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Sellers Are The Last To Admit The Market Has Changed

A report from the Home Buying Institute on California. “Last month, we reported on the situation in San Jose. House values in that California city are dropping steadily. But the ‘damage’ is not limited to that one housing market alone. Similar trends are occurring throughout the region. There’s no other way to say it, and no reason to sugarcoat it. The Silicon Valley real estate market is crashing — at least from a price perspective.”

The Mountain Democrat in California. “Our real estate market has been so good for so long that the recent slowdown in home sales and price dip has caught many sellers and a few agents by surprise. Buyers are always the first to sense when the market is changing. That’s likely because they are constantly on the internet searching for homes and keeping track of sales activity. Sellers are the last to admit the market has changed. They continue to base their pricing on where the market has been. Buyers make decisions based on where the market and prices are headed.”

“Looking back, the market has favored sellers. Looking forward, maybe not so much. The median listed price for a new home in El Dorado County is $735,000. We have more listings above $1 million than below $300,000. In 2001 48 percent of all young adults, 25 to 34, were homeowners. Last year only 40 percent. This market isn’t going to bounce back anytime soon. It’s the new normal.”

From Chicago Business in Illinois. “A palatial mansion in Winnetka that former Democratic candidate for U.S. Senate Al Hofeld first listed for sale in 2012 at $9.4 million came back on the market on July 29 after almost three years off. The asking price now is $4.9 million, about 51 percent of what Hofeld wanted for the home seven years ago.”

The Tampa Bay Times in Florida. “To show how much the market has changed in five years, the Times compared single-family home sales in June 2014 with those for June 2019. (The analysis was limited to Pinellas and Hillsborough, the bay area’s two most-populous counties, because 2014 sales data could not be obtained for Pasco and Hernando.)”

“By 2014, the recovery from the crash was well underway. Earlier that year, a Times story had proclaimed 2013 as when ‘Tampa Bay’s housing market came alive.’ Once again, ‘Sold’ signs sprouted in front of thousands of homes, although many were foreclosures.”

“Cyndee Haydon, a broker associate with Future Home Realty, said the biggest demand tends to be for houses in the $314,000 range, the minimum price at which a property is eligible for FHA financing with 3 percent down. Among her biggest concerns is flood insurance and whether new maps that move many properties into high-risk zones could spark a huge increase in premiums.”

“‘Homes that don’t need flood insurance will see an uptick in prices,’ she predicted, ‘but others will see a significant downturn.'”

The Shawnee Mission Post in Kansas. “To some this news is shocking. Honestly, I think to many PV residents this news might be shocking. I speak to hundreds of residents on a monthly basis and the general consensus is that the PV market is hot and will continue to be so. This is simply not the case.”

“The real estate market is always shifting. We have been in an abnormally long seller’s market for over six years and the pendulum must now swing the opposite direction- a buyer’s market. We observed that the days on market required for a property to sell have been on the rise. Price adjustments are occurring more frequently and earlier in the listing process. Most importantly, buyers are simply not in a hurry.”

“When home buyers have a lot to choose from, they might see the home at their first opportunity, and then do nothing. They think about it. Consider their options. They might even provide feedback that the home is a great fit for them, but still do nothing. This is what we have been seeing recently and it is a clear sign that the market has shifted.”

“What if I told you that as I write this column (8/1) there are 89 homes for sale in Prairie Village? I remember not too long ago when the number of active homes for sale in PV did not exceed 30. Therefore, 89 is big increase from what we have seen in recent years.”

“Last year 57 homes went under contract in July. This July only 28 homes went under contract. That is a significant drop in the demand for PV homes. Lastly, the number of homes that expired off of the market, or failed to sell is up as well. When under contracts are down, days on market and expired listings are on the rise, the market is in a downturn.”

“So what does this mean for a PV resident looking to sell their home in the near future? Do it now! Home prices are being affected currently, but not tremendously at this point. It is coming though. Each week that you wait brings more competition and higher expectations from active buyers when it comes to your home’s condition and price. Our market is becoming a pricing war AND a beauty competition. The days of just throwing a home on the market are gone.”

“Thoughtful conditioning of a home in order to sell is a must and pricing- this is a big one- pricing MUST be strategic. In today’s market, pricing inaccuracy can cost you thousands.”

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This Post Has 76 Comments

  1. ‘the biggest demand tends to be for houses in the $314,000 range, the minimum price at which a property is eligible for FHA financing with 3 percent down’

    You are fooked.

    ‘The median listed price for a new home in El Dorado County is $735,000. We have more listings above $1 million than below $300,000’

    You are fooked.

    1. I’ve mentioned many times how shack prices drift up to federal loan limits. Dong! So let’s all cry about prices being too high when we could just get the gubberment out of the way and crater! Cheap houses for everyone!

          1. Exactly. Government’s main goal is to maximize consumers spending not promotimg affordable housing.

  2. I remember not too long ago when the number of active homes for sale in PV did not exceed 30. Therefore, 89 is big increase from what we have seen in recent years.”

    These realtors, despite their art appreciation degrees, have quite the grasp of basic math.

  4. “There’s no other way to say it, and no reason to sugarcoat it. The Silicon Valley real estate market is crashing — at least from a price perspective.”

    Since price equals value then there is no reason to sugarcoat it. The Silicon Valley real estate market is crashing – at least from a value perspective.

    Values represent equity wealth. Destroy prices and you destroy values. Destroy values and you destroy equity wealth.

    Our stupid economy is an economy that stupidly relies on massive amounts of consumer spending. Much of this consumer spending relies on equity wealth.

    This equity wealth is a function of prices, prices of real estate and prices of stocks. In order to keep our stupid consumer-based economy humming along this equity wealth must be maintained, must be supported. IMHO one should fully expect that extreme measures will be taken by the PTB to support both real estate prices and stock prices in Silicon Valley and everywhere else because the PTB wants to remain the PTB and will do whatever is necessary to remain the PTB.

    1. ‘extreme measures will be taken by the PTB’

      Where is it? It’s already crashing. Has been for over a year. Remember a year and a half ago, I posted the Palo Alto UHS saying prices would get slashed by a million bucks and no offers? And that was from multiple offers over asking just months before. No cavalry is coming California! Sux to be you!

      2. Even here people forget that the gubberment is popping this bubble, just like most countries around the world:

        January 29, 2019

        “One of the principal gatekeepers to housing-finance markets is stepping up scrutiny of nonbank mortgage lenders, concerned that some may not have the financial heft needed to overcome stressed conditions.”

        “The increased oversight by the Government National Mortgage Association, or Ginnie Mae, comes as nonbank lenders play an ever-bigger role in making mortgages to Americans and as housing markets are cooling. Many of these companies flourished after the financial crisis as banks stepped back from the mortgage market but haven’t yet been tested by an economic downturn.”

        “For the first time in recent memory, the agency has asked a handful of these lenders to improve certain financial metrics before granting them full ability to continue issuing Ginnie-backed mortgage bonds, according to Maren Kasper, who stepped in as Ginnie’s acting head this month. In the meantime, it has been granting approvals with shorter time frames to the lenders.”

        “Ginnie has also undertaken its first stress tests of business partners. The exams look at how lenders’ and servicers’ monthly cash-flow obligations would hold up if they reduced loan production and margins while increasing delinquencies. The results are expected shortly.”

        “Ginnie is particularly exposed to nonbank lenders. These firms service 61% of loans in securities issued by Ginnie, up from 34% at the end of 2014. What’s more, Ginnie’s outstanding issuance of mortgage bonds has grown fivefold since the financial crisis to $2 trillion. ‘It’s uncharted territory,’ Ms. Kasper said.”

        “Neither Ms. Kasper nor others in the industry expect chaos in the mortgage market. But with mortgage refinancing recently falling to its lowest level in 18 years, nonbank lenders face new strains. Government officials and economists are concerned that many of these companies may not be able to tap the more stable sources of financing available to bank lenders if they face a cash crunch.”

        “Last year, there were 31 mergers and acquisitions in the mortgage industry, nearly three times the amount in 2017, according to Stratmor Group. Moody’s Investors Service said that about a third of the nonbank mortgage lenders graded by the rating company aren’t profitable right now, which means they likely need waivers from their own lenders to be able to keep accessing cash to make mortgages. It didn’t name the companies.”

        “While Ginnie executives have been flagging this issue for years, it is gaining a wider audience as nonbank lenders have struggled over the past year. In a paper last year, economists at the Federal Reserve raised concerns over unique funding challenges that nonbank servicers face, especially for those who manage payments on Ginnie bonds.”

        “‘This is not a system that has ever been tested in a time of stress,’ said Karen Pence, one of the authors, in presenting her findings at a Brookings Institution conference last year. ‘We question whether it is wise to concentrate so much risk in a sector of the economy that has little capacity to bear it and has a history, at least during the financial crisis, of going out of business.’”

        “There isn’t any single agency responsible for directly overseeing such nonbank entities.”

        http://housingbubble.blog/?p=879

        This past week the FDIC fired a shot at banks lending to non-bank mortgage companies. And the cash-out refi limit got cut for the first time in years.

        1. And there was this too:

          The EB-5 Minimum Investment Level Is Rising

          https://www.prweb.com/releases/the_eb_5_minimum_investment_level_is_rising_so_make_sure_you_are_conducting_the_proper_due_diligence/prweb16481643.htm

          ‘For some regional centers and developers, especially those with projects in places like Manhattan where TEA gerrymandering had become commonplace, this will be their final attempt to secure EB-5 funding. These types of projects probably should not have ever and may never again qualify for the minimum investment threshold.’

          ‘The EB-5 industry has been plagued by numerous half-baked projects that have failed due to shortfalls in the overall planning and funding needed to complete their construction. A regional center that could not solve for these issues in the past and is currently raising EB-5 funding should be a major red-flag now. Aspiring investors also need to be weary of so-called “recession proof” markets. Just because a project is located in a major U.S. city does not a guarantee recipe for success. Currently, there are major EB-5 projects making headlines, especially in New York City as the luxury condominium market is experiencing a downturn. The downturn was outlined in a recent Wall Street Journal article entitled “Manhattan Condo Slump Starting to Imperil City Developers”.

          1. Mean.a.while$ over in farm country:

            U.$. bill rai$ing debt ceiling for farm bankruptcie$ heads to White House

            P.J. Huffstutter | POLITICS| AUGUST 2, 2019 | MarketWatch

            CHICAGO (Reuters) – With farm bankruptcies rising and agricultural debt loads $oaring, the U.S. Senate has passed a bill that will make it easier for more farmers with larger amounts of debt to file for bankruptcy protection

            it raises the ceiling on how much debt producers who file for Chapter 12 bankruptcy can have, to $10 million from the previous $4 million.

            Chapter 12 is a part of the federal bankruptcy code that is designed for family farmers and fishermen to reorganize their debts. It was created during the 1980s farm crisis as a $imple court procedure to let family farmers keep operating while working out a plan to repay lender$.

    2. The Silicon Valley real estate market is crashing — at least from a price perspective.

      And what other perspectives would they have us consider?

      1. Other dimensions of a crash besides price declines include declining volume of sales and rising inventory of homes for sale.

    3. “because the PTB wants to remain the PTB and will do whatever is necessary to remain the PTB.”

      Yep Yep Yep

  5. Repost for the weekend thread, Wall Street Journal — Families Go Deep in Debt to Stay in the Middle Class:

    http://archive.is/pTTCd (archive link to bypass paywall)

    Note the following:

    Overpaying for used housing
    Student loans
    New car loans
    Cable TeeVee
    Having children you can’t afford
    Living in coastal bubble cities
    Eating at restaurants

    Those Instagram likes on posts promoting the narrative of your fake life were worth it. Loosers…

    2. Families Go Deep in Debt to Appear To Stay in the Middle Class

      Fixed that. Unfortunately maintaining appearances will destroy any hope of actually doing it.

    4. From the article:

      “That’s a radical shift in the structure of the market,” Mr. Purviance said. “What we may have to prepare for in the future is that buying a new home, and in some markets even buying an existing home, may become a luxury.”

      I’ve said it before, I’ll say it again: buying a new house (and increasingly a vehicle) are luxury purchases in the USA. Unless w get some broad price adjustments, the dream of being middle class and affording a new house and a new car will be an illusion.

      That same article quoted the average new car price of $37k last quarter. Unbelievable.

      1. an illusion.

        The illusion is people thinking that going into debt for decades will make them somehow better off. In my grandparent’s day, debt was foolish and a house <1000 ft2 was their dream.

        1. a house <1000 ft2 was their dream.

          But now to get that house you need to a lot with a 3000 ft^2 monstrosity on it and knock it down, then build your < 100ft^2 house.

          And if you want a decent sized lot you'll need to buy and knock down two of those and re-join the sub-divided lots!

        2. 1000 sq ft isn’t functional unless you’re single.

          There is a new build down the street which is about 1700 sq ft. That seems like a nice size for a couple. We looked at some 50s built 3/2’s around 1100 sq ft and decided we’d be too crowded. Great houses but too small for our family. We have frequent overnight guests so having a dedicated guest room really works out. My parents are here at least 2-3 nights a month, often more than that. We just close the vents and door when they’re not here.

      2. Because the average “car” is a large truck or large SUV. I drove a new six speed Chevy Cruze off the lot for less than $16,000 a few years ago,thanks to Costco and credit card rewards. It get 45 miles to the gallon. Gasoline is about $2.20 at Costco in Albuquerque. A cheap Tesla is about $22,000 more than my car. So that will buy 10,000 gallons of gas. I can go 450,000 miles on that except neither the Cruze nor the Tesla are going to last that long. I think that when you factor in the coal based electricity and the impact of mining the lithium and cobalt, I did far less damage to the environment with my purchase. When I fill the tank I have a range over 600 miles.

        BTW, I did see a Tesla X in Albuquerque, it was a first for me, also saw a S in the same parking lot. Interestingly, it was at a Texas Roadhouse. The X is a nice looking vehicle but it costs three times the cost of similar SUVs. Blue collar workers probably paid $7500 per vehicle so the rich can have their toys.

        1. A cheap Tesla

          And Tesla is in the hole some $50K for every car they’ve built and going deeper every day. The sticker price is only half of the fossil fuel consumption to build the things. Ecological and economic disasters.

  6. What Ails the U.S. Press?

    The media’s lack of interest in the Steele dossier amounts to collusion in a coverup.

    ‘These questions are not just necessary for historical accuracy. They are of scintillating journalistic interest. If you’re a reporter who can’t simultaneously disapprove of Mr. Trump (as many journalists do) and see their urgency, you should rethink your career choice. (I believe it was the psychoanalyst Karen Horney who said the professions function partly to attract those least capable of exemplifying their values.) News consumers might marvel that so many journalists at least are so devoted to their partisan allegiances, but devotion has nothing to do with it. It’s just dumb conformism and lack of imagination. As in any field, one learns not to be surprised that so many unprepossessing persons are in positions of authority.’

    https://www.wsj.com/articles/what-ails-the-u-s-press-11564782086

    ‘the professions function partly to attract those least capable of exemplifying their values’

    I’m reminded about these money losing “real estate” companies run out and hire an economist who just so happens to believe shack prices only go up! That is, until he or she begins to scolds sellers for being greedy.

    1. Ahem…

      Barron’s
      Spotting Bubble Trouble With Robert Shiller
      In prior eras, he warned about tech-stock and housing valuations—before they … Shiller might not see a bubble in U.S. equities, but that doesn’t mean he hasn’t …
      14 hours ago

  7. “The Silicon Valley real estate market is crashing — at least from a price perspective.”

    We saw this in the early 2000s, after the tech stock crash and before the broader global real estate and financial markets collapse of 2007-2009. The Silicon Valley real estate market virtually shut down, as purchase demand shifted to cheaper markets in the East Bay.

  8. “Sellers are the last to admit the market has changed. They continue to base their pricing on where the market has been.”

    Denial ain’t a river in Egypt…

    1. Amazing how popular bathing in de Nile is; watch out for yout dingaling those crocs will bite.

  14. Went to check out a new listing in my hood today. Just listed yesterday. Structurally sound but needs a total make over. Even though it just listed yesterday I still couldn’t beat the flippers. The tattooed gym rat flipper with the trophy wife and gleaming new European luxury SUV was already there. You know the guy. You saw him everywhere in 2005. The miasma stretching from Vancouver to San Francisco hasn’t seeped this far south yet. Flippers still scavenging the San Diego landscape for anything that hasn’t been remodeled in the last twenty years. I don’t have statistics on it but the flipping seems worse now than last time.

    1. “The tattooed gym rat flipper with the trophy wife…”

      She’s not his girl; it’s just his turn.

      1. “She’s not his girl; it’s just his turn.”
        To get a new STD to go with his new SUV

        2. In an economic downturn, which will be hardest to get rid of: the girl, the STD or the SUV?

    1. The $190,000 is probably all gone. The autos leased, probably even renting the house. It does not take long to spend that little. It is a lot of wasted tax dollars but not a lot to support a lavish lifestyle.

    2. During the great recession, the disability trust fund went broke since so many people who could not get a job faked disability. It appeared at that time the Obama administration turned a blind eye since it lowered unemployment to allow them to be counted as disabled. Fast forward to now, the disability fund is flush with case and just last year the life of the fund increased twenty years. MAGA https://www.thenbxpress.com/social-security-financial-status-update-2019/

      2. 80 percent of benefits payable at that time. Of course the media will never admit this….same with state pensions….you get an IOU or have to live with 80%

    1. Is China’s economy dead in the water without it, is the more important question. The answer is yes, at ten percent the tariffs are revenue raisers, you put 25% tariffs on shoes etc. and the industries collapse. Time to change the supply chain and produce them in El Salvador and other countries sending us people. Two problems solved at once, China’s growing military power fueled by its economy and central American immigration. MAGA

      1. Watch Fox Business Live
        Trump: ‘We will be taxing the hell out of China’ until a trade deal is reached
        By Brittany De Lea
        Published August 01, 2019
        Trade War
        FOXBusiness
        Trump: We’ve taken the toughest ever action to stand up to China’s trade abuse

        President Trump talks about his new China tariff during a rally in Cincinnati, Ohio.

        President Trump stood fast by his decision to implement 10 percent tariffs on an additional $300 billion worth of goods coming into the U.S. from China on Thursday, saying the pain will continue for Beijing until an agreement is struck.
        …

      2. “Time to change the supply chain and produce them in El Salvador and other countries sending us people.”

        That’s an interesting idea.

        1. It makes sense. If people are ostensibly coming here for better lives, help create better lives for them at home.

    1. That bathroom would be a deal breaker for me. Just leave the dated bathroom that was there for me to fix.

    1. Our driveway, which is two miles west of the Poway city limits, looks like a California fault zone. Either our landlords will have to fork out the dough to repair it, or the next owners will inherit a serious deferred maintenance liability.

      Either way, it’s not our circus, not our monkeys, not our monies.

      1. Praise God for generous landlords who are willing to shoulder the astronomical costs of home depreciation and maintenance on behalf of their tenants.

      2. Either our landlords will have to fork out the dough to repair it, or the next owners will inherit a serious deferred maintenance liability.

        Your landlords will likely pay the price for their deferred maintenance either by prepping it for sale or discounting the sale price.

      3. looks like a California fault zone

        Same with ours — the ground under the aggregate surely has been shifting/eroding. I believe the estimate they got was $40k to fix or replace.

        They opted to “patch” it for now, and defer the maintenance further…

    2. “What you don’t see is the shared asphalt driveway…”

      You can see it on Google street view. That’s not a place for kids since it is not on a neighborhood street but is a double yellow center lined busy street, and a slope too! Sux!!

      1. Yep! And with all the rain we had this past winter, the driveway was like a stream for weeks.

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