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Bubble Bursts Must Start Somewhere

A report from US News and World Report. “The tables have turned across the U.S. as the real estate market has shifted from a seller’s to a buyer’s market, which means that more homes are for sale than there are buyers to purchase them. Gone are the days of listing a home and it selling overnight simply because of its mere existence, as if it were the last home to be had. In many parts of the country, buyers had felt lucky and accomplished just for winning a bidding war for a property.”

“Those days are over and now sellers have to do everything perfectly, from initial pricing to marketing strategy, in order to sell their properties on a reasonable timeline. A buyer’s market is not the time for aspirational pricing. Only unique properties, which are really outliers, fly off the shelf these days. Buyers are looking for deals and they rarely bid at asking price.”

“Get real. Listen and educate yourself on current market conditions in your neighborhood. Ask your real estate agent for recent comparable closings and active listings, and size them up to market highs. The real estate market has pressed the reset button. Now more than ever, sellers cannot leave anything to chance if they want to get top dollar for their properties in this new arena.”

From Variety on California. “After more than three years with no deep-pocketed takers willing to take the plunge, Jim Belushi has swapped his former real estate agents for another Platinum Triangle powerhouse broker and unceremoniously chopped one million dollars off the asking price of his longtime house in the Brentwood area of Los Angeles, Calif., that now stands at a tetch under $29 million.”

“The star began his years-long real estate odyssey in the spring of 2017 when the property was floated as an off-market whisper listing with an inexplicably bloated price of $42 million. Sequestered behind gates, the estate officially popped up on the open market in the fall of 2017 at a still too rosy $38.5 million and in the summer of 2018 the price was radically slashed in one fell swoop to $29.995 million before it was taken off the market near the end of the year.”

The Orange County Register in California. “Orange County’s mid-point price for all residences sold in February was $700,000 — down 1.4% compared with a year earlier. At the neighborhood level, prices were up in just 35 of 83 Orange County ZIP codes. Sluggish buying is a culprit: 1,903 Orange County residences sold in the period, down 17% in 12 months. Sales rose in only 20 of 83 Orange County ZIPs.”

“On a scale of zero bubbles (no bubble here) to five bubbles (five-alarm warning) … this is THREE BUBBLES. For a bubble to burst, prices must be falling … significantly. This drop is tiny … but bursts must start somewhere. Continued sales weakness is equally worrisome. But if you think local pricing’s recent winning streak was extremely long — perhaps even bubble-ish … please note the previous multi-year upswing ran 122 months — yes, a decade-plus from December 1996 to January 2007. And that surge spiked the Orange County median selling price by 213 percent.”

The Denver Post in Colorado. “Year after year this decade, construction cranes and work crews in metro Denver have gotten only busier. But activity may finally take a breather, according to a forecast from a leading cost estimation firm.”

“‘Denver has been one the hottest markets across the country since 2013 and 2014,’ said Dan Pomfrett, a regional director with Cumming. ‘We expect this (slowdown) to be more of a market catching up with itself than a recession.'”

“Cumming predicts that construction spending in metro Denver will drop about 8 percent this year, led by an 11.5 percent decline in residential construction activity. Residential construction, which includes apartments and single-family homes, will drop from $13.1 billion to $11.6 billion, making it the largest contributor to this year’s decline.”

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This Post Has 61 Comments

  1. ‘Denver has been one the hottest markets across the country since 2013 and 2014…We expect this (slowdown) to be more of a market catching up with itself than a recession’

    Wa happened to my shortage Dan?

    Eeee-bola Brentwood!

    1. You always ask this question.

      The answer is easy: there was a shortage then more housing was built and more people decided to sell. Shortages and gluts come and go.

        1. Do you not get the joke Doomed?

          Also were you not here when people were insisting that a glut was impossible under current conditions? That’s what makes the joke funny.

          1. “Also were you not here when people were insisting that a glut was impossible under current conditions? That’s what makes the joke funny.“

            I think he is new to the blog unless he is johndave 🤔… I also assumed he was a realtor because of his handle but he assured us he is not. Either way, just another poster with a different view than most here.

  2. This is from an email I got recently:

    “My husband and I sold our Denver house for a good profit in the summer of 2017. We’ve been in a great rental situation ever since (house rents for about half of what buying it would cost). Our plan is to buy in a few years when the market bottoms out. Problem is, there’s a house in the exact area we want to be in that will be up for sale in a few months. My husband wants to bite the bullet and pay what I think is peak market cost for it (our neighborhood hasn’t experienced any significant drop in prices yet) but I think we should wait and see. He thinks Denver is “different” and won’t experience any severe downturn in prices (“but so many people are moving here!” “but the mountains!”) and I think the housing market could (will?) drop significantly.”

    “Do you have any predictions on how much the Denver housing market will fall? And when we’ll see significant drops to asking prices – maybe this summer? We bought at the peak of the last housing bubble and I terrified to make that mistake again.”

    1. “(house rents for about half of what buying it would cost).”

      Hmmmm…. Gee wiz.

      Now stack on carrying costs like taxes, insurance and depreciation at $3/sqft per year and buying is triple the monthly cost.

      Ooooooph.

    2. ‘He thinks Denver is “different” and won’t experience any severe downturn in prices (“but so many people are moving here!” “but the mountains!”)’

      Yeah, they say that about every place with a housing bubble. Presumably an equity locust would have to come from some other zip code that’s also in a bubble and also “where everyone is moving to.” This does not compute. So where are these mythical new people coming from to inflate both bubble cities simultaneously? Venus? China? Mordor?

    3. We bought at the peak of the last housing bubble and I terrified to make that mistake again.

      See? These are people who were about to learn the lesson of a lifetime only a few short years ago. But they were saved from learning it then and must learn it now when they are even later in life and even less likely to ever recover. She says “terrified” but obviously they are not.

      1. She says “terrified” but obviously they are not.

        Clearly, they’re not. She’s seeking free advice from Ben because she’s too lazy to use the search function on his free blog, read for herself and come to a conclusion. It’s only one of the biggest purchases in your lifetime!

      1. A high percentage of the people who are moving here are illegal aliens and druggie vermin. The people moving out are the productive taxpayers who want to get out from under the Bolsheviks who have taken over Denver.

    5. “Do you have any predictions on how much the Denver housing market will fall? And when we’ll see significant drops to asking prices – maybe this summer?”

      Ben, do you have a crystal ball we don’t know about?

    6. Sounds like her real issue is selling 2 years early. She claims right now is peak pricing. Which means, she missed out on a lot of appreciation between 2017 and 2019.

    7. Apparently it is not always the wife who is el stupido when it comes to buying at the top.

  3. ‘Gone are the days of listing a home and it selling overnight simply because of its mere existence, as if it were the last home to be had. In many parts of the country, buyers had felt lucky and accomplished just for winning a bidding war for a property’

    Yeah, that’s not crazy talk or anything.

  5. will drop about 8 percent this year, led by an 11.5 percent decline in residential construction activity.

    So what’s a recession?
    30% ?

  6. Seeing as how the Fed completely reversed and is now a dove’s dove, and with the eCONomy awash in cheap money with much, much more to come, and as new loan programs abound (see Bank of America’s newest $5Billion bullsh!t), I don’t expect an eCONomic crash this year.

    I now believe this whole liquidity bomb has more legs than I ever thought possible. DOW 40,000? Perhaps. Crude oil $100+? Would no surprise me in the least. Bitcoin $20,000 redux? Why not? This sh!t show seems unstoppable. If you have to eat food and pay for shelter to live, you can’t avoid it.

    1. Trump’s Renewed Venting Against Fed Chief Raises Concerns: Report
      Scott Van Voorhis
      Apr 2, 2019 9:16 PM EDT

      President Donald Trump continues to fume over the performance of Federal Reserve Chief Jerome Powell, in private as well as in public, even venting his displeasure in a phone call to the central bank leader, new reports indicate.

      In a March 8 phone call, Trump reportedly told Powell point blank, “I guess I’m stuck with you,” according to a story Tuesday evening in the online edition of The Wall Street Journal citing an unnamed person who said they heard the comments in a meeting.

      The phone call came after rising concern over the U.S. job market triggered the biggest weekly stock drop of the year, Bloomberg reported.
      …

  8. “In many parts of the country, buyers had felt lucky and accomplished just for winning a bidding war for a property.”

    From Winners of bidding wars to FB Bagholders, this is classic textbook example of a BUBBLE BUST. Darn I say, NO QUESTION ASK END OF STORY!!!

  9. “But if you think local pricing’s recent winning streak was extremely long — perhaps even bubble-ish … please note the previous multi-year upswing ran 122 months — yes, a decade-plus from December 1996 to January 2007. And that surge spiked the Orange County median selling price by 213 percent.”

    What happened again in 2007? Can someone refresh my memory? I’m so RICH that I’m burning money on utility bills, property taxes, etc., that I can’t remember.

    1. Do you own a $25M vacation home in Florida? Then yeah you don’t care about utility bills.

      1. Did you see the billionaire who slashed 10M off of his 25M Florida shack? Seems kinda motivated.

    2. At a +213% increase, a $500k house in 1996 would be $1,565,000 by 2007. And of course we know 1) incomes did not rise by a similar amount, and 2) prices did not subsequently decrease by -68% to unwind that bubble.

      Funny, journalists are usually careful not to mention how long the bubble stretches back and the magnitude of bubble price increases pre-2002. Might spook people to see such extreme, obviously bubbly numbers like above, going back to before the official housing bubble of ‘02-‘07.

    2. New vehicle leases and sales are heavily dependent on high residual values of trade-in (used) vehicles. This means that the used car market need access to unfettered credit.

  11. Y-o-y declines in median list and median list per sq ft in Los Angeles, Orange, Irvine and San Diego. Since far fewer homes are selling at asking, when this batch of homes sells in about 20-30 days, it will be a sea of red ink from San Diego to Seattle. By mid summer, everyone on the west coast who bought last year using minimum downpayment will be underwater. They will have to cut rates so all these people can refi and the rest of us can go back to earning 0.00001% returns on our savings accounts.
    Los Angeles
    https://www.movoto.com/los-angeles-ca/market-trends
    Orange
    https://www.movoto.com/orange-ca/market-trends/
    Irvine
    https://www.movoto.com/orange-ca/market-trends/
    San Diego
    https://www.movoto.com/san-diego-ca/market-trends/

        1. “CoreLogic is now forecasting that home prices will begin to see bigger annual gains, closer to 5 percent by next year.

          The prediction comes just as affordability has improved. Roughly 40 percent of the nation’s 50 largest housing markets are now considered overvalued (CoreLogic categorizes a market as overvalued when home prices are at least 10 percent above the long-term, sustainable level). ”

          LOL what will 5% increase do to affordability? Someone is smoking some good sh*T! So Just 40% is overvalued!!! Lets make it 100% HAHAHAHAHA. DOOMED will get his commission checks!

      2. I would say this feels more like 2007. Just look at Corelogic stock CLGX performances.

        https://www.google.com/search?q=NYSE:+CLGX

        During the last Housing Bubble 1.0, they peaked at 28.80 around May 2007. They hit 10.72 around November 2008 then bottom at 8.42 August 2011.

        During Housing Bubble 2.0, they peaked at 54.90 around July 2018. This was peak for Bubble 2.0. Since then they have dropped to 37 something. No doubt they will fall farther if people get scared of the housing markets.

        I don’t think they have any vested interest in predicting that housing prices going UP.

        /S

        1. Buy now or be priced out forever! Shadow lenders got your back don’t worry. 60k yr salary with 2-3k in suv and credit card payments per month will qualify you for that 500k+ shack you need, want, have to have. This time is different, before it was no questions asked loans with interest only payments, now they ask the questions but don’t care about you answer. Just Airbnb a room to offset your Starbucks and $15 avocado toast habit. RE only goes up, in fact Susanne and johndave told me it’s going to the moon so please please buy now before the FOMO your experiencing causing you health problems. -realtor

          1. One bank with a national presence pre-approved me for a mortgage 5 times my annual pre-tax income. When I didn’t send them my pay stubs they said no problem and went ahead with the approval.

            It’s almost like the banker on the other end did not have my best long-term interests in mind…

            But this time will definitely be different! People don’t lie about income or anything so it’s not like a bank that produces the mortgage should do any due diligence.

    2. Yeah, and Bitcoin is headed to $40,000 a coin. Everything is going up soon, I mean everything!

  15. Key points:
    > Zillow announces a new “Home Loans” division that will allow users shopping for mortgages to receive financing directly from the company.
    > It’s the company’s latest push toward having customers directly buy and sell homes.
    > The company said in February it was doubling down on its homebuying and selling business, projecting annual revenue of $20 billion over the next five years.

  17. Overheard during a 10 min stop at childrens resale shop today, Vancouver wa.

    Exchange between shop owner and a seemingly regular customer, discussing customer’s friend who “has put in 4 full price offers so far you know”.
    Owner, “She can’t find a house she really likes or is this normal for her?”
    Customer, “This is totally normal for her. She’s just so compulsive. I try to tell her she should just stop and soon she’ll see that that would be wise. Then she just jumps back into another bidding war.”
    Owner, “Sounds like she needs a life coach”
    Customer, “Ya, you know she’s went all the way through to the home inspection on two of them before backing out.”
    Owner, “Isn’t she losing money then?”
    Customer, “Oh, yeah she is! And the last house that seemed sure about and backed out on, more or less she didn’t just really love it. Its just at the time she’ll make it fit her needs so it looks like a go. At this point, she mentioned that her agent isn’t returning phone calls now. I think that agents gonna drop her. I mean she hasn’t made any money on anything yet.”
    And it segued into discussion about the agent then.

    These bidding wars are what Bubble 2.0 will be known for. Basic psychology messing w/ people’s FOMO. The banks always win, right Mr Banker

    2. “The banks always win, right Mr Banker.”

      Right.

      “Basic psychology messing w/ people’s FOMO.”

      This FOMO is something the buying pukes bring on themselves -with a bit of help from people such as Suzanne. When they finally walk into the bank these pukes are already throughly lathered up and ready to sign up for anything that is placed before them.

    1. “Of course, ‘Lock Her Up’ was a feature of the 2016 Trump campaign. Do you in, retrospect, wish that people like yourself, the head of the FBI, the people in charge of law and order had shut down that language, that it was dangerous potentially, that it could have created violence, that it kind of is hate speech? Should that have been allowed, she asked.”

      So Christiane doesn’t care for freedom of speech bue she is fine with this…

      Florida school bus aide pulled MAGA hat off teenager’s head, surveillance video shows

      Posted: 3:44 AM, Mar 08, 2019
      By: Meghan McRoberts

      MARTIN COUNTY, Fla. — Surveillance video on a Martin County school bus shows a bus aide yelling at a student to take off a “Make America Great Again” cap, then grabbing it off of his head.

      “Boy, if you don’t that hat off this bus… take it off,” an unidentified bus aide said, according to surveillance video.

      He continued the bus ride without wearing his hat, though other students wearing hats were allowed to keep wearing them.

      https://www.10news.com/news/national-politics/florida-school-bus-aide-pulled-maga-hat-off-teenagers-head-surveillance-video-shows

  20. “The tables have turned across the U.S. as the real estate market has shifted from a seller’s to a buyer’s market, which means that more homes are for sale than there are buyers to purchase them. Gone are the days of listing a home and it selling overnight simply because of its mere existence, as if it were the last home to be had. In many parts of the country, buyers had felt lucky and accomplished just for winning a bidding war for a property.”

    Here’s to hoping lots of corporate buyers caught themselves falling knives in competing with Mom and Pop for their family homestead.

  21. In SoCal it’s definitely not a buyer’s market yet, especially where we’ve been looking in Hawthorne. The scales have tipped a bit, but absolutely still favors the sellers — especially for any property priced under $500K. There’s just too much demand.

    Hawthorne YOY numbers indicate inventory is up 211%, but despite that, median sales prices STILL managed to climb 9% YOY. Days on market increased from 22 to 38, but I’ve seen starter homes under $600K go pending in the first week.

    For people like my wife and I (two earner household, two young kids, no money hookups through family), it’s extremely hard to find a place we can afford. We have zero credit card debt, less than $4K remaining in student loans, one car payment of $200/month, and we shop at Food-4-Less and Costco. We’ve been in the same apartment for over 9 years because it’s rent controlled and we can’t afford to rent anywhere else now, but we can’t find a house we can afford comfortably until daycare, aftercare, and diaper costs subside a bit. Even then, we don’t want to pay $3K/month in mortgage for a “sweat equity charmer.”

    We’ve been seriously looking to buy for about 2 years now that we have the second rugrat, but we’re priced out until the market modulates towards a healthier buyer-seller balance supported by local fundamentals, instead of blatant asset inflation due to Chinese money, REIT greed, and artificial inventory shortages perpetuated by lenders cooking the books.

    Hoping 2020 brings some relief.

    1. “sweat equity charmer”
      That’s the ugliest and most unappealing phrase I’ve heard for a listing in a while. The descriptions are always funny, but that…

      I’m always disappointed if they don’t say “dinning room”.

      1. I’m always disappointed if they don’t say “dinning room”.

        Well at least now all those specuflippers stage names like “dinning room, beach house, kitchen” plaques on the walls of each room to help the FBs identify each room. I typically swipe over those type of listings, I have a bias / hatred built up to them 😉

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