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The Year When House Hunters Had Too Many Homes To Choose From

A report from the Orange County Register in California. “When 2018 started, the housing buzz was ‘where’s the supply?’ Now with the year almost complete, the industry now wonders ‘where did all the buyers go?’ Ponder that in housing-starved Southern California, builders have the largest standing supply of completed homes to sell in six years. Yes, newly constructed residences are a pricey niche that’s not for everyone. Still, the change of momentum is remarkable.”

“Housing tracker MetroStudy reports that at the end of the third quarter, 3,401 new homes were finished but unsold in the four-county region covered by the Southern California News Group. That’s up 428 homes in 12 months, or 14 percent, and was the highest inventory level since 2012’s second quarter.”

“But this year, house hunters have pulled back — for both new and existing residences. If you need a stark measurement of the buyer reluctance, look at this: CoreLogic reported Southern California home sales of all types in September suffered their largest year-over-year decline in nearly eight years.”

“It adds up to a situation where not too long ago local builders had many buyers waiting months for homes to be completed. Today, most housing projects offer new homes ready for immediate occupancy — with special pricing, no less.”

“Look at the market upheaval in Orange County. It’s got the region’s biggest boost in new-home supply, according to MetroStudy. As of Sept. 30, O.C. had 1,074 finished residences for sale, up 277 or 35 percent in a year. It’s O.C.’s largest new-home inventory in nearly 12 years.”

“Builders, faced with their own industry competition, also are up against homeowners in the region who rushed to list their homes. As that new-home supply swelled in the third quarter, Southern California owners averaged 35,333 listings, according to ReportsOnHousing. That’s 4,568 more existing homes on the market than a year earlier — or 10 times the growth of unsold new homes.”

“Yet this is an autumn period when many owners typically take homes off the market. Who knew that 2018 would be the year when house hunters had too many homes to choose from?”

From Curbed Los Angeles. “The number of homes for sale in the Los Angeles area climbed more than 30 percent in October, according to Zillow. That suggests the region’s sky-high home prices could continue to fall, as they did in September.”

“During the month of October, inventory (the total number of houses and condos on the market) in Los Angeles and Orange counties jumped nearly 32 percent above levels recorded in October of last year. A bump in the number of homes available for sale often corresponds with falling prices, since sellers have more competition when listing their homes and are less likely to be overwhelmed with offers above asking price.”

“The spike in the number of homes available for purchase mirrors—and far exceeds—a nationwide trend. Across the country, inventory went up 3 percent since last year, marking the first yearly increase since 2014.”

“‘This is a phenomenon we’re seeing in several pricy markets throughout the country,’ says Zillow economist Aaron Terrazas. He points out that inventory has also risen by double digit percentages in San Francisco, Seattle, and San Jose.”

“Terrazas tells Curbed that much of the inventory growth in LA and other markets is driven by homes that take longer to sell, suggesting that buyers may be less willing to pay bloated prices.”

“‘This is a reflection of how poor affordability is in those areas,’ says Terrazas. ‘Buyers are starting to pull back a little bit from where they were a year ago.'”

This Post Has 53 Comments
    1. good HBB coverage article on Zero Hedge.

      pretty soon ‘ol Ben will have his White House pass revoked for being a pain in the azz to the shack sellers . . . but the Pulitzer on the mantel is sweet revenge.

      1. +1 on the ZH article.

        To any newbs who wandered in as a result, welcome to one of the only honest sources about the housing bubble. This is where the marketing, the Realtorbabble, all of the lies are analyzed and deconstructed.

        This is not HGTV. This is not the city-data forums. This is not Reddit.

        Underwater home “owners” your anger, your grief, your denial, is understandable. It’s time to admit to yourself that you were lied to, that you were deceived. Accept that you’ve lost tens of thousands, hundreds of thousands of dollars, pick up the pieces, and move on from your mistake.

      1. “Look at the market upheaval in Orange County. It’s got the region’s biggest boost in new-home supply, according to MetroStudy. As of Sept. 30, O.C. had 1,074 finished residences for sale, up 277 or 35 percent in a year. It’s O.C.’s largest new-home inventory in nearly 12 years.”

        KEEP BUILDING BOYZ. I’m sure everyone was putting 20% down on these million dollars shack!

    1. Nice work Ben 👍👍. I actually heard it this morning and found it really informative as you guys covered about everything that could be covered.

    2. Found your blog from PeakProsperity. I live in LA and yes, it’s been pretty crazy here, and with the rate hike, it is now taking a breather. BUT I must say that good homes, even at a pretty high $ point, will sell. Those homes out in the market a while aren’t selling for a reason.

  1. ‘As that new-home supply swelled in the third quarter, Southern California owners averaged 35,333 listings…That’s 4,568 more existing homes on the market than a year earlier — or 10 times the growth of unsold new homes’

    Oh dear…

  2. ‘This is a phenomenon we’re seeing in several pricy markets throughout the country’

    Amazing isn’t it? All the “oh so hot” shortages went poof, at the exact same time! It’s almost like there wasn’t a shortage at all, but rather a whole bunch of speculators trying to time the top.

    ‘suggesting that buyers may be less willing to pay bloated prices’

    The only reason someone would pay a bloated price was if they expected to make a big profit doing so. When that goes away, down she goes.

      1. Playing with the NYT buy vs rent. So in San Fran last year prices were still increasing (according to Case Schiller about 10%) interest rates were low. I buy for 1M dollars at 3.67% interest with 20% down, I expect RE to go up by 10% a year, I estimate inflation at 2.5%. I am in 40% tax bracket I estimate investment returns at 7%. I expect to stay in the property for 10 years.

        The calculator tells me it is better to buy then rent even if rent is free.

        Now this year, I am looking at a 1.1M (10% appreciated) but now the annual appreciation of RE is set to 0% inflation I will set at 3% investment returns maybe 5% lets see what it says!

        Under the new assumptions I am better off renting if I can find a similar property for less than $5700.

        So the picture last year was literally buy no matter what, and this year it is “think about it”

        So I suppose every buyer that uses the NYT buy vs rent calculator has exited the market. The numbers swing harder against buying if you plan to stay in the property for less time.

    1. Absolutely, play around with the NYT buy vs rent calculator and you will see that a big part of the buy vs rent decision has to do with expected appreciation of the RE. Once the expectation that RE always goes up is debunked the price you should be willing to pay for RE goes way way down.

      1. buy vs rent calculator

        Common sense was always better than that spreadsheet. If the price of the house isn’t going to go up every year, you will lose alot of money. If rent isn’t going up every year for the next 30 years, you will lose alot of money buying. If you don’t figure in wear and tear and obsolescence, you will lose alot of money on the house. If you called all three wrong, you are a Blue Ribbon Donkey.

        Not to mention that if you cannot buy a house without a 25 or 30 year loan, you cannot afford it.

        1. Seriously play around with it, it assigns something like 1% a year for maintenance, figures in the benefits of your tax rate all sorts of stuff. It is better than a gut feel.

    1. Thee.oh.See! … is built out, no more taxpayer$ monies$ to $upport new 50 year toll road bond$ to bring x2 income debt $laves to the fancy pant$ developer$ new non-exi$tent flat land$ home$ … The.Oracle.@.OC Central: “Vertical & high den$ity” & (democratic.)

  3. “Buyers are starting to plug back a little”

    Oh really? When does the talk truly represent the reality? Sounds just like 2006. When you look down a tunnel the distant approaching train light looks small and dim. Better turn around and run.

      1. I’ve seen a couple blog that have a 5 minute (or so) window after the post in which the author can edit the post. Would be handy if that could be added here.

  4. Ben, saw your quote on Zerohedge. Appreciate that advice
    you want to buy from a bank or a lender, that will frequently be Fannie May and Freddie Mac. For instance, in 2010, I helped somebody buy a house for $12,000 through an online auction. That house had been refinanced four years before for over $100,000.

    1. Wait until the distressed sales. You don’t want to be buying retail in real estate.’

      Good advice that’s what I did in 2012 , but you have to be patient if its a short sale, buying at a auction IDK ? My house was days away from a auction probably could have got it cheaper if I knew how to play that game. Blackrock got into the game around that time 2012 and was over bidding on houses. Their money must be free.

      Anyway don’t buy retail not at the top. Just don’t do it.

  5. I am beginning to see some REAL action in terms of pricing (though not yet increased inventory) in West LA.
    Someone really wants to unload this house. It was never worth 1.95 million in any real or alternative world, but now it’s down to 1 million.

    https://www.zillow.com/homes/for_sale/Los-Angeles-CA-90064/fsba,fsbo,new_lt/house,townhouse_type/20461720_zpid/96045_rid/globalrelevanceex_sort/34.0779,-118.386484,33.992619,-118.473516_rect/13_zm/0_mmm/

    DATE EVENT PRICE AGENTS
    11/20/2018 Listed for sale $1,000,000 -42.9%
    10/16/2018 Listing removed $1,750,000 —
    10/4/2018 Price change $1,750,000 -2.2%
    9/22/2018 Price change $1,790,000 -3.2%
    9/8/2018 Price change $1,850,000 -2.1%
    8/16/2018 Price change $1,890,000 -3.6%
    8/13/2018 Back on market $1,960,000 —
    8/3/2018 Price change $1,960,000 -0.5%
    5/29/2018 Listed for sale $1,970,000 +129.1%
    10/29/2016 Sold $860,000 +1.3% Vanessa Spiva, Jamie Tsai
    9/17/2016 Price change $849,000 -14.1%
    8/8/2016 Listed for sale $988,800 —

    1. 1 million is auction start though. It’s not even worth 1 million. It’s literally a house down away from I-10. Think of the noise.

  6. 1 million is auction start though. It’s not even worth 1 million. It’s literally a house down away from I-10. Think of the noise.

  7. What’s the unfunded pension liability in your county?
    5.6 billion here in fxco.
    They’d have to double taxes to pay it off.

    1. Interesting comment in the last minute about their auctions. Realtors put the house up at auction knowing it won’t sell, because they are charging the house owner advertising fees!

    1. Well it looks like what is selling in Santa Cruz compared to last year is smaller properties. Smaller houses are cheaper by and large compared to bigger houses. So the “selling price” declined by 22% but the $/sq ft actually increased. So who knows what happened? If you bought two years ago are you now underwater? Can’t say from this data. Now go on Zillow and look for individual properties that sole a year or two ago and are now for resale, might give you a better idea. Still won’t factor in improvements.

      1. Smaller houses are cheaper

        People buying smaller cheaper houses is an excellent real time indication that the market is going down. On they way up they bought bigger more expensive houses. Look at Case Shiller in a few months for aged same house data, or read and accept the posts on HBB already citing countless examples of same house sales price dropping everywhere.

        1. Case Shiller is the gold standard for this kind of thing. Trumpeting that smaller houses are cheaper as evidence that a crash is happening not so convincing. At this stage of the game the leading indicator will be months of inventory. Once that starts going up sellers are losing pricing power.

  8. Welcome, any Zero Hedge regulars who wander over to the HBB. Grab a chair. Put your feet up. Hang out for awhile. Welcome to a bastion of truth and free thinking in a sea of corporate media lies and propaganda.

  9. Ben Jones: “I can’t think of a market in the United States I would buy in right now.

    Colorado Springs. It’s different here. My realtor assures me of this. Her research also confirms that the house she wants to sell me is a special listing, and that we can do this.

    1. If I had crypto, I would be using it to buy anything but crypto. Gold, USD, lame racehorses, diseased hookers, broken RV’s anything IMHO will hold its value better than crypto.

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