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As Sellers See Demand Fall Off, The Number Of Price Cuts Is Rising Quickly

A report from CNBC. “Millennials are in their prime homebuying years, and they’re used to cheap credit. So they might be in for a rude awakening as mortgage rates jump.The average rate on the 30-year fixed loan sat just below 4 percent a year ago, after dropping below 3.5 percent in 2016. It just crossed the 5 percent mark, according to Mortgage News Daily. That is the first time in eight years, and it is poised to move higher.”

“Five percent may still be historically cheap, but higher rates, combined with other challenges facing today’s housing market could cause potential buyers to pull back.”

“Higher rates, however, could throw cold water on today’s overheated home prices, as sellers see demand fall off and their houses sit on the market longer. The number of price cuts is rising quickly, signaling that sellers, and their expectations, are in fact coming back down to earth. Prices are unlikely to fall, but the annual gains should shrink.”

From the Eastsider LA in California. “Prices on around five dozen condos, apartments and other Eastside properties dropped during the past week. Here are some examples, followed by a breakdown by neighborhood: Highland Park: Price drops $104,000 for three units on a lot – 1.5 blocks from Occidental College. $995,000.”

“Echo Park: $20,000 cut on a 2-bedroom hillside bungalow. $745,000. Lincoln Heights: $30,000 reduction on a newly built 4-bedroom contemporary. $769,500.”

“More price cuts by neighborhood: Atwater Village, Boyle Heights, Eagle Rock, East Los Angeles, Echo Park, El Sereno, Highland Park, Lincoln Heights/Montecito Heights, Monterey Hills/ North El Sereno, Mount Washington, Silver Lake.”

From SocketSite in California. “Purchased for $8.001 million in October of 2015 and subsequently ‘re-imagined by some of the areas top designers, the 2018 Decorator Showcase home at 465 Marina Boulevard hit the market with an $8.995 million price tag at the beginning of May. And as of yesterday, the ‘stunning quintessential trophy Marina Boulevard home’ has been re-listed anew, with a $7.495 million price tag.”

From Curbed Hamptons in New York. “We’ve featured the 4.4-acre estate at 209 Hedges Lane in Sagaponack a couple of times before—once when it came on the market for almost $24 million in June, and then again when it first cut its asking price down to $21.5 million just two months later.”

“After four months and two price cuts, the property is now listed for its lowest $19,995,000 with Corcoran Group. When we first featured the house it was criticized in the comments for its price—especially considering it’s not on the beach.”

From the Daily Mail. “A stunning one-acre private island, just 75 miles away from New York City, has seen its price drop from $2.9 million to $1.4 million in the space of just a few months.”

“Fabled for its connection to Thimble Islands where Scottish pirate Captain Kidd was said to have buried his treasure before being executed in Wapping in 1701, incredible images show the 34.000-square-foot island in Branford, Connecticut, from above with rolling green lawn, shade trees to offer privacy and an area for launching kayaks.”

“Wheelers Island is located just 14 miles from the exclusive Hamptons across Long Island Sound and sitting in the heart of the Thimble Island community. It was previously for sale through Vladi Private Islands at a cost of around $2.9 million in August but has now had its asking price slashed to $1.4 million.”

This Post Has 25 Comments
  1. ‘The number of price cuts is rising quickly, signaling that sellers, and their expectations, are in fact coming back down to earth’

    Wait for it…

    ‘Prices are unlikely to fall, but the annual gains should shrink’

    Sellers are a sawin’ and a slashin’ Diane.

    1. If prices are not going to fall, then what is going to shrink the rapidly growing inventory pile up in markets formerly known as hot?

      1. “We’re going to see quantitative easing in our future on a scale that will shock everybody.” —John Mauldin

    2. Someone should check my late-night math, but I’m getting a 16.3 percent reduction in the amount that can be borrowed off the same monthly payment on a thirty-year loan if interest rates go up from 3.5 to 5 percent. That could translate into a sizable decrease in purchase demand from what it was back when the 30-year mortgage rate was 3.5 percent. I will be surprised if prices don’t adjust downwards to an equilibrium level that reflects this new financial reality.

      1. “I will be surprised if prices don’t adjust downwards to an equilibrium level that reflects this new financial reality.”

        +1 It’s all about the “how much a month” debtors.

  2. ‘Purchased for $8.001 million in October of 2015…has been re-listed anew, with a $7.495 million price tag’

    Why that’s three bubble years gone. Oh dear…

  3. I’ve had more than one boomer complain to me “These dang kids…..When I bought a house back in 1982 my interest rate was 15 percent, now money is cheap”.

    Seriously, bring on the higher interest rates. It would be delicious to hear old people tell me they can’t sell their palace because of “these higher interest rates”

    1. Don’t forget: when those houses were bought a single income family was more the norm. People go pale when I include modern daycare costs in the housing budget equation.

        1. Interesting.

          Majority of households in 2000 were dual income, fuel was $2/gal and there were no pensions yet resale housing prices were 70-80% lower than they are today.

      1. The Irony:

        In the 50s, 60s and 70s—before US and European offshoring sent 6 million breadwinner jobs to cheap-labor nations, like China—Westerners could pay off a house in just a few years on ONE income, removing the impossible expense of housing in their less-employable, elderly years.
        Now, most Americans cannot even afford the rent for a crappy, one-room apartment on one, earned-only income stream, and most will have an unaffordable housing expense when elderly despite the fact that all mommas now work, not very hard in their absenteeism-gang “voted-best-for-moms” jobs and their flextime-momma management jobs, but that is another story.
        In march rich people from the “poor,” cheap-labor nations, where so many jobs in US-owned corporations were shipped, and they have no need to chain themselves to 30-year house notes since they can pay in cash for million-dollar ranch homes.

  4. quick Zillow check and Homes prices falling in 93021. So they barely crested 2006 prices and now falling back. Kinda a dead town work wise.

    State and county workers and retirees.

  5. Saw a good comment on this Yahoo article
    Everyone has refinanced into lower rates. Who is willing to sell a house with a 4% mortgage to trade up to a house with a 5% mortgage? Or 6%? So owners are mostly locked in now. That only leaves first time buyers. The game is up. The curse of low rates will be with us for a long time.

    1. As the owners of homes who are now locked into 4% mortgages eventually move on to Elysian Gardens Retirement Villa, they will have to take a hit on the sale to buyers financed at over 6%.

    2. “The economy seems to be coasting upward. But this kind of complacency, this kind of confidence can be volatile,” Prof. Robert Shiller, co-creator of the S&P CoreLogic Case-Shiller Home Price Indices, said in an interview on CNBC’s Squawk on the Street. “The question is, is this a turning point in the housing market. I’m a little bit worried about that but not ready to call that.”

      Unless the Fed turns tail and reopens the QE spigots, or the economy drops into a recession, it is hard to envision mortgage rates returning to 3.5 percent. As the Fed is moving away from QE, the recession scenario seems like the only near-term way to bring back ultralow rates, but then demand would die for other reasons.

      I’m curious under what scenario Professor Shiller imagines the Housing Bubble 2.0 peak could return, as it seems to me the bubble has passed a turning point of no return.

  6. Treasury yields keep highering and highering and highering!
    The Financial Times
    US stock futures slip as bond yields march higher
    Pan Kwan Yuk in New York yesterday

    US stock futures are trading firmly in the red on Tuesday as rising Treasury yields continue to sap investors’ appetite for equities and overshadow expectations for a strong corporate earnings season when third-quarter reporting kicks off later this week.

    With about 90 minutes to go before markets open, futures for the S&P 500, the Dow Jones Industrial Average and the Nasdaq 100 were all down 0.6 per cent.

    The declines came as yield on the benchmark 10-year Treasury hit a near seven-and-a-half year high on Tuesday, after the bond market reopened for trading following a holiday on Monday.

    The yield on the 10-year note rose as much as 2.6 basis points to 3.2594 per cent, a level last seen in May of 2011. Treasuries sold off heavily last week following a batch of strong economic readings — including Friday’s jobs report — that reinforced expectations that the Federal Reserve will stick to its pace of interest rate tightening this year and next. Yields rise when prices fall.

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