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Everyone Knows Prices Are Tumbling

A report from the Wall Street Journal. “Builders are on track to finish more new apartments in 2020 than in any year since the 1980s, a new study shows, with developers across the U.S. chasing after the more affluent tenants. An additional 371,000 new rental units are expected to hit the U.S. market this year, which is a 50% percent increase over the number of new units completed in 2019, according to RealPage. In some of the largest metropolitan areas, like Houston and Los Angeles, the number of new rentals in 2020 will more than double last year’s figures for new supply.”

“But as much as 80% of new supply this year will come from luxury developments, or what the real-estate industry calls ‘Class A’ properties, said RealPage chief economist Greg Willett. ‘A lot of these properties are competing for a small group of renters,’ Mr. Willett said. ‘A typical renter can’t afford this brand new product.'”

“‘Land prices are expensive’ said Cyrus Bahrami, a managing director of Houston developer Alliance Residential, which has built several luxury rental buildings there in recent years. ‘It’s very difficult financially to make sense of building a cheaper product.’ RealPage’s Mr. Willett said that the potential oversupply in high-end developments is likely to lead to some price concessions for the most expensive apartments.”

The Bellingham Herald in Washington. “Rent increases appear to be slowing down in Bellingham, with median rates starting to drop in some situations, according to Zumper, which looked at December active house and apartment listings in Bellingham and other Washington cities. It’s possible that supply is finally starting to catch up with demand, particularly with apartment construction. According to data from the city, permits were issued for 1,011 residential units in 2019, making it the highest issuance level in at least a decade. This comes on the heels of a busy 2018 in terms of residential permit activity in Bellingham.”

From WTOP in Washington DC. “The D.C. area’s housing market has entered the winter doldrums, and for buyers, that might just be a good thing. Redfin said the number of sales with multiple offers on the table nationwide is at a 10-year low right now — and only about 9% of Redfin-represented buyers in D.C. faced competing bids in December. So, maybe an offer that’s not quite full price will get some traction right now.”

“‘Competition will heat up in the spring. Early this year could be a really good time to make a move on a house,’ Redfin chief economist Daryl Fairweather told WTOP. ‘You might still get it for under list price, and you might get some favorable conditions on it, like not having to waive any contingencies.'”

The New York Post. “Everyone knows the apartment condo-sale picture is bleak. Prices are tumbling. So much inventory has built up that Halstead Development Marketing estimated it could take six years for developers to completely sell them.”

The San Francisco Examiner in California. “A December survey completed by the U.S. Census Bureau raised the eyebrows of those who’ve been ignoring The City’s biggest real estate open secret: despite our city’s well-documented chronic housing shortage, San Francisco has 11,760 homes that are vacant. That’s not units that need to be built; that’s nearly 12,000 existing properties whose owners choose, for a variety of reasons, to leave them empty. This is not a new phenomenon by any measure. San Francisco has a tradition of vacant properties. As insane as it may sound to not capitalize on the most overheated rental market in the United States, there are a number of reasons why owners leave houses empty.”

From Homes and Property on California. “Michelle Pfeiffer and her TV producer husband have sold their San Francisco estate for £16.9 million. The Hollywood actress originally listed the place for £22.7 million in 2018 but agreed to drop the price for a mystery cash buyer.”

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This Post Has 65 Comments

  1. I had to cut this short as I’m headed to an auction. One shack I looked at was bought with a down-payment assistance loan a year and a half ago. Then the owner got a 20k foreclosure assistance loan and still bailed. This is what happens when you loan with nothing down.

    2. 18 months from sale to auction? That’s fast — certainly better than during the bust years. Why aren’t we hearing any MSM stories of kiddie beds being thrown on the sidewalk?

      The buyer must not have made a single payment. And what happened to the $20K foreclosure loan? $20K is enough for at least another year of payments. Did the buyer make off with it? To many people , government is a thing that you hoodwink cash out of. It’s ok to cheat if you get away with it, because that shows you were smarter. But if the gov denies you, then you can pull the rac card. This is one reason I red pilled.

      2. ‘The buyer must not have made a single payment’

        That’s what it looks like. Didn’t pay the HOA either, until the 20k rolled in. Vacated by at least last May, per the winterization notice on the window. A very brief turn at the casino.

        1. A lot of HOAs are in for a world of hurt, between the broke new FBs and the longtime owners facing skyrocketing monthlies. I’ve noticed more than a few foreclosures in CA where the HOA fees have’t been paid for YEARS. Often the HOA is the only party interested in actually foreclosing.

      3. Q: What is something that poor people do that when a rich person does it, it seems clever?

        A: Get $$ from the government.

    4. Ha ha

      Millions, I mean millions of homes are a paycheck away from foreclosure. That should give anyone a pause about the so called rebound.

  3. From the Bellingham, WA piece: “It’s possible that supply is finally starting to catch up with demand, particularly with apartment construction.”

    Bellingham has experienced an Equity Locust invasion from people leaving the Olympia, Seattle, Tacoma and Portland, OR regions. North and West Bellingham are where the newer modern housing exists. Around the university are the older smallish homes that are cold and moldy most of which are rented to students for a premium. The winters there a very wet, and today there is a wind storm bringing icy single-digit Canadian air into the region through the Fraser Gap.

    1. With millions of new immigrants each year, they gotta go somewhere. California isn’t even the first choice on the list anymore.

  4. “The median home value in 92104 is $580,860. 92104 home values have gone up 3.0% over the past year and Zillow predicts they will rise 1.5% within the next year. The median list price per square foot in 92104 is $607, which is higher than the San Diego average of $476. The median price of homes currently listed in 92104 is $600,000 while the median price of homes that sold is $530,300.”

    ” Zillow predicts they will rise 1.5% within the next year.”

    So there are money trees in the backyards of all these San Diego homes?

    1. North Park has gotten trendy. When I moved here, aside from small patches, North Park was a dump. You could by the little craftsman cottages for less than 200k. Now they throw up some paint and throw down some laminate flooring and sell them for 600k$. The schools there are still pretty bad and you are never too far to walk to buy crack.

  5. A lot of the info (and comments) I am seeing on this blog are anecdotal. I am a huge housing bear, but I’d like to offer some anecdotes from where I sit.

    (1) My mother in law’s house is in a prime Bay Area zip code and the Zestimate is $2.85 million. Granted, that is down from $3.46 million, but there’s no concern up there.

    (2) A sister in law bought a way-too-expensive 50-year Bay Area ranch (in another, different prime zip code) in 2006. It appears they took money out of that home to buy another, more expensive home (of course) and paid $2.08 million for it in early 2016 (and they rent out the first home). Over $3 million in mortgage debt, but Zestimate says the second home is $2.5 million. No concern on their end either.

    I live in a prime south Orange County zip and homes go for $1.3 million to $2 million in my neighborhood. I’m not seeing much if any loosening – and definitely no concern.

    Just saying a lot of the comments on here are ‘doom & gloom’, but a lot of data sources (and my anecdotes) do not support / are not congruent with what I mainly read here.

    1. I’ll add: when we moved back to So Cal, there was no way I was buying into this credit bubble, so we leased an ‘executive’ home. When we moved into it a little over 4 years ago, it Zillow’d for $1.2 million and some change. Then it went up to $1.4 million, and now it is back to $1.2 something. Surely that is ‘loosening’ from the $1.4 million peak, but no one seems to care around here….and $1.2 million is still *a lot* of money.

      1. I am a huge housing bear

        You tell them TOM! I can’t believe all these loser renters… They could have brought houses in 2018 or 2019 but they’re too scared. What a bunch of morons. And these millennials living on the teets of mom. What sore, bitters losers who can’t even buy houses in Prime South OC for 1.2 millions? Come on! You ALL missed the boom. Get over it. Buy NOW or forever be priced out. Get ready to live in tent cities for goods.

        1. Socal Jimbo john dave tom is that you! Missed you buddy! Remember: money is free, housing only goes up, renting is throwing away money, leave you doors open with the heater and/or AC on, IPO millionares are lined up to buy your shack. FREE!!!

    4. “It appears they took money out of that home to buy another, more expensive home ”

      So after 14 years, what is the principal balance (+equity withdraw loan$?) owed on the 1$t ( …bought a way-too-expensive 50-year Bay Area ranch)?

    5. No worries$ Tom, all’$ well, that end$ well!

      The world is drowning in debt

      By Anneken Tappe, CNN Business |January 14, 2020

      New York(CNN Business)The world’s already huge debt load $mashed the record for the highe$t debt-to-GDP ratio before 2019 was even over.

      In fact, it broke that record in the first nine months of last year. Global debt, which comprises borrowing$ from household$, government$ and companie$, grew by $9 trillion$ to nearly $253 trillion$ during that period, according to the Institute of International Finance.

      That puts the global debt-to-GDP ratio at 322%, narrowly surpassing 2016 as the highest level on record.

      Despite favorable borrowing conditions, the refinancing ri$k is ma$$ive. A total of more than $19 trillion$ of $yndicated loan$ and bond$ will mature in 2020. It’s unlikely that all of these will be refinanced or repaid.

    6. Last year this time the market was dead in the water. But the interest rate slashing and loosening of lending standards definitely turned things around in my neighborhood. Flippers are still very active and prices still seem to be pushing historic highs….again. So I’m a monkey’s uncle. The ability of the central planners to extend these bubbles confounds me.

        1. It seems the current bubble is an all or nothing game. Last time the tech bubble burst six years before the housing bubble. This time everything seems to be cresting at the same time. So if the bottom falls out the measures required to “save” the system will be that much more extreme. No doubt it will involve handing over more power to the central planners to fix the problems they created the last time they got more power.

    7. there’s no concern…no concern…no concern

      Hopefully for your family, lack of concern will protect them from what is unfolding.

    8. Well, Tom, it’s kind of like 2006 all over again, so of course you’re not going to see massive price declines – we’re near the pinnacle peak in most markets. What you can’t dispute is the information, and it looks really ugly from all angles:

      1) House prices completely detached from incomes
      2) Sales volume drying up
      3) Inventories building
      4) Subprime lending in all markets, with deteriorating loan quality
      5) All time high rental rates which still don’t even remotely support purchase prices. 30% down won’t even cash flow.
      6) Year over year prices flat to declining

      1. Here in SLC you need to put $70,000+ down on for a 60-100 year old used house and hopefully get $1,500 a month in rent. Rents are sideways here since 2016, and tens of thousands of new apartments were opened last year with tens of thousands more planned this year.

        Household income barely exceeds $70,000 here. Not sure how many have the salary to support $400,000+ mortgages, but hey, I’m just an idiot renter with a savings account.

        I’m sure all these landlords are banking money and growing that sweet equity.

      2. Another marker of pinnacle peak:

        7) A recent influx of magazine articles, books, blog posts, etc. about “what it means to be a man,” the state of Manhood and (toxic) masculinity in the US, what it means to provide vs. going MGTOW, and the measure of manliness as a function of the ounces of consumed soy.

        The last time I saw this level of macho meta was in the mid-1990s, when men were holding retreats in the woods to discuss “Iron John” and find their inner child. Such navel-gazing is a LUXURY, something to do only when the economy is good, very good. Nobody does this crap when they are hunkering under the radar and praying to keep their jobs. Just that it’s gone this far is a clear indication that something is about to pop, and soon.

        1. MGTOW had to look that up . I think or at least read that this is common in Japan.
          Today I looked out on all the new landscaping, new furniture in the lobby, all the Penny mac’ers running around ( share a big building with them and a few other companies) and what I saw looked like the peak of the Bubble. Plus our stock is at a all time high that reminds me of 1999 another lifetime riding another high tech bubble.

    9. Anecdotal info is useless. If you bought last year in San Mateo or Santa Clara counties. Today, you are probably under water.

    10. As one noted economist so eloquently stated: “I can ask $50k for my beat up, 10 year old Chevy pickup, but where’s the buyer at that price?”

      And as another exclaimed: “Get what you can for your house today, because it will be worth less tomorrow, and for decades to come!”

      They’re both right.

  7. One more comment about ‘data’ that I saw on here: someone posted (in the past week) how a Bay Area zip code was down 15%. They listed a Zillow link as their source. I went to the link, and followed the directions, and it turns out that -15% was for 1 bedrooms….c’mon….that is not a good proxy. I’m glad it was down at all. But ‘noisy’ data is not very helpful.

    Another example listed San Mateo in the Bay Area. Sure enough, their reference / listed data checked out. But Movoto did not agree with Zillow, and not even close. Again, if data is noisy, it is much less relevant / solid.

    2. Dude, ignore Mafia Blocks, but the truth is, even with a good economy and low interest rates, SFBA prices are trending down (down >5% yoy). Yes, houses are still selling, but it’s taking longer, and often with price reductions.

      Now imagine if the “tech” (really, advertising/electric car/taxi/WeWork/food delivery/big data/self driving car/AI/whatever) bubble bursts….and there are signs, I just read an article about “top 10 AI companies that went bust in 2019” ( “It’s just about having great technology; you need to have paying customers”)

      1. Dude, ignore Mafia Blocks

        Like clockwork. Every few months someone chimes in about his links.

      2. Dude, ignore Mafia Blocks

        I think he figured that out already.

        What I’m seeing in my little burg are slowing sales and stagnant pricing. This time around there was a lot less new residential construction than during Bubble 1.0. We aren’t even close to what the panic years were like back then, with big price reductions. I’m still seeing “Under Contract” signs popping up, though they do take longer. No more list it and get a bidding war and go under contract in a week. Now it takes a month or two.

          4. Newbies giving too much credence to your headlines rather than Ben’s ample evidence.

            Advice for newbies: Install drumminj’s Joshua Tree extension on your browser and you can filter out the useless posts from the attention hungry trolls.

          5. And as always, as our host indicated today, “Everyone Knows Prices Are Tumbling”

            Exhibit A:

            El Dorado Hills, CA Housing Prices Crater 10% YOY As Housing Vacancy Rate Hits Multi Decade High

            https://www.zillow.com/el-dorado-hills-ca/home-values/

            As a noted economist advised, “Why buy a house when you can rent one for half the monthly cost. Buy it later after prices crater for 70% less.”

  8. “‘Land prices are expensive’ said Cyrus Bahrami, a managing director of Houston developer Alliance Residential, which has built several luxury rental buildings there in recent years.

    Not as expensive as regret, Cyrus.

  9. despite our city’s well-documented chronic housing shortage, San Francisco has 11,760 homes that are vacant. That’s not units that need to be built; that’s nearly 12,000 existing properties whose owners choose, for a variety of reasons, to leave them empty.

    The Moms 4 Housing occupation of an empty investor-owned house in Oakland could be a watershed moment if other Gimme Dats follow their example and start helping themselves to vacant housing. As the corporate wing of the Democratic Party loses ground to progressives, such takeovers are going to have political top cover in an increasing number of cities, which will only accelerate the trend. Meanwhile, vulture capital firms are going to discover that all those distressed shacks they hoovered up for future resale are going to need around the clock security, which is going to eat into their profit margins and make such “investments” much less attractive, especially if communities like Oakland start mobilizing against them.

    https://sanfrancisco.cbslocal.com/2020/01/14/after-release-on-bail-moms-4-housing-activists-plan-to-return-to-oakland-home/

    Singer would not say if security has been increased at the company’s other Oakland properties.

    “Wedgewood is really focused on this one incident,” he explained. “We’ve never had something like this happen before, we hope it never happens again. No one likes to have their property stolen and no one likes to have to go to the sheriff to have people evicted.”

    Off camera, a number of other companies told KPIX that they are aware of the incident and take any number of precautions to secure vacant properties. But those empty homes have become the focal point of Oakland’s housing movement.

    1. “We’re placing a fence around the property,” said Wedgewood spokesman Sam Singer. “We’re putting security guards inside of it. We’re hoping that the individuals who have been evicted from the home go away peacefully.”

      The house flipping company that owns the home called it a peaceful conclusion. Moms 4 Housing called it a victory.

      “This ain’t gonna stop!” exclaimed Cross. “That’s a temporary fence. It’s not in the concrete. Anything built up can be broken, just like this system.”

      Hear that, Wedgewood? You and your fellow vulture funds better start recalculating the long-term costs of holding and guarding all those vacant shacks in an increasingly hostile community environment.

      1. They could also, you know, mitigate those holding costs by renting out those properties.

        I suspect there’s more profit in keeping them off the market to drive up demand.

  10. $helter.$hack “True.Believer$” about to $uffer from U$ury modification$. Adeste Fideles (O Come All Ye Faithful)

    Politic$
    Turkish Clerics Defy 1,400 Years of Edicts With Home Loan U-Turn
    Bloomberg |By Cagan Koc | January 15, 2020

    Ruling challenges hundreds of years of religious thinking
    Most pious Muslims think high-intere$t loan$ are forbidden

    Turkey’s top Islamic authority is challenging 1,400 years of religious thinking, with a new ruling on the fraught topic of u$ury.

    According to the High Board of Religious Affairs, interest on home loans doesn’t violate Islam’s proscriptions against u$ury as long as the loan comes from a Turkish $tate bank and goes to buy a home in a government hou$ing project.

    The majority of pious Muslims believe there is no room for interpretation when it comes to Islamic beliefs forbidding lending money at high interest rates. But the board maintains that in the case of government housing, interest rates aren’t sinful because the main purpose is to help low-and-middle-income citizens instead of earning interest income.

    Home sales rose by more than 200,000 units in December, a record going back to 2013. The increase was spurred by lower loan rates and pent-up demand after a currency crisis in 2018 hit the housing market.

    Opposition parties allege the admini$tration is a $lush fund that mask$ the di$tribution of government ca$h to Erdogan $upporters in the con$truction indu$try. The government says the agency has helped hundred$ of thousand$ of lower-income$ families buy their own home$.

  12. Incoming new narrative via Rachel Maddow tonight: Giuliani and friends conspired to kidnap or murder US ambassador to Ukraine. 🙄

  13. Our median price in Reno fell 63% during the last bust, from $365,000 to $135,000. Calling it an absolute slaughter would be putting it mildly. Now, prices are much higher than last time and for a much longer duration. Things are so nutty that vacant lots are listed (certainly not selling) at close to $500,000 in some instances, in a town where a $15 per hour warehouse job is considered a “good paying job.” The median now stands at roughly $400,000.

    It is my opinion that Reno is the biggest real estate bubble in the entire United States. It’s not just CA locust money, it’s CA speculators, too. When CA starts running up, they pour their money into Reno. Unfortunately, Reno has none of the industry that CA has, so the prices are straight whack. Sure, there’s Tesla, Amazon, Walmart, etc. out near Fernley, but most of those jobs are, again, of the $15 per hour warehouse variety.

    Rents have inflated so high that just a space in a trailer park for an RV is approaching $1,000. Then, you get to live next to MS13 types, the opioid addicted, the drunks, etc. An errant gunshot penetrating your RV while sleeping wouldn’t be surprising, nor would anything going missing from your car, etc. – or an assault on your person just walking around such unseemly environs. I have seen these places from the street and they do not look inviting whatsoever. It’s very tough for these people.

    Meanwhile, the local chuckleheads who run things are giddy with delight as if Reno is the IT city in the country, because Tesla don’t you know…. They celebrate the rising median price as if it’s some sort of grand achievement. “Hey, our house prices have skyrocketed, we made it!!” Homelessness has absolutely exploded. The riverbanks are loaded with people, both men and women, sleeping outdoors along the banks. You can get lost in the willows and have a little bit of privacy, especially if you want to shoot up. I’ve never seen needles like I do now. They are now littering all the once beautiful outdoor areas, parks and even the parking lots of the strip malls, like the druggies park there late at night when the shops are closed, or something.

    When will this all end? I don’t know. How? Again, I don’t know. But it has to. It is completely unsustainable, and has led to the degradation of the entire area.

    1. Can we send Moms 4 Housing there? Yo there’s a lot of vacant properties by evil billion dollars corporation B*tches LOL

    3. Thanks for the summary. We haven’t heard much about Reno this bubble, but it sounds pretty grim.

  14. Hello, REALTOR.

    I can easily “qualify” for a used house loan in Denver with over 20% down on a 15 year note but I won’t buy. Not all of us are howmuchamonth loosers who can’t math. The price is just too high, and I don’t want it and will not buy it.

    Eat ramen while I renew my lease, @ssholes.

    1. Testify, Brother 401. Can I get a “Hallelujah!” in the house?!!

      And the people said, “Amen!”

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