was close to being right.

The biggest problem is that sellers and listing agents are way too optimistic in the beginning, and are unwilling to adjust fast enough to get in the game.

Here is my list-price rule-of-thumb for sellers:

If you are getting offers, your list price must be within 5% of being right.

If you are getting showings but no offers, your price must be 5% to 10% wrong.

If you’re not having any showings, your price is more than 10% wrong.

Here’s an alternative plan for those sellers caught in this dilemma.  Reduce your price once by as much as you can endure (5% to 10%), and if it doesn’t sell by Halloween, then wait until next year.

To just cancel the listing now without a price reduction doesn’t give you any price-discovery data to use when listing next year.  Don’t be surprised if next-year’s comps will suggest starting at the lower price, and leave you wondering if you should have just bit the bullet in 2014.

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