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Sellers Cling To False Hope That Someone Will Pay Their Yesterday Price

A report from the Santa Cruz Sentinel in California. “The California housing market posted its largest annual sales decline since March 2014 in September, as home sales fell below the 400,000-level benchmark for the second consecutive month. This indicates that the market is slowing as potential buyers appear to be putting their homeownership plans on hold, according to the California Association of Realtors.”

“Sales in the San Francisco Bay Area declined 16.4 percent from September 2017, the largest decline since October 2010. Santa Clara County posted the largest drop at 22.6 percent. Home sales there were down 22.2 percent from August.”

“Other counties experiencing year-over-year double-digit sales declines were Sonoma (-19.4 percent), Solano (-19.3 percent), Contra Costa (-17.3 percent), San Mateo (-14.6 percent), Napa (-14.2 percent), San Francisco (-11.5 percent), and Alameda (-10.4 percent).”

“Statewide active listings rose for the sixth consecutive month, increasing 20.4 percent from the previous year. September’s listings increase was the biggest in nearly four years. The Bay Area had the largest increase in active listings, with a surge of 44 percent year over year. In Santa Clara County, active listings more than doubled (+113 percent) from September last year.”

“‘We’ve always said real estate is a cycle and while we’re not concerned about a downturn, this shift in the market indicates buyers may have more negotiating power now than a year ago,’ said Bill Moody, president of the Silicon Valley Association of Realtors. At the same time, Moody cautions about timing the market. ‘The time to buy or sell is the right time for you, what’s best for your situation and for you family,’ said Moody.”

The Orange County Register. “Southern California house sales fell in September by the biggest rate since the depths of the Great Recession, the latest housing report by the California Association of Realtors shows.”

“Sales of existing single-family homes fell 17.6 percent from September 2017 in the five-county Los Angeles metro area, the biggest annual percentage drop since October 2010, CAR reported Monday, Oct. 22. The drop was the state’s biggest, with Los Angeles County house sales falling 22 percent.”

“In Orange County, sales fell 21.8 percent. Riverside and San Bernardino counties recorded an annual sales decline of 9.7 percent and 12.4 percent, respectively. Statewide, house sales fell 12.4 percent in September, which was California’s biggest year-over-year sales decline since March 2014, CAR reported.”

“CAR President Steve White also attributed sales drops to federal tax cuts adopted late last year, which make homeownership less advantageous by capping property tax deductions and reducing the amount of mortgage interest that can be deducted from federal income taxes.”

“‘The housing market continued to deteriorate, and the decline in sales worsened as interest rates remained on an upward trend,’ White said.”

The Mountain Democrat. “The California Association of Realtors recently published its forecast for the 2019 California real estate market. It’s a little scary. It’s also early.”

“Most housing economists wait until November or December before they start forecasting what’s in store for the upcoming year. CAR’s early forecast reflects its confidence in their 2019 predictions regardless of what happens during the next few months.”

“When Realtors say there will be a slight adjustment in the market, it’s time to take cover. The last time CAR’s yearly prediction said there would be a ‘minor correction,’ property values fell like a rock. Looking back to 2007, no one was predicting anything but a ‘soft landing’ for property values.”

“When property values are increasing, it’s a good time to sell and when they are decreasing, a good time to buy. It’s all good. When CAR publishes their forecast stating ‘a modest decline in existing home sales’ everyone should duck and cover.”

“The California real estate market has become victim of its own success. Property values have climbed too high, too fast, for too many. Home values have been appreciating across the state between 7 and 8 percent yearly.”

“In El Dorado County our year-to-date median selling price on 2,300 home sales has been $500,000. Last year the median selling price was $457,000. That 9.5 percent increase cannot be sustained without a corresponding increase in personal income.”

“Five years ago the state’s median selling price was $425,000 and the median statewide household income was $57,000. Today our statewide median selling price is $600,000 and household income $70,000. Income has increased 22 percent while home prices have jumped 47 percent. At some price point buyers give up and wait.”

“It will take a year for sellers to discover that the market has changed and begin serious adjustments in their asking price. Until then, buyers will cautiously wait on the sidelines. Sellers are naturally reluctant to adjust their price expectations. They cling to false hope that someone will pay their ‘yesterday’ price.”

“Following a declining market is a poor investment strategy for sellers. It’s best to exit early at today’s market price than to hold while the market continues its descent, finally selling at a lower price.”

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This Post Has 35 Comments

  1. ‘Sellers are naturally reluctant to adjust their price expectations. They cling to false hope that someone will pay their ‘yesterday’ price’

    This is a UHS telling you this. Sellers are fooked, naturally, but how does he expect anyone to stick their head in the noose?

    ‘Following a declining market is a poor investment strategy for sellers. It’s best to exit early at today’s market price than to hold while the market continues its descent, finally selling at a lower price’

    1. So for buyers it’s “You can’t time the market” but for sellers they’re happy to suggest “Sell now before it gets worse”

  2. Some Orange County statistics:

    ‘Orange County’s existing homes for sale are taking an estimated 46 more days to sell this year as 40 percent more residences sit on the market. Here is what you need to know from ReportsOnHousing’s take on data for Orange County, data as of Oct. 18’

    ‘Supply: 7,292 listings, up 2,077 residences for sale in a year or 40 percent; and up 23 percent vs. 6-year average.’

    ‘Demand: 1,974 new escrows, down 419 sales contracts in 12 months or 18 percent; and down 20 percent vs. previous six years.’

    ‘Market time: 111 days vs. 65 a year earlier and an average 81 days in 2012-2017.’

    ‘Success rate: Comparing current escrows to listings 14 weeks earlier shows 30 percent of sellers were successful vs. 40 percent a year earlier and an average 36 percent over six years in mid-October.’

    ‘Elsewhere in Southern California …Los Angeles County: 37 more days to sell vs. a year ago (100 days total) as supply rose 30 percent.’

    ‘Riverside County: 58 more days (124 days total) as supply rose 22 percent.’

    ‘San Bernardino County: 34 more days (104 days total) as supply rose 21 percent.’

    1. Where did all these shacks come from! We’ve been told they can’t build but one granny flat a year in California and they need millions of them?

      1. Just a matter of time for these soft sales in these so-called hot coastal markets (Seattle, Orange County, San Francisco, etc.) to start hurting the other boom towns like Portland, Reno, Boise, and Salt Lake City. The equity locusts can’t continue their march inland if there isn’t a lesser fool willing to buy their place in CA.

        1. I was in a meeting and the word is new homes are slowing down in Raleigh. Nothing was said about Existing homes, but that is also important as the usual verbiage is about the shortage of homes for sale. NoT this time. Totally silent on that.

    2. Great stats. Supply up 40%, demand down 18%. At the same time. And supply and demand was so important to the bubble myth on the way up!

    3. “…existing homes for sale are taking an estimated 46 more days to sell…”

      Evidently it takes longer to sell if you list your home at a price far in excess of market value.

  3. “We’ve always said real estate is a cycle…”

    No, I’m pretty sure they always said that real estate only goes up! Or at least that’s what they told the prospective buyers.

  5. “The time to buy or sell is the right time for you, what’s best for your situation and for you family,’ said Moody.”

    Gee, I think the best thing for all “situations and families” is to not pay artificially inflated housing prices.

  6. Looking back to 2007, no one was predicting anything but a ‘soft landing’ for property values.”

    No one? Not true.

    1. 2007 was a penny dropped a foot high into puddin’ … 2019 is a half dollar dropped 5 feet high into crow puddin’ … $platt!!!

  7. Text I got last night:

    “You are right. Prices have come down. I was just speaking with 2 agents about it.”

    1. Realtors and mortgage brokers will lie until they realize they can’t get away with it anymore.. Then it will dawn on them that they probably ought to start telling the truth.

    2. Sounds like a response from a shack seller with an expectation of winning the housing lottery by finding a FB to buy and overbid his home before it craters…. reality stinks (for sellers)

  8. “‘We’ve always said real estate is a cycle and while we’re not concerned about a downturn, this shift in the market indicates buyers may have more negotiating power now than a year ago,’ said Bill Moody, president of the Silicon Valley Association of Realtors. At the same time, Moody cautions about timing the market. ‘The time to buy or sell is the right time for you, what’s best for your situation and for you family,’ said Moody.”

    Someone been lion. It looks like last year buyers just got SCHLONGED! Lets hope they werent betting on their stock options as plan B.

  10. “The time to buy or sell is the right time for you, what’s best for your situation and for you family,’ said Moody.””

    What happens when the best time to sell for your family is when you’re underwater because you drastically overpaid some boomer to cash-out of their aging home and ridiculously overpaid?

  11. Thought you all would appreciate the price slashing on this flip near me.

    https://www.zillow.com/homes/for_sale/Arroyo-Grande-CA/15394437_zpid/23523_rid/globalrelevanceex_sort/35.192363,-120.548558,35.107376,-120.622115_rect/13_zm/

    Bought 3/2018 for $776k. Fully renovated with high end finishes.
    Listed for $999k 9/2018.
    Dropped to $799k 10/25/2018.

    This is the second or third flip in my area where someone bought in the last 12-18 months and is set to either clear very little or lose money.

    2. Tack on sales fees and they’re at a steep loss. Looks like panic price drops. Short term remodeling loan is probably crippling.

    3. Wow, that is a big adjustment downward. The Zestimate says it is worth $920,000!

      Here is another one in Nor Cal. https://www.zillow.com/homes/4000-Monteverde,-Lincoln,-CA_rb/

      Paid $625,000, slight rehab, listed at $749,000, now walking down to $669,000….now removed from the market. Accidental landlord. If it rents for $40,000/year, the NOI will be about $25,000/year on $650,000 = 4% return, assuming no debt.

        1. NOI will be about $25,000/year on $650,000

          Interesting that you calculate NOI for yourself based only on the down payment, and for others as if the invested the whole purchase price. Did you get into an accident or something?

  13. A doozy of a price cut on a “trophy” house in the Hollywood Hills – down 41.3% in one year. Listed Oct 2017 for a wish price of $15 mil, relisted Oct 2018 for a new wish price of $8.8m. They tried to scrub the $15mil ask but Curbed did a feature when the house was first listed.

    https://www.redfin.com/CA/Los-Angeles/2000-La-Brea-Ter-90046/home/7126740

    https://la.curbed.com/2017/10/27/16515244/margo-leavin-la-brea-terrace-hollywood-hills-for-sale

  14. “largest annual sales decline since March 2014”

    2014 was when the rebubble in the US was starting to implode of its own volition. It’s amazing to think how many people’s financial lives would have been saved had the market not been juiced with more artificial liquidity and lowered lending standards in the 2014-18 period.

  15. I think many are bailing on Orange County. Checked U-Haul 2 day rental for 30 ft van. OC to Vegas one way $648. Vegas to OC is just $124 one way. Have a feeling that outbound boomer migration is only going to compound things.

    1. It might have something to do with the population of Las Vegas at 600,000 and the population of OC at 3,000,000. Just based on averages, you would have 5 times the numbers of outgoing vans in OC.

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