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It’s Been Years Since We’ve Had To Talk Price Reductions

A report from the Bay Area Newsgroup in California. “Runaway Bay Area housing prices have started stalling in San Mateo and Santa Clara counties, hinting that even well-salaried professionals have had enough. Resale home prices dropped year-over-year in February in Santa Clara County by 16 percent and in San Mateo County by nearly 6 percent, according to CoreLogic.”

“Home sales over $2 million in Santa Clara County dropped nearly 30 percent in the last two months, compared with the same period last year. ‘Did we begin to hit more and more people’s limit?’ said CoreLogic analyst Andrew LePage. ‘Sure.'”

“The super-heated prices in tech-heavy counties dropped: Santa Clara home prices fell from $1.29 million last February to $1.09 million this year, while San Mateo dropped from $1.45 million to $1.37 million, and San Francisco remained flat at $1.45 million. Santa Clara County prices also dropped double digits, year-over-year, in December.”

“The valley market is getting back to a more historic balance, said Alan Barbic, president of the Silicon Valley Association of Realtors. ‘It’s been years since we’ve had to talk price reductions with our clients,’ Barbic said.”

“Transactions fell 12 percent from the previous year and were at the lowest mark for February sales since 2008. The record streak of rising Bay Area home prices started in April 2012, when the median sale price in the nine county region was $425,000, according to CoreLogic. Over the next seven years, median sale prices have more than doubled, hitting a peak of $935,000 last May.”

The San Francisco Chronicle. “‘The intensity of the market we had a few years ago is not there right now,’ said Jeannie Anderson, an agent with Alain Pinel in Palo Alto. ‘A lot of the foreign money we had a few years ago isn’t there. That has made somewhat of a difference. A lot of people who did extremely well with their investment have sold their properties, taking the money while they can. A lot of people have gone out of state,’ she said.”

This Post Has 62 Comments
  1. ‘It’s been years since we’ve had to talk price reductions with our clients’

    Not really Alan. For instance, in San Francisco the percentage of slashin’ is about the same as 12 months ago.

    1. Keep in mind that the tech is still at Massive Tech Bubble Peak, not massive crisis, yeah prices are coming down. Whats gonna happen to the market when both Housing and Tech Bubbles Burst together?

        1. 2019 February Job Cuts: U.S. Employers Announced 76,835 in February

          The shortest month of the year saw the highest number of job cuts in over three-and-a-half years, as U.S.-based employers announced plans to cut 76,835 positions from their payrolls in February. That is 45 percent higher than the 52,988 cuts announced in January, according to a report released Thursday from global outplacement and executive coaching firm Challenger, Gray & Christmas, Inc.

          Last month’s job cuts are 117 percent higher than the 35,369 cuts announced in February 2018. It is the highest monthly total since 105,696 cuts were recorded in July 2015, primarily due to the U.S. Army’s cutting over 50,000 jobs and tanking oil prices, causing thousands of cuts in the Energy sector.

          “Job cuts have been trending upward since the last half of 2018. We continue to see companies respond to shifting consumer behavior, new technology, as well as trade and market uncertainty through workforce restructuring,” said Andrew Challenger, Vice President of Challenger, Gray & Christmas, Inc.

          “Meanwhile, Retailers are closing or revamping brick-and-mortar locations, leading to job loss or going bankrupt and cutting their entire workforces,” said Challenger.

          Retail leads all sectors in job cut announcements with 41,201 this year, 92 percent higher than the 21,484 Retail cuts announced through February last year. It is the highest January-February total since 2009, when Retailers announced 72,727 job cuts in the first two months of the year.

          February’s retail cuts include the announcement by Payless ShoeSource that 16,000 associates would lose their jobs as the company closes 2,500 stores.

          Industrial Goods, which includes heavy and industrial manufacturers, announced 31,948 job cuts through February, while companies in Health Care, including Health Care Products and medical device manufacturers, announced 7,766. Transportation companies have announced 7,193 cuts so far this year.

          The Automotive sector has announced 7,049 cuts this year, 239 percent higher than the 2,078 cuts announced through this point in 2018.

          “The Auto industry is one in which shifting consumer demand and new tech is creating the need to pivot in a different direction. Tech companies like Apple and Tesla are competing for the self-driving market, causing disruptions to traditional manufacturers and suppliers,” said Challenger.

          The majority of cuts this year are due to restructuring, as companies cited this reason for 42,882 layoff announcements. Bankruptcy has claimed 38,863 jobs so far this year. Technological updates were directly blamed for 1,022 cuts. Companies relocating operations overseas claimed 683 jobs, while tariffs led to 300 cuts.

      1. Three things you never want to see made: laws, sausages, and the $h!t they sell on Wall Street. Last time it was the subprime debt time bombs they peddled to pension funds. This time they switched things up and financialized a really annoying version of your high school year book that constantly updates itself, steals your personal data and sells it to the highest bidder, and has millions of fake users. The pension funds will be the last people to find out when the only users left are bots.

  2. ‘A lot of the foreign money we had a few years ago isn’t there. That has made somewhat of a difference.

    The foreign money from Chinese embezzlers and money launderers pales in comparison to the gusher of fake Yellen Bux from the counterfeiters and racketeers at the Fed. Will that spigot be turned back on? Time will tell.

    1. Remember those tours in the luxury buses Deleon Realty was giving to the foreign buyers! 2018 was a sad year for that venture as they all disappeared. Funny part is that it took this long to realize they vanished… guess the lingering local resident knife catchers that continually got outbid by those money launderers, Gave the realtors a few bones to scrape on. Even the local ones left are getting skeptical of what’s left and the realtors are doomed / going hungry. Every month, every day, the snowball is getting bigger and headed right off a cliff. Hang on tight!

        1. Dating myself a bit here but does anyone remember the commercial real estate bubble when the Japanese were buying up iconic US real estate? A flood of foreign capital is always a sure sign of a maturing bubble.

          1. Yes they bought the Rockerfeller center (couldn’t even pronounce it). At the time it was said that the imperial palace in Tokyo was worth more than California. Either their RE was over valued of CA’s was undervalued. Then their bubble burst.

          2. I keep on wanting to draw parallels to the Rising Sun era in the late ’80s but am having some trouble. Yes, they splashed out indefensible amounts on showcase properties but I think that was done during the “drunk frat boy with daddy’s credit card” phase of their maturation as a world financial player. The Chinese seem to be more desperate in their purchasing.

  3. ‘A lot of the foreign money we had a few years ago isn’t there. That has made somewhat of a difference. A lot of people who did extremely well with their investment have sold their properties, taking the money while they can. A lot of people have gone out of state’

    But. Weather? These people were just speculating. Notice they mention how much sales have slowed but nothing about inventory.

    1. “Runaway Bay Area housing prices have started stalling in San Mateo and Santa Clara counties, hinting that even well-salaried professionals have had enough. Resale home prices dropped year-over-year in February in Santa Clara County by 16 percent and in San Mateo County by nearly 6 percent, according to CoreLogic.”

      Chris Boy, where is Chris “No Bubble” Thornberg? Mommy cooked you crows for dinner again? Where is he????

      1. Crow night at Golden Corral. “You know, it’s really not that bad if you add a little horseradish.”

        1. Don’t tell me you are butt-hurt about crow man too?

          Cheddar will go well – with all that egg on his face!

  4. “‘The market was going to move again, regardless,’ he said. ‘It takes a big mess to cause home prices to fall. I don’t just mean a mess in the housing market. I mean an economic mess.’”

    -Chris “End of STORY” Thornberg

  5. Speaking of bubble tops, has the stock market already peaked for this cycle?

    Say it ain’t so!

    This time, an inverted yield curve suggests the stock market has already peaked, some analysts say
    By Chris Matthews
    Published: Mar 28, 2019 3:34 p.m. ET
    3 of past 7 recessions have seen stocks peak before recession takes hold
    AFP/Getty Images
    Downhill from here.

    Slowing economic growth and an inverted yield curve has many investors worried about a potential recession in the next year or two, but also has them excited for the heady stock-market returns that have often been sandwiched between an inverted yield curve and the subsequent economic downturn.

    But some analysts and economists are warning that statistical averages can be misleading, and that there is reason to believe that the latest yield curve inversion signals returns for the rest of year will be tepid at best and that the stock-market top may already be in.

    1. The ‘volatility cavalry’ is coming for the stock market, other assets, according to this chart
      By William Watts
      Published: Mar 28, 2019 5:03 p.m. ET
      Yield curve typically leads volatility measures by close to 3 years: Deutsche Bank’s Ruskin
      “Dances With Wolves” 1990/Everett Collection
      The bugle sounded.

      What can’t the yield curve predict?

      Not only has an inversion of the Treasury yield curve — a line plotting yields across all Treasury maturities that under usual circumstances slopes upward — sparked recession fears, it ends up that a prolonged shift to a flatter profile also portends a renewal of price volatility for stocks and other assets, according to Alan Ruskin, global macro strategist at Deutsche Bank.

    2. Or not….

      “But Bespoke also notes that when the S&P has gained more than 5 percent in a quarter, followed a quarter with a sharp decline of 10 percent or more, like this year’s first quarter, the subsequent quarter was then higher most of the time with an average gain of more than 9.6 percent. There have been 10 such instances since 1970, and in all but two, the follow up quarter, which in this case would be the second quarter, were all positive.

      Another case can be made for a positive second quarter performance when studying the performance of the market after a decline of 10 percent or more. According to Bespoke, before last year’s fourth quarter, there were 19 such quarters since World War II, and a year after those quarters, the S&P was up an average 15.9 percent. The market was also mostly higher two quarters later, for an average gain of 11.3 percent.”

  6. “Because Americans are the dumbest investors around, and there’s lots of liquidity in this market.” – George Economou, CEO Dryships

    (Investing in Dryships= An excellent way to lose your ass)

    Moving on to today’s news …

    “Lyft Prices IPO At $72, Valuing Firm At $24 Billion”

    https://www.zerohedge.com/news/2019-03-28/lyft-ipo-transportation-disruptor-or-money-pit

    (snip)

    “Lyft, Inc. today announced the pricing of its initial public offering of its Class A common stock at a price of $72.00 per share. Lyft is offering 32,500,000 shares of its Class A common stock, plus up to an additional 4,875,000 shares that the underwriters have the option to purchase. The shares are expected to begin trading on the Nasdaq Global Select Market on March 29, 2019 under the ticker symbol “LYFT” and the offering is expected to close on April 2, 2019, subject to customary closing conditions.”

    Some popcorn and a lounge chair are in order.

    1. I like what Bloomberg’s Matt Levine said the other day in his newsletter about why VC investors keep supporting money-losing companies:

      “We have talked, a couple of times, about why the venture capitalists might care about growth and not profits, with possible answers including (1) they correctly believe that in the long run rapid growth will lead to monopoly profits, (2) they incorrectly believe that, (3) they are just nice or (4) they are trying to forestall socialist revolution by giving people cheap stuff. “The fun view of the venture-capital-subsidized perpetual-loss-leading user-growth-at-any-cost economy is that it represents socialism as the transcendent end state of capitalism, a capitalism that is so refined that it consists of just giving people free stuff in exchange only for their willingness to take it,” I once wrote.”

    2. “Hedge funds investing in Lyft don’t believe in its long-term prospects”

      (snip snip snip snip snip)

      “Investors are excited for Lyft to go public.”

      Dumb. Dumb investors are excited for Lyft to go public.

      “So many are clamoring for Lyft’s stock that the bankers bringing the company public have raised its price. But that doesn’t mean investors think the company will be successful in the long run. Indeed, the hedge funds that are investing in Lyft aren’t particularly thrilled about its longterm prospects.”

      Ya gotta love it.

      “Some 30 percent of hedge funds are bullish about Lyft, the ride-sharing underdog that’s going public this week, according to a survey conducted last week of 40 hedge funds by Titan Invest, a portfolio investment app. But most of those are focused on how the stock will perform in the near term, not necessarily how well Lyft as a company will perform a few years from now.

      “Near term”. Stay tuned for their definition of “near term”.

      “The primary reasons for optimism were non-fundamental ones like ‘scarcity value’ and ‘investor demand.’ In other words, Lyft is the first ride-sharing company to hit the stock market, having gotten the jump on its bigger rival Uber, and investors are excited about a shiny new tech stock. (Uber has also filed for an IPO and is expected to price next month.)”

      Now we approaching their definition of “near term”.

      “’Short-term stock prices are not necessarily tied to fundamentals,’ Titan Director of Research & Operations Vincent Ning told Recode. ‘For shorter-term funds, they could be out of the name by the end of the day Friday’ — that is, the first day Lyft is expected to trade on public markets.”

      Near term = Less than one day.

      “Hedge fund investors buy stock in bulk and are able to purchase it at the offer price, which is usually about 10 percent to 15 percent lower than what it will trade at on the stock market, according to Ning. That means they’re likely to make a big profit early on. That’s especially so in the case of Lyft, a high-profile company with lots of interest from regular investors. Hedge funds will probably sell that stock long before interest in it subsides.”

      Yep, suck ’em in, then sell.

      https://www.recode.net/2019/3/28/18285344/lyft-hedge-funds-ipo-investors

    3. Substitute Google and Facebook’s IPO and it’s exactly what people were saying then as well. And Netflix. And Twitter. And…well basically every tech IPO over the past 15 years. And it’s the same stale argument along the lines of “how can this company possibly be worth billions when they don’t do anything, they don’t make anything, it’s just code man”.

      1. Google is an advertising platform. They sell ad space. Thus, reasonable revenues.

        Facebook packages user information and sells it to firms to input into CRM type systems to create targeted advertising across the internet (phones, PCs, tablets). Thus, reasonable revenues.

        Lyft produces revenues if people are willing to buy capital (cars) and use Lyft’s service to connect with potential riders as a means to help pay the costs of the car. If the cost of money increases, it will become more expensive for people to buy capital equipment (cars). Their model relies on people shouldering capital risk. In an environment of low interest rates that is doable. If rates go up and the cost of money increases who knows how their business model will fare.

        It’s literally the farthest thing from just code, man.

        1. “Their model relies on people shouldering capital risk.”

          Not just shouldering risk, but also eating depreciation. Does Lyft pencil out for drivers if depreciation is properly reflected in the profit calculation?

          And what’s up with negative earning companies selling for multibillions? More Yellen bucks seeking a toetag home to die in?

    4. Oh, come on, Lyft only lost nearly a billion dollars last year. What could go wrong?

  7. The US housing market is not the only place Ebola is a concern.

    The Financial Times
    Opinion Ebola
    The world must wake up to the threat of latest Ebola outbreak
    The number of confirmed deaths has passed 1,000, making it the second worst in history
    David Pilling
    Health workers in the ‘red zone’ of an Ebola treatment centre. Attempts to gain trust through community outreach have had mixed results in eastern Congo © AFP
    David Pilling 15 hours ago

    In 1976, the laboratory of the Institute of Tropical Medicine in Antwerp received a Thermos from the Democratic Republic of Congo, a vast central African country then called Zaire. In it was the blood of a Flemish nun who had died of an unknown disease. The mysterious illness caused fever, uncontrollable diarrhoea and haemorrhagic bleeding. Most people who contracted it were dead within weeks. Only later was it given a name: Ebola.

    Ebola is back, even if the world has barely noticed. What has become the second-worst outbreak in history is quietly felling victims in eastern Congo, one of the poorest regions of the world. This month, confirmed cases topped 1,000, with 639 deaths recorded by March 26, according to the country’s health ministry. That is a long way off the more than 11,000 who died in west Africa from 2014 to 2016 when the disease spread across Guinea, Sierra Leone, Liberia and beyond. But it is roughly the level reached by that epidemic in July 2014, just before it gained deadly momentum.

  8. Hopefully we see increased inventory and lower prices in Sacramento area. Prices are sky high right now.

  9. Does it seem ironic how government efforts to help low-income families buy houses resulted in prices inflated to levels that only wealthy families can comfortably afford?

      1. “And who benefits from all of this? Not the FBs…”

        The neighbors benifit from all of this.

        1. True but not without the help from Mr Banker to allow them pull out that equity 😉

          #realestateonlygoesup
          #believesussanejohndave

          1. “True but not without the help from Mr Banker to allow them pull out that equity 😉”

            I said this many times before: Bankers rule.

            Bankers control the economy. Bankers decide the what, the when, and how much. Bankers utilize as tools the vast quantities of totally dumbed-down ignorant pukes to carry out their desires. Bankers perform this feat by feeding money or by refusing to feed money to these ignorant pukes. The ignorant pukes then respond accordingly.

            Easy money.

      1. When the gold bugs bought into the Cleptocurrencies hook, line and sinker, I had to scold myself for ever listening to them in the first place. Not knocking gold itself.

    1. Yes, hard to believe Pd was pushing $1,600 just days ago. Maybe someone noticed that a recession is looming and not so many cars will be built?

  10. Microsoft: Please tax us more (and Amazon too)

    https://www.fastcompany.com/90326641/microsoft-please-tax-us-more-and-amazon-too

    ‘Microsoft’s public appeal to pay more taxes, while applaudable, also feels like a PR move against its rival. The latter has been repeatedly subject to criticism for what many see as a failure to pay its part in taxes. Amazon paid $0 in federal taxes on $11.2 billion profits last year, reports Fortune. It’s the second year in a row it owed nothing.’

    But…progressive?

    1. It is super frustrating to see the tax shenanigans and the loopholes that exist such that some companies pay wildly different rates than others. It totally undermines the market economy. Apple has had such little tax burden from their “Double Irish with a Dutch Sandwich.” I applaud the EU for actually going after them for breaking the spirit of the tax law.

  11. Feb. ‘19 NHS up 4.9% MoM & 0.6% YoY. Leading housing indicator. Blip or trend change? PHS down yesterday. Also leading. Need more data. Bubble-nomics says blip… Watching next few months.

    1. If this is such a big deal, how come Mr Market doesn’t care one iota?

      Business ‘devastated’ by Brexit vote
      9 hours ago

      Business groups have said they are “devastated” after Parliament’s latest rejection of the prime minister’s EU withdrawal plan.

      They urged MPs and the government to find a solution and stave off the “nightmare” of a no-deal Brexit.

      “The UK’s reputation, people’s jobs and livelihoods are at stake,” said CBI deputy director-general Josh Hardie.

      And the Institute of Directors’ Edwin Morgan said businesses were “sick” of being stuck in “spirit-sapping limbo”.

      Mr Morgan, the IoD’s interim director-general, said: “The Brexit merry-go-round continues to spin, but the fun stopped a long time ago.”

  12. Try to avoid the temptation to catch yourself a falling knife. The low rates won’t last, and many folks will be shocked to find themselves instantaneously underwater when rates eventually revert to normalcy.

    Are economists worried about the U.S. housing market?
    Share This Article
    March 29, 2019 1:04pm NYSE:XHB
    From Dion Rabouin:

    There was a flurry of U.S. housing data this week that painted a negative picture of the economy, but showed signs for potential growth.

    The bad news: Building permits fell for the second straight month and housing starts had their largest decline in 8 months, according to U.S. government data. Construction of single-family homes dropped to its lowest in more than 18 months.
    Show less

    Details: Existing home sales rose 11.8% in February, but buyers signed 1% fewer contracts for existing homes, month-over-month, and pending contracts were 4.9% lower than a year earlier.

    The Case-Shiller price index showed home prices rose 4.3% annually in January. However that was the weakest gain since April 2015.

    What they’re saying: Tendayi Kapfidze, chief economist at LendingTree, says the slowdown is actually a good thing.

    “We do not see the housing market as a risk to the broader economy,” he says. “When we look at prior housing cycles, continued acceleration in home sales and prices would have to come at the cost of increasing leverage; this is how we got in trouble before. Had the market slowed in an orderly fashion in 2003/2004, we may have saved the economy from the woes unleashed later in the decade.”

    He points out that homebuilder confidence readings show expectations of strong demand in the months ahead. However, the sub-index for buyer traffic fell to 44, indicating contraction.

    The good news: U.S. mortgage rates had their biggest one-week drop in 10 years, with 30-year mortgage rates falling 22 basis points.

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