“Did they just get caught up in the frenzy fever – or is Jim really that good”?
“Or does he just list ’em low just to stir up the frenzy?”
Let’s consider the two most recent sales, #3 and #6 on the list above.
Number 3 is a model-match to the subject property, but it did not have the additional bedroom and full bath down like we did. Our list price of $1,379,000 reflected a $54,000 premium for those.
Number 6 is the bigger floor plan and is RIGHT ACROSS THE STREET from our listing – and it closed for $1,410,000. We would have to expect that buyers would consider it strongly.
Two things to note about the subject property:
We have a downstairs master suite, which is an in-betweener. Seniors who want the traditional one-story think it’s too much house for them, and some families with little kids don’t like having them on a different floor. It’s probably why we had three offers, and the pending listing had eight offers.
Our backyard was a similar size as all the other comps and was tastefully landscaped, but it didn’t have any extras that would cause people to pay more. It also had a window that stood out:
All considered, our original list price of $1,379,000 looked like full retail when we started.
Nobody offers $91,000 over list just for the heck of it. Only two of comps closed substantially over list price, and just by $30,000 – which is way different than $91,000 over.
Admittedly, our market conditions have been hot and the inventory had dwindled down to there being virtually nothing similar for sale when we listed. But it was also December, so the holiday spirit or the raging pandemic could have cooled our chances too.
Someone must have created an ideal environment for buyers to pay the extra pop!
Two other notes:
Mr. Seller has read the blog since 2005 – my second seller this year who has been here since the beginning!
I first met the sellers on December 1st, and thirty days later they closed for $91,000 over list price. Is that the type of efficiency you’d like to have? Then contact me to sell your house!
He is right – I don’t give much thought to SEO, which is probably why we had the lowest number of estimated monthly visits (by far) of the nine blogs included. He mentioned that the view-counter tends to be low, especially for hyperlocal sites.
Here’s our number of viewers this month from Google Analytics:
If defaulters were pressured to pay or sell…..what metro areas would suffer most? Even in the worst cases, any additional inventory from defaulters will be drawn out over time because they don’t want to move.
It looks like the San Diego-Carlsbad region is under San Francisco’s 6.22%!
I didn’t see this until today – but the hotness sounds similar throughout SoCal:
Katerina Krumwiede wasn’t looking to move.
She and her husband, Rob, recently spent “well over” $100,000 on a complete remodel of their Encino house that added a backyard gazebo, custom kitchen countertops, new roof and imported bathroom tiles from Spain.
But Krumwiede, 40, said the single-story house still lacked quiet space — a drawback when the COVID-19 pandemic hit and she had to work from the master bedroom if she wanted to escape the sound of her husband’s frequent video calls.
Eventually, it became too much, setting off a chain reaction that led the family to sell their Encino home for $1.5 million and purchase a larger one in Calabasas for $1.7 million.
“It was very uncomfortable sitting on the bed all day long,” said Krumwiede, an entertainment industry lawyer. “My back was really hurting.”
In recent months, the national and Southern California housing markets have been red hot. Bidding wars are common. Homes fly off the market in days.
Many experts say the frenzy is due in large part to the pandemic. Although many low-wage workers worry they’ll face eviction, the economic downturn has left relatively unscathed the higher wage workers more likely to buy homes in the first place.
Federal Reserve policy has helped drive mortgage interest rates into the recently unheard of 2% range at the same time people are spending more time at home and realize they could use more space.
But the torrid pace of the for-sale market raises the question: Just how long can this continue?
For some, the pandemic simply accelerated decisions planned for the near future. And unemployment is still high, which will hinder home-buying dreams for others.
After an insanely unpredictable real estate market in 2020, will our strong sellers’ market continue in North San Diego County’s Coastal region? Probably, but it should be more balanced.
Mortgage rates around 3% (and under) will continue through at least the first half of next year, but how about the low inventory? The number of homes for sale today is 38% fewer than it was last year at this time, so it appears 2021 will start out with the lowest inventory ever for any new year.
But I don’t think it will last.
Do we have pent-up supply waiting to burst onto the market? Here are my categories where I think we will shave additional homes come up for sale, roughly in the order of the most-likely contributors:
1. Move-Uppers – Covid-19 changed what we want from homes. Low rates/high equity make it possible!
2. Baby Boomers – A survey said that half of seniors delayed listing their home in 2020 due to Covid-19.
3. Politics/Taxes – Many Californians have had enough. The migration trend to other states should ramp up.
4. Work From Home – This trend frees up many to move…..up and out!
5. Forbearances – Lenders will be lenient, but some in default will tap their equity, rather than risk losing it.
6. Prop 19 – Enables 55+ homeowners to take their low property-tax basis with them. Though this won’t be the sole reason to move, it makes for a nice sweetener – and may be the last straw to make it worth it.
7. Divorce Rate is Up 34% – Technically,this could add more sellers AND buyers, but realistically those coming out of a divorce will be more likely to split their equity and take a break.
8. Unemployment – Older homeowners will grapple with taking a pay cut or quitting the job-search altogether – and retiring earlier than expected won’t seem so bad when their home’s equity has never been so high. More boomer moves that would have happened in 2022-2025 will be pulled forward.
9. Eviction Ban – In the second and third quarter of 2020, there were 11% of renters who missed a payment. Mom and pop landlords will begrudgingly sell and pay the capital-gains tax, rather than risk another episode like this one.
10. 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.
The potential home sellers that are in more than one category (and have more motivation) will be the first out – which means we should get off to a fast start in 2021. We probably won’t see a flood, but it will only take 10% to 20% more sellers to change the game dramatically.
The house across the street and a couple of doors down from my pending listing in La Costa Oaks went on the market today. I emailed the listing agent to tell her that we had 25 showings during the first weekend, and our sales price – which is higher than her list price. She appreciated the tip.
She got back to me later – she has TEN showings today!
Christmas is next week. I hope we get the day off!
Long-time broker Jeff Hyland promoting his new high-end search portal
While the Real Estate Frenzy of 2021 appears to be on its way, there are reasons why it could be muted, or not happen at all. Here are a few:
Lack of Inventory: Our recent history of fewer homes for sale is likely to continue. It’s not getting easier to move – and most will say it’s harder than ever to sell your home and buy another one around here (you need to leave town to really make it worth it). If would-be sellers get discouraged and decide to pack it in instead, the frenzy will get whipped up but not sustain without a continued flow of product. A real frenzy needs momentum, which will be more detectible if we have 10% to 20% more homes come on the market like I predict.
Rates Go Up: It’s unlikely the Fed will do much, if anything, for the next 1-2 years. But al we need is for rates to get back up into the mid-3s and buyers are going to cool off quickly. They already don’t like these prices, and they will insist that any rise in rates should be accompanied by lower prices – and they will at least pause for days or weeks to see what happens.
List Prices Go Nuts: The most-likely deterrent to a frenzy will be the jubilant over-confidence of sellers who aren’t happy enough to have picked up ANOTHER 5% to 10% appreciation in 2020 – and insist on packing another big lick on top of that.
Cocky Agents: I had one on Sunday refuse to show her listing after two days on market – she already had enough offers. I guess we need to understand that some agents can’t handle a full load, but it’s the surly attitude that comes with it that wears people out. It is a confidence that prevails throughout the industry, and when buyers tire of it, will agents notice in time? Doubtful.
Buyer Exhaustion: There will come a point where some buyers will give up.
Craziest Buyers Already Bought: Just because we had a frenzy in 2020, doesn’t mean it will continue. It’s always different players every year.
Vacations Resume: Those who value a great vacation probably skipped one this year, so they will make up for it this summer.
As the threat of Covid-19 diminishes, so do the reasons for moving: For those who were moving to improve their pandemic environment, will they still need to move once the pandemic goes away?
The potential 2021 home sellers would be smart to get a jump on it and sell in February or March, just in case the frenzy turns into a glut. You might leave a couple of bucks on the table if the market around you evolves perfectly and nobody else lists their home for sale. But if a few neighbors try to get out right when you do, the competition could turn into a price war (it’s a fine line).
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After the first offer, I suggested to the sellers that we raise the list price which I don’t remember ever doing before – and remember plenty of times when I resisted such an idea. We bumped the list price by $20,000 to $1,399,000 knowing we had a good offer higher than that already. It was intended to give second notice on the hotsheets that this might be worth a look, so I added my update for extra transparency:
It may have worked – I have nine more showings tomorrow, making a total of 25 showings in the first 2.5 days on market. The demand for these newer neighborhoods makes you think we could be selling 2x or 3x the number of homes if there were just more to sell!
I hope he didn't get pushed out - he's the best that San Diego ever had: Padres broadcaster Ted Leitner to transition to new role in 2021 https://www.mlb.com/press-release/press-release-padres-broadcaster-ted-leitner-to-transition-to-new-role-in-2021?tcid=tw_article_ via @MLB
At the close of a presentation to a large audience of real estate agents today, I was asked to succinctly compare the Manhattan sales market of 2020 to the potential for 2021. Upon reflection, I said that 2021 had the potential to suck less.
"Where do we begin..2020 has been a year for everyone. When COVID hit and shut down both my husband and my businesses, we were left with a mortgage and very little income coming in. We were stressed, scared and felt stuck. We made the hard decision to sell our home and move out of state. We contacted the Klinges' and spent a good hour going over what we hoped we could accomplish. Jim and Donna came over with comps in hand and suggestions on improvements to get our house ready for the market. It was overwhelming to think about, but Donna was there and one step ahead in every scenario. more "
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I consider myself a rather savvy buyer/seller. I've bought/sold 7 times in more "
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