This is how Plateau City looks on paper when the YoY change nears zero in 2024-25 (above). From Fannie Mae – which, like most forecasts, is guessing that price increases will slow to about half of what they were last year:
When it comes to housing, the report says, “The past year’s demand surge was driven by a combination of factors, low mortgage rates, down payments supported by stimulus checks and other savings, and a pandemic-driven reshuffling of preferences and move timing on the part of many households, all of which are expected to wane. Furthermore, the recent rapid house price appreciation and rising mortgage rates will lead to growing affordability constraints, dragging on home sales, but also likely limiting further price appreciation to a more sustainable pace.”
The economists don’t expect a soft year for home sales, existing sales will slow by only 3.2 percent this year, to the second fastest annual pace since 2006. But they do expect extremely limited inventories to produce “hypercompetitive bidding wars” in which potential homebuyers are priced out of the market.
Rapid price growth will eclipse wage gains and waning stimulus checks and built-up savings, will make it increasingly difficult for many potential buyers. Mortgage-backed security issuance data continues to show the average back-end debt-to-income (DTI) ratios of borrowers increasing, indicating growing affordability pressures. There appears to be ample prospective homebuyers currently, but their volume will likely lessen as the year unfolds.
Changes to the sales forecast are minimal. Total home sales are expected to fall 1.2 percent, an improvement from last month’s -1.4 percent forecast. The 2023 slowdown has been revised from -3.8 percent to -3.6 percent.
Worsening affordability is still expected to dampen home price growth, but Fannie Mae expects prices growth to slow to 7.6 percent from the probable 17.3 percent in 2021. This is still considerably higher than the average pace of 5.4 from 2012 to 2019. Price growth will slow further to 3.3 percent in 2023. The current estimates are higher than the December forecasts of 7.4 and 2.9 percent.
One of the primary questions? How are the kids going to be able to buy a home?
If prices just stay at this level, it will be near impossible for local kids to save the down payment and afford the monthly nut when starter homes are selling for around $1,200,000.
Plus, there is the incentive now for seniors to hang onto the family homestead and then let one of the kids live there so they can keep the old property-tax basis. For kids who never left, they will live in the same home their whole life!
But if you have more than one kid, then what? It used to mean selling the family homestead and dividing up the loot, but today’s heirs probably own their current home too. Tomorrow’s heirs? Not so sure, which means more homes will stay in the family when the parents die, and fewer homes will be coming to market.
The tight inventory could get worse.
Because the majority of homes being purchased today are ‘forever’ homes and will be owner-occupied for generations, it narrows down the list of probable sellers to those who have owned their home for longer than 12 years, AND are selling for one of the Big Three reasons (death, divorce, and job transfer).
And the baby boomers are going to decide the outcome.
Baby boomers are:
Still relatively young, and living longer than ever.
Aging-in-Place, rather than pay the imposing tax penalty for selling before you die.
Hoping a kid will inherit the house and live in it.
There may be a boomer-liquidation surge in the future, but it will be at least 5-10 years before it could happen on a larger scale. In the meantime, seniors will live comfortably in their old family homesteads, and probably be joined by as many kids as can fit.
The seniors who do move will be from these categories:
Those buying a one-story house.
Those buying a multi-gen house so kids can help with senior care.
Those moving to assisted living.
Those who will rent, at least for now.
Some may have to move out-of-town, but at least their pockets will be full of cash.
Once they take care of themselves, boomers are going to focus on their kids – many of whom are still hanging around the house!
It means the entry-level markets will be full of younger buyers backed by affluent parents and grandparents – and they are loaded. There is also the multi-gen buyers who are looking for larger homes that will suit the whole family – or they will buy the one-story home for the folks, and then leave the old house for the kids.
There really should be an extra premium available for those home types when they sell, given the demand. If you are going to sell one of those (entry-level, multi-gen, or one-story), then list your home with me, and I’ll make sure you get all you deserve!
We received the five offers and completed the highest-and-best round with all.
On the way over to the sellers’ house to discuss the results with them in person, Offer #6 arrives by email – and it’s all-cash with an escalation clause, which makes it a real contender. We have a horse race now!
Most agents would jump on the offer with the escalation clause, and call it a day.
But I had already discussed with agent of Offer #1 that escalation clauses aren’t fair to the losers – because every buyer at this price point would gladly pay an extra $5,000 to $10,000 extra to win.
With the sellers’ permission, I tempted #1 to raise their offer again – for the third time – after telling them about the cash offer. After a brief deliberation, they declined.
The cash offer was completing a 1031 exchange, and their relinquished property had already closed escrow – which means that they were in their 45-day identification period. Buyers in that position are feeling the pressure, and they have to buy something. If they don’t identify up to three properties within the 45 days that they might purchase over the next four months (they have six months from their escrow close date), then they will be forced pay capital-gains tax on that previous rental property.
Time is of the essence!
It is crucial for me to ‘read the room’. I’ve exhausted the other buyers #1-5, and the sellers are ready to sell their house. How much farther can I push it with the cash offer?
Rather than go back and forth with my auction format, we decided to just counter $50,000 higher, at $2,150,000, to the cash offer, instead of using the escalation clause. I called it in to their agent and told him that if that was acceptable, we’d send him a signed counter right away.
But then 90 minutes went by with no response.
We have an acceptable offer on the table with owner-occupants (those are more likely to close) and a good agent. The sellers had baked cookies and swapped stories with us for over an hour as we analyzed the different angles, and it was time to make the deal. During that time, the sellers got more comfortable with foregoing the extra $50,000 and opt for the sale that’s more likely to close.
I told the agent of the cash-offer that we were taking the other deal.
It happens regularly that sales are won and lost in hours, if not minutes. No lollygagging!
“It’s alright,” Jeffrey Goddard said to a group of neighbors on the street as officers escorted him to a patrol car in handcuffs. “I’ll be back.”
Days earlier, neighbors said Goddard told them he deserves to live in the Clairemont house where he’d spent nearly every night for more than a week.
Thing is, he didn’t buy the house and he isn’t renting it either.
Goddard told officers he saw it on the news last month, after carbon monoxide poisoning sent the 84-year-old homeowner to the hospital. The homeowner’s adult daughter was found inside the home dead.
Soon after, neighbors tell NBC 7 they watched Goddard change the locks, replace the door and even receive Amazon packages.
Every other agent would have recommended that their seller sign the $1,950,000, which is a whopping $155,000 over list price. Who wouldn’t be happy with that?
My thought? We have five strong offers over list. At least one buyer will probably go higher.
Because I know how to properly handle a bidding war, we gave EVERY buyer a chance to submit their highest-and-best offer (unlike the Redfin agent who told me she only counters the serious offers after I submitted an offer that was $250,000 over list).
Guess who won.
That’s right, the $1,850,000 buyer won it with their highest-and-best offer of $2,100,000:
The buyers who want to spend $1,700,000 to $2,000,000 in Carlsbad today only have four choices:
Alba has an odd backyard, Merganser backs to Batiquitos Dr. and is next to the gate, and Packard is a single-story that should be going higher in price.
For those who need a house, it is perilous.
There will be others, but will the supply EVER get to healthy levels again? Buyers are worried that it won’t.
We have three more showings today and then almost 200 people will have seen the house since Friday! Next we will engage in open bidding by phone with all interested parties and let the MARKET decide the winner, not the listing agent (which is how everyone else does it).
Here’s a buyer-agent strategy that can be really effective, especially with weaker listing agents:
