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Boomerang

From the SD Union-Tribune:

http://www.utsandiego.com/news/2015/jun/05/foreclosure-shortsale-boomerang-buyers-real-estate/?

An excerpt:

When Chad Sanfillipo got the keys to his house in Ramona last year, he had come full circle in the real estate market.

After losing his home to a short sale during the crash of the housing market, Sanfillipo was once again an owner.

“It felt so exciting to be able to buy again, to have something I own,” said Sanfillipo, 45, who rented for a couple of years before a bank would lend him money again. “There’s no landlord or rent check. I get to say what I get to do with my house.”

Sanfillipo, a systems engineer, is one of roughly 116,000 San Diego County residents who had either a short sale or foreclosure between 2006 and 2014, before and after the Great Recession, according to CoreLogic, a real estate data company.

The good news for Sanfillipo and others who lost their homes during the downturn is that there’s ultimately forgiveness in the lending market. Each month, thousands of San Diegans who went through short sales or foreclosures are completing waiting periods that render them eligible to once again apply for government-backed loans. In the worst case, some must wait seven years, but others can get new loans in just one, depending on whether they go through the Department of Veterans Affairs, Federal Housing Administration, Fannie Mae or Freddie Mac.

People who lost their homes during the recession but own again are called boomerang buyers, and they’re becoming a larger part of the market.

Boomerang buying is becoming a nationwide movement. The National Association of Realtors says that 9.3 million homeowners underwent foreclosures between 2006 and 2014. Already, 1 million of them purchased homes again, and an additional 1.5 million will become eligible over the next five years.

boomerang buyers

http://www.utsandiego.com/news/2015/jun/05/foreclosure-shortsale-boomerang-buyers-real-estate/?

California Home Sales in May

The state is cooking! She brings up a good point – it might be hotter if there was more to sell:

California home sales softened in May, but the housing market momentum continued to be solid as the spring home-buying season marked higher year-over-year home sales and prices for the fourth straight month, according to the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.).

Highlights

  • Home sales rose above the 400,000 mark in May for the second straight month since October 2013 and were the second highest level in nearly two years. Closed escrow sales of existing detached homes in California totaled a seasonally adjusted annualized rate of 423,360 units in May.
  • The May figure was down 1.1 percent from the revised 427,880 homes sold in April, slightly below the long-run April-to-May average sales increase of 0.6%.
  • Home sales were up 8.9 percent from a revised 388,690 in May a year ago though, and the statewide sales figure so far has outpaced last year by more than 5 percent.
  • CKC.A.R. President Chris Kutzkey commented, “The spring home-buying season continues to be strong, especially in areas where insufficient housing supply is less of an issue. With mortgage interest rates edging up recently and an imminent increase in rates by the Federal Reserve, housing affordability concerns will be heightened but may also prompt prospective buyers to feel a sense of urgency to enter the market.”
  • The median price of an existing, single-family detached California home edged up in May from both the previous month and year for the fourth consecutive month. The median home price was up 0.8 percent from $481,880 in April to $485,830 in May, the highest level since November 2007.
  • May’s median price was 4.4 percent higher than the revised $465,470 recorded in May 2014. The median sales price is the point at which half of homes sold for more and half sold for less; it is influenced by the types of homes selling as well as a general change in values.
  • While sales continued to improve from last year at the state level, the number of active listings dipped slightly from the previous year, keeping the supply of homes on the market flat. The May Unsold Inventory Index was unchanged from the 3.5 months reported in April.

http://www.car.org/newsstand/newsreleases/2015releases/may2015sales

Cause of Financial Crisis

subprime vs prime

Hat tip to Wendy for sending in this article on subprime vs. prime mortgages causing the crisis.  The authors probably didn’t catch the fact that prime borrowers were getting neg-am loans based on FICO scores only, and those weren’t considered subprime loans:

https://fortune.com/2015/06/17/subprime-mortgage-recession/?

An excerpt:

We can draw two conclusions from this data. One is that your chances of being foreclosed upon in the past decade was more a matter of timing than anything else. If you were a subprime borrower in, for instance 2002, who bought a bigger house than a more prudent and creditworthy borrower would have bought, chances are you would have been fine. But a prime borrower who did everything right—bought a house he could easily afford, with a large downpayment—but did so in 2006 would have had a higher chance of defaulting than the subprime borrower with better timing.

Since whether you were hurt by the crisis had more to do with luck than anything else, Ferreira argues we should rethink whether doing more to help underwater homeowners would have been a good idea.

https://fortune.com/2015/06/17/subprime-mortgage-recession/?

Real Estate Agent Teams

The DANGER report also concluded that agent teams were a threat:

real estate agent teams

I run a brokerage, and have agents who work for me. But I am a salesman through and through, not a guy making a living off other agents.  It is why I write blog posts like the one yesterday – I love agents, but detest the big brokerages who take advantage of both agents and consumers.

When I got started in the business, I worked for various franchises, but they were smaller then – mom-and-pop shops that were manageable.  Since then, the big franchises have grown into big-box operators, hiring hundreds of agents and providing scant supervision and training.

Enter the agent team.

The lead agent hires other licensees to assist him/her in the business, and they grow as a sub-set of the brokerage. In the old days, those groups would break from the franchise and start their own brokerage, but now they are allowed to grow within the same company.  It allows the agent teams to still be part of the franchise when wanted and needed, but for the most part, the franchise name is reduced to fine print on advertisements – and the agent team builds its own identity.

But this is good for the industry because in a smaller group, there can be more supervision and training. The agent teams are providing what the franchise can’t – the daily personal touch with their agents.

We need agent teams to bring up the new agents.

Yes, the big franchises have their mentor programs and training sessions, and I’m sure they are somewhat effective.  But those who can, do, and those who can’t, teach.

Besides, it is the hands-on daily management and nurturing of agents is what has them turn into great agents – and the agent teams are the most likely to produce the great agents of the future.

I complain about the agent teams advertising that the lead agent has sold 100+ houses, when in reality it is the combined effort of 10-15 people.  When we finally get to the day when we are publicizing agent statistics, the number of people contributing to the agent’s sales should be disclosed (Redfin is the #1 offender).

But everything else about agent teams is good.  It is experiential training, where new agents can learn from the best agents while on the job.  If brokerages are threatened by this, then so be it – at least the agent teams are bringing up the new agents right.

Disaster Relief

carmel valley 92130 map

Earlier today, reader ‘socalbuyer’ asked,

Jim,

Word on the street is that Qualcomm is going to layoff a couple thousand folks in San Diego this year. Wanted to get your thoughts on how that would affect the real estate market in San Diego. Most of those jobs may not find a fit in San Diego, and a bunch of Qcomers probably don’t need to sell.

Your thoughts?

My response:

It should mean an instant 10% decline in prices around Carmel Valley because buyers will expect some insurance.  Sellers will reluctantly agree because they probably made that much in appreciation over the last year.

After that, it will get interesting.

The unemployed will shine up their resume and hunt for a new job for a year (or more) before ‘giving it away’. Spouse and kids won’t surrender easily either.

This is what we can expect from any disaster, natural or otherwise, that shocks the system.  Buyers will be prone to hesitate, and the sellers who feel somewhat panicked will accommodate by lowering their price to clinch a sale.

Real estate isn’t known to be a liquid asset, so everyone will adjust expectations after the initial pop.

socalbuyer asked,

My understanding is that we have a total of 9000+ property sale transactions a year in San Diego…the qcom layoff number is as high as 5000. Figure 50% find a job out of San Diego and need to sell, 2500 units on the market sounds sizable, especially if most are in 92130.

Last year there were 22,079 detached homes sold in San Diego County, and 470 in the 92130 – which is only 39 per month.  If pricing retreated a little, there could be a surge of CV buying but either way, it is a small portion of the market compared to the overall county.  I’m guessing that there is enough underlying demand that any excess properties will get soaked up – it’s just a matter of price.

Carmel Valley prices have gone up 20% in the last 2-3 years.  If sellers had to give that much back, they’d survive.  The market will too – CV has too much going for it.

Independent Realtors vs. the Rest

Yesterday, a name and number was sent to me by an internet lead service.  It doesn’t cost me anything to receive the leads – the internet-lead company gets a referral fee from the listing agent once the sale closes.  I’m on the list more for amusement – I’ve never closed a sale from any internet-lead service.

I always check the MLS to see if their house has been listed recently, and look for upgrades in the photos – because there could be a 10% swing in price.

This property was an active listing, so I knew what was coming – the sellers weren’t getting enough action, so they blamed the agent (not their price).

I get the seller on the phone, and he starts right in with,

“What company do you work for?”

His current agent is an independent, so instead of having a frank conversation about the realities of the market and why his house isn’t selling, he jumps to the conclusion that he needs a big company to push the product.  I mention that I can better expose his property using my video tours, but he wouldn’t have anything to do with it.

He wants a big-name company. Period.

This is why the large franchises exist.  They know that sellers don’t have much experience with selling real estate, and the accompanying discomfort causes them to make snap decisions. Many people have been brainwashed by advertising, and feel more comfortable selecting a brand name, rather than investigate the choices.

My take on the subject:

1. Most are independents.  According to NAR, the majority of realtors (57%) work for independent, non-franchised companies.  If the realtors themselves don’t see the value in working with a franchised company, then why should the consumer?

http://www.realtor.org/field-guides/field-guide-to-franchises-vs-independent-firms

2. Selling real estate is an individual sport, not a team sport.  Sellers are hiring an agent to advise them how to sell for top dollar with minimal hassle.  You want to believe that there is a ‘Company Way’ to sell houses and every one of their agents did it the same.  But it’s not like that – we are independent contractors that all sell differently.  Want proof?  The only thing we have in common is the MLS – and look at how differently it is used by agents.  Some include lousy or no photos, great or crappy remarks, etc.

3.  Quality – The recent DANGER report concluded that ‘the No. 1 liability for the industry is its masses of “untrained, unethical and/or incompetent agents.”’  These agents work at every company (franchise and independent), and sellers are misguided to think that if they call a brand-name company, they will automatically get a competent professional.  Inexperienced agents typically usually learn at a big franchise office, then go out on their own once they are experienced – which would make you think that hiring an independent agent would make it more likely to get an experienced agent.

4. Reputation – Have you ever had a bad experience with a brand-name company?  This is why many agents prefer to be independent – the actions of other realtors in the office can have a negative impact on their own reputation.

5. Independent companies vs. independent realtors. Once you are open to hiring an independent, then break it down further.  A big independent brokerage has some of the same problems as a big franchise.  Ideally you want to hire a guy whose name is on the door – he has the most riding on every detail of the transaction.

This isn’t a knock on franchise offices themselves – there are good and bad agents everywhere you go.  It’s the industry itself that prefers to mask the competency of the agents. Have you noticed how few realtor blogs there are?  Why is that?  It’s because agents don’t want to be scrutinized, and their employers don’t want to be either.  They prefer to hide behind big names and imagery where the consumer has little idea what they are actually getting – until it is too late.

Get Good Help!

10% Range in Values

2015-06-11 17.54.08

Is there an easy answer to how much sellers should spend on repairs, to sell?

You see me on various jobs talking about projects undertaken by sellers – and the scope of the project are almost always related to the house’s age.  You want to bring houses up to speed, but items that are dated and hard to change (eight-foot ceilings, split-level, bad yard, etc.) make it a real challenge.

Where do you start, and where do you stop?

Work it backwards.  Those who live in a super-custom area (RSF, Del Mar, La Jolla, etc. where values can vary widely from lot to lot), have a wider range.

But those who live in tract neighborhoods can expect home values to range roughly 10% between the fixers and the cream-puffs.  The newer the tract, the easier it is to predict where you are in the range, because the improvements are more likely to be similar.

If your house is mostly original, buyers will expect to pay a minimum of 10% less than the comps that have been fully remodeled or have other positives (view, big yard, one-story).

If you can find a way to spend less than 10% to get your house from fixer to full retail, then do it.  Your renovated look could spur a bidding war, and/or provide additional benefits later like easier repair-list, easier appraisal, and less chance of fallout.

If the cost of needed improvements exceed 10% of your current value, then just sell it as a fixer, and have your price do the work – list for 10% under the renovated comps.

There are other variables – a bad agent can cost you 2% to 3%, and a great one can add 2% to 3%.  Quality contractors at reasonable prices make a substantial difference, and timing is everything!

Get Good Help!

Upcoming Local Events

Two local events coming up this weekend:

cmf

Saturday, June 20th

The Carlsbad Music Festival kicks of the summer with its third annual free Village Music Walk, featuring dozens of musicians performing over 60 sets during a 6 hour celebration of adventurous music.

An extension of the August Carlsbad Music Festival, the Village Music Walk is an all- ages, free of charge, community event that features a wide array of music performed in outdoor and indoor spaces throughout the historic Village of Carlsbad. The unique performance venues range from public parks and art galleries, to local music stores and even a 19th century chapel.

Drawing annual crowds of over 4000 community members and cultural tourists, the Village Music Walk runs from 4-10pm with 20-minute sets starting every half hour. With multiple performance options to choose from at any time, attendees of the Village Walk are invited to create their own concert journey through the Village.

http://carlsbadmusicfestival.org/events/

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beer

The San Diego International Beer Festival had over 10,000 people last year, and two of their sessions are already sold out this year:

June 19-21. 
2260 Jimmy Durante Blvd., Del Mar 92014. With more than 400 beers from around the world to choose from, beer aficionados will enjoy hard-to-find specialty craft brews alongside favorites from the local brewing scene. Specialty vendors will be selling a variety of accessories and gifts for the beer lover. With a stage featuring everything from home brewing advice to educational demos to food pairings presented by Venissimo Cheese and The Lost Abbey, you won’t want to miss out.

http://sandiegobeerfestival.com/

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The Carlsbad Concerts in the Park series begin on Friday, June 26th:

http://www.carlsbadca.gov/services/depts/arts/events/tgif/schedule.asp

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