He claimed that I said Yes, because of my post about it being a great time to buy if you’re selling a cheaper home and buying a more-expensive home. It’s because the higher you go price-wise, the colder the market gets. Fred said it is a good time to buy as long as you don’t plan to move in the next five years.
It’s a question that deserves a full answer, not just yes or no.
The most common blog chatter is that history always repeats itself, and it will just be a matter of time before this cycle runs out.
The economic cycle will sputter again, but the housing market is different now.
Because distressed sales are well-managed.
The California Homeowner Bill of Rights mandates that loan modifications be dangled in front of anyone in trouble. The foreclosure process gets drawn out for months and years so we’ll never see a flood of trustee sales again.
As a result, making your mortgage payments has become optional.
If we have another economic downturn where homeowners can’t pay, then the government will insist that lenders give them a break. The cast was set in the last crisis – the government will create bailout programs that allow everyone to kick the can down the road.
With distressed sales few and far between, the vast majority of home sales will be elective. Sellers with the mantra – “I don’t have to sell, I’m in no hurry, and I’m not going to give it away!”
Prices will maintain a tight range of +/-5%, because the minute a seller thinks he is being forced to ‘give it away’, he will object. Different neighborhoods will have periods of stall-out, where few or no buyers will pay what sellers want, and real estate loitering will be common.
But days of drastic price dips are gone.
The other buffers to a housing downturn include reverse mortgages, rampant flipper business, and baby-boomer estate distributions.
If today’s buyers have assurances of pricing protection, is it a good time to buy? Well, yes, if that’s all that matters.
But for most, it is a terrible time to be a buyer, which is different.
If you are on the low-end of your market, you can forget about buying your “dream house”. The competition is fierce, and compromise required – if you can even get your hands on something.
My listing at 2022 Cherokee in Escondido – the one priced at $549,000? We had six offers, and four of them were all-cash. All were at list price or higher.
It was viewed 3,198 times on Zillow since Friday, and I received 100+ phone calls and texts from agents. I had over 200 people visit the open house on Sunday, and it was probably shown at least 50 times between Monday and Wednesday.
Almost all of the lookers didn’t offer, so they will be competing against each other on the next one – literally hundreds of buyers floating from new listing to new listing, hoping for a miracle.
Was it a giveaway? Agent comments included, “Price was fair and reasonable’, and ‘The defects were properly discounted’ (defects included no direct access from house to backyard, master suite downstairs and kids’ bedrooms up, and it backs to the I-15 freeway – the rear fence was the CalTrans chainlink).
Buyers have to endure bidding wars on anything decent, no rules about how to win, and shady realtor tricks that seem to favor insiders. Buyers are quick to jump to that conclusion, but it is more due to a realtor’s incompetence that bidding wars are vague and hard to win.
If you can get a house into escrow, it almost always happens that it’s condition is worse than imagined. But sellers are in the driver’s seat, and do little or nothing to assist. Buyers usually end up feeling like they are buying an over-priced turd.
In June, 2011, Ben Bernanke said at a live press conference:
“We have told the banks to handle their REOs…..long pause………..in an economy-supportive way.”
Banks took that as permission to stop foreclosing, and that, combined with the California Homeowners Bill of Rights, have caused foreclosures – as we once knew them – to dry up. All three of the big North County REO brokers have all given up and left the business, and the occasional bank-owned listing that does hit the market is priced at retail, or retail-plus.
Here are the NSDCC detached-home listings that were bank-owned (REO) or short sales:
Short Sales Sold
Instead of foreclosing, the banks have thrown a loan modification to anyone who would sign it, and when those expire, extensions will likely be granted. Distressed sales have gone the way of the dodo bird!
Those 45 sales last year were 1.5% of the 3,018 total sales, and with higher prices, the count is likely to go down. We will be in a retail-priced environment for the foreseeable future!
With publication of his memoir, The Courage to Act, on Tuesday by W.W. Norton & Co., Bernanke has some thoughts about what went right and what went wrong. For one thing, he says that more corporate executives should have gone to jail for their misdeeds. The Justice Department and other law-enforcement agencies focused on indicting or threatening to indict financial firms, he notes, “but it would have been my preference to have more investigation of individual action, since obviously everything what went wrong or was illegal was done by some individual, not by an abstract firm.”
Fannie Mae has been over-pricing their REOs by at least 10% since 2012, and have been getting away with it because buyers think that because it’s a foreclosure, they are getting a deal, and because Fannie provided ‘HomePath’ financing where no appraisal was required.
They instituted a seven-day First Look Program, where only the owner-occupying buyers were allowed to purchase, which helped to whip up the excitement in unsuspecting buyers, many of whom were purchasing their first home.
But in October, 2014, the HomePath financing was terminated, and apparently the REO portfolio needs to be goosed again.
Here the ‘new’ 20-day First Look Program is rolled out by our N.A.R. goons, and presented as a great new idea to help buyers and preserve neighborhoods. But in reality, it’s extending the period that Fannie can take advantage of unsuspecting buyers:
This story is humbling, but these folks could have short-sold this house years ago and gone back to living in their townhouse. How many people are not paying their mortgage, and not getting foreclosed? Hat tip to Nathan for sending this in from the wapo:
A decade ago, Comfort and Kofi were at the apex of an astonishing journey they had made from Ghana in 1997, when they had won a visa lottery to come to America. They did not know it at the time, but they were also at the midpoint in their odyssey from American Dream to American Nightmare.
Today, they struggle under nearly $1 million in debt that they will never be able to repay on the 3,292-square-foot, six-bedroom, red-brick Colonial they bought for $617,055 in 2005. The Boatengs have not made a mortgage payment in 2,322 days — more than six years — according to their most recent mortgage statement. Their plight illustrates how some of the people swallowed up by the easy credit era of the previous decade have yet to reemerge years later.
His research? Because the Case-Shiller Index is still rising, just not as fast – that means prices will be heading lower? There are plenty of reasons you could use to justify the doomer position (wars, unemployment, unaffordability, earthquakes, etc.), but smaller increases are a weak excuse.
He also thinks we will still have a surge of foreclosed properties to come, just because their are so many people delinquent. But once you miss a few payments and ruin your credit, the delinquent homeowners might as well ride it out until they get the boot.
How are the San Diego foreclosures?
Some said they dropped off because of the Homeowners Bill of Rights, which was released two years ago and became law on January 1, 2013. The bansk have had plenty of time to adjust – here’s how they are doing:
It’s hard to believe that people just go back to making their payments, whether they get a loan mod or not. The banks will wait until they can make money by foreclosing, which around the coastal markets, should be after another 10% appreciation or so. Until then, why foreclose and lose money?
I spoke with a long-time REO listing agent this week who agreed completely with my theory that banks have stopped foreclosing.
Banks like Wells Fargo keep laying off workers:
The latest round of layoffs is “the result of continuing market changes, including improvements in delinquency and foreclosure rates and reduced demand for mortgage financing,” said Wells Fargo spokeswoman Mariana Phipps in Oakland.
But the improvements in delinquency and foreclosure rates are due to the banks not pursuing foreclosures. My friend mentioned how hard it is to get several owners of mortgage tranches to agree on principal reductions and loan modifications, and instead the servicers just let defaulters ride.
The accounting standards were suspended long ago and Helicopter Ben said himself that he told the banks to not do anything to harm the economy – so not foreclosing is a great solution. Banks can then cite the ‘improvements’, and layoff workers to pump earnings further.
The decline in foreclosures continues, but the pundits and media don’t really look into it much further. Here is the best quote they could come up with in this article, linked below (hat tip to Stormin’):
“We have now registered two and a half years of continuous decreases in the number of homeowners who are in some stage of the foreclosure process. This consistent decline means fewer Americans are experiencing the distress of delinquency and default,” said Anand Nallathambi, president and CEO of CoreLogic.
The foreclosure notices and the number of properties actually foreclosed have dropped considerably in San Diego County.
We have had 1,500 to 2,207 notices sent out per quarter over the last 12 months, but only 450-610 properties foreclosed per quarter. The big gap makes you think that the banks/servicers are still throwing loan mods at anyone who wants one, and cancelling any notices soon thereafter.
“The relatively high percentage of foreclosures with equity is surprising to many because it would seem homeowners with equity could easily avoid foreclosure by leveraging that equity by refinancing or with an equity sale of the home,” Blomquist noted.
No surprise here.
With no pressure from anyone to foreclose on non-payers, mortgage servicers can be picky about who gets foreclosed. It makes sense to foreclose where you can make a profit, and let the still-underwater folks ride the gravy train for another year or two.
Deadbeats don’t need to panic, it’s still quiet around SD County:
Plans are taking shape for 10,000 units of new housing in the heavily industrial area - Is San Diego building an Amazon company town from scratch? https://www.sandiegouniontribune.com/news/environment/story/2021-09-25/san-diego-amazon-company-town
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!