The N.A.R. Chief Economist Lawrence Yun was befuddled in his previous press release, and now this:
“Home prices keep chugging along at a pace that is not sustainable in the long run,” Yun said. “Current demand levels indicate sales should be stronger, but it’s clear some would-be buyers are having to delay or postpone their home search because low supply is leading to worsening affordability conditions.”
Yunnie is an old-fashioned guy who relies on historical norms. But more people are probably thinking the same – this run-up in pricing isn’t sustainable.
Or is it?
We are in an environment where we are peppered with lottery ads daily. People dream about getting rich quick, and selling your house is about the closest most people get – and it’s not enough just to sell your house for an all-time record price. Instead, every seller wants more than the last guy got.
Won’t there be a point where we run out of ready, willing, and able buyers? Yes, but unless a seller NEEDS to move, they aren’t going to budge. They aren’t going to lower their price until they are absolutely convinced that they must – and it’s more likely that sellers will withdraw their listing and try again later.
If sellers do need a solution, there are more alternatives than ever:
Once we reach the point where the market stalls, it will stagnate for years until sellers and realtors realize they must adjust their price to sell. Realtors themselves struggle to accept the rules of supply and demand – they just keep hanging onto their listing until the market catches up.
Rising rates, economic downturns, political drama, world calamities – none will be as influential as a seller’s ego when it comes to adjusting on price.
Watch the number of sales – they are the precursor. If/when sales start to decline, all it means is that fewer sellers are willing to adjust enough on price.
Will their reason for moving be powerful enough to not seek an alternative, and sell for what the market will bear? It’s doubtful, and as a result, a market that is this hot will take time to re-calibrate – if it does at all.
In the article, she says that nationally we have the fewest homes for sale than at any time in the last 18 years. But are they just selling faster, which would give the appearance of low inventory? If we have a similar number of houses being listed and they are selling faster, I wouldn’t consider that a drought, let alone a severe drought.
First, let’s compare the total supply and number of closed sales in 2017 to previous years – these are the numbers from January 1st to March 15th:
NSDCC (La Jolla to Carlsbad)
# of New Listings
# of Solds
This year’s number of new listings is 7% below the average of the last four years, but I wouldn’t call that a drought. If I watered my grass 7% less, it wouldn’t die. Besides, 40% of all listings don’t sell, so maybe the fewer listings just means fewer OPTs? The number of closed sales is much lower than previous years, but better than 2016.
How about the rest of the county?
San Diego County
# of New Listings
# of Solds
There are 10% fewer listings this year, compared to the average of the previous four years, but sales are HIGHER than any of the last three years. There isn’t a perfect relationship between listings and sales, because some of the closed sales were listed before January 1st. But the trend looks fine.
I don’t keep a record of the number of houses that are pending, but a couple of months ago we were around 300 in NSDCC (between La Jolla and Carlsbad).
Here is today’s count:
# of Active Listings
# of Pendings
San Diego County
The reason we have a record-low number of homes for sale is because they are selling so fast. Severe drought isn’t the right adjective – can we call it scorching hot? Half of the pendings found a buyer in 15 days!
With half of the upcoming closed sales finding their buyer that fast, it means they probably paid the seller’s price, or close. The other half are sellers who are willing to wait until they get their price! It means the pricing trend should continue upward.
How long can the hot market continue? It’s up to the sellers. If they are willing to sell for what the market will bear, we’ll keep rolling because there are lots of people who want to buy a house – it’s just a matter of price.
If the auction format gets more popular, it would solve everything.
The price surge has locked many first time buyers out of the market. But it has been a boon to owners, many of whom regained equity after being underwater on their mortgages following the Great Recession crash.
The gains have been seen across Southern California, though inland areas remain further behind. In October, the median price — the point where half of homes sold for more and half for less — rose in all six counties compared to a year earlier, CoreLogic said.
In Los Angeles County, the median jumped 7.4% to $525,000; in Orange, 9% to $655,000; in Ventura, 7% to $535,000; in San Bernardino, 9.6% to $285,000; in Riverside, 8.1% to $335,000; and in San Diego,11.1% to $507,500.
The sustained price gains have real estate agents, buyers and sellers wondering how long the hot market can continue.
Most economists say price increases should be smaller next year as families struggle to make larger offers on homes. Wage growth simply isn’t keeping up with the rising cost of housing, they say.
Though he’s just one guy, we called him because he has the dubious distinction of having predicted the 2008 market crash. His colleagues used to call him “Dr. Doom.”
He says that the money flooding the Bay Area isn’t built on speculation like the last boom.
“These are people with real money, with real incomes,” he says. “They have enough money to live in whatever cities and neighborhoods they want, so if there’s not enough high-end housing, they’ll just gentrify lower-income neighborhoods.”
And while the growth may slow, it won’t stop, Thornberg predicts. He believes the solution is a matter of adding to the housing supply. As more units come on the market, prices become more reasonable for everybody, he says.
But others argue that without policies making sure some of the housing is affordable, it’s not going to make any difference for middle-class and poor people.
“That’s completely wrong,” Thornberg says. “The evidence tends to suggest that for the most part, when you start layering rule after rule after rule on real estate developers, ultimately you end up simply hurting the supply worse.”
So what should Eaton do?
Thornberg’s answer? Buy now. Anything you can get.
While the whole NSDCC market feels like it is cooking, the inventory shortage and resulting dash to tie up properties is restricted to the lower end of each area.
We’ve considered a 2:1 ratio of active listings to pendings to be a fairly normal market, and the higher-end of local markets are in that range – or worse. But the lower-ends have been scorching hot:
Detached-Home Listings, Under/Over $1,000,000
Town or Area
Under $1M Actives/Pend+Cont
Over $1M Actives/Pend+Cont
It supports the notion that there isn’t much move-up buying, at least not up into our higher-end regions. Most sellers fall into three categories: those leaving the county, estates that are liquidating, and the exhausted over-encumbered folks. It is similar in the ultra-high end markets too:
Detached-Home Listings, Under/Over $2,000,000
Town or Area
Under $2M Actives/Pend+Cont
Over $2M Actives/Pend+Cont
The contingents make up about 25% of the Pend+Cont totals, and would make those categories appear slightly bloated, but the short-sales are more likely to close now than ever – because buyers are willing to hang around longer.
Want to purchase a house around North SD County’s coastal region for less than $1,000,000? You can expect a very challenging competition for the good buys. Want to spend more than $2,000,000? You’re in the driver’s seat!
The overall SD County market looks hot with 52% of new listings finding a buyer within 2-4 weeks, but how about the tonier North SD County coastal region? The year-to-date numbers look similar to the county’s stats we saw in the last post, rather ho-hum:
NSDCC Detached-Home Sales, Jan 1 – Oct 13
# of Sales
Sales are up 19% year-over-year, but average pricing and days-on-market aren’t over-heating.
Indeed, it is a bit calmer around NSDCC:
NSDCC Detached-Homes Listed Between Sept. 15-30
Total Number of NSDCC Detached-Homes Listed Between Sept 15-30: 135
Number Already Marked Contingent, Pending, or Sold: 46
Only a third (34%) of new listings have found a buyer in NSDCC, compared to just over half (52%) throughout the county.
People hang onto the notion that it takes longer to sell the more-expensive homes, and while that is a statistical fact, we shouldn’t just accept it as normal when everything else has changed.
Reasons Why It Shouldn’t Take Longer To Sell More-Expensive Homes
The same internet tools enable all participants to determine the value accurately.
People of means should have more resources/equity = fewer distressed sales.
Better agents work the higher-end markets.
But how many NSDCC sellers price their home to sell quickly?
There are other reasons to price ’em to sell – the hassle of keeping the house immaculate, the inconvenience of showings 7 days a week – many with short notice, and the desire to move on. But here are the NSDCC detached-home stats on how close sellers got to their list price this year, compared to how long they were on the market:
# of Sales
The Sales Price-to-List Price ratio is figured from the current LP at time the listing was marked active – it doesn’t include any price reductions in the interim. If you have been on the market 60+ days, you probably had to lower the price to re-ignite urgency because after 14 days, the showings dry up. The 95% above is probably more like 90% of the original list price, and maybe lower.
Buyers use the days-on-market stat like a club, and want to penalize sellers for not pricing accurately. They will pay all the money in the first week or two, but after that it is a slippery slope. It is more efficient for sellers to price accurately from the beginning.
Sellers will find out how hungry buyers are for new meat – there is a rush of showings during the first 1-2 weeks, then they stop on a dime, and reducing the price is the only fix.
I don’t mind taking them a little high to test the market, as long as we adjust as needed. My closed non-REO listings this year have averaged 50 DOM, and 97% SP/LP, and removing a short sale and two paid-off homes, they improve to 14 DOM and 99% SP/LP.
While it seems like the local market has been cooking this year, when you look at the basic stats it’s hard to be impressed. Here are SD County detached-home sales for Jan 1 to Oct 14th:
# of Sales
Sales are up 15% this year, but the avg. cost-per-sf and days-on-market are similar – ho-hum, right?
The reason it feels so hot is because of the speed in which the attractively-priced new listings are finding a buyer. There isn’t a way to research previous time periods, but this looks spectacular compared to the 72 DOM average:
SD County Detached-Homes Listed Between Sept. 15-30:
Total Number of Houses Listed between Sept. 15-30: 1,263
Number Already Marked Contingent, Pending, or Sold: 655
More than half (52%) of those new listings have already found a buyer! It shows how efficient the market is when more than half of the sellers can get the price right in the first 2-4 weeks.
Mortgage rates moved up significantly last week. Will rates continue to rise? Expect mortgage rates to go up this week closer to 3.1%. Freddie Mac will release the 30-year fixed mortgage rate tomorrow morning. Stay tuned.
Jim the Realtor is legit - I interviewed three brokers; he said list price should be $100,000 higher than the other two brokers; listed it with him and had all cash (no financing) offer in two days, five day contingency period, closing in two weeks - and it closed at his recommended list price. I could not recommend anyone more than I recommend Jim the Realtor.
When we moved to San Diego in 2005 we rented a big house on Mt. Soledad (La Jolla) with 180 degree ocean views for the same payment as a mortgage on a dump in Chula Vista. Clearly something was wrong. Yet, the media was full of the usual happy-talk nonsense, so I was glad to find Jim's blog. I've followed his honest assessments and data since.
We decided to sell and move to AZ at Thanksgiving. Dec. 1st we met with Jim to sell our home. We closed today (29 days later). Jim orchestrated a feeding frenzy -- we had 25 showings in 2-1/2 days, multiple offers, and sold for well over asking price. I'd say he earned his commission! We have owned and sold homes in 5 different States always using experienced, productive, full-time realtors. Jim outshines them all.
You don't decide to sell and close 29 days later over Christmas (with COVID lockdown) without some miracles. Donna was amazing at performing lots of those miracles and ensuring that everything was done right and on time. They are a terrific team with a very responsive and professional network.
Where do we begin..2020 has been a year for everyone. When COVID hit and shut down both my husband and my businesses, we were left with a mortgage and very little income coming in. We were stressed, scared and felt stuck. We made the hard decision to sell our home and move out of state. We contacted the Klinges' and spent a good hour going over what we hoped we could accomplish. Jim and Donna came over with comps in hand and suggestions on improvements to get our house ready for the market. It was overwhelming to think about, but Donna was there and one step ahead in every scenario. Basically we just approved what they suggested and Donna handled literally everything. We placed our house on the market and within the first day we had multiple offers well above asking price! We couldn't believe it. We were overjoyed! Jim countered the offers to weed through them, and everyone came back with way more. It was amazing, and we are ?? sure it was because of the staging and repairs the Klinges suggested we do.
Due to unforeseen dishonesty from the buyers lender, we hit a big hurdle when trying to close. We had already moved out of state and were shocked when three days before closing the lender dropped a bombshell on the buyers and us. However, Jim and Donna handled it like veterans, not afraid to play hard ball and represent their clients. After a few phone calls with us, and several between Donna and the lender, they had a plan B-Z to make sure we were taken care of. In the end we closed with even more money than we ever thought possible and with very little work from us. The Klinges handled this entire "2020" worthy event with the utmost professionalism and did everything in their power to not only make this as smooth as possible for us, but we also walked away with more money from the sale of the house than we ever hoped for. After working with Jim and Donna, you don't ever use anyone else. They are hands down the best team to represent you in any scenario.
Working with Klinge Realty Group was a great experience! They are very responsive, professional and knowledgable about the real estate market! I would definitely recommend Klinge Realty Group.
Jim and Donna Klinge made the sale of our condo extraordinarily easy. They know the market and gave us sound advice backed by details and very considerable experience, reflected both in the initial pricing and subsequent negotiations. They work together as a team and are always available to talk. We had a few challenges with our property and they were able to coordinate the resolution to everything, including items that I would not think would ordinarily be their responsibility to handle. They made the whole process effortless on our part. They are folks with high integrity and we cannot recommend them highly enough.
Review for Member: Donna Klinge
I cannot believe there are no reviews of Donna yet, ugh!! She is the secret sauce of the Jim Klinge/Donna Klinge combo! I will touch on Jim here, but Donna is why I'm so totally loyal to these two (no offense to Jim :)).
I consider myself a rather savvy buyer/seller. I've bought/sold 7 times in about 15 years. On the buy side, Jim is the PERFECT combo of: completely digitally savvy (he will pull data all day long until you feel comfortable with your chosen house, area, school district, anticipated appreciation rate...anything!), he's super well respected and known in the area by other agents, an amazingly cool but strategic negotiator, is totally devoid of desperation for a sale/commission, and more.
Then once you get into contract phase, Donna literally handles every last and final detail in a concierge-like manner -- totally shielding you from the daily back and forth, noodling and annoyances of the buyer's requests. She solves it ALL; it's miraculous what that woman accomplishes over and above what is even expected in a buy/sell transaction.
On the sell side, Jim and Donna do the same, but even moreso. Donna in particular truly takes everything off your plate: she'll manage getting the house painted, the carpets replaced, she'll go on site (as she Jim both did for me when selling our rental properties) to work with the renters and make sure the house is ready to show -- freeing me to have to take time off of work to do so. They work with A+ integrity, too, so you know you are serving all parties fairly and lawfully throughout.
A home purchase/sale is the most considered you'll ever make. HIRE A SAVVY AGENT, not a friend!, and get what you need out of the transaction. Jim and Donna are our agents for life.
Jim and Donna Klinge are by far the most professional, personable and responsive realtors I have ever worked with. They provide VIP concierge level service in every area of the process of selling your home. My home was marketed so successfully that we received an offer the day after our first and only open house. Thanks to Jim's pricing and negotiating, our house is now the highest sold in our community. Jim's vast experience means he has worked with several realtors and knows the market all over north county. Donna is AMAZING in processing everything in the transaction. She scheduled trades people to work on the house in preparation for the sale as well as the repairs needed before closing. She communicated clearly every step of the way about what would be happening. She took the weight off my shoulders for the whole process. I will always use Jim and Donna for my future real estate needs and I whole heartedly recommend them to anyone buying or selling a home.
Jim and the team at Klinge Reality are without a doubt the best in the business! Not only was Jim helpful and extremely knowledgeable, he was patient and determined to help me find my first home. Jim and his team have been in the business for many years, and it shows. Jim is a wealth of knowledge and was my biggest proponent despite the temperature of the competitive market. I ended up getting the perfect property in my dream neighborhood all thanks to Jim. From the day my offer was accepted, Donna was a real lifesaver. She was extremely helpful, responsive, and knowledgeable when it came to every minute detail, and held my hand through the process. As a first time home buyer I had no idea what the process would entail, but Donna curtailed every concern I came across and made the escrow process feel seamless. Jim and Donna provided me the best home buying experience, and I am very grateful for all they did for me. It was truly a pleasure to work with Jim and Donna and I am already looking forward to the next time we work together!
Review for Member: Richard Morgan
Richard is an amazing realtor! He has high integrity and genuinely cares about his clients and their needs. Richard paid close attention to what I was seeking in a home and was very patient in our search to find it. I would highly recommend Richard and will use him for future transactions. Truly a different kind of realtor experience!
Could not be happier with my experience with Jim and his team. He helped me sell a very unique and challenging property. Throughout the entire process he was always available, honest, transparent, trustworthy, and always put my interests as a seller first. A (rare) true professional! During close of escrow Jim went above and beyond to complete the deal. It would not have been possible without his experience, fantastic team, and pure dedication. Highly recommended!
Thanks Jim and Donna Klinge!