The South County real estate market has been defined by its low inventory, which is causing hardship for contingent offers in a market already facing some barriers.
Real estate professionals in the South County market discussed this and other trends at a recent roundtable discussion hosted by The Daily Transcript and sponsored by Cox Communications.
Chula Vista faces barriers in regard to its school districts and lack of jobs when it comes to attracting homebuyers.
Richard D’Ascoli, CEO of the Pacific Southwest Association of Realtors, said Chula Vista’s school districts rival that of Poway, especially the elementary schools.
But Miguel Contreras, a Realtor at Dominion West Properties Inc., disagreed, saying school districts detract some buyers from the area.
Many buyers who aren’t familiar with South County don’t see Chula Vista as a great alternative, Contreras said.
“When people think of South County they think of blue-collar Mexican, and that scares a lot of white people away,” he said.
He said that perception is changing, but “it takes a lot of prodding and pushing and really selling on the part of the Realtor,” Contreras said.
Dushaun Fairley, branch manager at Century 21 Award, said buyers are looking less at schools and more at the home quality -- and getting the most for their money.
The newer housing stock also attracts buyers to the area. The average house in Chula Vista is 29 years old, compared with 35 years in the county as a whole, D’Ascoli said.
Another barrier is the commute many residents make to the Sorrento Valley area -- a drive that should take 30 minutes and instead takes more than an hour, Contreras said.
“When people look at the cost of gas and commuting, it’s not a viable option -- no matter how good the schools are or how great the communities are planned,” Contreras said.
“We have a serious void when it comes to business parks and [high-paying] jobs down here,” he said.
Even with the barriers, Contreras said, he’s excited about South County real estate, especially in Imperial Beach and National City.
He said there’s a lot of home-grown investment going into those areas, with San Diego companies putting their faith in the future of those communities.
Joe Gummerson, broker/owner at Ashlon Realty, agreed, saying that there’s a small window of opportunity in Imperial Beach to buy a house for less than $400,000.
He said it could be the last West Coast beach community where buyers can purchase properties at these prices.
About 90 percent of property owners have equity, said Steve Lemack, Realtor at Realty Executives Dillon.
The growth in equity has given many homeowners the opportunity to move up to a more desirable home, but some are choosing not to after being burned by the last cycle, Contreras said.
“I think this generation is starting to have some of that fear of the bubble bursting again,” Contreras said.
Nikki Coppa, broker/owner at Guardian Agents, said her clients come armed with a lot of information from the Internet, but she has to spend a lot of time re-educating them with information specific to South County.
Buyers typically don’t know how timing and inventory levels can affect the market, Coppa said.
She said clients often look on Zillow (Nasdaq: Z), get a “Zestimate” and assume that’s the price they’ll pay for a house -- not taking into account the other offers the seller will receive.
With only about 1.4 months of supply in Chula Vista, there’s a lot of competition, she said.
“And you have to go strong at the beginning if you want it,” Coppa said.
If a buyer has a max of $425,000 and the house is going for $430,000, take it, she said.
“If you don’t get the one for $430,000 today, that same one is going to be $450,000 in two months,” Coppa said. “I’m trying to get them to understand that for us it’s not about getting them to write the highest offer -- it’s about achieving their goal.”
The low inventory, especially in the mid- to high-end home market, with no construction on the horizon might cause a small bubble, said Jorge Ahuage, broker/owner at Ahuage Realty Group.
Appraisers keep the market grounded, but not when the buyers are paying cash.
When one property is sold at a premium to a cash buyer, the house next door can be appraised for that value as well, creating a small bubble, Ahuage said.
Move-up buyers are also coming into the market with $200,000 to $300,000 in cash, so even if the buyers aren’t paying all cash, they’re still putting down 20, 30 or 40 percent, Gummerson said.
“There’s no risk for the lender, so appraisals aren’t an issue. Values continue to climb -- they’re not spiking as much as last year, but we still have a very steady upward trend in terms of value,” Gummerson said.
Lemack said he knows his buyers are moving up because he’s writing more offers that are contingent on the sale of their homes.
Contingent offers are causing a problem because of the low inventory, Coppa said.
Sellers don’t want a contingent offer because they know they’ll probably get a noncontingent one, which is keeping potential move-up buyers in their homes and causing even less inventory from coming on the market, Coppa said.
Potential move-up buyers are also reluctant to enter the market because they remember how hard it was to get their first property, Contreras said.
They question whether they’ll find a house and remember buying in the foreclosure market, which was impersonal and cold, he said.
Some buyers who purchased bank-owned (REO) and short-sale properties are holding onto them long term, which also contributes to the low inventory Ahuage said.
“They don’t want to go back into another house they can’t afford,” he said. “They bought a house at a good price. They’re enjoying life, going on vacations and saving money.”
Those buyers who are ready to move up must put their houses on the market before putting in a contingent offer, Coppa said.
“I get contingent offers and they don’t have their house on the market yet,” Coppa said. “You might as well put a Post-It note saying ‘I want to buy this house,’ because that’s about what it’s worth.”
She said that goes back to educating the buyer and also educating the other agents.
Agents who entered the market after 2006 might not have any experience with contingent sales, said Mark Scott, broker at McMillin Realty Inc.
Some agents won’t even look at a contingent offer, Scott said, often giving up $10,000 to $20,000.
“There’s an education curve,” Coppa said. “Contingent isn’t a bad thing -- those people have money and that’s awesome.”
She added that the same goes for VA buyers.
It’s important to do a little extra work looking up the buyer with a contingent offer, Scott said.
When he accepts the contingent offer, Scott said, he makes sure to call the others who made offers and reject them nicely, so that if the first deal falls through he still has options.
“A lot of times I’ll get an offer rejected and then I never want to do business with that agent again in my life,” Scott said.
Fostering relationships with other agents helps when trying to get deals done efficiently. Many agents send offers without calling the listing agent, Coppa said.
Scott agreed, noting that only a single-digit percentage of agents actually call the listing agent to talk about the offer.
Relationships between agents are important, as well as the structure of the offer.
In a traditional market, the family stories, pictures and videos help sellers choose their buyers -- but Coppa said only about 2 percent of agents actually present those personalized offers.
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Jorge Ahuage, Owner and Broker, Ahuage Realty Group
Robert Anselmo, Principal, Ambient Communities
Miguel Contreras, Realtor, Dominion West Properties Inc.
Nikki Coppa, Owner and Broker, Guardian Agents
Richard D'Ascoli, CEO, Pacific Southwest Association of Realtors
Dushaun Fairley, Branch Manager, Century 21 Award
Joe Gummerson, Owner and Broker, Ashlon Realty
Steve Lemack, Realtor, Realty Executives Dillon
Mark Scott, Broker, McMillin Realty Inc.
Colette Toolsie, Product Marketing Manager, Cox Communications (sponsor) and Cox Home Security