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Some Of The Pie-In-The-Sky Asking Prices Are Being Trimmed Back

A report from the Detroit Free Press in Michigan. “Remember that too-hot-to-handle housing market in metro Detroit? The one where a nice, well-priced home in Ferndale could get three offers on the table in one day? Well, we’re starting to see listing prices on some homes inch down enough to indicate that we’re settling into a housing slowdown. ‘You’ll probably even get a little bit better of a deal in the spring than you would right now as a buyer,’ said Tim Gilson, associate broker for Keller Williams Domain and the Gilson Home Group in Birmingham. ”

“More likely than not, experts say, this isn’t a temporary blip but a clear indicator that the days of name-your-price bidding wars are likely to be fading fast. There may be more room to negotiate on price in some cases. Some of the more pie-in-the-sky asking prices are being trimmed back here. ”

“Last week, for example, 17 homes listed for sale saw price reductions in the Woodward corridor on homes in a variety of price points, Gilson said. A quick look on Zillow indicated price cuts of $5,000 to $20,000 on some homes in the past few weeks.”

“Of course, most sellers aren’t willing to engage in fire-sale prices, either. Jim Shaffer, operating partner for Keller Williams Domain and Keller Williams Metro Royal Oak, says he’s concerned that some potential bargain shoppers may dwell on the headlines but make unrealistic bids, as a result.”

“Recently, he said, one seller in southern Oakland County dropped a home’s asking price from $250,000 to $225,000. A potential buyer countered at $200,000. After some negotiation, the seller agreed to drop the price by another $8,000 to take the home down to $217,000.”

“But the buyer walked away — unwilling to pay $217,000 for a home once priced at $250,000. ‘Their judgement gets clouded by those news reports,’ Shaffer said.”

The Dallas Morning News in Texas. “Home sales are down this year in two-thirds of Dallas-area neighborhoods. After years of sharp gains in North Texas home sales and soaring prices, 2018 is the year of the housing market shift. Higher interest rates and buyer fatigue are probably to blame for a slowdown in the Dallas area’s frenetic home market.”

“Through the first nine months of 2018, the number of preowned home sales is down in more than two dozen of the Dallas-area neighborhoods The Dallas Morning News tracks each quarter. A year ago, about half that many local neighborhoods had year-over-year home sales declines.”

“The largest double-digit percentage home sales declines this year have come in neighborhoods including Duncanville (19 percent), Fairview (19 percent), Northwest Dallas (17 percent) and Allen (15 percent).”

“Sales are also down in Northeast Dallas (14 percent), Colleyville (11 percent) and Grapevine (10 percent) for the first nine months of 2018 compared with the same period of last year.”

“‘Mortgage rates are a big issue,’ said Paige Shipp of housing analyst Metrostudy Inc. ‘For every 1 percentage increase in mortgage rates, you can buy 10 percent less home. That’s a big chunk of change.'”

“Housing inventories in North Texas have increased this year by about 14 percent. But most of the growth in listings has been at higher price points. ‘We are seeing a lot more competition for buyers at the higher price points,’ where there is more supply, Shipp said.”

“Even with the slowdown in home price gains, a midpriced home in the Dallas area that sold for $175,000 five years ago now costs almost $100,000 more. Toss in the higher mortgage costs, and that means it costs about $560 a month more to buy the same house.”

“The pause in the local housing market should not be seen as a negative, said real estate agent Gary Hulkowich of DFW Re/Max Associates.”

“‘We have needed a market slowdown, and we also have needed higher inventory to stave off multiple offer situations that are driving prices up probably beyond what they should be,’ Hulkowich said. ‘Sellers need to wake up and smell the coffee and price their homes fairly.'”

“That’s especially true if that house sale was last year. The Dallas housing market isn’t where it was in 2017.”

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This Post Has 44 Comments

  1. ‘The largest double-digit percentage home sales declines this year have come in neighborhoods including Duncanville (19 percent), Fairview (19 percent), Northwest Dallas (17 percent) and Allen (15 percent). Sales are also down in Northeast Dallas (14 percent), Colleyville (11 percent) and Grapevine (10 percent) for the first nine months of 2018 compared with the same period of last year’

    Northeast, northwest, it’s Eeee-bola all the way to Oklahoma ya’ll!

  2. ‘one seller in southern Oakland County dropped a home’s asking price from $250,000 to $225,000. A potential buyer countered at $200,000. After some negotiation, the seller agreed to drop the price by another $8,000 to take the home down to $217,000’

    ‘But the buyer walked away — unwilling to pay $217,000 for a home once priced at $250,000. ‘Their judgement gets clouded by those news reports’

    So soon after pie in the sky asking prices, one may be tempted to think 200k is way too much. I can remember reports of Detroit shacks going for single digit thousands.

        1. “…the west coast is falling.”

          It’s about time. Do bubbles normally take this many years to deflate? I can remember predictions that the last gasp of the Housing Bubble would occur in 2013. It’s five years later, and the air has only barely begun to escape.

    3. ‘But the buyer walked away — unwilling to pay $217,000 for a home once priced at $250,000. ‘Their judgement gets clouded by those news reports’

      Was it clouded? Or were they right? I guess we’ll see if the house sells for more than $200k this year as-is. If it doesn’t then they weren’t wrong, the seller was.

  3. “But the buyer walked away — unwilling to pay $217,000 for a home once priced at $250,000. ‘Their judgement gets clouded by those news reports,’ Shaffer said.”

    Why does the average person always need a news report to determine if a market is over-heated. We just went through this 10 years ago, and they must have known housing appreciating was outstripping inflation by a mile. You would think it would be common sense.

    1. ‘Even with the slowdown in home price gains, a midpriced home in the Dallas area that sold for $175,000 five years ago now costs almost $100,000 more’

      This is nothing really. I documented shacks north of Dallas going up 50% from 2012 to 2014, hitting $350,000. Those giant mcmansions way up north start around 700k to 900k. Zero down though!

    2. “they must have known housing appreciating was outstripping inflation by a mile.”

      The way I see it, the housing appreciation IS the inflation. The bust is the correction. Pass the popcorn. Only way this “housing appreciation/inflation” sticks is if we see wage inflation in the next 6 years equal to what the housing “appreciation” was. I don’t think this can happen in a global economy.

      1. Do you really believe wages are going to triple or quadruple to meet grossly inflated housing prices?

        Of course not.

        Housing prices will continue falling to dramatically lower and more affordable levels meeting current wages.

        Irvine CA Housing Prices Crater 9% YOY As Orange County Chokes On Record High Mortgage Defaults

          1. It seems to me that every time prices go down, the square feet reported goes down as well so that the per square foot price actually goes up. Coincidence?

      2. “The way I see it, the housing appreciation IS the inflation. The bust is the correction.”

        The bailout is in the bust. And by disallowing prices to settle down to fundamental, non-speculative value, inflation is baked into the cake in the wake of the recovery.

    3. “Why does the average person always need a news report to determine if a market is over-heated.”

      Because the average person (your term; my term involves the use of the noun “puke”) has been totally so dumbed-down by our oh, so wonderful and progressive educational system that he/she cannot think for him/her self and thus is relegated such absent thinking to the MAINSTREAM MEDIA, which is mainly and mostly controlled by a handful of seriously rich people who, by default, get to call all – ALL – the shots as to the fate that awaits these ignorant schmucks.

      A two step process is involved here regarding tbese pukes:

      Step 1: Dumb ’em down.

      Step 2: Profit.

    4. Maybe there was something wrong with the house itself. Or the buyer wasn’t too hot on the house to begin with. But yeah, listing a house at $250K doesn’t entitle the seller to demand $218K. For all we know the house could be worth $175K or less.

      1. For all we know…

        Without the magical belief that houses generate income from debt, most over sized and poorly built houses aren’t worth much more than an old pair of jeans. People will seek the smallest shelter practical and at the lowest price when the know it’s simply a liability.

        1. Most rational people will. But plenty of people are trying to impress others and “keep up with the Jones”. They also have drunk the HGTV koolaid:

          http://www.vulture.com/2017/09/the-ugliness-behind-hgtv-never-ending-fantasy-loop.html

          “HGTV depends on the dream that has been with us since the saltboxes of New England and the Spanish bungalows of Southern California and the Leisuramas of Montauk: that if you can just get the right house — the one that looks like your friends’ houses look, only a little bit better — your family will pour into it, like thick cream into a pitcher: smooth, fluid, pleasing. Who could get a divorce in a house with so many lush towels rolled up in the master bathroom? Who could raise a sullen teen when there is a “great room” where the family can gather for nachos and football on the big screen?”

  4. Please remember look up while walking near tall structures. Given how fast the markets are turning, there could be jumpers.

    1. It’s still there. But there’s a mouse gnawing on a corner and you should probably sell before it’s worth less.

    1. I guess we should expect those housing markets and the tech stocks, whose geographically proximate companies’ employee salaries fuel astronomical housing prices, to crater in tandem?

      2. Add in the Chinese money leaving these areas…over supply of homes…rising rates…look out below

      3. “…whose geographically proximate companies’ employee salaries fuel astronomical housing prices…”

        Those 20 year old’s who just bought a $$4mm house in Silicon Valley expecting to pay with stock options, just might be getting a bit nervous right now.

        1. I bet I can count those on one hand if they exist at all. Dual income wannabe richies on their 3rd move-up house on the other hand…

  8. If the Fed pauses now in its punchbowl removal process, will market watchers conclude that Powell caved in the face of withering political hostility?

  10. OT… So, a Trump supporter was arrested and charged for mailing pipe bombs to Trump “enemies.” How might this impact the upcoming elections? I’m thinking it’s not good for the Republicans. #MAGAbomber hashtag is already thriving on Twitter.

    1. I’ll be curious to see how this plays out. Mailing incompetently assembled non-functional scary objects does seem more likely to have come from a Pelosi fan who would like to see her with a gavel again. But the number of idiot Trump supporters isn’t zero, so who knows.

  11. Robert Schiller (of Case-Schiller fame) and Joe-somebody were just on CNBC power lunch. They said there’s no housing bubble.

    They’re experts so what they said must be true, right?

    2. I guess he doesn’t bother to read here any more, as he seems oblivious to the incipient global housing crash.

      1. Markets
        Business News
        CNBC TV
        Nobel Prize winner Robert Shiller: I don’t expect a sharp turn in the housing market
        – The housing market may be slowing down, but Yale economist Robert Shiller says he isn’t fearful that a big downturn is ahead.
        – The impact of rising mortgage rates is already being felt on the housing market.
        – “I don’t expect a sharp turn in the housing market at this point,” Shiller says.
        Michelle Fox
        Published 8 Hours Ago CNBC.com

        The housing market may be slowing down, but Nobel Prize winner Robert Shiller told CNBC he isn’t fearful that a big downturn is ahead.

        During the financial crisis, the fluctuation of home prices was the sharpest anyone had ever seen — and the word “housing bubble” entered the vocabulary, the Yale economist said.

        Now, “you can call it a bubble” because home prices have been rising since 2012, “but it’s not the same. It’s more placid,” he said on “Power Lunch.”
        …

        1. I read his statement and I think he is choosing his words very carefully here. Notice that he didn’t say that housing was fairly valued. I do believe he thinks housing is bubbly, but I think he is trying not to spook the herd by saying he doesn’t see a “sharp turn” in the market. I think the best case scenario that policy makers can hope for is zero appreciation for a decade or more for the housing market while inflation takes its course and brings prices more in line with historical averages as they relate to earnings.

          1. I think the best case scenario that policy makers can hope for is zero appreciation for a decade or more for the housing market while inflation takes its course and brings prices more in line with historical averages as they relate to earnings.

            That’s what they were hoping to pull off last time by foaming the runway. Instead prices started to fall off a cliff and they had to blow it back up with a firehose of money. I don’t see why anyone would expect this to be different.

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