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More Evidence The Once Torrid Market Is Slowing Down And Increasingly Favors Buyers

A report from the Wall Street Journal. “Sales of previously owned homes fell in January, although a decline in home prices and mortgage rates could bode well for a pickup this spring. January marked the third consecutive month of declining sales, and last month’s 4.94 million home sales were the lowest since November 2015. Compared with a year earlier, sales in January declined 8.5%.”

“Inventories of existing homes for sale rose 3.9% to 1.59 million in January. At 3.9 months’ worth of supply, inventories were up slightly from 3.7 months in December, the realtors’ group said.”

The Tampa Bay Times in Florida. “Tampa Bay’s housing market began the New Year with more of a whimper than a bang as homes sales plunged in Pinellas County. The January figures, released today by Florida Realtors, provide more evidence that the once torrid market is slowing down and increasingly favors buyers. And the local results mirrored those statewide and nationally.”

“Pinellas took the worst hit as sales of single family homes plummeted 13.6 percent compared to the same period a year earlier. For the entire month, there were just 685 sales, the smallest number since early 2015.”

The Dallas Morning News in Texas. “Nationwide home inventories have increased in four of the last five months after 44 months of straight declines, according to Zillow. The biggest gains in listings were in high-priced west coast market, including San Jose, Calif. (42.9 percent), Seattle (36.9 percent) and San Diego (31.9 percent.)”

“Houses up for sale in Dallas County rose more than 43 percent in January compared with a year earlier. And listings 42 percent higher in Denton County and were 37 percent higher than a year ago in Collin County, according to the MetroTex Association of Realtors. January’s listing total for North Texas in the real estate agents’ multiple listing service was the highest in six years.”

“Danielle Hale the chief economist with Realtor.com said at the housing industry’s annual meeting this week in Las Vegas that home inventories across the country started to swell in the fall. ‘That’s huge news. The market was really really starved for inventory,’ she said. ‘In spite of the fact inventory is coming back it will be difficult to see sales growth.'”

From Mansion Global on California. “A century-old Gothic Tudor estate once owned by actor Nicolas Cage has come back on the market in San Francisco at an asking price of $10.95 million, a $1 million price cut from its most recent listing two years ago. The actor first bought the home in 2006, and sold it in 2008 for $7.7 million amid financial troubles.”

From Patch Seattle on Washington. “If you’re a mansion-buyer on the hunt for a serious discount, check out 724 14th Avenue East on Capitol Hill. The 10,400 square-foot mansion built in 1905 has been on the market for two years now, and the price has been cut from $8 million down to $4.7 million.”

“The listing agent for the property calls it an ‘incredible opportunity for a savvy buyer.’While that might be true, you still have to be filthy rich to afford to live here. Property taxes will run about $40,000 in 2019.”

This Post Has 41 Comments
  1. ‘home inventories across the country started to swell in the fall. ‘That’s huge news. The market was really really starved for inventory,’ she said. ‘In spite of the fact inventory is coming back it will be difficult to see sales growth’

    You guys said you could sell everything in two weeks, or less! Wa happened to my shortage?

    1. “You guys said you could sell everything in two weeks, or less! Wa happened to my shortage?”

      And indeed they could, if only they were willing to lower the price to current market value.

  2. ‘homes sales plunged in Pinellas County…as sales of single family homes plummeted 13.6 percent compared to the same period a year earlier’

    13% is a lot but the entire state of California is doing worse.

  3. No income tax in SE Region IV and my Shack Tax is $2,800 a year

    Fairfield County real estate listings climb as SALT protests grow

    By Alexander Soule Updated 12:33 pm EST,
    Thursday, February 21, 2019

    “I think we all recognize that it doesn’t take a whole lot in the state of Connecticut to get to $10,000 in state and local taxes,” said Scott Jackson, commissioner of the Connecticut Department of Revenue Services, speaking in late January in Hartford before a committee of the state General Assembly. “That’s not a rich person’s space. Those are working people.”

    According to estimates by the Government Finance Officers Association, 41 percent of Connecticut taxpayers claim deductions under SALT — averaging $19,650 a deduction, or more than $67,000 from this year through 2025 when the federal cap is scheduled to expire.

    https://www.newstimes.com/business/article/As-protests-grow-over-SALT-Southwestern-13633546.php

    1. Should have said No State income tax in SE Region IV.

      Speaking of that, the Dude who taught the Law and Finance class I took for my contractors test told us to be kind to tourists because they were the reason there is no state income tax in Florida.

      1. “be kind to tourists because they were the reason”

        LOLZ I told my mother in Pinellas County this a few weeks ago when she was complaining about snowbird traffic. The Tampa / St Pete economy doesn’t exist without them. There’s no manufacturing jobs there, yes Uncle Sugar provides lots of MID stimulus but other than that, how does anybody make money there besides selling each other used houses or harvesting those snowbird dollars?

  4. Was doing work in a progressing housing development yesterday . Strange thing I saw in this one and several others in our area of SW Florida.

    Several houses are nearing completion but very few new starts evident. I decided to drive through some neighboring new developments and saw exactly the same thing. Dozens of vacant sites with “Available” signs but few new permits posted or starts evident. These are modern high quality planned developments typically with 300 to 500 or more total sites.
    In a few weeks to couple months the houses under construction will complete and, if this trend continues, there won’t be any going up. This is just like late 2006 when I saw the same thing. By early 2007 you had large developments which consisted of finished houses and vacant lots. Sometimes sales offices were closed and builders models sold off and no further activity.

    I have driven through about 5 or 6 of these developments which feature houses in price range from about 300 to about 700k. Some are a bit higher. I am starting to see an increase in finished houses with for sale signs. This is not typical here. Usually the houses are contracted prior to construction.

    2 years ago in same developments there would be dozens of houses in construction in all different states of completion, a huge work force of workers all over, and taco trucks patrolling the many streets with active construction.

    In our area this is a huge shift. Many of the houses under construction I saw did not even have crews actively working. Very low activity. This is our peak season right now.

    Anyone else noticing this in your areas? Try doing this drive for yourself in your areas and see if same is happening. It is a bizarre sight here and a very significant change.

    See ya.

  5. I continue to see so many building projects all over Vegas (and Lake Las Vegas) where they are erecting a number of luxury homes ranging from $500,000 – $900,000. I can’t imagine that people are still buying these new homes up in Summerlin and Lake Las Vegas. Anyone have any comments or ideas about how much these values will drop over the course of the next 2-3 years? It seems like Lake Las Vegas, in particular, never really takes off. Summerlin is just getting overcrowded. I keep hearing that same silly notion as well that the Raiders coming to town will somehow magically support unrealistic housing prices. I would imagine that a lot of the construction will slow to a halt across the city in a matter of months.

    1. I was in Raleigh last week and saw 2 huge Apartment complexes being worked. Maybe half way finished and a couple smaller complexes being worked on.I also saw 2 Ultra Luxury Sr. Living centers being developed.

  6. Since I do valuation and real estate analytics, I would offer this suggestion for your prediction of value inpact. No one has a crystal ball but history does tend to repeat. If you have access to mls or know someone who does, look at historic mls records for similar houses in two time periods. This first would be in 2005 and the second would be around 2009 or 2010. Calculate the per centage drop then apply that to pricing you see today. Try to match up major features such as pools, garage sizes, land fetuses such as location on ponds, site sizes etc, and, of course, living area.

    If I was contracted for a forecasting or feasibility assignment, this is exactly what I would do.

    If I had a forecast

    1. Oh good lord. Autocorrect changed my attempt to say “features” into “fetuses”.

      Sorry, did not proofread. Please adjust your mind accordingly

      Wow.

      1. Land fetuses works. Perhaps fetuses left over pickens from a realtors meal of pregnant squirrel? The math you suggest is inline with what I mark as the bottom and top of what a homes value should not exceed. Typically here in coastal CA, the homes are about 1.5-2x the 2005ish peak price and 3-4x 2008-2011 price. It’s craziness and I’m way to stubborn to accept that as an acceptable price. I have noticed some prices up in Folsom / Sac surrounding areas to be right at or even below 2002-2006 prices. That to me is a good sign but would much prefer seeing them at the post bubble price. All observations here, nothing to concrete but a bit of a tell tale and hoping history does repeat!

    2. “Since I do valuation and real estate analytics, I would offer this suggestion for your prediction of value inpact.”

      An $800,000 house and $100,000 condo host the same loneliness.

    3. Calculate the per centage drop then apply that to pricing you see today.

      This is “business cycle” thinking. Is Fed manipulation now the permanent business cycle itself, or does reality have a seat at the table this time?

  7. Are you worried that by reflating the stock market when the economy is strong, the Fed may have little remaining ammunition in case a future downturn weakens it?

    1. Opinion: The Federal Reserve won’t be able to rescue investors if the stock market dives again
      Published: Feb 21, 2019 1:07 p.m. ET
      By capitulating, the Fed has reinflated stock prices this year, but at the cost of leaving it with less ammunition to deal with the next recession
      Getty Images
      Fed Chairman Jerome Powell
      By Sven Henrich

      At the time of this writing, the U.S. stock market has risen nine weeks in a row, following a slump in December.

      There has essentially been a risk-free market since Federal Reserve Chairman Jerome Powell famously caved on Jan. 4, signaling flexibility on the central bank’s balance sheet runoff. Every dip in prices is bought, and stock market bears, not bulls, are increasingly looking as if they’re the ones who are trapped.

      The parade of central bank jawboning has been as spectacular as it has been global. Consider what signals have been sent to markets by central banks in just the past few weeks:

      • The Fed: No more interest-rate hikes, flexible on balance sheet reduction, even open to stopping it altogether and discussing making bond purchases a regular tool, not just an emergency measure. I thought we were done with those? Is quantitative easing (QE) 4 coming?

      • The European Central Bank (ECB): Discussing bringing back LTRO (long-term refinancing operations), which would constitute another liquidity infusion. Didn’t they just end QE six weeks ago?

      • Bank of Japan (BOJ): Ready to ease monetary policy more. More? They never stopped, and the BOJ famously owns more than 75% of the Japanese ETF market already.

      ­• People’s Bank of China: Has added record liquidity infusions in 2019, desperate to provide liquidity to its lending market.

      There is no doubt that renewed global central bank capitulation has succeeded in levitating asset prices from the abyss in December.

  8. “Sales of previously owned homes fell in January, although a decline in home prices and mortgage rates could bode well for a pickup this spring.”

    It could also lead knife catchers to make the financial mistake of a lifetime, as you can only use rock-bottom interest rates to inflate housing prices to current lofty levels once before inadvertently creating a historically large air gap between fundamental value and prices on the second try.

  9. Apartment 401
    February 21, 2019 at 11:13 am

    “automate all work and jobs”

    Robots can lay bricks but they’ll never replace sparkies.

    https://i.imgur.com/lpXMGUy.jpg

    Show me a robot that can climb up here and run 2″ EMT.

    Oh right, because they can’t…

  10. I am in ABQ today. This town has potential if they would just triple the police force! The Sandias are amazing, food is good and not too crowded!

  11. Saw the Yun bit in that article. Let’s see January was a cyclical low huh.

    Do not anticipate and further problems. Huh.

    Would be Interesting to see in a couple months when YOY looks horrific (sum of 12 months individual downturns) how he would react when his feet are held to the fire of his comments from today.

    Actually I will be busy when that time comes looking through all the upcoming foreclosure auctions for a good waterfront place. Don’t think we are too far off.

  12. Just to keep this all in perspective. “If it looks like a duck and walks like a duck, it is a duck.” No amount of spin or happy talk can change the facts. Unicorns and lollypops forever! (Please.)

    What amazes me is that the Fed is allowed to continue to exist. Oh, wait, follow the money. Ask yourself “Who benefits?” This is the third Fed-induced asset bubble in 20 odd years. How could anyone with a straight face say “we couldn’t see this coming?”

    Seems great on the way up, but not so much on the way down…

    https://www.investopedia.com/articles/stocks/10/5-steps-of-a-bubble.asp
    5 Steps Of A Bubble
    By Investopedia Staff
    Updated Jun 2, 2010

    Five Steps of a Bubble
    Minsky identified five stages in a typical credit cycle – displacement, boom, euphoria, profit taking and panic. Although there are various interpretations of the cycle, the general pattern of bubble activity remains fairly consistent.

    Displacement: A displacement occurs when investors get enamored by a new paradigm, such as an innovative new technology or interest rates that are historically low. A classic example of displacement is the decline in the federal funds rate from 6.5% in May, 2000, to 1% in June, 2003. Over this three-year period, the interest rate on 30-year fixed-rate mortgages fell by 2.5 percentage points to a historic lows of 5.21%, sowing the seeds for the housing bubble.
    Boom: Prices rise slowly at first, following a displacement, but then gain momentum as more and more participants enter the market, setting the stage for the boom phase. During this phase, the asset in question attracts widespread media coverage. Fear of missing out on what could be an once-in-a-lifetime opportunity spurs more speculation, drawing an increasing number of participants into the fold.
    Euphoria: During this phase,caution is thrown to the wind, as asset prices skyrocket. The “greater fool” theory plays out everywhere. Valuations reach extreme levels during this phase. For example, at the peak of the Japanese real estate bubble in 1989, land in Tokyo sold for as much as $139,000 per square foot, or more than 350-times the value of Manhattan property. After the bubble burst, real estate lost approximately 80% of its inflated value, while stock prices declined by 70%. Similarly, at the height of the internet bubble in March, 2000, the combined value of all technology stocks on the Nasdaq was higher than the GDP of most nations.
    During the euphoric phase, new valuation measures and metrics are touted to justify the relentless rise in asset prices.

    Profit Taking: By this time, the smart money – heeding the warning signs – is generally selling out positions and taking profits. But estimating the exact time when a bubble is due to collapse can be a difficult exercise and extremely hazardous to one’s financial health, because, as John Maynard Keynes put it, “the markets can stay irrational longer than you can stay solvent.” Note that it only takes a relatively minor event to prick a bubble, but once it is pricked, the bubble cannot “inflate” again. In August, 2007, for example, French bank BNP Paribas halted withdrawals from three investment funds with substantial exposure to U.S. subprime mortgages because it could not value their holdings. While this development initially rattled financial markets, it was brushed aside over the next couple months, as global equity markets reached new highs. In retrospect, this relatively minor event was indeed a warning sign of the turbulent times to come.
    Panic: In the panic stage, asset prices reverse course and descend as rapidly as they had ascended. Investors and speculators, faced with margin calls and plunging values of their holdings, now want to liquidate them at any price. As supply overwhelms demand, asset prices slide sharply. One of the most vivid examples of global panic in financial markets occurred in October 2008, weeks after Lehman Brothers declared bankruptcy and Fannie Mae, Freddie Mac and AIG almost collapsed. The S&P 500 plunged almost 17% that month, its ninth-worst monthly performance. In that single month, global equity markets lost a staggering $9.3 trillion of 22% of their combined market capitalization.

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