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Most Price Reductions Are Because The Investors And Flippers Are Trying To Resell

A report from the Arizona Republic. “It’s still a sellers market in metro Phoenix, but buyers are gaining ground. At the same time, the number of homes for sale is up. ‘Buyers now might be competing with three other offers compared to 15 last year,” said Tina Tamboer, senior housing analyst with the Cromford Report.”

“The number of new home listings in the Phoenix area jumped 78 percent from December, according to ARMLS. Valley home sales fell 16 percent in January from December. ‘January’s numbers are in, and we are off to a roaring mediocre start,’ said Arizona housing analyst Tom Ruff with The Information Market. ‘Not good, not bad, just slightly above average.'”

“Many first-time buyers have had to compete with investors and flippers going after homes priced around the Valley’s median. But recently, homes for sale priced below $250,000 have seen the most price reductions, said Tamboer. That’s partly because many of the investors and flippers are now trying to resell homes they purchased in that price range.”

The Naples Daily News in Florida. “Following a national trend, house flipping has slowed in Southwest Florida. By double digits. Also, the upward pressure on home prices has subsided in the region, making it more challenging for flippers to avoid becoming floppers.”

“‘When you take appreciation out of the equation, that means you have to buy right, not sell right. The risk is much greater’ said Denny Grimes, with Denny Grimes & Co., in Fort Myers.”

From Globe St on California. “Home sales in Los Angeles slowed down at the end of the year, causing rippling concern throughout the market that it could be the precursor of a recession. However, Brett Miller, a real estate agent at Nourmand & Associates, says that concerns are greatly exaggerated.”

“‘The shortage of housing and new construction units means prices still prevail in California for 2019,’ he explains.”

“But, if demand is so strong, why are housing sales slowing in the market? Well, upward pricing has been responsible for the stalled sales activity, along with rising interest rates. ‘As people continued to flock to Los Angeles, median prices rose, and with no end in sight to the boom, you could sell your home above its real value. Over time, this market mindset has conditioned many sellers to think their overpriced home will always sell for 10%-15% more than the listing price with little improvements justifying that price,’ Miller explains.”

“In addition, buyer economic sentiment is shifting, and no one wants to buy a home at the top of the market. ‘There are cautious buyers who have read about the housing bubble and have decided to sit tight in their situation. In the market upswing over the past several years, every property was selling, regardless of price,’ says Miller. ‘When prices are high and sellers are worried about a bubble, you must price strategically, understanding that buyers are tired of paying more than a home is worth'”.   

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This Post Has 66 Comments

  1. From the last link:

    ‘I believe the risk of a crash from over borrowing is minimal for obvious reasons such as tightening lending standards and qualifications’

    Then he says:

    ‘As people continued to flock to Los Angeles, median prices rose, and with no end in sight to the boom, you could sell your home above its real value’

    So just who was borrowing “above real value”? Where were the tight lending standards during the “no end in sight boom”?

    ‘understanding that buyers are tired of paying more than a home is worth’

    But appraisers wouldn’t let that happen, especially in a market where crappy shacks can cost a million Yellen bucks?

    1. 60% of FHA backed loans in November of 2018 exceeded the standard debt to income limits for a qualifying mortgage. These numbers are similar to those seen in the last bubble.

      1. FHA is also risk layering by accepting lower and lower FICO scores. Have no fear, Fannie is “competing” in the race to the bottom! Now just why two entities that supposedly don’t keep any profits need to compete is a mystery. And here’s something I learned from the AEI conferences. FHA is supposed to be a counter cyclical lender, that is they expand loans when the other GSE’s, which are supposed to be pro-cyclical, are contracting. But around 2014, shazaam, FHA went pro-cyclical too! In other words, they are all in. Oh sure, it’s all safe and cuddly out there in loan world.

        1. The popping of a bubble always coincides with a peak in the number of experts telling everyone it isn’t happening. The obligatory comment from a bubble denying real estate expert in every MSM report on housing is a sure sign the end is near.

        2. FHA Related comment:
          Non-depository institutions now make the majority of these loans. There will most likely be very limited recouping of triple damages should the Government claim fraud because they have limited assets. Declare BK and
          Then Just change your company name, get a new person to get the licenses in their
          Name and start again.

        1. So debt to income is historically high, but 20% lower than the 2008 peak. Down looks like the probable direction but is it going to be as crashy as last time?

      3. There may be some similarities now to the last housing bubble, but I think it is minimal at this point. I remember seeing out and out fraud everywhere in 2005, 06, and 07. Not seeing that now as I did back then. Also remember, not much of anything was built on spec for quite some time. We are here in north GA and very little inventory as far as spec homes. If you want a new house in a new development, you will be putting your deposit down and waiting 3-6 months for the house to be built. Inventory is tightish here and if the house is priced right, we are still seeing houses move quick in this suburban market.

        1. As of last report, there are 3,400 new unsold shacks in Orange County CA. Sales down more than 50%.

          1. ‘As people continued to flock to Los Angeles, median prices rose, and with no end in sight to the boom, you could sell your home above its real value. Over time, this market mindset has conditioned many sellers to think their overpriced home will always sell for 10%-15% more than the listing price with little improvements justifying that price,’ Miller explains.”

            Lets hope no one overpaid in this environment! Im sure everyone put 20% down and didnt have to roll with it

        2. My acupuncturist recently asked me if I wanted join in on an investment flipping houses. I said I had some concerns about rising inventory. In reply, she asked what I meant. It’s a bubble.

          2. When I look at inventory in all of the markets I watch in multiple states, a large percentage of houses for sale are staged flips. It tells me all I need to know about the kind of market we are in. It’s 100% a speculative market.

        3. Here we go again, another shill with the old “Hey, my arm was just amputated but 2 seconds later I have not bled to death so I’m not going to. Hoorayy!!!!” tripe.

          It takes TIME for all of this to reverse. Real estate is not like the stock market which can blow off in spectacular fashion, though we’re seeing some pretty jaw-dropping prices in places like Seattle already.

        4. GA comment
          My brother lives in the northeast suburbs of Hotlanta and he says they are building everything every where.
          Homes starting in the low $300’s with lots of townhouse starting some what less. No idea if they are spec. Or president.

        5. There may be some similarities now to the last housing bubble, but I think it is minimal at this point.

          Another realtor self-identifies.

          1. @ Boo Randy
            Definitely not a realtor. We bought our house for cash at the foreclosure auction (courthouse) back in 2010. Just because you want something to be true, doesn’t mean it is. My comment was that I don’t see the out and out fraud we saw last time around. I’m sure there is some froth in local markets due to lack of spec building for many years. That will find an equilibrium. The last bubble was very obvious to everybody here; I’m just not seeing it like we did last time. I’m not seeing the condo flips, the fraud, the NINJA loans or LIAR loans in large numbers. Remember, it took 5 years of nobody checking this stuff with rampant amount of fraud before the music finally stopped. We are no where near that point in my estimation.

      5. “60% of FHA backed loans in November of 2018 exceeded the standard debt to income limits for a qualifying mortgage. These numbers are similar to those seen in the last bubble.”

        There is only one way to push house prices so far past incomes, and that’s FRAUD. Plain and simple. Once this whole thing shakes out, we will find that it was entirely fraudulent on the part of the lenders, just like last time. “Control fraud” as William Black likes to say.

  3. ‘January’s numbers are in, and we are off to a roaring mediocre start,’ said Arizona housing analyst Tom Ruff with The Information Market. ‘Not good, not bad, just slightly above average.’”

    Your attempt to spin the latest data as not disastrous news for housing has fallen flat, Tom. Even a child can see that the Emperor has no clothes.

  4. “‘When you take appreciation out of the equation, that means you have to buy right, not sell right. The risk is much greater’ said Denny Grimes, with Denny Grimes & Co., in Fort Myers.”

    Or you can just sit in your lawn chair on the sidelines, celebratory adult beverage in hand, and watch the carnage play out.

  5. February numbers should be coming out soon and it will be interesting to see changes. Actually in our neck of woods there was a bump in contracts early in month. Saw same thing in 06 before the big slide initiated.

    Dead cat bounce? Dont know but bounce did not last long back then. Also YOY should start to show increasing downward trajectory. News of this creates self perpetuating events and loss of confidence. The rest is well documented from past debacle. Unless, of course, you ask Mr. Yun. Always fun to hear his explanations.

    Seeya.

    1. February’s numbers mean nothing to me. It is going to take YEARS for things to play out. Whether February is up, down or sideways is immaterial. We are at the absolute apex in many smaller markets.

      As I have pointed out before, a lot of the markets which are driven entirely by equity locusts and speculators from the larger markets are still showing strong buying at the bottom end, as braindead flippers with dumb, borrowed money continue their shenanigans. Meanwhile, the major markets are experiencing a massive decline in transactions, with price declines as well.

  6. ‘The number of new home listings in the Phoenix area jumped 78 percent from December’

    Holy frijoles Phoenix! Don’t everybody rush for the exits.

    1. ‘Buyers now might be competing with three other offers compared to 15 last year’

      You know Tina, if I had three people competing for my shack, I don’t think I would cut the price at all. Which makes me think there aren’t 3. It also makes me question the 15 last year thing.

      1. The realtors spin the “competition” thing with some truth in it. 3 offers for 20-50-% less than asking price in their minds is “competition”

  7. “‘The shortage of housing and new construction units means prices still prevail in California for 2019,’ he explains.”

    This realtor clearly is out of touch with reality spewing all this nonsense. Shortage? We will prevail… no realtor you will not, you will be fighting the other realtors over rodent carcasses praying the foreign money launderers will return.

  8. This about flippers
    Is reminding me that someone I know who was convicted of a pretty unpleasant crime and thusly left disgraced and unemployed had to resort to house flipping lol. It’s a sideways move morally, at best.

  10. I’m sure plenty of those cutting prices are indeed flippers and “investors”, but there are plenty of average Joes out there in Southern California who thought they could sell this year for what their neighbors got the previous 2-4 years. Just last month a friend of mine who works in real estate, and who knows my landlord is trying to sell our rental property, got me to look at a couple of places where she knew that the sellers are motivated. Both have dropped their asking prices since listing late last year, and one even mentioned they would be willing to sell to me for more than 10% under their wish price. I can hear the resignation in her voice when I tell her that there is plenty of inventory out there, both for-sale and rental, and so we are just going to take our time and see how it all plays out 🙂

    1. Forgot to mention that said landlord also asked outright if I wanted to buy the place we are renting from him, and even offered a discount of almost $100k from the current list price. I told him that even that was about $50k too high based on the rent I am paying, and since then the place fell out of escrow with another buyer who according to the agent “changed their minds”. As I live there and put up with the house’s many issues, it is no surprise to me!

      1. People on this board must know that this “changing minds” thing is popular in a markedly increased rate.
        So much so that a local realtor who does “reporting” on local conditions made a point of saying how notably common this is lately lol!

  12. Tesla owes about $50,000 to creditors for every vehicle it has ever sold. If it sells its “cars you can sleep in” for $35,000 each, I wonder how many it has to sell to pay its debts.

      1. Bugs: “eh, could be Doc!
        (Can’t wait to see their ’63 $tudebaker Avanti ver$ion!)

        Recycle, reu$e, repurpo$e … Cra$hed Te$la Vehicle$!

        The Rise Of The Electric Vehicle Conversion Shop
        August 26th, 2018 by Kyle Field | CleanTechnica

        “What’s especially exciting about this “Electric Vehicle Performance Shop” is that they’re about the performance and the technology first. Said another way, they’re not doing this to save the planet. President of EV West Mike Bream was a bit more blunt to Road and Track: “F*** the environment. Save the cars! Oh wait, we also saved the environment? That’s good too …”

        “The selection at EV West includes everything from a Model S motor kit with aftermarket controller to all the fuses, switches, connections, and terminations you need or think you’ll need or wish you could need for an EV build, including the elusive “Danger High Voltage” stickers that add a few horsepower each to any EV build.

        Building on their selection of DIY EV components, they build 4-wheeled custom creations in their shop, with a core competency in old VW conversions of bugs, vans, and even Karmann Ghia’s. They’ve also taken on a few Porsche conversions in what could be seen as an attempt to offset the emissions mess the VW Group has made of its deployed fleet of vehicles.”

    3. True, but that is about like saying that a 1st year doctor owes about $20k in debt for every patient she has seen. Capital expenditures to build factories are significant and get recouped overtime. If they build and sell 400-500k cars this year, they will be sitting pretty. I would be more worried about Ford, Chrysler, and Fiat than Tesla.

      1. If they build and sell 400-500k cars this year, they will be sitting pretty. I would be more worried about Ford, Chrysler, and Fiat than Tesla.

        Misinformed and/or delusional.

        1. Gathering Threats Stir Doubts About Auto Sector
          March 5, 2019
          Wall Street Journal
          Sam Goldfarb

          “In the current period of modest but steady global growth, financial distress has tended to concentrate in two sectors: retail and energy. Now, investors and analysts are growing more concerned that the global auto industry could join that group.”

          “After holding steady last year, U.S. auto sales are widely expected to fall in 2019 as the fading effects of 2017 tax cuts lead to less demand from businesses. World-wide, light vehicle sales fell 8% in January, led by a particularly sharp decline in China, according to LMC Automotive.”

          “Both the retail and auto sectors are “facing a ‘Bermuda triangle’ of threats: unfavorable economic conditions, disruptive forces, and changing consumer preferences,” the AlixPartners report said.”

          “Though Ford’s bonds have rallied this year, their yields still indicate investors believe the Detroit manufacturer could lose its investment-grade ratings. Investors have shown particular caution about buying Ford bonds that will take decades to mature, which is in part a reflection on the longer-run future of the company and its industry.”

        3. More made up stuff from Tesla.

          “The Model 3 achieved the top rating, five stars, on that ranking along with other vehicles such as the 2018 model Volvo S60, Toyota Camry, Honda Accord, Honda Civic, Volkswagen Jetta and Ford Mustang cars.”

          “…there is no NHTSA ‘safest’ ranking within the five-star category,” the agency said.”

          Ratings are based on a collision with the same car. Seriously, if you got hit by my truck, you’d likely be crushed.

          1. Yes, you are spot on. Driving is by far the most dangerous activity that most Americans do every day. Trucks and SUVs are extremely dangerous. Pedestrians are getting killed more than ever just walking on the sidewalk. I see this all the time in the ICU. We should lower the threshold for blood alcohol content for drunk driving, raise the minimum age for drivers license, and start having mandatory driver safety checks at about 55 and every 5 years to catch elderly who are at risk of having their reaction time and vision fail but who are too stubborn to give up driving.

        4. Lowest probability of what? Being refueled? They need to stop making cars and start converting fuel stations. You’re not going to transform the transportation industry with a couple 5-hour recharge stations at the granola food store.

          1. My model 3 has 325 miles of range. Level 3 charging will charge it to 80% in 15 minutes, but I’ll usually just plug it in at home or the EV charging station where I work.

    1. Interesting but that study is from 2012:
      Article first published online: November 19, 2012; Issue published: November 1, 2012

      Wonder how thinking has evolved in those seven years.

    2. BlueSkye cloud $eeding with “fake $ilver iodide” ?

      1.He’$ a “Oil Indu$trial Complex$” paid mouth piece … (knot a Forbe$ reporter)

      James Taylor
      Contributor | I am president of the $park of Freedom Foundation.

      2. Only 1,077 “$cienti$t / oil engineer$” are the “re$pondent$”

      Profe$$ional engineer$ and geos$cientists are particularly influential in this indu$try. Alberta has the highest per capita of professional engineers and geoscientists (a category of licensure that includes climatologists, geologists, glaciologists, meteorologists, geophysicists, and paleo-climatologists) in North America. And the petroleum industry – through oil and ga$ companie$, related industrial $ervices, and con$ulting $ervices – is the largest employer, either directly or indirectly, of professional engineers and geoscientists in Alberta. In oil and gas companies, almost half of CEOs are professional engineers or geoscientists and most senior management teams and boards have at least one licensed professional

      1. “Climate scientists say these extreme events are becoming more common in our warming world.”

        Who is supposed to believe this cr@p 15 year-olds? I’ve been watching these “extreme events” since the 60s, back then it was on our black and white TV that brought the Vietnam War to our house on the Evening News 5 nights a week.

        Week of remarkable weather extremes: Is this the new normal?
        BY JEFF BERARDELLI

        FEBRUARY 27, 2019 / 11:53 PM / CBS NEWS

        From record-shattering snow and relentless rain to astounding extreme events around the globe, it’s been a week of unprecedented weather. Climate scientists say these extreme events are becoming more common in our warming world.

        https://www.cbsnews.com/news/remarkable-weather-extremes-is-this-the-new-normal-climate-change/

        “Climate scientists say these extreme events are becoming more common in our warming world.”

        I’ve been watching these “extreme events” since the 60s, back then it was on our black and white TV that brought the Vietnam War to our house on the Evening News 5 nights a week.

        The ‘Thousand Year Flood’ of 1964

        By CLAY MCGLAUGHLIN |
        PUBLISHED: December 18, 2014 at 8:10 pm |

        This December marks the 50th anniversary of the “Thousand Year Flood” in Northern California, which officially began on Dec. 21, 1964 — reaching its peak on Dec. 23 of that year and continued until early January 1965. Striking nine years almost to the day after a 1955 flood that was called “the disaster of the century,”

        https://www.times-standard.com/2014/12/18/the-thousand-year-flood-of-1964/

        Vintage photos of some of the worst tornado damage in Alabama 1943 – 1974

        Posted Feb 21, 2017

        By Bob Gathany | bgathany@al.com

        Severe Weather Awareness Week in Alabama is upon us: February 19-24th this year. Looking back through the archives of the Alabama Media Group we have gathered vintage images of storm damage throughout Alabama caused by tornadoes from 1943 thru 1974.

        These historic photos demonstrate devastation, destruction, the horrible aftermath of some of Alabama’s worst tornado outbreaks.

        https://www.al.com/living/2017/02/vintage_photos_of_tornado_dama.html

  14. Hanging out in Phoenix (Mesa, AZ actually) for the last week and through end of this week.

    Been talking randomly with neighbors where I’m staying in. 2 foreclosures / short sales in the last 4 months on the same street I’m on. There seems to be some awareness that things are ‘not right’ with local real estate.

    Will be back in Seattle in a couple weeks where I am sure the poor numbers will be blamed on the snow storms.

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