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I’m Not Scared At All, The Bubble Is Not Bursting

A report from the Salt Lake City Tribune in Utah. “Sales of single-family homes declined in all five counties along the Wasatch Front in early 2019 as prices continued a multiyear trend upward, though that rise in prices appears to be slowing significantly. ‘It’s definitely not a sellers’ market, except in some price ranges,’ said Scott Robbins, the board’ president. ‘I’m not scared at all. The bubble is not bursting.'”

“‘I suspect it’s an indication of market resistance to prices by buyers,’ said James Wood, a senior economist at the University of Utah’s Gardner Policy Institute. ‘Buyers are pulling back a bit.'”

“Separate numbers over the summer indicated a total of 3,725 new homes either under construction or poised to break ground across a seven-county region centered on Salt Lake County. That report, issued by Metrostudy, also revealed a 43% jump year over year in construction of attached homes for sale, including condominiums, duplexes, town homes and row houses.”

“Utah’s rental markets may be seeing similar supply relief, Wood said. Thousands of new apartment complexes have opened in Salt Lake County in recent years as a flurry of projects approved between 2014 and 2016 are completed and open to customers. At least 5,000 dwellings are now under construction in the county for rent at market or luxury rates, Wood said.”

“‘We’re going to see how deep that market goes,’ he said.”

“The Wasatch Front’s three most expensive ZIP codes are now 84108 and 84103, which cover portions of Salt Lake City’s east bench and have an average median price of $657,000 and $592,000, respectively; and between them, 84004, which includes parts of Alpine in Utah County, at $627,500.”

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This Post Has 52 Comments

  1. ‘It’s definitely not a sellers’ market, except in some price ranges,’ said Scott Robbins, the board’ president. ‘I’m not scared at all. The bubble is not bursting.’”

    I bet Scottie is gobbling Xanax by the handful.

    1. It’s OK Scott. Admitting it’s a bubble is the first step. We can talk about whether bubbles always burst later.

      1. IKR? That’s so crazy…to be actually willing and able to say it’s “the bubble” and say it’s “not bursting” . Yeah, later for discussions about the physics of bubbles lol.

  4. The arrogance of Mr. Robbins is breathtaking. As if it’s all about him and how many more families he can put out on the street by making shelter more unaffordable.

    1. In my book 5 or 6 hundred thousand bucks is a lot of money. But I guess they aren’t making anymore land in Utah.

        1. Oh, also for the media types out there. How do prices in southern and northern California turn negative for the first time in 7 years, in the same month, if something larger isn’t happening?

          1. Surely these are one-off anomalies and outliers, Mr. Jones, due to the unseasonal winter storms that hit California this year. By next month the green shoots of Spring will most assuredly be bursting forth in their verdant glory like mutant vegetation at Chernobyl. The media parrots on the REIC’s shoulder assure us that Everything is Awesome – Buy Moar Stawks!

          2. This article is staring up at me from the dead tree edition of The San Diego Union-Tribune on my breakfast table. For some reason, it is nowhere to be found online:

            “HOME SALES DIP 8.6% IN S.D. COUNTY

            Prices rise 0.9% to $555,000 but well below August peak*

            BY PHILLIP MOLNAR

            * The median home price was $555,000 in March, …, a gain of 0.9% in one year. That’s down from a peak of $584,750 reached in August. In March, there were 3,224 home sales, down 8.6 percent from the same time a year ago.”

        2. “check out what’s coming: An extra 3.11 million people at prime first-time home-buying age. From 2019 through 2028, 44.9 million people will turn 34, the median age of current first-time home buyers”

          3.11 million “prime” buyers my arse. More like 3.11 million college debt ridden, boomerang hipsters. The only thing they will do for the housing industry is accelerate the current speed of cratering.

          1. From 2019 through 2028, 44.9 million people will turn 34, the median age of current first-time home buyers”

            Whoever writes this drek seems unaware that Millennials and Gen Z aren’t forming families the way previous generations did, which is a primary driver of first-time home buying. In addition, they have a certain aversion to responsibility or honoring their financial or other obligations, which does not bode well for their willingness to commit to buying a shack, or sticking around if said shack goes underwater.

          2. Don’t worry, all that student loan debt will be forgiven so they can instead go into deep debt for a house.

          3. “Don’t worry, all that student loan debt will be forgiven so they can instead go into deep debt for a house.”

            I hope you’re wrong. I’ve got two in college right now bleeding my retirement.

          4. I don’t think the college loan forgiveness thing can actually fly, tbh. Such a nasty pander from Warren to push such a thing but it’s too regressive for the true progressives and the centrists wouldn’t accept it. Millenials needing houses is a cute thing, but doesn’t that correspond precisely with the dying of the boomers? They’ll wait to get daddy and mommy’s home when they hit the assisted living facilities, or move in to the really giant Mansions and re-model to make semi-multifamily, won’t they?! Millenials are frugal effers, they’ve had to learn to be!

          5. They’ll wait to get daddy and mommy’s home when they hit the assisted living facilities

            Plenty of examples of millennials not waiting but just moving back in.

          6. Plenty of examples of millennials not waiting but just moving back in.

            Isn’t our system designed to reward that? Something about avoiding inheritance taxes if you care for your parents in the place for a few years first?

          7. They might be the prime age to buy, but they don’t have the don’t have the prime finances to make the math work. They are stretched and are on thin ice.

        3. IMHO, Zillow has a huge conflict of interest now they’re buying/selling properties. I’d completely ignore their comments. BTW, their timing into the market was terrible and will be painful financially for them.

        4. ….with no mention of a corresponding “wave” of sellers aging out of their single family homes.

          I’m not inclined to dig into population statistics, so I have no idea if there would be an actual wave of retirement-age sellers. My point is that they hype up the demand side an ignore the supply side to create a false sense of a growing market and think no one will notice.

          1. I’m not inclined to dig into population statistics, so I have no idea if there would be an actual wave of retirement-age sellers.

            Two big studies, one from Fannie Mae and the other from George Mason University, suggest that a boomer sell-off will put significant downward pressure on housing prices:

            The Washington Post
            Housing values may fall as baby boomers die off or sell off, two studies say

            July 18, 2018
            Kenneth Harney

            “All of these homeowners face key choices: Do we stay put, sell, downsize or move to a rental? At some point, the inevitable kicks in: Health issues and death will force them to dispose of their properties.”

            “Fannie’s study estimates that from 2016 to 2026, between 10.5 million and 11.9 million older owners will end their ownership status. Between 2026 and 2036, another 13.1 million to 14.6 million will do the same.”

            “This massive and unprecedented generational unloading of houses could be “negative for the home sales market,” the Fannie study warns, because the upcoming generations of buyers may not have the financial capacity — or desire — to absorb the large numbers of homes coming to market. How much of a price hit to boomers’ and potentially other owners’ properties could occur can’t be predicted at this point, Myers told me in an interview”

        5. they can change history

          And the future!

          “Rents will keep climbing, too. Younger generations’ persistence in the rental market will continue to put pressure on those markets despite all the new apartment building.”

          Oxy already discovered the future of rents always go up. You are late to the party.

      2. “In my book 5 or 6 hundred thousand bucks is a lot of money.”

        Same here. I think that might be what is most insidious about what the Fed and GSEs have done – keep things propped up for so long that they’ve normalized 5, 6, 700K prices for regular Joes.

    1. YoY data is better longer-term indicator. NHS+PHS are leading indicators. While trend has changed, I’ll want to see June ‘19 data (late July ‘19) for confirmation (end of Spring ‘19 selling season).

    2. “Yun is alive!”

      I had no doubt. Lawrence Yun and the other cockroaches will survive a nuclear winter, happily watching the world burn from their overpriced luxury roach motels.

  7. fair to say?
    With a real estate dominated economy a 50% increase in inventory is the best indicator of the beginning of recession.

    Atlanta and other are in the tank

  8. Is it possible that prices drop modestly in expensive markets but the bottom doesn’t drop out of the entire market when there is plenty of positive economic news? Don’t hate me, just asking?

    1. At a minimum there will need to be sone sort of price correction in real estate, which I think will vary by location, and probably something on the order of 15-25%. Realtors and builders simply can’t continue raising home prices at percentages that outrun worker income without affecting demand at some point, which is the point we are more than likely at now.

      1. The thing that is scaring me more this time around is how much of the financial activity has moved from traditional banks and into non-bank lenders.

        1. Wanker.banker Mega Bank$ $trong! … NON.bank$ $acrificial lamb$ soon to bee sent to $laughter.

          The $nowball is melting & $unshine of time will show no misty eye’d mercie$.

    2. ” …when there is plenty of po$itive economic news? ”

      All perspective$ are local!

      Trade war$ and $agging price$ push U.$. family farmer$ to leave the field$

      P.J. Huffstutter| BUSINESS NEWS | APRIL 30, 2019 / Reuters

      BEATTIE, KANSAS (Reuters) – Shuffling across his frozen fields, farmer Jim Taphorn hunched his shoulders against the wind and squinted at the auctioneer standing next to his tractors.After a fifth harvest with low grain prices, made worse last fall by the U.S.-China trade war, the 68-year-old and his family were calling it quits.

      It took less than four hours to sell off all the tractors, combines and other farm equipment at the Taphorn retirement sale, ending a family tradition that had survived nearly a century.

      “We went through the bad times in the ‘70s and ‘80s,” said Jim, 68, broad-shouldered and stocky. “In some ways, this is worse.”

      Across the Midwest, growing numbers of grain farmers are choosing to shed their machinery and find renters for their land, all to stem the financial strain on their families, a dozen leading farm-equipment auction houses told Reuters. As these older grain farmers are retiring, fewer younger people are lining up to replace them.

      The trend has created boom times for the auction houses, which report that their retirement business has grown 30 percent or more over the past six months, compared to the same period a year earlier.

      By 2012, farm profits were flourishing as corn and soybean prices soared amid global demand and tight supplies. For the first time in decades, the number of producers aged 44 or younger in the Midwest grew.

      From the financial crisis in 2008 through 2012, their ranks increased more than 40 percent in Iowa and Illinois, nearly 57 percent in Indiana and 60 percent in Kansas, according to data from the U.S. Department of Agriculture.

      Taphorn’s son Tom, who works as a district manager at a cattle feed company near Manhattan, Kansas, was among those who wanted to return home to farm with his parents.

      But the father of three couldn’t make it work. During the boom, Tom sought to expand by renting more land – but as grain prices fell, most landlords refused to lower their rates. It was beyond Tom’s reach, leaving him and his parents with too little land to till to cover two families’ expenses.

      “Up until now, there wasn’t a lot of motivation to exit farming,” Steffes said. “Now, what I’m hearing from folks is, ‘It’s no longer fun to farm.’”

      Many farmers don’t have 401Ks or other traditional retirement safety nets. Now they’re worried that if they keep going, they’ll have to take on debt against land they own, which will threaten their income stream long-term.

      “We’re getting calls every day from farmers looking to sell off their equipment, but keep the land,” said Luke Sullivan of Sullivan Auctioneers, headquartered in Hamilton, Illinois. “They want to rent out their ground, because that land is their retirement.”

      Some renters propose to split farm expenses and pay landlords in corn or soybeans, not cash, the modern equivalent of sharecropping. But typically retirees seek renters who pay top-dollar, tenants who are big and can farm thousands of acres.

      1. “They want to rent out their ground, because that land is their retirement.”

        Everybody thinks they are going to retire on overpriced dirt. Not on excess production that they saved up. It’s bubbles all the way down.

        1. bubbles all the way down

          Agriculture is the backbone of any society, of its art, of it’s prosperity and technology (not smart phone apps sorry). We’ve allowed our cultural future to be monetized. It will be discounted.

    3. “positive economic news”

      What news? Was reading an article today about how iPhone sales have dropped 17% this year. Pixel 3 also slashing prices. People seem tapped out. FAANG seem to be the few places where activity is happening with “everybody” else doing stock buybacks to keep the illusion going for a bit longer.

      1. FAANG seem to be the few places where activity is happening with “everybody” else doing stock buybacks to keep the illusion going for a bit longer.

        Not so sure about that. GOOG and GOOGL are down 7.7% and 7.5%, respectively, and APPL just announced a buyback.

        1. Yeah, I didn’t articulate that properly. They seemed to be the last holdouts and now the news is coming that revenue is down. I’m wondering when it will start hitting the employment numbers.

    4. plenty of positive economic news

      Doesn’t change economic reality for any family in the least.

  9. Got deceleration?

    Real Estate
    Home prices grow at a slower rate in February: S&P Case-Shiller
    Published 2 hours ago Updated an hour ago
    Diana Olick

    Key Points
    – National home prices rose 4% in February compared with February 2018, according to the latest reading on the S&P CoreLogic Case-Shiller home price index. That is down from a 4.2% annual gain in January.
    – The 10-City Composite rose 2.6% annually, down from 3.1% in the previous month.
    – The 20-City Composite posted a 3% year-over-year gain, down from 3.5% in January.
    …

    1. My guess is that this is largely being driven by the bust in bitcoin mining, which destroyed graphics accelerator demand with exorbitant pricing over the past couple of years.

      1. But crypto is back, baby!!! I’m hearing Bitcoin is going to eclipse that $20k in the next year.

  11. Read today that a company in CA is offering a zero down loan that will pay off 50,000 in student when in escrow.
    Aimed at SF area.
    No link as my system disables any links.

  12. From the Salt Lake Tribune article:

    “The latest Salt Lake Board of Realtors report found the median home price in Salt Lake County is now hovering at about $350,250.

    That was about 3% higher than it was a year before — and fully 30% above where it stood five years ago, when the first-quarter median home price for Utah’s most populous county was $105,250 lower, at $245,000.”

    I found the 2019 Salt Lake Realtor report found here: https://slrealtors.com/wp-content/uploads/2019/01/2019HousingForecastReport.pdf

    Some quotes:

    “The adverse impact of higher prices and interest rates on
    a mortgage payment and housing demand is shown in
    Figure 4. In 2013 the mortgage payment for the median
    priced home ($245,000) in Salt Lake County was $1,299. By
    2018 the payment for the median priced home ($355,000)
    jumped to $2,014, a 55 percent increase in just five years.”

    “Slower Demographic Growth: Net in-migration is expected
    to be significantly lower due to revised forecast”

    “Increase in Average Pay Not as Strong – The 3.8 percent
    increase in average pay in 2018—the largest increase since
    2006— is projected to decline to 2.5 percent in 2019.”

    “Slightly Slower Job Growth – Employment growth will
    slow from 3.3 percent in 2018 to 3.1 percent in 2019; still an
    impressive growth rate.”

    Don’t worry, the 2019 report promises 7% price growth for single-family homes this year.

  13. Here’s a fun recent price history for a Salt Lake Valley home in a decent part of town:

    4/29/2019 Price change $449,900(-5.3%)
    3/13/2019 Price change $475,000(-5%)
    12/10/2018 Listed for sale $499,900(+81.8%)
    9/27/2016 Sold —-
    9/3/2016 Listing removed $275,000–
    9/1/2016 Listed for sale $275,000–

    Look at that growth! All sustainable and based on fundamentals.

  14. prices still creeping up in Phoenix, AZ area, albeit more slowly than in recent years. Seems the steady inflow of those fleeing CA (and likely illegals that are being dumped here) are keeping a floor under the housing/apt market so far. No doubt we will catch a cold in the not too distant future … housing and apartment building still going on like crazy

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