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When You Lose Your Shirt

A report from Yahoo Finance. “Homebuilding last month leapt to its highest rate in 12 years, newly released construction data says. But the havoc wrought by last decade’s housing bubble has buyers wondering how to protect themselves if the market goes south. Drew and Jonathan Scott, co-hosts of the HGTV show ‘Property Brothers,’ offer simple real estate investment advice for the moment a market downturn approaches: Find the sweet spot between panic and patience.”

“The most precarious investors are those who stretch to afford a property outside of their budget, Jonathan Scott said. ‘Anytime you make an excuse to buy a property, like, oh, well, maybe this isn’t the best time, but I’m going to make it work, and you overleverage,’ he says. ‘That’s when you lose your shirt.'”

The Wall Street Journal. “People with steady incomes but less-than-perfect credit are often shut out of buying homes because they can’t qualify for a mortgage. Divvy, along with companies such as ZeroDown, Flyhomes and others, are among a wave of startups creating new paths to homeownership at a time when high home prices and a limited supply of starter homes have made it difficult for some people to enter the market.”

“Rent-to-own models are a response to a mortgage market where banks aren’t lending as much as they used to, says Sarah Bolling Mancini an attorney with the National Consumer Law Center. ‘For most people the safest route is to wait until you qualify for a mortgage and save your money and keep renting like a regular tenant,’ she says.”

The Plain Dealer in Ohio. “Maple Heights Mayor Annette Blackwell said that in her southeastern suburb, white residents left and took their wealth with them. Redlining persisted. And today, many residents — most of whom are black, many of whom are single, working women with families — struggle to attain homeownership, in large part because banks will not lend them money.”

“Whether or not the county presses its banking partners to expand lending, communities in Cuyahoga County — including Maple Heights — are considering leveraging their own relationships with banks to make change. I’ve heard the word redlining all my life,’ Mayor Blackwell said. ‘When are we going to do something about it?'”

The Post and Courier in South Carolina. “High prices and a lack of affordable homes aren’t the only problems facing Charleston’s housing market. Getting people to walk through the door to look at a house is another worry. For 12 straight months through July, home showings have been in negative territory, according to the ShowingTime Showing Index for the Charleston region.”

“Home showings dipped 7 percent in July. They are off 10.2 percent for the 12 months since last August, when the slide began.”

The Santa Monica Daily Press in California. “Sarah, the elderly home owner struggling to make ends meet, feels forced to sell up and leave Santa Monica. The elderly woman only feels able to rent her home empty, rather than be present in the home on the few weeks a year she would rent to paying guests. But the City has said empty home rentals are illegal.”

“So the current ordinance puts Santa Monica residents, and the city treasurer, at a disadvantage versus Venice, Brentwood, Pacific Palisades and Malibu. (The proof is in the pudding. As I wrote this I opened AirBnb for Venice listings. Of the eighteen listings on page one, all eighteen were for ‘the Entire House.’ Private home rentals is where the money is.)”

The Idaho Statesman. “The trade association for residential real estate agents says it will oppose Boise Mayor David Bieter’s efforts to regulate short-term rentals such as those on Airbnb. Boise has no regulations in place for short-term rentals. Idaho law prevents cities from prohibiting them outright, but grants cities the power to regulate them ‘as it deems necessary to safeguard the public health, safety and general welfare in order to protect the integrity of residential neighborhoods.'”

“Since 2016, the number of short-term rentals in Boise has increased from 336 to 1,183, according to data from AirDNA, a short-term rental analytics company. At the same time, Boise renters are facing a shortage of available housing. The rental vacancy rate in the city dipped to 2% in 2018, compared with 8% in 2009. ‘We are fundamentally opposed to this restriction of private property rights,’ said Phil Mount, the president of Boise Regional Realtor. ‘This is a significant overstep that threatens one of the most basic precepts of property ownership: the right to rent.'”

The Chicago Tribune in Illinois. “The housing market in Naperville and other collar county communities are showing signs of trouble. GOBankingRates said the city’s housing market has been slumping and home prices have dropped more than 2% the past two years. The median list price in Naperville was $439,990, the website said. Also, more than a quarter of homes on the market in Naperville showed cuts in the list price. GOBankingRates said that at 26.4%, Naperville had the highest percentage of listed homes with prices cuts of any city on this list.”

“When it comes to foreclosures and negative equity, one in 3,897 Naperville homes is in foreclosure and 6.5% of homeowners are underwater in their mortgages, the company added. Naperville is not alone; eight other Illinois cities made the top 50 list. The worst city in America is Peoria, where 21% of mortgages are underwater, one in every 932 homes is in foreclosure and housing prices fell 16% in the last two years. The only state with more cities on GOBankingRates’s list of housing markets going south was the America’s most southern state. Florida has 15 from Jacksonville to Miami Beach and Naples.”

From Community Impact on Texas. “First the good news: Single-family home sales in Leander-Cedar Park spiked 10 percent—to 373 sales—in August compared to August of last year, according to the Austin Board of Realtors monthly real estate report. However, the median selling price for single-family homes in Leander-Cedar Park dropped 5.5 percent—to $322,000—over the same period, according to ABoR. The dip came in Cedar Park, where the median selling price dropped 17.7% in August compared to August of last year, according to the report. The median price for homes sold in Cedar Park during August was $298,738.”

From Aaron Layman in Texas. “New home sales continued to outpace the resale market in August with new construction sales helping to lift the overall sales numbers. Average prices for new construction in DFW fell 3 percent in August, while prices for resale homes were about 2 percent higher. That helps explains the continued sluggishness of the resale housing market in general. Prices are simply too high. New construction sales were up by 48 percent in the City of Denton during August, while sales of existing resale homes declined by roughly 7 percent. MLS stats show that the average price of a new home sold in Denton actually fell by 5 percent compared to August of last year.”

“The trend of a stagnating housing market is still intact, confirmed by the percentage sellers are receiving in terms of original list price, as well as the average days on market. Average days on market in Denton County were up by 30 percent compared to last year. With mortgage interest rates back to near record lows, there is little room for a misstep. From a practical standpoint, all the Federal Reserve did was push local home prices back to the upper ceiling in terms of what borrowers can afford. That is going to pose some problems going forward.”

“We are in the midst of the longest economic expansion in American history, and the president just called for the Federal Reserve to drop interest rates to zero or negative. That is not the kind of policy action you see from your central bank during a healthy economy. That is crisis-level policy used to avert economic catastrophe. It should tell you something about the strength of the global economy that the European Central Bank (ECB) just restarted quantitative easing (QE) only 9 months after they ended the stimulus program designed to support their insolvent zombie banks.”

“For better or worse, the housing market growth story depends on cheap liquidity and intervention. Without intervention, the growth narrative falls flat on its face as the wall of debt hits a ceiling of obligations necessary to sustain it. The rapid plunge in mortgage interest rates in 2019 provided a temporary fix to some of the structural issues with the housing market, but it was only a temporary fix. With the 2020 election coming, there will certainly be more policies and intervention to keep up appearances. Just don’t be distracted into believing that these are permanent solutions to avoid the end of the normal business cycle.”

“If you weren’t paying attention at the end of 2018, you may have been surprised by the sudden chill in the DFW housing market, as sales declined and inventory shot higher. There is no reason to be caught off guard. The pundits, including many sell-side practitioners in the real estate industry, may tell you that the coast is clear. Nothing could be further from the truth. They may tell you this time is different. Unfortunately, that is rarely the case. The end of the economy cycle will arrive regardless of the Federal Reserve’s (or Trump’s) interventions to prop up the markets.”

This Post Has 100 Comments
  1. ‘the median selling price for single-family homes in Leander-Cedar Park dropped 5.5 percent—to $322,000—over the same period, according to ABoR. The dip came in Cedar Park, where the median selling price dropped 17.7% in August compared to August of last year’

    Good thing everybody is putting 20% down…

  2. ‘People with steady incomes but less-than-perfect credit are often shut out of buying homes because they can’t qualify for a mortgage. Divvy, along with companies such as ZeroDown, Flyhomes and others, are among a wave of startups creating new paths to homeownership’

    But there’s no subprime lending going on.

    ‘white residents left and took their wealth with them. Redlining persisted. And today, many residents — most of whom are black, many of whom are single, working women with families — struggle to attain homeownership, in large part because banks will not lend them money’

    ‘I’ve heard the word redlining all my life,’ Mayor Blackwell said. ‘When are we going to do something about it?’

    1. Someone else buys the house and rents it to you, and your payments build equity towards its purchase?

      Uh, isn’t that what a mortgage essentially is…?

      1. What Drove SoftBank’s Vision Fund Up Is Dragging It Down

        ‘The downturn highlights the risks SoftBank has piled up: The fund effectively borrowed money to make risky investments; it raised and spent its cash in record time, deep into the longest bull market in history; and it took huge stakes in unprofitable companies, making it hard to unload them if their businesses or the market turn down…By financing much of its assets with what is essentially debt, the Vision Fund has increased its risk. Roughly 40% of the Vision Fund’s capital—$40 billion—is in the form of preferred stock, which promises a return of 7% a year, just like debt. It is unusual for a fund to include preferred shares. SoftBank has retained proceeds from asset sales to ensure it can pay the coupon.’

        ‘The lure of regular payouts allowed the fund to raise money at a faster pace and in bigger chunks than any fund before it. It attracted Saudi Arabia’s Public Investment Fund and Abu Dhabi’s Mubadala Investment Co., which contributed more than half of the fund’s nearly $100 billion in capital. That structure meant that holders of the fund’s roughly $60 billion in common equity—SoftBank and its employees have roughly half of that—get big returns on the way up, but the potential for big losses on the way down.’

        ‘That is because the coupon payments—in theory as much as $2.8 billion a year—need to be made whether or not the fund makes money. And since owners of preferred stock are first in line when the fund cashes out of its holdings, any gains from investments go toward paying that $40 billion before equity holders get any. After all those payouts, the fund would need to generate around $12 billion in cash every year to produce a 20% return, an analysis by the Journal showed.’

        ‘Already, some of SoftBank’s plans for extracting cash to pay the Vision Fund’s investors are starting to look overly optimistic. SoftBank Chief Executive Masayoshi Son —the mastermind behind the fund—said he is counting on five or six IPOs from its portfolio during the fiscal year ending March 2020, and another 10 the following year. But many of the Vision Fund’s companies are still burning through cash and losing money, something that the public markets may not view favorably, as We’s attempt to list has shown.’

        ‘The fund can borrow more if it needs to generate cash quickly. In August, it said it had secured an unusual three-year loan facility, backed by its shares in Uber and Guardant. The loan lets it borrow up to $4 billion to return cash to its investors. Having some form of leverage isn’t unusual for a large fund, but it isn’t common practice to use stakes in public companies as collateral on loans.’

        ‘If the fund had invested when markets were cheap, it might have benefited from a rebound. Instead, in the 11th year of the longest bull market in history, the fund said it has invested close to $85 billion of the nearly $100 billion it raised in 2017. Three of those investments—Uber, We and Didi—account for nearly 30% of the Vision Fund’s portfolio by value, estimates research firm Astris Advisory. SoftBank’s $33 billion stake in the fund, which accounts for more than half of the equity in the fund, also relies on borrowed money. SoftBank itself has more than $160 billion in debt, and the company extended about $8 billion in loans to Vision Fund employees to invest in the fund, the Journal reported.’

        ‘Investors have grown skeptical of SoftBank’s ability to handle this balancing act. The company’s shares are down nearly 25% from their recent peak in April.’

        https://www.wsj.com/articles/what-drove-softbanks-vision-fund-up-is-dragging-it-down-11569243411

        1. That’s a lot of B’s as in billion$. Borrowing billions to “invest” in companies that are burning through cash at levels never heard of: what could go wrong?

        2. This story has only just begun to unfold.

          The Financial Times
          We Company
          WeWork turmoil puts spotlight on JPMorgan Chase and Goldman Sachs
          Rift with largest investor SoftBank highlights depth of relationship with banks

          Eric Platt, Andrew Edgecliffe-Johnson, James Fontanella-Khan and Laura Noonan in New York yesterday

          When Masayoshi Son’s SoftBank turned on Adam Neumann this weekend, seeking his removal as the head of WeWork, it opened a remarkable rift between the controversial chief executive and his largest investor, which has channelled $10.65bn into the office leasing company.

          Mr Neumann’s response was to call on another of the important financial figures in his orbit: Jamie Dimon.

          Sunday’s visit to meet the JPMorgan Chase chief executive highlighted the depth of a relationship between Mr Neumann and Mr Dimon’s bank, which began courting him when he had just one building. Wall Street executives have fallen over themselves to woo Mr Neumann and his company, but it was JPMorgan that won the coveted lead role on an initial public offering designed to bring in at least $3bn to cover WeWork’s swelling losses, plus $6bn in an associated debt financing.

          But stock market investors thumbed their nose at WeWork’s business model and Mr Neumann’s flouting of corporate governance norms, enabled in part by JPMorgan. Along with other advisers including Goldman Sachs, JPMorgan’s own reputation risks being tainted by the unfolding crisis.

      2. “When are we going to do something about it?”

        There’s already something you can do about it. Just file a lawsuit against the bank who redlined you. Easy peasy.

        Except that, unlike newspapers, courts like evidence and proof.

        1. Yes. For instance, you might have to divulge your credit repayment history to demonstrate that you were redlined.

  3. ‘Average prices for new construction in DFW fell 3 percent in August, while prices for resale homes were about 2 percent higher. That helps explains the continued sluggishness of the resale housing market in general. Prices are simply too high. New construction sales were up by 48 percent in the City of Denton during August, while sales of existing resale homes declined by roughly 7 percent. MLS stats show that the average price of a new home sold in Denton actually fell by 5 percent compared to August of last year’

    And this is where it’s headed. New undercuts existing, putting recent buyers underwater quick.

    ‘The worst city in America is Peoria, where 21% of mortgages are underwater, one in every 932 homes is in foreclosure and housing prices fell 16% in the last two years. The only state with more cities on GOBankingRates’s list of housing markets going south was the America’s most southern state. Florida has 15 from Jacksonville to Miami Beach and Naples’

    Funny how the Florida UHS haven’t mentioned this.

    1. “New undercuts existing, putting recent buyers underwater quick.”

      Sounds familiar. Why buy a crumbling used shack when a brand spanking new one can be had for less?

      Southern California builders cut prices 8% as new-home sales jump 13%
      New homes’ median of $554,000 was down 8%; all-home median was up 2%.
      STAFF GRAPHIC
      By Jonathan Lansner | jlansner@scng.com | Orange County Register
      PUBLISHED: September 3, 2019 at 12:04 pm | UPDATED: September 6, 2019 at 3:24 pm

      Southern California builders sold 13% more homes in July than a year ago as prices fell 8%.

      CoreLogic reported 1,719 newly built homes were sold in the six-county region vs. 1,516 a year earlier. Builders’ 13% sales increase far outpaced the region’s 3% rise for resales of existing homes.

      This meant local builders grew their market share: New homes were 7.8% of July sales regionally vs. 7.1% a year earlier.

      As for cost comparisons, Southern California’s new homes had a median selling price of $554,000, down 8% over 12 months. Compare that with the median for all homes sold: $540,000, a 2% increase in a year.

      1. So lowering prices does work. Who would have thought! realtor told me “to the moon Alice, get in now or be priced out forever”. There’s some light at the end of that tunnel in SD, it’s still a little dim. 30% reduction sounds a lot better 🙂

    1. (snip)

      “Break it down by borrower, and the average homeowner with a mortgage gained $4,900 in home equity in just one year.”

      There is something deeply wrong with statement and if you do not see it then you are an idiot.

      1. Wouldn’t that $4900 in new equity have come from principal paydown, meaning there was no appreciation?

        Isn’t the objective to pay off the mortgage, preferably long before you retire?

  4. “If you weren’t paying attention at the end of 2018, you may have been surprised by the sudden chill in the DFW housing market, as sales declined and inventory shot higher. There is no reason to be caught off guard. The pundits, including many sell-side practitioners in the real estate industry, may tell you that the coast is clear. Nothing could be further from the truth. They may tell you this time is different. Unfortunately, that is rarely the case. The end of the economy cycle will arrive regardless of the Federal Reserve’s (or Trump’s) interventions to prop up the markets.”

    A honest realtor???? No way!

  5. ‘Idaho law prevents cities from prohibiting them outright’

    This is how the scam spread. Pay off the higher up to pass laws to keep from having to obey the local laws.

    ‘We are fundamentally opposed to this restriction of private property rights…This is a significant overstep that threatens one of the most basic precepts of property ownership: the right to rent’

    And the “right” to throw wild parties, night after night. Beer can flotillas on the lawn every morning, right Phil? Just why are the UHS opening their pie-holes at all? Anything to keep the prices up.

    1. That’s the most bizaro-world part of the story though: is Boise suddenly a raging kegger, spring breakers, Las Vegas party destination??? Who exactly is renting all these AirBnBs? What the HECK is going on?

      1. I can’t help but think of the Boise couple who stayed in one of my Airbnbs this summer. They were young home owners and they came down to spend a weekend at Lagoon amusement park. They talked to me and decided that they were going to go home and start Airbnbing one room out of their house to help pay their mortgage.

      2. Having spent two weekends ago in Boise, I must say that the downtown area was noticeably more raucous than I recall on prior visits. And the new construction around downtown was also eyepopping.

    2. Boise has become the inland destination for the LGBTQ community that has been priced-out of the coastal “safe place” enclaves. Identity politics and virtue signaling have become the new reality there, and their liberal vision of “acceptance and inclusion” is to declare Open Season on the local deplorables.

      1. Boise has become the inland destination for the LGBTQ community that has been priced-out of the coastal “safe place” enclaves.

        I thought that was Boulder. But maybe they’re priced out of Boulder too.

    3. I agree with you Ben. Local cities and municipalities should be able to regulate short-term rentals as they please. The ideological purists who passed these pro-Airbnb laws Arizona and Idaho maybe didn’t think things through well enough. When all regulation is deemed bad, then you get some really crazy results.

    4. “most basic precepts of property ownership”

      Yeah, the old saw about “I can do what I want with my own property.” Which is totally false. When you bought that property, you signed a statement that you agree to all the laws and covenants of the local government where the parcel is located. If you don’t like it, you are free to purchase a different property with different laws and covenants. Air-BnBs are unregulated bed and breakfasts or uninspected unregulated hotels, a clear violation of zoning laws.

      1. Except for in Idaho and Arizona they passed laws that were backed by conservatives/libertarians that strictly prohibited banning and severely handcuffed the local cities’ ability to regulate Airbnbs. When you have ideological purists, then regulation is a four-letter word and you get Airbnbs without any restrictions. Then the experiment in unfettered free markets runs afoul and you get some centrists who realize that maybe a little regulation is needed.

  6. “…Boise Mayor David Bieter’s efforts to regulate short-term rentals such as those on Airbnb.”

    The timing here is curious. By pure coincidence, Bieter is up for re-election in November.

  7. The easy way to restrict short term rentals is to check whether or not owners have commercial loans. Most residential mortgages prohibit renting to non-owners. Just put rules to regulate against occupancy fraud in the city code. Btw even though it’s not prosecuted occupancy fraud is a federal crime. You have a right to rent your property but if you have a mortgage you are renting the banks property.

    1. Local leaders could also vouch it as protecting the housing market. Look up this study that shows fraudulent investors default at 2x rate of owner occupiers and honest investors:

      Owner Occupancy Fraud and Mortgage Performance*
      Ronel Elul†
      Federal Reserve Bank of Philadelphia
      Sebastian Tilson
      Federal Reserve Bank of Philadelphia
      October 13, 2016

    2. Any time they start using the word “Pathway” to something you know it’s going to be dumb, corrupt, or ilegal.

      The pathway to homeownership means giving a person a loan they can’t afford. This is a pretty mean spirited thing to do, especially if the unqualified are used to just bail out the speculators.

      How about the ” pathway to citzenship .” Isn’t this really saying that the ilegal didn’t qualify legally and they didn’t want to wait in line.

      People don’t like to qualify, they don’t think it’s fair. They think it’s racist . So, now if you don’t qualify you get the free shit and the free pathways.

      1. “residential mortgages prohibit renting to non-owners“

        Source please. If this is even remotely true, it would be a Major game changer for all RE.

      1. It’s been a while, but I don’t recall such a thing. Might be a problem if you do this and don’t tell your insurance company though.

  8. “We are in the midst of the longest economic expansion in American history, and the president just called for the Federal Reserve to drop interest rates to zero or negative. That is not the kind of policy action you see from your central bank during a healthy economy. That is crisis-level policy used to avert economic catastrophe.”

    I was a regular poster on this site (under a different name) during last crash (which is the same crash). And just like last time, everything to make this bubble clear and apparent is just COMMON SENSE!

    1. ‘This was meant to be the year of blockbuster IPOs. Technology companies that had generated private valuations worth billions of dollars despite never making a profit were destined for some of the biggest stock market debuts of all time. Investors were licking their lips at the feast they were about to be served. Months later, their appetite has waned considerably — and it is not hard to see why. The year has been so disappointing that analysts are wondering whether they are looking at a bubble that has already burst.’

      ‘Some of the sector’s most eagerly awaited flotations have quickly turned sour. Lyft, an American taxi-hailing company, has lost a third of its value since it floated in March with a share price of $72. Uber, its much bigger rival, was forecast to have a value of up to $120 billion at its initial public offering; only for that figure to be $82 billion when the day came in May. It is now worth $55 billion. Shares in Slack, the workplace messaging service, have dropped by 36 per cent since they were first traded in June.’

      ‘Then last week Wework said that it was delaying its float from this month until the end of the year, at the earliest. The nine-year-old shared offices company had last been valued at $47 billion in January, thanks to the latest $2 billion investment from a total of $10 billion put in by Softbank, the Japanese conglomerate, in recent years. After its IPO prospectus revealed a company burning through cash and questionable corporate governance methods, the market had been warning that Wework should expect less than $15 billion if it listed this month.’

      “I wouldn’t say we are quite in 1999 territory yet, more like 1998”, John McClain, a portfolio manager for Diamond Hill Capital, an investment firm, said. “I think we are still in sleepwalking mode, I don’t think we have completely woken up. It will take some additional spectacular failures for people to really pay attention. As an investor it’s probably better to not lose money at this point over the fear of missing out. Because you certainly don’t want to be the last one at the bar at 2am when the lights come on.”

      https://www.thetimes.co.uk/article/is-the-tech-bubble-about-to-burst-all-over-again-0n2z5dhd2

      1. “I wouldn’t say we are quite in 1999 territory yet, more like 1998”, John McClain, a portfolio manager for Diamond Hill Capital, an investment firm, said.

        Fool me once, shame on … shame on you. Fool me… You can’t get fooled again!
        -George W. Bush

        1. Note again people expect two events to play out in a mirror image of each other, when it’s actually highly unlikely.

      2. Shares in Slack, the workplace messaging service, have dropped by 36 per cent since they were first traded in June.’

        We use Slack where I work. We used to use IRC (Internet Relay Chat) for the same task, I have no idea why we switched to Slack.

        Hard to believe that its market cap is $13B and it has 500M in losses so far this fiscal year. For a product most people have never even heard of. I suppose that if they go bust that we’ll go back to IRC

        1. “…I have no idea why we switched to Slack.”

          Slack is a great messaging system for projects when people retire and new hires need “one source” for background searches and to get up to speed. It’s hardly a technological breakthrough though I could be wrong. Thumbs-up from me for Slack!

  9. “Since 2016, the number of short-term rentals in Boise has increased from 336 to 1,183, according to data from AirDNA, a short-term rental analytics company. At the same time, Boise renters are facing a shortage of available housing. The rental vacancy rate in the city dipped to 2% in 2018, compared with 8% in 2009. ‘We are fundamentally opposed to this restriction of private property rights,’ said Phil Mount, the president of Boise Regional Realtor. ‘This is a significant overstep that threatens one of the most basic precepts of property ownership: the right to rent.’”

    Phil and all his ilk are the ones who are heavily leveraged in real estate. They are also the ones relying upon shenanigans like AirBnb to prop up prices and rents. AirBnb stole a bunch of housing from long-term rental stock and placed it into short-term rental stock which essentially priced out renters for those houses. It’s one of the reasons rents hyperinflated.

    Just like last bubble, REALWHORES have been drinking their own Kool-Aid and flipping houses. They have multiple reasons to not want prices or rents to fall. First, the higher the house price, the higher the commission. Next, if house prices fall then they take a loss on that flip. Further, if that flip flops and they have to “rent it out,” lower rents may not cover their mortgage. These people have never had their clients’ or the greater good’s interests in mind, only their own.

  10. Heh, the thread title reminds me of a 2001 newspaper advertisement I saw for a local gym: “Dot Commers: Look Great When You Lose Your Shirt. — Washington Sports Clubs.”

    1. Oh, and speaking of which, have you seen any very recent episodes of the Property Brothers? They look like they could use a membership to said gym themselves. Sorry dudes, you’re not going to be 34 years old forever. Insulin resistance creep is a thing.

  11. Drew and Jonathan Scott, co-hosts of the HGTV show ‘Property Brothers,’ offer simple real estate investment advice for the moment a market downturn approaches: Find the sweet spot between panic and patience.”

    Here’s a better idea: find a nice vantage point for your lawn chair, settle in with an adult beverage and popcorn in hand, and let the carnage play out, sans you.

    1. That is crazy! How is that price even possible? I don’t know the area obviously, but I can’t imagine how someone can even list that with a straight face. Try dividing by 2 and relisting.

      1. The only possible explanation I can arrive at is that someone with more money than brains thinks they’re going to reel in a Chinese investor who will only look at the nearby comps and not see how overpriced this boring, outdated colonial is.

      1. 5 bedrooms in 1794sq ft?? Either they confused two bedrooms as closets or there are five average to small closets in the house and they are listed as bedrooms!

        1. I’m assuming that one of them is down in the basement — around here these “colonials” with the two upstairs front windows are typically four bedroom, with a shared bathroom on the second floor. I lived in a similar one as a teenager.

        2. I saw this a lot when I was househunting in 2011. The original house was 3 small bedrooms in ~900 square feet ranch. Someone put a bathroom in the basement and threw some paneling up for walls, and voila, a “5 bedroom” house without changing the square footage. The driver behind this was to sell the house to an immigrant who would rent out the illegal bedrooms to two more illegal families.

  12. “Sarah, the elderly home owner struggling to make ends meet, feels forced to sell up and leave Santa Monica.

    Cry me a river, greedhead. Sell your shack, pocket the obscene profit you’ll make, and head for Appalachia or someplace affordable.

    1. Agree. And why does Sarah need this money so badly that without it, she has to sell? Presumably she owns the house outright and pays minimal tax because of Prop 13. If she’s that broke, sell and move. Like people have been doing for Millenia.

      The rest of the article is liberal nonsense:
      ————-
      “As mentioned above, the wrinkle here is that Nancy is happy to stay in her home as a host, while Sarah cannot… But what the Council doesn’t realize they’re doing in the process is creating a blatantly unfair playing field, providing an impetus to accelerate conversion of homes to B&B’s for anyone who can do so, while harming a much larger segment of the population who, like Sarah, don’t want to, or can’t convert their homes to B&B’s.”
      ————-

      Wait, it’s unfair because Sarah “doesn’t want to” be present in the home? What is she, four years old?

      There’s an obvious reason they want to owner to be present in the home. If the AirBnB renters are going to party loud and trash the place, the owners should be forced to listen to it just like the neighbors have to. After that, owners tend to be more careful about who they rent to. It’s no coincidence that Nancy only rents to singles and couples, and that Sarah has been renting to vacationers, i.e. partiers.

    1. There was a really good article on Zero Hedge explaining how the fed instrument actually works (unfortunately I cannot find it now). It isn’t a $400 billion bailout. The fed gives about $75 billion in cash a night and takes that amount in bonds as collateral. In the morning the fed gets back its cash and the banks get back their bonds. Since it resets every morning, the effect on the money supply isn’t cumulative.

      In my view, the question is this: are banks not lending to each other over night because they are scared they won’t get their money back in the morning (this happened after 9/11 when the fed had to do massive repos)? or because they don’t have any money to lend (the “we just had to pay our taxes” argument we are currently hearing)? Either way it’s kinda bad, but I think the implications are slightly different.

  13. SolarCity fraud and Musk’s Ponzi scheme laid bare in Plaintiffs’ Motion for Summary Judgment. Highlights:
    https://threadreaderapp.com/thread/1176173861999529988.html

    “Almost immediately after the Acquisition closed, SolarCity’s auditors E&Y confirmed that SolarCity was, in fact, insolvent.”

    “Prior to the Acquisition, Musk described Tesla, SolarCity, and SpaceX as a ‘pyramid’ atop which he sat; it was ‘important that there not be some sort of house of cards that crumbles if one element of the pyramid . . . falters.'”

        1. There’s your future “green new deal” — a bunch of corrupt lefties stealing from taxpayers and leaving them nothing to show for it.

  14. An anecdote:

    A couple I mentioned here in the past that was thinking of selling and trading up have just done that. This time I was unable to talk them out of it.

    Anyway, they bought an old split level in 2009 for 100K. They got an offer for 270K today and are planning on buying a new shack for 400K.

    I told them to stay put and pay off the split level as soon as they could, but they have the new house bug, and bad. They are otherwise thrifty. They drive beaters, never carry any credit card debt, pay cash for everything and actually have about a year’s income saved.

    It took just one week to sell their shack, which at its price is at the very bottom of the food chain in my little burg. There is almost nothing in that price range as most “starter homes” around here start in the low 300’s. The range they are looking at has seen some price compression. They almost took the plunge last year and apparently they are paying 40-50K less than they would have a year ago, while their old shack allegedly held on to its price.

    I am fairly confident that their new shack will drop in price, probably more than the old one would have. But with interest rates where they are there was no talking them out of it. They are taking out a 15 year loan, so there’s that too.

    1. “They drive beaters, never carry any credit card debt, pay cash for everything and actually have about a year’s income saved.”

      A rare breed these days. I’m living this low depreciation expense lifestyle too, and my shack is owned free and clear. Good thing as my wife dislocated her elbow Sunday morning while jogging by tripping over her un-phuc’n trainable Spaniel that cut in front of her. Bring on the co-pay!

      1. un-phuc’n trainable Spaniel

        Springer? Someone running with a Cocker or Cavalier King Charles would be a funny sight.

          1. Can barely see the compression wrap.

            There’s no magic trick to resetting a dislocation. Dilaudid for pain, Propofil for sedation, and some Western Style muscle work until…pop! (you can hear it), back into the socket.

      1. They just want to upgrade to a brand new house, with the hardwood floors, 9 ft ceilings, quartz counter tops, central A/C, etc. The current house is pretty crummy. No duct work, so no central air. The old nabe is pretty sketchy. I amazes me that anyone would pay $270K for that house. No bidding wars, they accepted the first offer they got.

  15. Does it seem like this is the fall when the Great Housing Bubble finally began to pop?

    RIP 1992 – 2019

    1. Forbes Magazine
      60,586 views | Sep 12, 2019, 11:57 am
      The California Real Estate Boom Is Over. What Now?
      Ingo Winzer, Contributor
      Real Estate
      I write about investing in local real estate markets.
      Aerial view of La Jolla little coastline city. California, USA
      San Diego, California. Getty

      If you had invested in a property in San Francisco five years ago and cashed out in 2019, you would have made a 50% profit, never mind the rental income. But if you had bought a year ago and sold today you would have made exactly zero.

      The California boom is over and investors need to switch to Plan B, which is the answer to the Jeopardy question: How do you deal with a market that at best will be moving sideways, but could also drop 20%?

      The end of the boom in California also poses troubling questions for investments elsewhere in the country. Will other tech economies follow suit? What are the prospects for booming markets in Arizona, Nevada, Utah, Texas and Florida? And will panic selling drive down prices everywhere, as it did in 2008, pushing an already weakened national economy into recession?

      Is it just the Bay Area?

      No, Southern California is right behind. Home prices in the LA basin were up 3% in the past year, but 9% the year before and the trend is clear. The LA economy is not as tightly tied to the tech sector but it has been weak, with job creation on the low side, even as home prices in the past five years surged 40%.

      Throughout much of California prices are now 20% to 30% higher than the ‘income’ price—the price that relates to local income—which always leads to a market correction.

    2. Housing is not the only bubble, of course…

      The Financial Times
      US & Canadian companies
      Insider stock sales rise to two-decade high in the US
      Top executives are looking to cash in on high equity prices as outlook weakens
      The Walton family have sold a combined $2.2bn of shares in the Walmart retail empire © AFP
      Richard Henderson in New York yesterday

      Executives across the US are shedding stock in their own companies at the fastest pace in two decades, amid concerns that the long bull market in equities is reaching its final stages.

      Corporate insiders — typically chief executives, chief financial officers and board members — sold a combined $19bn of stock in their companies through to mid-September, according to data from Smart Insider, a UK-based group. That puts them on track to hit about $26bn for the year, which would mark the most active year since 2000, when executives sold $37bn of stock amid the giddy highs of the dotcom bubble. That projected total for the year would also set a post-crisis high, eclipsing the $25bn of stock sold in 2017.

      Enthusiastic sellers of their own stock this year include members of the Walton family, who have sold a combined $2.2bn of shares in the Walmart retail empire. Executives at Estée Lauder, the cosmetics giant, and clothing group Lululemon Athletica also appear among the most active sellers, according to Smart Insider.

      Investors often use data on insider stock sales as a rough marker for the confidence of executives in their own companies’ prospects. Spikes in selling indicate that top figures in boardrooms around the country are taking advantage of high valuations in the US stock market, which has broken records this year but which faces pressures stemming from slowing global growth and Washington’s lengthy trade dispute with Beijing.

  16. “Most residential mortgages prohibit renting to non-owners.”

    Isn’t it more correct to say that most residential mortgages require the borrower to attest that the home will be his or her primary residence?

    1. Richard Perry
      @HantecRich
      Big drop on US Consumer Confidence to 125.1 (133.5 exp, 135.1 in August).
      Not disastrous yet but is it a sign that US confidence (that drives 70% of the economy) is rolling over?

    2. Cryptocurrencies are cratering again. Usually that pump & dump action signals similar action in the stock market.

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