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The Gloom-And-Doomers Are Starting To Say, See? I Told You So!

A report from My Folsom on California. “Being a Realtor means I have to keep my finger on the pulse of the housing market. For the 16 years I’ve been in the business, I’ve been looking for signs. Yes, there are changes afoot, but this is not the time to panic. In fact, panic is what could actually cause a crash. It’s not as bad as you think. Maybe it’s not bad at all.”

“Take, for example, the housing market in my beautiful little city of Folsom California. If you look at homes for sale in Folsom today, you’ll find 109 active listings, and 47 of them have reduced their prices. The average days on market for these listings stands at 52. Since the average days on market for homes sold last month was only 20, this may seem like a sign of the apocalypse.”

“If we look at pending sales, we find something that points in the other direction. Of 73 currently pending, 31 of them sold in 10 days or less. Owners of those homes might have the opinion that it’s still a strong, seller’s market, and maybe even wondering if they sold too low.”

“The average list price for those was $620k. With the average sale price last month at $548k, doesn’t this look like a sign that prices are rising? But wait, there are some pending that lowered their prices before they accepted an offer. Those averaged 55 days on market and an average price of $529k. A sign that prices are falling?”

“Sometimes the comps (comparable properties) suggest one price, but after getting it listed, the market thinks differently, and you don’t get any offers. If that happens, adjust your price. Don’t wait. As I always say, there’s nothing wrong with any house that a lower price won’t fix.”

“My last 3 closed sales and my 2 current pending averaged 5 days on market. On the other hand, I have a beautiful home listed at 785 Travis in Folsom, with comps at the time we listed, at about $789k. 94 days later, we’re still on the market, currently priced at $745k.”

“With the slow down and price reductions, the gloom-and-doomers are starting to say, ‘See? I told you so!’ The thing that could make them right is if homeowners panic and start listing en masse, causing a glut of houses on the market, and then start dropping prices to beat the competition.”

From Curbed Los Angeles. “Home prices in Los Angeles County have never been higher, but there are signs the local real estate market may be getting slightly more buyer-friendly, according to Trulia. The report finds that 16.5 percent of homes for sale in LA during the month of August were listed with a price cut.”

“That may not seem like very many, but according to Trulia it’s the largest percentage of homes with price reductions since 2011, when the company began tracking this statistic. It’s also a sizable increase over August 2017, when prices had been reduced on 12.1 percent of homes listed in LA.”

“The median reduction in August 2018 was 2.5 percent of the home’s prior asking price. Based on the median home price given in the report ($612,809), that amounts to a roughly $15,000 discount.”

“Some areas have more price cuts than others. By Trulia’s calculation, prices had been reduced on more than 20 percent of listed homes in parts of Calabasas and Malibu during the month of August. Price reductions aren’t only affecting neighborhoods filled with luxury housing. In Pico Union, for instance, 15 percent of listed homes were advertised with a reduced price in August—up from 5.3 percent a year before.”

“Leslie Appleton-Young, chief economist for the California Association of Realtors, confirms that a ‘shift’ is taking place in LA’s real estate market—though it’s not clear yet how it will affect sales in coming months.”

“On the one hand, Appleton-Young says, the number of homes on the market has increased recently, giving buyers more options to choose from. But prices are high enough that many home shoppers are abandoning their searches.”

“‘I wouldn’t call it a buyer’s market yet,’ says Appleton-Young. ‘But it is certainly less of a seller’s market than it has been lately.'”

The Orange County Register. “Berkshire Hathaway CEO Warren Buffett has sold his ocean-view, six-bedroom house in Laguna Beach for $7.47 million. The 3,588-square-foot house in guard-gated Emerald Bay took a steep price cut recently. Buffett slashed $3.1 million off it in August 2018, bringing the asking price down to $7.9 million. The home was listed in February 2017 at $11 million.”

“The average time on the market for all homes priced above $4 million in Orange County is nearly a year, according to Steve Thomas of Reports on Housing. The higher end of the luxury market represents 6 percent of the overall housing supply, and just 2 percent of the demand, according to Thomas’ math.”

“Some of those properties take years to sell, even at steep price cuts.”

This Post Has 31 Comments
  1. ‘Yes, there are changes afoot, but this is not the time to panic. In fact, panic is what could actually cause a crash’

    I appreciate your concern, but I’m fine really. Cool as a cucumber.

    Eeee-bola Folsom!

    1. Housing price cuts in San Diego, other parts of US at highest levels since 2014, Trulia report says
      Jermaine Ong
      7:54 AM, Oct 11, 2018
      9:52 AM, Oct 11, 2018

      SAN DIEGO (KGTV) – Housing prices in the San Diego region, and in many cities across the U.S., dropped in August — a possible sign that a shift to a buyer’s market is underway.

      A new report published by real estate company Trulia shows the number of home listings in the U.S. with a price cut increased to its highest level since 2014.

      Trulia’s analysis shows the number of housing listings with a price cut jumped in July and August 2018. With that development, the slowing of home price growth and housing inventory levels rising in some parts of the country, Trulia says it might be a time to buy.

  2. ‘With the slow down and price reductions, the gloom-and-doomers are starting to say, ‘See? I told you so!’

    Carl, did you send your co-workers a link to this blog?

    1. The “doom and gloomers” appear to have gotten it right once again, while the Bubbleonians are going to get their heads handed to them, again.

      Market fundamentals don’t matter, until they do.

    2. Hahah. Nobody listens to me or we’d have crashed a long time ago. But my wife is even hearing people in China talk about prices dropping in the USA. And reading between the lines it sounds like the author is begging everyone to band together and not let me be right. This should get good soon.

  3. ‘San Francisco Portola residents fed up with RVs on street’

    “Once you get a couple RVs, it’s like a signal goes out. It’s a dumping ground,” said David Lara. “We’re at the point it’s getting out of control,” he added.’

    ‘On Thursday night, ABC7’s crew counted half a dozen RVs in the area, but Lara said he’s seen up to 35 RVs and trucks parked in one day.’

    “Neighbors have… witnessed things being dumped down the sewer,” said David’s wife, JoAnn, who has lived in the Portola her whole life. “DPW said that’s urine and stuff, so it’s kind of gross,” JoAnn explained.’

    ‘She’s concerned about the safety and well-being of both her neighbors and the people living in the RVs. “Why doesn’t the city open their hearts and find somewhere for these people?” JoAnn asked.’

    1. “Neighbors have… witnessed things being dumped down the sewer,” said David’s wife, JoAnn, who has lived in the Portola her whole life. “DPW said that’s urine and stuff, so it’s kind of gross,” JoAnn explained.’

      DPW (David’s poor wife?) did they not know that S.F. and most off California welcomes this with open arms. I’m surprised DPW isn’t complaining about the shoot up sites they have opened up all around her neighborhood.

      Carl you must be glowing reading the part on Folsom! Now you can share with your wife and get some well deserved kodos from her 😉

    2. “Why doesn’t the city open their hearts and find somewhere for these people?” JoAnn asked.’

      Why not open the doors to your house, Miss Sincerely Concerned, and invite these poor unfortunates inside?

  4. “Don’t wait. As I always say, there’s nothing wrong with any house that a lower price won’t fix.”

    Oh that’s just a beautiful quote. Hang it up in the rafters Ben, this “Expert and Analyst” is right on target. A lower price fixes all houses.

  5. “The thing that could make them right is if homeowners panic and start listing en masse, causing a glut of houses on the market, and then start dropping prices to beat the competition.”

    This has started happening already. But Don’t panic ok. Just ride the market down LOL

    1. ‘If you look at homes for sale in Folsom today, you’ll find 109 active listings, and 47 of them have reduced their prices’

  6. “With the slow down and price reductions, the gloom-and-doomers are starting to say, ‘See? I told you so!’ The thing that could make them right is if homeowners panic and start listing en masse, causing a glut of houses on the market, and then start dropping prices to beat the competition.”

    People who bought houses as shelter don’t all of a sudden panic and put their house on the market. Only speculators do that. Of course, the past 6 years have been nothing but a speculative housing orgy, so…

    1. The real-estate-always-goes-uppers are starting to ask, ‘What if the gloom-and-doomers are right?’

    2. “The 3,588-square-foot house in guard-gated Emerald Bay took a steep price cut recently. Buffett slashed $3.1 million off it in August 2018, bringing the asking price down to $7.9 million. The home was listed in February 2017 at $11 million.”

      Luckily for Uncle Warren, a $3.1 million dollar (28%) price reduction is peanuts compared with his overall wealth. Unfortunately it sounds as though even a 28% discount off the initial asking price has yet to attract a buyer. In other words, it appears the current market value is more than 28% below the February 2017 asking price.

      This nugget of information raises an interesting prospect: Will the myriad other California luxury properties with Berkshire-Hathaway yard signs out front require comparable or even larger percentage reductions to their list prices for them to sell?

    3. I find it very offensive that realtors would blame people listing their houses and reducing their wish price to get it sold before the collapse as the cause thereof. It sounds like they are desperate. It reminds me of Homer Simpson running around with his hand over his ears screaming THIS IS NOT HAPPENING. THIS IS NOT HAPPENING.

      1. “I find it very offensive that realtors would blame people listing their houses and reducing their wish price to get it sold before the collapse as the cause thereof. It sounds like they are desperate.”

        Exactly. Notice no one blamed buyers for stampeding in with multiple offers over the last several years.

        One thing that is very different this time around is the memory (if you’re 30 or older), that housing can and does correct in a big way on a national level.

  7. “Those averaged 55 days on market and an average price of $529k. A sign that prices are falling?”

    $529k looks suspiciously reminiscent of the GSE conforming loan limit. Is Uncle Sam implicitly setting market prices in California? If so, why?

    1. I have a serious question about the conforming loan limit. At what point did the U.S. federal government decide on a policy of supporting residential real estate prices in high price markets? Or is there a general denial that this is the unintended consequence of setting a higher conforming loan limit for costly areas?

    2. I am seeing similar things in northern denver metroplex. Prices falling to 4 to 5 percent of GSE loans. Also, weld county gse limits may cause price reductions in bordering neighborhoods in boulder or Adam’s county.

  8. I recall that a junk bond selloff preceded The October 1987 Black Monday stock market crash.
    …………………………………………..
    The Financial Times
    High yield bonds
    Investors take flight from junk bonds in ‘risk-off’ move
    Net redemptions jump to $6.1bn on concerns over higher rates
    Nicole Bullock in New York October 11, 2018

    Investors pulled more than $6bn from junk bonds in the past week on concerns about highly indebted companies after a rise in interest rates.

    This was the largest outflow since a previous bout of market tumult in February, according to net redemption figures by EPFR Global.

    John McClain, a portfolio manager at Diamond Hill Capital Management, attributed the capital flows to “a risk-off attitude” that has taken hold throughout global financial markets.

    1. Investors pulled more than $6bn from junk bonds…

      Just reached in there and pulled out $6bn? I suspect what this really means is that a few investors successfully offered lower prices and the whole imaginary perceived value of everything in the portfolio went down by $6bn.

      1. It sounds like the $6 billion figure pertains to the amount of junk bonds that were recently sold in order to reduce exposure to further losses. The total unrealized losses due to drop in market value could be much larger. For example, the figure that was floated in the MSM last
        week as the total drop in the value of bonds at the international level was $900 billion. I’m not sure how much of that is labeled as “junk,” but it probably exceeds $6 billion.

    1. Renting or even just squatting in California seems more legally secure than landlording.

      The worst-case scenario is that a squatter gets a free attorney, either through legal aid or on contingency, Fountain said.

      “That free attorney will demand depositions, written discovery, jury trial — all the expensive mechanisms of litigation,” she said. “There are no such resources for property owners — they have to pay their attorneys, usually between $300 and $400 an hour. So, it’s easy for the squatter to force them to waive a money judgment and give them lots of free time in the place in exchange for eventually leaving, because it’s still far cheaper than paying for litigation.

      “Many people think this sounds like extortion, but it’s legal.”

      Meanwhile, Oye-Marquez already is out at least $12,000 due to lost rent and security deposit along with other expenses. However, she would rather have peace of mind than money. “The most disturbing part is not having control of my own property and knowing that the law doesn’t protect property owners,” Oye-Marquez said.

      1. “The most disturbing part is not having control of my own property and knowing that the law doesn’t protect property owners,” Oye-Marquez said.

        A collectivist party with a known disdain for property rights and a core voting base of social parasites has had a stranglehold on California for a generation now, Ms. Oye-Marquez. You’re just now figuring this out?

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