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When It Comes Time To Sell, The Market Is Often Unforgiving

A report from Inc Magazine. “To find the most overpriced cities, GOBankingRates combed through data on the nation’s 722 biggest housing markets, comparing median listing prices in 2019 (through November) to Zillow’s estimate of median home value, which is based on actual sales. Then it identified the 50 cities with the biggest difference (in dollars) between the two. What does it mean when homes in a city are being listed for much higher prices than they’re actually selling for?”

“A third possible explanation is that prices in your market are falling, or about to start falling. Realtor.com noted in May that, although average home prices in the U.S. were up for the previous 12 months, one in five American cities was seeing falling prices. In some cases, such as San Jose and San Francisco, the price drop simply reflects the fact that prices in recent years had risen to stratospheric levels that–not surprisingly–proved to be unsustainable.”

“Like much of the San Gabriel Valley, Arcadia benefited from a lot of foreigners buying U.S. homes. The area has been especially popular with Chinese buyers. But a slowdown in China’s economy combined with the trade war and anti-immigrant rhetoric in the U.S. has slowed China’s Southern California buying binge. It also means many of the homes purchased by Chinese nationals now sit unoccupied. According to Redfin, home prices in Arcadia have fallen 10.7 percent since last year, and homes take an average 67 days to sell. Rather than buy a home in Arcadia, it might be worth trying to get one of these absentee owners to let you house-sit.”

“‘It’s Now a Buyer’s Market in Manhattan Real Estate,’ declared a New York Times headline in October. The story went on to say that a decline in foreign buyers along with a new tax on luxury apartment purchases has cooled the real estate market there, bringing prices down by 8.2 percent compared to a year ago.”

“It’s clear that the real estate market in Dallas has cooled, although it’s not clear whether that’s just a reversion to normal pricing or something more. Redfin figures show that Dallas home prices have fallen a precipitous 39.7 percent since last year, whereas according to a D Magazine piece published in July, prices are still increasing, just more slowly than before.”

From Bloomberg. “In the mid-1990s, a wealthy family commissioned architect Steven Holl to build a country house on 33 acres in the Catskills. The result was a bright red, 2,900-square-foot house in a Y shape that cost about $1.3 million. Eventually though, the family began to spend all its time in Europe. It decided earlier this year to put the house on the market. Its asking price is $1.6 million, or about 20% less than was poured into the property 23 years ago.”

“Raj Kumar, a broker representing the property, and the owners of the property are encountering the sobering reality of selling a ‘starchitect’-designed home: They might have gotten what they paid for in their house’s dramatic lines, luxurious materials and prestigious pedigree, but when it comes time to sell, the market is often unforgiving.”

“Unlike most houses that languish on the market, many of these properties are not examples of faulty design, undesirable markets, or owners with unreasonable expectations of making a large profit. Instead, in multiple instances, sellers often hope simply to recoup their building cost. In other instances, it’s not a question whether homeowners will sell for less than it cost to build the house; it’s how low they’re willing to go. Take a 10,561-square-foot house designed by Rafael Vinoly in Ridgefield, Connecticut.”

‘The house’s original owner spent more than $25 million between design and build,’ says Laura Ancona, a broker who represents that home. When its original owner died, her heirs left it to Fairfield University, which, after a few years, put it on the market ‘and sold it for a fraction of its value,’ Ancona says. The closing number in 2012, according to Zillow, was just $2.7 million, well below the listing’s initial asking price of $10 million.”

“The property’s buyer quickly put it back on the market for $25 million, presumably in the hopes of making a quick profit. It failed to sell. Now it’s back on the market – this time including an adjacent house on 11.23 acres for a total of $9.75 million. ‘When we listed it for $25 million, it was indicative of what (the seller) would have parted with it at the time, and now the price is indicative of his increased motivation,’ Ancona says.”

“If the house sells for its current asking price, it will have lost more than half its value in 30 years, and that doesn’t factor in any value for the second property thrown in.”

From Patch McLean in Virginia. “This architectural masterpiece in McLean could set the standard for fine homes in the region. According to the realtor.com listing, the Peacock Estate may be nearing a sale. HUGE $1.5M PRICE REDUCTION! Priced to MOVE IN for the holidays! MOTIVATED SELLER.”

From 6 sq ft in New York. “So what’s in store for the year ahead? ‘My overall feeling about 2020 in terms of real estate is to expect more of the same in 2019, with perhaps more hesitation to pull the buying trigger. Oversaturation of unabsorbed inventory with more inventory to be released will lead us to inventory sitting on the market. I think things will hold steady and remain a buyer’s market. I find there is lways uncertainty around an election year, no matter who is running. I think this will cause a lot of buyers to sit further back and wait to see how things shake out’, Jessica Swersey agent with Warburg Realty.”

“‘Inventory will tighten as the amount of pipeline supply has slowed several consecutive years and inventory will hold pricing as a result. However, I think concessions will continue to sell off the ‘panic inventory’ and this could have a long-lasting impact,’ – Josh Schuster, principal of Silverback Development.”

This Post Has 51 Comments
  1. ‘one in five American cities was seeing falling prices. In some cases, such as San Jose and San Francisco, the price drop simply reflects the fact that prices in recent years had risen to stratospheric levels that–not surprisingly–proved to be unsustainable’

    My, that sounds like lending could be a bit wacky out there? What say you crow-breath Thornberg?

    ‘Like much of the San Gabriel Valley, Arcadia benefited from a lot of foreigners buying U.S. homes. The area has been especially popular with Chinese buyers. But a slowdown in China’s economy combined with the trade war and anti-immigrant rhetoric in the U.S. has slowed China’s Southern California buying binge. It also means many of the homes purchased by Chinese nationals now sit unoccupied. According to Redfin, home prices in Arcadia have fallen 10.7 percent since last year’

    Ah yes, the “all cash” Chinese geniuses take one a$$-pounding after another.

    1. “…one in five American cities was seeing falling prices.”

      San Diego is apparently among these…see my mathy post yesterday if you have any doubts.

      Meanwhile, just to our north:

      39. Escondido, California

      Median list price in 2019: $624,533.65
      Median home value in 2019: $538,070
      Difference between list price and home value: $86,463.65

  2. ‘It’s clear that the real estate market in Dallas has cooled, although it’s not clear whether that’s just a reversion to normal pricing or something more. Redfin figures show that Dallas home prices have fallen a precipitous 39.7 percent since last year’

    Oh dear…

    1. “Redfin figures show that Dallas home prices have fallen a precipitous 39.7 percent since last year”

      No bubble there! Lack of foreign buyers likely has no rile in the decline as well. Probably a mix issue with a side of low inventory causing this seasonal (rounding up) 40% minor decline… looking forward to watching that witch Olick spin this one

      1. Yeah, it’s at least partly a mix thing. But what we do know is, like other cities, builders have slashed prices close to existing shacks. And they build more new there than anywhere else.

        Greater Dallas went nuts with the flipping. Time to pay the price.

        1. Looking forward this manifesting in Ca ;). Most of my comment above was /s. I blame the money launderers and specuvestors 100%. Take them away and we have a rational RE market. Hope they cant maintain or unload there oiggy banks and lose everything!

    2. This one city’s crater probably just wiped out all of the GSEs’ razor thin capital buffer. Oh well, at least it was cheaper than renting.

  3. ‘put the house on the market. Its asking price is $1.6 million, or about 20% less than was poured into the property 23 years ago’

    ‘a 10,561-square-foot house designed by Rafael Vinoly in Ridgefield, Connecticut…The house’s original owner spent more than $25 million between design and build,’…The closing number in 2012, according to Zillow, was just $2.7 million’

    Dang, this shack gambling thing is trickier than we’ve been led to believe.

  4. What I am thankful for this holiday season: my apartment.

    I live in a top floor corner unit with no shared neighbor walls, this is the quietest place I have ever lived. My rent includes heat and hot water. I can warm up my car in my designated parking spot in the morning without worrying about it getting stolen. I live in a security / buzzer building, nobody can just walk inside without a key or getting buzzed in. My building has almost no amenities and does not allow pets. This combined with it being just far enough from neighborhoods desirable to millennials and hipsters means that I don’t worry about steep rent hikes. I haven’t mowed a lawn or raked a leaf in 15 years.

    What do the majority of loanowners all have in common? Worrying about money, worrying about money, worrying about money. I never worry about money, because I have so much money left after “throwing money away on rent” every month that I don’t know where to throw it.

    P.S. Realtors are liars.

    1. +1

      Im thankful for not paying HOA nazis, not paying any maintenance on my shelter, not paying property taxes, having the option to move anywhere i want at anytime.

    2. Love it! This gem is up for sale near me:
      https://www.coldwellbankerhomes.com/ma/southborough/22-a-lovers-ln/pid_34072265/

      Has a long history of legal battles, including the builder and Realtor sleeping together:
      https://www.metrowestdailynews.com/article/20110626/NEWS/306269754
      https://www.metrowestdailynews.com/article/20130602/NEWS/306029742
      http://archive.boston.com/news/local/massachusetts/articles/2011/04/01/family_imprisoned_in_a_home_of_horrors/

      The moral of the story? Realtors are Liars, and every closing a crime scene. Always.

      1. The hell? I can’t tell if the place was unfinished or stripped by gangbangers. And the outside is fugly. Someone doesn’t know about proportion. Even my house has more curb appeal than that.

        1. You should see the street it’s on (Street view doesn’t do it justice). It’s one of those typical New England, 1 way (where the other person has to pull into the dirt to let you pass) roads. It’s a swampy, gross, wooded area. Why anyone would plop a million dollar shack (now worth half that), on such a disgusting street, is beyond me. I’d rather rent forever. It did have an overhang over the front door, but it fell off.

          Peak American excess right there.

          1. “It’s a swampy, gross, wooded area.”

            They probably have one heck of a Spring run-off with their basement leaking and getting moldy.

    3. I live in a nice SFH with a garage and basement in a good neighborhood, and pay less in rent than most apartments are charging for single rooms. Several of my neighbors are divorcees who have had to rent out rooms to make ends meet. No thanks.

      1. “Several of my neighbors are divorcees”

        That sounds like a loanowner problem.

        Look at the Facebook or Instagram (with a barf bag) of loanowner couples or families over the holidays. The forced smiles and conspicuous consumption can’t hide the fact that the majority of them are drowning in debt, living paycheck to paycheck, or worse yet going even deeper in the hole every passing week.

        Anywhere there is a mortgage involved with a relationship, most of them have stopped having sex with each other, one or both are cheating, they hide debt from each other, and they’re likely headed for a divorce within 5 years.

        Debt and love don’t mix, but some of us (especially the enlightened readers of the HBB) know that these people are living a lie.

        1. “they hide debt from each other, and they’re likely headed for a divorce within 5 years.”

          I was lookin’ for loans in all the wrong places
          Lookin’ for loans in too many faces
          Searchin’ their eyes
          Lookin’ for traces
          Of what I’m dreamin’ of
          Hoping to find a friend and a loaner
          I’ll bless the day I discover
          Another heart lookin’ for loans

          https://www.youtube.com/watch?v=FAyDmJvjxbg

  5. Instead, in multiple instances, sellers often hope simply to recoup their building cost. In other instances, it’s not a question whether homeowners will sell for less than it cost to build the house; it’s how low they’re willing to go.

    Mr. Market doesn’t give a rat’s ass about how much money FBs sank into their shacks, or their greedhead wish prices. The market value of your shack is determined solely by how much a credit-worthy buyer is willing to pay.

  6. When its original owner died, her heirs left it to Fairfield University, which, after a few years, put it on the market ‘and sold it for a fraction of its value,’ Ancona says.

    Sounds like sour grapes, Ancona. But that “fraction of its value” is now the new market value. Sorry about that fat commission you had to forego.

  7. “But a slowdown in China’s economy combined with the trade war and anti-immigrant rhetoric in the U.S. has slowed China’s Southern California buying binge. It also means many of the homes purchased by Chinese nationals now sit unoccupied. According to Redfin, home prices in Arcadia have fallen 10.7 percent since last year, and homes take an average 67 days to sell.”

    The poor, poor Chinese knifecatchers. They are so hosed. Such a pathetic bunch of loosers!

  8. My wife’s cousin and her husband managed to get out of their Bethesda McMansion last spring and park the proceeds in a retirement abode in the backside of the Wasatch Front before the crater gained steam. We visited them a few years ago when a full-blown mania was underway, as evidenced by home renovation projects run wild throughout their neighborhood.

    1. Bethesda, Maryland
    Median list price in 2019: $1,219,050
    Median home value in 2019: $971,090
    Difference between list price and home value: $247,960

  9. Because of the artificial markets , my price discovery is taking 1998 prices + another 10% off for deflation because of lack of wage growth. Than let’s take another 10% off for gutting of stable jobs. Than of
    course take off another 15% for price fixing monopoly prices in health care . Than you might get what a house should go for.

    Further, no faulty lending and you have to put 20% down, with no government backed home loans.

    Interest rates should be raised to 7% Oh ,also a extra tax for foreign buyers to purchase.

  10. And a Merry Impeachmas to all “From the “real reporters” .

    “The amendment defines “real reporters” as “a salaried agent” of a media company such as a newspaper, broadcast news station, news website or another type of news service.”

    Sen. Dianne Feinstein, D-Calif.

    ‘Merry Impeachmas’: Washington Post defends reporter after ‘ill-considered’ tweet sparks bias uproar

    The Washington Post came Thursday to the defense of a reporter who tweeted the leftist taunt “Merry Impeachmas” with a photo showing the newspaper’s smiling congressional team celebrating over dinner after the House vote to impeach President Trump.

    “The reporter who sent out this ill-considered tweet was celebrating being off the clock after a long day covering impeachment,” said Kristine Coratti Kelly, Post vice president of communications, in an email. “She wasn’t celebrating impeachment.”

    Reporter Rachael Bade quickly deleted the tweet, saying her message had been “misinterpreted,” after the Trump campaign and White House accused The Post crew of partisan bias following Wednesday’s vote to impeach Mr. Trump.

    https://www.washingtontimes.com/news/2019/dec/19/merry-impeachmas-washington-post-defends-reporters/

    1. Merry Christmas Jeff!

      In one of the last lucid conversations I had with my father while he was in a rehab hospital before moving into assisted living and dying there two months later, I told him that he and his three siblings (who all died before him) were the last generation of Real Americans.

      It’s very sad, but in a way better off that he didn’t have to continue living through this media circus as scripted by Real Journalists.

      I recently re-read Solzhenitsyn’s The Gulag Archipelago before sending it to a friend as a Christmas gift. This is where this country is headed. Stay strong and keep fighting the good fight!

      1. “Merry Christmas Jeff!”

        Justice Neil Gorsuch Says “Merry Christmas,” Liberals Burst into Flames

        Brian Baker
        Dec. 18, 2019

        Amee Vanderpool
        @girlsreallyrule
        Supreme Court Justice Neil Gorsuch just appeared on Fox and Friends this morning, making a point to parrot the “Merry Christmas” talking point of the GOP. If he’s willing to go on Fox and throw a shout out to Republican narratives, what ele is he willing to do?

        https://www.wibc.com/blogs/chicks-right/justice-neil-gorsuch-says-merry-christmas-liberals-burst-flames

        At risk of smelling like a Trump voter and being accused of spouting a racist talking point, Merry Christmas to you also my friend.

        https://www.youtube.com/watch?v=is4NQkUN3AI

  11. Curious if any others on the hbb are noticing more house auction listings? Mabye end of year clean up? 1/2 or more of recent listings in my area are auctions. Ben, you seem to have eyes on the foreclosure / auction listings, is this wide spread or just Northern California

    1. Yes, Republicans managed to make gay marriages and abortions constitutional rights without constitutional amendments. Oh nevermind.

  12. Don’t let this fake news story worry you one iota.

    The Fed’s Repo Problems are Only Beginning as the Biggest Bubble in History Looks Ready to Pop
    The Fed’s repo problems shed light on where the real dollar-liquidity crisis is brewing: Europe. Deutsche Bank is at the center of the storm.
    Author:
    Tom Luongo @@tfl1728
    Published:
    December 21, 2019 13:00 UTC
    – What’s driving the Fed’s interventions in the repo markets?
    – $500 billion in fresh liquidity is coming over the next month.
    – Major bank failures on the horizon.

    The Fed just held another oversubscribed repo swap on Monday. Banks offered more than $54 billion in Treasuries and mortgage-backed securities against a $50 billion limit.

    The rates paid for these repo contracts were the highest this month. And that says, quite clearly, there is still a dangerous lack of liquidity in U.S. dollar markets.

    Banks are short dollars and their need for them is not abating.

    Last week the Fed announced their repo operation schedule, which will create $500 billion in term repos (swaps lasting more than overnight) to provide a flood of liquidity to keep short term rates from rising.

    1. I am *so* tired of the word “liquidity.” Just call it what it is: signing up for a new credit card to pay the minimum payment on a maxed out card. Just one rollover after another, like freekin TitleMax.

      I must be the only person who plans to pay debt OFF, you know, like when I paid off my car last summer and my credit cards last month and I actually intend to hold a mortgage-burning party. I feel like such a chump.

  13. Are you concerned that a negative rates monster might gobble up all the accumulated equity in your financial HODLings?

    1. How does it feel to be stuck in a liquidity trap of your own design, with no way out?

      Opinion Tail Risk
      Sweden fears it may have created a negative-rates monster
      Central bank raises rate to zero and says it expects to hold it there ‘in coming years’
      Katie Martin
      FILE PHOTO: The sign for Sweden’s central bank is pictured in Stockholm, Sweden, August 12, 2016. Picture taken August 12, 2016. REUTERS/Violette Goarant/File Photo
      The Riksbank’s decision to lift rates reflects growing unease throughout Europe about the side effects of life in the monetary freezer © Reuters
      Katie Martin
      December 19, 2019

      You have to tip your hat to the Riksbank.

      The Swedish central bank has been the canary in the monetary coal mine for years, exasperating analysts by pushing benchmark interest rates way below zero even while the economy was roaring ahead, and keeping them there even while it openly fretted about a housing bubble. Now the bank has raised rates, dragging them higher just as the economy is starting to weaken, citing fears that it may have created a monster.

      “If negative nominal interest rates are perceived as a more permanent state, the behaviour of economic agents may change and negative effects may arise,” it said.

      The Riksbank’s movements from here will be closely watched by nearby rate-setters, who are puzzling over how to end the increasingly tricky experiment with negative rates.

      To be clear, Sweden is not exactly offering high yields at this point. The rise has simply taken rates to zero. What is more, the bank said it expected the rate to remain at zero “in the coming years”, so this is not the start of a cycle of rises. Indeed, some believe the Riksbank will end up cutting rates again if the economy keeps deteriorating.

      Still, this is Sweden’s first move out of negative territory in almost five years and it reflects growing unease throughout Europe on the nasty side effects of life in the monetary freezer, which is still occupied by Switzerland, with a benchmark rate of minus 0.75 per cent, and the eurozone, where deposit rates are still minus 0.5 per cent.

    1. That cover shot of Lake Merritt seems out of place for this “average price” of Oakland real estate story.

  14. The tsunami of FedBux that created Housing Bubble 2.0 will soon run up against the “silver tsunami” as Boomers who own one in three shacks will be forced to sell their shacks for various reasons to younger generations that in our oligarch-looted economy won’t have a hope in hell of paying Boomer greedhead wish prices.

    https://www.marketwatch.com/story/these-housing-markets-will-feel-the-biggest-impact-from-the-silver-tsunami-2019-12-02?mod=mw_latestnews

    1. younger generations…won’t have a hope in hell

      If they wish to avoid despair, they should avoid debt.

  15. Obama is hyping Warren to big donors. Apparently, Bernie has never been accepted into the globalist club and even Obama knows that Biden is not playing with a full deck. People wonder why Obama, Bush and Clinton can all be such friends, the answer is obvious, they all promoted globalism. Now like used car salesmen their talking points vary based on the target but the goal remains the same. Bernie and Trump are not in the globalist club. Unfortunately, Bernie has changed on immigration, the old left knew that immigration depressed wages but his view on trade and billionaires keeps him out of the club.

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