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A Lot Of Sellers Are Forced To Become Realistic And Many Times They’re Selling For Less Than They Paid

A report from Forbes. “Knock forecasts savings for home buyers which in several desirable areas. Sean Black, Knock.com’s CEO talks about the research findings. ‘Deals are slowing more than we thought. That’s good news for buyers. It’s taken some time for sellers to come back to earth from the days of multiple offers above asking prices. Overall, we’re seeing a softening in the market, with a declining rate of change in homes selling below their list prices.'”

“Topping the chart with a 5.67% predicted discount to original list price is Miami-Fort Lauderdale-West Palm Beach, Florida. Knock predicts an astounding 84.2% will sell at a discount. The Chicago MSA is number two with 77.7% selling for less than original listing price.”

“Taking the number ten spot is the Las Vegas-Henderson-Paradise, Nevada MSA at 71/9% selling at a discount. Black points to markets like Las Vegas which enjoyed appreciation after taking a deep dive during the recession when condos on and off the strip where going for fifty cents on the dollar. ‘We see deals in Vegas because as the economy softens tourism is the first thing to go.'”

“The best advice Block has for buyers, ‘negotiate and don’t throw your best offer out first. You can also sneak in concessions and then let the sellers sweat it out.'”

From Fox Business. “Major cities across the United States saw a large number of luxury condos transform their skyline the past five years — units that boasted glitzy waterfronts and sparkling city views, with a hefty price tag. But now, cities are seeing ghost towers. And thousands of unsold units are clogging up the real-estate market.”

“‘Many developers over-calculated what they could sell.’ said Katrina Campins, a luxury real estate specialist in Miami. ‘You’re experiencing that in various different markets. One market is South Florida, where you have an oversupply.'”

“Large cities across the U.S., including Los Angeles and New York City, also saw a big boom in condo developments during the past five years, only to see many remain empty. Economists say a fourth of more than 16,000 new condos built in the Big Apple over the last six years remain unsold.”

“‘We don’t have the demand from Latin America, which has definitely affected the market,’ Campins said. ‘A lot of sellers are forced to become realistic and many times they’re selling it for less than what they paid for.'”

The Snoqualmie Valley Record in Washington. “Nearly 3,300 luxury apartment units are either built or in the pipeline in Seattle, but a new study argues that many of these are vacant and damaging the surrounding communities. The study examines a trend seen in other U.S. and international coastal cities, where wealthy investors buy into luxury apartments and leave them vacant while the areas surrounding them struggle with skyrocketing housing prices.”

“Further, since actual occupancy isn’t tracked, it’s not known how many of these sit vacant and serve as a parking spot for global capital. But the study did look at registered voters’ addresses. In the eight buildings, only 39% of residential units had the same person registere to vote as the person on the deed. Some 30% had no registered voters at all. The most extreme example was the 99 Union, which had 81% of units where no one was registered to vote.”

From Curbed New York. “Hedge funder Steven Cohen first listed his luxe One Beacon Court penthouse back in 2013 for $115 million. Now, six years later, the property still hasn’t sold despite several price cuts. Most recently, in January, the unit listed for $45 million. This week, the pad hit the market with another steep discount, asking $34 million.

From Mass Live on Massachusetts. “Suffolk Construction is suing developer Weiner Ventures to the tune of $100 million over a failed condo tower originally planned for Boston’s Back Bay above the Massachusetts Turnpike, according to multiple reports. Suffolk Construction’s John Fish claims that former business partner Stephen Weiner owes him $100 million after scuttling a $800 million-plus tower the two hoped to build in a long-dormant corner near Massachusetts Avenue and Boylston Street, the Boston Herald reports.”

“The lawsuit alleges that Weiner was reluctant in committing to hundreds of millions of dollars in financing for the project, which Weiner publicly stated he’d scrapped on August 16, according to the Globe. A MassDOT spokeswomen told the Globe the state has no plans to seek another developer.”

The Houston Chronicle in Texas. “Noted as one of the finest River Oaks homes built by revered Houston architect Birdsall P. Briscoe, the property at 3229 Groveland just saw a Texas-sized price cut. Situated on more than an acre of land, the stunning five-bedroom, 7,098-square foot estate was originally listed at $14.8 million in 2017 before being reduced to $12.9 million. It’s now listed at $10.5 million — a bargain if you’re in the market for multimillion-dollar manor.”

The Wall Street Journal on California. “After nearly three years on the market, America’s most expensive home has finally sold—for 62% off. With a price tag of $250 million, ‘Billionaire’—the elaborate Los Angeles spec house built by handbag entrepreneur Bruce Makowsky – was the priciest in the nation when it came on the market in 2017. After several reductions, it has found a buyer for around $94 million, according to people with knowledge of the transaction.”

“Billionaire’s variable fortunes reflect the shifting Los Angeles luxury market. One of the most elaborate homes in the country, with a candy room and a crocodile skin-clad elevator, it made its debut at a time when the high-end Los Angeles market was riding high following a couple of record-breaking sales. Listings priced at $100 million or more were the order of the day.”

“Nearly three years later, despite a handful of major transactions, prices are facing pressure amid an oversupply of extremely expensive homes. While the deals are evidence of demand for high-end real estate in the Los Angeles area, particularly from overseas, the sales have only made a small dent in the glut of properties on the market.”

“In a 2017 interview, Makowsky justified the price tag by comparing buying a luxury home to buying a yacht: ‘To me it doesn’t make sense that somebody spends $250 million on a boat where they spend eight weeks a year, but they’re living in a $30 or $40 million house,’ he said.”

“The home is directly adjacent to another spec mansion, which is currently on the market for $180 million.”

This Post Has 114 Comments
  1. ‘Large cities across the U.S., including Los Angeles and New York City, also saw a big boom in condo developments during the past five years, only to see many remain empty. Economists say a fourth of more than 16,000 new condos built in the Big Apple over the last six years remain unsold’

    It’s groundhog day in A-Merica. Glut, oversupply. And the lying media will go back to the shortage horse-hockey right away and tomorrow is another day!

    1. Any thoughts on whether these luxury airboxes will ever be occupied at some (reduced) price, or will most go straight to demolition after outliving their utility as Yellen bux repositories?

      1. As long as the property taxes are low and there is no real stick in the form of regulation or exacting fines to penalize owners for holding vacant property, I imagine they will just sit for a while. Living in St. George a good deal of the housing stock here is unoccupied for large parts of the year as they serve as vacation homes. It’s not the same as air-boxes, but might as well be because the effect is roughly the same.

        1. ‘a good deal of the housing stock here is unoccupied for large parts of the year as they serve as vacation homes’

          Vacation shacks are illiquid, money draining and speculative.

          1. “Vacation shacks are illiquid, money draining and speculative”.

            And they are usually the first thing that a FB liquidates when things start to get ugly.

          2. I agree. But the family dynamics here is such that a lot of people will have a vacation home and share it broadly with extended family. Since I have a mini-Airbnb empire, I correspond frequently with property management of these vacation rental companies. Mostly they take around 25-30% to run and operate them. At current prices they don’t really make any money. But for some that bought awhile back, they turn a tidy profit and provide some free weeks of vacation.

      2. “…these luxury airboxes will ever be occupied at some (reduced) price,…”

        Holding costs (property tax, insurance, maintenance, HOA fees) will eventually eat these properties alive.

        Kinda like timeshares, easy to buy, hard to get rid of.

          1. In some cases you don’t even need to use outfits like them or Timeshare Exit Team.

            The younger, dumber me bought an entry level timeshare for about $3K. I had long paid it off and wasn’t in arrears. TET wanted about $3K to “sue” to invalidate the contract.

            Instead, buried deep in my timeshare’s website, I found a link for deed buybacks. I think it cost me a processing fee of about $150 and I was done. I think they’d much rather do it quietly and quickly than have to deal with teams of barking lawyers.

      3. Any thoughts on whether these luxury airboxes will ever be occupied

        I suppose they could end up being Section 8 housing. Makes one wonder if they might end up suffering the same fate as the Grenfell Tower in London (which I missed by about one week)

        1. I hope it’s not all Section 8 housing. We can ridicule the luxury prices, but these are still newer buildings on valuable land with high-end finishes. They should be priced for the middle class — say, ~$70K HH income — before being doled out to the poor who will likely trash it.

          That said, I do not object to workforce housing, provided those residents are actually working. Want to live in a luxury complex on a low budget? OK. Provide proof of employment at a nearby employer, quarterly, and gov will partially subsidize rent. Lose your job or can’t provide proof? Pay for the unit yourself.

          1. This is exactly how a well run program ought to work. The incentive should be to encourage working and productivity, not discourage it. Incidentally, this is what is wrong with most government assistance programs because as soon as you start doing better, they drop off. So the unintentional consequence is for non work. This is especially true for low wage workers with children. High cost of childcare can easily eat up almost all benefit from working, and then someone else is taking care of your children. This is one of the reasons why I support universal child care or even a meaningful tax credit directed at the working poor.

          2. They should be priced for the middle class — say, ~$70K HH income — before being doled out to the poor who will likely trash it.

            Of course. But that’s who we’re at war with, and we don’t want to give aid and comfort to the enemy. We’d rather destroy them first.

            Why would we be at war with them you ask? They keep deplorably resisting the shackles. As far as we’re concerned that’s an act of war.

      4. “I sure wish my FIL hadn’t decided to sell his speculative St. George condo!”

        Likely the best day of his life!

    2. Here is the difference — many fewer condos, and more rentals, than in the 2000s. And yet the condos are still empty.

      The son of a friend’s wife keeps saying lets move to NJ (and overpay there) because they can never afford Brooklyn. Now long before normal pricing returns for a school administrator married to a nurse? And this rate nobody will go here anymore, because it’s too crowded.

      I heard yesterday that supposedly the nastiest guy on the block over put his unrenovated rowhouse on the market for $2.9 million. To whom does he hope to sell it?

      “Any thoughts on whether these luxury airboxes will ever be occupied at some (reduced) price, or will most go straight to demolition after outliving their utility as Yellen bux repositories?”

      The cost of demolition, given the possibility of damaging the buildings next door, would be astronomical. The question is how long will the owners/developers/banks be allowed to hold on to vacant housing before something requires the market to clear.

      1. ‘many fewer condos, and more rentals, than in the 2000s’

        Not in Miami and probably not in Boston, LA, Portland, Seattle, Denver, Dallas, Nashville, Atlanta and SF. The nation is at a 40 year high in airbox production. SF was 72 years, Boston 60 years. And in Miami the prices per square foot are something like 40-60% higher than last decade. I’d bet something similar has happened in NYC.

    3. Market Econ. 101:
      High supply = glut = lower prices.
      Realtor Econ. 101:
      High supply = shortage = lower prices, OR higher prices depending on how they want to spin it.

      1. The laws of supply and demand are so badly distorted right now that price discovery has been suspended. A tsunami of Fed liquidity, accounting gimmicks, subprime loans, etc. have created an eCONomic fantasy.

  2. ‘owes him $100 million after scuttling a $800 million-plus tower the two hoped to build in a long-dormant corner near Massachusetts Avenue and Boylston Street…The lawsuit alleges that Weiner was reluctant in committing to hundreds of millions of dollars in financing for the project, which Weiner publicly stated he’d scrapped on August 16, according to the Globe. A MassDOT spokeswomen told the Globe the state has no plans to seek another developer’

    But the Globe will tell you every day – for years it’s to the moon Alice! Jeebus, downtown Boston airboxes have been down double digits for over a year.

  3. ‘it made its debut at a time when the high-end Los Angeles market was riding high following a couple of record-breaking sales. Listings priced at $100 million or more were the order of the day’

    Hardly noted by the MSM, this mansion bubble within bubbles peaked in 2016.

    ‘Nearly three years later, despite a handful of major transactions, prices are facing pressure amid an oversupply of extremely expensive homes. While the deals are evidence of demand for high-end real estate in the Los Angeles area, particularly from overseas, the sales have only made a small dent in the glut of properties on the market’

    Wa? Glut – in California? Eat yer crowz Thornberg!

  4. ‘it’s not known how many of these sit vacant and serve as a parking spot for global capital. But the study did look at registered voters’ addresses. In the eight buildings, only 39% of residential units had the same person register to vote as the person on the deed. Some 30% had no registered voters at all. The most extreme example was the 99 Union, which had 81% of units where no one was registered to vote’

    Wa happened to my shortage Seattle?

  5. “Hedge funder Steven Cohen first listed his luxe One Beacon Court penthouse back in 2013 for $115 million. Now, six years later, the property still hasn’t sold despite several price cuts. Most recently, in January, the unit listed for $45 million. This week, the pad hit the market with another steep discount, asking $34 million.“

    I found this:

    “The Times reports that Cohen paid around $24 million for the 51st- and 52nd-floor apartment in 2005.”

    So, this guy (crook) is still asking $10 million above what he paid for the place. He was speculating and trying to cut a fat hog. He’s one of the many wealthy speculators rushing for the exit because he knows he’s going to take a bath if he doesn’t get out soon. His $115 fantasy price was just that. In fact, it was rapacious greed.

    1. The stock market and luxury residential real estate market seem to be trending in polar opposite directions, with new record highs on headline Wall Street market indexes crowding out the news of 50%+ off prices on mansions.

    2. Not only is it $10 million above what he paid, it’s $10 million above what he paid in 2005, peak Housing Bubble. No one is falling for this anymore, not even the Chinese.

      1. Right, and as Ben has highlighted, New York has now been cratering for more than 2 years. This guy is literally “chasing the market down.” I am sure he put some money into the place – how much we will never know – but I’d venture to guess he’s going to take a bath on it.

        1. asking $34 million…“The Times reports that Cohen paid around $24 million for the 51st- and 52nd-floor apartment in 2005.”

          He has already taken quite the bath. Even if he didn’t borrow a penny, taxes and insurance for 15 years have jacked up his cost minimum $14M. Oh and the transaction costs to sell. Hey, it was a tax write-off.

    1. “… Oceanwide Plaza in LA is still going nowhere for almost a year…”

      And such a great location, just (literally) blocks from [official] Skid Row!

      So many homeless now, that most all of DTLA has become a skid row.

      Who in their right mind [besides money launderers] would even consider buying one of these airboxes?

      1. It’s actually not in the “poo zone” but close to the well-maintained LA Live/Staples entertainment mega-plex. It does butt right up to the 110 fwy so dwellers will get all the fine soot and particulate matter from 24/7 traffic. I think this’ll get built but someone’s going to lose their Chinese-made shirt on the deal.

        I recently took a trip down to Ensenada via the 10 toll road the runs along the coast. The number of seemingly-abandoned projects sitting on prime coastal land that I saw on the drive was thought-provoking.

  6. Observation from YouTube. I was watching a musicians channel the other day. He was building a home studio. He lives in Nashville. He said they had looked all over at existing houses. He ended up buying new. He said they could build the new house CHEAPER than anything existing they looked at.

    After hearing his description of the Nashville market I couldn’t help but hear Ben’s mantra, “Once the developers start undercutting existing house prices it’s all over.”

    ***The studio adds another bit of complexity to his pricing comps between new vs. existing houses but it didn’t sound like it had much effect. He said new was MUCH cheaper than existing.

    1. Back during Bubble #1, the locals leveraged themselves up to their eye-teeth with HELOCs for pickup trucks and fancy vacations. When the bubble popped the local builders were still building homes selling for substantially less than the existing older homes that were leveraged. Foreclosures happened.

      1. Depends upon what they paid for the land. Some builders went BK, too, because they overpaid for the land and could no longer build at the market price. The bubble is in the land, which means a lot of builders/developers are fooked this time around as well.

        1. The bubble is in the land, which means a lot of builders/developers are fooked this time around as well.

          Agree 100%. Of the building input costs (e.g. land, material, labor, regulations), land is the most elastic. But a lot of the big builders bought land up on the cheap after The Great Recession and have been banking it. D.R. Horton comes to mind and it is why they can build so cheaply still. As a side note, this is why I am hopefully about self-driving solution. Maybe not 100% self-driving, but building more houses is not near as easy as building more widgets. The market gets gummed up way to easily with regs, NIMBYism, cartels, etc. So you get the drive ’till you qualify. There is cheap land, but you have to go a bit to get there. People already waste a ton of time on the internet, media, etc., if they could passively consume their media while getting to and fro from work, it would dramatically alter the housing market. As it is now, you have people stressed out driving 1-2 hours one way so they can afford a house somewhere.

          1. I really like this point, and it makes sense regardless of if one thinks driverless will “work” or not. IF we get driverless, it will affect the demand for side of land prices. I agree.

            I believe that uber has had a similar effect in DC, making blocks far from the metro much more accessible. Prices have gone up in neighborhoods that were once inaccessible. Now, when uber actually starts charging a price that makes them a profit who knows what will happen…

          2. IF we get driverless, it will affect the demand for side of land prices.

            A big IF, I acknowledge that. But it seems more likely than the Fed stopping support of housing prices and letting things get to 2x-3x median income nationwide.

            There is a city just about 45-50 min north of us (Cedar City) where the same house is about $100k cheaper. It’s just location and land. So we do have people who work in this area and live in Cedar, and they have an extra 2 hour commute every day. But that 2 hours is precious because that is maybe the time you could have worked out, or spent time with your children, or done some hobby. So working families become a slave to the house and commute to make the math work.

          3. People already waste a ton of time on the internet, media, etc., if they could passively consume their media while getting to and fro from work, it would dramatically alter the housing market.

            True. But that commute is still expensive even if the time isn’t. EV might make it somewhat cheaper but every mile is still going to cost in energy and tires and risk due to weather and other vehicles. I hate to see people spend so much of their income that way.

  7. Knock! Knock!

    “Knock predicts an astounding 84.2% will sell at a discount.”

    “The Chicago MSA is number two with 77.7% selling for less than original listing price.”

    “Taking the number ten spot is the Las Vegas-Henderson-Paradise, Nevada MSA at 71/9% selling at a discount.”

    – Summary: Price is set at the margins. Once prices start falling, the lowest comp. sets the market price (just like the highest price on the way up). It cuts both ways. This is national now. No putting the toothpaste back in the tube.

    1. Price discounts are the flip side of bid wars, just as Dutch auctions are the flip side of English auctions.

  8. Everything to the moon today! Stocks, oil, gold, and a $1,200 moonshot for Shitcoin to boot. Meanwhile, the Fed is injecting close to $100 Billion per night so the banks can continue to borrow. Something smells really, really gross. Just foul.

  9. The worst kind of Keynesian beauty contests are those which allow politicians to claim credit for “doing something” about the problem, when in reality they make the problem worse.

    Like rent control, for example.

    Pocket Worthy
    Stories to fuel your mind.
    Rent Control: a Reckoning
    The eventual drawbacks of rent restriction policies appear to outweigh the benefits to low-income individuals. So, is it time to reform them?
    CityLab | Tanvi Misra
    A mixed-income housing project in San Francisco. Photo by Robert Galbraith/Reuters.

    Rent control. Advocates say it really helps low-income tenants keep their homes, especially in places where they’re likely to be priced out, helping maintain economic and cultural diversity. Critics say it’s, at best, a mere Band-Aid. So, which is it?

    A new working paper published in the National Bureau for Economic Research provides a complicated answer: While these policies are a boon to many low-income tenants who directly benefit, they worsen the affordability crisis in the longterm. “It’s somewhat of a transfer from future tenants to incumbent tenants,” said Rebecca Diamond, an assistant professor of economics at Stanford University, who authored the paper along with colleagues Timothy McQuade and Franklin Qian.

    Rent control policies impose limits on rent increases for the duration of a tenant’s stay. But since landlords have many loopholes for escaping those requirements, the Stanford researchers found that that they ended up pulling properties from the rental market—shrinking the rental housing supply overall.

    1. A few simple tweaks to federal and local housing policy would eliminate the need for rent control or any other government shenanigans, and quickly bring back affordability. Get rid of Section 8. Get the government out of housing finance. Penalize speculators, etc. Alas, the moneyed special interests don’t want that, nor do governments. High housing prices = high property taxes. The government’s self-interests are opposite of the people’s. That goes against the role of the government. That’s why we need a tax revolt, and more.

      1. I don’t have the faith you have that the so-called free market will provide natural affordable housing for 100% of the population. How government programs are structured so as not to worsen the situation is a separate discussion. But there should be form of assistance for those on the margins.

        Housing assistance should be like food stamps. They should not be capped. Reform the program (as Carson is going a good job of), but it’s not like we cut off food aid to someone who qualifies. Housing aid should be the same.

    2. “It’s somewhat of a transfer from future tenants to incumbent tenants

      That describes in a nutshell the Fed response after the Great Recession. Pumping up housing assets have screwed younger generations while helping older (mainly boomer) households.

      1. “Pumping up housing assets have screwed younger generations while helping older (mainly boomer) households.”

        Maybe in states like California with its Prop 13 protection, but older generations in many states are driven from their homes by high property taxes. I recently received an increased assessment for my paid-off house located in eastern Washington.

        1. That’s unfortunate and maybe something I missed. I’ve always viewed property taxes as the best form of tax because its very difficult to avoid. It is a lot harder to avoid property tax because than paying workers under the table or getting all sorts of loopholes skirt the income tax. In my ideal world, maybe there would be some sort of progressive property tax whereby ultra lux gets some higher rate. Not a punitive rate, just a higher rate. The net effect would 1) derive more revenue for services 2) push the market to develop more affordable housing (e.g. 2x-3x of income) because residents would understand that higher priced homes would come with higher property taxes as a percentage of housing value.

      2. Apparently the Fed views the younger renter generation as a more screwworthy class than old homeowners.

        1. Probably not many young renters in positions of power at the Fed. Or at organizations who are friends of the Fed either.

      1. Judging by the promises made during the debates by the Democrats it does not matter. I think Warren has about four trillion a year in new spending and only about one trillion in new taxes on the “wealthy”. Trump is building a wall to keep people out, if most of the candidates running win you will need walls to keep people in the country.

        1. if most of the candidates running win you will need walls to keep people in the country

          You’re assuming that other countries will welcome American refugees.

          Where will the caravans go? Will they board ships and head to Europe like in Camp of the Saints?

    1. To quote Mr. Ben: “I$ we there yet?”

      (Eye’m off to the jacuzzi, red blend & tin cup in hand.)

      Cheer$! A single shot of this whi$ky costs more than a Por$che 911 Carrera

      Raise a gla$$ to this.

      A bottle of Scotch whisky dating back to 1926 has just shattered world records, fetching a staggering $1.9 million at a Sotheby’s auction in London.

      That’s more than $100,000 per $hot.

      For context, a Porsche 911 Carrera starts at $97,000.

      The “Holy Grail” of whiskies with the eye-watering price tag is a bottle of “The Macallan Fine and Rare 60-year-old 1926” single malt. It was distilled in 1926, and aged in casks of “European Oak” for 60 years before being bottled in 1986.

      Sotheby’s, the world’s largest auctioneer, said it was the highest price ever paid in public for a bottle of whisky or any other drink. The Guinness World Records could not immediately be reached for comment

  10. New intriguing Poway listing: 14369 Horizon Ct
    1bd/1ba guest suite and art studio over 3-car garage. Finally, a house with appliances in keeping with the price point: Sub-Zero refrigerator, dual Bosch dishwashers, Wolf gas range, double wall ovens. Yard’s a bit blah and I hate the soaking tub. Love the garden structure though! I may need to save that to a Pinterest board.

    1. Found the listing for the April 2002 sale. Guest suite and art studio are an addition. Would have preferred the original 3,850sf. Definitely worth attending the open house on Sunday.

      1. No one cares about lame-azz third world poway except yourself, so go post that junk somewhere else. Poway is loserville, no there there but people who cant afford somewhere nicer or just want to be closer to work in RB build some half-azzed palace thinking it will suddenly become versailles.

        Its a dump. Dont believe me? Hang out at the soccer fields by the library. Third world. I will say this, the library does still have some books in english, unlike the one in escondido.

        1. Feel free to ignore me then. I asked if people were interested in my 1031 exchange and some people appear to be.

        2. ‘so go post that junk somewhere else’

          I’m the one who decides who posts what here, not you. I can make it to where you go away though.

          1. “Poway is lo$erville…”

            Oh geez, really Mr. Jasper.eye.wash.panties.in.La.Jolla, fir$t of all they have a bowling alley, 2nd of all they, is close to East San Diego county & the closer ya get to Anza Borrego the better!

          2. Do you know he’s our conductor now? Better go see him soon, because I expect him to eventually move back to Berlin or a similar world culture center. Unless he likes to surf, that is.

          3. Payare

            San Diego Symphony calendar has a lot of Beethoven. Not a fan. Prokofiev & Dvorak looks interesting but Jahja Ling is conducting.

        3. “Poway is lo$erville…”

          Oh geez, really Mr. Jasper.eye.wash.panties.in.La.Jolla, fir$t of all they have a bowling alley, 2nd of all they, is close to East San Diego county & the closer ya get to Anza Borrego the better!

    2. Thats a nice home! It actually looks like a 2m property (in todays insane prices.). Not the 1m shacks we see that should be 500k and usually require tons of maintenance and upgrades.

      1. Nasty anklebiter comments aside, Poway has some of the most beautiful large homes I have ever seen, in California or anywhere else. Albeit I don’t hang with the Rancho Santa Fe crowd enough to have a firm basis of comparison. However, I would guess that you can get a lot more house for the money in Poway, due to greater distance from the coast. And these predate the crowded tract home McMansions that the Wall Street funded builders belched up closer to the coast during the Bubble years, and marketed “from the $1 millions”.

        1. you can get a lot more house for the money in Poway

          And as the congestion along the I-5 corridor worsens, people are realizing this.

          1. The only big drawbacks of Poway that come to my mind are heat, fire, and capital appreciation bonds. It’s a beatiful, culturally diverse area, the people are nice, and the public school system is great.

          2. I wonder if anyone invloved in setting up this bond deal expected to have the lowest interest rates on record ahead?

            The right way, the wrong way, and the Poway of school bond financing
            08 Aug, 2012 by CalWatchdog Staff
            Aug. 8, 2012
            By Wayne Lusvardi

            Imagine you can get in a time machine and fast-forward to the year 2032 in the Poway Unified School District, the third largest school district in San Diego County. In that year, $981 million in deferred interest on a $105 million bond for school facility improvements will become due and payable. That is nearly 10 times what the school district borrowed in 2012.

            Imagine paying a $1 million mortgage for your one-bedroom tract home worth only $100,000 in 2012. (Typically, bonds only have to pay double what was borrowed, just like your home mortgage — not 10 times.)

            By 2032, nobody can sell their home in the Poway area due to the huge property tax liens on every property. And the large proportion of over-mortgaged homes — also called “underwater mortgages” — is still depressing home values in 2032 in the Poway area. The $105 million borrowed in 2012 to improve school buildings stimulated the local economy. But, by 2032, the Poway economy is now stagnant. The largest industry is financial-disaster tourism, like in Detroit today.

          3. Then and Now
            Poway was on fire 50 years ago
            A photo from the News Chieftain shows flames along Espola Road.
            (Poway Historial Society)
            By Mary Shepardson
            Oct. 13, 2017
            6:45 PM

            Wildfires in Southern California can occur at any time of year, but those who have lived here for a while know that the fall months, following a long, arid summer are prime time for conflagrations — especially when the hot, dry Santa Ana winds blow in from the deserts to the east.

            That was the case 50 years ago. At 7:22 a.m. on Oct. 29, 1967 “fire broke out near the Ramona Airport. In spite of being within a mile of an air tanker base, the fire escaped initial attack and spread rapidly through grass and old chaparral, climbed the eastern slopes of Mt. Woodson, then headed down slope towards the community of Poway,” According to a U.S. Forest Service report. The dense brush on Mt. Woodson had last burned in 1913.

            The fire would not, of course, be the last major blaze to roar through Poway, with the Cedar Fire in 2003 and the Witch Creek Fire, a decade ago in 2007, are figuratively burned into more recent memory. Both fires were in the same late-October/early-November time frame. It’s always a good time to be especially wary.

            Shepardson is vice-president of the Poway Historical and Memorial Society.

          4. Witch Creek

            Same area burning now. It’s not just Poway though. My Encinitas property, West of I-5, was threatened by fires twice in the last 20 years too.

          5. Not living in CA, we don’t deal with the wildfires. But a guy from Paradise, CA moved into our neighborhood after his house burned down last year.

            Isn’t the root cause of CA wildfires electrical transmission lines? It seems like dry conditions and extreme weather (whether you ascribe that to climate change or not) just set up the conditions, but that human electricity generation is typically what is lighting the spark.

          6. Much of California is desert scrub better known as Chaparral, and the Diablo and Santa Ana east winds are nothing new. Even the nomadic Indians were aware of the danger. Developers see it as a buyer’s problem.

  11. This was a funny hypothetical exchange that Matt Levine posted between Masayoshi Son and Adam Neumann:

    “My very favorite part of the Adam Neumann legend might be the story of his first encounter with Masayoshi Son, who runs SoftBank Group Corp. and invests its vast piles of money. (One insane aspect of this encounter is that it happened in 2017. A busy two years!) “Mr. Neumann has told others that Mr. Son appreciated how he was crazy—but thought that he needed to be crazier.” 1 I like to imagine that conversation with the hindsight of the last few months:”

    Son: What does your company do?

    Neumann: We lease office buildings, spruce up the space and sublet it in small chunks.

    Son: Hmm I invest in visionary tech stuff, this doesn’t really sound like my thing.

    Neumann: Did I mention we are a state of consciousness. A generation of interconnected emotionally intelligent entrepreneurs.

    Son: Okay yeah that’s more like—

    Neumann: The world’s first physical social network. We encompass all aspects of people’s lives, in both physical and digital worlds.

    Son: You’re crazy! I love it! But could you be, say, ten times crazier?

    Neumann: You’re going to invest $10 billion in my company, which I will use as kindling to light the whole edifice on fire, and then when we are both standing in the ashes you will pay me another billion dollars to walk away while I laugh at you.

    Son: All my life I have dreamed of meeting someone as crazy as you, but I never really believed this day would come.

    Neumann: I’m gonna use your money to buy a mansion with a room shaped like a guitar, where I will play the world’s tiniest violin after all your money is gone.

    Son: YES PUNCH ME IN THE FACE.

    Neumann: Also I’ll rename the company “We” and charge it $6 million for the name.

    Son: RUN ME OVER WITH A TRUCK.

    “He got his money; SoftBank ended up investing more than $9 billion in WeWork before its aborted IPO.”

    Attribution: From Matt Levine’s “Money Stuff” Column (“How you like We now?”)

    1. This is what happens when you have the most reckless central bank in history, pumping untold trillions in cash to wealthy insiders who have absolutely no respect for money or the traditional hard work it used to take to make it.

  12. “In a 2017 interview, Makowsky justified the price tag by comparing buying a luxury home to buying a yacht: ‘To me it doesn’t make sense that somebody spends $250 million on a boat where they spend eight weeks a year, but they’re living in a $30 or $40 million house,’ he said.”

    Makowski must not own a yacht; the whole point is to lose money.

    1. Not QE.

      Opinion: The Federal Reserve is in stealth intervention mode
      By Sven Henrich
      Published: Oct 25, 2019 4:43 p.m. ET
      What the central bank passes off as ‘funding issues’ could more accurately be described as liquidity injections to keep interest rates low
      Getty Images
      Federal Reserve Chairman Jerome Powell

      The Federal Reserve has gone into full intervention mode.

      Actually, accelerated intervention mode. Not just a “mid-cycle adjustment,” as Fed Chairman Jerome Powell said in July, but interventions to the tune of tens of billions of dollars every day.

      What’s the crisis, you ask? After all, we live in an age of trillion-dollar market-cap companies and unemployment at 50-year lows. Yet the Fed is acting like the doomsday clock has melted as a result of a nuclear attack.

      Think I’m in hyperbole mode? Far from it.

      Unless you think the biggest repurchase (repo) efforts ever — surpassing the 2008 financial-crisis actions — are hyperbole:

      What is the Fed not telling us?
      I’m asking for a friend. pic.twitter.com/BZK0XuLloV
      — Sven Henrich (@NorthmanTrader) October 23, 2019

      What, indeed, is the Fed not telling us?

      Something’s off. See, it all started as a temporary fix in September when, suddenly, the overnight target rate jumped sky high and the Fed had to intervene to keep the wheels from coming off. Short-term liquidity issues, the Fed said. Those have become rather permanent:

      And liquidity injections are massive and accelerating. On Tuesday, the Fed injected $99.9 billion in temporary liquidity into the financial system and $7.5 billion in permanent reserves as part of a program to buy $60 billion a month in Treasury bills. The $99.9 billion comes from $64.9 billion in overnight repurchase agreements and $35 billion in repo operations.

      But market demand for overnight repo operations has far exceeded even the $75 billion the Fed has allocated, suggesting a lot more liquidity demand. Hence, on Wednesday the Fed suddenly announced a $45 billion increase on top of the $75 billion repo facility for a daily total of $120 billion. Here’s the Federal Reserve Bank of New York, the branch involved in such actions:

      “Consistent with the most recent FOMC [Federal Open Market Committee] directive, to ensure that the supply of reserves remains ample even during periods of sharp increases in non-reserve liabilities, and to mitigate the risk of money market pressures that could adversely affect policy implementation, the amount offered in overnight repo operations will increase to at least $120 billion starting Thursday, Oct. 24, 2019.”

      And, consequently, on Oct. 24 the Fed injected $134 billion in temporary liquidity.

      These actions are surprising. What stable financial system requires over $100 billion in overnight liquidity injections? The Fed did not see the need for these actions coming. It is reacting to a market that suddenly requires it.

      1. Something’s off. See, it all started as a temporary fix in September when, suddenly, the overnight target rate jumped sky high and the Fed had to intervene to keep the wheels from coming off. Short-term liquidity issues, the Fed said. Those have become rather permanent:

        They’re going to do whatever it takes to keep October 2019 from matching October 1929. No matter how bad the market wants to. It’ll work until it doesn’t.

    1. Enjoy picking up nickels ahead of the approaching steamroller while the opportunity lasts!

      In battle between stock market and yield curve, SocGen says bond market will be ultimate victor
      By Sunny Oh
      Published: Oct 25, 2019 11:33 a.m. ET
      S&P 500 index climbs above all-time record close

      U.S. stocks are near all-time highs again despite a flat U.S. Treasury yield curve that only un-inverted a two weeks ago, with the two markets signaling different views on the economy’s health.

      The divergence between booming risky equity assets and lingering economic growth worries baked into the bond-market aren’t new, according to bearish strategists at Société Générale. In fact, in the last two economic cycles, stocks were close to their cyclical peaks before they “cracked under the weight of slower growth.”

      “One asset class will ultimately be wrong, and history favours siding with the bond market,” wrote Jason Daw, an analyst at Société Générale. “Conflicting signals from the curve, equities, and monetary policy, coupled with uncertainty surrounding the depth and longevity of the downturn, should not obscure the dangers of owning risky assets.”

      The S&P 500 (SPX, +0.41%) was up 0.53% on Friday above its all-time record close of 3,025.86 set on July 26, FactSet data show.

      The spread between the 3-month bill (TMUBMUSD03M, -0.01%) and the 10-year note yield (TMUBMUSD10Y, +1.60%), an indicator of the yield curve’s slope, stood at a positive 10 basis points on Thursday, compared with negative 51 basis points on Sep. 3.

      An inversion or a very narrow yield spread is widely seen as a prelude to an economic downturn, and is employed by the likes of the New York Federal Reserve in their recession models.

      Daw said if investors looked at other leading indicators of global economic growth such as purchasing manager surveys, freight orders, and exports, the state of the U.S. economy looked dim.

      “Our economists believe that the U.S. expansion is on its last legs and that a recession should be apparent by mid-2020,” he said.

      1. Most people I know on the left are too depressed to resort to violence.

        I used to think that. But antifa and such seems to really pick them up. Just watch what happens as soon as we find a way to disarm the right.

      2. Depressed people can spontaneously burst into violence with surprising energy. So much so that Anger is one of the classic stages of grief.

        1. “Depressed people can spontaneously burst into violence with surprising energy.”

          +1 Got that right…especially those with traumatic brain injuries who may appear lame, but have stored-up energy that can be released faster than a crash airbag.

  13. Delinquency rates on subprime auto loans are surging at the highest rate since 2008. Thank goodness the housing markets are ring fenced from any similar delinquencies, since our resident REIC trolls inform us that subprime shack loans are but a distant memory, and todays shack purchasers are all scrupulously creditworthy buyers who put down 20%.

    On a related note: why are the TBTF banks giving the Fed as collateral on the $120 billion a day (and rising inexorably) in repo money being pumped into the banking system? Sounds like a perfect scam: Wall Street grifters hive off their toxic waste collateral onto the Fed at par, while getting billions in fresh new gambling money to speculate with.

    https://www.dallasnews.com/business/autos/2019/10/25/dallas-subprime-auto-lenders-loans-souring-at-fastest-clip-since-2008/

    1. While Santander Consumer has generally chosen to repurchase loans that defaulted early to improve the performance of its securitized deals, it was required to do so in deal documents following a settlement with Massachusetts and Delaware in 2017. The states alleged that it facilitated the making of high-cost loans that it knew — or should have known — were not affordable for the borrowers.

      Santander Consumer is the only subprime auto asset-backed issuer that has contractually made this promise. The loan buybacks have recently ticked up as more borrowers fail to meet their first two payments.

      For another series of bonds, those backed by loans to some of the riskiest subprime borrowers, Santander Consumer had to buy back even more loans. For one bond that was sold about a year ago, around 6.7% of the loans have been repurchased so far, mostly in the first few months after issuance, according to a Bloomberg analysis. That’s higher than average for a deep-subprime auto lending business, according to PointPredictive, which consults on fraud to banks, lenders, and finance companies.

      That first sentence is telling.

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