Monthly Archives: January 2014

For Arm-Chair Realtors…

chairsWhere were we?  Oh yeah. That was the year that was.   We were reviewing broad brushstrokes of the market’s trajectory in 2013.  With the lofty assumption that having a good feel for our recent past might help us get a better handle on what’s coming in 2014.

On a side note – it always amazes me how many arm-chair Realtors there are out there. One’s who rely on national news stories to tell them what’s happening in their own backyards.

They read quotes from the Case Schiller Index,  articles about consumer confidence and headlines regarding median prices in major metropolitan areas and try to graft the bold font directly onto our own little market in Santa Cruz County. Whether it’s a good fit or not.

Too much big data (including Zillow Zestimates) can lead to a host of small mistakes, bad choices and messy outcomes for individual Buyers and Sellers.  We’re the 2nd smallest county in California and it’s hard to compare the market dynamic on the Westside to Watsonville’s. Or Aptos Hills’ to Scotts Valley’s.   The numbers are all over the map!

Lesson? All real estate, like all politics, is local.  Hyper-local and personal.  Know your sources.  Think global all you want – you still have to act local.

To recap the first six months of 2013… January started with a low inventory of homes. As most Januaries do. The collective sense was that the market had improved and would continue to improve. Interest rates were low.  Spirits were high.

Near the end of February as a little inventory began to filter onto the MLS,  pent-up demand rushed out of the gate. The market exploded.  Multiple offers became the de rigueur m.o. du jour.  Agents, Buyers and those who made the decision to Sell were certain that 2005 had resurrected itself from the grave.

The bulls were off and running.  All kinds of apocryphal real estate stories made their way over the hill from Silicon Valley hot spots –  adding fuel to the fire.

The year before – the much- anticipated Facebook IPO had done a face-plant.  The speculative excitement and fervor that had begun to inflate the market in the early spring failed to materialize.

Come to think of it…we also had little mini-runs in March  2010 and March 2011. But each time they quickly played themselves out.  Couldn’t quite find solid footing. Or momentum to sustain themselves.

But last year, it felt like the market was truly back.  Ready to launch into another long boom cycle.  We prepped for the tsunami of sales that was sure to follow.

But sometime in July, things began to wane.  Almost imperceptively.  Little things.  Like instead of taking a week to receive offers, it might take two or three. Instead 5 or 10 offers maybe we’d only see 3 or 4.  Or even just one.  And that one wasn’t always at full price. Buyers were pushing back. Getting pickier.

Prices remained oblivious to the nuanced shift. Continuing to run on the exhaust fumes everyone was still inhaling.  Seemed like each new listing raised the bar $25k over the last sale in the neighborhood.

But something else was happening too.  Fewer new sellers were coming on board.  The median price was going up, but the number of actual sales was going down. And it wasn’t because buyers didn’t want to buy.

Plenty of people wanted to buy. They just couldn’t figure out how to do it. Financing guidelines had changed.  Those easy equity lines and no qual loans weren’t available anymore.  And fat chance any Seller was going to take a contingency offer from a buyer needing to sell their own house.

Next week: How “Inventory, Inventory, Inventory” became the three most important words in real estate in 2013.

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Polishing the Rear View

RearviewIt’s  January already? You mean, magically, mysteriously, somehow, some way we’ve managed to make it through another year in real estate together? Congratulations! Let’s give ourselves a big thumbs up and get it ready and poised to press the reset button for 2014 in the next few weeks.

I guess time flies when you’re having…having….well… er…. whatever it is that real estate has been having this past year?

Not exactly fun.  That’s not the word that immediately comes to mind for 2013.  Some excitement? Yes. Intensity at times? Yes.  A quickening of the pulse? A rising sense of promise? Isolated incidents of some serious shake and bake? Yes. Yes. And more yes.

Here’s a quick snapshot.  Last January, we started with a median price of $485,000 in Santa Cruz County.  The Average Price was $548k.  Interest rates were 3.6%.  And there was a noticeably low inventory of homes available for buyers to choose from – just 460 single family listings including those already in contract but not closed.

By  November,  the median price had ballooned to  $659,000.  The average sales price was $716,000.  Interest rates were at  4.37%. And the inventory of homes was at its lowest level starting any November in the last 16 years.

A 30-35% increase in the median and the average.  On par with any of our previous bull/boom markets.  A huge change. But did it qualify as unmitigated fun?  Nah.

Sometime in late February the market took an unanticipated shift into radical high-gear.  For a brief shining moment, lasting a few months (until around May) it  almost felt like it was 2005 all over again.  (sans all the subprime loans)

A familiar sense of déjà vu washed over the market. Pervading the air. Rousing some of those irrational exuberance centers nestled dormant in our brains that had fallen into a deep trance back in 2008.

The adrenalin was suddenly pumping.  Multiple offers were jumping.  Prices started leapfrogging up as buyers jockeyed for acceptance from sellers who were suddenly strutting their stuff  – happy to feel powerful and in charge again

In a sure sign  Agents were getting more confident and cock-ier,  the majority of new listings coming on to the MLS prefaced their remarks with the standard phrasing:  “No showings until Brokers Open on Thursday. All offers to be reviewed next Tuesday at 5pm.”

Which roughly translates as:  “This listing is coming on today.  You can’t see it until brokers open on Thursday.  Don’t bug us until then. We’ll have Open Houses on Saturday and Sunday.  If you are interested you’ll have one additional day to get your act together.  Then we’re going to review and respond to all offers we’ve received on the next day.  That’s the cut-off . Don’t be a day late or a dollar short.”

After I received 19 offers on a Westside listing in early March,  I wrote an 8 week series on Multiple Offers. How to position yourself. How to write them. And how to negotiate the process effectively after you submit them. Because multiple offers were all anyone wanted to talk about.

Remember the young couple that the Santa Cruz Sentinel wrote about that had written more than 20 offers on 20 different places and didn’t get a single acceptance on anything?  As  I recall,  they gave up and headed south towards San Luis Obispo hoping they’d find a coastal housing market that was less intense than this one.

Things began to settle down and settle out by mid to late June and although the rest of the summer wasn’t quite a swoon, it wasnoticeably less frenzied.

Next week we’ll pick it up and continue to retrace our steps through the rest of the year that was.

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