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We Have This Expanding Inventory And There Just Aren’t Enough Buyers

A report from the Wall Street Journal. “Actor Bruce Willis and his wife have sold their country estate near Bedford Corners, N.Y., for $7.66 million, or 41% off its original listing price. The 22-acre property came on the market in January for $12.95 million. The Willises paid about $12 million for the property in 2014.”

From Mansion Global. “Sentiment can’t get much worse for New York City’s high-end home sellers than it was in 2019—that seems to be the feeling among the city’s real estate professionals. The top of the market remains the most vulnerable to further price declines in 2020 as demand fails to keep up with a glut of new luxury condo development.”

“Even in a year when Los Angeles recorded a stunning half-dozen deals over $80 million, 2019 proved La La Land is not immune to overdevelopment and overpricing. ‘There’s been quite a lot of supply of homes that are aspirational in pricing. That has left too much inventory,’ said independent luxury broker Ben Bacal. ‘There are almost 200 homes on the market priced between $10 million to $30 million. That’s a big number; three years of inventory.'”

“It’s also created a clear opportunity for buyers in the market for a contemporary glass-encased spec home, of which there are many. ‘There’s been a lot of speculative building,’ said Stephen Kolter, CEO of Douglas Elliman’s Western Region brokerage. ‘In many cases, builders bought the dirt three years ago when pricing on the for the dirt was higher.'”

“Overbuilding in certain pockets of the Bay Area’s luxury housing market will hand savvy buyers opportunity next year. San Francisco is coming off a robust 2019, when a series of giant market-disrupting companies went public and funneled billions into the city, including high-end real estate. That infusion of wealth will likely peter out in 2020, leaving the city with more luxury condos than buyers can readily absorb, said Patrick Carlisle, San Francisco-based chief economist at Compass.”

“‘The weakest segment of the market is the ultra-luxury market,’ said Mr. Carlisle, who defined it conservatively as condos over $3 million. ‘We have this expanding inventory of gorgeous magnificent condos, and there just aren’t enough buyers.'”

“At the moment, there are some 10 to 20 condo listings for every buyer, which ‘does not create a big sense of urgency,’ he added. ‘That was unheard of two years ago.'”

“Turbulence in Miami luxury home prices, which have fallen or stagnated for most of the past three years, continues to turn off potential home buyers while an abundance of inventory leaves genuine house hunters with no sense of urgency. ‘We’ve been so overpriced over the last two, three years in so many different segments people, are confused. Especially for out-of-town buyers, there’s a question of what is it really worth?’ mainland Miami-based broker Madeleine Romanello said. ‘Buyers only want to pull the trigger on homes that are priced correctly.'”

The Bakersfield Californian. “After months of delays, a path appeared to clear Monday toward a new future for Sundale Country Club in southwest Bakersfield. At a public auction held at 10 a.m. Monday on the steps of Bakersfield City Hall, no one stepped up to bid on the financially troubled golf course, and as expected, the ownership was transferred to the purchasers of the club’s debt, a partnership that includes Bakersfield businessmen Girish Patel and Jay Patel.”

“The opening bid — which received no responses — was $1.251 million plus one dollar. ‘Ownership reverted back to the lender,’ Jay Patel said Monday. ‘We are the lender, basically.'”

The Press of Atlantic City in New Jersey. “One of the most cheerful sights this month had nothing to do with the holidays. More than 200 people gathered in Atlantic City to enthusiastically bid on 195 typically small properties being auctioned. This scene wasn’t possible for more than a decade. Interest in city real estate started plunging in 2006 with the collapse of the U.S. housing market. That set off the severe recession of 2007-2009, costing many their jobs and homes. Many more abandoned houses no longer worth anywhere near the mortgages they were paying.”

“In New Jersey, the courts halted and then slowed foreclosure processing, in part in response to reports of improper documentation by lenders. The state soon led the nation in percentage of homes in foreclosure. Atlantic City was hit hard again in 2014 by the closing of three casinos. By the next year, it had the highest foreclosure rate of any U.S. metropolitan area.”

“After the New Jersey Judiciary’s Special Committee on Residential Foreclosures recommended ways ‘to ensure a timely foreclosure process while upholding due process rights,’ the Legislature passed and Gov. Phil Murphy signed a package of nine bipartisan reforms to foreclosure processing. Among them are foreclosure mediation, getting vacant houses to a sheriff’s sale within 60 days of a foreclosure judgment, and disclosing who is responsible for maintaining properties in foreclosure.”

“The timing looks very good for the bidders at the auction of city properties this month. With no expectations of another recession at the national level and the city slowly turning around, the properties they bought — some in the $5,000 to $50,000 range — may look like incredible bargains someday.”

“It’s reassuring to see the good part of the economic cycle being used to strengthen individuals, the city and the county. The best time to counter the next inevitable downturn is during the good years after the last.”

This Post Has 58 Comments
  1. ‘the properties they bought — some in the $5,000 to $50,000 range — may look like incredible bargains someday…It’s reassuring to see the good part of the economic cycle being used to strengthen individuals, the city and the county’

    When people walk away from a loan they can’t pay, it’s good for the economy. When people get a shack for cheap at an auction, it’s good for the economy. When lenders take an a$$-pounding for reckless lending, it’s hilarious.

    1. ‘sold…for $7.66 million, or 41% off its original listing price. The Willises paid about $12 million for the property in 2014’

      Still no bubble WSJ?

      After everything that’s happened, how difficult would it be to acknowledge that there was a bubble in luxury housing and that it has burst? The REIC could still claim there’s no bubble elsewhere. Isn’t it curious that there’s pretty much a MSM blackout on the idea of a mania in luxury when it’s undeniable by now?

      1. “Isn’t it curious that there’s pretty much a MSM blackout on the idea of a mania in luxury when it’s undeniable by now?”

        Keep ’em stupid, and profit.

        Not reading a newspaper will cause you to be uninformed, reading a newspaper will cause you to be misinformed.

        The uninformed (if he has any sense) will realize he is uninformed and will act accordingly and with caution.

        The misinformed will not realize he is misinformed and will act accordingly and with confidence.

      2. still wonder why a couple sells in 2-3-4-5 years at a big loss when there is no divorce in sight? Bedford corners has a good location its not out in the boonies where you can easily get lost

          1. Bruce Willis is worth $250M. I doubt he cares about keeping a job.

            My guess is that Willis is 64 and just wants to simplify his life instead of jetting from mansion to mansion. And it wouldn’t surprise me if Trump’s new ceiling on the SALT deduction is behind a lot of these sales, especially in tax-heavy New York State. $5+ million is not a lot to lose compared to years of property taxes and hired help.

    1. A noted economist stated, “If you paid more than $500 for an acre of land, you paid too much.”

      Years ago in her day my grandmother said $10 was top-dollar for an acre of irrigable land.

  2. We have an anniversary:

    Saturday, December 11, 2004
    Subprime Lending Surges

    “Overall, new originations of subprime mortgages totaled an estimated $375 billion through the end of September, a figure that marked a 63 percent year-to-date rise. Putting that number into perspective, one out of every six new residential mortgages made this year has gone to a credit-impaired”..borrower.’

    The link for the first months archives:

    http://thehousingbubble.blogspot.com/2004/12/

      1. I think I found this blog in early 2005 when my wife was asking…

        How come we can’t buy a house when (name 5 couples) did and they don’t make anymore money than we do.

        My answer of …

        I don’t know but I know we can’t afford a $400k or $500k house.

        Was wearing thin when I asked…

        How do you turn that computer on and how do you ask it a question.

        About 3 hours later I found The Housing Bubble Blog and I looked like the Seinfeld actor at the end of the 0:51 video below.

        https://www.youtube.com/watch?v=Lj7trS_SYkc

    1. Mortgage lending
      Subprime subsidence
      Parts of America’s mortgage market are in turmoil. Some on Wall Street see this as an opportunity. Others are biting their nails
      Finance and economics
      Dec 13th 2006
      | new york

      1. That article represented the tipping point of the subprime implosion. By the summer of 2007, the Markit ABX subprime mortgage index was trading at pennies to the dollar, and Ben Bernanke was reassuring anyone who would listen to him that subprime would be contained to $200 bn.

      1. And I was wondering where all my friends were finding the $60K downpayment (heh) for a $300K condo in Tyson’s Corner. Little did I know…

    2. Some problems never seem to improve:

      Monday, December 13, 2004
      The Unsustainable California Housing Market
      The California Association of Realtors has put out a report on the gap between incomes and home prices in that state. “California households, with a median household income of $52,940, are $55,370 short of the $108,310 qualifying income needed to purchase a median-priced home at $462,510 in California, according to the…Homebuyer Income Gap Index”.

      1. The good news: According to Uncle Fred, California median income is up to the low seventies, a 40% increase over 2004 levels.

        The bad news is that the California median home price is now reportedly at an all-time high, somewhere north of $600,000.

        California’s median home price jumps 6% to $605,280
        Sales rise 1.9% in October
        November 18, 2019, 6:30 pm By Kathleen Howley

        The median price for a single-family home in California jumped 6% in October from a year earlier.

        The state’s median home price was $605,280, more than double the U.S. median, according to the California Association of Realtors. California home sales rose 1.9% compared with October 2018.

      2. “California households, with a median household income of $52,940, are $55,370 short of the $108,310 qualifying income needed to purchase a median-priced home at $462,510 in California“

        So the standard is now a 4x + annual income? Guessing that has to do with the lower interest rates? 2 1/2 – 3x is what i recall but what do i know as there are plenty of strawberry picker waged FBs qualifying for 10-20x income to price loans. This all seems very sustainable, its different this time…

        1. It’s misleading to compare median house price to median household income. The bottom 35% of households almost all rent. It’s better to compare the median house price to median income of the buyer pool – that is, to the median income of the top 65%. That brings the standard closer to 3.5x income. At 4% interest, a frugal couple can cover a PITI for 3.5x income. It’s not ideal but it’s doable.

          1. Ox: people forget you can live today in a lot less space then 10 years ago. due to the digitization of almost everything. I had 2500 cd’s now maybe 300 all on hard drives in full wav files….easy access who really need massive numbers of bookcases full of books dvds vhs etc. and dont forget records those vinyl lps….. most of my 6000 were sold over the years to other dj’s even to a few 18 year olds who wanted to experience the joys of spinin’ vinyl……… so where is the need for 4-5 bedroom McMansions anymore?

  3. I guess if you are Bruce Willis a 5 million dollar loss is no biggie. How nice for him and his lovely wife. I don’t understand why someone would buy a huge estate like that and then sell it a few years later but, what do I know….I’m a lowly renter.

    Here in greater Bostonia, as the aforementioned long-term renter I faced several unsolicited queries from relatives and friends in recent weeks and over holiday gatherings re: “How long have you lived there? You’ve been there a long time, huh? Do you think you’re going to buy a house (condo)? What are you waiting for? Prices are just going to continue going up, up, up! It’s different here….”

    “But, but, but I’ve saved a lot renting and I actually like renting”.

    Sorry, if you’re not a member of our club, we will continually remind of your non-club status and that you just don’t belong! (What is wrong with you, you pathetic silly fool!)

    No one asks a mortgage holder how long they’ve been living there or how much interest they are paying over a 30 year period as they rent from the bank. Yet I am continually forced to justify and explain my renter status. One (well-meaning) relative told me emphatically that if I bought a house “your life will improve dramatically”. I had not reported that my life needed improvement but I guess if I do buy a house, then my life will be rosy and complete, perhaps overnight!

    It’s an interesting (yet annoying) phenomenon to observe and experience.

    When I bring up the Fed, historically low interest rates, asset inflation, the “everything bubble”, I get befuddled blank stares, more concern and condescension and “No, not here, that won’t happen here. Prices are just going UP”.

    Oh well, maybe they are right. Only time will tell. Happy New Year!

    1. New year’s resolution: find some new friends and dont waste your time or effort with the ignorant relatives or, if you feel so inclined, point them to some factual data that they cant argue (tons on the hbb). I am in a similar situation and do not engage in conversation with the sheeple mindsets. Luckily most my family and friends are aware of the mania that has led us to this bubble and often come to me for advise. I have a couple recent knife catcher friends who are already under water and struggling financially and have joined the club of FB shame. They dont engage in conversations about RE nor do I rub it in their faces, only a little 😉

      P.S. Realtors are liars, happy holidays!

      1. Thanks, good advice! I have a few more holiday gatherings to get through, and I am quite convinced that RE will come up. As I am a polite, civilized person who does not offer unsolicited advice to other adults, I will refrain from rubbing it in their faces that I am just as wealthy as they are (in some cases, even wealthier) and I have zero debt.

        “Oh, but being a saver is so yesterday! Debt is where it’s at, didn’t you know? ”

        Not only that, but I don’t have to worry about ice dams, gutters, assessments, HOAs ruling my life, or annoying neighbors that I can’t easily get away from! 😄

          1. It’s a big topic around here, and I seem to encounter continual discussions about houses and real estate in most of my circles.

            I know at least four people who used to rent apartments in their houses but now they do AirBnB and that’s a hot topic. If you’re a renter (like me) during these conversations, you encounter thinly veiled pity, mild disbelief and predictably, unsolicited advice. And why not? Property “values” have doubled in many cases since 2012.

        1. I rented a long time before buying too.

          The question I always ask is — what are you planning to do when you retire and your income drops? Do you plan to save enough money renting to buy a house outright when you retire? Do you plan to put so much away that your retirement income will not significantly drop when you stop working, such that you can continue to pay rent? Do you plan to move somewhere cheaper and continue paying cheap rent? Some combination?

          As long as you know how you’re going to pay your housing bills when you’re older, there’s nothing wrong with renting or buying to please yourself.

          FYI, in my area, rent was increasing such that buying was actually cheaper than renting. When I retire, I plan to sell and use the proceeds to buy something cheaper outright.

    2. I guess if you are Bruce Willis a 5 million dollar loss is no biggie.

      He is allegedly worth 200M. While a 5M loss won’t bankrupt him, I’m fairly certain he isn’t thrilled with the loss.

    3. “ Prices are just going to continue going up, up, up! It’s different here….”

      I hate people in Boston… this is where I pull out the FRED chart and show them how twice in the last 30 years, Boston has had dips and was not immune to 2008. 1988 took 10 years to return to the same nominal pricing. The hot job market means housing is more susceptible to losses with a downturn.

      “your life will improve dramatically”.

      By endlessly dealing with maintenance and repairs. When I ask them how much they’ve spent in repairs over the years on their 100 year old shacks, I usually get blank stares too. I also ask if they think the fed can squeeze another 10-fold increase in 30 years via interest rates, and explain how equities and other investments have much better return horizons. That’s usually when the response turns emotional like: “but don’t you want to OWN something?”. No, not particularly. I sold near the peak of this bubble and am content renting for the foreseeable future while those Yellen Bux work for me elsewhere.

      1. Exactly. Why don’t you want to OWN? Because I like the freedom of renting, I have cheap rent, I’ve saved a LOT of money and I like my neighborhood. Yes, maybe it’s not forever but it’s OK for now.

        Last year after divorce, one relative sold a house (in NV) and rented (cheaply) for about 9 months before she bought a condo because “you’re paying someone else’s mortgage”. She had to “own” as she couldn’t stand being in lowly renter status. In 2018 she paid double for what the condo sold for in 2013, with no major upgrades.

        Maybe I’m the idiot here but the rapid doubling of prices in a short time period seems “bubbly”.

    1. As loan delinquencies go parabolic, credit is going to tighten, all right. Way too late. Then when investors belatedly figure out that the Fed is intent on printing away all government and corporate debt, and start refusing to buy U.S. treasures at the current pathetic yields, that’s when things are going to get real.

  4. I wonder if this will have any effect on a co-workers spouse who is making a killing in LA selling 10M dollar flips? I’ve had enough bragging about 100 dollar truffle pizza STG

    Even in a year when Los Angeles recorded a stunning half-dozen deals over $80 million, 2019 proved La La Land is not immune to overdevelopment and overpricing. ‘There’s been quite a lot of supply of homes that are aspirational in pricing. That has left too much inventory,’ said independent luxury broker Ben Bacal. ‘There are almost 200 homes on the market priced between $10 million to $30 million. That’s a big number; three years of inventory.’”

  5. “Sentiment can’t get much worse for New York City’s high-end home sellers than it was in 2019—that seems to be the feeling among the city’s real estate professionals.

    Those REIC shills are a sanguine bunch, at least in public. But here’s a news flash: you ain’t seen nothing yet.

  6. The opening bid — which received no responses — was $1.251 million plus one dollar. ‘Ownership reverted back to the lender,’ Jay Patel said Monday. ‘We are the lender, basically.’”

    Properties going bid-less at auctions – oh dear. You’re not just the lender, Jay. You’re the bag holder. Lucky you.

    Say, is India a non-extradition country? Asking for a friend.

  7. California is the most impoverished state in the country:

    “In a state with the world’s fifth largest economy, an IPO tech boom, and some of the richest people on earth, California’s severe affordable housing shortage has become what advocates describe as a moral failing and public health emergency.

    Los Angeles experienced a 16% increase in homelessness this year, with a total of 36,000 people now homeless across the city, including 27,000 without shelter. San Francisco’s homeless count surged 17% to more than 8,000 people. There was a 42% increase in San Jose, a 47% increase in Oakland, a 52% increase in Sacramento county and increases in the Central Valley agricultural region and wealthy suburbs of Orange county.”

    https://www.theguardian.com/society/2019/dec/26/theyve-turned-their-backs-on-us-californias-homeless-crisis-grows-in-numbers-and-violence

    1. “It’s a bold fashion choice, that’s for damn sure.”

      It has “Look at me!” written all over it. Designed and marketed for very insecure buyers, as are many things.

  8. If he hadn’t before Michael Moore has truly reached WTF status.

    Michael Moore: White People “Are Not Good People,” “You Should Be Afraid” Of White People

    Posted By Ian Schwartz
    On Date December 26, 2019

    “Two-thirds of all white guys voted for Trump. That means anytime you see three white guys walking at you, down the street toward you, two of them voted for Trump. You need to move over to the other sidewalk because these are not good people that are walking toward you. You should be afraid of them,” Moore warned.

    Moore joked that the “other guy” with the group of three whites are people “like him” that didn’t vote for Trump.

    “We’re traitors to our race, that’s how they see us,” Moore said of pro-Trump white people.

    https://www.realclearpolitics.com/video/2019/12/26/michael_moore_white_people_are_not_good_people_you_should_be_afraid_of_white_people.html

  9. He either needs Moore or less drugs. The one out of three white guys are either on drugs or need to be.

    1. Had considered opening an Irish pub style place with Mexican food called Juan Moore. Sure it’s been done already.

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