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Potential Buyers Are Beginning To Camp Out In The Rental Market

A report from CNBC. “Mortgage applications to purchase a newly built home dropped 11 percent in November, compared to a year ago, according to the Mortgage Bankers Association. This drop is surprising, given the sharp drop in mortgage rates in November, and therefore underscores the fundamental weakness in the housing market today.”

“Home price gains have cooled dramatically in the last six months, and there is growing concern among consumers that buying now would not be the best investment. In some markets, there is a fear that home prices will actually fall in the coming year, so buyers today would lose money.”

From Mansion Global on New York. “In Manhattan, November’s rental market saw slipping median prices, rising concessions and falling vacancy rates, according to a report Thursday from brokerage Douglas Elliman. “

“The market share of Manhattan concessions—discounts or incentives offered to potential tenants, which include a free month’s rent or an owner-paid broker fee—rose year over year for the 42nd consecutive month, up to 42.2% last month from 29.6% the year previously.”

“Also helping fill buildings are potential buyers who are ‘beginning to ‘camp out’ in the rental market until some of the uncertainty facing the sales market eases,’ Douglas Elliman said in the report.”

“In Brooklyn, landlord concessions dominated the market, with eight out of 10 new development rentals coming with a concession, and the share of overall concessions rising to 46.5%, up from 18.6% last year. In Queens, the share of market discounts was higher at 59.2%, but the increase was far smaller, rising from 44.5% last November, Douglas Elliman said. “

From Realtor.com on Florida. “It looks like Birdman‘s loss will be someone else’s gain. After the rapper and record producer, whose given name is Bryan Williams, was evicted from his baller mansion, his personal belongings were placed in storage, and the 10-bedroom, 14-bath waterfront home went on the market for $15.5 million last month.”

“The massive estate initially went on the market for $20 million in 2017, when Birdman’s creditors began to chirp. Since then, it’s been nothing but drama for the Cash Money impresario.”

“Birdman slashed the price to $16.9 million shortly before the South Florida Business Journal reported he was facing $12 million foreclosure proceedings. The bank was ready to reclaim not only the 19,970-square-foot home, but also a 26,040-square-foot Miami office building that’s home to his Hit Factory Criteria Recording Studios. From there, it got worse.”

“Williams bought the 2004-built Miami Beach mansion for $14.5 million in 2012, and immediately set about tricking it out, reportedly to the tune of millions.”

The Houston Chronicle on Texas. “Houston-area home sales last month held up in price ranges above $150,000, but the number of homes that sold for less than that figure plunged, a new report shows.”

“Sales of homes priced between $100,000 and $149,000 were down 24.3 percent in November compared with a year ago, the Houston Association of Realtors said in a monthly report released Wednesday. Sales of homes below $100,000 were off 25.3 percent.”

The Los Angeles Times in California. “To the editor: Columnist George Skelton expresses unusual optimism that the Democrats in Sacramento will not go overboard on new taxes. In the past, Skelton has suggested a willingness to modify Proposition 13 as a new revenue source. Not a good idea.”

“Property valuations and real estate sales are already being affected by last year’s federal tax reform law. We see more and more ‘open house’ signs in our neighborhood every weekend. My sister-in-law just sold her home for 20% less than the listed price a year ago, when it first went on the market.”

“And, with the recent dramatic drops in the stock market, there will be fewer millionaires paying capital gains taxes in California than in the recent past. Democrats had better tighten their belts and learn to live with a new reality.”



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This Post Has 44 Comments

  1. ‘there is growing concern among consumers that buying now would not be the best investment. In some markets, there is a fear that home prices will actually fall in the coming year, so buyers today would lose money’

    Sounds like day traders…

    1. Everybody knows the primary reason to buy a house is to make a bundle of money. Conversely, when home prices are falling, we should rationally expect buyers to stand clear until they bottom out.

      1. The primary reason to buy a house should be to gain shelter. That said, it is a big commitment and if prices are falling a foolish one. Play around with the NYT buy vs rent calculator and you see a huge part of the decision over which is better hinges on expected (de)appreciation.
        In fact if you expect houses to be cheaper next year it is just flat out idiotic to buy today.

        1. “The primary reason to buy a house should be to gain shelter.”

          We’ll know the mania has ended once that is finally again the case.

        2. “In fact if you expect houses to be cheaper next year it is just flat out idiotic to buy today.”

          That’s precicely why soft landings don’t typically follow the hyperbolic price blowout phase of a rapidly inflating bubble. Once no more price appreciation is forthcoming, the artificial demand generated by a horde of speculators solely in the market to chase price appreciation suddenly disappears. Collapsing speculative demand puts anyone who just needs a place to live at risk of losing a lot of money if they buy at the point of bubble collapse. What naturally results is a situation approaching a free fall in prices until the point when they realign with the fundamental value of housing as shelter. This typically takes years to play out due to downside price stickiness (the owners don’t want to just give it away).

      1. Borrowed money that they are failing to pay back as they sit on there “investment” waiting for a knife catcher to rescue them from foreclosure. Many in my neck of the woods are not being rescued and the foreclosures are piling up. Fun to watch 🥳

  2. ‘We see more and more ‘open house’ signs in our neighborhood every weekend. My sister-in-law just sold her home for 20% less than the listed price a year ago, when it first went on the market’

    Sacre bleu!

    2. ‘a year ago, when it first went on the market’

      Yeah and with CAR’s two weeks of inventory, I’d bet it got relisted a dozen times.

      1. I’d bet it got relisted a dozen times.

        If that practice was rare and isolated, it would be a shame. Since it is universal, it’s rather like organized crime.

    4. I expect she got a better deal than she would get next December. If she bought early enough she probably made some money too.

  4. I’d definitely say that’s what I’m doing, “camping out” waiting for a better market. We definitely have the means and even the down payment to buy but the market is obviously out of whack. I had no appetite to engage in the multi-bid mania and definitely have no appetite for the beginning of falling prices. So we just hang out, renting is fine.

    The fun part is playing the role of the “poor renter” and watching friends/acquaintances give out real estate advice. The consensus is that we should buy a townhouse. You know, so we can flip that in a couple years and buy a real house. LOL

    1. No you need to first buy a condo, then trade up for a townhouse, then a small house, than a big house…. paying hundred of thousands for commissions, fees, taxes, etc.

    2. I will soon be literally “camping out” waiting for a better market! As in, moving out of my rental and into my little “camper.” 😀

    3. More people telling you how you should spend your money. It doesn’t matter if you make $20,000 or $20 million a year, everyone’s an expert. It’s unfortunate for them that I don’t need help spending my hard earned money. We do well living our meager lifestyle, don’t suffer or splurge, and are able to bank well over half our take home pay. That works for me, it may not work for others and if they disagree then that’s fine. I really don’t care.

    4. “It’s a dry heat”: I hate to break it to you, but you have a condition. Realtors around these parts call it “buyer fatigue”. Get plenty of bed rest, take two aspirin, and call me in the morning.

    5. Us too. Living the lifestyle we wanted while renting a 2/3 townhouse for 1/2 the purchase payment. So what if the kids have to share a room.

    6. Agreed…attached homes or developments where you pay HOA’s FEES go one way, UP, the governments are a nightmare (human nature) and they tend to not hold value as well as something w/out those fees and gov that have more privacy if you can find that now days among the “Fish Bowl” plots driven by greed. Be smart, study the real-estate cycle – lots of good books on it – and list out what you won’t compromise on. You want a real woodturning fireplace, this is one of the first things every crook estate agent tries to talk us out of or tell us “oh, it’s nothing to put in…” WRONG…or Gas is just as good…WRONG. Agents love to push compromise after compromise and are no where to be found once extreme buyers remote sets in on all of the post buy discoveries set in that get really compounded when you lose money within the first year ob purchase. Be strong and patient…find what you want at a fair price. Trust No one but yourself.

    7. the fun part is playing the role of the “poor renter” and watching friends/acquaintances give out real estate advice.

      My wife and I enjoy this very much. Keep a low profile and you don’t attract a lot of attention. Let everyone else get loaded up on debt and into trouble, while you just be prudent and bide your time. We will be cash buyers when the time is right, but if that never happens, that’s okay. We’re getting almost 4% risk-free on our cash.

          1. The best recent opportunity to buy Treasurys was last month, before yields took a late-year dive. But they are currently trending up again.

            The Wall Street Journal
            Credit Markets
            U.S. Government Bonds Decline on Mixed Data
            Investors are looking for any signs that would suggest a shift in the direction of economic growth
            By Daniel Kruger
            Updated Dec. 13, 2018 3:51 p.m. ET

            U.S. government-bond prices edged lower Thursday after data showed the economy remains on solid footing, yet with few signs that inflation is building.

            The yield on the benchmark 10-year Treasury yield rose for a fourth consecutive session, to 2.911% from 2.908% Wednesday. The 10-year yield had fallen to 2.851% Friday from a seven-year high of 3.232% last month.
            …

        2. There was a 5-year FDIC CD available from a bank a few weeks ago. I check depositaccounts.com regularly. The highest yielding FDIC/NCUA account right now is 3.63% for balances greater than $20k.

  6. “Potential Buyers Are Beginning To Camp Out In The Rental Market”

    This suggests a potential near-term lack of rental vacancies accompanied by high rents in markets where home prices are falling.

    Once prices have adjusted back down to affordable levels relative to local incomes, we can expect rents to adjust downwards as well, once prospective homebuyers feel comfortable wading back into the market.

    2. “Loanowners with mortgages never go here.”

      No, they just swarm the 14er trailheads in their Subarus.

  9. Wow, what a surprise, sales down even with a bit or lower rates. Do you suppose that speculators are out and done? They key on appreciation or income return. Also, if you have ever seen a mortgage chart, you will realize that regardless of the rate the earlier payments are dominant interest. Later in the loan life principal predominates. I never see this discussed. The loan balance does not decrease in a linear fashion over the loan life.

    So if speculators are out and everyone else is in wait and see mode, then what do any of these folks think is going to happen to sales?

    Will be a great time for move up buyers in next couple years.

    1. Will be a great time for move up buyers in next couple years.

      Maybe. Unless they can’t sell the old place. It will be a great time for renters to move up…if nature takes its course.

      1. Nope.

        All cash.

        The reason move up will be good is that the price difference between an average property and the move up property will reduce if all properties reduce by the same rate. In fact, going back to around year 2010, I saw that the lux market was hit by a higher rate than average properties. Sure will take hit on current place but well worth it to take advantage of hit on higher value property. Think about it.

        1. Do not know why above comment is placed here. It is clarification for my comments a couple of comments below this post

    1. “But prices were still rising up to October thanks to a surge in buyers priced out of California, new jobs in the region from growing data centers, and the planned relocation of the Oakland Raiders football team to Las Vegas in 2020. ”

      Is Switch really hiring that many people? And how many people will the Raiders hire (I mean real FT jobs, not ushers and concession sellers)?

      I’m sure there are plenty of CA equity locusts, if they can get a job here or if they’re retired.

    2. Wow, a straight article courtesy of Morningstar. All true and via correct logic and facts. Just need to report MOM rather than YOY. Once they do this you will see real market data. Most MLS providers can generate a Market Conditions report. This format is specified by fannie, freddie, and FHA. It breaks down sales, lisings, DOMs and other data into 3 time slots. They are 0 to 3 months, 3 to 6, and 6 to 12. NAR would definitely know about the MC form, but have you ever heard it quoted?

      The funny part is once we reach 1 year past peak market, then the median price change YOY will be the worst and create panic if they decide to keep using.

      The YOY strategy will backfire and we on the blog will be laughing ass. Get ready.

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