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The Good News Is More Sellers Are Slashing Prices In California!

A report from the Los Angeles Times in California. “A chill is settling over the once white-hot Southern California housing market. Listings are up. Sales are falling. Price reductions are becoming more common. The latest evidence came Tuesday when CoreLogic released its monthly market report. Sales across the region plummeted nearly 18% in September compared with a year earlier, the largest drop in almost eight years.”

“According to Redfin, listings in September grew in all six Southern California counties compared with a year earlier, ranging from a 2% gain in San Bernardino County to a 32% leap in San Diego County. Zillow estimated even larger increases in listings, ranging from 14.6% in San Bernardino County to 39% in San Diego County.”

“The share of listings whose prices have been cut in the past two months is at multiyear highs — a sure sign that sellers are scaling back ambitions. Redfin says Los Angeles County saw price cuts on 23.8% of listings in September, up from 17.9% a year earlier. Data from Zillow show 15.5% of listings had price cuts last month, the highest level in at least eight years.”

“Barbara Boyd, 61, was recently laid off from her job as a project coordinator at NBCUniversal and worried that she might lose the equity she had built up in her five-bedroom home in Valley Glen, which she bought in 2011 for $615,000. The home went into escrow for $1 million. Boyd plans to move to Arizona.”

“‘At a certain point, even if it doesn’t crash, it’s going to stop,’ Boyd said. ‘I am not going to gamble .… I am pulling the plug.'”

The Orange County Register. “Although local agents say it’s too soon to call it a buyer’s market, a slowdown reported over the past six months appears to be deepening, they said.”

“‘I don’t think it’s time to panic. I don’t think it’s a bloodbath,’ said Jordan Levine, a senior economist for the California Association of Realtors, which last week reported similar sales drops in the region. ‘I definitely think it’s time to look at the market with eyes wide open.'”

“In all, 17,369 homes changed hands last month in the six-county region, or 3,700 fewer than in September 2017. Sales drops were more pronounced in Los Angeles and Orange counties. Transactions fell 23.6 percent in Orange County and were off 19.3 percent in L.A. County, CoreLogic figures show.”

“The Inland Empire, by comparison, had drops of 16.4 percent in San Bernardino County and 10.1 percent in Riverside County – less severe but still in the double digits. San Diego and Ventura counties both saw sales fall by more than 17 percent.”

From Curbed Los Angeles. “Prospective homebuyers in Los Angeles didn’t close many deals in September, according to CoreLogic. Sales in the month dropped off an astonishing 25 percent from August.”

“That hefty dip in sales came in spite of some serious price reductions. Median prices countywide fell 3.3 percent, from a record-high $615,000 to $595,000. That’s still 3.5 percent above the median price a year ago, but September is the first month since April that the median price has fallen below the $600,000 mark.”

“The good news for buyers is that prices appear to be plateauing and more sellers are slashing prices. According to Zillow, the number of homes in the Los Angeles metro area being advertised with a price cut is up 6.5 percent since this time last year.”

From CNBC. “Higher mortgage rates and overheated home prices hit Southern California home sales hard in September. Sales of newly built homes were 47 percent below the September average dating back to 1988, while sales of existing homes were 22 percent below their long-term average.”

From Eastsider LA. “Prices on around five dozen condos, apartments and other Eastside properties dropped during the past week. Here are some examples, followed by a breakdown by neighborhood: Boyle Heights: Price drops $80,000 for a bungalow containing three units – a 3-bedroom, a 2-bedroom and a 1-bedroom. $735,000.”

“El Sereno: $50,000 cut on a 4-bedroom/3-bathroom/2-living room contemporary fully updated. $849,000. Lincoln Heights: $51,000 in reductions over the last month for a 2-bedroom cottage on 16,668 square feet of land. $699,000.”

The Daily Mail. “Elementary star Lucy Liu has put her Hollywood home back on the market after unsuccessfully offloading it earlier this year. The actress has reduced the price by $700,000, bringing it down from its May asking price of $4.199 million to a cheaper $3.5 million. The Kill Bill star’s home is found in the celeb-saturated Fryman Canyon area of Studio City in LA.”

The San Francisco Chronicle. “With authentic Spanish tile, a one-of-a-kind indoor pool and spa with waterfall and retractable skylights, and other custom features throughout, 10 Scott Court in Hillsborough has all the detailed specificity of someone’s dream home. ‘The owners are of Mexican descent and building a home gave them the opportunity to show what a true Spanish estate would look like in California,’ said listing agent Phil Chen.”

“The owners, who built on the 1.2-acre property in 2006, never actually lived in the home they spent so much time and money customizing. Instead they considered the house an investment property and put it on the market shortly after completion. But after the financial crisis of 2008 hit, the owners removed it from market and leased it out, until now. ‘They have been observing the market until they felt ready to sell,’ said Chen.”

“Chen placed the home on the market this summer for $9.8 million but says he and the owners always figured the home would sell in the $8-million range. ‘Given the limited inventory in the summer market and recent homes in the area selling for over $10 million we wanted to ‘test the waters’ so to speak, first at a higher rate,’ he said. With the fall selling season drawing to a close, and the dreaded holiday season slowdown about to hit, the home recently got a dramatic price cut to $8.4 million.”

“At that price, buyers in Hillsborough (which Chen called ‘still undervalued’) will be getting ‘a lot of house for the money,’ he said. The agent admits that, given the time of year, stock market downturn and higher interest rates, the market for super luxury homes like this one has been softening. But he believes the market is just a few IPOs away from a resurgence.”

This Post Has 50 Comments
  1. ‘I don’t think it’s time to panic. I don’t think it’s a bloodbath’

    Jordan, take a deep breath. Calm down. Listen, I’m fine. I’m going to just fine. Thanks for your concern.

    1. Jordan now: I definitely think it’s time to look at the market with eyes wide open.

      Jordan six months ago: Just close your eyes and overbid by as much as you can.

      It’s pretty impressive how good a handle he has on the market and what buyers need to do at any given stage.

      Jordan in a year (to seller): Just close your eyes and accept the first offer, no matter how low it is.

  2. ‘Chen placed the home on the market this summer for $9.8 million but says he and the owners always figured the home would sell in the $8-million range. ‘Given the limited inventory in the summer market and recent homes in the area selling for over $10 million we wanted to ‘test the waters’ so to speak, first at a higher rate’

    You fudged up Phil. Missed it by that much!

    1. Looks like the owner of that shack in Hillsborough has a mortgage of $4,180,000 that was taken out in 2015-LOL!!

      Mortgage Amount $4,180,000

      and the owner Albert J Gomez has another home he owns in the ritzy Hillsborough neighborhood that he recently took out a mortgage for :
      Mortgage Date 03/16/2018
      Mortgage Amount $4,000,000

      Wait until these homes are worth less than what he owes, maybe I’ll be moving on up and buying thee for pennies on the dollar.

    2. Every UHS knows the best way to sell a house is to start with an overpriced listing!….. LOL.

      “The owners, who built on the 1.2-acre property in 2006, never actually lived in the home…..”

      It’s looks like a gaudy P.O.C., designed and built by someone who never lived in it!. What do you think of this 5 bds • 7 ba • 11,000 sqft home I found on Zillow? https://www.zillow.com/homedetails/15515482_zpid/

        1. Those prices appear to bracket the runup and denouement of the largest, most protracted real estate mania in history. I wonder what it would have sold for at the peak?

  3. ‘Boyd plans to move to Arizona’

    Barbs, you don’t want to move here. It’s hot. Even in winter it’s 100 degrees at midnight. Try Nevada, Oregon or Utah.

    1. Just did the CA -> OR relocation, flew to AZ to pick up a big rental truck and drove it to San Diego then OR. Truck rental in San Diego – $3,200 but in Phoenix it was only $300. Reverse manifest destiny is leading to an abundance of supply in Reno, LV, and Phoenix.

      The difference in what we can buy in CA at the peak vs. OR at the bottom should be pretty staggering.

      1. “Truck rental in San Diego – $3,200 but in Phoenix it was only $300.”

        Sounds like there’s an epic emigration underway from San Diego to anywhere more affordable. I totally get it. Having lived and worked here for over a decade, I still don’t understand how people can survive the high cost of living plus the triple whammy of federal, state, and local taxes on one or two incomes, unless they either brought along a fortune made elsewhere when they moved here or struck gold in Silicon Valley.
        It seems one of the only economically viable solutions was to own an expensive home that was providing an extra income in the form of double digit annual appreciation plus a big federal tax writeoff.

        Now that the tax advantage of owning an expensive home has been whacked, and home equity wealth games are tipping to negative, I expect the steady flow of out migration from San Diego to soon crescendo to a flood.

        1. Some friends are looking for exit plans. For those with two incomes it’s really difficult to relocate. Would be interesting to look at the impact of two income households on job mobility.

          1. My wife and I are fortunate in having very portable credentials, in case we ever decided to leave California.

        2. We are now thinking of moving to Lake Tahoe, NV on the North shore or along the My. Rose Highway. We’ll retire soon and the difference in state tax ($0 in NV) will pay for our housing costs.

          We looked at San Diego, but downtown is challenged w so many homeless living on the streets and traffic is miserable. We want to be comfortable and feel safe.

          1. North Lake is beautiful and as long as your ok with the snow, it would be a great place to retire IMO. You won’t find many homeless up there unless your closer to Reno off the Mt Rose Hwy. Any coastal city in CA is going to be flooded with homeless and over priced shacks for what you get (human waste, needles, thefts, traffic, annoying people, home / lot size). I’m on my last straw with living here but stuck because of raising a family and surrounding family. Prices are going to have to come way down for me to at least feel somewhat complacent with buying a home in California again. NV is where I would love to retire.

  4. ‘Sales of newly built homes were 47 percent below the September average dating back to 1988’

    But Diane, there are 3,300 completed unsold shacks in Orange County alone. Who’s going to buy all these knock-offs?

    And there’s a couple of Thornberg quotes in the LA Times piece. Something about they aren’t overbuilding.

    DONG!

    1. More slashin’ and a sawin’:

      “Although median home prices dipped down to $660,000 last month, first-time Sonoma County home buyers are still lookout for options that won’t break the bank. These eight contemporary townhouses, offer spacious interiors and modern conveniences at a fraction of the price.”

      “The eight townhouses above offer the same square footage of some Sonoma County’s starter homes, at prices up to 50 percent less.”

  5. “The good news for buyers is that prices appear to be plateauing. . .”

    10-15% price cuts sound more like an impending avalanche. I now feel bad for people who buy a single family home for their primary residence, and think they’re getting a good deal. This is the time when Realtor lies really start to sting.

  6. This is happening at breakneck speed. So much faster than I expected. I know they say there is subprime lending, but I don’t think it’s enough to keep things going on for two more years as was the case with the last bubble.
    Back in March, I was scanning rental listings all the time, worried that my landlord would want to sell our rental as realtors were knocking at my door to ask if the house was for sale. Fast forward to September and I begin to see price drops, houses sitting, etc. That’s when I said here that we were in “suspended animation” as I did not see more houses coming on the market. However, the very next day I started getting “new listing” e-mails out of the blue. It is not a flood of listings, but we are past the tipping point. Thanks, Ben, for keeping me sane.

  7. The first article was intriguing and these sentence was gold:

    “There is not one reason to think a little bit of a slowdown turns into anything more dramatic than that,” Thornberg said. “Real estate bubbles are driven by overbuilding or overborrowing and you don’t have either one right now.”

    Overbuilding 🤔 check

    Over borrowing 🤔 check

    Guess that means we ARE in a bubble, thanks professor Thornberg!

  8. “But after the financial crisis of 2008 hit, the owners removed it from market and leased it out, until now. ‘They have been observing the market until they felt ready to sell,’ said Chen.”

    They missed the boat twice! And that second time was the last boat.

    1. the last boat

      A 40 year old super ultra mega credit expansion will not likely resolve instantly. It just might be like bouncing down a flight of stairs. The first bounce was pretty spectacular!

        1. I’ve thought for years this was The Suckers Rally. If now we’re headed for next step down or the final splat I don’t know. Either way I think I’ll be fine.

    1. “Home has $15,000-$20,000 BUILT IN EQUITY. Not fire sale.”

      And yet seller just slashed price by $15k yesterday. LOL.

    2. They listed the house, knocked down the price a few times, jacked it back up, and then dropped the price again, to a price that is slightly higher than the price in September. ?????

  9. “The good news for buyers is that prices appear to be plateauing and more sellers are slashing prices.”

    Slashing prices seems inconsistent with achieving a permanently high price plateau, but rather more consistent with creating a massive crater.

    1. ‘Godfather’ of chart analysis says ‘damage done to the stock market’ is much, much worse’ than anyone is talking about
      By Mark DeCambre
      Published: Oct 30, 2018 10:30 p.m. ET
      Acampora tells MarketWatch that the action under way in the stock market reminds him of the 1987 crash
      Altaira Wealth
      Ralph Acampora is bearish on stocks

      Prominent market technician Ralph Acampora says the stock market is in bad shape and it’s worse than many on Wall Street investors appreciate.

    2. 10-year Treasury yield posts largest daily climb in 3 weeks on trade-deal optimism
      By Sunny Oh
      Published: Oct 30, 2018 4:10 p.m. ET

      Looking ahead, investors will take a peek at the Treasury’s November refunding on Wednesday, which will show how much auction sizes have increased to deal with the U.S.’s growing budget deficits. Market participants expect the refunding package to amount to $83 billion, which would top the record set by former Treasury Secretary Timothy Geithner in 2009 when the economy was recovering from a financial crisis.

      “It looks to be a troubling deficit trajectory,” said Thomas Simons, senior money market economist at Jefferies, who anticipates further fiscal stimulus in the next two to three years.

      1. Can anyone who understands why trade deal optimism would naturally lead to a selloff in long-term Treasurys please explain the connection?

    3. Cash is king again, but that may be a bad sign that another recession is looming
      By Brett Arends
      Published: Oct 30, 2018 7:00 p.m. ET
      – Interest rates on two-year certificates of deposit have just cracked 3%
      – Retirees, and those near retirement, are willing to accept lower returns for a lot less risk.

      Yes — cash is back.

      Once again people who don’t want to take on the risks of the stock market or the bond market or the gold market or any other market — and just want a reasonable rate of return on their savings without having to worry — are starting to feel some love.

      Interest rates on two-year certificates of deposit or CDs — not quite “cash,” but pretty close — have just cracked 3% for the first time since living memory. And rates on parallel two-year Treasury bonds are not far behind. Just a couple of years ago they were offering barely half a percent — and this minuscule rate of interest, of course, was fully taxable too.

      These rates are already well ahead of the 2.2% overnight Federal Funds rate set by the Federal Reserve, as financial markets have already anticipated further rate hikes by the Fed, expected later this year and in 2019.

      The surge in rates for deposits comes at a time when stocks and bonds are both suddenly looking distinctly rocky. Those buying CDs can now beat inflation

      The surge in rates for deposits comes at a time when stocks and bonds are both suddenly looking distinctly rocky. And for the first time in quite a while, those buying CDs can beat inflation, which has averaged about 2.5% this year.

      One woman’s trash is another woman’s treasure, so while Wall Street speculators freak out at the prospect of rising interest rates, and President Trump complains that the Federal Reserve is going “crazy” by putting rates back up, let’s not forget all for those whom rising interest rates are a matter of enormous relief. That means, above all, retirees, and those near retirement, as well as all those who are willing to accept lower returns for a lot less risk.

    4. Are your emerging markets stocks submerged?

      Markets
      Emerging-Market October Sell-Off Signals Consolidation in Store
      By Lilian Karunungan
      and Yumi Teso
      October 30, 2018, 8:43 PM PDT
      – MSCI EM stock index heads for worst month since May 2012
      – Argentine peso, Turkish lira, Brazilian real set for gains

      Emerging markets are poised to end October in the red as the global stock sell-off, concern over the Federal Reserve’s tightening path and an escalation in the U.S.-China trade war scupper the chance of a recovery in this year’s worst-hit economies.

      The MSCI Emerging Markets Index of equities has fallen 10 percent in October, set for its worst month since May 2012, after the S&P 500 Index slipped into a correction from a record close in September. An MSCI measure of developing-nation currencies is down less than 1 percent, as the Argentine peso, Turkish lira and Brazil’s real head for a winning month.

  10. Notice how we have recently transitioned from an ‘all news is good’ to an ‘all news is bad’ investing climate?

    Here’s the ominous message tech companies sent to investors in October
    By Barbara Kollmeyer
    Published: Oct 31, 2018 8:34 a.m. ET
    Critical information for the U.S. trading day
    Getty Images
    Ominous October

    Something wicked this way came for investors in October.

    Even as another bullish day builds for stocks on All Hallows’ Eve, the damage has been done. The Nasdaq is set for its worst month since October 2008—and the Dow and S&P 500 are looking at the most brutal monthly performances since 2015 and 2010, respectively.

    “It has been a wild ride for investors and there is no guarantee it is over yet,” says Craig Erlam, senior market analyst at OANDA, in a note to clients. That’s because next week we’ll get what could be the mother of all midterm election battles, along with a Fed meeting, he says.

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