Market Trends

I kind of like the new logo for our periodic market updates. We aren’t fighting crime, mind you. In fact I probably should have gone with more of a Dragnet theme (”Just the facts”), and the “man” part is a little misleading until I can shame Steve into making a cameo blog appearance, but I think it is snappy nonetheless.

We are running a little late due to the Labor Day weekend, but our housing sale statistics on the website are now up to date. We track six zip codes and the San Diego region as a whole, but I always pay special attention to Scripps Ranch (duh) where we have seen a dismal eighteen sales record since August 1st.

This is the kind of news that makes hyper-local agents shutter, given that there are enough licensed agents living and working in Scripps Ranch to fill the cheap seats at Qualcomm Stadium, which is why I eyed this morning’s news that City leaders are at least entertaining the idea of selling naming rights to our new City Hall as a potential opportunity. I suggested the “Kris & Steve Berg City of San Diego,” while Steve thought “City of San Diego Castles” dovetailed nicely with our brand. We are still brainstorming. Either way, I find the keyword potential very exciting.

And speaking of stats (which I sort of was at the beginning), here are a couple of year in review charts for Scripps Ranch and for our coastal cousin, Carmel Valley. This data is for detached homes and, as always, compliments of Altos Research.

And, so, we continue to chug along the bottom. As soon as the hoards of buyers I see floating around out there can start getting financing again, we just may start to turn the corner.

What fun that was for a Thursday!

photo credit: akaalias

Hellooooo! Is anybody there?

It has been so quiet over the past week, you can hear a call drop. And it is just so hard to be a blur of activity, a working machine, when the real estate world feels like it is operating under a cone of silence. It must be August.

This happens every year, and I am having to remind myself that a lot of the lethargy we are seeing now may in fact be seasonal and not market-driven. Our market is less than ideal; we have consensus on this point. Buyers are buried under a barrage of reports of the end of the world as we know it, fearful that a purchase today would cause their friends to lob taunts and jeers in their general direction. There are always those motivated few, the few with a sense of urgency, but absent a true “need” to move in August, most people tend to put any buying (and selling) “wants” temporarily on the back burner.

So what does this mean if your home is currently offered for sale? Patience. Every summer-end, I find myself repeating this little speech: From now through January, stuff is going on, stuff outside of real estate. If seasonal trends hold true, showings will be fewer, and open houses will not likely be festive beehives of activity. We all enjoy competing demands this time of year, from the back-to-school daze and the vacations, to the “What am I going to be?” costume decisions and and the social and gift-buying obligations. The people who do look at your home during the next several months, however, probably mean business. And, don’t forget that there are a whole bunch of busy would-be sellers out there who are putting off listing until the relatives leave, so your competition is arguably less.

My father-in-law used to say, “Don’t fight the feeling,” and this is particularly good advice right now. When someone decides to view your home during the next several months, they have probably done so because it is a priority, a higher priority than basting the turkey. Expect fewer showings, but know that the quality of your showings will be greater for awhile. It always is. Veteran agents know the season all too well and use this time to improve systems, attend to those “projects” which have been languishing since last August, and generally mobilize for the next seasonal wave. Sellers would be wise to use this time to enjoy the things their potential buyers are enjoying while they aren’t looking at homes.

Lately it has been all about the market, but sometimes it’s just August.

I had this amazingly thought-provoking post of the epic variety in the hopper this morning when I took a call from an agent on one of our listings. OK, fine. The other post wasn’t all that great, but I couldn’t let this one go.

The agent was phoning to arrange a showing. I dutifully told her, just in case she had missed it, that we reduced the price just last night. “Are they motivated?” she asked. “Well, yes,” I said. “They want to sell their home, which is why it is offered for sale.”

Motivated? I am just so fed up with the “Are they motivated” question. So, I will attempt to answer it once here, and the answer applies to all of our listings — past, present and future.

1. The seller has listed his home for sale because he wants to sell it. He has not done so because he is a showing and staging hobbyist who thrills at the opportunity to have a cavalcade of perfect strangers rummaging through his closets at the most inconvenient times.
2. Using logic, we can conclude that the corollary to #1 above is this: If the seller was not motivated to sell, his home wouldn’t be offered for sale.
3. See #1 above.

As a matter of disclosure, we do not represent home owners who have no true interest in selling, nor do we represent home owners who expect a price closer to the National Debt than to true market value. We can’t, because those homes will not sell, and we only make a living when homes sell.

Now, I recognize that my truisms do not always apply to every agent and to every agent’s  listings. We see homes every day where the prices suggest someone has been sniffing the Elmer’s. But, if you think the price is high, do not call and argue with me. The list price is not going to get any lower just because you wish it to be so or because it is more than your client’s can afford. It is going to get lower when market conditions demand it and the seller agrees to it. In the meantime, if your clients like the home, write an offer which reflects the buyer’s perception of value, and we can let our clients “talk about it.”

And, please, don’t ask me if the seller is “motivated.” What could you possibly hope that I would say? Giving an answer such as, “Why, yes, they are willing to sell for pennies on the dollar!” would justify stripping me of my license and thumping me upside my big fiduciary head with it for good measure.  Ask me where they are going, why they are going, and how soon they need to be there. If I am authorized to tell you, I will, and then you can deduce my client’s “motivation” all on your own.

Selling a home is time-consuming, it can be stressful, and it is always an intrusion. It is rarely a barrel of monkeys. Suggesting that the seller, my client, is just messing around is insulting to both of us. We would all have better things to do if that was the case.

“But,” she pushed on, “are they willing to take less because of all the short sales?”

Less than what? Good grief. I feel another post coming on.

photo credit: spaceodissey

I believe I have set a record. It has been a full seven days since I have posted here, and somewhere around day four of my sabbatical I stopped worrying about it. Circumstances were simply beyond my control, and a blog post last week simply wasn’t in the cards.

My father had an uncanny knack for ignoring the things he couldn’t do anything about. I think it’s a guy thing, and I hated him for this. I, on the other hand, am an obsesser. I tend to take a trip to crazy town every time I sense I am not driving the bus.

Me, worry?

The truth is, I’m a worrier by nature. I worry when I am too busy, and I worry when business is slow. And when things seem to be chugging along according to the divine plan, I worry that I don’t have anything to worry about. Now, in fact, I am worrying that I just ended a sentence with a preposition.

I am seeing a lot of people like me in this market. This morning’s requisite Chicken Little article in the San Diego Union Tribune is one fine example. “Housing prices sink,” trumpets the headline. Sure, sales for July were up 10.5% in San Diego County from last year, but where’s the fun in that? Prices are down, so fortunately we still have something to worry about.

Nearly 41% of the sales, they report, involved foreclosure sales. This is bad. Or is it good?  We know that the mortgage mess has left us with a legacy of distress sales, and these distress sales will be with us for awhile. The fact that the foreclosed homes are selling in great numbers should be welcomed; our market won’t reverse course until we complete the cleansing process, and this is going to take some time and additional price decline. We can worry about this, or we can acknowledge it and move on.

The F-word

“Foreclosure” has become the new f-bomb. New foreclosure listings are still outpacing foreclosure sales, says the article, and we are reminded that this should be cause for concern. I will argue that it is what it is, and focusing on the nature of the sale is a lot of wasted fretting at this point. We will work through the distress sales in time; we will work through them because they are a symptom of an epidemic, an epidemic of irresponsible lending practices, which has been isolated and quarantined.

This is mainly because getting a home loan today is as simple as threading a needle wearing a ski mask. The lending pendulum has swung too far in the other direction, and obtaining financing leaves today’s buyer feeling a little like Michael Phelps but without the endorsements. There are plenty of people who want to buy in today’s market, at today’s prices, but for whom the door has been closed due to tighter underwriting standards. This is bad, and it is good. It is a matter of perspective.

If we weren’t so busy using the f-word, we would be acknowledging that traditional listings are also outpacing traditional sales. Our market is equal opportunity. Market times in the I-15 corridor are generally running 60 to 80 days, depending on the community. This is bad if you are a seller and only remember 2003. On the other hand, if you had the pleasure of listing a home for sale in the mid-’90s, life is not too shabby. And the same goes for prices.

Time to unwind and rewind

Perhaps agents, sellers, buyers, the whole lot, should maybe stop worrying so much. We can fight our circumstances and obsess about our little paradigm shift, or we can deal. If we take a step back, this market is not fundamentally different from any other. There are people who want to buy homes for the lowest possible price, people who want to sell homes for the highest possible price, and agents who want to make a living assisting them in the transaction.

What is different is that our circumstances are forcing us all to push the rewind button on our thinking. Being a real estate agent, for all but the exceptional few, has not historically involved out-earning a Hollywood A-lister. The past half-decade, a time during which anyone who could find their way to the testing center and successfully fill in the bubbles on a Scantron was guaranteed a six-figure income, was an anomaly. Homes have not historically been our singular investment vehicles. To our parents and grandparents, their homes represented security and shelter, not a mega-lotto ticket. The fact that many saw their “investments” double in three years was an exception, not the rule. And home buyers have traditionally had to work and save toward this end and demonstrate that they could ultimately afford the American Dream, rather than having the dream handed out as freely as potsticker samples at Costco.

I couldn’t blog last week because this week I am one daughter short. In a few short days, I saw my own paradigm shift in a very big way. We pushed a personal rewind button of sorts. Operation Dorm Delivery was a success, but while we have spent the past 18 years preparing for this day, nothing can entirely prepare you for the reality. Life, like the real estate market, is cyclical. Now I have less laundry, less arguing (”Clean your room, and release that headlock on your sister!), and a smaller grocery bill. And I have more time to blog.

It’s good, and it’s bad.

photo credit: TheTruthAboutMortgage.com

I vented about the joys of the short sale last week on Inman News. Yesterday, the San Diego Union Tribune published the story of an East County resident who lived the nightmare, not as an agent, but as a person simply trying to save his home. Sadly, he failed, and his story is so incredible, you can’t make this stuff up.

For those who are rusty on the concept of short sales, we talked about it here. From the CliffsNotes, short sales are sales in which the settlement charges (costs of sale including the pay-off of outstanding loans) will exceed the sale price of the home. Unfortunately, we aren’t seeing a light at the end of our short tunnel; these situations are going to be with us for awhile.

A year ago, we saw agents tending to avoid short sales like that gallon of expired milk. First, the whole idea of negotiating with a faceless lender was daunting; for so many of us who were doing other things during the last down market, the idea of navigating these waters was mysterious, the disclosures ominous, and the shear level of difficulty involved in meeting the paperwork requirements enormous.

Second, an agent takes on a potential short sale listing at great risk. There is no guarantee a lender will ultimately accept a short pay-off and, even if the odds are favorable, the entire exercise often becomes a game of Beat the Clock. As agents, we make the daily calls to the lender begging for action, calls during which we may speak to a half-dozen or more different people looking at different computer screens, each of whom will tell us we will be hearing something in “a week to ten days.” Each new day, we rinse and repeat, but we ultimately have no control over the pace at which they will consider and act on our client’s request. So, often, the weeks become months, the buyer loses interest, and we find ourselves in a position of having to start the process again. And sometimes, it is just too late.

Finally, while most of us have resigned ourselves to short sale listings, both because they are becoming so commonplace that they can’t be avoided and because we feel a social obligation to assist all sellers, even when it is not convenient, comfortable, or even lucrative, agents representing buyers today are running for the hills in greater numbers at the first sign of bank involvement. They are doing this for all of the reasons previously mentioned, and they are doing this because short sales do not pay handsomely. The listing contract can call for a 6% or a 16% commission, but if the bank’s approval after months of time and effort stipulates that I will make $1.95, that is what I will make. We have yet to see a short sale transaction of our own that didn’t involve an arbitrary, eleventh hour pay cut to the agents.

In Phoenix, it seems that even the listing agents are thinking twice about taking on short sale listings. Phoenix is a different market, however. While Jay Thompson cites a 90 to 95% failure rate for attempted short sales in his market, Steve and I are currently (and fortunately) batting a thousand.  But it hasn’t come without a lot of brain damage along the way.

Short sales are, at least for the foreseeable future, going to be a sad reality of our market. If you find yourself in the position of needing to sell short, recognize that the process is complex and potentially lengthy. There may be tax and credit consequences, so it is advisable to chat with a CPA or attorney at the first sign of trouble. Your second call should be to an agent who has some experience with these transactions and is prepared to stand by you throughout the process.

I got a little suspicous when I first posted this Altos chart showing the Market Action Index (less than 30 suggests a buyer’s market, duh) and weekly absorption (homes opening escrow) for Scripps Ranch. Specifically, this data shows Scripps Ranch detached homes going into escrow at a clip of approximately 8 to 10 per week, yet I know that we aren’t closing 40 homes a month.

My own experience tells me why we are seeing a discrepancy; more homes are failing to close once under contract or, as we more commonly say, falling out of escrow.

This morning I took a quick peek into the statistics, courtesy of the Sandicor Multiple Listing Service. I looked at both homes which successfully recorded in July and homes currently in escrow to see how many of these had experienced previous failed attempts.

On the one hand, I expected the data to be worse (more “fallout”). On the other hand, if you have found yourself in that smaller slice of the pie, it’s pretty bad. And, from purely the agent’s perspective, you can imagine how much we love doing everything twice. Again based on my experience, this is partially due to buyer cold feet in an uncertain market but mostly due to the difficulty in obtaining financing in a market where the rules of underwriting are changing as often as a new mother of twins. In recent times, up until about a year ago, failed sales were quite the unexpectedly anomaly. Today, it is important to remember that your home is not truly sold until the Fat Lady gets her County tax stamp.