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A Market Awash In Inventory

A report from TC Palm in Florida. “The latest data on new home sales nationwide are not encouraging. The Commerce Department reported that new home sales declined 8.9 percent in October on a seasonally adjusted basis, and sales have been falling at an annual rate since March. “

“Indian River County is doing better than the national average, but even here home sales are stalled somewhat, and listed homes remain on the market longer. “

“Is the world about to end because the housing market is faltering? Not likely. Although over-extended developers and banks will experience some difficulties, the price of homes will adjust downward and the excess inventories will simply be worked off at lower prices.”

From MarketWatch. “The sharp downturn in the U.S. housing market over the past few months wasn’t much of a surprise, given how out of whack the market had become. The bigger question now for anyone interested in housing is: what next?”

“Every month, analysts at Credit Suisse publish a survey of real estate agents in about 40 metro areas. Their observations are occasionally local, but often big nationwide trends can be gleaned. Read on for selected commentary from Credit Suisse’s Monthly Survey of Real Estate Agents from November.”

“Boston: ‘Rising interest rates, but lower prices.’ Columbus: ‘No longer multiple offers on homes’ ‘Homes sitting on the market longer and having price drops’.”

“Houston: ‘Too many new homes being built.’ Los Angeles: ‘Fewer Chinese buyers in the area.’ San Diego: ‘Entering a market correction.’ Tucson: ‘New construction offering too many incentives.'”

From National Mortgage Professional. “For most homebuyers, purchasing a property no longer involves diving into a bidding war. According to new data from Redfin, 32 percent of offers written by the brokerage’s agents on behalf of their home-buying customers faced one or more competing bids in November, down from 45 percent one year earlier. This is the lowest level recorded since Refin began tracking data on offer competitions in 2011.”

“One of the most dramatic examples of the disappearance of bidding wars was Seattle. During the spring, Redfin reported that three out of four offers in Seattle faced competition—but as of last month, only about one of every five offers in the Seattle area faced competition, the lowest rate of Redfin’s largest markets.”

From Bloomberg. “‘Try before you buy’ was once a persuasion tactic employed almost universally by down-market timeshare agents. Now, in a second-home market awash in inventory, developers are using it to induce buyers. Tina Necarson, vice president for residential at the hotel management company Montage International, has worked in timeshares, fractional ownership, ‘and every sort of second-home venture imaginable,’ she says.”

“At the Montage Kapalua development in Maui, where homes go for $1 million to $20 million, Necarson’s team will arrange four-night stays that range from $500 to $2,000 per night and might include cultural heritage tours, luaus, private dinners, and spa treatments. She estimates that more than half of those who come for a trial stay become buyers.”






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This Post Has 26 Comments

  1. ‘During the spring, Redfin reported that three out of four offers in Seattle faced competition—but as of last month, only about one of every five offers in the Seattle area faced competition, the lowest rate of Redfin’s largest markets’

    Gsoh, I hope no one overpaid last spring.

    Eeee-bola Indian River County! Good old TC Palm.

  2. “the price of homes will adjust downward and the excess inventories will simply be worked off at lower prices.”

    I suppose that’s one way to describe a bubble popping.

    1. SSSSHHHHHHHHH….there is no bubble. Just a slowdown. The market is just decelerating from 180 MPH to 129 MPH in a 22 MPH zone. This is good for the market. Prices are still going up but just at a slower pace. Nothing to panic about. This is normalizing the market which is a good thing. Now is the best time to invest! The sky is not falling. Real estate is the best investment you will ever make!

      /S

      2. You’re right! The biggest danger here is that lots of people start to think, simultaneously, that the market is way overbought and they start to sit it out. Then, an otherwise totally normal, “healthy” market will collapse and send us back to the Dark Ages, which would never have happened if people didn’t start thinking, for no reason, the market was in a bubble in the first place.

        Got it.

        /s

      3. That’s what I hope my landlord thinks, or else we’re moving again. This is just so old at this point.

        1. we’re moving again. This is just so old at this point.

          We’re in the same boat. On to a new rental when our lease is up this spring. Hoping the rental market here will have at least softened a bit, and we can find a decent, “professional” landlord rather than the “accidental” kind.

          1. That’s a shame – my sympathy. We’re good till the end of February (no word from them, lease is up 12/31). They’ll give us the usual month’s notice, but I’ll go to court for an extra. As far as accidental vs professional, each have pros and cons in my exp.

            My hope that the weakening market here would not be widely accepted (rah rah Golden Knights) before I sign a new lease is pretty much dead now that this article hit Drudge.

          3. The older I got, the more I disliked moving regularly or playing games with lease renewals.

            A downturning market should give renters some relief. I expect many landlords to suddenly see the value of keeping good tenants happy and enticed to stick around again.

    2. This professor does a good job explaining how credit and interest rates drive a boom and the bust. It’s worth reading in full.

          1. “the housing industry is almost uniquely credit-dependent on both the supply and demand side of the market”

            Indeed. The price of everything I need is uniquely credit dependent, joined at the hip to housing and the speculation on it.

      2. Alot of UHS keep saying the economy is strong, we will be fine. The prices wont go down because the economy is strong.

        2 Observations
        1.) The economy was also strong in 2006. We all know what happened after 2006.

        2.) The reason why the economy is strong is because of the BUBBLE! What will happen when the BUBBLE blows up! Oh wait, they dont think there’s a bubble to begin with!!!!!

        “The good news is that the 10-year economic expansion from the depths of the last recession has been shouldered, in large part, by the recovery in home sales and investments in the construction of new homes and condos. This housing and construction recovery (at mostly higher prices) has been accompanied by substantial increases in employment and by real income growth throughout the economy. Two cheers.

        But the disappointing news is that this housing recovery, like almost all previous ones since World War II, is not sustainable in the long run. Indeed, the data seem to indicate we already are in the early stages of the inevitable “bust” phase of that cycle. That phase is usually associated with slower sales, a gradual swelling of inventories, moderating prices and an eventual increase in foreclosures.”

  3. “At the Montage Kapalua development in Maui, where homes go for $1 million to $20 million, Necarson’s team will arrange four-night stays that range from $500 to $2,000 per night and might include cultural heritage tours, luaus, private dinners, and spa treatments. She estimates that more than half of those who come for a trial stay become buyers.”

    Isnt it cheaper just to get a hotel room and just visit the place for free? Maybe there are some stupid Chinese that will pay for this but I think this lady is dreaming…You get to pay $2,000 per night and buy at peak Housing Bubble 2.0 Price, whats not to like????

    1. I assume that whatever you pay for your trial stay counts toward the purchase. Standard marketing…get them feeling invested ASAP.

    2. Isnt it cheaper just to get a hotel room and just visit the place for free?

      Yes. IIRC the Ritz-Carlton is right in that area and you get a heck of a lot more for less per night.

    1. Ouch. The Zillow price index shows 500K but the median list price has fallen to 350K. That’s some serious hurt.

  5. LA agents…” fewer Chinese in the Market” its liberal/Socialist/ hate Trump California, what you can’t look for Russians instead?

  6. Although over-extended developers and banks will experience some difficulties,

    Ahem. Not so much that any runway foam is required, I certainly hope.

    the price of homes will adjust downward

    I like the sound of that.

    and the excess inventories will simply be worked off at lower prices.

    OK. How much lower? Enough to clear the market? No matter what?

  8. Randoms from another blog post on real estate, here Australia:

    “It’s starting to hit the fan here in Australia. Nobody is buying. Greedy boomers who have relied on their property value to retire on are getting angry and not accepting what their property is now worth. It’s hilarious. They’re gonna lose even more if they don’t sell now. It’ll drop harder next year.”

    And meanwhile back in the United States:

    “in considerable debt. scraped together the absolute bare minimum for a down payment, 85% of their monthly income goes to their mortgage and payment on their flashy car. Minimal savings/emergency fund.

    When the recession hits hard and they take a pay cut or lose their jobs, a lot of these millennial with the picture perfect social media life are going to be in full on panic mode/foreclosure.”

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