The inventory is getting picked over quickly!

The following is an email I sent out to some of my clients regarding the state of the market. I thought it would be helpful to everyone:

Dear Cameron, Gerald & Jamie, Greg, Illyana, Israel, Jacciel, Jodessa, Ketesemane, Lisa, Liz & Jeff, Mario, Matthew, Matt, Michael, Miguel, Mike, Mike 2, Michelle, Nick I., Nick M., Phong & Kim, Tom & Cammie, and Wei (23 in alphabetical order),

While I run the risk of scaring some of you, I feel that it is my duty to you as your agent to tell you what is happening in the market. This isn’t a sales pitch, it is a WARNING!!! It is my STRONGEST PROFESSIONAL ADVICE!!! (I know it’s long, but you NEED to read this…again, it isn’t spam, but a very urgent market update).

I write all of your names to make a very significant point- there are A LOT of buyers looking for exactly what you want. You are all looking (most for single family homes, 3+ beds) in the low $300 to $400k range. This is the typical 1st time home buyer range, and the huge amount of San Diegans who have been waiting to “time” the bottom of the market. I’m just one agent- think of the other 18,000 registered agents in the county, and how many buyers are out there!!! Fortunately, most of you are looking in slightly different areas, or have little differences in exactly what you want, so I haven’t seen a whole lot of overlap (except the Otay Ranch/Eastlake bunch- things are getting sparse down there, huh!).

Part of my job is to help manage my client’s expectations, and right now all home buyers (including your competition) are looking for “move in ready” properties in prime locations. But it’s getting to the point that these “move in ready” properties don’t exist in this price range anymore. They’ve all been bought (6 of them in the last month by my clients who trusted my previous predictions)! Every property left has something slightly wrong- a little too old, needs carpet/paint, location isn’t perfect, yard is a little small, floor plan isn’t perfect, kitchen needs updating, etc.

I’ve literally looked at 300+ properties in the past 1.5 months, and 90% have a little problem. The 10% that doesn’t is usually sold by the time I call about it. We’re seeing nice properties sell within 2-5 days, often at or up to $30k above asking price! I’ve encountered numerous situations where 10-25 offers are submitted within 3 days of listing for the best properties. The 6 properties that I closed ALL made aggressive bids above list price. Everyone else has been outbid (I think I need to start an “Outbidders Anonymous” support group!).

If you think I’m exaggerating, please see this article (link below) from the LA times that came out today. I quote: “REO homes (bank shorthand for "real estate owned") that are in good condition and listed at $300,000 or less are drawing as many as 15 to 20 bids from home buyers and investors looking for bargains, area real estate agents report.” We know that $300k translates to $400k in the areas we’re looking at in San Diego.

http://www.latimes.com/business/la-re-market1-2008jun01,1,7861975.story

Or consider these numbers for the block east of 125, north of 8, south of 52 all the way to the beach (this link takes you to the numbers- Residential One-Line):
Last month 30 (thirty) 3-4 bedroom properties sold. This month 75 (seventy five) are in escrow, meaning that the market activity has nearly TRIPLED this month. There are less available properties on the market (85 available vs. 105 sold) than have sold in the last 90 days or are currently in escrow. That’s right- MORE THAN HALF OF THE INVENTORY HAS SOLD IN THE PAST 90 DAYS!!!!! I’ve previewed most of the properties remaining, and they are all dumps. This will only continue, and we see how many buyers are out there for each new property that comes on the market.

Most of you have received my warning emails several months ago, and unfortunately many of your situations dictated that you couldn’t buy right then. For others, I’ve had friendly discussions about the direction of the market, and I respectfully disagreed that prices would continue to drop and the market would be soft for the entire year. Please take this email very seriously because the market will be picked over very soon, and only the “fixer” or “TLC needed” properties will be left. For your sake, please trust me this time!

FACT: Properties average 97% of sales price vs. asking price (even this is deceivingly low because of how they calculate the numbers). YOU WILL HAVE ALL “LOWBALL” OFFER OUTRIGHT REJECTED. “Move in ready” properties sell for 100% or more.
FACT: The media is DEAD WRONG about what is actually going on. They are typically 8 months behind. How many of you have seen headlines like “Transactions had an unexpected increase last month”. Unexpected to who? Not us realtors in the field!
FACT: If you want to live in National City, North Park, east Santee, Lakeside, El Cajon, or Jamul you’ve got plenty of time! Wait until the winter to buy. But if you’re looking at Mission Valley from La Mesa west, north of the 8 up to Carmel Valley, all the way to the beach; or Otay Ranch/Eastlake; or downtown- you’re on the verge of being too late.
FACT: Markets have yearly cycles, and the most buyers are looking May-September. There will continue to be more and more and more buyers until Fall- we haven’t even hit the mid-summer peak yet!!!
FACT: If you want a perfect 3 bedroom property, plan on spending $450-500k. If you have a little extra cash set aside, you’re in good shape if you are willing to do a little “cosmetic fixing” that will cost you $30k.

Ok, so here’s the good news…
I write this knowing that if we hustle, and I mean within the next couple weeks, we can still have a puncher’s chance at getting one of these ideal properties before the real buyer flood hits. We’ll have to be aggressive, but it’s not unreasonable. Let’s hope the media doesn’t catch on before then. (Incidentally, look for my article about this phenomenon in the Union Tribune shortly.)

A FINAL CONSIDERATION:
Interest rates have risen significantly in the past 2 weeks, and look like they will continue to rise throughout the summer. This is bad news for you!!! A common question I get is, “Won’t that mean there will be less buyers or price drops because when interest rates rise, buying power goes down?” The answer is NO! Most of you could handle an extra $100/mo increase in your mortgage payment, and so can everyone else out there right now. Even 7% interest rates are historically amazing, and don’t scare buyers off. However, every day you waste not locking a loan rate will mean that you pay significantly more over the life of that loan when you do buy.

I’m sorry for being so blunt, using so many capital letters and exclamation points, and causing a general sense of disillusionment. Most of you know that I’m very nice in person and not the “car salesman” type, but in your best interest I needed to say something. Please understand.

PS- For the 6 “active” lookers who I’ve been working with over the past month, all of which have been outbid on properties or seen first hand “multiple offer” situations, please don’t interpret this email as anything but an attempt to be informative. I’m not attempting to put pressure on you, but want you to know that I’ve had the same experience with many other clients lately. I understand everyone would like to find a great place, and I’m happy to continue to work with you, and will do my best to find what you’re looking for.

PPS- I’ve Cc: a few others, most in the under $300k range, and this situation is only worse for you. Sorry. For my clients above $500k, you aren’t in such bad shape, but it is picking up significantly.

As you know, I take great pride in providing excellent personal service to every client, and I look forward to the day that I hand you the keys to your new home!