by Jim the Realtor | Jan 19, 2025 | Disasters, The Future, This Is America |
Expect the cost of insurance to rise, or taxes to go up. Or both! An excerpt:
Earlier this month, JPMorgan estimated the fires around Los Angeles had inflicted $50 billion in losses, of which only $20 billion were insured.
One reason for the gap: State regulators have prevented insurers from charging premiums commensurate with rising property values, construction costs and wildfire risk exacerbated by a warming climate. Many thus stopped renewing policies.
Hundreds of thousands of homeowners shifted to California’s state-run backstop, the Fair Plan, whose exposure has tripled since 2020 to $458 billion. It has only $2.5 billion in reinsurance and $200 million in cash.
If the Fair Plan runs out of money, it can impose an assessment on private insurers to be partly passed on to all policyholders. In other words, the costs of the disaster will be socialized.
California is a microcosm of what happens when insurance breaks down: Either households face potential ruin or the public is handed a financial time bomb.
“What we are seeing is a real disconnect,” said Carolyn Kousky, an economist specializing in risk and founder of the nonprofit Insurance For Good. “There are opposing views on insurance: Is it a private market good, or is it social protection, to make sure everyone has the resources to recover from disaster?”
A central feature of insurance is risk pooling: The combined contributions of the community cover the losses incurred by members of the community in a given year.
Another feature of private insurance is actuarial rate-making, that is, calibrating premiums to the customer’s risk. That’s to prevent “adverse selection,” in which only the riskiest people buy insurance, and moral hazard—the tendency to encourage risk by undercharging for it.
But some activities or individuals are so risky they could never obtain, or afford, private insurance. That’s when risk gets socialized. The federal government’s expansion since the 1930s has largely been through the provision of insurance: Social Security, unemployment insurance, health insurance for the elderly and poor, deposit, mortgage, and flood insurance and, after Sept. 11, 2001, terrorism insurance. Not for nothing is the federal government often called an insurance company with an army.
Link to free WSJ article
A great WSJ article on private firefighting:
Stop them from burning
by Jim the Realtor | Jan 5, 2025 | 2025, Contests, Inventory, Jim's Take on the Market, Market Surge, Padres, The Future, Thinking of Buying?, Thinking of Selling?, Why You Should List With Jim
Virtually everyone is reluctant to predict the future of the real estate market. Even most realtors will throw their hands up and declare, “Who knows?”.
But around here, one fact has been clear and it tells us what we need to know about the rest of the year. The number of NSDCC listings in January ends up being 8% to 9% of the total for the year:
NSDCC Listings and Sales Data (La Jolla, Del Mar, Solana Beach, RSF, Cardiff, Encinitas, and Carlsbad)
It means that by mid-February we will be able to predict how many listings there will be in 2025, and thus, give us the likely direction of the market for the rest of the year.
I’ve been saying for three months that there is going to be a surge of listings, and it could be 15% to 20% more than there were in 2024. We’ve been doing the contest for Padres tickets to help put a spotlight on the January listings, and it has never been more interesting to see how many will hit the market this year!
Tomorrow, I’ll do a summary of the guesses so far and give everyone the rest of the week to enter or revise their guess so come back Monday morning.
The chart above gives more data for the analytical folks to craft their guess.
My Thoughts:
The last frenzy before Covid was in 2013. Pricing was stuck in a fairly tight range for the previous five years, but listings dropped and sales took off in 2012 and pricing followed in 2013 with a little more inventory. The variables weren’t all the same as today, but you may want to apply a similar effect from the animal spirits to today’s market. Or maybe not?
With another 9% increase in the median sales price and cost-per-sf in 2024, it shows that there really hasn’t been any limits on pricing. Will 2025 be the year that it changes? If so, will it be caused by another surge in listings? Or is there enough money floating around that more listings will cause more sales at higher prices like it did in 2024? It could go either way.
What about the political climate? Pro-Trump supporters are elated and will gladly join the buyer pool. Anti-Trump people are fearing the worst, but like we saw during the pandemic, fear is a fantastic motivator and it causes people to want to hunker down…at any price.
I had more people attend my open house yesterday on La Costa Avenue than I’ve had at the previous seven OHs. Most were just getting started, and the basic need for housing will keep them looking around. Will they buy? We’ll see.
We round-tripped four of our 17 listings in 2024 – and three of those were since the commission debacle on August 17th. Successfully working with buyers had already been a major challenge for agents, and now it’s worse. The affluent buyers will probably always want professional help, but will there be many, if any agents left who are willing to devote months of effort just to have their commission rate dangled in front of the seller for their approval?
Will the market survive it all? Yes, because there isn’t anything that price won’t fix!
by Jim the Realtor | Dec 24, 2024 | 2025, Market Surge, The Future, Why You Should List With Jim |
If there is a surge of inventory in early 2025, what will happen?
Here are the choices:
Frenzy – With rates stubbornly high, the best case is a mini-frenzy where buyers engage in bidding wars for only the top-quality listings. Some of the insanity bleeds over to the not-so-great homes and a few get picked up. About 33% to 50% of listings sell, and the more sane, rational buyers are left shaking their heads.
Not Frenzy – There aren’t enough buyers left who are willing to pay whatever it takes, and instead the wait-and-seers get even more picky and only 1 out of 10 listings are selling.
Middle Muddle – This is the most likely scenario. Great agents list the spruced-up homes for attractive prices and there is a good, solid flow of sales happening….while most listings are languishing on the market. Those sellers want to believe that if they just wait longer, they will be rewarded. By summertime, there are unsold listings stacking up everywhere – and being ignored.
I heard about one seller who has already moved, and intends to list their home for sale in early 2025. They paid $1,800,000 for it two years ago, and when you look at the listing photos, you wonder what they were thinking. But now their zestimate is $2,475,000, so they are going to list for $2,500,000 – even though they didn’t do any work.
There will be hundreds of listings that try to pull off a miracle like that one. Pricing will seem insane.
In the first quarter of 2024 there were 763 NSDCC homes listed for sale.
If there is the 20% surge on top of last year’s inventory, it would make for 916 listings in 1Q25.
Let’s predict 1,000 first-quarter listings to account for the many re-lists coming from late-2024.
I’m going to guess only 25% to 33% of those are salable.
We know that usually there are 2/3s of the listings that sell, so it will be a weird mix that nobody sees coming. There will be a steady flow of sales but only a minority of the total homes for sale are getting lucky.
It’s the swipe-left generation, where the junkers, bad-locations, and terribly-presented homes get ignored immediately. Buyers will forget them forever unless there are major price reductions – which won’t happen because “hey, I’ve only been on the market a couple of months and I’m not going to give it away”.
What will happen as we get into March-May? The unsolds will be stacking up to the sky, causing buyers to get even more picky, while sellers are digging in on price.
Mortgage rates are too high, and I think Powell is going to finally get what he wanted – peak pricing.
The main reason? If sellers have to take 5% to 10% less, they can.
Last time, they were maxed out on ez-qual financing and had no equity. But it’s the total opposite now, and we’re going to see how bad the sellers want and need to sell. If they had to take 10% to 20% less, they could, and they would still come out with a load of cash.
Think of my last Over-List report.
In November, HALF of the NSDCC sales closed for at least $100,000 UNDER the list price!
Because the creampuffs selling for top-dollar will be a smaller minority, our lousy pricing metrics will get dragged down by the sellers who dump on price. They could have spruced up their home and/or hired a better agent in the beginning, but nobody told them it was going to be this tough to sell. Instead, they dump.
A larger price gap between the creampuffs and fixers will develop, causing more appreciation for how critical it is to have an excellent presentation AND an attractive price.
by Jim the Realtor | Oct 31, 2024 | Builders, The Future |
Sounds like a fair compromise to me – if they can get around the construction-defect litigation that seems to come with every new complex. Two-story is preferred vs. three-story:
Owning a home has long been a core part of the American Dream. Today, however, there simply aren’t enough affordable options, and that ideal is increasingly out of reach. There’s a sensible way to address this shortfall, but it requires moving beyond the antiquated vision of a big house with a fenced yard in the suburbs.
The new American Dream should be a townhouse — a two- or three-story home that shares walls with a neighbor. Townhouses are the Goldilocks option between single-family homes in the suburbs and high-rise condos in cities.
Though townhouses have long been perceived as starter homes for young couples who hope to later move to a larger place, developers say that stereotype is changing. Today, townhouses are popular options for many kinds of households — couples with one child, single parents, people who live alone, couples in their 30s and 40s with no kids, and empty nesters in their 50s looking to downsize. People are drawn to the low-maintenance lifestyle and the sense of community. Many people don’t want to isolate themselves in suburban homes where they have minimal contact with neighbors and are fully dependent on a car.
“We absolutely love our next door neighbors,” said Katherine McKay, 40, who lives in a townhouse in Silver Spring, Md., with her wife. They met their neighbors — a retired couple — when they were all outside one evening on their back decks. They immediately bonded over the fact that they all enjoy having just enough space for a “postage stamp” garden. “Our townhome is 1,700 square feet. I don’t want more to clean.”
Link to free article
by Jim the Realtor | Oct 11, 2024 | Commission Lawsuit, Compass, Realtor, The Future |
Robert the big boss was in town yesterday.
He is committed to changing or ending the Clear Cooperation Policy, which is a controversial stance.
The CCP makes in mandatory that every agent upload a listing onto the MLS within one business day after any public marketing of the property. Robert (and other brokerage leaders) say that nobody should have the right to dictate how a home is sold, and sellers should have the right to market their property however they choose.
Skeptics think that is a thinly-veiled excuse to hold more listings off the market, and sell them in-house instead – which would benefit the bigger brokerages, and possibly squeeze out the little guys.
But Robert said that the real problem is that we are sitting ducks waiting for another class-action lawsuit.
The last lawsuit was about the mandatory requirement that the listing agent include a buyer-agent’s commission rate in every MLS listing. NAR tried to hide behind the fact that the rate was negotiable, but got their clocks cleaned when the jury found otherwise. Even though Compass had never sold a home in Missouri, the forced NAR settlement cost Robert and Compass $52 million.
Because the submission of a listing to the MLS within 24 hours is also a mandatory requirement, it’s only a matter of time before the class-action attorneys start lining up for another big pay day. He is literally hoping to change the CCP before we get sued again!
NAR doesn’t get it. Their chief legal counsel quit last week after 17 years, which leaves them adrift, and they are sure to bungle the next wave of lawsuits which should be arriving any day now.
Robert is taking the high road and trying to negotiate a peaceful change, but I don’t get the feeling that the people in power are listening. This is where the biggest brokerages will probably have to sue NAR to get their attention before another class-action lawsuit is filed.
Why doesn’t NAR stand up for realtors? The main reason is because they have $750 million in the bank, and they are very comfortable. They had two presidents quit, the executive director retire just in the nick of time to avoid responsibility for the last lawsuit, and now the chief legal counsel quit too. They aren’t equipped to handle any controversy, let alone one that could put them out of business.
But that day is coming, it’s just a matter of when.
Abolishing the CCP is just the start.
Eventually, the biggest brokerages will quit NAR and the MLS, and go it alone, just like the commercial brokers. Zillow and Homes.com will scramble to make deals with us to keep our listings coming, because if they don’t, they will be out of business too.
I guarantee that this is the future of home sales.
It’s just a matter of when.
by Jim the Realtor | Aug 26, 2024 | Commission Lawsuit, Compass, Jim's Take on the Market, The Future, Why You Should List With Jim |
In the week BEFORE the new rules went into effect, there were 29 NSDCC listings that were marked pending. In the first week AFTER the new rules went into effect, there were 38 new pendings.
Homes keep selling. Buyers and sellers keep moving, and Realtors keep helping.
It’s the other jokers who got in the way.
Somehow, the National Association of Realtors conspired with ambulance-chasing attorneys to levy big fines against brokerages for crimes they didn’t commit. The alleged offenses were committed by independent contractors who had home sellers pay a bounty to buyer-agents for causing their home to sell. The seller only paid the bounty if the agents involved were able to make both the sellers and buyers happy enough that they found a way to close escrow. If the sellers weren’t happy enough, they paid nothing.
We called it a ‘buyer-agent’s commission’.
Now we call them ‘compensation paid from seller concessions’.
We put different words on it, and added a load of new paperwork. That’s it – and homes keep selling.
But the brokerages are tired of being pushed around, and the really big changes are still to come.
1. The Clear Cooperation Policy is going to go away.
In the coming months, all the big brokerages will be suing NAR to rescind the policy that requires an agent to input their new listing into the MLS within one business day after they promote it publicly. The policy was a continuance of the NAR paranoia about protecting smaller brokerages, but that ignores giving the seller a choice on how they want to market their property.
2. Brokerages are going to leave the MLS.
I’ll call it a rumor because I didn’t hear from Reffkin’s mouth myself, but it makes sense. Why be a member of a club that sells us out and fines us $50 million? The commercial brokerages get along just fine without an MLS, as does the residential brokerage business in NYC.
Zillow provides the same benefit, without the lawsuits. Let’s cut a deal with them to upload our listings there and we won’t need the MLS.
What about cooperating with agents in other brokerages?
The NAR Settlement has effectively cut off that benefit already. The main benefit of the MLS was publishing and guaranteeing the buyer-agent fees, but that’s gone now. Every buyer-agent has to call around to find out what the “seller concessions” might be, if any. Sounds just like the commercial brokers, doesn’t it? And they have never had an MLS.
Is defecting from the MLS what is best for buyers and sellers?
We will sell you on that, don’t worry. Besides, you will still have Zillow, and their manipulated zestimates!
Zillow will become the defacto MLS, just like they do it in New York City!
by Jim the Realtor | May 1, 2024 | Commission Lawsuit, Realtor, The Future, Zillow |
Test drive an agent free for seven days!
Now that NAR’s proposed settlement of the Sitzer/Burnett lawsuit has received preliminary approval, the industry is receiving numerous updates about the future of real estate practices.
One change, set to take place in July, is that home buyers will be required to have written agreements with real estate agents before touring properties.
Although Zillow is not required to offer consumer-facing agreements, it recognizes that this step can foster transparency, open communication and better alignment between agents and clients. It also understands that buyers may hesitate when it comes to signing a long-term contract with an agent they don’t know.
To help solve this problem, Zillow is offering a non-exclusive touring agreement for agents to use.
In the announcement, Errol Samuelson, Chief Industry Development Officer stated, “…insisting that a buyer sign an exclusive, long-term agreement with an agent, perhaps before even meeting the agent, feels premature. That’s why Zillow has created a non-exclusive touring agreement, and we’re making it available for use to the entire residential real estate industry.”
With this agreement, neither exclusivity nor compensation is required. Zillow suggests negotiating these aspects after the initial meetings when both the home buyer and real estate agent are comfortable moving forward.
“At the time when an additional agreement is signed, the buyer and the agent should be aligned on all terms and expectations, including compensation, with no surprises,” Samuelson said in Zillow’s post.
While this agreement benefits buyers who are not ready to fully commit to an agent before touring a property, Zillow also emphasized the value agents bring to transactions, noting that agents help ease the complexity and stress involved in buying a home.
Zillow is encouraging agents to embrace transparency and prioritize building trust with clients, and the group is offering its touring agreement to all agents.
“As we move forward, it’s important to remain focused on who the real estate industry serves: buyers and sellers,” Samuelson stated. “In this moment of evolution we’re extending an invitation: join us in putting consumers first.”
Touring-Agreement-zCopyrighted-vr041124
From Zillow:
“Buying a home is complex and often comes with a lot of stress: half of buyers tell us they cried at some point during the process. Without an expert prioritizing their individual needs, buyers can miss out on making a competitive offer, leave money on the table in the negotiation, ignore potential pitfalls or waive important aspects such as inspections – which can end up costing them later. Most buyers want and need an expert on their side – we don’t see that changing. This makes finding the right agent that much more important and it’s why upfront conversations about expectations and compensation are critical. We strongly believe in the value of independent representation: buyers and sellers deserve to work with an agent who is committed to their best interests and only represents them.”
by Jim the Realtor | Apr 28, 2024 | Auctions, Bidding Wars, The Future |
It’s just a matter of time before a big player brings the auction format to the residential resale market. These guys are in position – they are auctioning commercial properties, and with their sister company Homes.com wanting to be the #1 search portal, it would be a natural transition:
When Sotheby’s sells paintings at auction, no one thinks of them as being distressed.
So why does real estate sold at auction get a bad rap?
Ten-X, the world’s largest online commercial real estate exchange, makes a positive case for auctions as the fastest and most accurate way of finding a property’s true value. By combining 21st Century online sales tech with industry-leading data from CoStar, Ten-X cuts through the inefficiencies of the traditional sales process, finding sellers the right buyer in an average of 100 days from marketing to close.
TRD sat down with Ten-X President Steven Jacobs and Vice President Victor Gutierrez to learn how their platform is perfect for sellers feeling stress in the current market, who need to get assets off their books before they become distressed.
Ten-X’s sales platform is built to establish a property’s value from the start and then find the right buyer in a timely fashion with as little back and forth as possible. But what may seem like an obvious way of doing business is actually the reverse of how most real estate deals are done.
“The way traditional sales are done is fundamentally backwards,” says Gutierrez, who describes the inefficiencies of the normal process: “I give you a bit of information, and then you give me the price you’re willing to pay, and then I give you the rest of the information, and then you adjust your price, and now we’ve been going back and forth for months.”
“When you’re selling a property, by the time you get through the first and second round of offers, then the best and final round and pick an investor, it’s taken five or six months,” adds Jacobs. Only then does the due diligence begin, after which, “a majority of the time you get a retrade.”
In the end, months after going to market, the result is a deal for a lower price than the initial offer. “It becomes a negative experience,” says Jacobs.
With Ten-X, this order of operations is turned on its head. “The buyer does the due diligence before making an offer,” explains Jacobs. “As a buyer, by the time you come to the auction, you’ve read the rent roll, you’ve toured the asset, you’ve looked at the financials, you’ve seen the property condition report. You’ve had access to best-in-class CoStar data and documents. All the stuff that you typically have to do post-contract, you’ve already done beforehand.”
This transparency benefits both sellers and buyers. For sellers, they can complete a sale in a fraction of the time as a traditional deal while retaining a similar degree of control over the price thanks to their ability to set a reserve price under which they can choose not to accept an offer. For buyers, not only do they have all the information before making a bid, but the process is transparent and fair, what Jacobs describes as “an even playing field.”
Buyers, like sellers, access the Ten-X platform through a robust digital platform that puts all the information they need to make an informed bid at their fingertips. Ten-X has also brought Stripe technology to the platform, which has streamlined the buying process further by giving bidders the ability to securely link their bank accounts for instantaneous approvals and real-time proof of funds updates.
Link to Full Article
by Jim the Realtor | Apr 24, 2024 | Auctions, Commission Lawsuit, Realtor, The Future
They are only three months into their mega-launch of Homes.com, and CoStar founder and president Andy Florance is already taking victory laps. He is also the #1 cheerleader for buyers going directly to the listing agent, which will be the end result of all the changes underway. Here’s Andy talking in front of a group of realtors:
Florance said Homes.com’s “Your Listing, Your Lead” model was the antidote to agent and consumer frustrations, as evidenced by triple-digit traffic growth during Q3 2023 that gave them a contested lead on Realtor.com as the second-most-trafficked residential portal.
“In the rest of the world, when an agent has a listing, their name is on the listing, their phone number is on the listing, and there’s branding happening,” he said to riotous applause. “Only in the United States is it the portals’ brand goes on the listing rather than the agents’ brand. That’s bizarre.”
Although CoStar didn’t reveal its exact plans for Matterport, Florance did outline a plan to capitalize on digital twinning, a term used to describe hyper-realistic 3D listing experiences.
Florance said digital twinning could enable homebuyers to visualize what their current home furnishings would look like in a new home, play with renovation options for a fixer-upper, or walk with a virtual agent through a virtual listing.
“In residential focus groups, homebuyers are telling us that they prefer listings that offer 3D digital twins so that they can best understand the property,” he said. “Adding virtual reality to Matterport, you can take a virtual tour of the property with your virtual agent who will walk into the space with you.
Florance spent a few moments of the call focusing on buyer-broker commissions and reiterated Homes.com’s potential value when NAR’s settlement terms go into effect this summer. Florance said Homes.com will give buyers an avenue to directly connect with listing agents to view a home, bypassing the potential pressure to sign a representation agreement before they’re ready.
“Currently only 30 percent of buyer agents ever get a written agreement at any point in the transaction process,” he said. “Homes.com connects homebuyers directly with the listing agent, so they can arrange to see the house with no paperwork or commitments.”
“We are increasingly confident in our ability to build out the number one residential marketplace in terms of traffic revenue and profitability in the years ahead,” he added.
CoStar owns LoopNet, the website for commerical listings, as well as ten-x.com/ which is an online auction house for commercial properties. It won’t be long before they bring auctions to the residential market, will it?
by Jim the Realtor | Apr 21, 2024 | Compass, Market Conditions, The Future
This is the #1 reason I went to Compass, and I didn’t really feel like I had a choice.
When realtors get disrupted, this is the way the big brokerages can survive while the little guys die.
Hoard the listings in-house as ‘private exclusives’, like they do in the commercial real estate. The practice is legal (per the Clear Cooperation Policy) and is a choice for home sellers to make.
The big benefit for sellers is that they don’t get penalized by the days-on-market statistic, which buyers normally consider as the best way to know if the price is wrong after the first week on the market.
Compass has this option available for sellers, as do all the other brokerages, but nobody in management is pushing it around here. It’s used more like a Coming-Soon feature while homes are being prepared for open-market exposure. But there are deals being made.
If there was an organized, committed effort to use it as a survival tool, then I could see 30% of our sales happening off-market. But we’re not there yet.
Maybe next year?
