Higher Rates in Spring?

It’s bad enough that the Fed chairman doesn’t know how his actions will affect the markets. If you didn’t know, wouldn’t you be cautious?

Apparently not for Powell, and it seems likely that the Fed will bump their Fed Funds rate another 3/4% in the first half of 2023 – and maybe do all of it in the first quarter (there are two Fed meetings in 1Q23).

The mortgage companies have to be scrambling with the drastically-reduced volume of loans, so hopefully some of it is already priced in, for their sake. Financed sales are probably down 50% and there aren’t many homeowners wanting to refinance at these higher rates, so lenders will be forced to squeeze their margins just to stay in business.

If they can keep jumbo rates in the 5s, I think we’ll be ok next year.

But we can’t expect to absorb another 3/4% hike by the Fed and not see it affect mortgage rates. It means that today’s rates might be the lowest we see until a few months into the Fed-induced recession….if it happens.  If the recession doesn’t happen or is mild, then we’ll be stuck with those higher rates – and if they hike by 3/4% and just let it ride, today’s rates could be the lowest we see in the next 2-4 years.

Yet they will be wasted because there is nothing to buy – sellers will hold off until the coast is clear.

Powell can’t envision this scenario, even though it should be obvious. When you publicly state that you are trying to reset the the real estate market, potential sellers are going to wait until later to sell.

Will Congress think about revisiting the 2 out of 5 year exemption, passed in 1997?  They should, because that’s what could flood the market with inventory. If you want a reset, you need to do things to INCREASE the supply, not tighten it.

Rant over, thanks for listening.

Realtor Lawsuits

As you may know, there are multiple lawsuits pending that accuse realtors of price fixing, and it ain’t looking good for us. Here is evidence provided in court – thanks Rob:

The Franchisor Defendants provided training to brokers which directed them to offer a 6% commission rate, to be split equally among the Seller-Broker and the Buyer-Broker. The Franchisor Defendants used this 6% commission rate split in educational transaction models.

For example, Re/Max training documents instructed brokers to develop their “Economic Model” and “define the ‘average’ commission that will come from each of their closings,” including an example of a 6% commission rate per transaction, split 50/50 between the Seller-Broker and Buyer-Broker.

Similarly, Keller Williams trained its brokers to develop an “economic model” which provided a “standard 6% commission” rate per transaction, split 50/50 between the Seller-Broker and Buyer-Broker.

Additionally, the HomeServices Defendants circulated training materials from Intero, a California subsidiary, that instructed brokers to “always have 6% written in on ALL listing agreements” and, if they “have to give something,” to “remember they always have to pay [the Buyer-Broker] a minimum of 2.5%.”

Further, the Franchisor Defendants trained brokers to never lower their rates. For example, Re/Max trained brokers to “have the commission typed into the listing agreement” before speaking to Sellers, and to tell Sellers “‘This is what my company charges.’”

Re/Max franchises must “maintain . . . quality,” including avoiding “discounting rates,” or the franchise may be sold.

Keller Williams provided brokers with scripted responses to requests to lower commissions, stating that brokers “require a full 6 percent” to “do the advertising that they do” and that a “discount rate will not provide you with enough exposure to get you top dollar.”

Realogy acknowledged that its franchisees compete with one another, and instructs franchisees to “avoid any action or discussion intended to eliminate or restrict competition” including discussions of “commission structures.” However, Realogy provided training to its franchisees and subsidiaries regarding commissions and trains its agent to tell clients they cannot cut commissions. [Citations removed, and edited for legibility and clarity.]

This probably didn’t help much:

The next court date isn’t until October, and undoubtedly there will be an appeal, so it will be a year or two before the case is done. The likely results will be that sellers won’t be obligated to pay the buyer-agent commissions. Not sure if that will reduce them, or eliminate them, but this will likely be the big commission disruption that has been expected by outsiders.

Zillow Local Predictions

As the national leader of real estate, Zillow is attempting to guide people with data, thankfully. Their Home-Value Index has been decent, and I’ll take the -7% for San Diego….which means our premium areas haven’t felt much decline at all.

Their comment on current conditions isn’t ground-breaking but at least it offers some hope:

Activity in the housing market has slowed to a crawl this winter but the stage is set for a spring thaw: buyers can count on the usual springtime flood of new listings, and less frenzied competition than the last two spring selling seasons in the New Year. But if home shoppers really want to experience some deserted open houses, there’s no time like the present, because this lull won’t last long.

Here are their latest predictions about our local areas, all of which have values that are higher YoY:

NW Carlsbad

SE Carlsbad

NE Carlsbad

SW Carlsbad

Carmel Valley

Del Mar


La Jolla

Rancho Santa Fe

Let’s enjoy our stay in Plateau City – we may be here for a while!

Seniors Are Flush

The #1 reason that the real estate market has been in the doldrums over the last few months is because of the inept response from realtors on how to handle it. There hasn’t been ANY real guidance or advice coming from NAR and other industry leaders on what to do, which gives the appearance that they probably don’t have a clue.

But the least they can do is respond to doomers leaving unsubstantiated teasers on your twitter account.  This guy is begging you to respond, and you just let it go?  Have some guts and reply with something that forwards the conversation…..please!

I’d respond with this:

The baby boomers own most of the homes, and 91% of them aren’t interested in accessing their equity, let alone moving!  There isn’t going to be a flood of boomer liquidations, though I hope it comes some day.  While there might be some minor outbreaks in 2023, for the most part, seniors are going to age in place and chuckle at the real estate mailers that promise instant riches.

2023 Forecasts

The 2023 real estate forecasts keep coming in.

With the radical change in market conditions, the annual statistics are going to look dramatically different from the more recent activity – look at these differences in home sales between La Jolla and Carlsbad.

NSDCC 2022 Annual Sales, and Sales Since Nov 1st:

Data Point
Jan 1-Dec 20
Nov 1-Dec 20
% Difference
Median LP
Median SP
Median DOM
Median SF
Median $/sf
Average $/sf

My guesses?

I’m predicting a +5% change in the current NSDCC median sales price of $1,890,000 which gets us back to almost $2,000,000. Combine the softer pricing with current seller disappointment and the damage has been done – the 2023 local inventory should be so low that it helps to create a floor in pricing.

Here are several more opinions:


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