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The Simple Rational Expectation Of, ‘Why Buy Today When I Can Get The House At A Lower Price In Six Or Eight Months?’

A report from My Folsom in California. “The Folsom Housing market started out the first quarter of 2019 with a somewhat-expected whimper. We typically see a dip in prices too, and the average price per square foot was down to $259, the lowest since May of last year. First quarter closed sales reflect the activity of the brave, bargain-hunting or relocating buyers, as well as the motivated sellers. Softer demand can result in lower prices.”

“As of today, there are 111 homes for sale in Folsom, and 29 of them have come on the market in the past week. A rise in inventory, a drop in rates, a strong economy, and nice weather. For buyers, if you were taking the ‘wait til next year’ approach, next year is here, take advantage of the situation while you can.  More inventory means more choices, and lower interest rates means homes are more affordable. For sellers, lower interest rates may help keep prices steady, though I’d suggest pricing it right, and detailing your property for today’s picky buyers.”

The Daily Republic in California. ” January, February and March all are lower in sold properties than a year ago. Our year over year same quarter comparisons show we are up 0.07 percent in new listings, down minus 13.6 percent in solds and down 14.2 percent in pending sales. The red flag is the March 2018 vs. March 2019 pending sales were down at minus 19.2 percent. That’s a lot fewer homes that will show as sold in April 2019.”

“Many of you may be thinking prices will continue to go up but the numbers suggest otherwise. Our Days On Market (DOM) has increased significantly. The days of multiple offers, selling for way over asking price are disappearing fast. In fact, homes are now selling for as low as 96 percent of the sales price as was demonstrated in the month of January.”

“So it’s important to understand that a $400,000 listed price should expect a buyer’s offer to be as much as 5 percent to 7 percent less than asking and settle around 3 percent to 4 percent less. Would you accept a $384,000 offer on a listed $400,000 home?”

“The good news, depending on if you are a buyer or seller, is we peaked in pricing about a year ago. We slipped pretty strongly from June 2018 through September 2018 and have now started to recover and what we in the industry term as ‘balance.'”

The Coastal Breeze in Florida. “According to the March 2019 Market Report released by the Naples Area Board of REALTORS® (NABOR®), which tracks home listings and sales within Collier County (excluding Marco Island), the median closed price of homes decreased 5.6 percent to $340,000 in March 2019 from $360,000 in March 2018.”

“Another reason for the decrease in median home price is due to sellers pricing their homes appropriately – based on actual comparisons of recently sold homes – to gauge their home’s estimated value rather than pricing their homes based on unvalidated values.”

“‘When inventory was tight, there was more urgency to buy,’ said Wes Kunkle, Managing Broker at Kunkle International Realty. ‘But so far this year buyers have been spending time looking around more and at new construction too.’ Kunkle added that the Southwest Florida MLS showed ‘about 19 percent of the single-family closed sales in March were new construction.'”

“Inventory during March increased in only one segment and place: single-family homes in the Naples Beach area. This area’s inventory increased by 4.1 percent and is where a large majority of ‘spec’ home building is taking place.”

“Brokers reviewing the March report also discussed their concern about how water quality issues and short-term rental limits might impact the Naples housing market moving forward. ‘If the county puts limits on rentals we may see a spike in inventory,’ said Mike Hughes, General Manager for Downing-Frye Realty, Inc.”

From The Epoch Times. “With the home buying season now getting underway, the signs of a moderating real estate market are already showing themselves. For instance, over the past year or so, the national average of housing price increase is a paltry 0.6 percent. This time last year, annual housing appreciation was up 10 percent. This is the–and perhaps part of the cause–of changing buyer perceptions.”

“Data from Redfin confirms a shift in buyer behavior. In January of this year, only 13 percent of homes on the market had competing offers, down from 53 percent in January of 2018. Buyer sentiment, at least in the early part of 2019, appears to be less optimistic, if not wary of where the market is headed.”

“Perhaps just as importantly, even though wages are rising, home prices are rising faster than wages in 80 percent of U.S. housing markets. That’s a huge factor in how buyers view the market. Not surprisingly, buyers aren’t moving as quickly as they have over the past several years. Plus, with predictions a price drop in real estate just as plentiful as those predicting the opposite, people tend to confirm their own biases.”

“Thus, many buyers are waiting before they make an offer. Their thinking is borne of the simple rationale expectation of, ‘why buy today when I can get the house at a lower price in six or eight months?‘ This reasoning has led to offers coming in slower and lower for homes on the market in 2019.”

“Many markets are seeing housing surpluses. Inventory is up the majority of the top 50 biggest metro areas of the country, including Los Angeles, Denver, Nashville, Atlanta, Dallas and Boston. It’s a noteworthy irony that half the country can’t afford to buy a house and the other half can’t afford to sell theirs.”

“To add fuel to the low interest rate fire, zero-down loans have come back into the mortgage market. Of course, banks have been loosening credit for the past four years to keep abreast with the credit cycle, so the latest round is part of a longer trend. That said, lowering lending standards usually happens when there aren’t enough qualified buyers to keep the housing market afloat, as the most credit-worthy borrowers have acquired their financing. That doesn’t always end well.”

From Think Realty. “Leading U.S. counties in foreclosure starts is Los Angeles County, California, which had 837 properties initiating the foreclosure process in March 2019, ATTOM reported. The figure is a whopping 54 percent increase from the previous year.”

“Following Los Angeles County is Cook County, Illinois, at 803 properties starting the foreclosure process, ATTOM found, which is a decline of 17 percent from last year. No. 3 Harris County, Texas, reported 546 properties, No.4 Broward County, Florida, posted 381 properties and No. 5 Maricopa County, Arizona, had 377 properties.”

“A handful of states are reporting year-over-year increases in foreclosure starts, including Montana (up 48 percent), Minnesota (up 29 percent), Nebraska (up 28 percent), Texas (up 15 percent), and Florida (up 13 percent).”

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This Post Has 49 Comments

  1. ‘When inventory was tight, there was more urgency to buy…‘about 19 percent of the single-family closed sales in March were new construction’

    ‘Inventory during March increased in only one segment and place: single-family homes in the Naples Beach area. This area’s inventory increased by 4.1 percent and is where a large majority of ‘spec’ home building is taking place’

    Data at the bottom of the article:

    Single-family median closed price (YOY) -7.8%

    Builders in Naples have been undercutting the existing market for some time.

  2. ‘Many markets are seeing housing surpluses. Inventory is up the majority of the top 50 biggest metro areas of the country, including Los Angeles, Denver, Nashville, Atlanta, Dallas and Boston’

    Wa happened to my shortage?

  3. ‘Many of you may be thinking prices will continue to go up’

    Where would they get that idea?

    ‘but the numbers suggest otherwise. Our Days On Market (DOM) has increased significantly. The days of multiple offers, selling for way over asking price are disappearing fast. In fact, homes are now selling for as low as 96 percent of the sales price as was demonstrated in the month of January’

    ‘The good news, depending on if you are a buyer or seller, is we peaked in pricing about a year ago’

    Thus the “my BMW payment isn’t going to make itself, lower your prices you greedy bashtards or I’m gonna starve!”

    1. These people add absolutely nothing of value to the transaction. They are leeches, nothing more. I am shocked that they have been able to maintain a stranglehold on their commissions in this day and age of technology.

      1. Totally agree. In a world without realturds: The realtors commission could be instantly deducted from all transactions basically lowering the pricing across the board about 5%. That with the continued crater would be a great start to get us back to a sustainable real estate market.

    2. Who is enjoying baked crow for their Easter dinner?

      Up or down?

      Some economists remain bullish on the housing market. Chris Thornberg, a founding partner with Beacon Economics, predicted sales could be back in positive territory by this summer.

      “All these ridiculous claims of a housing downturn is just ridiculous,” Thornberg said. “The economy is humming along like nobody’s business. The fact that mortgage rates have dropped will not cause a rebound. It’s simply going to make the rebound stronger.”
      …

  4. I got an update of the FHA changes in an email from Edward Pinto:

    “The latest MBA Weekly Application Survey provides further clarity regarding the eventual impact of FHA’s Total Scorecard changes on FHA endorsement volume. FHA and VA application shares usually track fairly closely, especially over short time periods. Since FHA made a policy change and VA did not, this provides the opportunity for a natural experiment.”

    “We start by comparing FHA and VA’s respective shares for the two weeks prior to the announcement (with VA indexed to 100). We can then track relative changes in the ratio of FHA apps to VA apps. As indicated in the chart below, for the two weeks prior to the effective date, the ratio was 1.00. However, in the first week the changes took effect, this ratio dropped to 0.91. In the second and third weeks that the changes were in effect, the average ratio was 0.87 or a 13% drop relative to the VA. Application data was just released for the fourth week since the changes took effect indicates a ratio of 0.83% or a 17% drop relative to the VA. Given the magnitude of this drop and that the deviation in FHA’s application volume relative to the VA continues to grow, there is a growing likelihood there will be a significant drop in FHA’s eventual endorsement volume for April and that this decline will continue into May. That would also indicate that FHA is getting the desired results from the Total Scorecard changes.”

    “We will continue tracking this relationship, but definitive results will not be available until June/July when loan level origination volumes for April/May are released.”

    1. Ben, can you parse this for us who haven’t followed this “natural experiment” as closely? What is different now between FHA and VA? Which agency has looser standards?

      2. VA is all subprime cuz the goal is housing vets. FHA has been leading the race to bottow for everyone else, until:

        http://housingbubble.blog/?p=879

        FHA has made changes and what this email shows is that they are indeed loaning a lot less. As I understand it, he used the VA comparison simply because it usually tracks FHA closely. We’ll have the full numbers this summer.

        1. The veterans look to be in line to become the unwitting bagholders in the next crash, thanks to the folly of government-sponsored, preferential ‘affordable lending’ programs.

          1. Got it. Thanks for explaining. I guess that is good that FHA is back peddling a little bit. Too bad the VA isn’t following suit.

        2. “…this email shows is that they are indeed loaning a lot less.”

          If the same howmuchamonth buyer has a choice between lenders with tighter (e.g. FHA) and looser (VA) lending standards, they will pick the looser standards lender, as they will be able to “afford” to qualify for a larger loan to purchase a bigger, more expensive house, at a higher debt-to-income ratio and lower downpayment. And the chump who goes FHA will get outbid by subprime borrowers of similar financial means who borrow from the VA. Those who win bids get to buy; those who lose, drool.

  5. “For buyers, if you were taking the ‘wait til next year’ approach, next year is here, take advantage of the situation while you can. More inventory means more choices, and lower interest rates means homes are more affordable. ”

    Now is the best time to buy!

    1. One thing’s for certain – there are no bargains to be had at this time, only grotesquely overpriced houses.

      1. Yeah, definitely. I appreciate that article, I hadn’t seen it before. It’s been a little frustrating around here this spring. Just enough buyers to keep prices from falling much so far. I don’t look at anything over 750k so I didn’t realize how much expensive inventory there was. Looks like we finally found a suitable rental. Nice ones in the right places have gotten very scarce this spring, it seems that lots of people are choosing to rent instead of buy and lots of landlords are choosing to try to sell. So anyway, looking forward to getting into a rental that will be nicer for the next couple years than the overpriced H1B ghetto we currently inhabit.

  6. “To add fuel to the low interest rate fire, zero-down loans have come back into the mortgage market. Of course, banks have been loosening credit for the past four years to keep abreast with the credit cycle, so the latest round is part of a longer trend. That said, lowering lending standards usually happens when there aren’t enough qualified buyers to keep the housing market afloat, as the most credit-worthy borrowers have acquired their financing. That doesn’t always end well.”

    Wait. A bunch of people said this cant happen! You mean nonprime is the same as subprime???

    1. Yep, that thing is old and nothing special, although its kinda big. In flyover you could get that same thing for less than 1/5 the price with clean air, clean water, lower taxes, more land, fewer freakazoids and little to no traffic.

      Be lucky to get what he paid for and he probably sunk money into “remodeling” it like every fool does.

  9. “So it’s important to understand that a $400,000 listed price should expect a buyer’s offer to be as much as 5 percent to 7 percent less than asking and settle around 3 percent to 4 percent less.

    Ya know, I’m thinking in terms of true price discovery, which to my mind means that $400K prices is just way too high. So expect my offer to be 66% less, though I’ll settle for around 60% less if I’m feeling particularly generous.

  10. Their thinking is borne of the simple rationale expectation of, ‘why buy today when I can get the house at a lower price in six or eight months?‘

    Ten years of Fed “emergency measures” have fed a speculative bubble unmatched in human history. True price discovery, when it finally imposes itself despite the central bankers’ extend-and-pretend stratagems, is going to lay waste to these fictitious valuations. You’d have to be nuts to buy a shack before the Everything Bubble bursts and hits bottom, as no one knows how many trillions on Yellen Bux valuations are going to ascend into debauched currency heaven before it’s all said and done.

    1. I never thought this 2nd everything bubble was even possible, so I question if we’ll ever get a crash at this point. I think they will try to QE over the entire problem.

      1. I think they will try to QE over the entire problem.

        I agree…the question now is when will it stop working?

        1. It didn’t work to stop asset prices from collapsing in Japan after their bubble popped, circa 1989. They were pushing on a string with negative results from what was intended. Maybe the Fed knows better how to use QE for financially engineered bubble price reflation?

          1. The Wall Street Journal
            Economy
            Fed Chief Gets Set to Apply Lessons of Japan’s History
            By Jon Hilsenrath
            Updated Oct. 12, 2010 12:01 a.m. ET

            As a Princeton professor in the 1990s, Ben Bernanke lectured Japanese officials for mishandling their economy.

            Today, Tokyo’s economic problems are more than academic for the Federal Reserve chairman. They are a window into his own situation as he stares at what could be a long period of slow growth, high unemployment and declining inflation in the U.S.
            …

        2. Keynesian armageddon looms. Read the handwriting on the wall and weep:

          The Diminishing Effects of Japan’s Quantitative Easing
          By Sean Ross
          Updated Oct 26, 2018

          Japan is the most indebted country in the world as measured by debt-to-gross domestic product (GDP). As of 2018, the Japanese debt-to-GDP ratio was at an all-time high at 254%. Government debt to GDP in Japan averaged 137.4% from 1980 until 2017. Japan’s record lowest debt to GDP was recorded in 1980 when it was 50.6%.

          The country is a case study in modern macroeconomic policy and exemplifies why governments and central banks cannot control the economy in the way that many textbooks suggest.

          Japan’s central bank, the Bank of Japan (BOJ), has pursued decades of unconventional monetary policy. Starting in the late 1980s, the BOJ has deployed strict Keynesian policy, including more than 15 years of quantitative easing (QE), or the buying of private assets to recapitalize businesses and prop up prices.

          Despite these efforts, there is strong evidence that Japan’s easy money policies only produced an illusory growth while failing to improve the fundamentals of a stagnant economy. The more Japan’s leaders tried to stimulate their country’s economy, the less it responded.
          Stagnation Begins, and the Government Steps In

          The money stock in Japan grew by 10.5% per year between 1986 and 1990. The discount rate fell from 5% in 1985 to 2.5% in 1987, fueling large-scale borrowing that many Japanese investors used to buy assets in mainland Asia, particularly South Korea. Asset prices climbed in Japan, a phenomenon that tends to occur whenever interest rates are artificially lowered for years at a time. Japan was effectively in a bubble economy propped up by cheap paper.
          …

        3. The question is akin to asking at what point the drunkard’s hair-of-the-dog hangover cure finally gives way to cirrhosis of the liver, a life on skid row, and subsequent untimely demise.

        4. The Financial Times
          Opinion US economy
          What Donald Trump gets right about the US economy
          The president understands monetary policy has done more for the markets than Main Street
          Rana Foroohar
          April 14, 2019

          It is amazing how adept Donald Trump is at identifying something important in the felt experience of the American public…

          [Mr Trump] has … hit on an important truth — that monetary policy over the past decade has done much more for the markets than the real economy.

          Consider that since the beginning of 2010, real hourly wages in the US have grown by only 6 per cent, while real housing prices have grown by over 20 per cent and inflation-adjusted stock market valuations have doubled. Household incomes have grown quicker than wages, thanks to employment growth. They are up 10 per cent from 2010 to 2017, though they still lag behind asset price growth. Meanwhile, the period 2007 to 2016 saw the largest increase in wealth inequality in the US on record.

          This, along with record levels of corporate indebtedness relative to gross domestic product, were unintended consequences of the Fed’s efforts. The central bank could bolster asset prices, but couldn’t remove the principal drags on the economy. These do not stem from a lack of money, but from deeper challenges that monetary policy can’t solve — from a skills and jobs mismatch, through an ageing workforce, declining geographic mobility and greater corporate concentration, to technology-driven labour market disruptions.

          You can’t fix those things with low interest rates and quantitative easing…

          2. “…at 1978 levels.”

            That’s a while back — before I entered the adult workforce, which in and of itself was a while back. The late 1970s were not good economic times in the US.

          3. This is where Ivanka Trump’s idea for expanded tax breaks for childcare would be very useful. Same with Elizabeth Warren’s ideas on that front. Make it easier to provide reasonably priced high quality childcare and you’d get a strong stream of talented women in the workforce and you’d also raise the labor force participation rate.

      2. I’m afraid that price discovery is no longer an option for the current monetary system. They continue with ZIRP/NIRP QE PPT ESF TARP Operation Twist heroics or the whole system goes belly up and we start over.

        2. The Fed can only surprise the masses with its fooling games so many times before the fools can no longer be fooled…in theory, at least. (However, one should never underestimate the financial ignorance of the American public…)

          1. The vast majority of the ‘Murican sheeple get their news and information from the Oligopoly media, which deliberately keeps them in the dark as to the magnitude of the swindles being perpetrated against them by the Fed and its financial sector accomplices.

  12. A five minute perusal of Zillow finds numerous six figure price cuts in ZIP 80113, note also the numerous million dollar plus properties sitting on the market for six months, a year, or longer.

    Cut $130,000 to $1,700,000 on 4/16:

    https://www.zillow.com/homedetails/3663-S-Albion-St-Englewood-CO-80113/13123136_zpid/

    Cut $300,000 to $2,500,000 on 4/16:

    https://www.zillow.com/homedetails/70-Meade-Ln-Englewood-CO-80113/99612842_zpid/

    Cut $100,000 to $2,675,000 on 3/14:

    https://www.zillow.com/homedetails/14-Sunrise-Drive-Cherry-Hills-Village-CO-80113/2099931839_zpid/

    Cut $150,000 to $2,850,000 on 4/19:

    https://www.zillow.com/homedetails/2-Viking-Dr-Englewood-CO-80113/13149331_zpid/

    Cut $155,000 to $2,995,000 on 4/2:

    https://www.zillow.com/homedetails/4411-S-Lafayette-St-Cherry-Hills-Village-CO-80113/2137941916_zpid/

    Cut $200,000 to $2,795,000 on 3/25:

    https://www.zillow.com/homedetails/4733-S-Elizabeth-Ct-Englewood-CO-80113/13149543_zpid/

    Cut $500,000 to $3,499,000 on 4/9, its highest asking price was $5,700,000 back in 2013, this last one is a bank owned foreclosure, no “pent-up demand” happening here:

    https://www.zillow.com/homedetails/4733-S-Elizabeth-Ct-Englewood-CO-80113/13149543_zpid/

  15. Consumer Affairs

    “Within five minutes of parking his Pontiac Grand Prix, Todd’s car, pictured at right, lit up a suburban Virginia roadside in roaring orange flames as the car turned to charred metal, melted plastic and burned rubber.”

    “He’s not alone. Last year there were 266,000 car fires reported in the U.S. The fires killed 520 people and the problem seems to be increasing.”

    “Despite NHTSA’s sanguine view, there’s no shortage of complaints about car fires, and in many cases consumers insist they were up to date on the maintenance of their vehicle. Many of the fires involve cars that had been parked for hours or even days.”

    “In Long Beach, New York, Rory’s 2003 BMW 330ci with 49,000 miles spontaneously caught fire at 11:35am September 13th, he told us.”

    “I had not driven the car in two days,” Rory said. “I was getting ready to leave my house when I heard my car alarm going off. As I approached the vehicle I could see smoke inside the car. I quickly tried to unlock the doors with my keyless entry which didn’t work at this point.”

    1. Hundreds of thousands of gas car fires happen every year. This is not news. EVs are probably a lot less likely to catch fire, although stories about Teslas catching fire are probably more likely to be reported in the media because they get clicks.

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