Over the history of real estate, buyers have determined the market.
They decide how much education and investigation they need to complete before making what is now the biggest decision of their life, and then they proceed when ready – or when they see an attractive house, hopefully in that order! There isn’t much education available on how to do it, so people just trust their gut and start looking around – even those who already own a home. HGTV makes it look easy (see three, and buy one), and the disrupters keep promoting that their agent-lite program is all you need. In a hot market, the investigation/education phase usually gets obliterated.
You’d think it would cause people to Get Good Help, to compensate – and many do (thanks!).
But once on the playing field, the buyers are split into two categories:
Those who own a home here now, and are trying to do better.
Those who don’t own a home here, and want/need to get in.
Buyers from the second category are determining the market.
They see every decent home get snatched up by those who got desperate sooner. It becomes a race for those newcomers to get desperate enough so they can compete with those ahead of them.
Buyers in Category 1 already have it good. Even if their home doesn’t suit their current needs, it’s what got them here. The property taxes are lower, the neighborhood is a known quantity, and they are comfortable. Are they going to rise to the same desperation level as those who don’t own a home here yet? It’s doubtful, even if the Prop 19 passes and sellers can take their property-tax basis with them anywhere – nobody is desperate to leave coastal San Diego.
It’s what is causing the inventory to be so thin, and why I’m convinced it’s only going to get worse.
Consider these factors:
Baby boomers are older now – if they haven’t moved yet, it’s probably too late. They will make do with their current residence, and make it last for the duration. Kids will inherit, and one of them will occupy as their primary residence – and the cycle of low inventory for sale will continue for another generation.
San Diego is a mid-range market – there are a number of more expensive areas that makes us look cheap, relatively. It’s those move-down buyers from affluent areas who are filling up Category 2, making it very tough for locals to compete, which prevents them from moving…..which means less inventory.
There aren’t any new-home tracts left to build in Coastal North County.
There will be massive pressure on the Fed to keep rates low for years to come.
The business is being dumbed-down for easier consumption, not smarter.
These factors will keep the inventory low, and competition high for a long time. It also means that the deliberate, informed buyers will keep getting run over by those who are just in a hurry to buy a house.
The old adage of buyers determining the market is being snuffed out.
Sellers can name their price now, and there is probably someone who will at least consider paying it. Until unsold listings are stacking up to the rafters, sellers will ensure that prices keep creeping upward.
Yesterday, we closed our fourth off-market buyer sale of the year (Richard, 1 and Jim, 3).
Here’s how they happened:
Reaching out to other agents working the neighborhood.
Saw one in the Compass Coming Soon section (which was public).
Saw one on Zillow as a Coming Soon.
I haven’t been a proponent of this method for my sellers. But pursuing off-market inventory is a good way for buyers and their agents to increase their choices.
One challenge to completing an off-market sale is that the seller will use the idea of going on the open market as a negotiating tool, and they are prone to beating you over the head with it. But at least the chances of getting into a bidding war are greatly reduced.
The new Clear Cooperation policy allows for in-house sales, which is legitimizing the off-market sale. Brokerages everywhere are being forced to develop their own exclusive off-market platforms.
Now we have Coming Soons being uploaded to our MLS only (and not to the search portals).
Everything seems like “If” these days, but if we had a market comeback, the dates of a modified and compressed selling season would be fairly predictable, looking at it logically.
The actual results will be a matter of compression and intensity.
If there isn’t much of a market rebound, then we might only have a couple of hot weeks in July, and a lot of standing around, relatively. If things get cooking, then we could have a solid 4-6 weeks before school starts (in red above) when the most sales will be made.
The dates in green is when buyers will be looking hard – and might be when the best deals are made.
Two to four weeks in October will be a lost cause, due to the election. In December, buyers and sellers will both pack it in early for the holidays, and prepare to GET ‘ER DONE IN ’21!
Next year’s selling season is 11-12 months away – we gotta be ok by then, right?
The panic ensues over the coronavirus, but people want and need to move too – especially as mortgage rates climb higher. What can we do to keep the real estate market hopping?
Here’s what can we do for home sellers.
Those who are concerned about strangers coming into their house should go ahead and move to their next home first. We can give you a Compass Bridge Loan to access up to 90% of your equity in your current home to purchase your next one, and we’ll front up to $50,000 for home improvements and staging to make selling your old home more effective. Let’s go this route on every home sold – it’s easier on you!
What can we do for home buyers?
The COVID-19 might be what finally gets agents to do video tours of homes. Selling homes by video is a real possibility, and if listing agents just walked around the house with a camera like they were showing it in person, then every potential buyer could see it from the comfort of their own home. If making a film makes you queasy, have your kids do it – they have no problem with producing videos.
This could also be the chance for home auctions to take hold. After a few days go by and/or the video reaches 100+ views, then conduct an online auction to determine the winner. Then have that buyer view the home in person, keeping traffic to a minimum.
Or have buyers submit written offers after seeing the video tour, and if the seller permits, have only those contenders view the home in person. Investment properties are regularly sold this way to minimize the impact on the existing tenants – you’ve heard the phrase, “Show with offer”.
Either way would reduce human interaction and possibly make home-selling MORE effective.
Buyers don’t necessarily need to see the home in person, either.
My buyers purchased this home and closed escrow without ever stepping foot inside. We also did a video of the home inspection, and between the two, the buyers got a full experience of what they were buying – and never saw the house in person until they owned it:
Either we can adopt new and improved ways to serve our clients and keep everyone moving, or we can sit at home watching the paranoia grow on TV. It’s your choice!
From the doctor in charge of infectious diseases at Rady Children’s hospital:
With our tight inventory and ultra-low mortgage rates, it kinda feels like Tesla stock. One minute you’re in the $800s, and the next thing you know, the same house is in the $900s!
What can buyers do?
Don’t buy crap.
Simple enough, right?
But it’s hard to accomplish both, because the best locations have the oldest homes.
Let’s narrow it down further.
If you can afford a decent location, what else can a buyer do to ensure a smart purchase?
Buy a newer home, and/or buy a one-story home.
Newer: Homes built in the last 15 years typically have modern floor plans with a large open great room and lots of windows that allow for ample natural light. When you go to sell it someday, it will still be a desirable home without a load of upgrading or maintenance costs to you.
One-Story: Boomers aging in place guarantee that the scant supply of one-story homes will stay tight, and those that do leak onto the open market will be hotly contested.
Here’s a good example.
This sold for $850,000 two years ago, and after a complete remodel it goes on the market for $1,149,000…..and they get multiple offers. Those who thought they could still buy a nice house in Old La Costa in the $800,000s are really scratching their heads now! But it had the good location, and the sellers added the new look to clinch a nice boost in value.
If you want to stick with a newer house and/or a single-story house, what are your chances?
# Built Since 2005
# One-Story Built Since 2005
0 – $1M
$1M – $2M
$2M – $3M
Buying a newer home or a single-story really looks daunting now, but if you can pull it off, you got it made!
Insisting on a newer home and/or a one-story home will give you maximum assurance that you’ve made a smart buy that will appreciate better than the rest. We can add a few older homes that have been thoroughly remodeled, but they probably still have a floor plan cut up into smaller rooms with low ceilings.
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I consider myself a rather savvy buyer/seller. I've bought/sold 7 times in more "
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