The California Association of Realtors said that the number of pendings has been falling.
They don’t give any other details or interpretations, so what will casual readers conclude?
The market must be coming apart!
Thanks C.A.R.!
But because pendings and sales are directly related to inventory, we must consider the impact of having fewer homes for sale. Look how dramatically the inventory has dropped recently, and yet we still had a good amount of sales, relatively:
NSDCC Detached-Homes
Year
Total Listings, Jan 1 to May 31
Total Sales, Jan 1 to May 31
Sales/Listings
2018
2,222
1,112
50%
2019
2,273
1,099
48%
2020
1,855
871
47%
2021
1,780
1,322
74%
2022
1,349
946
70%
In 2021, the frenzy was so hot that every house was selling, and the lower inventory wasn’t as obvious because the sales count was tremendous. But now that the number of homes for sale has really dried up, the impact on pendings and sales is more noticeable – at least for those who are willing to look that far.
This year has been really great! The rest of the year will probably be less great. It might even get back to 2018-2019 levels, which is fine – that’s the way it always was. We could handle worse if we had to.
This is our third look this year at a house in the Ranch of Carlsbad – the other two closed over $4,000,000 (one famously at $1,000,000 over list). This property didn’t sell in the first month, probably due to the interior looking somewhat original and in the Ranch – where lots are at least a half-acre – buyers expect more usable yard. The listing went live on April 7th at $3,400,000, they lowered it a month later to $3,250,000, and then it went pending on May 27th. It closed three weeks later for $3,175,000, which is a modest 2% discount off list.
Seeing how the government got us into this, let’s note that they are willing to carry some of the burden of higher mortgage rates. At today’s rates, buyers can write off twice as much mortgage interest!
Signed in 2017, the Tax Cuts and Jobs Act (TCJA) changed individual income tax by lowering the mortgage deduction limit to loans of $750,000 and under.
Let’s compare the amount of interest that is deductible in the first year:
$750,000 @ 3% = $22,285.85
$750,000 @ 6% = $44,749.47
The 30-year fixed-rate mortgage payment for $750,000 @ 6% is $4,496.63. To qualify, a buyer would have to earn approximately $200,000 per year, which would put them in the 32% tax bracket.
It means today’s buyer would pay about $7,188 less in federal tax in the first year, or ~$600 per month.
The difference between the 3% and 6% mortgage payments is $1,334 per month. With the additional $600 per month in tax savings, it means Uncle Sam picks up about 45% of the difference!
Now he’s done it. Chairman Powell’s remarks yesterday (and my comments at bottom):
Rates were very low. A good place to start is rates were very very low for quite a while because of the pandemic and you know the need to do everything we could to support the economy when unemployment was 14% and the true unemployment rate was well higher than that. So …
And that … that was a, uh, rates were low and now they are coming back up to more normal or above levels. So … in the meantime, while rates were low and while demand was really high … obviously demand for housing changed from wanting to live in urban areas to some extent to living in single family homes in the suburbs. Famously. And so, the demand was just suddenly much higher.
So we saw prices moving up very very strongly for the last couple of years.
So that changes now. And rates have moved up. We are well aware that mortgage rates have moved up a lot. And you are seeing a changing housing market. We are watching it to see what will happen.
How much will it really affect residential investment? Not really sure.
How much will it affect housing prices? Not really sure. Obviously, we are watching that quite carefully. You’d think over time … There is a tremendous amount of supply in the housing market of unfinished homes … and as those come online …
Whereas the supply of finished homes, inventory of finished homes for sale is incredibly low. Historically low. So it’s a very tight market. So prices might keep going up for a while, even in a world where rates are up. So it’s a complicated situation and we watch it very carefully.
I’d say if you are homebuyer, somebody or a young person looking to buy a home, you need a bit of a reset. We need to get to back to a place where supply and demand are back together and where inflation is down low again, and mortgage rates are low again.
This will be a process were by ideally, we do our work in a way were the housing market settles in a new place. And housing and credit availability are at appropriate levels.
Good grief!
One of the most powerful players in the world is making moves that will negatively affect every American, and he’s not sure how it will turn out? Did you ask anyone? Did you seek advice from anybody who is actively involved with the real estate market (not economists) to get some opinions?
Certainly, someone from the real estate industry will help him out….like Larry:
Oh, ok great. In response to her question about whether home prices will go down, he said we should produce more oil to reduce gas prices and lower inflation so mortgage rates could come down and make homes more affordable. Thanks for clearing that up, Larry!
What nobody is considering is that SELLERS GET A VOTE. If potential home sellers think that the Fed is trying to tank the real estate market, then they won’t sell now – they will wait for better days ahead.
I talk to buyers and sellers every day. I’ve knocked 1,000+ doors this year in search of potential home sellers, and haven’t gotten a single listing. The ridiculously high price they can get today isn’t enough to get them to sell. If they think that we’ve past the peak, they really won’t move!
Buyers need a reset, alright. But this won’t be it!
This 1998 tract house sold for $2,440,000, or +$144,000 over list price (+6%). The +6% should be about the maximum from now on. Heck, these are selling for the same money as they were getting next door in the Ranch of Carlsbad last summer!
This just hit the market and will be a good one to watch.
It’s the least-expensive house for sale west of I-5 in Solana Beach, and it’s in a quiet little stretch only a block from the beach access and walking distance to everything in downtown SB! Asking $2,395,000 – thanks to the Compass listing agent Wendy!
By the end of today, the 30-year mortgage rate should be in the mid-6s – who would buy a house now?
Between higher prices, higher rates, and the hefty federal and state capital-gains tax, the move-up/move-down homeowners are effectively locked in to their existing home. It’s just too hard to make sense of a move, unless there is another strong reason to overcome those.
It would help if they don’t mind leaving town, and probably leaving California. But who wants to do that?
Without the move up-and-downers, the supply and demand will both be greatly diminished, and the number of sales should drop significantly. But there will always be sales!
Here are the potential buyers who might still be interested, even at 6%-7%:
The Mega-Rich – When they see something they like, they just buy it.
Tenants – They are sick of how high the rents have become, and they don’t want to keep moving around trying to ease the pain. Some inheritance would help.
Inheritance/Gifts – They have been waiting, and now their ship has come in.
Job Transferees – They are used to owning, and they usually have their company’s blessing – and relocation package ($$) to assist them with the transition.
Contarians/Opportunists – The deal hunting will kick into high gear.
Self-Employed – Lenders should ease up a bit on underwriting to keep the doors open, and the alternative mortgage products might get more love. Qualifying with 24 months of bank statements, instead of tax returns, and getting a 8% or 9% rate won’t sound as onerous as it did when rates were 3%.
Most Everyone at a 10% to 20% discount – Those who stay in the hunt might get lucky!
Hopefully, the floor for NSDCC sales should be around 100 per month while the market recalibrates in preparation for the next selling season.
If sales drop below 100 per month, then I’ll be looking for the panic button!
Coming off the initial covid months, everyone thought the red-hot market was an acceptable reaction to the way our world had changed. But it’s gone too far, and somebody had to do something – and the Fed is going to do it again tomorrow, which will continue the rise in mortgage rates.
It means sales are going to tumble, which is nothing we can’t handle.
Here’s how it looks so far:
NSDCC June Sales
2017: 360
2018: 299
2019: 282
2020: 274
2021: 357
2022: 61
Currently there are 198 homes in escrow, and 68 of those were marked pending this month.
Of those that went pending prior to June 1st, let’s guess that 100 of them will close in June – and there might be a few others that are just coming together this week with a quick close date in June too.
It will make for around 180-200 NSDCC sales this month! It’s quite a bit lower than usual, but we’ll survive.
We’ll have more unsold listings, longer market times, price reductions, and fewer sales – it’s all part of the recalibration! Additional price reductions are an unreliable indicator because you don’t know how crazy the recent list prices were in the beginning, and they have never been so optimistic, even for the frenzy.
The closed-sales pricing will be the last thing to change, if at all.
I’m sticking with my +/- 5% for NSDCC pricing here in Plateau City.
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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
Trustindex verifies that the original source of the review is Google.
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
Trustindex verifies that the original source of the review is Google.
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
Trustindex verifies that the original source of the review is Google.
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
Trustindex verifies that the original source of the review is Google.
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.
