Inventory Watch

A bit of a breather this week, which Doug would find humorous.  But there was also another round of graduations that probably slowed the activity too.  We should see a surge over the next 2-3 weeks as the selling season wraps up!

Week
New Listings
New Pendings
Feb 6
101
55
Feb 13
89
55
Feb 20
92
57
Feb 27
66
73
Mar 6
102
66
Mar 13
99
59
Mar 20
93
82
Mar 27
82
60
Apr 3
104
70
Apr 10
96
83
Apr 17
99
69
Apr 24
106
68
May 1
111
88
May 8
96
94
May 15
93
80
May 22
104
60
May 29
112
93
Jun 5
100
71
Jun 12
98
71
Jun 19
81
60

There are 15% fewer homes for sale today than there were this time last year – 23% fewer houses for sale that are priced under $1,400,000, and 12% fewer that are priced over $1,400,000.

(more…)

Floating Homes

Floats engineered specifically to support homes are crucial to the design.

We should do these everywhere – hat tip daytrip:

“There’s a lot of action and fun when you’re building a floating home,” says builder Marc Even.

“There are also a lot of logistics,” he adds with a chuckle.

Even is owner of Even Construction and builder of one-of-a-kind homes that live on the water in Portland, OR. “My in-laws’ home was the first floating home I built, 20 years ago, and I fell in love with the process,” he says.

A love of water runs deep in his history. His father was a Navy captain who started building homes for entertainment after he retired. Those were “land homes,” as Even says.

Even grew up in San Diego’s surfing culture, and he has brought that sport’s upbeat attitude to his homebuilding career. Although he does build custom land homes, he says constructing floating homes is more exhilarating. “I build homes for people who want some excitement in their lives,” he explains. “The river is a unique environment.”

He’s built floating homes for doctors, lawyers, judges, hospital presidents and comedians — anyone looking for a different way of living.

From start to finish, the building process takes Even and his crew eight months to a year. Log float homes are built on the water at the company’s facility in St. Helens, OR, and concrete float homes are launched after they are built.

While a concrete float might seem counterintuitive, it’s not a new concept — just one that is increasing in popularity. These floats are specifically engineered to suit your home, and can even incorporate radiant floor heating. They have superior support, and last for decades with little maintenance.

The trickiest part is maneuvering the home from the company’s building site to its new moor. The river has its ways, but so do Even and his crew.

Building floating homes takes a lot of patience. Not many builders are willing to tackle the task. “Everything is moving and bouncing around,” Even says. “It’s a lot of work. Land homes don’t move, and they’re level. There’s no such thing as level on the river.”

https://www.zillow.com/blog/marc-even-building-floating-homes-197302/

‘Craziest’ Markets

From realtor.com:

“With a record number of home buyers out there, this is officially the most competitive, fastest-moving spring housing market in decades,” said Javier Vivas, manager of economic research at realtor.com. “Following a furious start to the season, the median days on market for homes on realtor.com in May is the lowest since the end of the recession, and marks the first time that 1 in 3 homes is selling in under 30 days nationally.”

The median age of properties on realtor.com in May is 60 days, which indicates that properties are selling five days (8%) faster than this time last year, and two days faster than last month.

“The lack of affordable inventory remains a critical issue, particularly for a growing number of first-time home buyers and millennials lining up for starter homes and urban dwellings.”

So where in the U.S. are things the craziest—those places where homes fly off the market the fastest, and buyers are up all hours, clicking on listings? When we pulled together this month’s list of the hottest markets in the country, the top markets were a one-two punch for the Bay Area, with San Francisco (including nearby Oakland and Hayward) at No. 2 and Vallejo, just to the north, at No. 1.

I don’t think a faster-moving market is crazy – instead, the tight inventories have caused us to naturally evolve to quicker pace.  It’s not just the buyers – agents, lenders, appraisers, and inspectors all move faster now, and you could say, ‘it’s about time’.

Words like ‘craziest’ are just headline porn – the market evolution is on track.

Is there a potential benefit to slowing it down?

Agents dig the face pace – buyers and sellers have less time to think, and deals close quicker so we can get on to the next one.

How would sellers and buyers benefit from slowing down the process, and how could it happen?

Imagine if we eliminated the ‘Coming Soon’, ‘Sold Before Processing’, and other ways that agents wrongly tilt the table.  Instead, we adopt an industry-wide standard process for selling homes so everyone has a crack at buying each house.  After all, shouldn’t that be in place already?

If everyone knew that the seller would pick the buyer on Friday afternoon (or some other deadline), then we’d have an open, honest, and predictable marketplace.  If we added a open bidding process at the deadline, the resulting transparency would help even more.

The frantic running-around today is from agents abusing the system, which causes buyers to pull their hair out every time they lose a property unfairly.  They are determined to get the next one, no matter the cost, because they abhor the way they are treated.

You could say that the realtors’ unethical behavior that has helped to create the frenzy does benefit the sellers.  Most will say that as long as sellers benefit, then all is good.

But is it a long-term solution?

We will eventually run out of buyers who are willing to put up with this environment.  Then what, another dip?  Great.

The conversion to The Slow-Down Plan outlined above (adopting a industry-wide process for selling homes) is our soft landing.  If we continue at a break-neck speed with no solution in sight, won’t we crash….again?

If There Was No Bubble

What would have happened if we didn’t have the bubble/burst?

This graph suggests we would have gotten here anyway, and it’s probably true.

The national 3.6% annual appreciation rate sounds a little rich, but we would have had strong demand from baby boomers setting up their kids lately.

What else?

  1. We probably wouldn’t have sub-4% mortgage rates.  The jury is still out on whether the Fed can navigate this through to the other side, so there could be further prices to pay later.
  2. If the fixed-rate on mortgages wasn’t so low, we might still have ARMs.
  3. We’d still have foreclosures.
  4. Kamala Harris wouldn’t be so famous.
  5. The Tan Man wouldn’t have been sent to early retirement, and his golf game would have suffered slightly.
  6. Bubbleinfo.com wouldn’t be here!

I’m grateful we are here together trying to figure it all out!

Fed Raises, Mortgage Rates Drop

Rates are under 4.0%, no points! From MND:

Mortgage rates fell convincingly today, though not all lenders adjusted rates sheets in proportion to the gains seen in bond markets (which underlie rate movement).  Those gains came early, with this morning’s economic data coming in much weaker than expected.  Markets were especially sensitive to the Consumer Price Index (an inflation report) which showed core annual inflation at 1.7% versus a median forecast of 1.9%.

Core annual inflation under 2.0% is a hot topic–especially today–considering that’s one of the Fed’s main goals.  This afternoon’s Fed Announcement did acknowledge the recent drop in inflation, but continued to suggest it was being held down by temporary factors.  The Fed also officially unveiled its framework for decreasing the amount of bonds its buying (though it didn’t announce a start to the program yet).

Bottom line: Fed bond buying is one of the reasons rates are as low as they are.  Markets know the Fed will eventually enact this plan and they’ve accounted for that to the best of their ability.  But as the Fed actually goes through the steps toward enacting the plan, it causes some upward pressure for rates.  That was the case this afternoon, but bond markets were nonetheless able to hold on to a majority of improvement seen this morning.  As such, the day ended with most lenders offering their lowest rates in exactly 8 months (a few days following the presidential election).

Subprime is Back

John South of Drop Mortgage and George Flint of Triumph Capital wait for waves off Encinitas. The group of mortgage industry professionals meet weekly on the beach for a morning surf before work.

From the wsj.com

An excerpt:

Lenders say there is an untapped market among borrowers with good credit scores like self-employed workers who don’t have proper income documentation, or for responsibly made loans to borrowers with credit problems that have had bankruptcies in the past or had to sell their home for less than it was worth.

If they are successful in recruiting brokers, lenders believe the market potential for both types of loans could reach $200 billion annually.

A big hurdle: finding the right kind of brokers and instructing them in the lost art of making a subprime loan. Some are returning to the industry for the first time since the crisis. Others like Mr. Boyd have never been in it.

“I knew a mortgage was a loan for a house,” said Mr. Boyd, who was recruited by his boss, Jon Maddux, after selling him a Calvin Klein suit at a local outdoor mall. “I came in just a blank slate.”

Before he co-founded Drop Mortgage, the parent company of FundLoans, in 2014, Mr. Maddux ran the website YouWalkAway.com between 2008 and 2012. The site charged homeowners on the brink of foreclosure $995 to learn how to leave their debt behind.

Mr. Maddux said his experience advising down-and-out homeowners is today helping him pitch them loan products. Drop Mortgage and FundLoans made about $200 million in subprime and alternative documentation loans in 2016, funding them by selling them to hedge funds and other Wall Street investors.

“I’ve seen what caused these people to walk away and I don’t want to be a part of that,” he said.

Subprime mortgages are typically made to borrowers with a credit score of around 660 or lower, at interest rates ranging from 6% to 10%. Alternative documentation loans, or Alt-A loans, are made to borrowers with higher credit scores but who use bank statements or other less conventional ways to prove their income.

Read full article here:

LINK

Price Coaching

A friend is trying to buy a house on the east coast, and finds himself in…..guess what…..another bidding war.

He was hoping the listing agent would give him some help.

He asked, “What will it take to win?”, which is a logical question. But of course, the agent told him that she couldn’t answer that question, and for him to make his best offer and let the chips fall where they may.  We’ll call that blind bidding.

But isn’t it in the seller’s best interest to administer the most effective process in order to achieve a top-dollar sale?  If buyers have a price to shoot at, or some pricing hints, it is more likely they will respond favorably.

An open auction is the ideal solution.  The competing bids are out in the open, and animal spirits take over.  The environment changes from buyers wanting to pay their price, to doing whatever it takes to win the contest.

We have a long ways to go before open auctions become routine.  In the meantime, listing agents can be transparent and help both buyers and sellers.

But agents are only familiar with blind bidding, and just hold out hope that a buyer might go crazy and submit a bid way over the list price – which could happen if the property was deliberately under-priced.  But the vast majority of properties are priced at retail – on those, there are multiple offers submitted due to the lack of other quality choices, not because the price is too low.

With blind bidding, offerors will only bid a little higher and hope to keep the purchase price in line with comps.  If they don’t know what the other offers are, and are bidding blindly, it is natural for them to be conservative – especially when you consider we are probably in the later stages of our bull market. Buyers are miffed at the lack of transparency, and only add a little extra mustard to their original offer.

As a result, with blind bidding, sellers are leaving money on the table.

Why do we allow this?  It’s because it’s the way we have always done it.

Listing agents should provide transparency to buyers, and let the animal spirits take over.  Buyers would appreciate the candor, and bid with abandon to win the property.

It’s an old wives’ tale that we aren’t allowed to share the other offers with every buyer. But I challenge anyone to show us where it says that sharing offers is forbidden.

This is at the bottom of our required Form PRBS:

We disclose to every buyer that their offer may not be confidential, and they agree.  Why, then, do agents insist that they can’t share the information?

It’s because they aren’t comfortable with conducting a slow-motion auction.

They’ve never done it before, they’ve never heard of it, and it is too easy to just take a blind bid that might be slightly over their list price.  That’s good enough, isn’t it?

No, it’s not.

Of course the sellers deserve top dollar, yet we refuse to employ the best strategy to achieve it. Don’t get me started on how many properties we see that are “Sold Before Processing”, where the listing agent tilts the table to avoid any bidding war.

But it is also not fair to the buyers.

How many buyers have you heard say, “I would have paid that much”, after a sale closes.    Both sellers AND buyers deserve better…..but are agents going to put in the extra effort?

Get Good Help!

The Good Old Days

In its July 13, 1953 issue Life magazine ran one of many photo essays on the city of Los Angeles. This one focused on the immense population and development growth the city and surrounding area encountered in the late ’40s and early ’50s. Here then is a gallery of the most interesting photos — some unpublished — that went into its story called “400 New Angels Every Day.” There were all shot in either December ’52 or July ’53 by J. R. Eyerman.

More old photos here:

http://www.grayflannelsuit.net/blog/time-capsule-los-angeles-development-boom-of-the-1950s

Hat tip Eddie89!

Daytrip sent this in:

Life magazine told America about the rapid development of Lakewood in 1953 in a series of photographs that included a dramatic panorama of a street filled with moving vans. The photo seemed to show a typical moving-in day. As this Press Telegram story shows, however, the shot was staged by the Lakewood Park publicist. The Life magazine photo later became famous as a icon of suburban life in the 1950s.

https://lakewood-ca.smugmug.com/keyword/moving%20vans/

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