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Trying To Get Re-Acclimated To The New Reality

A report from the Press Democrat in California. “Sonoma County home sales rebounded in October, boosted by a spate of price reductions that pushed the median price to its lowest level of the year. The median price of $649,500 has fallen from its June peak of $700,000 and now is nearly unchanged from a year ago. ‘The serious sellers reduced their prices,’ said Jeff Hill, an agent with Bertolone Realty in Santa Rosa.”

“For example, Hill listed a home on Terra Linda Drive in Santa Rosa where the seller recently reduced the asking price to $695,000 and the property this week went into escrow. Rick Laws of Pacific Union cited a ‘push back on price’ by buyers as the most likely reason sales had hit an 11-year low in September.

“‘There’s still a lot of buyers who want to buy, but they just don’t want to overpay,’ he said. Working with the local multiple listing service, Laws found that sellers had cut prices on roughly a third of the houses on the market in October. That amounted to nearly 540 properties.”

“Initially, many sellers seemed slow to adjust to the shifting market, agents said. Instead, they kept thinking buyers would keep paying the escalating prices they did in the months after the fires. ‘You’ve got people right now trying to get re-acclimated to the new reality of the Sonoma County real estate market,’ said Adam Menconi of Prosper Real Estate.”

“At the end of October, there were 1,040 single- family homes for sale. That was over 400 more than a year ago and the most homes in the county available for the month in seven years.”

“‘It seems like we’re selling about the same number of units, but with a lot more inventory,’ said Brian Connell, the managing broker at the Santa Rosa Mission Office of Coldwell Banker. As a result of the extra home inventory, ‘we’re seeing price reductions where we maybe wouldn’t have seen them six months ago.'”

This Post Has 46 Comments
    1. When you get below $324k so eligible for no money down FHA loan, those go quick. Doesn’t mean it’s healthy.

    2. “Listed at $269k, pending in 2 days. Needs a ton of work, but great neighborhood.”

      Those are the flippers – the greatest fools of all. Flipping should never even exist as remodel costs historically return pennies on the dollar, but flipping in a declining market is financial suicide. “A bucket of money and a box of stupid” comes to mind.

      When prices were rapidly rising, the longer the rehab took, the more money they were making. Imagine that. You dawdle along and waste time and money, and get financially rewarded. We’re now at the opposite end of the spectrum – you can’t finish the remodel fast enough to avoid massive losses, as the market is declining faster than you can work.

      In fact, just buying then immediately reselling the property within only a month or two would result in a loss not only due to transaction costs, but the rate of decline in house prices.

      Imagine a market like Boise where the median price is, say, $350k in that particular neighborhood (for argument’s sake). If house prices are declining at a rate of 10% per year, then that flipper is going to lose roughly $12,000 in 4 months time due to eroding values alone. That doesn’t cover carrying costs like interest, opportunity cost of money, etc. These people are short on math skills.

      Keep watching these “flips” which are “pending in 2 days,” you’ll start to see them showing up and selling on the courthouse steps to the highest bidder.

      1. Oh, I agree. These are the same people who waive inspection and buy with the hopes of sweet, easy money. On this same street there are two old houses that sit empty. One has a contractor’s sign out front (for past 2 months), the other has had work crews taking the place down to studs. These people are late to the party.

  1. 4,658 homes lo$t in the Santa Rosa / Tubbs fire in 2017 … They’re having a lack of buyer$ …

  2. Have been looking for properties in N. California coastal areas for some time. The better properties (nice house, yard, neighborhood) are selling within a few percent of the asking price. The construction costs in this area for a design/build single home are much higher than the current purchase price. If prices were to drop a lot, sellers will probably stay put (many are baby boomers who are delaying moving to retirement areas).

    1. Did CA voters have a ballot initiative that allowed boomers to keep the same tax rate on their old house as long as they retired in California? I heard about it briefly but not sure of the details or if it passed.

      1. Failed – it was a expansion of a current law that allows sellers to keep the same low tax appraisal when selling and buying within certain counties

    1. 88,465 views|Oct 16, 2018, 3:36 am
      China’s Bitcoin Dominance Is Worrying Trump’s White House — And Pushing It Toward Ripple
      Billy BambroughContributor
      Crypto & Blockchain
      I write about how bitcoin, crypto, and fintech are changing the world.

      China is, by some distance, the undisputed world leader in bitcoin mining — with Chinese mining pools controlling more than 70% of the bitcoin network’s collective hash rate, the measuring unit of the processing power of the bitcoin network.

      Many in the bitcoin and cryptocurrency industry have expressed concern about how much control this gives China over bitcoin, with the Beijing-based Bitmain Technologies mining more than half the world’s bitcoins.

      Now it appears U.S. president Donald Trump’s White House is also worrying about China’s bitcoin dominance, with a Ripple Labs executive suggesting the U.S. administration is interested in ripple (XRP) adoption to offset China’s bitcoin strength.

      1. This is why bitcoin and any other decentralized crypto’s have very little chance at becoming a dominant source for currency. The government isn’t going to allow a decentralized currency to take over unless they control it. The blockchain technology is a good idea but the hype and mania we have had from it is not logical for a “controlled” economy.

    2. Once escaped, it is almost impossible to put a genie back in the bottle.

      China’s Central Bank Warns Against Cryptocurrency Bubble Risk
      By Athena Yenko
      Nov 09, 2018 05:33 AM
      People’s Bank of China (PBOC)
      People’s Bank of China published a paper detailing the financial risks posed by blockchain-related financing and investments on cryptocurrencies.
      (Photo: REUTERS/Jason Lee)

      People’s Bank of China warned of the bubble risk posed by financing and investments on cryptocurrencies, like Bitcoin, and most especially on investments involving Initial Coin Offering.

      The paper, written by Xu Zhong, director of the research bureau of China’s central bank, and Zuo Chuanwei, a PBOC analyst, underscored that virtual currencies could not be a replacement for legal currencies because of its lack of intrinsic value or credible sovereign backing.

      The paper also highlighted that cryptocurrencies are extremely vague in nature which makes it hard for authorities to implement anti-money laundering policy and to trace “receipts” of financial transactions.

      China has already rolled out policies banning all ICOs since September 2017, the paper noted. At the time, the government declared ICOs as a form of illegal fundraising. The government has also been on a crackdown against ICOs channels. ICOs affected by China’s ban has since moved their operations to Singapore, Japan, and Hong Kong.

    3. The energy and greenhouse gas emissions costs of cryptocurrency-based Ponzi finance operations are mind blowing.

      1. Bitcoin Mining Takes Three Times More Energy Than Gold Mining – Study
        Anna Golubova
        Monday November 12, 2018 21:42

        (Kitco News) – It takes three times as much energy to produce one dollar’s worth of bitcoin than one dollar’s worth of gold, according to a new research study.

        More specifically, it requires seventeen megajoules of energy to digitally mine one dollar’s worth of bitcoin versus five megajoules needed to physically mine the same value in gold, said the report titled ‘Quantification Of Energy And Carbon Costs For Mining Cryptocurrencies’.

        Other cryptocurrencies, including ethereum, litecoin, and monero, also require higher amount of energy than real gold. The timeframe for the study was between January 2016 and June 2017.

        “As an average of all days from 1 January 2016 to 30 June 2018, to generate US$1, we estimate that Bitcoin, Ethereum, Litecoin and Monero mining required 17, 7, 7 and 14 MJ [megajoules], respectively. In comparison, we estimate that mining aluminum, copper, gold, PGMs and REOs required 122, 4, 5, 7 and 9 MJ [megajoules] to generate US$1,” the study said.

        The study also warned that the estimated energy needed for mining cryptocurrencies is likely at the lower end of the spectrum because processes like cooling crypto-mining equipment were not part of the calculations.

        The research also stated that the energy consumption behind crypto-mining is projected to only increase from here on out.

        “While the market prices of the coins are quite volatile, the network hashrates for three of the four cryptocurrencies have trended consistently upward, suggesting that energy requirements will continue to increase. During this period, we estimate mining for all 4 cryptocurrencies was responsible for 3–15 million tonnes of CO2 emissions,” the study said.

          1. Bitcoin Mining Takes Three Times More Energy Than Gold Mining – Study

            I’d rather buy tulips. At least I’d have something to show for it if the electricity goes out.

  3. Can Bitcoin Kill Central Banks?
    By James McWhinney | Updated September 30, 2018 — 5:40 PM EDT

    Bitcoin is a digital currency that, in the words of its sponsors, “uses peer-to-peer technology to operate with no central authority or banks.” By its very definition Bitcoin seems well positioned to kill off central banks. Could it? Would it? Should it? Like just about everything else involving finance, the topic of central banks and their potential replacements is complex with valid arguments for and against.

  4. Shouldn’t an ICO crackdown help support the price of Bitcoin, by limiting entry of competing altcoins?

    Something else must explain the current wave of bubble collapse.

    Bitcoin and Ethereum Continue Tumble in Wake of ICO Crackdown
    The value of Bitcoin has dropped as low as $5,173, from a peak of $20,000
    Peter Kovalev Peter Kovalev/TASS
    By David Meyer 6:32 AM EST

    After the cryptocurrency crash that hit late last week, the Bitcoin market stabilized for a while. But not for long — on Monday, it plummeted again, taking the value of one bitcoin as low as $5,173.

    This is the sort of level where Bitcoin was at back in October last year, when it was on its way to its brief peak just below $20,000. As usual, it is not entirely clear why the latest tumble occurred. However, Friday saw actions by the U.S. Securities and Exchange Commission (SEC) that could have something to do with it.

    The SEC announced settlements with two cryptocurrency startups that were running initial coin offerings, or ICOs. Airfox and Paragon Coin agreed to pay civil penalties for running token sales last year without registering them as securities offerings.

    1. “…on Monday, it plummeted again, taking the value of one bitcoin as low as $5,173.”

      It breached $5,000, trading down to $4,951, then shot back above. My guess is that the fraudsters are desperately trying anything to keep this pig from going to zero.

      1. Treasury yields slip amid weak housing data, global trade worries
        Fred Imbert | Sam Meredith
        Published 5 Hours Ago Updated 29 Mins Ago

        Treasury yields fell on Monday after the release of weaker-than-forecast housing data while concerns over global trade plagued investors.

        The benchmark 10-year note yield slipped to 3.061 percent while the short-term two-year yield dipped to 2.787 percent. Bond yields move inversely to prices.

        Homebuilder sentiment dropped to its lowest level since August 2016 this month amid rising mortgage rates and unrelenting price growth.

    1. Housing market eee-bola has spread over to wall Street.

      Stock-market decline accelerates after big drop in home builder confidence
      By Mark DeCambre and Chris Matthews
      Published: Nov 19, 2018 10:56 a.m. ET
      The National Association of Home Builder’s confidence index drops most in four years

      Stocks retreated Monday, extending a decline after a report showed home builder’s confidence plummeted in November, to kick off a holiday-shortened week on a down note.

      1. Yes, but if you look, all the homebuilders are up slightly today. Do not think the market shift is due to homebuilder confidence. That’s already baked in. Bitcoin flirting to go below 5k may have something to do with it.

        1. “Do not think the market shift is due to homebuilder confidence. That’s already baked in. Bitcoin flirting to go below 5k may have something to do with it.”

          LMFAO – Bitcoin? Get real…

      2. Professor,
        Do you have an opinion about where we are in the credit cycle?

        I think of the economy as a leaky boat with a sump pump. As long as the pump can get rid of more water than the leaks let in, the boat stays afloat. Right now, more fiscal stimulus (late in expansion, deficits already at $1T+) seems very unlikely. That leaves monetary. Fed could stop raising but the derivative effects are interesting. Fed front runners with UST shorts will have cover (buy UST), thereby leaving less demand for corp bonds (already under stress). Mortgage rates will decline as the 10yr yield goes down, so some increase in housing demand. But psychology has shifted , so that effect might be small or none.

        It just looks like the leaks are starting to overwhelm the pump

        1. In my unsolicited opinion we’re close to, or at, the very end of the Virtuous Cycle when everything looks like roses.
          The herd is realizing the incurred consumption-debt needs to be paid back, and that it’ll be harder as rates rise, peak employment ends, and there are no greater fools left to sell their crap to.
          The Cycle is about to turn Vicious and I for one hope to make it out unscathed, though doubt it’ll happen.

          1. appreciate the opinion
            Yeah, my pleasure. I should clarify that I don’t think it matters what happens with rates at this point. They’re already so low, and everyone has already taken on so much debt, that I think we’re at the point where debtors can’t (or won’t want to) pay it off, so defaults of all kinds will be rising.

            Auto loans, student loans, credit cards, mortgages, stock market margin accounts, etc, will all be putting a serious dent in consumption for years. As such, I think we’re looking at the beginnings of a massive fire sale.

  5. “You’ve got people right now trying to get re-acclimated to the new reality of the Sonoma County real estate market,’ said Adam Menconi of Prosper Real Estate.”

    But Adam, I thought the “new normal” was to waive inspections, offer above asking and write letters to sellers? What happened to the “new normal/new reality” in the past few months?

  6. Does the appearance of myriad death crosses in stock charts make you want to dump your HODLings and reinvest the proceeds into ultrasafe two-year Treasurys yielding nearly 3 percent?

    1. Netflix’s first bearish ‘death cross’ chart pattern to appear in 2 years at the open
      By Tomi Kilgore
      Published: Nov 19, 2018 7:16 a.m. ET

      Netflix Inc.’s (NFLX, -4.02%) stock chart is set to open with a new bearish “death cross” pattern, as the 50-day moving average is on track to open below the 200-day moving average for the first time since October 2016. Netflix’s stock slipped 0.3% in premarket trade. The 50-day MA, viewed as a shorter-term trend tracker, is set to fall to $335.929 at the open from $337.173 on Friday, while the 200-day MA, a long-term trend guide, is set to rise to $336.327 from $336.167. A death cross is seen by many chart watchers as the point where a shorter-term pullback transitions to a longer-term downtrend. Netflix is on track to be the third FANG, or FAANG, stock to produce a death cross, following Facebook Inc. (FB, -3.59%) in September and Google parent Alphabet Inc. (GOOGL, -1.54%) last week. Inc. (AMZN, -2.89%) and Apple Inc. (AAPL, -3.02%) are still at the very least weeks away. Netflix’s stock has shed 9.7% over the past three months while the S&P 500 (SPX, -0.73%) has declined 4%.

    2. The Fed may be trying to walk back its aggressive rate hike schedule.

      There is also a flight to quality move into Treasurys underway.

      2-year Treasury yield logs steepest weekly drop in two years after dovish Fed remarks
      By Sunny Oh
      Published: Nov 16, 2018 3:46 p.m. ET

      Treasury yields retreated on Friday, extending their weeklong decline, after a senior Federal Reserve official voiced concerns over softer global growth, potentially setting the stage for fewer rate hikes than expected next year.

      The 2-year Treasury note yield (TMUBMUSD02Y, -0.89%) the maturity most sensitive to shifting expectations for monetary policy, slipped 5 basis points to 2.813%, adding to a weeklong drop of 12.2 basis points, its largest such drop since June 2016.

  7. “The median price of $649,500 has fallen from its June peak of $700,000 and now is nearly unchanged from a year ago.”

    $50,500/5 = $10,100 LOSS PER MONTH
    $10,100*12 = $121,200 LOSS annually
    $121,200/52 = $2,331 LOSS PER WEEK

    1. $2,331/7 = $333/night.

      Why not just live in a luxury hotel and save on all the expenses of ownership (taxes, interest, insurance, maintenance, depreciation, etc)?

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