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We Are Re-Educating Sellers

A report from the Wall Street Journal. “Lumber prices typically rise in the spring as builders stock up for construction season. But this year, they are being hit hard by bad weather and a decline in home building. ‘We’re starting to feel a little nervous about the market in the next year,’ said Abbe Will, from Harvard University’s Joint Center for Housing Studies. ‘This certainly does look like a turning point in the cycle.'”

The Herald Tribune in Florida. “Manatee County reported 602 housing starts in the first quarter, down 18.4% for the year. Sarasota County had 526 starts, down 3.0%. The under-construction backlog stood at 2,429 units as of March 31, or 397 less than six months ago.”

“The largest gain in home-start activity came in the $400,000 to $450,000 price band, with a near 20% annual growth rate. The largest increase in unit count was for prices over $450,000, where starts jumped by 161 units compared to last year’s annual rate. ‘The ‘Snowbird Season’ got off to a slow start in January, as contract pace was off substantially compared to January 2018,’ said Metrostudy regional director Tony Polito. ‘The big concern is the inability to produce product under $250,000. Just 19% of all new home construction is considered ‘affordable.'”

The Arizona Republic. “Not all metro Phoenix neighborhoods saw home prices climb in 2018. Downtown Phoenix, among the handful of areas that saw prices dip last year, is the biggest surprise. The area’s overall median price dipped 4 percent to $322,000 in 2018 from $333,250 in 2017.”

“It’s not that values are falling in the area drawing many new residents. Instead, new-home prices have dropped as developers try to provide more housing affordable to workers and students in downtown Phoenix. The price on new homes fell from $423,000 in 2017 to $175,000 last year.”

“This far north Scottsdale ZIP code saw prices dip 2 percent last year from $700,000 to $687,000. In the West Valley, this large ZIP code includes part of retirement community Sun City Grand in Surprise. The area’s overall median home price fell 2 percent last year from $281,161 to $276,928.”

From Boston.com in Massachusetts. “Larry Rideout, chairman of Gibson Sotheby’s International Real Estate, added a few words of caution that other agents quoted in this story echoed. ‘We are re-educating sellers,’ Rideout said. ‘Pricing a home correctly is more important than ever. We’re not seeing the numbers we were seeing a couple years ago. If a home isn’t priced realistically, buyers won’t even look at it.'”

From Fox News. “Managing Director at The Ackman-Ziff Real Estate Group Jason Meister said big city developers struggle to sell real estate, especially in New York, because ‘blue states need to shape up. They’re fiscally irresponsible,’ adding, ‘Investors are not going to be here (New York City). It’s just not going to happen.'”

“According to Miller Samuel Inc., a real estate appraisal and consulting firm, more than 40 percent of apartments on New York City’s ‘Billionaires’ Row,’  the area around West 57th Street and Central Park South, are sitting unsold.”

“Meister said New York City offers an environment that ‘makes for an unsafe investment.’ He added, ‘New York always was a safe investment and what’s happening is, it’s becoming an unsafe investment. Capital is very smart. It leaves when things are not safe.'”

“The struggle to sell real estate is also being reported in San Francisco, Ca. and Washington, D.C. When asked what all three cities have in common, Meister answered, ‘The cities, they’re run by Democrats.'”

“‘New York State is going to lose $2.8 billion of tax revenue. We’re going to lose 800,000 residents who pay taxes. This state has a serious problem. So does California,’ he said.”

From Globe St on California. “San Diego and Los Angeles were among the worst cities for real estate investment last year, according to a new report from Compound. The report analyzes single-family housing appreciation in the last 12 months and the volatility and risk of purchasing in each market.”

“‘These markets have relatively high volatility. When you invest in a market, you have to generate outsized returns to justify the risk,’ Jesse Stein, founder of Compound, tells GlobeSt.com. ‘These markets can move 15% to 20% in a year, either on the upside or the downside. In investing in those markets, you need to be able to justify the risk that is associated with that volatility will be accompanied by outstanding returns.'”

“West Coast markets accounted for the top five cities on the ‘worst investments’ list, with San Jose, San Francisco and Seattle rounding out the list. ‘The West Coast markets, which have done great over the last eight to 10 years, have slowed down over the last 12 months,’ says Stein. ‘They are in a period of correction and they are volatile markets, and when you mix those two, they have under performed in the last 12 months.'”

“Stein doesn’t have an opinion about what has caused the slow down in appreciation. He says that this is a natural evolution of the market—which has been rapidly expanding. ‘This is a natural correction based on the tremendous run up,’ he says.”

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This Post Has 80 Comments

  1. ‘These markets have relatively high volatility. When you invest in a market, you have to generate outsized returns to justify the risk…These markets can move 15% to 20% in a year, either on the upside or the downside. In investing in those markets, you need to be able to justify the risk that is associated with that volatility will be accompanied by outstanding returns’

    Note how he talks about shacks like gambling in a casino. The west coast is sinking like a turd in a well Jesse.

  2. ‘We are re-educating sellers…Pricing a home correctly is more important than ever. We’re not seeing the numbers we were seeing a couple years ago. If a home isn’t priced realistically, buyers won’t even look at it’

    Ah yes, the massaging of expectations. Good dog, roll over! Those BMW payments aren’t going to make themselves!

    1. Read: You greedhead sellers! Cut the prices so I can make a sale! I’m tired of eating subway with my buddy D00med.

    2. Not seeing much in terms of seller re-education in San Diego. Sellers still holding out for top dollar even in higher crime neighborhoods with dysfunctional school systems. One thing that’s different about this bubble is that they’ve achieved a near complete MSM black out of bubble talk so this bubble has a more surreal quality to it like an impenetrable phantasmagorical dreamworld that desegmented from a reality populated by homeless hordes and people living paycheck to paycheck as the rising cost of living strangles their future.

      1. ‘they’ve achieved a near complete MSM black out of bubble talk’

        You noticed that too.

        1. I think it is denial coupled with extreme fear. Many don’t want to “spook the herd” by mentioning the “b” word. There seems to be the idea that by not articulating it somehow you can magically change the facts that this is a spectacular bubble that has been reflated.

      2. Very well stated. I keep wondering why ANYONE would buy a million dollar shack in the town I live in that’s over ridden by homeless, tweakers, criminals, and usually all 3 of those combined into 1 disgusting human.

      3. Part of it is the fact that we’re still in the massive boom stage of the economy. I don’t expect we’ll see much acknowledgment until the jobs numbers start to get really ugly.

  3. ‘more than 40 percent of apartments on New York City’s ‘Billionaires’ Row,’ the area around West 57th Street and Central Park South, are sitting unsold’

    Pick any plausible definition of a bubble and this meets it.

    ‘New York always was a safe investment and what’s happening is, it’s becoming an unsafe investment. Capital is very smart. It leaves when things are not safe’

    But, safe deposit boxes in the sky?

    2. Capital is very smart. It leaves when things are not safe’

      Wait until the pitchforks and torches come out after the collapse of the Fed’s Everything Bubble. “Capital” will be fleeing in its Gulfstreams to offshore hidey holes, but they won’t be taking their Hamptons mansions or NYC skyboxes with them.

  4. I keep looking for those green shoots the MSM assures me will herald a reinvigorated Spring buying season for shacks, but I’m just not seeing it.

  5. ‘The price on new homes fell from $423,000 in 2017 to $175,000 last year’

    DONG! When the builders start undercutting the existing market, stick a fork in it.

      1. A 60% reduction in price on new product…. and still profitable.

        Hmmmmm….

          2. Just saying they might be cutting their losses. Running for the exits before the FBs. Etc.

          3. That occurs when they’re selling decisively under $40/sq ft. They’re still very profitable at current prices.

      2. But lumber prices? Permit costs? Labor costs? This is un-possible! No way this is real. Builders can’t build affordable housing anymore! Must be fake news! All you losers stop reading fake news! I’m tired of eating subway!

    2. ‘The price on new homes fell from $423,000 in 2017 to $175,000 last year’

      I wonder where in Phoenix that happened…. That seems like a huge plumment but I don’t see anything like that happening anywhere in Maricopa. I’m looking forwarding to purchasing when it drops…. but that seems exaggerated or like a mistake.

  6. Lumber prices typically rise in the spring as builders stock up for construction season. But this year, they are being hit hard by bad weather and a decline in home building.

    Misleading. If lumber were free, would that really make a difference in new home prices?

  8. Remember an article last year stating that the tariff wars was the reason why lumber price was so high. They can’t afford to build affordable housing due to costs! All the shills blaming Trump LOL

    “Lumber prices typically rise in the spring as builders stock up for construction season. But this year, they are being hit hard by bad weather and a decline in home building. ‘We’re starting to feel a little nervous about the market in the next year,’ said Abbe Will, from Harvard University’s Joint Center for Housing Studies. ‘This certainly does look like a turning point in the cycle.’”

    The reason why IS the HOUSING BUBBLE! The reason why it’s not is because the BUBBLE POPS!

    https://www.nasdaq.com/markets/lumber.aspx?timeframe=10y

    The prices is back to end of 2016. Before even Trump was president! Will the MSM go back and correct those stories?

    1. Look at the prices jump! Housing Bubble 2.0 peaked in Spring of 2018 for some and Summer of 2018 for most. East coast was end of 2018. Ben said when the prices shoot up and then crash, it’s an indication of a Bubble and a Bust!

  10. I was reading the comments section on a Zero Hedge article last night, and two people, presumably Wall St. types, were saying that the Fed (PPT) is propping up Tesla. They were pointing out that the data showed $900M purchases of Tesla stock in 15 minute windows. These two were saying NOBODY but the Fed has that kind of liquidity to throw at a single stock. They said that Tesla is considered TBTF by the PPT because they have political connections and are the “GREEN” darling.

    1. I believe it. The manipulation in the precious metals markets this month, especially in the past few days, has been massive and blatant. This is why a real audit of the Fed and an honest investigation into market rigging and manipulation – and the complicity of our corrupt and captured regulators and enforcers – is imperative. But with our DoJ and FBI long since subsumed into The Swamp, I’m not sure who has the resources or integrity to conduct such investigations.

      1. The manipulation in the precious metals markets this month, especially in the past few days, has been massive and blatant.

        I was wondering about that. Precious metals have only been on my radar since the discussion here about gold coins and after binge-watching Mike Maloney’s Hidden Secrets of Money.

        1. Gold hasn’t beaten inflation in the past 10 years. Maybe it is about to break out, but I think gold as a store of value isn’t really panning out. It would have been better to invest in iBonds or something ultra conservative with a yield that to plunk money down in gold.

        2. For those who might be interested, Mike Maloney gives a nice presentation about “the baby boom demographic disaster” at 10:40 of Episode 6.

      2. This is why a real audit of the Fed and an honest investigation into market rigging and manipulation

        Let’s say by some miracle that this happened. Have we reached the point that those who should get angry about it wouldn’t even understand it? And everyone else is ok with trying to make money off it?

    2. When a company consistently survives every near death experience without a scratch you gotta wonder if they don’t have a special deal with TPTB. Just read a tin foil hat article from someone who’s sure that TPTB want desperately to get everyone into cars that can be controlled remotely. I’ve read wackier theories.

    3. Tesla stock has dropped pretty steadily over the past year from about $340 to now around $235. I’m pretty sure stock price is not being propped up with that trajectory. I love my Tesla, but I wouldn’t buy Tesla stock at the lofty valuation it was at.

      By the way, there are tons of people who have that kind of liquidity. Just look at sovereign wealth funds of Norway or Saudi Arabia, Baillie Gifford, Warren Buffet, or Masayoshi’s Son’s Vision Fund.

      2. Buffett? Geez that’s pathetic.

        More likely Calpers et al keeping their utopian dream from turning to ash. I talked with a guy who was before the Portland planning commission and all these blue state fools have been designing their cities and roads for high density living units and automated vehicles.

        Elon is likely a made man (CIA – a different mafia) and many palms were greased to get this far. If he goes down he can probably take many many fools with him.

        1. Buffett? Geez that’s pathetic.

          You do know that Buffet is a major investor in BYD, China’s major electric vehicle auto makers, right? They turned a very tidy profit last quarter, while Tesla did not.

          The Japanese came into the US auto market and took a huge bite out of Detroit with Toyota, Honda, and Nissan. Next came the Koreans with Hyundai and Kia and they have been upping their game. Heck, the US auto makers don’t even make cars anymore. GM is closing plants and Ford is moving them to Mexico. US legacy automakers (except Tesla) have thrown up their hands and said, “We surrender, we’re just going to keep making trucks, cross overs, and SUVs.” Those vehicles are protected against imports by steep tariffs.

          It’s not about loving or hating Tesla. Tesla may just be a flash in the pan. The real issue is that the US legacy automakers are putting their heads in the sand an not realizing that the EV shift is coming. If they don’t innovate, they will die. They will end up like Nokia before the iPhone came out, or Blockbuster after Netflix. They risk becoming obsolete. It’s a classic case of innovators dilemma.

          1. The real issue is that the US legacy automakers are putting their heads in the sand an not realizing that the EV shift is coming.

            Pretty sure they see it. Maybe they just don’t like it and would rather build trucks as long as they can and then retire. Screw the young guys and the dealers. But a lot could change between now and electric utopia. It will be interesting to watch.

          2. the EV shift is coming

            Maybe, but probably not that quickly, and it won’t look like Tesla. It needs to be economical to really make a shift and not be just a fun expensive novelty for the monied few.

            Almost 50 years ago I was doing daily 25 mile commutes to class on an EV that carried hundreds of passengers on steel rails. Nothing fancy. Economy mattered then.

          3. EVs make no sense outside of heavy urban areas, and even then trains or similar – even bikes – would be better. As the saying goes, if you suck at math, physics and finances, EVs are great.

            Elon is a con artist but he masterfully sucked in a lot of virtue signaling fools who really just want to show off their wealth-without-intelligence.

          4. I don’t like BS and virtue signalling and I love internal combustion engines. But having said all that I think EVs are a little more potentially useful than you’re giving them credit for. Depending on your definition of “heavy urban areas” I guess. A car is just better than trains and bikes for some things.

    5. the Fed (PPT) is propping up Tesla.

      Yesterday it was “Insiders are selling out.”

  11. Speaking of re-education – the Globalist News Network, aka CNN, saw its viewership plunge by 26% in the latest ratings, below that of “Bonanza” re-runs, as more and more red-pilled viewers are rejecting the corporate media’s lies, propaganda, and agenda pushing. Meanwhile, citizen journalists and commentators who tell it like it is are seeing their viewership soar as the public hunger for real news and real truth is growing. Learn something, Real Journalists.

    https://www.youtube.com/watch?v=Tk6Q0FYx6-w

      1. Feinstein’s idea of “real reporters” is limited to those Oligopoly-owned media outlets that purvey The Narrative and DNC talking points. Since truth-tellers were disputing MSM lies and propaganda on the Internet with great effect, the creepy Oligopoly tech giants and their globalist controllers have been going all out to silence and suppress all dissident voices calling bullshit on the garbage the Establishment has been trying to force-fed us through the globalists’ media-entertainment complex.

        https://www.zerohedge.com/news/2019-05-01/coming-america-complete-de-platforming-all-non-establishment-voices

  12. “The largest gain in home-start activity came in the $400,000 to $450,000 price band, with a near 20% annual growth rate. The largest increase in unit count was for prices over $450,000, where starts jumped by 161 units compared to last year’s annual rate. ‘The ‘Snowbird Season’ got off to a slow start in January, as contract pace was off substantially compared to January 2018,’ said Metrostudy regional director Tony Polito. ‘The big concern is the inability to produce product under $250,000. Just 19% of all new home construction is considered ‘affordable.’”

    Dont worry Tony-boy. When those 400K become foreclosures and sell for what people can afford, you will have a nice gigs driving Uber or flipping burgers! Enjoy your Bubble BUST!

    BTW, 250K is not affordable. FL has a low median income! I remembered shacks in FL selling for $50K in Orlando from 2010-2012.

    1. “BTW, 250K is not affordable.”

      4-5X median household income doesn’t align with long term historic trend of 2-2.5X median income. Now that price declines are accelerating, we’ll all see just how easy it is to pump out new houses in the $$45-$60/square foot range is.

      Some will be mildy amused…. Many more will be stamping their feet.

    2. “BTW, 250K is not affordable. FL has a low median income!”

      Exactly. Pre-bubble, $200k and up was considered a massive price for a house where I grew up. The price the median earner paid was usually somewhere between $115k and $150k. Now, the median is almost $400k, and rents have exploded.

    3. “The ‘Snowbird Season’ got off to a slow start“……….

      That’s because Boomers are broke! They may act like they are in complete control while partying away Tony Montana style, but they are broke. What was that stat? 40 percent of people 60 and over have less than $10,000 saved for retirement? How can they afford that nice, new condo in Del Boca Vista, Phase 3?

        1. This is why socialism is going to be voted in by the old people, not the young people. Boomers don’t sacrifice anything!!!

          1. socialism is going to be voted in by the old people

            Hey. We’ve got a Nationalized Pension and old folks socialized medicine. People who are now dead voted for that. Boomers paid into it for the past 50 years.

            That doesn’t mean we will vote for free everything for working age people. We paid for our college or whatever and our housing. Well, we borrowed for it maybe.

  13. “These markets have relatively high volatility. When you invest in a market, you have to generate outsized returns to justify the risk,” Jesse Stein, founder of Compound, tells GlobeSt.com. “These markets can move 15% to 20% in a year, either on the upside or the downside. In investing in those markets, you need to be able to justify the risk that is associated with that volatility will be accompanied by outstanding returns.”

    NOW HE TELLS US!

    I guess no more writing Love Letters, burying statues, doing feng shui, or feeding rodents.

    1. She also stole the HBB line ” She is living in trump’s head rent free”
      She can use sarcasm, she is not in office, ya know.

      1. Hillary Clinton is a bigot who sees people of color only as votes, not as human beings worthy of a better future.

        1. a bigot who sees people of color

          If you are privileged, entitled and amoral, color is merely a coincidence. A tool is a tool.

    1. Articles like this make my day. The oligarchs who fund and control the progressive movement need to experience the joys of “fundamental transformation” they and their enclaves have been foisting on the rest of America.

    2. How touching, they’re concerned that the place is a firetrap. I’m sure there’s no nimbyism here.

      /sarc

      LOLz at those poor billionaires.

      1. “Neighbors have opposed having a homeless shelter nearby for fear it would lead to an increase in crime, a decrease in quality of life, and a drop in the values of their homes.”

        OMG, not a drop in the values of their homes!

    1. Powell reminds me of a cut dog. When Trump walks in with the morning paper his bladder leaks as he scampers off to another room.

    2. I’m actually curious to taste the new Beyond Meat burger going in at Burger King. I’ve heard the Carl’s Junior version is pretty good. As a rule, I don’t eat this sort of fast food crap, but I might make an exception to see how the plant-based protein experiment is going. Trader Joe’s sure has a lot of delicious vegetarian/vegan options and we love our sofritas at Chipotle.

  18. The Sarasota and Manatee County area is my back yard and I am extensively engaged in new home developments developments here.

    One of the things that really detailed the early part of our tourist season here was the over publicized red tide outbreak. It was for sure pretty severe, but the press did their usual gloom and doom campaign. No doubt resorts and seasonal rentals declined severely, but everyone came back down starting about early february.

    As for housing starts in developments, I have seen a shift in the models being built from the builders upper end models to those lower in their product line. Does not necessarily mean that prices for a given model are lowering, but rather a shift in preference to lower end models. Median price is not an apples to apples comparison. Resale prices seem to be moderating a little bit, but sell quickly when priced right. Do not see increases in pricing in most classes of housing. Clearly a leveling phase in the cycle.

    What I do see in new home developments is a lack of new ground breaking. One new development I was in recently has about 370 parceled lots. 10 have sold since sales began last summer. Several finished properties have “available” signs in front, and only 2 are under construction in entire development!

    This is very strange and extreme shift from 2 years ago where typical new developments of similar location, size, and quality would have dozens under construction and armies of construction workers everywhere you look. If this trend continues, it will be armageddon and repeat of 2007-8.

    1. Median price is not an apples to apples comparison.

      When we can’t afford oranges, we buy apples.

      Case Shiller index won’t show this.

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