Zillow Price Changes
San Diego’s YoY gain of 9.4% is third highest behind San Jose and Hartford, and our +55.4% since March, 2020 is #1 among the higher-end markets!
Single Agency Is Upon Us
Due to expected scrutiny from the DOJ, the California Association of Realtors has abandoned buyers, and the buyer-agents. If a listing agent wants to include paying an incentive to buyer-agents, not only do they have to convince a seller that it’s a good idea, but then they have to use an optional form and NEVER call it a commission. Beginning on July 24th:
The Residential Listing Agreement will no longer provide for any offer of compensation from the listing broker to the buyer’s broker. C.A.R. confirmed that they will no longer facilitate broker-to-broker compensation agreements. The Cooperating Broker Compensation Agreement is being retired and will no longer be part of the C.A.R. forms library; the same applies to the Anticipated Broker Compensation Disclosure. The message is clear: C.A.R. will not produce/provide any forms related to broker-to-broker compensation.
The newly revised RLA will only include the agreement between the seller and the listing broker as it relates to compensation. The option for the listing broker to charge an additional fee if the buyer comes to the table unrepresented will remain. This option is available to account for the additional work that may be required of the listing agent when buyers elect to self represent.
In transactions where a buyer is unrepresented it is imperative that the listing agent not act as a fiduciary. The Buyer Non Agency Agreement form must be provided to and signed by the buyer. It is important that listing agents are careful with their words and actions, so as not to imply a fiduciary relationship with an unrepresented buyer.
As it relates to concessions that a seller may wish to offer to a buyer, the listing agreement will not specifically reference such offers. However the Multiple Listing Service Addendum includes the concession language. Paragraph five of “MLSA” will inform the seller as to the option of offering a concession to the buyer. The default will indicate that there are no concessions, however, there will be a checkbox in paragraph 5B2 wherein the seller may agree to consider a concession to the buyer to be used toward the buyer’s closing cost. No amount, either flat fee or percentage, shall be stated without the express written consent of the seller.
It is important to remember that concessions may not be designated for commission rather they are a seller to buyer offer extended solely to assist a buyer with closing costs which may include a variety of fees including broker compensation.
First, the National Association of Realtors botched the defense of buyer agency – allowing the world to believe there has been a conspiracy to inflate commissions – which could not be further from the truth. Now the California Association of Realtors has caved to the implied DOJ threat and revised all their forms to cover themselves, instead of fighting for buyers and buyer-agents. They didn’t even try to fight it – they just caved and revised their forms instead and expect agents to adjust.
In addition, the new listing agreement won’t mention any buyer-agent compensation, but it has a paragraph for the listing agent to include more pay for handling the unrepresented buyer without providing any fiduciary duty. The form is promoting single agency!
This is a disaster. Buyer-agents will be expected to convince buyers that they need to commit in writing to paying the buyer on-agent commission before buyers even find a house. They don’t think they need help finding a house – they have access to Zillow.
They will go direct to the listing agent instead.
SINGLE AGENCY IS UPON US – IT IS HERE, STARTING AUGUST 17TH AT THE LATEST.
It will be the worst thing to happen to real estate ever, yet outsiders will claim that they got commissions reduced so it worked and everything is fine.
Sales will plummet the rest of the year – I guarantee it – but we won’t know if it’s due to buyers waiting it out and/or not knowing what to do, the insane political circus that will only get worse, or if home prices and rates are too high. But that is a wicked triple threat!
Does It Take Longer To Sell?
I was on a national sales call yesterday where agents from coast-to-coast were complaining about how bad their market is currently. I kept thinking, “It’s nothing price won’t fix!”
Instead, the common fallacy that ‘it just takes longer to sell a home‘ will prevail.
It’s been a belief among sellers and agents for decades. Could it be wrong? Yes.
Of the 21 NSDCC closings over the last 30 days that sold for $5,000,000+, the median time that it took to find the buyer was 34 days. Of the 17 homes in escrow today that are priced over $5 million, the median market time is 31 days.
Why does the belief keep lingering? It’s because it’s easier to digest than “Your price is wrong”.
How does the market really work? The house that sells today is the one that is the best deal for sale.
All a seller has to do is price their home to be the best deal on the market. They can do it from the beginning and get into escrow in the first week or two, or they can wait for weeks or months before getting their price right. Some get lucky when strong demand clears out all the better deals in a hurry, causing the over-priced-turkey to look competitive quickly. It’s just dumb luck though, rather than a deliberate strategy, because it can go the other way too when newer listings at lower prices leave the OPT high and dry.
This is the type of market where some listings will never sell. They price too high from the beginning, never adjust, and they just help to sell the better-priced listings down the street or around the corner. The market can just fade away, or like we will see in 2025, a flood of new inventory can set a new standard for pricing in the neighborhood.
Some days there is enough demand that the best few deals will all sell at once. A surge like that usually happens when there aren’t other distractions like 4-day weekends, Easter, graduations, vacations, etc. We’re due for a wave of demand here over the next 2-3 weeks. But will any of the current homes for sale be considered a good enough deal? it can happen that NONE of the active listings look like deals – especially this time of year when everything is so picked over.
All that a seller has to do is price the home so it is the best deal available, and it will be the next to sell.
We started with an aspirational price here (my recommended LP was $2,200,000). But we adjusted quickly, and once the price got down to $2,250,000, we found the buyer within two weeks (more on this one later):
Anyone can do it!
Will Home Prices Drop?
Here are four tepid responses to the question on whether home prices will drop this summer:
https://www.cbsnews.com/news/will-home-prices-finally-drop-this-summer-heres-what-experts-say/
The lame last paragraph sums it up:
The bottom line
The real estate market seems unlikely to experience significant price decreases nationally this summer, but it’s possible that in specific local markets, there will be dips. Still, until conditions change, like with more housing inventory, it could be tough for prices to decrease. Even then, it could take time for pent-up demand to temper, but it’s possible that overall affordability at least increases, such as if mortgage rates drop.
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You can’t come to much of a conclusion about summer pricing in July, but let’s check the data! How we measure the pricing has been strong all year between La Jolla and Carlsbad:
The world is too crazy for something not to give. My opinion of the pricing trend above is that the higher-priced superior homes are gaining in market share (who wants to buy a dump in this environment?) and it’s providing a head-fake that disguises the truth.
What’s going to give is the number of sales – we may not see 152 monthly sales the rest of 2024.
The commission debacle will be discouraging to the marketplace, mortgage rates aren’t going down enough to make a difference, and the political firestorm will get worse. The only way a buyer will ignore all of that and keep buying is if they see the perfect home.
There will be some nice deals for those who are willing to dig them out.
But I think by the screwy ways we measure it, the NSDCC pricing will look fairly strong, but the best precursor of the future – the number of sales – will be dropping the rest of the year, which will create even more softness. Buyers won’t feel confident about the price they are paying unless they have some decent comps to rely on, and those will be few and far between.
Inventory Months Supply
It’s considered normal for a market to have six months’ worth of inventory, where the number of homes for sale this month equals 6x the number of sales last month.
Our market has done better over the last few years, and three months’ worth seems normal now:
Here are the interactive graphs for the last five years, and the last sixteen years!
While we’re at it, here are the graphs for the median sales price per square footage. Carmel Valley (92130) is up 84%, and both Carlsbad and Encinitas have both more than doubled in the last five years. Normal?
The Rest of 2024
Above is what’s coming for the next six months, and it’s going to be a slugfest as buyers and sellers grapple with price. The relation of sales price to the days on market will be exact.
How much should buyers offer as we cruise into lowball season 2H24? The price that makes you cringe, relative to how bad you want it. If wifey says buy it, then pull out all the stops.
June 30 is the peak of the year, so we have some visibility.
Here’s Mike’s video for all the details: https://youtu.be/CW9V-ELOlxI
More Inventory Affecting Sales
Earlier this year, I speculated that the market could endure – and probably snap up – additional inventory, as compared to last year. The 2023 inventory was like the Mohave Desert!
It seemed that 10% to 15% more would be easily digested, and maybe even +20% or +25%.
Bill’s new stats out today suggest how much, is too much:
Local Trends
None of the pricing metrics are great but at least they demonstrate the trends over time. These graphs above are showing the latest data, including last month, and it’s all fairly positive….for now. With the extra inventory, buyers aren’t going to pay crazy money unless they see the perfect house. Sellers aren’t going to give them away though, so the trend for the rest of 2024 should be flat.
These graphs are interactive so scroll over to see the numbers.
There is extra unsold inventory but nobody is going to call this a flood, especially vs. 2019:
Sales will suffer as long as rates and prices are high. Have we gotten used to having fewer sales yet? The trend is going to last a while – probably for years to come:
Populations from the 2020 Census:
Carlsbad: 114,746
Encinitas: 62,007
Carmel Valley, 92130: 61,595
Rancho Santa Fe: 9,344
Zillow Lowers Forecasts
Zillow has every reason to be the nation’s real estate cheerleader since they derive the bulk of their income from realtors. They had been predicting 3% to 6% appreciation locally this year….at least up until two weeks ago.
Something has changed:
Carlsbad NW – 92008
Carlsbad SE – 92009
Carlsbad NE – 92010
Carlsbad SW – 92011
Carmel Valley – 92130
Del Mar – 92014
Encinitas – 92024
La Jolla – 92037
Carmel Valley out in front with a +2% over the next year? Yikes!
It means they think that everywhere else will be flat, at best.
All-Cash Market
How does our market keep trucking along with sky-high prices AND mortgage rates 2x higher than they were three years ago? How does pricing levitate when money is so much more expensive – shouldn’t prices adjust downward?
We know that the generational wealth transfer of $70 to $80 trillion dollars is underway, and this is where some of it is showing up – purchases of quality real estate.
There have been 115 closings between La Jolla and Carlsbad this month, and 47% of them were all-cash. It’s the highest percentage we’ve seen so far, and it’s likely to continue.
Those who aren’t paying all-cash have big down payments to help cushion the higher rates. Payment too high? Put more down!
For the downsizers, it’s the best way to justify giving up the 3% mortgage too – sell the long-time family estate and buy the next one all-cash.
Last month’s 200 sales will probably be the highest monthly count we’ll see in 2024, so the market will have to endure less volume, and more listings sitting around unsold.
It means that the percentage of all-cash buys will probably be increasing. I think it could get up to 66% by the end of the year!
Jim Klinge
Klinge Realty Group
Broker-Associate, Compass
Are you looking for an experienced agent to help you buy or sell a home?
Contact Jim the Realtor!
- 682 S. Coast Hwy 101, Suite #110
Encinitas, CA 92024 - (858) 997-3801 call or text
- klingerealty@gmail.com
CA DRE #01527365, CA DRE #00873197
