It will be the sixth sale over $3,000,000 this year in Encinitas Ranch! With a solid foundation of six sales, the next peak to climb is obvious – potential ER sellers will be wondering if they can get $4,000,000!
Buyers will cringe at the thought, and be reluctant to be the first to pay it. Everything will have to go perfectly for a $4,000,000+ sale to happen.
Let’s identify what could impede such a sale:
Coming Soons – Advertising the property to the public before it’s ready to be shown just diminishes the urgency. By the time a buyer does see it, their dwindling enthusiasm and disappointment has already set in.
Value-Range Pricing – As we head into the post-frenzy era, the gimmicks and sideshows only wear out the buyers. They want the truth, and an easy path to purchasing the home.
Poor presentations – Professional photos and videos will be a must – buyers want to swipe! Once they get into the home, it better look like a top-notch model home to warrant $4,000,000.
Hard to show – Having to clear hurdles like submitting financials just to see the home, having tiny windows of time to see the home, and having the listing agent follow around the buyers like a hounddog only create anxiety in buyers.
Unattractive High List Price – The list price will need to start with a three, to get to a 4-handle. Otherwise, the gap will seem too large, and buyers will be tempted to wait it out.
But even if the sellers and listing agent handle all of the above correctly, it will still come down to how they handle the offer(s) once received. If days go by and then the typical counter-offer is returned with several demands like free rent for 60 days after close, buyer must waive appraisal (or all contingencies), and a higher price than offered, it will be easy for buyers to back away.
When my listing of 1463 Paseo de las Flores hit the open market on October 18th, there had been three other properties that were providing guidance on price.
The monster 7,277sf home at 519 Samuel had been in escrow for almost two months, and 628 Lynwood had been languishing unsold for 110 days. On September 27th, a model-match to my listing, 820 Jensen, came on the market at $2,899,999, which was devastatingly-low compared to our anticipated list price of $3,395,000. I called the owner/agent to suggest that she may want to raise her price, and sent her the six comps that were outside Encinitas Ranch but all over $3,000,000.
Her response? “We’re comfortable with our price”.
I called her a couple of weeks later right before we went on the market to inquire about her sales price.
Her response? “You’ll see it in the MLS when it closes”. Great, thanks.
(The eventual buyer’s agent told me that she received four offers – three at her list price, plus his cash offer at $3,060,000. The sellers took his cash offer.)
I was undeterred, and we hit the market at our $3,395,000 on a Thursday afternoon.
The next day at noon was the first showing, done virtually by an assistant.
Any buyer who responds that quickly must be highly motivated, so I didn’t hold it against them that the principal agent didn’t come or that it was a virtual showing. It would be hypocritical for me to have an objection since I’ve sold multiple houses virtually.
They made a full-price cash offer by the time I got to open house at noon on Saturday.
Greg and I entertained a big crowd at the open house, and one of the first attendees was a woman who brought her mom and her best friend, which I took as a good sign. She mentioned that she knew the previous owners, and had been to dinner parties at the house! They stayed for an hour, during which I told her that I had received a full-price cash offer.
Before the open house was finished, I received her cash offer for $3,500,000.
Every other agent would have taken her offer.
It was a whopping $105,000 higher than the first offer, she was charming, and she had spent serious time inside the house. It would look like a no-brainer choice to every other agent.
But I’m not like every other agent.
I called the first agent as I was leaving the open house, and told him I had received the $3,500,000 cash offer. I asked if he wanted to beat it, and if so, that I would go back to the second buyer and give her the same chance to beat his. We would go back and forth until a buyer prevailed.
We went five rounds before the second buyer passed at paying $3,800,000, and – armed with this insider information – she ran over to Lynwood and bought that house instead for $3,550,000 and a 10-day escrow. It still shows as a pending listing today, but I know what happened because the listing agent is advertising his good fortune all over Facebook.
The sellers of 820 Jensen? They were the buyers of Samuel, and they paid full price, $3,599,000.
The frenzy has been making headlines for so long that potential sellers are much more optimistic now. The 2022 Frenzy could look a lot different (i.e., list prices that start too high with sellers expecting even more). Bold added:
Realtor.com’s survey of 2,583 consumers, which was conducted online by HarrisX in September-October 2021, found that:
The majority of prospective sellers plan to list before the end of the year or in early 2022.
Among homeowners who indicated they will enter the market in the next year, 65% expect to within six months, including 19% who have already listed their home.
Compared to the spring (76%), more of today’s prospective sellers (93%) have already taken steps toward listing their home, including working with an agent (28%).
More than one-third of prospective sellers, at 36% each, have researched the value of their home and others in their neighborhood, as well as started making repairs or decluttering.
Consumers’ top reasons for selling reflect the rising influence of more time spent at home during COVID.
Compared to the spring (15%), nearly two-times as many prospective sellers (33%) have realized they want different home features after spending more time at home.
With more sellers having children at home this winter (65%) than in the spring (43%), family considerations are a top reason behind homeowner decisions to enter the market: 37% of prospective sellers say their home no longer meets their family’s needs and 32% want to move closer to friends and family.
The rise in remote work is also a key driver this winter: 23% of sellers are looking for a home office and 19% no longer need to live near their workplace, up from 6% in March.
Sellers have greater expectations of the current market this winter than in the spring.
Over one-third of today’s prospective sellers are eager to take advantage of the current market and think they can make a profit (35%), up from the spring (24%).
When asked how the current market impacts the terms they will ask for, top responses included asking for above what they think their home is currently worth (42%) and asking for a quick close (29%).
Compared to the spring, more of today’s prospective sellers anticipate that buyers will compete in bidding wars, offer above asking, forgo contingencies like inspections and appraisals and more.
Today’s prospective sellers plan to list in relatively affordable price ranges and are potentially more willing to compromise if their expectations aren’t met.
Sellers with homes at the core of the market ($351,000-$750,000) remained the same over March (29%). However, more sellers plan to list in the $500,001-$750,000 price range, which overlaps with recent median listing prices in increasingly popular first-time buyer cities like Riverside, Calif. ($540,000), Austin ($546,000) and Denver ($600,000).
More than three-quarters (77%) of prospective sellers would be willing to accept a lower offer to close quickly versus just over half in March (54%).
Compared to Spring sellers, a higher number of today’s prospective sellers plan to take alternative routes like moving in with family (19%), as well as temporarily renting their home back from the buyer (29%).
“The right time to sell your home is a deeply personal decision that has to be right for you and your family. For homeowners who do feel ready to sell, getting pricing right from the start is key to a fast and successful home sale in any market – take the goldilocks approach,” said Lexie Holbert, Home & Living Expert at Realtor.com.
We are wrapping up our sale in Encinitas Ranch, so I thought it would be a good time to comment more on the unconventional and remarkably transparent open-bidding process I employed to determine the winner.
Because nobody else does open bidding, some may question it’s merits. Here is why it is so much better than the current blind-bidding used throughout the nation:
Every buyer has a fair chance to win.
Buyers know when losing is imminent, and can raise their offer.
Buyers determine their own fate.
Winners are determined promptly – within hours.
In the end, everyone feels like it was a fair and honest selection method.
Compare my method to the features of blind-bidding:
There’s no specific process.
How the winner will be determined is unknown.
Buyers don’t know anything about the competition – if any.
It always drags on for days with no communication.
Losers walk away feeling like something is wrong with realtors and process.
The messy non-transparency of blind-bidding makes you want to go take a shower.
Unlike the black hole that is usually presented by listing agents, I explain rules of engagement in advance to the agents involved – specifically, that they will always have a fair chance to win, which is welcomed!
Will I change the real estate world with my method?
Maybe – if enough sellers list their home with me. I’m available – contact me today and we’ll get started!
Yunnie was in town this week, forecasting the safest bets like everyone else:
Is the economy back to normal? It’s the question everyone wants answered as we navigate through a semi-return to normalcy amid the pandemic, and it’s the question Dr. Lawrence Yun, chief economist of the National Association of REALTORS® (NAR), posed as he opened the Residential Economic Issues & Trends Forum at NAR’s annual REALTOR® Conference & Expo, this year held in-person at the San Diego Convention Center in California.
While several market indicators lagged throughout the pandemic, the housing industry was an outlier, experiencing better than average conditions that have been sustained over the course of the last two years. But how long will it continue?
“All markets are seeing strong conditions and home sales are the best they have been in 15 years,” said Yun. “The housing sector’s success will continue, but I don’t expect next year’s performance to exceed this year’s.”
At the moment, home sales are the standout. And although there should be a slowdown going into 2022, said Yun, they will likely remain above pre-pandemic levels. The outcome, however, will largely depend on the influx of inventory, and as mortgages exit the forbearance program, we should begin seeing additional homes enter the market.
“With more housing inventory to hit the market, the intense multiple offers will start to ease,” Yun said. “Home prices will continue to rise but at a slower pace.”
Affordability has been a real challenge these last two years, with low mortgage rates and high buyer demand providing some balance. But now with rates rising as we come out of the pandemic, fears concerning inflation are surfacing.
Yun predicted that mortgage rates will see an increase of 3.7% in the coming months, a rise he attributes to persistent high inflation. Home prices rose by 12% on average in 2020 and 2021, while inflation rose 3%.
“Rising rents will continue to place upward pressures on inflation,” he said. “Nevertheless, real estate is a great hedge against inflation.”
In terms of a bubble for 2022, the signs are just not there. While home prices have outpriced people’s income overall, said Yun, with value growth matching up to 2005 levels, we don’t have an oversupply situation or risky subprime lending like we did during the last market crash.
An area to watch, which fell behind as a direct result of the pandemic, is the jobs market. According to Yun, since the lockdowns were lifted, 18 million jobs have been created, but we are still behind by 4 million jobs compared to pre-COVID levels.
The increased remote work trend could have a long-term impact on jobs and work preferences, affecting how and where people choose to live.
“We are only in the first innings of work-from-home options,” Yun said. “People have not fully digested the work-from-home-flexibility model yet in determining home size and locational choice.”
One of the greatest singer-songwriters of all-time. Bring on the revolution:
As we watch the children play
Remember, it was me and you
So far away
The things we got out to do
The fond fear of danger
That’s what sets us apart
Couldn’t wait for the real world
To test the strength of the lion’s heart
Cats like me and you
Have got laws
That they adhere to
Laws outside the laws
As laid down
By those we don’t subscribe to
The world is getting stranger
But we’ll never lose heart
We can’t just wait for the old guard to die
Before we can make a new start
Bring on the revolution
Keep the pressure on
I want to die for something
Bring on the revolution
I want to die for something, want to die for something
Bring on the revolution
I want to die for something. (nothing)
Bring on the revolution
Don’t wanna die for nothing. (something, something)
For every freedom fighter
I want to hold on tighter
To the hope and will you gave
You were the brave, you were the brave
And one day, when I hear your children sing
Freedom will ring, Freedom
When we watch the children play
Remember how the privileged classes grew
And from this day, we set out
To undo what won’t undo
Looking for the grand in the minute
Every breath justifies
Every step that we take to remove what the powers that be can’t prove
And the children will understand why
Bring on the revolution
Keep the pressure on
I want to die for something
Bring on the revolution
I want to die for something
Bring on the revolution
Don’t want to die for nothing
Bring on the revolution
I want to die for something
Thanks to just some guy for sending this in – a company that is mass-producing ADUs that start as low as $49,500. Elon Musk has been living in one for a few months so you may have heard of these by now:
We didn’t have the huge price increases in 2001-2002 mostly because there was plenty of inventory to go around. It was more of a sales frenzy, which finally started to slow in 2004 as prices exploded.
I left out the 2007-2011 era:
The inventory dipped to an unprecedented low level in 2021, causing buyers to scramble for those homes that were for sale. We’ve had the most sales since the last frenzy of 2013, and will probably end the year with a total number of sales in the Top Five of All-Time.
Fewer listings make the pursuit more challenging, but this frenzy will continue until prices get high enough to cause sales to slow down. Keep an eye on the number of sales – our leading indicator!
The state has a new rule that any home that is within the Very High Fire Hazard zone must be inspected for compliance when selling. Each fire district has developed their own way to handle the requests, and Carlsbad charges $149 to visit the property and issue their report on the same day.
Here’s how our first inspection went:
Once the report showed some issues, it’s negotiation time because nothing in the contract dictates who is responsible – and the city doesn’t require compliance or does any reinspections.
Donna received the report promptly, and called me and asked what she should do.
But I had already handled it with the buyer’s agent.
I traded the responsibility for the fire hazards for the fridge!
Zillow has been vilified for many reasons, but the one thing they have going for them is the viewer data for each area. If their 2022 projections are based on the number of clicks on listings, then their forecast should be a reasonable reflection of the actual demand – a macro look that no one else has.
The Big Question: if they are so confident about the 2022 appreciation, why did they quit home flipping?
Their first move of suspending the program until next year while digesting their inventory was understandable. But why quit altogether? I think it was due to having billions invested in a high-overhead venture that was new to them – and the rich guys hit the panic button, instead of calling me.
I’m sticking with my 2022 NSDCC Pricing Guess of +15%, and agree with Zillow that most areas could see +20%. But this frenzy is going to come to a screeching halt with no notice (they always do), and it will be when you least expect it.
P.S. ALL of their forecasted value increases here are higher than last month:
NW Carlsbad, 92008:
SE Carlsbad, 92009:
NE Carlsbad, 92010:
SW Carlsbad, 92011:
Carmel Valley, 92130:
Del Mar, 92014:
Encinitas, 92024:
La Jolla, 92037:
Rancho Santa Fe, 92067:
Santaluz/Crosby/4S, 92127:
Coastal Oceanside, 92054:
S. Vista, 92081:
University City, 92122:
The additional last four areas show how overwhelming the demand is for all of north county.
