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A Large Number Of Hard-To-Sell Homes That Are Overvalued, Expensive, That The Owners Don’t Want To Take A Loss On

A report from the California Globe. “While driving down a few streets in the suburban Orange County city of Fullerton, an unusual by-product of the housing crisis presented itself. Rows and rows of large houses known as ‘McMansions’ built within the past 20 years lined the streets, many with ‘For Sale’ signs pounded into the front yard. A small stretch of street nearby the California State University – Fullerton campus brought a succession of three houses with signs out front.”

“”There’s another,’ said ‘Mary Jo,’ an Orange County realtor who did not want her name used, pointing at another of the large houses, this one advertising over 4,000 square feet. ‘I had a showing there last week and some people left without walking out of the foyer.’ ‘Younger people just don’t want them,’ she added, shaking her head as another large McMansion came into view. ‘That’s why so many of these houses are empty.'”

“Many McMansions also have a stigma of being cheaply made. Mary Jo has been selling houses throughout Southern California for years and notes that older houses she sells come in much better condition.”

“‘I’ve shown houses, both in Orange and LA, where ten year old houses were literally crumbling apart,’ remembered Mary Jo. ‘A lot of these houses were built so quickly, or had unusual parts on them, that builders were often rushed or couldn’t make heads or tails of what to do next. So some buildings have cracks in them ten years later. Some don’t have insulation because it was simply forget. Odd angled walls are coming apart because the construction crew didn’t know how to handle it. High ceilings get mold or permanent stains because they couldn’t be reached. Cheap plaster, cheap wood. Thin walls. You name it and chances are at least a few houses I’ve seen like this have had it.'”

“All of this has spiraled to a large number of hard-to-sell homes that are overvalued, expensive, that the owners don’t want to take a loss on, and younger people don’t want to buy. It’s difficult to estimate the average number of unsold McMansions, but real estate agents have reported that McMansions are hard to turn around. So much so that some neighborhoods are estimated to have half of their McMansions unsold or in foreclosure.”

“‘Some of our buyers only hang on to them for a year,’ said Mary Jo. ‘It’s the crisis hitting us. People can’t afford these, raise the money for a decent down payment, but then after a job loss or plain can’t affording it do to other higher costs, they foreclose or they sell the house. I can’t say how many are unsold in California, especially since many of them go in and out of being sold or on the market. But in Orange County it’s at least 10 to 15 percent of McMansions in states of not being sold in some developments, like if it’s in foreclosure or escrow. But it depends, become some neighborhoods have a much higher rate,’ Mary Jo explained, motioning to the row of houses with signs in front of them down the street.”

From KTVZ on Oregon. “Bend’s real estate market began the turn to fall in September as the median home sale price dropped $35,000 from its August record high, a monthly report from Redmond’s Beacon Appraisal Group LLC said. Bend’s new home building permits saw a noticeable drop, from 51 in August to just 25 in September, the lowest figure seen in recent years and well below the peak of 100 seen in October of last year.”

“Redmond also saw a decline in its median home sale price, though not as steep as Bend, from the record $338,000 of August to $325,000 in September, as home sales fell from 104 in August to 88 in September.”

From Mansion Global on New York. “Fourteen luxury homes in Manhattan went into contract in the seven days ending Sunday, a decent number given the Jewish New Year made it a three-day work week for many New Yorkers, according to a round-up from Olshan Realty. Nevertheless, it marked the 14th straight week that contracts for Manhattan homes asking $4 million or more fell below 20, the benchmark Olshan uses to signal a strong market.”

“The most expensive home to find a buyer was a three-bedroom condo on the 67th floor of One57, the first supertall to grace the southern edge of Central Park, asking $22 million. It marks a significant loss for the seller, who bought the unit from developer, Extell, in 2015 for a little over $28 million, according to Olshan.”

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This Post Has 46 Comments

  1. If Mary Jo is telling the truth, there’s a whole lot of lion going on in California. But it backs up what I see. I can find shacks in foreclosure everywhere I go.

    The Globe piece is worth reading in full.

    1. Mary Jo noted a small but growing trend – making “McRanches”.

      “These McMansion they couldn’t sell, they’ll saw off the top of the house, the entire second floor. With permits of course. Then they’ll re-roof it and suddenly it’s a very large single floor house. It goes for less too.”

      “These are still hard to sell, but it’s easier because we can say they’re a more luxurious starter home.”

      ^ How in the HECK is that cheaper than just slashing the price???? That is INSANE.

      1. Then they’ll re-roof it and suddenly it’s a very large single floor house.

        With 1 or no bedrooms?!

    2. – WAY too negative (and honest)! Here, let me reset “The Narrative”…

      Everything is awesome
      Everything is cool when you’re part of a team
      Everything is awesome when we’re living our dream

      Everything is better when we stick together
      Side by side, you and I gonna win forever, let’s party forever
      We’re the same, I’m like you, you’re like me, we’re all working in harmony

      Everything is awesome
      Everything is cool when you’re part of a team
      Everything is awesome when we’re living our dream
      (Wooo)

      3, 2, 1. Go
      Have you heard the news, everyone’s talking
      Life is good ’cause everything’s awesome
      Lost my job, it’s a new opportunity
      More free time for my awesome community

      – There, fixed it. – Your Friends at the MSM

      Read more: Tegan And Sara – Everything Is Awesome Lyrics | MetroLyrics

  2. ‘the first supertall to grace the southern edge of Central Park, asking $22 million. It marks a significant loss for the seller, who bought the unit from developer, Extell, in 2015 for a little over $28 million, according to Olshan’

    And this is just the first super tall. Imagine the a$$-pounding the Johnny come lately’s are taking.

  3. ‘I’ve shown houses, both in Orange and LA, where ten year old houses were literally crumbling apart,’ remembered Mary Jo. ‘A lot of these houses were built so quickly, or had unusual parts on them, that builders were often rushed or couldn’t make heads or tails of what to do next. So some buildings have cracks in them ten years later. Some don’t have insulation because it was simply forget. Odd angled walls are coming apart because the construction crew didn’t know how to handle it. High ceilings get mold or permanent stains because they couldn’t be reached. Cheap plaster, cheap wood. Thin walls. You name it’

    Eat yer crowz Thornberg…

    1. Like WTF? And english as a second language?

      “Some don’t have insulation because it was simply forget.”

      1. simply forget

        On my little reno project, the code officer inspected every bit of insulation before I was allowed to cover it up. But that is in NY. Maybe they self inspect like Australia.

      2. And english as a second language?

        It is California after all. You can take your driving test in 31 different languages,

    2. IMO, the limit on deduction of mortgage interest has had significant impact on the bottom line of the speculators. Most of those that bought RE over the past 3 years are cash flow negative. In addition, the take home pay is further reduced after limiting the itemized deductions for California state & local tax. I never understood why the rest of the country has to subsidize the coastal counties.
      I wish the mortage interest limit gets reduced to parity with other mid-west county median quickly.

      1. I wish the mortage interest limit gets reduced to parity with other mid-west county median quickly.

        Inflation will solve this over time.

    3. “Some don’t have insulation because it was simply forget.”

      It wouldn’t work for insulation for many reasons but I did know a builder in the 80s who would have his driveway wire mesh inspected and then pull it up, move it to the next driveway and pour the concrete without wire mesh. He built about 20 houses in that hood and the last one was the only one to have wire mesh when the driveway was poured.

  4. ‘I can’t say how many are unsold in California, especially since many of them go in and out of being sold or on the market’

    As I was saying yesterday, this relisting is just fraud the REIC is using to manipulate market numbers, and the press generally doesn’t say boo.

    1. “If you tell a lie big enough and keep repeating it, people will eventually come to believe it. The lie can be maintained only for such time as the State can shield the people from the political, economic and/or military consequences of the lie. It thus becomes vitally important for the State to use all of its powers to repress dissent, for the truth is the mortal enemy of the lie, and thus by extension, the truth is the greatest enemy of the State.” – Joseph Goebbels

      – Price discovery in every market, in every asset class, is a very rare commodity today. This is because the value of money is a variable, not a constant, and those in power are determined to control the economy – as if that were possible…
      – General truism: Many things today aren’t what they seem.
      – May you live in interesting times.

    4. They let the IPO millionaires loose and they are buying up properties right Diane?! Nope, they all got schlonged and the bidding wars you speak of are two low ballers under bidding 50% off or more. Yeah (under bid) bidding wars…

      1. The plural of anecdote is not data. I’m certain that there still is the occasional property in a particular zip code that will stand out and attract multiple buyers, but using that as a broad brush to create some sort of narrative for the entire national housing market is outright dishonest.

        How can there generically be “bidding wars” driving up prices when it is still factually true that overpricing your listing out of the gate assures that it won’t even be considered by buyers and will die on the market? The two situations contradict one another.

        1. How can there be bidding wars when prices are falling across the US?

          They already admitted the bidding wars narrative was a lie.

  8. “So some buildings have cracks in them ten years later. Some don’t have insulation because it was simply forget. Odd angled walls are coming apart because the construction crew didn’t know how to handle it. High ceilings get mold or permanent stains because they couldn’t be reached. Cheap plaster, cheap wood. Thin walls. You name it and chances are at least a few houses I’ve seen like this have had it.”

    One of my favorite econ papers is “The Market for Lemons” which won the Nobel Prize. It’s premise basically states that the chance of buying a terrible used car is high because of adverse selection (e.g. those who have lemons will know the defects and be more inclined to sell without disclosing them). Those who don’t have lemons, will value their vehicle and not put them on the market.

    This is why I feel like buying housing is so treacherous. The asymmetry of information about shoddy work and the financial implications of that is so high that it makes the risk calculus very large. You might not get one of these crumbling, shoddily built houses. But if you do, it might wreck your financial future.

    1. buying housing is so treacherous

      Lack of knowledge is treacherous. Paying $500/ft2 for something that only cost $50 to build is, and if it only cost $25 to slap up even more so.

      1. “Lack of knowledge is treacherous.”

        Consider that 21st century “milquetoast-dad” is unable to assemble their children’s Christmas toys despite simple diagram instructions with California cancer liability disclaimers printed in multiple languages.

        2. Consider that 21st century “milquetoast-dad” is unable to assemble their children’s Christmas toys despite simple diagram instructions

          Sadly, I may fall close to your description here! I assemble Ikea furniture and complicated toys just fine. But I don’t consider myself a handyman by any stretch of the imagination. Our dryer heating element went out and I watched several YouTube videos on how to repair it, but ended up just hiring a professional. There are a lot of skills I have, but fixing cars and mechanical ones are not them.

          1. “But I don’t consider myself a handyman by any stretch of the imagination.”

            I can fix just about anything, but the downside is we usually have lots of older stuff around, so we’re not trendy looking. However, we don’t have any debt.

    2. Not really that hard to do
      Educate yourself. Watch youtube videos. Read. You can do a first cut home inspection yourself pretty quickly and eliminate 90% of the crap houses.

      Do your homework on the house. Permits? Talk with neighbors? Find the contractor who did the work. Etc.

      Find a good house inspector and follow him around. Take pictures. Poke at beams with a screwdriver. Get a cheap camera snake. Get on the roof.

      Anything doesn’t look right – Get an experienced plumber, electrician, foundations guy, etc. to look further.

      “This is why I feel like buying housing is so treacherous”

        1. I’m still trying to figure out how “High ceilings get mold or permanent stains because they couldn’t be reached.”?

          Generally you get on the roof to stop the leak that permanently stained the high ceiling and caused the mold.

          I am yet to see the ceiling or roof that couldn’t be reached.

          1. I’m still trying to figure out how “High ceilings get mold or permanent stains because they couldn’t be reached.”?

            Some of these open ceiling homes have piss-poor insulation, and in the winter any moisture from cooking goes right up to the highest point and condenses on the cool surface. After a while it can get funky up there.

            We looked at one of these places back when our children were scampering around and making lots of noise. Their playfulness was echoing off of everything; scratch that open ceiling idea!

      2. Not really that hard to do
        Educate yourself. Watch youtube videos. Read. You can do a first cut home inspection yourself pretty quickly and eliminate 90% of the crap houses.

        All good advice, thank you for that. I think my reluctance is somewhat philosophical. In our age of specialization, there is a limit to how much of an expert one can be without devoting a significant time commitment towards something. Becoming an expert in home inspections necessarily means taking time away from something that I enjoy more (like running, reading, playing with my son, cooking, traveling, etc.).

        Implicit in using an expert is trust. I used to see that quite often when I was working as an RN in a hospital. The ignorance of patients with regards to their medical condition was often quite high, so they were at the mercy of their nurse practitioner/MD/PA. This often was just fine as almost all that I worked with were very competent. But even if they weren’t confident and recommended an intervention/medication that I was less certain of the benefit (alas, I am just the RN, who am I to question a provider?), the individual on the other end surely wasn’t versed enough to challenge that recommendation. Hence the reason for trust (and some healthy amount of licensing, standards, regulation, best-practices, etc.).

        On the flip side, you often have patients who have gone down some rabbit hole on the internet and received some terrible information and is convinced that they have some disease or that a certain treatment is bogus. There is a fine-line between empowered patient/educated consumer and paranoid patient/consumer.

  9. Less than < 22 day$ until $pooky "All Hallow$ Eve!"

    "$oft Landing$" is the word of thee month!:

    Boeing deliverie$ are down 70% from this time last year

    MarketWatch |Published: Oct 8, 2019

    Another order for two Max jets was canceled last month. In June, the parent of British Airways announced a commitment to buy 200 Max jets, but Boeing has not yet booked those order$, indicating that the deal i$n’t final.

    Boeing delivered 26 airliners in September, down from 87 a year earlier and trailing the 71 reported by its European rival Airbus. Over the first nine months of the year, Boeing delivered 302 airplanes, compared with 571 by Airbus.

    Market$
    Caterpillar $ags as Global Gloom Weigh$ on Bellwether Indu$trial

    Bloomberg | By Joe Deaux |October 8, 2019

    William Blair reduce$ 2019 and 2020 estimate$ on growth woe$

    ‘Healthy $kepticism’ amid ‘plummeting’ equipment market

    The outlook reflects growing economic gloom as a $lowdown in manufacturing and simmering trade tensions undercut growth prospect$. Morgan Stanley said a survey of U.S. con$truction-equipment dealer$ showed a jump in the number reporting elevated inventory level$, as well as those expecting a collap$e in pricing.

    No aqdan tailwind$ to help Boeing before Xma$, … $ad

  10. Meaningle$$ … $care tactic$ … Oct 31$t fa$t approache$!

    $ell the rumor$, buy thee fact$!

    Trea$ury weigh$ weakening rule$ to curb corporate tax inversion$: report

    Published: Oct 8, 2019

    Treasury Department officials are considering rolling back a rule aimed at preventing U.$. companie$ from moving money oversea$ to avoid U.S. taxe$, Bloomberg reported Tuesday, citing people familiar with discussions. The report said the Treasury could narrow rules aimed at preventing American firm$ from lowering their U.S. tax bill$ by borrowing from an offshore branch of the company. Treasury is also mulling repealing the regulations entirely, the report said.

  11. “All of this has spiraled to a large number of hard-to-sell homes that are overvalued, expensive, that the owners don’t want to take a loss on…”

    Not giving it away you m*****-f****** skinflints!

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