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I Wouldn’t Say This Is A Chicken Little Moment Where The Sky Is Falling

A report from the Orange County Register in California. “Southern California’s home prices boomeranged back in April from a rare price drop in March as lower mortgage rates and an increase in the number of homes for sale lured more home shoppers back into the market, CoreLogic reported. Southern California’s median price hit an all-time high of $537,000 in June, and last month’s median is in striking distance of that amount, coming just $9,500 below that record.”

“In addition to seeing sales drop in 17 of the past 22 months, the number of homes for sale has been rising. Listings in Los Angeles and Orange counties are at the highest level since 2011, Steve Thomas of Reports on Housing said recently.”

“The region has been in a sales slump since mid-2018, however, when transactions stopped rising from year-ago levels. Economists attributed the decrease to rising mortgage rates and prices climbing out of reach for most buyers. Many buyers also pulled back because they feared the market was nearing a peak and they didn’t want to buy at the top of the cycle.”

From Money Magazine. “San Jose made headlines in 2016 when its average home price passed $1 million. And they didn’t stop there: the average price of a home climbed to $1.37 million at the start of 2018, according to the National Association of Realtors (NAR).”

“For the past year, however, they’ve been falling fast. As of the first quarter of 2019, the average home price has fallen 11.1% since the same period in 2018 to $1.22 million.”

“San Jose isn’t the also the only place in the U.S. where prices are moderating or even falling. Other cities, like Naples, Fla., Norfolk, Va., and Topeka, Kan., are also saw decreases in year-over-year median listing prices for the first quarter, according to the NAR.”

From LA Downtown News. “In January, work stopped on the $1 billion Oceanwide Plaza project next to L.A. Live and the Los Angeles Convention Center. Developer Oceanwide Holdings announced in late January that it had put the project on hold while it restructured its capital, but pledged to resume construction by the end of the following month.”

“February has come and gone, as have March and April. Meanwhile, little apparent progress has been made. Although construction fencing remains up and cranes still rise above the frames of the three towers, on most days there appear to be few if any construction workers on site.”

“The project at 1101 S. Flower St. is slated to comprise 504 condominiums and a 154-room Park Hyatt hotel in two 40-story towers and a 49-floor high rise. Last week, a spokesperson for the project declined to comment and instead pointed to the developer’s statement in January.”

“The main issue behind the stall still appears to be the Chinese government’s capital control measures on direct international investment, according to Dr. William Yu, an economist with the UCLA Anderson School of Management and an expert on the Chinese economy. He said that over the last three years, Beijing has been exerting greater scrutiny and restrictions on overseas investment in areas such as real estate, following a near depletion of the country’s foreign currency reserves.”

“Dale Goldsmith, a partner with the land-use firm Armbruster, Goldsmith & Delvac and a veteran on the development process in Downtown, said that despite the project sitting unfinished in the heart of South Park, Oceanwide Plaza’s problems are not a sign of the overall development market in Downtown slowing down.”

“‘I wouldn’t say this is a Chicken Little moment where the sky is falling. It’s a complex project. I imagine sorting out new financing is very complex,’ Goldsmith said. ‘It’s a lot easier when you haven’t broken ground.'”

“At the end of January, contractor Webcor Construction filed a $52.8 lawsuit against Oceanwide, Lendlease and others, citing breach of contract and unpaid funds. That lawsuit is still pending. Oceanwide did not comment on the matter.”

From Realtor.com. “The former family home of beloved San Diego Padres great Tony Gwynn has had a rough few years since the Hall of Famer passed away in 2014. In 2018, the home, still owned by Gwynn’s widow, Alicia, fell into foreclosure. At the time, the property was worth about $2 million, but she owed more than $2.5 million to the bank, the San Diego Union-Tribune reported.”

“The home went to auction in June 2018, but failed to attract a buyer, so ownership fell to the lender. Property records indicate that the current owner of the home is a trust associated with Deutsche Bank.”

“Earlier this year, neighbors spotted squatters living in the home. These interlopers were difficult to evict due to California’s squatters rights, so a civil case was brought to rid the home of any inhabitants. Now the vagrants have scattered, and the bank is ready to find a new owner for the 2-acre property, so the mansion is on the market in Poway, CA, for $2,120,000.”

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This Post Has 54 Comments

  1. Squatters, foreclosure, huge towers stalled in downtown LA, prices sinking like a turd in a well, shacks piling up left and right. Are we there yet?

    ‘For the past year, however, they’ve been falling fast. As of the first quarter of 2019, the average home price has fallen 11.1% since the same period in 2018 to $1.22 million’

    Thornberg, eat yer crow!

  2. ‘Southern California’s home prices boomeranged back in April from a rare price drop in March’

    One of these things is not like the other.

    ‘Southern California’s median price hit an all-time high of $537,000 in June, and last month’s median is in striking distance of that amount, coming just $9,500 below that record’

    The OCR is working hard to spin its way out of this mess.

    ‘In addition to seeing sales drop in 17 of the past 22 months, the number of homes for sale has been rising. Listings in Los Angeles and Orange counties are at the highest level since 2011’

    Do tell. So just how much inventory are we talking about?

    1. Seems like you might being doing some spinning — the fact that prices bounced back shows some strength doesn’t it, or am I missing something?

      1. I thought prices always goes up in the Spring? FAKE NEWS….Real estate prices always go up! END OF STORY!

      3. ‘am I missing something’

        You’re missing a lot. Price is a lagging indicator. I can elaborate if you are unfamiliar. Price is subject to mix. (The REIC only mentions mix when prices are down. Interesting.) A tiny MOM price change is meaningless.

        The real story is sales (dismal and getting worse) and inventory (up hugely and getting worse). And what’s more, these numbers were telling us over a year ago where we are today.

        So why didn’t the OCR put these key numbers in that light? They didn’t even give us the inventory changes, just the most since 2011. And the writers at the OCR know what I just told you. But they’ve got ads to sell. I understand. But I also know see BS when I see it. Notice the word “peak”. Suggests a slide ahead. Notice we’ve seen “peaks” in almost all the “hot” west coast markets, at almost the same exact time. This isn’t isolated to southern California. Meaning something big is afoot.

        One more thing: we also know that the most expensive markets in the regions got hit first, harder and faster. Look at Beverley Hills, Newport Beach, Bel Air, etc.

        1. Egad, Mafia Blocks, you really believe that silly data you post. I know, square footage doesn’t matter. As far as Ben’s comments, you might be right that price is a lagging indicator, as it takes a while for sellers to adjust their expectation, but if the highest priced markets are hit first, presumably that would show in the overall median data. The “mix” you are referring to would include more low priced markets, driving down the median sale price. I do think those markets are eventually headed down, but I’m not sure how fast and how far while there is significant strength in the economy.

          1. YEEHAAWWW!!! The stock market is booming! Lowest unemployment rate in 50 years!!!! Consumer confidence at 100 years high! The Trade war going GREAT! Stupid Chinamon paying all the tariffs! The BEST PRESIDENT EVER! #MAGA Baby ….

          3. I’d like it if it were accurate. I’m considering buying a second home in the Phoenix area. Your data doesn’t support your claims even remotely. You have either taken leave of your senses or you know your conclusions are nonsense and you are engaging in a one man propaganda campaign. I’m not sure which option is better.

      4. The way I see it is we are hanging by a thread here. You got MoM declines in sales and prices going down (slowly but still down). List prices are meaningless if they don’t sell and from my window the ones that do sell are far below list. Even Zildo is forecasting declines ahead, that can’t be good for RE…

    2. Hey Mafia Blocks,
      If square footage is irrelevant, you should be able to post many examples of where square footage went up (or at least stayed the same) and list prices went down. With the exception of a very few markets, the listing price drops you show coincide with a LOWER total square footage and usually very large changes in median square footage. It should be obvious to you that a 1500 square foot house in Hawaii will sell for a lot less than a 2200 square foot house, but you tell us square footage doesn’t matter. So show us the example of lower prices with HIGHER square footage.

      1. irrelevant

        Living in the mania. You just go buy the biggest investment property you can qualify for.

      1. You can’t swing a dead cat around the Austin area without hitting a good BBQ place.

        2. You can’t swing a dead cat around the Austin area without hitting a good BBQ place.

          Makes sense. There’s no point in even opening there if you can’t run with the big dogs. Unlike California.

  4. ‘said that despite the project sitting unfinished in the heart of South Park, Oceanwide Plaza’s problems are not a sign of the overall development market in Downtown slowing down’

    Spot on Dale, the development market has apparently ground to a bankrupt halt. This is a billion dollar project, BTW.

  5. “…The project at 1101 S. Flower St. is slated to comprise 504 condominiums and a 154-room Park Hyatt hotel…”

    It takes a special kind of person with a really different view of the world to actually want to pay big $$ to live in DTLA.

    In this case your $$mm condo is right across the street from Staples Center with all the noise, hustle, drunks and homeless on the sidewalks.

    Been to DTLA plenty of times for business and the occasional convention center visit. For me, the best part of the trip is when I get back on the freeway (congestion 24×7) and go home.

    1. DTLA – Skid Row is amazing though! Like wild animals (on drugs) right out of your building!

      1. Maybe the new condo owners could set up some game cams and make a National Geographic type youtube show.

  6. Shouldn’t he be saying that he *does* believe this to be “a Chicken Little moment where the sky is falling”?

    I thought the whole point of that story was for it to be an allegory about being hysterically wrong in thinking that something was about to happen that really wasn’t.

  7. German banks and “Chinese investors” trying to get a rate of return in Southern California real estate. Isn’t globalism wonderful? The Federal Reserve is probably ready to bail out German banks liked it did under Obama. Chinese investors are desperately trying to get their money and themselves out of China before it goes back to shooting capitalists. Without Obama, China can just make idle threats which can drop the stock market 1 percent meanwhile the economy is slowing down to a point where it can never meet the debt payments. It is fun to watch when you have a President who knows how to win. Under Obama I saw China getting stronger.

    1. February 8, 2017

      “New York City is still the No. 1 destination for foreign capital in the world, according to this year’s AFIRE rankings, but it is no longer an environment in which foreign money — particularly from China — will buy anything in the market at any price. This year, China has clamped down on outbound foreign investment, and firms caught flouting the new laws will be punished harshly, China First Capital CEO Peter Fuhrman said. While most New Yorkers in commercial real estate are aware of the capital slowdown, Fuhrman said they are probably not taking it seriously enough.”

      “‘I have the perception that the full weight and severity of these capital controls hadn’t been fully felt here,’ Fuhrman said. ‘It’d be fair to say that the Chinese central government dropped a financial bomb on its businesses.’”

      “One of the Chinese government’s chief concerns when instituting the investment restrictions, Fuhrman said, is over outbound investors getting fleeced while paying record-breaking prices. ‘A concern of Chinese regulators is their investors have been really bad buyers,’ Fuhrman said. ‘This can sadly be seen more and more in the larger real estate deals they have done. What they are extremely concerned about is just about every acquisition the Chinese have made, is they have overpaid severely and foolishly, and that has spurred a loss of a lot of Chinese sovereign wealth.’”

      http://thehousingbubbleblog.com/?p=9989

      1. ‘A concern of Chinese regulators is their investors have been really bad buyers,’ Fuhrman said.

        They’re not bad buyers. They’re bad people, i.e. embezzlers and money launderers. They’re DUMB buyers, easily fleeced.

        There, fixed it for ya.

      2. every acquisition the Chinese have made, is they have overpaid severely and foolishly

        Probably because they have a much higher IQ than the rest of us, as per Adan.

        “…Chinese economy… a near depletion of the country’s foreign currency reserves.”

        Ouch. That’s going to make a debt crisis rather uncomfortable.

    2. “The Federal Reserve is probably ready to bail out German banks liked it did under Obama.”

      Deutsche Bank shares have lost something like 90% of their value since the 2008 financial crisis according to, “The Economist.”

      1. I think it’s a pretty good indication that we’re near the end of the cycle when you start seeing stupid desperation plays like this.

        Home buyers are pulling back, prices are falling, and folks want to jump in now expecting easy profits? Good luck with that.

    1. In finance it is always balancing the return on your money vs the risk of no return of your money. They probably received a lousy one or two percent extra. Well money talks theirs just said adios.

    2. “I don’t understand why they couldn’t keep the money at some place like Vanguard or Fidelity or Schawb and just withdraw living expenses at the ATM…”

      Low interest rates drives these diaper wearing retirees into the shark infested waters. Greed.

    3. Interesting that the Aussie got all his money back. While seemingly everyone else was asked to take a massive haircut.

  11. Now that Robert Mueller has resigned, maybe the FBI can focus on the Obama administration’s illegal spying and the political assassination of Seth Rich.

    1. REALTOR, shut up and eat your ramen.

      (You’ll be eating ramen again tomorrow, but tell yourself you won’t be and that it’s gonna work out fine.)

  13. “‘I wouldn’t say this is a Chicken Little moment where the sky is falling.

    You wouldn’t say it, Dale, but I bet you’re sure thinking it.

  14. In 2018, the home, still owned by Gwynn’s widow, Alicia, fell into foreclosure.

    Houses don’t “fall into foreclosure.” FBs fall behind on their payments. Then they discover who “their” house really belongs to.

    1. It’s important to note that the whole present day push to use “affordable”, federally guaranteed loans to encourage every US household to buy a home, coupled with unprecedented housing price volatility, sets the stage for many to bite off too much house during the boom years, only to discover they can’t or don’t want to hold on to a highly leveraged, falling knife asset during the subsequent bust.

      Perhaps it has been this way over decades, but the current volatility, at a decadal scale, is the most extreme ever.

  15. Saw similar back in 2006 where slightly lowered prices brought on an uptick in sales from buyers who perceived value. It was short lived and we know what happened next. Similar to stocks where it is called the “dead cat bounce”

    The rhetoric in press is the same now as then, I have noticed a similar affect on my business as then, and the slowing I am seeing in new home developments now is similar to then as well. History repeating? Rhyming?

    Next is to see if some large mortgage companies quietly go under or mid size banks by go into conservatorship without warning. Then, I think, it is writing on wall followed by precipitous stock market drop.

    Remember, torpedos to not announce in advance. Fun to look at 2007 to 2010 MLS records and see the destruction. Seems most have forgot other than us cooks and weirdos here on the blog. Can and will likely happen again

    2. “Next is to see if some large mortgage companie$ quietly go under or mid $ize bank$ by go into cons$ervatorship without warning.”

      Mega Wanker.Bank$ $trong! … NON.bank$ $acrificial lamb$ awaiting the crowd gate$ to bee $laughtered.

      Think of fun things to do in the meanwhile$!

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