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Many Buyers Are Unwilling To Purchase Until They See Larger Price Reductions

A report from the Mercury News in California. “Michelle Ronco, senior product marketing manager with MLS subsidiary Aculist, put Silicon Valley’s housing market in perspective for local Realtors at a meeting in Los Gatos. Santa Clara County’s sales volume peaked in May and the median sales price peaked in March at $1,454,500. The median single-family home cost $1,150,000 in December 2018.”

“Ronco explained that last year the market reacted to what appeared to be a weakened demand and by the September-October period, home sales dipped in all counties (San Mateo, Santa Clara, Santa Cruz, San Benito and Monterey). Home prices also fell, giving way to one in four price reductions. Then sellers made adjustments, and in December, sales volume increased.”

From Forbes. “Buyers should revisit the housing markets in Los Angeles and San Francisco for new buying opportunities according to Selma Hepp, chief economist at the San Francisco office of Compass, the national luxury brokerage firm.”

“‘The story is there are real opportunities out there for buyers now. There have been price reductions which is good for buyers since there was strong price growth in Los Angeles and San Francisco over the last few years,’ Hepp observes. ‘I do think to bring (those) buyers in larger numbers who got buyer fatigue back into the market, there still needs to be more price reductions.'”

“Hepp’s January 2019 numbers point to the year-over-year decrease in home sales continuing at double-digit-percent rates, with the three-month average decline in the Bay Area at 16 percent. Los Angeles was down even further by 18 percent.”

“‘In other words, over the last three months, about 1,100 fewer units sold on average per month than last year in Los Angeles, while the Bay Area averaged about 700 fewer sales,’ said Hepp. Hopefully, sellers are taking note of cooling buyer demand along with higher inventory numbers so they will change their pricing expectations to more sane levels.”

“Look to May 2018 to see when the separation on prices between Bay area buyers and sellers caused potential buyers to simply walk away. The numbers in units sold tell their own story. Consider there was a 4 percent increase in April 2018 which slid down to a 16 percent decrease in January 2019.”

“The decline in buyer demand led to a notably larger increase in price reductions than seen in prior years,’ Hepp notes. Price cuts went from 7 percent of inventory in March 2018 to 34 percent in January 2019.”

“In the Los Angeles area, Spring 2018 saw market prices appreciate 14 percent. Buyers were discouraged and began leaving the market. This caused the highest increase in properties with price reductions over the past three years. In January of this year, those numbers showed 30 percent of sales had price reductions. The spread between listing prices and actual sale prices was increasing.”

“The take-aways for buyers according to Hepp include good news and a dose of real-time reality. ‘Buyers now enjoy more favorable conditions than they did in the second half of 2018. However, many buyers have exited the market and are unwilling to purchase homes until they see larger price reductions and cooling home price growth.'”

From SCV News. “The inventory of homes and condominiums listed for sale throughout the Santa Clarita Valley continued to rise during January even as high resale prices and seasonal forces combined to keep sales in check, the Southland Regional Association of Realtors reported.”

“The 550 active listings at the end of the month were up 58.5 percent from a year ago, representing the eighth consecutive month-to-month increase after two-and-a-half years of monthly declines in inventory. ‘We haven’t seen a supply that high since February of 2012,’ said Amanda Etchevery, chair of the Santa Clarita Division of the SRAR. ‘Part of the sales slowdown is seasonal, yet part of it also is due to high resale prices that generate buyers’ resistance.'”

“Realtors helped negotiate 103 single-family closed escrows during January and 51 condominiums transactions, down 30.4 percent and 7.3 percent, respectively. Those totals came close to the record lows of 99 home sales and 31 condo sales; both records were set in January 2008.”

“‘It’s good to see homeowners listing more properties in a market that desperately needs housing,’ said Tim Johnson, the Association’s chief executive officer. ‘Now, the challenge for REALTORS® will be to convince those sellers that the market is in transition and yesterday’s prices may meet resistance today.'”

This Post Has 54 Comments
      1. Stupid sometimes hurts. But is always costs money.

        And a leaky faucet is the least of your worries. New roof ($12,000), new furnace ($7,000), cracked foundation ($20,000+), water damage from a leaky toilet/tub ($4,000), etc.

        ++++++

        Millennials understand basic costs, such heating and electric bills, but Bailey recommends also considering how much time and money it could take to mow the lawn, clean the house or deal with leaky faucet.

        “When you’re a homeowner, you can’t call your landlord to fix things, so you want to make sure you have a little extra cash in the bank,” Hale says.

        It’s a big transition going from renter to homeowner, so make sure to take some time to learn about the maintenance costs associated with potential homes.

        One in five said they were frustrated by damages they found after moving in, while others said they discovered the house didn’t end up working well for their family.

        1. “…And a leaky faucet is the least of your worries…”

          I observe many homeowners in my area [Irvine, Ca] oblivious to non-mortgage costs such as property taxes, insurance and routine maintenance.

          Yet these are very same folks are out shopping for the latest Benz or Tesla or are taking some fancy trip so that they can make in-your-face posts on facebook.

          All part of the look at me, instant gratification society that we all live in.

      2. Apartment 401 – Older millennial here who bought in 2011 and instantly regretted the decision. Then, inexplicably, houses started going up 5%-10% per year. Watched as every friend we had foolishly did the same thing despite our advice not to do it. Ironically, we have done the best financially but regret the purchase more the people we know that are going to lose all of their money and be trapped. We bailed last year with an insanely lucky profit that has given me financial security for life. Would I recommend anyone else do it? Absolutely f*ing not.

      1. Apartment 401 – Fun fact: There are more realtors than there are houses for sale. Add in huge commissions for a job that requires zero effort or intelligence and it totally explains the experiences you have had. Realtors are bottom of the barrel parasites that will do anything for an easy buck. The most dishonest get paid and honorable ones starve.

        1. There are 25 million excess, empty and defaulted houses in the US today….. with many millions more on the way.

          How many realtors are there?

    1. I once had a realtor tell me to my face that the house we were standing in was 1500 sf not counting the basement when it was the only possible way it could be said to be that many sf lol. We had been shopping together a while, we had been in many ranch homes of 900 sf or so; I surely knew the general parameters of 900 sf versus 50% more than that but she lied anyway.

  1. The Sequence.

    1. There are screams from realtors because of a shortage of inventory. We can sell everything in two weeks!

    2. Prices rise and stories of sweet equity go mainstream. Cheap and easy money (ZIRP + QE + bailouts + Mel Watt) fuel the speculators and mom/pop looking for an easy retirement.

    3. Prices rise even as more and more buyers are priced out. But get on the property ladder or you will be priced out forever! Lending standards get lower and lower….because racism!

    4. The cheap and easy money slows. Even just a minor amount.

    5. Inventory builds. Prices stagnant. (Note: Santa Clarita Valley, you are here now)

    6. Prices start to fall (note: they can be sticky!) even while inventory continues to build. Not going to give it away!

    7. Inventory rises and rises. Prices really start to drop. Many chase the market down. The term “underwater” takes on new meaning.

    8. Defaults, foreclosures, “feeding the alligator,” we are fighting for our home! We are victims! We need a bailout too!

    1. 2banana – You forgot step 1 which is when intelligent people realize that housing is undervalued. They put a floor on prices when housing becomes “cheap”. These are the same people selling when bidding wars on overpriced houses start and rents start to drop.

  2. Look$ like the Developer$ are bringin’ rain to the local$ nimby parade!

    Raintree Inve$tment Corporation bought the center in 2016 for nearly $21 million, according to property records. A plan to build housing was floated at the time, but things had been quiet on the idea until early this month when William Lyon Homes held open houses showing initial concepts for housing.

    The company is proposing option$ such as 174 $enior luxury condo$ or 135 townhome$, according to its website.

    “William Lyon Home$ is still meeting with the neighbors to determine what plan would fit best with the community,” the company said in a statement. “We’ll be conducting additional outreach before a proposal and an application is submitted to the city.”

    Residents expressed concern the housing would add too much traffic in an area that can already be gridlocked at the start and end of school days at nearby Santa Margarita Catholic High School.

    “It takes 10 minutes to go 100 yards already,” a nearby resident, Brandon Johnston, said.

    Residents also brought up concerns about parking impacts, evacuation in an emergency and a loss of revenue to the city from housing versus businesses.

    The developers say residential development would reduce traffic and make better use of the property.

    Housing proposed to replace Dove Canyon Plaza in Rancho Santa Margarita
    Jeong Park
    PUBLISHED: February 22, 2019 at 6:17 pm | UPDATED: February 22, 2019 at 6:24 pm
    Categories: Local News, News

    1. New$ from behind the “Orange Curtain$” … In “Thee.oh.$ee!”

      Hou$ing’s lou$y 2018: $ales drop 7.5% in Lake Fore$t, Mi$$ion Viejo, Rancho $anta Margarita, $an Juan Capistrano, Trabuco Canyon$

      Jonathan Lansner |PUBLISHED: February 21, 2019 | OC Register
      Categories:Business, Housing, Local News, News

      Homebuying in inland South County — including Lake Forest, Mission Viejo, Rancho Santa Margarita and San Juan Capistrano — fell 7.5 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 include higher mortgage rates; economic uncertainty; not to mention that homeowners seeking a new residences couldn’t unload their old home.

  3. Buyer “resistance,” “fatigue,” “pickiness”…..c’mon, petulant buyers, $$$ up and be the cash cows you were designed to be!

      1. I worked with Dan Abrams at Court TV he founded Mediaite

        Who is Dan Abrams?

        Dan Abrams is an attorney, author, Chief Legal Affairs Anchor for ABC News and co-owner of White Street Restaurant.

        Early Years
        Before joining NBC News, Dan worked as a reporter for Court TV

  4. until they see larger price reductions and cooling home price growth

    Manias don’t just cool and level out. They crash and no one who knows the market is crashing will sign up for a purchase 9 x gross income.

  5. What do the Zilldo stock HODLers see in the future real estate investing outlook that I am missing?

    Opinion: Zillow is betting big on flipping houses, and investors seem to like it
    By Therese Poletti
    Published: Feb 22, 2019 11:17 a.m. ET

    Zillow’s stock heads toward biggest day ever as company predicts billions in extra revenue from its Zillow Offers program while switching CEOs
    Bloomberg
    Zillow wants consumers to be able to buy and sell their homes through their phone.

    Zillow Group Inc. believes “Uberized” consumers want to instantly buy and sell homes on their phones, so it is making an even bigger bet on real-estate buying despite projections that carry a lot of risk.

    On Thursday, Zillow (ZG, +24.67%) said as part of its fourth-quarter results that it would be making more investments in its Zillow Offers service, which lets consumers easily sell their homes to the Seattle-based company. Zillow, which has seen its stock gradually lose nearly half its value since it launched the service in the second quarter of 2018, also announced a shuffling of jobs among its three co-founders, with CEO Spencer Rascoff stepping down and joining the board, replaced by co-founder Rich Barton.

    1. “buy and sell their homes through their phone”

      When you thought “push button, get mortgage” was stupid, now this.

      “You gotta roll with it” — Kaitlyn Vestal, millennial home buyer, Portland, OR

    2. “Zildo” that’s a good one😂

      “But so far, it is not achieving its 90-day sales goals. Zillow said that in total, it has purchased 686 homes since Zillow Offers launched, but only sold 177, with 141 of those sales coming in the fourth quarter. Zillow Offers is available in seven markets nationwide, with plans to be in 14 by year’s end.“

      Poor zildo… with such a novel idea for “push button” real estate, who would have guessed they would be subject to failure. I have heard it mentioned here before about specuvestors treating RE like the stock market and now they have absolutely solidified that reference. It’s going to crash hard, I think sooner than later…

      1. Maybe they should take it up a notch, and encourage flippers to make cryptocurrency purchases with their phones.

  6. Remember back when the Fed, Wall Street, and the entire economics profession denied the very possibility of bubbles? We’re making good progress, as these types no longer categorically deny the possibility of bubbles, although they do still routinely fail to notice any that might be presently occurring.

    Investopedia
    INSIGHTS  MARKETS & ECONOMY
    Bubble
    REVIEWED BY WILL KENTON
     Updated Apr 18, 2018

    What is a Bubble

    A bubble is an economic cycle characterized by the rapid escalation of asset prices followed by a contraction. It is created by a surge in asset prices unwarranted by the fundamentals of the asset and driven by exuberant market behavior. When no more investors are willing to buy at the elevated price, a massive sell-off occurs, causing the bubble to deflate.

    BREAKING DOWN Bubble

    Bubbles form in economies, securities, stock markets and business sectors because of a change in investor behavior. This can be a real change — as seen in the bubble economy of Japan in the 1980s when banks were partially deregulated, or a paradigm shift — which took place during the dot-com boom in the late 1990s and early 2000s. During the boom, people bought tech stocks at high prices, believing they could sell them at a higher price until confidence was lost and a large market correction, or crash, occurred. Bubbles in equities markets and economies cause resources to be transferred to areas of rapid growth. At the end of a bubble, resources are moved again, causing prices to deflate.

    1. as seen in the bubble economy of Japan

      And more spectacularly in the bubble economy of China, when the biggest expansion of credit in history occurred during a few short years.

  7. Look at the faces on these poor kids who had obviously just been through a major Green New Deal propaganda brain washing session try to figure out what Dianne Feinstein means by “a million vote plurality”

    Kids confront Feinstein over Green New Deal

    BY JOHN BOWDEN – 02/22/19 07:49 PM EST 2,014

    A group of young activists supporting legislation for a “Green New Deal” confronted Sen. Dianne Feinstein (D-Calif.) on Friday in a video released on social media.

    https://thehill.com/homenews/senate/431238-kids-confront-feinstein-over-green-new-deal

  8. What does everybody think of the idea that Kamala Harris was in on the Jussie Smollett hoax? The hoax came roughly a week after she announced her run, she immediately Tweeted that it was “an attempted modern day lynching,” and she is a personal friend of Jussie.

    There is video of she and Jussie shoulder to shoulder during the “Time’s Up” march, she is buddy-buddy with Sharpton, etc., and after Jussie was arrested she has been eerily silent. The attempt to pin the attack on Trump supporters and discredit them, and him, fits right into her narrative. The same can be said for Cory Booker, who Tweeted the “attempted modern-day lynching” verbatim.

    While it does fall under the conspiracy theory umbrella, it would not surprise me if she was in on it. She is a bad actor, so to speak.

          1. Different, but similar in a way:

            “Just because you’re paranoid doesn’t mean they aren’t after you.” – Joseph Heller, Catch 22

    1. Jim “the Snark” Goad at Taki’s Magazine puts it this way:

      “… everyone knows that feral white rednecks roam “ritzy” Chicago neighborhoods that are predominately black and gay in the middle of a polar-vortex night with nooses and bleach in hand and are such huge fans of TV shows about gay black singers that they were immediately able to recognize Smollett, a star of Fox TV’s Empire … ”

      They knew it was a crock but wished it to be true. Good enough.

  9. “(Reuters) – Warren Buffett is hunting for ‘an elephant-sized acquisition,’ but he is not optimistic about getting it done.

    “The billionaire investor wrote in an annual letter to shareholders on Saturday that the prospects of landing a mega-deal for his Berkshire Hathaway Inc conglomerate are ‘not good,’ because ‘prices are sky-high for businesses possessing decent long-term prospects.’

    “It is a problem for the Berkshire chairman and chief executive, whose company is sitting on $112 billion in cash and other low-returning assets that it has been struggling to invest for years.

    “‘In the years ahead, we hope to move much of our excess liquidity into businesses that Berkshire will permanently own. The immediate prospects for that, however, are not good: Prices are sky-high for businesses possessing decent long-term prospects,’ Buffett wrote. ‘That disappointing reality means that 2019 will likely see us again expanding our holdings of marketable equities. We continue, nevertheless, to hope for an elephant-sized acquisition.'”

    FWIW, etc.

    Warren Buffett says prospects poor for ‘elephant-sized acquisition’
    https://finance.yahoo.com/news/warren-buffett-says-prospects-poor-111813471.html

  10. A Blast from the Past: The Grilled Cheese Truck Company (now called American Patriot Brands, Inc)

    First listed at $6.00 or so, now priced at 60 cents or so. Never turned a profit, latest earnings report is minus 32 cents per share, which makes its profit margin equal to minus 247.44 percent and it’s return on assets a minus 721.83 percent. Oh, and it’s quarterly revenue growth (yoy) is minus 36.70 percent.

    And the thing is … it’s still there, it’s still trading. The price may be down to (a grossly overpriced) sixty cents, but, hey, it is still there.

    Amazing.

    GRLD 0.6000 0.0000 0.00% : GRILLED CHEESE TRUCK INC – Yahoo Finance
    https://finance.yahoo.com/quote/GRLD?p=GRLD

      1. Bahahahaha … check this out …

        “American Patriot Brands, Inc., formerly The Grilled Cheese Truck, Inc., incorporated on December 31, 2009, is a vertically integrated cannabis agriculture company. The Company is primarily focused on cultivation and distribution of medicinal and recreational cannabis.”

        Aha! 😁

        “The Company in May 2016, elected to discontinue its food truck operations and enter the United States cannabis industry. In September 2016, the Company spun-out its food operations.”

        American Patriot Brands Inc (GRLD.PK) Company Profile | Reuters.com
        https://www.reuters.com/finance/stocks/companyProfile/GRLD.PK

      2. Why throw your money away on The Grilled Cheese Truck Company stock shares when you could be HODling Bitcoin instead?

    1. China is leading the next charge to keep the global Ponzi economy alive.

      “Beijing confirmed that it had indeed decided to massively reflate its (and the global) economy, in what may soon be dubbed the Shanghai Accord 2.0, when the PBOC announced it had flooded the economy with a gargantuan 4.64 trillion yuan in various new forms of debt which comprise China’s Total Social Financing in January, including notably, the “shadow” credit which Beijing had been aggressively cracking down on: an aggressive credit expansion which many took as a tacit confirmation that China was losing the fight with deleveraging.”

      Close to $1 Trillion in just the month of January! Looks like the biggest shot of heroin yet.

      https://www.zerohedge.com/news/2019-02-23/chinas-premier-slams-central-bank-gargantuan-lending-spree

      1. I hope I survive at least until the point when it is obvious to all how economically destructive this era’s tsunami tides of central bank fiat money have been.

          1. We’re like frogs in a pot of water being brought to a boil, acclimating to higher and higher temperatures over time.

          2. a pot of water

            I might agree about the steady trickle of outright theft, but the theft by credit expansion part is stable like an iron pot, it’s fragile like a mountain of dominoes. That part will go suddenly and alarmingly.

    2. Agreed what struck me was no one helped Main street only wall street …….Ive said it before why did they bail out AIG and not CIT who provided loans to small business letters of credit to shipping companies advances on AR to smooth cash flow. Just Mind boggling and we will do the same next time.

      1. Why does it surprise you that they didn’t bail out Main Street? Rich, powerful people got bailed out and went on to make trillions more in the recovery and the slaves got to work and toil another day (or ten years). Do you honestly think there is no corruption in the system and they just made an honest mistake by only helping out rich and powerful people??? lol

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