Zillow Lowers Forecasts

Zillow has every reason to be the nation’s real estate cheerleader since they derive the bulk of their income from realtors. They had been predicting 3% to 6% appreciation locally this year….at least up until two weeks ago.

Something has changed:

Carlsbad NW – 92008

Carlsbad SE – 92009

Carlsbad NE – 92010

Carlsbad SW – 92011

Carmel Valley – 92130

Encinitas – 92024

Carmel Valley out in front with a +2% over the next year? Yikes!

It means they think that everywhere else will be flat, at best.

I’ll post the other areas when received.

DOJ Speaks Up

The elimination of buyer-agents continues:

The U.S. Department of Justice broke its silence in court on Tuesday on the impending changes coming for the real estate industry in the wake of settlement agreements by major brokerages and the National Association of Realtors in what experts say was a statement Realtors should heed.

During a status hearing for a case in Massachusetts, Jessica Leal, an attorney for the DOJ, said the regulator would neither support nor oppose the NAR settlement agreement, which will lead to sweeping rule changes this summer. “We believe offers of compensation should not be made anywhere, but certainly not on the MLS,” Leal said.

Without any advertised commitment to pay them a commission, what will buyer-agents have to endure? At best, the seller-paid commission will be a moving target, and many, and probably most times it will end up being peanuts. Any agent who expects to be a successful buyer-agent will have to become experts at having their buyers pay them.

But even if an agent can get buyers to sign a commission agreement, the process of buying a home around here is very difficult.  I have an entry-level buyer right now who is making full price, all-cash offers, and over the last 45 days has struck out six times in a row.

Buyer-agents are being squeezed out by several market forces, and who will mind? The lack of transparency and the games the listing agents play are so unsavory that buyers and their agents will have to be extremely motivated to succeed just to eventually buy something. Agents won’t want to represent buyers under these circumstances, and just quit instead.

The real issue now is that buyers HAVE to hire a buyer-agent in writing to buy a house. Once they figure that out, will they investigate the choices carefully, or just grab someone? Or have Aunt Bea handle it? Or just go to the listing agents? Once the frustration sets in, going to the listing agent will seem like a way to improve their chances.

But the old-school listing agents will cop an attitude and either not want to do dual agency at all, or they will want the buyers to be unrepresented. Progressive listing agents will encourage buyers to come to them directly, and it is inevitable that it will become the prevailing trend. It’s how the commercial brokers do it, and it’s mostly because agents don’t like other agents – not because it is what’s best for the buyers and sellers.

These agents discuss some of the pitfalls here. They have built a realtor team of 51 agents since covid, and have sold 448 homes in Connecticut over the last 12 months – so they are in the game. But they don’t come up with any perfect solutions – because there are none:

In other words, it’s going to be a mess of a market as agents turn their focus on getting buyers to sign an exclusive agreement. It will just complicate further what is already a very challenging environment.

All-Cash Market

How does our market keep trucking along with sky-high prices AND mortgage rates 2x higher than they were three years ago? How does pricing levitate when money is so much more expensive – shouldn’t prices adjust downward?

We know that the generational wealth transfer of $70 to $80 trillion dollars is underway, and this is where some of it is showing up – purchases of quality real estate.

There have been 115 closings between La Jolla and Carlsbad this month, and 47% of them were all-cash. It’s the highest percentage we’ve seen so far, and it’s likely to continue.

Those who aren’t paying all-cash have big down payments to help cushion the higher rates. Payment too high? Put more down!

For the downsizers, it’s the best way to justify giving up the 3% mortgage too – sell the long-time family estate and buy the next one all-cash.

Last month’s 200 sales will probably be the highest monthly count we’ll see in 2024, so the market will have to endure less volume, and more listings sitting around unsold.

It means that the percentage of all-cash buys will probably be increasing. I think it could get up to 66% by the end of the year!

Seller Disclosures

There used to be a belief that any defects that had been fixed, or things that happened to previous owners weren’t required disclosure items for today’s home sellers. But it’s gotten very specific now – and beginning July 1st, AB-968 takes effect.  If the home is being sold within 18 months of purchase, all the contractors and their contact information need to be disclosed too on any repair over $500:

Did You Know ~ All About Historical Disclosures:

  • Past defects, even if repaired by the seller or others, are to be disclosed. Not only that; the seller should provide all relevant information regarding the repairs to any prospective buyer. They must also disclose any improvements or modifications made to property with or without the benefit of permit.

  • The disclosure would include, but not be limited to,  the person(s) who performed the repairs (i) the property owner (ii) a licensed contractor  or (iii) an unlicensed tradesperson.  The documentation would also include all related documentation for all repairs   /improvements/modifications to the property.

  • The authority here  may be found in the  Seller Property Questionnaire (“SPQ”),  Question Number 5. This paragraph specifically prompts the seller to provide whatever material documents they have in their possession.  Questions 7A/8A of the SPQ  also address the importance of full disclosure. The Disclosure Information Advisory (“DIA”) is an excellent tutorial for sellers and should be reviewed with the homeowner before the disclosures are completed.

  • Let’s think about it; if a seller and/or their agent fail to disclose past defects and/or repairs, the buyer will not have the information they need to make an informed decision. For example,  if a past roof leak, flooding, or other water intrusion issues/repairs are not disclosed the buyer may not choose to inspect for other damage that could have occurred as a result, such as environmental hazards or wood / drywall damage that may not be visible. The informed buyer may wish to verify that the repairs were done correctly by a licensed professional, and/or ask for more details on the repairs themselves or the tradespersons or contractor that performed the repairs. It doesn’t matter how long ago the information was obtained; if you’ve got it produce it and by all means document delivery with a Receipt for Reports or similar documents.

  • The fact that a neighborhood or property specific defect exists, even if “well known” by the local residents and real estate community, disclosure is still required.  The buyer may be from out of the area or simply unaware of the issue.

  • Full and accurate disclosure is always the best practice and remember Gladys Kravitz is lurking and just ready to pounce on the buyer and share all that she knows.  You can count on Gladys to be the town crier.

  • When it comes to improvements and modifications to the property the same logic applies. Some homeowners take great care to ensure that all modifications and improvements and even repairs are made with the benefit of permit, comply with code, and are performed by licensed contractors, many others do not.

  • The key is disclosure! The buyer needs to know what they will be dealing with once they become the property owners. In order to make an informed decision, the buyer needs to have sufficient information to do so.

  • Neither agents nor sellers should “cherry pick” or “decide”  what documents are relevant, no matter how well intended. All disclosures, investigatory reports, and inspections, estimates, invoices and receipts, environmental analysis, invoices, estimates, surveys or maintenance records that are in the possession of the listing agent and/or seller are to be provided to the buyer in their totality.  Regardless of when they were obtained and whether the disclosure packet is delivered prior to an offer being written or after the sale is ratified.

  • Last note on this subject for now; disclosures should be thorough and accurate and ought never be minimized or glossed over. Explanations should be clearly stated for the buyer’s review.

Beach Sample

There are a few possible conclusions here.

  • The sellers inherited the property in 2011, so they still had plenty of capital-gains taxes to pay if they didn’t live here. Don’t want to pay so much in tax? Sell for less!
  • The sellers were happy for a fairly quick sale, and having to take less wasn’t an imposition. The same could be said for all long-timers – if they had to take less, they could…..unlike at the last peak when so many were financed 100% or more.
  • The buyers paid $25,550 in costs on behalf of the sellers – a nice sweetener.
  • Maybe the original condition was such a turnoff that the sellers knew they needed to budge.

Recent history would suggest that multiple offers might have been in order. But not here, and certainly not everywhere now…..and the fixers are the first to be taking the hit.

Inventory Watch

The NSDCC inventory has gotten off to a hot start in 2024 – it’s already at the level it was at in July of last year!  As long as the pending keep up….oh wait.

Well, maybe there will be a surge of new pendings on the way? There was a late-summer surge last year, and if it was going to happen, it really should happen earlier this year too.

Pricing of the unsolds probably won’t change much:

The last time mortgage rates were 7% was 22 years ago when local home prices were about one-third of what they are today. As a result, the only semi-relevant comparisons are to last year!


Market is Stable (For Now)

He’s using the Zillow metric for the month-over-month change and the delta for the Case-Shiller Index should be similar – San Diego home prices have been going up close to 2% per month in early 2024.

The increases could hold up too, if rates come down substantially (doubtful) or sales dry up and just the creampuffs are selling (likely).

Where to move? Every city that lost ground when rates went up are reporting small gains this year so it appears that national market conditions are stabilizing. You don’t have to worry too much about moving to town that will be more risky than any other.

Boise isn’t on this list but Susie reported that a new subdivision being built there had put their first home up for sale at $1,599,900 for a 3,250sf one-story house. She and her husband, plus four other couples, wanted to buy it – even though she has a fine newer home (built by the same builder) and a 2.85% mortgage. She said that it has been a buyer’s market recently in Boise, yet it demonstrates that the superior homes still draw a crowd (she lost out on the new home – the builder took an all-cash offer from a local Boise couple).

NSDCC Monthly Sales History

How will the rest of 2024 play out?

Like last year, sales will probably fade away unless more sellers are so motivated that they adjust their price in time. The number of NSDCC active listings has stayed under 400 all year – until this week.

Today there are 421 active listings between La Jolla and Carlsbad. Last year the number of actives was only above 400 during a three-week stretch in July.

There have been 90 sales closed in May so far.

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