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Asking Prices Are Being Slashed To Attract Buyers

A report from the New York Times. “By nearly any measure, this city is booming. There is so much construction that a local newspaper started a ‘crane watch’ feature. Yet, Denver’s once-soaring housing market has run into turbulence. Sales and construction activity have slowed in recent months. Houses that would once have drawn a frenzy of offers are sitting on the market for days or weeks. Selling prices are rising more slowly, and asking prices are being slashed to attract buyers.”

“Similar slowdowns have hit New York, Seattle and even San Francisco, cities that until recently ranked among the nation’s hottest housing markets. The specifics vary, but economists, real estate agents and home builders say the core issue is the same: Home buyers are reaching a breaking point after years of breakneck price increases that far exceeded income gains.”

“‘The local economy is still fantastic, all the fundamentals are there, but obviously wages are not keeping pace,’ said Steve Danyliw, a Denver realtor. ‘As the market continues to move up, buyers are being pushed out.'”

“Introductory economics textbooks suggest that high prices should attract more supply or suppress demand — or both. Inventories of unsold homes have risen in Denver and other markets in recent months, and the real estate site Zillow found that price cuts have become more common.”

“Over all, however, the housing market is not behaving as the textbooks say it should. Inventories remain low despite the recent increases, and new construction is slowing, not picking up.”

“Part of the problem, local real estate agents say, is that the furious pace of price growth has essentially gummed up the market, making homeowners reluctant to sell for fear of being unable to find a new home.”

“This big-city conundrum is spreading. People priced out of San Francisco moved to Seattle and Portland, driving up prices and displacing people who moved to Denver and Austin. Next on the list: Boise, Nashville and other cities offering some of the same attractions at lower prices.”

“Sure enough, the online real estate site Redfin this spring found that Denver had joined Seattle and San Francisco as cities with a ‘net outflow’ of users — that is, there were more people on the site looking to leave Denver than to move there.”

“‘City after city is going to face this,’ said Glenn Kelman, Redfin’s chief executive. ‘At some point, the buyers step back and say, ‘Enough is enough.’”

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This Post Has 13 Comments

  1. ‘Introductory economics textbooks suggest that high prices should attract more supply or suppress demand — or both’

    Gosh the NYT has realized that the rules of supply and demand haven’t been functioning as they should! For instance, when prices go up, a lot, you shouldn’t have a multi-year “Frenzy” across the nation.

    ‘Over all, however, the housing market is not behaving as the textbooks say it should’

    Again! So prices get slashed, inventory pours in, and demand decreases? Why that’s just how speculators would behave. Maybe that explains it.

    1. I’ll point out where the textbooks do explain what’s happening. A classic mania top and sharp reversal. If all these red-hot markets turned so quickly, and in such a short time, clearly “fundamentals” weren’t the reason. Is it more likely that many thousands of people simultaneously decided to move, or are speculators trying to time the market? And if shacks are really selling in a couple of weeks, why slash prices at all?

    2. when you have high demand from a specific buyers market, let’s say China, and then they mysteriously disappear you have less demand. Prices got driven through the roof and now we have the rational buyers left that are not willing to pay at these price levels. With no buyers, sellers panic and cut prices, others that are fearful join them. It’s not about affordability anymore, or FOMO, it’s now about what’s rationally a good decision and what the potential outcome could be in worst case scenarios. Lots of fear out there right now

  2. “‘City after city is going to face this,’ said Glenn Kelman, Redfin’s chief executive. ‘At some point, the buyers step back and say, ‘Enough is enough.’”

    At some point communities are going to have to say “Enough is enough” and start organizing and fighting back against the pernicious influence of speculators, investment banks, and their hot money flows. Houses are meant to be lived in, not speculative commodities priced out of reach of the middle and working classes.

    2. At some point, the buyers step back and say, “Enough is enough.”

      Same story for the lenders. Who is going to lend in a market with falling prices and reluctant buyers? Enough [is] enough.

  5. “more people on the site looking to leave Denver than to move there”

    A streak of violent crimes has many in LoDo concerned for their safety:

    “After another violent shooting near 14th and Market Streets, people that work in the LoDo area say they’re worried.

    One person was killed in the early morning shooting Friday and another was critically injured. It’s the second serious shooting in as many weeks and just the latest in a streak of violent crimes in the area.”

    https://www.thedenverchannel.com/news/crime/a-streak-of-violent-crimes-has-many-in-lodo-concerned-for-their-safety

  7. Does anyone know if RE summer sales information is published for any of the shoreline communities in the Northeast and Mid-Atlantic? What I’m looking for is a compilation of information or general trends, not necessarily individual communities, for example, were sales up or down, did it take major price cuts to move the houses, was there are a lot of activity at the lower end while the behemoths on the beaches just sat there?

    One area I follow on the Rhode Island coast is all over the lot. Seems like people held off on buying until the end of the summer and then went all in and now, I’m seeing a bunch of homes coming on the market at much lower prices than what I’d expect.

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