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We’ve Weathered The Storms, But This One’s Gonna Be The Hardest Of All

A report from the Wall Street Journal. “The aging-in-place technology trend marks a challenge to the numerous real-estate developers who have been rushing to build senior housing to accommodate the roughly 72 million Americans born between 1946 and 1964. Developers continue to build new facilities. New senior housing in 2018 accounted for 3.2% of all senior housing, compared with 2.5% in 2015, according to real-estate research firm Green Street Advisors. The figure is expected to hit 3.5% in 2023.”

“But developers might have jumped the gun a bit and now some worry there is an emerging glut of senior housing. Senior-housing occupancy fell in the third quarter of 2019 to 88% compared with 90.2% in the fourth quarter of 2014, according to the National Investment Center for Senior Housing & Care.”

The Auburn Plainsman. “Ray Huff , who ventured into Auburn student housing in 1996, said that the student housing market is oversaturated — to an extent he has never seen before. And if the student base does not grow, and the excess rooms are not absorbed, Huff predicts that vacancy won’t decrease. ‘The effect of capping enrollment is gonna create a larger and larger vacancy rate,’ Huff said. ‘There’s gonna be more product available, and we’re gonna have the same amount of users to fill that product up.'”

“When property goes unused, it devalues very quickly, which Huff predicts will cause rent to fall in many complexes. To fill rooms in his properties, Huff has already started dropping rent prices and foregoing security deposits, a practice he calls, ‘not good business practice at all,’ but one that he says many complexes in Auburn have started doing in order to draw in potential residents.”

“Times like these can make it hard for Huff’s company, and others like his, to sustain itself. ‘If rent goes down then our fees go down, and we have less money to cover our bills with,’ Huff said. “It makes it very difficult to operate. ‘We’ve all weathered the storms,’ Huff said. ‘But this one’s gonna be the hardest one of all, I can tell you that.'”

The New York Post. “By the end of this year, brokers predict, there will have been enough sales to verify how badly the multifamily segment of the sales market was affected. ‘The game-changing rent laws have had an impact,’ says Douglas Harmon of Cushman & Wakefield. ‘It has halted sales with any semblance of rent stabilization.'”

“‘There are still trades being made because the law won’t change so fast,’ says Jay Neveloff, head of real estate at law firm Kramer Levin, adding that, so far, he’s ‘not seeing anybody jumping off a roof. I don’t see panic.'”

From Minnesota Daily. “Developers of a long-proposed 40-story condominium tower in Marcy-Holmes have canceled the development to look into possible rental units instead. Bob Lux, founder and principal for Alatus, said he was ‘extraordinarily sad’ to see the condominium project bust.”

From Curbed Boston on Massachusetts. “Unit 5C at the Seaport Lofts at 437 D Street in—where else?—the Seaport District features 18-foot ceilings and oversized windows. The two-bedroom, two-bathroom is on sale for $1,295,000 through Compass. That pencils out to $994 a square foot—a hefty sum, but still one that might be considered a bit of a steal in today’s downtown Boston. A report covering closed downtown condo deals during 2019’s third quarter pegged the average price per foot for such properties at $1,134, for instance.”

The Santa Cruz Sentinel in California. “A common type of fraud is occupancy fraud. The residential mortgage industry has three categories of occupancy: principal residence, rental property and second home. Mortgage lenders are on the lookout for fraud in every new mortgage that is originated. Since the home that is being purchased or refinanced is the security for the new mortgage, the mortgage industry is very sensitive about the intended purpose of the home.”

“Rental homes probably account for the most popular form of fraud. The good news about rental properties is that 75 percent of the projected rents can be used to help qualify the borrower for the mortgage; on the other hand, a down payment of at least 20 percent will typically be required. During an economic downturn, borrowers who lose their jobs or whose properties have lost value, are more likely to stop making payments on a rental property they own before they stop making payments on the home they live in.”

“A borrower who applies for a loan as a vacation home when he intends on renting it is the same as a homeowner stating he will occupy the new home when in fact it will be a rental. And, believe it or not, fraud is also committed when a borrower says he will buy the home as a rental (in order to count rents to help qualify for mortgage) and then moves in as his principal residence.”

“These are all examples of mortgage fraud and if discovered by the lender, the borrower, at the very least, will have to pay off the loan immediately or lose the home to foreclosure or, in an extreme case, could face 30 years in prison and up to a $1 million fine. Beware, lenders are known to send out representatives to knock on the door to ask questions if occupancy fraud is suspected.”

The Tampa Bay Times in Florida. “Joseph Erickson owned a condo in this beachfront community but the view was of the Intracoastal Waterway, not the beach. So when he saw that a gulf-front condo in a nearby complex was up for sale at a foreclosure auction, he decided to try his luck. On Sept. 23, 2018, Erickson won out over several other bidders and bought the condo for $385,000. He knew that $35,000 would go to the Happy Fiddler Condominium Association, which had filed the foreclosure case to collect unpaid dues. But he expected Pinellas County’s Clerk of Court would return the $350,000 ‘surplus’ to him. Erickson hired a contractor and started renovating his new condo.”

“Then came two shocks. Erickson hadn’t done a title search, so only after the auction did he learn that there was a $350,697 mortgage on the property. After getting over that jolt, he figured he had enough in the surplus funds to pay off the bank before it too foreclosed.”

“But Erickson never received the $350,000 surplus. A company called Locations of Pinellas Inc. claims that it is the condo’s true owner and asked the clerk’s office to give it the money. Erickson’s attorney filed an emergency motion to block the release but that sparked a legal battle that pits Erickson against a man who spent four years staving off foreclosure on a $1.6 million Tierra Verde mansion in which he had been living rent-free.”

“‘The first time I do this, it blows up in my face,’ Erickson, 53, said of his foray into foreclosure auctions. ‘It’s devastating, it’s life-changing. As far as any thought of retirement, that’s out the window.'”

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  1. “A common type of fraud is occupancy fraud.”

    It seems rather the opposite. Occupancy fraud is encouraged by real estate agents and mortgage brokers. Anything to close a deal. If the mortgage is being paid, the banks don’t seem to care. I’ve never heard of anyone getting in trouble for it if they were paying the bills. Anyone ever seen this happen?

    1. Yes, my landlord in Austin back in 1998 got zapped. He eventually lost 5 shacks. Not for the fraud but because he was over-leveraged which is why these rules apply in the first place.

      As I’ve noted in the past, he was cash flow negative. You gotta make money in real estate.

  3. I was having a discussion about not getting a title report on a foreclosure we are considering last night. Basically it’s nuts to not spend a little for the report.

      1. I’ve heard title insurance isn’t worth the paper its printed on. At least the horror stories in the paper where something happens and they do nothing to help.

    2. I bought a FSBO, but the lender wanted the title insurance. Makes sense as the place might have outstanding encumbrances.

    3. It’s “foolish” not to (there’s a better word for it, but that will suffice). I observed a flipper buy at auction when the 2nd mortgage lien holder foreclosed. That should be a red flag by itself. An immediate $125K loss to the flipper who was surprised to find out a couple weeks or so later that the existing 1st mortgage was still in force. Making matters worse was the existing 1st mortgage was a
      loan mod. This is where the interest owed was tacked on the back of the mortgage and accruing interest 5-6 yrs! post the loan modification when it was done by the home debtor. Ironically, I could have seen this chain of title issue without even pulling a formal Title from Fidelity or First American or whomever. The recorded documents are online locally. Except the payoff of the first would be a bit more of a challenge due to the balance owed when a loan modification was present.

      The flipper was banking on at least a $200-250K post fix gross profit. Turned into an immediate $125K loss and the flipper let the property go and the 1st mortgage lienholder ended up foreclosing …..property sat again for months on end. The 2nd mortgage lienholder laughed all the way to the bank because they were given a “gift” by a flipper who made a very bad mistake.

  4. ‘The aging-in-place technology trend marks a challenge to the numerous real-estate developers who have been rushing to build senior housing’

    Yeah, the glut is cuz of something else. Same with student housing. Oh they capped the enrollment! Senior housing has been overbuilt for years, especially in certain segments. And the luxury thing! Students are demanding luxury dog washing.

    1. More like rushing to build overpriced senior housing very few seniors can afford.

      Aren’t folks supposed to downsize living expenses after retiring? Granted, my father was in declining health and needed special care, but his more than tripled after moving into one of these.

      1. I’ve been learning more about this stuff. The whole thing is sorta capped by medicare. I don’t know how they ever believed luxury was going to fly.

        1. “The whole thing is sorta capped by medicare.”

          Someone politically connected will buy these luxury adult places for a song when they are in default, and then they’ll lobby for more of that Medicare money. Shoving that proboscis into the government gravy is how the robber barons in suits get rich.

          1. This is what Amy Klobachar is talking about when she says “grey tsunami” and long-term care insurance. But she is right; the demographic time bomb is about to go off and the country is more spread out than ever before. I often had patients who were in my unit who had minor injuries but who weren’t found for days (because they lived alone), so they became major. I think the newest Apple watch is a smart bet, and a lot better than those scamy life alert overpriced subscription deals.

        2. I might be the only one on this board who has actually worked in an assisted living/independent living/skilled nursing facility with a “memory care” (read: dementia) unit.

          Let me just say this: if you are looking for a place for yourself or your loved ones, don’t waste time looking whatever the consultant/salesperson is showing. You need to talk to the CNAs (e.g. nurse aides) and ask them directly about the level of care and the average tenure of the staff. High turnover will tell you quite a bit. Also, Medicare has a good rating system if you search “nursinghomescompare”.

          1. My folks live in such a retirement community. My mom refers to me the tiered care arrangement as the “slippery slope”…

          2. Thanks for the insight and information! Since I’m single I will eventually have to look into some kind of alert system. It’s fun to mock the commercial where the old lady says “I’ve fallen and I can’t get up,” but I knew someone who died because of precisely that.

          3. “I’ve fallen and I can’t get up”
            My NYC detective cousin laughed when those personal alert devices came up. He said, “Do you know how many dead people we find clutching those things?”
            This was years ago; he’s long retired. He was at the WTC on 9/11 but when we asked, he would not talk about it.

          4. Sorry, just re-read what I wrote, sounds a little flip. His implication was that they don’t work. I guess better to keep your phone on you at all times. Not a good solution either.

          5. “His implication was that they don’t work.”

            My impression was that the First Alert device has an accelerometer that could sense a sudden stop such as someone falling and broadcast an alert to an operator who would call and ask if you were alright before sending help.

          6. It’s fun to mock the commercial where the old lady says “I’ve fallen and I can’t get up,” I once had as a patient an old lady who was still well enough to leave her house & go shopping. One afternoon after she got home, she settled back on her living chair. Her little dog greeted her by jumping up on her chest and licking her face. The lady felt unusually tired but not really ill. Soon there was EMS pounding on her door. They had been tipped off by the activation of her personal alarm, which she had kept on during her shopping trip. The device had been activated after she got home. 911 had been notified & when she didn’t answer her home phone, EMS was sent out. The lady did hear them knocking & let them in. At first everyone was at a loss why the device had been activated at all. Gradually it dawned on them that the little dog had firmly pressed the button while licking her mistress’s face. The lady denied feeling ill, but EMS checked her vital signs anyway. Her BP was good but her pulse rate was about 160 and it did not slow down during a repeat check. So they brought her in to the ER. She had some kind of pathological heart rhythm & was admitted to our coronary care unit. I forget the exact details. This was one of the few times I have ever heard of a pet directly notifying EMS of a problem.

          7. Sorry, just re-read what I wrote, sounds a little flip. His implication was that they don’t work. I guess better to keep your phone on you at all times. Not a good solution either.

            I think you make some good points Tarara. The Apple watch with fall detection when properly setup should be very good. The benefit of this is you don’t need to pay an outrageous monthly subscription for something that is largely unnecessary.

          8. This was one of the few times I have ever heard of a pet directly notifying EMS of a problem.

            Good to see you Tresho. It’s been a while.

      2. Retirees are aging in place to “be near grandchildren.” They aren’t interested in a $375K 2400 sq ft mini-manse (+400/mo HOA fee) in Florida.

        1. And thankfully, those seniors who “forgot to have children” (I can relate) all have multi-million dollar portfolios so a luxury retirement home and aging alone isn’t a problem at all.

          1. Actually, those Active Adult communities designed for folks 55+ do have an attraction, at least for me. Once I retire, I’d like to be around other people who want to do things, and be facilities and things to do.

          2. Nothing wrong with Active Adult 55+. But, just like for apartments for young hipsters, builders went too heavy on the Luxury end for seniors. As usual, affordable options just don’t pencil out.

          3. I’m not sure I even want to be a senior citizen in the US anymore, considering the healthcare situation. It’s just awful. I’m not only talking about the costs, I’m talking about the level of care. It has declined significantly. The number of deaths in this country for rather routine procedures vs other countries is very alarming.

          4. Speaking of luxury retirement community, this one is opening up soon in my nabe:

            https://ovationbyavamere.com/

            Sister location is in Omaha, NE. Swanky place, but pricey from what the sales office says. I think it is $4k+month, though that includes I think 1 meal/day and all amenities.

        3. One of my high school classmates (1965) had been living in CA for decades up to her retirement. Her children had all moved far from CA due to the high cost of living. She was quite aware of the declining quality of the state in recent years. She & her husband sold their CA home, moved to the TN area & built a new house there, much closer to the rest of her family & far from CA.

    2. The average late Boomer (1958 or later) and those in Gen X are paid 10 percent less than the Boomers had been at the same point in their lives. They kept spending by not saving for retirement, and they don’t get pensions.

      The average Millennial is paid fully 25 percent less than the average Boomer, and pensions are long gone.

      What no one is saying is that yes, Social Security is heading for a 21 percent cut in benefits when it runs out of money. But also, if they aren’t poor enough to be affected by the minimum or rich enough to be affected by the maximum, Social Security payments will also be lower because the work earnings on which they are based will be lower.

      We’re talking about 40 percent less in Social Security benefits for the Millennials.

      The rich seniors are all over 60 now, the richest are over 70. When they are gone, short the cruise ship industry.

        3. Local gov workers, maybe.

          For the Feds, the pension formula is .01*years*high three.
          That is, if you’re there 25 years and make $100K, you get $25K pension. It’s not nothing but not enough to live on. And you don’t start collecting until 62, no matter when you actually stop work.

          That’s the new system. There are still some oldsters who retire under the old system, but not for long.

          1. It’s not nothing but not enough to live on

            So if you work 35 years it’s $35K. Plus Social Security at $25K? Plus a little TSP @ $20K? Give or take, I’d say $80K is enough to live on for a retired person with no debt and a drastically reduced tax burden.

        4. Let’s not forget dads who get divorced in their 40s or 50s and lose most of their retirement to an unfaithful ex.

          Fastest way to go from 60 to 0 in the retirement savings game I’ve ever seen, short of having it 100% in Enron stock.

      2. I have read claims that if the upper limit of earnings on which FICA must be paid was eliminated, the future of Social Security would look much brighter. Haven’t found a good review article on that.

        1. That would require them to admit/accept that SS is a type of entitlement rather than just something that you pay into when you’re young and then get money back with interest when you’re old. Would the payout cap also be removed?

      3. The rich seniors are all over 60 now, the richest are over 70. When they are gone, short the cruise ship industry.

        My dad used to always say that he’d prefer to take perpetual cruises rather than age in a nursing home. His reasoning is that the cost is about the same, the food and entertainment much better, and the people who take care you you more pleasant! Obviously this doesn’t work in practice when someone has real medical needs, but it is super expensive to care for someone in the US. The top comments on that WSJ article on nursing homes are very profound and worth reading. I highly recommend them as they give a good insight into the pros and cons of nursing homes and the issues associated with them.

  5. ‘That pencils out to $994 a square foot—a hefty sum, but still one that might be considered a bit of a steal in today’s downtown Boston. A report covering closed downtown condo deals during 2019’s third quarter pegged the average price per foot for such properties at $1,134’

    Curbed is the last to know. Prices for downtown lux condos has been down double digits for along time.

    1. I used to work in the Seaport district. Never appealed to me as a desirable place to live but apparently others disagree.
      Price history at 437 D St. Apt 5C:

      11/11/2019 Listed for sale $1,295,000 (+32.8%)
      6/5/2015 Sold $975,000
      5/28/2015 Pending sale $975,000
      5/27/2015 Listed for sale $975,000 (+30.1%)
      12/16/2011 Sold $749,500 (-3.8%)
      9/14/2011 Listed for sale $779,000
      6/29/2011 Listing removed $779,000
      4/28/2011 Listed for sale $779,000 (+94.8%)
      11/13/2008 Sold $400,000 (+3.7%)
      3/27/1997 Sold $385,575

  6. The bidding just ended on that Tucson shack I posted here yesterday. Top offer 345k. Reserve not met. If the lender foreclosed in the 700ks, they got fooked.

    1. It looks down on a monstrous cement facility and is within smelling distance of the wastewater treatment facilities (which have improved in recent years but are still noticeable even from I10). You couldn’t pay me to live there.

  8. ” And if the student base does not grow, and the excess rooms are not absorbed, Huff predicts that vacancy won’t decrease.”

    Huff is a genius! I’m sure he gets paid big bucks for that kind of amazing insight and logic. LOLz

  9. “…“Ray Huff , who ventured into Auburn student housing in 1996, said that the student housing market is oversaturated…”

    I don’t even know where to begin with this character, Ray Huff.

    He says he has been in the student housing business since 1996 and doesn’t even follow market trend lines?

    No doubt he drank a full gallon jug of the “luxury student housing” Kool Aid.

    “…To fill rooms in his properties, Huff has already started dropping rent prices and foregoing security deposits…”

    Don’t worry Ray Huff, You will make it up on volume.

  12. Developers keep building housing for seniors. The problem is, seniors don’t want it.
    Senior housing faces a budding glut as Boomers Prefer to Stay Home.
    The rise of technologies that help the elderly stay in their homes threatens to upend one of commercial real estate’s biggest bets: Aging baby boomers will leave their residences in droves for senior housing.

    “People don’t want to go to a place where there’s only a bunch of other old people,” said James Crispino, head of the senior practice at design firm Gensler.

    The aging-in-place technology trend marks a challenge to the numerous real-estate developers who have been rushing to build senior housing to accommodate the roughly 72 million Americans born between 1946 and 1964, representing about 20% of the U.S. population. In about one decade, boomers will start reaching their mid-80s, the typical move-in age for senior housing.
    Senior-housing developers added 21,332 new units in 2018—more than double the number that was added in 2014, according to the National Investment Center for Senior Housing & Care, an industry organization. Senior housing is now one of the fastest-growing commercial real-estate sectors, ahead of office, retail, hotels and apartments, according to Green Street Advisors.
    But developers might have jumped the gun a bit and now some worry there is an emerging glut of senior housing. Senior-housing occupancy fell in the third quarter of 2019 to 88% compared with 90.2% in the fourth quarter of 2014, according to the National Investment Center for Senior Housing & Care.
    Some companies specializing in senior housing are suffering. Shares of Ventas Inc., a big health-care real-estate investment trust, fell close to 9% one day last month after it said the occupancy rate of its senior-housing communities declined to 84.1% on June 30, compared with 84.5% a year earlier and 88.5% in June 2014. Moreover, the average age that people enter senior housing has been rising, partly because of improving health. It is about 84 to 85 years today, compared with 82 one decade ago, according to Green Street analyst Lukas Hartwich.
    Complicating the Problem
    Developers are scrambling to come up with facilities where seniors do want to live.
    Assuming they succeed, what about all the already built developments that do not fit the bill?
    And if they don’t succeed, it’s even worse.

    1. Future behavior of an aging population is the big wild card. A dramatic shift one way or the other will cause a lot of dominoes to fall. But in my experience, there will always be a need for long-term care, and more of it. The builders may have overshot it a bit, but the population demographics mean that even though many seniors will want to age-in-place, mobility issues, dementia, Alzheimer’s, and a whole host of individuals who lack the capacity to perform ADLs (activities of daily living) will force many stubborn seniors who thought they could age into place into nursing homes. I would also say that senior living centers, at least the ones I’ve worked in, are quite enjoyable places. I worked for Western States Lodging and the Legacy Home properties and I would be glad to spend my last years in that place. Much better than dying of loneliness, which is an epidemic in most Western countries.

      1. Among my peers and schoolmates, more than once the idea of forming loose collectives to look after each other in our later years has come up in discussion.

        Among GenX’ers I know, our ability to retire with stability is all over the map. And thanks to the baby boomer (and their sprog) demographics, it feels like we’re going to be at the mercy of various governmental policies and programs not designed for us in the years ahead.

        1. One of the benefits of working in a hospital and a skilled nursing facility was the frequency of dealing with death. It sharpens the mind and really helps you understand what is important, and what is not. I found myself expressing affection and gratitude to loved ones far more frequently as a result. Death, mourning, and grieving are so sterilized in our modern society.

          1. A larger version of the transformation that some (but certainly not all) go through in their 40s/early 50s as not just their mortality, but the mortality of everyone around them is realized then?

          2. “Death, mourning, and grieving are so sterilized in our modern society.”

            This is why there are so many sorry looking patients, young and old. Little wonder our health care system is gobbling up such a huge portion of the budget pie.

          3. Go see the movie “Doctor Sleep” that’s out right now. I don’t want to give away too much plot, but it does include a rest home.

          5. IDK how I did that.
            Anyway, looked it up, main character is the kid in “The Shining”, interesting.

          6. Go see the movie “Doctor Sleep” that’s out right now. I don’t want to give away too much plot, but it does include a rest home.

            Thanks for the recommendation, putting it on the list. I’m a wimp when it comes to scary movies, but my wife loves them.

  13. It’s usually a good bit cheaper for seniors to remain in their homes than to pay the outrageous monthly costs for assisted living or nursing home care. There are contractors specializing in modifying homes to make them more accessible, and programs offering in-home assistance/caregivers for helping with tasks of daily living.

    States have figured out it’s generally cheaper to pay for those things if it means the senior gets to stay at home, instead of going into assisted living or a nursing home at Medicaid’s expense.

    I think one result of the coming Boomer mass retirement/aging will be a lot of the older housing stock will get these accessibility updates.

    1. Right on the money. Which is why the two fastest growing jobs in the US are nurse aides and solar installers. Nurse aides who make house calls and work under the direction of RNs who make a care plan with an MD is where the jobs are. Too bad they are very low pay.

      1. “Too bad they are very low pay.”

        I’ve read that some nurse aides to the elderly tend to hustle their clients in order to “rewrite their will.”

      2. “Too bad they are very low pay.”

        It’s corporate greed. The goal is to hammer wages into the floor.

        1. Exactly. Which is unfortunate because it is actually a very stable job in terms of demand outlook. It can’t be outsourced (though many health systems love to import Philipina and Caribbean aides) and can’t be automated.

          1. A couple of years ago a colleague’s elderly mom had a stroke and decided she wanted to stay in her home. She required 24 hour care. She hired aides and the occasional R.N. visit via a home health care agency to the tune of $19,000 a MONTH. This went on for about a year and then she relented to move to an assisted living facility that she reportedly likes. I am not sure of the yearly cost but I believe it was somewhere between around 40-60K, in a suburb about 12 miles from Boston.

            My colleague reported problems with the poorly paid CNAs who spent a lot of time looking at their phones.

      3. Nurse aides who make house calls We tried that with my sister after she had a small stroke in early June. Aide came in 4 days a week for 3 hours a day. She supervised breakfast, made up a lunch and dinner for my sister to eat later, supervised her meds, & communicated with her family. I’m an MD & helped coordinate the care with her own MD. The cost of just this little bit of help was greater than the monthly cost my sister is currently paying at an assisted living facility. Personal care is expensive!

        1. “The cost of just this little bit of help was greater than the monthly cost my sister is currently paying at an assisted living facility.”

          So there’s a subsidy at the assisted living facility?

        2. There are certainly some economies of scale and efficiency in assisted living centers. Utah is not friendly to RNs and allows med techs (who have hardly any pharmacology training) to pass meds and do stuff that typically an RN or someone with a bit more understanding of disease processes should do. Anyway, some of those aides are very efficient at assembly line stuff: glucose checks, compression stockings on, nasal cannula for oxygen secured, toileting done, etc.

  16. Just announced that gigafactory 4 is going to Germany. VW/Mercedes/Daimler should feel threatened. DJT was right to bemoan the German luxury vehicles being driven around en masse in the US. It will be nice to see US making cars that Europeans start to buy for a change.

    1. Maybe once my next startup is purchased by one of the tech giants (I actually have a plan for a new product/business with such potential, work begins in January) I’ll buy something like this at foreclosure auction and host HBB meetups in it 🙂

      The location sure seems targeted at the “Ive made it” crowd…

      1. I drive by this area on my way to family up in Park City, Heber, and Midway. The wealth in this area is astounding. There is a reason Park City refers to itself as “The Independent Republic of Park City”.

  18. We heard back form the sellers yesterday. They thought our offer was too low. Oceanside 750k asking, we offered 710k and they pay solar off. Comps are $699-710 for exact floorplan sans solar sold within the last 2 months. We even countered with 715k and we accept the solar and they said “we aren’t giving it away”.

    They claim its worth more because “its got solar” and “updated cabinents in the kitchen”. OK Boomer, The Solar LEASE is a liability and the cabinents look like something my grandmother would like but are dated.

    Their little burg is dropped 8k a month according to Zillow so all the best to them, I’ll buy their neighbors this year at 700k. They’ve got some problems coming as its the holidays in a week and they have to be out Jan 1 to move into their new McMansion. Crunch time

    1. If they come back in a few weeks make it 699. They’ll know they should take it but going under 700k will be a tough thing to swallow psychologically. Just to return the favor.

    2. I knew a “we aren’t giving it away” “its got” seller who had their shack all remodeled and listed at $430k who turned down a $400k offer in 2009 before riding it down to it’s $210k sale price in late 2010.

      1. I agree, I wanted to do 50k off but our realtor and the wife said they won’t even counter. Next time its 60k off and they are back on the hook for paying off the solar. Not a bad lease, 0% escalator clause, able to pay off year five which is next month, either 8k to cancel the lease payments or 17k to buy outright but then lose the service contract, but still they are at least doing the 8k or its not happening. Too many properties coming on line and each one sets a new lower comp. They missed out on last years prices and even though I will be taking a loss for 5 years its difficult to find coastal property we like in our price range.

        1. Re the solar: “Not a bad lease, 0% escalator clause, able to pay off year five which is next month, either 8k to cancel the lease payments or 17k to buy outright but then lose the service contract…”

          Jeebus, I guess I’m ignorant because I didn’t realize how expensive those solar installations are? Is this house completely off the grid? How can this be less expensive than simply paying the electric bill?

          1. Solar usually pays itself off in 6-8 years based on the system selected, panels, Time of Use costs, etc. I have several cousins from Texas selling solar in CA doing a brisk business.

        2. either 8k to cancel the lease payments or 17k to buy outright but then lose the service contract

          Or assume the lease, which is what it sounds like the sellers want. They probably view the installation as having saved the buyer(s) time and hassle.

    4. I’ll buy their neighbors this year at 700k. They’ve got some problems coming as its the holidays in a week and they have to be out Jan 1 to move into their new McMansion.

      Do the neighbors or the sellers who declined your offer need to be out by January 1?

      1. The seller begins paying their new mortgage AND this one Jan 1. I even gave them a 60 day close and a rent back just to ease their mind and they STILL turned it down. They are in for a rude awakening.

        1. They paid $250k brand new in 1998 and 1/2 a million in profit isn’t enough for these boomers, they aren’t getting any younger based on pictures in the place mid-70’s. The twist is its held in trust so its possible the children are fighting over how much they want to sell it for.

          2. The twist is its held in trust so its possible the children are fighting over how much they want to sell it for.

            I’ve been shocked at how common that is — in general – children fighting over their inheritance / parent’s estate, even while the parents are still around and attempting to get more from their parents.

          4. Mike in Carlsbad:

            If it’s the 🍓 house, it looks like they borrowed $300K in October 2007 from one of the children’s trusts. The lender name is incomplete but cuts off after the first three letters of the shared last name.

        2. The seller begins paying their new mortgage AND this one Jan 1.

          Ah, they already spent the “profit.”

    5. Hey Mike, my father just bought a place in Carlsbad in the $800s. It was actually last January, but he’s spent the better part of the year renovating it. The original listing price was over $1M. I have yet to make the trip down there to even see the place.

    6. Send them a link to this blog and remind them that they HAVE to sell whereas your perfectly fine waiting while the CR8R continues. Also unless your tied to your realtor, you can always work without one and save that overhead and inform the seller you would like 2-3% reduced.

      1. Using Redfin for the first time to put in offers, much better than standard realtors. They get some incentives for closing homes but nothing like commission only realtors. They get a steady paycheck in return. Some guy all he does is unlock doors while another regional rep puts in offers, no pressure, no BS and even agreed prices will continue to fall, whens the last time a realtor told you that.

    7. I’ve seen the brand-new-boomer-style kitchen cabinets in a used house for sale, dark cherry red Louis XIV style. Kiss of death. I honestly felt sorry for the sellers, they thought upgrading the kitchen would sell the house. It’s like having a party. Play PARTY MUSIC. Not your favorite classical indy maestro from baroque Vienna.

  19. Slightly less tourists coming to hawaii but it doesnt feel like it with the recent long weekend – tons of people on the beach. I think most of the islands (which are counties) have passed laws making the operation of an illegal vacation rental punishable with a 10000/day fine. I have not seen it reported that anyone has actually been fined though. AirBnB has agreed to give the state its records so that any unpaid taxes can be levied. Should be interesting as I think more than a few on that list will be big two faced mucky-muck democrat pols – the only kind this state has at this point, besides one lone russian agent, lol!

    Still not much inventory under 500k and what exists and isnt trashed gets bought pretty quick. 500-1M goes contingent pretty quick too, but much more to choose from. The high end is where there is a lot of inventory and it will be interesting to see what happens there. A local realtor just squawked about a bet she made that RE will not fall 20% over the next 3 years – the “fundamentals” are too strong. Those fundamentals never include a large number of well paid jobs, good schools or low crime. Speaking of which, elderly are getting pulled out of their cars, beaten at gun point and then their cars are used to pull store heists and set on fire afterwards. Soooo much aloha!

    1. “Speaking of which, elderly are getting pulled out of their cars, beaten at gun point and then their cars are used to pull store heists and set on fire afterwards. Soooo much aloha!”

      Wow, really? Never been to Hawaii so I didn’t know it was so bad. Thanks for the update, Bruddah!

        1. A friend of mine who was stationed in Hawaii had to pull his kids out of the public school system because of attacks on whites by native Hawaiians.

    2. STRs are a pox upon the neighborhoods. There’s trouble in paradise.

      https://therealairbnbstory.com/the-problem-with-airbnb/

      The Problem with Airbnb
      What’s the Problem with Airbnb?

      If you’ve seen the Airbnb commercials, you would think most of its hosts were local families renting a spare room to help with the mortgage payment. The reality is far different.

      85% of Airbnb Oahu revenue comes from entire home listings
      54% of Airbnb Oahu revenue comes from owners of 2 or more units
      64% of Maui vacation rental units are owned by non-Hawaiʻi residents

      Almost all of Airbnb Oahu revenue comes from investors, commercial operators and entire-home renters. They include companies like Hawaii Hideaways Inc., an Irvine, California company that has over 15 entire-home luxury home listings on Airbnb Oahu alone. They also include companies like Luxury Retreats, with numerous listings that start at $1,106 per night.
      Problem #1: Negatively Impacting Available Affordable Housing

      43% of Hawaiʻi residents rent a home or condo unit
      22,202 more rental units are needed in Hawaiʻi over the next 10 years
      Honolulu rents have skyrocketed by 33% over the last decade
      A significant number of the illegal short-term rentals listed on Airbnb are the type that a local family would be able to afford
      A 2015 study by Honolulu’s Office of Community Services indicates that at 80 percent occupancy, the average Airbnb unit would bring in about 3.5 times more revenue than a long-term rental

      Problem #2: Eroding our Neighborhoods

      Neighborhoods outside of resort areas are being overrun with illegal Airbnb rental units
      Airbnb is creating a revolving door of visitors in our communities, not the types of neighborhoods we want to raise our families in
      Airbnb rentals are hurting the essence of the community — they are changing the face of our neighborhoods
      Visitors partying, creating excessive noise, and serving as a constant stream of strangers are defining our neighborhoods

      Problem #3: Supporting Illegal Operations

      Airbnb shelters illegal short-term rental operators who are not paying transient accommodations or general excise taxes
      Legally operating bed and breakfast establishments, hotels and other businesses pay their fair share of taxes that cover their impact on our infrastructure
      Airbnb won’t identify short-term rental operators who are violating applicable zoning laws

    3. Thanks for the hawaii update kai. Ice heads up to no good. Many years ago when lived in oahu, i worked at a convenience store and we got robbed and the ice head robber fled and crashed his car in front if the store. Cops came and turned out the cop was related to the guy so the guy got a slap on the wrist. In my even younger teen years there while skateboarding in haleiwa, an older moke who just finished his day at the cane field knocked out my friend for leaning on his car, cops came and same thing, related… love the islands but i never felt to safe there and looking back i think i got lucky being a haole that never attracted unwanted violence aside from stupid drunk fights with my circle of friends ;). Fun times, good experiences as a kid

  20. Hanging out on the Texas coast again this week with my kids, and jeeeebzus is it freezing cold for the Gulf of Mexico. so much for half the stuff I had planned. I’m guessing nearly everyone else is dealing with it as well.

    1. Not much about weather in the world surprises me anymore. Always good to take a vacay and visit family though, enjoy your time there spiffy

  21. Hard to see a meaningful, broad-based correction coming when DJT is pushing negative rates:

    https://www.cnbc.com/2019/11/12/trump-rails-on-fed-says-market-and-economy-would-be-doing-even-better-without-powell-mistakes.html

    “Trump also contended that the Fed should continue to cut interest rates to make the U.S. more competitive in the global market.

    “We are actively competing with nations who openly cut interest rates so that now many are actually getting paid when they pay off their loan, known as negative interest,” he said. “Who ever heard of such a thing?”

    “Give me some of that,” he said. “Give me some of that money. I want some of that money.””

    1. The same corporate master that in 2016 quashed the Epstein story. What happened in 2016 again? 🤔

    1. I’m sure Bloomberg will avoid layoffs until after the Democratic primaries. Too much negative publicity.

  25. The Fed has thoroughly bamboozled the bulls by buying down the short end of the yield curve.

    I guess in Wall Street’s popular imagination, the yield curve is steepening all by itself. “Ignore the man behind the curtain.”

    Market Insider
    Once a source of panic, the yield curve is validating stocks’ comeback and may crown the winners
    Published Mon, Nov 11 2019 7:57 AM EST
    Updated Mon, Nov 11 2019 9:07 AM EST
    Patti Domm
    Key Points
    – Bank of America Merrill Lynch quant strategist Toby Wade studied the link between stocks and the yield curve, and found that cyclical industries, such as energy and materials, are most correlated to flattening and steepening of the yield curve.
    – The Treasury yield curve is watched as an economic barometer, since an inverted curve signals recession.
    – The study found that stocks are more linked to the spread than ever, with about half of 1,300 stocks studied correlated to moves in the yield curve.

    Traders work on the floor at the New York Stock Exchange.
    Brendan McDermid | Reuters

    It’s no coincidence that investors are getting more positive on the stock market as the yield curve has been steepening.

    Bank of America Merrill Lynch’s quantitative team has found a direct relation between the move in stock prices and the yield curve, and some sectors, like energy, financials and materials, are far more correlated than others. A steepening yield curve is a positive sign for growth, and those sectors are closely linked to cyclical performance of the economy.

    “I would say as the yield curve steepens, it has a positive impact on equity prices on a relative basis. As it inverts, it has a negative impact on stock prices,” said BofAML quantitative strategist Toby Wade. Wade’s study looked at 1,300 stocks, including those in the S&P 500 and BofA’s coverage universe. He looked at relative return going back 10 years, vs. the 2-year to 10-year yield curve.
    …

    1. The Fed has thoroughly bamboozled the bulls by buying down the short end of the yield curve.

      Once again, with feeling: with the Fed panicking and buying up everything in sight, including accepting toxic-waste collateral from TBTF banks at par in the repo market, yield curves and the bond market are no longer reliable indicators of what’s going on under the hood in these rigged, broken, “markets.” There are literally no more true price discovery instruments left, only the Fed and its deranged liquidity pumping. “Invest” in these Ponzi markets at your own risk.

    1. fictitious

      I’m not so sure after the ABC/Disney Epstein coverup expose. Some very rich and powerful people could be seeking protection from a continued Trump administration.

  32. ‘The Marshalltown Mall will join the online auction block on Nov. 19. Commercial real estate company Ten-X Commercial in California listed the property with a starting bid of $900,000. Ten-X sales executive Henry Buehrle said the auction will run for a full 48 hours. Whether or not the final bid is accepted by the owner depends on whether or not it meets the reserve price. Buehrle said the reserve price is not released. He also said there is a $10,000 auction participation deposit.’

    “The participation deposit is a safeguard,” Buehrle said. “If people do not have that in place, they cannot bid.”

    ‘Another safeguard on the auction is participants are capped as to how much they can bid depending on their declared assets.’

    “In traditional real estate there are quite a few situations where people are falling out of deals,” Buehrle said. “Buyers remorse is a thing and we are trying to eliminate that.”

    ‘After the auction ends and if the winning bid is accepted by the anonymous owner, the auction winner will have two hours to sign a purchase agreement which Ten-X will email. The auction was confirmed by Boh Kurylo, agent of the Lerner Company in Nebraska, the business which manages the mall. However, the owner of the mall is an anonymous New York City investment company.’

    ‘A representative of the owner, Yura Mitskevich, said the company is selling all of its out-of-state holdings.’

    https://www.timesrepublican.com/news/todays-news/2019/11/marshalltown-mall-up-for-auction/

    1. ‘SWANSEA, MA — This custom-built Swansea home features a media room, lavish landscaping with a waterfall, a jetted tub in the master bedroom, a new roof and a large garage with workshop space.’

      ‘Features: Owners retiring..moving south, hence drastic price reduction: Live the life!’

      https://patch.com/massachusetts/seekonk-swansea/1-brookridge-cir-swansea-wow-house

      CHATHAM, NJ – WOW HUGE PRICE REDUCTION!!

      https://patch.com/new-jersey/chatham/price-chop-chatham-74k-noe-avenue-home

        1. Orlando Business Journal
          Florida developer faces foreclosures for office, Isleworth
          mansion – Orlando
          Foreclosures have been filed for more properties relating to Abdul Mathin — the … once wowed Central Florida’s real estate community with the proposed $400 …
          8 mins ago

        2. Good article on Tesla. This race to the bottom of local cities and states offering huge tax abatements to attract new businesses strikes me as problematic. Certainly not just a Tesla problem, we saw it profoundly with Amazon shopping the entire country with its HQ2. Perhaps a federal law should be put in place to prevent the types of beggar-thy-neighbor policies that strip out revenue needed to fund local services.

          Tesla could greatly ameliorate the housing problem it has created in Reno if they would just make a decent sprinter-van with an electric battery!

    2. “In traditional real estate there are quite a few situations where people are falling out of deals,” Buehrle said. “Buyers remorse is a thing and we are trying to eliminate that.”

      Good luck with that, Buehrle. As the cratering gathers force, would-be knife catchers and greater fools are going to start seeing the light and bailing out of RE commitments en masse.

  35. “I’ve read that some nurse aides to the elderly tend to hustle their clients in order to “rewrite their will.””

    Oh, yes, some of them do. And they’ll play them for tips and gifts, too. The care provider shortage is so acute, some states are waiving the mandatory background checks/bans on persons with criminal histories from working with vulnerable populations. For those reasons, the states/Medicaid will pay a family member to be the care provider, and encourage it as the first option before having a stranger come into your home.

    A woman my sister knows became a care provider after divorcing her husband. Her plan had been to get alimony and child support and move back down South to live off her ex’s payments. The whole neighborhood provided evidence in court to help her hubby prove her unfitness as a mother, so that didn’t work out. Instead, she began providing care for seniors in their homes, giving them sob stories and collecting tips and gifts from her patients who fell for her lines. One well-to-do old codger was a former Harley guy, so she claimed she was a diehard biker who’d been forced to sell her bike due to hard times. She was hoping he’d leave her money in his will. Instead, he left her one of his older, cheaper bikes. She was FURIOUS.

    2. states/Medicaid will pay a family member to be the care provider

      In CA, the program is called In-Home Supportive Services (IHSS). It requires Medi-Cal eligibility, certification from a licensed health care professional, and an in-home visit.

  36. the states/Medicaid will pay a family member to be the care provider They couldn’t pay my sister’s family members enough to do that, since she has so alienated everyone by her behavior prior to her stroke. Learn more about it by Googling “white matter disease” and “loss of executive function”. I now believe her brain has been going downhill big time even 15 years before her obvious stroke.

  37. By the way, my sister is soon going into an office for 5 hours of neuropsychological testing, so that the rest of us might get a handle on how best to help her.

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