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It Could Get Worse, Because There Is A Lot Of Supply

A report from CNBC. “There’s an oversupply of homes in most housing markets across the country and rising interest rates are making it harder for buyers to make deals, billionaire real estate developer Stephen Ross told CNBC Thursday. That includes the New York City market, where Ross, who is founder and chairman of Related Companies, competed with President Donald Trump when Trump was a developer in his pre-White House years.”

“‘Whenever you increase rates, you kind of reduce the affordability issues, and therefore you limit your market,’ he said in an interview with Diana Olick on ‘Power Lunch.’ ‘In soft markets, you want as broad a market as you possibly can.'”

“Last week, mortgage application volume was down 22 percent year over year, and purchase volume was down 3 percent in that same period. In addition, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances was at its highest level since 2010.”

“‘It could [get worse], because there is a lot of supply,’ he warned.”

“On Thursday, Los Angeles-based homebuilder KB Homes shares fell nearly 18 percent, in one of its worst days of trading in more than 26 years, before closing down more than 15 percent. And the industry is on track for its worst year of trading since the 2008 crisis.”

“‘So those rising interest rates will certainly have an impact on the number of buyers and what they’re looking for and what they can afford,’ Ross said.”

“Developers, for the most part, have been unaffected by the rate hikes and are enjoying ‘pretty low rates than what we’re used to.’ They also have access to alternative sources to fund real estate developments, Ross explained. ‘If they have money, they’re going to build,’ he said.”

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  1. ‘There’s an oversupply of homes in most housing markets across the country’

    I bet Diane almost choked when he said that.

    ‘On Thursday, Los Angeles-based homebuilder KB Homes shares fell nearly 18 percent, in one of its worst days of trading in more than 26 years, before closing down more than 15 percent. And the industry is on track for its worst year of trading since the 2008 crisis’

    So where are those shortage people? You remember, “oh we need to build more shacks, we’re years behind!”

    Thornberg? Thornberg, eat yer crow!

    1. CNBC updated it to read “There’s an oversupply of luxury condominiums in most major cities across the country and rising interest rates…”

  2. Do you plan to HODL your stocks through the holidays?

    Santa rally for stocks? Get out while the getting is good, says this strategist
    By Barbara Kollmeyer
    Published: Nov 16, 2018 9:07 a.m. ET
    Critical information for the U.S. trading day
    Getty Images
    Watch for Santa’s signal

    Blink and you may have missed the one shining moment for equities this week.

    Thursday’s gains for the S&P 500 and other big indexes look pretty lonely when stacked up against the rest of the week’s losses. It could be tech stocks again, that spoil the party for everyone else on Friday after chip maker Nvidia warned that its revenue will decline in the fourth quarter.

    After some brutal selling in October, the last quarter of the year is already stacking up to be the worst since September 2015.

    Fitting that, yet again, investment advisers are sounding some end-year caution. Our latest and call of the day, from Seema Shah, global investment strategist at Principal Global Investors, says “take cover, worse has yet to come,” when it comes to equities.
    …

    1. Oh poor Nvidia… good thing the crypto market has near no impact on there revenue, or does it 🤔

      1. Tesla Slashes Its Residential Solar Pricing by $3000 to $5000
        Greentech Media-3 hours ago
        A Tesla spokesperson attributed the price reduction to “vertical integration” and to shutting down “more expensive sales channels.” Sanjay Shah, Tesla’s senior …

          1. “The clock is ticking on Tesla’s promise to bring 1,460 jobs to Buffalo.

            While the sprawling solar panel factory on South Park Avenue has been operating for more than a year, it wasn’t until mid-April that state and Tesla officials agreed that the facility was essentially complete.

            That started the clock on Tesla’s promise to create 1,460 jobs at the RiverBend factory within two years and to bring 5,000 jobs to New York within 10 years. Tesla made the commitment in exchange for the state spending $750 million to build and equip the plant.

            The completion date — set as April 16 under an agreement between the companies that is expected to be filed shortly with the Securities and Exchange Commission — is important because it starts a job creation timetable that Tesla must meet. It must pay penalties of as much as $41.2 million for every year that it falls short.”

            https://buffalonews.com/2018/08/01/for-tesla-the-clock-is-ticking-to-bring-jobs-to-buffalo/

            We gave them $500,000 per promised job. Could have employed those people directly for a decade or more doing something useful. Meanwhile, Tesla’s solar business is shrinking.

        2. Facebook morale, hurt by share drop, suffers another hit

          “Why does our company suck at having a moral compass?” one employee asked, in a message linked to the New York Times story.’

          “Getting rich has been a sore subject inside Facebook recently, especially for those, like the third poster, who joined long after the 2012 initial public offering. The company’s stock has been on the decline, ever since Facebook reported in July that it expected growth to slow in future years. Thursday marked a regularly scheduled vesting event for employee stock, according to people familiar with the matter. But it’s worth 34% less than at its peak in July of this year.”

          https://www.fin24.com/Companies/ICT/facebook-morale-hurt-by-share-drop-suffers-another-hit-20181116

      2. “…good thing the crypto market has near no impact on there revenue…”

        NVIDIA chips are the “shovel” of choice when mining for Bitcoin. (very efficient floating point math calculations)

        Could it be that yet another “shortage” [of Bitcoin] is on the horizon?

    1. Opinion: Wall Street’s herd is now much too bullish about the S&P 500
      By Ed Yardeni
      Published: Nov 15, 2018 5:49 p.m. ET
      Ed Yardeni: Optimism is rich and corporate profits and revenue are thinning
      Getty Images

      The latest earnings season seemed to contribute to the sharp selloff in stocks during October, as some companies reported bullish earnings that were more than offset by bearish guidance about future earnings prospects.

      Collectively, though, the S&P 500 (SPX, -0.29%) results through the week ended Nov. 8 were 4.9% better than analysts expected during the Sept. 28 week, i.e., just before the start of the latest earnings season (Fig. 1). As I’ve noted many times before, such positive “earnings hooks” are par for the course.
      …

    2. Does it seem like Mr Market is struggling to price in the Fed’s punchbowl removal process?

      Seems to me they’re struggling to prevent price discovery during the punchbowl removal process. People who matter must still own some of the most affected stocks.

  4. Snip

    “If they have money, they’re going to build,” he said.

    Keep printing that free money we need more more more housing

  6. “…It could [get worse], because there is a lot of supply,’ he [Stephen Ross] warned…”

    Not exactly sage advice that you can only get from Billionaires.

    Here is [Ross] statement correctly written

    “It *will* get worse because there is a lot of supply”

    In my own area (Irvine, Orange County) OSH [hardware] closed all stores last weekend.

    Part of the reason is that the store was filled to the brim with overpriced, cheap Chinese junk, and I do mean junk.

    Lowe’s has just announced closing of at least 2 stores in the OC.

    Same problem.. Overpriced, cheap junk. You feel like you are being screwed from the moment you enter the front door.

    BTW, What ever happened to all those OC House ATM Hipsters ready to buy gold flaked Granite Counter Tops?

  8. Got A “Home Report” email from zillow… interesting part was at the bottom:

    “In the Last 30 Days …
    233
    homes in 98104 have been listed for sale
    7
    homes in 98104 have sold”

    Ruh roh…..

    3. 98104 is downtown Seattle – International destrict and Pioneer Square – mostly commercial – those are going to be condos in large buildings – there’s not a single detached home there.

    1. We dined with friends in Summerlin during one of our road trips. It’s cookie-cutter identical McMansion tract home city.

      1. Society is built on Noble Lies
        A noble lie, which also could be called a strategic untruth, is one that would normally cause discord if uncovered, but offers some benefit to the liar and assists in an orderly society, therefore, potentially beneficial to others. It is often told to maintain law, order and safety.

    2. Used to take a lot more snow than that. When it happens it is amazing to see NYC so quiet and still.

      As a little kid I remember seeing some guy on tv screaming at the mayor (You’re a bum Lindsay! A bum!) I think Queens had been totally snowed in for a week at that point.

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