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Sellers Are Slashing Prices, Especially In California

A report from CNBC. “After three years of soaring home prices, the heat is coming off the U.S. housing market. Home sellers are slashing prices at the highest rate in at least eight years, especially in the West, where the price gains were hottest. In California, where home price gains were in double digits, active listings were 17 percent higher in August compared with August 2017, and sales dropped to the slowest pace in two years, according to the California Association of Realtors.”

“‘While home prices continued to rise modestly in August, the deceleration in price growth and the surge in housing supply suggest that a market shift is underway,’ said Leslie Appleton-Young, chief economist at the California Realtors group. ‘We are seeing active listings increasing and more price reductions in the market, and as such, the question remains, ‘How long will it take for the market to close the price expectation gap between buyers and sellers?'”

From Palo Alto Online in California. “The residential property market in Palo Alto is showing multiple signs of a slowdown. The median price of all sold homes in Palo Alto from June to August was $2.86 million, an 8 percent drop from the first five months of 2018.”

“The number of offers on a single property is dropping as well. The severe bidding war was a norm in the spring. Homes listed aggressively low compared with their fair market value could attract as many as 20 bids. Recently, many homes listed for $3 million only received one or two offers. At the high end, homes don’t seem to attract interest even after a $1-million price drop.”

“What caused the market to shift? First, home prices may have jumped too high too fast. The median home price in Palo Alto in the first half of 2018 reached $3.1 million. It was a 15 percent increase from 2017 and 29 percent higher than 2016, on top of a long bull-market cycle that ran for five years from 2010 to 2015, when Palo Alto’s home prices nearly doubled. It’s hardly sustainable.”

“Second, while we are still experiencing historically low inventory, the number of new listings increased by 11 percent over last year for the period from January to August, which helped slightly to restore the balance between supply and demand.”

“Lastly, as uncertainties about the global economy are rising, potential buyers, both local and foreign, are in wait-and-see mode. The rising tension between the U.S. and China is affecting the entire global “tech value chain.” The depreciation of China’s currency by about 10 percent since February also negatively affected potential demand by Chinese investors.”

From Realtor.com. “It looks like the nest Hugh Hefner bought for his wife, Crystal, isn’t quite as lavish as she imagined. In 2013, the 87-year-old Playboy founder paid $5 million for the sleek home in the Hollywood Hills for his 27-year-old wife. Although they lived together at the Playboy mansion in Los Angeles, Hugh wanted to ensure that Crystal would be taken care of after he’d passed on to the silk bathrobe in the sky.”

“Hugh died in September 2017, and a few months later Crystal put the place on the market for $7.2 million. It’s now back on the market for $5.8 million—the price reduced by a whopping $1.4 million.”

From the Los Angeles Times. “Owlwood, a 10-acre estate with a Hollywood history as rich as any, is back up for grabs in Holmby Hills. This time, it’s being floated for $115 million, down from the $180-million price tag it wore last summer. The current owner, a Sherman Oaks development group headed by Robert H. Shapiro called Woodbridge, bought the home for $90 million in September 2016.”

“The latest listing arrives as Woodbridge works its way out of bankruptcy proceedings. In December, the Securities and Exchange Commission charged the firm with running a $1.22-billion Ponzi scheme that defrauded over 8,400 investors, and the group filed for bankruptcy a few weeks before the charges arrived. In May, Woodbridge agreed to settle the liability portions of the SEC’s charges.”

This Post Has 24 Comments
  1. ‘many homes listed for $3 million only received one or two offers. At the high end, homes don’t seem to attract interest even after a $1-million price drop’

    Eeee-bola Palo Alto!

  2. ‘We are seeing active listings increasing and more price reductions in the market, and as such, the question remains, ‘How long will it take for the market to close the price expectation gap between buyers and sellers?’”

    Leslie Appleton-Young seems to be recycling the same lies and spin she trotted out back in 2006. So let’s reframe the question, shall we?

    This isn’t about “price expectation gap” between buyers and sellers, aka FBs; it’s about a rapidly narrowing window of opportunity for sellers to unload their shacks on a rapidly diminishing supply of Greater Fools and Knife Catchers before the Fed’s Everything Bubble implodes and buyers vanish, leaving panicked sellers two options: slash their price to get ahead of a cratering market, or mail the keys to the bank and walk away, like they did during the last housing bubble bust.

    Market forces are on my side, sellers. So I won’t be closing any gaps with you. I’ll just wait happily, popcorn in hand, while true price discovery asserts itself.

    Tick tock, greedheads.

  3. Homes listed aggressively low compared with their fair market value could attract as many as 20 bids.

    I see what you did there, REIC shill. “Fair market value” is 3X median income. Overpriced Palo Alto shacks, their value grotesquely and artificially inflated by Yellen Bux, have a long, long way to plummet before they reach historic (sane) affordability norms. But I’m patient.

    1. “have a long, long way to plummet before they reach historic (sane) affordability”

      On the house I mentioned last week (up +9,900% since 1979, typical small middle class development house), that would mean a 99% loss in value. Accounting for the higher interest rates then vs now, it would be a 92% drop. Accounting for the increase in median family income, it would still be a 76% loss.

      Yet most people can’t conceive of such a drop in prices and believe a 10% drop is impossible even as it happens right now.

    1. Lessee, here – an 1800 square foot house on a minuscule postage stamp lot in podunk Boise, Idaho with a price of $549,000 AFTER a $100k reduction? Uhh, NO. That’s a $100k house, pre-bubble.

    1. I don’t have anything to do with that. There may be a plug-in that does something similar. There are thousands upon thousands of plug-ins. I looked at few hundred and thought let’s get this thing going and decide what’s needed additionally later. Like the comments, there are a ton of those, some pretty amazing beyond nesting.

        1. No plans to migrate the extension at this point. I assume I can re-use the bulk of the code, but the page structure is different so it would likely require significant changes.

          I’ll post here if I ever do get around to it.

  4. I bought near San Jose about 8 years ago after having rented for 7 years. In that 8 year span my quite average house has according to Zillow gone up 2.5X (this is nuts). Just for fun I put the new Zillow price and the new interest rates into a mortgage calculator and it works out that the monthly nut has more than tripled. No way that makes sense. I would be a renter in todays market if I wasn’t constrained by my wife’s nesting instinct.

  5. “Sellers Are Slashing Prices, Especially In California”

    How else are they going to book sales, now that the all cash Chinese buyers are a fading memory?

    It’s great news, really, given how long and hard Uncle Sam has been working to provide Americans with affordable housing. Maybe by the time my kids are in the market and the Baby Boomers are dropping off like flies, the affordability goal will finally within reach.

    1. RE is “local” as the realtors put it. I pulled the report NAR released yesterday and of course Mr Yun makes note it is still a hot market with high demand but as we look at California, it’s not! I watch local RE here and in the past few months all I have seen is the shacks sitting unsold with price reduction after price reduction. I get that the listed price was over shot but what’s interesting is now some of these properties have been put back up as foreclosures. So what does this tell us… my guess is we had low level speculators getting in to late and losing it all. The big players are clinging on to the hope they can lure in a potential FB.

      https://www.nar.realtor/newsroom/existing-home-sales-remain-flat-nationally-mixed-results-regionally

      “With inventory stabilizing and modestly rising, buyers appear ready to step back into the market.”

      Oh yeah that makes sense… better get in quick, it’s gonna go back to the moon right mr yun!

      https://www.google.com/amp/s/therealdeal.com/2018/09/20/across-u-s-rising-home-prices-and-falling-inventory-led-to-fewer-august-sales-report/amp/

      “Home sales could dip again in September, NAR reported“

      Wait a second here mr yun, you just said the buyers will be lined up at the door ready to buy!

      1. I get the warm fuzzies when these flippers lose the house to foreclosure. “Flipping” houses should not even exist.

    2. The young$ters won’t bee homeloanmoaner$ Professor Bear, … But they might bee dweller$ in $helters u$ing: Hou$e “$ubscription$”

  6. Yup I was at Sacramento open houses in tony east Sacramento last weekend and saw a 2 bedroom home price cut from 600k to 590k. Not much of a drop but hope the trend continues so I can afford a home on a low paying government salary.

  7. I was in Santa Monica last week, 14 for sale signs at one intersection. Dozens and dozens every where we drove, the market has peaked and its headed down hill from here. How much of a correction will come? thats the big question and nobody knows. I say by 2020 we will see a 20% drop in CA, some more some less. Housing in Atlanta is pretty stable, but that will change over time.

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