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Realtors Should Quit Doing These 8 Things

These 8 things can hold you back from being the REALTOR you thought you would be when you first got your license. Consider giving up:

 

1- An unhealthy lifestyle. I am as guilty of this as most of you but, as you grind and grind away, there are four things you NEED to have the energy to produce at a superstar level:

 

a- 7-8 hours of sleep each night

b- a healthy diet

c- daily exercise (even if it's walking for an hour)

d- play. (build a sandcastle on the beach sometime)

 

2- a Short-Term Mindset. Successful people set long-term goals, and they know that these aims are merely the result of short-term habits that they need to do every day. Break down what you want into daily disciplines and make those daily disciplines non-negotiables. I started speaking with a minimum of five past clients/day in 2017 and it made a huge difference in my production numbers. I got to that number by reverse engineering my income goal into something a I could control each day. I can control how many people I speak with each and every day.

 

3- Playing Small. I am as guilty of this as anyone but I decided a year ago that I was going to learn commercial mortgage brokerage and fund $10 million in commercial loans in 2019. I didn't come anywhere close to that number (I funded $2.5 million in commercial loans) but I learned exactly what it takes to fund $10 million in 2020. Watch me do it this year. That's an extra $80K to the income we earn from residential mortgage brokerage. With a daughter at the University of San Diego, that extra income will come in handy (ASK ME WHAT MY NEXT "BIG IDEA" will be to add for 2020)

 

4- Excuses. Successful people know they play the hand their dealt. When I read Jocko Willink's "Extreme Ownership" in 2017, the light bulb went off. I started listening to the Jocko Podcast three years ago and I learned that I was responsible for EVERYTHING in my life: my business, my marriage, my family, my happiness, and my health. I stopped making excuses for why I wasn't making $500,000/year and started focusing on doing that.

 

5- Fixed Mindset. This goes hand-in-hand with #3. Can you learn something new? Maybe you can get your Military Relocation Professional designation and help a whole new market. Or get your Senior Real Estate Specialist designation and learn how to help San Diego's fastest growing market of existing homeowners.

 

6- Believing in the magic bullet. Overnight success is a myth.

Successful people know that making small continual improvement every day will be compounded over time, and give them desired results. If I can speak to 6 past clients each day, in 2020, I'll increase my input by 20%- I hope that increases my output by 50%

 

7- Perfectionism. Gosh this is hard for me, especially when working with real estate agents. I always wanted everything to be absolutely perfect for every single loan transaction. I would get mad at underwriters, appraisers, borrowers, and even the Realtors who referred me business because they weren't helping me to meet the closing goal. In reality, perfectionism is all about my ego rather than about doing the job right. I read Dan Kennedy's book about Time Management and I learned that "good enough is good enough". I also learned that by delegating more things to my wife Debra, I found out that she knows how to a LOT of things better than I did them.

 

8-Multi-tasking. Shut off the cell phone. Close your email. Don't go on Facebook. Do "that one thing" well and quickly and move on. The human brain is not wired for multi-tasking and its hurting your work quality.

 

Which is the next San Diego neighborhood to "Pop" ?

I need your help. If you could spend a couple of minutes reading this and replying with an answer, I'd be grateful.

 

Every year, since 2008, I have published a "San Diego Housing Outlook" for the upcoming year. I talk about "themes" and try to identify undervalued neighborhoods which fit those themes

 

In 2008, while the market was starting to decline, I liked the theme "Blue Collar Beach Towns" and suggested that investors/home buyers consider Oceanside and Imperial Beach. In 2011, I felt that most every property in San Diego County was a buy because they were selling below "fundamental value" . Two years ago, I suggested that millennial home buyers would migrate to suburban, single-family homes and out of the condos in urban neighborhoods.

 

I still think the theme of migration to singe-family homes is a valid one but I need your help. There is a shortage of SFR's in San Diego and the County isn't approving a whole lot of SFR building permits. Thus, the prices have been "bid up" and it's hard to tell someone where there are "hidden values". I think Linda Vista could be a neighborhood which "pops" but you folks are the real 'front-line" intelligence gatherers.

 

Would you reply and tell me which neighborhood(s) offers, in your opinion, the "best" value moving forward? You can offer a short answer or a detailed one and I will include your quote, and link to your website, in my 2020 San Diego Housing Market Outlook.

 

I appreciate your participation and we appreciate the opportunity to help your buyer clients obtain mortgage financing.

Why are San Diego real estate prices so high?

Why are San Diego housing prices so high?

 

a- the ocean?

b- temperate climate?

c- strong economy?

d- proximity to Mexico?

e- real estate is a rigged game in San Diego

 

The answer is a combination of all answers but "e" is the best answer. San Diego News Desk points out the glaring supply/demand imbalance in San Diego County:

 

In 2010, data revealed that San Diego was short 59,000 housing units. Furthermore, if one were to include the past 20 years, the data would reveal that San Diego is actually 140,000 housing units short.

 

San Diego has tried to recover from the 1990 recession that involved Southern California, but three decades later, San Diego has failed to approve the permits needed. The refusal to grant building permits, in turn, is producing the very slow homebuilding pace seen in San Diego. This impediment is ruining the housing market by artificially restricting the supply—which increases the cost of existing housing.

 

Here is my analysis, if you are thinking of purchasing a home in San Diego:

 

The supply shortage doesn't mean that housing prices will always rise, year-over-year, but it illustrates a structural imbalance which heavily favors ownership in residential real estate, be it for living in the home or holding it as a rental. Long-term then, San Diego real estate can be expected to rise at a greater rate than the inflation rate. When leveraged, San Diego residential real estate can produce annual returns which rival the stock markets but with far less volatility.

Realtors losing listings to iBuyers

Guess what?  Zillow is entering the San Diego residential real estate market and Realtors should take it seriously:

Zillow Offers is continuing its expansion, announcing Monday it will be buying and selling homes in San Diego.  Through its iBuying service, Zillow seeks to provide a solution by enabling sellers to forget about the hassle of cleaning their home, forgoing home repairs, open houses, and the like. They can even choose the date they want to sell and move by. (For more on what, exactly, is an iBuyer, read this.)

I know.  I know.  Zillow is no competition for a professional, local expert...or is it?  What San Diego Realtors often miss is that, while iBuyers may "low-ball" sellers, looking for homes with cosmetic repairs needed, the simple fact is that the iBuyers end up negotiating with sellers long before an agent has a chance to prsent his/her services.  Here is my friend, Phoenix real estate broker Greg Swann:

As for iBuyers being nothing to worry about: Ahem.

If they’re in your town, they’re in your potential-seller’s head – and maybe in his email in-box, too. They’re in everyone’s net.world, on billboards, radio, TV. If your prospect hasn’t solicited an offer yet, you need to get out in front of that eventuality.

The iBuyers are the elephant in the room at your listing appointment. If the seller doesn’t bring them up, you had better. It could be that iBuyer offers are already in play, so you may already be smoked. Or the seller may want your help going that way, in which case you just made the easiest money in your real estate career – although the party to whom you owe fiduciary duty may have just pissed away half or more of his accrued equity in the home. Or, god help you, he may want to be sold on the value of listing traditionally.

But to go in to a listing appointment assuming the listing is your to lose is a mistake, I think. In the iBuyer world, the listing is theirs to lose, yours to win. You got the appointment because the seller wants your advice, not because he wants your sign in his yard for six months.

Greg has done extensive research on just how poorly iBuyers perform and you should follow what he's doing.  More importantly, read the emboldened statement Greg made. I'll parse it for you here:

You got the appointment because the seller wants your advice, not because he wants your sign in his yard for six months

Realtors need a strategy to position themselves as a trusted advisor so that their clients contact them before the iBuyers do.  Gary Keller said, some 15 years ago, that Realtors are either going to be fiduciaries enabled by technology or functionaries working for technology.  Thus, San Diego Realtors are going to have to examine the way they charge clients for the knowledge, advice, and expertise.  For too long, Realtors have relied on the commission model ad the only way to charge for their services.  Developing a "menu of services", which includes pre-MLS solicitation of iBuyer offers seems like the only way to get ahead of the curve.

Wht China Matters to Southern California Real Estate

You have heard me talk about China and it's effect on California real estate a lot.   Just two years ago,  I was on TV, talking about the oversized influence Chinese nationals had on Southern California real estate.  Since then, a trade war with China escalated and the Chinese government cracked down on capital leaving Mainland China. The result has been lower mortgage rates and lower real estate prices in areas where Chinese nationals were buying properties.

Chinese buyers aren't as active as they were two years ago:

A big reason Chinese investors are retreating from the American housing market is that Beijing has placed tight limits on how much capital can leave the country in the wake of a devaluation in the yuan a few years ago. 

“In China, each family member has been restricted to $50,000 or less,” says Steven Ho, senior loan officer at Quontic, a New York City-based bank. That makes it tougher for Chinese investors to elbow out American buyers with all-cash offers.“A few years before, these restrictions were not so stringent.”

The government toughened capital controls last year as the Chinese economy weakened, Ho says.

Also, China's slowing economy itself has dampened the confidence and purchasing appetite of Chinese buyers, Yun says. The Trump administration's trade war with China, he says, has further chilled investment in U.S. housing.  

Meanwhile, more Chinese homeowners have been selling their American houses and condos because they can’t pay the maintenance costs with their money trapped in China, says Jeff Lu, vice president of Fidelity National Title Insurance.

President Trump's tariff war, with China, is causing global unrest.  Investors are flocking the US treasury bonds, driving US mortgage rates lower:

U.S. Treasury yields have plunged since the July meeting and the gap between 2-year and 10-year yields has inverted, a typically reliable indicator of an impending recession.

Thirty-year mortgage rates have dropped about 100 basis points since late last year and are expected to stay below 4% over the next several years, around 60 basis points lower than forecast just three months ago.

You may love or hate China.  You may love or hate Trump.  You can hold either or both opinions but to ignore Chinese buyers of real estate or US treasury securities is to let youor opinion cloud your judgement when making a real estate purchase

HIgher Loan Limits in Southern California for 2019

The 2019 San Diego County loan limit is $690.000, up from $649.750 in 2018.  

In Orange & Los Angeles counties, it's $726.525 and in Riverside, San Bernardino, and Imperial counties, it's $484,000.

 

The higher loan limit affects FNMA, Freddie Mac, and FHA loans. For VA loans, the county limit is for zero down payment loans ONLY.   VA loans have no loan "limit"  but may require a down payment for prices over the county limit. Read about how to calculate the VA downpayment for purchases over $690,000 here

This year, the FHFA published this interactive loan limit map, showing the loan limit for every county in the US.

For fun, compare the 2016 Presidential election map (by county) with the FHFA interactive loan limit map.  If you click both links, the maps will open side-by-side

There are STILL great real estate investment deals in San Diego

Yes, you can still make money in San Diego real estate and no, I dont know if property prices are going to drop. Here is what I DO know; there is a housing shortage in San Diego and rental rates should keep rising.

 

This means that, if you buy a property at the right price, and intend to hold it for 7-10 years, you should really make some money. Let me share with you the most recent transaction I handled for an investor. I represented the investor and my wife Debra handled the financing.

 

Our investor bought a Mission Valley 2 BR, 1 BA condo for $355,000. We closed on it three days ago (June 12)   She put 30% down and, with closing costs, it cost here $113,000 cash-to- close. Her mortgage payment, including taxes, insurance, and HOA fee is $2096. You can see the whole financing breakdown here

 

I immediately advertised it for rent on Craigslist, Zillow, Trulia, Hotpads, and Cozy at $2095/month. Yesterday (June 14), we signed a multi-year lease with a tenant who has a credit score of over 750.   In two days, my investor signed a lease which covers all the debt servicing expenses.

 

I think rising inflation will double San Diego real estate prices in the next 10-12 years but, with just a 4% inflation rate, this property should sell for $525,000 in 2028. At that point, my investor will walk away with about $300,000, almost triple of what she invested today.

 

Was this easy?

 

Absolutely not. I toured over 40 properties for her and only showed her properties which met three criteria:

 

1- They were "clean", meaning it would cost less than $1500 in cosmetic repairs to move in

2- They were in a San Diego neighborhood which was in demand.

3- They had been on the market for 21 days and could be purchased for a price which produced positive cash flow with 30% down payment.

 

She spent a 4 hour period with me and saw 7 properties. She offered on three of them, we negotiated with two sellers, and settled on the Mission Valley condo

 

It wasn't easy for me but I made it easy for her, and now she has a great investment.

 

Want me to do this for you?

 

Call me at 858-777-9751. We'll meet for lunch and I'll listen to your investment needs and goals. If they match up with what I am doing, I'll find the perfect investment property for you. If not, we'll have a great time catching up with one another.

2018 San Diego Real Estate Market and Housing Outlook

I have been writing these San Diego real estate market outlooks for ten years now.  This annual exercise always makes me examine macroeconomic data, talk to local politicians and business owners, and try to spot micro trends in the San Diego residential real estate market.  I am generally right about direction (except for last year when I recanted within two months) and sometimes off on timing.

"Buy land, they're not making it anymore"--  Mark Twain

I chose that Twain quote (which is sometimes attributed to Will Rogers) because it reflects the reason why you should buy a home in San Diego County-- we have a housing backlog and it is only getting marginally better.  Our state and local governments are the problem because they just won't issue housing permits to keep up with demand.  Worse, rather than get out of the way and issue those permits, the California Legislature passed a "Housing Affordablity Plan Tax" which takes effect this year.  Yes, in order to make housing more affordable, the government is taxing housing transactions--you just can't make this stuff up.

"The more the plans fail, the more the planners plan"--  President Ronald Reagan

If you're trying to buy a home in San Diego County, do it in 2018.  I can't guarantee that price appreciation will be a straight line up but, the supply demand imbalance tells me that prices will be as much as 50% higher in 2028 than they are in 2018.  If you put $100,000 down on a $500,000 house, you can expect to pay about the same amount for your mortgage as you would for monthly rent and, in ten years, should get three times your original down payment back when you sell.  That's an annual ROI north of 11%.  Mortgage rates will probably rise in 2018 (not as badly as you might think) but that shouldn't blunt the steady march up in home prices.

Can you just buy any property in San Diego County and make money?

Probably but I want to focus on two themes to improve your chances:  the rise of the suburban, single-family home and the 78 and 94 corridors.

Buy a single family home

Millennials are moving to the suburbs and that trend will get stronger in the next 10 years.  Since 2008, millennials predictably flocked to the traditional beach towns of Pacific Beach and Ocean Beach but, because there are so many of them, helped to repopulate the I-8 San Diego neighborhoods of Hillcrest, Mission Hills, North Park, South Park, and Normal Heights.  Five years ago, a late-20s man might want to live in an area where he could walk to a craft brewery, take a bus to his job, and go running in Balboa Park.  Today, our leading-edge millennial man is in his early 30s, married, and has plans to build a family.  The two-bedroom condo he bought in 2012 has substantial equity and he and his wife are going to want a house with a yard.

While millennials will cycle from the I-8 neighborhoods to the suburbs, those I-8 neighborhoods will be populated by the next generation; the centennials.  The centennial generation is almost as large as the millennials and considered to be more serious and grounded.  I won't be surprised if our millennial homeowners aren't selling their condos to 22-year old centennials (that's an early age for San Diego homebuyers).  Today's teenagers are just that darned pragmatic.

I talk about the housing backlog easing up a bit but, within the San Diego County housing permit data is an interesting statistic; three times the permits are issued for multifamily housing than are issued for single-family homes.  What this means is that the suburban, single family home will be in VERY high demand in ten years.  If you can afford to buy one (even if it means compromising your desired location), do it.

The 78 and 94 corridors

One thing I always watch is our military's footprint.  San Diego County is home to the largest concentration of veterans and active-duty service members in the world.  Traditionally, service members buy single-family homes in Oceanside or Clairemont but I've seen a shift this past year. As the county's job growth moves north, the 78 corridor has become popular.  Carlsbad and Oceanside have seen significant price appreciation and Vista was popular last year.  Our pick for the 78 corridor is Escondido.  City government is fiscally responsible, NIMBY-friendly, and offers great opportunities to own a 1600 sq foot, single-family home with a yard, for under $500,000.  Escondido is less than 30 minutes from the back gate at Camp Pendleton and MCAS Miramar.  Don't be surprised if you start seeing these flags in front of more Escondido homes.

The 94 corridor includes the popular I-8 neighborhoods (already mentioned) but has two hidden gems where someone can purchase a single-family home for less than $500,000:  Skyline Hills and Spring Valley.  Skyline Hills in the City of San Diego, has a 77% homeownership rate, is 20 minutes to 32nd Street Naval Base and Downtown San Diego, and offers nice views.  Spring Valley is 30 minutes from Downtown San Diego and offers different but equally as nice views.  These foothills, suburban style neighborhoods are poised for better than average price appreciation as millennials start looking for affordable suburban homes in the next 5-10 years.  Don't be surprised if you see more of these flags in front  of Skyline Hills and Spring Valley homes.

What areas might decline in San Diego County?

Probably none of them but, on a relative basis, price appreciation might not be as great in the over $900,000 market as it should be in the under $600,00 market.  I talk about this in detail in my article about tax reform (read the full article).

The luxury market (over $2,000,000) is strong today but that market is tied more to the stock market than mortgage rates.  The stock market was up 140% under President Obama and up another 25% under President Trump.    Tax reform should help most of these buyers but, if the stock market cools down there could be some weakness in the luxury market.  This is somewhat relative.  If the stock market cools down, you might get a chance to buy a single-family home in Rancho Santa Fe's Whispering Palms for under $1,000,000 or a Del Mar beach front home might drop from $20 million to $15 million.  Generally speaking, I don't care too much about those markets because we typically don't advise, broker, nor fund those transactions.

In summary, 2018 should continue to be what 2017 was.  Mortgage rates will increase a bit, home appreciation should outpace inflation, and new opportunities will emerge in markets which have been underappreciated before.

Call me at 858-777-9751 if you ever want to discuss my thoughts.

Will tax reform kill the 2018 San Diego Real Estate Market ?

Both NAR and CAR have been apoplectic about the tax reform bill which is moving its way to the President's desk. The bill passed the House today, should pass the Senate later this week, and is expected to be signed by the President by Christmas.

 

Will the tax reform bill really hurt San Diego real estate, though ?

Probably not.

 

The mortgage interest deduction is going to be capped at $750,000 instead of $1,000,000. That could cost some people as much $3000 in extra taxes. Those people though, would see a tax rate lowered by 2% on all of their income; that could be as much as $6,000 in tax savings.

 

The deduction for property taxes and state income taxes will be capped at $10,000. While there is a trade off for the lower tax rates, this could hurt the buyers over $800,000.

 

Keep in mind that half of the home sales are under $611,000. MOST people buying in the under $800,000 price point are going to save money from the tax reform bill.

 

Californians earning over $300,000 and San Diego home buyers over $900,000 may feel a pinch from tax reform but, all in all, most home buyers won't be dissuaded from buying a home up to $800,000. Some of them will actually have MORE money to spend now since their tax bills should be lower.

 

Investopedia does a pretty goo job of breaking it down here.

 

Call me at 858-777-9751 if you want to discuss this or have a home buyer worried about how tax reform will help or hurt them. I'm pretty good at running numbers and might just be able to help you save a deal

HIgher Loan Limits Announced for 2018

FHFA just announced the new (higher) loan limits for 2018. You can see each county's new loan limit here but this is the summary for Southern California:

 

• San Diego County $649.750
• Ventura County $672.750
• Orange and Los Angeles Counties $679.850
• Riverside, San Bernardino, and Imperial Counties $453,100

 

FHFA sets loan limits for Fannie and Freddie backed conventional loans but, over the past few years, FHA and VA has followed their lead. We expect the VA and FHA loan limits to be the same as the FHFA loan limits.

 

What does that mean?

 

It means more buyers can afford more homes and that's good news for you. If FHA and VA follows (we think they will), fundings could be tricky in the next 60 days. If you have clients who are banking on that higher loan limit, you should call us at 858-777-9751 before you enter escrow so we can determine a strategy so they can get a loan for the higher amount.