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After A Screeching Halt Sometimes Comes A Crash

It’s Friday desk clearing time for this blogger. “Tim Manickam, a broker at JMA Properties, said sales in some parts of Portland and Seattle were down around 20 percent. ‘I think 40-some percent of homes are having price reductions,’ said Alyssa Isenstein Krueger, a broker at Living Room Realty.”

“Manickam said he sold a luxury condo in the Pearl District for well over $1 million this spring while the price on a similar unit dropped by 20 percent this fall. ‘I had listings in the spring where we had six and 10 and 15 multiple offers where buyers were pushing to buy a house and they are taking a step back,’ Manickam told KOIN 6 News. ‘There is a limit – there is usually a ceiling of how much they can go and how much they will go. We may be reaching that point today.'”

“According to Redfin, 47 percent of Seattle-area home sellers dropped their prices by an average of $27,539. Redfin Chief Economist Daryl Fairweather told Lens: ‘You’re seeing much more price drops than has been seen in Seattle in the past as nearly half of active listings in Seattle experience a price drop. Earlier this year, it was only 12 percent.'”

“A once-sizzling housing market in West Side communities has cooled in recent months, according to local real estate professionals. Price reductions have become far more common in recent weeks, each of the agents indicated. ‘More higher priced houses are left on the market,’ noted Bill Mattos at Valley Real Estate in Gustine.”

“More homes are on the market and fewer are moving quickly compared to earlier in the year, added Jose Rodriguez, a Newman agent with Allison James Estates and Homes. ‘Last year you were seeing multiple offers. It is tough to get a multiple offer property now unless you are selling below market,’ he commented.”

“A buyer at Muse Residences in Sunny Isles Beach is suing to recover more than $7 million in deposits after alleging the development group misrepresented the size of their condos in marketing materials. The plaintiffs put down deposits in 2014 and 2015 to buy three condos in the planned luxury condo tower at 17100 Collins Avenue, according to the suit.”

“Sunny Isles Beach has the highest inventory of high-priced luxury condos in Miami-Dade County, according to a recent report. The beach town just north of Miami Beach is saddled with 17 years of inventory of condos priced at $5 million and up, the report from EWM Realty International said.”

“After a screeching halt sometimes comes a crash. This was the year when Canada’s housing market hit the brakes. So what will happen in 2019? In Vancouver, realtor Steve Saretsky sees a ‘full-blown buyer’s market’ with prices that will continue to trend lower for detached homes, condos and townhomes alike.”

“When sellers fixate on ‘old peak prices,’ they usually end up having to ‘chase the market down,’ watching their asking price gradually fall, he said. ‘If you are actually keen on selling, you have to be ahead of the market,’ and possibly anticipate future prices declines, he added.”

“Apartment units in projects nearing completion are selling for up to 25% less than the reserved value, the news agency reports, citing broker MyLondonHome as a source. ‘Those vendors that have sold at a loss are hidden from the public eye,’ said MyLondonHome managing director Andrew Griffith.”

“These numbers fail to be represented in official government housing data, as only the original price agreed when the market was in boom mode is recorded.”

“The market that only ever seemed to go up has started to turn lately. Buyers from mainland China—which accounted for around a quarter of luxury apartment purchases in Hong Kong last year according to Centaline—may also be tightening their purse strings as the Chinese economy decelerates.”

“A housing-price index compiled by property agent Centaline has dropped 5% from its August peak. The aggregate number probably doesn’t reflect the market’s gloomy sentiment—prices in some housing estates have fallen more than 10% in just the past month. Turnover has dried up, indicating buyers are still waiting for homeowners to slash prices further.”

“Over the past four weekends, more than 1100 properties across the city have failed to sell at auction across Sydney. But after a nine percent fall in house prices this year, the Domain research shows Sydney will face a further decline of about one percent next year, before growing by around four percent in 2020.”

“‘They have to be as optimistic as they can be, and may not publish what all of the scenarios are. They don’t want to incite panic unnecessarily,’ Hal Pawson, Associate Director at the City Futures Research Centre told 10 daily.”

“Pawson said while there’s a lot of focus on property prices, what often goes unreported is the number of properties changing hands. He said government figures shows that turnover has dropped a lot in NSW. In the second quarter of 2018, 27,000 homes changed hands. That’s 15 percent lower than the year before.”

“Growth of U.S. home prices will slow sharply next year along with economic momentum, according to a Reuters poll of property experts who largely said turnover in the housing market has peaked. The latest Reuters poll is the third in a row where analysts cut their existing-home sales forecasts.”

“‘The magnitude and speed at which home sales have weakened is surprising, following just a three-quarter of a percentage point rise in mortgage rates. We suspect the problem is a lack of affordable product in the markets where potential home buyers would like to live,’ wrote Mark Vitner, senior economist at Wells Fargo, in a note to clients.”

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This Post Has 42 Comments

  1. ‘Manickam said he sold a luxury condo in the Pearl District for well over $1 million this spring while the price on a similar unit dropped by 20 percent this fall’

    How could there not be a flood of foreclosures following such a crash? The bubble has popped.

    1. A 20% drop in 6 months is an epic crash, 40% annualized. I do not recall any area in the United States falling this hard and fast last crash. Oh, Portland!!

      1. Maybe 20% drop for some very high-end condos that were unrealistically overpriced to begin with. But I can assure you that the general single family home market in the Portland area has had nothing like a 20% drop. Some slowing, and perhaps some price reductions by unrealistic sellers. But around me houses still seem to e selling for basically the same price as a year ago.

    2. Exactly. Ultra-low interest rates meant the buyers were those with the means to get credit: investors, individual and corporate. These are the guys with the means to pay, hence the lack of foreclosures.

      Soak them all for parking their money in what should serve as shelter, driving up the price for everybody else to have a roof over their head, and being the proximate cause of the homelessness problem.

      And sooo many analysts expect the bubble popping to hit the economy hard, as if these investors actually circulate money that drives the economy rather than hoard it. In time, less rent money to landlords will be a tailwind for the economy, not a headwind.

      1. “… driving up the price for everybody else …” = creating equity wealth.

        “… as if these investors actually circulate money that drives the economy rather than hoard it.”

        Circulate money is what their neighbors will do, circulate money that has been magically created by the magical creation of equity wealth which in turn has been magically created by price increases – price increases magically powered by borrowed money.

        The Magical Economy: It’s all good.

      2. “And sooo many analysts expect the bubble popping to hit the economy hard,…”

        The economy will miss the cashout refi money.

        Speaking of, whatever happened to azdude?

  3. Cryptocurrency
    ‘I come to bury Bitcoin, not to praise it’: UBS
    Published Fri, Nov 30 2018 • 6:38 AM EST | Updated 4 hours ago
    Tyler Clifford
    Key Points
    – It’s time to “bury” bitcoin, UBS’ Paul Donovan says.
    – It was “obvious” that the bitcoin rally would end badly for people not “protected by any kind of regulation and got sucked into the process,” he says.

    https://www.cnbc.com/2018/11/30/i-come-to-bury-bitcoin-not-to-praise-it-ubs.html

    1. “After peaking, bitcoin is now trading around $4,330.”

      Try to keep up.

      1 Bitcoin equals
      3,970.03 United States Dollar
      Nov 30, 9:24 PM UTC

    2. R u still planning to buy the dip?

      Bitcoin
      Bitcoin crashes 37 percent in November, wiping $70 billion off of cryptocurrencies’ market value
      Published an hour ago
      Kate Rooney

      Key Points

      – The world’s largest cryptocurrency struggled to break above $4,000 on the last day of November, after starting the month well above $6,000.
      – The market capitalization of all major cryptocurrencies took $70 billion hit for the month, according to CoinMarketCap.com
      – “It’s unclear if this is a ‘bottom’ or a brief period of consolidation before next move down, but buyers are still maintaining some cash on the sidelines in case it does go lower,” said Michael Moro said, CEO of Genesis Global Trading.

      https://www.cnbc.com/2018/11/30/bitcoin-fell-37-percent-in-november-erasing-70-billion-from-industry.html

    2. 40 percent of Boomers have less than $10,000 saved for retirement. They are broke too. I’ve said before and I’ll say again, socialism will come from the old people, not the young people. When this next recession hits these grey haired folks are gonna be in for some pain!

        1. “Since millennials first started entering the workforce, their spending habits have been blamed for killing off industries ranging from casual restaurant dining to starter houses. However, a new study by the Federal Reserve suggests it might be less about how they are spending their money and more about not having any to spend.”

          Did they really need a “study” to conclude that?

          1. Millennials have cut and cut and cut. They are in debt and have low earning potential. The latest “cuts” by millennials are delaying tying the knot and having children. When they do have them, they are having far fewer. It should come as no surprise that in the next 10 years the housing stock will skyrocket, regardless of what interest rates are doing. That is exactly that the Fed study said. Demographics are destiny.

  5. “Across the United States, the number of newly built homes has gone through the roof – but many are sitting on the market without buyers.”

    WOW some shortage

  6. “It was “obvious” that the bitcoin rally would end badly for people not “protected by any kind of regulation and got sucked into the process,” he says.”

    Bahahahaha … any kind of regulation or just maybe a bit of common sense.

    A bunch of dummies. Truly.

  10. “These numbers fail to be represented in official government housing data, as only the original price agreed when the market was in boom mode is recorded.”

    Wait they lied!!?? Why? Are they attempting to prop up the hype in RE? Fail

    “The market that only ever seemed to go up has started to turn lately. Buyers from mainland China—which accounted for around a quarter of luxury apartment purchases in Hong Kong last year according to Centaline—may also be tightening their purse strings as the Chinese economy decelerates.”

    Well now that the China specuvestors have left, we seem to be “slowing” down a bit. Coincidence that right when the China gov regulations and there sudden withdrawal from foreign investment, the whole worlds RE began to “cool”’down. It’s not local, it’s worldwide. Everyone, everywhere is impacted when the primary buyers withdraw. Just a matter of time until everyone realizes it

  12. Ben, your content has been prophetic. I have been a full-time RE investor since about 2004 and you have always been a sane voice in the wilderness to me when everyone around me has regarded me as an uber bear. As a contrarian I’ve done very well in RE. Well done on your content you are prolific with your content. You called it. It’s unraveling.

      1. “The psychopath is callous, yet charming. He or she will con and manipulate others with charisma and intimidation and can effectively mimic feelings to present as “normal” to society. The psychopath is organized in their criminal thinking and behavior, and can maintain good emotional and physical control, displaying little to no emotional or autonomic arousal, even under situations that most would find threatening or horrifying. The psychopath is keenly aware that what he or she is doing is wrong, but does not care.” —Kelly McAleer, Psy.D

  13. The Economist
    22 November 2018

    There is more to high house prices than constrained supply

    Good article from last week that implicates the “financialization” of housing as the culprit on rising house prices, along with interest rates.

    “So goes the conventional wisdom. But even as policymakers have at last begun to embrace building, a new school of thought has gained prominence. Its advocates, the most vocal of whom is Ian Mulheirn of Oxford Economics, a consultancy, say high prices have little to do with supply shortages. They put the blame somewhere else: global financial markets.”

    “The true explanation, the argument goes, is found by viewing a house as a financial asset. It produces implicit income: the saving on rent achieved by owning the property rather than renting it (or equivalent digs) from a landlord. Like all streams of income, this can be valued using an interest rate. And just like the dividends offered by stocks, or the coupons offered by bonds, monthly savings on rent, capitalised as house prices, have soared in value as global real interest rates have tumbled.”

    https://www.economist.com/finance-and-economics/2018/11/24/there-is-more-to-high-house-prices-than-constrained-supply

    1. “And just like the dividends offered by stocks, or the coupons offered by bonds, monthly savings on rent, capitalised as house prices, have soared in value as global real interest rates have tumbled.”

      And now interest rates are heading up. What effect do Ian’s deep insights predict this new development will have on house prices around the planet?

    2. “financialization”

      I would call it “speculatization” at this point…but yeah. It wouldn’t have gotten as bad if they wouldn’t have made it as easy as possible to speculate on real estate.

  14. A nation of dummies …

    “American debt is set to hit $4 trillion and this expert isn’t worried”

    (snip)

    “In the first nine months of 2018, Americans had a cumulative $3.93 trillion in debt, excluding mortgages, with $1 trillion of that from credit cards and $2.93 trillion from other sources such as student loans and auto loans. With holiday shopping underway, Americans’ credit card bills are set to increase by at least 5 percent, according to mortgage site LendingTree. That $600 million or so in extra spending is likely to bring consumer debt to a new high of $4 trillion.”

    😁

    “Still, LendingTree’s chief economist Tendayi Kapfidze says consumers shouldn’t worry. ‘It’s a big number, but it’s actually not that concerning, because of the income growth we’ve seen since the crisis,’ Kapfidze tells CNBC Make It.”

    “One reason he’s not too worried, Kapfidze says, is that the economy is more stable in 2018 than it was in 2008, and real estate values and consumer bank deposits have grown more than debt has. ‘Deposits have grown by $2.5 trillion more than consumer debt, and homeowners have nearly $10 trillion more in home equity than they did a decade ago,’ he says.”

    Hmmmm … bank deposits have grown more than consumer debt?Isn’t this the country where something like 40% of the population could not raise $400 if needed for an emergency? And about this wonderful rise in home equity, isn this equity rise a function of the rise in prices, something that has been driven by debt and appears to be reversing?

    “Also, incomes have been growing at a faster rate than debt, he points out: ‘The net indebtedness of [individual] consumers is actually declining even though the total balance of debt is increasing.'”

    Yeah? Well if real estate rolls over then a big chunk of our stupid debt-powered consumer-based economy will roll over with it and then we shall get to see just how durable this growth in incomes will be.

    The wonder of it all: Even though incomes may fall accumulated debt gets to stay. 😁

    The totally dumbed-down American consumer: God’s gift to bankers.

    Pukes work, lenders reap.

    I like it, I love it, I want some more of it.

    Bahahahahahahahahahahahahahahahahahahahahahahaha

    https://www.cnbc.com/2018/11/29/american-debt-is-set-to-hit-4-trillion-and-this-expert-isnt-worried.html

    1. “Still, LendingTree’s chief economist Tendayi Kapfidze says consumers shouldn’t worry. ‘It’s a big number, but it’s actually not that concerning, because of the income growth we’ve seen since the crisis,’ Kapfidze tells CNBC Make It.”

      Thanks Mr Kapfidze, I was a bit worried thinking all this debt would have to be paid back or something. Keep spending, got it. Money grows on trees right…

    2. LendingTree’s chief economist Tendayi Kapfidze is obviously guided by ideology rather than pragmatism. Little wonder that economics is still considered a dismal science.

  16. Bay Area home prices climb despite jump in inventory

    https://www.sfchronicle.com/business/networth/amp/Bay-Area-home-prices-climb-despite-jump-in-13435074.php

    “Smith was hoping to be the only bidder on the two-bedroom, two-bathroom condo — and she was. She offered less than the $950,000 asking price and got it for $922,000. “In July (the seller) she would have had multiple offers. She probably would have gotten slightly over asking price,” Smith said.

    Yang said the price Smith is paying is what comparable condos in that complex were selling for in early 2017.”

    But yet the spin on the ever increasing home values… to the moon!

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