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The Buy-At-Any-Price, Get-It-While-You-Can Mind-Set Has Faded

It’s Friday desk clearing time for this blogger. “It was just last spring that home buyers in most of the nation were digging ever deeper into their pockets. And now, suddenly, they’re not. In Seattle, more than half of homes a year ago saw bidding wars, while less than a quarter are seeing them now. And supply in Seattle is up 60 percent compared to a year ago, according to Realtor.com.”

“In Los Angeles, 68 percent of properties for sale saw multiple offers a year ago. That is now down to 38 percent. In Southern California overall, home sales in October were at the slowest pace for that month in seven years, according to CoreLogic.”

“Inventory jumped in formerly hot markets like San Jose (+123 percent), Seattle (+96.5 percent) and Oakland (+60 percent). In Las Vegas, sales and prices were raging last year and last spring, but supply is now spiking and sales have ground to a halt. The inventory in November was up 54 percent from a year ago and sales were down 12 percent, according to the Greater Las Vegas Association of Realtors.”

“In Denver, another market that was incredibly competitive last year due to very short supply and high demand, inventory in November jumped nearly 47 percent annually, according to the Denver Metro Association of Realtors. Sales fell 12 percent. The high end is seeing the biggest shift.”

“‘The power switched to buyers when negotiating on homes priced over $1 million, with 7.22 months of inventory,’ wrote Jill Schafer, chair of the DMAR Market Trends Committee.”

“Even in Dallas, where demand is still quite strong due to a healthy local economy, inventory is up over 15 percent, and 14 percent of listings saw price reductions in October, according to Realtor.com. ‘I am seeing an increasing number of price reductions in homes over $500,000, as our inflated market has simmered, but not plummeted,’ said Laura Barnett, a real estate agent with RE/MAX DFW Associates.”

“The buy-at-any-price, get-it-while-you-can mind-set of home shopping a year or two ago has faded. ‘Things are reverting to normal in Dallas-Fort Worth,’ said Dr. James Gaines, chief economist for the Real Estate Center at Texas A&M University. ‘It’s going to look so much different because you’ve had such boom times for the last six or seven years and we have gotten used to it. But that couldn’t go on forever.'”

“‘As far as being in the type of bubble we were a decade ago, the numbers don’t support that,’ said Chris Kelly, the new CEO of Dallas’ Ebby Halliday Realtors. ‘Yes, we have seen home values here go dramatically up in our marketplace, but not nearly what we have seen in some other places.'”

“Still, Kelly said some D-FW home sellers have been caught off guard by the shift in the local housing market. ‘Some people are still expecting to get multiple offers and sell their houses immediately,’ he said. ‘When that isn’t the reality, they think something is wrong with the market.'”

“Houston real estate agent Shad Bogany is helping a couple close on a new home for $60,000 less than its listing price — a discount of over 20 percent. ‘Builders are super-discounting right now,’ Bogany said. ‘Because they’re trying to get rid of inventory.'”

“The discounts don’t just apply to new homes. The couple, in turn, had to cut the list price on their existing home by $10,000 in the hopes of selling it by the time they closed on their new place. Four out of every five Houston-area homes sold for less than their listed prices this November, according to the real estate startup Knock. The company predicts that share will continue to increase in 2019, placing Houston second in the nation only to Miami for this trend.”

“The discounts are significant. In 2018, the average savings off original list prices in the Houston area were 3 percent. The company predicts that the homes currently listed on the market will sell at a discount of 5 percent.”

“The tales of housing malaise stretch across metro New York. A Long Island home sat idle on the market until both its price and taxes were slashed. Buyers in Connecticut are asking to rent houses before purchasing them. Hoboken brokers lament their slow business.”

“Now, the growing consensus is prices are headed in one direction: down. From the high-rises of Manhattan to the city’s manicured suburbs, homebuyers are pulling back as they reel from a triple whammy of costly hits.”

“‘Brokers ask me, ‘When is it going to get better?’ said Greg Heym, chief economist of Terra Holdings. ‘Better’ for this market, in this area, is lower prices.'”

“In New Jersey, many buyers appeared to brush off the new tax law, and sales remained strong until September, when mortgage rates shot higher, said Jeffrey Otteau, president of the valuation company that bears his name. The decline in purchasing power means prices will inevitably have to adjust, he said.”

“‘Sellers have gotten greedy,’ he said. ‘It’s easier to say ‘blame tax reform’ than to say ‘we need to take an honest look at the price you expect to get for your house.’ Sellers don’t get it.'”

“Closer to Manhattan, the slowdown is palpable, said Sharon Shahinian, a Halstead broker in Hoboken. ‘All the agents are saying to each other, ‘Are you busy?’ Shahinian said. ‘Someone will say, ‘Oh my God, it’s so slow, and someone else will say, ‘I’m glad it’s not just me.'”

“‘It’s a great time for buyers, so it’s not all doom and gloom,’ Shahinian said. ‘But you have to manage sellers’ expectations that what they could have gotten two years ago, a year and a half ago, they can’t get now.'”

“In November 2017, French investor Jean-Philippe Mango flew to Miami for a meeting with managers of Steinmauer Realty, a brokerage that was handling real estate investments on behalf of him and other French nationals.”

“During the pow-wow to discuss the pending sales of several properties Mango and his partners owned, he discovered a Pompano Beach condo his investment group bought in 2015 had been lost to foreclosure a year later, according to a recent lawsuit.”

“By the time Mango received a sixth and final progress report, the investments had severely soured. ‘Many units that had been reported as profitable were suddenly reported as unprofitable,’ the lawsuit claims. ‘More importantly were the reasons why the units were no longer profitable: Renovation costs spiked and resale price estimates plummeted.'”

“In the last twelve months, home values in the Shawnee Mission School District have shot up by 11.2 percent based on November’s numbers. In real dollars and cents, that represented an increase of $24,000.00 in just twelve months ($215,000 to $239,000).”

“And because most home buyers did not receive an 11.2 percent raise this year, record home prices are now being rejected by today’s active buyers.”

“So how do we know that home prices are being rejected? The number of SMSD listings in November that expired off of the multiple listing service, meaning they failed to sell, was up 70.6 percent when compared to the same month last year.”

“Several NEJC area have already seen the median home price drop in recent months due to price rejection. In addition, the number of price adjustments is on the rise as well.”

“So what is the message to current and potential home sellers? The message is loud and clear. Today’s market is for sellers who have a strong motivation to sell their home. A motivation so strong that it will cause them to price their home in-line with today’s market and not try to price their home like it is March 2017.”

“This market is not for what I call ‘tryers.’ Tryers are home sellers who say, ‘We will try to sell our home, if and only if we can get the price we want.’ For the tryers out there, I hate to tell you but that ship sailed many months ago. Today’s market is more price sensitive than we have seen in several years.”

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This Post Has 46 Comments

  1. Weee-doggie, no room for international markets today. I’ll have to get caught up on that sizeable crater this weekend!

  2. ‘The buy-at-any-price, get-it-while-you-can mind-set of home shopping a year or two ago has faded’

    Golly, I hope no one paid too much in such an environment.

    1. “This market is not for what I call ‘tryers.’ Tryers are home sellers who say, ‘We will try to sell our home, if and only if we can get the price we want.’ For the tryers out there, I hate to tell you but that ship sailed many months ago. Today’s market is more price sensitive than we have seen in several years.”

      What happened to the shortage?

  4. “‘As far as being in the type of bubble we were a decade ago, the numbers don’t support that,’ said Chris Kelly, the new CEO of Dallas’ Ebby Halliday Realtors. ‘Yes, we have seen home values here go dramatically up in our marketplace, but not nearly what we have seen in some other places.’”

    Chris-Boy hasnt seen a housing bubble he doesnt like.

    Checkout the NAR membership number….Peak in 2007 and belongs to bottom out in 2012. Once Housing bubble 2.0 starts it started to go up again. I believe 2018/2019 will be peak and 2020 will start declining again which means 2018 was peak housing bubble 2.0

      1. Considering many realtors I have talked to are hustling as bartenders and other odd end jobs, I think your right. 2018 will be a peak and then they amount will “soften, decelerate, slow down, and cool” as they would put it

    3. If you chart the membership numbers and see where it peak, you can see where housing bubble burst. For example, my parents brought a place in 1989 at the peak.

    4. I believe 2018/2019 will be peak

      It is fortunate for us that someone around here can still predict the future. We’ve been short on predictions since ADan got lost back in the hills around Crow Mountain.

      Anyway, isn’t 2018 and the peak rather behind us?

  5. How come everyone on Wall Street is so glum these days? Don’t they realize the Santa Claus rally is right around the corner?

    Individual stock investors are the most bearish since 2013: survey
    Published: Dec 14, 2018 3:06 p.m. ET
    Some analysts see signs of panic in sentiment readings, flow data
    AFP/Getty Images
    Mood right now?
    By William Watts
    Deputy markets editor

    Investors looking for signs of capitulation in the stock market took heart in a closely watched weekly survey that showed bearish sentiment at its highest in 5 1/2 years.

    The American Association of Individual Investors late Thursday said bearish sentiment, expectations that stock prices will fall over the next six months, jumped 18.4 percentage points to 48.9% in the seven-day period ended Wednesday. The chart below from Bespoke Investment Group tracks the data.

    That’s the highest since a reading of 54.5% on April 11, 2013, and marks the 10th straight week bearish sentiment was above the survey’s historical average of 30.5%. The rise was also the largest weekly jump since April 2013 and the 24th largest since the survey began, AAII said.
    …

    1. Dumb question of the day: How many more 500 point drops can the DOW sustain before it goes to zero?

      1. BREAKING: Stocks Close Near Session Lows As Growth Fears Escalate
        Investor’s Business Daily
        News
        Stocks Go On Wild Ride Down; Ciena, Adobe, Costco, Delta, Google In Focus
        IBD STAFF 4:21 PM ET

        The stock market went on a wild ride, rallying early but ultimately closing lower. Global economic concerns worried investors, even as China cut tariffs on U.S.-made autos and reframed its Made in China 2025 tech ambitions, while Canada granted bail to Huawei’s CFO. Ciena (CIEN) reported its best earnings growth in years, while Adobe (ADBE) and Delta Air Lines (DAL) gave weak earnings guidance. Costco Wholesale (COST) missed on earnings while Starbucks (SBUX) trimmed long-term growth forecasts. Google’s (GOOGL) CEO Sundar Pichai went before Congress, supporting privacy legislation and defending the search giant’s practices.
        …

      2. With bull markets like this one, who needs bear markets?

        Opinion: Stock investors, you have now been warned for the last time
        By Sven Henrich
        Published: Dec 14, 2018 4:18 p.m. ET

        There are six warning signs that the bull market in U.S. stocks will soon be over
        Getty Images
        Investors are on the precipice of a stock-market downturn.

        This year many technical and macro warning signs were ignored by investors and Wall Street alike.

        Long gone is the record optimism that permeated the landscape not only in January but even as late as August and September. Wall Street analysts kept raising price targets on key stocks such as Apple (AAPL, -3.20%) and telling investors to buy every dip. Only now are they downgrading those same stocks by 20%-25% from where they were in September.

        With a record 90% of asset classes down for the year and almost half of S&P 500 Index (SPX, -1.91%) components in a bear market, hopes are for a Santa Claus rally to save what’s left of a terrible investment year. And while markets may still see sizable rallies, the warning signs are still all around us, and they send a clear message: The 10-year bull market will come to an end, and the investing and trading climate is changing dramatically, possibly, for years to come.
        …

  6. “In Los Angeles, 68 percent of properties for sale saw multiple offers a year ago. That is now down to 38 percent. In Southern California overall, home sales in October were at the slowest pace for that month in seven years, according to CoreLogic.”

    38 percent still sounds awfully high. How does that compare to what was happening two decades ago?

    1. Perhaps three decades back is the relevant time horizon, as the Bubble was already beginning to bubble by 1998.

    1. Interesting that his analysis assumed that 50M users justified a 20k valuation. So therefore unless the number of hodlers falls, the value doesn’t fall either. Strange logic. The mental gyrations that must be required to do this stuff full time…

  8. Wow, some surprisingly frank talk from unlikely people.

    Anyone agree that the tone of news as well as developments in the market are progressing at even faster pace then we here were predicting just a couple weeks ago? Still a lot of BS out there, but the fulcrum appears to be shifting.

    1. It’s kinda like the stock market. One day they say it’s going up and the next… I recall a few weeks ago any search for “housing market” produced declining result articles. Now they are drowned out with a bunch of fluff of realtor or REIC written babble. But yeah there is a good amount of truth in the “softening” RE market being reported

  9. “‘As far as being in the type of bubble we were a decade ago, the numbers don’t support that,’ said Chris Kelly, the new CEO of Dallas’ Ebby Halliday Realtors.

    What Chris means is that housing bubble 1.0 was unsustainable then, just like housing bubble 2.0 is unsustainable now. Chris undoubtedly denied there was a housing bubble then, just like he’s denying there’s a bubble now. Always Be Closing doesn’t leave room for truth-telling.

  10. The multiple offers will pick back up. They will be low, lower ,and lowest. My guess is some of the multiple offer situations currently documented have that already going on. Why would we assume that multiple offers mean ABOVE list price? We reached that point and that is really messed up!

    Time for the return to reality. Big changes coming. Prepare now. Nice house on navigable waterway should be in my reach in a year. Hope so.

    1. “The multiple offers will pick back up. They will be low, lower ,and lowest.”

      Funny you mentioned this. I just heard about a home I inquired on has many offers but none at or above asking price and how I could win this “gem” with a offer at asking / dream price!

      1. Then if you offer asking price, the Crook-estate Agents will come back and say…but can ya go a little more…one just came in for a more…because behind the scenes, they are all colliding and playing musical chairs to see who they can try and manipulate into which house…when they do this, either dig out that inspection and come back with a lower counter due to the 5K it’s gonna take to fix the deck. If they don’t believe you, send someone over to write up a bid and submit it to the agent, then it’s now on record and the owners are factually aware of wood rot. If they won’t negotiate, walk. We did this a few times back in 2011ish and it was funny how those last minute offers above asking never materialized once we started negotiating hard over deferred maintenance issues. Finally we won the house we wanted at a fair price to all with no BS.

        1. Thanks for the advise and I will be sure to use it when I put a real offer on the table but for now I wait as my offer would be about 1/2 and no greedbag in my neck of the woods would even consider it. I’ve made lowball offers for my own enjoyment and 9 times out of 10 get no response or the one response i do get is some fluff regurgitated spew about how prices are going up or a topic changing reply about another property.

          1. “…for now I wait as my offer would be about 1/2 and no greedbag in my neck of the woods would even consider it.”

            Of course they will reject lowball offers as long as they can reasonably hope for a greater fool to eventually appear with a better offer. That’s why I advise against buying until the greater fools are generally out of the game. This is inevitably the case when the economy goes into a recession.

      2. If there is more than one offer on a property I would say, too much competition. Back out, or lower your offer a couple of k.

    1. Heckova job

      Ironically, we don’t collectively have more stuff as a result, because there is only so much stuff. We only have higher prices and have to give some percentage of our stuff over to the bankers on a regular basis in perpetuity.

      Heckova job Everyone.

  14. Will be pulling up MLS soon to research property sales in my preferred zip which sold from 2008 to 2010 to see how far things have inflated and as a reference for where I will be offering.

    WILL be interesting to see how long it takes to get back. Of course sellers reducing significantly is about the last thing to,happen and requires a large hurdle be crossed. Decreased sales, increased listings, extended DOMs , pessimistic news and all that other stuff has to happen first. Appearance of short sales, reo, and others are next. List prices eventually snowball downward.

    Hope a year is enough time. Can’t predict when the knife is through falling. Missed out the last time, but also no knife cuts.

    Regards

  15. Seems like this time they’re not seizing on the season as the reason for slow sales.

    Forecast: 77% of Homes Will Sell Below List Price
    December 14, 2018
    Seventy-seven percent of current listings will likely sell below the original list price in the first quarter of 2019, according to a new forecast released by Knock, an iBuyer company that offers home sellers instant cash offers on their home.
    https://magazine.realtor/daily-news/2018/12/14/forecast-77-of-homes-will-sell-below-list-price

  17. 12-14-18 Hanson: HOUSE PRICES are More Vulnerable Than Most Think
    the 2011 to 2016 era wasn’t dissimilar from the 2002-2007 bubble. That is, “unorthodox demand using unorthodox capital & credit” became the main driver of demand and house prices…all those buy-to-rent, flip and floppers; institutions; foreign lock boxes; money laundering schemes; and EB5’s.

    And based on the historical divergence between end-user affordability and house prices in top metros in the nation today house prices could fall at least 30% and only be fairly-valued. I have plenty of local level data & models proving this.
    https://mhanson.com/12-14-18-hanson-house-prices-are-more-vulnerable-than-most-think/

  18. Good read! This guy is spot on

    “But the 2011 to 2016 era wasn’t dissimilar from the 2002-2007 bubble. That is, “unorthodox demand using unorthodox capital & credit” became the main driver of demand and house prices…all those buy-to-rent, flip and floppers; institutions; foreign lock boxes; money laundering schemes; and EB5’s.“

  19. I mentioned a couple of weeks ago my hope to pay under $3/gallon for gasoline by Christmas. I just filled up at Costco for $2.999/gallon. Do I thank Donald Trump, Uncle Fed, or Santa Claus?

  20. The Financial Times
    Global Economy
    Chinese data showing slowdown spook global markets
    Wall Street responds badly as gloom gathers around world economy
    China’s automotive market, the world’s largest, is on track for its first annual sales decline since the 1990s © AP
    Gabriel Wildau and Yizhen Jia in Shanghai, Hudson Lockett in Hong Kong and Sam Fleming in Washington yesterday

    A sharp slowdown in Chinese spending growth and manufacturing added to the gathering gloom around the international economy on Friday, sending financial markets lower around the world at the prospect of global loss of momentum.

    Retail sales grew at the slowest pace in 15 years in November in China, while factory output was the weakest in nearly three years, suggesting economic stimulus measures enacted by Beijing since the summer have failed to reverse flagging growth.

    Wall Street responded badly to the news, with the S&P 500 closing 1.9 per cent lower on Friday, despite US President Donald Trump saying the “US is doing very well” in contrast to China.
    …

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