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Racing Towards Single Agency, Part 2

Seen on social media

I spoke to a few agents on the broker preview yesterday about business this year, and the common theme was that agents are have big trouble finding people who want to sell their home. It suggests that the inventory of quality homes will be extremely low this year.

What happens, when that happens?

It means that when listing agents get a hot new property to sell, they will be tempted to find their own buyer first, and/or spoon it to a select few of their agent friends, and then maybe expose it to their office mates before putting it on the MLS/open market.

The extinction of buyer-agents is well underway.

As the market tightens further, more listing agents will be tempted to sandbag their listing and not put it on the open market.  Look what happened to the agent this week who received 20+ offers (they told me the final count was 30 offers). After the listing was put on the open market, the flood of offers caused regrets about the workload, so they just grabbed one and shut it down.

Last night I popped off in the comment section about how the business gets shadier every year.

Here’s proof – not every listing with zero days on market was sandbagged, but let’s face it. If you mark your listing pending within a few hours of it going live on the MLS, you didn’t get full exposure.

NSDCC Annual Closed Sales With Zero Days On Market

Year
Annual Detached-Home Sales, Total
# With Zero Days on Market
Percentage
2016
3,107
84
2.6%
2017
3,084
99
3.2%
2018
2,799
84
3.0%
2019
2,834
100
3.5%
2020
3,190
116
3.6%
2021
3,184
173
5.4%
2022
1,939
124
6.4%

When agents see other agents touting their off-market business, they think it must be ok, so they do it too. It feeds on itself, especially when the allure of double-ending the commission is so strong in a tight-inventory environment.

This disease among agents is everywhere. You will notice it at every open house you attend – the agents conducting the open house can’t wait to tell you about their off-market opportunities to get you to sign up.  You’ll see it mentioned on social media daily – agents don’t think there is anything wrong with promoting off-market deals. Heck, everyone is doing it!

I regularly ask the agents who have a quality home for sale how they will handle multiple offers, and the answer is always the same: “I don’t know”, before they stumble and mumble something about the seller will decide (oh, thanks for that!) so the agents don’t get blamed for the end result. It’s embarrassing that they don’t have any strategy, and want to leave the door open for shenanigans later. No wonder they want to do an off-market deal, with no scrutiny.

Because no one is doing anything to intervene, the off-market deals will continue to be an accepted practice, and exacerbate the trend towards single agency (and the extinction of buyer-agents). Within the next year or two, every buyer will just go to the listing agent and take their beating.

Private Exclusives

One sign isn’t going to change the world, but it’s an example of how home sales will be changing in the future. If/when homes are sold in-house (not exposed to outside brokers and buyers) like commercial properties, Compass should extend its dominance in San Diego County – especially north coastal.

I can’t control how this turns out; I can only roll with it!

Talk of More Taxes

This might be the last straw for some homeowners who are already tired of the higher taxes in this state:

https://californianewstimes.com/politics-report-bia-talks-new-tax/493057/

An excerpt:

Environmentalists and union laborers are working on a ballot initiative that could be some form of property or parcel tax to fund needed improvements and infrastructure in how we handle stormwater.

SANDAG and supporters of transit have been talking about the need for a new tax measure to expand the options people have to get around San Diego.

And we broke the news here that the largest labor union of city of San Diego workers has joined with the philanthropists behind the Library Foundation and Parks Foundation to support a measure that would implement a parcel tax to bring in more revenue to support libraries and parks in the city.

There’s a lot of tax talk going on.

And now there’s more.

The Building Industry Association, which is only a few weeks out from installing a new CEO, has outlined an ambitious plan to try to spur the creation of more affordable and middle-income housing. And one feature of it is to put a fee on real estate transactions.

It’s not something the group is determined to pursue but the idea has now advanced far enough to reportedly irk some of its allies. It’s part of a document the group is working on called a Three-Pronged Approach to Finance and Build Additional Restricted Affordable Housing in San Diego.

“This transfer tax (% to be determined) should be charged only at the point of a property sale, and should only be charged on the amount of property value increase a property owner received,” the document reads.

Lori Holt Pfeiler, the new CEO of BIA San Diego, cautioned the idea is just that – an idea. And she was a bit frustrated that the Politics Report got a hold of the document laying it out because she hadn’t had a chance to really discuss it and have partners, like real estate friends who have partnered with the BIA over the years, to influence it and get on board.

Tony Manolatos, who serves as a spokesman for the BIA, told the Politics Report that he wouldn’t be surprised if the measure was advanced for the November 2022 ballot.

“They haven’t settled on any tactics,” he said. “There is a real sense of urgency, though, to create more housing especially for the middle class.”

Read full article here:

https://californianewstimes.com/politics-report-bia-talks-new-tax/493057/

Ten More Years?

The author first explored this topic in 2015, and this follow-up article was published in February:

Welcome to the Brave New Housing Cycle: Factors indicate that an extended housing boom is underway.

A new long-term housing boom is upon us. And COVID-19 is the main reason why.

Both housing and economic cycles used to last five to seven years, but the economy has shifted to longer cycles, due to factors such as technology and monetary policy. The housing market has followed suit and the result is what I have defined as the Brave New Housing Cycle, which is poised to last seven to 10 years.

The current Brave New Housing Cycle actually started last year.

Read full article here:

https://www.forbes.com/sites/joshuapollard/2021/02/03/the-housing-market-just-began-a-new-10-year-upward-move/

Working-From-Home Buyers

Those with good-paying jobs who’ve discovered the benefits of working from home are the ones who are most-likely fueling the ferocious demand – especially in what’s now the $1,000,000-$2,000,000 starter-home range between La Jolla and Carlsbad (can’t believe that I just said that).

Evaluating the economic impact of “social distancing” measures taken to arrest the spread of COVID-19 raises a fundamental question about the modern economy: how many jobs can be performed at home? We classify the feasibility of working at home for all occupations and merge this classification with occupational employment counts.

We find that 37 percent of jobs in the United States can be performed entirely at home, with significant variation across cities and industries. These jobs typically pay more than jobs that cannot be done at home and account for 46 percent of all US wages. Applying our occupational classification to 85 other countries reveals that lower-income economies have a lower share of jobs that can be done at home.

https://www.nber.org/papers/w26948

Home of Tomorrow

In 2021, how many garages have 2-3 cars parked inside? We should change the name from garage to ‘flex space’, or ‘California basement’. Hat tip to my friend Ken:

JBREC was pleased to be asked to be part of a team assembled by Pro Builder Magazine to collaborate on a concept home for their “Immersive Show Village”  that was highlighted last week at IBSx and is available to tour all year long.  The home was dubbed “The New New Home” and JBREC’s research, in collaboration with Pro Builder and Woodley Architecture Group helped form the vision.

Link to ProBuilder digital magazine

Over the past year, the pandemic provided the opportunity for us to examine how people live now and how they will be living in the future. The team considered the functionality of the entire house from the front to the garage, outdoor spaces, and casitas. The following provides a glimpse into the research.

  • A 2,500-square-foot home that is right-sized for the family. The team chose to challenge itself by designing a home on a typical lot that is readily available throughout the country. The profile is a family with two children (around 9 and 12) with parents working from home and children attending school from home. Selfishly, this describes Ken’s family so we had a little bit of a head start.
  • A need for privacy. The New New Home was designed to look inward instead of toward the street with an interior courtyard rather than a larger front porch. This layout offers a private retreat while connecting almost every room on the lower floor to the outdoors. The courtyard also provides a safe place to drop off packages just inside the front gate.
  • Will we always need a two-car garage? Maybe not. While the home’s design highlighted a two-car garage, it included a single-car option to inspire and ask “what if?” In a future where we rely less on cars, the flexibility to offer a single car garage creates the opportunity for extra square footage, building in options to suit the preferences of different owners. The single-car option still allows for storage space in the garage and opens the possibility for more entertaining space in the courtyard.
  • A casita for multifunctional space. While the main house stays under 2,500 square feet, the guest house adds livable space. This multifunctional room could work as a guest quarters or multigenerational suite for extended family, whether a parent or a boomerang child who graduated college but is not ready to start their career. In the July 10, 2020 edition of The Light, we noted that more than 1.1 million 23-to-30-year-olds had moved “back home” since February. The casita could also function as a home office that is separate from the house.
  • A large, functional backyard. When asked to choose between a large backyard and a larger front yard, homeowners indicated the backyard was more important. The New New Home offers a private courtyard and a nicely sized backyard. The yard is large enough to include outdoor seating areas, a space to garden, an outdoor kitchen, and includes a covered outdoor room with transition space between the great room and the backyard.
  • A simple and open kitchen layout with all of the appliances along one wall is supported by a spacious island providing space for the kitchen sink and informal dining. Storage is important, and while this home doesn’t have a walk-in pantry, a run of cabinetry between a “clean room” (designed as a healthy transition space from the outside) and kitchen takes the place of the walk-in setup.
  • Multiple spots to accommodate working from home. JBREC’s consumer research found that 60% of households earning $50K+ who are working from home right now anticipate continuing to work from home at least part-time post COVID. The New New home includes two work spaces located on separate floors. Both offices were designed to incorporate lots of light, while considering the background behind the workspace. The offices have smaller dimensions to accommodate a built-in desk and storage but no space for clients “sitting across” from the worker.
  • Your kids live at home too! Our August 14 edition of The Light highlighted the need for spaces dedicated to remote learning as more than 4.0 million students were impacted by school closures. This home was designed to accommodate a growing family with the children’s “wing” featuring two secondary bedrooms that share a bath, and a layout that maximizes separation between the kids’ wing and the primary suite. The children’s bedroom provides space for separate study or remote learning areas.

Our New Home Trends Institute, our consumer research, and our constant “on-the-ground” consulting work continues to help inform our knowledge of how people live and how their homes are evolving. Let us show you how to implement these strategies into your next new home community.

Ken Perlman

If you have any questions, please contact Ken Perlman, Managing Principal, at (858) 281-7214 or kperlman@realestateconsulting.com.

https://www.realestateconsulting.com/

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Here’s Rick’s forecast of 15% appreciation for 2021, and another 15% for 2022-2024:

Zillow & ShowingTime

Wouldn’t it be great if they published the number of showings publicly?  It would help buyers know how competitive the bidding will be (or not), and later it would help to qualify the comp. When pricing the next listing down the street, you never know if the sales being used were a result of open-market activity or if a crazy buyer paid too much when they didn’t have to.  Knowing how many times the home was shown would be quality intel for future buyers and agents.

SEATTLEFeb. 10, 2021 /PRNewswire/ — Zillow Group has entered into a definitive agreement to acquire ShowingTime.com, Inc., an online scheduling platform for home showings, for $500 million. Touring is one of the most important steps in the home shopping and selling journey, and ShowingTime’s technology has streamlined and dramatically improved the touring experience. They are an industry leader, and Zillow Group will continue to invest in ShowingTime and increase its engagement among agents and partners.

“We have been impressed with ShowingTime’s ability to simplify a cumbersome but critical part of the home shopping experience by integrating with MLSs, agents and brokers, and giving buyers’ agents an easier way to schedule showings with listing agents,” said Errol Samuelson, Chief Industry Development Officer at Zillow Group. “ShowingTime will remain an open platform available to all industry participants, and we expect to grow ShowingTime’s engagement through all channels to ensure touring is easier for the industry and consumers.”

ShowingTime has a network of nearly one million agents across North America and has developed relationships with hundreds of Multiple Listing Services (MLSs). ShowingTime coordinates schedules behind the scenes so that agents can seamlessly book a confirmed home showing online and focus on their clients, not coordinating a complicated process. In 2020, the company facilitated more than 50 million showings industry-wide. Agents can update their listings’ availability for showings through the network, enabling interested buyers’ agents to schedule home tours online with the click of a button.

ShowingTime’s industry-leading technology will help increase tour volume and transactions for industry partners, including Premier Agents. Many Zillow Premier Agents are already using ShowingTime and value the ease it brings in scheduling tours. Zillow shoppers who request tours are high-intent buyers, and ShowingTime’s service enables more seamless tours for those buyers and sellers.

“This is a pivotal moment in real estate, and customer expectations for a simplified, tech-enabled experience are rising,” said Mike Lane, President of ShowingTime. “The ShowingTime technology serves nearly a million real estate professionals, and we look forward to sharing our technology solutions with even more customers, enabling a truly seamless real estate transaction that is efficient and simple.”

The acquisition will accelerate adoption of ShowingTime’s technology as home shoppers and sellers, agents and industry partners move toward a more efficient, digital future.

Link to Press Release

California Dreaming

I’m not sure a 30-minute TV show will change anyone’s destiny, but hey, at least they are trying:

As part of C.A.R.’s 2021 consumer advertising campaign, the Association has partnered with ABC to be the presenting sponsor of their new documentary, California Dreaming. The 30-minute special will air on KABC-TV, Los Angeles, KGO-TV, San Francisco, and KFSN-TV, Fresno at 9 p.m. (Pacific) on Saturday, Feb. 13. It can also be streamed online.

As part of this partnership, C.A.R. President Dave Walsh introduces the documentary, and closes out the film. Click the link below to watch the documentary’s trailer.

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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:

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