As you can see in my mortgage-rate tracker (in right column), we had another meltdown today, and the conforming rate now is over 6% (with no points).
The idea of paying higher prices AND rates really discourages the move-up/move-down markets. Combined those with having to pay federal and state capital-gains taxes and the existing homeowners aren’t going to give moving another thought. They probably weren’t giving it much thought any way! And now they might have to sell their home for less? Forgetaboutit!
While most will be (rightfully) concerned about how the buyer pool could dry up, also keep in mind that for every move-up/move-down homeowner that decides not to move, the supply side shrinks a little more too.
Bill added more towns to this list, and it keeps showing how San Diego is bucking the national trend:
We’ve had enough buyers who NEED a house that sales will keep happening, regardless of mortgage rates. I’m sure buyers are hoping to just pay the list price, or less, to compensate.
Yet, after rates got into the 5s and several ER sales closed for less, here’s another over-list:
The number of active listings keeps climbing, which is expected. The likelihood of getting the list price wrong has probably never been higher, given that sellers have been planning their move for months – and they are going to test it out to see if they can get lucky, rather than adjust the price pre-maturely.
With more choices available, the buyers are reacting, and the number of pendings increased 10%.
As a reminder from last week, we used to have 900-1,000 active listings at this time of year:
It will be irresistible for people to wait-and-see where this goes. But ‘it’ is not going anywhere. Until there is some sort of boomer liquidation event, which at the soonest will be 5-10 years from now, the demand is going to out-strip the supply and keep the pressure on pricing.
I encourage readers to click on the ‘more…’ button (below) and examine the individual stats by price range. If there is going to be a supply-and-demand problem, it will be on the high-end, where the active-to-pending ratio is back to 10:1. But those sellers are the most equipped to handle it.
Are you wondering if our local housing market could maintain current pricing – or even go higher? It’s possible, and if it happens, a major reason will be baby boomers pitching in to help their kids buy a home.
Compare the 2018-2022 era to what’s expected to happen over the next 20 years (chart above).
And then there’s this:
It’s hard to determine exactly how many buyers are receiving help from their parents, in part because few are willing to discuss how they’re paying for a new home. But financial advisors say they’ve seen a wave of ultra-wealthy parents seeking advice on buying homes for their kids because of the increased gift and estate tax exemption.
The Tax Cuts and Jobs Act doubled the amount that Americans can pass on to heirs tax-free, to about $12 million for individuals and $24 million for couples in 2022. It will sunset at the end of 2025, when the exemption is scheduled to be cut in half.
It’s not just for the ultra-wealthy either. Every homeowner has picked up enough additional home equity lately that they might find a way to tap into it to help out their kids:
Unfortunately, the generational wealth transfer will do nothing to add to the supply of homes for sale – it will only create more demand of affluent buyers playing with money that’s been given to them.
The Fed will be forced to keep trying to control inflation, and Rob Dawg thinks mortgage rates will get as high as 7.25% (and they could go higher). It will cause an uncomfortable frenzy-transition period because the longer it takes, the more money will be inherited. Yikes!
With mortgage rates blowing through the fives and another Fed meeting coming up on Wednesday, I think we can declare that the frenzy is over.
Or at least we can expect that it’s over in the buyers’ minds.
But one fact remains the same: There still isn’t anything to buy.
Will there be a surge of new listings? It would be very unlikely. If homeowners weren’t motivated to sell for all-time record prices during ideal conditions, they won’t be interested in the thought of taking less either.
There will be a transition period while buyers, sellers, and agents get comfortable with the new environment. The talking heads will keep reminding us that rates are still historically low, and that buyers have more negotiating power now (up from zero, previously).
By the time we get to the Selling Season of 2023 though, the market players (buyers, sellers, and agents) should establish a decent comfort level with the direction of the variables.
The big question is: What will happen between now and February?
We can probably count on these:
Superior homes that are priced at 10% under recent comps will sell.
Inferior homes that are priced at 20% under recent comps will sell.
Buyers will wait it out, sellers will wait it out, and agents will keep doing what they’ve been doing and ignore anything that’s negative.
Sales will plunge.
Ponder the other likely possibilities:
There are going to be occasional deals, and almost all of them will be on inferior properties. Because all homes will need more improvements to be able to sell for retail, more agents will be inclined to recommend a dump-and-run on the original-looking homes.
There will be a ton of false starts. We are already seeing new listings get cancelled pre-maturely or being refreshed with a new and improved price (but not improved enough to make a difference). There will also be wicked buyer’s remorse as friends and family react violently to those buying now.
Surprisingly, there will be bidding wars and homes selling over their list price. Of the 55 NSDCC houses that have closed in June, 62% of them sold for more than their list price. It’s almost like an addiction!
The market will be driven by the out-of-town buyers who really want and need to live here. They didn’t let higher prices stop them, and neither will higher rates. What are they going to do? Not move here? There might be fewer of them, and they might take longer, but they will keep coming – count on it.
I picked a great day to start the mortgage-rate tracker in the right-hand column! >>>>
Mortgage rates haven’t been in the 6% range since 2008:
How many agents have operated in a 6% environment? It will be less than half of the active agents today. To check, their license number would have to be around 01850000 or lower (real estate license numbers in California are sequential).
Wondering how to cope? Here are my tips:
Sellers – Offer to Pay Points. Even if the buyer won’t use your lender, offer to pay 1%-2% of the loan amount to buydown their interest rate. If their lender keeps the money instead of giving a lower rate, well then, heck, at least you tried. But the buyers should appreciate the effort, and two points should reduce the rate by at least 1/4%.
Sellers – Carry the Financing. If the seller carries all or part of the financing at a reasonable rate, it will help the buyers. Plus, sellers only pay capital-gains taxes on the money you receive, so you’ll get a break there. The big bonus will be if the buyer stops paying – you’ll get your house back too!
Buyers – Get a Short-Term Mortgage. We call them ARMs, or adjustable-rate mortgages which sounds scary after the neg-am debacle last time. But they offer a fixed-rate for the initial term – just get a seven-year or ten-year loan and refinance once we go into recession and the Feb has to back off again (because they owe $30 trillion themselves, it will probably happen sooner than later).
While the impact on the buyers’ monthly payments is real, it’s the market psychology that will make it worse. Buyers will be expecting lower prices, so instead, consider one of my tips above as an alternative.
Here are graphs that look generally supportive of the local market.
The SP:LP is still well above 100%, though hopefully it will keep receding. Everyone should be happy with it running around 100% or a little under, like it has throughout the history of real estate:
There are more homes for sale – but still low for the selling-season:
June sales are going to be really low, which is fine. Both buyers and sellers have the right to wait for some future date when it might be different (conditions are not likely to change though).
Rapidly-rising prices have decimated the lower-end markets. We’re left with an affluent, higher-end market where buyers and sellers both tend to wait for something better, later:
Check out my new mortgage-rate widget in the right-hand column – we just hit 5.85%! >>>>>>>>>>>>
This film was taken on May 25th, a month after mortgage rates hit 5%.
I can’t wait to hear from the doomers who swear that because sellers had to take a whopping $50,000 haircut off the list price to sell this house to cash buyers who closed in two weeks (with sellers who wanted to occupy until August 1st), that this comp means the market is in trouble.
Would you pay almost $3,000,000 for this house, plus free rent?
Here are two more charts from Bill that indicate how the San Diego market is bucking the national trend.
Compared to last year, our inventory keeps going down!
I don’t know what property types are included in Bill’s counts, but let’s use the SDMLS count for number of detached and attached homes sold in 2021, which was 39,671 / 12 = 3,305 average number of sales per month – but 2021 was a huge year.
What was the average in a fairly normal year? The 2019 average was 2,904 sales per month.
In San Diego County, we can expect 2,900 to 3,300 home sales per month.
Look how many active listings there were last month (well into the 5%-rate era):
The market is being starved out. Other areas in the country are getting surges of inventory, but we’re not. Without a major surge, sellers can wait this thing out, and hope that buyers come around.
A few years ago, some friends appeared on a house-hunting reality TV show. They had a blast, but afterward, they revealed something that surprised me:
It was all staged. They’d already purchased a house when they filmed the episode, and that house wasn’t featured on the show at all. The houses they did look at weren’t even for sale.
Like any normal person, I accept that so-called “reality” TV is scripted to a certain extent, but I’d previously assumed there had to be some truth to those real estate shows: that the information they presented was somewhat reliable, and that you might be able to pick up at least some basics about real estate and home renovation from watching them.
The actual reality is: Nope.
Whether it’s a house-hunting show, a home renovation show, or a house-flipping show, the only thing you can rely on is that you’re probably being lied to. Buying or selling a house is more complicated than looking at three homes and having a conversation over a glass of wine, buying a fixer-upper probably isn’t a bargain, and the Property Brothers are not going to spend weeks in your house personally hanging drywall and grouting tiles.
But it’s worse than mere fakery—a lot of the information these shows give out is completely wrong. If you base your life decisions on what you see in real estate shows, you’re going to be very sorry. Here’s why.
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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.
