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There Will Be Downward Price Pressure Because The Buyers Have Choice

A report from the Nashville Ledger in Tennessee. “‘I don’t want to appear desperate’ is how sellers often respond when their listing agent tells them their house is not selling because the price is too high. Here’s what buyers really think: ‘The price is too high, and I’m not looking at overpriced houses.'”

“When a seller reduces the price, buyers think the seller is reasonable or perhaps becoming aware of the reality of the market. They don’t think ‘desperation.’ If a seller offers a $1 million property for $500,000, buyers would not think the seller is desperate. The buyers would think they should buy the house. There is rarely an evaluation of a degree of desperation on a price reduction.”

“Larger home sales continue to sell well in the Nashville market. The home at 1019 Stonewall entered the market at $4 million last May and closed last week for $3,810,000.”

From New Orleans City Busines in Louisiana. “The single-family housing market is moving from a trend of record-setting prices of homes a few years ago to one where prices are decreasing at certain ranges, according to business leaders and economic experts who gathered at Loyola University.”

“Bill Bliss, managing broker of Latter & Blum’s Lakeview office, said the New Orleans area is currently experiencing a neutral market, meaning it is neither a buyer’s nor a seller’s market. It is also a market that is in transition.”

“Bliss said unit sales and prices are decreasing while available inventory is increasing. That’s a contrast from 2016, when unit sales and prices were increasing while inventory was decreasing, which is termed a ‘peak’ phase. ‘There will also be downward price pressure because the buyers have choice,’ he said.”

“Bliss predicted this trend would continue in the luxury housing market and start to trickle down to properties in other price points. He said prices are flat and will start to slowly decrease. Affordability is the biggest factor in this shift. ‘By next summer, we’ll know a little more where this market is headed and how long the duration of this will last,’ he said.”

The Houston Chronicle in Texas. “After several months, Angelina Keck’s $2.4 million listing in the Memorial area found a buyer. The deal was set to close later this month until Tuesday, when Keck, of Angelina Keck Properties, got a call Tuesday from the buyer’s agent telling here the deal was off.”

“In the time since the contract was signed, mortgage rates had risen from 3.5 percent to 5 percent, putting the home out reach for the buyers, who hadn’t locked in the rate quoted by their lender in September. ‘They said they can’t do it,’ Keck said. ‘Everyone’s sick about it. These people loved this house.'”

“In Houston, analysts say higher interest rates may have contributed to the region’s first year-over-year drop in home sales since March. September sales fell 6 percent from a year ago, the Houston Association of Realtors reported.”

“Jim Gaines, chief economist at the Texas A&M Real Estate Center, said that even with the dip last month, Houston-area sales are up almost 6 percent year-to-date and are expected to beat last year’s record come year end. Prices, too, should come in above 2017, although the increases have begun to slow.”

“Keck, who sells luxury homes, isn’t as optimistic. ‘I think there are going to be a lot more houses sitting on the market,’ she said. ‘We’re going to have a lot more frustrated sellers.'”

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This Post Has 47 Comments

  1. ‘There is rarely an evaluation of a degree of desperation on a price reduction’

    I don’t agree with that.

  3. ‘They said they can’t do it,’ Keck said. ‘Everyone’s sick about it.’

    Not true Angelina. Take me for example. I’m not sick about it at all. Like the panic thing you guys talk about. I’m fine, really.

    2. No worries at all. When that shack goes back on the market with a hefty price cut, THEN those folks can buy it!

    3. I suspect the buyers who backed out were a lot less “sick” than they let on. They probably started reading the housing-related headlines and realized they’re a lot better off waiting for better deals down the road as inventory soars and sales plunge.

  5. Quantitative tightening is breaking down the normal negative correlation between bond and stock market returns. Good luck to balanced fund HODLers!
    ———————————————————————————————
    Broken correlation between stocks and bonds is taking risk to 20-year highs, analyst Nick Colas warns
    Stephanie Landsman
    Published 5 Hours Ago
    CNBC.com
    A key relationship between stocks and bonds is breaking down, analyst Nick Colas warns

    Stock market investors may be facing a game changer.

    According to DataTrek co-founder Nick Colas, a key relationship between stocks and bonds has broken down, and it could greatly hurt nest eggs.

    His latest research shows that the two assets became positively correlated in September, a trend that’s rarely been seen over the past two decades.

    “A lot of portfolios over the last 20 years have gotten built on the notion that when stocks go down, bonds go up,” he said Wednesday on CNBC’s “Trading Nation.” “It has stopped working this year.”

    Due to the breakdown, Colas warns that bonds will not be a viable shock absorber for diversified investors for the foreseeable future.

    “The upshot is we’re going to be looking for a lot more volatility in balanced portfolios, and investors will feel a lot more volatility than they have historically,” Colas said.

    https://www.cnbc.com/2018/10/11/a-breakdown-between-stocks-and-bonds-is-game-changer-nick-colas-warns.html

  6. “…Angelina Keck’s $2.4 million listing in the Memorial area found a buyer…”

    “…In the time since the contract was signed, mortgage rates had risen from 3.5 percent to 5 percent, putting the home out reach for the buyers…”

    Got some more bad news for the “sick about it” buyers.

    If the buyers didn’t have a big enough cushion in their budget to handle an unexpected increase in mortgage rates for a $2.4mm house, then they really can’t afford it.

    Just wait until those “unexpected” increases in local property taxes, insurance, maintenance and other holding costs.

    Yet another example of the pretend rich, buying things they don’t need,
    with money they don’t have, to impress people they don’t know.

    I will bet that the “sick about it” buyers also lease a high-end Mercedes.

    After all, it all about image isn’t it?

  7. In the time since the contract was signed, mortgage rates had risen from 3.5 percent to 5 percent, putting the home out reach for the buyers, who hadn’t locked in the rate quoted by their lender in September.

    Calling BullSh*t on this one. Rates didn’t move 150 basis points in the last 45 days. Perhaps their lender was claiming they could buy the rate down to 3.5%, but even that seems unlikely – buydown’s usually aren’t for that many points. If they meant to say 4.5% to 5.0%, that would make sense.

      1. You could use code. I’m still evaluating comments plug-ins. The one I had on the last blog isn’t available anymore, to my knowledge, and I looked. The problem is there don’t seem to be any simple ones. It’s all razmataz adding a bunch of stuff I’m not interested in. Or they host the comments off site which I don’t care for either. But honestly I’ve been really busy with various things and haven’t been able to research it much lately. If anyone has a good plugin in mind I’d be happy yo look at it.

        1. Ben, the one thing you really need to implement on this blog is some way of marking certain posts already read (like the old blog with the Joshua Tree extension) to get lively discussions going. Old blog had over 100 posts (most of them informative) many times, now nowhere near that.

          Seems there’s a lot of good info not being discussed here anymore simply because nobody wants to try to remember which posts they’ve already read. If I see 20 posts, and read them all, then later return and see 30 posts, there’s no way I’m going to spend time trying to figure out which 10 posts I haven’t yet read.

          2. 2nd comment:

            “This plugin is no longer available to purchase, sorry.”

            Another thing is a bunch of these plug-in have no support and are full of bugs.

  8. “In the time since the contract was signed, mortgage rates had risen from 3.5 percent to 5 percent, putting the home out reach for the buyers, who hadn’t locked in the rate quoted by their lender in September. ‘They said they can’t do it,’ Keck said. ‘Everyone’s sick about it. These people loved this house.’”

    Sombody is “lion” here. We havent seen 3.5 since last year

    1. Maybe they read this blog and smarted up 🙂 – Made up an excuse to bail out before becoming a classic FB? We can only hope!

      1. I suspect a lot of prospective buyers are going to get cold feet as the Fed’s Everything Bubble starts to crater and people with memories of 2008 and the meltdown of Housing Bubble 1.0 decide to stay safely on the sidelines and see how things play out.

  10. CNBC headlines can’t keep up with the market, LOL.

    “Dow tumbles 650 points to new low on day, bringing 2-day losses to more than 1,400 points ” it says, but ATM the Dow is down 484.

    Will be interesting to watch the last hour of trading today.

    1. By coincidence I have been attending a financial planning workshop the past couple of days. The presenters are more-or-less saying that the stock market always goes up, and safe investments, such as bonds, are to be avoided, due to substandard returns. No acknowledgment has been made that the past decade was completely anomalous, due to the use of quantitative easing to rescue risk asset prices after the 2007-2009 financial, or that market behavior might be entirely different during the incipient quantitative tightening era.

  12. Individual investors grow bearish as stocks continue to fall
    Published: Oct 11, 2018 3:25 p.m. ET
    The Dow has shed about 1,300 points in the past two trading days
    Courtesy Everett Collection
    By Ryan Vlastelica
    Markets reporter

    The sharp and still-ongoing stock-market selloff is taking a toll on investor psyche.

    Sentiment took a sharp turn for the worse in the latest week, according to the American Association of Individual Investors, with bullishness tumbling by its highest amount in almost a year as Wall Street has sold off broadly. The Dow Jones Industrial Average (DJIA, -1.34%) has shed more than 1,300 points in the past two trading days alone, including Thursday, and on Wednesday both the Dow and the S&P 500 (SPX, -1.32%) suffered their biggest one-day percentage drops since February. The Nasdaq Composite Index (COMP, -0.50%) had its worst day since 2016 on Wednesday.

    Much of the weakness has been driven by rapidly climbing bond yields, which fueled fears that profit margins of U.S. corporations may be squeezed by higher labor costs and loftier borrowing expenses.

    https://www.marketwatch.com/story/individual-investors-grow-bearish-as-stocks-continue-to-fall-2018-10-11

  13. Notice how AlbuquerqueDan vanishes like clockwork when oil tanks?
    ————————————————————————————————–
    The Financial Times
    Brent clocks worst day since July as slide tops 3%
    10m ago

  14. Love this line in the Nashville article:
    “Telling a person who does not want something that someone else wants the thing they do not want always makes the original person want to buy the thing they did not want to buy in the first place.”

    I’ll have to remember that next time I have something that someone doesn’t want.

  16. Speaking of downward price pressure, how about that stock market?
    ————————————————————————————————-
    The Financial Times
    Markets volatility
    What is behind the global stock market sell-off?

    A mix of higher bond yields and growth worries take their toll

    The Wall Street fall carried echoes of February’s ‘Volmageddon’, when the S&P 500 suffered a 10 per cent correction
    Robin Wigglesworth, US Markets Editor 13 hours ago

    A sell-off that saw tech stocks drive the S&P 500 on Wednesday to its worst one-day drop since February rippled across global markets on Thursday.

    The severe drop on Wall Street carried echoes of February’s “Volmageddon”, when the S&P 500 suffered one of its swiftest 10 per cent corrections and raised questions over whether the almost decade-long bull market was at risk. While there was no immediate trigger for the sell-off, here are some of the forces at play in the current market turmoil.

    Rising bond yields

    Undoubtedly the proximate cause of the stock market reversal. Last week’s bond rout was caused by rising economic optimism, but the severity of the reaction in fixed income — the 10-year Treasury yield raced to a seven-year high of 3.25 per cent — has been sufficient to unnerve equities as well.

    Bonds have remained under pressure this week, but not nearly to the same extent. Analysts and investors say yields are not high enough to unduly worry them, and moves in the Treasury market were relatively muted until the equity rout worsened on Wednesday afternoon. The steepness of the drop prompted investors to dive back into the relative safety of US government debt. The yield on the 10-year bond was at 3.17 per cent in London.

    “Higher interest rates typically bring on tighter financial conditions which could dampen growth going forward and equity markets are reacting to that,” noted Charlie Ripley, a senior investment strategist for Allianz Investment Management.

    So rising yields might have set the stage for the sell-off, but probably cannot shoulder the blame for its ferocity.
    …

    1. Notice how the professor only talks about oil on down days and ignores that the trend of oil is strongly up? He cannot even admit he was wrong about oil still tries to pretend short term corrections show that he was not wrong. When oil hits a hundred a barrel he will still be shouting when it drops back to $98.

      1. I’ll be cheering when it gets to $98-$100 a barrel, thanks to buying the dip a few years back. But your prediction timing was horrible…$80 seems destined to go away for a while before $100 is reached.

      2. When oil hits a hundred a barrel…

        We should have learned that this kills the construction/credit economy dead in it’s tracks, and then there is a surplus. Credit expansion and speculation is more flexible than the supply chain. Degenerate day traders give the honest working folk whiplash.

  22. The ‘pain threshold’ approaches for the housing market, analyst warns

    Published: Oct 11, 2018 1:27 p.m. ET

    Getty Images

    By
    Shawn
    Langlois
    Social-media editor

    While investors are no doubt wringing their hands over what’s going on in the stock market this week, here’s another thing to fret over: rising mortgage rates.

    “What many in 2016 thought would never happen again is now reality,” writes Wolf Richter of the Wolf Street blog. “A line in the sand has been breached.”

    He explained that the average interest rate for 30-year fixed mortgages with conforming loan balances ($453,100 or less) and a 20% down-payment just passed 5% — the highest since 2010, according to the Mortgage Bankers Association.

    https://www.marketwatch.com/story/the-pain-threshold-approaches-for-the-housing-market-analyst-warns-2018-10-11

    1. “This is still historically low. It would take rates back to December 2008, when the Fed was kicking off its first round of QE to repress long-term rates and inflate asset prices,” he said. “Beyond that are the now unimaginably high rates of 7% and 8%.”

      This is a failure or perhaps absence of logic. Rates don’t have to get back up to 2008 levels for pain to occur. All that is needed is a substantial increase off the historic interest rate floor which recently drove prices above their peak mania levels in the pre-2008 period. And that increase is in the bag already.

  23. The ‘pain threshold’ approaches for the housing market, analyst warns
    Published: Oct 11, 2018 1:27 p.m. ET
    By Shawn Langlois
    Social-media editor

    While investors are no doubt wringing their hands over what’s going on in the stock market this week, here’s another thing to fret over: rising mortgage rates.

    “What many in 2016 thought would never happen again is now reality,” writes Wolf Richter of the Wolf Street blog. “A line in the sand has been breached.”

    He explained that the average interest rate for 30-year fixed mortgages with conforming loan balances ($453,100 or less) and a 20% down-payment just passed 5% — the highest since 2010, according to the Mortgage Bankers Association.

    https://www.marketwatch.com/story/the-pain-threshold-approaches-for-the-housing-market-analyst-warns-2018-10-11

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