The San Diego Home Blog

Every day can’t be a laugh-fest.

The Standard & Poors/Case-Shiller® Home Price Indices through December, 2007 were released yesterday. According to S&P:

(The indices) measure the residential housing market, tracking changes in the value of the residential real estate market in 20 metropolitan regions across the United States. These indices use the repeat sales pricing technique to measure housing markets. First developed by Karl Case and Robert Shiller, this methodology collects data on single-family home re-sales, capturing re-sold sale prices to form sale pairs. This index family consists of 20 regional indices and two composite indices as aggregates of the regions.

By relying on sale pairs, the methodology is intended to be an apples-to-apples comparison. For those with a little free time on their hands this morning, you can indulge yourself in a complete description of the index methodology.

The chart below shows the ten-year trend of the U.S. National Home Price, the 10-City Composite and the 20-City Composite Indices.

The decline in the S&P/Case-Shiller® U.S. National Home Price Index — which covers all nine U.S. census divisions — neared double digits, posting -8.9% versus the 4th quarter of 2006, the largest decline in the series 20-year history. During the 1990-91 housing recession the annual rate bottomed at -2.8%. The 10-City Composite also set a new record, with an annual decline of 9.8%. In December, the 20-City Composite recorded an annual decline of 9.1%

Here is what the breakdown looks like by metro area:

Source: Standard & Poors, data through December 2007

True to form, I will not attempt to embark on an in-depth analysis of  this data. I will, however, make a couple of observations:

• These indices are for single-family detached homes only. In our San Diego housing market, condominiums are generally fairing worse.
• As apples-to-apples as the the paired sales methodology is, today’s fruit basket of recordings often involve seller credits and buyer incentives not reflected in the recorded sale price. Therefore, the true price differences may very well be understated.

Friday, I spammed over 300 innocent people. This was a first and, in the strictest sense, it wasn’t spamming at all, but I will get to that.

It all started with a little online venting I was doing about the functionality (or lack thereof) of the Trulia listing widget I have on our side bar here. I have always loved the little guy, but it seems he had something against me, or rather, my listings. The problem was that by all appearances some ornery programmer armed with a random listing generator and intoxicated with the power of his position (Widget Czar) was unilaterally deciding which, if any, of our seller clients’ homes to display there on any particular day. I now give a big hat-tip to the Truia customer service folks who proactively worked through the problem and re-earned their exalted position to your right. Go Trulia!

As a result of that little post, I also got many “helpful hints” from other vendors, dozens actually, suggesting that they had my answer, the “better way.” If you are an agent, you like I undoubtedly get many of these “better way” offers each day in your email inbox. These unsolicited offers I generally ignore. Otherwise, I would be spending 27 hours a day doing nothing but testing new products. But, as for those who responded to my online cry for help, I don’t consider this spamming; I presented a problem publicly, and they responded.

Enter Diverse Solutions. Timing is everything. Just like the home owner thinking about selling when your recipe of the month card hits their porch, I had been thinking about replacing my current Search for Homes (IDX) provider for awhile. There was nothing inherently wrong with my current Home Search feature - it was fully populated compliments of our local San Diego MLS, it provided all of the property information for each home, and offered the automatic email feature which notifies users with new listings and status changes - but it was not map-based. I like map-based, and I am certain that the consumer does too.

Today we are switching over to the new search platform. And it scares the heck out of me. We have tested and had some clients test it to confirm that it indeed enhances the search experience (it does), but that is not the issue. The problem is that I have over 300 people currently “signed up” for the old system, people who have been saving “favorites” and customized searches, and people who have been receiving regular email feeds for, in some cases, many, many months. These are people I have done my very best to ignore.

I have long believed that failure to respect the anonymity of visitors to our site would drive them away. If a search experience results in helpful, unsolicited, monthly newsletters from me on winterizing your home, changing the furnace filter, or evaluating the current market (”It’s a great time to buy!”), I have always strongly suspected you will take your search elsewhere, “elsewhere” being a place where they leave you alone.

One thing that always bugged me about my former IDX provider was that there was this little “welcome” email that went out with my name on it each time someone signed up for automatic notifications. Only, it wasn’t really from me. I just couldn’t turn the darn thing off. In one of many phone conversations with the company reps, I had one gentleman in particular chastise me. “What? You don’t want to convert these leads? Do you know what a gold mine you are sitting on? You mean you never follow-up?” No, no, no. Ick.

Is this contrarian or just plain stupid? He favored the latter, but I prefer the former. I still believe that you want to be the one to initiate the conversation. My email and phone number are splattered all over that site and this one, and each has a fully functioning chat box. If I haven’t heard from you yet, a reasonable person would conclude that you aren’t ready or don’t want to engage.

So, forgive me, but I have spammed. And, I assure you it will only happen this once. About to pull the plug on hundreds of visitors who were going to show up looking for their saved searches and find they had “been disappeared,” I sent out a blast to all last week explaining the conversion which would be taking place today. If you missed the memo, we will keep the old search feature running in parallel (but hidden) for the next six months or so. Your bookmarks will continue to work.

And, I’m sorry that, even briefly, I had to acknowledge your existence. I promise I won’t do it again - unless you ask me to.

(Note to valued vistors “Ben Dover,” “Lulu Lolo,” and “YoYo” - Your emails were returned undeliverable. I hope you read the blog.)

I snapped this photo yesterday while on a reconnaisence visit to an upcoming listing. Yesterday, like today, is a perfect day it seems to look at homes. If you don’t believe me, just take a gander outside.

It’s at this moment raining like crazy in San Diego, which makes it “a great time to buy!” (if you are a waterfowl, that is). I’ll be checking my clients for webbed feet this afternoon as we head out on our intergalactic search for the perfect home. Anyone wanting to go out in this mess must mean business!

Oh, and the duck in the driveway would have been much funnier had I not later learned that it is a “pet,” and the owner had simply let her  - him? I didn’t check - out for some fresh air.

St. Paul Broker and blogger Teresa Boardman has always said that “Fridays are for fun!” Well, what’s more fun than dusting of the Altos Research market trend charts for San Diego to kick off our rainy weekend? (If you answered, “Out-patient surgery,” then you are correct, but you didn’t recognize my question as a being rhetorical.)

So, here we go.

The charts below show the 90-day rolling average median price trends and the Market Action Indexes for San Diego and for three sample I-15 Corridor communities (Scripps Ranch, Rancho Penasquitos and Mira Mesa). A few thoughts before we forge ahead:

1. The median price trends are for listings; these are the prices that sellers are currently asking. In the case of Value Range pricing, which is so often the case in our San Diego market, the high-end of the range is used. As the market has continued to decline, more sellers and their agents are abandoning value range pricing in favor of a fixed “offered at” price, recognizing that buyers in this market tend to ignore all but the low number. Therefore, the declines in seller pricing you see in the charts are likely overstated.
2. Altos describes the The Market Action Index as follows: “The Market Action Index (MAI) illustrates the balance between supply and demand using a statistical function of the current rate of sale versus current inventory.
   An MAI value greater than 30 typically indicates a “Seller’s Market” (a.k.a. “Hot Market”) because demand is high enough to quickly gobble up available supply. A hot market will typically cause prices to rise. MAI values below 30 indicate a “Buyer’s Market” (a.k.a. “Cold Market”) where the inventory of already-listed homes is sufficient to last several months at the current rate of sales. A cold market will typically cause prices to fall.” Okay, I don’t exactly get it either, and their formula remains a secret, but it usually feels about right.
3. These numbers are for single-family detached homes, and do not include activity in the condo market.

Here is a quick snap-shot of what our local MLS says about inventory versus homes currently in escrow:

Without thinking too hard (it is Friday, after all, the charts suggest that sellers are finally adjusting their pricing to the current market, or at least are starting to respond in the right direction. As far as supply versus demand, the charts also suggest that we are flat-lining, but keep in mind that we would have expected to see some upward trending in the Market Action graphs had the traditional seasonal factors been at play. Adjusting for this, it looks like the lines are still forming uphill and to the rear.

What fun that was! Have a great weekend.

Phil Hoover at the Boise Blog (they tell me that’s in Idaho) suggested that foreclosed properties aren’t always the best deals in town. You will find no argument from Steve and me, yet this seems to be a common misconception among many would-be buyers currently trying to sniff out an opportunity for instant equity.

Much like agents like to toss acronyms about (MLS, NAR, GRI)  forgetting that not everyone in the real world understands our curious language, we tend to speak in tongues when it comes to distressed property sales: REO, short sale, foreclosure, NOD. These terms are so much of my daily life, that I often forget that not everyone really understands their meanings. I was recently discussing a home for sale with a (very savvy) client. Upon my mentioning that it was a short sale, my client asked, “What does that mean?” So, first a little primer.

Homes for sale in the San Diego real estate market today come in many different flavors, and can generally be broken down as follows:

• Traditional, non-distress sale: Owner needs to or wants to sell and has equity. At closing, seller will receive proceeds from the sale.
• Traditional, distress sale: Owner needs to sell due to personal circumstances. Time is of the essence, they are highly motivated (not selling is not an option). 
• Short sale: At closing, proceeds from the sale will be insufficient to cover the costs and encumbrances including costs of sale (title, escrow, agent fees) and money owed to lenders, the tax collector, and other lien holders. In these cases, the seller will look to the lender(s) to accept less than what is owed as repayment. The lender may forgive the debt or they may require future repayment of the balance due. This may have credit rating and state income tax implications, but thanks to recent Federal legislation, the forgiven debt might not be subject to Federal income taxation.
• Potential short sale: Depending on the final sale price, the seller may or may not be in a short position. We call these “squeakers.”
• REO (or Real Estate Owned): The lender has foreclosed on the property and was unable to sell the home (for an “acceptable” price) at auction. The bank is now the owner, and they are trying to clear the inventory.
• NOD (or Notice of Default): This is not a type of sale, but a circumstance which may apply to all but the REO and Traditional/Non-distress sales. A Notice of Default is recorded by the lender when an owner has failed to make scheduled loan payments over a period of time, usually three months, but this can vary. A NOD marks the beginning of the foreclosure process.

Steve is working with a buyer right now who only wants to see bank-owned and short sale listings. No matter how often he reminds the buyer that there are equally attractive opportunities in the form of traditionally listed properties, he only wants to see the REOs and shorts. Alas, the customer is always right, so that is what he gets. But, as Phil pointed out, REOs and short sales come with a lot of baggage, and a buyer shouldn’t assume that these situations present the best value proposition. They often don’t.

First, these distress sale properties are rarely in excellent condition, and the buyer will most likely be taking them in their present state; what you see is what you get. There is a slightly better chance that you can negotiate repairs in the REO situation (and we have successfully done this on numerous occasions), but this will come in the form of a credit, usually toward price, so don’t expect a turn-key home delivered to you at closing.

Secondly, banks do not perform at Mach speed. They are big, they are bureaucratic, and, mostly, they are very, very busy. A response within thirty days of offer submittal is cause for breaking out the party hats. In fact, our most recent short sale listing left buyer, seller, and agents living in a three-month cone of silence. Some lenders are better than others, and REOs tend to move more swiftly, but every distress sale adventure is a surprise package. If timing is an issue, these are not the homes for you.

Finally, if your purchase is contingent on the sale of another property (you have a home to sell), forget about it. You are automatically disqualified; thank you for playing.

Homes are sold for many reasons, and the sellers each have different reasons and different degrees of urgency. “Motivated” sellers come in many flavors. A stereotype may sometimes, even often, prove true, but when a buyer limits themselves to only one type of sale situation, they may be selling themselves short.

(Standard disclaimer applies: We are not attorneys or accountants. You should always seek the advice of these professionals if you are a homeowner who finds yourself in one of these distress sale situations.)

Amended to add this link to a related (much more comprehensive) article: 3OceansRealty. Geez, what a copy-cat I am! I need to get out more.

In my neighborhood, a red Volkswagen Beetle can mean one of two things: It’s me, or it’s Merry Maids. If you have had the pleasure of seeing my personal living quarters this week, you would know that a company professing to perform housecleaning duties hasn’t been within a two-county radius of my humble abode since my children were born. Therefore, it must be me.

Steve stumbled on this Microsoft Virtual Earth shot of our home, via the Zillowsite of course. Why he was checking out our Zestimate (which, I am proud to say, is up about $20k this week) instead of working is still a mystery. Nonetheless, this kind of thing could trash the whole alibi if it was time-stamped. (I swear I don’t know that guy in the blue car!)

This was the view from the east. From the west, no Kris in sight. Thank goodness the “south” view didn’t show me frolicking in the spa. Now, that would have been ugly!

“Who is Erma Bombeck?”

This was the only reaction I could elicit from my oldest daughter, a too-cool-for-the-room teenager who is certain I was born during the Ming Dynasty. She’s not far off. But with age comes wisdom… or does it?

She is about to make her outmigration to college, and this college, in her mind, is a place where they will teach her everything she needs to know to be a successful (in her case) journalist. I’ve been there, and I know better. A diploma doesn’t necessarily signify that you have been trained; it says that you are trainable. Your degree doesn’t assure your future employer that you have learned what you need to know, but that you have demonstrated the capacity to learn.

In my college, I was taught a lot of stuff, some of which I still remember. I learned about Budding and Fission in Botany and the Yanomamo in Anthropology and Open Channel Hydraulics in Fluid Dynamics. Rarely have I found the need to watch my staghorn fern reproduce in a culvert while fending off violent Amazonians, but that’s not the point. The point is that after demonstrating that I could figure out this stuff, I was prepared to live in the real world and figure out that stuff.

I noticed that your home has recently come off the market.

Uh, oh! Somebody has completed their Broker training!

Last week, we let a listing expire. We did this because it was a short-sale situation, and the seller was able to renegotiate the terms of her loan with her lender. This was wonderful news, of course. So, we did what we always do when a home is withdrawn from the MLS - We removed her phone number from the listing before it expired.

If you aren’t an agent, you might not get this, but agents understand. An expired listing is like carrion, and the circling starts almost instantaneously. Agents are taught that “working expireds” is an excellent opportunity to procure new business. What’s more perfect? Instead of beating the bushes for potential prey, an expired listing represents someone who had the desire to sell but didn’t. And, when that listing disappears from the MLS is when agents move in for the kill.

First, I have to give the back story. In the case of our expired listing, we had initially (months ago) entered the wrong phone number for the seller in the MLS. Ironically, the number we did enter led to the cell phone of another area agent. This error was corrected during the first hours of “active” status but, unbeknownst to us, the damage had been done.

I guess I need to get out more. Apparently, there are hundreds (thousands?) of agents out there subscribing to a service that grabs these listings at birth and banks them for future sale, a work-around to the old deleting-the-number-at-cancellation practice. Consequently, we received a midday call from our poor, frazzled agent who, having spent his entire morning fielding calls from Top Producers in a position to help him sell the home he didn’t own where the agent he hadn’t hired had failed, was begging for mercy.

Forget everything you learned.

If our agent training focused more on developing critical thinking skills and less on delivering prescriptive methods to achieve success, I argue we would all be better off. Take “working expireds” (please). As both an agent and a consumer, if I fire up my frontal lobe for just one cup of coffee, I recognize this practice as spamming at its worst.

Let’s think about reasons why the owner of a property which “failed to sell” might not heed my early morning agent call to action:

• They are busy on the other line accepting an offer to save money on their long-distance phone bill;
• They knew in advance that their listing was going to expire, where you did not, and have already made arrangements to relist;
• They ultimately decided not to sell, for whatever reason, and therefore the “lead” you are chasing is not a lead at all.
• In the event that they do intend to relist and have not decided with whom they will do so, you are the 894th person to call them this morning, and now they are really pissed off - at all of you.
• They asked that their phone number be removed from the MLS so agents wouldn’t be calling them, and you just did.
• They hate spam.

The proponents of the expired listing game claim that the key to your success will be in making a distinction. How about this? Distinguish yourself by not calling, and use that valuable time to consider a marketing approach which might actually appeal to your audience, not turn them off. Spam, just because it comes from you, is still spam.

Whenever I consider a marketing approach or piece, I ask myself one simple question: Would I respond favorably to this approach if the roles were reversed? Where calling expired listings is concerned, unless you are someone who just accepted one of the forty-seven offers you received in your mailbox last week to refinance your home or transfer your credit card balance or lower your auto insurance payments, I suspect you would not. Sure, someone along the way may bite, but in the process you have left a wake of destruction, and our image just might be found among the debris.

I know, I know. There are a lot of agents out there who are not going to agree with me, agents who have had much success finding business through approaching “expireds.” That’s fine. Every agent needs to generate business; having business is how we make money. Over time, we each learn to apply our own unique strengths in finding our own unique approaches to success. What works for me won’t necessarily work for another. Yet, if working expired listings is one of the ways in which an agent attempts to grow their business, maybe mailing a compelling case for their services will be better received than hosting the 7:00 AM telethon. It is still “push” marketing, but it’s a little less pushy.

For me, there has to be a better way. I would rather spend my energies doing things that might inspire people who want to sell and have failed to call me - or, gasp, call me in the first place. But, then, what do I know?