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People Think, ‘I’m Going To Strike It Rich Right Now’

A report from MarketPlace. “The shift from a red-hot market has many realtors grappling with a new reality. On Tuesday, Los Angeles agent Hugo Torres was talking with his colleagues about sellers who have unrealistic expectations. ‘People think, ‘I’m going to strike it rich right now and I’m going to get very, very ambitious with my price,’ so Torres he said he has to be armed with data showing houses have been staying on the market longer, or news stories about the softer market.”

“In Portland, Oregon, realtor Tim Manickam called it ‘a new landscape.’ In the first part of the year he said his listings would sell in a matter of days, often with multiple competing offers above asking price. ‘Since June every listing has sat on the market at least a month, maybe six weeks before even getting offers.'”

“His client Jennifer Hames has had a harder than expected time selling her condominium in the trendy Pearl district. ‘I have had a ton of traffic,’ she said. ‘But it really didn’t turn out to be exactly what I had hoped.'”

“After about three months, the condo still hasn’t sold so Hames says she’ll hold on through the holidays and then she might lower her price from $361,500.”

From Reuters. “Sales of new U.S. single-family homes tumbled to a more than 2½-year low in October amid sharp declines in all four regions, further evidence that higher mortgage rates were hurting the housing market. The Commerce Department said on Wednesday new home sales dropped 8.9 percent to a seasonally adjusted annual rate of 544,000 units last month. That was the lowest level since March 2016. The percent drop was the biggest since December 2017.”

“September’s sales pace was revised higher to 597,000 units from the previously reported 553,000 units. New home sales have dropped in four of the last six months.”

“New home sales in the South, which accounts for the bulk of transactions, declined 7.7 percent to their lowest level since July 2017. Sales fell 3.2 percent in the West and plunged 18.5 percent in the Northeast to their lowest level since September 2015. They tumbled 22.1 percent to a 2½-year low in the Midwest.”

“The median new house price fell 3.1 percent to $309,700 in October from a year ago. There were 336,000 new homes on the market in October, the most since January 2009 and up 4.3 percent from September. Supply is, however, just over half of what it was at the peak of the housing market boom in 2006.”

“At October’s sales pace it would take 7.4 months to clear the supply of houses on the market, the most since February 2011, from 6.5 months in September.”

This Post Has 52 Comments
  1. ‘People think, ‘I’m going to strike it rich right now and I’m going to get very, very ambitious with my price’

    Does this sound like someone who just happened to decide to move?

    ‘There were 336,000 new homes on the market in October, the most since January 2009 and up 4.3 percent from September. Supply is, however, just over half of what it was at the peak of the housing market boom in 2006’

    I’m not sure why the 2006 number is thrown in there. The shacks built in 2006 are still out there.

    1. It seems the terms “shortage” and “supply” have been bastardized by the industry and the media. There never was a shortage of houses, only a limited number listed for sale because everybody was speculating that prices would continue to go higher, so they didn’t want to sell and miss out on those gains.

    2. “…agent Hugo Torres was talking with his colleagues about sellers who have unrealistic expectations…”

      “…realtor Tim Manickam called it a new landscape….”

      Hey Hugo and Tim, what ever happened to “unlimited upside”, “buy now or be priced out forever”, “they are running out of land”, “everybody wants to live here”?

      Is REIC capable of making even 1 truthful statement?

      I thought so.

    1. Are you kidding he “loves debt” he wants low interest rates for personal reasons I suspect.

      Populists tend to debase the currency keeps everybody happy for a while.

        1. Well in absence of any data we are free to speculate. Multiple bankruptcies would indicate perhaps a problem with debt? I will grant you that he is on the other side of the line, to whit owe the bank 1 million dollars and you don’t sleep at night, owe the bank 1 billion dollars and the banker doesn’t sleep at night.

          1. absence of any data

            The data is that Trump has never declared personal bankruptcy. Claims to the contrary are malicious gossip.

  2. The Reuters article says the US has 7.4 months of supply as of October.

    Wasn’t it just 3 or 4 months supply heading into the fall?

    It seems like I have to be misunderstanding or mis-remembering something.

    If not, this is a truly shocking increase. That escalated quickly…

    1. Higher interest rates are knocking people out of the game. From my experience if you aren’t the only offer on a house there is too much competition.

      1. Yep, this comes from the misconception that unaffordability comes from paying high price and paying higher interest rates. 4.8 is hardly a high interest rate historically. Younger folks have just never known a normal rate. Let’s stop blaming the rather natural corse of increasing rate. If blame needs to be rendered, it should be placed on near zero discount rate that has spawned excessive inflation. It is like 2006. Post 9/11 saw drop after drop which created a refined boom. Many who were foreclosed on were a result of borrowing again equity build up in their existing property.

        Many articles featured sad stories of people who had owned properties for 20 or 30 years and we’re foreclosed. Who in right mind would borrow 250k against a house they had previously paid off? Often done to buy investment properties. Saw this personally with many people back in the 03 to 06 years.

        You just cannot protect people from themselves. Sorry, it was not evil bankers who were villains in these cases. Do see similar potential in near future.

        1. “You just cannot protect people from themselves. Sorry, it was not evil bankers who were villains in these cases. Do see similar potential in near future.”

          Who is responsible for the proliferation of Fentanyl across the United States – the superlabs in China or the drug-addled addict laying in the gutter? You decide…

          1. If there were no market (in this case, people willing and eager to pump various substances into their bodies), there would be no supply (in this case, Chinese “superlabs”).

          2. Who is responsible for the proliferation

            Are you saying it’s house builders that are responsible for the debt addled donkeys lying in the gutter?

        2. I can’t see any reason to borrow against one’s home unless it was for some significant maintenance/repairs – and by that I don’t mean remodeling the interior to something more trendy. I’m thinking more like drainage/roof – something you do once every 20-30+ years. But I’ll bet that only accounts for 2-3% of all HELOC money spent…

          1. “I can’t see any reason to borrow against one’s home…”

            You’d never thrive down in “leverage-up and spread your seed” California.

          2. rms – I get cold called by recruiters quite often – have been for years.

            Sometime I would listen to their pitch, but the first question out of my mouth is ‘where?’ and I’ll end the conversation then if they answer ‘California’. See how a lot of them are bay area/silly valley companies, that weeds them out fast.

            When I worked for the mouse, sometime I would have to fly down to the imagineering labs in Glendale, CA. Doing that for just a a day ( look up ‘source rule’ and ‘duty days’) triggers a claim by the CA FTB to pay CA income taxes. Fortunately the company had a system for taking care of it and paid the extra taxes, but if I was to do a consulting gig or the like, I would do it in a way that no ‘work’ was done in the state.

          3. I’d never borrow against my paid-off home either.

            I interviewed at a San Jose firm about 18-months ago. It went well, but I was alarmed at their high turnover. Despite their high salaries it dawned on me that it still wasn’t enough to live in the Santa Clara valley. Walking through their parking lot I noticed that a large number of license plate frames indicated car dealerships from Tracy, Modesto and further out. These poor souls must spend three or four hours in traffic each day! And their cars… probably shot within three years? Engineering degrees and cutting edge technology, but still living check to check.

          4. rms – we are of like minds.

            I’ve been visiting silicon valley since the late 90s due to friends living and working there, and got a sense of how the situation for those not lucky enough to have a huge score has deteriorated year after year.

            I think it’s one of the reasons that drives so many to attempt to make “something/anything’ that will lead to a big payday/buyout – they think they have no other choice.

        3. How many news stories have we all seen about the welfare mom with 4 kids of 4 different fathers living a motel, but still sports a high end iphone and an Xbox?

          Seems to me “personal self-discipline” is a key concept that doesn’t seem to register with these folks.

          To these folks, its always someone else’s fault (as they drown in self pity).

          1. Eh, an xbox can provide a ton of entertainment at a single one-time. It can be taken location to location, and probably used as a computer for web browsing, youtube tutorials for improving ones skills, etc. The iPhone might be purchased second hand, or an old model. Communications is pretty much a needed thing to function in society these days, and again one device can serve years of use if taken care of. One month rent for a lot of people would often buy a new iPhone every month. Or an xbox plus large TV and stack of games.

  3. “The median new house price fell 3.1 percent to $309,700 in October from a year ago. There were 336,000 new homes on the market in October, the most since January 2009 and up 4.3 percent from September. Supply is, however, just over half of what it was at the peak of the housing market boom in 2006.”

    “At October’s sales pace it would take 7.4 months to clear the supply of houses on the market, the most since February 2011, from 6.5 months in September.”

    YOY house prices declined CHECKED
    Buyer markets with 7.4 months supply CHECKED
    NAR lying about the stats CHECKED
    Inventory exploding CHECKED

    Looks like its 2007 all over again

    1. And the local bottom will be what 2011? So 4-5 years out. This isn’t like a stock market high speed trading crash where a stock is cut in half on some news, the triples then ends the day unchanged. I suppose I should call you guys pot-watchers, in that a watched pot never boils (or at least takes longer)

      1. So 4-5 years out

        That might be a safe guess if this was just a normal business cycle, houses up 100% then houses down 50%, rinse and repeat. It wouldn’t be very entertaining watching that. We think we’re watching something else.

    2. “Looks like its 2007 all over again”

      Except this time the declines are occurring more rapidly.

      Whatever you do, don’t make the mistake DebtDonkeys did in 2010-2012 and pay double the long term price trend.

  4. Ben, I think you missed an important quote from the last article.

    “Nearly two-thirds of the houses sold last month were either under construction or yet to be built.”

    Once the bubble burst moved to phase 2 where there is no denying it from the media or real estate shills, I got a feeling a large number of these speculators will walk away from their deposits.

    1. Construction sales have different meaning than with existing sales. In construction, “sold” means under contract. Closing occurs once final draft is submitted from lender to builder and title and keys are handed to buyer. Exception is when a construction perm loan is made. In these cases, title is transferred to buyer when only a vacant lot exist. The purchase price on county records will show artifical low. Then,the banks issue various draws at specific stages of completion. In these cases, the county record will not show the actual final house/ lot purchase price or actual final c.o date. Most contruction these days that I am involved with are end loans whereby ownership of the property remains with builder until completion then a loan is issued to the buyer who originally contracted for the house many months earlier. At this point the property status changes from “sold” to “closed” and title is transferred.

      In resales, the term “sold” typically means closed. When under contract but not closed it is referred to as “pending”

      This is why comparing new home sales to existing home sales is not precise.

    2. It depends on how fast the Agents and Developers were able to ram the buyer through the schedule; how knowledgeable and available the buyer was to be able to “pop in” and inspect some of the critical progress of the work. In one build my wife and I did years a ago…every time we popped in we found a collasal mistake the builders were making just from the “eye view,” where they had to redo, and redo and redo every time we came by. That was the first and last house we ever bought in a dev. Every time the builder had to correct something, they always tried to buy us off with more bright shiny interior objects to off-set major problems elsewhere – we of course refused and almost walked away several times. So it depends on timing, how smart or “undistracted” or desparate the buyers are and how many gilded objects they push on them for free inside those poorly insulated, poorly aligned cardboard walls with plumbing, electric, and sewer pipes that will fail early for the next poor sucker to pay for.

      1. I won’t vote for Trump a 2nd time if he continues down this cheap money rat hole. I voted for the guy who called it a “big, fat, ugly bubble.”

        I think he’s making a grave mistake with his rhetoric and attempts to continue this grotesque bubble and overvaluation in stocks, housing, vehicles, etc.

  5. Your government is working hard to make your number one expense – housing – as expensive as they can. They are using your tax money to do so. Your government is trying to financially ruin you to benefit their crony capitalist buddies. High shelter costs help nobody but the wealthy.

  6. The current situation with housing, where pretty much all areas of the United States suffer from high purchase prices which working families cannot remotely afford, along with high rents, creates tremendous financial pressure, stress and unhappiness among large portions of the population.

    Situations like these give rise and support to politicians like Ocasio-Cortez, which is dangerous for the country long term. If there is a groundswell movement across the country where young people, the ones who suffer the most from these high asset prices, embrace these socialist types who also believe in open borders, we could reach a point of no return.

    That’s why I am vehemently opposed to these bubbles and the easy money policies of the Fed. They are serving to unleash a beast which, if free, could realistically end the US as we know it for good.

    1. “…we could reach a point of no return.”

      Odds are that we passed that point back in 2006. We’re just refinancing our old debt with new debt and refilling the punch bowl.

    2. Open borders = more votes for the Democrats, and more cheap labor for the Republican business owners. IMHO this is why no serious attempt has been made to secure the border.

  7. Crypto’s back! An absolute moonshot…

    $4,339.37 Bitcoin price
    +$606.19 Since yesterday (USD)
    +16.24% Since yesterday (%)

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