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One More 2023 Forecast

I was going to ignore one more forecast by a financial services company (what do they know about selling homes?), but this is from the squid, plus Derek mentioned it in the comment section.

None of these forecasts provide any evidence or reasons for their conclusions. They are just guessing, apparently, and merely searching for more eyeballs.

They are probably transfixed on the median sales price, one of the worst tools available.

San Diego County Detached and Attached Homes, Median Sales Price

April: $871,000

December: $757,250

Diff: -13%

There you go – the county’s median sales price has dropped 13% so far.

Do you see that much in the market?

I’ll give you a better example:

NSDCC Detached-Homes, Median Sales Price

March: $2,625,000

December: $1,895,000

Diff: -28%

Do you see houses between La Jolla and Carlsbad selling for 28% less than they did in March? Me neither. NSDCC sales dropped in half (207 vs 101), and the homes that are selling are smaller (average square footage is -13%) and more inferior which explains why the median sales price should be dropping. But nobody mentions the additional variables.

We are being dumbed down by the squid, and others.

Sellers should just wait it out.

Link to Article

Higher-End Pendings Since Jan 1

It’s impressive to see so many high-enders go into escrow this quickly – these are the NSDCC homes listed over $4,000,000 than have gone pending since the first of the year:

Not mentioned above is the listing that hit the MLS on January 3rd, went pending on the fifth, and closed on the 17th – and went back on the market the next day for $620,000 more:

https://www.compass.com/app/listing/4532-rancho-del-mar-trail-san-diego-ca-92130/1227253413756497393

It sold for $5,380,000 in 2019, $5,959,000 in 2014, and $5,650,000 in 2013.

Here are the historical counts:

Year
NSDCC Annual Sales Over $4,000,000
Annual Sales Over $10,000,000
2018
125
15
2019
126
15
2020
235
31
2021
356
32
2022
275
24

Avoiding Capital-Gains Tax

It’s doubtful that any 1031 changes will get passed this year, but they are going to keep knocking. If you are a longtimer who would like to sell your primary residence but don’t want to pay the hefty tax, I recommend doing the double move as the best solution (move temporarily for two years – rent your primary residence then exchange it):

Potential changes to the 1031 exchange

The President’s 2023 budget currently includes some proposed tax changes to the 1031 exchange benefit. The proposed changes, if passed, could limit 1031 exchanges to an annual maximum deferral of $500,000 per person. This means that if you sold a rental property for a $800,000 taxable gain, a 1031 exchange may only help you defer up to $500,000 of that gain and the remaining $300,000 could be taxable in the current year.

To be fair, there is no indication that this section in the proposed budget will pass and become law anytime soon. But even outside of the potential law change, there are times when a 1031 exchange is not the most ideal solution when it comes to tax deferral. With the hot real estate market, it can sometimes be difficult to identify and close on properties within the timeline and monetary restrictions of a 1031 exchange. In addition, investors may be interested in keeping some of the cash from the sale and not roll all of it into another property. Or if you are no longer interested in being a landlord and prefer to be a passive investor, then a traditional 1031 exchange may not be as appealing to you either.

So, this brings up the question:

Are there alternative ways to offset taxable gain outside of using a 1031 exchange?

If you have a healthy gain built up in your real estate, here are some other strategies that can potentially help you to minimize the tax bite.

https://www.american-apartment-owners-association.org/uncategorized/how-to-sell-real-estate-and-pay-little-to-no-taxes/

With The Optimism

I’m just happy to see someone – anyone – step up to the microphone and discuss relevant facts about the real estate market.  To also have my boss be so enthusiastic about the company and its future is an added bonus. Plus, our stock is up 50% (from $2 to $3!):

Inventory Watch

The graph above is boring this time of year, so I added my predictions in the lighter colors.  I’m figuring that the Fed will be relentless and the higher rates in the second half of the year will cause the pricing gap between sellers and buyers to be tougher to bridge.

It’s because there will be some decent sales in April and May that keep sellers optimistic that the perfect buyers are coming tomorrow….or next week….or well, heck, let’s just wait until 2024.

Here is the graph from last year:

For our contest participants, there are 120 new listings this month – and we’ve had 36 new listings every week for the last three weeks. It means our contest should wind up around 170-180 listings?

(more…)

“Price It Right”

KCM is a fine group of people who supply realtors with content for them to publish in their newsletters, social media, etc. They provide an invaluable service for the agents who’d rather just pay for content than create it themselves. It tends to be a softer version of what I do here at bubbleinfo.com because most realtors aren’t interested in a deep dive – they are fine with the lightweight stuff.

But because I said last week that “price it right” is code for listing your home for the realtor’s price, I thought I should comment on the above.

UNDERPRICED – The fear of underpricing your home and leaving money on the table is real….if you list with an agent who just wants to take the first offer and go back to sleep.  When you list your home with an agent like me and the market responds favorably, I will let EVERY buyer compete for your home and then pit them against one another to drive the price up.

OVERPRICED – Realtors want to be the hero and are just as likely to overprice a home as a seller. This is especially true when several agents are competing for the listing – it is irresistible for sellers to strongly consider, and end up hiring, the agent who quotes the highest price.

The worst part about overpricing is not reacting quick enough.  Once a home is on the open market, both the sellers and the listing agent wants to believe that if they just wait a little longer, the magical perfect couple with 2.2 kids will come along. But today’s buyers are watching the market time of each listing very closely, and making up things in their head about what it means – and none of that is good for sellers.

MARKET VALUE – It would be a miracle if a seller or agent could guess the market value.  The conditions are changing every day in every area – and NOBODY knows what a buyer will pay until a home is on the open market. Besides, there is a slush factor of 5% on every house, based on it’s unique location, upgrades and condition, ease of showing, and the competence of the listing agent.

The best thing any seller could do is to hire a listing agent who is an expert in handling what to do if the market conditions cause the home to be underpriced OR overpriced – because every agent can handle a listing that gets lucky and miraculously happens to be perfectly priced.

Carlsbad Train Redevelopment

As a way to “raise additional revenue and to increase ridership on trains and buses”, the train people started looking for developers last April – their solutions:

Under agreements the board approved Thursday, West Village Partners will build 184 market-rate apartments or townhouses and 50 affordable units on 14.37 acres the transit district owns at the downtown Carlsbad Village Station on State Street.

Affordable housing will make up 27 percent of the Village residential units, well above the city’s minimum requirement of 15 percent. The Village project also will include 17,000 square feet of ground floor retail space, 435 parking spaces, a 110-room boutique hotel, a senior living facility, and 80,000 square feet of office space, according to preliminary plans.

“This location is primed for redevelopment with only a short walk to restaurants, retail and local beaches,” a district staffer said.

The Village station sees an average of 800 patrons daily, with about 600 of those riding the Coaster and 200 using Breeze buses. The Poinsettia station, on Avenida Encinas near Poinsettia Lane in southwest Carlsbad, averages 400 Coaster riders and about 40 bus riders daily.

Raintree Partners was selected for the 11.47-acre Poinsettia Station, which will have 146 market-rate dwellings and 31 affordable units, or 17 percent of the residences. Almost 5 acres of the site will remain undeveloped under a permanent conservation easement.

Both exclusive negotiating agreements are valid for 2.5 years. During that time, the developers will work with district, city and regional officials on final designs, permits, and other issues. Construction is expected to start in 2025 at the Village station and in 2027 at the Poinsettia station.

Just another 234 apartments, a 110-room hotel, senior facility, and ~100 offices in downtown Carlsbad.  You think it’s crowded now? There won’t be any room left for the tourists!

Link to UT Article

Robot-Made Homes

For those who wouldn’t mind moving to Arizona if you could find a brand-new home for less than $300,000, you should check out this new-home tract in Casa Grande.

It’s called part of the Phoenix Metro area, but if you’re going to central Pho-town, you better pack a lunch. P.S. They need to come up with a better name than ‘printed’ homes – it sounds like you are making them out of paper, not concrete poured by a ‘full-stack automated robotic assembly’.

https://www.centurycommunities.com/landing-pages/printed-homes

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