Market conditions in the off-season will be tepid but temporary – buyers will be lying in the weeds, and sellers should wait until the 2024 Spring Selling Season.
I don’t know how this sale above happened, and it doesn’t matter. All that we know is that the seller took an offer that was 29% below the list price. It’s highly unlikely that you or I will get that kind of deal, but you can’t win if you don’t play.
The buyer’s agent is from Laguna Beach and got her real estate license in 2020 so it’s unlikely she had some super-duper sales tricks to convince the seller to dump 29% on price. Either they just happened to be in the right place at the right time, or the seller needed to sell that day.
The chance of you getting a premium home at a discount is low – probably less than 5%. But you can’t win if you don’t play! Make offers, the off-season is upon us!
Are you wondering what it is like being a buyer these days – and how we can asisist you?
This is a good example. Our buyer above made offers on seven different homes over the last year before winning the right home, at the right price. We survived a five-offer bidding war when the sellers accepted our offer of $1,340,000, then we worked them down by $50,000 after our inspection.
At $1,290,000 for 1,801sf, I think it will be one of the better buys in Carlsbad this year:
The minute I saw this address I knew that it would have a big ocean view because I sold one in here before. It turns out, I sold this very home in 2001 for $257,000 when it was all-original (I rep’d the seller then). It has since sold for $461,000 in 2005, $429,000 in 2014, $613,000 in 2018, and $979,000 on Thursday.
My buyer is out-of-state and made the offer based on this video – and then came for the home inspection:
Even though I’ve had a record amount of inquiries already, I don’t think there will be many sales early on. The inventory of quality homes is excruciatingly low, the prices are filled with early-season exuberance, the market uncertainty is off the charts, plus come on – it’s only January 8th!
Sales in the first quarter will be done by those who go out and create them while most people are standing around, waiting to see what happens. The tougher, the better for me. This should be my favorite year ever!
Our new listing in Carmel Valley! Open 12-3 this weekend.
Check out this attractively-priced Portico home with fully remodeled kitchen, hardwood floors, 3 bedrooms + loft and downstairs den, sumptuous primary suite with two walk-in closets, and upstairs laundry room. New paint and carpet, private yard, and cool front porch to watch the balloons go by! Live here and send your kids to Solana Ranch Elementary School – verified with the school district on Nov. 16th. The community pool/clubhouse is like a 5-star resort! It’s a good distance away from Carmel Valley Road too. This model sold for $2,086,000 on May 9th. Look at the savings – our list price is 20% off, and the 30-yr jumbo rate is back down in the 5s! Fed governor Bullard said today that the Fed Funds rate might have to go 1% to 3% higher. This home is the best discounted price/low rate combo you’ll see in the next 1-2 years! Only $1,675,000.
I tell potential home buyers to keep looking because you never know when you will find the right house – which is the most important part of the equation. Most will convince themselves that it will be easier to find the right house if prices came down, and besides, the current crop isn’t that interesting.
To keep it simple, let’s just calculate how mortgage rates have changed the equation:
Purchase Price: $2,000,000
Loan Amount: $1,600,000
30-yr jumbo rate: 3%
Monthly pmt: $6,746
Buyers who expect the sellers to make up the entire difference with a lower sales price will have to wait until they can find a home that meets this description:
Purchase Price: $1,400,000
Loan Amount: $1,120,000
30-yr jumbo rate: 6%
Monthly pmt: $6,715
If home prices come down 30%, it will enable buyers to buy the same house for the same monthly payment – and with a $120,000 smaller down payment too. If it happened over the next five years, it means we only need to drop about 6% per year, and we’ve already dropped more than that in 2022.
Or let’s say you want to roll back to pre-pandemic pricing.
NSDCC homes that sold in February, 2020 closed at a median of $509/sf, and last month the median was $793/sf which means we’d need a 36% decline to get back to pre-pandemic pricing.
How are you going to play it?
Are you going to wait until you actually see homes selling for 30% to 36% off to get back into the game?
Are are you going to wait until rates come back to 3%?
Or do we acknowledge that the buyers who have more horsepower are going to jump back in sooner, and there’s not much chance of prices dropping the full 30% to 36%? The highly-motivated affluent folks will probably be satisfied with 20% off, and they will derail a full decline. It’s what happened in 2012.
Can you live with 20% off?
Because if you can, then you need to stay in the game.
If the #1 variable is buying the right house, then #2 is timing.
I think the affluent will be looking next spring, and if they find a suitable house, they are going to buy it. By then, some of the statistical pricing gauges will be showing 10% to 20% declines, either nationally or in isolated markets. Because the local pricing isn’t that nuanced and buyers just want a house, they will decide that’s close enough and go ahead with the purchase.
To support my suspicion, I’ll note that during the frenzy, it was the same mentality, just in reverse.
When people found the right house, they just paid whatever it took – even if it meant paying $500,000 to $1,000,000 over the list price! Nothing else mattered besides getting the right house.
Most buyers won’t believe their eyes, and the volume will be thin. But sellers will appreciate any momentum and be encouraged to price their home for about what they thought they could get, with not much discount. Buyers who want discounts will be relegated to scouring through the dent-and-scratch bin, or hope that moving during the off-season might be more fruitful. Great for them.
Let’s face it, at least 90% of the current listings aren’t coming off their price much. To get a deal, you have to make offers! Here are some good tips:
We were discussing the “mold” found by a home inspector, who wasn’t qualified to comment on the subject – though that didn’t stop him from trying to scare the daylights out of the buyer just so he could CYA.
I suggested that it was the garden-variety mildew that could be removed with a squirt of bleach and a wipe of a cloth. After all, it tested ‘dry’ and the minor stain under the kitchen sink looked like it was years old.
Of course, they asked, “What do you know about mold?”
Last week, reader TOB talked about a buyer he knew who walked away from a deal over the Rampart fireplace. Here’s a list of other issues that might be deal-killers, but we try to find a way to solve them before giving up!
