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Real Estate Commissions and the DOJ

Hat tip to the three people who sent in this article:

https://www.axios.com/real-estate-fee-showdown-lawsuits-5e88b18c-3baa-4cb0-8302-2a2a8fa16eda.html

It’s a sexy topic because the realtor industry is terrible at explaining commissions, and then reporters jump into the middle of it with their pre-conceived ideas and write articles like this one that make it worse.

Let’s sort out the two issues.

#1. Do agents steer their buyers based on commission being paid by listing agent? Yes.

Will disclosing the commission rate stop steering by agents? No.  Will buyers insist that their agent show them those listings any way? Maybe, but agents will find a different reason why they don’t want to show it so it won’t be about the discounted rate.

Sellers should insist on rewarding the buyer’s agent – pay them a bounty for selling your home. If the listing agent is paying 2% or less to buyer-agents, it discourages them from showing your house.

#2. Everything else is an assault on buyer-agents, who are getting squeezed out of the business.

Redfin and Rex want to convince buyers that they don’t need help. Just find yourself a house that you want to buy, and they will do the paperwork for you. They will say anything to convince you it’s all you need.

If the day comes that buyers have to pay for their agent, then they will just go straight to the listing agent who will have worked out a deal with the seller to handle those cases.

In either case, buyers won’t get good help. They will get no help – not from an agent who represents the best interests of the buyers, and advocates on their behalf.

Buyers don’t realize how much they want and need good help until it’s too late – but this doesn’t get considered by the Department of Justice, NAR, or reporters.

From 2018:

Get Back – New Beatles Movie

Last night I watched the John Lennon Imagine documentary on Netflix and it was an incredible experience of the John and Yoko era. This is similar but different:

Acclaimed filmmaker Peter Jackson’s “The Beatles: Get Back” is a unique cinematic experience that takes audiences back in time to The Beatles’ intimate recording sessions during a pivotal moment in music history. The film showcases the warmth, camaraderie and creative genius that defined the legacy of the iconic foursome. Shot in January 1969 and compiled from over 60 hours of unseen footage (filmed by Michael Lindsay-Hogg) and more than 150 hours of unheard audio, all of which has been brilliantly restored, “The Beatles: Get Back” is the story of John Lennon, Paul McCartney, George Harrison and Ringo Starr as they plan their first live show in over two years and charts the writing and rehearsing of 14 new songs, originally intended for release on an accompanying live album. The film features – for the first time in its entirety – The Beatles’ last live performance as a group, the unforgettable rooftop concert on London’s Savile Row as well as other songs and classic compositions featured on the band’s final two albums, Abbey Road and Let It Be.

“The Beatles: Get Back” will open in UK cinemas in August, 2021.

Inventory Watch

Even though it looks like a record-low inventory for January (251 NSDCC listings so far), the number of pendings increased by 9% in the last week – buyers will not be denied!

I don’t think that the numbers of actives and pendings have ever been this close:

NSDCC Actives: 367

NSDCCC Pendings: 306

The action is weighed on the lower-end:

NSDCC Actives Median List Price: $3,950,000

NSDCC Pendings Median List Price: $1,895,000

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Temporary Bubble?

Excerpts here from an article yesterday about the Fed’s involvement. The rapid run-up in home prices is brutal on home buyers, but for home sellers, realtors, and the overall economy, it is great news. Expect that the Fed will be very accommodative for longer than it takes to get employment on track, which means we should have low mortgage rates – and higher home prices – for at least the next year.

But what if the run-up in home prices is temporary?

Does Powell expect home prices to come down when rates go up?  I hope not, because sellers get a vote – and we know they will be VERY reluctant to sell for less.  Either we will have low rates forever, or once they go up (back to 4-something), the bubble created won’t pop or crash – instead it will ooze like slime while participants grapple with an unprecedented marketplace with little or no help:

Powell explained that the Fed has had to use its extraordinary policy to help the economy with still more than 9 million people out of work.

“It’s very much appropriate that monetary policy be accommodative,” he said. Powell also said with regard to financial stability, the Fed considers asset prices, leverage in the banking system and nonbanking system, as well as funding risk.

“I would say financial stability vulnerabilities are overall moderate,” he said, adding the Fed’s goals are also to prevent long-term damage to the economy and make sure the financial system is resilient to shocks. He said he believes the run-up in housing prices is temporary, and the pandemic has created a surge in demand because of people working from home.

“I think he’s reluctant to talk about specific stocks and even when he was asked about the housing market, he feels as though some of that is specific to the idea that supply was constrained, and there was pent-up demand and it’s temporary,” said Michael Arone, chief market strategist at State Street Global Advisors. “I wouldn’t expect the Fed chairman to acknowledge that Fed policy helps create bubbles.”

The Fed’s zero rate policy has helped fuel a mortgage boom with record low lending rates. Home prices were up 9.5% in November from a year earlier, the strongest annual growth rate in over six years, according to S&P CoreLogic Case-Shiller Home Price Indices. It is one of the strongest annual gains in the 30-year history of the data.

Powell, during the briefing, said the latest run-up in asset prices was not due to monetary policy but due to news on vaccines and fiscal stimulus.  “He’s overstating the ability of the Fed to help the economy and understating its ability to help markets,” said Peter Boockvar, chief investment strategist at Bleakley Global Advisors. “He keeps deflecting.” Boockvar said the Fed’s policy impact is clearly felt across markets, including junk bonds where yields are at historic lows and some prices are at record highs.

“They’re solely focused on the virus and they don’t care what the side effects are of what they’re currently doing. Buying $80 billion of short term Treasurys, how does that translate to better economic growth?” he said. “Powell was so nonchalant about these hikes in home prices. It’s just temporary. Tell that to the first time homebuyer who is trying to buy a home and keeps getting outbid.”

Rupkey said the Fed is more concerned about other problems and does not see an issue yet.

“This Federal Reserve is not going to respond to asset prices unless they go up another 100%. This Fed is more concerned than ever about maximum employment,” Rupkey said, “helping those on the very fringe of the labor market.”

https://www.cnbc.com/2021/01/28/the-fed-doesnt-see-.html

Top Jimmy & The Rhythm Pigs

Top Jimmy & The Rhythm Pigs had a residency playing “Blue Mondays” every Monday night at the Cathay de Grande nightclub at the corner of Argyle and Selma in Hollywood, California for three years, and was an important part of the Los Angeles rock scene. Top Jimmy & The Rhythm Pigs concerts often featured guest appearances by such artists as Tom Waits, David Lee Roth, Stevie Ray Vaughan, members of X, The Blasters, The Gun Club, The Circle Jerks, The Plugz, The Fabulous Thunderbirds, and many more.

D.J. Bonebrake, who appeared on Pigus Drunkus Maximus, was a member of X. The band was saluted in the Van Halen song “Top Jimmy”, and mentioned in “The Call of the Wreckin’ Ball,” on the The Knitters album, Poor Little Critter on the Road and the X album, Live at the Whisky a Go-Go.

Live, Top Jimmy & The Rhythm Pigs usually consisted of Top Jimmy (James Paul Koncek): vocals, Carlos Guitarlos: guitar and vocals, Gil T.: bass and vocals, Dig The Pig: guitar, Joey Morales: drums and either Tom Fabre or Steve Berlin on saxophone. On their only record, Pigus Drunkus Maximus, released in 1987 (Down There Records, distributed by Restless), D.J. Bonebrake and Tony Morales contributed drum parts, while Gene Taylor added piano.

Top Jimmy got his nickname because he at one point worked at a fast-food stand called “Top Taco”, located across the street from the A&M Records studios in Hollywood. At some point, he got a job working as a roadie for X. At the end of a soundcheck, he sang a version of the Doors “Roadhouse Blues”, which garnered the attention of the band and Doors member Ray Manzarek, and led to Top Jimmy performing an encore version of the song with X and Manzarek, during a May 1980 X show at the Whisky-A-Go-Go.

Koncek died in 2001 in Las Vegas, Nevada from liver failure.

http://en.wikipedia.org/wiki/Top_Jimmy_%26_The_Rhythm_Pigs

January Inventory By Area

Monday’s breeze

We are only able to sell what’s for sale, so the direction of the frenzy depends on inventory.

If we get a surge of inventory, then sales will increase.

If we don’t get a surge of inventory, then bidding wars and prices go crazy.

We saw the differences here where the inventory shortage under $1,500,000 is particularly acute.

When looking at inventory by area, it’s the same thing.  We are comparing to non-Covid years and this month isn’t done yet, but you can see below that the number of houses coming on the market is well under what it’s been in the past:

January Total SFR Listings By Area

Year
Carlsbad
Encinitas
Carmel Valley
Totals
2017
123
63
54
240
2018
114
75
50
239
2019
118
69
60
247
2020
101
56
45
202
2021 MTD
54
40
29
123

We have 123 listings so far this month and we might get up to 150 by Sunday – but even that will be 25% under last year’s count at a time when we probably have twice as many buyers in the hunt.

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Inventory Watch

We’ve only had 193 new listings between La Jolla and Carlsbad this year, which is still running about 20% behind the pre-Covid count last January.  Undoubtedly, there are still sellers that are wary of the risk of opening their home to strangers, but it could also be the backup in lower-priced but desirable areas to which many Californians are moving.

From a realtor in Austin, Texas:

Here on the ground, I can confirm the extreme buyer demand in Austin. Most properties are currently seeing 30-60+ offers with many homes selling $100,000+ above the list price in just 24-48 hours. Inventory is at near zero levels in many neighborhoods and suburbs.

For those potential sellers who are nervous about allowing Covid into your house, here’s my proposition.  Stay in a hotel for the weekend, and I’ll sell your house by Sunday night and have the scrub-down crew sanitize before you come back.  As for where to move…..go where everyone else isn’t!

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10 Trends to Watch in 2021

When it comes to the home and design trends experts anticipate prevailing in the year ahead, the overarching theme will be options in abundance.

While homeowners continue to want their outdoor spaces that offer a safe retreat, that appeal has shifted into other parts of the home, coupling comfort with function. In other words, homeowners want amenities for work and leisure, and they plan to enjoy long them long after the pandemic.

Here are 10 trends to watch in 2021.

1. What it is: Two-for-one kitchen

Why now: Even before COVID-19 spread, many homeowners with an open floorplan were finding that there is a downside to not having walls in the kitchen. Clutter, messiness, and dirty dishes aren’t as easy to hide.

Leave it to the trendsetters to develop a solution: two kitchens in one. Mick De Giulio of de Giulio Kitchen Design in Chicago calls it a “layered kitchen” with separate work and living zones. Cheryl Kees Clendenon of In Detail Interiors in Pensacola, Fla., refers to it as a “prep and show kitchen.” Granted, extra space and renovation funds are needed to complete the concept.

The work area is typically in the back of the kitchen, hidden by a door or wall. This is where the serious food prep and cleanup takes place. The area may be part of a large laundry room or storage room that can be converted into this hidden cooking zone. It may also be used by caterers (when entertaining returns with gusto), Clendenon says.

In contrast, the living or show kitchen at the front remains part of the open floorplan. It’s designed to display culinary delights in an uncluttered way. This is where a roasted turkey comes out of the oven before being carried to the back-work area for carving while a buffet is set out. Some homeowners may designate one kitchen for special needs, such as gluten-free prep, a request from one of Clendenon’s clients. The back-kitchen space could also be used as a beverage center with a coffee station, and include refrigerated drawers or a wine cooler, De Giulio says.

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Inventory Watch

Custom mirror/rock wall combo!

Contest update:

We’ve only had 136 new NSDCC listings this month (including the Coming Soons), so matching last year’s count of 353 listings in January looks unlikely.  Those with the lower guesses are looking good:

234 – REOAndre

270 – lifeisradincbad

289 – Derek

305 – Joe

311 – Old Man

318 – Doughboy

325 – Haile

333 – Kris K.

347 – Big Crazy

353 – TominLaCosta

What’s not looking good is the idea that buyers will have plenty of choices this spring!

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Paying Over List Price

The days of wondering how much of a discount you could get off the list price have been replaced with hoping to limit how much OVER the list price you are willing to pay.  For buyers, how much to pay is relative to how well the home fits all of your needs, and how much you love it.

Here’s a gauge of how to determine how much to offer:

  • For home you only like a lot, try to keep the premium-above-list to 5% or less.
  • The average winner pays 6% to 7% over the asking price.
  • The top-rated masterpieces are fetching 10% (or more) above list price!

Any decent property that’s fixed up and priced right should go pending in 7-10 days.

If you are a dare-devil, one strategy to consider is waiting a couple of weeks after a home is listed for sale. If it hasn’t gone pending, then the condition, price, or agent was a problem and by then, the herd has cleared out so you should have a little more negotiating power.

But if you think the new listing is a hot one, then you better get over there right away for a look.

Tips:

  1. Ask if the listing agent has a strategy for determining the winner.  Most agents will spread the offers out on the coffee table, and let the sellers pick one. If that’s the case, the terms of price, down payment, waived contingencies, and escrow time will probably be what determines the winner – with influence from #2:
  2. Any compliments you can bestow on the sellers and listing agent in person or with a love letter can go a long way.  The love letters have come under scrutiny lately, and I totally agree that sellers and agents will discriminate consciously, or sub-consciously. Just use your first names and no photos.
  3. Know what you are looking at, and don’t overpay for fixers. You may see crowds, but almost all buyers will pass on the fixers.  If you aren’t that familiar with spotting needed repairs and identifying costs, then work with someone who is.
  4. Waiving contingencies. It’s uncomfortable, but your competitors are doing it. All four of the Crater Rim buyers who were willing to pay $90,000+ over the list price waived their appraisal contingency.
  5. If you know you are going to buy the house regardless, make your deposit non-refundable and release it to the sellers within seven days after acceptance.
  6. Have your mortgage pre-approved by a well-known and respected lender who will call the listing agent to sell them on your qualifications.  If there are cash offers, this is about your only hope to compete.
  7. The listing agent has influence on the selection, and prefers a buyer’s agent they know and trust. The buyer’s agent is smart to provide their own qualifications that demonstrate they can close a deal.

If all else is equal, the homeowners want to sell to someone who will close on time with minimal problems. Someone who makes it easy. Somebody they like.  Buyers are smart to make a lasting impression on the sellers or listing agent, because in a close race, how the sellers feel about the buyers will decide it.

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