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The Selling Season Is Here!

The Super Bowl is complete, and the spring selling season begins today!

Judging by the quick jump in the total number of pendings, homebuyers aren’t waiting around. Mortgage rates have risen faster than any time in the last dozen years, and the number of homes for sale is scary low:

There was heavy activity over the weekend, and on the hot buys, the offers seemed to be starting at 10% over the list prices – which is now the new normal.  Waiving contingencies and giving sellers free rentbacks for 60 days will be part of the landscape for the next few months.

Will rising rates cool off the market? Only for those who are on the fringes and sensitive to payment shock. The affluent – the buyers who are controlling the market – are less impacted, and a measly 1% rise in your loan rate only changes the payment by $1,116 per month on a $2,000,000 mortgage.

How long will the 2022 frenzy last?

It should stay hot until one of the following happens:

  • Mortgage rates hit 5%
  • A flood of inventory
  • Mid-summer

By summertime, the pool of highly-motivated buyers should be diminishing, and we’ll be left with those who haven’t been willing to pay these prices. Remember that when you see another crazy-high sales price, there was only one buyer who was willing to pay that much – the rest all wanted to pay less!

San Diego Brokerage Rankings, 2021

I screwed up the national rankings the other day. Donna sent me that clip but it was the 2020 list, not from last year. Anyway, who cares about the national – real estate is local!

In just 3+ years, Compass has become the dominant real estate brokerage in San Diego County, and it’s not close. Even if you add the two CBs together, our volume last year was almost double any other brokerage.

How will this affect consumers in the future?

As buyer-agents are phased out over the next 1-2 years (and it could happen sooner), there won’t be a need for the MLS. Inputting our listings onto Zillow will become voluntary, and only used if the homes can’t be sold in-house.

It will be just like the commercial side of real estate, where all the good deals are kept in-house, and only when they don’t sell, are the listings inputted onto LoopNet.

Encinitas Ranch – The Comps, Part 2

Will my sale end up being a fluke, or are these prices sustainable? It will depend on how the homes are sold.

This is another pending sale that will likely close above $3,000,000 too:

https://www.compass.com/listing/819-jensen-court-encinitas-ca-92024/891355227122800457/

It will be the sixth sale over $3,000,000 this year in Encinitas Ranch!  With a solid foundation of six sales, the next peak to climb is obvious – potential ER sellers will be wondering if they can get $4,000,000!

Buyers will cringe at the thought, and be reluctant to be the first to pay it.  Everything will have to go perfectly for a $4,000,000+ sale to happen.

Let’s identify what could impede such a sale:

  1. Coming Soons – Advertising the property to the public before it’s ready to be shown just diminishes the urgency. By the time a buyer does see it, their dwindling enthusiasm and disappointment has already set in.
  2. Value-Range Pricing – As we head into the post-frenzy era, the gimmicks and sideshows only wear out the buyers. They want the truth, and an easy path to purchasing the home.
  3. Poor presentations – Professional photos and videos will be a must – buyers want to swipe! Once they get into the home, it better look like a top-notch model home to warrant $4,000,000.
  4. Hard to show – Having to clear hurdles like submitting financials just to see the home, having tiny windows of time to see the home, and having the listing agent follow around the buyers like a hounddog only create anxiety in buyers.
  5. Unattractive High List Price – The list price will need to start with a three, to get to a 4-handle. Otherwise, the gap will seem too large, and buyers will be tempted to wait it out.

But even if the sellers and listing agent handle all of the above correctly, it will still come down to how they handle the offer(s) once received.  If days go by and then the typical counter-offer is returned with several demands like free rent for 60 days after close, buyer must waive appraisal (or all contingencies), and a higher price than offered, it will be easy for buyers to back away.

Get Good Help!

Seller Optimism Is Up

The frenzy has been making headlines for so long that potential sellers are much more optimistic now.  The 2022 Frenzy could look a lot different (i.e., list prices that start too high with sellers expecting even more). Bold added:

Realtor.com’s survey of 2,583 consumers, which was conducted online by HarrisX in September-October 2021, found that:

The majority of prospective sellers plan to list before the end of the year or in early 2022.

  • Among homeowners who indicated they will enter the market in the next year, 65% expect to within six months, including 19% who have already listed their home.
  • Compared to the spring (76%), more of today’s prospective sellers (93%) have already taken steps toward listing their home, including working with an agent (28%).
  • More than one-third of prospective sellers, at 36% each, have researched the value of their home and others in their neighborhood, as well as started making repairs or decluttering.

Consumers’ top reasons for selling reflect the rising influence of more time spent at home during COVID.

  • Compared to the spring (15%), nearly two-times as many prospective sellers (33%) have realized they want different home features after spending more time at home.
  • With more sellers having children at home this winter (65%) than in the spring (43%), family considerations are a top reason behind homeowner decisions to enter the market: 37% of prospective sellers say their home no longer meets their family’s needs and 32% want to move closer to friends and family.
  • The rise in remote work is also a key driver this winter: 23% of sellers are looking for a home office and 19% no longer need to live near their workplace, up from 6% in March.

Sellers have greater expectations of the current market this winter than in the spring.

  • Over one-third of today’s prospective sellers are eager to take advantage of the current market and think they can make a profit (35%), up from the spring (24%).
  • When asked how the current market impacts the terms they will ask for, top responses included asking for above what they think their home is currently worth (42%) and asking for a quick close (29%).
  • Compared to the spring, more of today’s prospective sellers anticipate that buyers will compete in bidding wars, offer above asking, forgo contingencies like inspections and appraisals and more.

Today’s prospective sellers plan to list in relatively affordable price ranges and are potentially more willing to compromise if their expectations aren’t met.

  • Sellers with homes at the core of the market ($351,000-$750,000) remained the same over March (29%). However, more sellers plan to list in the $500,001-$750,000 price range, which overlaps with recent median listing prices in increasingly popular first-time buyer cities like Riverside, Calif. ($540,000), Austin ($546,000) and Denver ($600,000).
  • More than three-quarters (77%) of prospective sellers would be willing to accept a lower offer to close quickly versus just over half in March (54%).
  • Compared to Spring sellers, a higher number of today’s prospective sellers plan to take alternative routes like moving in with family (19%), as well as temporarily renting their home back from the buyer (29%).

“The right time to sell your home is a deeply personal decision that has to be right for you and your family. For homeowners who do feel ready to sell, getting pricing right from the start is key to a fast and successful home sale in any market – take the goldilocks approach,” said Lexie Holbert, Home & Living Expert at Realtor.com.

https://news.move.com/2021-11-11-Low-Temps,-High-Expectations-Realtor-com-R-Survey-Shows-65-of-Prospective-Sellers-Plan-to-Enter-the-Market-this-Winter

Mandatory Fire Inspection

The state has a new rule that any home that is within the Very High Fire Hazard zone must be inspected for compliance when selling. Each fire district has developed their own way to handle the requests, and Carlsbad charges $149 to visit the property and issue their report on the same day.

Here’s how our first inspection went:

Once the report showed some issues, it’s negotiation time because nothing in the contract dictates who is responsible – and the city doesn’t require compliance or does any reinspections.

Donna received the report promptly, and called me and asked what she should do.

But I had already handled it with the buyer’s agent.

I traded the responsibility for the fire hazards for the fridge!

Contractors are Busy!

For those who are thinking of selling next year and plan to do some improvements, don’t wait to begin.

In fact, start today!

Yesterday, I contacted three different flooring contractors, and all were booked into December.  Our GC is currently booked for two months, our pool-repair guy has work scheduled for the next FIVE MONTHS, and our plumber gave up and suggested that we find someone else.

If you want us to provide an initial consultation and give opinions of what repairs/improvements would be smart to complete prior to selling, feel free to contact us – now. We can call in favors if needed – the pool guy got started within two weeks!

It made me wonder how many homeowners were in the hunt for a new house over the last 1-2 years, and have since given up on moving and decided to remodel instead.

No matter how small the percentage, it means the demand for homes for sale will be increasingly more dependent upon the out-of-towners who don’t have a house here yet.  Their desperation level is higher than our current homeowners here who are comparing to what they already own……and who are finding it more difficult every day to justify a move.

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More slides from the C.A.R. forecast:

They are forecasting a 5.2% YoY drop in sales in 2022, after we will likely set the all-time record for sales here in 2021.  They are probably considering the slowdown in pending sales:

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They also showed how 70% of the business is done by 30% of the realtors….and the rest of the agents are barely in business with less than two sales per year:

Get Good Help!

San Diego County Median Sales Price, History

While we’re talking about the median sales price of detached-homes in San Diego County, let’s review the last ten years. There usually is some dropoff towards the end of the year:

The last frenzy in 2013 saw the median sales price increase 26% between January and September.

The Greatest Frenzy of All-Time started with closings in May, 2020 that had a median sales price of $660,000. It peaked in June/July at $875,000, which is a 33% increase and lasted five more months than in 2013. I’m happy with it, the fun was great while it lasted, and now here we are.

Well, at least until 2022.

There was some hesitancy in the market at the end of 2013, but it took off again in 2014.

Look at the difference though (the graph is interactive).

The increase was only +7% between September, 2013 and June, 2014 before it decelerated again – and the median sales price in November was back to where it was in the previous September!

Sellers should appreciate the big boost we’ve had, and the uncertainty of the future.  Don’t attempt to time the market for max return – it’s great where it is today.

Why Sell Your Home Now

School is back in session and the holidays are right around the corner – it’s the time of year that potential home sellers start looking forward to the next selling season, instead of moving in September/October.

Are you thinking of waiting until 2022? Here are my reasons for selling now, instead of later:

1. The Shine Is Off The Frenzy.  Those who are pulling back on their enthusiasm:

JBREC – Two of three buyer categories are down slightly (above chart).

CoreLogic – they only predicted a gain of +9.1% in San Diego pricing over next 12 months, which is way less than the +23.7% since last July. Don’t be surprised if +9% becomes the new +3% of predictions – it’s a lot higher than the previous safe bets without being double-digit.

Zillow Offers – backtracking 5% on price commitments made 2-3 weeks ago.

Navy Fed – suspended the issuing of home-equity loans ‘temporarily’.

Refi appraisals – heard of several appraisals coming in low as market softness creeps into their minds.

2. Interest rates – They have nowhere to go but up, and it’s just a matter of when. Once they start, home buyers will want something in return from sellers.

3. Boomer liquidations – There probably won’t be a mass exodus, but all you need is 2-3 on your street.

4. Fewer Fix-Ups – The current inventory is so thin, sellers are getting away with murder now. If there was an index that measured how close sellers got to selling ‘as-is’, we’d be setting records today.

5. Safe – You know what you can get today, and let’s admit – it’s a lot higher than it used to be. Cashing out now instead of risking any of the above getting worse in 2022 is the safe bet. How much are you hoping to hold out for next year? Another 2% or 3%?

When is the best time to sell? When everyone else isn’t!

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