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The Shift Is Here And It Will Get Worse Before It Gets Better

A report from the Wall Street Journal. “Home prices in 2018 grew at their slowest pace in four years, while construction slumped, signaling that the housing market started this year on shaky footing. Economists cautioned that a rebound to the frenzied activity of early 2017 looks unlikely. ‘This year probably isn’t going to be gangbusters. It’s probably not going to collapse, but it’s not going to be a record year on many fronts,’ said Ralph McLaughlin, deputy chief economist at CoreLogic Inc.”

From Realtor.com. “Realtor.com®‘s February housing report released today, shows 2019 may have one of the coolest spring homebuying seasons in recent years as growing inventories drive price cuts. This marks a significant reversal from a year ago when the housing market struggled with 41 straight months of inventory declines.”

“Much of this available inventory can be traced to the nation’s 50 largest metros, where inventory increased by 11 percent year-over-year. The largest jumps have continued on the West Coast, led by San Jose, Calif., with a massive 125 percent increase. This was followed by an 85 percent increase in Seattle, 53 percent increase in San Francisco, 39 percent increase in San Diego, and 36 percent increase in Portland, Ore.”

“A recent rise in the share of price cuts also hints towards a potential shift into a cooler market for spring. In February, 39 of the 50 largest markets saw an increase in share of price cuts. The greatest yearly increase was felt in Las Vegas, which jumped 19 percent. It was followed by San Jose, Calif., with a nine percent increase, Phoenix with a seven percent increase, San Francisco with a five percent increase, and Dallas with a four percent increase.”

The Naples Daily News in Florida. ” Three experts revealed the latest real estate trends in Estero. This much is clear: The housing market is shifting — and it started shifting months ago to more of a buyers’ market. Randy Thibaut, owner of a leading real estate brokerage and development firm based in Fort Myers, expects buyers to be in the driver’s seat in 2019.”

“‘The Southwest Florida market is not in a bubble, but it’s time to anticipate change,’ Thibaut said. ‘Change is afoot and those who are prepared to adapt are best positioned to succeed.'”

“Denny Grimes has been in the residential market for 35 years in Southwest Florida. In the last four months, sales were the worst seen in 10 years, Grimes said, because of a ‘feeling in the bones’ among buyers, who have become more price resistant. ‘The shift is here and it will get worse before it gets better,’ he said.”

“He described the shift in the market as ‘a natural cycle of real estate,’ saying it shouldn’t bring panic. Buyers’ expectations have changed, he noted, and sellers have to realize they can’t take the value of their home and ‘multiply it by their zip code’ to come up with a selling price anymore.”

“He shared a snapshot of the local multiple listing service, or MLS, that showed 1,948 prices adjustments made over seven days. The demand for high-rise condos, in particular, has slowed with so many projects built over the past year.” 

This Post Has 36 Comments
  1. ‘This year probably isn’t going to be gangbusters. It’s probably not going to collapse’

    That’s very reassuring Ralph.

    ‘The largest jumps have continued on the West Coast, led by San Jose, Calif., with a massive 125 percent increase. This was followed by an 85 percent increase in Seattle, 53 percent increase in San Francisco, 39 percent increase in San Diego, and 36 percent increase in Portland, Ore.’

    ‘A recent rise in the share of price cuts also hints towards a potential shift into a cooler market for spring. In February, 39 of the 50 largest markets saw an increase in share of price cuts’

    Wa happened to my shortage?

    1. “It’s probably not going to collapse, …”

      Subtle implication: We can’t rule out the possibility that it will collapse, the way that Australia and Canada already are.

    2. There is no more reliable an indicator of an impending collapse than the sudden proliferation of experts paraded out by the MSM to lull the unwitting public into a false sense of security. After all, if the public rushes to the exits before the bankers, hedge funds, and portfolio managers, who is left to fleece?

  2. ‘He shared a snapshot of the local multiple listing service, or MLS, that showed 1,948 prices adjustments made over seven days’

    Jeebus, the UHS must have numb finger tips with all that sawin’ and a slashin.’

    1. Cut from article:

      “….Income is rising faster than home prices in many areas…”

      Huh?

      When it comes to twisted logic, Lawrence Yun is right on top of it.

      Reality:

      Incomes are flat or (in real terms) declining due to inflation. (Anybody go out to dinner lately?)

      Home prices are declining in my area (Irvine, Ca).

      To be fair, perhaps Lawrence was referring to service sector jobs whose wages *are* increasing primarily due to minimum wage bumps.

      But when is the last time any service worker had enough income to purchase *any* type of home?

      There is also the 1%, but do they care?

      1. It would be nice to get some report on Irvine, my old hood. I guess the Chinese money launders had stop last year?

        1. “…the Chinese money launders had stop last year?…”

          For years, I have been very suspicious about using Irvine R/E to launder money. Of course, hard data is about impossible to come by, so you have to rely on gut instinct, but I have always wondered why so many $>>2mm homes sit empty (Turtle Rock and Shady Canyon) are some areas I keep an eye on.

          IMO, I think the money laundering / organized crime folks have shifted to crypto (ie. bitcoin) as being the laundry method of choice. A theory I have is that the only reason that bitcoin holds its price is because the laundry / crime crowd now depend on it. But that’s a different topic for a different day.

          1. 4 bed 2 1/2 bath 1980 tract home across the street from my parents house in the Northwood part of Irvine sold for $1m to Chinese buyers. My parents have only seen them once. It sits empty most of the time, but my mother tells me they occasionally have other family/friends staying there for a week or two at a time.

            My mother also relayed a story about her church friend who was on business in China. He was asked where he lived and when he responded he lived in Irvine, the quote was “We didn’t know there were still white people there.”

  3. “Trees don’t grow to the sky.” Price in a bubble reaches crazy, then buyers take off their rose colored glasses and economic reality reasserts itself. Not organic recovery. Just more financial heroin. Markets dependent on it. Just look at Powell caving on rates and QT. Extend and pretend, but can’t prevent the cycle. The housing market will take a few years to bottom, but stocks will be faster. Looking for an end to central banking during the reset. It’s just socialism for the rich. Negative impact on Main St. Keynesian economics failed. MMT is BS.

    1. “Looking for an end to central banking during the reset.”

      I totally disagree. If anything I look for the powers of central bankers being strengthened as once again they will be called on to “save” us.

  4. “Buyers’ expectations have changed, he noted, and sellers have to realize they can’t take the value of their home and ‘multiply it by their zip code’ to come up with a selling price anymore.”

    This may still work if you was to insert a decimal point just ahead of the zip code.

        1. LOL

          My zip is 92604, so .92604 is about right.

          I will test this “new rule” the next time I run into a pushy R/E agent.

    1. sellers have to realize they can’t take the value of their home and ‘multiply it by their zip code’ to come up with a selling price anymore.

      I was wondering if he was smart enough to realize the full implications of that statment…considering the distribution of zip code number across the country. Implying western real estate was worth much much more than eastern real estate. Seemed like a very California-centric thing to say, whether intentionally or not.

  5. They need Alexandria Ocasio-Cortez and a high minimum wage!

    Alexandria Ocasio-Cortez fires back at Ivanka Trump: ‘A living wage isn’t a gift, it’s a right’

    Kate Sullivan byline
    By Kate Sullivan, CNN

    Wed February 27, 2019

    https://www.cnn.com/2019/02/26/politics/aoc-ivanka-trump-minimum-wage/index.html

    Oh wait

    Ocasio-Cortez Mourns Restaurant Driven Out Of Business By Minimum Wage Law She Backs

    8/21/2018

    Economic Illiteracy: This week, Alexandria Ocasio-Cortez “swung by” to say goodbye to a restaurant where she used to work. What she didn’t say is that it is closing because the owners can’t afford New York City’s soon-to-be $15 minimum wage — the very job-killing policy Ocasio-Cortez and her fellow Democrats want to impose nationwide.

    https://www.investors.com/politics/editorials/ocasio-cortez-minimum-wage-jobs/

    1. Probably not closing due to $15 minimum wage. More likely closing because of poor business model and quality of food and high rents.

      1. I kinda of agree but with memories still fresh in many people minds, I think it will bottom (or normalize) in 2022 or 2023. Things are already moving faster than last bubble bust.

      2. It won’t take six years, since we are already over a decade out from the first bubble peak, and artificially reflated prices are a long way feom finding a bottom. It’ll be closer to twenty years before it’s done bottoming out.

    1. That’s what I suggested in a post yesterday…before reading Charles Hughes Smith’s similar advice.

      Don’t worry, Millennials, those of you who patiently wait out the end of this mania will eventually have an opportunity to buy. No bubble in history has lasted forever, and all of them have ended in a spectacular price crash as people collectively came to their senses.

    1. “Recession is when your neighbor loses his job. Depression is when you lose yours.” —Ronald “Mommy?!” Reagan

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