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The Last 30 Years Have Been All About Making Credit More Freely Available

It’s Friday desk clearing time for this blogger. ” The year 2018 was one of ebbing expectations. Early in the year the local market was still rather robust with limited inventory and relatively strong demand from buyers. Sellers were still seeing multiple offers – though fewer than last year – and selling prices often exceeded asking prices. This is the model both buyers and sellers had come to expect, the new normal that began in earnest in 2013-2014 as we recovered from the Great Recession.”

“Then summer arrived. You could almost smell it in the air – buyers had had enough of escalating prices, multiple offers, trying and trying to get a house only to find something that was less than they wanted for more money than they wanted to spend.”

“After years of skyrocketing home prices, why has King County’s real estate market begun going in the opposite direction? It’s pretty simple: With fewer buyers competing over more homes, the days of furious bidding wars that jack up home prices are over. The average buyer actually now has enough negotiating power to get a house for less than the list price; and in about a fourth of listings, sellers are just lowering their asking prices because they didn’t get any nibbles.”

” It’s part of a national trend of inventory finally starting to rise slightly; prices are even falling a tad in a few West Coast cities, like Portland and Vancouver, B.C., though the changes have been more dramatic here than anywhere else.”

“With rising interest rates, slowing sales, and some owners cutting prices, the Southern Nevada housing market is showing the first signs of weakness since its comeback from the Great Recession. But Heidi Kasama, president of Nevada Realtors Association, believes we’re not seeing the beginnings of another housing crisis. Instead, she calls it a slow down.”

“Kasama said the softness going on in the market right now is part of what’s been going on over the past few months. She thinks Southern Nevada will continue to see a drop in prices but not a dramatic bubble burst as we experienced in the Great Recession. ‘A slow down is frankly warranted at this point,’ she said, ‘We can’t continue with 6 and 7 percent price appreciation every month.'”

“Real estate investor Peter Lezeska had high hopes when he listed his totally refurbished multi-family property for sale late last spring. The triple-residency property is located at 1059 Atlantic Ave. in trendy North Winton Village, and Lezeska wanted to fetch in the $350,000 range.”

“It was expected to go quickly, but it languished for months before it sold in November for $310,000. ‘The market has turned,’ said Lezeska, who is a Realtor as well as a house flipper. ‘We’re not getting the prices that we’re used to.'”

“A new report from the Austin Board of Realtors found while we are seeing a slight decrease in the number of homes sold within Austin city limits. Mustian and Tracey Wallace are newlyweds who recently sold a condo and bought a house.”

“‘ I thought it was going to be super easy,’ said Mustian. ‘I was like, oh for sure, our place is just going to, go on sale and a day later, we’re going to have six offers.’ That’s what happened two and a half years ago when Wallace had to compete against other offers to buy, but selling it now, they said, was a little more challenging.”

“‘We had a bunch of foot traffic into our condo but no real offers until about a month in,’ Wallace said.”

“It’s been a year of high highs and low lows in Kelowna’s real estate market. It was announced with much fanfare that the average selling price of a single-family home in the city hit a record high of $782,398 in July. However, a slowdown quickly followed and the average price nosedived to $650,785 by November. That’s a plunge of $131,613, or 17 per cent.”

“All the stars aligned in 2017 and early 2018 to make the Kelowna market soar. The economy was buoyant, consumers were confident and homeowners in Vancouver were selling their places for an average of $1.6 million and coming to the Okanagan to buy a similar place for half the price.”

“The Vancouver market eventually cooled and that chill spread to the Okanagan. It’s an adjustment, for sure, from the recent sellers’ market, in which homes were priced high and often fetched more when frenzied potential buyers started bidding. Homes sit on the market a long time and sellers usually have to drop the price to attract a buyer.”

“25 years ago, my parents bought their home in Melbourne for about $2 million less than they sold it for on Saturday 24 November 2018. As a nation we funded the housing boom by borrowing. Australia’s household debt to income ratio is nearing 200 per cent, one of the highest levels in the world.”

“That’s how the lucky family that paid just over $2 million for a bungalow in inner-city Melbourne can the afford the thing. CoreLogic’s Cameron Kusher said: ‘the last 30 years have been all about making credit more freely available.'”

“Gary Jacobs of Allen & Jacobs, with offices in Blackrock and Dublin 8’s Clanbrassil Street, says prices have fallen and the same prices are not being achieved now that were last spring. But he isn’t advising vendors to drop prices – at least not yet. ‘There are so many buyers not in the market, now is not the time to make a call on reducing prices.'”

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This Post Has 79 Comments

  1. ‘But he isn’t advising vendors to drop prices – at least not yet’

    This entire article is stuffed full of people hacking prices left and right. The Dublin bubble has well and truly popped.

    1. “A reader sent this in:”

      “Due to the weather, sales always slow down in the winter. So home prices drop, as there are always sellers who want, or have, to sell their houses. Oftentimes, a quick sale is better for them than holding out and hoping for the top dollar, which may take months to achieve.”

      Yikes!

      1. What Ben is describing here is what was going on in 2012. Houses on sale for months, price drops, negotiations, seller pays closing costs, etc.

    3. Good link Ben!

      Sadly I do think there are two different bubbles here. One in the primary ‘blue’ markets (Seattle, SF) and then a bunch of seemingly unstoppable ones in the red ‘inbound’ areas…the Spokanes and Boises etc.

      Blue area bubbles imploding and Red areas still inflating? This massive movement of people is a big factor. Curious your thoughts.

      1. “Curious your thoughts.”

        All bubbles are local, but some bubble areas are strategically important, so those zip codes get rescued while the rest are left to fend for themselves a la Titanic’s steerage passengers splashing in the frigid sea.

        A home’s price is all you really need to know to access whether its occupants will founder or survive. No fancy algorithms required.

        Identifying when a heated market turns into a bubble is when the bankers succeed in getting the government to guarantee their loans from default. Again, no fancy algorithms required.

    4. HGTV’s Boise Boys seen queuing in a soup line at the Rescue Mission as housing bust absolutely obliterates home flipping industry in Boise, Idaho.

        1. Looking at Zillow there are many houses for sale that are obvious flip attempts: buy house, add granite countertops and stainless steel appliances, list again 3 months later for +$50,000 asking price, and crickets… Reduce price 3%, 5%, 10%, 15% … Oh snap, maybe this flip ain’t gonna make us a quick buck!

        2. I saw one hilarious episode of Flip or Flop where Tarek knew things weren’t going well, so he told Christina that he was going to list the house for $788,888. Because “some buyers” think that 8s were lucky. But they sold the house in a couple weeks for something like $758,888 to a “cash buyer.”

          Yeah, just come out and say it Tarek. You were doing Chinese Laundry.

  3. “Then summer arrived. You could almost smell it in the air – buyers had had enough of escalating prices, multiple offers, trying and trying to get a house only to find something that was less than they wanted for more money than they wanted to spend.”

    What a bunch of horsesh!t. Prices have nothing to do with what people can afford or “want to spend.” We passed that long, long ago. Speculators disappeared, and the market was left to twist in the wind.

  4. ‘the last 30 years have been all about making credit more freely available.’

    I’ve been thinking about the falling stock, bond, housing, oil, and cryptocurrency prices which we have witnessed play out in tandem for much of 2018, as the Fed quietly, predictably, steadily unwinds Quantitative Easing and ever so gingerly brings up short term interest rates off the zero bound (which turned out to not be a bound).

    Despite the gentility and transperency of the stimulus unwind, speculators are screaming bloody murder about the Fed’s taking away the punchbowl. One almost begins to wonder if the stellar asset price gains witnessed over the recent decade amountes to no more than a motley assortment of bubbles across all risk asset classes, temporarily inflated by Yellen bux chasing yield.

    1. “One almost begins to wonder if the stellar asset price gains witnessed over the recent decade amountes to no more than a motley assortment of bubbles across all risk asset classes, temporarily inflated by Yellen bux chasing yield.”

      I think it’s a no-brainer. Prof. Also, look at a chart of the Fed’s balance sheet for a real eye-opener. And “supposedly” they’re already thinking of pausing QT (quantitative tightening).

    3. I would LOVE to see a rebalancing of financial markets away from Wall Street back to Main Street. Basically, move the economy away from speculation and financialzation back towards fundamentals (housing prices based on income, stocks based on profits, etc)

      1. That ship sailed 10 years ago… When we bailed out AIG with all their toxic loans and let CIT go bankrupt CIT provided loans to small businesses advances on AR, and letters of credit for shipping companies, when that froze all heck broke loose.

      2. Definitely, something is wrong with a financial system when the people with money are incentivized to speculate in anything and everything … except goods and services.

        1. Definitely, something is wrong with a financial system when the people with money are incentivized to speculate in anything and everything … except goods and services.”

          And pay raises for workers

      3. Never happen…too many powerful, greedy cartel parasites …Banksters, Crookestate Agents and “Brokers – as in making others go broke,” The information cartel, our corrupt government, the oil cartel, and so on. This beat is a predictable symphony if you take a long step back and look at all the cycles and swindling that has gone on. This is why immigration is so popular as once the legacy population either gets raided to death where there is nothing left and their kids hopefully don’t fall for it, they need new, uninformed blood to feast off of.

    2. “As a nation we funded the housing boom by borrowing.”

      Behaving like the heterogeneou$ collection of tulipbulb headed “True.Believer$” that de$ired it so … @.any.co$t!

  6. From the Nevada article:

    ‘And while some people might be concerned about the price of homes, Nat Hodgson, the CEO of the Southern Nevada Home Builders Association, said the dip in prices over the past few months can’t really be compared with the massive drop in prices the region experienced 10 years ago.’

    “You look in the mid-90s to 2002… that was 22,000 to 24,000 homes a year,” he said, “We’re up on the second or third rung of the ladder. We were on the 12th rung in 2006. That’s a long way to fall. We’re not that far off the ground.”

    ‘He said this year homebuilders might hit the 11,000 permits for new homes. So, if there is a softening of a couple of percentage points that is not necessarily a bad thing.’

    ‘Hodgson said most of the builders are not going after the lower or entry level market because it costs too much to build homes in Nevada. He said land prices have gone up, along with prices for materials and for labor.’

    ‘While people looking for a home under the $300,000 range find it difficult to find something in Nevada, people moving to the state from California see the house prices as a real bargain. “They see us as an absolute steal,” Uri Vaknin, whose company bought several condominium developers when the market hit bottom a few years ago.’

    ‘Vaknin said 30 percent of the people buying into his buildings are from California. He said they are usually retired or about to go into retirement.’

    “Californias who are living a middle-class lifestyle in California they are able to come to Las Vegas and actually have this upper-middle-class lifestyle,” he said.’

    ‘Northern Nevada is seeing the same influx of people from the Bay Area.’

    This is stealth speculation:

    ‘they are usually retired or about to go into retirement’

    You couldn’t give me a Las Vegas condo if I had to live in it.

    1. ‘if there is a softening of a couple of percentage points that is not necessarily a bad thing’

      Translation: we are undercutting the people who bought from us 6 months ago.

    2. ‘“Californias who are living a middle-class lifestyle in California they are able to come to Las Vegas and actually have this upper-middle-class lifestyle,” he said.’

      Wow, this is such an interesting new situation, where they can actually pick up their job up and move it to Las Vegas, too. Anybody else surprised that the CA incomes are moving to NV with the people? And, why is NV median income staying the same if these people are bringing their high-priced jobs with them? Something smells like rotting fish…

        1. why would anyone want to live in lv?
          get drunk,puke,gamble cheat on spouse

          Yeah, it’s exhausting. Hardly leaves any time to do drugs.

      2. “o come to Las Vegas and actually have this upper-middle-class lifestyle,” he said.”

        Only those whose CA homes are paid. Those who borrowed heavily will be in ‘same $hit different city.’

    3. The real damage is the lo$t.wage$ democraptic blue blood voters staining the other 90% of the great state … Imhto

    4. Vaknin said 30 percent of the people buying into his buildings are from California. He said they are usually retired or about to go into retirement.’

      “Californias who are living a middle-class lifestyle in California they are able to come to Las Vegas and actually have this upper-middle-class lifestyle,” he said.’

      And who’s buying the homes in CA? Chinese? I don’t think so they stopped.

  7. Did you forget to “go all in” on Bitcoin Cash?

    $182.30 Bitcoin Cash price
    +$101.43 Since last week (USD)
    +125.45% Since last week (%)

  8. Most important advice for stock HODLers: Don’t try to time the market through buying low and selling high. It’s always a good time to buy (and pay my firm a commission for whatever we did to help with your purchase decisions).

    1. What you need to remember fits on one note card
      Published: Apr 6, 2018 11:49 a.m. ET
      ‘Never make important decisions based on emotions’
      By Ryan Vlastelica
      Markets reporter

      The recent turbulence in the U.S. stock market no doubt has a lot of investors searching for a strategy to navigate the volatility and protect their capital. The good news: The best tactic most investors can take is easier than they may expect.

      In fact, according to one adviser, the important things to keep in mind are so simple they can fit on a single note card. Such a card was recently tweeted by Ritholtz Wealth Management, which credited it to Anthony Isola, a financial adviser at the firm who tweets under the handle @ATeachMoment.
      …

    2. Further important advice: In case it seems like the market is tanking, be sure to bury your head in the sand so you won’t notice.

  10. . ‘The market has turned,’ said Lezeska, who is a Realtor as well as a house flipper. ‘We’re not getting the prices that we’re used to.’”

    B…b…but I thought realtors were supposed to be experts on local housing markets. Yet Flipper Boy didn’t see the cratering coming his way?

    1. Heh, Toll Brothers. At first I thought you were referring to the latest tolls on I-66.

      (for you non-DC people, the local transit authorities put a mandatory toll on a major highway. The toll increases as the lanes fill with cars. Some of those tolls went very high during rush hour, upwards of $40.)

      2. if your solo commute now falls inside the expanded hours, what are your options?

        For drivers caught in the additional hours, the options to avoid a toll are to start a carpool, shift commuting hours, or take transit, such as some of the new bus service that has been rolled out.

        Alternative routes include Route 50 and 29. VDOT officials said they will be monitoring adjacent roadway systems to adjust traffic signal timing as needed.

        https://wtop.com/dc-transit/2017/12/new-i-66-tolls-frequently-asked-questions/

      3. Well it was HOV only in the morning once you hit the beltway, now it’s HOV or super high priced toll only in the morning.

        I really hope they don’t toll Fairfax County Parkway 🙁

        1. Charge every driver in the DC area $5 a mile even on the side streets. That should take care of traffic congestion really fast. Those can don’t like that can move to NoDak.

          1. Elon Musk has it right: you can’t live in a 3D world with high condos and apartments and have 2D streets. Eventually with enough density traffic congestion is inevitable. The solution is some combination of teleworking, more underground travel options, better mass transit (e.g. trains, light rail), good “last mile options” like electric scooters, and self-driving. People can and will tolerate a long commute if the cognitive effort necessary isn’t there. If you can sit back and watch a movie, read, or nap while your car grinds through traffic, that probably makes even bad commutes more bearable.

  15. “Kasama said the softness going on in the market right now is part of what’s been going on over the past few months. She thinks Southern Nevada will continue to see a drop in prices but not a dramatic bubble burst as we experienced in the Great Recession. ‘A slow down is frankly warranted at this point,’ she said, ‘We can’t continue with 6 and 7 percent price appreciation every month.’”

    Now SHE tells us! I bet 6 months ago she was singing a different tune.

      1. (…to be the first…) (need that post-edit feature)

        And the picture is meant in a complimentary way, Ben 🙂

    1. They are also:

      Thief’s, racists, homeless, drug users, alcoholics, rapists, canabals, repeat offenders, child molesters, reason the ramen shelf’s at the grocery store are empty, color blind, first to contract AND create AIDS (monkey sex), etc…

  18. Is it too late to hold out hope for a Santa Claus rally?

    The Financial Times
    US stocks chalk up biggest weekly drop in years
    Peter Wells in New York 2 hours ago

    The US stock market closed out Friday with its biggest weekly drop in years and the Nasdaq Composite finished in a bear market as the looming threat of a partial US government shutdown prompted investors to throw in the towel after a string of volatile trading sessions.

    The declines keep stocks on track to chalk up their biggest annual decline since the financial crisis, and the S&P 500 on course for its worst December performance since 1931.
    …

    1. “Is it too late to hold out hope for a Santa Claus rally?”

      Yes, but it’s not too late to HODL out hope.

  19. I just noticed this story on my local feed…

    Seattle has a family-size housing problem (curbed.com)

    They’re finally noticing that by making 80% of all new construction 550 sq ft 1-bedroom ‘efficiency’ units for single millennial tech bros and gals, they might have neglected a less-profitable demographic: normal people with families.

      1. Once the deal is in the pipeline…. can’t turn back.

        That’s a big part of the problem – it takes multiple years to get one of those apartment towers completed from pre-planning/permitting/bearded newt inpact studies/etc to open for business.

        There’s still a number of buildings in mid-construction. By the time they open for business, it’s gonna really suck to be them.

        1. I would assume they factor in risk over the lifespan of all this building. Even the most optimistic REIC companies must believe that it can’t go up forever right?!

          1. I think many of them were counting on selling it to a greater fool once completed. So it doesn’t have to go up forever … just ‘long enough’ for them to make their score.

  20. I saw this earlier this week and forgot to share. Gotta love the title:

    It appears Orlando’s housing market is getting slightly less shitty

    https://www.google.com/amp/s/www.orlandoweekly.com/Blogs/archives/2018/12/17/it-appears-orlandos-housing-market-is-getting-slightly-less-shitty%3fmedia=AMP%2bHTML

    As others have mentioned, the MSM has been on a run with the optimistic RE propaganda. Ben does a great job of pulling the factual news which can be very tough when it’s so murky out there on the interweb.

  21. Does this year on Wall Street more closely resemble 1931 or 1987? Yegads…tough choice!

    This brutal stock-market rout mirrors the 1987 crash in 1 important way
    By Mark DeCambre
    Published: Dec 21, 2018 5:29 p.m. ET
    Average daily moves for three stock gauges are the worst since 1987, according to Dow Jones Market Data
    Getty Images
    1987-esque?

    As the Dow Jones Industrial Average confronts its ugliest December loss since 1931, the time of the Great Depression, there is another notable way to put the severity of this persistent bout of losses into historical context.

    If current conditions hold, it would mark the worst average daily moves for the Dow (DJIA, -1.81%) the S&P 500 index (SPX, -2.06%) and the Russell 2000 index (RUT, -2.56%) since October of 1987, according to Dow Jones Market Data.

    In market lore, October of 1987 is a period that remains infamous. On Oct. 19, the Dow sank 22.6% in a single session, marking its steepest percentage drop ever, with trading during that period under pressure all month until the final crash.

    There’s a similar downtrend that is taking hold in December, despite the seasonal tendency for that month to enjoy a pre-Christmas updraft, typically known as a Santa rally, with institutional investors finding the month a good time to buy looking ahead to the new year.
    …

  22. It’s time to stop crying over your shrivelled HODLings and learn to love the bear.

    Dec 21, 2018, 5:25 pm
    U.S. Equity Averages Have Fallen From Parabolic Bubbles And Are Forming Bear Markets
    Richard Henry Suttmeier, Contributor
    Intelligent Investing Contributor Group

    As 2018 draws to a close the five U.S. equity averages have gone from what I call “inflating parabolic bubble” formations into correction or bear market territory. Over the course of the year I have provided many reasons to be cautious. Today we focus on the how deep the bear market can become.
    …

    1. Ya gotta love this guy’s no-BS approach:

      For this analysis I focus on the S&P 500, which set a ‘panic low’ of 666.79 on March 9, 2009. The first bull market peaked at 1,217.28 during the week of April 23, 2010 for a bull market of 82.6%. By definition a bull market ends with a correction of 10% or more. During the week of July 2, 2010, the S&P 500 had declined by 16.9% to 1,010.91.

      The second bull market began from this low and totaled 35.6% to a high of 1,370.58 set during the week of May 6, 2011. The next correction was a bear market as the S&P 500 fell by 21.6% to a low of 1,074.77 during the week of October 7, 2011.

      The third bull market began from this low and totaled 98.6% to a high of 2,134.72 during the week of May 22, 2015. The next correction was 15.2% to a low of 1,810.10, set during the week of February 12, 2016.

      The fourth bull market began from this low and totaled 58.7% to the high of 2,872.87, set on January 26, 2018. The next correction of 11.8% ended with the February 9, 2018 low of 2,532.69.

      The latest rally never reached bull market territory and it was thus a failed attempt as the S&P is now in correction territory at the beginning of a bear market.

  23. Will Wall Street find this news reassuring?

    Politics
    Trump Discusses Firing Fed’s Powell After Latest Rate Hike, Sources Say
    By Jennifer Jacobs, Saleha Mohsin, and Margaret Talev
    December 21, 2018, 8:42 PM PST

    President Donald Trump has discussed firing Federal Reserve Chairman Jerome Powell as his frustration with the central bank chief intensified following this week’s interest-rate increase and months of stock-market losses, according to four people familiar with the matter.
    …

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