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Zestimate Manipulation

Zillow did get around to updating their Estimated market value after a few days. They kicked up the zestimate by $633,200 to get within 0.18% of the list price – and they are still wrong!

It is incredible how much faith and confidence the consumers put in their zestimate’s accuracy. But after years of being the source for the one-click home valuations – and consistent re-marketing by email – people believe it.

Zillow says their zestimate is within 1.9% of being right on price with the on-market homes, which sounds really good until you realize what that means – they just change the zestimate once a home gets listed…..and they brag about that? They hope you don’t notice.

From last week:

Bidding War! Part 3 – Auction

You say ‘full transparency’ and blah, blah, Jim – what do you mean?  What happened? Give us the dets!!

We received two cash offers during the open house on Saturday, one from the first people who saw it on Friday, and the other from a buyer who attended the open house – which was a quick turnaround because I told her that we already had a cash offer.

Each buyer had their own agent, and the terms were similar.  It was going to come down to price.

They are called ‘bidding wars’ in this business, but the way the vast majority of agents handle them, it’s really just a collection of offers.  The listing agent might use a spreadsheet to organize them, but in the end, they are presented to the sellers who then just picks a winner – usually after the listing agent chimes in with their preference.

It’s not right that the listing agents get to play God and decide the outcome.  I want the market to decide it, because that’s what is fair to all buyers, all buyer-agents, and especially the sellers.

Plus, I don’t want to delay the outcome for hours or days and risk that the buyers might cool off – which is what usually happens as listing agents let days go by after their first offer is received, thinking it might get better, later.

I started my bidding war as soon as I got in my car to leave the open house.

I called the agent for the first buyer and told him he’d been outbid, THEN I TOLD HIM BY HOW MUCH, and asked if he wanted to go higher.

He called back in ten minutes with his new bid.

I went back to the agent for the second buyer and told her that SHE HAD BEEN OUTBID BY X AMOUNT, and asked if they wanted to improve their offer.

My slow-motion auction lasted until one of the buyers ran out of gas about 90 minutes later.

It worked great, and maybe even better than a live auction because bidders don’t feel rushed to make an instant decision.  They were able to confer with their agent and make a deliberate new bid.

Both buyers had a fair and clear chance to purchase the home, which is missing with the Offer Collection method. When listing agents just pick their favorite offer, instead of requesting higher bids, it leaves money on the table and it makes the remaining buyers wonder what happened – most of which would have made a better offer, if they were only given the chance.

Get Good Help!

 

SD North County, September

Thanks go out to Jerry Ryan, who publishes a monthly newsletter out of the goodness in his heart – giving us another look at the local stats.

He circled in red (above) and I added a red arrow below that show how the inventory has been so different this year – and it really dropped off in September.  Yet sales are actually higher, YTD.

I love his sparkbars too!

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Previously, it might have been possible to have a month or two where the SP:LP ratio would be close to 100%.  But in 2021, we might have the ratio be over 100% for the entire year!

We had a surge in sales at the end of 2012 and 2020, and both were followed by incredible frenzy conditions the next year. Are we setting up for a big 2022? Here is the latest report on the national picture:

(more…)

Jim’s Podcast

Natalie (who is doing a stellar job as marketing director!) suggested that some people might want to hear thoughts on the market conditions in a longer podcast-type format, so here’s my six minutes:

The real estate business is fast moving and sellers and buyers are making snap decisions. You want an adviser who knows the market and can deliver advice extemporaneously!

Declining Inventory & More Sales

We keep hearing people say that the inventory is rising………..but is it?

Bill’s chart shows how different the San Diego inventory is compared to all the others:

Ten of his 22 metros did have increases in their inventories, month-over-month!  But MOST had declines, with San Diego being the leader – by far.

The San Diego inventory plunged almost 19% month-over-month (second only to Albuquerque) and was the decisive #1 metro winner with the 49.3% decline, YoY.

We have half the inventory we had a year ago!

But it’s not affecting sales, because demand is overwhelming.  The September sales were outstanding – higher than in recent years, except for the big rally in the second half of last year:

How will this play out next year?

Let’s assume that there is pent-up supply, and there is a surge of listings next year – is there precedent?

Yes, and let’s check the last time the inventory had been in decline.  In early 2013, we got a boost of listings, and the waiting demand gobbled them up – and the frenzy was on:

Hopefully it will happen like that again in 2022, and it will be surge-proof. The more listings that come to market, the hotter the frenzy will be.

I’m on a morning call with 150 Compass agents around California. The leader said today that most agents have a 10:1 ratio of buyers to sellers. The demand is there!

But it could be fairly subdued next year, if nobody wants to sell.

Carlsbad Custom

The developer sold these last five lots separately so buyers could build their dream home. Here’s a custom 2,143sf one-story house overlooking the lagoon that’s priced at $2,388,000. It fell out of escrow once, and went right back in – currently pending:

More Appreciation in 2021?

People are leery when the squid speaks, but they could be right about additional price gains in 4Q21.

Here’s why:

  1. We had a 15% increase in the NSDCC median sales price between September, 2020 and January.
  2. There will be fewer sales this year, which typically provides more volatility.
  3. Frustrated buyers will pass on the fixers, and wait ’til next year instead.
  4. With the sales mix having a bigger percentage of superior homes, pricing should get a boost.

My #1 reason?  We’ve experienced intense frenzy conditions, and it has gotten to the point where the comps don’t seem to matter any more. Buyers just want a house, and they will pay whatever it takes!

Showings Are Flat

It looks like the California showings are reflecting the lack of new listings coming to market.

For the last few months, it has felt like January (which is what this graph is indicating). Not many decent listings to consider, at any price – and hopes for something to change soon!

Drought and Real Estate

This latest survey by realtor.com shows that only 11% of homebuyers are concerned about the drought (just edging out the sinkholes!):

Homeowners were the most concerned about tornadoes, at 39%; severe cold or winter storms, at 38%; flooding, at 35%; hurricanes, at 29%; earthquakes, at 21%; wildfires, at 17%; droughts, at 11%; and sinkholes, at 8%.

According to drought.com, 87.9% of California is enduring ‘Extreme Drought’ conditions today, but San Diego County isn’t part of it:

Link to Drought.com/sandiego

The last severe drought peaked in 2014, and it was only after the fact that we found out that San Diego had plenty of water. This year, the governor has urged Californians to voluntarily cut domestic water use by 15%, and more restrictions are likely to follow.

How will it affect the real estate market?

Hopefully it will cause more buyers and sellers to seek out the truth – that San Diego is in better shape than most of the state.  There is a very affluent demand for homes here, and water will always be available….at some price. Buyers with bigger and better reasons to move here won’t be deterred, and besides, what’s the alternative?  Move to Florida?

It might cause a few more potential sellers to add one more reason to their list of why they should move, but the fear of water drying up won’t be enough to overwhelm the reasons to stay – weather, it’s-more-comfortable-to-stay, don’t-need-to-move, don’t want to go through my stuff, kids-are-here, etc.  Maybe some additional inventory hits the market in selected areas, but don’t expect a flood.

Doug had thoughts about the drought in 2015:

Zillow Forecast By Area

Here are the latest guesses from Zillow that they’ve sent me over the last month.  They agree with me that next year will be rip-roaring!

In parentheses are the percentage increases for the last year:

NW Carlsbad 92008 (+28%)

SE Carlsbad 92009 (+30%)

NE Carlsbad 92010 (+28%)

SW Carlsbad 92011 (+28%)

Carmel Valley 92130 (+26%)

Del Mar 92014 (+23%)

Encinitas 92024 (+27%)

La Jolla 92037 (+20%)

Rancho Santa Fe 92067 (+23%)

West Bernardo 92127 (+30%)

Basically, we’re going to have a 40% to 50% increase in local home values over two years!

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