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Is The Extended Boom Coming To An End?

A report from the Atlanta Journal Constitution in Georgia. “The retreat in Atlanta’s housing market is becoming a rout: the number of home sales last month took a double-digit tumble from a year ago, according to two reports issued this week. ‘A 15 percent decrease in home sales year-over-year in metro-Atlanta is a significant reduction and much more than the national average,’ said John Rainey, Re/Max vice president. ‘While homes sales traditionally continue to decline in the fall, what we’re seeing locally is unusual.'”

“The number of listings has ticked up in recent months, said Brad Dillman, chief economist for Atlanta-based Cortland. ‘With more competing supply, and buyers already hamstrung by high prices and recent breakouts in rates, some individual homeowners looking to sell in the months ahead may find themselves less liquid than they want to be – or need to be.'”

The Star Tribune in Minnesota. “The Twin Cities housing market continues to show signs of a shift to a buyers’ market. September saw the smallest decline in active listings since May 2015, and data pointed to the possibility that inventory gains, which would make the environment more friendly for buyers, could be around the corner.”

“In September, there were 6,857 new home listings in the Twin Cities, a 5.9 percent increase from a year ago, according to the monthly report. It’s a turn from last September when new listings dropped 5.2 percent.”

“‘Many buyers have been waiting for more sellers to jump in,’ said Todd Urbanski, president-elect of MAAR. ‘The fact is, four of the last five months saw year-over-year gains in new listings.'”

“Closed sales dropped 5.8 percent to 5,087, and pending sales declined 1.8 percent to 4,762 further indicating a market cool-down.”

The Detroit Free Press in Michigan. “The extended boom in residential real estate sales in metro Detroit may be peaking if newly released September sales numbers are any indication, though experts say it remains a seller’s market. In the tri-county metro Detroit area, Oakland County felt the biggest pinch, with residential homes sales down 8.9 percent to 1,399 last month, compared with 1,529 in September 2017, according to numbers provided by RealComp.”

“So is the boom coming to an end? A random check by the Free Press of 10 Zillow listings for homes for sale in Royal Oak in the $250,000 to $300,000 price range, showed six of them had reduced the original asking price.”

‘Drew Mahar, a listing agent at Jim Shaffer and Associates in Royal Oak, said he’s not surprised. He said the median sale price numbers can be misleading because they are based on closing of houses that sold before the market shifted.”

“He said houses in desirable neighborhoods or that are close to downtown Royal Oak and priced right are ‘going to fall off the market in the first week with multiple offers.’ But houses in other areas are sitting on the market a little longer, he said.”

“‘It’s definitely an interesting market that we are in right now,’ Mahar said, adding that he believes rising mortgage rates ‘is pushing the market the way it is.'”

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This Post Has 41 Comments

  1. ‘A random check by the Free Press of 10 Zillow listings for homes for sale in Royal Oak in the $250,000 to $300,000 price range, showed six of them had reduced the original asking price’

    Eeee-bola Detroit!

    Good thing wages have been rising faster than shack prices in Detroit and everybody put 20% down.

    ‘some individual homeowners looking to sell in the months ahead may find themselves less liquid than they want to be – or need to be’

    Oh dear…

    1. Liquidity is not a problem if a seller is willing to lower his asking price to current market value.

      2. Unless you bought recently or recently took all your equity out via a HELOC, and have less than 5k in the bank which is about the median savings rate outside of retirement plans. In which case willingness is not an issue. Time to bring back the short-sales.

  3. “‘It’s definitely an interesting market that we are in right now,’ Mahar said, adding that he believes rising mortgage rates ‘is pushing the market the way it is.’”

    Good thing we have these eye opening prophecies from “experts”. Interest rates are the cause, ok… buy now before they go up even more!

    1. “There were 6,857 new home listings in the Twin Cities, a 5.9 percent increase from a year ago, according to the monthly report. It’s a turn from last September when new listings dropped 5.2 percent.”

      Given this type of information it is interesting that the “experts” are saying interest rates are the only cause of the slow-down (i.e., it is just buyer side variables increasing the days on the market number responsible for the inventory uptick), and there was no bubble. If you are buying shelter for your family, you would have locked in a 3.5% or less rate knowing over the long haul you will never see such low rates again. For such people, dumping en-masse when the job market is as tight as it has ever been, meaning fewer layoffs than usual, wouldn’t make sense in a rising interest rate environment. The only answer it that they were just speculating for investment purposes and now realize we have already peaked in terms of valuation. However, the “experts” say this hasn’t been happening, so it is nothing like 2007. Whom to believe, the statistics or the “experts”?

      1. Agreed that speculator buyers are slowing down.

        Also, no one ever talks about how the lending standards changed a lot in the past several years. We are finally lapping the major DTI change from 44% of income to 50% of income that happened in July 2017. In January, we start lapping the conventional loan limit increase.

        Debt drives housing, so unless Fannie and Freddie raise loan limits in January, you won’t see the 5%-7% price gains. They will at least be flat, but likely prices will be falling since interest rates.

        That is not even factoring in speculators exiting the market.

  4. Margin calls and panic selling in China as the “national team” that has for years been levitating China’s asset bubbles and Ponzi markets with endless printing-press “stimulus,” a la Bernanke & Yellen, is a no-show and true price discovery shows up instead.

    A preview of coming attractions for our own asset bubbles & Ponzi markets?

    https://www.zerohedge.com/news/2018-10-18/china-crashes-flood-margin-calls-sparks-liquidity-crisis-panic-selling

    In the latest shock to Chinese confidence, overnight Chinese shares extended the world’s worst slump as the yuan touched its weakest level in almost two years, testing the government’s ability to maintain market stability and calm as risks continued to mount for Asia’s largest economy.

    Two days after we reported that concerns about pledged shares, in which major investors put up stock as collateral for personal loans – a disastrous practice when stock prices are dropping – emerged as a key pressure point for China’s market, overnight Bloomberg reported that “rising fears of widespread margin calls fueled a 3 percent tumble in the Shanghai Composite Index, which sank to a nearly four-year low as more than 13 stocks fell for each that rose.”

    The concentrated selloff, sent the Shanghai Composite down 2.9%, closing at session lows of 2,

    2. Meanwhile the US has the lowest initial unemployment claims since 1969 and the leading indicators are up .5 percent. The PTB are raising interest rates but most of the damage is being done outside of the US. Globalists just do not have a good play.

      1. The PTB would like to hurt Trump but they are killing globalism. No, despite their propaganda accepting illiterate immigrants and cheap junk from China does not help middle class Americans.

    3. stock as collateral for personal loans…

      Personal loans weren’t a thing in China just a few years ago. Consumer credit, which I would think is all unsecured, has exploded to nearly 100% of household income according to tradingeconomics. But hey, consumer spending is up.

    4. Chinbabwe’s money printing has been off the charts. Why else do you think Chinamen (and women) were showing up up on the shores of almost every country in this world, with bags of money to drive up the locals’ housing prices? It sure as hell wasn’t from producing iPhones and Walmart trinkets.

      1. Paying low Chinese wages but then selling at world levels made millions of Chinese rich and maybe 100 million middle class as we would understand the terms. However, as wages have risen the profit margins have diminished and the tariffs have taken them away. No question printing money was part of it but real money was still being made until Trump changed the game. Now it is game over for China. They no longer have ten cents an hour labor, they import oil and coal instead of exporting them and tariffs on steel, aluminum and solar panels make them unprofitable.

        1. middle class…

          There is a catch. These so-called middle class are deeply in debt. If it’s game over they will default and it won’t be pretty.

  5. “The retreat in Atlanta’s housing market is becoming a rout: the number of home sales last month took a double-digit tumble from a year ago, according to two reports issued this week. ‘

    Gosh, I sure hope no one overpaid. That would be a tragedy of epic proportions.

  6. Aussie research group Roy Morgan warns that as shack prices crater, the number of “homeowners” (mortgage-payers) with zero or negative equity is expected to rise. Such astute and uncannily prophetic observations – no wonder Roy Morgan gets paid the big bucks.

    https://www.canstar.com.au/news-articles/more-than-380k-home-owners-have-no-equity-roy-morgan-warns/

    The number of homeowners with mortgages that dwarf their home values is expected to rise as house prices continue to fall in Australia’s two biggest property markets, research group Roy Morgan has warned.

    Roy Morgan has estimated, based off its survey of more than 10,000 mortgagees, that 386,000 owner occupiers have “no real equity” in their home, which means the value of their homes were either equal to or less than the size of their home loans.

  7. Leveraged loans should never have been legal, given the systemic risks they pose to the financial system and the speculative excesses they enabled. Now we’re going to see why the Keynesian central bankers and their policymaker accomplices who presided over the most gargantuan bubbles in human history using fake and borrowed money deserve to be locked up for life.

    https://www.businessinsider.com/if-you-want-to-worry-about-something-this-is-it-central-banks-and-investors-are-warning-about-the-1-trillion-boom-in-leveraged-loans-2018-10

    1. Which is why I am delaying repairs and updates on my house.

      Right now most of the contractors / firms get back to you when they feel like it, throw out highball estimates, and tell you it’ll be 6 months before they can work you in to their schedule.

      I’m going to wait until they are a lot more hungry…

      1. Given the number of construction guys on the bench and unemployment out there, it doesn’t appear you’re looking diligently.

      2. You’re on Mercer Island in a million dollar house. You’re going to pay nosebleed prices whether you like it or not. When a contractor bids a job, they consider the house/location, etc. The owner of a modest 3/2 in Burien is going to get a better price on a job than you are. It’s just a fact. Pay to play.

        1. Not everyone slaps on a location surcharge, though I and my neighbors have seen it. The big problem is that everyone known to do good work is booked out for months. It’s easy for them to be very picky in that situaiton. Instead of saying a hard “no” they often just give back a ridiculous quote.

    1. They key points here are overlooked by UHS “expert” realtors. It helps them validate urgency to buy now. Focusing on “Another wild card in this dynamic is rising interest rates, which are once again approaching 5 percent. “

      I’m curious how skewed tomorrow’s NAR report for September will be. We all know they will put some BS spin on it, likely blaming the interest rates and omitting the true facts.

    2. That’s a cool thought. I wonder how many Chinese investors in West Coast housing will have to dump their HODLings in order to cover margin calls back home.

  10. More flipping of brand new luxury apartments. This is why these things are being built:

    ‘Brand Properties has sold two newly developed multifamily assets in Atlanta to Blaze Partners for $133 million. The luxury communities, totaling 608 units, both opened their doors earlier this year, according to Yardi Matrix.’

    1. I’m going to love watching these “luxury apartment” speculators get their heads handed to them. Will enjoy even more watching former “luxury apartments” emerge from foreclosure auctions as affordable housing for the masses.

      1. What is going to be really interesting is the sell off in vacation rental properties. In my area (southern Utah) builders aren’t building houses for people to live in, they are building vacation rental properties for buyers to buy and then run on VRBO or Airbnb. Because they are zoned as “nightly rental approved” the developers are charging about double what the going rate is. I see stuff that would be somewhere in the mid $200s being market at $480k. It’s crazy stuff.

    2. At some point, these apartment flippers are going to start doing math and realize the prices represent massive cash drains because of negative cap rates given declining rents and vacancies. I know they are doing it for tax reasons, but subsidizing rents to avoid capital gains isn’t a sound plan.

  11. There is no shortage of homes for sale here. The “shortage”, as it were, is in reasonably priced, well located affordable housing.

    For the past couple of years, there has been a boom in upscale construction, where smaller homes in what are now becoming trendy, upscale “walkable urban” small inner and outer ring cities (Birmingham, Royal Oak, Ferndale, Plymouth) are sold for the value of the land, torn down and replaced with larger, more expensive homes, $600K to $1M and sometimes even higher.

    Home builders here have simply abandoned building anything but mansions for the rich, crying crocodile tears that they can’t make a profit otherwise. And if you can’t make the price of admission, you are relegated to either a lot of driving to your job or taking your chances in declining blue-collar neighborhoods.

    1. Are there that many households making that kind of cash around there these days?

      ( It’s been decades since I lived in the area )

  12. Analyst who predicted the 2008 crash warns of bubble brewing in U.S. household wealth
    By Barbara Kollmeyer
    Published: Oct 18, 2018 9:39 a.m. ET
    Critical information for the U.S. trading day
    AFP/Getty Images

    Much has been made about how much wealth is sloshing around in U.S. households and the significance of that fact.

    Our call of the day, pulls no punches as it warns that all that oft-referenced increase in affluence, has been artificially inflated by the Fed, which is ultimately bad news for the economy and the stock market. Here’s how Jesse Colombo, analyst at Clarity Financial, explains it:

    “The U.S. household wealth boom since the Great Recession is a sham, a farce and a gigantic lie that is tricking everyone into believing that happy days are here again even though the engines that are driving it are bubbles that are going to burst and cause a crisis that will be even worse than the 2008 crash,” Colombo said in a video he posted via the Real Investment Advice blog.
    …

    1. “The U.S. household wealth boom since the Great Recession is a sham, a farce and a gigantic lie…”

      Now THAT’S telling it like it is.

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