Instant Vision

Let’s keep improving a listing as we go along!

It became obvious at the open houses that people didn’t feel the need to explore the backyard – they just looked out from the house to get their feel.  But the hedge in the middle blocked some of the view, and to fully appreciate the size of the backyard, you need to see past it.

It’s common that buyers are in a hurry and may not fully explore the potential, so let’s help them with the vision of what’s possible:

One of the main positives about this property is how suitable it is for adding a granny flat, and still have big yards for both.  Originally, we thought the hedge might help to differentiate the two possible locations, but if buyers aren’t going to walk out for a look, let’s make sure the extra-large yard is visible from the house!

The other concern is that buyers aren’t used to seeing homes built in the 1970s.

These are literally the oldest houses in South Carlsbad, and $800,000 is the entry-level.  The 2019 median sales price within a half-mile of my listing is $1,072,500, so for those who want a larger, newer home with more upgrades (but smaller yard + HOA), they are certainly available – you just have to pay more.

Here’s another example of the 1978 variety – and this is probably our main competition.  It has upgrades, but the fancy stuff doesn’t change the floor plan and the yard is almost 5,000sf smaller:

Entry level means sacrifices, and the temporary inconveniences at my listing can all be fixed with money!

Good-Bye MID?

Maybe having a mortgage is going out of fashion now that the affluent have taken over real estate? Or do we just need to Get Good Help with filing taxes? (30%-40% of Americans prepare their own taxes)

The mortgage-interest deduction, a beloved tax break bound tightly to the American dream of homeownership, once seemed politically invincible. Then it nearly vanished in middle-class neighborhoods across the country, and it appears that hardly anyone noticed.

In places like Plainfield, a southwestern outpost in the area known locally as Chicagoland, the housing market is humming. The people selling and buying homes do not seem to care much that President Trump’s signature tax overhaul effectively, although indirectly, vaporized a longtime source of government support for homeowners and housing prices.

The 2017 law nearly doubled the standard deduction — to $24,000 for a couple filing jointly — on federal income taxes, giving millions of households an incentive to stop claiming itemized deductions.

As a result, far fewer families — and, in particular, far fewer middle-class families — are claiming the itemized deduction for mortgage interest. In 2018, about one in five taxpayers claimed the deduction, Internal Revenue Service statistics show. This year, that number fell to less than one in 10. For families earning less than $100,000, the decline was even more stark.

The benefit, as it remains, is largely for high earners, and more limited than it once was: The 2017 law capped the maximum value of new mortgage debt eligible for the deduction at $750,000, down from $1 million. There has been no audible public outcry, prompting some people in Washington to propose scrapping the tax break entirely.

For decades, the mortgage-interest deduction has been alternately hailed as a linchpin of support for homeownership (by the real estate industry) and reviled as a symbol of tax policy gone awry (by economists). What pretty much everyone agreed on, though, was that it was politically untouchable.

Nearly 30 million tax filers wrote off a collective $273 billion in mortgage interest in 2018. Repealing the deduction, the conventional wisdom presumed, would effectively mean raising taxes on millions of middle-class families spread across every congressional district. And if anyone were tempted to try, an army of real estate brokers, home builders and developers — and their lobbyists — were ready to rush to the deduction’s defense.

Now, critics of the deduction feel emboldened.

“The rejoinder was always, ‘Oh, but you’d never be able to get rid of the mortgage-interest deduction,’ but I certainly wouldn’t say never now,” said William G. Gale, an economist at the Brookings Institution and a former adviser to President George H.W. Bush. “It used to be that this was a middle-class birthright or something like that, but it’s kind of hard to argue that when only 8 percent of households are taking the deduction.”

Link to Full NYT Article

Inventory Watch

I don’t think this has happened before.

This week we had the exact same number of new listings AND new pendings as last week (102 & 47)!

The NSDCC active inventory this year has remained in check, however.  We came into summer with a bigger load, but the number of homes for sale didn’t get a July pop like last year:

The Jan-July closed sales are 3% below those in 2018, and the total number of NSDCC pendings today is only 4% lower than last year at this time.

This year’s lower rates have only enabled us to keep close to last year’s activity, and those relatively-stable conditions have kept sellers from hitting the panic button too.

(more…)

Another Comp for Segovia

People almost instantly separate themselves into posers or players by their comments at open houses, and the remarks today ranged from “you’re nuts” to “this will sell in a week”.

Those who are following the market closely will recognize that the entry-level house in the Encinitas School District today starts around $800,000.  Add in the popularity of one-story homes and the general resistance to HOA and Mello-Roos and my listing has many positives.

Here is another comparable home that closed this week that happens to be in the Carlsbad school district (vs the preferred Encinitas school district).  For buyers who can live with an funky one-story floor plan on a larger (though multi-level) lot with no HOA or Mello-Roos, this would have been a potential candidate – and it closed for $995,000 (my listing is priced at $880,000):

3022 Segovia Way

Segovia Way is in an area of mostly long-time owners and low turnover – people love the area!  It makes it harder on buyers though because the comps are few and far between.

I mention in this video tour (with special guest!) that the house is worth $800,000, and the double-sized lot is worth a premium – I say 10%:

Here are my comps that suggest the house alone is worth $800,000:

The last model-match closed for $795,000 and went pending the first week of January, 2017 – two-and-a-half years ago. The San Diego Case-Shiller Index has gone up 10% since:

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The last model-match sale was actually this house, but they had added a fourth bedroom without permits. It has the same formica kitchen and dirt backyard, but backed to a very busy six-lane Rancho Santa Fe Rd.

It closed a year ago for $808,000:

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This larger 3br needed work (though everyone should have a toilet near their bed) and was on the main feeder street for the neighborhood – it closed six months ago for $833,000:

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This was in original condition and had an old pool that took up most of the backyard. They had multiple offers, and it closed for $850,000 a month ago:

 

If the house at 3022 Segovia Way is valued around $800,000 in its current condition, how much is the premium for a double-sized lot? Five to ten percent should be reasonable.

Want to compare the other homes currently for sale?

A. Older kitchen, pool takes up most of the backyard. Listed for $925,000:

https://www.compass.com/listing/7723-anillo-way-carlsbad-ca-92009/304159237772949985/

B. Slightly older look; pool takes up most of the backyard. Listed for $975,000:

https://www.compass.com/listing/3207-azahar-place-carlsbad-ca-92009/302014303171154001/

C. Larger 3br nearby with pool. On the range $999,000 – $1,099,000:

https://www.compass.com/listing/3103-cadencia-street-carlsbad-ca-92009/300125264994684577/

My listing is the classic case of buyers expecting a discount just because the house is older – but every house is older in this neighborhood! Richard and I will be there 12-3pm this weekend!

Sales Counts

I had guessed that sales would drop 20% this year, but with mortgage rates being so cooperative it looks like we’ll be fine.

Detached-home sales in San Diego County’s north coastal region for the first seven months of 2019 are only down 3% year-over-year (1,642 vs. 1,693 in 2018).  We’ll have a few more reporting over the next few weeks which should pull us within 1% to 2% of last year.

Mortgage rates spiked during the second half of 2018, helping to cause a 10% drop in NSDCC sales in the last five months of the year, compared to August-December 2017 (1,121 vs. 1,242 in 2017).

It will be hard to under-perform last year with rates about 1% less!

 

Whisper Listings

Pocket listings should keep the excitement level higher for now.

From the Business Insider:

The ultra-wealthy are known for being exclusive, and the way they handle the purchases and sales of their multimillion-dollar homes is often no exception.

Now, that’s not to say the market hasn’t seen some very prominent, top-level listings. There’s the most expensive home for sale in the Hamptons, which is listed at $150 million, and, of course, Los Angeles’ Chartwell Estate, which was listed at $245 million and, before getting a major price cut, was the most expensive listing in the US.

But for those looking to keep the sales of their homes a little more under the radar, there are whisper listings.

Whisper listings, also known as pocket listings, are for-sale homes that aren’t available to the public. Off-market listings are popular among the ultra-wealthy and are bought and sold by word of mouth.

Los Angeles real-estate agent Aaron Kirman recently told Business Insider that he’s a veteran whisper-listing agent -and revealed three main reasons why sellers keep their homes off the market.

Kirman is a top real-estate agent at the real-estate company Compass. He’s been in the industry for 24 years and has sold over $4.5 billion worth of real estate since the start of his career. In 2019, REAL Trends named him the 10th-best real-estate agent in the country by sales volume.

Here’s a look at what compels wealthy homebuyers to keep their houses off the market and to instead opt for whisper listings.

1. Sellers can list their homes for higher prices through whisper listings.

By not putting a home on the market, the seller avoids value expectations, Kirman explained to Business Insider. With whisper listings, sellers have the advantage of pricing their homes above an area’s median listing price.

According to Kirman, sellers see this as an advantage because they are able to price their homes as high as they want regardless of the current state of the market.

“If you go live on the market, you have to publish a price. By not going live, you’ve never been public on a price so you don’t necessarily have to go down,” Kirman told Business Insider. “I’ve had sellers up the price of a whisper campaign because they have nothing to lose.”

2. Whisper listings can be used to keep a seller’s personal business out of the public eye.

Whisper listings can serve specific purposes, particularly when it comes to privacy.

For example, if a seller doesn’t want to put a home on the public market for political reasons, such as a divorce, they’ll use a whisper listing instead.

“Sometimes there’s political reasons as to why people don’t like them on the market whether it’s divorce, business reasons, or they just want to keep it quiet,” Kirman told Business Insider.

3. Whisper listings are exclusive and often viewed as a symbol of wealth.

Some sellers prefer to use whisper listings because they are more exclusive than public listings and, as such, are oftentimes seen as a symbol of wealth. However, Kirman told Business Insider that he doesn’t think using a whisper campaign, for the sake of exclusivity, is effective in today’s market.

And within that, there’s the potential downside of missing a prospective sale simply because the agent is not connected to the right person.

“The thing is, I don’t know everybody. So I always tell people there may be that one multimillionaire or billionaire that, because you’re not out there [on the public market], you missed – and they will go buy another house that was public,” Kirman told Business Insider.

https://www.businessinsider.sg/how-the-ultra-wealthy-sell-mansions-whisper-listings-2019-7/

More talk here:

Link to Discussion of PLS.com

Rates & Prices

So we got the expected 1/4% from the Fed, and mortgage rates didn’t move – it was priced in.

What’s worse is talk of another Fed cut is needed just to keep mortgage rates where they are today.

From MND:

That means, all other things being equal, if the Fed were to say “we’re done cutting for now and will keep rates at these levels for the next 6 months,” you’d see an immediate and rather large move higher in rates.  In other words, we’re already counting on another 1-2 Fed rate cuts simply to sustain the low rates that are already here.  If those cuts don’t come, rates will move back up.

It sounds precarious, doesn’t it?

Eventually, people will start wondering, “Are home prices going to come down?”

Homes priced under a million should be fine for now; it’s the higher-end that could struggle.

But the detached homes in San Diego County that have sold over $1,000,000 have been in a fairly tight range of $525/sf to $575/sf for years now.

If sellers can just live with the same money as the last guy got, we should muddle along….for now.

Mortgage Rates to Remain Low

As long as everything stays rosy, we’ll be fine……

The housing market has been looking slightly better over the last few month and Freddie Mac July economic report reflects that fact.  They also maintain a fairly rosy picture of the economy as a whole.

They note that the 30-year fixed-rate mortgages (FRM) dipped below 4.0 percent at the end of May and has remained there “amid concerns over trade disputes, a possible economic slowdown, and market anticipation of a Federal Reserve interest rate cut.”  This has caused a spike in mortgage applications for both purchase and refinancing and they predict that low rates, along with a thriving labor market, will help sustain the housing market, not just short term, but for at least the next year and a half.

They have, in fact, revised down their quarterly forecasts for mortgage rates over that period, forecasting an annual rate for the 30-year fixed-rate mortgage of 4.1 percent this year and an even lower 4.0 percent in 2020.

As to other rates, while not predicting a cut in the Federal Funds rate after today’s Federal Open Market Committee (FOMC) meeting, they still expect “cuts” in the second half of the year and project an effective rate of 2.3 percent in the third and fourth quarters with an average of 2.4 percent for the year, unchanged from their earlier forecast. The average next year will be 2.3 percent in 2020 and they see no further FOMC cuts.

The lower rates will turn investor interest towards more lucrative stocks and away from government bonds they say, and forecast that the 10-year Treasury rate will decline to 2.3 percent in 2019 and stay at the same level in 2020. Also, maintaining the spread between government bond yields, they see the 1-year Treasury rate to be 2.2 percent in both 2019 and 2020.

They say the strong homebuilder confidence and lower mortgage rates will lead to a recovery of housing starts and sales from their 2018 slump and that housing starts will end this year at 1.26 million and increase to 1.34 million in 2020.  Home sales will be 6.0 million in 2019 due to the continuing shortage of inventory but will return to 2017 levels of 6.12 million next year.

The recent home price reports have sent mixed signals, but the report’s authors expect home prices to rise by 3.4 percent this year.  They have revised their expectations for next year down to a 2.6 percent appreciation rate.

http://www.mortgagenewsdaily.com/07312019_freddie_mac_forecast.asp

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