I think we can say that summer is over, and the off-season is here.
How will the rest of 2022 play out, and what will be the effect on the 2023 Selling Season?
We know that the local NSDCC sales counts will be low for the rest of 2022. Last year we had 136 closings between August 1-15, and this year we’ve had 65. If we keep having about half of the 2021 sales, then our total sales between August and December will be 594, or an average of 119 per month!
It could look something like this green line:
We will probably have fewer listings than ever in 2H22, but those sellers should be motivated to sell. If they didn’t need to sell, wouldn’t they be tempted to just wait until spring to go on the open market?
We know that every seller has a load of equity, so if they have to lower their price to sell, they could. But will they? We can speculate that if they only had to lower their price by 5%, then they would make the deal. But going lower than 5% off is where the trouble starts – and the seller’s ego gets a vote.
If sellers continue to hold out on price, and sales follow the green line, it will look like a hard landing – and the 2023 selling season could end up being a dud. It would definitely get off to a slower start, and could sputter through the selling season if the inventory is lackluster and priced at retail, or retail-plus.
How likely is that? Very!
The second-half sellers of 2022 are going to determine our fate for the 2023 Selling Season. Expect next year’s market to be somewhere in the Sputter-to-Frenzy range, guaranteed!
But if you are a buyer, what are you going to do? Wait until 2024?
Let’s re-visit this in January. If sales beat the Green Line, then a more active market in spring is likely!
The latest Zillow 1-Year Forecasted Values are still expecting a fairly strong appreciation rate over the next year – these estimates are the same or higher than last month! I can see a path to how this could happen.
The Spring Selling Season gets frenzied up for 3-4 months where buyers and sellers all jump in at the same time, and then the market goes flat for the rest of the year…..kinda like this year!
NW Carlsbad, 92008:
SE Carlsbad, 92009:
NE Carlsbad, 92010:
SW Carlsbad, 92011:
Carmel Valley, 92130:
Del Mar, 92014:
Encinitas, 92024:
La Jolla:
Rancho Santa Fe, 92067:
They do have website-viewer data that nobody else has, and hopefully they are using it to track the activity and make predictions.
The reason for breaking down the active and pending listings by zip code is to give the readers a closer look at their neighborhood stats. We’ve considered a 2:1 ratio of actives-to-pendings to be a healthy market.
Most areas today have the same or better stats as they did last month. The number of active listings hit their peak in August last year, as usual, and it’s likely that the count of unsold listings will drop slowly over the rest of 2022 (and the pendings follow). Prepare for 2-3 months of NSDCC sales being under 100!
NSDCC Actives and Pendings
Taking out the high-enders La Jolla and Rancho Santa Fe, the actives-to-pendings is 2.4-to-1 (291:121), which isn’t bad, all considered.
Mid-February, and the 2023 Selling Season, is only six months away!
Yesterday was the Compass 2Q earnings call (transcript here) and as usual, the headlines focused on the net loss of $101.2 million – more than half of which was stock-based compensation for agents.
Compass has been very generous in their support of agents nationwide, and management is finding ways to effectively scale it back a bit. For example, they won’t be offering stocks as a recruiting tool any more. But we, the existing agents, aren’t affected by recruitment, and we’d be fine if they didn’t hire another agent! So while the stock may get battered, the agents are doing well.
I’ve mentioned that our annual contract is up in July. There was a time when we discussed Kayla joining Compass in NYC, and during that discussion our CEO offered us a 2-year contract. I brought it up again last month, and he agreed to it. We signed a two-year extension a couple of weeks ago – we are happy here!
Here are the Compass internal comments about the earnings call:
It’s probably true that seniors are leading healthier, longer lives and will prefer to age-in-place – which will keep a limit on the number of homes for sale and temper any downdraft in pricing. What is worse is that the resulting back-up will cause others to stay in their current home forever too!
It was asked on Twitter, ‘how could homes prices get cut in half?’ I said, “Boomers die 10x faster”, which got my Twitter account suspended temporarily. Let’s see if they do it again!
Reader ‘just some guy’ sent in this UT article – an excerpt:
On Thursday, county officials announced that San Diego County has become the first county in the nation to have all 18 of its eligible hospitals receive the Geriatric Emergency Department (GED) Accreditation.
San Diego County is home to a large population of people age 60 and older, and that demographic is projected to continue growing over the next decade. Today, there are approximately 670,000 county residents in this age group, and by 2030, they are expected to surpass 900,000, said Nick Macchione, director of the county’s Health & Human Services Agency.
Seniors are more likely than almost any other age group to visit the emergency room. The county reports that each year, about 275,000 county seniors make ER visits, which leads to about one-third of all hospital admissions. “That is why it’s critically important to have all our hospitals that are eligible be geriatric certified,” Macchione said.
There was a nice bump of 17 additional pendings in the past week, from 151 to 168. The biggest increase was in the $4,000,000+ category, which grew from 24 to 32 pendings!
There are two pendings priced at $10,000,000+, and 51 active listings!
It doesn’t look like there will be much more change in the quartiles this year:
I’ll find someone to buy my $2,295,000 listing in La Costa Oaks, and it could be the last LCO listing of the year. It will mean that LCO sellers will be expecting at least $2-something in the 2023 selling season, which won’t feel like prices dropped much while buyers were on vacation.
Here is a wider look at the fire map for Encinitas/Carlsbad.
The blue dot is the location of my listing in La Costa Oaks; a neighborhood of 820 homes built in 2005-2013 (long after the Harmony Fire of 1996). The newer homes were built on the outskirts of town, so if you prefer a recently-built home, it’s very likely that it’s going to be in the fire zone.
For those who can’t find a traditional insurance carrier to provide fire insurance, there is the California Fair Plan. Here’s a quote from a Liberty Mutual agent:
Regular homeowners policy (liability, theft, etc.): $1,700 per year.
CA Fair Plan (fire): $3,500-$5,000 per year, depending on the deductible amount.
My sellers’ policy (with fire coverage) with Mercury Insurance is $3,500 per year, so the additional amount with the CA Fair Plan is approximately $3,200 per year if you like a lower deductible.
Homeownership is expensive. If you want a newer house, it’s likely to be located in the fire zone and be more expensive to insure. If you buy an older home, you’ll probably spend the same or similar amount having to update/improve it every year to bring it up to today’s standard. It’s your choice!
For home buyers, it’s hard to tell if you are on red alert hunting for houses, or sitting on the sidelines because it feels the same. Either way, there aren’t many homes to consider – you can go weeks without seeing anything worth a look – so it’s hard to keep your chops up.
Then add in the end-of-summer malaise as families focus on back-to-school events and we have an environment that you would think was flat. But the first ten days of August are off to a better start than July, and about the same as June.
What is different this summer:
Higher mortgage rates.
No urgency due to stalled pricing.
Having to wait now extends to sellers too.
What is the same:
Ultra-low inventory of quality homes at decent prices.
Sellers have lots of reasons not to sell or lower their price.
Buyers who really want to buy have to cope with the desperation.
The biggest problem is that price reductions don’t change any of the above – unless you really dump. The two listings we’ve seen that chopped $500k have found their way into escrow, so we can say that the half-million reductions work.
But the usual 2% to 5% reductions aren’t going to impress buyers, especially after 30+ days on the market. By the time any of today’s active sellers lower their price enough (at least 2x), it’s going to be October and a little too close to the 2023 selling season. They will wait until then instead.
What’s the Best Thing Buyers Can Do? Expand the zone – look farther out and/or consider the fixers.
What’s the Best Thing Sellers Can Do? Complete more improvements – make it look like a model.
September should be more productive than we expect – we’re overdue for some real action, and buyers who have been patient might throw some offers around. Hang in there – Halloween is 80 days away!
What if you convert a vacation home to your primary residence, live there for at least two years and then sell it? Can you qualify for the full $250,000/$500,000 capital gains tax exclusion? No.
If you sell a main home that you previously used as a vacation home, some or all of the gain is ineligible for the home-sale exclusion. The portion of the gain that is taxed is based on the ratio of the period of time after 2008 that the home was used as a second residence or rented out to the total time that the seller owned the house. The remaining gain is eligible for the $250,000 or $500,000 home-sale exclusion.
If you hold rental property, the gain or loss when you sell is generally characterized as a capital gain or loss. If held for more than one year, it’s long-term capital gain or loss, and if held for one year or less, it’s short-term capital gain or loss. The gain or loss is the difference between the amount realized on the sale and your tax basis in the property.
The capital gain will generally be taxed at 0%, 15% or 20%, plus the 3.8% surtax for people with higher incomes. However, a special rule applies to gain on the sale of rental property for which you took depreciation deductions. When depreciable real property held for more than one year is sold at a gain, the rule requires that previously deducted depreciation be recaptured into income and taxed at a top rate of 25%. It’s known as unrecaptured Section 1250 gain, the number of its own federal tax code section.
Take this simple example: You bought a rental home for $300,000, deducted $109,000 of depreciation and sold the property for $500,000 this year. The first $109,000 of your $200,000 gain is unrecaptured Section 1250 gain that is taxed at a maximum rate of 25%, while the remaining $91,000 is taxed at the regular long-term capital gains tax rates.
Note that the unrecaptured Section 1250 gain can also apply to the sale of your main residence if you took depreciation deductions for it in the past, such as from a conversion from a rental home to your primary home or if you had an office in the home.
Capital losses from the sale of rental real estate can offset your capital gains, plus up to $3,000 of other income.
When real property used in a business or held for investment is exchanged for like-kind real property under Section 1031 of the tax code, all or part of the gain that would otherwise be triggered if the realty were sold can be deferred. This tax break doesn’t apply to main homes or vacation homes, but it can apply to rental real estate that you own.
The rules are very complicated and tricky, with many requirements to meet. Also, President Biden and Congress have proposed rules to limit the break. Make sure to talk to your tax adviser if you’re contemplating a like-kind swap.
See eight examples of the capital-gains tax when selling a home here:
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We sold a home with Jim and Donna and from beginning to end they were consummate professionals. Their initial walk through the property resulted in a list of items to be repaired or updated. They supplied a list of vendors and job quotes to do the repairs and updates. We originally wanted to sell ‘as is’ and just get it over with. They gave us a selling price for ‘as is’ and options for doing a few updates/repairs to doing it all with the selling price for each option. We agreed to do all they suggested and we sold for the exact price they predicted. For every dollar spent we got back more than $2 back in the selling price. And they got that price in a rising interest rate environment! Donna and Jim are extremely detailed and guide you through ever aspect of the sale. There were no surprises thanks to their guidance. We couldn’t be more pleased with their representation.
Thank you Donna and Jim,
Jerry and Mary
Heather Quejada
March 27, 2025
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We have known Jim & Donna Klinge for over a dozen years, having met them in Carlsbad where our children went to the same school. As long time North County residents, it was a no- brainer for us to have the Klinges be our eyes and ears for San Diego real estate in general and North County in particular. As my military career caused our family to move all over the country and overseas to Asia, Europe and the Pacific, we trusted Jim and Donna to help keep our house in Carlsbad rented with reliable and respectful tenants for over 10 years.
Naturally, when the time came to sell our beloved Carlsbad home to pursue a rural lifestyle in retirement out of California, we could think of no better team to represent us than Jim and Donna. They immediately went to work to update our house built in 2004 to current-day standards and trends — in 2 short months they transformed it into a literal modern-day masterpiece. We trusted their judgement implicitly and followed 100% of their recommended changes. When our house finally came on the market, there was a blizzard of serious interest, we had multiple offers by the third day and it sold in just 5 days after a frenzied bidding war for 20% above our asking price! The investment we made in upgrades recommended by Jim and Donna yielded a 4-fold return, in the process setting a new high water mark for a house sold in our community.
In our view, there are no better real estate professionals in all of San Diego than Jim and Donna Klinge. Buying or selling, you must run and beg Jim and Donna Klinge to represent you! Our family will never forget Jim, Donna, and their whole team at Compass — we are forever grateful to them.
Lou F
March 27, 2025
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WeI had the pleasure of working with Klinge Realty Group to sell our home in Carmel Valley, and I cannot recommend them highly enough!
Jim and Donna demonstrated exceptional professionalism, offering expert guidance on market conditions and pricing strategy, which resulted in a quick and successful sale.
Communication was prompt and we were well-informed throughout the entire process.
For anyone looking for a dedicated and knowledgeable real estate team, look no further!
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William Sams
March 25, 2025
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Donna and Jim Klinge of Klinge Realty Group have our highest possible recommendation. From Donna and Jim’s first visit to our house through closing their advice and counsel was candid and honest in all dealings. They kept us fully informed throughout the process. The house sold less than three days after listing with a two-week closing. My wife and I have sold several houses during our lives. This was by far the best experience. Klinge Reality is a premium service realtor. You can’t make a better choice for someone to sell your home fast and for top dollar.
Emily Hernandez
December 29, 2024
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Donna and Jim provided exceptional support and professionalism throughout the entire process. We couldn't have been happier with their efforts. They made our house shine, and thanks to their expertise, it sold above the listing price in the very first weekend! Truly a fantastic experience from start to finish.
Jesus Adrian Sahagun
November 11, 2024
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This year has been difficult on our family, mainly due to having to sell our home. Thankfully we knew God had a plan for us and working with the Klinge team was a key part of it. It was an obvious decision to work with them again after such an amazing experience when purchasing the same home we needed to sell. The challenge was, how will we do this in so little time with so much going on? Jim and Donna held our hand every step of the way. Whenever an unexpected issue arose they found and provided a solution. Never once did we feel pressured to make a decision and the Klinges were always reassuring after providing the information that the decision was ours to make. Despite the curve balls, they never panicked and exemplified the “can do” attitude, making us feel optimistic and taken care of. Their expertise and professionalism was superb. But of all the reasons to work with the Klinges, the most impactful and valuable is their compassion and genuine care for their clients. We pray that we can one day purchase our forever home and you better believe that Jim and Donna will be representing us - as long as they will have us of course. Thank you again Klinge team! Your execution, experience, and care are unmatched.
SABIHA PASHA
July 23, 2024
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Jim and Donna were fantastic! Jim understanding my needs, recommending potential places, pointing out the pros and cons of each property was invaluable. Then when the offer was accepted Donna’s organized guidance through the inspections, paperwork etc made the whole process seem effortless.
So grateful that I had them on my side!
Anu Koberg
July 13, 2024
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We first found Jim through his blog at bubbleinfo.com, which really showcased his knowledge of SoCal real estate. Since then we've done three transactions with Jim and Donna, and they are an incredible full service agency, with Jim's deep market insight and Donna's deft contract and project management. We trust them implicitly in their analysis and strategy, which is based on years of experience. They're always available and on top of things, and we strongly recommend them to anyone.
Bjorn Isachsen
July 10, 2024
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The Good
The Klinge Realty Group operates like a finely tuned machine, with a very personal touch. We contacted them on a Sunday and they were talking to us about our family and our needs on our living room couch the following day. They carefully listened to us and worked with us to identify the best and quickest path to listing within 2 weeks to take advantage of the low inventory conditions in our South Carlsbad neighborhood. They knew our tract specifically and had many previous sales there over the years - they came prepared with a thorough analysis of comparative sales and recommended a pricing strategy that they felt confident would yield offers the first weekend on the market.
The Great
Over the next two weeks Donna coordinated a range of vendors who she knew from experience could get the preparation to list work we needed done on time and with high quality. Our light tune-up involved excellent experiences with their stagers, landscapers, contractors, electricians, and plumbers. Throughout this period Donna's daily communication was clear, concise, and responsive. Any time we had questions Donna picked up the phone or texted immediately - but almost always, she answered our questions before we even knew we had them.
The Outstanding
We had a tricky situation with a shared fence that could have delayed our escrow. Donna used superb mediation skills to negotiate the terms of replacement and was personally on site with the fence contractor to make sure everything went smoothly. The fence looks great and escrow closed on time.
The Truly Exceptional
Our house came on the market on a Wednesday and between then and Monday morning Jim was personally at all three open houses. He was in constant communication explaining potential buyer reaction and strength. As he predicted offers began to come in on Saturday and each one was incrementally higher than the last. At the end we had 5 offers, 4 of which were over list, and the final accepted offer was $100,000 over list. In addition to being over list it included rent back terms that met our needs.
The Recommendation
For all of these reasons we would strongly recommend The Klinge Team to anyone wanting to sell in North County Coastal San Diego. I had been reading Jim's bubbleinfo.com blog for 15 years and knew when the time came to sell that he would be our first call. Jim Klinge is not your standard realtor. He is keenly aware of market conditions and sales strategies. And, works his tail off - though not as hard as Donna . At this point he's gone from realtor to friend and I plan to have him over to grill and chill at our new place to talk real estate, but also just about life and raising kids in San Diego. He's more interested in relationships than his sales numbers - and that's why his sales numbers are so high. We have already recommended the Klinge's to some close friends and another successful sale is on deck right around the corner...
Chris Shea
June 21, 2024
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We recently had the pleasure of working with Jim and Donna from Klinge Realty Group to sell our house, and we couldn't be more satisfied with the experience. From the initial meeting, they listened attentively to our needs and provided invaluable guidance on specific improvements to get our home market ready.
Their responsiveness throughout the entire process was truly impressive. Anytime we had questions or concerns, they were quick to address them, ensuring we felt comfortable and informed every step of the way. What stood out the most was their team and extensive network of tradespeople, which made addressing any necessary repairs or updates seamless and stress-free.
Thanks to their expertise and dedication, our house sold quickly and at a great price. We highly recommend Jim and Donna to anyone looking to buy or sell a home. They are a fantastic team who truly care about their clients and deliver exceptional results.
