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A Sure Sign Buyers Not Smelling What Unrealistic Sellers Are Cooking

A report from the Herald Tribune in Florida. “The ‘West of the Trail’ neighborhood has been the golden child of Sarasota’s residential real estate market for decades. But there is a change happening, says real estate appraiser Don Saba, who lives in the neighborhood. ‘We are starting to see more inventory and homes sitting awhile,’ he said.”

“There is no shortage of houses for sale, with prices ranging from $250 to $600 per square foot for off-the-water properties — and a noticeable number of them are being advertised as ‘price reduced.’ That’s a sure sign of buyers not smelling what the unrealistic sellers are cooking. Plenty are priced from $1 million and up.”

The New York Post. “Real estate hotshot Ivan Kaufman, CEO and president of Arbor Realty Trust, is in contract to buy Three Ponds Farm in Bridgehampton for around $35 million — more than half off of its $75 million asking price from 2003. (It most recently asked $49 million.)”

From Celebrity Net Worth on New York. “It’s spread across 42 acres in the Hamptons, it’s been on the market for almost two years without a sale, and now according to its most recent listing on Bespoke Real Estate it’s now $30 million cheaper. It’s called Jule Pond, and it’s now got an asking price of $145 million.”

From on California. “Actress Kirstie Alley hasn’t been able to say cheers to her home, so she’s chopped $1.2 million off the price tag. After paying $2,998,000 in 2000 for the 8,622-square-foot home in Los Feliz, CA, Alley listed it last November for $11,970,000. But now that it’s been languishing on the market for nearly seven months, she’s dropped the price to $10,750,000.”

The Los Angeles Times in California. “One of the biggest, most expensive homes in all of L.A. County just got another massive price cut. The Manor, which listed last year for $175 million, is back up for grabs at $160 million in the ritzy Westside neighborhood of Holmby Hills. That’s down 20% from its original price tag of $200 million.”

From City Journal in Illinois. “Every homeowner leaving Illinois puts a house on the market without buying another one locally. That’s one reason the Chicago marketplace is struggling. The average price of a single-family home in Chicago is lower than it was before prices began plunging back in 2009.”

“One consequence of the lagging recovery is that Chicago has more homes with underwater mortgages than any other major market. As many as 135,000 of these homeowners may risk default when the next recession hits and prices plummet again.”

“Homeowners are feeling the pinch in other ways, too; local papers are filled with stories of people regretting their investment in a house. Last year, Crain’s Chicago Business told the story of a Chicago-area executive who lost more than half a million on the sale of his home when he retired to move elsewhere. If he had invested the money in the stock market instead, he said, ‘I’d probably have $6 million now.'”

This Post Has 152 Comments
  1. ‘The ‘West of the Trail’ neighborhood has been the golden child of Sarasota’s residential real estate market for decades’

    Once again, the most expensive and desirable areas crack first and fall further, fastest. A sign of a bubble popping.

    1. Prices on everything nearby of comparably lesser value will be crushed by the avalanche tumbling down from the top of the mountain.

      1. Yup. The high end home prices helped raise the prices of the more modest homes on the way up, so why would it do anything else on the way down.

        1. Spiffy. I read the post and some responses regarding your knees. Have had four orthopedic operations, including both knees, I am keenly aware of the residual effects. You have been offered some good advice. What I would offer is that serious rehab is required if you want a future that gives you much of your opportunity to do the things you would like to do. It will be painful and discouraging at times but staying with it until fully rehabbed, will reward you years into the future. Just my 2-cents.

          1. scdave,
            Serious rehab is a given.

            Right now the biggest question mark is scheduling and insurance. I’m on Mrs Spiffy’s insurance and she just started a new job, with her new health insurance starting yesterday. The surgeon I like so much is going on sabbatical in a couple months so I’m trying to get it done before that. They’re working on the surgery order right now. Trying to get it done in about 6 weeks.

            In the mean time, there are 2 things I am focusing on. #1 is dropping some weight. #2 is daily workouts to build up cardio, leg and upper body strength. When I was younger I would go on programs to stay fit for entire season of skiing – trying to tap the auto-programming memories to keep at it.

            After the surgery I’m planning on 6 weeks of nothing but recouping and PT.

            We’ve built our emergency fund back to right about 1 year of living expenses – it got whacked when we purchased this house in 2018 – so I can afford the downtime.

          2. #1 is dropping some weight.

            The med-surg unit I used to work on was a bariatric center for excellence. We did tons of sleeve gastrectomies and other variations of bariatric surgery. I don’t know where you are in terms of goal weight so this might be way unnecessary, but I have had two family members do that procedure and it was life changing for both of them. One was my sister and she is younger than I was. Just had a lot of weight after having her baby and had gestational diabetes. Bariatric surgery is maybe one of the most effective and sustainable interventions and often people don’t look into it. There was a really good NYT article about the procedure a year or two that did a deep dive into the medical literature on it and its effectiveness.

          3. OneAgainstMany,

            I don’t think I’m a candidate for bariatric surgery yet, but I have let the stress (there’s has been a metric crap-ton of it due to a certain company in Redmond) and lack of activity / stress eating get the better of me. I’m up to 225 ish now and know I can get back to around 190 like I was earlier in the decade (5′ 10.5″) The surgery is coming up so fast, I’ll be lucky to lose 10 pounds, but I’m going to give it a try.

        2. More to the point, why would anyone pay more for a lower quality home than they would pay for a luxury home simultaneously offered at a bargain basement price level? That would make no sense.

          1. And it’s waaay easier for a buyer to shop around and see just what is out there at what price than it used to be 20-30 years ago when the Realtor(tm) was the choke-point for information. Now it’s much closer to comparison shopping on Amazon.

  2. “Real estate hotshot Ivan Kaufman, CEO and president of Arbor Realty Trust, is in contract to buy Three Ponds Farm in Bridgehampton for around $35 million — more than half off of its $75 million asking price from 2003.

    But…but…that pesky REIC troll that used to infest the HBB informed us that a 50% drop in shack prices was utterly inconceivable. Pretty sure he’s living in a cardboard box these days.

    1. Half off seems to be the magic number right now. The Friday post had entire cities hitting it.

      Dr. Drew Pinsky compares LA health crisis to Third World country …
      Washington Times-21 hours ago
      … They literally won’t take the housing if we give it to them.

        1. I guess you aren’t betting that Jay Powell & Co. will replay the housing bailout for which Ben Bernanke created a precedent? Or is your assumption that it wouldn’t work a second time, even if they tried?

          1. There is no fear or pain atm. Once it hits the fan they’ll block foreclosure proceedings and allow everyone to stay in their home. “The Family Act of 2021”

            Also not ruling out the Fed full-on buying houses at some point.

      1. “Half off seems to be the magic number right now“

        Out of curiosity Ben and HBB followers, do you have any predictions as to when we will actually get to this number or thereabouts? I get that no one carries a future telling crystal ball around and I’m asking a very vague question but watching this all unfold AGAIN must provide some approx timeframe (QE, Fed assistance, foreign investors aside). Not looking to bank on the answer, just curious your (and other HBBers) thoughts. I am guessing 2020 after elections we will be back to 2009 levels

        1. IMO it’s better to understand what’s going on now. This shack is scheduled for foreclosure auction on June 18:

          116 Mountain View Ave
          Santa Cruz, CA 95062
          3 beds 2 baths 1,020 sqft
          Off Market
          Zestimate®: $896,001
          Rent Zestimate®: $2,800 /mo
          Est. Refi Payment
          $See current rates
          Note: This property is not currently for sale or for rent. The description below may be from a previous listing.
          Not many 3/2 homes of this size and yard in this quaint and convenient Santa Cruz beach location! Motivated Seller says SELL! Only a short walk to Seabright Beach; one block to the Brewery, Betty’s Burgers, yacht harbor and more! Although this is an unfinished remodeling project, the kitchen has newer appliances and tile flooring throughout. This can become your dream home for a very good price. It has an updated master suite with an updated bathroom. Home decorators and designers will appreciate this as a possible dream house!

          Year Built

          Take a look at this beauty.

          1. $2,100,0005 bd3.5 ba4,230 sqft
            4480 Terra Brava Pl, San Jose, CA 95121

            This home has a pending offer.
            TIME IS OF THE ESSENCE, FOLKS! AND WE DON’T HAVE PLENTY OF IT~This gorgeous home is sadly in pre-foreclosure~We need d best offer 2 consider for d Seller’s lender approval~This is a spectacular Tuscan Hills villa


            $530,5693 bd1.5 ba1,200 sqft
            5115 Winthrop St, San Diego, CA 92117
            Pre-foreclosure Foreclosure

            2/11/2019 Home in default $28,270 past due
            6/12/2006 Loan issued $468,000

            A loan was issued by FIRST FRANKLIN FINANCIAL CORP on 6/12/2006 in the amount of $468,000.


          2. The homes in that neighborhood truly are shacks. Unless you find a diamond in the rough that someone has completely renovated from the studs, you would be buying a dilapidated, high maintenance money pit. Also, it is a high traffic area for crime, mainly car break ins and yard thefts. I have a friend that had one of her wheels stolen off her car. The thief WAS kind enough to leave the axel on cinder blocks though..

          3. “IMO it’s better to understand what’s going on now.“

            Agreed and RE is local (for the most part) I’m hopeful that at least in CA we will have a faster correction as RE price went higher quicker than last round which leads me to think it will work similar in the other direction.

          4. Consider some of what we are seeing. Places like San Jose tanking first and fastest. No rolling foreclosures. No job loss to speak of. Similar to Seattle. Prices have fallen hard in NYC and Miami Beach for years, but I haven’t read about recessions there. It may come to pass, but a mirror image of last decade is not what’s happening now.

          5. Ben,
            I don’t think we need an active recession or lots of job losses for prices to fall far enough to cause a lot of problems.

            The run up in prices was unprecedented – it wasn’t just Mailbu and Naples, Fl, but in Boise, Id and tiny rust belt towns – money was pouring in from all sorts of speculative sources in greater quantities and ways than we saw before. I’d argue that foreign and institutional ‘investment’ along with speculation and criminal activity and wall street trying to get an edge in an era of ZIRP and QE played a much bigger role than ‘MGSpiffy and his family need a house to live in’ this time around compared to prior cycles.

            Now with a hole ripped in the metaphorical side of the hull, that money is going to try and rush back out. Caution is advised.

          6. prices to fall far enough to cause a lot of problems

            The problems were created when dumb borrowed money made the malinvestment in the first place.

          7. “The problems were created when dumb borrowed money made the malinvestment in the first place.“

            Very true! Problem is how easy they make it to acquire this borrowed money and there’s plenty of dummies or perhaps “smart” people that know how to take advantage of the system to borrow it. I have an immediate remedy to bring prices 5-6% down but I don’t think realtors will like it 😉

          8. The first one is HELOC’d to the gills. It hasn’t been sold in more than 10 years.

        2. I feel like the bear stearns moment comes in winter 2020. General deflation will continue for a few years after that. Just my gut feeling.

          1. The Treasurys market seems to be trying to price in peak deflation on a 3 to 5 year time horizon.

        3. I tend to think that the market will remain irrational longer than we expect, especially mortgage rates don’t get above 6%. But I think things will get interesting in about 10 years due to demographic shift. I would say in 10 years time we have a real chance at having median house price 2x median household income nationwide. I think this will be some combination of inflation of earnings coupled with deflation of asset prices.

          1. Whoa… Some people on here are like late 50’s or early 60’s … waiting for prices to crash. In 10 years they might be dead or jobless.

            I’m a late millennial in mid-30’s and waiting 5 years for correction seems a long time.

            I can’t imagine being like 60 and waiting…

          2. like 60 and waiting…

            Being like 60 isn’t an excuse for a really bad financial move, like buying an overpriced house. Some of us have figured out workarounds and just watch in amazement as the perfect financial storm unfolds in slow motion.

          3. “I can’t imagine being like 60 and waiting…”

            A bit of spin on Keyne’s famous saying: “The market can stay irrational longer than you can stay solventthan you can stay alive.”

          4. I can’t imagine being like 60 and waiting…

            I’m a little younger than that, but yeah. Waiting isn’t fun but it still beats the heck out of being screwed over by Mr. Banker. It also helps you realize that maybe you should quit looking at McMansions and start looking at where you want to be for your retirement sooner. If the “right” time comes to buy it may make more sense to buy your ideal 70yo house wherever that is and rent it out if necessaru and continue to rent close to work for the last few years of your career.

          5. Some people on here are like late 50’s or early 60’s

            Invaluable, uncensored perspective!

          6. buy your ideal 70yo house

            Our first and likely only purchase will be a single-story ranch home.

          7. a single-story

            I will intentionally do stairs until I can’t. Then there is plan B. Worked for the generations before me.

          8. do stairs until I can’t

            ATFL repair two years ago has me thinking ahead to Plan B and skipping Plan A. Plenty of single-story ranch homes in SoCal too.

        4. “Places like San Jose tanking first and fastest”

          This validates my “narrow vision” in RE. I see it happening here (Bay Area) whereas other US cities possibly are not experiencing it as fast. All the equity locusts from here seem to be helping maintain areas they are infesting which will only drag on for so long. When I read about TX, AZ, WA, CO,OR, and all the other CA transplant destination states cratering, it sends off some warning signs we are getting close.

        5. Globalization has made answering domestic economic questions contingent upon the whims of Draghi, Kuroda, PBOC as well as our own Fed. From what I have been reading, , Kuroda and PBOC are still in print mode, with Draghi looking set to unleash more printing.
          Combine this with rising populism and the next round of wealth transfer might not be to the banks and the 1% but to average folk. A recession seems near and if Powell responds with helicopter money, this could keep the game going a bit longer (2 years?). However, he should be more careful than Robin Williams measuring the L- Dopa in Awakenings. Too much helicopter money and a nasty bout of inflation will follow. And inflation is checkmate because they *cannot* raise rates without massive strain and defaults.
          IMHO, in any eventuality, we are within 2 years of a major adjustment

        6. I think this guy is in the ballpark on the housing bubble cycle. It’s probably going to be a few years before there’s a buying opp’ty., so get some popcorn, a comfortable chair, and log in daily to the HBB for latest updates from Ben!

          Of Two Minds
          Charles Hugh Smith
          Monday, April 24, 2017
          Housing’s Echo Bubble Now Exceeds the 2006-07 Bubble Peak

          Of Two Minds
          Charles Hugh Smith
          Housing Bubble Symmetry: Look Out Below
          September 12, 2017

          Of Two Minds
          Charles Hugh Smith
          May, 2015
          When the Current Housing Bubble Finally Bursts
          Bubbles are followed by echo-bubbles, and the bursting of the second bubble ends the speculative cycle.

          1. Interesting.

            I have to disagree with him on the timing, though…more like 10 or so years up (e.g. 1982-1991,1996-2007, 2012-2019) punctuated by 5 or so years down (1991-1996, 2007-2012, 2019-2024, etc.). None of this is exactly the same each time, and there is geographic variation, but that’s the rough pattern.

          2. Disclosure: I’ve subscribe to Charles’ musings before.

            I’ve really appreciated his musings on big picture and personal interest issues and not being just another blog that reads the tea-leaves of yesterday’s market numbers. Recommended.

            While I don’t think anyone can predict precisely how things will play out (though it’s possible someone may guess right), I think it’s possible to predict the general ballpark of the sh*t hitting the fan and possible response the powers that be may take from all the information we have today. That’s sort of thing is we’ve been doing here in a hive-mind fashion these last few years.

  3. I am from Sarasota and to put it bluntly the area has become a mess. The numerous new buildings with all of the concrete in downtown Sarasota has literally stifled air movement. Recently and still ongoing there have been heat emergencies with the temp and the humidity readings very high. Thus downtown Sarasota is beyond uncomfortable. Traffic is gridlock. With only I75 and the Tamiami Trail there are few options for alternative routes. Sarasota once a quiet secluded enclave has now become a traffic nightmare, polluted, overpriced muck.

    1. I am also in sarasota. Riverview high a few decades back, and yes downtown is a mess and the old Quay site is getting under way. Rarely go to St. Armands Circle any more.

      Think there will be a big glut in condo/multifamily very soon with big crash in values downtown and Lakewood Ranch. New home construction clearly slowing although slight bump recently.

    1. This is a real need. We often used ride sharing to discharge patients in the ward that I worked in. The reality is that many older patients are increasingly poor at driving and they don’t always live next to family members who can shuttle them to and from specialists. Even if they do live next to family, it can be difficult for a working child to take time off to take dad to the cardiologist.

    2. If an older patient can’t handle arranging his/her own ride to the doctor, he/she probably shouldn’t be going to the doctor alone.

      1. Which is why a lot of them don’t go to the doctor. Too many of my patients fall and weren’t found until hours or a day later.

          1. Your point is that they should be somewhere else, likely an assisted living facility, skilled nursing facility, or living with family.

            The problem is many older people can’t afford some of those options or won’t relinquish their independence. My wife’s grandparents are case in point. They have major mobility issues yet they have stairs in their home. But they are not going to move, no way. And neither of them drive well. Couple that with TIAs and Parkinsons and it’s a disaster waiting to happen. But pride and the fear of losing independence keeps people tied to spaces that no longer suit them.

          2. “They have major mobility issues yet they have stairs in their home. But they are not going to move, no way.”

            Sounds like it’s high time for the kids to intervene.

          3. “Couple that with TIAs and Parkinsons and it’s a disaster waiting to happen.”

            That sums up my Dad’s situation, except that my parents are in a retirement community (“independent living” apartment with elevators between floors) and have one of their children helping them 24/7. It’s an expensive living arrangement, but the alternative is near-term household disaster that would fall on my 90-year-old mom, possibly literally.

          4. Sounds like it’s high time for the kids to intervene.

            MIL has tried, but they won’t budge. Too stubborn They are going to die in the house that they love. Pride goeth before a fall, sometimes literally!

  4. Colorado Brewery Closures Are Still Rare, Despite Last Week’s Carnage

    ‘Until last week, only six breweries had closed statewide in 2019: Ute Pass Brewing in Woodland Park, Lost Highway Brewing in Centennial, Fermaentra in Denver, UTurn BBQ in Lafayette, The Brew Pub & Kitchen in Durango, and 1876 Ale Works in Colorado Springs (which closed two weeks after it opened).’

    ‘So, no, the “bubble,” as some people call the explosion of craft breweries over the past five to ten years, has not burst — at least not yet. That trend could certainly change at any time, however, as rents continue to rise. Five-year leases are expiring for many of the new wave of breweries that signed or opened in 2013 and 2014. In fact, Colorado saw its highest number of brewery openings in 2014, Adams points out, with a whopping 68. So there is a good chance that more breweries will close as those leases expire and rents go up.’

    ‘But for now, talk of a bursting bubble is still premature.’

    1. ‘which closed two weeks after it opened’

      Should have gone for the flying car thing…

        1. Millennials sure can find numerous ways to spend more money. People use to eat a lot of left overs for lunch to save for a house down payment. Also, how does ordering take-out help reduce their carbon footprint?

          1. It’s pretty terrible for the environment. So much excess package, boxes, etc. So much wasted energy delivering individual meals. Amazon is a nightmare for the environment.

    2. There are many outstanding brew pubs/craft breweries in Colorado Springs, The State of Colorado, and overall in the U.S. The free market will sort out the winners and losers, as well as the ultimate numbers. Many have their products now available in stores as well. I visit the brew pubs or buy their wares and completely bypass the large corp. brewers such as InBev, etc.

      Small to medium enterprises (SMEs) are the engine that drives job growth in the U.S. This is through entrepreneurship via innovation and being more nimble in the marketplace vs. “the big guys”. Recall that Apple started in a garage. I wish all of the good brew pubs/craft breweries success! Making this country great again, one brew pub at a time.

      Sidebar: DOJ is FINALLY looking into anti-trust action against GOOGLE. This is needed and long overdue. Warning shot over the bow of the USS Si Valley monopolies. Let the games begin (better late than never). Between corp. stock buybacks (killed CapEx), monopoly/oligopoly behavior, and crony capitalism, the U.S. has become less competitive, and with fewer “good” jobs being created and more income and wealth inequality since the GFC. Let’s fix this!
      Capitalism means free markets. What we have now is leading to the popularity of Socialism, which is even worse.

      1. Don’t forget that capitalism also works best when you focus on the capital part, like everyone at all income levels being able to accumulate some capital. Not the extreme wealth inequality and rentier economy we’re living in.

      2. “I visit the brew pubs or buy their wares and completely bypass the large corp. brewers such as InBev, etc.”

        For those who don’t know, InBev is the mega-beverage company that swallowed up Anheuser-Busch a few years ago.

        I agree with favoring the small craft breweries over the 800 lb gorillas. Beer has never tasted better than after they blue up the beerigopoly that preceded them.

        1. Millennials and Gen Z are drinking less than previous generation. Alcohol sales in US have been down for 3 straight years.

    3. If the craft beer bubble bursts, I sure hope it doesn’t portend the end of competition in the brewing industry. Having grown up with nearly-identical Anheuser Busch products and few distinctive alternatives, I can attest that we live in the Golden Age of Beer.

      1. I think it’s a normal ‘thinning of the herd’ – when something explodes like craft beer you’re going to soon get over-saturation as new players jump in. Then the shakeout happens, and the better run and better products survive and hopefully setting into an equilibrium with the market.

        1. Made my first trip to L.A./SoCal as a kid in 1969 and the place blew me away. When I moved to San Diego I would drive up the 405 on weekends to catch shows at the Whisky on Sunset Strip and eat lunch at the restaurants along Manhattan Beach.

          You can’t pay me enough to go near L.A. at this point and when I fly into LAX. I make sure I lock the doors of the rental car and get onto the 405 headed south pronto. I used to do a lot of work in Manta, Ecuador, El Salvador and Costa Rica and parts of L.A. resemble those countries.

          1. I, personally, am happy when City Fathers declare their cities to be Sacurary Cities because:

            1. It offers the homeless some place to live that is a different place from where I live, and

            2. They are letting me know that I should not go there.

        2. Probably a terrible policy, but also probably not cause and effect. I’m sure if Fargo, ND declared themselves a sanctuary city they wouldn’t have the homeless problem SF does because of, well, the frigid temperatures.

        Woman Says She Got Typhus From Working at Rat-Infested City Hall
        Health | 12:40 PM PDT, May 30, 2019 – Inside Edition Staff

        Los Angeles Deputy City Attorney Elizabeth Greenwood has filed a claim against the city for $5 million after she says she contracted the disease due to a rat infestation at City Hall.

        “Rat Infested City Hall” – Indeed. Need to differentiate between the two-legged and four-legged varieties.

        1. US festival thanks to Woz (had the chance to meet him, lives up to his great guy reputation). Notice the average BMI of the audience back then before HFCS was in everything…

          1. “Notice the average BMI of the audience back then before HFCS was in everything…”

            Yep. 🙁

  5. “If he had invested the money in the stock market instead, he said, ‘I’d probably have $6 million now.’”

    Well it was still much cheaper than renting…

    1. OTH!! Idiots run to the exits and sell low, remember marks, err future FBs, RE is like bitcoin, it only goes UP (to the moon I’m told). If you panic sell then the buyers are winning and we hate buyers! Let’s get them to write us letters again by uniting together as greedbag sellers that won’t just “give away”!our massive profits, HODL your “investment” because it will pay off even if it takes 100 years it will eventually go back up, Mabye. -Saint Doomed JohnDave the realtor

  6. Bay Area housing crisis pushes millennials back home with mom and dad
    The Mercury News
    Karen D’Souza
    June 2, 2019

    Overnight guests can be tricky when you live with your parents

    “As housing costs soar in the Bay Area, more millennials are living with mom and dad. In the San Francisco and San Jose metro areas, more than a fifth of young adults between the ages of 23 and 37 lived with their parents in 2017, according to a Zillow analysis of U.S. Census data, increasing 65 percent in San Francisco and 56 percent in San Jose since 2005. The growth is striking, Zillow noted, because young adults are living at home even as the economy booms and unemployment rates are low.”

    1. The growth is striking, Zillow noted, because young adults are living at home even as the economy booms and unemployment rates are low.” ??

      I don’t believe things are as “rosy” as they may appear to be…

  7. “Actress Kirstie Alley hasn’t been able to say cheers to her home, so she’s chopped $1.2 million off the price tag. After paying $2,998,000 in 2000 for the 8,622-square-foot home in Los Feliz, CA, Alley listed it last November for $11,970,000. But now that it’s been languishing on the market for nearly seven months, she’s dropped the price to $10,750,000.”

    What??? Only 350% gains since 2000? Is Kirstie expecting to gain as much as the stock market as with housing? My wage income did not go up 350% since 2000 so I will have to pass on this one.

    1. Jenny Craig better drop Kirstie Alley as a spokeswoman before she starts eating her feelings again.

    2. You beat me to the punch on that one.

      You can ask whatever you want for your used 2000 Honda Civic, but good luck in getting $50,000 for it.

  8. “local papers are filled with stories of people regretting their investment in a house”

    They need to stop putting those two words in the same sentence. It was never supposed to be one.

      1. It can (and probably should) be part of someone’s overall long term financial plan, but it should never have been couched as a “retirement nest egg”. Unreasonable expectations on return are what causes all of the instability discussed here.

  9. ‘The pain is just beginning’: After 38,000 layoffs, Wall Street wakes up to ‘peak car’
    Jim Edwards
    Business Insider

    “”The industry is right now staring down the barrel of what we think is going to be a significant downturn,” Bank of America’s John Murphy told a conference last week. The decline of sales in China “is a real surprise,” he added.”

    “”We expect passenger vehicle sales in Europe (ex-Russia) to fall 4%” year-on-year, to 15.06 million units in 2019, Nomura’s Kunugimoto says. In the US, he believes sales will go down 3% to 16.8 million cars.”

    1. Lots of really good deals on used car prices these days. Inventory piling up on stealership lots.

      Uber/Lyft drivers make almost nothing, but I can’t help but wonder if this is part of the reason for the depressed auto sales.

      1. This brings up something I have thought about regarding the impacts ride sharing will have on used car sales. Isn’t there requirements to how many miles and the age of allowed ride share vehicles and if so, wouldn’t we see a growing flood of these cars enter the used automobile market? Would this lower values? Would used ride share cars be less desirable due to the wear and tear and short distance driving? Just thinking out loud here. IIRC Japan or China has some law which requires engines to be replaced at what the US considers low mileage and those engines end up here at reasonable prices (tarriffs I am sure will change that).

        1. IIRC, the UK has very strict standards to allow a vehicle to run on their roads. Many vehicles most in the USA would consider just fine, would not be allowed on UK roads. The effect is to force auto owners to junk older vehicles and buy new ones. Another effect is to keep the less wealthy from owning any vehicle.

          1. Lots of large cities around the world are experimenting with congestion pricing. NYC just did it. Part of London has done it. Owning a vehicle is about to get a lot more expensive. It won’t make sense unless you are wealthy.

            Austen Goolsbee wrote a good article on what is likely to happen for Uber/Lyft yesterday:

            Passengers May Pay a Lot More. Drivers Won’t Accept Much Less
            The New York Times
            May 31, 2019

            “Yet they are both trading on public markets with a combined worth of more than $80 billion. Investors presumably expect that these companies will some day find a path to profitability, which leaves us with a fundamental question: Will that extra money come mainly from higher prices paid by consumers or from lower wages paid to drivers?”

            “Old-fashioned economics provides an answer: Passengers, not drivers, are likely to be the main source of financial improvement, at least within the next few years, mainly because of something called “relative price sensitivity.””

          2. Investors presumably expect that these companies will some day find a path to profitability

            I suspect most stock flippers don’t have a very long view.

        2. I have an uncle who drives for Uber in Park City, UT during ski season and Sundance Film festival. He does it for fun, not the money (though I think that is something he just says to be honest).

          The word on the street is that you can’t make any money driving for Uber/Lyft unless you have a Prius or some other really reliable hybrid. The cost-per-mile once depreciation and fuel is added on is too high on many cars.

        3. IIRC Japan or China has some law which requires engines to be replaced at what the US considers low mileage and those engines end up here at reasonable prices (tarriffs I am sure will change that).

          Japan. China has plenty of old junk driving around. But 20 years ago it was nice buying those 40k mile crate motors from Japan for pennies on the dollar. Not sure if that’s still a thing.

      2. “I can’t help but wonder if this is part of the reason for the depressed auto sales.”

        Very unlikely. A couple of drops can’t change the temperature of a bucket full of water.

        1. This percentage will drop if they jack up their rates.

          Quick quiz: What percent of 2016 vehicle miles traveled (VMT) in the United States came from ridesharing? Given the hype, it would be reasonable if your estimate were higher than the right answer—1 percent.

          1. Just looked up vehicle categories for VMT and the top three were:

            1) Class 8 truck
            2) Transit bus
            3) Refuse truck

            Cars are way down in the list. It looks like the bulk of US miles traveled are not from cars anyway.

      3. “Lots of really good deals on used car prices these days.”

        These used Tundra crew cabs with 140k miles and a $34K balloon payment aren’t moving. There are some massive charge-offs looming, IMHO.

  10. One of my Airbnb guests just sold their home for top dollar in SLC. Pocketed about $200k if they are to be believed. Where to next? Moving to Belize to be with other American expats. Interesting strategy.

    1. Curious how long they last in Belize. Couple decent places, but long term it’s dicey. Outside of diving and some hiking….not much to do. And lots of sketch folks.

      1. Never been. I did love Costa Rica though. We stayed for 1 week in a gorgeous home that was built by an ex-pat who I think lost his job after the Great Recession.

    1. Hey Mortgage Watch, your data shows the price of condos went up during the time you claim home values dropped 30 percent. Any explanation for that?

  11. Low unemployment rates don’t translate into affordable housing. Shelter costs use to track with wages , but now housing Is based on casino investment needs. Going back to 1990 prices might be a good start

    1. I like the countertop with the microwave underneath over the stove MW is not viable with a short GF.

    2. This is the consequence of radio ads that ran in the Phoenix area a while back, promising “guaranteed profits, no risk”. Naturally, anybody with any understanding immediately filtered these out.

      But plenty of flippers took the bait, and now are ruined or in the process of becoming so.

    1. I dunno…”Buy now or be priced out forever” and “Now is the best time to buy” are standard realtor whoppers right up there with the mythical “pent-up demand.” Then there’s the “research” that invariably tells FBs “You guys can do this!” even when the shack under consideration is more of a financial stretch than they can handle.

        1. I have a different perspective of this commercial now,

          My wife passed away in early December 2018, but in early 2005 I had been trying to find a bigger place for us to live for a year but she was still the mother of 3 kids in a 2 bedroom place. She would look at me and say why can’t we afford to buy a house, couples X Y and Z have and they make less money than we do.

          I looked her right in the eyes and said they can’t afford a $450k house and neither can we. I can’t tell you when but it’s gonna bite them in the @ss.

          Despite much smarter people than me telling her different, she stuck with me.

          Thank you for that Collleen, I miss you and I love you.

          1. What a lovely recollection. And it shows what is really important in life. How are you holding up, Jeff?

          2. Sounds like you were smarter than the many who jumped into houses they couldn’t afford circa 2005, and blessed with a wife who respected your judgment (as am I).

            So sorry for your pain; cherish and hang onto those sweet memories of your Colleen.

          3. jeff – I recall you lost your daughter, too. I am terribly sorry to hear of your wife’s passing. Best wishes.

          4. Thank you all.

            Some days I hold up pretty well, I have two other kids so digging a hole and pulling the dirt over me isn’t an option. Some days it’s hard to even get out of bed but there are less and less of them.

            If you ever saw me you wouldn’t think it was possible, but there are still some nights I can’t sleep and I listen to two or three songs like the one below, think of my wife and daughter and cry.


      1. It’s a new paradigm, and everybody who doesn’t buy, now, will be priced out forever. Anybody who does buy will be rewarded with a lifetime of riches, as their property will continue its 30% yearly price increase.

        Renters, and anybody born in a future generation, will not be able to afford a $15,000,000 starter home in 15 years. They will live in tent cities, and Hondas.

        This asset bubble is different than all of the others – it will never slow down, or pop. The gains are permanent.

    1. “Consumers are pissed off,” Hahn said. “There’s more and more sentiment from consumers that Realtors don’t earn their pay.”

      I read this the other day but missed all the comments. Well worth the read if you have time. I’m actually surprised realtors have got away with robbing both sellers and buyers this long. I would join any movement or donate to any cause that rid us from used shack sellers

          1. I see the problem.. I’ve been listening to Weird Al all this time and not using an AMD chip…

  12. Did you sell in May and go away?

    fastFT Markets
    Stocks suffer gruelling month as investors reach for safety
    Trade and growth fears combine into a broad sell-off
    © Getty
    Philip Georgiadis in London May 31, 2019

    Global stock markets were on track to suffer their worst month of the year in May, as a steady drip of negative headlines over the relationship between the US and China amplified growth concerns and sent investors out of equities and piling into the government bond market.

    Investors are now weighing how the tensions over trade and technology between the world’s two largest economies will develop at the G20 summit in June, as political disruption coincides with worries over whether the economic cycle has peaked.

    “Populism and its close cousin protectionism are rearing their heads, and have already taken a toll on global growth,” said Diane Swonk, chief economist at Grant Thornton.

    1. May gray
      Has given way to
      June gloom
      And further market swoon.

      Dow futures tumble as trade war escalates
      By David Goldman, CNN Business
      Updated 8:20 PM EDT, Sun June 02, 2019

      New York(CNN Business) Dow (INDU) futures were nearly 200 points lower Sunday evening as Wall Street braced for the fallout of worsening global trade tensions.

      China on Friday retaliated with new tariffs on American imports after the Trump administration raised tariffs on Chinese goods. Also on Friday, President Donald Trump announced the United States would remove India from a special trade program. And investors are still trying to determine how new tariffs on Mexico might affect American businesses and the economy.

      The sudden, unexpected expansion of tariffs have rattled Wall Street.

      The Dow tumbled below 25,000 points to four-month lows on Friday. The Dow and S&P 500 declined nearly 7% apiece in May, their first losing months since December. The Nasdaq tumbled 8% on the month, its worst May since 2010.

    2. Shorts who gambled on rising Treasury yields are getting their faces ripped off by a ferocious bear.

      Here’s one way the 10-year Treasury could tumble down to 2%, analyst says
      By Sunny Oh
      Published: May 31, 2019 10:37 a.m. ET
      Speculators have boosted bets on rising yields, leaving market vulnerable to backlash
      AFP/Getty Images
      Putting on the squeeze.

      Bond investors are now contemplating what it would take the Treasury market’s benchmark yield to 2%, a level not seen since the days following Donald Trump’s presidential election victory in 2016.

      Besides the usual bugaboos of an economic downturn and a global trade war, Ed Al-Hussainy of Columbia Threadneedle said just the way market participants are set up in the bond-market may be enough to provide the impetus for the 10-year Treasury yield to breach the key psychological level.

      “One of the catalysts that can move yields lower is the short-space capitulating,” Al-Hussainy, senior interest rates and currencies analyst for Columbia Threadneedle, told MarketWatch.

      The 10-year Treasury yield (TMUBMUSD10Y, -2.07%) is trading at 2.159%, near its lowest since Sep. 2017, down more than 1 percentage point since the benchmark rate hit multiyear highs in November, Tradeweb data show. Shorter-dated maturities, sensitive to expectations for monetary policy, like the 2-year note yield (TMUBMUSD02Y, -3.94%) and the 5-year note (TMUBMUSD05Y, -2.24%) have already pushed below 2% on Friday. Yields and bond prices move in opposite directions.

    3. fastFT Equities
      Morgan Stanley warns on growing risk of US market ‘downturn’
      Wall Street bank’s market cycle gauge shifts from ‘expansion’ for first time since 2007
      Adam Samson in London 2 hours ago

      The US market cycle has shifted from an expansionary phase to a “downturn” for the first time since 2007, according to a new report from Morgan Stanley that underscores deepening investor concern over the world economic and political landscape.

      Morgan Stanley said the decline of its cyclical indicator adds to “a litany of downside risks we see for the markets.” The Wall Street bank cautioned that a “phase-change” in its gauge has typically pointed to “higher chances of recession or a bear market.”

      The report from Morgan Stanley, sent to clients late on Sunday, comes after global equity markets finished May with the heaviest losses since the global market ructions at the end of last year. America’s benchmark S&P 500 index dropped 6.6 per cent, or 6.4 per cent on a total return basis that includes dividends.

    1. US Treasury Inversion Worsens as $12.6 Trillion Bonds Trade With Negative Yield
      Martin Baccardax
      Updated May 29, 2019 9:45 AM EDT

      Global bond markets extended their recent rally Wednesday, pulling benchmark U.S. Treasury yields to fresh multi-year lows, as investors continue to favor fixed income assets amid escalating trade tensions, slowing growth and tepid inflation.

      Bank of America Merrill Lynch figures suggest nearly $160 billion has flowed into fixed income assets this year, dwarfing the $135 billion that’s moved out of global equity markets, pushing benchmark yields in the world’s biggest economies to multi-year lows. In fact, the drive for safe-haven assets, which has been exaggerated by the ramp-up in trade war rhetoric and notable declines in manufacturing and services activity from Tokyo to Toronto, now has nearly $13 trillion in fixed income securities trading with a negative yield.

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