It was so great to start the tour today with Pete’s new listing on the Encinitas Ranch Golf Course whose owners succumbed to the problem at hand. They get hit by golf balls, so provide a barrier and live with it.
This is way better than the alternative where potential buyers have to wonder about the impact. Know this – when a golf ball hits your roof, it sounds like a bomb went off.
There isn’t as much fluff as we used to have in the pre-pandemic days.
In March 2019, there were 6,026 homes for sale, but only 2,554 sold, which means there were lots of sellers and agents on the open market who were in price-discovery mode – and they found out what the market wouldn’t bear.
We’re heading back that way again.
For the last three years, we’ve been spoiled by maximum demand (caused by low inventory combined with low rates). But now that both are creeping upward, there will be sellers/agents who are overly-optimistic and don’t factor the negative impact into their equation.
Last month’s ratio of 2,871/1,950 = 1.47 is still better than the 2019 numbers of 6,026/2,554 = 2.36, but don’t be surprised to see an upward trend of unsold listings forming over the next few months.
The first quarter of 2024 is the only 1Q in recent history to have increases in BOTH the number of listings AND the median list price. Previously, increases in pricing had a corresponding dip in the number of listings available for buyers to consider.
If you are like me, you’ve seen a noticeable surge in seller optimism in 2024. It’s not just the median list price that is up 8%, doesn’t it seem like everything is $200,000 higher than last year?
It looks like we’ve found the number.
Because the inventory was so low last year, I thought the market could easily handle a 10% to 20% increase in active listings this year.
But now the number of actives is +30% YoY, and the pendings aren’t increasing in a similar fashion. If sales don’t pick up, it means a glut of unsold listings could be forming over the next 1-2 months.
Will buyers care?
Probably not, because they have shrugged off worse (higher prices and rates). But once a listing goes unsold for 2-3 weeks, it will take something drastic to get the buyers’ attention again.
While the media has been stirring up their hysteria over the commission decoupling…..this from CNN:
It’s the second part of the settlement that will likely frustrate buyers even further:
Let’s call it, The Return of the PEAD!
When Covid broke out, it was decided that the only way we could safely show homes again was if every buyer and agent submitted a form to the listing agent that declared they didn’t have Covid, and weren’t exposed to anyone who did. It was a joke of an exercise, but we had to do something.
Because this is a business where the competency of the listing agent is many times just measured by their ability to complete the forms, the gathering of the PEADs became almost militant in nature. Listing agents demanded that a buyer-agent MUST provide their PEADs before even thinking about scheduling an appointment to show the home!
Do you remember how in the minutes/hours it took to send the PEADs over to the listing agents, it caused just enough delay to allow shenanigans to take place behind the scenes? Listing agents would declare with glee, “Oh, you took too long to submit your PEADs and I already sold the house to someone else!”
The same thing will happen with the buyer-broker agreements. I’ve already had a Coldwell Banker agent tell me that if I was going to submit an offer on his listing, to make sure I include a copy of my buyer-broker agreement. It’s not required until July, but hey, it’s never too early to bust the chops of the buyer agents!
Secondly, think about the buyers who haven’t found a buyer-agent they liked yet, and just want to attend an open house that looked semi-interesting online.
The new rule says you can’t see the house without a buyer-broker agreement.
Open-house agents will be manning the front door with their “sign-in” sheets. But now those sheets will be committing the buyer to a buyer-agent commitment too. Will the agents mention that part? How many unwitting buyers will attend an open house in July and then find themselves in a 3-month or 6-month commitment with an agent they just met?
The legit agents will at least designate their agreement for this house only, where the buyers are committed to the agent if they buy the open house. But those buyers will be giving up their name, address, phone, and email so if you don’t buy this one, the agents keep contacting you until you buy or die.
Oh, you don’t like that program?
Chuck had the best reply so far, “Hey, it’s the DOJ”.
(tomorrow is a day off – I’ll be back Thursday!)
The number of active listings is a reflection of how many new listings are coming on the market vs. how many are going off the market at the same time.
While today’s number of actives is 29% higher than it was last year at this time, let’s note that the 2023 inventory was a virtual flat line where they were selling as fast as they were coming on the market.
Any reason for alarm today?
Not really – more actives means there are more homes to choose from, which should mean more sales as long as the number of unsold listings doesn’t start looking like a glut and spook the buyer pool (apparently, the +29% is acceptable). So far, so good in 2024.
This year looks pretty strong! If you house isn’t selling, it ain’t the market’s fault.
This was going to be the big test.
The controversial local brokerage in Los Altos was offering a measly $10,000 commission to the buyer-agents on their listings, most of which were $4,000,000 and up. They listed a similar house on a quiet street about a mile away for $2,988,000 and then marked it pending a week later.
So I followed their lead and priced my listing at $2,995,000 even though mine needed EVERYTHING and was on a heavily-traveled street.
My video tour of my listing HERE.
I wanted to prove that paying 2.5% commission to the buyer-agent would cause a better result.
Theirs closed for $4,200,000 (and was put up for rent for $2,900/mo).
Mine sold for $4,200,000 too, but then our buyer-agent volunteered to cut 1.5% of her 2.5% commission and deduct it from the sales price. In those cases, the lender has to get the appraiser to re-issue their appraisal at the revised price – but she forgot, which delayed closing for another week. I’ve never prayed so hard for an earthquake not to happen!
I don’t know if the agent on the other sale only got paid $10,000 to support her buyer with paying $1,200,000 over their list price, but she deserved more.
But combined with my buyer-agent being so generous, and the other comments at open houses, the agents around the Silicon Valley are so desperate that they are begging for business. The amounts buyers pay over the list prices indicate the same.
I still think my result was better than the $10,000 guy due to our harsh condition and busy street. But I can’t say that the 2.5% made any difference at all.
We can probably come to this conclusion though. In a scorching-hot entry level market, you don’t need to pay much to a buyer-agent, if anything at all. If the buyer-agent is smart, they will have their own agreement with their buyer to cover it.
In areas where the actives-to-pendings ratio is 4:1 or higher (Rancho, I’m looking at you), paying a reward or bounty to a buyer-agent is worth considering. Is that steering? No, it’s America, where paying incentives to get what you want should be legal and encouraged.
In January, 30% of the NSDCC sales offered less than a 2.5% commission to the buyer-agents, and in February it was 25%.
Since the NAR settlement was announced on March 15th, 40% of the listings are offering less than a 2.5% commission to the buyer-agents.
There isn’t a new rule that directed listing agents to offer less commission. They just felt like doing it.
Is it due to the listing agents being weak and inexperienced? Or are the listing agents are still charging their full fee and taking more for themselves? Either way, they are under-appreciating of the job of buyer-agents, which isn’t good for their sellers.
What’s going on?
Would you want either of those agents in your corner when the action starts?
Smart home sellers will recognize a critical issue.
The eventual sales price matters more than the commission rate.
Homeowners who don’t want to pay ANY commissions can sell their house to the buffoon who advertises on television. But he only pays 70% of the home’s value – yet he gets business because there are people who fall for the ‘quick cash and no fees’ enticement.
In addition, there are plenty of agents who offer a reduced rate in exchange for reduced services – but what real estate services can you do without? What are the vital sales skills needed to sell for top dollar?
The best agents have sales skills that cause your home to sell for more money, and they are successful enough that they don’t need your listing. Do you think they are going to discount their rate?
Are you going to hire a great agent who will push the sales price higher? Or will you settle for any old licensee just to save a point on the commission?
Reducing commissions aren’t going to make agents better, or have them put in extra effort. They aren’t going to do the same job for less pay. Because they agreed to be paid less, they will want to do less.
Is that who you want working for you?
The top agents employ a collection of superior sales skills that deliver a top-dollar sales price AND make the experience easy and enjoyable. Isn’t that what you want?
The potential surge in new listings has stalled, and for the second week in a row we had more new pendings than listings! But something has to give, doesn’t it?
The pricing continues to levitate, at the cost of sales:
NSDCC Monthly Detached-Home Sales, March
There will be the usual late-reporters that get this year’s number of sales up to 155-160 or so, and this trend should continue for the next 2-3 month where just the deserving homes get sold. It would seem to be inevitable that the number of active (unsold) listings start to pile up by the end of summer. Get ‘er done!
It appears that for every person that has left San Diego County over the last three years, there has been a replacement – and an affluent one at that!
Are you looking for an experienced agent to help you buy or sell a home?
Contact Jim the Realtor!
CA DRE #01527365, CA DRE #00873197
