Category Archives: Real Estate Of Mind Articles

Tom Breszny is a frequent contributor to the Santa Cruz Sentinel. Read about his perspective on the real estate market.

The 60 Minutes Syndrome

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Another Home Inspection this week. Another reminder just how risky daily life can be.

Home used to be a place of refuge, a sanctuary from all the bad things that could happen – out there. They used to say most accidents occurred within five miles of home. But after digesting this 60-page tome of an Inspection Report, I’m not sure how anyone makes it out of their home alive these days.

I call it the 60 Minutes Syndrome. Goes something like this: Morley Safer (suspicious show biz name) does a riveting exposé on the dangers of garage door openers – the ones that pin unsus- pecting children and pets helplessly underneath. By the following week, consumer protection advocates are calling for new auto-reverse safety mechanisms.

By the following year, Home Inspectors are citing chapter and verse about brand new garage door codes. They understand (after a lawsuit or two) that if they don’t warn everyone about every possible thing that could harm them, their own asses may be in grave danger. CYA rules. Absolute CYA rules absolutely.

Real estate has moved into strange territory. Caveat Emptor (Buyer Beware) has been replaced by Caveat Venditor – Seller Beware – of all those things that can scare the heck out of potential buyers. Home Sweet Home. How can it kill, maim or injure thee? Let me count the ways… Here are just a few of the dangers you never knew you had to worry about…until now:

Does your oven have an anti-tip device? Ever seen an oven fall over on someone? Not pretty.

That naked light bulb hanging in your closet? Stack those sweaters high enough and it’s a fire waiting to happen.

That old dryer vent? It’s filling up with combustible layers of lint as we speak.

How many dyslexic plumbers have installed hot and cold water lines backwards? A special invitation to unexpected scaldings.

Is every stairway a potential stairway to heaven? Risers too high? Too wide? Treads uneven? Handrails too wide to grip?

Deck rails more than 4 inches apart? That’s just wide enough for small heads to get stuck.

And the list goes on…GFCIs. CO2 Detectors. Smoke Alarms. Pool Alarms. Ban all extension cords. Install tempered glass. Clamp open the damper on your gas fireplace. Replace the sharp screws in your electrical panel.

When I was growing up, all we had to fear was the atomic bomb. As long as we listened to Bert the Turtle and remembered to duck and cover and didn’t stare directly into the blast, we were fine. Everything else was gravy.

People Vote With Their Pocketbooks

Vote yes and vote no. Ballot box.

Continuing the conversation…. talking about the changing market and how real estate agents and sellers are scrambling to adjust
on the fly.

As the evidence mounts (more listings, more price reductions, fewer overall sales)
it’s starting to feel like less of a seasonal lull and more like a larger shift in the balance between buyers and sellers. If that’s true, it’s a shift that’s at least a year overdue. This has been the longest uninterrupted seller’s market anyone can remember. A wild ride. But no cycle, up or down, lasts forever.

Which is an easy thing to say in the abstract. But a much harder thing to accept when it’s your house that’s in the middle of a changing market! To help inform some of the difficult discussions ahead, as agents, sellers and buyers struggle to tweak their perspectives, here are a few more observations about how the market communicates its message. Whether it’s the one you want to hear or not.

If you are selling your house… the goal is to sell your house. It doesn’t matter what you think your house is worth. Or what your agent thinks it’s worth. Or what anyone else thinks along the way. The market simply doesn’t care. The only thing that matters is what all those ready, willing and able buyers think your house is worth.

The market can be defined as: how every house compares to every other house that’s for sale. And by how many Buyers are competing with each other at any given point in time. a.k.a the law of supply and demand.

“People vote with their pocketbooks”.

Everyone has heard the phrase. Nowhere is that more true than in real estate. When some places sell and others don’t, it’s the perfect illustration of people voting with their pocketbooks. They compare, contrast and exercise their right to choose from all the available options.

The most fundamental truth about any marketplace is this: At the right price, every- thing sells. Friends, neighbors, relatives and/ or your own inner-voices driven by fear and expectation, can spin the market’s message in a confusing variety of ways. There’s never a lack of excuses about why a house isn’t selling.

But in the end, it all comes back to the same thing. At the right price, it doesn’t matter if there’s too much freeway noise, too much work, too many trees, too small of a yard, (or too big of a yard!), too many steps, too few bedrooms ad infinitum, ad nauseum. Because.. at the right price all of those objections will magically disappear and your house will sell.

Shifts Happen!

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We’ve been hearing about a “shift”  in the marketplace, in hushed tones, for quite a while now.  Buyers, Sellers and Agents have all been noticing subtle changes creeping into what has been a lopsided Sellers Market for years. 

People reading the tea leaves have probably picked up on a few signs: One easy one is that there seem to be more actual real estate signs dotted around the landscape. It also seems like houses are staying on the market longer. And there are also more reports about price reductions. And a lot fewer stories about the ten offers the neighbor’s house just received.

Of course, the overall number of sales has been low for years but since the active inventory has also been at historic lows, it stands to reason there would be fewer sales. And while we’ve been hearing that the real estate market in Silicon Valley has slowed, to the uninitiated it still looks like prices are so high over there that it seems silly to think of any  “softening”. 

Some talk about a “shift” has been spurred by the general belief that markets can’t just keep going up forever. That they have to rest and come down every once in a while.  And yet, there just hasn’t been a lot of “hard evidence” about an actual “shift” that anyone has been able to point to.   

Until now of course… The trailing indicators have finally arrived to give credence to what people have been whispering about for months. Closed sales for Santa Cruz for September spell out the details and offer definitive handwriting on the wall for all of us to consider. 

Median Price:  DOWN from $930k in September of 2018 to $795k in September of 2019. For more than a year, the median price has hovered around $900k and this is more than a significant adjustment downward. 

Days on Market:  UP to 56 days in September of 2019 from 53 days in 2018.

% of List Price Received:  DOWN to 98% in September of 2019 from 99% in 2018. This number is based on actual list price at the time of sale, not the original list price. The % of original list price number is much closer to $92% given the drop in median price. 

Average Months to Sell:  UP to 3.6 months in 2019 from 3.3 months in 2018.  This is the longest it has taken to sell a home in quite a few years, signalling a slower, more balanced market.

Number of Sales:  UP from 131 homes in September 2018 to 151 homes in September 2019. Translation: as prices were reduced, more homes sold. 

More on the shifting market next week

 

Sellers, the Market Is Talking To You

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Picking up the thread…. Sellers have selective memories. Fluid understandings about the market and how it works. When things are going well, the machinations of the market seem obvious. When the cycle shifts, the message morphs into a mystery they just can’t seem to fathom.

Do the market’s dynamics function differently in different markets? Is that why a Seller’s ability to “get it” vacillates between such extremes? My own perspective is that the market is an extremely honest feedback system. It tells the truth and delivers a consistent message in every market cycle.

Rather, it’s the gap between people’s expectations and results that tends to fluctuate wildly in different markets. Since expectations arise in the non-rational regions of the brain and results are usually interpreted through the lens of our emotions, both are easy avenues for disconnect.

To help Sellers adjust to the shift that’s going on right now, here’s one fundamental truth about real estate that everyone should hold to be self-evident: at the right price, everything sells. (Yes, it really is that simple.)

If you are one of those Sellers who ís struggling to figure out what the market is saying, here are the six most important ways it is talking directly to you:

 

Open Houses: How many people are attending your open houses? 10? 50? 100? If you don’t know, find out. If you aren’t having open houses, you’re blowing it. The primary audience for Santa Cruz hails from over the hill and weekends are when buyers come.

Showings: Is your house being shown independently outside of those opens? How many separate showings have you had? Have some Agents brought the same clients through more than once? If you don’t know, find out.

Days on Market: Has your listing been on the market for less than a few weeks? Or more than 30 days? If you’ve already reduced your price, how many days have gone by since you dropped it? If you don’t know, find out.

Feedback: What are buyers and agents saying about your house? What recurring observations are being voiced? If you aren’t hearing the feedback from agents and buyers, your agent isn’t doing their job. Find out.

Request for Reports: How many buyers’ agents have actually asked to see the collection of reports and disclosures that your agent has hopefully worked so hard to help you compile? Find out.

Offers: Have you had offers? Even low ones? Hopefully you know the answer.

These are all the ways the market communicates. In every kind of market. Next week, we’ll discuss how you can interpret the fundamental truth about your price, after you’ve gathered all the feedback.

Summer Review

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Here we are…right on cue. It’s the 6th day of summer and, not uncoincidentally, we’ve been talking about the seasonal downshift that often happens right about now, despite all the ad hoc wisdom that likes to insist that summer is the best time to sell a house.

That’s when the weather is warm, the catfish are jumpin’ and the prices are high. But if
you want to hear why that just isn’t the case anymore, read my recent columns that deconstruct the myth of an always-bullish summer market.

Today, let’s catch up on local sales stats for SC County to see if they shed any light on where things are headed. Trying to get an accurate read on what the market is doing from random newspaper articles and posts selling some kind of spin is next to impossible.

So let’s all start out on the same page, with the same stats moving forward. Next week I’ll tender a few predictions about what Sellers and Buyers can expect to see between now and 2020.

Anyone interested in receiving more detailed breakdowns on market trends in Santa Cruz, Santa Clara and San Mateo Counties, can email me. I’m happy to forward complete metrics for each. If you don’t understand why it’s important to follow those neighboring markets, it’s time to get a refresher course on how Silicon Valley drives real estate sales here on the Coast.

Here’s a quick review of single family home sales in Santa Cruz County:

Median Price: This number was up significantly year-over-year as it approached an all-time high. It was $945,000 for May of 2019 compared to $863,000 for May of 2018.

# of Closed Sales: This number dropped by about 20%. 147 Sales were recorded in May of 2019 versus 184 Sales in May of 2018.

Average Days on Market or DOM (I’ve written extensively about the importance of days on market as an indicator of market value for buyers): This number increased from 28 DOM in May of 2018 to an average of 36 DOM in May of 2019.

% of List Price Received: In May 2018, sold listings, on average, received 102% of their list price. In May 2019 sold properties received 99% of their list price.

Average # of Months to Sell: In May 2018 it took an average of 2.7 months for a home to sell. In May 2019 that number rose to 3.7 months.

Heading into the summer, these are decidedly mixed results. The median price point is close to its all-time high but virtually every other indicator is down, suggesting that inventory is growing and things are slowing.

More next week.

Fish in Water

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It’s tough to drill down on any topic in 450 words. Let alone write something intelligible enough to help the average person understand something as complicated as the real estate market. Sometimes I feel like a fish struggling to explain the concept of water.

Even if most people prefer answers served up in big bold news font, there’s no one message about “the market” that’s capable of being translated correctly into everyone’s personal language. The essence of the market is defined by how every home compares to every other home. And no one on the planet has enough neurons to wrap their heads completely around that concept.

Everyone lives in a different place (home), and is at a different place (stage) in their lives. All I can do is draw a rudimentary map that allows folks to triangulate some notion of where they might be in relation to everyone else. Since the world keeps changing, the map is always in a steady state of flux.

The key to real estate is not so much understanding where the market is. It’s more about understanding where you are in relation to it. Here are a few hints that might prove helpful when reading things about real estate in the future:

Don’t get freaked out when the median price fluctuates 3-6% in a month. That kind of shift up or down is normal. Every month.

There’s no such thing as a national or statewide real estate “market”. There’s not even much of a regional one either, except to identify broad trends and cycles over time.

Even within the County there are significant differences between the real estate market in the cities of Santa Cruz and Watsonville, or San Lorenzo Valley, or even Aptos.

There are many submarkets within the County that aren’t geographical in nature. A different market for homes at $600K than for those listed at $1.6M. A different market for single level homes vs multi-storied homes. Rural settings vs those close-in neighborhoods. Condos vs. single family residences. Etc., etc.

Almost all statistical data in newspapers is trailing information. The sold statistics you’ll read for November are a snapshot of what willing Buyers and Sellers agreed to do back in August or September when they opened up 30-60 day escrows.

Buyers interpret the same exact information differently than Sellers do. Always have, always will. When it comes to people who are trying to both buy and sell in the same local market, juggling those two opposing viewpoints during the same transition can be a monumental task.

We’ll stop there and continue next week…

Profiling the Pod People

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Continuing the conversation…Who’s selling homes these days and where are they going? And who’s buying homes and where are they coming from? This thread started a few weeks back when we were musing about increasing concerns around more Buyers immigrating into the County from elsewhere.

More than a few locals are worried that the unique character of Santa Cruz is changing. And that somehow, some way, we are getting close to a tipping point where whatever it is that makes our Santa Cruz-ness unique is in danger of being lost.

For some, it almost feels like a remake of the “Invasion of the Body Snatchers”. Every night after they go to sleep a few more of their longtime friends and neighbors seem to disappear and get mysteriously replaced by alien “pod” people who look like them, but don’t quite act like them.

We’ve already talked about the people selling their homes and where most are going. Typically they’re aging baby-boomers or the aging parents of aging baby-boomers moving to gray-er pastures outside of California. But what about those Buyers?

It’s tempting, but is it fair to lump all those recent arrivals under the heading of “carpetbaggers”. Can we simply assume that all our Buyers are all rich, Silicon Valley techie- types (because who else can afford a house here) who are intent on buying up all of the real estate in Santa Cruz to use as privileged second homes?

There’s a disconnect of course… When it comes time to Sell, many of those same locals who’ve been worried about Santa Cruz’ changing character seem to flip and start fantasizing about the rich Silicon Valley techie- types who are going to plunk down all-cash offers on their homes. I don’t think I’ve ever seen a Seller significantly discount their price so that more deserving locals could afford to buy their home.

And in all likelihood, people already living in some of those other States where our Sellers are going, see them as rich carpetbaggers from California coming to wreak havoc on the local vibe and drive up real estate prices. That’s an old story from a number of different migrations out of California in decades past.

So what is the profile of people buying in Santa Cruz these days? They tend to be younger
than people who are selling. Most are between 35-65 years old. And it’s true that the majority are coming from over-the-hill – mostly Santa Clara and San Mateo Counties and San Francisco and Marin. But they aren’t all or even mostly wealthy techi- types intent on buying second homes where they can come on weekends and make the line-ups more crowded for local surfers..

Next week we’ll break down the typical Buyer.