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The Mentality Shifts Quickly From ‘I’ll Get What I Want If I Wait Long Enough’ To ‘Get Out Fast Today With Whatever We Can’

A report from the Philadelphia Inquirer in Pennsylvania. “Sales in Philadelphia, declined 15.4% from the year before, though they remain much higher than the historic average. ‘I haven’t noticed any acute response or panic from the market — no one has called me and said, ‘I need to sell right now because of the recession, or I need to buy now because of the recession,’ said Jeff Block, a real estate agent. Then again, he joked, as the old saying, the market ‘has predicted nine of the last five recessions.'”

The Washington Post. “Recently, we came across a headline in a local Chicago news outlet about an expensive home that had been for sale for a while. It read: ‘Spec house sells for two-thirds original list price.’ Then we saw another news story about a home that had just sold for less than what it sold for in 1988. A third home sold for less than the price the builder paid for the lot.”

“Is it just Chicago? When real estate markets start to turn, residents might simply wonder why it is taking so long to sell their homes. If they need to leave, or if they believe prices will be lower in six months, they drop their list price dramatically. No one wants to be the canary in the coal mine. The mentality shifts quickly from ‘I’ll get what I want if I wait long enough’ to ‘Get out fast today with whatever we can get.'”

From Bisnow on New York. “When New York passed a sweeping set of rent control regulations earlier this year, multifamily investors and landlords saw it as a catastrophe. ‘It was worse than expected,’ Hornig Capital Group Managing Partner Daren Hornig said. ‘Once this law went into place in New York, it’s been horrific and there’s no way to work around it. There’s no upside. Now, nobody wants to buy that type of product, and banks don’t want to finance it,. [Multifamily] went from the most valuable asset class in the city to arguably the worst asset class in the city, and owners have lost billions of dollars in value.'”

The Marin Independent Journal in California. “Bucking a national decline, the Bay Area is seeing an increase in apartment construction. The San Jose metro area is expected to increase apartment construction by 283 percent, from just 1,579 units last year to 6,044 this year, according to a new report. Oakland is expected to add some 1,850 units, followed by Milpitas at 1,685 units. San Francisco ranks fourth for the region with 1,204 apartments expected in 2019.”

“And while the latest report doesn’t take smaller buildings or accessory dwelling units — which the city has been pushing — into account, ‘San Jose is just blowing out…it’s just unbelievable,’ said Doug Ressler, manager of business intelligence for the company.”

The San Francisco Public Press in California. “For nearly four decades, San Francisco’s rent-control regulations have permitted landlords to delay, or bank, an unlimited number of the allowed annual rent increases and apply them any time in the future — all at once if they would like. These banked increases never expire, even after a new landlord buys the building.”

“Noni Richen, landlord and president of the Small Property Owners of San Francisco Institute, said that like tenants, many landlords of rent-controlled buildings are perched on the financial edge. ‘Most people do the increase every year, and they need every penny,’ she said.”

The Del Mar Times in California. “One Paseo’s temporary billboard signs must come down by the end of the month. The planning board contends that the large 30-foot double signs on the corner of Del Mar Heights Road and the two long signs on El Camino Real that advertise new tenants must be removed as they are not in compliance. Per the sign guidelines, temporary ‘grand opening/coming soon’ -type signs are permitted, but only for 90 days. Typically the board has let signs stay up longer to be friendly to businesses but as one local resident pointed out, the signs have been there for over a year.”

The Seattle Times in Washington. “Seattle is still in the midst of a building boom that’s adding thousands of new apartments to the city each year — but new data shows a slowdown is likely to begin soon. There are fewer planned apartments and condos on Seattle’s horizon than this time last year, according to housing market data. One reason developers are pulling back is that they don’t expect job growth to continue at current rates, said Drew Daly, co-founder of Seattle multifamily developer Daly Partners. ‘There’s a fear of recession,’ he said. ‘The building cycle has gone on for so long that people are getting more cautious.'”

The News Gazette in Illinois. “A federal tax break outwardly designed to benefit low-income areas is being used in Champaign to build more student housing in a market that already is oversaturated. The apartments will go up at the same time other Campustown apartment complexes seek reductions in their property tax assessments because of high vacancy rates.”

“Michelle Layser, an assistant professor of law at the University of Illinois wrote that they are ‘poised to become the latest — and most devastating chapter in the history of tax incentives that target poor neighborhoods but leave communities behind.'”

From Senior Housing News. “It’s a common refrain that the senior housing industry is mired in normal supply-demand dynamics. If such were the case, owners, investors and providers feeling the pain now can wait for the real estate cycle to turn and then continue doing business as usual.”

“Brenda Bacon, CEO of Brandywine Living, does not subscribe to that line of thinking. ‘You’ll hear a lot of people say, ‘Oh, well, this happened in 2008 and it happened in 2002 when the industry got overbuilt, and so this, too, shall pass,’ Bacon told Senior Housing News. ‘I, for one, don’t believe we’re in a cycle. I think we’re in a sea change.'”

From Real Estate Business Online. “Seniors housing investors are pumping the brakes on acquiring memory care facilities as the property type’s fundamentals and high turnover have proven to be worrisome. The panelists said that memory care was a hot product type in the recent past but that the sector’s current distress is a direct result of overzealous developers.”

“‘Memory care was low hanging fruit for developers but now it has become overbuilt and has fallen out of favor’ said the panel’s moderator Adam Heavenrich, managing director of Heavenrich & Co., a seniors housing investment brokerage firm based in Chicago.”

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This Post Has 79 Comments

  1. ‘Recently, we came across a headline in a local Chicago news outlet about an expensive home that had been for sale for a while. It read: ‘Spec house sells for two-thirds original list price.’ Then we saw another news story about a home that had just sold for less than what it sold for in 1988. A third home sold for less than the price the builder paid for the lot’

    These are the big shot RE experts that write in the WP. Readers here knew this long ago.

    ‘Is it just Chicago? When real estate markets start to turn, residents might simply wonder why it is taking so long to sell their homes. If they need to leave, or if they believe prices will be lower in six months, they drop their list price dramatically. No one wants to be the canary in the coal mine. The mentality shifts quickly from ‘I’ll get what I want if I wait long enough’ to ‘Get out fast today with whatever we can get’

    Sounds more like day trading gamblers.

  2. ‘The panelists said that memory care was a hot product type in the recent past but that the sector’s current distress is a direct result of overzealous developers’

    Yes, the hottness. Always precedes the glut.

    1. Memory care is freaking expensive. Both of my in laws spent their final few years in a Memory Care Unit. Memory Care is where you keep people with Alzheimer’s and Dementia locked up so they don’t harm themselves. I recall that it cost about $7000 a month each. My FIL had a great pension and he didn’t have to dip too much into his savings to pay for the care, but for most people this is something that is utterly unaffordable.

      On paper they look like gold mines, but that’s only if they’re full.

      1. but for most people this is something that is utterly unaffordable.

        This is also why GE is likely headed to bankruptcy because they wrote tons of long-term care insurance policies and grossly underestimated the pay-out they would be on the hook for.

        1. “This is also why GE is likely headed to bankruptcy because they wrote tons of long-term care insurance policies and grossly underestimated the pay-out they would be on the hook for.”

          A link and a snip …

          General Electric Is ‘One Recession Away’ From Bankruptcy
          https://finance.yahoo.com/news/general-electric-one-recession-away-161532459.html

          “Markopulos believes GE is headed for bankruptcy. He claims the company has engaged in a $38 billion accounting fraud, amounting to over 40% of its market capitalization. If true, this would make it the biggest such fraud in history as he said it would be ‘bigger than Enron and WorldCom combined.’

          “The crux of Markopulos’ argument is the industrial conglomerate is hiding enormous losses in long-term care liabilities. Long-term care reinsurance is part of GE Capital, the financial services division of General Electric. The investigators have accused the company of claiming insurance premiums as earnings for decades, without setting aside adequate capital reserves to pay policyholders. This was all fine when the policyholders were younger, but now that they are a rapidly-aging cohort, the losses will start to mount.

          “Markopulos cites industry data that shows less than 14% of these claims have been filed, and yet those have resulted in a $15 billion realized loss already. He concluded: ‘Simple math tells you what the other 86% will do to GE’s balance sheet.'”

          1. How can any insurance that is reasonably priced cover something than can cost $80,000 a year? My in laws were in memory care for almost 3 years. That was about half a million $ between the two of them. His pensions were huge. He was collecting SS from both the US and Germany and was a retired VP. He never made the crazy money corporate VPs get today, but his combined pensions and SS was more than I make.

          3. Markopulo$ = $7,000.00 profit … Many thank$!

            Buy.the.rumor, … $ell.thee.fact.

            Hwy is right to point out that Markopolous had a short stake in GE so there is an incentive for him to overplay GE’s financial troubles. It might not be as dire as he suggests, but having worked in memory care units and assisted living centers and having seen the price tag for the level of care related (unless we import a bunch of Philipina nurse aides), I don’t think he is that far off base, financial incentives notwithstanding.

          4. “Markopolou$ had a $hort $take in GE so there is an incentive for him to overplay GE’s financial trouble$”

            Eye ‘ve have been out of $twaks ( – brkb) $ince Sept 19/2018) 26,743.51

            1. Do knot believe any analyst’$ / whi$tle blower’$ progno$tications based on being compen$ated bye someone who stand$ to have financial advantage$ to such negative outcome$

            2. GE was knot going to $uffer from a “rece$$ion” in the next 30 days.

            3. Look @ #1 above … Geez!

            Eye bought the next day @ $7.96.

            To quote Radical Rick: ” How tough is it? ”

            Bat$ feed knot in daylight …

          5. (unless we import a bunch of Philipina nurse aides)

            That whole concept only works when there is cheap housing available. Skilled labor won’t be cheap as long as housing is artificially inflated.

          1. They’re busy cooking some more books. In their defense, the idea that they’re the only ones engaging in such fraud is delusional. Welcome to Enron, USA.

          3. “They’re just another zombie corporation”

            Eye try to remember that $entiment whilst eye’m drinking medical red wine in the $outh of France next $pring.

        3. This is also why GE is likely headed to bankruptcy because they wrote tons of long-term care insurance policies and grossly underestimated the pay-out they would be on the hook for.

          FWIW, wouldn’t that be just the insurance arm that would go BK? I’m fairly certain that it’s a wholly owned subsidiary, just like the jet engine division is another wholly owned subsidiary.

        4. They’ll be fine, if my parents’ case is any indication. All they need to do is to collect premiums, then pay attorneys to ensure no claims are ever paid.

          Attorneys aren’t that expensive…

          1. All they need to do is to collect premiums, then pay attorneys to ensure no claims are ever paid.

            The insurance business model in a nutshell. Which is why Americans will probably insist on a socialist solution for medical care even if they don’t like socialism generally.

          2. socialist solution for medical care

            Got Medi-Cal approval for my son yesterday. Still don’t know how to use it for what he needs. Hoops thus far:

            ASD Diagnosis > Regional Center > Respite Care Services > Income Waiver > Medi-Cal Application > Income Disclosure (despite waiver) > Medi-Cal Approval & Benefits Identification Card > ?????

            Regional Center to Medi-Cal Approval has taken 8 months. Granted most people won’t have to go through these hoops but it is illustrative. “Medicare for All” would suck, big time.

      2. How hard would it be to convert Memory Care housing to something else? It sounds like such a facility could accommodate drug rehab without much alteration. But I’m sure the developers would never get back the money they put into it.

        2. The biggest challenge would probably be getting the stench of incontinence out before you could hope to repurpose it.

  3. ‘Per the sign guidelines, temporary ‘grand opening/coming soon’ -type signs are permitted, but only for 90 days. Typically the board has let signs stay up longer to be friendly to businesses but as one local resident pointed out, the signs have been there for over a year’

    But, shortage?

    ‘It was worse than expected…it’s been horrific and there’s no way to work around it. There’s no upside. Now, nobody wants to buy that type of product, and banks don’t want to finance it,. [Multifamily] went from the most valuable asset class in the city to arguably the worst asset class in the city, and owners have lost billions of dollars in value’

    Billions gone, in just one city.

  4. ‘like tenants, many landlords of rent-controlled buildings are perched on the financial edge. ‘Most people do the increase every year, and they need every penny’

    This is how I spotted this bubble: there’s no money in it. It’s all been about appreciation. Which is greater fool stuff.

    1. And without the speculation and crazy appreciation it would probably pencil out for landlords.

      There used to be a concept of “reasonable return” on investments, which as a rule of thumb used be twice the opportunity cost (say the interest you would have earned on the principal in the bank). That flew out the window a long time ago.

      1. “….used be twice the opportunity cost (say the interest you would have earned on the principal in the bank). …”

        Trying to wrap my head around the effect of proposed negative interest rates. (not only for mortgages but CD deposits as well)

        If I understand the REIC argument correctly, negative interest rates would maintain/increase ROI on highly leverage R/E investments.

        I simply don’t understand the math.

        My horse sense indicates that the whole scheme would be incredibly dangerous not only to borrowers / debtors but even more so for savers as well.

        Tastes like yet another REIC scam.

        1. “I simply don’t understand the math.”

          Probably a good sign. If you begin to think otherwise I suggest you:

          1. Seek immediate help, or

          2. Visit your nearest bank and demand an equity cash-out.

        2. If I understand the REIC argument correctly, negative interest rates would maintain/increase ROI on highly leverage R/E investments.

          When the opportunity cost is zero (or less than zero) what else can you do if your want a return, other than to make speculative investments?

          I remember as a child I proudly had a passbook savings account at BofA, where I diligently saved part of my allowance. I thought it was so cool to see the interest accruing. Imagine now, you save your money, and it shrinks, in nominal terms.
          Bizarro World.

          1. Borrow a pile of money and buy a rapidly depreciating house and you’re sure to see it shrink in whatever term you want.

    2. “It’s all been about appreciation. Which is greater fool $tuff.”

      this would NEVER happen to any $tawks.market$ participant$!

  6. “Then again, he joked, as the old saying, the market ‘has predicted nine of the last five recessions.”

    Real estate shills predicted 0 of the last 5 housing bubbles.

  7. I read that Del Mar article as well as other SD county articles. That place, any place in libtard controlled states are fooked. The mandates for the nice towns along the coast to increase density are insane, but lefttards insist on destroying everything, including even themselves. Funny how these international socialists want to put everyone on trains, where have I heard that before?

    1. That place, any place in libtard controlled states are fooked.

      Where do you go? All the surrounding states are heading in the same direction with the flood of Californian expats. Even Idaho is being transformed.

        1. They now have lower real poverty rates than California so I do not think someone from California should be making snide remarks about them. It appears that their citizens still use indoor plumbing and not sidewalks. But enjoy living in Calcutta of the Western world.

          1. “But enjoy living in Calcutta of the Western world.”

            Indeed. Of course, if you are part of the elite workforce you’ll be paid well and might even score in the IPO fiesta. Living in a 3rd world city is the price to pay in order to have a cool Tesla and maybe make a wad with your stock options.

          2. Living in a 3rd world city is the price to pay in order to have a cool Tesla.

            Lots of Teslas in super red Southern Utah. Not sure how that stereotype squares. Do only liberals buy Apple and conservatives PC? That used to be the stereotype back in the day. But stereotypes are easily broken, like the MAGA trucker who bought my electric bike off me last year. Everyone can enjoy a cool car.

    2. Funny how these international socialists want to put everyone on trains, where have I heard that before?”
      they were just national socialists last time

      1. “want to put everyone on train$”

        How does ya think USA soldiers during WWll got to travel from rural America to ships overseas for D-day? … When did USA inter$tate Hwy $ystem begin?

        “international $ocialists” … how old are you?

  8. Q: Why isn’t there any affordable housing in NYC?

    A: ‘Once this law went into place in New York, it’s been horrific and there’s no way to work around it. There’s no upside. Now, nobody wants to buy that type of product, and banks don’t want to finance it,. [Multifamily] went from the most valuable asset class in the city to arguably the worst asset class in the city, and owners have lost billions of dollars in value.’”

  9. One Paseo’s temporary billboard signs must come down by the end of the month

    I used to live in that neighborhood and it’s a great location. But there are so many condo projects that have recently come onto the market or are in development. There are projects around UTC. There is a large condo project on the east end of Mira Mesa. There are numerous projects downtown. But there aren’t many jobs downtown in San Diego aside from bars and restaurants. They’ve crammed so many condos in downtown I don’t go down there much anymore. No parking, traffic is bad, and it’s too crowded. It seems very similar to 2006-2007. A lot of condo projects coming onto the market on the backend of peak.

    1. Seems like much of the SD downtown condo market is out of towner vacation property, retirees, and speculators. And those are all people who aren’t tied to the property by a job and kids in school. Demand would seem to be highly cyclical.

    2. I used to live in that neighborhood and it’s a great location.

      As did I. It now feels like old UTC and new UTC just sucks.

      1. They’ve turned UTC into a jungle of mall space and condos. It almost blocks out the sun. And with the train being put in it will be mobbed day and night. Just doesn’t seem like a desirable place to live anymore for the reason it used to be sought after. Convenient but still relatively serene. With the traffic, bustle, and congestion it is a lot less of both. Still seems to be popular none the less.

  10. how long from concept to completion in bay area?
    4 years?
    5?

    Bucking a national decline, the Bay Area is seeing an increase in apartment construction

  14. So how/why does realtorDOTYcom say that featured property has been oh lets say 2 days on their site when in fact they have listed the same property last month, or 6 months ago or last year as well? Some properties will say several hundred days on their site and some claim they are newly listed when there really not.

    Yes I know Realtors lie but why do this?

    1. Dug a bit and found this…

      Days on market loopholes
      In certain markets, a listing’s days on market can actually reset. For example, in New York, if a listing is taken down for 90 consecutive days, the clock goes back to zero days on market when it’s relisted. The same generally happens if a new agent takes over the listing.
      Be sure to ask your agent to do a deep dive on a listing’s full history so you will know exactly how long the home has been for sale.

      1. I see listings with fake days on the market all over San Diego. It’s rampant. Especially, if the property goes pending and falls out, the clock almost always gets set back to zero. There was one place in my hood that took almost six months to sell and the days on market was getting set back to zero with every price drop. I actually went to an open house right after a reset and the scamming agent told me it was new on the market even though I had been walking past the for sale sign every day for months. When I challenged her on it with that fact, her excuse was “it’s a new listing at this price”. The days on market statistic is probably the most rigged piece of data in the entire real estate industry.

        1. I have also noticed that property history has been limited when DOM is around 10. It’s like they only show the current date and listed price. I liked that I could surf properties where some UHS would try add 90% to his purchase price in less than 18 months.

        2. I just saw one here locally where they dropped the listing price $1.00. Guess they wanted to see if someone was on the fence.

      2. 90 days off resets the DOM. UHS’s know “tricks” like pulling the listing off and reposting with a slightly altered address ie west st instead of w st. I suspect they have other means to alter DOM but this was method seems most common for them in my area. Basically proves that realtors are liars.

  15. Ben Jones
    September 15, 2019 at 7:50 pm
    ‘Somebody launched a large-scale drone attack that knocked out one of the world’s largest production facilities’

    That stinks to high heaven. Note the media gobbled it up without question.

    There are some aerial pictures of the Abqaiq oil processing facility posted by several news channels, fox, DNA India and Forbes. The “damaged areas” are highlighted with red boxes. I find a few things very odd about these pictures.

    There are numerous spherical storage tanks with black dots on them. Supposedly the dots are where they were struck by a missile. The dots are all in the same place on each tank. The tanks are intact and not blackened. Spherical tanks are for storage of compressed gas.

    There are numerous floating roof oil storage tanks. They are all empty. Seems unlikely for a bustling and essential facility.

    There is a row of what looks to me like furnaces to the left. Also marked with a red box. It looks like two or three of them are operating, as there is black smoke coming from the top. They are all standing.

    Nothing anywhere is “blown-up”.

    Refinery fires are fought with water, lots and lots of water. BTDT personally. The ground is completely dry.

    There are no vehicles in the plant. I find this nearly impossible to imagine in a facility that is the new “Pearl Harbor”. It would be all hands on deck, cranes and pipefitters like an ant hill. JMO.

    link to follow.

    2. Quite the price jump from 2013. 975k up to 13m then down to 10m. Have fun riding the market down specuvestor

        1. wildfire as in suspicious fire prior to insurance claim? Might be out of luck on obtaining future fire insurance so better gas that place and light a match greedbag

  17. The mentality shifts quickly from ‘I’ll get what I want if I wait long enough’ to ‘Get out fast today with whatever we can get.’”

    The shift from greed to panic is well underway.

  18. [Multifamily] went from the most valuable asset class in the city to arguably the worst asset class in the city, and owners have lost billions of dollars in value.’”

    Die, speculator scum. You made shelter unaffordable for millions. Now it’s payback time.

    1. Some investors fear negative-yielding debt more than the inverted yield curve. Here’s why.
      Carmen Reinicke
      Sep. 10, 2019, 08:18 AM
      Reuters/Brendan McDermid
      – The yield curve — a trusted recession indicator throughout history — has been inverted for months.
      – But some investors interviewed by Markets Insider say they’re more scared of what the growing mountain of negative-yielding debt may mean for the market’s health.
      – Negative rates are top of mind for investors as the US Federal Reserve signals more interest-rate cuts ahead. Negative rates are already a reality in Europe and Japan, which has pulled down yields on US Treasurys.
      – With rates so low, the Fed has less room to further stimulate the economy in the event the US enters a recession.

      The yield curve has long been viewed as a reliable indicator that a recession is looming. After all, an inversion of the curve has preceded every US recession since 1950.

      But even though parts of the curve have been inverted for months, not all experts see it as the biggest issue. That includes Lisa Shalett, the chief investment officer at Morgan Stanley Wealth Management.

      “That’s just what happens at the end of a business cycle,” she told Markets Insider in an interview. “What bothers me is the level of interest rates.”

      Ed Yardeni holds a similar point of view. In recent meetings with clients, the chief investment strategist at Yardeni Research also noticed more fear around negative interest rates than the yield curve.

      “Most of them believe that the US economy can continue to grow for the foreseeable future,” Yardeni wrote in a note. “So they aren’t freaking out about the recent inversion of the yield curve. However, they are somewhat anxious about the prospect of negative interest rates in the US, though they think it is a remote possibility.”
      …

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