thehousingbubble@gmail.com
Blog

Buyers Simply Aren’t As Willing To Pay Something Unrelated To Reality

A report from CNBC. “This oceanfront mansion in Hillsboro Beach, Florida, was on the market for $159 million in 2015. But for three years the 60,000-square-foot compound had no takers. The owner eventually decided to put the estate on the auction block, and in November of 2018, it sold for a fraction of the original asking price at $42.5 million. That’s a $116.5 million or 73% price cut. Broker Senada Adzem — who was not involved in the transaction — believes that ‘when it hit the market, the price was mandated by the sellers based on what they had invested in the property, not based on the current market value. The money spent on custom homes is not in direct proportion with the final sales price. There is a point of no return and diminishing returns in super luxury real estate.'”

“When fashion mogul Tommy Hilfiger listed his Manhattan penthouse in 2013, he was asking $80 million for it. The 6,000-square-foot duplex sat on the market for six years. And over that time, it was incrementally reduced. In 2017, the asking price was lowered to $50 million. The duplex finally sold in September for $31.25 million. That’s a reduction of about 61% and a total price drop of more than $48 million from the original asking price.”

“This Los Angeles mansion originally hit the market for $250 million. Back in 2017, that nosebleed asking price made it the most expensive listing in America. But the 38,000-square-foot home sat on the market for over two years. The price was eventually chopped to $188 million, and soon after it dropped again to $150 million. Finally, it sold in October for $94 million. While that’s an extraordinary amount of money and one of the largest residential real estate transactions in the country, it was also a 62% reduction from the original list price.”

“The $156 million price drop isn’t just the largest dollar amount reduction this year, it’s also one of the biggest price cuts in residential real estate history.”

The Los Angeles Times in California. “Real estate agent Tregg Rustad said he’s also seeing a surge in demand in the pricey Westside neighborhoods of Los Angeles, something he wouldn’t have expected a year ago when the market started to slow dramatically. While he’s now seeing multiple offers, he said buyers simply aren’t as willing to pay something ‘unrelated to reality’ as they were two years ago. ‘They’re a little more cautious,’ the Rodeo Realty agent said. ‘Instead of paying an arm and a leg, maybe they just pay an arm.'”

“Whether demand continues to rise is an open question. The jump in sales in September was just the second increase seen in a year. The 10.4% increase was from September 2018, which had the lowest sales for that month in at least seven years. Setting aside that month, September 2019 still had the lowest number sales for a September since 2014. Sales did rise in all counties compared to a year earlier. But in Orange, San Diego and Ventura, the median actually dropped, indicating affordability remains a challenge.”

From Realtor.com on New York. “It looks like ‘Hunger Games’ star Jennifer Lawrence is craving a quick sale of her New York City penthouse. After listing the three-bedroom, 4.5-bathroom abode for $15.45 million in July, Lawrence recently dropped the price to $14.25 million. It looks like she’ll lose a bit of cash on the sale; she purchased the home in 2016 for $15.6 million.”

“‘It’s a lovely penthouse in a good building at an OK location,’ says real estate broker Martin Eiden of Compass Real Estate in New York. ‘The problem is, there are at least 100 other properties in this price range that have the same description. She bought it at the height of the market for $15.6 million. I’d advise to hold on if she could, or suffer a substantial loss and offer it at $12 million.'”

Related Posts

Nowhere To Go But Down

A report from Bloomberg. "Fannie Mae and Freddie Mac’s regulator is confronting a fresh crisis…

This Post Has 74 Comments

  1. ‘he said buyers simply aren’t as willing to pay something ‘unrelated to reality’ as they were two years ago’

    Gosh, I hope no one over paid in such an environment.

    1. It’s great that the Housing Bubble is deflating against the backdrop of a strong economy. This will save the Fed the trouble of targeting stimulus at the housing market in order to keep the economy aloft. Apparently the economy can get along fine without a housing bubble to artificially prop it up.

      1. Lower prices are an economic plus. When people walk away from a huge loan they can’t pay, economic plus. When speculators take an a$$-pounding, it’s entertainment.

      2. It’s great that the Housing Bubble is deflating against the backdrop of a strong economy.

        I didn’t see the sarc tag, PB. Debt fueled consumption and Fed-juiced Ponzi markets should not be confused with a “strong economy.”

        1. As long as the proles and the MSM’s porcine beauticians say the economy is strong, then it’s strong.

  2. ‘The $156 million price drop isn’t just the largest dollar amount reduction this year, it’s also one of the biggest price cuts in residential real estate history’

    Still no bubble CNBC? Diane? Diane?

    Bueller?

  3. ‘there are at least 100 other properties in this price range that have the same description. She bought it at the height of the market for $15.6 million. I’d advise to hold on if she could, or suffer a substantial loss and offer it at $12 million’

    Well, it was cheaper than renting Jen.

  4. The owner eventually decided to put the estate on the auction block, and in November of 2018, it sold for a fraction of the original asking price at $42.5 million. That’s a $116.5 million or 73% price cut.

    Oh dear. That blew right through the 50% haircut resistance line that our resident REIC trolls informed us was un-possible. At the top of the hour, let’s all please observe a moment of silence for those tens of millions of dear departed Yellen Bux who screamed out their last in this single transaction before ascending to debauched currency heaven.

  5. ‘in Orange, San Diego and Ventura, the median actually dropped’

    Thornberg said this was unpossible. Notice that not one media outlet asked Thornberg about his declaration that prices wouldn’t fall? That says a lot about the dishonest REIC/media mafia we have to put up with. They don’t care if you lose your a$$ a on a shack, or go into foreclosure. They would sell their grandmothers for one more months commission.

    1. “Notice that not one media outlet asked Thornberg about his declaration that prices wouldn’t fall? That says a lot about the dishonest REIC/media mafia we have to put up with.”

      You don’t have to put up with it, you can simply ignore it.

      “They don’t care if you lose your a$$ a on a shack, or go into foreclosure.”

      Correct.

      “They would sell their grandmothers for one more months commission.”

      Body parts as well.

    2. The Thornberg name conjures remnants of gawd’s children, so he’s beyond question, a moral paragon and exemplar in thought and deed for the entire human race.

        1. Thornberg History, Family Crest & Coats of Arms

          In ancient Anglo-Saxon England, the ancestors of the Thornberg surname lived in Thornborough found in the counties of Buckinghamshire and North Yorkshire. Thornberg is a topographic surname, which was given to a person who resided near a physical feature such as a hill, stream, church, or type of tree. During the Middle Ages, as society became more complex, individuals needed a way to be distinguishable from others. Toponymic surnames were developed as a result of this need. Various features in the landscape or area were used to distinguish people from one another. In this case the surname was originally derived from the Old English thorn broc which means that the original bearers of the surname Thornberg were named due to their close proximity to the stream by the thorns.
          Early Origins of the Thornberg family

          The surname Thornberg was first found in Cumberland where they held a family seat at Selsheyd (now known as Selside.) This chapelry, in the parish, union, and ward of Kendal is now in the county of Westmorland. “The chapel, dedicated to St. Thomas, was erected in lieu of a more ancient edifice, about 1720, by the inhabitants, on a site given by William Thornburgh, Esq.; and was rebuilt on an enlarged scale in 1837, at an expense of about £600.” [1]

          Thornberg Name Meaning, Family History, Family Crest & Coats of Arms
          https://www.houseofnames.com/thornberg-family-crest

          2. Thunberg, as in Greta the Great!?

            My guess is that Thornberg is a close relative of Thunberg, just as English is a derivative of its Scandanavian ancestors.

          1. Actually his Americanized name I$ : Thorn.in.yer.$ide.berg =

            “No unemployment, No HB.B ll $helter.$hack bubble!”

    1. “Who is buying these mega size mega priced elephants?”

      The same type of people who buy the other sizes, the people who do not have the money.

  7. CNBC shill Jim “Jo-Jo the Clown” Cramer is bullish on homebuilder stocks and purports to see no sign of a recession. The sheep and lemmings who get their investing “advice” from this REIC carnival barker should visit their nearest homeless encampment and ask around for the dupes who believed Cramer when he told them back in ’08 that “Bear Stearns is fine!” right before it crashed from $60 to $2 a share.

    https://www.cnbc.com/2019/11/01/jim-cramers-mad-money-recap-stock-picks-nov-1-2019.html

    1. Jim Cramer is like pro wrestling of the investment business. Anything he says should be understood as kayfabe and not taken seriously.

  8. Do you believe that there was once an ocean of water between the Sierra’s & the Rockies & all that is left today is the Great Salt Lake?

    Doe$’nt $eem Po$$ible that such an EVAPORATION could happen! Musta took some ticking’$ of the clock for that scenario to take take shape.

    1. I expect this ocean of irrational housing market exuberance to similarly shrivel up into a dead sea of housing market victims, eventually.

      1. I think the Salton Sea is a better match. Unlike the Dead Sea it’s artificial and it’s vanishing.

        1. Salton Sea is a modern manmade ecological disaster.

          Great Salt Lake and Dead Sea are vestiges of ocean zones that got cut off and dried up in geologic time.

          Totally different situations…

    2. Do you believe that there was once an ocean of water between the Sierra’s & the Rockies & all that is left today is the Great Salt Lake?

      Doe$’nt $eem Po$$ible that such an EVAPORATION could happen! Musta took some ticking’$ of the clock for that scenario to take take shape.

      Sure. I can see how that much water draining out of an ocean that big could have done some major erosion. The kind of thing that could make a really big canyon. Really big. Might be a really grand sight to see.

      1. big canyon

        There was an ocean over southern Nebraska too and all that is rather flat. I stopped at a road cut there years ago to check the tires. The cut was through an impressive fossilized oyster bar.

  10. “Sales did rise in all counties compared to a year earlier. But in Orange, San Diego and Ventura, the median actually dropped, indicating affordability remains a challenge.”

    That’s not an affordability challenge, but rather an improvement!

    But don’t tell the Chinese investors who paid top dollar for SoCal investment properties, just in time for negative yields to ensue.

  11. People Are Staying in Their Homes Longer- A Big Reason for Slower Sales
    Wall Street Journal
    11/3/2019
    Laura Kusito

    “Homeowners nationwide are remaining in their homes typically 13 years, five years longer than they did in 2010, according to a new analysis by real-estate brokerage Redfin. When owners don’t trade up to a larger home for a growing family or downsize when children leave, it plugs up the market for buyers coming behind them.”

    “More homeowners staying put has helped cause housing inventory to dwindle to its lowest level in decades, which has also helped push up prices on homes for sale. Adjusted for population, the inventory of homes for sale is now near the lowest level in 37 years of record-keeping, according to housing-data firm CoreLogic Inc.”

    “The shortage of homes is especially acute in the Salt Lake City metropolitan area, where there are nearly 60% fewer homes for sale than there were nine years ago, according to Redfin. Real-estate agents say that home prices in the area have risen so much that it is difficult for longtime residents to afford to move. Around Salt Lake City, owners now typically remain in their homes for more than 23 years, or nearly nine years longer than they did in 2010, according to Redfin. The shortage of homes has helped drive the median home price up nearly 75% in the same period to around $340,000.”

  13. ‘Since 2008 the CCP has embarked on a journey of boosting its economy with land sales and money printing. In 2009 China’s broad money supply (M2) was 170 percent of its GDP. Today the ratio has maintained above 200 percent for five consecutive years. With China’s surface prosperity, it has hoarded a gigantic amount of foreign exchange reserves that reached close to $4 trillion in mid-2014, thanks to hundreds of billions of dollars’ annual trade deficit to the United States for many years. Sitting on an oversupply of RMB and sufficient foreign exchange reserves, the CCP had no reason to open up the financial industry.’

    ‘But the “prosperity” was short-lived, and it did not take long for financial crises to reemerge. The excessive funds the Chinese banks injected into the real estate industry have formed a large bubble that is now at the verge of bursting. The economy is declining, and the currency over issuance has been maxed out.’

    ‘Since 2017, this downward economic trend has cast ominous shadows on the prospects of China’s real economy, and left businesses deep in debt. The banks can’t find many credible enterprises who are willing to expand production, so they continue to lend to the real estate industry.’

    ‘Chinese financial insiders summarize this situation as “too much money but no liquidity.” “Too much money” refers to the central bank’s continuous over issuance of funds. “No liquidity” means the banks are starved of high-quality loans. Many businesses went bankrupt in 2018 due to debt default, excessive capacity and over-borrowing, while the more conservative small/medium enterprises struggle with a deteriorating economic environment.’

    https://www.theepochtimes.com/is-ccp-opening-up-financial-industry-to-save-the-economy_3135712.html

        1. The really hilarious part is that China’s great and all powerful dictator is a short, insecure little wimp that can’t stand a little good-natured ribbing. How pathetic.

          1. When he was visiting years ago, he stopped off at the Boeing plant. Workers were instructed by management to avoid eye contact during his visit for fear of insulting him.

          2. “Workers were instructed by management to avoid eye contact during his visit for fear of insulting him.”

            LOL! The things we do for money.

  14. Big thanks and shout out to everyone who replied to the ‘what’s going on with you?’ thread yesterday! It was really neat to hear about everyone. I wanted to reply to some of you, but Mrs. Spiffy’s oldest is having a birthday today and we’re about to be descended upon by older teenagers, and I have a lot of prep to do first. Catch up later today when some of you are watching SportsBall!

  15. for three years the 60,000-square-foot compound had no takers… 73% price cut

    A story of compound errors.

    1. A good example of an AWOL media. Who needs such giant shacks? Why were so many started just a few years ago? Hey media, look at the prices and sales frenzy just prior – there’s your bubble. And it was at about the same time as the “safe deposit box in the sky” phenomenon, which produced many thousands of huge airboxes no one needs nor can afford.

    2. the price was mandated by the sellers based on what they had invested in the property, not based on the current market value

      I think there’s a lesson in that for all of us.

    1. Iffin’ Uncle Warren started counting @ $1,000 ca$h per $econd, how many minute$ until he reaches: $128,000,000,000.86?

    2. -Pocahontas can’t win.

      “No one in this world, so far as I know – and I have searched the records for years, and employed agents to help me – has ever lost money by underestimating the intelligence of the great masses of the plain people.”

      — H. L. Mencken

      1. As democracy is perfected, the office of president represents, more and more closely, the inner soul of the people. On some great and glorious day the plain folks of the land will reach their heart’s desire at last and the White House will be adorned by a downright moron.

        H.L. Mencken, On Politics: A Carnival of Buncombe

      2. “Suppose you were an idiot. And suppose you were a member of Congress. But I repeat myself.”

        -Mark Twain

  18. ‘when it hit the market, the price was mandated by the sellers based on what they had invested in the property, not based on the current market value. The money spent on custom homes is not in direct proportion with the final sales price. There is a point of no return and diminishing returns in super luxury real estate.’

    The super luxury qualification is a red herring. Generally speaking, money spent on renovations cannot be fully recaptured in a comensurate increase to the market value. For one thing, the taxes that the construction company pays on its earnings drive a wedge between the market value of renovations and the price. Secondly, whatever choices the owner makes in carrying out renovations is unlikely to match buyer tastes. It’s more sensible for a seller to just slash the asking price by the anticipated renovation cost, and let a future owner decide on whether and how to carry them out.

    2. The concern I’m starting to have is over how little consumers are protected from crime and fraud in the use of these “tech” company services — how safe are you getting into a stranger’s relatively unmarked car versus a commercial taxi cab? How do you know the food you had some stranger go to the restaurant and pick up for you wasn’t tampered with after it left there? And now look what happens when you think you’re getting one thing with a short term rental booking that turns out to be a bait and switch.

      I don’t know who I hate more — the people who run these companies with absolute disregard for the well being of their customers, or the investors enabling them.

  21. The global financial bubble is in peril, as a Blackstone strategist notes the same concerns as HBB posters do.

    What I don’t get is, if the Fed can forestall bubble collapse indefinitely, why didn’t they back in the 2007-2009 episode?

    The ‘mother of all bubbles’ could blow up the economy if profits don’t improve, warns Blackstone strategist
    By Shawn Langlois
    Published: Nov 4, 2019 9:43 a.m. ET
    Critical information for the U.S. trading day
    Getty
    Look out below?

    “When we try to pick out anything by itself, we find it hitched to everything else in the universe,” wrote famed naturalist John Muir more than a century ago, referring to an epiphany he had while hiking in California’s Yosemite Valley.

    In our call of the day, Blackstone strategist Joseph Zidle offers a similar take, but with dollar signs instead of granite cliffs.

    “At the end of any economic cycle, we often get warnings that appear to be unrelated,” he wrotein a recent not. “It’s in hindsight that we realize that they were not at all random.” Investors saw this during the runup and aftermath of the housing bubble, he added, and we’re seeing it now.

    Among the recent troubles he thinks are connected are repo market woes, negative-yielding debt, global trade conflicts and collapsing manufacturing. And every cycle ends with excess.
    …
    The tweet

    Fed balance sheet now north of $4 trillion again increasing by over $261 billion in just 2 months.
    That’s $1.566 trillion on an annualized basis.
    But remember it’s not QE because the Fed said so. pic.twitter.com/WK0EwbKB0v
    — Sven Henrich (@NorthmanTrader) November 1, 2019

    1. The Fed thought it could allow a recession under W, get Obama elected and then create a normal V shape recovery. Had the Fed pulled it off globalism would be unchallenged. Only true conservative Republicans were opposing open borders. They were crushed in 2008 only to surge in 2010 as the tea party because the Fed and Obama failed to have V shaped recovery. You assume that the Fed failed or the PPT failed, they did not even try to stop the stock crash. Where they failed is restarting the economy.

      1. “The Fed thought it could allow a recession under W, get Obama elected and then create a normal V shape recovery.”

        I didn’t think the fed was partisan.

        1. The Fed is not. It supports the uniparty which is controlled by the Globalists for around the last 30 years. The Democrats were not allowed to win until they abandoned their role of protecting blue collar workers. Bill Clinton was promoted because he both abandoned workers and he had a better chance of passing NAFTA since he could run over the remaining Democrats supporting labor. W was brought in to open the borders since the opposition was on the right. When he failed it was left to Obama to push open borders after Conservative Republicans were crushed in 2008. The uniparty after 2012 tried to convince Republicans that the only way to win was by promoting amnesty. It might have worked had Trump not come along. The right has figured this out, the left who should really being supporting Trump is still being manipulated to believe that the biggest issue is ensuring that trans people have access to the bathroom of their choice. Meanwhile they cannot afford housing or many things that working class people could afford in previous generation. They think substituting bugs for steaks and bikes for cars is woke. No it is just being forced on them to concentrate more wealth with billionaires and equalize poverty in the world. The left are controlled like sheep by the MSM.

    2. What I don’t get is, if the Fed can forestall bubble collapse indefinitely, why didn’t they back in the 2007-2009 episode?

      I figured that there were still too many people playing by the old rules at that time…a problem that has since been mostly corrected. Some actually thought at the time we were going to take our medicine and get back to something sustainable in the longer term.

    3. “And every cycle end$ with exce$$.”

      Why look, Prince$$ Euphoria is standing right next to the exit door$!

  22. Yes Trump was elected because enough people did realize the uniparty existed. But as soon as he had the nomination the deep state was working to stop him. Do not confuse powerful with omnipotent. They lost the Brexit vote too but three years later Britain has still not left the EU.

Comments are closed.