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It Was Worse Than Anybody Was Looking For

A report from Bloomberg. “Toll Brothers Inc.’s new home orders dropped 24 percent in the fiscal first quarter, the steepest annual decline for the biggest U.S. luxury homebuilder since the depths of the housing crash in 2010. Orders fell 62 percent in California, where Toll has a heavy focus. ‘It was worse than anybody was looking for,’ said Bloomberg Intelligence analyst Drew Reading. ‘It has become very clear that the higher end of the market has been weaker than the lower end.'”

From The Blast. “Those looking to scoop up an iconic piece of real estate in the mountains of Santa Barbara may be in for a treat because Michael Jackson‘s infamous former residence is back on the market after getting a price slash. The King of Pop’s former ranch in Los Olivos is back on the market for $31 million — a staggering $36 million price in reduction.”

“The 6-bed, 7-bath ranch was originally listed for $100 million in 2015, but was dropped to $67 million two years later.”

From Mansion Global. “For Karina Nasir, leaving California for this booming Las Vegas suburb was the chance to escape commutes up to three hours. For Bill Clune, it is saving nearly $5,000 a year on his water bill. For John Falkenthal, the opportunity to have some money left over every month after paying his mortgage.”

“‘I never even considered leaving Southern California, but it took me every dime I had to buy a home there,’ said the 54-year-old Mr. Falkenthal, a software engineer who moved to Henderson from San Diego last October.”

“The outflow has accelerated lately. Net migration to other parts of the U.S. from the nation’s largest state was more than 100,000 in 2015, 2016 and 2017, according to the Census Bureau. Total emigration from California to other states between 2006 and 2017 was 1.24 million, according to the Census Bureau, third highest in the nation behind only New York and Illinois.”

“‘They’re moving out of the state for less expensive housing,” said Mohamed Hassan, a real-estate broker in Woodland Hills, Calif., who helped three clients sell their homes last year to relocate elsewhere.”

“At the 1,300-acre MacDonald Highlands in the dusty bluffs overlooking Las Vegas, Californians accounted for about 70% of purchases in 2018, compared with 30% 20 years ago, said Rich MacDonald, the developer. He said he began increasing the share of his marketing targeting Californians over the past three years after seeing the run-up in housing costs there.”

“‘They’re tired of getting their pockets picked,’ Mr. MacDonald said.”

“Mr. Falkenthal initially looked for a house in San Diego after selling his former home following a divorce three years ago. But his half of the proceeds, about $250,000, would have paid for only a small townhouse or condo in the coastal area where he lived, he said. Instead, he bought a three-bedroom, two-story house in Henderson in October for $416,000.”

“Average housing prices in the Las Vegas metro area rose to $278,000 in 2019 from $120,000 in 2012, according to Zillow. The increase has pressured some locals looking to buy, but 47% of Vegas-area residents can still afford it, said Jeremy Aguero, principal of Nevada consulting firm Applied Analysis. That is down from 88% after the last recession, he said.”

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  1. ‘he bought a three-bedroom, two-story house in Henderson in October for $416,000’

    They saw this idiot coming from a thousand miles away.

    1. Instead, he bought a three-bedroom, two-story house in Henderson in October for $416,000.”

      “Average housing prices in the Las Vegas metro area rose to $278,000 in 2019 from $120,000 in 2012, according to Zillow.

      He went from one bubble to another.

  2. ‘Toll Brothers Inc.’s new home orders dropped 24 percent in the fiscal first quarter, the steepest annual decline for the biggest U.S. luxury homebuilder since the depths of the housing crash in 2010. Orders fell 62 percent in California, where Toll has a heavy focus’

    Expensive shacks are discretionary, thus speculative. Tolls crashing sales is more consistent with a bubble popping than just a slowdown.

      1. 36.38-0.89 (-2.39%)

        52 Week Range 28.68 – 45.76

        https://finance.yahoo.com/quote/TOL/

        ‘Toll Brothers is especially vulnerable to the housing slowdown, which has hit the higher end of the market where inventory is greatest. While mortgage rates have come back down, they jumped last year, exposing an affordability problem that built up over years as prices outpaced incomes. It is especially bad in California, where sales are falling, making it more difficult for Toll buyers to sell existing homes to buy new ones.’

        ‘Alex Barron, analyst with the Housing Research Center in El Paso, Texas, said that California orders likely took a hit, in part, because Chinese buyers are getting scarce as China tightens controls on capital outflows. “This is not just an issue for Toll but for anybody selling homes to the Chinese,” Barron said.’

        https://finance.yahoo.com/news/toll-brothers-orders-plunge-california-144209405.html

        1. Australia, Canada, Dubai, California all blaming lack of Chinese buyers for the slowdown.

          Who’s next? How will the Altman brothers afford their $200k cars if they can’t unload the properties to the Chinese?

          1. so the next question. Was all this money laundering from Chinese municipal govt and provice fraud, was it fraud on contract between companies? or something else

            Does fraud just stop in its tracks

          2. Chinese Investment in U.S. Senior Housing Halts After Years of Activity

            ‘There were no Chinese acquisitions of U.S. senior housing and care assets last year, according to real estate data and analytics firm Real Capital Analytics (RCA). That is a startling contrast to past years, when China accounted for over $1.4 billion in U.S. senior housing and care deal volume from 2015 to 2017.’

            ‘The pressure from Beijing on Chinese sovereign wealth funds may be somewhat warranted. Two of the highest-profile buyers, Anbang Insurance and HNA Group, have become sellers in the past year, amid reports the companies are strapped for cash. Chinese dispositions of U.S. real estate outpaced acquisitions in Q2 2018, reversing a 10-year trend, and Chinese companies sold $1.05 billion in U.S. real estate the following quarter.’

            https://seniorhousingnews.com/2019/02/27/chinese-investment-in-u-s-senior-housing-halts-after-years-of-activity/

    2. “Orders fell 62 percent in California, where Toll has a heavy focus.”

      If this trend continues, Toll workers may soon have to move into their parents’ basements.

      1. “It was worse than anybody was looking for,” Reading said in a phone interview. “It has become very clear that the higher end of the market has been weaker than the lower end. Also in December there was stock market volatility and a lot of Toll’s buyers are purchasing their home with their investments, rather than monthly paychecks.”

        I see…gambling with those stocks RSUs

      2. As some here have heard me recently discuss drives through new home developments where I work extensively, a very noticeable change is occurring in new home construction.

        Plain as day here in SW Florida. Would not be surprised to see similar data coming out for our region. Just not seeing new permit boxes or ground breakings in these developments. Several houses finishing up

        No taco trucks driving around. Now that is a big business indicator!

      1. Just reported in the news that last month (January) was the lowest hotel occupancy in Hawaii in 4 years. Junkies running dry.

    5. Here’s a way to identify speculative demand: Ask a buyer: if the price of the house was not going to rise in the next ten years, would they still have purchased it.

      Now, this also captures FOMO demand. But even FOMO demand is driven by assumptions of continuing price increases, the same core assumption which drives speculative demand.

      1. It’s a Keynsian beauty contest though. It’s not just whether or not buyer’s think their house is going to go up, it is whether or not buyers think that other buyers think that housing will go up. Layers of speculation.

  3. “The King of Pop’s former ranch in Los Olivos is back on the market for $31 million — a staggering $36 million price in reduction.”

    If they refuse to price to market value, they may need to rename Neverland Ranch to Neversell.

    1. FTA: After plunging further in December, January Pending Home Sales rebounded more than expected (+4.6% MoM vs +1.0% MoM exp) but remains lower YoY for the 13th straight month.

  6. Back in about 2006 there was a bump in sales when the first round of price reductions took place in our area. This was followed by a protracted slide into oblivion. Would not be surprised to see this again. There has been a recent bump up in resales in our area consistent with the national data. Does seem to conflict with the Zerohedge article however.

    In a couple of months the blog will feature an article entitled: “What Were We Thinking” and feature those who are buying at present. The shift is happening.

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