June 2008

Photo credit: Rebecca Berg (Go Scripps Ranch Falcons!)

We are working with enough buyers right now to fill the right field bleachers at Petco Park. For the most part, they are all waiting on the exact, same home — the one that is a “deal.”

A decade ago, the sacrifice was the popular play. Recognizing that there is no such thing as a perfect house, shopping for a home involved the old Ben Franklin approach. “I’d like a walk-in pantry, but I need a fourth bedroom. A three-car garage would be nice, but road noise is completely unacceptable.” Through a process of evaluating and ranking the positives and the negatives, the perfect home was the one that was the least imperfect within their budget.

Then came the days of double-digit home value appreciation in San Diego. The home purchase became the suicide squeeze, and budget no longer entered into the equation. That is because qualifying for a loan, any loan, required only the ability to make eye contact with a Mortgage Professional.

Buyer: I have a babysitting job on Saturdays.
Mortgage Professional: So, you make $87,000 an hour?
Buyer: Uh, OK.
Mortgage Professional: Congratulations! You’re qualified to purchase Tunisia. Go buy yourself something pretty.

On any given day in any given neighborhood, 17,356 to the twelfth power buyers were competing for the two homes on the market. Caught up in the While Supplies Last frenzy, the perfect home was the one with the For Sale sign in the front yard. ”It does have three of the four walls we have always dreamed of. We’ll take it!”

Now, we are in the seventh inning stretch. The buyers who were decisively trounced in the early innings by a seller’s market, are enthusiastically waving their foam fingers. “We’re Number 1!” It’s pay back time. It’s not enough to get on base; buyers are swinging for fence. Everyone wants the same thing. They want perfection. They want a home run. 

Lest I kill the metaphor, I’ll dive right into the point (after having dispensed with the requisite 400-word introduction). And there are two points, actually. First, there is no such thing as the perfect home — never has been, never will be. It doesn’t matter what the budget or the market. Unless you are Bill Gates or Warren Buffett, there is always going to be some feature you would have liked but didn’t get. And even Bill Gates, I suspect, has occasionally had to compromise. “Dang, I wish I had made that shipping channel just a little bit bigger.” In San Diego, we all want the big yard, the ocean view, the free-form pool with the mermaids who convey, the Viking appliances, the three-car garage, and the fully-stocked twenty-by-twenty wine cellar containing only French Chardonnays. (OK, maybe that last one is just me.) But sometimes, you are just going to have to give up something.

The second thing we are seeing is that everyone wants everything, and they want everything for a “deal.” That deal is defined as whatever the seller is asking minus a very big number. While the number varies among buyers, the concept rarely does. For one of our clients, the magic number is $100,000. If the home is priced at $500,000, they want to offer $400,000. If the price is $1.95, they want to offer the fuzzy change from their sofa and receive a credit of $99,999 towards non-recurring closing costs.

There is nothing wrong with having great expectations or writing low offers. It is the arbitrary nature of the magic number that is frustrating. Too many buyers don’t want to see the “comps” anymore. They don’t care. And too many of these same buyers are firing blanks, writing offer after unsuccessful offer, or worse. Many others are relegating themselves to the stands, waiting for an easier inning, a better “deal,” while the almost-perfect home passes them by.

Thankfully, we are starting to see more than a few serious buyers deciding that it is time to get in the game. The would-be buyers who are realistic, who are considering value, are starting to buy again. The homes they are purchasing are not perfect, and until we can say with certainty that we have seen the market bottom, they are not even the perfect “deals.” But, when these buyers look back at our current season, next year and in years to come, I firmly believe they are going to be pleased with the outcome.

(Note to bearish readers: Go easy on me. Even you have to admit we are getting closer to the pivitol turning point.)

It’s a glorious Monday morning in San Diego and here’s what’s happening:

Quick Hit #1- Now that my Principal Partner and Chief Technology Officer, Kris, has had her brain fried by our new and exciting Tempo 5 MLS software, I should probably be thinking about a new career. Obviously our value to our clients was not foremost in the minds of the San Diego Association of Realtors (SDAR). So I’m thinking about going into the software biz myself. The fact that I am totally unqualified shouldn’t make a difference. I have found the perfect client - SDAR. If they bought the Tempo 5 piece of (insert favorite, colorful expletive), I’m certain they will buy just about anything I have to offer. I’m sure glad SDAR is here to better serve me.

Quick Hit #2 - The National Association of Realtors (NAR) reports this morning the Pending home sales took and unexpected jump in April, up a much greater than expected 8.3% in the West. Based upon the fact that Kris and I, along with our two Buyers Agents, John and Lisa, are currently working with a dozen active/serious buyers, I can’t say I’m surprised. Add to that the fact that we are actually short on inventory in the market areas and price segments within which these buyers have interest, and we may be getting closer to stabilization than many think.

Quick Hit #3- Scripps Ranch closed sales stats for May, 2008 showed mixed results. There were 26 closed escrows (If we can trust Tempo 5). This is down from May, 2007 when we had 31 closed escrows. However, it was also the fifth straight month of increasing sales in 92131. The average “sold” price was also up 6% from the previous month to $296 per foot, but still down approximately 10% from May, 2007.

Quick Hit #4- While our fearless leaders in Washington D.C. contemplate another big and creative (but totally worthless) incentive program for the many homeowners on the path to losing their homes (throw them another $600 check), maybe they should be thinking about real solutions. Instead of focusing on the Supply side, maybe they should attack the problem from the Demand side. How about the “Home Investment Act of 2008?”  Buy a home (Primary owner-occupied residence) over the next 24 months with a minimum 5% down payment and get a supplemental tax write-off of 10% of the purchase price, not to exceed $50,000,  taken pro rata  over the 3 tax years subsequent to the purchase. Driving demand will solve the supply-side problems, including the government sending out billions of $$ that are essentially worthless to solving the housing recession.  

Those are my thoughts this morning. I’ve got to go take Kris to therapy now (I will be forwarding the bill to SDAR). Hope everyone has a great week.

We don’t need no stinkin’ beta test!

I’m still on the rampage. That’s because my MLS is broken.

There is a popular saying that goes something like, “143% of home buyers start their search on the Internet.” Well, if you currently have your home listed for sale in San Diego, I wouldn’t be calling the moving truck any time soon.

In a comment on my last rant, the tech savvy and ever eloquent Galen Ward wrote the following:

Tempo5 sounds like a can of suck. Add the fact that their IDX went down for 5+ days and you can imagine why no one was answering the phones.

Now, being one who appreciates artful prose, I was focused on the “can of suck” part. I missed the forest for the tree stumps. Actually, I had suspected  a couple of days ago that if I couldn’t access listing date in my own MLS system, the IDX (data exchange) feeds to other sites might be compromised. I made a quick trip to my own web site search feature and saw that the data looked fine: No funky entry fields, a populated map, and so forth. How naive am I? (That was rhetorical, so let’s move on, please).

It was this morning, nine exciting, fun-filled days after the big coming out party of Tempo5, that the words a buyer client uttered yesterday starting reverberating in my dense skull. “There haven’t been any new listings in a week.” Now, at the time, I thought she made this statement much like my children say, “There is nothing to eat in this house,” meaning, “There is nothing that interests me.” Au contraire. What she meant was there haven’t been any new listings showing up on the sites she uses for her search — None, nada, zip.

In my unofficial survey this morning, I confirmed that no home listed since D-Day appears on Trulia, Realtor.com, Prudential’s web site, or even my own web site with the most-awesome search feature compliments of Diverse Solutions. I found a few newer listings on a site which shall remain nameless (it starts with an “R” and ends in “edfin”), but I ran out of steam before I confirmed their offering was complete.

What does this mean? Well, for starters, Zillow should start a full-on promotional blitz of Tempo5 nationwide in order to solidify their global dominance. Because I can (and do) manually enter our listings there, my sellers are represented. Ditto Craigslist, and the half-dozen or so random sites which are fed my property flyers via Postlets. If your data is coming straight out of Sandicor, however, you (and my clients) are screwed.

Sandicor, if you are listening, please fix my MLS! I am frustrated, my appraisers are frustrated, and my clients are getting p*ssed off. If it is the IDX recipient who is responsible for making some changes to properly process your newly formatted feed, then work with them! You might think that you have bigger fish to fry than assist third-party for-profit sites get our data right, but even Realtor.com is effected. Remember them? They are the site promoted as the “Realtor’s” site, the one to whom I pay (insert very big four-digit number) a year for the privilege of “enhancing” my listings. Just having my listings represented would be an enhancement this week.

I had a buyer client tell me this week about a conversation she had with another agent at a weekend open house. The agent, armed with impressive binders and folders of statistics and spreadsheets, shared a little secret. It seems according to this agent that homes in Carmel Valley are selling at 96% of their list price.

My client shared this news with me with the same enthusiasm of someone who has just unlocked the mysteries of the missing socks — You know, the ones that begin the laundering journey as pairs, sole mates if you will, but arrive from the dryer as fierce independents, with nary a match in sight. Ninety-six percent! Now we know what to offer!

This is just another example of a useless statistic. According to our crack MLS system, the new one I am so fond of, the sale price to list price ratio (SP/LP) for homes sold in Scripps Ranch last month was 95%. In May of last year it was 97%, as it was the year before. In April of this year the SP/LP was 96% versus 97% in April of last year and the year before.

Homes always tend to sell within 2 to 4 percent of list price — final list price. The difference is that today it may take a few price reductions before a home finds that sweet spot, the price at which buyers will perceive value.

I can already hear the nay sayers. What about a community with an abundance of short sales and foreclosures? We know the sellers and lenders are dumping those, right? In the Chula Vista zip codes, areas notorious for a high number of distress sale offerings, the average SP/LP was 97% in May of 2006 and 2007, and was 98% in 2008.

Now, in Chula Vista the absorption rate is a much higher 5.7 months (based on May detached sales) compared to our approximate 4.3 month absorption rate in Scripps Ranch. This tells me that even though our market is slower, more uncertain, different than the market of two years ago, contracts will be consummated on average within reasonable striking distance of the final list price. Maybe the sellers rejected a boatload of offers representing a much deeper discount, and only when they came to terms with the market realities did they adjust price and make the sale. Maybe the buyers had the “Why bother?” mentality, figuring they would just wait for the reduction that would bring the price back into the land of logic. Whatever the reasons, it is what it is.

There is much more to the story, of course, but this is a good segue into the idea of the “low ball” offer, one I will try to get to in due course. In the meantime, this useless statistic has some value, even if that value is nothing more than reinforcing the importance of pricing at or near market value. The whole testing the waters philosophy is never a good one, not in any market and particularly not in this one. And I say this with 99.893 percent certainty. If you are sincere in your wish to sell your home, price it well, and get it sold.

photo credit: Zevotron

The sun came up again, our new MLS system is still with us, and Steve has a shiny new computer. Two out of three aint so bad. As Steve began what would be a four hour phone conversation with tech support Sunday, my little Pollyanna declared, “They’re going to fix it!” This was my cue to immediately set about digging through the home office drawers in search of his system restore disks. Sometimes I just hate being right. I have learned that tech support’s solution to virtually every problem involves wiping the hard drive and starting over. This time, however, the system restore disks were not even enough to undo the damage.

Now that Steve is again interconnected, I can turn my attention to more pressing matters — Wasting time.

This week, I am finally convinced the world has gone mad. My shredder is working overtime. Imagine you spend three days in the new car show room. You take multiple test drives, you spend many torturous hours sitting in a little cubicle waiting for the salesman to get his manager’s approval on your offer, you fill out the financing papers, and finally, just as the arm is extended holding the keys to your new wheels, you grab your stuff and go home. “Gotcha! Just kidding! I don’t like it. I want a blue one.”

Wasting time. That is what I am mostly doing these days. Last week, I wasted time negotiating multiple offers on a home, multiple offers which each vaporized in rapid succession at the very moment of seller acceptance. Meanwhile, Steve was also wasting time on another offer. Upon acceptance of this one by the seller, the buyers decided they needed to see the home “one more time.” After 48 hours of no return phone calls from the buyer’s agent, he was finally told they had changed their minds.

Today, I will be wasting time in another way. I get to partition a few hours out of my day to deal in good faith with a buyer who has submitted an offer which appears to be missing a couple of digits. I want to believe they were using scientific notation, but I suspect otherwise.

I am seeing too many home-shopping hobbyists these days, writing offers for sport, only wanting what they can’t have, and only finding victory in rejection. If you reject my offer, then you are a seller unrealistic about pricing, and I have established my superiority. If you accept my offer, then I must have offered too much, so I will reject you.

In each of these situations, however, the playthings are well-intended people, people wanting to sell their home. Offers, both serious and frivolous, must be presented, each time requiring the sellers and their agents to spent many quality hours together thoughtfully discussing the contractual nuances and the implications and crafting a response. During the downtime, once the counter offer has been returned to sender, the sellers are emotionally scheduling the moving truck. They are making plans, and they are doing so because, through your offer, you have given affirmative notice that you have more than a passing interest in purchasing their home.

These are challenging times for sellers and their agents. Market times are long and prices are down. Buyers are plentiful, but serious buyers are few. Having been stung by the rollercoaster ride of the past few years, buyers are tentative. This is understandable, but please don’t use the offer and negotiation process as a test drive. The moment of offer acceptance is not the time to determine in earnest whether you like the home enough to make the purchase.

Have you noticed your agent behaving strangely? Maybe he has been a little testy, a tad grumpier than usual. Perhaps she walked through the walk-through with glazed eyes and a look of befuddlement, not really seeming into the whole discussion of how to operate the irrigation timers. Or, it could have been the odd encounter at the open house that tipped you off, an open house lacking cookies, a guest register or, most curiously, that coveted “free list of homes.”

If you have never before felt compelled to be kind to a Realtor, I beg you to dig deep this week. Muster all of the compassion you can. Your Neighborhood Specialist has been Tempo-ed.

Last Wednesday, the curtains came down on our local Multiple Listing Service (MLS) software. May 28, 2008 will be date forever etched in the memories of San Diego agents as the day the music died. Tempo 3 was killed dead and, in its place, Tempo 5 was born.

“What happened to Tempo 4?” you ask. I am wondering the same thing; the missing link is probably the software that actually worked. At a time when agents everywhere are otherwise indisposed, distracted with thoughts of just how they will eat in July and generally working three-to-the-ninth-power times harder for a fraction of yesterday’s paycheck, our Board of Realtors decided it was time to better serve us.

Now, this isn’t about agents being disinclined to embrace change. Every new lunar cycle brings a new statute, a new form and a new lockbox vendor, the latter requiring tens of thousands of soldiers defending the American Dream to converge at some random convention hall to take advantage of the limited time trade-ins. With each conversion comes a few weeks of confusion, but we have always managed to survive. That was then. Tempo 5 is Armageddon.

Here is my own analysis of what is wrong with our new Tempo 5 MLS software: It doesn’t work.

The gory details follow:

1. First we will assume that your computer runs on Internet Explorer, because Tempo 5 only runs on Internet Explorer. Before you can safely enter the system for the first time, you need to change your screen settings, download ActiveX controls from a site that cannot be accessed, a site that perpetually returns a “404 Error - Site not found” message, adjust your Internet security settings, enable pop-ups, and add a total of four sites to your “trusted sites.” This doesn’t seem insurmountable until you consider that the average agent can’t back out of their driveway without a Thomas Guide.
2. The old system required each agent to log in with a special password, one that was updated each month for security purposes. It seems that some bad apples were sharing their special passwords, however, so a new, safer system was clearly needed to ensure that only licensed, dues paying, authorized users can gain access to the proprietary data — You know, the data that you can find on Zillow or Trulia or Redfin or Realtor.com or…  So, now we have a little key fob. Logging in requires a Member Number, a Password and a randomly generated Access Code obtained by punching the button on your key fob thingy. Where is this key fob? In my case last week, it was in my purse on the Louisiana Swamp Tour, while Steve was in San Diego needing to input a listing.
3. The new software is as intuitive as the Bush administration. For a profession where the barriers to entry include a number two pencil and an opposable thumb, we have a software system seemingly developed by a rabid badger holding a Doctorate in quantum physics and a grudge.
4. We need a bicycle, but the Board delivered a space shuttle — one with defective O-Rings. Search result screens without scroll bars, even the blank “white screen” variety which Steve has been enjoying of late, were initially an irritant, but are actually becoming welcome sights. It beats the heck out of “Internet Explorer has encountered a problem and must close,” which is the screen I have most often enjoyed. If one is lucky enough to keep their connection for any measurable length of time (say, a nanosecond), they are confronted with load speeds roughly equivalent to the gestation period of the African Elephant.
5. We can make this easy, or we can make this hard. We made it hard. To input a new listing requires 125 distinct inputs. The basic search screen offers thirty different search fields, and the advanced search page is the page where only the bravest dare go. While I am spending my month of June trying to get a new listing entered or narrow down the active listings to just the homes with an upstairs laundry closet with gas hook-ups and a community pool but homeowner’s fees less than $72.95 a month, every would-be buyer west of the Mason-Dixon is out signing a contract on a home they found on Craigslist.

I have only scratched the surface of the Realtor’s anguish this week, but hopefully it is enough to inspire you to be kind to your agent. Run, don’t walk, to Hallmark. Offer your sympathy and your support. Your Top Producer is going through difficult times. And, whatever you do, don’t ask us about homes currently on the market. We have no clue.