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At The Beginning Of A Significant Market Transition

A report from the San Francisco Business Journal in California. “The pace of change sweeping across the Bay Area housing market spurred one brokerage to issue a ‘special report’ this month on the Bay Area housing market. ‘Dramatic changes abound,’ said Patrick Carlisle, chief market analyst with Compass.”

“He rattled off a lengthy list of concerns: Declining and sometimes negative year-over-year appreciation rates, declines in sales volumes and overbidding, increases in price reductions and listings pulled off the market.”

“‘Many of the changes seen over recent months are substantial, and none more so than the sudden plunge in year-over-year median price appreciation rates,’ Carlisle said, cautioning against reading too much into one month or a few months of data. ‘Indicators can also be somewhat schizophrenic at the beginning of a significant market transition, if that is what is occurring, as buyers, sellers and agents struggle to figure out a changing reality.'”

“‘The days of listing far below the anticipated sale price may be over,’ said Vanessa Bergmark, CEO of Red Oak Realty in Oakland. ‘Seller expectations should reflect the current state of the market, and the list price should be set to stand out against the competition. This also reduces the possibility of needing to take a price reduction in response to buyer feedback.'”

“Home sellers need to understand current market conditions after years of ever-higher home prices and quick sales amid bidding wars, especially when it came to the Bay Area’s high-end homes.”

“‘It’s important to price realistically and be patient. We are seeing a slowdown, but not a crash,’ said Marion Henon, a broker partner at Marvin Gardens Real Estate, which serves the East Bay.”

“The debate among agents just a few months ago was whether to hold an open house for a second weekend, said Christine Kim, president of Climb Real Estate in San Francisco Now the question is whether to hold an open house for a third weekend.”

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This Post Has 44 Comments

    1. A striking aspect of the incipient real estate downturn is that it has begun against a backdrop of record low unemployment.

      Look out below if unemployment increases off this floor.

      San Diego gains jobs as unemployment rate stays low in October
      Birney Elementary school
      Fifth grade teacher Elena Monetti teaches her class in late October at Birney elementary school in University Heights. Education hiring led job gains between August and September. (John Gibbins / San Diego Union-Tribune)
      Phillip Molnar
      Contact Reporter

      San Diego County’s record low unemployment rate held steady in October and was led by gains in education hiring for the start of the school year, according to state labor data released Friday.

      The county’s local non-adjusted unemployment rate in October was 3.3 percent, up 0.1 percent from the previous month. A year ago, the rate stood at 3.6 percent.
      …

      1. No mention of under-employment. I know a few people who lost jobs during the great recession and lost income with their new job; today they might be where they were ten years ago.

  2. “The debate among agents just a few months ago was whether to hold an open house for a second weekend, said Christine Kim, president of Climb Real Estate in San Francisco Now the question is whether to hold an open house for a third weekend.”

    Lets hope they saved their commission checks that last 5 years…

    “‘It’s important to price realistically and be patient. We are seeing a slowdown, but not a crash,’ ”

    Don’t panic BEN! Don’t PANIC!

      1. Well, I suppose there is a small upside for the Realtor(tm)s…

        Does anyone remember the The Honda Scandal from the late 80s – where dealers were having to bribe the guys at corporate who controlled the allocation of inventory (because basically all inventory was guaranteed to sell at a nice profit)?

        My impression from talking to agents the last couple years reminded me of that. The agents with the connections and power who got the sale listings were the ones all but guaranteed to make a nice commission check for a small amount of work, while those without listings represented buyers.. most of whom would lose out enough listings ( or couldn’t find what they wanted ) who put in a lot more work for often nothing.

        Well now, with all this new inventory magically appearing, and buyers disappearing (*poof*), they ALL can be sellers agents…. That’ll work out great for them, right? … right? … uh… correct?

        1. What happens in the industry is that when the market turns, a lot of the people who were top sellers suddenly find themselves with an ever shrinking piece of the pie. I suppose it’s because all of their lies and BS were exposed.

          1. I sort of play it for laughs, but it seems inevitable that there will be population crash in the ranks of Realtors – a fairly hard one. And that’s not to mention all the supporting jobs like mortgage broker and title insurance agent.

            Now I know Realtors have to get licensed, but it always struck me a profession with a reasonably low bar of entry for the amount of that it was possible to make. And when the times were good, that was probable a refuge for a lot of people – some nice and some not so nice.

            Increases in unemployment and lots of cutting back on spending, including by those remaining employed would be just one of many additional negative input into our economic feedback loops. I’m hedging my bets towards another recession.

          2. “What happens in the industry is that when the market turns“

            More garbage can fires and passing of that moonshine.

    2. We are seeing a slowdown, but not a crash

      I’m starting to think that the word “crash” will never be mentioned unless there is a crash. And then it will only be mentioned to say that it’s not one.

      1. never be mentioned

        We are being “handled” by perception operatives. I can’t imagine a UHS agency needing a “Chief Economic Analyst”. They’ll call it a crash when everyone already knows it is, and pivot from that to the next concocted sales pitch.

        1. There’s one sales pitch that never gets old: “It’s always a good time to buy and sell real estate.” They actually say that.

      3. I am not seeing anything like a crash in the Sacramento foothills. There is a noticeable shift in the market to a slower pace. This always happens this time of year.

        The important trend observations will occur in Spring 2019, and again when the U.S enters a recession. If housing is already in a funk and jobs start disappearing, it could get ugly.

        1. How many units for sale this year compared to last? How many closed sales this year compared to last. Months of supply increasing is a good leading indicator. Any bottom is 2 or more years out.

          1. I say at least 3 years out. Keep in mind the economy is still doing well and people are still drinking the kool-aid. This is what I predict next week.
            1. Prices will stop decelerate and start to drop YOY. Sales will continue to collapse.
            2. The FED will try to hold interest rate steady and prevent the bubble from bursting more but it’s too late.
            3. Quicken Loans and PennyMac and other “nonprime” loaners will start to run into trouble with financing. Similar to Countrywide.
            4. Banks see the problem and start to cuff all the HELOCs.
            5. Economy will start to slow down even more and stock markets behave erratically.
            6. See 2008

    1. Interesting. They focused on the $900k meh house needing a ton of work and how it still got 25 bids in a week, and only gave cursory discussion at the end to “cooling housing market”.

      The Trulia ‘senior housing economist’ saying “I think a lot of people are waiting for big drop (..) but we don’t see that necessarily happening, but we do see downward pressure on prices” sounds like 2 parts denial, one part “omg, I sure hope not”

      What was most interesting to me was the family making $35K/yr sharing a 1-bedroom apartment with another family. It’s the fate of people like them that get little coverage, but stand to have an outsized impact on the communities in the future.

        1. Yeah. they were nuts… That family went from what? $2900 a month rent to $6200 a month rent for what looks like a ~1100-1200 sq ft house in crappy shape on a 4000 sq ft lot.

          Then being turned down at 8 different apartment complexes because their income wasn’t at least $120K/yr…. I’m assuming it’s the 3x or 3.5x mandatory income requirement, which doesn’t make as much sense when the rents get that high.

          For all the ribbing I get for living among the 6-figure+ crowd, remember I grew up entirely in a tiny working class town in the rust belt. Most of the people I knew and interacted with were not that far removed from Cindy’s family, but everyone more or less got by and even thrived a bit. There are way more people like them than the MSM ever acknowledges, and their pain will be felt at the polls.

          1. There are way more people like them than the MSM ever acknowledges, and their pain will be felt at the polls. Or on the streets, as is happening in France recently.

  9. Ok guys. I’ll be away tomorrow, and much of the week…

    I have an interview with one of the really big boys tomorrow (I didn’t apply – they sought me out), and I will be down in Silicon Valley Thursday-Friday for the finals at megacorp HQ.

    Who knows?

  10. Memes
    Why Bitcoiners Are Using Memes to Cope With a Crash
    Bitcoin’s price has plummeted, but the memes keep coming. What’s behind this community’s obsession?
    by Jordan Pearson
    Dec 11 2018, 7:56am

    If you have a cryptocurrency investor in your life, you might have noticed some dour looks lately.

    The price of Bitcoin crashed to roughly $3,000 from around $6,000 within a month, and other digital coins haven’t fared any better. The nascent industry is feeling the crunch. During such trying times, you’d expect the community to be fairly downbeat, but the memes… Folks, the memes are surprisingly decent.
    https://motherboard.vice.com/en_us/article/nep99g/why-bitcoiners-are-using-memes-to-cope-with-a-crash

  11. “This also reduces the possibility of needing to take a price reduction in response to buyer feedback.”

    What’s so embarrassing about lowering the price continually until it sells? I do that all the time on craigslist.

    If the eventual selling price is going to be X, it doesn’t matter to me whether I list for X, X-Y and get an overbid, or X+Y and get an underbid.

    As a seller of some good, my tendency is always to list high to see if there are any takers. Why not find out?

    2. I think it feeds in to market psychology. Once you drop the price the mark (er customer) might begin to think nobody else wants it, why should I? It is the opposite side to the psychology of a bidding war.

      1. Why doesn’t this rule apply on Black Friday then? Surely it’s human nature to want a lower price aka a good deal. Unless you’re the super rich, bidding on some piece of art where part of the satisfaction is landing the item at whatever cost. But those are (a) generally unique items and (b) relatively cheap compared to the wealth of the bidder. Houses are surely more like commodities, though perhaps not as ubiquitous as the latest flat-screen tv. But certainly the relative wealth of the buyer is not even close. Unfortunately, like diamonds, there is so much being held off the market that it creates an artificially high price, which, combined with the all-powerful REIC propaganda machine leads people into believing these shitboxes are worth many multiples of what they inherently are.

        1. Houses are surely more like commodities

          If you can’t buy one without borrowing the money for 20, 30 or 100 years, you cannot afford one.

    3. What’s so embarrassing about lowering the price continually until it sells?

      I don’t know. What if your whole self image is about how much smarter you were than the ones who didn’t or couldn’t get in when you did?

      1. What if your whole self image is about how much smarter you were than the ones who didn’t or couldn’t get in when you did? Self-importance is a vice. It does not pay in the end.

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