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Sellers May Take A Loss But Their Need To Move On Is Stronger Than Their Desire To Achieve An Unattainable Number

A report from the Australian Financial Review. “Dixon Advisory’s ailing US property fund has told investors it is writing down the value of its assets by up to 30 per cent, blaming a weak New York real estate market, development losses and a recent reversal of favourable currency moves. The US Masters Residential Property Fund, or URF, made the disclosure before it completed its six-month property appraisal process, triggering a near 25 per cent plunge in the unit price of the ASX-listed trust.”

“It cited general weakness in New York City housing conditions for a 6 to 8 per cent write-down of its properties over the period. The 30 per cent write-down comes as the URF’s new management is in the middle of a sell-down plan aimed at cutting the fund’s high debt levels and addressing the widening discount between the unit price and the net asset value.”

“The URF’s Monday update said there were several reasons for the weakness in New York area real estate, including lower levels of homeowner demand and an increase in supply of stock on the market from a period of high construction. Increases in the so-called ‘mansion tax,’ changes to rent regulation and tax changes also hit the market, forcing write-downs. Median sales prices of homes in New Jersey family homes fell by 8.7 per cent over six months while volumes were up 29 per cent, the statement said.”

“The value of its property assets was reduced by 6 to 8 per cent, but decline in the NAV, at between 13 and 18 per cent, is greater due to the debt gearing of the fund. Another contributor to the write-down was expected losses on four of the five outstanding development projects. This was after management determined it would ‘revalue these assets to reflect current market conditions.”

From Patch New York. “Luxury markets north of New York City, all distinctive and unique, ended the year on a mixed note, according to the Houlihan Lawrence Luxury Market Report. In Westchester, Putnam and Dutchess counties, buyers showed a value-driven mentality at the high end and a conservative attitude towards real estate, company officials said. The ultra-luxury segment of the market, $5 million and higher, was level with 2018, but a sharp drop in selling prices made 2019 look very different from 2018. Most ultra-luxury sales took one or more price reduction and sold on average 26 percent off the original list price.”

“‘The new decade ushers in an election year which is likely to impact luxury sales in the second half as buyers wait to see what the next four years will bring,’ said Anthony Cutugno, Senior Vice President and Director of Private Brokerage for Houlihan Lawrence. ‘For sellers who are truly motivated to sell, now is the time to take an objective look at pricing and presentation, adjust as needed, and enter the spring market with a too-good-to-resist offering.'”

“Sellers who listen to the market arrive at a realistic value that closes the gap between list price and selling price. Sellers may take a loss but their need to move on is stronger than their desire to achieve an unattainable number.”

From Greenwich Time in Connecticut. “According to a Greenwich market report put out by Houlihan Lawrence, home prices dipped in 2019 because ‘value oriented buyers cautiously waited for market sensitive pricing before negotiating deals.’ ‘Overpricing a home dramatically bloats the selling timeline as one or more price reductions take time to attract buyers,’ the report stated. ‘On average it took more than 230 days to sell a home in town last year.'”

“Mark Pruner, a town resident and Realtor at Berkshire Hathaway Home Services, has been a longtime observer of the local real estate market. ‘While lots of people want to get into Greenwich for under $1 million, and we traditionally have a seller’s market, in 2019 we saw fewer sales, down 35 sales, and more inventory, up 21 listings at the year’s end, under $1 million,’ Pruner said. ‘So while it’s still a seller’s market it was the weakest we have seen at that end of the market. So it’s a better time for buyers.'”

The Denver Post in Colorado. “From 2015-18, the time a home spent on the multiple listing service in metro Denver averaged a consistently short 26 days. But last year, that average jumped to 31 days, according to the Denver Metro Association of Realtors. And as the year came to a close, nearly 45% of the homes that sold had to make a price cut, lengthening their time on the market to an average of 70 days, versus only 15 days for those that priced correctly.”

“Effectively, if buyers liked a home’s price, it sold in about two weeks. If they didn’t, a seller could count on two months of agonized waiting. Chalk that up to buyers flexing some newfound market muscles. Buyers are struggling with affordability and ‘want more for less’ and sellers will need to ‘do more to get top dollar,’ Jill Schafer, chairwoman of the DMAR Market Trends Committee told a crowd of Realtors.”

A press release on California. “There is one thing to be sure about in the real estate market. The market is going to change back and forth between buyers and sellers markets. This is true no matter what location in the U.S. you live in. Real estate agents in Thousand Oaks California, the Wire Team, have seen this change recently within the past year. This means more homes are sitting on the market stagnant than in previous times. For a seller, this can be a difficult and trying time.”

“A buyers market means those looking to move into the area have a larger selection of homes to choose from and can be much more selective in their home buying process. This also means that the chances of buying a home at a lower price is equally good. ‘If there is someone needing to move, they are willing to do almost anything to get the home sold. It is rare, but some will take a loss to do it,’ continued Wire.”

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This Post Has 84 Comments

  1. ‘The value of its property assets was reduced by 6 to 8 per cent, but decline in the NAV, at between 13 and 18 per cent, is greater due to the debt gearing of the fund’

    Well what do you know? Leverage works in reverse too.

    BTW, the Denver UHS are a silly bunch. This horse-hockey story they tried to put together about “power struggle” with buyers and sellers doesn’t make sense. What I do know is they told us it was to the moon Alice! and it obviously isn’t. Why would 40 something % cut prices if it was a month of inventory?

    3. Leverage works in reverse…

      writing down the value of its assets by up to 30 per cent

      Apparently it is a very short fall from there to insolvency.

  2. ‘For sellers who are truly motivated to sell, now is the time to take an objective look at pricing and presentation, adjust as needed, and enter the spring market with a too-good-to-resist offering’

    You tell em Tony, get to slashin’ greedy sellers!

    I’m backed up with CRE links and need to post some Canadian stuff. Maybe later today.

    1. Ben do you think the increase in the number of sources/links you’ve been seeing is a sign that we’ve hit a major inflection point a few weeks ago?It feels like there is a major increase in volume in news of the bubble- not as a theory but as something that is truly beginning to burst

      1. I was in the second half of 2018 I started to see an increase of articles with price declines outside of NYC and Miami, which seemed to be spreading disease like. I dubbed it the ebola. It was consistent enough that I redid this blog to be more friendly to mobile devices, etc.

        It’s my theory that the REIC had run out of subprime tricks and thus run out of buyers. Giving Mel Watt the boot accelerated the trend.

          2. The time frame on declining prices is glacial. We’re looking at probably 5 years until we get back to prices that incomes even remotely support.

          3. probably 5 years

            A credit bubble like this has never been seen before and it was 40 years in the making. Might be a whole flight of stairs to fall down. That household income thing might be a falling target as well once the defaults start cascading.

          4. It took 6 years from last peak to trough in the markets I’m familiar with. January 2006 was the pricing pinnacle, January 2012 was the floor. I know it’s hard to imagine an exact replica, but it’s really all I have to go off. We’re still at peak pricing around here, so it’s hard to imagine any deals for at least 5 years. Further, the last bottom was artificial, so it’s really difficult to guess what might transpire this time. In the meantime, the roads, restaurants, stores and everything else are packed.

          5. the last bottom was artificial

            artificial

            There’s the thing. It wasn’t a real bottom. Perhaps we’ll get a better look at reality this time? The longer this artifice stuff goes on, the uglier reality gets.

        1. Generally prices have to fall YOY before the press will stop covering it up. The giveaway is when UHS switch from telling buyers they’ll be priced out forever to lecturing sellers on not being greedy. And of course this played out in the luxury/expensive segment first.

  3. I am getting out of Florida specifically the west coast Tampa Bay area. Years ago it was somewhat of a paradise but that time has long past. The traffic, environmental degradation, terrible humid heat that seems now to last 10 to 11 months out of the year, lower taxes but the trade off is crappy state roads and other sub par services, the list goes on.

    2. And the locusts move on…

      Imagine what Florida will be like in 20 years. I never understood why anyone would want to be there. But then, while at Disney World, I went to its nature preserve area, and looked out over an expanse with not a strip mall in sight. Oh, so that was it!

    3. The bugs alone are a show stopper for me. I can only imagine how much pesticide Disney must go through in a single day. Heck, they even have to trap and relocated gators on their property.

    4. “…The traffic, environmental degradation, terrible humid heat that seems now to last 10 to 11 months out of the year…”

      I went to Disney World for a business conference and could not even believe the humid conditions. (Was early June, I believe).

      Weekend, rented a car and drove to Daytona Beach, just in time to witness the local police taking down a suspect in the parking lot for attempted armed robbery.

      I remember asking myself “People actually want to live here?”

      Another time, another conference, this time in Hollywood, Florida. Well known global brand beach front hotel. Just 50 feet from front door, you are greeted by hookers and what I think were the local gangsters looking for some naive tourist to scam. Went inside and bought an overpriced beer from the *hotels own gift shop*. For the very first time in over 50 years of holding a credit card, it was scanned an within 1 hour more than $11,000 of gift cards in small $700+ increments that were sent to Nigeria or Ethiopia. (I have a pretty decent credit limit). Notified VISA immediately and they did reverse charges, no hassle.

      Maybe other parts of Florida are nicer? Not holding my breath.

      2. I remember asking myself “People actually want to live here?”

        I asked myself the same question the last time I was in Orlando, and I didn’t experience any crime. And hoo boy, when it rains there, it rains!

      1. Bruh, that song’s about Hawaii. My mom worked for Timothy B. Schmidt in the 70s there. The rest of the Eagles were there a lot.

        1. And the song looks pretty prophetic if you go there now. Born there, love it, and the tragedy of what the MIC and welfare have done to it make it the most beautiful indian reservation in the world, with every connotation that word suggests.

    6. In Michigan we have high property taxes, a not-nothing state income tax, 6% sales tax AND awful roads subpar services! It’s a real wonderland and house prices anywhere that’s not a total backwater range from “seriously ?” To “no effin’way really?!“.

    7. I agree with you on the Tampa escape. I escaped to coastal California 21 years ago. Graduated high school, packed my car and headed west . Best decision ever. Tampa was ok 20 years ago and I lived and grew up on Lake Carrol. I visit now and can’t last 3 days and have to get back to California.

  5. “Sellers who listen to the market arrive at a realistic value that closes the gap between list price and selling price. Sellers may take a loss but their need to move on is stronger than their desire to achieve an unattainable number.”

    I get the feeling that many suburban homes may end up in estate sales down the road. Because their owners don’t “need to move” and won’t give it away.

    The key metric is how many homes that poorer later born generations cannot afford do the Boomers have, how fast are they selling, and how fast will they be selling based on the actuarial table.

    Same thing for stocks.

    Boomers now ages 56-73. Those under 62 are poorer, more like Gen X. The even richer “Silent Generation” is age 74 and up — age 90.

    In ten years, those under 72 are poorer, and many of those older are gone.

      1. missed the pension

        That boat might have sailed earlier. I started working as a professional in the ’70s and worked for some major corporations. None of them offered a pension of any sort. The 401K was born in 1978.

        1. …. and the boomer demographic ship sailed long ago. It’s strange they’re still talked about as if they’re relevant.

        2. Some employers still did offer them, before phasing them out, usually in the 90’s. HP and IBM come to mind. Never firms, like Apple, Oracle, Intel, MS, etc. never offered them to begin with.

        1. FRONTLINE investigates the role of state governments and Wall Street in driving America’s public pensions into a multi-trillion-dollar hole. Marcela Gaviria, Martin Smith, and Nick Verbitsky go inside the volatile fight over pensions playing out in Kentucky, and examine the broader consequences for teachers, police, firefighters and other public employees everywhere.
          https://www.pbs.org/wgbh/frontline/film/the-pension-gamble/

          1. I still say the actuaries never anticipated how well the anti-smoking campaign worked from 40% to 13% meaning a longer life……millions who should have died are still collecting monthly checks……..and they never raised the retirement age for full payout until it was too late…i know a contract is a contract..

          2. I still say the actuaries never anticipated how well the anti-smoking campaign worked

            The fatpocalypse should offset that.

          3. That story was misleading. Underfunding was the problem in Kentucky, but not NYC. Retroactive pension increases were the problem here.

            Who screwed you varies from place to place.

      1. Tesla has gone parabolic. It makes no sense because they haven’t even reported any good news.

          2. I don’t pretend to understand what’s going on, but a company who holds 1% market share yet is valued more than GM and Ford combined doesn’t pass the smell test.

          4. a company who holds 1% market share yet is valued more than GM and Ford combined doesn’t pass the smell test.

            Nothing has passed the smell test for 15 years. It started to clear out there for a little while about 8 or 9 years ago and then quickly got worse.

        2. They’ve started production in China. Perhaps that has some people all excited.

          On the fraudulent green subject, it appears poor Greta’s tweets have been ghost written. How Dare You!

          1. On the fraudulent green subject, it appears poor Greta’s tweets have been ghost written.

            Makes sense. Somehow I thought that whole machine was big enough and smart enough to use someone that wasn’t a parent.

          2. “On the fraudulent green subject, it appears poor Greta’s tweets have been ghost written. How Dare You!”

            Do you have a link for this?

          3. Nevermind, I found it. What kind of parent would use their kid like this? Absolutely despicable.

          4. The whole thing was orchestrated by Hollywood. They already have a movie about her planned.

            About all the alarmists have left to resort to at this point is violence and destructive actions, both of which they already have some experience with (ELF).

            There are sensible ways to be good stewards of the planet that don’t need full-scale redistribution of wealth.

        3. Elon’s new squeeze that he just knocked up is maybe 20 years younger? I think he already has 4 kids from his wife. Its like we’re watching a slow motion train wreck.

          Link to one of her music videos – I think she’s mocking the club culture
          https://www.youtube.com/watch?v=1FH-q0I1fJY

          I’ve never heard Musk say anything that struck me as intellectually impressive. Strikes me as a con man.

          1. My biggest problem with him and his company is the losses. If it were a sustainable venture, I’d give him kudos.

          2. with him

            If he marketed it as fun and nerdy, that would be fine. Unfortunately he has pitched an endless series of deceptions to the gullible.

          3. My biggest problem with him

            Consumer fraud, securities fraud, accounting fraud, embezzlement. RICO?

        4. It makes no sense because they haven’t even reported any good news.

          I read somewhere the the Model 3 is the best selling EV, outselling all other EV’s combined.

          If it wasn’t for that pesky “unprofitable” thing.

  7. Seattle, WA Housing Prices Crater 16% YOY As Housing Demand Plummets On Rising Mortgage Defaults

    https://www.zillow.com/seattle-wa-98101/home-values/

    *Select price from dropdown menu on first chart

    As a noted economist said, “I can ask $50k for my run down 10 year old Chevy pickup but where is the buyer at that price? So it is with all depreciating assets like houses.”

    1. Funny, I remember that video from here in 2008. What a spectacular series of bad decisions.

      By the way, you don’t pay the IRS $3000 in taxes on a $10,000 loan from your 401K. She must have defaulted on that and had it converted to a distribution.

  9. “Sellers who listen to the market arrive at a realistic value that closes the gap between list price and selling price. Sellers may take a loss but their need to move on is stronger than their desire to achieve an unattainable number.”

    Denver REALTORs, please starve and DIE.

    1. Longtime realtors in Colorado Springs and Manitou Springs, who generally have built good reputations over the years, will tell you that most Denver realtors are beneath contempt.

  10. I’ve been a longtime follower of this site and have watched the slow churn of the market. I’ve had related family sell a house in San Francisco last year and also family sell a house near Pasadena last year. Both groups were a few years too late and took considerable price cuts before selling. The house in San Francisco sold for 40% less than asking. I told them four years ago to sell but they all thought I was crazy and it would easily sell. They put it on the market too late and too high and rode it down. I think now is a great time to buy if you are willing to shoulder the flack from sellers saying your offer is too low. I currently have an offer in on a stagnant home that is 30% lower than asking price. I pencil out the cost for me to build today with permits etc,what it can rent for if I need to move , and how much work it needs .Then I offer my price regardless of what the seller is asking.

  11. Is it fair to describe the Green New Deal as an incoherent mishmash of hairbrained Democrat policy proposals?

    …
    The goal of the Green New Deal is to reduce greenhouse gas emissions in order to avoid the worst consequences of climate change while also trying to fix societal problems like economic inequality and racial injustice.
    …

    1. I donated another $20 to Bernie today to sustain the momentum going into Iowa. I disagree with alot of his platform but it’s a small price to pay to give another middle finger to Hillary, Obama, Biden, and the billionaire pedophile owned DNC.

        1. While it does suggest a certain mentality, I have my doubts that cities will burn. They were all going to Canada too and look how that turned out.

    1. Maybe its past time to say, you can camp here, we will put in porta potties and we wont hassle you, but if you sleep over there we will.

        1. “Opponents, who primarily live near the proposed Saxony Road site, said they weren’t opposed to helping homeless people, but said the site wasn’t an appropriate spot because it is located near many homes. The parking lot proposal will likely add traffic to an already congested roadway, increase criminal activity in the area and reduce the value of their homes, they said.”

          Poor baby. Like my realtor always said, housing prices always go up!

    2. The counties seem reluctant to open an area within their fairgrounds to establish a bivouac where hot coffee and meals can be served from a truck especially during the winter months. It’s certainly a vexing problem for elected officials.

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