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If You Continue Pricing Like It Is 2016, It Is Going To Sit On The Market A Long Time

A report from the Union Tribune in California. “San Diego County had the second-most home price reductions in the nation so far in 2019, said Trulia. San Diego County hasn’t seen as many cutbacks since 2014 when the market was still crawling out of the recession. Twenty percent of homes for sale in February had a price drop, the most of any California city. At the same time last year, the percentage was 10 percent.”

“Jason Cassity, a real estate agent based downtown, said the industry has a problem shifting when there has been a big change — such as a downturn in sales at the end of last year. He said some agents are operating like there will still be a bidding war.”

“‘If you continue pricing like it is 2016, it is going to sit on the market a long time,’ he said. ‘Or you are going to be one of those 20 percent (in February) that have to price reduce.'”

“A few examples of price reductions: 3675 8th Ave. — This 2,660-square-foot craftsman home in Hillcrest went on the market for $1.1 million in September 2018, but had its price reduced 15 times. It is now on the market for $905,000. 2165 Anthony Drive — This 916-square-foot single-family home near Shelltown went on the market in August for $389,000. The 90-year-old house was taken on and off the market before selling for $330,000 last week.”

The Dallas Morning News in Texas. “Dallas is one of the U.S. metro areas where rising home prices have hurt homeownership the most. Dallas, Denver and Houston were identified as the markets where there is the most downward pressure on homeownership, according to a new report by Florida Atlantic University and Florida International University faculty.”

“‘Of the metros in our index, Dallas is the highest and exhibiting the greatest downward pressure on the demand for homeownership,’ said Ken Johnson, real estate economist in FAU’s College of Business. ‘The extraordinary appreciation in the area is a major driver of this score.'”

From The Daily News in Washington. “Lumber prices have plummeted over the past 10 months, casting an uncertain pall on a sector that’s been a harbinger of economic downturn in the past. It’s worrying news for Cowlitz County, home to more forest product jobs than any other county in the state.”

“After peaking at $582 per 1,000 board feet last May, the price of Douglas fir is down to $390 this month, according to Nasdaq commodities data. If construction continues to stall, the 12,300 Cowlitz County residents whose jobs are tied to logging and wood products processing could be the first to feel an economic slowdown that has the potential to reach far beyond local sawmills.”

“That’s what happened 12 years ago, when the price of wood was one of the first hints that a major recession was on the way, said Cindy Mitchell, public affairs director for the Washington Forest Protection Association.”

“‘Back in 2007, log prices dropped really quickly,’ Mitchell said. The subprime loans that would be blamed for fueling the Great Recession were still readily available, and public data did not yet hint of the coming economic chill. But builders and lenders were growing wary about the future, and as they hesitated log and lumber prices fell.”

“Construction of new homes and apartments in January dropped by 7.8 percent compared to a year ago. ‘People who are building multi-family housing are on the forefront of what is happening with log and lumber prices,’ Mitchell said. ‘And everything is connected.'”

From My Met Data on Colorado. “Those hoping to gain some form of relief from high rent prices in Denver may soon be rejoicing. Although the housing market started off hot in the beginning of 2018, rent prices began to decline in the last two fiscal quarters of the year.”

“Mark Williams, executive vice president of the Apartment Association of Metro Denver said the long awaited surplus of apartments could bring more long-term respite. ‘This signals a leveling off of the rental market, which should provide some relief to rental seekers in the Denver metro market,’ he said.”

“The decline is attributed to steadily increasing vacancy rates throughout the Denver market, which reached 5.8 percent by the end of the year. The construction of 12,324 new apartments in 2018 — a number nearly three times greater than Denver’s long-run average construction levels — was a key factor.”

The Philadelphia Inquirer on Pennsylvania. “Huge numbers of apartments throughout the city center are being converted into ersatz hotel rooms by a new breed of well-funded operators who are targeting guests seeking homier overnight stays.”

“Part of what’s fueling the growth in the short-term stay-business — in Philadelphia and other cities — is a potential surplus of apartments after aggressive construction during the nearly decade-long economic expansion, said Stuart Levy, a management and tourism studies professor at George Washington University.”

“The short-term stays may actually be helping sustain that strength by sopping up excess inventory during what’s been a strong uptick in new apartment construction, said Kevin Gillen, a senior research fellow specializing in housing markets at Drexel University’s Lindy Institute for Urban Innovation.”

“‘We’ve got a bit of a surplus of space now that’s taking some time to absorb,’” Gillen said. ‘This is something that softens the downturn.'”

This Post Has 38 Comments
  1. ‘Of the metros in our index, Dallas is the highest and exhibiting the greatest downward pressure on the demand for homeownership…The extraordinary appreciation in the area is a major driver of this score’

    This is an important distinction because skyrocketing prices are driving sales when the bubble psychology is in effect. You can see that it validates paying too much – “you gotta roll with it”, etc. Then suddenly, it’s driving demand down.

    What was making prices go up pushes them down. Then people have fear and look out below.

    1. you could sense it in coffee shops and restaurants in the Plano, Frisco area. Many people seemed to be associated with the RE industry and you could hear the excitement.

      Granted there were new companies relocating — but they over built by 5 times

    2. The most significant and least quantifiable metric of all in real estate is confidence. That is the one which dislodges the boulder on the hill.

      Amazing how many ….since 2006-7 observations are leaking out in various press quotes these days. History repeating. Our MLS database goes back well over 10 years. I love seeing those records from 08 through 11. History may repeat those as well.

  2. ‘That’s what happened 12 years ago, when the price of wood was one of the first hints that a major recession was on the way…’Back in 2007, log prices dropped really quickly’

    The lumber collapse happened last fall. How much have you seen about it on the MSM? The first time I posted about it was an obscure hardware guys report out of Florida.

    1. “Construction input prices rose 0.9 percent monthly in February and 1.8 percent in the past 12 months, according to an Associated Builders and Contractors (ABC) analysis of recently released U.S. Bureau of Labor Statistics data. Inputs to nonresidential construction were up 1 percent on a monthly basis and 2.7 percent on a yearly basis. This is the first time that input prices have risen on a monthly basis since October 2018, when prices increased by 0.5 percent, ABC says.

      Of the 11 construction subcategories, seven experienced price declines for the month, with the largest decreases in natural gas (-25.8 percent) and unprocessed energy materials (-10.7 percent). The largest monthly increases in prices were seen in softwood lumber (+4.8 percent) and crude petroleum (+2.6 percent). ”

      https://www.cdrecycler.com/article/february-construction-input-prices-rise-abc/

      1. “The largest monthly increases in prices were seen in softwood lumber (+4.8 percent)…”

        Such a weak central bank driven dead cat bounce doesn’t go very far towards offsetting last fall’s price collapse.

    2. They interview the “lumber market fella” every week on RFD.TV … High of $610 … floating around $390 … this $pring might bring call$ of …. timmmmmber$!

      1. So the price of lumber didn’t collapse so much as return to normal after a stratospheric spike. Was something other than airbox construction responsible for the spike? So re-building after major storms, or perhaps shortage of supply?

        1. It can go a lot lower than the recent levels once denial over the collapse in demand gives way to fear.

    3. West Fraser Timber results miss analyst expectations in tough fourth quarter
      By Canadian Press
      February 12, 2019 – 3:09pm Updated: February 12, 2019 – 4:07pm

      VANCOUVER – West Fraser Timber Co. Ltd. says it had a challenging fourth quarter as it grappled with falling prices, difficult weather conditions, production curtailments and unplanned downtime.

      The Vancouver-based company says the combined effects led to earnings of $29 million or 42 cents per share for the quarter ending Dec. 31, compared with earnings of $238 million of $3.25 per share for the same quarter a year earlier.

      Adjusted earnings came in at $43 million or 63 cents per share, well below analyst expectations of $101.2 million or $1.40 per share according to Thomson Reuters Eikon.

      The company says benchmark prices for spruce, pine, and fir lumber dropped by 32 per cent in the fourth quarter, but that the lumber market has started to recover in the first weeks of 2019.

      Softwood lumber prices had a dramatic run-up last year to peak at record highs in early summer, before plummeting back down by fall on concerns on overpricing and a potential slowing of the U.S. housing market.

  3. ‘A few examples of price reductions: 3675 8th Ave. — This 2,660-square-foot craftsman home in Hillcrest went on the market for $1.1 million in September 2018, but had its price reduced 15 times. It is now on the market for $905,000’

    15 times in 7 months?

    1. Take a gander at the house itself. You gotta love it when the realtor posts pictures of the photoshopped room right next to a of the actual room. And then neglects to photoshop in some actual grass (not a blade..)
      Oh, and the house backs right up to the Cabrillo Freeway.

  4. “This 2,660-square-foot craftsman home in Hillcrest went on the market for $1.1 million in September 2018, but had its price reduced 15 times. It is now on the market for $905,000”

    That’s $13K reduction on average. For a $1.1M listing that’s a rounding error, not a price reduction. What do sellers hope to accomplish by this? Do they think there’s a buyer out there for whom $1.1M is too expensive, but $1.087M is a bargain? Christ, if you’re going to reduce, then reduce at least 5%, otherwise don’t bother.

      1. The $1 or $100 cuts are so they show up when buyers search for only listings with price cuts on Zillow or Trulia or Realtor. So those kinda make sense. They’re not real cuts, they’re just marketing cuts to get more search results. But the 15 times in 7 months example is just delusional sellers who think 1% cuts will entice buyers.

    1. Recently saw a 2k reduction in a 1m+ listing. An attempt to go back on the MLS hotsheet. Doesn’t fool anyone

  5. “This 2,660-square-foot craftsman home in Hillcrest went on the market for $1.1 million in September 2018, but had its price reduced 15 times. It is now on the market for $905,000”

    An 18% price reduction and still not a buyer in sight. Keep a’ slashin’. 🤣

    1. The 18% reduction matters not at all if the initial wishing price was wildly higher than current market value.

  6. “Lumber prices have plummeted over the past 10 months, casting an uncertain pall on a sector that’s been a harbinger of economic downturn in the past. It’s worrying news for Cowlitz County, home to more forest product jobs than any other county in the state.”

    So much for the Tariff War increasing building materials … I have stated many times on this blog, when trollers and folks tried to blame the high prices to the Tariff Wars.

    https://www.nasdaq.com/markets/lumber.aspx?timeframe=10y

    Prices used to be closer to 300 but dead cat bouncing. Once the tech bubble burst with the housing bubble, it will be HELL! The high prices are BECAUSE of the BUBBLE! Just like the STRONG Economy!!! Remember the economy was also STRONG in 2006!

    1. “Remember the economy was also $TRONG in 2006!”

      1. They’ve improved the efficiency of their own monie$ printing pre$$es since 13 year$ ago.

      2. There’$ NO penaltie$ for $itting on their Trillion$ of dollar Production$

      3. Beside$, the ma$ter.mind$ are ve$ted with complete financial indemnification$.

      4. $till a $hortage of crane$.

      1. Yep. Your 1st sentence is profound and I think of that fact every time a see one of the MSM writers pontificating about the strong economy supporting housing. Torpedos tend to hit suddenly. Actually when they hit, they are uncovering festering wounds which are finally being revealed.

    2. By driving a wedge between what buyers are willing to pay and production costs, tariffs can be a demand killer.

      1. As stated on this blog many time by Ben and others, these builders are trying to find excuses for the high prices because they overpaid for the land! They brought at Bubble Prices! They can’t afford to build affordable units because they can’t. This time is different. No affordable shacks PERIOD. END of STORY!

        1. “They can’t afford to build affordable units because they can’t.”

          Even if they could afford to build affordable units, they wouldn’t be priced affordably because we are in a bubble – they would be priced at bubble prices. This is why the whole “we need to build affordable housing” bullsh!t from local and federal governments is just that. We need to not have housing bubbles, is what we need.

          1. Almost everything the governments do to promote affordable housing results in higher prices, and/or eventual defaults.

  7. “Twenty percent of (San Diego) homes for sale in February had a price drop, the most of any California city. At the same time last year, the percentage was 10 percent.”

    Seems like my poor landlords missed out on the chance to cash out at the Housing Bubble 2.0 peak. It may take a generation for prices to return to that level again.

      1. We could then use the rent increase as an excuse to relocate, leaving them high-and-dry from anyone else willing to pay the amount we do.

    1. I don’t trust those numbers. I believe the % of price reductions is much higher in SD. If I manually analyze the listings in my zip code searching the property history, the number is more like 40%. Realtors have various ways of hiding price reductions. The worse the situation gets, the more fake data we’ll have to contend with and the harder it will be to decipher the real state of the market. The bigger the banana on the bubble sundae, the more fudge gets applied.

  8. In Oklahoma, which I left, (long term struggling inbred craphole) my favorite move by sellers is sitting on a house their elderly parents left them and not reducing the price a single $1, but then go and Mexican remodel it and raise the price. It sits and then gets pulled from the market. To sit. What are these reprehensible turds smoking..???

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