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Inventory By Area

What’s it like being a home buyer today? It’s a bonanza if you are in the multiple-millions category – there are hundreds of choices! If you want to stay under $1,500,000, the inventory looks bleak:

NSDCC Active Inventory

Town or Area
Zip Code
Actives Under $1.5M
Actives Over $1.5M
Overall Median List Price
Cardiff
92007
1
11
$2,895,000
NW Carlsbad
92008
4
10
$1,872,000
SE Carlsbad
92009
7
9
$1,594,000
NE Carlsbad
92010
2
0
$842,000
SW Carlsbad
92011
5
2
$1,149,000
Carmel Vly
92130
2
21
$3,450,000
Del Mar
92014
0
42
$5,423,000
Encinitas
92024
6
34
$2,737,000
La Jolla
92037
3
95
$4,245,000
RSF
92067
1
100
$5,295,000
Solana Bch
92075
0
12
$5,075,000
NSDCC
All Above
31
336
$3,995,000

Should the lower-end buyers be discouraged? No! There are 92 pending sales listed under $1,500,000 – they just sell fast. The lower-priced you are, the more tuned up you have to be to win a bidding war.

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Paying Over List Price

The days of wondering how much of a discount you could get off the list price have been replaced with hoping to limit how much OVER the list price you are willing to pay.  For buyers, how much to pay is relative to how well the home fits all of your needs, and how much you love it.

Here’s a gauge of how to determine how much to offer:

  • For home you only like a lot, try to keep the premium-above-list to 5% or less.
  • The average winner pays 6% to 7% over the asking price.
  • The top-rated masterpieces are fetching 10% (or more) above list price!

Any decent property that’s fixed up and priced right should go pending in 7-10 days.

If you are a dare-devil, one strategy to consider is waiting a couple of weeks after a home is listed for sale. If it hasn’t gone pending, then the condition, price, or agent was a problem and by then, the herd has cleared out so you should have a little more negotiating power.

But if you think the new listing is a hot one, then you better get over there right away for a look.

Tips:

  1. Ask if the listing agent has a strategy for determining the winner.  Most agents will spread the offers out on the coffee table, and let the sellers pick one. If that’s the case, the terms of price, down payment, waived contingencies, and escrow time will probably be what determines the winner – with influence from #2:
  2. Any compliments you can bestow on the sellers and listing agent in person or with a love letter can go a long way.  The love letters have come under scrutiny lately, and I totally agree that sellers and agents will discriminate consciously, or sub-consciously. Just use your first names and no photos.
  3. Know what you are looking at, and don’t overpay for fixers. You may see crowds, but almost all buyers will pass on the fixers.  If you aren’t that familiar with spotting needed repairs and identifying costs, then work with someone who is.
  4. Waiving contingencies. It’s uncomfortable, but your competitors are doing it. All four of the Crater Rim buyers who were willing to pay $90,000+ over the list price waived their appraisal contingency.
  5. If you know you are going to buy the house regardless, make your deposit non-refundable and release it to the sellers within seven days after acceptance.
  6. Have your mortgage pre-approved by a well-known and respected lender who will call the listing agent to sell them on your qualifications.  If there are cash offers, this is about your only hope to compete.
  7. The listing agent has influence on the selection, and prefers a buyer’s agent they know and trust. The buyer’s agent is smart to provide their own qualifications that demonstrate they can close a deal.

If all else is equal, the homeowners want to sell to someone who will close on time with minimal problems. Someone who makes it easy. Somebody they like.  Buyers are smart to make a lasting impression on the sellers or listing agent, because in a close race, how the sellers feel about the buyers will decide it.

Get Good Help!

Have you been thinking about getting a great realtor to help you buy a home, but feel loyal to your Aunt Bea or a friend who just started in the business?  This story is for you.

We received five offers on our new listing over the weekend.  The lowest offer was written by a new agent who is in her brokerage’s mentor program, and even her mentor attended the showing which made me feel like this was important. Typically, the mentors are has-beens who can’t hack it any more on the front lines, and instead want to be pseudo-coaches for new agents and get a chunk of their commissions.

I told both the agent and the mentor that we had already received multiple offers over list price, and to make their highest-and-best offer.  Once received, I asked specifically, “is this your highest-and-best offer?”

They never responded.

We had three buyers who were willing to pay at least $90,000 over the list price, so I engaged them in a second round to determine the winner.

We accepted an offer that was $100,000+ over the $1,100,000 list price.

Yesterday, the new agent got back to me and said her buyers are willing to match our high offer.

Even though her buyers must have been extremely interested in the house, the advice they received didn’t even put them in contention at the time.  And now it’s too late.

Immediate buyer demand requires, and deserves, immediate great advice.

I regularly meet people for the first time at a house in which they have interest – and I proceed to discuss the state of the market, evaluate the condition of the house and repair costs, and then pinpoint the value of the home based on comps and suggest a strategy to win it. There’s a handful of my clients who bought the first house they saw.

Get Good Help!

~~~~~~~~~~~~~~~~~~~~~~~~~

For the skeptical who want proof of the demand, here’s the turnout over the weekend:

Low Inventory, Defined

We’ve heard for years now that the inventory is low.  For the casual observers, it’s a discouraging thought – but it’s not as bad as it sounds. There have been plenty of homes for sale this year, and in 2020 we could post the highest number of NSDCC sales in history…..during a pandemic!

For everyone’s sake, we should be more clear. There have been plenty of homes for sale – they just sell fast, giving the appearance that there isn’t much for sale.

The inventory of ACTIVE listings is low, especially in the more-affordable price ranges.

Look at the median days-on-market of NSDCC homes sold this year:

Price Range
Listings Since 1/1/20
Actives
Pendings
Solds in 2020
Median DOM
Under $1M
597
11
52
529
9
$1M – $1.5M
1,305
30
97
1,044
13
$1.5M – $2.0M
939
63
91
648
23
Over $2M
1,633
352
126
816
38

If you want to buy a NSDCC home for less than $2,000,000 today, you have 104 choices. In an area of 300,000 people!

But don’t despair – we have sold 2,220 homes sold for less than $2,000,000 this year, mostly to buyers who had a strategy of jumping on the new listings quickly.

What can buyers do?

  • Work with an agent who has a great reputation in the community.
  • Work with an agent who has bidding-war strategies and works in the off-market space.
  • Work with an agent who can present a compelling case on why sellers should accept your offer.
  • Make a cash offer.
  • Get pre-approved with an impressive and well-known lender.
  • Consider removing contingencies upfront (be careful).
  • Include an intro love letter that’s neutral/generic so sellers can’t discriminate.
  • Make a big deposit – and maybe non-refundable if you know you are going to buy the house.
  • Let sellers occupy for free after closing.
  • Find a way to make an offer that’s not contingent upon selling another property.

Get Good Help!

Only An Occasional Low Sale

The 15% increase from the last peak 15 years ago doesn’t seem bad, though both were bubblelicious thanks to stimulus (exotic financing then and ultra-low rates today).

https://wolfstreet.com/2020/11/24/the-most-splendid-housing-bubbles-in-america-november-update/

The big difference is that the last bubble was built on the backs of the the under-qualified borrowers who took exotic mortgages from unscrupulous loan brokers.  The bad loans were funneled to Wall Street, where the same thing happened – the Tan Man took advantage of greedy but unknowing financiers and the combined effect exposed the house of cards.  Without the end users making their payments, the machine came to a grinding halt.

Could it happen again?

Because mortgage underwriting has been strict over the last ten years, it’s hard to imagine that a wave of homeowners loaded with equity would get foreclosed – and then the banks would give them away too.

But it is possible that we could have mild swings of 5% to 10%.  But if there were a couple of low sales, wouldn’t the lower-motivated sellers just wait it out? Probably.

Here’s a recent example we can follow – I think we can call this a low sale:

1756 Skimmer Ct., Carlsbad, CA 92011

4 br/2.5 ba, 2,409sf one-story with 3-car garage on a 10,041sf lot.

LP = $1,328,000 on September 10, 2020

SP = $1,000,000 on November 17, 2020.

The home had been on the market for a couple of months and it was time – the seller was ready to move!  My buyers offered the right price, on the right day, and the seller signed it.

It’s a classic example of finding a long-time owner who could sell for less and still walk away with a bucketful of money. The seller paid $430,000 when the home was new in 2001. They didn’t put in any upgrades then or now – it was the original carpet and paint, etc., they made no attempt to improve the property for sale:

https://www.compass.com/listing/1756-skimmer-court-carlsbad-ca-92011/603767865654710185/

The thing to appreciate about this home is that it backs to dedicated open space, where the other side of the street backs to Poinsettia, a four-laner which will soon be connected to the I-5 off-ramp about a mile away.  My buyers benefit from easier access but no noticeable road noise!

New bridge in red

The last two sales of this model were $910,000 and $935,000 in 2017 (does anybody want to pay within 10% of 2017 prices today – yeah!). The last sale on this street was a newly-built 3,380sf home at the end of the street that sold for $1,380,000 in August. It was in the shadow of the power lines, and backed to El Camino Real/Poinsettia intersection with substantial road noise:

Here are the one-story homes sold in the last six months – they average $533/sf, and we closed at $415/sf:

Yes, I’m tooting my own horn for being the agent who recognized that this home was languishing on the market, had an original owner and would be a candidate to sell for less.

But will I be the villian who started the Big Downturn in the 92011? No, every other one-story-home seller nearby will shrug this off and list for at least $500/sf in the foreseeable future.

 

San Diego Top 5 Brokerages

The local recruiting effort by Compass has been very effective, and it’s really starting to show up in the numbers. With 1,200+ productive agents in San Diego County now (I was #160 in July 2018), we are taking away market share and becoming the dominant brokerage – especially in the coastal markets.

How will it all play out?

There could be a tectonic shift in the business if this lawsuit prevails.  The result will be that the commission rate paid by the seller to the buyer-agents will be revealed publicly (can’t find them now), and it could end up that buyers will have to pay their buyer-agent’s fee, instead of the seller:

https://www.seattletimes.com/business/real-estate/a-challenge-to-real-estate-commissions-gains-ground/

This training video from a realtor seminar is expected to be a key piece of evidence:

If buyers have to pay their agent’s commission, hopefully they will take more interest in their qualifications, and ability to give good help! We’ll see which brokerages can survive then.

2021 Moving Survey Results

The results are in!

We reached 1,692 people, of which 89 participated in the survey, which is about right.

Let’s go through each question.

Q1. Most of the participants (2/3) already live in San Diego County.  The question was passive in nature, but it was interesting that 10 out of 86 people have thought about moving here!

Q2. No surprise that 2/3s aren’t moving, but stunning that the next highest category was those who are selling and leaving California!  Of those who are moving, 37% are leaving the state!

Q3. (No chart) Their results chart was poorly formatted, but 10 out of 70 rated their likelihood of moving as an 8,9 or 10.

Q4. Of those who plan to move, 27% are jumping right on it in the first quarter of 2021!

Q5. Covid-19 only caused 5 people to change their plans about moving?

It’s still 7% of those surveyed, which is enough to change the outcome, especially if we had that much more inventory to sell. The tipping point is probably more like 15% to 20% additional inventory to sell – then buyers might take a step back to see where this is going.

Q6. A bit of a shocker here: Getting My Price was the least concern!  It may look easy, but getting your price in 2021 will require skill and some luck. Finding the Next Home is by far the biggest concern, and if we have more inventory it could grease the wheels a bit.

Q7. Those who aren’t moving would have selected the #4 answer, but glad to see the majority believe in good help!

Others left warm thoughts appreciating the blog and the effort. It’s my pleasure – thanks for participating!

2021 Frenzy Preview

While the 2020 is winding down and we look forward to next year, I’ll occasionally repost the unique factors that will have impact on the 2021 selling season. Let me know of any others:

Ultra-Low Mortgage Rates – Rates around 3% are expected to continue through 2021, and they are probably the #1 factor that keeps buyers interested – because you can buy more house!  This is especially helpful for those who are trying to move up – if their current rate is higher, then getting 3% or lower helps to offset the increase in price.

Vaccine News – Just the thought of Covid-19 coming to an end will energize the populace, and the motivated buyers & sellers will want to get a jump on it – even before any actual vaccine is readily available.

Work From Home – This trend frees up many to move.

Unemployment – Older homeowners will grapple with taking a pay cut or quitting the job-search altogether. Retiring earlier than expected won’t seem so bad when their home’s equity has never been so high, and more boomer moves that would have happened in 2022-2025 will be pulled forward.

Eviction Ban – With both tenants and landlords being affected, this new frustration could cause more transactions that are rushed (buyers pay too much/sellers giving it away).

Politics – No matter who wins the presidential election, it will be the last straw for some.

Divorce Rate is Up 34% YoY – Technically, this could add more buyers and sellers, but realistically those coming out of a divorce will be more likely to split their equity and take a break.

Prop 19 – Our association swears that more 55+ seniors will move if Prop 19 passes, so if it does, we’ll have more sellers and buyers. I still expect Prop 19 to be soundly defeated.

Capital-gains tax.  From the WSJ: Biden will raise the tax on the capital gains of high earners to the same rate as wage income, increasing the rate to 43.4% (39.6% plus Medicare 3.8% investment tax) from 23.8%. Mr. Biden on Thursday estimated that these increases on high earners would raise $92 billion, but that’s before they put their tax lawyers to work. Biden has also said he will eliminate the 1031 exchanges, but all of the above will need Congressional approval. Just the thought could cause landlords to hurry up their plans of selling.

Don’t Own Here Yet – Renters, first-timers, and out-of-towners have a different look at our home values because they don’t own here yet.  They are more motivated to get their hands on something, and will pay more than those who are just trying to do better than what they already own.  The market will hinge on buyers in this category!

Those are TEN reasons why 2021 will be the most exciting real estate market ever!

Get Good Help!

No More Love Letters

The time-honored tradition of buyers hoping to sway sellers with a personal introductory letter came to an abrupt halt this month with the new FHDA form (see snip above).

Not only has it been customary to submit a letter of introduction with your offer, but if you don’t, the listing agent usually asks about the buyers. I had one last week say, “Tell me their story” which probably wasn’t meant to gather information to use against them, but who knows?

Paragraph 8A mentions ‘actual or unconscious bias’.  Agents who are stuck in their ways may not realize how this information is being digested.

It’s not just for agents either. Paragraph 7 specifically includes sellers and landlords too.

Nobody reads these forms so the practice will probably continue for a while, which means that those who DON’T include a love letter could be hurting their chances if other agents keep doing it.

(hat tip Annabama)

Bad Time to Buy?

Here’s a sexy headline:

Red-hot home prices have more consumers saying now is a bad time to buy

Anyone out hunting for a house knows that bidding wars are no longer the exception, but the rule.  Demand for housing has been unusually strong, due to the coronavirus pandemic, and supply is historically lean. That is a recipe for high prices, which are now beginning to take their toll on potential homebuyers’ confidence.

The share of buyers who say they think it’s a good time to buy fell in September, from 59% to 54%, according to a new survey from Fannie Mae.

Home values were up nearly 6% annually, according to CoreLogic, a data analytics firm. More consumers now expect those price gains to grow.

The percentage of respondents to the Fannie Mae survey who says prices will go up in the next year increased from 33% to 41%, while the share who said prices would go down decreased from 26% to just 17%.

More people do think now is a good time to sell a home, which is an improvement from the first months of the pandemic, when potential sellers didn’t want shoppers in their homes and worried about the state of the overall economy.

If seller sentiment improves substantially, that could help bolster supply and take away at least some of the heat in prices.

“Going forward, we believe the wild card to be whether enough sellers enter the market to continue to meet the strong homebuying demand,” said Doug Duncan, Fannie Mae’s chief economist. “The home purchase market requires the proper mix of home price growth and continued economic recovery to achieve sustainable levels of housing activity.”

https://www.cnbc.com/2020/10/08/red-hot-home-prices-have-more-consumers-saying-now-is-a-bad-time-to-buy.html

A bad time to buy? When you can get a mortgage rate under 3%?

Any possible declines in home prices will be offset by higher mortgage rates, so there won’t be much, if any, savings in your payment if prices did come down – but fewer people in the survey think that’s going to happen. You would pay less property taxes, however.

Saying it’s ‘a tough time to buy’ would be more accurate.  Finding the right house, at the right price, is extremely difficult – but many signs point to the supply increasing next year.  Stay engaged, regardless of what the talking heads tell you about the general market. You only need one!

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