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This Economic Reckoning Comes After Costs Jumped Much Faster Than Wages For Years

A report from the Tennessean. “Home buyers are gaining the upper hand in Nashville as demand continues to trend down this year. The number of unsold homes in the Nashville Metro area sitting on the market in March – 11,510 – was the largest since January 2015. ‘Nashville is one of the many places where prices were growing at an unsustainably high rate,’ said Zillow economist Jeff Tucker. ‘Many buyers appear to be hitting a ceiling in what they can afford in some of the areas that were hot a year ago.'”

“Across the United States, some of the most heated housing markets like Seattle and San Jose are now experiencing the biggest value declines. This economic reckoning comes after home costs jumped much faster than average wages for years. ‘By far, the most severe slowdown is in expensive West Coast markets,’ Tucker said.”

The Seattle Times in Washington. “The national Case-Shiller home price inde showed Greater Seattle had one of the coolest housing markets in all the land when looking at the full metro area. Home values on the priciest level actually dropped a smidgen on a year-over-year basis. Prices even dipped slightly on a month-over-month basis, defying the normal seasonal gains.”

“How unusual is that? The last time any segment of the market saw prices drop on an annual basis was seven years ago, when home values bottomed out following the recession. Why the divergence? There are fewer people out there snatching up higher-end homes, making competition less hectic than it used to be. The number of homes for sale across the Seattle area has grown faster in the last year than anywhere except San Jose, according to Redfin.”

The Marin Independent Journal in California. “‘Total March 2019 home sales in the San Francisco Bay Area were the lowest for that month in 11 years,’ said Andrew LePage, a CoreLogic analyst. ‘Each month since December 2018 has logged the lowest sales for that month in 11 years.'”

“Patti Cohn, a broker with Compass Real Estate in Larkspur, said some might say the housing market is due for a correction, based on the current upward trend of 118 months that is approaching the longest real estate market upturn on record of 120 months. However, Cohn said she does not see a big collapse as occurred in 2008.”

“‘Times are really different now,’ Cohn said. ‘Things are not going down; they’re just going to be flat.’ CoreLogic reported that the Marin median price declined 4.7 percent in March to $1.09 million, a drop from the $1.14 million median price posted a year earlier.”

From WTOP. “Sellers are still in control in the Washington-area housing market, but the grip may be slipping. Trulia says a year ago, 15% of D.C.-area ZIP codes were trending in favor of buyers. That’s at 45% now. ‘How long homes are staying on the market, how common price cuts are becoming and by looking at the actual selling price of a home compared to its original list price,’ Trulia economist Felipe Chacon told WTOP.”

“‘Generally speaking, those ZIP codes that are shifting in favor of buyers are slightly more expensive areas than those shifting in favor of sellers,’ Chacon said. ‘We’re seeing the biggest shift in favor of buyers on the periphery of the metro [area], in Northern Virginia and Calvert County, Maryland, and the area between Bethesda and Chevy Chase are making the more dramatic shift in favor of buyers.'”

From 27 East on New York. “The number of sales of single-family homes in the towns of Southampton and East Hampton during the first three months of 2019 was 18 percent below the same period last year—while, at the same time, inventory nearly doubled, according to the Elliman Report.”

“Single-family homes on the market swelled 93.8 percent, from 1,201 at the end of March last year to 2,327 at the end of March this year. The average sales price fell 4.1 percent, to $1.73 million, and the median sales price dropped 7.9 percent, to $860,000.”

“Jonathan Miller, the CEO of real estate appraisal and consulting firm Miller Samuel, prepared the Elliman Report for Douglas Elliman Real Estate. His take on the data is that buyers and sellers are going through a period in which they are recalibrating what value actually is.”

“Mr. Miller offered another reason why the high end of the market has gone soft: There was a development boom in New York City and its surrounding areas that followed the 2008 financial crisis, peaking in 2014 and 2015. ‘Investors were chasing higher returns all over the globe and looking for tangible assets,’ he said, explaining that interest rates were low.”

“While the traditional financiers of development, banks, were still licking their wounds, sovereign wealth funds, private capital and hedge funds were investing in real estate. Coupled with investors’ demand for higher returns was the high cost of land. Land was priced for luxury development, so it was ‘luxury or nothing at all,’ Mr. Miller said.”

The New York Post. “This northern New Jersey mansion dates to the roaring ’20s, but it’s certainly not roaring now. The grand property — once one of the state’s most expensive properties — is back on the market asking just $9.99 million. That’s $29 million off its original $39 million asking price in 2013 — a reduction of almost 75%.”

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This Post Has 48 Comments

  1. Are we there yet?

    ‘Things are not going down; they’re just going to be flat’ …the Marin median price declined 4.7 percent in March to $1.09 million, a drop from the $1.14 million median price posted a year earlier’

    Click!

      1. That’s what Leslie Simpleton Young the CAR “ economist” stated in January of 2005.
        We all know how that ended:)
        50-75% decrease

    2. The trend is here, but prices have a long, LONG way to fall before they are even remotely affordable to those who work for a living. Somewhere on the order of a 60% drop is needed in most areas of the west coast.

    3. Why is Zillow continuing to predict price increases in Rockland County?? Is this really true? It seems there is a lot more for sale this spring than this time last year. And things do sit around for a bit, so I don’t quite get it..

  2. ‘Investors were chasing higher returns all over the globe…Land was priced for luxury development, so it was ‘luxury or nothing at all’

    ‘That’s $29 million off its original $39 million asking price in 2013 — a reduction of almost 75%’

    My that’s some fine return chasing…

    2. You mean all this BS talks from REIC that they can’t afford to build affordable housing was horsesh*t? I think Ben has been talking about the LAND Bubble for some time now!

    3. ‘Investors were chasing higher returns all over the globe…Land was priced for luxury development, so it was ‘luxury or nothing at all’

      This pretty much sums up the entire bubble. The land prices have been delusional for more than 20 years now. The deep pockets held the land through the last downturn. There haven’t been any “deals” in 25 years.

      I was taking a walk last evening and I was looking around at some commercial acreage which a particular business has owned for like 40 years or something. I’d guess it’s 100 acres, maybe a little less. I’d venture to guess they paid $1,000 an acre or less. Nowadays, you’re looking at 100x that or more.

  3. However, Cohn said she does not see a big collapse as occurred in 2008.”

    “‘Times are really different now,’ Cohn said. ‘Things are not going down; they’re just going to be flat.’

    You keep telling yourself that, Patti.

    1. Because she saw the last crash and sold a ton of out of the money puts on REITs and is now financially independent. Oh wait… She is actually just peddling used shacks..

        1. “In a time of universal deceit, telling the truth is a revolutionary action” — George Orwell

  5. ‘Home values on the priciest level actually dropped a smidgen on a year-over-year basis…How unusual is that?’

    Actually this same pattern has been seen all over the world.

    ‘The last time any segment of the market saw prices drop on an annual basis was seven years ago’

    Huh, just like all of California, in the exact same month. But, shacks are local? Maybe something bigger is going on?

    3. Fork.in.thee.road? … or … $tick.a.fork.in.it! ?

      Is the era of double-digit home price gain$ behind us?

      MarketWatch |Andrea Riquier |Published: Apr 30, 2019

      Have we reached a new fork in the road for the hou$ing market?

      In February, of the 20 cities tracked by the closely-watched Case-Shiller home price index, none had double-digit price gains, the first time since January 2015 that had happened.

      Overall price gains have been braking hard for the past year or so, although it’s worth noting that this is not the first downturn since the housing market bottomed out in 2012. The 20-city index surged by double digits for a year, then slowly moderated back to a 4.2% increase in November 2014. Prices mostly accelerated – that is, risen at faster and faster paces – until about a year ago when they started tapping on the brakes.

  7. Definitely feel things changing just the last few days. My business depends on chips and things are definitely down. Bonus is still paying for last fiscal half but it’s smaller and the trend isn’t good.

    Worst of all my wife gets a call from a friend in Australia who needs money for a week or two to pay rent (they bought land there but didn’t build a house yet). Trying to liquidate some business stuff and are experiencing a cash crunch. And these were people who appeared to have a ton of money as of a year or two ago in Shanghai. Wife is shocked. I’m not, but it’s weird to watch.

    In the meantime it just came to light one of her staff was playing games and probably taking kickbacks to buy substandard product from a supplier. It feels like things are getting crazy but maybe it’s just me.

    1. Is your wife’s friend Chinese? If so, do you think the China capital controls is contributing to their credit/cash crunch?

      2. Is your wife’s friend Chinese?

        No. American friend with British husband who together owned a piece of an American franchise chain that has storefronts in Asia. British husband got an American green card a while back and has to deal with American taxes too…worst of both worlds apparently.

    2. Was at brunch with a friend on Sunday and he told me his friend in HR at MGM Las Vegas was working that weekend. He said they’re laying off people because they’re predicting a recession and his friend doesn’t even know if he’ll have a job that much longer…

      1. “MGM Resorts International is expected to eliminate 1,000 more positions in May 2019.  8 News NOW learned more about MGM’s 2020 plan from a conference call with investors on Monday.  

        The newest cut of positions is expected to occur by the end of the 2nd quarter.

        The first wave of MGM’s 2020 plan was implemented in March. Some of those position reductions were announced last week. ”

        https://www.lasvegasnow.com/news/local-news/mgm-resorts-expected-to-cut-1-000-more-jobs-under-2020-plan/1964816061

        1. It’s all good. None of those 1,254 laid off workers has to make a mortgage or car payment, and even if they did they will find a new, better paying job immediately. And even if they didn’t, they would easily be able to sell the house for more than they paid, and the car for at least the amount owed. And even if they couldn’t, they have enough savings to not work anymore and still pay the bills.

          1. …and even if they don’t have enough savings, it is Las Vegas so they can sell their bodies for booze money

            Ya see, the system works!

    3. Good Intel there Carl ;). It’s happening in the Bay Area too. There seems to be a push to cut out the employee overhead and push towards more automation. I work with high tech and mainly in security and have noticed this trend.

    1. What BS! More magical thinking at the peak. The Fed owns this: 1929, 2000, 2008-9, (2019-2022?). They have extended the “expansion” via artificial ingredients, but not prevented the contraction in each case. In fact, they’re the cause of all of these. Centrally-planned, command economies are doomed to fail.

  10. A real estate expert said the reason why sales is low is because the agents don’t understand the rich Millennials. They like Avocado toast. When you sell a house, you need to offer Avocado toast! They’ll be buying like no tomorrow. Forget the free BMW or HDTV. They use Lyft/Uber and watch shows on their $1,000 iPhones. Trust me! Give them Avocado toasts!!!!

    https://www.thestar.com/vancouver/2019/04/24/how-to-sell-a-condo-to-millennials-in-vancouver-with-a-side-of-free-avocado-toast.html

  14. Apple earnings call. Apple iPhones Sales drop 17% but “Apple also said that it would spend $75 billion on share repurchases and it also approved 75 cent dividend per share, a 5% increase.”

    UP 5% afterhours!!!!!! LOL

    1. see! the economy is great!!! companies can purchase there own stock with the super duper legit money the PPT prints for us (the .0001%) to enjoy. Money doesn’t grow on trees it is magically created and gifted to the world, no one is poor except for poor people and they are only poor because they dont buy stawk and RE. Whats that manifestation again… oh yeah ” to the moon! ” #buybitcoinandlyft #donateyour$2realtors #doomedwasright #eatavocadotoasteveryday4lyfe

      1. Repurchasing shares

        A decision made by managers with stock options I would bet. Corruption celebrated.

    1. “My daughter-in-law made no contact after the house was bought (July 2018) until January 2019 when she sent an email, saying my son was a monster, my other son was a creep, and I was just a sinner that had produced bad sons. My son said she wants a divorce and wants to split the proceeds from the sale of the house.”

      “This was not what I wanted to do with my father’s money. She’s never even paid bills before so I don’t imagine it would last her for very long. Her other idea was my son could move out and she would continue to live in the house and have my son support her and the boys.”

      The beta-cucks never see this happening… until it does!

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