Off-Market As A Strategy

by | Jan 15, 2019 | Coming Soon, Jim's Take on the Market, Realtor, Why You Should List With Jim | 22 comments

It’s been widely accepted for years that off-market sales are part of the real estate landscape.  After the (fraudulent) short sales went away, realtors needed another sexy lure to attract new clients, and rather than crafting the high demand and bidding wars into an auction-like experience, we went the other way and are using restricted access as our ploy.

None of the industry players want to even talk about it, let alone do anything.

In the meantime, it’s the way the business is trending.

With no public objections and so many off-market deals happening right before our eyes, every agent and brokerage wants to take advantage and create an effective off-market strategy.

It restores control of the inventory to the agents – we decide who gets exposed to the listings, and when.   It will also turn the MLS into the website of last resort, used only when a listing agent can’t find their own buyer.  The real estate portals will suffer, and full access for consumers won’t be the same.

We might as well go back to the MLS books!

Many agents claim it’s just ‘pre-marketing’, but what happens if a buyer makes an offer before the listing hits the open market?  Are you going to turn it down? Or are you going to make a quick deal and move on to the next one?

The phase underway now is the building of realtor clubs.

There’s the PLS, as well as the Top Agent Network, which is operating in 31 markets and should be coming to San Diego soon.  They offer club membership to the top 10% of producing agents in each region so they can network and market their listings to each other.  I’m also a member of 4-5 groups on Facebook, where the focus is pre-MLS exposure of listings and ‘making deals’, plus there are several realtor meet-ups around town too.

The shift to private, off-market deal-making isn’t just coming soon – it’s here.

I think we should just admit it to ourselves and to the consumers, and then find a way to make the best of it – because it’s not going away.

Due for a Surge?

by | Jan 14, 2019 | Interest Rates/Loan Limits, Jim's Take on the Market, Market Conditions, Market Surge | 1 comment

Does weather affect home sales?

Yes, buyers don’t mind the distraction when the market is uncertain!

But now that the holidays are over, the Chargers are done, more houses are coming to market, and mortgage rates are a half-point lower than they were three months ago, we are (over)due for a surge of activity.

There are two big NFL games on Sunday afternoon, which leaves Saturday wide open – and it has the best weather of the week.

No big games the following weekend, so if the weather holds out, buyers should be fully engaged – and if they aren’t, then that says something too.

It’s hard enough just trying to sell – if you have to schedule around the weather and other conflicts (graduations, for example), it narrows down the chances even more.  But if we can anticipate opportunities, let’s take advantage.

Inventory Watch

by | Jan 14, 2019 | Inventory, Jim's Take on the Market | 1 comment

A few general observations as the 2019 market continues to liftoff.

  1. At the Inventory Watch, we are measuring the active listings, which are the unsold listings – so we are measuring what isn’t working, at least not yet.  In the past, it was just a matter of time before the rising market came up enough to meet every seller and their price, but now we’re not as confident about when that might happen. It may take a lot longer before pricing rises substantially, and we could plateau for years to come.
  2. Rising inventory gives buyers more confidence that waiting longer will produce better results.  It used to happen like that when banks were selling REOs for whatever the market would bear, but now that those days are over.  Will there be sellers who want/need to sell for whatever the market will bear, or will they wait? (which would create a glut of unsold listings)
  3. Markets will vary. You can see in Bill’s graph above that inventory behaves differently, and it’s really an indicator of how much sellers and listing agents are holding out on price.  Our current inventory is +24% year-over-year, which is mellow given our higher price point compared to those in the graph.

Are you coming off vacation and getting back in the swing? Click here to register your guess of how many total listings we will have between Jan 1 and Feb 28 – the closest will receive four tickets to a Padres game!

(more…)

Leucadia Beachfront Hotel

by | Jan 13, 2019 | Jim's Take on the Market, Leucadia, Local Flavor, View

From the UT with hat tip to WC Varones (JMI = John Moores, ex-Padres owner):

Developers have finally started construction activity this week on a Leucadia bluff-top hotel project that’s been talked about for decades.

Located just west of La Costa Avenue’s intersection with Coast Highway 101 and part of a site that once contained the Cabo Grill, the 4.3-acre property will become home to a $110 million, 130-room hotel. The luxury hotel, which will have ocean views from all but two of its guest rooms, is scheduled to open for business in November 2020.

Fenway Capital purchased the property about 13 months ago and is working jointly with JMI Realty to develop the land, which was once owned by KSL Resorts, Jackel said. Long ago, this property was envisioned as a companion property — kind of a “beach club” — to the La Costa Resort & Spa just east of El Camino Real, he added.

People passing the site initially will notice little more than new fencing, construction trailers and some surveying work. But at the end of January, a hotel project-funded sand replenishment will start on the beach below the bluff. Contractors will be adding 45,000 cubic yards of sand to the beach between late January and the end of February.

A public staircase in the area will remain and a new beach access pathway will be added from La Costa Avenue as part of the hotel development, Jackel said. The new pathway is scheduled to open just before the start of summer in 2020, a construction timeline indicates.

https://encinitasbeachhotel.com/

Link to Full Article

More Contingent Sales in 2019

by | Jan 12, 2019 | Jim's Take on the Market, Market Conditions, Realtor, Why You Should Hire Jim as your Buyer's Agent, Why You Should List With Jim | 3 comments

While some folks can’t make sense of a move up or down, there are others who have specific wants/needs, and are willing to forge ahead – if they can just sell their existing home and pour their equity into the next one.

I’m three for three this year with contingent sales already, and I wouldn’t be surprised if half of my sales in 2019 will involve contingent buyers.

The challenge gets more complex when multiple sales are contingent!  They stack up like dominoes, all dependent on sales on either side to be completed successfully – and risk all crashing if a problem pops up that can’t be solved.

Up to now, listing agents and sellers haven’t had to deal with contingent buyers because we’ve had enough non-contingent buyers to go around.  Not any more.

The #1 reason sellers and listing agents should consider a contingent offer?

Contingent buyers pay more.

They know they are asking a favor, and in effect, they are purchasing a favor.

Plus, their purchase is contingent upon them selling their house (read: getting the price they want), so everybody gets what they want. Win-win!

Contingent sales can be highly speculative, however, and our existing system doesn’t provide a safety net, so there is a risk that every seller could get left holding the bag.

How can we tighten these up?

  1. Have buyers obtain full loan approval.  At least if the buyers are fully approved by the mortgage underwriter, that concern is satisfied.  A pre-qual letter isn’t solid enough to tie up a property.
  2. Review the lender downstream.  If there is a chain of contingent sales domino-ed together, let’s take a good look at everyone’s lender letter – because we’re all in it together.
  3. Review the agents downstream.  Is everyone competent? If my sale is reliant upon an agent downstream finding and solving problems, then it’s not asking too much to know who it is.  What else have they sold lately?
  4. Supply comps and photos of contingent properties. Every agent involved should know – and get to render their opinion – on the price/value of the other homes in line.
  5. Bridge loans. Bridge loans are out there, and Compass should have a good alternative ready before too long. A fantastic option that solves everything.

There is another viable alternative that every contingent-buyer should consider: Selling your home first.  The immediate reaction is usually the same – I don’t want to be left homeless, or I don’t want to have to move twice, which is understandable.

But we do have the seller contingency that allows us to find a suitable buyer for your home while not binding the seller to move until they find suitable housing:

Our ability to master the contingent sale will probably make or break the market this year.  Without them, will there be enough buyers with the equity, desire, and ability to keep the party going?  It’s doubtful.

Most realtors, let alone buyers and sellers, are unfamiliar with contingent sales.  But this is where our creativity will pay off in a challenging market!

Real Estate Cycle

by | Jan 11, 2019 | Boomer Liquidations, Boomers, Jim's Take on the Market, North County Coastal, Sales and Price Check, Slowdown | 6 comments

www.sacramentoappraisalblog.com

Ryan posted the history of real estate cycles in Sacramento County, so here are the same years for North San Diego County’s coastal region for comparison.  Human nature tends to flow in the same direction everywhere, and as a result, our history looks a little like his:

Year
Number of Sales
Median Sales Price, Annual
Change
1999
3,236
$475,000
+8%
2000
3,285
$555,000
+17%
2001
2,926
$570,000
+3%
2002
3,717
$630,000
+11%
2003
3,932
$732,500
+16%
2004
3,363
$948,000
+29%
2005
3,014
$1,000,000
+5%
2006
2,626
$985,000
-2%
2007
2,479
$1,000,000
+2%
2008
2,037
$890,000
-11%
2009
2,223
$817,000
-8%
2010
2,461
$830,000
+2%
2011
2,562
$825,000
-1%
2012
3,154
$830,000
+1%
2013
3,218
$952,250
+15%
2014
2,850
$1,025,000
+8%
2015
3,079
$1,090,000
+6%
2016
3,103
$1,160,000
+6%
2017
3,084
$1,225,000
+6%
2018
2,797
$1,325,000
+8%

At the time it seemed like sky was caving in, but looking back we only had two bad years (2008 and 2009) in the last twenty. There was some scuffling around as we found our way in 2006-2007, and 2010-2012, but given that our market had been injected with the most exotic financing ever known to man, and then tanked by foreclosures and short sales, I think we did pretty good to survive it as well as we did.

Now what?

With 90% of the NSDCC active listings priced over $1M, all we need is wealthy people to keep coming here to buy their forever home.  We’re still cheaper than the LA/OC and Bay Area, so we look attractive to downsizers.

Our pricing may bounce around, but without brainless bank clerks dumping properties for any price, who else is going to cause a collapse?  We could run low on the number of buyers – and if we did, all it would do is cause a protracted descent; re: soft landing over years.

Boomer liquidations?

Here’s a conversation I had yesterday with a guy who is 80+ years old and who has lived in his house since the 1960s:

Him: Convince me why I should sell my house.

Me: How are you getting around?

Him: I ride my bike to the store.

Me: Do you need the money?

Him: No.

Me: Have you ever dreamed about buying a house on the lake and fishing the rest of your life?

Him: No.

Me: Are you married?

Him: No.

Me: Did you know that if you did sell, you’d have to pay six-figures in taxes?  How would that make you feel?

Him: What?  I only paid $19,500! I’d never pay that much in taxes!

Me: What happens upon your demise?

Him: My daughter will inherit – she grew up here, and will likely move back in.  But I told her if she doesn’t move in, it’s ok with me to sell it.

Me: Do you have a family trust?

Him: Yes.

Me: Did you know that if she sells the house, she will pay no tax?

Him: You’re kidding? If I sell it, I have to pay the tax man six-figures, but if she sells it, she pays nothing?  Jim, I think we have the answer!

There will be occasional sales where sellers hire bad agents and get taken advantage of, but there won’t be an avalanche of desperate sellers dumping for any price.  It would take a tsunami, earthquake, or terrorist event at the border to cause a drastic shift in housing – which could happen!

Here’s the latest photo of the nuclear waste being stored right on the surf at San Onofre.  All we need is one crack in a storage cask…..

Without a catastrophic event, what’s the worst we can expect?

Maybe 5% drop in pricing in the short-term?

Any more than that, and sellers will just wait it out.

County Waives Fees for ADUs

by | Jan 10, 2019 | ADU, Jim's Take on the Market, The Future | 3 comments

We’ve talked about one-story homes – another way to add insulation from any potential downturn is to buy a property that can accommodate a granny flat. They can produce extra cash flow (the county states that they can be rented), and if you ever have to sell, there are home buyers looking to have grandma on-site rather than putting her in a senior facility at $5,000 per month.  Cities have been slow to accommodate the accessory dwelling units (ADUs), but they need to comply with low-income housing so they should come around.

Hat tip to Bryce and Nancy:

The San Diego Board of Supervisors voted to waive fees for residents building accessory units on their property Wednesday to address the county housing shortage.

These accessory dwelling units, known as “granny flats,” are described as attached or detached residential spaces to an existing property that can provide sleeping, eating, cooking, and sanitation, according to the county.

“This is a critical step in our on-going efforts to address the region’s housing crisis, especially the serious need for affordable housing,” said District 2 Supervisor Dianne Jacob. “This new program is the quickest and easiest way for us to expedite the development of housing.”

The board voted Wednesday to waive all county permit and development impact fees over the next five years with the hopes of bringing thousands of additional granny-flat homes across the county.

The previous cost of a permit for a granny flat was $1,222 plus $0.0411 per square-foot of space, according to the county’s website.

In total, residents planning to build granny flats could save an average of $14,000, according to District 5 Supervisor Jim Desmond.

In order to offset the loss of these fees, the county said it would subsidize $11 million for the five-year program.

“We will continue to be creative and challenge the status quo to solve the region’s housing crisis,” said Desmond.

The incentivized units can be used for family members or rented out as a source of income for the homeowner, the Board of Supervisors said.

To learn more about what constitutes a granny flat, go to the county’s website.

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