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A Possible Broader Slowdown In The Red Hot Housing Market

A report from the Press Democrat in California. “The slowdown in Sonoma County’s residential real estate market sharpened in November, when sales and prices declined while the number of homes available for buyers jumped significantly.”

“In November, the county’s median housing price fell to $615,000, a decline of nearly 9 percent from the record peak of $700,000 in June, according to The Press Democrat housing report, compiled by Rick Laws of Compass real estate brokerage.”

“Even more striking, the number of homes sold in the last three months has fallen to its lowest level in eight years. And the number of homes for sale at the end of November increased to 909, a 77 percent increase from a year earlier.”

“The current slowdown in home sales is evident throughout the Bay Area, but is happening to a greater degree in the North Bay and especially in Sonoma County, according to a recent analysis of the local housing market one year after the October 2017 wildfires, which destroyed 5,334 homes in Sonoma County.”

“The increase in inventory in Sonoma County is largely driven by the availability of homes under $1 million, a trend that is also evident in other parts of the Bay Area. Selma Hepp, chief economist at Compass noted a marked increase in the number of county sellers cutting the price for their houses. In September and October, 45 percent of sales involved a price reduction, compared to 26 percent during that period in 2017.”

“Lori Sacco, managing broker at Vanguard Properties said another thing that’s noteworthy about the current housing market is that homes in the $2 to $3 million range or above are sitting on the market a little longer than they have in the past. ‘The higher-end luxury home, it’s a purchase that’s made because it’s discretionary,’ she said.”

The Register Guard in Oregon. “Home sales and sale prices dipped in Lane County last month, according to a new real estate report. The county’s median sale price was $277,500 in November, down from $290,000 in October, according to the Portland-based Regional Multiple Listing Service. The 370 closed sales was down from 421 in October.”

“Price and sales dips are expected in the winter months, when the real estate market typically slows down. But the RMLS data hint at a possible broader slowdown in Lane County’s red hot housing market.”

From The Oregonian. “Four employees were laid off Friday at the Portland Bureau of Development Services as the city’s development boom shows its first signs of slowing. Rebecca Esau, the Development Services director, said the cuts come as officials there were given a ‘quite sobering’ forecast for Portland building trends.”

“A construction slowdown by definition hurts the bottom line for Esau’s bureau, which gets most of its funding from permit application fees. ‘The longer we wait to reduce expenditures, the worse future cuts will need to be,’ Esau wrote.”

“Esau’s decision is a proactive step that prior officials didn’t take during the last recession. The bureau and its then-commissioner-in-charge, Rand Leonard, held off on making layoffs until 2009, when budget setbacks forced officials to cut 90 jobs.”

The Traverse Ticker in Michigan. “Statistics from the Traverse Area Association of Realtors show that the slowdown in the housing market is continuing. Sales in the five-county area for November were 320 units, down from 365 in November 2017, and the average price of a home dropped to $270,893 from $289,097 a year earlier.”

“Most of that drop can be attributed to Leelanau, Benzie, and Antrim Counties, as both Grand Traverse and Kalkaska County sales were very similar to November 2017. But Leelanau dropped to 40 from 55, Benzie to 40 from 51, and Antrim to 40 from 54. Though the dollar volume for the latter two was very similar for the two years, in Leelanau there was a precipitous drop, from $27,077,735 in 2017 to $13,351,550 this year.”

From Curbed Boston in Massachusetts. “These Dorchester homes are priced to sell, having recently reduced their tags to entice buyers midwinter. They range from $440,000 to $770,000—all you have to do is move in. Will this tactic work? Your call.”

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This Post Has 32 Comments

  1. From the Michigan article, a comment and a reply:

    “Don Pi
    Please correct your headline to read: Housing Inventoty Down In TC Area: Contributes to Less Sales do to .. ta da.. Lack of Inventory… the rise in interst rate to 4.5 to 4.7 does not deter those from buying… invetory does.. thats why builders and crews are scrambling to get new builds undeway!.. The prices you cite “going down” is due to the crap that is left out there no one wants and less than desirable areas to live.! Unelss at a price. sheeesh!”

    “Ralph Alexander
    Ah yes, that hoary old chestnut of financial wisdom: increasing supply will increase prices. Don Pi was asleep that day in Econ 101”

  2. ‘as the city’s development boom shows its first signs of slowing. Rebecca Esau, the Development Services director, said the cuts come as officials there were given a ‘quite sobering’ forecast for Portland building trends’

    Wa? But we were told they need several million airboxes in Portland and that still wouldn’t be enough! I’m starting to have serious doubts about this shortage thing.

    ‘a marked increase in the number of county sellers cutting the price for their houses. In September and October, 45 percent of sales involved a price reduction’

    Why would they cut their price if they can sell in a month? Maybe that’s just not true?

    ‘And the number of homes for sale at the end of November increased to 909, a 77 percent increase from a year earlier’

    Sacre bleu!

  3. “The current slowdown in home sales is evident… especially in Sonoma County, according to a recent analysis of the local housing market one year after the October 2017 wildfires, which destroyed 5,334 homes in Sonoma County.”

    So a year after over 5,000 homes (inventory) are destroyed by fire, prices went down? If you believed there was a shortage of inventory, how would you explain this? 5,000 shacks is a lot of shacks.

    1. Wonder how the RE market is going to look a year forward for the paradise and LA county areas that got scorched 🤔. According to MSM RE prices went up for the surrounding areas of paradise.

  4. “In November, the county’s median housing price fell to $615,000, a decline of nearly 9 percent from the record peak of $700,000 in June”

    Ouch, that’s a quite a haircut! It’s a seasonal thing right… summer vacations, winter holidays, you know…

    Spring break 2019 is gonna really hurt as all the millennials buyers will be on a party vacation and in between we got Valentine’s Day which will surely be another holiday potential buyers will have to take time off for

  5. Are slowdown fears killing off your Santa Claus rally?

    Nearly half of US CFOs fear a 2019 recession
    By Matt Egan, CNN Business
    Updated 12:46 PM ET, Wed December 12, 2018

    New York (CNN Business)
    America’s finance chiefs fear the economic expansion is nearly over.

    Almost half (48.6%) of US chief financial officers believe the United States will be in recession by the end of next year, according to the Duke University/CFO Global Business Outlook survey released on Wednesday.

    And 82% of CFOs surveyed by Duke believe that a recession will begin by the end of 2020.

    “The end is near for the near-decade-long burst of global economic growth,” Duke finance professor John Graham said in a statement.
    …

      1. Here’s why the Fed won’t save the stock market, despite its worst December start since 1980
        By William Watts
        Published: Dec 15, 2018 8:00 a.m. ET
        AFP/Getty Images
        Wake up, Santa.

        Another brutal week left the stock market with its worst start to a December in 38 years, and a meeting of Federal Reserve policy makers might not offer the relief some investors are pining for when they conclude a two-day policy meeting on Wednesday, says one economist.

        How bad was it? Stocks ended a week of often whipsaw trading with a decided move to the downside Friday.

        The Dow Jones Industrial Average (DJIA, -2.02%) dropped nearly 500 points, leaving it more than 10% below its early October all-time closing high, meeting a widely used definition of a market correction. It joined the S&P 500 (SPX, -1.91%) and the Nasdaq Composite (COMP, -2.26%) which were already in correction mode. The S&P and Dow are negative for 2018, while the Nasdaq is clinging to a 0.1% year-to-date rise.

        And it’s hardly an auspicious start to a month that’s historically a positive one for equities. Over the first nine trading days of the month, the Dow is down 5.6%, the S&P is off 5.8% and the Nasdaq is 5.7% in the red. That’s the worst start to a December for all three benchmarks since 1980, according to Dow Jones Market Data.

        That sounds bad, but it probably isn’t bad enough to convince the Fed to pause when it comes to interest-rate rises, said Tom Porcelli, chief U.S. economist at RBC Capital Markets, in a note.
        …

      2. Some posters have been mentioning stimulus measures lately. I will suggest you start listening to the American Enterprise Institute’s housing reports. (They are free and very thorough.) I don’t agree with everything of course, but they get into the weeds between the weeds on GSE lending, etc. If you follow along you’ll find there can hardly be more easier lending that what we’ve got right now, especially on the FHA side. These guys are shoehorning first time buyers in like crazy! Risk layering is standard.

    2. Sounds like some fun times are ahead in 2019 for asset HODLers.

      Ft.com
      Markets volatility
      Investment chiefs fret over high debt and liquidity crunch
      CIOs overseeing $21tn expect volatility, protectionism and Brexit to pose big risks
      Many investment heads are warning clients to prepare for volatility next year
      © AP Photo/Brian Witte
      Owen Walker 6 hours ago

      Investment bosses at fund managers controlling $21tn of assets warn that high levels of corporate debt and tighter liquidity pose a risk to the global economy in 2019.

      The executives predict that volatility will be an overriding feature of markets next year, while this year’s dominant events — Brexit, US-China trade tension and hardening monetary policy — will still influence their decisions.

      Investors should strap in for a “wild and bumpy ride”, said Kristina Hooper, chief global market strategist at Invesco, the $1tn US manager.
      …

  6. From the Portland, OR piece: “Unfortunately, in the current economy, there is not going to be a lot of demand for new construction for quite some time,” Edlen said. “Tell me how fast our unemployment is going to turn around and when it’s going to turn around. That’s a question we’re all asking ourselves.”

    Doesn’t look like they’re expecting a Spring turn-around.

  9. Flood gates are opening. Generally a slow process but median drops are beginning. Atleast they are beginning to report some MOM data or atleast the June to November data quoted. Really makes a difference, doesn’t it. YOY will become a thing of the past as its number will look increasingly bad.

    You know you are arriving at the new paradigm when municipal agencies start laying off. I recall one month in Manatee County during the last bust when a total of 14 building permits were issued one month. This for a previously rapid growing county of about 250k people. Yes, county layoffs were occuring as well as other side effects.

    As for the BS, the blame down here for the light tourist season is red tide. Got to be red tide. That probably has some validity, but is being used as a catch all explanation. Not really a problem at present but had been bad this summer. Sales of lux homes way down.

    It’s happening.

  11. “In November, the county’s median housing price fell to $615,000, a decline of nearly 9 percent from the record peak of $700,000 in June, according to The Press Democrat housing report, compiled by Rick Laws of Compass real estate brokerage.”

    These are jaw-dropping numbers. That’s an 18% annualized drop. This isn’t just a correction, it’s a full blown crash MUCH worse than the last one.

    1. annualized drop

      “By September of this year, Sonoma County posted the largest year-over-year decline of all Bay Area counties, at 26 percent, according to Hepp’s analysis.”

    2. You got that right. Happening even faster than us doomsday peppers on the blog have suspected and predicted! Can you,believe that one?

      Once it sells papers, the press will jump on board and it will dominate. Then the panic really begins. Prices will reduce further which will generate more press and the snowball grows.

      No joke, the starting gun has fired. Makes me long for next week’s articles. Kind of like watching the cryptos fall, although I do sympathize with those who suffer losses. Not funny, just a matter of “we warned you ” coming to bear

      1. “Happening even faster than us doomsday peppers on the blog have suspected and predicted!”

        If you searched the Housing Bubble Blog archives for 2006, you’d discover we had quite the competition going on doomsday predictions, even as the MSM continuously parroted their “All is well!” mantra.

        Imagine my surprise when the actual financial calamity which played out over 2007-2009 far exceeded the most pessimistic forecasts by the gloomiest of the Housing Bubble Blog doomsayers!

      2. “Kind of like watching the cryptos fall, although I do sympathize with those who suffer losses.”

        I’m missing the tragedy in cryptocurrency losses. Nobody put a gun to any HODLers’ heads and forced them to sink their hard earned money’s into fake currency. And I personally have warned anybody who would listen for years. Whose fault is it when people ignore sound precautionary advice and instead chase up prices in a mania?

        2. Stupid should hurt. The Bitcoin fanboys never missed a chance to mock the “old bugs” who refused to buy into their hype about cryptocurrencies making gold obsolete as a store of wealth and hedge against central bank debasement of the currency. They drank the Kool-Aid, and now they’re learning the hard way what we told them all along: that they were “investing” in a scam currency with zero intrinsic value. Live and learn, bagholders.

          1. When you invest to take the glory and greif. There were people doing same thing 2005 era. One individual I met had house paid off. 3 teenage daughters approaching college age. He was getting 200k heloc for down payments on 4 houses which was going to be his retirement when he flipped later.

            I remember thinking at the time that I was witnessing a tragedy that was yet to happen. Don’t know whatever happened, but cannot take any glee in what was about to happen. Felt sorry for him mainly despite his apparent bad judgement. Not a criminal, just a hard working guy with a vision but no sense of caution. No, I will not trivialize what he must have gone though. I just learn from it. Sad.

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