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With Fewer Buyers, Sellers Are Cutting Their Asking Prices

A report from the Orange County Register in California. “Unaffordable home prices coupled with rising mortgage rates are expected to create ‘a weaker housing market in 2019,’ according to a statewide real estate industry group. A forecast by the California Association of Realtors estimates house sales across the state will fall to their lowest level since 2014. Buyers waiting for price drops, meanwhile, will be disappointed.”

“The forecast marks a dramatic shift from the red-hot housing market of the past four years, which saw steady demand and price gains fueled by bidding wars. This year, however, the market shifted. California’s home sales, for example, have been down in five of the past eight months.”

“Asked in an online poll last month if now is a good time to buy a home in California, 78 percent of respondents said no. Where are the buyers going? ‘They’re on the sidelines waiting. They’re going to see what’s going to happen,’ said CAR’s Chief Economist Leslie Appleton-Young.”

“With fewer buyers, sellers are cutting their asking prices. Nearly 40 percent of California sellers reduced their asking prices in August. The median price drop was 4.3 percent. ‘Would I call this a buyer’s market? No,’ Appleton-Young said. ‘But are we moving in that direction? Yes.'”

“Only one in four households will be able to afford the median-priced home in the Golden State, the forecast says. ‘The low rates are what kept mortgage payments reasonable,’ Appleton-Young said.”

“With rates rising – hitting 7½-year highs on Thursday – more people are moving to more affordable parts of the state — or out of state entirely, CAR economists said.”

“Twenty-nine percent of California home sellers this past spring moved out of state, up from 19 percent in 2013, a CAR survey of its members showed. More than a third of Southern California and Bay Area homebuyers moved to more affordable counties.”

“‘Where are people that leave Southern California going? They’re going inland, to the Inland Empire, and they’re going to other Western states,’ Appleton-Young said. ‘Where are people in the Inland Empire going? They’re going out of state. They’re going to Arizona and Texas.'”

“When will prices actually stop going up and start dropping?”

“‘I think you’ll start to see some softening next year. I think we’ve already seen it at the upper ends of the market, … the $1 million and more properties,’ Appleton-Young said. ‘At the lower end of the market, I would expect people to start jumping in as they see more inventory and more concessions in price. We’re just not seeing it yet. The shift is in process.'”

The Mercury News. “Economists for the California Association of Realtors on Thursday offered a somber forecast for the state housing market in 2019, expecting rising interest rates and a lack of affordable housing to push more prospective buyers out of the market.”

“‘Home ownership is becoming a luxury good in California,’ said CAR chief economist Leslie Appleton-Young. Across the Bay Area, the strong economy coupled with a lack of new housing has led to record prices. ‘There is no quick fix.'”

“Although the market still favors sellers, economists also see signs it has begun to turn. About 40 percent of recent real estate listings have dropped prices this year, and homes have begun to spend a few more days on the market.”

“Jeff Barnett, regional manager of Alain Pinel in Los Gatos, said the Santa Clara County market has shown signs of slowing down. The inventory of homes for sale doubled this summer, and the number of homes selling for more than $5 million has increased to a six-month supply, he said.”

“The market is still historically strong, but Barnett believes its heading back to normal. ‘It’s healthy,’ he said.”

“The association also surveyed about 1,500 agents to gauge what’s driving supply and demand. Agents reported sales to international buyers at their lowest levels in a decade. More first-time home buyers are moving outside of their county to find cheaper homes.”

“‘Are we at the peak of the cycle?’ Appleton-Young asked. ‘I think we are.'”

The San Diego Metro. “Sales of previously owned homes saw a significant drop in September, according to housing statistics compiled through the Multiple Listing Service by the Greater San Diego Association of Realtors.”

“Single-family home sales dropped 25 percent in September, compared to August, and were nearly 22 percent lower than the same month last year. Condominiums and townhomes similarly saw an 25 percent decrease last month, and are down about 23 percent from September of last year.”

“‘I’m hopeful that residential sales will continue along a mostly positive line for the rest of the year,’ said SDAR President Steve Fraioli, ‘but it’s possible that rising prices and interest rates may factor into many home purchase decisions.'”

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This Post Has 54 Comments

  1. ‘The low rates are what kept mortgage payments reasonable’

    And those low rates are going poof Leslie, pronto! So where does that leave payments? Unreasonable?

    Oh dear…

    1. It’s starting to look like they’re gonna try to pin this on interest rates. And they may be partly right. (I still think they just ran out of buyers).

      But what long know truth is being exposed?

      The perils of keeping interest rates so low – Telegraph
      https://www.telegraph.co.uk/finance/…/The-perils-of-keeping-interest-rates-so-low.html
      Nov 6, 2015 – The Bank for International Settlements has repeatedly warned that a prolonged period of low interest rates would inflate asset bubbles in other …
      5 Problems With Ultra-Low Interest Rates – The Atlantic
      https://www.theatlantic.com/business/archive/2011/04/5…low-interest-rates/237038/

      Apr 9, 2011 – This short-term rate defines the cost of lending from bank to bank through the Fed … The Fed has also taken measures to keep longer-term rates low, …. But when they’re left there for an extended period, distortions can begin …
      The Dark Side Of Artificially Low Interest Rates – Smaulgld
      https://smaulgld.com/the-dark-side-of-artificially-low-interest-rates/

      Oct 3, 2013 – Period. Artificially low interest rates are bad for the economy. … productive investments where there might be a long term return on investment, …

      Mar 30, 2015 – Ben Bernanke says that low interest rates are not a short-term … Interest rates around the world, both short-term and long-term, are exceptionally low these days. … of labor and capital resources, perhaps after some period of adjustment. … and investment decisions by keeping interest rates “artificially low.
      [PDF]The Dangers of an Extended Period of Low Interest Rates: Why the …
      https://www.cdhowe.org/sites/default/files/attachments/…/Commentary_381_0.pdf

      by PR Masson – ‎2013 – ‎Cited by 5 – ‎Related articles
      period distort investment decisions, leading to excessive risk taking and inefficient and … The cumulative effect of artificially low interest rates also risks fuelling.

      How does the U.S. keep interest rates artificially low after …
      https://www.quora.com/How-does-the-U-S-keep-interest-rates-artificially-low-after-multi…

      How does the U.S. keep interest rates artificially low after multiple successive rounds of …. by stock traders and this will continue to be the case for a long period.
      Why Very Low Interest Rates May Stick Around – The New York Times
      https://www.nytimes.com/2015/…/why-very-low-interest-rates-may-stick-around.html

      Dec 14, 2015 – The Federal Reserve will most likely raise interest rates this week for … engaged in extraordinary interventions to artificially depress the cost of … But if you look at the longer arc of history, a much different possibility emerges.
      How Ultra-Low Interest Rates Will Cause The Next Global Recession
      https://www.forbes.com/…/how-ultra-low-interest-rates-will-cause-the-next-global-rec…

      May 22, 2016 – Second, ultra-low interest rates for a prolonged period of time fuel what I call “pent-down” demand, which undermines future growth.

      2. “It’s starting to look like they’re gonna try to pin this on interest rates. And they may be partly right.”

        Say, I wonder what these higher rates mean for the demand of grotesquely overpriced new and used vehicles?

        1. Use <em> and </em> … to add emphasis, renders italic text.
          <em>This ship will fall off the edge of the world!</em>
          ***
          This ship will fall off the edge of the world!
          Relax, the world is round.

      3. Remarks by Chairman Alan Greenspan
        Reflections on central banking
        At a symposium sponsored by the Federal Reserve Bank of Kansas City, Jackson Hole, Wyoming
        August 26, 2005
        …
        Whether the currently elevated level of the wealth-to-income ratio will be sustained in the longer run remains to be seen. But arguably, the growing stability of the world economy over the past decade may have encouraged investors to accept increasingly lower levels of compensation for risk. They are exhibiting a seeming willingness to project stability and commit over an ever more extended time horizon.

        The lowered risk premiums–the apparent consequence of a long period of economic stability–coupled with greater productivity growth have propelled asset prices higher. The rising prices of stocks, bonds and, more recently, of homes, have engendered a large increase in the market value of claims which, when converted to cash, are a source of purchasing power. Financial intermediaries, of course, routinely convert capital gains in stocks, bonds, and homes into cash for businesses and households to facilitate purchase transactions. The conversions have been markedly facilitated by the financial innovation that has greatly reduced the cost of such transactions.

        Thus, this vast increase in the market value of asset claims is in part the indirect result of investors accepting lower compensation for risk. Such an increase in market value is too often viewed by market participants as structural and permanent. To some extent, those higher values may be reflecting the increased flexibility and resilience of our economy. But what they perceive as newly abundant liquidity can readily disappear. Any onset of increased investor caution elevates risk premiums and, as a consequence, lowers asset values and promotes the liquidation of the debt that supported higher asset prices. This is the reason that history has not dealt kindly with the aftermath of protracted periods of low risk premiums.

        https://www.federalreserve.gov/boarddocs/speeches/2005/20050826/default.htm

        2. Has there ever in history been a more protracted period of low risk premiums than the one since when Alan Greenspan bailed out the U.S. stock market after the October 1987 Black Monday crash? This was followed by 31 years of generally levitating market values of asset claims, which may have actually started earlier, in the aftermath of Paul Volcker’s inflation extermination exercise. Now that long-term Treasury yields are rising off a historic low, it appears that a turning point has passed.

    3. The Washington Post
      Where We Live
      Mortgage rates soar to seven-year highs

      The 30-year fixed-rate average made its biggest one-week jump in nearly two years.
      (J. David Ake/AP)
      By Kathy Orton
      October 11 at 10:27 AM

      Mortgage rates are at their highest levels since April 2011.

      According to the latest data released Thursday by Freddie Mac, the 30-year fixed-rate average jumped to 4.90 percent with an average 0.5 point. (Points are fees paid to a lender equal to 1 percent of the loan amount.) The 19-basis-point jump (a basis point is 0.01 percentage point) was the largest one-week spike in the 30-year rate since November 2016, when it increased 37 basis points. The 30-year fixed rate was 4.71 percent a week ago and 3.91 percent a year ago.

      The 15-year fixed-rate average climbed to 4.29 percent with an average 0.5 point. It was 4.15 percent a week ago and 3.21 percent a year ago. The five-year adjustable rate average rose to 4.07 percent with an average 0.3 point. It was 4.01 percent a week ago and 3.16 percent a year ago.

      “Strong employment and payroll data releases met analysts’ expectations, providing more evidence of a booming U.S. economy,” said Aaron Terrazas, senior economist at Zillow. “Markets tend to move in fits and spurts, with sharp movements often followed by brief retreats, as we’ve seen over the past few days. But there is no doubt that the trend is decisively higher, and comments from several Fed officials bolstered the notion that the American economy can withstand higher rates.”

      Mortgage rates are influenced by many factors but significantly by investors’ expectations. A strong economy tends to cause home loan rates to increase. One way to predict where rates are headed is to track the movement of long-term bonds, particularly the 10-year Treasury.

      When yields go up, mortgage rates tend to follow, and the yield on the 10-year bond has been on an upswing recently. It grew to 3.23 percent on Friday, rising 14 basis points since the start of the month. It has retreated the past couple of days but still is hovering around 3.2 percent.

      The last time the yield on the 10-year Treasury was this high, mortgage rates were around 5 percent. Danielle Hale, chief economist at Realtor.com, expects rates to rise to that level next week.

      “Although a 5 percent mortgage rate is historically low, crossing this threshold could have a sticker-shock effect on some buyers currently in the market,” she said. “We could see some buyers, especially first-timers, leave the market as a result.”

      Bankrate.com, which puts out a weekly mortgage rate trend index, found that a majority of the experts it surveyed say rates will continue to rise in the coming week. However, a third predict that rates will remain about the same. Michael Becker, branch manager of Sierra Pacific Mortgage, is one who sees rates holding steady.

      “Treasury yields and mortgage rates are now at their highest levels in seven years,” Becker said. “Bond markets have quickly repriced for current economic conditions. The fact that no negative shocks to the markets, like a trade war, have caused a flight to safety and bid for bonds means this spike in rates is here to stay. However, I do think the worst of the spike in rates is over, and we can stay at the current levels for the coming week.”

      The upturn in mortgage rates has begun to put a damper on the housing market.

      “Rising rates paired with high and escalating home prices is putting downward pressure on purchase demand,” Sam Khater, Freddie Mac’s chief economist, said in a statement. “While the monthly payment remains affordable due to the still low mortgage rate environment, the primary hurdle for many borrowers today is the down payment, and that is the reason home sales have decreased in many high-priced markets.”

      The slowdown in the housing market is reflected in mortgage application activity, which fell off this week, according to the latest data from the Mortgage Bankers Association. The market composite index — a measure of total loan application volume — declined 1.7 percent from a week earlier. The refinance index fell 3 percent from the previous week, while the purchase index slid 1 percent.

      https://www.washingtonpost.com/business/2018/10/11/mortgage-rates-soar-seven-year-highs/?utm_term=.44e6f188a327

  3. “Buyers waiting for price drops, meanwhile, will be disappointed.”

    Oh OK. I can wait longer. 1 year? 2 years? 3 years? more?

  4. Here’s something weird, I just checked back to see who wrote the OCR piece and someone changed this line:

    ‘And while buyers waiting for price drops will be disappointed, sellers won’t reap the type of gains they’ve become accustomed to’

    I got scads of articles with freaked out Californians sawin’ and a slashin’.

    ‘Home ownership is becoming a luxury good in California,’ said CAR chief economist Leslie Appleton-Young’

    That’ll probably go down in history next to the “God’s country” bit.

    1. With propaganda like that it’s no wonder DebtDonkeys cling to their rapidly depreciating house at their own peril.

  5. “Unaffordable home prices coupled with rising mortgage rates are expected to create ‘a weaker housing market in 2019,’ according to a statewide real estate industry group.

    Gosh, if only I had such a talent for stating the blindingly obvious, I, too, could pull down the big bucks as an REIC “expert.” I bet chicks would dig me….

  6. Where are the buyers going? ‘They’re on the sidelines waiting. They’re going to see what’s going to happen,’ said CAR’s Chief Economist Leslie Appleton-Young.”

    Oh, we know what’s going to happen, Leslie. So do you. We’ve both been here before. So let the cratering begin!

    1. Our old lion friend Leslie Yun. Remember this?
      https://www.eastbaytimes.com/2005/12/06/hot-bay-area-market-expected-to-cool-down-2/

      “I’m calling it a soft landing — a return to what is considered to be more normal market conditions,”

      – Leslie Appleton-Young, Chief Economist, California Association of Realtors

      When questioned about this “soft landing” her gyrations go into double time;

      “Maybe we need something new. That’s all I’m prepared to say”
      “I’m sorry I ever made that comment.”
      “When I get my new term, I’ll let you know.”

      An old tenet called truth might be something new to NAR. Debacle after debacle, millions of destroyed lives, a destroyed economy and NAR still can’t bring themselves to adhere to their own code of ethics.

      NAR,

      You’re reading so why not comment here.

  7. I’m about to get on a plane to San Diego to find a rental (moving from FL). Been watching listings drop by the day.

      1. That’s great news. Maybe we’ll start looking for a cheaper rental soon.

        On another note, are you moving to CA to fish here? What for?

        2. Saltwater fishing is my obsession and a sizable component of my diet. Hence my desire (need) to be a costal species myself. But in real life I’m a molecular biologist. Soon to be ex-professor. Embarking on phase two of my life in industry. A remarkably easy transition with the portability of renting.

          In fact my lady friend refers to me by various ursine monikers… and being a professor as well, I suppose we are practically related PB.

  8. When will prices actually stop going up and start dropping?

    “I think you’ll start to see some softening next year. I think we’ve already seen it at the upper ends of the market, … the $1 million and more properties,” Appleton-Young said. “At the lower end of the market, I would expect people to start jumping in as they see more inventory and more concessions in price. We’re just not seeing it yet. The shift is in process.”

    They are waiting for the housing bubble 2.0 to burst!

  10. “Asked in an online poll last month if now is a good time to buy a home in California, 78 percent of respondents said no. Where are the buyers going? ‘They’re on the sidelines waiting. They’re going to see what’s going to happen,’ said CAR’s Chief Economist Leslie Appleton-Young.”

    Sounds like the buyers are trying to avoid catching themselves falling knives.

  12. Global Markets
    China
    Bitcoin no safe haven as Asian markets join global rout
    Digital asset sector follows mainstream stock market slump as $13 billion is wiped from global crypto exchanges in a matter of minutes
    By Asia Times staff October 11, 2018 7:46 PM (UTC+8)

    As Wednesday’s US market rout spilled into Asia on Thursday, all major crypto-currencies were also hit by a widespread investor sell-off.

    Wall Street fell sharply on Wednesday, with the Dow and S&P 500 posting their biggest one-day drops since February and the Nasdaq notching its largest single-day sell-off since June 2016. And, as Asian markets began to close on Thursday, with all experiencing falls – and Chinese stock markets particularity hit, after plunging to their lowest levels in four years – Bitcoin experienced a sudden drop in value with 5% falling off its price almost instantly.

    http://www.atimes.com/article/bitcoin-no-safe-haven-as-asian-markets-join-global-rout/

    1. Oct 9, 2018, 3:09 am
      IMF Issues Stark Warning Over Bitcoin And Crypto ‘Rapid’ Growth
      Billy Bambrough
      Contributor
      Crypto & Blockchain
      I write about how bitcoin, crypto, and fintech are changing the world.

      The International Monetary Fund (IMF) has warned the “rapid growth” of bitcoin and cryptocurrency assets could create “new vulnerabilities in the international financial system,” as the world’s banks adjust to the recent bitcoin and blockchain boom.

      Bitcoin and cryptocurrencies, including Ripple Lab’s XRP token, ethereum, litecoin, EOS, and stellar, are being examined by the traditional financial system to gauge how they might be integrated as both investment tools and ways to move money across borders more quickly and cheaply.

      https://www.forbes.com/sites/billybambrough/2018/10/09/imf-issues-stark-warning-over-bitcoin-and-crypto-rapid-growth/#2e59865f3544

    2. Cryptocurrencies continue plunge with another $6 billion of value wiped out in a day
      – Over $6 billion of value was wiped off global cryptocurrency markets in a day.
      – XRP and ethereum led the plunge as prices of many digital coins continued falling. Bitcoin stabilized, however, after seeing a big drop on Thursday.
      – There was no obvious single catalyst for the sell-off, but negative comments about cryptocurrencies have recently come from major economists and financial institutions.
      Arjun Kharpal
      Published 3 Hours Ago

      https://www.cnbc.com/2018/10/12/bitcoin-price-cryptocurrency-market-drops-as-xrp-ethereum-plunge.html

      1. Bitcoin primarily has use as a way of sneaking grifted money out of China. Perhaps there is less of it trying to get over the border.

        Poor poor Alphonso.

        Poor poor ADan.

  13. ‘but it’s possible that rising prices and interest rates may factor into many home purchase decisions.’

    It’s possible that rising interest rates and falling sales may factor into many home price reduction decisions.

  14. Love this interview. It’s like this lady is on trial

    “With fewer buyers, sellers are cutting their asking prices. Nearly 40 percent of California sellers reduced their asking prices in August. The median price drop was 4.3 percent. ‘Would I call this a buyer’s market? No [no comment],’ Appleton-Young said. ‘But are we moving in that direction? Yes.[guilty]’”

    I see SOOOO many listings come on the market each day up here in Northern California (Bay Area). Using trulia app, I see all the high end RE dropping dramatically and the lower end (under a million, 800-1m) sit unsold and price cuts after weeks (sometimes just a week). Yet, the realtors state these shacks will sell for asking price or above…

    I find these ones funny

    38 days on the market with a 30% drop. The last picture should be changed to a cigarette and a hand gun which is what this seller will need to end the pain of his shack being taken away by the banker.
    https://www.trulia.com/p/ca/santa-cruz/7-rockview-dr-santa-cruz-ca-95062–2084360410

    This one has dropped from 1.5m back in May, down to 1.25m this month with 4 or 5 price reductions, yet the realtor or listing agent has been able to hide in the history of these drops (realtor tricks…)
    https://www.trulia.com/p/ca/santa-cruz/123-alamo-ave-santa-cruz-ca-95060–2084336639

    I could write a book with the dropping values here but that book is being written every day as the fear sets in.

  15. Why the stock market just ushered in its worst start to October since 2008
    By Mark DeCambre
    Published: Oct 11, 2018 7:12 p.m. ET

    It has been an ugly stretch for U.S. stocks, which was capped by Thursday’s more-than-540-point tumble for the Dow Jones Industrial Average, coming immediately after a 831-point drop in the prior session.

    https://www.marketwatch.com/story/why-the-stock-market-tumbled-wednesday-ushering-in-its-worst-start-to-a-quarter-in-about-2-years-2018-10-10

  16. ‘The Punch Bowl Is Finally Being Taken Away.’ Fund Manager on the Stock Market Plunge
    By Mark Cobley, Financial News
    Oct. 11, 2018 10:43 a.m. ET

    The biggest drop for U.S. stock markets in six months on Wednesday sparked sell-offs around the world Thursday, with Asian markets retreating overnight. The Dow Jones Industrial Average, the S&P 500 and the Nasdaq were all close to even on Thursday morning.

    Some market commentators have pointed to better-than-expected economic and employment data from the U.S. as the specific trigger for the bearish bout, as fears mount that the booming U.S. economy is running ahead of the Fed’s existing plans to raise interest rates—signalling further rate rises to come.

    That began a selloff in U.S. bond markets—for bonds, prices fall as rates rise. And equity markets have followed them down on expectations that faster-rising US rates might put a general dampener on economic growth —coupled with the market’s existing fears of a slowing Chinese economy, rising trade tensions, and Brexit.

    Fund managers pronounced themselves “unsurprised” at the market fall on Thursday, which was described as a “healthy rebalancing correction” and a buying opportunity for some.
    …

  18. “The association also surveyed about 1,500 agents to gauge what’s driving supply and demand. Agents reported sales to international buyers at their lowest levels in a decade”

    So where did they go and more importantly, why did they stop buying? Do they know something we don’t? I wish we had visability to the historical RE purchases by foreign shack buyers (Chinese mainly). Here in the Bay Area it seems that July is when they stopped “investing”. I know many factors go into the softening/cooling/slow down/low inventory/realtor fluff excuse of why sales are down and prices are no longer going up but this foreign investing factor is what I’m betting on as a root cause to the insanity that drove up prices beyond any rational means.

    1. February 8, 2017

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

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

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

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

      1. That was a fun flash back to the past and way before I discovered your blog. I’m a bit of a “conspiracy theorist” but it seems all the cards have been layed out face up. Perhaps the more recent foreign investing was in fact, money laundering. Shell companies and such.

  19. There’s no way to avert the next financial crisis, warn former regulators from 2008 meltdown
    By Donna Borak
    September 13, 2018: 10:11 AM ET

    Reforms have strengthened the financial system. Banks have bolstered their balance sheets. Regulators now examine financial institutions once a year to make sure they can weather a downturn.

    Yet a decade after the financial crisis, there’s no telling when the next calamity will strike, according to three regulators who helped steer the country through the meltdown.

    “It’s a forever war,” Timothy Geithner, the former New York Fed chairman and Obama administration Treasury secretary, said during a panel discussion on the financial crisis at the Brookings Institution on Wednesday.

    “There’s no way to anticipate the full range of things that can cause a system to break down. It’s good to worry about all the potential sources of shock but you must be humble and skeptical about the ability of people to identify, and therefore, preemptively defuse those things,” he said.

    The collapse of the Lehman Brothers investment bank 10 years ago sparked a panic that rippled across Wall Street, and forced an unprecedented rescue of the financial system. Millions of Americans lost their homes to mortgage foreclosures in the Great Recession, and the jobless rate hit 10%.

    https://money.cnn.com/2018/09/12/news/economy/financial-crisis-anniversary-bernanke/index.html

    1. There’s no way to anticipate the full range of things that can cause a system to break down…

      No, but the full range of things you idiots did to make the system increasingly fragile are all in plain sight.

  20. The timing of this dire warning compared to the onset of the stock market swoon underway is quite interesting.
    ————————————
    Economics
    Investors Underestimate Risk of a Financial Shock, IMF Warns
    By Andrew Mayeda
    October 9, 2018, 5:00 PM PDT
    Updated on October 9, 2018, 11:17 PM PDT
    – U.S. stock valuations appear to be stretched, fund says
    – Short-term risks to global stability are up ‘modestly’: IMF

    Investors may be ignoring the risk that financial conditions could tighten sharply and send tremors through the global economy, the International Monetary Fund warned.

    “Asset valuations appear to be relatively high in some markets, notably in the United States,” the IMF said Wednesday in its latest Global Financial Stability Report. “Overall, market participants appear complacent about the risk of a sharp tightening of financial conditions.”

    https://www.bloomberg.com/news/articles/2018-10-10/investors-underestimating-risk-of-a-financial-shock-imf-warns

  21. ‘It’s just a beginning’: Investors react as stock rout hits Asia
    Thu, Oct 11, 2018 – 12:53 PM

    [SINGAPORE] The selloff that struck the US overnight ripped through Asian stock markets on Thursday, with indexes in Japan and Hong Kong tumbling at least 3 per cent.

    All stocks listed on the Nikkei 225 Stock Average retreated, while Japan’s Topix index headed for its steepest decline since March. The Hang Seng Index and China’s Shanghai Composite fell more than 3 per cent each. Taiwan’s Taiex index led the rout with a 5.6 per cent slump.

    The MSCI Asia Pacific Index headed for its worst day since February, with the measure sliding 3.1 per cent. Turbulence spiked in Asian markets as the Nikkei Stock Average Volatility Index surged 45 per cent.

    “It’s just a beginning,” Banny Lam, head of research at CEB International Investment Corp, said by phone. “The US tech bubble may take a while to burst and we are facing many external uncertainties – trade wars, risks in emerging markets currencies and oil price. And people should also watch yuan closely.”

    https://www.businesstimes.com.sg/stocks/its-just-a-beginning-investors-react-as-stock-rout-hits-asia

  22. The water wars begin.

    Plan to slow creeping Colorado River crisis could drain more water from Blue Mesa, Flaming Gorge reservoirs:

    “Nearly two decades into a pervasive drought that has more to do with a warming climate than precipitation, the seven states that rely on the Colorado River are nearing completion of a seven-year plan to protect water in the West.

    The Upper Colorado River Basin Drought Contingency Plan — one of the most significant proposals in the history of Colorado water management — isn’t going to buoy all of the 40 million people who rely on the Colorado River.

    But the plan, a draft of which was released Tuesday by the U.S. Bureau of Reclamation, could spread the burden of these exceptionally dry years across all the communities that draw from the overtaxed river. It also would move water from popular reservoirs like Flaming Gorge and Blue Mesa to bolster a flagging Lake Powell.”

    https://coloradosun.com/2018/10/10/colorado-river-water-crisis-blue-mesa/

  24. There could be some interesting information here for housing market HODLers and stock market dips buyers to ponder.
    Sounds like the quants may have
    forgotten to include the effects
    of quantitative easing in their
    models of asset returns.
    ——————————————–
    Investing
    The Big Problem With Machine Learning Algorithms

    The potential for tapping new data sets is enormous, but the track record is mixed.
    By Jon Asmundsson
    October 9, 2018, 2:00 AM PDT

    Machine learning is enabling investors to tap huge data sets such as social media postings in ways that no mere human could. Yet, despite the enormous potential, its record remains mixed. The Eurekahedge AI Hedge Fund Index, which tracks the returns of 13 hedge funds that use machine learning, has gained only 7 percent a year for the past five years, while the S&P 500 returned 13 percent annually.
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    Consider one risk-on strategy that had worked well in the decade since the financial crisis: bottom-fishing equity indexes. “Everyone’s buying the dips,” Koulajian says. “There are all these people who have learned to basically suppress the vol,” or volatility. If you use machine learning, you can implement dozens of versions of this strategy. The risk, according to Koulajian, is that the relentless bull market that made such strategies work so well was driven by central bank liquidity—and that’s being pulled away now. Meanwhile, skew, a measure of tail risk, is implying the S&P 500 could fall 30 percent, Koulajian says: In August, the CBOE Skew Index, which tracks out-of-the-money index options, reached a record high. If you’re buying the dips with machine learning, Koulajian says, it’s easy to congratulate yourself on using much more complex model optimization and lose sight of the larger risks.
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    https://www.bloomberg.com/news/articles/2018-10-09/the-big-problem-with-machine-learning-algorithms

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