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A Wholesale Reassessment Of Values

A report from the Press Democrat in California. “Last summer with the rental market still reeling from the 2017 North Bay wildfires, the three-bedroom home in the southeast Santa Rosa Kawana Springs neighborhood easily would have fetched the owner’s asking price of $3,600 a month. Today, the owner of the home had to twice reduce the rent he was asking before landing a tenant who would sign a lease for $3,200 a month, said property manager Jenny Rihl.”

“‘Ultimately, the owner doesn’t decide the value of their home and neither do I,’ Rihl said. ‘It’s what people are willing to pay, and the market that decides. And people are willing to pay $3,200’ for that Kawana Springs house.”

“Summertime usually is the high point for rental prices in Sonoma County, then the market tends to soften as the weather cools in the fall and through the final few months of the year. This summer, though, and over the past 12 months, the housing rental market here has significantly retreated. Property owners have resorted to something virtually unheard of since the 2017 fires — price reductions for apartments and rental houses to lure tenants.”

“Keith Becker, owner of DeDe’s Rentals, said he has had to make several price cuts this summer for property owners he represents. June, July and August are usually ‘the top of the market,’ he said of housing rentals. Of the 25 rental properties his property management company listed for the first time in July, prices have been reduced on three of them because they were not generating enough interest.”

“Becker said the local rental market is about to get another jolt as more rental properties are listed in Santa Rosa’s Coffey Park neighborhood. Some of these, he said, are likely to fetch monthly rents of about $2,750. ‘There is likely to be a wholesale reassessment of rent values,’ Becker said.”

“At the Coddingtown Mall Apartments, manager Harry Brown said monthly rental prices have been mostly unchanged. Brown said occupancy is about 98%, but empty units are staying vacant longer. ‘It’s getting soft,’ Brown said of the rental market. ‘It’s getting harder for us to fill our units.'”

“Dale Suwannurak, the owner of the Kawana Springs rental home, said he had a hunch $3,600 was asking too much given the rental market’s downward trend. Suwannurak said the house was built in 2016 and has a lot of features that deserve a higher price: hardwood floors, marble countertops and new appliances. At $3,200, Suwannurak is taking a loss of $200 below his monthly mortgage payment on the house he views as a long-term investment property.”

“‘It’s hard to find tenants,’ he said. ‘It would be nice to get a higher price … but if I have a good tenant and they will be able to keep the house clean and nice, I wouldn’t mind at all taking a little bit of loss.'”

The Wall Street Journal on New York. “Actress Meryl Streep is relisting a downtown New York penthouse for $18.25 million, 26% less than she sought a year ago. The property came on the market for $24.6 million in August 2018. It was reduced to $19.75 million in October and was taken off the market last month.”

The Chicago Sun Times in Illinois. “For most of his life, Karl Mables has lived in the 6400 block of South Honore Street. But he struggles now to recognize the neighborhood he’s called home for decades. ‘When I was growing up, there were houses on each of these lots, and now that I am older, there seem to be two vacant lots in between every home,’ says Mables, 30. ‘It hurts.'”

“What’s happened on Honore Street isn’t unusual for Englewood. From 2008 through 2018, 861 buildings were razed in Englewood. In West Englewood — Racine Avenue is the dividing line for the two neighborhoods that together make up what’s known in the area as Greater Englewood — the number was 829. Drive through Englewood, and you see the result. There are craters where homes previously stood. Vacant lots become vacant blocks.”

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This Post Has 104 Comments

  1. ‘At $3,200, Suwannurak is taking a loss of $200 below his monthly mortgage payment on the house he views as a long-term investment property.’

    ‘It’s hard to find tenants…It would be nice to get a higher price … but if I have a good tenant and they will be able to keep the house clean and nice, I wouldn’t mind at all taking a little bit of loss’

    Wa happened to my shortage California?

    Trolls say, “oh it’s only luxury shacks that are falling!” It’s across the board trolls, even rents. Eat yer crowz trolls!

    1. $200 loss on the mortgage alone. I’m sure maintenance, taxes, and possibly HOA fees add some more loss for the noodle bar owner.

      “Suwannurak, who owns a couple of restaurants in Santa Rosa including SEA Noodle Bar, said the house was built in 2016 and has a lot of features that deserve a higher price: hardwood floors, marble countertops and new appliances.“

      You deserve nothing more than the ramen noodles your realtor inspired ramen bar will be feeding you Suwannurak

      1. Financial manias are always right out in the open. Completely irrational behavior is stated and accepted as “investment”.

        1. Pshaw, Ben, you nay-saying so-and-so. If this was a financial mania, Real Journalists would have sounded the klaxon as soon as the first red flags appeared.

          Everything is Awesome – Buy Moar Stawks!

          1. Just in the past week, the most expensive property in California was foreclosed for $100,000. NYC new airbox prices fell 45%. Sunny Isles Beach developers are walking away from multi-million $ condos. The media obviously isn’t going to say the bubble has burst. It happened years ago.

          1. Just in the past week, the most expensive property in California was foreclosed for $100,000. NYC new airbox prices fell 45%. Sunny Isles Beach developers are walking away from multi-million $ condos.

            Okay, I’ll concede that this week was something of an anomaly.

        3. And also, prices declines that are openly reported in the main stream media are roundly ignored by true believers in the bubble.

      2. Ramen bars are quite trendy right now in San Diego. Those aren’t cheap noodles anymore and most of the places just give you a little slice of meat or two on the top.

        2. It’s no wonder many live pay check to pay check when they have to spend $7 for a coffee, $10 on some avocado toast and then another $15 on a bowl of ramen. Probably explains why that landlord is ok losing on rent, he prob makes a good chunk back on his rental lose from the people buying his over priced ramen.

      4. $200 loss on the mortgage alone. I’m sure maintenance, taxes, and possibly HOA fees add some more loss for the noodle bar owner.

        Assume he’s not the only one in that exact same scenario… All it takes is one ‘bad’ tenant who trashes the place and has to be evicted to inflict a ton of fiscal hurt.

  2. ‘Actress Meryl Streep is relisting a downtown New York penthouse for $18.25 million, 26% less than she sought a year ago’

    A Dingo ate my baby!

    1. ‘Actress Meryl Streep is relisting a downtown New York penthouse for $18.25 million, 26% less than she sought a year ago’

      “A Dingo ate my baby!”

      “The earliest known dingo fossil, found in Western Australia, dates to 3,450 years ago”

      That’s one old dingo.

      Not to mention those old dog bones they found in Western Australia.

    2. Michael Chamberlain, whose baby was snatched by a dingo in outback Australia in 1980 – sparking a murder trial that divided the nation – has died, aged 72.

      Chamberlain’s then wife Lindy, who famously screamed “a dingo has got my baby” after their nine-week-old daughter Azaria went missing at a campsite near Uluru, or Ayers Rock, was convicted of murder and sentenced to life in jail.

      He was found guilty of being an accessory and was given an 18-month suspended sentence.

      “We had lived by the credo that if you have done nothing wrong, you have nothing to fear”Michael Chamberlain

      The pair spent years fighting to overturn their convictions and were eventually pardoned by the Northern Territory government in 1987.

      Their ordeal divided the nation and was turned into the film A Cry in the Dark, in which they were played by Meryl Streep and Sam Neill.

  3. At $3,200, Suwannurak is taking a loss of $200 below his monthly mortgage payment on the house he views as a long-term investment property.”

    Okay, so I was always better at science than math, but how does losing $200 a month on a depreciating asset constitute a long-term investment?

    1. losing $200 a month on an investment makes as much sense as buying a negative yielding bond. But people do it. I don’t understand it either.

    2. Obviously the hope is two fold:

      1) That rents will eventually rise.
      2) That the shack will appreciate.

  4. Worker shortage hits Denny’s — Owners cut operating hours to cope

    Denny’s at 878 Munson Ave. in Traverse City has been open from 7 a.m. to 3 p.m. for about three weeks, according to Amicus Management, the Grand Rapids company that operates the diner.
    The restaurant even closed for the weekend of Aug. 10-11.
    The reduction in hours was attributed to one thing: staffing.

    — [Amicus Management President Dan] Yeomans said staffing problems at the Traverse City Denny’s began with “visa issues with seasonal workers from Jamaica.”

    1. It’s not a worker shortage, it’s a good paying job shortage. Cheapass managers and shareholders have no one to blame but themselves.

      1. Exactly. Sorry, but taxpayers should not be subsidizing your workers, with food stamps, Medicaid and the EITC.

      2. If Denny’s raised their pay enough to attract workers (who can’t afford the rents anywhere near Traverse City) and then raised their prices enough to support that pay rate, they wouldn’t attract enough business to stay in business. It even costs about $1000 a month to stay at the state park just down the road. What to do, what to do?

        2. Well, there’s the other problem, that we can blame the REIC, real estate speculators, AirBnB operators and house flippers on.

          1. Plus a seasonal location such as Traverse City, MI (which is much less habitable four months out of the year) is probably not the best example for discussion.

    2. I guess restaurants are a lot like new apartments. Land is so expensive that only “luxury” apartments pencil out. Similarly, land is so expensive that only trendy Millenial food like Ramen noodles pencils out. Affordable fare like Denny’s need not apply.

      1. Yesterday I ate a trendy taqueria in central Denver. The tacos were good, but were tiny and expensive ($5 each). With a beer it was easy to end up with a $25+ check.

        The place was packed.

      2. I have to think there’s s a big gap in stability between restaurants that own their own land (and not the franchiser either) vs those that rent it.

      5. We went to Costa Rica as a family about 5 years ago. We got off the red-eye flight and looked for a place to eat. We ate at Denny’s and it was the best meal I’d had in a long time. Weird, because we would never eat at Denny’s normally, but for some reason the brand inspired confidence that morning.

        1. “Weird, because we would never eat at Denny’s normally, but for some reason the brand inspired confidence that morning.”

          That’s the express purpose of a franchise.

  6. $700k Apartments and $300k Toilets for the Homeless in LA Public Housing Scandal

    ‘The costs to build apartments for the homeless have ballooned to almost $700k a unit. Apartments in Koreatown are being built at a projected cost of $690,692 for each unit. Two other projects in pre-approval are expected to go over $700,000 per unit in total costs.’

    ‘Despite attempts to justify the high prices, costs are higher than the median sales price of a home in Los Angeles County, which was reported as $618,000 by the tracker CoreLogic, in June 2019.’

    https://usaherald.com/700k-apartments-300k-toilets-homeless-la-public-housing-scandal/

    2. So we are going to have free education, free healthcare, food stamps, Obama phones, welfare, and free 700k apartments in LA AND be a sanctuary state? What could go wrong.

    4. It’s just the beginning. Someone will have to get the contracts to maintain the properties. You can’t take these people off the street and put them in 700k apartments and expect the problem to be solved. Someone will have to pay the water, electricity/gas, and phone bills because they won’t be able to. Someone will have to pay to fix the plumbing and electrical issues, washing machines, dryers etc. There will have to be full time staff to make sure the residents are cleaning their apartments and taking their medications. They’ll have to have drug testing to make sure the place doesn’t become a haven for drug addicts and dealers. They’ll need full time security because some of these people are mentally unstable and prone to violence. The most likely outcome sadly is that in 10-20 years time these properties will be condemned due to misuse and abuse.

      1. And then it will go up in flames like that “council housing” tower in London did, started by a tenant using too many extension cords. I recall that many of the survivors were moved into million pound flats.

        1. You’ve just hit on one reason why I hate apartments and the like. You are exposed to the dangerous habits of neighbors. An errant cigarette from the drunk next door can burn you alive through no fault of your own.

          1. Some interesting data:

            “The majority of multifamily residential building fires, 73.8 percent, did not extend beyond the original object or area of origin, such as the kitchen stove.”

            https://www.verisk.com/insurance/visualize/fire-trends-in-multifamily-housing/

            Fires have been trending down for a while now:

            https://www.usfa.fema.gov/data/statistics/#causesR

            Also, only 2.2% of fires are caused by smoking. The vast majority (51.6%) of fires come from cooking. 9.1% of fires come from heating.

            I would be interested in finding data that compared the frequency of fires in SFH vs apartment complexes/condos. Our previous condo we lived in had sprinklers and extensive fire detection gear. Our house and townhouse we rented did not have anything like that.

    5. What I don’t understand about housing for the homeless, which does seem like “nice thing” in principle, is why the hell it has to go in desirable areas. Even as a productive citizen, I have had to live in some locations that weren’t my favorite at certain points in my life — because I haven’t always made a great salary. Why CAN’T we send homeless folks to cheap land well outside the urban core? This is the perfect place to stick them. We can build more units, cheaper. They can get the care they need without getting in other people’s way.

      Long story short — Why are they building these units in K-Town? I’ve also seen this happen in DC. It has to be crony land contracts.

      1. Few of the homeless will change their life style because they are moved a few blocks inside a building. They are still going to have access to the same drug dealers and same liquor stores and the same pimps. It would make more sense to move them to a different environment and try to help them slowly develop healthier life styles. But this is California and we know all their problems are caused by social injustice and every problem can be remedied by tax payer largesse.

        1. “It would make more sense to move them to a different environment and try to help them slowly develop healthier life styles.”

          Wherever they go, there they are.

          It’s not where they are that matters, it’s who they are. A new environment won’t help them unless the who-they-are factor is changed. And good luck with that.

          1. For the few who are capable of and willing to change, a different environment would seem to be important for breaking old habits. Maybe someone with direct experience working with the homeless can comment.

          2. “For the few who are capable of and willing to change, a different environment would seem to be important for breaking old habits.”

            I posted this a couple of days ago …

            https://en.m.wikipedia.org/wiki/Right_2_Dream_Too

            Note the rules:

            “Code of conduct reads drug and weapon free zone as cited by OPB in February 2016.[10] Full time lodging is given only to members. Membership subject to approval process by existing members. Non-members sleep on the floor and are restricted to 12 hours per 24 hour period, as of June 2017.[11]

            “The camp has a 24-hour security desk at its entrance, which is manned by camp residents. Sleeping bags used by the camp’s populace are laundered weekly.”

            This place works for people who are willing and able to follow rules, for those who are capable of and willing to change. Unfortunately some people cannot or will not follow rules, are incapable or unwilling to change.

          3. Of course mental illness and drug addiction require intensive resources. But if you take a look at the “housing first” efforts it does show that providing housing as a starting point dramatically solves a lot of problems and greatly ameliorates many others. The previous approach of trying to fix character flaws and then give housing are less effective as just providing housing.

            Having said that, no one said that said housing need to be opulent or shared with people who don’t want those people there. Spartan dwellings with a roof over a head and the essentials might suffice.

        2. Socioeconomic segregation is a social injustice and diversity is our strength. Gated communities should be required to have low income housing as well as places like Martha’s Vineyard and Chappaqua so we can build a real community. The hypocrisy of the democratic elites is amazing.

      2. According to the bleeding hearts around it here it’s because we’ve been oppressing them and if we hadn’t they would be outstanding and highly productive members of society – so we are merely putting them in the places they would have been on their own had not we, the evil patriarchy, deliberately kept them down.

        I never miss a chance to tell them they can start by housing homeless in their own homes and back yards. The hemming and hawing and silence speaks volumes.

      3. “Why CAN’T we send homeless folks to cheap land well outside the urban core?”

        There are few social services well outside the urban core.

        1. Because social services are bolted down to the sidewalks of the downtown areas. They can’t be moved or expanded upon. Nope.

          1. Next weekend, I’ll be attending Pax West in downtown Seattle at the Convention Center.

            The intrusion of homeless, who have become quite embolden, upon the convention goers (a large number from outside of Seattle) has not gotten much press… yet. It’s not as bad as San Francisco’s Moscone Center has become, but I heard multiple goers complaining about it last year in the “maybe we shouldn’t come back” vein. And that’s despite a ‘security sweep’ by the police to keep them at a distance.

  9. “It’s not a worker shortage, it’s a good paying job shortage. Cheapass managers and shareholders have no one to blame but themselves.”

    Yeah, well there’s this …

    “JDJ Hospitality, which operated seven Denny’s in Michigan, filed for Chapter 11 bankruptcy protection in May 2018. Yeomans said Amicus Management was named a receiver of five Denny’s locations, including the Traverse City store, in Kent County Circuit Court on Feb 13.”

    1. This was meant to be a response to Chino’s post.

      For whatever reason the economics for this particular Denny’s doesn’t seem to be working out.

      We may soon discover if the employees at Denny’s will be better off working without a raise or not working at all.

      1. Perhaps the problem for the Denny’s is excessive real estate prices for the locations. It does not change the fact that businesses should not be expecting taxpayers to subsidize their workers. Importing tens of millions of people to fill jobs that cannot exist without subsidization is the reason why the country is broke but some like the Koch brothers get to have tens of billions of dollars. Perhaps we just do not need so many chain restaurants.

        1. Cheap labor is never cheap. Slavery existed to serve the elites. We are still picking up the check for that decision 400 years later.

        2. “Perhaps we just do not need so many chain restaurants.”

          It seems like eating out anywhere, even at a mediocre chain restaurant, costs a small fortune these days.

          I met with someone yesterday to eat some fancy tacos. I could have made a filet mignon dinner at home for half the price.

  10. ‘Horses and their humans would enjoy living at this San Juan Bautista home. Located at 2300 Salinas Road, the three-bedroom, three-bath, 3,153-square-foot home was built in 2003. The custom Old California-style home sits on 60 acres with views of the valley below.’

    ‘A 140-by-70 covered arena is constructed on the property, as well as horse paddocks. A number of riding and hiking trails are complemented by open pastures. A 14-acre slice of the property is available for development.’

    ‘The home is listed at $1,698,888 by Remax Unlimited. It had its price slashed by $168,000 on July 19.’

    https://sanbenito.com/2019/08/22/property-for-the-horses/

        1. I was going to say – are the Chinese really that stupid? Do they not understand how easy it is to add 8s to the asking price? Do they add as many 8s as they can to the actual sales price, too?

          1. Some in China spend tens of thousands of US Dollars equivalent for a “lucky” license plate.

            Superstition and money make weird decisions.

  11. Local Attorney Responds to Rising Bankruptcies in Southern California

    ‘Wipe Away Debts, a local bankruptcy and debt relief attorney, responds to rising Southern California bankruptcies. With their approach to Chapter 7 and 13 bankruptcies, they are offering solutions for the Valley Village community and surrounding areas.’

    http://www.digitaljournal.com/pr/4424001

    1. So what is the choice besides a senile and crooked Biden? Do you not think that Trump is not going to make an issue of Hunter Biden’s business deals with China. The Democrats are not going to be running against McCain or Romney. He is running to win not to create the appearance of a race. Remember when someone who went by Joseph Smith on this blog said that the Republicans were never going to win again?

      1. The landlside in 2020 is going to be epic.

        Why do you think all the progressive talking heads are praying for a recession?

        1. It’s not going to be a landslide. Dems are united against Trump, and yes they will vote for Biden or Warren or Stacey Abrams if they have to. No more Berniebots staying home in protest. No more Jill Stein protest votes either. It’s Dem or bust. The question is whether Trump can hold the economy together for another 18 months.

          1. And dems were not strongly united behind Hillary? With THE most organized and best financed campaign in the history of the republic?

            The “leader” and presidential democrat candidate is going to go through a long and bruising and expensive primary. And will mostly likely be a hard core marxist/socialist that no independent will likely vote for.

            The campaign commercials are going to write themselves.

            And don’t write off third party candidates just yet. Already quite a few “left of center” to “way left of center” rich folks are making noise to do just that.

          2. Yes but the power of incumbency should not be underestimated. Friday, Rasmussen compared Trump’s number to Obama’s at the same point in the Presidency and Trump was a number of points ahead. I remember the talking heads saying that Reagan would never get reelected in 1983 just before he had his landslide. But I will concede that a major recession could change that but despite all the alarmists it really is not on the horizon. An inverted yield curve is very easy to create if you control the money supply like the Fed. It means very little if the Fed is creating it or at least actively not preventing it. That really is the only indicator of a recession and it does not outweigh the strength of the consumer. Also the election is not really 18 months away. 40% of the US population now votes before the November election date and in many states they start voting in September. By election day of November 2020, the election may have already been effectively decided.

          3. Dems are united against Trump

            That’s not enough. Open borders and free sh!t for illegals isn’t helping them either.

          4. The democratic electorate are not going rise en-masse to oust Trump; they’re expecting something tangible for free.

  13. As President, Obama did this …

    Obama Moves To Protect Against Flooding From Rising Sea Levels | HuffPost
    https://www.huffpost.com/entry/obama-sea-level-rise_n_6581980

    (snip)

    “A study from the U.S. Geological Survey found that half of the U.S. coastline is at high or very high risk of impacts due to sea level rise.”

    This was in 2015. Now Obama is doing this …

    “Barack and Michelle Obama are close to buying a massive Martha’s Vineyard estate.

    “TMZ reports that the former president and first lady are in escrow — aka in contract to purchase — a 29-acre beachfront plot with a 6,892-square-foot main house.”

    https://nypost.com/2019/08/22/barack-and-michelle-obama-are-buying-15m-estate-in-marthas-vineyard/

    2. It is the scam of global warming.

      The most progressive/liberal global warming cheerleaders, who would be more than happy to have you/family be cold and hungry in the dark, continue to buy very expensive beachfront property.

      Which, according to Al Gore, should be underwater at least 5 years ago. And pummeled by CAT 5 hurricanes twice a year.

      1. “It is the scam of global warming.”

        Amazing isn’t it.

        Yet if you bring up the fact that Obama is buying beachfront property which makes the Global Warming I mean Climate Change rising ocean argument look pretty silly at an Antifa rally, you might get hit by a brick thrown by one of ten masked socialists surrounding you who each have $150,000 in student loan debt claiming what you were saying was hate speech .

        1. It makes sense that someone interested to buy beachfront property might engage in efforts to convince potential rivals that it might soon lie underwater.

  15. As I was a Senior Appraiser in California State Department for about 30 years , I well remember the valuation process of market, replacement cost, and rental income valuation. That last one seems to have been ignored for years now.
    It was simple, the house was valued at 120 times the rental. Or in effect , if the home rented for $1,000 per month the property was worth $120,000
    It was, I believe, based upon receiving 6% on your money, 2% for maintenance and 2% depreciation.
    Now I m 96 years old and may remember erroneously but that is how I remember it.
    My home, that cost me $25,000 way back then, is now worth about $700,000 more or less, but I could never get $7.000 per month rental for it in fact $2,500 might be possible, so based upon the old figures the home is worth about $250 ,000, with a replacement cost of about building only, of about $360,000, so how could it possibly be worth the proposed valuation of $700,000
    Appraisal creep probably LOL

    1. I would think that back in the day, the higher nominal interest rates were a factor in arriving at those equations. With historically low rates, sales prices have shot up because the same payment amount could finance more borrowing.

      1. Absolutely, but , that is why the appraiser is supposed to consider the three valuation methods!
        But , the pressure on the appraiser is immense
        When I appraised for FHA I would use the three methods and adjust the conclusion accordingly. The fact that the buyer wanted to pay more for home has little effect on the valuation because it is not part of the calculations.
        I would tell the buyer that fact that he thought the house had a higher valuation could not affect my conclusion as to my valuation of the home.

        1. God Bless ya, Jack. Not for anything you stated, but for making it to age 96! Cali must have been good for ya.

        3. Back in the day, Jack, “Appraiser” was an esteemed profession. Nowadays, they’re nothing more than hit-the-numbers hacks, bought and paid for by the REIC.

          1. Second LL here (Las Vegas) was an RE appraiser (dick). First was a UHS (RE agent and electrician – he was a good person.) Third was an FB (also dick). Fourth and current one is a “professional investor”. According to the PM, she has owned as many as 60+ SFR here in Las Vegas at one time and he has assured me that she is in for the long haul. Had to really push to get a new lease after the first expired and now no extension has been offered (here four years as of July) and I have not brought it up because last time the rent was raised 12%.

            In reality, they’re all speculators. Every month I feel slightly nauseous opening the rent notice. No way to live.

    2. Old school math before men peeing in women’s bathrooms was a constitutional right:

      House price = 100-120 x rental prices of same type of house

      Average house price = 2.5-3 x average family income of the area

      20% down. No more than 35% of AFTER tax income to pay all debt (to include the mortgage).

      Pay stubs from last 6 months verified.

      And then the US government starting guaranteeing mortgages and using the CRA like a club. To make things “fair.”

      “No loan is exempt; no bank is immune. For those who thumb their nose at us, I promise vigorous enforcement.”

    3. “As I was a Senior Appraiser in California State Department for about 30 years”

      What kind of pension does that job have?

      Probably a lot better now than when you retired.

    4. “Now I m 96 years old and may remember erroneously but that is how I remember it.”

      That’s awesome that you are posting into your tenth decade! I hope I have the passion and presence of mind to remain similarly engaged for a few more decades.

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