This house went live on the MLS around lunchtime on Thursday, and by Friday afternoon all 52 showing-appointments allotted for the weekend were booked:
I got here early enough to catch the 3:15 agt on her way out, but the 3:30 agent showed up ten minutes late (his clients were on time) and he locks himself inside the house – which is all it takes to screw up the whole schedule. I was the 3:45 appt – I think there were at least five other parties who came after me:
I think we can agree that list prices today are at or above the all-time highs, yet with demand overwhelming the few listings that are trickling out, buyers are forced to consider going even higher. It’s working too:
We usually get some anxious buyers who pay closer to the list price in Jan-Feb, but the average has stayed under 100% in recent years.
With January already pushing 101%, it’s going to get crazier – and this is the Over-$815,000 market!
If you’re the type of buyer that refuses to get into a bidding war, you might have to sit this one out.
Two offers that I made on behalf of buyers fell on deaf ears this weekend.
The first listing agent pulled the usual stunt – the blackout, where he doesn’t answer the phone or communicate in any way until the deal is done. Once he got the winning offer signed, he started answering his phone again (instead of communicating with the losers that he “went in a different direction”). We had offered full price on a two-day old listing, and lost without any chance to compete. When I got him on the phone, I asked, “You must have sold it for at least $50,000 over list?”, to which he said, “No, $15,000 over”. Some agents prefer to grab the first decent offer, rather than create a bidding war – so get there early!
A listing agent on another new listing told me that he had four offers in hand, and expected a couple of others – and he couldn’t say if he was going to counter-offer. So we made a new offer that was $80,000 over list price, to which he responded, “Just finalized the transaction”, and then emailed me a couple of hours later to let me know that the seller has rejected my offer. Rubbing the losers’ nose in it is another common trait among the inexperienced listing agents too.
This listing agent reported that she had over 50 phone calls between Friday night and Saturday afternoon, so they raised the price by $200,000:
The second-wildest bidding war of 2021 (so far) resulted in the winner paying $2,100,000 cash for this house on January 13th (listed for $1,850,000, and ten offers submitted). With the frenzy conditions, buyers may try to make a quick buck – don’t be surprised if we see more of this:
We’re not even in the selling season yet – it starts tomorrow!
For Mark Stapp, a real estate professor at Arizona State University, what’s going on in the real estate market right now is not a bubble.
“The definition of a bubble is that when it pops, there’s nothing there,” Stapp said. “That’s not this case. There’s very real demand that exists and that’s what’s causing prices to increase.”
Realtors across the country generally agree.
Mary Jo Santistevan, a top-producing sales associate with Berkshire Hathaway HomeServices in Phoenix, said buyers are flowing in from congested cities of California, Washington State and the Midwest. They are looking to take advantage of Arizona’s lower home prices, lower property taxes and quality of life. But they are confronting a situation where inventories of unsold homes have been dropping steadily in recent years and are now teetering on a one-month supply in some areas and less than that in others.
“Even builders are struggling to keep up with demand,” Santistevan said. “There’s a 10-month wait time for construction. The majority of builders are using a lottery system. One builder in particular in Gilbert had a waitlist of 100 deep.”
Stacie Lee, a fellow agent at Berkshire Hathaway, says whenever something goes on the market in Phoenix, the showings are usually back-to-back and a closing comes within a matter of days.
“Many homes go for $30,000 to $40,000 over list price and a few homes in the mid $300,000s have sold for $100,000 over list,” Lee said. “A lot are going for cash. Cash is king right now.”
Lee added that she had 70 people show up for an open house over the summer and had 15 offers in the first couple of hours. The home sold for $375,000 and is now back on the market at $550,000.
“There’s a lot of investors flipping homes here,” she said.
Nearly 3,000 miles away in Augusta, Maine, the housing market is just as frothy.
Fifteen of Maine’s 16 counties experienced a 10% increase in median home prices in 2020, according to Aaron Bolster, president of the Maine Association of Realtors. Some of those counties saw leaps of 20% or more.
“We already knew Maine was popular,” Bolster said. “More than 32 million people visit between Memorial Day and Labor Day. They don’t typically come at this time of year. But in a pandemic, it’s a safe place to be. The population density is very low and teleworking suddenly got popular in 2020.”
Bolster said 25% of buyers in 2019 came from out of state. Last year, that number rose to 33%. Without a large housing stock to begin with, available listings got siphoned off pretty quickly as out of state buyers bid up the prices.
At the moment, there are only 6,000 homes for sale in the entire state, Bolster said, and half of them are under contract.
The situation is unique for Maine and Bolster is not sure how long it will last, especially given that the demand is driven by people coming from out of state – many of whom will presumably be able to work from home – and not by job creation within Maine’s borders.
“Maine doesn’t create a lot of new jobs,” Bolster said. “When we create a new job, we give one up. So real estate doesn’t usually appreciate that fast. It’s interesting to see such a robust market when it’s not really tied to economics.”
We’ve had 208 closed SFR sales between La Jolla and Carlsbad this year.
How crazy is it?
Eighty homes sold over the list price, which is 38% of the total number of sales. Of those, most were just $10,000 to $50,000 over list, but there were some big bombers:
Most % Over List Price
List Price
Sales Price
Percentage Over List Price
$1,150,000
$1,500,000
30%
$1,500,000
$1,750,000
17%
$1,850,000
$2,100,000
14%
$1,500,000
$1,710,000
14%
$650,000
$740,000
14%
$2,199,000
$2,475,000
13%
$2,395,000
$2,660,000
11%
$2,250,000
$2,495,000
11%
$2,995,000
$3,300,000
10%
$1,449,000
$1,600,000
10%
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
It’s not just paying more than the list price. The listing agents will test your mettle too.
Here’s a seller counter-offer on a million-dollar home with nine offers on it:
The house was built in the 1980s, and you expect the buyer to take it as-is without a home-inspection contingency? And you’re going to get 5% to 10% over list price, but you can’t throw in a home warranty?
There will be buyers who would have paid more money but who drop out when they see the extra demands.
Listing agents believe that this is how you get rid of the buyers who ‘aren’t serious’, but in reality it just limits the remaining buyer pool to the emotionally-charged-and-will-sign-anything buyers. They are the ones that are less likely to close escrow.
Historically the market has felt healthy and balanced when we’ve had a 2:1 ratio of actives vs. pendings.
Remember when the Ranch was 10:1 for years? Now look at the market – especially on the lower-end:
NSDCC Actives and Pendings
Town or Area
Zip Code
Actives
Pendings
Cardiff
92007
11
16
NW Carlsbad
92008
17
19
SE Carlsbad
92009
9
38
NE Carlsbad
92010
1
12
SW Carlsbad
92011
2
17
Carmel Valley
92130
26
43
Del Mar
92014
43
13
Encinitas
92024
39
45
La Jolla
92037
101
46
RSF
92067
96
35
Solana Beach
92075
11
10
NSDCC
All Above
356
294
Carlsbad, a town of 110,000+ people, has 29 houses for sale?
It’s probably going to get crazier too as the traditional selling season opens up and we see a few more listings trickle out. It would take a flood of new listings to cause the market to slow down now.
With no real surge in inventory (yet), we are entering the hyper-frenzy phase now.
It’s an environment where most listing agents are ill-equipped to handle the pressure because they’ve never done this before. The only time we’ve been close to having insanity like this was at the bottom in 2009 when the bank-owned properties were getting 10-30 offers on every property.
How many REO listing agents are left, besides me? Yep, I can’t think of any either.
As a result, sellers are leaving money on the table all over the county. Why? Because inexperienced agents get inundated with requests and offers, and instead of handling them professionally, they just shut it down instead. Examples from this week:
They stop answering the phone, or returning calls/texts.
They direct you to automated services.
They mark the listing as pending or withdrawn before accepting an offer.
They accept an offer before showing appointments are completed.
Basically, they blow you off.
While they may think that it is their prerogative, they aren’t upholding their fiduciary duty to their seller by limiting the showings. Furthermore, they have an obligation to their fellow agents to allow them the opportunity to sell the listing. Yes, broker cooperation includes letting every agent have a chance to sell your listing – it’s how the system works. You sell my listings, and I sell yours.
It’s gotten so bad that another agent was joking with me that when he sees a hot new listing come up, he just books the first appointment available, and then looks for a buyer.
If we are going to abandon the traditions, let’s take it a step further to solve all the problems at once.
There have been misguided attempts previously that have probably sent us backwards, so there’s work to do to convince people. But auctions are the answer.
Conducting a live auction where all participants can witness the process (to keep it honest), and let the transparency drive the Fear Of Losing is the most effective way to get buyers to pay top dollar.
Will the jacked-up Covid-19 era finally cause auctions to emerge as the answer?
It doesn’t have to be anything fancy – this one worked great:
Will auctions be implemented by the old guard? It’s doubtful. While the hottest bidding wars are primarily on the lower-end properties (under $2,000,000), we can learn a lot from an auction company who only works the higher-end. They have a designated showing period where buyers are welcome to tour the home with their inspectors, then attend the live auction where a lucky bidder will likely buy a house that day.
Think of their benefits:
Showing dates and times arranged in advance.
Day of sale (Auction date) set in advance
10% commissions (known as ‘premiums’ which sounds friendlier)
Commissions are PAID BY BUYER and tacked onto the winning bid.
Sellers and agents will love that program, and we’ve already seen buyers be ready, willing, and able to pay 10%+ over list price these days – so they end up in the same place anyway.
The industry should convert to this auction format today and solve everything!
Showings are already 20.2% higher than they were during the first week of January, which is double what they were last year. But the NSDCC listings in January are going to be at least 20% fewer, year-over-year.
Last January we had 354 NSDCC listings, and today we have 239, month-to-date. We going to end up about 25% below last year’s count.
More demand and less supply = max frenzy conditions!
We can hope that the magical April-1st-date-when-seniors-can-take-their-tax-basis-with-them, combined with lower Covid-19 counts will unleash a surge of new supply.
Could it be that potential sellers are purposely waiting for prices to go up higher?
Here’s one example:
I sold this 2-on-1 property for $400,000 in 2002.
My client and I had begun chatting about selling early last year. At the time, my quote was in the $900,000s, and by the end of summer I was up to $1,200,000. He said he’d think about it.
He ended up listing with a different agent for $1,395,000 in November.
They were going for max money, but the market didn’t quite agree. They ended upselling for $1,187,000.
It’s only one example, but it makes me think that buyers might have some attachment to reality, and that starting with an attractive price in the beginning is the best way of getting it bid up to the moon.
Facing an upsurge in housing demand across the country, many home buyers are finding themselves in bidding wars for the limited inventory on the market. To win, buyers are trying to find ways to entice sellers beyond price—and at times are taking it too far, real estate professionals say.
Mary Lou Wertz of Maison Real Estate in Charleston, S.C., talked to The Wall Street Journal about one couple relocating from New York who fell in love with a $1.2 million, four-bedroom home online. The seller had already accepted another offer, however. The New York couple offered to pay $10,000 more than the other buyers as well as offer their competitors $25,000 to walk away from the home. They also told the seller that they would make a $30,000 donation toward a hospital for cancer research since the seller had recently lost his wife to cancer.
Ultimately, the New York couple’s offer was not accepted. The offer seemed “a little over the top” to the seller, Wertz told the Journal.
Another couple shared with the Journal how they toured 50 Los Angeles homes, submitted 16 offers—sometimes above the asking price—and were outbid every single time. But they weren’t about to lose out on a three-bedroom home listed for $735,000 in the Northridge area. “We were turning up at showings, and there would be a line of people who were there before us,” Andrea Kissling of Los Angeles told the Journal. “These houses were getting 30 or 40 offers and going $100,000 over asking.”
The buyers noticed memorabilia around the house of the Harry Potter films. So they produced a Harry Potter-themed video for the sellers (one of the buyers provides design services for Warner Bros.). The video fawned over the home and showed the couple reading Harry Potter books to their children. The couple also offered to buy the sellers VIP passes to The Wizarding World of Harry Potter at Universal Studios Hollywood.
Despite all the work, the couple still lost out to a higher offer for the home.
Chris Furstenberg of Nourmand & Associates in Los Angeles told the Journal that one of his clients—a filmmaker—once made an offer that came with the promise of tickets to the Academy Awards. Still, the seller went for a higher offer.
Furstenberg says such enticements often only work to settle a tie in a bidding war. But if there’s a higher price, that usually always wins out in the end—no matter how much buyers try to sweeten the deal with other offerings.
This one was in Del Mar, but on the far north end off San Dieguito Dr. which isn’t the prime Del Mar village area (though close physically). Usually it’s the creampuffs that attract all the interest and offers, but in this case it was a regular old fixer that listed for $1,150,000.
It closed for $1,500,000, which was $350,000 over list!
