thehousingbubble@gmail.com
Blog

Sellers Got A Little Over Zealous With The Price The Last Couple Of Years

A report from D Magazine in Texas. “For a while now in Dallas, water cooler or bar-side conversations with new homeowners have sounded the same: the process took forever, their first and second and third choices were snapped up by people who paid over asking, and eventually they learned to work fast and bid aggressively on the homes they really wanted. But, according to the Wall Street Journal, a different story is starting to emerge—particularly in some of our region’s booming suburbs.”

“In a piece out this morning, the WSJ hones in on Collin County to explain a national slowing of the housing market alongside an otherwise strong economy.”

“More: ‘Yet even with the booming growth, Dallas’s once vibrant housing market is sputtering. In the high-end subdivisions in the suburb of Frisco, builders are cutting prices on new homes by up to $150,000. On one street alone, $4 million of new homes sat empty on a visit earlier this month. Some home builders are so desperate to attract interest they are offering agents the chance to win Louis Vuitton handbags or Super Bowl tickets with round-trip airfare, if their clients buy a home. Yet fresh-baked cookies sit uneaten at sparsely attended open houses.'”

“A lot of this has to do with just how quickly prices have grown in recent years. Or, as the WSJ says it, the degree to which affordability has gotten ‘out of whack with historic norms.’ At a median price of $235,000, a house in Dallas costs up to 50 percent most than it did in 2007.”

“The WSJ talked to a couple who bought a house early this year when the market ‘felt extremely hot,’ and then struggled to sell their previous home when they listed it a few months later in May. By then, mortgage rates had risen. In mid-October, they sold for $16,000 less than their original asking price.”

From KPBS in California. “In the San Diego-Carlsbad area, 26.4 percent of the homes listed for sale had at least one asking-price reduction this past August, according to Trulia. Nationally, that number was 17.2 percent, the highest national rate since 2014.”

“In San Diego, there has been an almost 17 percent decrease in single-family home sales from October of last year to October of this year and a 15 percent decrease in condominium and townhome sales in the same time period, according to Multiple Listing Service of San Diego.”

“Analysts said the median home prices are likely going to continue to rise, just maybe not as fast as in years past. Right now, the average single-family home price in San Diego is $645,000.”

“Steve Fraioli, president of the Greater Association of San Diego Realtors, said sellers should be careful at where they price their property. ‘I think people got a little over zealous with the price of their homes over the last couple of years, so there’s a bit of adjustment if you priced your home too high than yes you’ll have to lower the price for it,’ he said.

Related Posts
This Post Has 50 Comments

  2. This is from the Wise County Messenger. North and west of DFW, and should be a bellwether for suburban markets:

    ‘The average home sales price dropped to $192,500 last month. The average price for the 64 homes sold in October was $44,000 less than September and $4,500 less than October 2017.’

    ‘Of the homes sold last month, 42.6 percent were priced between $100,000 and $199,999. Homes between $200,000 and $299,999 made up 19.7 percent of the market.’

    ‘The month ended a string of seven straight months of increasing inventory. The months of inventory dropped to 4.1 from 4.2 the previous month.’

    1. Ben,
      Wise County is more rural housing and some smaller acreage type properties. Denton and Collin counties are more indicative of the DFW suburbs. I’m right in the thick of the action, watching Denton and Collin County as they start to deflate. The various submarkets are reacting differently depending on quality of neighborhoods and schools, but the deflation is readily visible throughout the Dallas-Fort Worth area. Most Realtors are still in denial, and it is telling that the actual number of Realtors is near a new bubble peak. Ding, ding!
      I’m watching the bubble come unraveled with the Fed’s shrinking balance sheet. We have a new crop of underwater borrowers here in Denton County who were lured into this new echo-bubble because there were few good options to choose from whether it be renting or buying. The Fed facilitated the land grab in Dallas seen during the last 5 years, and DFW real estate will deflate as long as the Fed tries to unwind their huge mistake
      https://aaronlayman.com/2018/11/denton-county-tx-underwater-borrowers-hud-annual-report-fha-loans/

      3. Hey MGSpiffy,

        One thing that I have been doing for WSJ articles is inserting “Outline.com/” and then removing the ‘s’ from https. This seems to bypass the paywall for WSJ, which is unique in that going into private browser for WSJ doesn’t work.

        1. outline.com/http://www.wsj.com/articles/the-u-s-housing-boom-is-coming-to-an-end-starting-in-dallas-1543248073

    2. From the WSJ comments:

      Andy Herman said…

      Don’t forget to factor in the impact of Dallas area property taxes. The property taxes on my house in 2012 (when I sold it) were $7,200/year – that’s an additional $600.00/month on top of the monthly mortgage.

      Just for the heck of it, I checked the property taxes on that house earlier this summer and they are now over $8,800.00/year or an additional $733.00/month on top of the mortgage and that doesn’t even consider the sky high utility costs in Texas.

      I paid almost $310,000 for the house when I bought it and sold it after 5 – 1/2 years for $260,000 because of the downturn. All in all, I couldn’t wait to get the H out of Texas, so it was worth the loss to me.

      1. Texas also has one of the highest homeowner insurance rates inn the country. So there’s that to consider as well.

        1. I’ve owned two homes in the greater Dallas area.

          This is how it was when I last was there a decade ago (there may have been some sort of state-wide reform, I’m not sure, but the zillow tax numbers have gone down own on my old places)

          Assessed value is usually targeted at purchase price (and the appraisal districts will jack it up the maximum allowed each year), with the homestead exemption being only $20k off assessed, and not for all of the taxes applied (school taxes on the full appraised amount for example).

          The total tax percentage was capped at 3% per law, but local school districts and cities would bomb homeowners with ballot measures to approve additional taxes beyond the 3%, so many places had 3.25% or 3.5% effective tax rates.

          Homeowners Insurance (thanks in part to hail storms and average roof life of just one decade) was around 1% of appraised.

          So owning a house there, you were looking at 4% (even as high as 4.5%) of appraised valued to cough up every year. Part of the trade off for not having a state income tax.

          The taxes & insurance on my current home in Mercer Island are notably less than the taxes on my $290k home in Texas was 15 years ago.

          1. 3 to 4 per cent is extraordinary high tax rate. Are you saying that property assessed at 100k would have a 3 to 4k tax bill? Wow. I am in Florida and we do not have state or local income taxes. Typical tax burden is about 1 per cent but it is not a simple formula and depends upon special assessments such as road paving for a given street or area or CDD fees,in new developments. Sometimes association fees are included in taxes.

            Ultimately, here, taxes are indexed to operating budgets of municipal agencies and the house value is reference to determine the owners proportion in comparison to the total value of all properties in the municipality. If the revenue is insufficient to cover budget, a roll up rate is applied which increases the rate of taxation applied to the assessment. Hence, Texas increase even though the assessment stays the same or even reduces in the event of falling property value. Hope this is not too confusing. Differs state to state.

          3. jdog – yes. it was.

            circa 2003 I recall my house was appraised @ $279k and i paid around $9300 in property taxes that year. This was just east of Dallas county. Insurance was ~$1900 – 2000 I believe.

            The reason for the high insurance owners insurance was the north Texas weather – very hard and fast thunderstorms were common with concentrated cells. Every couple of years there would be hail storms, which would tear up all the roofs in entire subdivisions, not to mention dent any car not sheltered. The roofing companies and auto body shops would feast for the next few months.

            Here’s an album of pics from my ($89k) house in Richardson, Tx around 2001 when a hailstorm hit in the evening (one car parked outside we tried throwing blankets on to protect) The whole thing came and went in less than 30 minutes.

            https://imgur.com/a/r4IqIAW

          4. “Here’s an album of pics…”

            Realize that those golf ball sized hail stones grow as they are forced upward through dark cumulonimbus clouds by violent winds and blast out near the top before crashing downward. Frequently occurring along the north-south, mid-west corridor, warm moist air from the gulf meets up with cold Canadian air producing violent storms.

  5. The WSJ could write the same article for any city in United States. They could substitute Dallas for Topeka or Omaha.

    The article sights experts explaining a shortage of homes drove up prices in DFW. This same shortage and run up in home prices happened everywhere in the USA, all at once.

    1. had GREAT Thanksgiving!

      Back to the housing bubble topic at hand: you just know when you start hearing the doublespeak phrase such as “a little bit” that prices have already fallen.

      wait, I meant “tumbled”. or is it “new price” ?
      same. exact. script that happened 10 years ago.

      just don’t be the first Realtor to yell fire or you might have to fall back on that magic shop your wife bought you . . .

    1. The Dallas metro area has spent the last 3 decades expanding in all directions, converting a near limitless supply of (flat) farm land and prairie to gleaming new subdivision full of ever larger boxes that cost a bundle to cool (and heat).

    1. “DW actually thinks a little break in the market may be a good thing. We are certainly nowhere near the Death Star days of the mid-80’s when Fannie Mae bulldozed entire home developments until the recession was over because it was cheaper to maintain raw land than empty houses.”

      I thought they bulldozed excessive inventory to protect the value of the existing mortgages, i.e., protecting the bank’s assets.

  11. a house in Dallas costs up to 50 percent most than it did in 2007.”

    Grammar be hard yo

    Ok so how low ,how long?

    1. The “smaller” homes, the ones typically purchased by the ‘middle’ middle class and the like, are up more like 75% (looking at my old neighborhoods), with most of the “gains” in the last 5 years. Of course that’s sustainable….

  12. How about that.

    An “analyst” says that SD median should increase and the Greater SD RE association president suggest that sellers should be prepared to lower their prices

    If you live long enough you see just about everything! Actually, realtors will change course 180 when it comes to advice when it becomes conducive to sales. Saw this extensively back in the short sales days.

    When you start to see this, watch out. The paradigm shift has occured. Not quite there yet as seller resistance is still quite evident. A bit of downward curve to go. RE is a slow moving machine, especially compared to securities, but it does get there.

    In one of our luxury zipcodes, there is currently about 150 listings and 9 closed sales in past 30 days. 2 were reo properties

  16. Don’t get bitconned!

    Business
    The Bitcoin ‘pyramid scheme’ continues to collapse
    By John Crudele
    November 26, 2018 | 11:39pm
    bitcoin on 100 dollar bills (stock art)
    Getty Images

    The ancient Egyptians made pyramids to last forever. Wall Street’s pyramid schemes aren’t nearly as durable.

    Bitcoin, while not officially a product of traditional Wall Street, is a pyramid scheme. A fraud. But it is best described as a “confidence game.”

    I’ve been calling it a “bitcon” for a long time. And now the pyramid seems to be collapsing because fewer and fewer people have confidence that the price of this inherently worthless “cryptocurrency” is going to continue to rise.

    I’ve just repeated some of the comments I made about bitcoin (and you could include other cryptocurrencies here) for years. But I’ve been especially vocal since early this year when bitcoin was reaching nearly $20,000 in price and even staid Wall Street firms were being lured to this “investment.”

    Here’s what I said about the crypto in a column on Jan. 4 that made predictions for the new year.

    “The fact that anyone even has to discuss the fate of this and other so-called cryptocurrencies shows just how crazy the world has become. Bitcoin — or bitcon — is a confidence game. A scam. It will exist and move higher for as long as extremely wealthy people are willing to prop it up in hope that suckers remain confident that bitcoin has some value,” I wrote.

    I predicted a number of times that bitcoin would eventually be worth $0.

    https://nypost.com/2018/11/26/the-bitcoin-pyramid-scheme-continues-to-collapse/

  17. To me the GM layoff announcement today seems like it might be an inflection point. I feel like psychologically something is shifting. It will be interesting to see if in 6 months from now the recession officially started today.

    1. GM Lordstown closing is certainly the end of an era.

      Globalists destroyed Ohio’s manufacturing base and they wonder why people don’t want to vote for candidates who support / are owned by globalists?

    2. If it did just begin, there won’t be any announcement within six months. However, the unemployment rate statistic will tell the story.

  18. Does it seem like the Bitcoin selloff is accelerating? The Wall Street Journal headline indicates the price just fell another 10% in one day.

  24. Never thought I’d be watching two RE crashes from the same blog from outside of the USA. It’s like deja vu. Great ZH story Ben and hopefully that’ll bring more readers and commenters to the blog. Maybe it’ll bring back TxChick and some of the oldies.

  25. Florida is a mess. They’re building retirement housing like there’s no tomorrow. And sales are slow, slow, slow. In this area, anyway.

  26. Good thing you cleaned up the format and commenting, Ben. I’ll bet you get some new commenters here now.

    Great interview. I appreciate that you discussed the harsh realities of buying foreclosures and post foreclosures. Even realtor.com now lists auction properties in with the retail listings. The opening prices are BS, though. Like 10, 20 thousand below a regular listing price. Why even bother? You can get that discount just by making an offer to an owner who really wants to sell.

Comments are closed.