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Has The Housing Bubble Finally Burst?

It’s Friday desk clearing time for this blogger. “The new color for this spring’s housing market map is red, as more and more Dallas-area neighborhoods show declines in purchases from a year ago and lower overall sales prices. The biggest year-over-year price declines were in East Dallas, Far North Dallas, Northwest Dallas and Irving — all with prices 8% below where they were a year ago, according to data.”

“But housing analysts don’t see a similar housing shakeout in the works for North Texas. ‘A crash would involve a loss of jobs, incomes going down and foreclosures,’ said James Gaines, Real Estate Center chief economist. ‘We are not doing a 2007, 2008 or 2009 crash again.'”

“‘Buyers that were paying more than what a house was listed for are now paying closer to market value, said Paige Shipp, regional director of research firm Metrostudy Inc. ‘What we were doing before was not sustainable. We would have fallen off a cliff.'”

“More neighborhoods saw first quarter declines in home purchases than in any year since 2009 — during the worst of the Great Recession.”

“While real estate agents say Houston is still a hot market, the pace of home price appreciation has begun to slow, indicating a softening of prices. That rebalancing comes as many sellers’ expectations are still in tune with the hefty year-over-year increases of past years. It’s time, said real estate broker Mark Dimas, for sellers to have more realistic expectations when pricing their homes.”

“‘If people keep putting homes on the market at higher prices, inventory will continue to grow and eventually you’re going to have a buyers’ market and prices are going to start to fall,’ Dimas said.”

“According to the Fort Collins Board of Realtors , 217 new townhouse-condo listings hit the market from January through March, compared with 563 single-family homes; 142 sales closed, slightly below last year. While the market may have tempered, some sellers’ expectations have not, Realtor Sean Dougherty said.”

“He said two clients recently put in cash offers for the full asking price. Both sellers rejected the offers, preferring to wait to see if better offers came along. ‘If they wanted more money, they should have priced their homes higher,’ Dougherty said. The downfall of that approach is ‘it already pissed off the buyer.'”

“The first signs of change came in the summer of 2018, which one realtor Curbed spoke with dubbed “the most competitive housing market in recorded history.” But that prediction didn’t materialize. Instead, homes started lingering on the market and home sales dropped, setting the stage for potential price drops. This trend has been strongest in West Coast markets that have become some of the most expensive in the country, including San Jose, California, San Francisco, and Seattle.”

“The West Coast continues to see inventory pile up, according to Realtor.com’s March data, particularly in San Jose. Total active listings keeps skyrocketing, and homes that are on the market are staying there longer. Price cuts have spiked. The number of price cuts to homes listed in March jumped by a whopping 275.9 percent year-over-year in San Jose, by far the highest in the country. Las Vegas, Seattle, San Francisco, and Salem, Oregon, also saw price cuts jump by triple-digit percentages in March.”

“A drop in property sales in San Francisco suggests a housing slowdown despite a booming economy, according to city Assessor-Recorder Carmen Chu. ‘We have seen a reduction in single-family homes that are being sold,’ Chu said. ‘There’s a lot of questions about why that is. Is it because inventory isn’t there? Are people not willing to sell? Are people waiting to sell at a different time? Are there not willing buyers? Hard to say exactly what the reason is, but we definitely have seen a lower number.'”

“A recent culinary renaissance has created ‘flip-flop fine dining”’—a local term for high-caliber cuisine enjoyed with casual attitude and style. A significant price drop (almost 10 percent for single-family homes) in the central Oceanside area, from 2018 to 2019, makes the city even more appealing for buyers.”

“According to StreetEasy’s 2019 Q1 report, sale prices in Manhattan dropped five percent to an average $1.1 million compared to last year. And Manhattan’s luxury tier, which StreetEasy categorizes as the top 20 percent of the sales market, also dropped nearly five percent year-over-year to an average of $3.9 million, marking the first time that category dropped below $4 million since 2013.”

“Less than half of the 12,000 homes that were listed on their website during the spring of 2018 had sold as of February 2019. Of the homes that were sold, 70 percent closed below their initial asking price and buyers saw a median discount of more than five percent, the report showed.”

“On top of the existing slow market, Grant Long, senior economist at StreetEasy explained that there was a deluge of new luxury residential stock coming online or in the pipeline that will further aggravate the supply issue. Combined with sellers who often overprice their properties, Long said it’ll take some time for the market to be strong again. ‘It’s a tough case on the high end just because there’s so much construction there,’ Long said.”

“Lena Dunham has been very open in recent months about her desire to break her longtime roots in Brooklyn and move to Manhattan. And now she’s willing to take a loss on her Williamsburg loft to make it all happen. The Girls creator and star just slashed the asking price of her digs by $350,000 to $2.65 million. Dunham bought the condo for $2.9 million in April 2018.”

“Coos County, which includes Berlin, saw its median sales price drop by 12.9 percent to $105,000 year-over-year in March. For the January-through-March timeframe, Coos County was down 15 percent to a $96,000 median price compared with $113,000 for the first quarter of 2018.”

“In New Jersey, we’ve all seen a home like this before. Overgrown lawn, broken window shutters, holes in the backyard fence. It’s an eyesore in an otherwise beautiful neighborhood. And it drives the neighbors who have to walk or drive past it each day absolutely crazy.”

“More often than not, these homes have one thing in common; they are going through the lengthy process of foreclosure, and the end may be nowhere in sight. Sadly, the Atlantic City area reportedly has one of the highest foreclosure rates among U.S. metropolitan areas with populations of at least 200,000.”

“Miami is full of over-the-top real estate listings. The latest to cross our desk is this seven-bedroom, eight-bath stunner situated on Miami Beach’s Di Lido Island, first on the market last October, the 7,828-square-foot house recently took a $1,200,000 price cut.”

“Has the Bywater housing bubble finally burst? Judging by the price tag for this renovated bargeboard home ($289,000!), it seems the market is finally cooling down. Maybe it’s a result of stricter short-term rental laws; maybe it’s because all the post-Katrina transplants have grown disenchanted with New Orleans and moved on, or maybe this two-bedroom, two-bathroom home has very motivated sellers.”

This Post Has 132 Comments
  1. No room for international articles today, too much US crater. I’ll catch up this weekend.

    ‘The West Coast continues to see inventory pile up, according to Realtor.com’s March data, particularly in San Jose. Total active listings keeps skyrocketing, and homes that are on the market are staying there longer. Price cuts have spiked. The number of price cuts to homes listed in March jumped by a whopping 275.9 percent year-over-year in San Jose, by far the highest in the country. Las Vegas, Seattle, San Francisco, and Salem, Oregon, also saw price cuts jump by triple-digit percentages in March’

    And zillow says San Jose prices are off .2%. Fake news!

    1. “And zillow says San Jose prices are off .2%. Fake news!”

      yeah fake news indeed! perhaps a decimal or 2 off. as we all can tell, the pro RE shills use misleading numbers and verbiage in an attempt to stop the panic or cratering that will inevitably happen. mabye zildo was silently talking about “list” price…

    2. “…Price cuts have spiked…”

      Speaking of price cuts:

      Nightly Business Report – April 25, 2019

      https://www.youtube.com/watch?v=A2flLD2VYvI

      Start 20:13 Finish 26:46

      Fun quotes from video

      “Residents complaining that sellers can’t even give away a house”

      “I’ve seen people selling at a loss” (From a Realtor no less!)

      “It’s a problem!”

    3. Does San Diego belong on this craterfest list, or is it a laggard this round after leading the way down last time?

      1. I think San Diego won’t officially make the crater list until mid to late summer. It’ll happen though.

        1. It’s sad to see San Diego lose its leadership position, as in the last episode, it was one of the proud owners of the “Ground Zero for the Crater” title.

          1. If I recall correctly i think Sacramento was a surprise bubble king contender in the last episode with swaths overbuilt developments blanketing the landscape.

          2. Scanning my bellweather zip codes for San Diego, it looks like sales are falling off steeply again and inventory is spiking again. I think San Diego will be an upstanding proud member of the crater list around July.

          3. I saw a large concentration of For Sale signs yesterday during a drive through Rancho Santa Fe, off my usual route. This tony community of large homes and estates is not where one normally expects to see fire sales, but a wave of selling is a natural consequence of the aftermath of a period when high-end vacant inventory was hoovered up by speculators seeking short-term gains.

            The short-term is now ending.

      1. I’m in an outlying area. This year is definitely much different than last year. But no crater yet. Just a bunch of warning lights and smoke in the cockpit, stewardesses telling everyone to just stay in their seats and everything is under control.

        1. If you look at the top end of the Folsom / El dorado market it’s sinking like a turd. I imagine the 500k and below is still hanging on by a thread because of the “ it’s better than renting, get in be for your priced out” belief system the used shack dealers spew out.

      2. It looked like the Sacramento foothills markets were getting softer in 2018, but lately they have shown some strength. The big difference in 2019 vs 2007 is inventory. The builders were putting up 20,000+ houses/year in 2005-7. Today, I think they are building about 9,000/year. Demand calls for about 12,000/year, but the builders can’t get the workers needed to meet demand. I do think we have reached pricing limits so no more appreciation for a while (5 years?).

        It is a really strange market.

  2. ‘Buyers that were paying more than what a house was listed for are now paying closer to market value, said Paige Shipp, regional director of research firm Metrostudy Inc’

    Paige, unless these buyers are picking up a second or third shack, it’s different buyers.

    ‘What we were doing before was not sustainable. We would have fallen off a cliff’

    You are off the cliff Dallas. You had your boom, welcome to the bust.

  3. ‘If people keep putting homes on the market at higher prices, inventory will continue to grow and eventually you’re going to have a buyers’ market and prices are going to start to fall’

    This is a good example of the horse-hockey we have to put up with. This same paper has had numerous reports of prices getting slashed, loads of foreclosures, then, it’s ground-hog day! These crazy sellers still think prices are to the moon Alice!

    1. North Texas grew too much too fast. Collin County used to be a nice area to live, good schools, low crime, green spaces, ranches… Now we are turning into L.A. Crowded, expensive, higher crime rate, traffic is a nightmare. Apartments everywhere, many rentals.
      I have to stay around here for family reasons, but I wish I could get the hell out. Not worth it anymore. 45% of new residents in the DFW area came from abroad. Culture is changing, I remember seeing groups of Chinese investors shopping for houses with their Chinese realtor. It can’t end well. I know so many families priced out of the market. It’s sad. Even rent is waaaaay overpriced.

      Even if prices come down, this area is way too crowded, traffic is awful. The new increasing mixed Demographic trend is not American culture. We have to keep our Christian Holidays to ourselves so we don’t offend the new folks.

      I wasn’t born here, I’m an immigrant, but I LOVE this country, I love American culture, I married into a military patriotic family, my late father in law was former Vietnam POW. I wish the new comers would assimilate like I did, but I see the opposite, they segregate themselves into their own neighborhoods and those turn into another country. You should see our schools…

      1. My brother-in-law is from the UK. He has a huge truck, a beard, a man bun, and several guns. This was not his persona before he moved here. He has embraced some version of US manly man/millennial/hipster stereotype.

        1. Geez, I thought you were gonna relay this story:

          “Another man has died after suffering a fatal accident at a Rednecks with Paychecks event over the weekend.

          Fairbairn was originally from England. According to family, he attended the Rednecks with Paychecks Spring Break event for the second year in a row. He went with two other friends, excited for an American experience that matched his interests.

          https://www.wfaa.com/article/news/local/please-think-twice-about-going-man-dies-in-another-accident-at-rednecks-with-paychecks/287-a7d9bd9e-7545-4ce9-ac17-bcf7a7f1bb3d

          This is like the 3rd or 4th fatality they’ve had there….

          1. Not too far off with the pic, and surprisingly close to home with the Rednecks with paychecks event!

        2. Not everybody wants to be a good little soyboy regardless of what their government would prefer. Sounds like he couldn’t wait to go somewhere else to be himself.

      2. Culture is changing, I remember seeing groups of Chinese investors shopping for houses with their Chinese realtor.

        What happened to Irvine CA now spread all the way to Texas.

        1. The other day the unfinished shacks in Texas mentioned carloads of Asians and something about visas for the investors. And a ponzi scheme.

          1. Yes! I think they have to “invest” 600K or more to qualify for the visa.

            I’m seeing a new trend of multiple families moving into one, yes 1 house. In the high end neighborhoods.
            There goes the neighborhood.

            I know one house where 3 families from India are living together. 3 married (with kids) siblings. They bought the house together.

            Our new culture around here.

          2. There’s something permanently horrible about bilking the elderly out of their life savings.

            News
            Poway investment adviser charged in nearly $8 million Ponzi scheme
            Ponzi Scheme News
            District Attorney Summer Stephan, second from left at table, and Sheriff William Gore, in uniform, were joined at a news conference Friday about a Poway investment adviser charged with grand theft and fraud.
            Pauline Repard/San Diego Union-Tribune
            Christopher Dougherty was jailed on suspicion of bilking more than 50 victims over several years.
            By Pauline Repard
            April 26, 2019
            4:50 PM

            One couple in their 70s lost their $1.2 million savings for retirement, and may lose their home.

            At least 30 other investors also lost large sums — totaling $7.75 million — after trusting a Poway financial investment adviser, who in some cases was recommended through their employers at several regional school districts, officials said Friday.

            That adviser, Christopher Dean Dougherty, 46, was charged Friday with 82 felony counts of theft and fraud by the District Attorney’s Office. The federal Securities and Exchange Commission also filed a civil injunction against Dougherty, charging him with securities fraud.

  4. “‘Buyers that were paying more than what a house was listed for are now paying closer to market value, said Paige Shipp, regional director of research firm Metrostudy Inc. ‘What we were doing before was not sustainable. We would have fallen off a cliff.’”

    Buyers from 2013 – 2018: NOW SHE TELLS US!

    1. Anybody can go back and look at what Metrostudy has said. They never, ever, said shack pricing was unsustainable at any time, until now.

  5. “‘If people keep putting homes on the market at higher prices, inventory will continue to grow and eventually you’re going to have a buyers’ market and prices are going to start to fall,’ Dimas said.”

    YOU GREEDHEADS! LOWER THE PRICES SO I CAN AFFORD TO EAT!

    1. “A drop in property sales in San Francisco suggests a housing slowdown despite a booming economy, according to city Assessor-Recorder Carmen Chu. ‘We have seen a reduction in single-family homes that are being sold,’ Chu said. ‘There’s a lot of questions about why that is. Is it because inventory isn’t there? Are people not willing to sell? Are people waiting to sell at a different time? Are there not willing buyers? Hard to say exactly what the reason is, but we definitely have seen a lower number.’”

      Where are you IPO buyers?

      1. ‘Snap Inc. posted a $310 million loss on $320 million in revenue Tuesday, but you would have never known it from the stock market.’

        ‘As the social media company’s shares were rising that day, my colleague Christopher Mims, wondered on Twitter: “Has there ever been a time where this many companies lost this much money and everyone acted like it was completely normal?”

        ‘This could be asked every day. Ride-hailing company Uber Technologies Inc., aiming to pave the way for an initial public offering, said Friday it lost at least $1 billion in the initial three months of 2019. Work-place messaging company Slack Technologies Inc. published its IPO paperwork saying it lost $140 million in the first quarter, equal to the same period in 2018 when revenue was 82% lower.’

        ‘In Silicon Valley, the red ink flows. A stable of so-called unicorns and decacorns (startups valued at billions or tens of billions of dollars) are going public this year. As they do, eye-popping market capitalizations are assigned to companies whose plan for profitability is hard to discern beyond their willingness to spend and spend and spend on growth that promises a profit…someday.’

        ‘Lyft lost nearly $1 billion in 2018, and could have been far closer to profitability if it cut down on subsidies designed to steal riders from Uber, or had it dialed back technology investments. However, if Lyft did this, it wouldn’t just be crushed by Uber—it would just be another taxi company and not a candidate to enjoy the spoils of the expected dominance that app-based mobility services could enjoy.’

        ‘Not all sectors work like this. If an unprofitable restaurant chain tried to build an IPO on a promise to add more stores, the market would scoff, Mr. Ritter says, because no one will believe that you can make money on 150 restaurants if you can’t do it with 100.’

        ‘If this feels like a remake of a movie you’ve seen before, that’s because in some ways it is. More than 600 companies staged initial public offerings in 1999 and 2000, just prior to the dot-com bubble bursting. Only 14% of those companies were profitable, according to Mr. Ritter’s research.’

        ‘Jeff Bezos, the Amazon.com Inc. founder who weathered the dot-com bubble, said his company delivered a case study in how patience can pay off. “People always accused us selling dollar bills for 90 cents and said ‘look anybody can do that and grow revenue,’” he said.’

        https://www.wsj.com/articles/why-investors-dont-care-that-snap-and-lyft-are-hemorrhaging-money-11556289952

          1. lost $702 MILLION

            While blowing through $1.5 Billion in cash.

            “They certainly have a cult following.”

          2. The only US car companies currently in operation that have not gone bankrupt are Ford and Tesla. Ford probably would have gone bankrupt in 2008 if US government hadn’t give it an $8 billion line of credit.

            Gigafactory in China is super expensive, as is building a new truck, model Y, and the new roadster. Solar City being acquired by Tesla really hurt Tesla’s profit as Solar City has dragged down profitability big time.

            Tesla will probably need to raise more capital or issue shares, but no bankruptcy on the horizon.

            Ford’s earnings looked very strong this past quarter. Losses and bleeding cash everywhere but the US. But they are selling a ton of trucks at huge prices. Good thing US trucks are protected by tariffs so they don’t have to compete. Risks to Ford’s business model is rising fuel prices. Kind of the opposite risk to Tesla’s business model.

          3. Tesla is suffering from low demand and high production costs. That’s why they’re losing money, and there’s nothing to suggest that will change. Worse, they’re losing more of their government tax credit this July. No amount of fanboi fluff will change that.

          4. Tesla will probably need to raise more capital

            Yeah. One commentator said like $2.5 Billion STAT.

            What has happened to other car makers does not help Tesla. They are selling way below production cost and sales have tanked. We don’t need 1 million Luxury self driving trucks, which is their current hype. $10 Billion in debt that they can’t service and they really need to double down on that. The math doesn’t look good.

          5. Tesla is suffering from low demand and high production costs.

            Tesla was .11% of US auto market in 2014. They were 1.11% in 2018. I wonder where they will be in 2019?

          6. “Tesla was .11% of US auto market in 2014. They were 1.11% in 2018. I wonder where they will be in 2019?”

            It really doesn’t matter, because they’re building at a loss. More sales just mean more losses. They cannot lower the cost of production meaningfully to fix that. You somehow think that continuing to borrow money to run in the red is going to magically fix it. It can’t, hence the junk bond status. Only fools would loan this company more money – it’s never getting paid back. Nice looking car, horrible business.

          1. Uber and Lyft rides are about to get a lot more expensive now that the companies are public. I wonder if the demand will survive as prices rise and what will happen to driver sentiment as they are squeezed for higher profit margins.

          2. It’s not a given that their prices will rise. The higher their prices, the fewer their customers, as there are other available transportation options available. Will it remain attractive to ride around in some foreigner’s used Prius at a higher price point than the current already-expensive price? Time will tell…

          3. It’s not a given that their prices will rise. The higher their prices, the fewer their customers, as there are other available transportation options available.

            Matt Levine makes had a good commentary on this a few days ago. He basically pointed out that with Uber and Lyft now being public, it will be pretty easy to see just how much is being lost per ride given. The transparency of a public company whose shareholders will demand profitability will push for duopoly pricing. That is the argument that analysts are making. The days of running subsidized rides for gaining market share are numbered.

        1. “Has there ever been a time where this many companies lost this much money and everyone acted like it was completely normal?”

          Yes. I was in the Bay Area when it all came tumbling down the first time.

          1. The dot-com bubble (also known as the dot-com boom,[1] the tech bubble,[2] and the Internet bubble) was a historic speculative bubble and period of excessive speculation mainly in the United States that occurred roughly from 1994 to 2000, a period of extreme growth in the use and adoption of the Internet.[3]

            The Nasdaq Composite stock market index, which included many Internet-based companies, peaked in value on March 10, 2000, before crashing. The burst of the bubble, known as the dot-com crash, lasted from March 11, 2000, to October 9, 2002.[3][4] During the crash, many online shopping companies, such as Pets.com, Webvan, and Boo.com, as well as communication companies, such as Worldcom, NorthPoint Communications and Global Crossing failed and shut down.[5][6] Others, such as Cisco, whose stock declined by 86%,[6] and Qualcomm, lost a large portion of their market capitalization but survived, and some companies, such as eBay and Amazon.com, declined in value but recovered quickly.

        2. I think this goes along with the absolute mania sweeping among the tech companies right now to lock in customers and get subscription revenue in perpetuity, by any means possible. There’s already the feeling of a brewing backlash, but it’s not clear how to avoid it for everything you need. Many of these losses are sue to things like Slack buying up all their competitors (bye bye Hipchat, etc) to remove alternatives so they could reduce free services and jack up prices.

          Just wait until Microsoft makes Windows 10 require an ongoing subscription… You may think I’m joking, and maybe it’s a bug stretch, but try to get a game greenlit over there right now for either PC or Xbox – even a Single player, one playthrough experience like a big classic RPG – If it doesn’t have a subscription component and/or significant ‘Recurring User Revenue’ there no chance – the directives have come down from the executive suite. Already Microsoft doesn’t want you to purchase Office 2019 and makes it hard to. The thought of Monthly subscription payments for Windows OS by home users has them spooging themselves.

          1. The day they try to charge me monthly to run my computer is the day I quit using a computer. It’s a want, not a need. A smartphone can handle everything I need.

          2. Chinbabwe

            The sad thing is that the pressure is always on with these companies to keep growing – even well past the point of every human on the planet having 3 computers. The idea of a mature industry and a steady-state company that focuses on consistent dividends instead of perpetual stock price growth … has become ‘quaint’ if not ‘obsolete’.

          3. Many of these losses are sue to things like Slack buying up all their competitors (bye bye Hipchat, etc) to remove alternatives so they could reduce free services and jack up prices.

            The antitrust division of the DOJ has been asleep at the switch for too long. Perhaps deliberately so.

        3. I only have to look at the max timeline for most stocks to know they are way overvalued. So many have gone exponentially higher in the past 5 years. I’m dismissed regularly when I suggest 35% will be coming off of most stocks (Dow at 17K, S&P 500 at 1900 for reference).

        4. It really doesn’t matter, because they’re building at a loss. More sales just mean more losses.

          Two quarters before this most recent one were profitable. This one was a big loss, but also because of massive capital expenditure and new projects.

          The more Teslas on the road, the more Tesla can make on selling electricity at supercharging stations. How many car manufacturers do you know that monetize fuel? Solar panels + powerwalls + charging stations = $$$. You don’t have any labor and you just sit there and collect something that looks like an annuity. It’s basically like an unmanned gas station that sells fuel at 1/4 the cost.

          1. Two quarters before this most recent one were profitable

            Looking at the year, they reported $1Billion loss.

            As for the plant in China, looks like they borrowed that money from the Chinese.

            I don’t know about that selling electricity as a company saving gravy train. There isn’t anything proprietary about battery charging.

      2. ‘There’s a lot of questions about why that is. Is it because inventory isn’t there? Are people not willing to sell? Are people waiting to sell at a different time? Are there not willing buyers? Hard to say exactly what the reason is, but we definitely have seen a lower number.’

        Early warning sign of the unicorn stock bust, perhaps?

  6. And hogs get slaughtered.

    #####

    “He said two clients recently put in cash offers for the full asking price. Both sellers rejected the offers, preferring to wait to see if better offers came along. ‘If they wanted more money, they should have priced their homes higher,’ Dougherty said. The downfall of that approach is ‘it already pissed off the buyer.’

    1. “while Average Joe will be brought to his knees as the latest real estate bubble bursts,…”

      Apparently the commentator never heard of bailouts.

  7. “Lena Dunham has been very open in recent months about her desire to break her longtime roots in Brooklyn and move to Manhattan. And now she’s willing to take a loss on her Williamsburg loft to make it all happen. The Girls creator and star just slashed the asking price of her digs by $350,000 to $2.65 million. Dunham bought the condo for $2.9 million in April 2018.”

    Well Lena, at least it was cheaper than renting 🙂

  8. 3.2% GDP and this market is stalling. Only one way to go from here, and it’s not up.

    REALTORS are liars.

    1. “3.2% GDP and this market is stalling”

      It happened the same way last time. The subprime mortgage ABX index began to crater in December 2006, a full year before the onset of the Great Recession. High finance tanked well ahead of Main Street.

      1. Mortgage lending
        Subprime subsidence
        Parts of America’s mortgage market are in turmoil. Some on Wall Street see this as an opportunity. Others are biting their nails
        Dec 13th 2006 | new york

        MORTGAGE lending is hardly the raciest business, but it has its moments. “It’s a bit like the definition of combat: 59 minutes of boredom followed by a minute of sheer terror,” says Michael Youngblood, an analyst at Friedman, Billings, Ramsey, an investment bank. “And we seem to be going through another one of those minutes now.”

        What has set pulses racing is subprime lending—mortgages extended at higher than normal rates to those with weak credit histories. In America, where it is most advanced, this market is under a lot of strain, and so, by extension, is the giant asset-backed securities market that is linked to it. The market for prime mortgages (those extended to higher-quality borrowers) is faring better, though it, too, is showing signs of weakness, exacerbated by cooling house prices. Might these troubles, some wonder, be the canary in the mine, warning of a looming credit crunch as investors, for years free with their money, recoil from risk?

  9. “… sale prices in Manhattan dropped five percent to an average $1.1 million compared to last year. And Manhattan’s luxury tier, which StreetEasy categorizes as the top 20 percent of the sales market, also dropped nearly five percent year-over-year …”

    In Santa Barbara and Montecito (a “luxury tier” unto itself), median selling prices of preexisting homes are off their late 2018 highs, albeit by considerably less than five percent. Along the entire Santa Barbara coast (from Goleta to Carpinteria), a total of 12 residential properties were sold at market during 2019 Q1 for less than their purchase price. Each of those prior purchases (save one) occurred between 2014 and 2018:

    Santa Barbara Area Homes Sold at a Loss (January – March, 2019)

    Query whether that quarterly number will increase going forward.

    Barb
    Administratrix, Santa Barbara Bubble

    1. February 13, 2019

      “Housing affordability in Santa Barbara County jumped from 18 percent in fourth-quarter 2017 to 32 percent in fourth-quarter 2018, primarily due to a sharp drop in the median home price, which fell from $710,000 in fourth-quarter 2017 to $514,950 in fourth-quarter 2018.”

      http://housingbubble.blog/?p=1006

      1. no bubble in SB, please visit one of our fine beaches and bury your head in the sand until the tide comes up.

      1. “homeless have taken over the downtown”

        they are infesting all the popular / sought after coastal beach towns. we thought about moving down there because of our own homeless / theft issues up north but have heard its no different down south. hawaii?

        1. Head to the high desert /mtns, they can’t survive the winter. Seattle and SF are the worst. HI has lots of “campers,” secret spots have entire tribes living off the grid.

          1. Can’t run from them in CA they are in every nook just like those pesky realtors. Find me a spot free of realtors and homeless and I will consider that my retirement paradise 🙂

          2. Nothing to laugh at. It’s politically incorrect as hell, but a couple of my new neighbors (the tiny road I’m on has had 50% turnover in the last 2.5 years) have off the record said that the lack of homeless and the thought it will stay that way (very limited access and a PD that’s got orders to boot them the hell off on sight), was a big part of the decision to move here and not into a comparably priced neighborhood in Seattle, etc.

            No gated communities, but the sentiment is there. People are fed up with it and the political response to coddle them. No easy answers though I fear until the issue gets a lot worse.

        2. Same in Santa Cruz, San Francisco, San Diego…if there is a San in the name of a coastal California city, you can be sure of two things:
          1) There’s a large and growing homeless population.
          2) Anyone who is housed but didn’t either get into the housing market before the onset of the bubble or is among the lucky few born into wealth or highly successful in their career faces an onerous shelter cost burden.

          1. There’s not enough mainstream acknowledgement of your Point #2, and the impact that’s going to have in the future.

            We see no way our kids are going to have a shot at what we got (we barely got it in time) and as existing homeowners age out and/or move on, the makeup of who can live in many areas is going to change by excluding most people in certain professions/economic situations. Marrying rich might become the best way to break into some area someday soon. (I joke about that around here already when I see the young moms all out and about in the middle of the weekday)

          2. We see no way our kids are going to have a shot at what we got (we barely got it in time) and as existing homeowners age out and/or move on, the makeup of who can live in many areas is going to change by excluding most people in certain professions/economic situations.

            That assumes TPTB are successful in preventing true price discovery forever. I’m a cynical guy myself, but I haven’t gone so far as to fully assume that.

          3. Carl,

            That assumes TPTB are successful in preventing true price discovery forever. I’m a cynical guy myself, but I haven’t gone so far as to fully assume that.

            It is a pretty cynical view, I’ll admit. I look ahead at multiple trends and see increased consolidation of power and productive assets in a smaller and smaller group of people, combining that with continued population growth and more monkeys/fewer bananas along with globalist policies and other trends and I think in we might be seeing a peak in the standard of living for the non elites. I also see western countries following China’s lead in shaping what information is available. With everything online, it’s easy to re-write or remove the past, or even the present. Maybe I’ve just been watching too much 1970s dystopian sci-fi lately…

          4. I think in we might be seeing a peak in the standard of living for the non elites

            Cheer up MG. We’re closer to peak debt than peak standard of living. Most of us are spending our most energetic decades working long hours to pay for shoddy houses and cars and tons of crap they already threw away or lost in the garage. When the debt mania bursts, the standard of living will go up.

            The elite’s wealth and power depends on this debt system as much as everyone else’s miserable poverty does. Emancipation will bring down many seemingly imposing centers of “wealth”.

          5. Marrying rich might become the best way to break into some area someday soon.

            This was one of Thomas Pikkety’s central themes in “Capital in the 21st Century.” He quoted Jane Austin and several other writers. In the gilded age it was an established fact that you don’t get wealthy by working. It’s like my grandfather used to say, “You can marry more money in a minute that you can make in a lifetime.”

        3. Hawaii is way worse, at least Honolulu. The entire beach is just homeless and drug users. I went for a walk and one guy asked me if I wanted to buy anything. Filthy.

  10. “We are not doing a 2007, 2008 or 2009 crash again.”

    Stamp your little feet there, James.

  11. “We’ve seen home values run up pretty consistently around the country,” said Felipe Chacón, a housing economist for listing site Trulia. “Incomes haven’t quite kept up.”

    The not so funny things was during the run-up or bubble years, you never hear REIC talk about this. It was “You Gotta Roll with It” or “Write Love Letters Stupid” mania BS talks. No mention of incomes haven’t increased much or it’s not good to pay over asking prices. No it’s “Cash Rich Chinese Buyers BABY forever!!!”

    Now that they are running out of greater fools and sales tanking, it’s “Well that was not sustainable”, “I feel for the buyers”, or “We would have ran off the cliff” talks. By next years, they may need part-time jobs driving Uber/Lyft or porn careers? Just wait until Tech start-ups get involve in buying and selling houses. They got billions to burn and profits is not a goal. From flipping houses to flipping burgers for REIC soon.

    1. From the comment in the Houston article,

      “texas_geo
      22h

      I bought a new construction 3-story house (not townhouse) in Shady Acres in 2014. Sold it in 2018 for $15K less than I paid after nearly a year on the market. Builders are putting up farms of high density poorly constructed facsimiles at a rapid clip and then selling them cheap with lots of incentives, killing everyone else’s home values. Little do those buyers know the years of work and expense ahead of them fixing all the shortcuts the builders took.”

      I visited to Dallas-Fort Worth area 18 months ago for vacation and a wedding. My wife was contemplating moving to TX from SoCAL because the houses there were cheaper. I’m pretty open minded so I said lets visit and see. I have never been to TX before. First observation (1) It was Oct and the weather was hot and humid! I am from the East Coast (MD) and it’s not that hot and humid in Oct. My wife hated the weather in MD when we lived there! (2) There were so much lands… I mean open land everywhere and constructions everywhere! (3) Property taxes are insanely high. Yes no state income taxes but still don’t like taxes. When I retired I still need to pay high property taxes? (4) Family there is nice on wife side but I don’t know anyone there! No one!

      Long story short, I decided to move up to SV and see if I can take advantage of the Tech Bubble! Wish me luck LOL

      1. Having lived in TX for a couple decades, I’ve taken it off my “possible places to retire” list.

        The weather in North Texas, Austin, and Houston is quite oppressive at least two thirds of the year. As I get old, I’m more susceptible to heat, and I would like my retired lifestyle to involve getting out more during an average day and not being chained to a desk (and keyboard and monitor)

        Property taxes are, as you noted, quite high. The percentage of appraised value used is high, and homestead and senior exemptions that I saw didn’t amount to much. Over a couple decades it could eat alive someone on a fixed income.

        Insurance on the houses is often quite high as well (> 1% per year) due to tornado, hail, floods, hurricanes. Termites are also a problem, as is the hard limestone under the soil sometimes.

        Then there is the sprawl. I first visited Austin, Ft. worth, etc in the mid ’80s and watched as the urban areas just kept expanding in all directions. Bad traffic and distance to get around is worse than in many other areas of the country, though I imagine California to be even worse still.

        I think I’ve mentioned it before: If we don’t wind up staying put here just outside of Seattle on Mercer Island, I think we’ll fulltime in a 5th wheel (Keystone Montana 3950BR or Open Range 376FBH tickle our fancy the best) and avoid paying property taxes altogether. Did you know that the industry officially unofficial size limits on RV/5th Wheels at 400/430 sq/ft came about because they are just under the size needed to trigger property taxes in states like AZ?

        1. If we don’t wind up staying put here

          But you said paying an extra half million didn’t matter because you’re in it for the long haul!

          1. I paid an extra half million?? That’s news to me 😀 I better check my purchase documents…

            In all seriousness, we’re 99% sure we’re staying put here for the next 10-12 years minimum – kiddos and ex’s are going to pretty much ensure that (looks like a couple of the kids are going to be attending UW here locally). After that, we’d like to stay here in this house and retire. However…

            We acknowledge that when trying to plan that far out, things could change in ways we just can’t see coming. And we’ve had discussions like “well, if we didn’t stay here, what would we do? And why?”

            And there’s always the “What if disaster strikes or one of us gets sick and dies?” or Zombie Apocalypse, etc. It’s only natural to ponder scenarios like that with your spouse. If one of us died (and this isn’t funny right now – a good friend was diagnosed with breast cancer a month ago and her prognosis isn’t looking good ) the other would likely sell the house and move/downsize. We discussed plans going the other way as well, like what to do if kids boomeranging back after college.

            Separate from that, if we’re both still working from home full-time in the future, we might try out working remotely from an RV for a season or two just to see how we like it, and experience the travel around country. We’re getting to that age and with kids finally starting to leave the nest (my oldest just turned 18), that we’re trying to do more things than just working / sleeping / child-rearing while we still have most of our health. And traveling around is one of them.

          2. We’re getting to that age and with kids finally starting to leave the nest (my oldest just turned 18), that we’re trying to do more things than just working / sleeping / child-rearing while we still have most of our health. And traveling around is one of them.

            I suggest you consider long-term Airbnbs as an option. I’ve met some of the most interesting older individuals who are living an extraordinary life. They find decent deals for a month or two at a time and really live it up. Not that RVs aren’t a good solution, but often the costs at some of the prime RV destination places are surprisingly expensive. I would give it a go in an electric Sprinter Van, but some of those RVs are white elephants when it comes to carrying costs.

    2. Already happening. A great company in Seattle is now moving down to California, Flyhomes. Once you qualify they pay cash for the home so the seller gets to close in a day or two then you buy the home from Flyhomes for 1% over the paid price. They can turn the entire industry on its head and stop the wealthy from outbidding people with cash offers when everyone becomes a cash offer. They also do a RedFin like search engine. They can take out the banks, realtors, and MLS… companies THIS good tend to get buried by the big names out there. If it wasn’t private I’d be all in on equity.

    1. “They basically said they didn’t have any money”

      I nominate this for quote of the week.

      1. Well, there is the inconvenient fact that DJT has been pushing Powell to lower rates, even threatening to fire him:

        “Well I personally think the Fed should drop rates,” Mr. Trump said. “I think they really slowed us down. There’s no inflation. I would say in terms of quantitative tightening, it should actually now be quantitative easing. Very little if any inflation. And I think they should drop rates, and they should get rid of quantitative tightening. You would see a rocket ship. Despite that, we’re doing very well.”

        1. the inconvenient fact that DJT has been pushing Powell to lower rates

          This is nothing new. He should be calling for the end of the Fed, like his buddy Andrew Jackson, but I don’t expect he will.

      2. Holding rates low enough for long enough might eventually spark “higher than expected” inflation, leading to a shifting of wealth from creditors to debtors.

        1. One aspect of the Fed’s tightening is that they do it to suppress wage inflation. Forcing the Fed to continue to throw gasoline on a tanker fire might lead to massive wage inflation and subsequent high inflation throughout the economy, with savers getting better returns but also suffering higher and higher prices on food, fuel, etc.

          1. I should have said “with savers ultimately getting better returns as the Fed is forced to start raising rates rapidly to counter inflation.”

          2. I think you are right. I remember when the push for a $15 federal minimum wage was considered a pipe dream. Now you have Target setting their minimum wage at $13 this summer and going to $15 within a year. Walmart will be at $13 soon, and Amazon will be at $15 by 2020. These are large employers and they will push other establishments to increase their wage rate.

  12. https://www.afr.com/real-estate/residential/housing-bust-could-be-over-quickly-20190426-p51hgj

    “If the RBA cuts interest rates, which financial markets are handicapping as certain by July, Australia’s housing bust will be over. The RBA’s own internal research estimates that a 1 percentage point reduction in the cash rate would boost house prices by 28 per cent, assuming it is fully passed on by banks (and borrowers consider the change permanent).”

  13. http://www.marketwatch.com/story/the-big-mystery-in-the-gdp-report-where-did-the-inventories-come-from-2019-04-26?mod= stockpiling of goods boosted first-quarter GDP growth by about 70 basis points and helped propel growth to a 3.2% annual rate, well above forecasts._theo_homepage

    “This stockpiling of goods boosted first-quarter GDP growth by about 70 basis points and helped propel growth to a 3.2% annual rate, well above forecasts.

    The problem is that it is not at all obvious where these inventories came from. Goods have to come from somewhere, either produced by domestic firms or imported from abroad.

    The mystery is that both production and imports fell in the first three months of the year, according to government data.

    “You can’t stockpile what you do not import or do not produce,” said Robert Brusca, chief economist at FAO Economics.”

    ‘Lies, Damned Lies and Statistics”!

  14. https://wolfstreet.com/2019/04/14/whatll-happen-to-home-prices-in-silicon-valley-san-francisco-after-the-mega-ipos-last-two-times-we-got-a-housing-bust/

    Great article by WolfStreet that points out how wrong the MSM coverage has been about “newly minted” IPO money that will come flooding in. First, those folks may well have sold options/shares years before the IPO, either as part of the company’s own buy back program or to banks/VC firms who buy up options. Ergo, the all-cash $3M buyers over the last decade. And once those shares are sold off pre-IPO, the money won’t stay local post-IPO. The local press is covering this as if all of the money is “new” and will go straight to houses in Noe Valley and the local Tesla dealer.

        1. I just sat on 1.5 hours of traffic to go from SC to Oceanside. Its every Saturday after 9am. My parents live in SC. Great little town like Carlsbad.

        1. I’m sure something better will pop up for you. I don’t think that patience will have any negative outcome 😉

    1. San Clemente, I lived there in 1984-88, before the Persian Invasion. Used to be a great, small town. #sealrock #trestles

      1. A runaway truck is a perfectly apt metaphor for a collapsing bubble. Once momentum reaches a critical level, there’s no stopping it.

  15. What I’ve seen in Boise on Zillow is that a lot of home builders are putting there spec homes for rent. Large dogs allowed… speculators who bought have a no pet restriction.

    1. Builders are smart and know the game. It costs money to hold empty property so you better get it rented out pronto with few restrictions. Most other speculative owners are, shall we say, clueless morons.

  16. This has absolutely NOTHING AT ALL to do with housing!

    But, well, it is, uh, interesting …

    To fight K-pop’s influence in China, a club teaches young boys to be alpha males – Los Angeles Times

    (a snip)

    “Chinese military leaders seem to share fears about the nation’s men, with the army newspaper People’s Liberation Army Daily complaining that 20% of recruits were not fit enough to pass the fitness test for admission because they were overweight, watched too many cellphone videos, drank too much or masturbated too often.”

    “… or masturbated too often.”

    Bahahahahahahahahahahahahahaha.

    https://www.latimes.com/world/la-fg-china-masculinity-pop-idols-backlash-20190426-story.html

  17. The stock and bond markets are sending contradictory signals of where the economy is going. Something has to give!

    After a sterling first-quarter GDP number, rate-cut bets gain steam. What gives?
    By Sunny Oh
    Published: Apr 26, 2019 3:36 p.m. ET
    Core PCE inflation extends drop below Fed’s 2% target

    “The bond market is celebrating the Fed can’t hike rates,” said John Bredemus, head of capital markets at Allianz Investment Management, in an interview.

    The 2-year Treasury note yield (TMUBMUSD02Y, -2.21%) sensitive to shifting expectations for Fed policy, slumped 4.2 basis points to 2.288%, while the 10-year note yield (TMUBMUSD10Y, -1.42%) retreated 2.9 basis points to 2.505%. Bond prices move inversely to yield.

    And expectations for a rate cut by December 2019 have risen to 65.4% on Friday, from 58.2% a day ago, based on trading in the fed fund futures market. The Fed’s overnight benchmark lending rate currently sit between 2.25% and 2.50%.

    Equities also rallied, with the S&P 500 (SPX, +0.47%) and the Dow Jones Industrial Average (DJIA, +0.31%) on track to finish modestly higher on Friday.

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