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These Reductions Are Only Just The Beginning

A report from the New York Post. “The Long Island mansion from the 1986 flick ‘The Money Pit’ has become a real-life money pit. This Nassau County home has sold for $3.5 million after five years on the market. That’s 76 percent less than its original 2014 asking price of $12.5 million. Sellers Rich and Christina Makowsky invested $5.9 million in renovations after buying the North Shore spread for $2.12 million in 2002, according to Fox Business.”

The Pikes Peak Courier in Colorado. “According to an informal survey of six real-estate brokers, sales in Woodland Park average about five a month, with the median price holding steady from $350,000 to $360,000, a jump from the median range between $250,000 and $275,000 in 2014. And there are no fisticuffs around to signal bidding wars for homes; that’s pretty much in the past according to the six.”

“The market is in transition, with homes staying on the market longer. ‘In 2018, for instance, most homes sold for the listing price or above,’ said Michael Harper, independent broker. ‘My recommendation to the seller is to price the home correctly. You can’t expect to get away with pricing a home for more than it’s worth.'”

“Since 2016 housing prices have been appreciating about 30%, said Beth Gregory, a 15-year veteran of the business. ‘It’s been one of those crazy markets for the past couple of years.’ But the appreciation is not destined to last. ‘We’ve got sellers right now who are challenging to work with, because they got so used to housing prices jumping — we were seeing bidding wars in the spring and summer seasons, but those have ceased,’ she said.”

“Kellie Case and Connie Sims are part of the Agent Leadership Council for Keller Williams Clients’ Choice Realty who work in the Woodland Park office. Case saw a shift in demand for single-family homes beginning in July. ‘There are a few new listings every day and lots of price decreases, because 99% of what drives a home’s ability to sell is price,’ she said.”

“As far as demand does, homes in the $300,000 to $400,000 range are still selling quickly. ‘We’re still seeing some multiple offers, but not for everything,’ she said. ‘But homes from $500,000 to $700,000 didn’t go as we had thought. I priced them based on the previous six months of comparable sales, but the market didn’t tolerate it.'”

“Relatively new to real estate, Case acknowledges that she hasn’t been through previous recessions when the market collapsed. ‘I am preparing me and my business to weather a downturn because it’s really an opportunity, if you look at it, instead of being doom-and-gloom,’ she said.”

The Orange County Business Journal in California. “Aliso Viejo homebuilder New Home Co. is following through on its plan to focus on sales volume over price, shifting its home prices downward to capture growing demand for affordable housing. The developer and builder, among OC’s top sellers of higher-priced homes the past decade, is emphasizing ‘pace over price,’ said Leonard Miller, who took over from Larry Webb as chief executive in August.”

“‘Our more affordable projects continue to perform well relative to our move-up and luxury communities from both a sales pace and margin perspective,’ Miller said during the company’s quarterly conference call.”

From KXII in Texas. “Last month was the largest single month for home building in Sherman in more than three decades, and a local realtor said this growth is affecting the housing market. City officials say Sherman added 59 new houses in October. Owner and broker at Tracy Realty, Tommi Homuth said developers like Highland Homes, Cupid Homes, and Holley Jolly Developments are expanding housing options in the area. ‘We have more inventory on the market, prices are starting to come down, it’s a buyer’s market,’ Homuth said.”

From Arlington Now in Virginia. “A $999 reduction on a million-dollar home. Why should you care? It’s a question we get quite a bit here at the Just Reduced column. Sure, some of the reductions we see equate to a one percent savings off the list price… or even much less. These types of reductions may not seem that impressive, especially when we see prices on some listings drop by hundreds of thousands of dollars or upwards of 10 or even 25 percent.”

“But it’s important to keep this in mind: These reductions are only just the beginning. Some sellers reduce prices to appease to online searchers (e.g. a buyer with a budget of $1 million won’t find your $1,000,001 listed home in a search of properties under $1 million). Some have drastically overpriced their initial listings. And, in some instances, buyers have deadlines of their own to meet and just need to get moving.”

“The bottom line with reduced properties: Sellers are taking action. With a trusted team by your side, you can harness their activity/urgency and negotiate further.”

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This Post Has 90 Comments

  1. ‘These types of reductions may not seem that impressive, especially when we see prices on some listings drop by hundreds of thousands of dollars or upwards of 10 or even 25 percent’

    Ahem…

    ‘Aliso Viejo homebuilder New Home Co. is following through on its plan to focus on sales volume over price, shifting its home prices downward’

    But what about the suckers, I mean homeowners who bought from you in the last year Leonard? Fudge them, huh?

    2. We have been looking lately in North County San Diego. We’ve now seen the new home builders like Meritage Wildgrove in Vista and Cypress at The Preserve by Cornerstone in Carlsbad undercutting the used homes. In Vista for $685k its basically a model home with solar and all the high tech gadgets like Ring doorbells, upscale kitchens.

      We took this and went and lowballed some used home sellers 50k under asking today nearby and I’m a little afraid they will accept it. My sticking point is they must in addition to taking 50K less is pay off their solar lease for another 17k on top of that. If they do it I’m willing to let it decrease in value and live in it for 10 years. If not no problem, their neighbors will be even cheaper a year from now and in the mean time I enjoy my boat in Dana Point, CA another year and continue living in my Carlsbad previously bank owned condo from 2011 with an Ocean view. Livin is easy!

  2. ‘‘We have more inventory on the market, prices are starting to come down, it’s a buyer’s market’

    Eeee-bola Sherman and Woodland Park!

  4. ‘The ballot measure was soundly rejected by 71.4 percent of voters in Tucson, according to unofficial election results released by the city, with all precincts reporting. Some remaining ballots will be counted in the coming days. The measure was widely opposed by local leaders including the Pima County Sheriff, Tucson Police officials and Tucson’s largely Democratic city council and mayor.’

    https://www.kgun9.com/news/political/elections-local/tucson-voters-soundly-reject-sanctuary-city-initiative

    1. In case anyone forgot, every one of the Democrat Party presidential candidates at the second primary debate raised their hands to support *FREE* health care for illegal aliens.

      If you were born here or immigrated legally, you don’t matter, the only thing about you that matters is your tax dollars to provide gibs for the FSA.

      1. I expect to see that scene, with all of them raising their hands, to be played repeatedly next year in GOP campaign TV ads. Still, I fear that while Trump will win that the left will capture more seats in the House and Senate.

        We had our local and state elections yesterday. TABOR survived intact (prop CC failed) and every prop to raises taxes to pay for free sh*t in my burg failed. Had they all passed sales tax would have increased by about 1.5 basis points, from 7.6% to 9.1% in my now not so littered burg. One of the props was to spend over $60M to build a second rec center, which some opponents pointed out would have cost a whopping $600 per square foot, which smelled to me like a sweetheart deal for some builders. Still, about 40% voted yes. In years past a prop like that wouldn’t have won even 30% of the local vote. Not a good trend.

      2. The issue is much more complex than raising a hand. There is a problem with illegal immigrants not having health insurance because they show up at the ER and are required to receive treatment. So the US govt and health insurance holders already already pay for some treatment anyway, but the illegal immigrants don’t participate in the cost sharing. They also ration their care and consume a lot less (because there are many barriers to getting care, and they are poor).

        But generally I agree that you have to build a wall around the welfare state, meaning health benefits. DJT was right to enhance the meaning of an immigrant becoming a “public charge”.

        To the extent illegal immigrants are in this country, you want them insured, both for health and for auto.

        1. The issue is much more complex than raising a hand.

          Agreed. But the show of hands is an insult to everyone who pays for their insurance and their healthcare.

          1. To me it is not. It’s the primaries, and I understand the audience. To me the bigger issue is that the Affordable Care Act capped premiums for older adults at 3x those of younger adults. This is absolutely a disaster because the elderly population are huge consumers of medical care, much more than illegal immigrants by far. It is socialism for the boomers.

          2. But the show of hands is an insult to everyone who pays for their insurance and their healthcare.

            To me it is not. It’s the primaries, and I understand the audience.

            OK, I’m not sure it’s not insulting to the D base. But do they understand the rest of us can hear what they are saying too? And we will be a factor in the general election?

        2. The issue is much more complex than raising a hand.

          OK, and most of us are not heartless. Every criminal should have urgent medical care when in custody. It shouldn’t be done so as to enable the criminal lifestyle though.

          1. But Blue if they are in for life with no chance of parole??? Gotta draw the line somewhere at the $$$$million dollars costs…

  5. “Relatively new to real estate, Case acknowledges that she hasn’t been through previous recessions when the market collapsed.”

    A newbie. Check.

    “‘I am preparing me and my business to weather a downturn because …

    (wait for it)

    “… it’s really an opportunity, if you look at it, instead of being doom-and-gloom,’ she said.”

    A downturn in sales means no commissions. No commissions is seen as an opportunity.

    Got it.

    1. She has no idea what a return to close to normal might look like. It could be quite the Learning Opportunity.

      1. “It could be quite the Learning Opportunity.”

        Or the creation a Brand New Diet plan, one that fully utilizes the time-tested reality of hopeless starvation .

    2. Here is a chart showing real estate commissions for Louisville, KY for the year 2011. Note that a few realtors – a very few number of realtors – made a lot of money but most realtors did not. This is the way it was in Louisville in 2011 and this is the way it is everywhere for any given time. (More or less.)

      https://images.app.goo.gl/zsh6R9MoLGTGu4548

  6. “‘We’ve got sellers right now who are challenging to work with, because they got so used to housing prices jumping — we were seeing bidding wars in the spring and summer seasons, but those have ceased,’ she said.”

    “Challenging to work with”. I like the way that was put. I would have said something like “Totally pissed off” or “Out of their F*cking minds” or something a bit colorful, but “Challenging to work with” would get me past the editors. (And if you are a reporter one of your main jobs is getting your story past the editors.)

  7. “Case saw a shift in demand for single-family homes beginning in July. ‘There are a few new listings every day and lots of price decreases, because 99% of what drives a home’s ability to sell is price,’ she said.”

    – Wages didn’t magically levitate along with house (and stock) prices. It was/is another Fed-induced mania/asset bubble. Prices now well above the historical 3x income ratio. Seems to be a national phenomenon. What happens next is what’s happening now. The Fed can print, but interest rates already at historical lows and without unconventional buyers and policy, shelter- buyers are the market. Prices heading down unless the Fed starts buying houses. Stocks in same situation, but the Fed keeps intervening. Works until it doesn’t. Bubbles always pop. Are we there yet?

    1. IMO what’s emerging is reality versus REIC fantasy. For years we were told lending was rock solid. Now we read the head of the FHFA saying the GSE’s are lending 500 to 1. And given the non-bank situation, liquidity for the entire housing market could literally dry up overnight. The latest surge into non-qualifying lending, with the inevitable spike in defaults on those loans, seems to signify end of the road for this subprime insanity. So what we were told was rock solid is actually not, right down to the loan guarantors themselves. It could be said that the reason so many of these markets rolled over at around the same time is the subprime buyers have been used up. What we apparently have is another lending bust.

      3. 1) Due to cheap credit / low rates from the Fed, investors / speculators / foreign / unconventional buyers drove up prices, which priced out shelter-buyers.
        2) Said unconventional buyer cohort then exited market due to high prices.
        3) Shelter-buyers still priced out, so who’s gonna buy now?
        4) Let’ lower lending standards to enable subprime cohort to attempt to keep prices elevated.
        5). Speculators/unconventional buyers gone. Shelter-buyers still priced out. Now subprime saturated and defaults increasing.
        6) Game over. No new cohort left to buy. Prices now need to fall substantially to enable shelter-buyer, the only cohort available, but at much lower prices.

        Welcome to bubble economics. A similar scenario is playing out in the auto industry, but it’s farther along the curve. Debt now drives the economy. Still waiting for stocks to follow suit. Not holding breath…

      4. Reality bites if you are selling. Turns out for many that they spent unicorn equity but must pay it back with reality bucks.

    2. What would the Fed do with a portfolio of houses, either than letting them rot or making political allocation decisions that lie outside the scope of their mandate? I don’t see them interested in entering the real estate market, but then they did surprise me with their QE3 housing market reflation program circa 2012.

      1. Ive said before sell them to the Chinese govmint and give them green cards and repatriate some of our trillion dollar debt they own.

        1. Hell no, no more chinese immigrants please. I live in a neighborhood full of ’em and they’re terrible neighbors. The idea that the US is simply a commodity for sale needs to go away, and soon.

          1. My Chinese immigrant neighbors, who overpaid considerably for the dump next door, dissapeared almost overnight after their marriage fell apart under a weight of unaffordable real estate debt.

  8. “…Sellers are taking action. With a trusted team by your side, you can harness their activity/urgency and negotiate further…”

    Wasn’t the “trusted team” the same gang of REIC geniuses who until just recently insisted that it was un-possible for housing prices to go down?

    Visit any typical REIC franchise office and you will find more arrogance, more in-your-face lying per square foot than any other place on planet earth.

  9. ‘The Money Pit’ has become a real-life money pit

    There’s something really funny about that. Just think how much enjoyment they got out of telling people it was the house from the movie all these years. Only to have this happen.

  10. “to capture growing demand for affordable housing”

    As opposed to all that massive demand for unaffordable housing?

  12. If 99% is price what does that say about the marketing, social networking, drone pics, staging and the dog and pony show BS that the realtors spew out.
    It’s worthless.
    So are they.

  14. It’s worthless when the house is still worth less. The reduction in the SALT Deduction has been a game changer. Now get the GSE’s out of the game and you have a pathway to affordable houses for the middle class.

      1. That’s what I sense; that this is just the beginning. I’d stumbled upon this blog years ago, prior to the collapse. I learned a lot, shorted the market and paid for my first year of grad school. I got burned out on bubble talk and drifted away.

        Now I find myself returning. This is not random. I could see signs of declaration and knew there would be valuable information here. My take is this: We’re going to be experiencing a similar drop in asset prices, only this time QE or whatever the heck bankers name the next great infusion won’t really be available because we’ve been doing that continuously. This could only mean a deeper and longer depression/recession. But again, I’ve been away, so maybe I’m off my game.

        This is a long preamble to the question: What does everyone think this next one will look like?

        2. the next great infusion

          It should be interesting, whatever it looks like. There is an obstacle. A great infusion requires a great horde willing to take on more debt. Last time it was China, and they lifted the world with their spending but now seem to be “oversaturated”. Credit crushes those to whom it is given in excess. Who’s next and are they up to it, and also that stupid? I don’t see any likely candidates.

          2. Also even the US is capable of running larger deficits. In 2010, the deficit to GDP ratio was 9.68 percent, today it is 4.77 percent. You cannot compare just the nominal amounts of the deficits, you need to adjust for inflation and growth. Go to the Debt Clock for more comparisons.

        3. “We’re going to be experiencing a similar drop in asset prices, only this time QE or whatever the heck bankers name the next great infusion won’t really be available because we’ve been doing that continuously. This could only mean a deeper and longer depression/recession.”

          I’ve had similar thoughts. The central bankers never normalized rates after the Great Recession and went overboard to the other extreme during the supposed recovery, suppressing sovereign bond yields to negative levels never previously encountered in the entire history of finance. I could see the Fed pushing yields to negative in order to forestall or combat a future recession, but the unwind from that could result in catastrophic asset price collapse. Given that they probably don’t want that scenario to ensue, it’s hard to picture what they will do instead.

          1. what they will do

            What ever they do it only makes the reckoning worse. I rather think the reckoning is inevitable. The “hoping for the best” ship has already sailed, so prepared for the worst it is.

          2. “Given that they probably don’t want that scenario to ensue, it’s hard to picture what they will do instead.”

            According to Alan Greenspan entitlements need to be scaled back, way back! Of course Magoo already has his loot stashed. Also, no cuts to middle-east spending ’cause that’s The Kingdom.

        4. My take is this: We’re going to be experiencing a similar drop in asset prices, only this time QE or whatever the heck bankers name the next great infusion won’t really be available because we’ve been doing that continuously. This could only mean a deeper and longer depression/recession.

          I think your first two alternatives contradict each other. If they can’t do the next infusion even faster and bigger I think the drop can’t be as limited as it was last time.

          My prediction based on last time is that they WILL go faster and bigger, and that it’s already begun. I don’t know if they will succeed, but if I was betting money (and in a way maybe we all are) I would bet that mortgage rates are manipulated almost all the way to zero and they do manage to spin the wheel of fortune at least one more time before collapse.

          1. mortgage rates are manipulated almost all the way to zero

            That’s going to create an enormous amount of pain for the average person.

          2. That’s going to create an enormous amount of pain for the average person.

            Eventually yes. But first it will help alleviate pain for People Who Matter as assets rise in price again. So far that’s been enough to make the decision for us.

      2. “It’s just the beginning.”

        +1 Indeed. Having to drop your selling price to sell is like leaving your valuable paintings and other belongings behind on the Titanic, but getting a seat on a lifeboat is better.

    1. LOL. Good luck with that. As if spending that little on some POS off of Craigslist that was pulled out of a flooded ditch in Houston is going to cost less to keep on the road.

      No shortage of Dave Ramsey / Suze Orman knowitalls out there.

      1. Just spend all of your free time learning to fix cars so you can replace your used junker every 3 years. That’s how internet millionaires do it!

        1. I’m no internet millionaire, but I did more or less do that with an ‘85 Escort while I was in college. I didn’t have the tools or skills to do all of it — I had to pay someone to replace the clutch one time — but the routine maintenance like brakes, tune ups, links etc. was doable in my father’s driveway. Ended up getting about 140K on it when I traded it in after graduating.

          New cars are getting really overpriced now, and something has to give; financing for seven years or more is just stupid.

          2. “New cars are getting really overpriced now, and something has to give; financing for seven years or more is just stupid.”

            Ford can’t remain profitable unless everyone is driving a four-door F-150 that costs $50k. They dis-continued their sedans because there was no profit in it.

          3. A 1980s car is simpler than a 2010s car.

            Why is 7 years so dumb if a new car can be kept on the road for 200,000 miles and 20+ years?

            This isn’t a 1980s anymore where a Ford will rust in three Chicago winters.

      2. That was really an overly snarky reply, and I’m sorry for that. I just think that there are financial risks no matter which route you take.

        Who knows, you could be really shrewd and happen on a real bargain that does end up saving you in the long run.

        1. There is a sweet spot between buying new and buying a clunker that costs a fortune to maintain.

          The article was more taking aim at people who spend over half a year’s gross pay on a depreciating asset whose value will drop to zero over a few years, even as they pay a fortune in interest on the loan they took out to buy it. It’s a popular first step down the path to financial ruin.

          1. Agree completely — I just thought that the blanket rule was a bit draconian.

            Something else that needs to be considered down the road are long term maintenance costs of ICEs versus BEVs, and the latter have not been on the road long enough to really assess this. Are cars going to end up becoming more disposable consumer goods like other electronic products, where it ends up costing more to repair them than to just replace them?

            Maintenance costs on newer vehicles are also not as bad as they used to be, all other things being equal — you have much longer service intervals for things like the cooling system and transmission, and even spark plugs now will go to 100K. Where you get killed is based on the conditions of pavement where you live, and how quickly that wears down chassis and suspension components.

          2. disposable consumer goods

            They are.

            I believe that if you want to spend less money (or for some reason use up less energy) you can do so by driving less and or driving lighter vehicles. I am not a good example for this behavior.

    1. By Ana Alexandre
      Cameron Winklevoss: Buy BTC to Escape Negative Yield Bonds

      Bitcoin (BTC) bull and co-founder of Gemini crypto exchange Cameron Winklevoss has noted that the volume of negative interest bonds accounts for $17 trillion and has urged the public to buy Bitcoin.

      In an Oct. 17 tweet, Winklevoss wrote:

      “$17 trillion dollars are currently held in negative interest bonds. 17 trillion reasons why you should own bitcoin.”

      How to move such a volume to BTC?

      In a series of comments to the tweet, one of the users argued that “migrating this over to Bitcoin is a huge challenge,” to which Winklevoss asked which challenges they are referring to, further stating that it takes less than two minutes to open an account on a crypto exchange.

      However, when the user asked how one can move negative debt to BTC in that volume, Winklevoss did not respond.
      …

      1. “Secure wallets” are getting emptied all the time by hackers. Never had that problem with physical precious metals in the safe deposit vault at my local bank. Bitcoin, like all fiat currencies, has an intrinsic value of zero. I think I’ll buy physical precious metals instead.

      2. “It takes two minutes to open an account on the crypto exchange”

        How long does it take to cash out?

    3. I am puzzling over this very question at the moment. When federal bonds are essentially junk, but their price held artficially low for the time being by the fed, and stocks are overvalued as well what does one buy? I think maybe gold and buttcoin…

      1. I think you should wait to buy anything. I think all the cybercurrencies are a scam. What is the intrinsic value of anything which is easily duplicated? Tomorrow Hillary could announce that she is running for president and will pay for the run with bit*hcoin. What is to keep her from running or starting a new cybercurrency?

        1. BTW, Hillary is trashing Warren after being essentially a campaign advisor. I guess she could not get her to commit to the VP spot. Perhaps Warren was afraid of ARkancide

          1. Interesting. My prediction is that no matter who gets the nomination (assuming it’s not Hillary or Warren) that either Warren or Gabbard is the VP on the ticket. If the nominee is Warren then she might want Gabbard but would probably pick a man just because of conventional wisdom.

          2. “BTW, Hillary is trashing Warren…”

            Haha…Saint Hillary doesn’t know when to fold ’em. Dried up and thicc she’s facing the pasture and a bell. Slick still has some nut to spread, so she’ll be lonely.

          3. she’s facing the pasture and a bell

            At least that’s where they’ll tell everyone she went. “To live on a nice farm in the country”.

  21. Observation: According to what I’m “not” reading, we currently have “Not-Subprime” and “Not-QE”. Does “Not-Buybacks” also apply to the stock markets?
    In any case, all of the asset “Not-Markets” are up, so party on.

    1. Winnie the Poo wants a trade deal, Chinese still want to eat, even 70 years of communism has not cured that “vice”.

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