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The Drop In Prices Has Created A Buyer’s Market

A report from Market Watch. “Sales of newly-constructed homes finally gained momentum after months in the doldrums. One thing that helped boost sales: lower prices. The median price of a home sold in March was $302,700, 9.7% lower than the same period a year ago. At the current pace of sales, it would take 6 months to exhaust available supply.”

“For the year to date, sales are running just a hair – 1.7% – stronger than the same period last year. In March, the Commerce Department revised down several prior months’ sales estimates. Rob Dietz, chief economist for the National Association of Home Builders, acknowledges that comparing the current housing economy to the one from two decades ago has some downsides. For one, the population isn’t growing nearly as fast now as back then. Still, the gulf between then and now is stark – and 2018’s anemic pace of construction follows several years of similar underbuilding.”

From Wood Business. “The latest data of U.S. new housing starts and of home sales for March 2019 is not encouraging. At a time of year when wood sales would normally be hot, this housing market softness is doing nothing to improve already dropping North America construction framing softwood lumber prices.”

“For the week ending April 19, 2019, Western Spruce-Pine-Fir KD 2×4 #2&Btr (RL) FOB sawmill wholesaler prices averaged U.S.$336 mfbm, a decrease of -$12, or -3.5%, from the previous week. This week’s price is -$66, or -16%, less than it was one month ago. Compared to one year ago, prices are down -$220, or -40%.”

“In the Pacific Northwest, kiln-dried Douglas-fir lumber purveyors couldn’t believe that they were still waiting for a wave of demand associated with spring construction to occur. Secondary suppliers found some success from day-to-day, but only by selling below sawmill-replacement levels — which all slid another $5 or so themselves. For their part, KD fir producers were in tough when it came to log supply. While low volumes of incoming fibre reduced pressure to sell at increasingly deeper discounts, log quality and especially pricing put them in a definitive pickle.”

From KPIX 5 in California. “For the first time in seven years, housing prices have dropped in San Jose, albeit slightly. Gary Shapiro, a senior broker with The Shaprio Group, called the downward trend a ‘trickle,’ not a sign of a real estate bubble on the verge of bursting.”

“Shapiro said the drop in home prices has created a buyer’s market in Silicon Valley. But he also cautioned that the drop is likely only temporary. ‘The long-term projection is very positive for this valley,’ he said. ‘I really feel that the market is just taking a pause and it’ll end up appreciating again in no time.'”

“Dominic Detar said he hopes the decline is only temporary, and that the home that he owns in San Jose continues to climb in value. ‘I think it’s exciting,’ he said. ‘We’re number one in the country, so I think that’s good.'”

The Wall Street Journal. “Compass, a fast-growing residential real estate broker, is still trying to figure out the business. But its free-spending ways are rattling rivals and shaking up the industry. Industry executives say these are programs that many traditional firms can’t afford if they plan to break even. ‘It doesn’t make sense,’ said Bess Freedman, chief executive of New York brokerage Brown Harris Stevens. ‘Are you a charity or are you a real estate company?'”

“The firm is one of a current group of startups that has relied on funding from venture capital to grow rapidly without much concern over profits and with an IPO as the end game. ‘Short term profitability is something that many of the more modern companies are not as focused on,’ Compass CEO Robert Reffkin said.”

“Mr. Reffkin said the company plans to make money through ancillary services like title, mortgage and insurance services, but it’s not clear how. ‘We’re not yet at a stage where I have a very clear monetization strategy because we haven’t really talked about it,’ said Chief Operating Officer Maëlle Gavet.”

“Compass has expanded rapidly through acquisition, including venerable firms like Stribling & Associates in New York and Pacific Union in San Francisco. Jeff Barnett, a manager at Alain Pinel Realtors, a 1,300-agent company recently acquired by Compass in the Bay Area, saw the move as survival. ‘Our margins kept getting thinner and thinner,’ he said.”

“Bigger firms are also feeling the pinch from a weaker housing market and the increasing power of listings aggregators who are driving up fees. Realogy’s net profit sank by 68% in 2018 from a year earlier as it ramped up commission splits and battled a declining luxury market.”

“‘I definitely keep my eye on competitors who are doing more desperate things and are willing to lose money and don’t seem to have a path to make money,’ said Ryan Schneider, Realogy CEO.”

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This Post Has 38 Comments

  1. ‘The median price of a home sold in March was $302,700, 9.7% lower than the same period a year ago’

    DONG! That sound you hear is the cries of thousands of newly minted FB who bought new shacks recently.

    1. This is fantastic news! America’s affordable housing goals now lie within reach!! With new homes down in price by nearly 10% since a year ago, used home prices are soon to follow, as nobody is going to want to buy a used dump wkth new homes on sale for 10% off. Slash your used shack price now, or stay priced in forever!

  2. So zillow says San Jose is down less than one percent. Even Leslie is calling BS on that.

    ‘Jeff Barnett, a manager at Alain Pinel Realtors, a 1,300-agent company recently acquired by Compass in the Bay Area, saw the move as survival. ‘Our margins kept getting thinner and thinner’

    Does that sound like less than 1%? BTW I check every day and not a peep out of Santa Clara media with their double digit crater. Hmmm.

  3. ‘FOB sawmill wholesaler prices averaged U.S.$336 mfbm, a decrease of -$12, or -3.5%, from the previous week. This week’s price is -$66, or -16%, less than it was one month ago. Compared to one year ago, prices are down -$220, or -40%’

    Now what were the shack builders saying about the cost of construction going up?

    1. I got this in an email today:

      Markets Across the U.S. Experience Continued Declines in Showing Traffic in March
      Eighth Consecutive Month of Slower Year-Over-Year Activity

      Key Points:

      March saw a 7.2 percent year-over-year drop across the U.S.; the West Region experienced a 17.2 percent drop in showing activity compared to the same time last year, marking the 12th consecutive month of slowing activity and bringing the 12-month average of year-over-year declines to -13.4 percent
      Showing traffic was also slower compared to the same time last year in the Midwest (-9.2 percent), South (-7.2 percent) and Northeast (-3.2 percent), the sixth consecutive month of declines in every region

      April 23, 2019 – The promise that March would see an uptick in home showing traffic in the traditionally busy spring selling season went unrealized as activity continued the trend of year-over-year declines, according to the latest data from the ShowingTime Showing Index®.

      Buyer traffic slowed for the eighth consecutive month in the U.S. compared to the same time last year, with activity down 7.2 percent. The West Region was the hardest hit by the continued lag, recording a 17.2 percent drop in year-over-year showing activity. The West has now experienced a full year of declining traffic compared to the previous year.

      1. That must be a misprint Mr Jones. Zillow was predicting more double digit increases for San Jose in 2019.

        Zillow’s 2019 predictions for top ten hottest markets. Five of these have already gone negative. Any bets on how many will stay above the waterline? Orlando, Nashville, and Jacksonville are looking like they will succumb by year end. Maybe Atlanta and Minn can stay afloat? 2 out 10. Hmmmm. Will be interesting to see how their home flipping business works out given the accuracy of their market predictions.

        San Jose
        Down y-o-y o.2% in April

        2. Orlando

        3. Denver
        Down y-o-y 2.2% in February

        4. Atlanta

        5. Minneapolis-St. Paul

        6. San Francisco
        Down y-o-y 4% in April

        7. Dallas-Fort Worth
        Down y-o-y 2.5% in February

        8. Nashville

        9. Jacksonville

        10. San Diego
        Down y-o-y 0.3% in April

        1. There now literally are more CR8Rs than you can shake a stick at. How will the real estate pimps ever manage to stomach their supersized helpings of crow?

      2. CR8R

        “…the West Region experienced a 17.2 percent drop in showing activity compared to the same time last year, marking the 12th consecutive month of slowing activity and bringing the 12-month average of year-over-year declines to -13.4 percent…”

    2. Whoa. With a few more high profile data points with a 2019 price substantially below the 2002 price, I will begin to suspect that the Great Housing Bubble may be on its last leg.

    3. Honestly that’s a pretty nice house. They don’t show any private areas (bed or bath), but the place is understated and classy. The cottage/recording studio is cutie-patootie. The area around the pool is a bit underdone. It needs more landscape/hardscape, but that’s easy to do.

      And it’s probably the first time I’ve seen a piano in a living room with actual sheet music on it instead of family photos. “Phantom of the Opera.” Somebody clearly plays that piano — likely one of the kids.

      FYI Paul Simon net worth: $55 million.

  7. Sorry Domenic, in about 24 months your $hack will be worth 50% of today’s value if you’re lucky. Or you can listen to David Lereah 2.0, AKA Danielle Hale, who recently revised her bull$hit forecast upwards today.

  8. “Shapiro said the drop in home prices has created a buyer’s market in Silicon Valley. But he also cautioned that the drop is likely only temporary. ‘The long-term projection is very positive for this valley,’ he said. ‘I really feel that the market is just taking a pause and it’ll end up appreciating again in no time.’”

    What a bunch of chicken little? Zillow reported a drop of 0.2% YOY in prices and it’s now a buyer’s market? I think someone is “lion” here. Either the drop is much worse or everyone was trying to time the market at the same time????? IPOs are coming like one shill said!

    1. March 19, 2019

      ‘In California, San Jose, San Francisco and Orange County saw prices dip 11.3%, 7.9% and 2.4%, respectively. San Jose is also experiencing a glut of inventory. The number of listings on the San Jose market has jumped 82% in the last year’

      http://housingbubble.blog/?p=1263

      2. The stench of ramen is overwhelming the air here in the Bay Area. Had an email from a realtor I lowballed on a property back in October asking me today if I was still interested in that shack.

  9. 2018’s anemic pace of construction follows several years of similar underbuilding

    Sure Rob, following decades of overbuilding. Why keep building more when your members can’t “cash flow” already. Prices are falling faster than they can nail up those rapidly depreciating 2x4s.

    Poor, poor Rental Watch.

  12. What’s that we keep hearing over and over again — they can’t build homes affordable to more people due to the costs?

    Builders are liars.

    1. It’s mostly a stalemate in this area currently. Very little selling, and sellers for the most part are clinging to inflated prices. Homes that are in the desired segment of the market, are priced and presented correctly are selling normally. But the homes of the stubborn, greedy flippers are gathering dust.

  14. are there any positive markets in the US
    bend?
    asheville?

    only 22151 reigns supreme under Orangeman protection

    1. Nope, market in Oregon is drying up, crater is coming here too. Talked with a realtor for 4 hours the other day, he’s going to cash and advising clients to take any reasonable offers. Days on market is up something like 4-5 fold at the high end in the past year. Prices were crazy and still are. Lots of building while existing sits empty just down the street. He said 155 people a day moving there and the leeches in government want to pack them in as densely as possible while they enjoy their sprawling estates and fat pensions

      2. the leeches in government want to pack them in as densely as possible while they enjoy their sprawling estates and fat pensions

        It’s the American Dream.

    2. Boots

      Even suburban MD isn’t doing great. In my drives to the semi-country or established burbs, I see lots of inventory in the $800-$1M places, all chasing the market down $15K at a time. Homes in my nabe are selling, but only if it’s been reno’ed with Minimalist Millenium Gray including not-quite-legal basement apartment. Handyman specials are sitting because they are overpriced and renos are expensive.

      I don’t think I would call this an average price drop just yet. The price drops for expensive houses are just wishing prices coming to reality. The rest of the houses are unlike each other, so it’s hard to say if a price drop is due to bubble popping or some flaw with the individual house.

      Lots of attached product going up near the railroad tracks/metro stops — $600K+ for a tiny crappy built townhome.

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