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Is This Happening All Over The Country?

A report from the Sacramento Bee in California. “After months — and even years — of rising home sale prices, the Sacramento region could be seeing the first signs of a decline. The median home sales price in the Sacramento region fell by 5 percent last month compared to December, one of the steepest declines seen in large metro areas across the country, according to Redfin.”

“The question lurking in the back of the minds of many realtors: is this just a seasonal dip or a long-term trend? ‘The thing to keep in mind is we have seasonal dips in our market — things slow down at the end of the year through the beginning of the year,’ said Kellie Swayne, a real estate agent with Dunnigan Realtors in Sacramento. ‘So whether or not the dips we’re seeing are significant ones or if they’re seasonal ones remains to be seen.'”

“The market has shown signs lately that the upsurge is wavering. The decline comes as the volume of home sales in the region has also softened, falling by more than 19 percent in January compared to December. In perhaps another sign of the market cooling, home sales were down nearly 22 percent compared with the same period the year before.”

From The Real Deal on Florida. “Luxury condo developers in South Florida are now dangling cash rebates and zero maintenance fees at buyers — and the potential for huge commissions at brokers — in an effort to unload remaining units amid the ongoing sales slowdown.”

“According to Douglas Elliman’s latest residential market report, the number of luxury condos sold in Miami Beach and the barrier islands during the fourth quarter fell 15 percent year over year. Condo sales in January dipped more than 11 percent in Miami-Dade and Broward counties compared to the same period the year before, according to the Miami Association of Realtors. In Palm Beach County, the dropoff was more than 18 percent.”

“Meanwhile, new condo projects continue to enter the market, adding to the competition. ‘Condo developers in South Florida want to sell their inventory this year, so they are offering different incentives all over the place,’ said Craig Studnicky, principal of brokerage RelatedISG.”

“In Miami, Swire Properties is saying it will give buyers a 10 percent cash rebate at its recently-built Reach and Rise, twin 43-story condo buildings at Brickell City Centre. About 19 percent of the combined units remain unsold. That means for a $1 million unit, Swire will write a check to the buyer for $100,000, plus pay two years of condo fees, which amounts to about $15,000 per year, according to Studnicky.”

“And at the 180-unit Echo Brickell in Miami, Property Markets Group is now giving a 10 percent discount to buyers along with a 7 percent commission to brokers.”

From The News Chief. “After years of sellers calling the shots, the negotiating power pendulum is slowly swinging back toward buyers. DEAR DAVE: Home prices and sales in our area were really strong until a few months ago, but then suddenly started to slow. What gives? Is this happening all over the country, or is it something that’s just happening in our community?”

“ANSWER: There are definitely signs of a modest real estate slowdown in many parts of the U.S. — as well as some signals that negotiating power is gradually shifting from sellers to buyers. There are some emerging trends in the market that suggest the recent softening may be more than just a temporary slowdown. The National Association of Realtors reported in December that sales the previous month, the latest figures available, were down 7 percent from a year earlier.”

“Fewer home shoppers have slowly been pushing the number of houses for sale higher and properties are taking a bit longer to sell, both of which make sellers more willing to bargain. Recent stock market volatility and rising mortgage rates are shrinking the pool of potential buyers even more, adding to the power of those still looking for a house or condo.”

“There’s no reason to panic. As I wrote a few weeks ago, most economists are expecting home sales to dip only slightly this year and the average nationwide price to rise a modest 2 percent to 3 percent. If those forecasts prove correct, it will lay the groundwork for a solid housing market for at least the next two years and assure that buyers will regain a more equitable share of power in the bargaining process.”

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This Post Has 62 Comments

  1. ‘So whether or not the dips we’re seeing are significant ones or if they’re seasonal ones remains to be seen’

    The ebola got to Sacramento a long time ago Kellie. Run for the hills.

    1. “In perhaps another sign of the market cooling, home sales were down nearly 22 percent compared with the same period the year before.”

      What happens year-on-year does not meet the definition of seasonal. In fact, the rationale behind year-on-year comparisons is to control for seasonality. It sounds like a crash is underway.

      And don’t head for the hills around Sacramento unless you love living in the wildfire hazard zone.

      1. “…the number of luxury condos sold in Miami Beach and the barrier islands during the fourth quarter fell 15 percent year over year. Condo sales in January dipped more than 11 percent in Miami-Dade and Broward counties compared to the same period the year before,…”

        There are more nonseasonal declines on the opposite side of the US. It’s as if God decided to start letting air out of local market bubbles everywhere at exactly the same time!

      2. “The National Association of Realtors reported in December that sales the previous month, the latest figures available, were down 7 percent from a year earlier.”

        Those nonseasonal year-on-year declines are so widespread, it’s almost like a global eebola outbreak hit the buyers.

    3. Ha! I live in Sacramento, my wife and I sold our house. Now ready for the bust. Probably at least two years before we buy.

  4. Whatever happened to Jingle Male? This story could concern his investments, which I assume he has cashed out of by now.

  6. “There’s no reason to panic. As I wrote a few weeks ago, most economists are expecting home sales to dip only slightly this year and the average nationwide price to rise a modest 2 percent to 3 percent. If those forecasts prove correct, it will lay the groundwork for a solid housing market for at least the next two years and assure that buyers will regain a more equitable share of power in the bargaining process.”

    Don’t panic Ben!!! Don’t panic!!!!

  7. I notice Ben keeps posting one recent story after another about falling prices and/or sales in one major urban housing market after another from every corner of the developed world. I’ve been recently tutoring one of my sons in his first college economics course, which reminds me that through the lens of economic theory, falling home sales and falling prices are most likely due to one and the same driver, which is a sudden collapse in home purchase demand.

    The supply of homes over the short run is relatively fixed, as used homes typically enter the market based on major life changes such as job change, changes in post-retirement circumstances, or death, while new homes are built slowly. If demand suddenly dries up while supply remains constant, economists would describe this as a leftward shift in the demand curve while supply remains fixed, with a predicted outcome of some combination of fewer sales or lower prices. If fewer sales is the main effect, but sellers continue listing their places at the same rates as before, an inventory buildup results which can only be absorbed by falling prices or a resurgence in demand to a higher level than before the inventory buildup began.

    2. Another quirk of housing is that the option is generally a binary one: buy vs. rent. Housing is also a necessary expenditure, so it is relatively inelastic, until it’s not. When prices of iPhones and Samsung phones both go up, buyers can shrug it off and not buy, or buy some other competitor. But with housing, you still have to live somewhere. Thus the “none of the above” option that doesn’t include buy vs. rent are the homeless, people who double-up and the RV crowd. It’s a way of trying to act rationally in a market that is not correcting fast enough on the price side.

      1. There are a few more options to consider:
        1) Buy or rent in the ghetto (been there / done that);
        2) Move to a less expensive (e.g. lower tax or housing cost) state;
        3) Move to Oil City;
        4) Move to the outer rungs of your metro area’s commuter sphere;
        5) Avoid areas with good schools, low crime, ocean views, etc.;
        6) Live in a smaller square foot or fewer bedroom home than you can afford, and invest the difference;
        7) Only buy a place when most people you know are unemployed or fearful of job loss, otherwise rent;
        8) Live with your parents.

        There’s really an infinite variety of ways to avoid becoming a housing market victim if you are creative and adaptable.

        1. Buying or renting in the ghetto simply pushes up prices in the ghetto, which is an undesirable place to live, more than they should be. All of those suggestions are reasonable, but they are still buy vs. rent in a way and they will indirectly push prices up in undesirable places more than they perhaps ought to be. A housing bubble infects oil city, the ghetto, the bad school districts, and even less expensive cities/states (e.g. equity locusts). A true opt-out is neither buy nor rent, though that is not practical for very many.

        2. The only way I’m buying a house right now is if I can crush a recently widowed baby boomer or an estate at the negotiation table. shacks could be at least 25% overvalued right now.

          1. Consider the real possibility that shacks are 60 to 75% overvalued at least. Most of us wouldn’t have watched this bubble for a decade and a half over a 25% bubble. Prices have to roll back 50% just to wipe out the ridiculous past few years of mania.

          2. “The only way I’m buying a house right now is if I can crush a recently widowed baby boomer or an estate at the negotiation table. shacks could be at least 25% overvalued right now.”

            Imagine what happens when the babyboomers start getting widowed in greater numbers over the next 15 years, and decide to move in with kiddos or be relegated to the assisted living facilities…

          3. Imagine what happens when the babyboomers start getting widowed

            Nobody with money will want what’s left of their houses except in the best location as teardowns. But it should virtually end homelessness if true price discovery is allowed and taxes are allowed to reflect the true value. Unless a California underpass really is nicer than a poorly maintained shack in BFE.

          7. “The only way I’m buying a house right now is if I can crush a recently widowed baby boomer…”

            The millennials will enjoy feeding you into the proverbial wood chipper feet first. 🙂

  8. Dumb question of the day: Does this current wave of housing bubble collapse signify the beginning of the end for the California real estate brain-dead zombie investor cult?

    1. brain-dead zombie investor cult

      You may have answered your own question. And, it’s not just in CA real estate.

        2. It is not just SoCal, it is also in pockets of flyover where people believe their area is the next big thing. Detroit has believers, TN has believers, college towns has believers, other high-cost regions like NoVA has believers, and they have been seeing the run-ups in recent years so what is to disabuse them. It’s different this time, the press keeps telling us! Especially in flyover country because things are too expensive on the coasts and presumably always will be….

          1. Hence, my original statement that it’s not just in CA real estate. It’s everywhere including the stock market. Brain-dead zombie investors are throwing money at unprofitable companies.

  10. “the upsurge is wavering”

    LOLZ. Who writes this horseshit? Oh right, real journalists do.

    “There’s no reason to panic”

    “This is far and away the strongest global economy I’ve seen in my business lifetime” — U.S. Treasury Secretary Hank Paulson, 2007

        1. US Top 40 Singles for the Week Ending 13th August, 1966

          1 3 SUMMER IN THE CITY –•– The Lovin’ Spoonful (Kama Sutra)-5 (1 week at #1) (1)
          2 2 LIL’ RED RIDING HOOD –•– Sam the Sham and the Pharaohs (MGM)-10 (2)
          3 5 THEY’RE COMING TO TAKE ME AWAY, HA-HAAA! –•– Napoleon XIV (Warner Brothers)-4 (3)
          4 1 WILD THING –•– The Troggs (Atco/Fontana)-8 (1)
          5 4 THE PIED PIPER –•– Crispian St. Peters (Jamie)-10 (4)
          6 6 I SAW HER AGAIN –•– The Mamas and the Papas (Dunhill)-7 (5)

          Peaked at #3 behind…

          https://www.youtube.com/watch?v=cdVVLbe1rfY

    2. Big Hank started covering up a recession beginning in December 2007, but by Fall 2008 he was on his knees begging Pelosi to bail out his friends on Wall Street.

  11. “And at the 180-unit Echo Brickell in Miami, Property Markets Group is now giving a 10 percent discount to buyers along with a 7 percent commission to brokers.”

    Tempting, but I think I’ll just wait for the bankruptcy auction.

  12. “There’s no reason to panic. As I wrote a few weeks ago, most economists are expecting home sales to dip only slightly this year and the average nationwide price to rise a modest 2 percent to 3 percent.

    Um, yeah…if you go back to 2006, as Housing Bubble 1.0 was bursting, the same “economists” said the same thing. So if you’re an FB, start panicking.

    1. Yep, the YOY quoting is the last tool left to minimize the hard truth. This is because, despite about 4 to 5 months of dropping sales and median prices, they about where the market was a year ago in many areas.
      However when you get about 1 years past the peak, it turns on you and creates panic. Thence it will ceased to be used.

      Some are past that point as evident from data in California and perhaps Miami. Soon to follow in many other places. Can’t wait to see public reaction once national YOY shows down 15 to 20 points which is realistic for 1.5 to 2 points monthly and compounded for 12 months.

  13. Realtors are getting a little clingy and panicky in West LA. This weekend, I saw 3 open houses walking distance from my rental. It must truly be at least 9 years since that happened around here. Interestingly, all three were different and crazy expensive in their own way. One was large super luxury new build, the other had been bought in 2007 (last bubble peak), the other was bought in bidding war in 2016 and had nicely redone kitchen and bathrooms. All three are ‘forced’ to ask ridiculous prices, but perhaps those who bought in 2007 have more leeway to take a price cut. That is all it takes, but who knows. It will be easy to follow these listings as they are so close to us.

    2. I had realtors actually admitting that this past summer was tippy-top in my area in MI. That generally takes a lot. But there are still buyers from elsewhere, internationals money parking, and desperate young families looking for a decent school district and a yard. Some sales involve all three around here. This winter and fall the realtors were all “well, we’ll see what the spring brings, but does it feel like we’ve hit a top? sure does…”. I’ve never heard that from the local bunch, and I was getting it from older ones and newbies alike. Still no word from the guy I’d been working with lol. And I liked him because he seemed so honest… I suppose I have to assume he’s left the state or gotten another job…
      I’d gone by some new construction in the fall/early winter and am now getting emails advertising new spring incentives of 30K in upgrades etc etc..

  15. Was in a couple more new developments today and seeing yet more houses reaching completion but no new ground breaks or permit boxes. They can’t keep hiding this data. Most that are under construction are nearing completion. Soon it will look completely bizarre with none under construction. Just finished houses and many, many vacant lots.

    Perhaps getting near time to short the SFR home builders.

  17. Broward and Palm Beach counties might just get bailed out by the changes in SALT deductions. Will be interesting to see how this plays out.

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