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There’s A Little Bit Of A Shock Value

A report from the Wall Street Journal. “The national housing slowdown is spreading to markets like Las Vegas and Phoenix. Angela Hutchins, a Las Vegas realtor, said price cuts of up to tens of thousands of dollars are now common. ‘Any property that we’re pulling up right now, it’s reduction, reduction, reduction,’ she said.”

“The deceleration in these less expensive markets suggests that the housing slowdown isn’t a temporary blip but could become a longer-term shift to a more sluggish national housing market in the months to come.”

“In Phoenix, another prominent victim of the housing bust, a similar malaise has recently overtaken the market. Sales of new homes were down more than 20% from mid-October to mid-November compared with a year earlier to their lowest level in two years, according to Jim Belfiore, founder and president of Belfiore Real Estate Consulting.”

“Builders are starting to offer more incentives for buyers, such as $5,000 to $10,000 of free upgrades. Mr. Belfiore attributes the slowdown more to the psychological impact of roughly a one-percentage-point increase in mortgage rates. ‘I think there’s a little bit of a shock value,’ he said.”

The Buffalo News in New York. “The Buffalo Niagara housing market still is sizzling, although there are some signs it’s not quite as hot as it was during the summer. Susan Lenahan and other agents say activity has slowed a little bit from the record-setting pace of this summer, when home prices hit an all-time high.”

“‘I think the market is leveling off somewhat,’ Lenahan said. ‘We were running at a pretty frantic pace for a couple of years, and you can’t sustain that.'”

“Betty L. Harris, broker at Metro Town Center Realty on Grand Island, called it a ‘roller-coaster year,’ but affirmed that it’s slowed slightly since October, as buyers became more discouraged and deterred by the pressure of multiple offers above asking price for high-demand homes. ‘They can only offer so much, and sometimes they are reluctant to even want to do an offer,’ she said.”

“Where many new listings used to receive more than a dozen offers and disappear from the market within days, homes now are staying active for weeks, giving buyers more opportunity to view a handful of homes without rushing into bids and decisions.”

“Buyers also are not having to offer as much money to win the day. While homes were selling for their most recent asking price in June and July – a highly unusual occurrence in Western New York – sales now are commanding a more normal 98 percent of their latest asking price, according to data from the Buffalo Niagara Association of Realtors.”

“And contingent offers – the bane of buyers’ existence during the heat of the market – are being accepted again, ‘which is a plus for buyers needing to sell a home,’ said Greg Straus, broker-owner of 716 Realty Group. ‘I’m having a lot of success offering low,’ he said. ‘The key today is to price it right, for today.'”

This Post Has 59 Comments
  1. ‘Mr. Belfiore attributes the slowdown more to the psychological impact of roughly a one-percentage-point increase in mortgage rates’

    I am open to this idea. But if it’s true, these “oh so strong” markets turned out to be thin skinned weaklings.

    1. Why resort to the psychological impact explanation when simple math will suffice? A family that could have “afforded” the monthly payment on a $500,000 loan at last year’s interest rate can now only afford a (roughly) $415,000 loan at this year’s interest rate, despite making the exact same monthly payment. And as long-term rates continue reverting to historic norms, this perceived psychological impact on buyers’ willingness to pay astronomical purchase prices will only continue to worsen.

  2. ‘I think the market is leveling off somewhat…We were running at a pretty frantic pace for a couple of years, and you can’t sustain that’

    People ask me how bad can this get? I think most of the media/public doesn’t realize how wide the mania is, with all the little Buffaloes out there going “frantic” for years.

    1. “People ask me how bad can this get?”

      As the economy accelerates when prices fall, I ask, “just how good is this going to get?”

    2. all the little Buffaloes

      We sold my mom’s house in Williamsville (Buffalo suburb) 10 years ago. It appears to have gone up 70% since then.

    3. I’m in Rochester, about an hour east of Buffalo.

      The market here got a little crazy last summer. Some friends of mine reported losing out on multiple houses in multiple bidding wars. These two young professionals finally “won” a 1950s estate sale/fixer with asbestos in the basement. I also have a friend who sold an investment property last year and made a nice profit not five years after purchase.

      That’s when I knew some weird stuff was happening — Both Rochester and Buffalo have been losing population for 30 years. We have not had any major new employers enter the area recently either.

      My guess is, at least in western New York, this has a lot more to do with easy money than a robust economy.

      1. Foo, in Rochester too. So right. Had some friends “win” houses last year also. Were looking to buy but HBB convinced us to wait. We’d been fooked GenX FTHBs last housing bubble. Boomer family members told us house was good investment and we believed their and realtors lies. Back to renters last several years. We’d keep renting but rental place was bought by local property company with all the indictments. Rent is better for what we get than elsewhere though so we’re staying put. Housing prices need to go way down in Rochester because RE’s seriously overpriced for the area!

        1. ‘was bought by local property company with all the indictments’

          One Wall Street Journal headline and all is forgotten!

          1. Ben, they bought our rental property a couple years ago so it was before things came to light.

            Locally it hasn’t been forgotten. Those four were indicted and the father stepped down as CEO, but his COO or VP or whatever stepped into CEO role. We haven’t seen anything else change as far as how they conduct business. But they own nearly EVERY rental property in the region now. We have friends who live in other of their properties.

            First few years when our property was owned by another company was awesome. Now… not so much. They do bare minimum, or fix cosmetic things instead of things that need fixing.

            It could be worse. We get a lot of space for what we pay because we’re grandfathered in from the previous company. We’d be stupid to leave because we’d pay nearly double elsewhere and still not get the space we have now. Taking the good with the bad.

      2. Foo, easy money but also foreign money, flippers, and specuvestors too drove up prices and depleted decent inventory. We saw it when we’d go to open houses. Many foreign buyers and H1B visa holders to house family members they’re trying to bring over, or invest in houses close to the colleges to rent out to students. Lots of LLC owned flips by people with no experience. One realtor “flipped” homes and sold them as already rented out investments to foreign buyers. Tons of shady business going on here in the ROC.

  3. How to Handle a Housing Market Glut

    “The designers of a luxury condo in South Florida have answers that include target marketing and timing.”

  4. “Betty L. Harris, broker at Metro Town Center Realty on Grand Island, called it a ‘roller-coaster year,’

    Hey Betty, roller coasters go down AND up. Cratering housing markets, on the other hand, just go down.

    Try to pick a more apt analogy next time, Betty.

    1. My Chinese friends tell me that capital controls for $$ getting out of China are much tougher than before. So the flood of dollars is now a trickle. This is a political decision so could change at any moment but given the US v China nature of politics today do you think that will happen?

    1. Clark Ivory the Pricipal of a REIC Ivory Homes. This Ivory foundation is as legit as the Clinton foundation. Just another way to cheat more money into his RE portfolio. Disgusting

      1. I wouldn’t be so quick to pass judgement on Clarke Ivory. Ivory Homes is Utah’s #1 home builder. True, they are phenomenally wealthy, but he does a lot of good here, especially when it comes to addressing the homeless problem. Also, some of the solutions mentioned do have merit, such as increasing modular building, addressing restrictive zoning, and adding density. That doesn’t address the easy credit or speculative aspect of the bubble, but many of the solutions touted are reasonable.

  5. “The national housing slowdown is spreading to markets like Las Vegas and Phoenix.”

    Seems like the eee-bola epidemic is uncontained…

  6. ‘In Phoenix, another prominent victim of the housing bust, a similar malaise has recently overtaken the market’

    And not peep about this from the Arizona Republic…

    1. “Real journalists” are liars.

      Remember that stupid Time Magazine cover of some FB hugging his house with dollar bills leaking out of it, from 2005?

  7. “Builders are starting to offer more incentives for buyers, such as $5,000 to $10,000 of free upgrades.”

    Many consumers dont understand math. What % is $10K off a $300K house? They think that the $10K is free money ….

    1. Agreed and the upgrades are usually still quite tasteless, builder grade quality (you mean an upgrade from that boob lamp for 500 per fixture), and waaaaayyyy overpriced. Time permitting, better off to buy your own appliances, fixtures, etc, ship them to the builder and have them install as you’re already paying for that. You can get what you like at a better cost despite the BS they tell you and then control the warranty yourself. Although I would not ever buy into a development. I have seen too many people get burned from buying in to those. If you’re in one now, try to get out with as minimal a loss as possible. If the value tanks, be prepared to by another home at lower levels and rent the dev house until you can recoup losses.

  8. How soon will the Fed slash rates and print money to get this party popping again?

    That is the real question to me. Q2 2019?

    1. Law of diminishing returns applies here. Most people have already refi’ed at low rates, most companies have already borrowed at low rates. Another interest rate slash will have a far lower effect than the previous one and it will smack of desperation. Credibility, such as it is, may be the last domino to fall

      1. true – but the impact of the the very small increase in mortgage rates has had a big impact on the trade-up buyers. if you cannot afford to move up (because of monthly payments) – this stalls the entire real-estate apparatus

        1. I think the trade-up apparatus is largely broken because entry level buyers (read: Millennials) are too broke from low wages and student debt to buy. Holding interest rates steady or even lowering them will be pushing on a string as it were. We’re very close of running out of greater fools with access to credit.

        2. Agreed and agree with OneAgainstMany.

          I suspect if we somehow had access to the true stats, we would see that new first-time entries to ‘the housing ladder’ have drastically been curtailed, moreso in HCOL areas than LCOL areas, and exasperating the divergence from the historical (post-ww2 though ’90s ) house buying patterns.

    2. I think if they they start slashing rates again, the only thing that will have effect will be a NIRP. And since it’s a galactically stupid idea, rest assured the Fed will do it

      1. if they they start slashing rates again

        Credit expansion hollows out productive companies and working families. At some point, carpet bombing the country by the central bank will have little noticeable effect. Let’s hope people wake up before then.

    3. How soon will the Fed slash rates and print money to get this party popping again?

      That is the real question to me. Q2 2019?

      I don’t anticipate it to happen on a schedule. I think it will happen when People Who Matter start to lose real money. So I think it requires a big stock market drop and bankers to lose bonuses or even jobs.

      My big question is back in 08-09 how long did it take from Fed capitulation to actual reinflation to begin? 2 years? I don’t expect it to work as well this time but I do expect them to try it again since it worked the way they wanted last time.

  9. A Year After the Crypto Bubble Burst, Will Bitcoin Ever Recover?
    Everybody had crypto dreams. What did they think they were buying?
    By Tracy Alloway
    December 13, 2018, 1:00 AM PST

    Bitcoin was worth $3,300 on Dec. 11. That’s amazing, considering that cryptocurrency was created out of nothing 10 years ago. But it’s also depressing to many, because a year ago, Bitcoin’s value hit almost $20,000 in what could prove one of the most dramatic economic bubbles in world history.

    The fallout has been stark. “Mr. Satoshi, the CEO, [is] not showing up to provide any kind of explanation … #Shame #Refund,” lamented one frustrated crypto enthusiast online, apparently misinformed about the role of Bitcoin’s unknown, pseudonymous inventor.

    https://www.bloomberg.com/news/features/2018-12-13/where-does-bitcoin-go-from-here

  10. More anecdotal evidence from Phoenix.

    Comparatively “cheap” homes are still selling in our neighborhood. Much to my disgust a 1300 sqft home is under contract for about $300k. That represents a very large gain from the last few years. It’s definitely in good shape based on the pictures but this is on the edge of the ghetto. The area is just not nice. “Price is what you pay, value is what you get.”

    On the other hand, definitely seeing less desirable listings and even flips fall off the market or even being turned into rentals. I watch some flips in a much better neighborhood in North Scottsdale and it’s quite fascinating. A cluster of flips I toured has been on the market for almost 4 months. They’ve been holding on to the asking prices with small reductions but one of the flippers has blinked and they’re now making bigger cuts. That house is down about 10% now. Another house in that neighborhood had a “will review offers at the end of the fist week” attached to the listing, 30 days later it’s still on the market and with a small price cut. Looked today and found high priced listings in that area with “motivated seller” and “huge reduction” in the description. For reference, this is the “magic zipcode”(realtor propaganda) of 85254. Or as one of the flipper’s realtor told me, “a gold mine”. Seems like that mine has run dry…

    1. Luxury sales in NE Scottsdale are getting killed. Many 15 to 20% reductions and still little takers. The RE agents playing with the dangerous DOD numbers, after several months remove the listing and return it 30 days showing new listing no DOD?
      BTW this is not legal, you have to wait 90 days but many are great with computers and data changes it looks like?

  11. 2 nuns in California admit to embezzling Catholic school funds
    ABC News
    Published on Dec 9, 2018
    The Archdiocese say the nuns took at least $500,000, spending it on travel and gambling.
    youtube.com/watch?v=ZQMyD6HDIjE

    At least gambling’s holding up in Las Vegas.

        1. They look like such sweet little old ladies. As in the case of sweet young things, appearances have been known to deceive.

  12. 1% rate increase to blame? Not really, how about prices to high, quality suspect, up grade packages, and the famous lot premium, where you have the privilege of a glimpse maybe a mountain or not another house behind you (till they build a hospital you didn’t know about) a 50k and up price tag?

  13. “The national housing slowdown is spreading to markets like Las Vegas… Angela Hutchins, a Las Vegas realtor, said price cuts of up to tens of thousands of dollars are now common. ‘Any property that we’re pulling up right now, it’s reduction, reduction, reduction,’ she said.”

    I like it.

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