You Finally Persuade The Seller To Take That Price, But The Buyer Then Decides The Market Is Still Going To Fall More

1. ‘I could tell the market was unsustainable because of speculators and money launderers’

   A dead giveaway.

   1. That’s a sharp 32 year old.
      Such a stark contrast to Caitlin “You gotta roll with it” Vestal.

2. ‘they have dropped more than $150,000. ‘[This] basically creates an environment where the inventory can continue to build up, thus causing more competition for the sellers’

   This is a key aspect. Sure prices are down, but still profitable or enough on paper for developers to finance more shacks and airboxes. More supply.

   1. There’s some factors that could maybe cause the detached market to go even lower.

      Maybe the factor that median family income is around $70K and shack prices 15 or 30 x this aren’t sustainable?

3. Providence, UT Housing Prices Crater 18% YOY As Mortgage Defaults Ravage Salt Lake City Area

   https://www.zillow.com/providence-ut/home-values/

   *Select price from dropdown menu on first chart

   1. Birmingham, MI -16%

      https://www.movoto.com/birmingham-mi/market-trends/

4. “Bryan Velve, who became a real estate agent in 1987, said the phenomenon among buyers known as fear of missing out, or FOMO, now seems a distant memory. ‘Today, sometimes a buyer will make an offer at one price and you finally persuade the seller to take that price. But nope, the buyer then decides the market is still going to fall more and wants a cheaper price,”’ Mr. Velve said.”

   Oh Sh*t!

   1. Just tell the sellers to write love letters!

      Me luv yu long tine

   2. Sell now or be priced in forever.

5. “Housing sales have slid to a 19-year low in Greater Vancouver as listings languish and prices fall to levels last seen in mid-2017.

   I’m waiting for prices to fall to 19-year lows. Wait for it, “winners” of all those 2016-2017 bidding wars. You are so screwed….

   1. An informal survey via trulia.com. Oh, and prices only go up. Wait a minute. Never mind.

      Colorado Springs, CO – All Listings:
      https://www.trulia.com/for_sale/Colorado_Springs,CO/APARTMENT,CONDO,COOP,SINGLE-FAMILY_HOME,TOWNHOUSE_type/
      Showing 190 of 1836, zoom to see more

      Colorado Springs, CO – Price Reduced Listings (Past Week):
      https://www.trulia.com/for_sale/Colorado_Springs,CO/APARTMENT,CONDO,COOP,SINGLE-FAMILY_HOME,TOWNHOUSE_type/7_pr/
      Showing 142 of 142, move map to see more

      142/1836=7.7% Price Reduced In Colorado Springs. Just getting started, or a statistical aberration (during prime Spring selling season) (?).

   2. The Chinese P2P “group investors” that are holding the bag probably don’t even know what they invested in. Wait til they find out it was a Vancouver 3/2 1200sq ft shack for 2 million 😀

6. crushing……….housing………losses

7. Oil and gasoline prices are cratering.

   Apparently the Plunge Protection Team is myopically focused on propping up the stock market. Traders in other asset classes are screwed.

   1. Oil just fell into a bear market — here’s why
      By Myra P. Saefong
      Published: June 5, 2019 3:31 p.m. ET
      U.S. crude benchmark settles 22% below its most recent highs in April
      AFP/Getty Images

      U.S. benchmark West Texas Intermediate crude oil entered a bear market on Wednesday, and it doesn’t look set to exit it any time soon.

      “A combination of rising U.S. inventories, trade war concerns and economic fears are trumping the supply-side factors that encouraged us to reach a high of $66 in late April,” said Matt Smith, director of commodity research at ClipperData.

      “Broader economic sentiment has turned south in the last month or so, and crude has been tagging along for the move lower in equities—further juiced by the U.S. inventory build,” he said.

      On Wednesday, front-month July WTI crude fell $1.80, or 3.4%, to settle at $51.68 a barrel on the New York Mercantile Exchange. It settled 22% below its most recent high of $66.30 on April 23. Entry into a bear market is defined by a drop of 20% or more in prices from the most recent high. It would take a 20% rise from the current bear market low to put crude back into a bull market.

      The average bear market for crude oil lasts 60 trading days, according to Dow Jones Market Data. The last bear market, which oil exited on Jan. 9 of this year, lasted 40 trading days.

      The sharp drop Wednesday followed data from the Energy Information Administration, which revealed a weekly U.S. crude supply climb of 6.8 million barrels, the largest in five weeks. That took domestic crude inventories, excluding those in the Strategic Petroleum Reserve, to 483.3 million barrels — the highest since July 2017.

      “The stock build was tremendous on its own and well exceeded expectations due to a steep increase in imports and a rise in production to a new weekly record high,” Marshall Steeves, energy markets analyst at Informa Economics, told MarketWatch. That rise was “propelled primarily by shale increases out of the Permian but also by higher offshore output.”

      Refined product stocks “also rose by significant margins and gasoline demand is averaging 1.3 % below last year on a four-week average basis,” he said. U.S. gasoline inventories climbed by 3.2 million barrels, while distillate stockpiles added 4.6 million barrels last week, according to the EIA.

      Retail gasoline prices are higher than last year at this time, “so that is having a marginal negative impact on demand as the summer season gets under way,” said Steeves. AAA pegged the national gas price average for regular unleaded at $2.795 on Wednesday, up from $2.940 a year earlier.

      Taking a look at the bigger picture for oil, however, “prolonged trade tensions are hindering the outlook for global demand growth, with no end apparently in sight for the U.S.-China negotiations and now with tariffs about to be introduced on Mexican imports,” Steeves said. “That has been a factor for some time now, but I think traders were expecting a quicker resolution.” Concerns over a slowdown in the global economy has fed expectations for weaker energy demand.

      The drop in WTI futures has sent prices below near-term support levels, introducing “technical weakness that could accelerate at $50, where there are likely sell stops that would be triggered,” warned Steeves.
      …

   2. Like clockwork, when AlbuquerqueDan comes out of the woodwork to resume posting, oil prices are sure to soon plunge.

      U.S. oil prices enter a bear market as weekly domestic crude supplies jump to a nearly 2-year high
      By Myra P. Saefong and Rachel Koning Beals
      Published: June 5, 2019 3:36 p.m. ET
      Getty Images

      Oil futures dropped Wednesday, with U.S. prices entering a bear market, as domestic data revealed a weekly crude supply climb of almost 7 million barrels—the largest in five weeks—to their highest level in nearly two years.

      “Crude inventories are now at their highest since July 2017, up nearly 44 million barrels since mid-March,” said Matt Smith, director of commodity research at ClipperData.
      …

      1. Yet oil is up today. So Professor where is that sub-twenty dollar oil you posted about over and over?

         1. Just few months a go this board was filled with links that Trump’s sanctions on Iran were going to cause $100 a barrel Brent crude. Speculators drove up the price. Now, speculators are driving prices down to the alleged impacts of a trade war. Sorry Trump knows what he is doing. He is working with the Saudi’s to keep oil in the sweet spot. It will be low enough to satisfy consumers/voters but high enough to keep frackers producing. Right now there is a softness in the rig count, which will lead to higher prices since production but there is a lag since it is not the amount of rigs drilled that causes production but the number of wells fracked. That number has to drop soon since the number of drilled but not fracked wells in the best areas for oil production is dropping.

            1. This isn’t a board, it’s a blog.

            2. It’s everybody on the board vrs. the lone Albuquerque oil soothesayer.

         2. Nice try. I never predicted sub-$20 oil.

            By contrast, years ago you endlessly pounded near-term $80 oil that looks less likely by the day to ever occur in the future course of human destiny.

            1. No, you do not say I predict, you just post link after link where you think something is going to go and you were posting numerous links of under 20 even back to ten dollars a barrel.

            2. No, you do not

               Not really a defense for being so wrong for so long on oil and China. Besides, it wasn’t the Professor, or me as you’ve claimed.

      2. Crude Oil Craters 32% Since Q3 2018 As Global Oil Demand Plummets

         https://www.marketwatch.com/investing/future/crude%20oil%20-%20electronic

         1. And up over 500% since 1998/99

            1. up over 500%

               Just goes to illustrate that oil can and does go below $20. A look at the long term price movement shows a ginormous twin peak pattern 1980/2008.

            2. And up over 10000% since 1890.

            3. I may have slightly overestimated the long term percentage change in nominal price, which appears to have been off a bottom of $0.56.

            4. Elsewhere, India just required that 40% of ridesharing fleets (e.g. Ola) run on electric power by 2026. That could be a big deal for oil demand since India is one of the most populous countries.

   3. The most accurate forecasts recast a current development as though it is not already underway, but rather is destined to occur at some point in the near future.

      And it does seem as though the Fed’s inflation engineering program is sputtering.

      AAA forecasts a decline in summer gas prices
      By Myra P. Saefong
      Published: June 6, 2019 12:01 a.m. ET
      With crude prices retreating, gas is forecast to be cheaper than last summer for most
      …

   4. Apparently traders around the globe are convinced that the Fed continues to backstop equities. Friday US payrolls data could provide an interesting test of the hypothesis.

      By the way, is there any basis, theoretical, practical, or legal, for a central bank policy of propping up a specially favored asset class, such as stocks or housing?

      The Financial Times
      Opinion Tail Risk
      Testing time for Federal Reserve’s safety net for global equities
      Without a deterioration in Friday’s data, the case for rate cuts could unravel
      Katie Martin yesterday

      Investors are increasingly convinced that the Fed has their back. Such confidence should worry anyone with even a scant memory of being repeatedly punched in the face by market shocks over the past six months.

      Expectations that the US Federal Reserve will ride to the rescue if equity markets keep sliding are not without foundation, given patchy economic data and dovish signals from the central bank itself.

      On Monday, James Bullard, head of the St Louis Fed and a voter on the rate-setting committee, said that lower interest rates might be “warranted soon”, given drab inflation and risks to growth. Bond prices, already flying high on the resurgence of global economic concerns surrounding President Donald Trump’s stance on trade tariffs, shot higher, reflecting mounting expectations for rate cuts.

      Futures markets, too, are near-certain that interest rates will be cut this year, possibly in July. But the last time markets were so sure of the Fed’s way forward, it was towards the end of last year, when they were predicting the precise opposite: three rate rises in 2019.

      Now, the Fed is seen as a safety net for global equities, as is Mr Trump, who has in the past been brought back to the negotiating table with China when stock markets have balked at his combative stance.

      Both factors helped markets to rebound in the first quarter after a grim end to 2018, but it is worth questioning whether either would ride to the rescue again.

      First, Mr Trump appears to be shaking off his once-keen sense of validation from stock markets. And as Andrew Sheets, chief cross-asset strategist at Morgan Stanley points out, the Fed is not a sure bet. “Everybody thinks central bank support is around the corner,” he said. “I don’t think that’s necessarily the right way to think about the current environment. It is a vulnerable assumption.”

      Charles Evans, the Chicago Fed president, followed Mr Bullard’s comments on Tuesday, saying that those betting on rate cuts might be seeing “something that I haven’t seen yet in the national data”.

      Then Jay Powell, Fed chairman, also expressed concern about potential market excesses that could come from desperately seeking to push inflation up to target. Mr Powell said he stood “ready to act” if trade wars bite but, seemingly, not at any cost.

      Friday brings the next set of US jobs data and much hinges on whether the unemployment rate, last observed at a 50-year low of 3.5 per cent, picks up. A separate slug of employment figures on Wednesday have certainly painted a dismal picture but they have, at best, a shaky correlation with the official payrolls report. Without a deterioration in Friday’s official data, the case for an imminent series of rate cuts could unravel.

      “A solid [payrolls] report would shake the US Treasury market as well as equities,” said Sebastien Galy, a strategist at Nordea Asset Management. “Volatility is likely to stay elevated for a while.”
      …

8. Whoa, somehow I missed this. Really ugly numbers.

   https://www.foxbusiness.com/economy/private-sector-hiring-adp-report-may

   1. Bad news = Good news

      Rate cut and QE4 on the way!!!

9. Dumb question of the day: Is there any theoretical basis to the Fed’s steadfast assertion that the general welfare is maximized when they systematically devalue our currency at a 2% annual rate?

   1. Note that if they consistently achieved their 2% annual inflation target, the value of the dollar would drop by 50% every 36 years, a result of the “Rule of 72” (72/2 = 36 years).

      Note further that the 2% annual inflation target has rarely been achieved.

      1. Better maths:

         (1 – 0.02)^36 = 0.48

   2. Central bankers seem unable to end the alcohol-induced coma which quantitative easing has wrought in their domestic economies. Hair-of-the-dog revival measures are in order.

      The Financial Times
      European Central Bank
      ECB policymakers set to address mounting economic worries
      Central bank’s latest meeting must consider response to sharp slowdown in inflation
      ECB president Mario Draghi is expected at a minimum to signal that the bank stands ready to act should inflation continue to underwhelm
      Claire Jones in Vilnius yesterday

      European policymakers meet in Vilnius on Thursday as concern mounts over the health of the eurozone’s economy.

      A sharp slowdown in inflation earlier this week fuelled investors’ doubts about the European Central Bank’s ability to hit its target of below but close to 2 per cent.

      This forms a “challenging backdrop” to its latest meeting, according to Marchel Alexandrovich, senior European economist at Jefferies.

      Markets’ expectations are growing that the guardians of the single currency will have to confront the question of whether to launch a further round of monetary stimulus. ABN Amro’s Nick Kounis predicts that the bank will have to restart the expansion of its €2.6tn quantitative easing programme.

      “We judge that the ECB will react to a more prolonged economic slowdown by relaunching QE,” Mr Kounis said, in response to the latest fall in inflation.
      …

   3. I believe the contemporary reasoning for growing the money supply is that it disincentives hoarding cash. If money under your mattress is devalued 2% a year, you are more inclined to lend it out. To varying extents investment implies growth. Hence a little inflation is a good thing.

      I personally believe a hyper-rule based approach to the money supply, e.g. always expanding it exactly 2% per year in perpetuity, would be better at preventing hoarding while also not blowing bubbles. I suppose the counter-argument is that tying hands in this fashion would leave a country vulnerable to beggar-thy-neighbor currency devaluation strategies of other nations.

      1. “If money under your mattress is devalued 2% a year, you are more inclined to lend it out.”

         Why would you want you incentivize frivolous lending on useless ditchdigging projects that have real costs of wasted human and natural resources which exceed dubious benefits?

         1. I think the idea is there is some level of investment between none and frivolous ditchdigging that is actually good for society and in the absence of some inflation we could easily end up with none (i.e. hoarding). This is just my basic understanding of why we (and essentially all societies that have ever existed, as new gold deposits have always been found) increase the money supply. Not saying it is good or bad.

            1. “…in the absence of some inflation we could easily end up with none (i.e. hoarding).”

               How does frivolous ditchdigging put food on the table?
               It seems like the absence of inflation would help households allocate consumption more effectively; money saved today could be spent tomorrow, without concern about “higher than expected” inflation eating away its value.

      2. You know what would be a great way to target hoarding of cash? Shift to a wealth tax instead of an income tax for tax revenue generation.

   4. Planet Money NPR did a deep dive into this and it was rather informative. It basically was a consensus created by Greenspan, Bernanke, and Yellen in 1996 after are a result of inflation targeting by other countries’ efforts.

      Episode 879
      The Secret Target
      NPR Planet Money

      https://www.npr.org/templates/transcript/transcript.php?storyId=672353562

      1. “It basically was a consensus created by Greenspan, Bernanke, and Yellen in 1996 after are a result of inflation targeting by other countries’ efforts.”

         I will maintain my hypothesis that there is no ecomomic basis for the notion that inflation is necessary to incentivize spending until I see more convincing evidence than a shared doctrine among the leaders of the central banker’s cabal. It really makes no sense, given the need to spend money to survive in a modern economy, whether or not inflation is happening.

         1. It really makes no sense

            It is simple theft, dressed in lamb’s clothing.

         2. I suggest listening to the entire article. The history of New Zealand and the economist Arthur Grimes (e.g. “zero to 2 by ’92”) is where the inflation targeting came from:

            GONZALEZ: If you have 1 percent inflation, that means that the price of carrots goes up by 1 percent, but you’re not skipping meals over this. You just buy turnips instead of carrots now. One percent inflation doesn’t affect your well-being, so economists in New Zealand consider 1 percent inflation kind of like neutral inflation.

            Not saying it’s right or wrong, but I think it is just interesting to know the history behind where the 2% from the Fed came from. It came from New Zealand and Arthur Grimes who brought inflation down massively in New Zealand. The thought was that he overshot it though.

            DUFFIN: And then Arthur thinks, we need some wiggle room. And so he says, let’s give ourselves plus or minus 1 percent. So that’s how they got zero to two. But they knew that reaching this target would be much easier said than done

   5. Is there any theoretical basis to the Fed’s steadfast assertion that the general welfare is maximized when they systematically devalue our currency at a 2% annual rate?

      I thought the theory was that you don’t want anybody hoarding money. It’s fine if they hoard houses and gold and 1950s Fender Stratocasters but that money needs to circulate. So it needs to depreciate to make sure that happens.

      1. the theory was

         However, this new money is loaned into existence, at interest. Keeping money circulating is a very silly excuse for the elitely positioned to siphon off the wealth of the nation and get to collect interest at the same time. I don’t think it’s a theory, I think it’s a story.

         1. It’s a story told over and again within the confines of the central bankers’ marble palaces until it is commonly accepted as untested doctrine, promulgated to the masses by latter-day high priests of economics.

            1. It’s also why narrow banking is being skewered right now. There was a pretty credible proposal for a large institutional bank that didn’t lend out money a la fractional reserve system but rather just invested directly in government notes. The charter for this was shot down because, if I recall correctly, the Fed said that the existence of something like this would be destabalizing. I guess they were worried about some institution like this would tend to collect more deposits and thus increase credit costs thereby negate the Fed’s ability to use monetary policy to target interest rates.

            2. Fed Rejects Bank For Being Too Safe
               Bloomberg
               Matt Levine
               September 6, 2018

               “But someone came up with a much simpler and amazing solution. It’s this:

               1) Start a bank;
               2) Take deposits;
               3) Invest 100 percent of those deposits in reserves at the Fed; and
               4) Pass the interest on to your depositors.

               It is called TNB USA Inc. (for “The Narrow Bank”), it is run by the former head of research at the New York Fed, and it is simultaneously a dumb simple one-sentence idea and the most interesting bit of financial engineering that I’ve seen this year. ”

               https://www.bloomberg.com/opinion/articles/2018-09-06/fed-rejects-bank-for-being-too-safe

         2. “I don’t think it’s a theory, I think it’s a story.”

            According to the IMF it’s a script. The final act of this corruption is the fire-sale of valuable government assets to the wealthy.

10. After such a massive overdose of central bank stimulus over the past decade, the likely magnitude of the impact of the next recession on housing cannot be overstated.

    1. Who comes up with this propaganda drivel? “Home prices, a gauge of an economy’s health…”

       International
       HSBC sounds alarm over ‘vulnerable’ Canadian housing market as global home prices cool
       – Higher interest rates, cooling measures have dampened sentiment in cities like Vancouver and Toronto
       Topic | Canada
       Cheryl Arcibal
       Published: 7:28pm, 4 Jun, 2019
       Updated: 10:24pm, 4 Jun, 2019

       Home prices, a gauge of an economy’s health, cooled across the globe in the last quarter of 2018, but higher interest rates in Canada have made the country’s housing market more vulnerable than other economies, according to the latest report from HSBC.
       …
       Nominal home prices in Canada rose 2 per cent, while real house prices declined 0.1 per cent, significantly lower than the 4.5 per cent and 2.3 per cent gains in the nominal and real house prices, respectively, of its closest neighbour, the US, according to data from the Bank for International Settlements.
       Vancouver’s ‘spicy measures’ have lowered property prices. Why haven’t Hong Kong’s?

       Canada’s tightening of monetary policy over the last two years has added about 1 percentage point to household debt servicing costs, which means households need to allocate a bigger portion of their income to pay for credit card loans or mortgages, according to economists at HSBC. Debt service charges in Canada are currently near historic highs.

       “As the Bank of Canada started to raise rates in mid-2017, households and the housing market face financial challenges through mid-2019 and beyond,” said the report authored by economists James Pomeroy, Paul Bloxham, and David Watt.

       Besides the interest rate increases, Canadian cities Vancouver and Toronto had rolled out cooling measures in recent years such as additional taxes levied on foreign homebuyers. Vancouver increased the tax to 20 per cent in February, up from the 15 per cent which took effect in August 2016. Toronto and its surrounding area imposed a 15 per cent duty on foreign property investors in April 2017.

       In January 2018, federal authorities tightened mortgage lending regulations and introduced more vigorous stress tests for potential borrowers.
       …
       “It usually takes about two years for interest rate increases to begin to affect arrears. So long as the job market remains strong, we would only expect any increase in arrears to be quite small. That said, the low arrears rate might not give a reliable measure of the financial situation of the household sector,” the HSBC report said.

       “Amid anecdotal evidence that a rising number of households are facing financial constraints, we see the housing sector as facing a precarious challenges in coming months.”

       This article appeared in the South China Morning Post print edition as: Canada housing vulnerable, HSBC says

    2. Yes, I certainly agree that the central banks overdid it. To put it mildly.

       1. And to top it all off, they are already positioning themselves for another round of debt-financed hair-of-the-dog stimulus. I’m not sure how it ultimately ends for central bankers, but for alcoholics, the eventual outcome of repetitive hair-of-the-dog hangover cures is life on the streets followed by early demise due to cirrhosis of the liver.

          1. hair-of-the-dog

             You’ve used this expression numerous times. I finally had to look it up.

             From Oxford Dictionaries: The expression the hair of the dog, for an alcoholic drink taken to cure a hangover, is a shortening of ‘a hair of the dog that bit you’. It comes from an old belief that someone bitten by a rabid dog could be cured of rabies by taking a potion containing some of the dog’s hair. The correlation suggests that, although alcohol may be to blame for the hangover (as the dog is for the attack), a smaller portion of the same will, paradoxically, act as a cure. There is, it should be added, no scientific evidence that the cure for either a hangover or rabies actually works.

11. Are trade jitters tempting you to pile into gold or Treasurys?

    1. 10-yr yield is just barely above water…2% is the point of no return.

       Treasury yields tick lower on U.S-Mexico trade jitters
       By Sunny Oh
       Published: June 6, 2019 7:40 a.m. ET
       10-year Treasury yield trading at 2.10%

       Treasury prices rose Thursday, dragging yields lower, as trade uncertainty reared its head again after President Donald Trump said trade talks with Mexico had not made enough progress.

       What are Treasurys doing?

       The 10-year Treasury note yield (TMUBMUSD10Y, -1.29%) fell 2.5 basis points to 2.098%, while the 2-year note yield (TMUBMUSD02Y, -0.88%) was down 1.9 basis points to 1.822%. The 30-year bond yield (TMUBMUSD30Y, -1.75%) slump 3.3 basis points to 2.600%. Debt prices move in the opposite direction of yields.
       …

       1. If the Fed flipped from hinting at three near-term rate increases last fall to two near-term cuts currently, how much of a drop in long-term Treasury yields is implied by the policy shift?

Comments are closed.