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Technically, There Could Be An Oversupply Of Housing

A report from the Idaho Statesman. “The median house price in Ada County jumped $10,000 from February to March to $335,000, the Intermountain Multiple Listing Service reports. That’s the highest median price since a record $334,400 last August. ‘You’d better hit the saddle and tighten up your seat belt, because it’s going to be crazy,’ said Rick Gehrke, a real estate agent with RE/Max Executives in Nampa.”

From Bloomberg. “The tightest housing markets in the U.S. are unwinding in time for the key spring selling season, giving buyers an edge for the first time in years. San Jose, at the heart of California’s Silicon Valley, had the biggest gain in inventory in the first quarter, jumping 55 percent from a year earlier, according to a study by Trulia of the 50 largest metropolitan areas. Seattle, Salt Lake City and San Francisco followed.”

“Homes in many previously hot areas are piling up as demand cools. Inventory grew in more than half the 50 largest metros, including Los Angeles; Denver; Nashville, Tennessee; Atlanta; Dallas and Boston. ‘West Coast markets were getting slammed — affordability was slipping away from everybody,’ said Felipe Chacon, a housing economist for Trulia. ‘Now it’s showing signs of shifting back the other way, in favor of buyers.'”

“In San Jose, for example, homes that sold in the first quarter were listed for only 57 days. That was one of the fastest paces in the study, but up from 40 days a year earlier. Also, the data only capture timing for properties that sold in the period. Others in the still-available supply have probably languished longer, Chacon said.”

From The Real Deal on New York. “Manhattan’s luxury market saw 17 contracts signed last week for a total of about $127 million, according to the latest report from Olshan Realty. Only three of the units that went into contract were sold by developers. The properties spent an average of 306 days on the market last week and had an average discount of 12 percent from the original to the final asking price.”

The Grand Junction Sentinel in Colorado. “After stark increases to kick off 2018, the residential real estate market has dialed it back to start 2019 with fewer transactions and building permits issued during the first quarter of the year. Bray Real Estate Research and Development Coordinator Kevin Bray said it will be more evident this summer if things are actually trending down, but it could be that the first quarter of 2018 was actually an anomaly.”

“‘Nobody has a crystal ball, otherwise we wouldn’t have cycles,’ Bray said.”

“Even the planned construction projects that could bring upward of 1,500 new homes to the market are not enough to keep up, Bray said. That lack of inventory has also driven up the median housing price, which sits at $250,000 for March. That number was at $229,000 a year ago. ‘The median price is a sign there is still a lot of demand,’ Bray said.”

“He added that we could be nearing a price ceiling as wages have not risen at the same rate as the median price.”

From Street Roots News in Oregon. “Clatsop County has more housing units than it has residents, but many are second homes that are vacant most of the year. It isn’t that there is a shortage of housing in Northwest Oregon’s Clatsop County; it is that a lot of the housing is out of reach to year-round residents.”

“People are being priced out of both rentals and homes for sale, and second-homes and short-term rentals are tying up housing and driving up prices. A 27 percent vacancy rate in the county is attributed largely to second homes. Technically, there could be considered an oversupply of housing in Clatsop County based on a simple comparison of numbers from the study: 1.4 housing units per each permanent resident. This number is misleading because it counts second homes that sit vacant much of the year.”

The Los Angeles Times in California. “Il Pelicano, a dramatic Malibu residence built into a coastal cliff-side, has returned to market for $35 million, down from last year’s $57.7 million asking price.”

This Post Has 45 Comments
  1. ‘1.4 housing units per each permanent resident. This number is misleading because it counts second homes that sit vacant much of the year’

    It’s not that misleading: you got too many shacks! Like China.

  2. ‘Homes in many previously hot areas are piling up as demand cools. Inventory grew in more than half the 50 largest metros, including Los Angeles; Denver; Nashville, Tennessee; Atlanta; Dallas and Boston’

    It’s getting hard for the REIC to maintain this shortage myth with the “hottest” metros “piling up.” Wa happened to my shortage?

  3. ‘the median housing price, which sits at $250,000 for March. That number was at $229,000 a year ago. ‘The median price is a sign there is still a lot of demand’

    This is a key point. Price does indicate demand. And builders are throwing up 1,500 shacks based on that price. But…

    ‘He added that we could be nearing a price ceiling as wages have not risen at the same rate as the median price’

    The loans are filling this gap, not true demand. Grand Junction, I remember when you were on your knees overflowing with foreclosures.

    1. wages have not risen at the same rate as the median price’

      We’ve known that for many years, yet the Real Estate Experts just now pull this out of their hat as the market rolls over. Of course, you knew it all along.

    1. Opinion: There’s no safe place to hide from the consequences of the biggest bubble yet
      By Eugene Steuerle

      Published: Apr 15, 2019 7:00 a.m. ET
      Risk of another big crash is high, but the alternative outcome may be just as bad
      Getty Images
      Have we reached the top?

      Today the United States sits in the midst of the largest wealth bubble in post-World War II history, as measured by household net worth (or wealth) relative to gross domestic product. As I showed in detail recently in the Journal of Business Economics, only two other postwar bubbles come close, with peaks in 1999 and 2006, just prior to the tech stock crash and the Great Recession.

      No one should ignore the risk that this bubble will burst, as did the previous two, with declines in the value of stocks (DJIA, -0.24% SPX, -0.25%), homes, and other assets accompanied by recession, unemployment, and disruption in the plans and lives of many Americans.

      We’re not off the hook, however, should the bubble fail to burst or should peak valuations decline only gradually.

      Household wealth is now more than 5 times the size of gross domestic product, the largest wealth bubble yet.

      Either way, rates of returns on assets likely will remain significantly lower than in the past, creating its own set of risks for pension plans, personal retirement planning, new homeowners, commercial real estate, and other investments, especially those dependent upon returns extrapolated naively from the recent past.

      If valuations stay at current high levels, the expected return is closer to today’s 0% to 2% real interest rate on bills and bonds or a 5% earnings rate on corporate stock, but not the 7% or 10% total returns on a diversified portfolio many people have become used to receiving.
      $20 trillion bonus for investors

      In addition, even without a sudden crash, there likely would be a gradual reversal of the extraordinary period of “bonus appreciation” that, since the mid-1990s, entailed gains of more than $20 trillion in household net worth over and above what might have been expected had wealth merely increased at the same rate as income.

      Suppose that the wealth-to-income ratio simply returns to some prior average. Combined with the lack of past appreciation, that could a represent a negative swing of $40 trillion or more (again, at today’s level of GDP) relative to projections that recent past growth is prologue.

      The recent three bubbles share characteristics and causes unique to a modern period since about 1990.

      1. “Many conventional theses associate the 1999 bubble with tech stock$ and the 2006 bubble with owner-occupied hou$ing. True, those market$ were at the forefront of a$$et appreciation just prior to the two recent rece$$ions with which they are a$$ociated, but, more generally, appreciation $tretched acro$$ most a$$et market$ during those time$.

        appreciation $tretched across most a$$et market$ during those time$.

        appreciation $tretched across most a$$et market$ during those time$.

        Wanker Banker Mega.Bank$ are $trong! … Non.Bank lender$ are $afe!

        “Go dog, go!” … Where are you going dog? … To the dog party!

        “Go dog, go!” By P.D. Eastman

      2. Where, pray tell, is all this wealth hiding? All I see are illegal immigrants driving six-month beater cars and heroin addicts on the road medians begging for money.

        1. The back parking lot where I work all I see are Ferraris, Porsche, BMW, and other less common stuff not even sure what they are. A fancy gym brings in these expensive cars. Workers drive ho hum cars. The homeless are all in Ventura by the government center.

          1. How many of those are leases for goombas trying to keep up with the Joneses (not Ben, lol)?

            Whole lotta that in Clownifornia.

        2. It’s hiding in all the investment and bank accounts of the wealthy – the only real benefactors of the Fed’s “trickle-up poverty” policies.

        3. “heroin addicts on the road medians begging for money”

          Suburban Maryland sounds like a real sh*thole.

          At least is was cheaper than renting, right?

          1. It’s not a sh**hole, in the sense that we do have real flush toilets and electricity and lots of grocery stores and a basically functioning society. But yeah, there’s been a marked increase in unemployables in the past few years. Perhaps you could cleanse your palate with a stroll along the 16th street mall?

          2. What is a six-month beater car?

            I was kinda wondering that myself. My guess was either paying a few hundred bucks for a beater that lasts about that long on average OR maybe that’s how long you can get away without registering it and need to move on to another one?

          3. Someone on HBB used the term “six-month cars” probably a year ago. And yes, it’s an extreme beater that escapted the Cash for Clunkers purge. Like a ’95 Celica with a different color hood and a busted front bumper. Or a very noisy old truck being held together by duct tape and a tarp for windows. I see plenty of those and wonder how they pass inspection and/or emissions. Heh, they probably “know somebody” who will trade a signature for a case of El Presidente cerveza. Because that’s how things are done back home.

    2. True.Believer$ faith is greatly $upported with such an assertion, as long as they have a job.

      (Where ya gonna re$ide next Donna? No luxury U$C hou$ing for you!)

      HOT PROPERTIE$ |REAL E$TATE |BUSINE$$

      Ex-USC official Donna Heinel lists Long Beach home in wake of college admissions scandal

      By NEAL J. LEITEREG | APR 15, 2019

      Donna Heinel, the former USC senior associate athletic director who was fired in March after being indicted in connection with the college admissions scandal, has listed her home in Long Beach for sale at $1.998 million.

      Heinel was fired after being accused by prosecutors of receiving bribes totaling more than $1.3 million to help parents take advantage of relaxed admissions standards for athletes at USC even though their children were not legitimate student athletes.

  4. ‘Only three of the units that went into contract were sold by developers’

    Considering they’ve got thousands to sell, how many decades of inventory is this?

  5. Technically, there could be considered an oversupply of housing in Clatsop County based on a simple comparison of numbers from the study: 1.4 housing units per each permanent resident.

    When prices stop rising and, heaven forbid, start falling, that is when the true glut is revealed. People accumulate housing for reasons other than consumption (e.g. to live in) because they think it is an investment. The bubble tricks people into thinking it is. Then the music stops, prices go flat, a flood of inventory comes in, prices fall, and the whole cycle goes into reverse.

    1. and the whole cycle goes into reverse.

      And since this is the biggest bubble in history, there is more air under the market(s) than most can imagine.

      1. But the Fed can’t see bubbles, they’re only evident after the fact – after they burst and cause widespread economic carnage. My question is this: If everybody in the world sees bubbles everywhere, but the Fed can’t, why should the Fed even exist when they cannot read the tea leaves while in charge of monetary policy for the world’s largest economy?

        1. If everybody in the world sees bubbles everywhere, but the Fed can’t, why should the Fed even exist when they cannot read the tea leaves while in charge of monetary policy for the world’s largest economy?

          Your question seems to imply they are intended to perform some sort of service that’s useful to you.

          1. some sort of service

            Makes you wonder how the Founding Fathers absolutely forgot to establish a banking cartel to create fiat money as the fourth branch of government.

  6. “He added that we could be nearing a price ceiling as wages have not risen at the same rate as the median price.”

    Oh the horror! Plenty of new cash cows out there to offset that “wage inflation” everyone keeps complaining about. Soon Uber and the other IPOs will produce billions of Monies to shoot RE back to the moon!

  7. It took an increase in mortgage rates to “expose” how much the cost of homes had risen?

    Having trouble getting my head wrapped around this — I’m not even anywhere near the loan terms by the time I have decided a house is beyond what I think I can afford.

    It just seems to me that if a fractional change in interest rate is some sort of go or no go for purchasing, you are shaving the numbers way too close.

    1. We really need to see a geographic breakdown of where non qualifying mortgages are originating. I am confident those numbers would turn the whole myth of tighter lending standards on its head in California. It’s impossible for a person with median income and median savings to come anywhere near conditions to qualify for a median priced home in SoCal. Either there is another epidemic of fraud going on or the % of borrowers getting non qualifying loans from non bank lenders must be the very significant majority of borrowers or some combination of both. We’ll probably only find out post Mortem. Speaking of which has anyone else noticed how much harder it is to find critical alternative information regarding the housing market and the economy in general as compared to during the last bubble? The standard search engines are basically useless. The only results they return are from Bloomberg, MSNBC, CNN and the like.

      1. WolfStreet went over this a few times:

        https://wolfstreet.com/2019/02/27/shadow-banks-take-on-largest-mortgage-risks-federal-housing-administration-fha-on-the-hook/

        Today, there’s a new generation of shadow banks dominating mortgage lending. According to a February 2019 report by the Mortgage Bankers Association, the share of mortgage originations by nonbank lenders has surged from 24% in 2008 to 54% in 2017, while the share of large banks has plunged:

        In November, a record 60% of FHA-insured purchase mortgages exceeded the QM limit for DTI.
        50% of VA mortgages exceeded the QM limit.
        But Fannie and Freddie mortgages are well below the limit, at around 30%

      2. “Either there is another epidemic of fraud going on or the % of borrowers getting non qualifying loans from non bank lenders must be the very significant majority of borrowers or some combination of both. We’ll probably only find out post Mortem.”

        Like always?

      1. Wonder when the FB stopped paying the mortgage? DoM show under a year but been listed since 2016

        Price and tax history

        Price history
        DATE EVENT PRICE
        1/23/2019 Price change $1,695,000(-4.5%)
        5/18/2018 Price change $1,775,000(-1.3%)
        3/20/2017 Listed for sale $1,799,000(+0.2%)
        1/6/2017 Listing removed $1,795,000–
        7/8/2016 Price change $1,795,000(-5.3%)
        6/9/2016 Price change $1,895,000(-5%)
        5/19/2016 Listed for sale $1,995,000(-15.1%)
        7/22/2005 Sold $2,350,000–

        1. “DATE EVENT PRICE
          1/23/2019 Price change $1,695,000(-4.5%)

          7/22/2005 Sold $2,350,000–”

          Maybe my math is funny, but I see a reversal of
          (1,695,000/2,350,000 – 1) X 100% = -27.9% over the fourteen year period from 2005 through 2019. Could this be a harbinger of the rear-view mirror view of the Housing Bubble which awaits us?

    1. If history is anything to go by, all these auctions will be postponed.

      This prompted me to look into a foreclosure in an area I watch – notice of default in 2009, notice of sale 2018, scheduled for auction this month, probably won’t happen. 3 years of unpaid HOA dues. Liens, lawsuits. A zombie borrower enabled for over a decade!

  8. I realize the Boise valley area is still growing due to stronger-than-average growth, but it certainly looks like the area is just slow to see the bubble burst, especially after considering median prices are up 100% since 2012, the entire US is slowing, funny-money is getting harder to come by everywhere, and the virtuous cycle is about to turn vicious once again.

    Sure they’re seeing more people immigrate than emigrate, but at some point soon they’ll realize there’s no real housing shortage as inventory continues to increase and pricing levels off before it drops precipitously.

    1. growing due to stronger-than-average growth

      LOL, growth due to growth doesn’t explain much. Meant s-t-a job growth.

    2. Some of this demand must be people relocating from Seattle. At recent open houses in Seattle eastside we’ve asked why the owners are selling. 50% of the time the answer is: “Retiring and moving to Idaho/Montana/Eastern WA.”

    3. News is slower to trickle in to a smaller market like Boise, and the Realtors and other housing pimps can keep the bubble going for a while longer with a public generally ignorant of larger national trends. But when it does, it will be a doozy. Sales were down 7% YOY in March, and as sales decline prices will follow.

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