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Gee, So Sorry For Your Loss, What Goes Up Just Came Down

It’s Friday desk clearing time for this blogger. “High-end home prices got kicked out of the penthouse in early 2019, falling for the first time in nearly three years, according to Redfin. In Boston, the average luxury home sold for $3,219,000, down 22.4 percent from the first quarter of 2018. ‘It’s condos that tend to do the worst in a downturn; they’re the most sensitive in terms of demand,’ said Redfin chief economist Daryl Fairweather.”

“For the fourth consecutive month Seattle condominium market values underperformed its 2018 levels as sales activity improved. The April Seattle citywide condo median sales price of $495,000 reflected a year-over-year dip of 9.34%. There were 592 Seattle condos listed for sale in the NWMLS database that reflected a 150.9% and 11.1% increase over last April and last month, respectively. However, that figure excludes several hundred units in presale or are under construction that are not reflected in the NWMLS.”

“Houston saw more people move away than relocate here for the second straight year in 2018, according to the Greater Houston Partnership. University of Houston economist Bill Gilmer said housing permits are beginning to slow down, injecting some skepticism about the market. ‘We’re seeing big discounts being offered on new homes,’ Gilmer said.”

“Orange County population growth has been slowing since 2015, and the housing sector is starting to respond, according to JLL. ‘The housing market has already showed signs of slowing down, especially when it comes to homebuying. This is happening in Orange County and across the Southern California region as homebuying has experienced a year-long cool down and buyers have begun to gain leverage,’ Paulina Torres, research analyst at JLL, tells GlobeSt.com.”

“Three homes mentioned in our recent story on the trend of expensive Berkeley homes going to all-cash San Francisco buyers have had price cuts. The five-bedroom, 5.5-bathroom 1909 home at 1035 Shattuck Ave., which came to market two months ago, has seen $545,000 shaved off its $3,495,000 list price and is now looking for $2,950,000, a 16% decrease. The 2,200-square-foot completely rehabbed home at 1470 Seventh St. went up for sale at $1,995,000 on April 10. It got a 20% price reduction on May 8, however, and is now asking $1,595,000.”

“The owners of this residence tried to sell it on their own for $589,000, but, after three months, not a single potential buyer had requested a private tour. The sellers decided to enlist the help of agents Bryon Howard and Shirley Wright, who immediately reduced the asking price to $539,900.”

“With the asking price further reduced to $519,900, another interested party came to the table and a negotiated deal for $500,000 was signed in early March. ‘That’s the reality of Calgary’s market,’ Mr. Howard said of the lengthy sales process.”

“Landlords and property managers in Metro Vancouver are offering bonuses, such as a free month’s rent, in an attempt to woo potential tenants. Moe Mousavi, a property manager at Macdonald Realty says landlords are now being forced to offer incentives because there’s more supply in the market than demand. One of Mousavi’s clients has a new building with 157 available rental units. He says each one includes incentives.”

“And it’s not just developers offering bonuses. Mousavi says landlords with single units are also having to fight for tenants. ‘A lot of these people are under pressure because of mortgages … so it’s, sort of, a desperate attempt to get their properties rented,’ he said.”

“Current market conditions might slow the momentum of Thai-foreign joint ventures. Most foreign developers expect to see an investment return from condominium projects in a relatively short term. But unit sales and transfers have been slowing lately, primarily due to a market glut and the impact of tougher mortgage lending rules.”

“The Woodleigh Residences launch is slated for this Saturday. Blogger Blade Knight said the developers must have ‘decided that the risk of the market downturn may not be worth it and started slashing prices drastically in order to move more units. The blogger added that launch over the weekend, will see ‘a 958sqft 3 bedder unit prices (drop) from S$1.92Mil to S$1.66Mil.'”

“Australia’s well-catalogued free-fall in house prices, slumping offshore demand and tighter bank lending has forced Melbourne’s developers to shelve or repurpose 51 apartment projects – and an estimated 16,550 units – over the past two years. From the first quarter of 2017 to March this year, at least 31 projects with 7850 apartments were abandoned.”

“The collapse in apartment investors was painfully illustrated by Singapore-listed developer Chip Eng Seng which recently reported selling just 13 out of 222 apartments in a mega-project launched nearly a year ago, despite offering $2 million in incentives to the first 70 buyers. Overall sales to-date in local subsidiary CEL Australia’s signature Fishermans Bend project are running at 5.9 per cent, with sales ‘not expected to improve significantly’ in the first quarter this year.”

“Longer sales campaigns mean overall stock levels are up 1 per cent in the past three months year on year, with almost 44,000 Sydney properties on the market. More than half of those properties have been for sale since January or earlier, creating a backlog of stock.”

“‘Eighteen months to two years ago … we’d be listing and selling every week,’ said Sonia Poulos of Century 21 Combined Liverpool. ‘I’ve got a lot of listings …but they’re just sitting there. Owners still want the prices from six months ago.'”

“Recent figures from the Real Estate Institute New Zealand revealed a tale of two cities when it comes to the relative growth or decline of property and house values. One example was the central Auckland suburb of Mt Albert, which saw house and property values declined 30 per cent. However, figures showed that the number of apartments increased by 25 per cent compared to last year, said REINZ chief executive Bindi Norwell.”

“‘So new apartments – actually, that’s not a bad thing. It opens up opportunities for first homebuyers as well, and the number of properties that sold over $1 million declined, so that’s why it explains the figures,’ she said.”

“A local business owner recently informed me that the days of Scottsdale (even south Scottsdale) being affordable for the middle class is over. ‘That ship has sailed,’ he rather smugly proclaimed. Hmmm. Well, I guess the rest of us bottom dwellers have been put in our rightful place.”

“To those who share an attitude similar to the one expressed by the business owner, let me just say this. Remember the housing bubble of 2008? What goes up must and will come crashing down, an opinion shared by many Realtors and financial planners I have spoken with.”

“Then perhaps the rest of us slackers may have the satisfaction of informing all those investors, developers and assorted elite who feel the rest of us are financially unfit to inhabit the same city they call home, Gee, so sorry for your loss as in money on your investment but the days of inflated rents and housing prices are over for now.”

“That ship has sailed. What goes up just came down. Then what will Scottsdale be left with? Oceans of apartments and condos that are all competing for renters at bargain basement prices? Another appropriate saying comes to mind. History is doomed to repeat itself. Apparently we learned nothing from the last housing meltdown except that practice makes perfect.”

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This Post Has 70 Comments

  1. ‘The five-bedroom, 5.5-bathroom 1909 home at 1035 Shattuck Ave., which came to market two months ago, has seen $545,000 shaved off its $3,495,000 list price and is now looking for $2,950,000, a 16% decrease. The 2,200-square-foot completely rehabbed home at 1470 Seventh St. went up for sale at $1,995,000 on April 10. It got a 20% price reduction on May 8, however, and is now asking $1,595,000’

    But prices aren’t going to fall, says Chris Thornberg….

    Eat yer crow!

    2. “went up for sale at $1,995,000 on April 10. It got a 20% price reduction on May 8, however, and is now asking $1,595,000.”

      Seems pretty quick to shave off 20% of the dream price, are they a having a FOGS moment and trying to exit the market? They could have at least rolled the dice and asked $1,888,888 and buried a statue in the front yard first, did they forget about all the IPO millionares and chinese all cash buyers that only buy properties with enough 8’s in the listing price.

    3. Me thinks “Sorry for your loss” greeting cards (In the death and sympathy section of your local CVS), will be the next growth industry.

      Just classic quotes from Larry Yun of NAR, and the those fun loving pranksters from the NAR will keep card designers busy for years.

  2. ‘In Boston, the average luxury home sold for $3,219,000, down 22.4 percent from the first quarter of 2018’

    The title for the article:

    ‘Is Boston’s luxury condo market really in a downturn?’

    2. I called out the San Diego Union Tribune for this during the last bubble. The author replied and said he doesn’t get to write the headlines, just the articles.

    3. Boston will be ground zero for crater when we pass the crest of this bubble. The obscene pricing for 100+ year old shacks is unsustainable.

      1. It’s was probably around 2015 I posted an article where Boston appraisers announced they were taking into consideration long lines at open houses to keep up with the rapidly increasing prices. Then about a week later a similar story was posted on California. Now that’s some tight lending right there!

  4. Speaking of losses:

    ‘A report last year from the Economic Policy Institute (EPI) found Uber driver pay averages only $9.21 an hour after deductions for Uber fees, vehicle expenses, payroll taxes, and the cost of a “modest benefits package.” Although the report was published in 2018, the information is “relatively the same,” Lawrence Mishel, the author of the report and a distinguished fellow at EPI, told Yahoo Finance.’

    “Wages for most workers have actually risen relative to inflation over the last several years,” Mishel said. “I’m not sure that Uber driver wages have grown along with it, so I think Uber drivers are probably falling further behind.”

    ‘There are higher estimates out there of how much Uber drivers earn. A May 2019 study from Stanford University indicated that the gross hourly earnings for U.S. drivers between January 2015 and May 2017 was $21.07. However, Mishel pointed out that these findings didn’t subtract costs like gas, car depreciation, and Uber’s service fee.’

    “This is far from a measure of wages we can compare to BLS data for other workers,” he said. “It actually is quite exaggerated and misleading.”

    “Right now, I think Uber faces the following conundrum,” Mishel said. “It’s locked into a price competition with Lyft and other potential companies. It’s only the size that it is because venture capitalists happened, subsidizing passenger fares quite substantially.”

    https://finance.yahoo.com/news/uber-driver-pay-144045917.html

    ‘because venture capitalists happened’

      1. Uber and Lyft are both counting on the quick arrival of level five autonomous vehicles to salvage their business model. Looks like investors aren’t too keen on that strategy.

        1. Autonomous vehicles were the linchpin of the business model all along. Allowing people to participate by giving local folks rides around town as a side hustle has always been just a stop gap while they wait for the technology to catch up.

          Useful idiots who thought they were going to make a career out of becoming unlicensed cab drivers are just deluding themselves.

    3. Interesting New York Times article: Why You Should Root for the Uber I.P.O. to Fail

      “We should all root for a comeuppance for those investors, who have helped to debase the entrepreneurial system that is so important to the global economy.”

      “This cycle — in which unsustainable start-ups make ever-larger promises to bloated venture capitalists, who promise more than they can deliver to flush sovereign wealth funds, who are too eager to believe them — distorts the allocation of capital and talent. The rush to invest, no matter the underlying economics, diverts entrepreneurial energy toward unviable business models.”

      2. The resurgence of doomed unicorn IPOs selling for $billions wouldn’t be possible without the Fed enablers support for lending rates approaching the zero bound.

        1. Good read on Uber.

          I like the commentary from Matt Levine over at Bloomberg several months ago from his daily newsletter:

          “You can quibble with the numbers, I suppose. And you could be more bullish than Horan and Kaminska are; self-driving cars could do wonders for Uber’s margins! But if you take this at face value, then it doesn’t quite read like a transfer from the working class to the urban metropolitan elites, does it? The drivers get economics that are roughly comparable to, maybe a bit worse than, what they’d get from regular taxi companies. But 59 percent of the cost comes from investors, specifically, the earnings-insensitive high-net-worth investors in Uber’s recent private funding rounds. It’s a transfer from the investor class to the urban metropolitan elites. Annie Lowrey has it right: Uber looks more like “progressive taxation from the filthy rich to the somewhat less rich.”

          “I suppose it can be both. Matt Yglesias famously called Amazon “a charitable organization being run by elements of the investment community for the benefit of consumers,” but it is not hard to find articles about how Amazon’s low costs and high customer satisfaction come in part at the expense of its workers. Perhaps the trick is that consumers don’t feel too bad about exploiting workers if they are exploiting capitalists more. It is not always clear what’s in it for the capitalists, though.”

  5. ‘landlords are now being forced to offer incentives because there’s more supply in the market than demand’

    Wa happened to my shortage Bob Rennie?

    ‘One of Mousavi’s clients has a new building with 157 available rental units. He says each one includes incentives’

    ‘And it’s not just developers offering bonuses. Mousavi says landlords with single units are also having to fight for tenants. ‘A lot of these people are under pressure because of mortgages … so it’s, sort of, a desperate attempt to get their properties rented’

    That’s not a problem. Just do what Stanford did with uber and don’t count the mortgage!

  6. ‘The collapse in apartment investors was painfully illustrated by Singapore-listed developer Chip Eng Seng which recently reported selling just 13 out of 222 apartments in a mega-project launched nearly a year ago, despite offering $2 million in incentives to the first 70 buyers’

    You gotta go through the waves of foreclosures to find a bottom Australia, there’s no way around it.

  7. ‘tried to sell it on their own for $589,000…reduced the asking price to $539,900…further reduced to $519,900…a negotiated deal for $500,000 was signed in early March. ‘That’s the reality of Calgary’s market’

    This as Calgary’s shack market has been sinking like turd in a well for 5 years. And what did we hear from the UHS for the first 3 years? “It’s bottomed, to the moon Alice!”

  8. “‘So new apartments – actually, that’s not a bad thing. It opens up opportunities for first homebuyers as well, and the number of properties that sold over $1 million declined, so that’s why it explains the figures,’ she said.”

    It’s a mix problem that’s all!

    $999,999 for first-time knife-catchers (I MEANT BUYERS) what a deal!!!!!

    1. Never mind that the banks won’t give first-time buyers a mortgage on an apartment anyway. Reality has no place in anything Bindi says.

  9. The sellers decided to enlist the help of agents Bryon Howard and Shirley Wright, who immediately reduced the asking price to $539,900.”

    Overpriced shacks = sitting unsold. Bryon & Shirley must be getting tired of their monotonous diet of Ramen noddles and Dollar Store pasta.

  10. Mousavi says landlords with single units are also having to fight for tenants. ‘A lot of these people are under pressure because of mortgages … so it’s, sort of, a desperate attempt to get their properties rented,’ he said.”

    Such a crying shame that we renters feel no sense of urgency whatsoever in our search for the best deal. Sorry about your underwater mortgage, Desperate Landlords.

  11. Oceans of apartments and condos that are all competing for renters at bargain basement prices?

    The horror!

  13. Yep, history is repeating itself and more rapidly that the press will let on.

    Soon the downturn will become mainstream news, then lookout below!

    1. So is the consensus that we’re somewhere around 2006-7 or so when compared to gigundo bubble 1.0? That’s my take – a year or two out til the whole s-tstorm goes up in flames.

      That inventory number for Sydney Australia seems pretty damn big.

      1. That inventory number for Sydney Australia seems pretty damn big.

        44,000 for a city of 4 1/2 million doesn’t seem so damn big to me. It is just the beginning. That country has never experienced a housing price collapse.

      2. That’s my take – a year or two out til the whole s-tstorm goes up in flames.

        I’m anticipating more speed this time. Faster crash, harder to contain, even higher bounce if it is successfully contained. Lather, rinse, repeat, faster and faster until it blows up.

    2. Once the CR8R gets MSM recognition, the Fed, Treasury, and crony capitalist collaborators on Wall Street can start foaming the runways in preparation for the next round of bailouts.

      1. “volume” as in sell more -37% profit margin homes? guess that would work in the grand scheme where the higher the loss the higher the value…

    2. I can’t stop laughing at Zillow’s horrible timing, getting into house flipping just as the market was turning south.

    4. Swilll-o may get the last laugh when they are bailed out by the Fed to keep their inventory from dragging the rest of the housing market down with it.

      1. Yeah, them and Open Door and anybody else willing to keep house prices “where they belong” as J6P slips below the surface again.

    5. Just wait for Zildo’s unsold shacks to collect tumbleweeds on the dead lawns as frozen burst water pipes soak mold-covered drywall inside… meanwhile the local sheriff deputies will routinely raid meth labs set up in the genuine Chef’s Kitchens in abandoned Zildo shacks. Believe me, that is the end game for this experiment.

      1. After the last boondoggle, It’s hard not to be cynical about the end result. Even if Swill-O goes belly up, I doubt it will result in deals for the little people who have diligently worked and saved. Their whole inventory will be sold off for pennies on the dollar to some insider investment group with government backed money and then resold back to the public once the Fed has reinflated prices through more NIRP/ZIRP/QE.

        1. “Their whole inventory will be sold off for pennies on the dollar to some insider investment group with government backed money and then resold back to the public once the Fed has reinflated prices through more NIRP/ZIRP/QE.”

          Has anything similar previously happened?

  16. Boston’s condo bubble is insane. Not going to be a pretty sight in a few years. Ancient condos in terrible neighborhoods for 700k minimum or a shoebox in a so so area for 700k minimum. Why do people repeat the same mistakes over and over?

    2. Recency bias, mediocre intelligence, FOMO, peer pressure and a banking-government-real estate cartel which encourages and benefits from gambling on shacks.

    1. When I was a kid we used to stay at my aunt’s apartment in Greenpoint. Every afternoon we would be overwhelmed by the haze of smoke coming out of the Trunz meat processing plant. She wouldn’t let us hang out on the stoop at night cause the apartment faced a cemetery and people would be in there getting high and raising hell. I think she was paying $45 a month for that place in 1967.

      I miss the good old days.

    1. “Fannie Mae guidelines allow mortgage lenders to approve new mortgages after a waiting period of just four years“

      Articles like this just confirm how hungry the mortgage industry is. Sad

    1. Sweet. We’ve been over that discussion many times. Its great to see the MSM is finally starting to catch on!

    2. It sounds like the Fed is nearing victory in its War on Savers!

      The Wall Street Journal
      U.S. Economy
      One-Third of Middle Class Can’t Afford $400 Surprise Expense, Fed Finds
      – Many U.S. adults remain in position of ‘financial fragility’ despite ‘marginally’ improved economic security, central banker says
      – Nearly 3 in 10 middle-income adults carry a credit-card balance most or all of the time, a Federal Reserve survey found.
      Photo: Keith Srakocic / Associated Press
      By Lalita Clozel
      May 10, 2019 1:48 p.m. ET

      WASHINGTON—One-third of middle-class American adults couldn’t afford a $400 surprise expense, and some 6% also couldn’t manage such a cost even by borrowing money or selling something, a soon-to-publish Federal Reserve survey of household economics is expected to conclude.

      Fed governor Lael Brainard said in a speech Friday that the Fed’s 2018 Survey of Household Economics and Decisionmaking, expected to be released later this month, would show that while economic security has been “marginally” improving, many U.S. citizens—both in- and outside the middle class—were still in a position of “financial fragility.”

      Americans’ widespread inability to shoulder an emergency expense “is something that is very pronounced in recent years, and we should be taking a hard look at it,” Ms. Brainard said. “It’s still a pretty large percentage of our respondents who find it difficult…to meet what may seem like relatively manageable expenses.”
      …

  24. ‘Plenty of people thought Uber was going to make history–just not this kind. Shares of Uber stalled on their first day of trading Friday, falling 7.6% to just under $42 amid mounting trade war tensions.’

    ‘And, according to noted IPO watcher Jay Ritter of the University of Florida, on a dollar basis, investors who purchased the 180 million shares offered through the IPO at $45 per share collectively logged $618 million in paper losses Friday. That represents the worst dollar losses for a U.S. IPO going back through 1975, excluding foreign stock listing in the country via American Depository Shares.’

    ‘In terms of the share price drop, Uber’s IPO ranks as the ninth worst first day performer of all time, according to DealLogic.’

    http://fortune.com/2019/05/10/uber-ipo-worst-performing-percentage/

    1. ‘Shares of ride-hailing company Lyft fell 7.4% on Friday after larger rival Uber had a disappointing debut on the New York Stock Exchange, closing down 7.6%. Throughout the morning, indications of Uber’s opening trade price dropped from an initial estimate of $46 to $48, until it opened at $42 per share. That’s below the $45 price of shares sold in its initial public offering, and even below the $44 low point of the company’s estimated pricing range last week. Uber closed at $41.57.’

      ‘Lyft was having a rough week already. The shares fell more than 10% Wednesday after the company released its first earnings report since going public.’

      https://www.cnbc.com/2019/05/10/lyft-crashes-amid-middling-uber-market-debut.html

      1. I keep getting promo emails offering 25% discount on Lyft rides. I never use Lyft or Uber. I do, however, use public transit.

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