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Key Culprits In The Slowdown Include Homeowners Couldn’t Unload Their Old Home

A report from the Sacramento Bee in California. “Sacramento County total home sales fell 22.5 percent year-over-year in December, the lowest for the month since 2007. In the four-county region, the largest decline in the year-over-year median sales price for neighborhoods with more than 10 homes sold was in Colfax in Placer County.”

“Most of the region’s neighborhoods saw modest year-over-year increases in median home price of resale homes. Prices dropped 24 percent in the 95713 ZIP code compared to December 2017. The median sales price was $254,800, down from $337,000.”

The San Francisco Chronicle. “The slowdown in new market-rate, residential development is starting to take its toll on San Francisco’s affordable housing pipeline, as rising construction costs and a softening market are resulting in less money flowing to the city programs that support affordable projects.”

“Kate Hartley, director of the Mayor’s Office of Housing and Community Development, said the decline isn’t surprising, as market-rate developers have become more cautious about breaking ground on new buildings. ‘It’s pretty well documented that the market-rate development has slowed,’ Hartley said.”

The Orange County Register. “Homebuying in Aliso Viejo, Dana Point, Laguna Niguel and San Clemente fell 10 percent in a year with the steepest countywide drop in sales in 11 years. Last year saw the fewest Orange County homes sold since 2014 and the 8.6 percent drop in sales vs. 2017 was the largest year-over-year percentage decline since 2007.”

“Key culprits in the slowdown included higher mortgage rates; economic uncertainty; not to mention that homeowners seeking a new residence couldn’t unload their old home.”

From Curbed Los Angeles. “Is Los Angeles turning into a buyer’s market? With typical home prices eight times higher than the median income, that might be a stretch—but two new reports from Zillow suggest home shoppers may have a slightly easier time navigating the city’s daunting real estate market in coming months.”

One of those reports indicates that 21,357 homes were listed for sale in January across the entire Los Angeles metropolitan area. That’s nearly a 30 percent increase since a year ago and the highest number since 2016. A separate report from the company confirms that competition among buyers is tapering off. It reveals that 26.3 percent of homes in the LA metro area sold above asking price in December, down from 35.1 percent throughout 2017.”

“‘Buyers should not mistake a few more options for a sudden bounty,’ warns Zillow economist Aaron Terrazas, explaining that home prices are continuing to escalate due to ‘high demand from buyers and limited availability of homes for sale.'”

The Los Angeles Times. “After $1.5 million in price cuts, former One Direction star Harry Styles is just aiming for a modest profit on his Hollywood Hills home. The contemporary estate is now listed for $6.995 million, or $12,500 more than he paid for it three years ago.”

The Mountain Democrat. “El Dorado County has been a magnet for Bay Area buyers for the last several years. About 60 percent of all new home sales in El Dorado Hills are to Bay Area transplants and one out of four countywide home sales are to folks relocating from the nine Bay Area counties.”

“But their annual spring migration may be postponed this year. Last week, Core Logic reported that Bay Area home sales are down 21.6 percent from a year ago. December’s decline was the seventh straight month of reported year-over-year drops in sales. Core Logic analyst Andrew LePage said that ‘the nearly 22 percent year-over-year drop in activity was the largest for any month in more than eight years.'”

“When the Bay Area’s real estate market catches a cold, El Dorado County’s market gets the flu. That’s because our real estate market has grown dependent on the wealthy, all-cash homebuyers from the Bay. If their homes are not selling, it’s not likely they will be showing up for our open houses this spring.”

“Who then will take their place? County home prices are too high to attract most first-time buyers and many of our own move-up buyers are relocating out of state. Bay Area sales will pick up once sellers adjust their pricing and when they do those buyers will be back in the foothills.”

This Post Has 43 Comments
  1. “Key culprits in the slowdown included higher mortgage rates; economic uncertainty; not to mention that homeowners seeking a new residence couldn’t unload their old home.”

    These greedheads could easily unload their old home. All they have to do is price it to sell.

    1. I don’t know. Refinancing is larger than purchasing and the cash out biz has been going crazy for years. A reader sent this to me last night:

      ‘After struggling to keep up with the mortgage business’ new reality of lower refinance originations due to higher mortgage interest rates, HomeStreet Bank announced Friday that it is plotting a mass exodus from the mortgage business.

      Back in July, HomeStreet, a community bank and mortgage lender that operates bank branches and standalone home loan centers, said that it was laying off more than 125 mortgage staffers and closing down several offices. At the time, the company said the move was due to the “persistent shortage of new and retail housing and increased interest rates, reducing demand for both purchase and refinanced mortgages.”

      ‘But it appears that move wasn’t enough to stop the bleeding. HomeStreet announced Friday that it is planning to sell off its entire retail mortgage operation, which includes 72 home loan centers in five states, as well as nearly all of the mortgage servicing rights associated with loans originated in those retail outlets.’

      ‘HomeStreet doesn’t have a buyer for its retail mortgage business yet, but it said it is looking for one. According to HomeStreet’s website, the company has 72 home loan centers: 37 in Washington, 16 in California, six in Hawaii, five in Idaho, and eight in Oregon.’

      https://www.housingwire.com/articles/48196-homestreet-bank-moves-to-sell-off-almost-entire-mortgage-business

        1. I’m sure Ditech was an isolated, one-off event that in no way signifies another financial crisis is brewing. Sure, their business model of underwriting mortgages so that the manifestly non-creditworthy could “buy” overpriced shacks that they clearly couldn’t afford was fundamentally unsound, but surely they are an outlier. The resident REIC trolls on the HBB assure me of this.

        2. A related article …

          A decade after housing bust, mortgage industry on shaky ground, experts warn: A boom in fragile nonbank lenders has put the system at risk of another meltdown — ScienceDaily
          https://www.sciencedaily.com/releases/2018/03/180329190834.htm

          (snip)

          “‘If these firms go out of business, the mortgage market shuts down, and that has dire Implications for the overall health of the economy,’ says Richard Stanton, professor of finance and Kingsford Capital Management Chair in Business at Haas.”

          Oh, pray tell, and just why is that?

          My take is these mortgage businesses supply the money that is used to keep real estate prices lofty.

          Lofty real estate prices = Equity wealth.

          Without these mortgage businesses these lofty prices lose support and thus these lofty prices suffer a decline.

          A decline in real estate prices = A destruction of equity wealth.

          This is not a good thing to happen to a (very stupid) economy that is SEVENTY PERCENT BASED on consumer spending, much of which (most of which?) is fueled by borrowed money.

          A nation of dummies.

          1. Agreed. The old saying of “something is worth only what someone will pay for it” is turned to “something is ‘worth’ what someone can borrow”. Houses sold to the highest bidder who has to shell out the most debt for it, comps reset, and off to the next one.

            Every drug addict needs a dealer, and every FB needs a ‘push button, get mortgage’ company.

      1. From the article …

        “‘The challenging regulatory environment, including changes to loan underwriting and disclosure rules …”

        Aka, honesty …

        “… and increased data integrity requirements …”

        More honesty…

        “… have combined with higher loan officer compensation to significantly increase loan origination costs,’ the bank said. ‘Non-bank lenders are regulated by different regulators with different approaches to compliance and regulatory oversight than bank mortgage lenders. This condition has resulted in uneven compliance interpretations, guidance, and enforcement risks between banks and non-bank lenders.’

        “The bank also cites the amount of capital banks are required to hold in order to service mortgages. ‘The regulatory capital required today for holding mortgage servicing assets is onerous, and in conjunction with declining hedge profitability as a result of a flattening yield curve, our return on invested capital in this line of business has been adversely impacted,’ the bank said.”

    2. I do think a ton of demand was pulled forward when lending standards and interest rates were lowered between 2014-2018. So many people bought already.

      I think a factor is there are simply less buyers looking for homes.

  2. From yesterday: “We forget how abnormal this market had gotten.” And Ben asked, “The question is, in what year did things become abnormal?”

    For price history geeks, I was checking up on a building I like and found some illustrative price histories (all same size/similar view), which prove how abnormal and for how long:

    Apt 1 (+479% in 21 years)
    Dec 30, 2016 Sold $1,737,500
    April 13, 2016 Sold $1,138,000
    Mar 3, 1995 Sold $300,000

    Apt 2 (+549% in 18 years)
    July 20, 2018 Sold $1,850,000
    Nov 28, 2011 Sold $1,050,000
    Oct 2, 2002 Sold $600,000
    Sept 17, 1999 Sold $285,000

    Apt 3 (+840% in 20 years)
    April 25, 2018 Sold $1,400,000
    Feb 6, 2017 Sold $1,175,000
    Oct 20, 2009 Sold $723,000
    Aug 8, 2005 Sold $795,000
    Jun 19, 2001 Sold $395,000
    May 23, 1997 Sold $149,000

    It took a long time to get here and it’s a long way down.

    1. “It took a long time to get here and it’s a long way down.”

      The “free-market” path back down will be much shorter.

  3. Well I am waiting for inventory to rise and prices to drop in Sacramento parts of downtown, Land Park, midtown and so forth.

  4. “After $1.5 million in price cuts, former One Direction star Harry Styles is just aiming for a modest profit on his Hollywood Hills home. The contemporary estate is now listed for $6.995 million, or $12,500 more than he paid for it three years ago.”

    Lol. Keep in mind that shack is still way overpriced. What’s the commission on this?

  5. “‘Buyers should not mistake a few more options for a sudden bounty,’ warns Zillow economist Aaron Terrazas, explaining that home prices are continuing to escalate due to ‘high demand from buyers and limited availability of homes for sale.’”

    Thanks for the concern aaron-boy. Us buyers will just wait then.

  6. I think the republican party died again yesterday. All hail the debt king! Hey 25th Amendment, we need you!

    1. Sorry snowflake, you boy obuma the muslim experiment spent more, gonna be a long 6 more years for you an that Trump Derangement Syndrome, better retreat to your safe space in moms basement. Greatest President EVER, lock her up, drain the swamp and build that wall.

  7. $omething.Wicked.This.Way.Come$! … or, …

    “Some circumstantial evidence is very strong, as when you find a trout in the milk.” (Henry David Thoreau)

  8. Sellers biggest mistake, putting to many high end up grades and now expecting the buyers to pay you for them.
    Best to price it to sell in a buyers market?

  9. See student loan debt, national debt, and car loan debt!
    Borrowing our way to prosperity is a secret.
    Household debt hit a record high of $13.5 trillion last quarter
    Total household debt is now $837 billion higher than its previous peak, which was in 2008 before the recession.

    Da…da…da…DEBT!

  10. The Democrats are working hard to field a liberal extremist candidate and develop a platform which will virtually ensure a loss to Donald Trump in 2020. I wish them great success!

    The Financial Times
    The Big Read Democratic Party US
    Turning left? Democrats divided on how to take on Donald Trump
    The party is embracing progressive policies on tax, health and climate, but some fear alienating voters
    Getty Images; Bloomberg. Amy Klobuchar, Kamala Harris, Alexandra Ocasio-Cortez, Cory Booker and Elizabeth Warren
    Demetri Sevastopulo and Courtney Weaver in Washington yesterday

    After suffering a crushing defeat in the November midterm elections and having been outsmarted during last month’s government shutdown, Donald Trump is kicking off his re-election campaign on the back foot. At just over 40 per cent, his approval rating is one of the lowest ever for a president at this stage in the cycle.

    Yet the US president believes he has a potential winning card — the embrace by the Democrats of a series of leftwing policies, from tax to healthcare to the announcement of a radical and hugely expensive Green New Deal to tackle climate change.

    Mr Trump warmed to his theme in last week’s State of the Union address when he complained about the rise of “socialism” among the Democrats. He picked it up again this week at his first re-election rally in El Paso, Texas, when he warned: “I really don’t like their policies of taking away your car, taking away your aeroplane flights, of ‘let’s hop on a train to California’.”

    1. remember… seeing the light and being anti agent orange (or pro Earth) does not make you a liberal. ( see Ann Coulter) I dont know a single fiscal conservative who approves of the G o p anymore.

  11. “Sacramento County total home sales fell 22.5 percent year-over-year in December, the lowest for the month since 2007. In the four-county region, the largest decline in the year-over-year median sales price for neighborhoods with more than 10 homes sold was in Colfax in Placer County.”

    I guess ‘since 2007’ includes 2008 and 2009, when a major global financial panic was underway. It must be pretty bleak there in Sacramento this year.

    I take the impression that Sacramento had quite a few speculators in the market in the post-2009 period, including some folks who post here regularly. Any investors who didn’t get out by now are face dismal prospects for capturing the capital gains they were expecting.

    And regarding that statement about a decline in median sales price, it must be fake news, as Chris Thornberg has given his personal assurance that California housing prices will not fall.

    1. It must be pretty bleak there in Sacramento this year.

      Admittedly the part of Folsom I’m watching is very small and is considered highly desirable for school reasons. But what I’m seeing so far this spring is that things are slow and some things have been pulled off the market but there have been no fire sales yet. However just in the last couple of weeks I’ve been encouraged to see multiple rentals and listings suddenly showing up for well under the Zillow price. Until now all the “realistic” stuff was in line with Zillow. But now we’re talking 10-20% under all the sudden. Hope the trend continues.

  12. “‘Buyers should not mistake a few more options for a sudden bounty,’ warns Zillow economist Aaron Terrazas”

    So, we have to wait for the REAL bounty – when there are a LOT more options. Got it, Aaron! Thank you! 🙂

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