Jim the Realtor: “Market is a buzz”

[SD Realtor]

Jazz I understand what you are saying to a point. Sadly, and by far, the majority of sales people in the real estate industry misinform buyers and do indeed put pressure on them to buy homes. There is and will never be any argument to that.

Don’t confuse getting an offer accepted under market price, with desireability of a region as a whole. How many dual income engineers who want to live in an astounding climate, with plenty of jobs and very highly regarded school systems will buy homes in France, Maui, and Santa Barbare? How many? Not many at all. Last I checked Santa Barbara was not known for affordable homes. The point I am making is that San Diego offers a variety of opportunities that are pretty much not found in many places around the world with regards to employment, climate, quality of life, and variety of different areas to live in.

This by no means indicates it is impossible to get a home below market price. It does however indicate that for the same size home in pretty 90% of the USA with the exception of other large coastal cities with a large employment base, you will always pay less. This is the desireability that I am referring to and this is why prices will always be higher. Your 3000 sf home in 4S ranch will always be double or even more then the same home in Dallas. It is not ever going to scale the same.

This does not indicate prices will not go up or down in San Diego, personally I believe the biggest driver of prices will be interest rates and lending conditions. However scale that across the country and San Diego is and always will be higher.

[bearishgurl]

[quote=Jazzman] . . . I have had offers accepted in three highly desirable places, Santa Barbara, Maui, and France WELL BELOW asking price. However, in each case I went against my broker’s advice and beat the so-called odds. Tenacity, patience and a firm belief it’s a buyer’s market is all it takes. Any hint of uninformed buyer competition and you walk away. Home prices are still very over-valued in many high end areas. The housing market has been socialized, and the industry needs to be grateful for the benefit check it receives from the tax payer. So it’s not the market is “a buzz”, as there is no true market, and many realities still haven’t been absorbed by everyone.[/quote]

Jazzman, I completely agree with your strategy here. If I or my client(s) ever made an offer on property (right here in SD County) where the seller was NOT “institutional,” the seller got only 72 hours to accept it outright, reject it or counter it (yes, even if the seller was out of town). After all, there IS/WAS such a thing as a fax machine, even back then, lol!

On the few occasions where we/I submitted a written offer on a property and the seller’s agent “claimed” they had other offers in hand so we/I needed to “come up on our offer more” (without formally rejecting the offer or countering it) we walked.

This agent behavior is nothing more than unprofessional “game-playing” while leaving serious interested buyers on the hook indefinitely so they can play one buyer against the other – whoever can come up with the most “cash” wins.

This is one of the main reasons I wouldn’t “play the game” as a short sale buyer/buyer’s agent. Often, before closing, the seller is requesting “walking $$” as an “11th-hour closing condition.” I don’t believe a defaulting “seller” deserves one penny. Much more often than not, they have already ridden the “equity-extraction train” and “free-rent train” long enough. Their “party” has been long over for quite some time.

I don’t even believe in “short sales.” If more than one TD holder has been defaulted on for the same amt of time, the 1st TD holder should file the NOD first. The 2nd TD holder is welcome to come to the trustee’s sale, bid the opening bid amount and take its encumbrance “subject to” if it is interested. If only the 2nd TD holder is in default, it should commence foreclosure proceedings first. In any case, both TD holders should follow through with foreclosure promptly, beginning with whoever has the longest period of default. This will lessen the running interest and late charges and thus lower any encumbrance due to the 1st TD holder at the time of trustees’ sale.

And I don’t believe “short sales” net more $$ to the defaulted upon lenders than filing timely NOD and NOS and conducting a timely trustee’s sale does. CA foreclosure law is all laid out for lenders to use for a reason. The “better short-sale outcome” mantra is just another “fallacy” we’ve been fed by the RE sales industry who has profited immensely from “short sales” in the form of sales commissions, escrow fees, title ins premiums, mtg commissions, SS negotiator fees, etc. And the SS “seller” receives a “slightly better” outcome (+ all the cash they pocketed free from their “extracted equity”) in the form of less points taken off their FICO scores. WHY SHOULD WE CARE ABOUT THIS?? For most SS sellers, who undoubtedly had low FICO scores to begin with, it makes no difference if 100, 200 or 300 points come off their FICO score, due to other debt problems besides their upside-down property (i.e., if a SS seller’s current FICO score was 630 PRIOR to defaulting on their RE loan(s), then WHO CARES how many more points come off of it)? Their goose was already cooked.

It’s a buyer’s market and the most highly qualified buyers should win, NOT necessarily the ones willing to pay cash “bribes” out of escrow.

[end of rant]

[bearishgurl]

[quote=SD Realtor]Jazz I understand what you are saying to a point. Sadly, and by far, the majority of sales people in the real estate industry misinform buyers and do indeed put pressure on them to buy homes. There is and will never be any argument to that.

Don’t confuse getting an offer accepted under market price, with desireability of a region as a whole. How many dual income engineers who want to live in an astounding climate, with plenty of jobs and very highly regarded school systems will buy homes in France, Maui, and Santa Barbare? How many? Not many at all. Last I checked Santa Barbara was not known for affordable homes. The point I am making is that San Diego offers a variety of opportunities that are pretty much not found in many places around the world with regards to employment, climate, quality of life, and variety of different areas to live in.

This by no means indicates it is impossible to get a home below market price. It does however indicate that for the same size home in pretty 90% of the USA with the exception of other large coastal cities with a large employment base, you will always pay less. This is the desireability that I am referring to and this is why prices will always be higher. Your 3000 sf home in 4S ranch will always be double or even more then the same home in Dallas. It is not ever going to scale the same.

This does not indicate prices will not go up or down in San Diego, personally I believe the biggest driver of prices will be interest rates and lending conditions. However scale that across the country and San Diego is and always will be higher.[/quote]

Good post, SDR. I agree with all of it except that the biggest driver of prices will be interest rates and lending conditions. Historically (between 1964 and 2004) interest rates were higher than now … sometimes MUCH higher and the RE market survived … even flourished. Prior to about 2003, there WERE FF lending standards in place and even standards to qualify for an (in-house) portfolio jumbo loan. It is only since then that lending standards were loosened beyond all recognition.

I believe that there are WAY TOO MANY cash buyers and buyers who take out mortgages equaling less than 50% of the appraisal price in the SD region to cause the most desirable areas to be price-sensitive solely on “interest rates and lending conditions.”

And you forgot to mention that, for the insured person, the choice of renowned medical practitioners to choose from in this region is bar none. THIS IS NOT THE CASE is some of those “cheaper housing areas” across the country.

If a prospective buyer does not like what they can get in SD County for the price they are willing to pay, then they need to shop elsewhere for a home, continue to rent here or decide not to relocate here after-all. It’s as simple as that.

[Jazzman]

[quote=outtamojo][quote=Jazzman]”[T]here is and will for the most part always be people that will step in as buyers …The desireability factor simply makes it so.”

SD, not sure I agree here. I think that willingness is for the most part buyers not realizing the score, and agreeing to buyer broker pressure. I also don’t see desirability as being a huge factor. I have had offers accepted in three highly desirable places, Santa Barbara, Maui, and France WELL BELOW asking price. However, in each case I went against my broker’s advice and beat the so-called odds. Tenacity, patience and a firm belief it’s a buyer’s market is all it takes. Any hint of uninformed buyer competition and you walk away. Home prices are still very over-valued in many high end areas. The housing market has been socialized, and the industry needs to be grateful for the benefit check it receives from the tax payer. So it’s not the market is “a buzz”, as there is no true market, and many realities still haven’t been absorbed by everyone.[/quote]

When offers are accepted “well below” list price is that so much due to only “informed buyers” making offers or dreamy sellers with way too high listing prices? You say desireability is not a factor but I am curious about the days on markets for your properties…[/quote]

Yes and no. There are still many delusional sellers out there, but as I said it is as much about realizing buyers are in a very strong position, and that your broker may not be exploiting that to your best advantage. DOMs are always a factor as is looking for other weaknesses. Why the curiosity with that?

[SD Realtor]

Jazz there is no doubt that the astute buyer is the one who has patience and is willing to walk away from 99 deals to get the 100th deal that is the best. However be careful about projecting your personal valuatins with other buyers. That is, the vast majority of buyers DO NOT act in this manner. More often then not they are driven by other factors and are more concerned with moving on to other stages of their lives then getting the bottom most dollar. In the same breathe I would say realtors manipulate them and indeed capitalize on that, no argument there.

Of course most sellers are delusional and DOM is a good indicator to perhaps gauge how sharply you as a buyer want to throw your lowball in at. DOM also may indicate the stubborness and level of delusion that sellers may have and that they are hopeless and will choose to never sell the home. You never know but if you have the time and patience, taking that approach is a good idea. To your point, making sure your agent understands that approach is very important. In the end though sellers are sellers and your agent cannot persuade the seller to do what you want them to do. You try long enough though and something should happen.

******************

BG I agree that markets did flourish under high rates but comparing the periods you brought up to say the early 80s and there was a pronounced effect. This is what I am referring to, a calamity of sorts. Also I would point out that in the periods you discussed there was strong wage inflation that helped consumers keep up. I would argue that we have not seen the wage inflation over the past several years that would be necessary to keep up which is one of the drivers of keeping costs where they are at. In the absence of wage inflation the market will indeed suffer if rates move substantially higher and lending standards continue to tighten. I agree with you about the cash buyers and investor entry into the market. However as rates do rise you will indeed see an investor shift out of the money to alternate vehicles that will provide them returns for the cashpiles they have. The reason you see those investments now is… well where the heck else can you put your money?

[outtamojo]

[quote=Jazzman][quote=outtamojo][quote=Jazzman]”[T]here is and will for the most part always be people that will step in as buyers …The desireability factor simply makes it so.”

SD, not sure I agree here. I think that willingness is for the most part buyers not realizing the score, and agreeing to buyer broker pressure. I also don’t see desirability as being a huge factor. I have had offers accepted in three highly desirable places, Santa Barbara, Maui, and France WELL BELOW asking price. However, in each case I went against my broker’s advice and beat the so-called odds. Tenacity, patience and a firm belief it’s a buyer’s market is all it takes. Any hint of uninformed buyer competition and you walk away. Home prices are still very over-valued in many high end areas. The housing market has been socialized, and the industry needs to be grateful for the benefit check it receives from the tax payer. So it’s not the market is “a buzz”, as there is no true market, and many realities still haven’t been absorbed by everyone.[/quote]

When offers are accepted “well below” list price is that so much due to only “informed buyers” making offers or dreamy sellers with way too high listing prices? You say desireability is not a factor but I am curious about the days on markets for your properties…[/quote]

Yes and no. There are still many delusional sellers out there, but as I said it is as much about realizing buyers are in a very strong position, and that your broker may not be exploiting that to your best advantage. DOMs are always a factor as is looking for other weaknesses. Why the curiosity with that?[/quote]

Takes me back to the days when I was fighting with other “uninformed buyers” and dreamy sellers that’s all.

[briansd1]

[quote=SD Realtor]

BG I agree that markets did flourish under high rates but comparing the periods you brought up to say the early 80s and there was a pronounced effect. This is what I am referring to, a calamity of sorts. Also I would point out that in the periods you discussed there was strong wage inflation that helped consumers keep up. I would argue that we have not seen the wage inflation over the past several years that would be necessary to keep up which is one of the drivers of keeping costs where they are at. In the absence of wage inflation the market will indeed suffer if rates move substantially higher and lending standards continue to tighten. I agree with you about the cash buyers and investor entry into the market. However as rates do rise you will indeed see an investor shift out of the money to alternate vehicles that will provide them returns for the cashpiles they have. The reason you see those investments now is… well where the heck else can you put your money?[/quote]

Pretty good summary.

I would add that the market is not much affected by cash buyers. Real estate values are driven by the marginal credit buyer. The reason the market is slow now despite low rates is because buyers don’t have down payments, wages and confidence to support house buying.

[Jazzman]

[quote=SD Realtor]…the vast majority of buyers DO NOT act in this manner. More often then not they are driven by other factors and are more concerned with moving on to other stages of their lives then getting the bottom most dollar. [/quote]
Therein lies a paradox. Bottom most dollar or just value for money, this doesn’t deny the fact that the very same people spend a small fortune and several years on education and training in order to get well paid jobs to service these huge debts. Yet little of that investment seems to go towards figuring this out.

[Jazzman]

Bearishgirl, I found that short sales are good for backups or Plan B’s. Tying up a home as ‘pending’, especially if you can get a ‘do not continue to show’ status, allows you to continue a search. An insurance if you will.

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