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Forcing Sellers To Be More Realistic

A report from the Los Angeles Daily News in California. “The housing market continues to be slightly friendlier for buyers in the San Fernando Valley compared to earlier in the year as more homes come on the market and sales slow down, according to the Southland Regional Association of Realtors. There were1,509 active listings at the at the end of last year, a 40 percent jump from a year ago and largest percentage increase since 2014. “

“‘Buyers who are in actively house hunting now understand that this is a window of opportunity,’ said Tim Johnson, the association’s chief executive officer. ‘Current buyers realize that they have a chance to snag a lower interest rate. Plus, slower prices increases eases some of the pressure to act quickly, and the added bonus is that they have more options as the inventory slowly expands.'”

“In the Santa Clarita Valley, the median price of homes inched up 3.4 percent to $560,000 from a year ago. Meanwhile, the condominium median price was $390,000, a 1.7 percent increase from last year. The record high median price for condominiums in Santa Clarita was posted in April at $410,000, according to the report.”

“The change reflects ‘pushback from buyers, forcing sellers to be more realistic, and comes as an increasing inventory gives buyers more leverage and more options to chose from,’ according to Johnson. There were 603 active listings reported at the end of last month in Santa Clarita, a 44 percent increase over a year ago.”

From Forbes. “The Tax Cuts and Jobs Act, the only big piece of legislation passed by President Donald Trump, was enacted last December, but tax year 2018 is when a lot of the provisions go into effect. And it didn’t just cut taxes. It also removed a lot of the perks homeowners and middle class taxpayers have relied on.”

“The biggest change is the repeal of deductions for state and local taxes. Going forward, an individual can only claim up $10,000 for all state and local sales, income, and property taxes together. For example, a small house in New Jersey may pay just property taxes of $25,000. But with the $10,000 cap, taxpayers are going to be shelling out a lot more to the tax man.”

“While the home mortgage interest deduction didn’t disappear, it did take a hit. The deduction for a mortgage used to buy, build or improve your home taken out after December 15, 2017, will max out at $750,000. For mortgages taken out before December 15, 2017, the limit is $1 million.”

“This is already having an affect on the high-end real estate market, especially blue states that have high state income taxes, such as New York, California, Connecticut, Massachusetts, New Jersey and Illinois.”

“‘The fact they are no longer tax deductible is causing a lot of people to look at relocating their primary residence to states such as Nevada, Texas, Florida or other states with low income taxes.’ said Jeff Fishman, JSF Financial in Los Angeles.”

The Boston Globe in Massachusetts. “When market rent for a modest one-bedroom apartment is twice what a minimum-wage worker takes home in a week, it’s clear that we have an affordable housing crisis. Unfortunately, Governor Baker’s ‘housing choices’ bill does not provide the right choice for solving it.”

“We do need to change our state’s zoning laws to remove arbitrarily high thresholds for zoning approval, especially in the suburbs. But we can’t build our way out of this crisis, as the large number of vacant units in Boston’s new luxury towers can attest.”

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This Post Has 83 Comments

  1. ‘a 40 percent jump from a year ago and largest percentage increase since 2014…There were 603 active listings reported at the end of last month in Santa Clarita, a 44 percent increase over a year ago’

    Isn’t it amazing that all these people decided to move right before Christmas? So right now while you all are opening presents, they know the phone may ring and they have to beat it while some strangers walk through snapping up their cookies.

    1. And most galling, the open house attendees will almost all be looky-loos instead of serious, credit-worthy buyers.

    4. Maybe they are hoping that some of Santa’s elves might be in the market for a house in a warmer climate than the North Pole’s?

    5. Saw several open house signs this weekend. Not as many as last weekend, but clearly “out of character” for the past 5 years and not a fluke.

      I also have seen an uptick in bulk mailings from realtor(s) – not sure what they are trying to accomplish with some of them.

      1. Only the strongest will survive! I’m sure many realtors are starting to get nervous about the changing market. I listen to some of the podcasts from real estate coaches Tim and Julie and they mention that having more open houses and more advertising “may” help in a tanking market.

    6. “Isn’t it amazing that all these people decided to move right before Christmas?”

      I bought my FSBO spec 3/2 rancher in the dead of winter, February 2003, and closed ten days later in early March at a title company’s office.

  5. I just heard Jerry Brown bragging on the radio about California’s fantastic $30 bn budget surplus. I wonder how recent stock market gloom might impact the budget situation facing Gavin Nuisance.

    Politics
    Why December’s ugly stock market is very bad news for California’s finances
    Published Moments Ago
    Jeff Daniels
    Key Points
    – California could see its tax collections take a hit in December because of its heavy reliance on the wealthy and its revenue exposure to financial markets.
    – The state’s top 1 percent of personal income tax earners generate about half of the personal income taxes.
    – S&P 500 went into “bear market” territory on Monday and is on pace for its worst December since the Great Depression.
    – The bear market could prove especially painful if it’s long lasting and also potentially force a revision in the state’s budget plans.
    …

    1. I always read that is was copper that led the economy , I guess its Oil now? This is a werid sell off almost like nobody really trusted the expansion and were just in it for the easy low interest rate money. Hot money traders.

      Nothings fixed except maybe banks don’t hold millions of bad mortgages so its safe to pull the plug.

  7. The Beaten-Down Stock Market Is Still Overvalued
    Stocks
    December 24, 2018
    Michael Carr

    Stock prices have been dropping since October. Yet they can still drop more.

    That’s because, even after double-digit declines, stocks remain overvalued.

    The chart below shows the price-to-earnings (P/E) ratio for the S&P 500 Index. The P/E ratio measures the value of stocks.

    Low readings show stocks are a bargain. High readings warn of possible declines.

    This chart confirms the bear market is just beginning.
    …

    1. This chart confirms the bear market is just beginning.”

      Have to wait and see if it turns to major layoffs next year. Right now its just stock holders getting smacked around I read most Americans don’t have stocks but probably do have jobs.

    2. BREAKING: Stock Futures Fall Sharply

      Stock Market Today
      Dow Jones Futures Tumble: Dow On Verge Of Bear Market
      Even stocks with rising or record relative strength are crumbling, reflecting the ongoing bear market.
      ED CARSON 12:35 AM ET

      Dow Jones futures fell sharply early Wednesday morning, along with S&P 500 futures and Nasdaq futures, after U.S. stock markets were closed for Christmas Day. The Dow Jones is on the verge of a bear market. The Nasdaq composite, Russell 2000 and the S&P 500 index already have crossed into a bear market territory.
      …
      Dow Jones Futures Today

      Dow Jones futures fell 1.1% vs. fair value in volatile action. S&P 500 futures sank 1.1%. Nasdaq 100 futures were off 1.2% vs. fair value. Dow futures and other overnight action often don’t carry over to actual trading in the next regular session. That’s been true during the stock market correction, especially in the dive toward bear market country. Dow Jones futures will show gains for much of the overnight session, perhaps signaling modest losses before the open, but nothing to indicate the vicious stock market sell-offs.
      …

      1. “Stock Futures Fall Sharply”

        Santa was late this year on Wall Street, but he showed up last night and turned around those ugly stock market futures on a dime. It’s truly a Christmas miracle that the Santa Claus rally has finally arrived.

        1. “In economics, a free market is an idealized system in which the prices for goods and services are determined by the open market and by consumers. In a free market the laws and forces of supply and demand are free from any intervention by a government, by a price-setting monopoly, or by other authority.” —wiki

          2. If you were a top politician with the opportunity to steer markets in a direction that bolstered your political support, wouldn’t you naturally do so?

  9. BEIJING (AP) — Japanese stocks plunged Tuesday and other Asian markets declined following heavy Wall Street losses triggered by President Donald Trump’s criticism of the U.S. central bank.”

    Oh ugly

    1. If stocks are as overvalued as widely reported, then aren’t lower share prices desirable? It seems like this would make the market more efficient, and increase inflows to the stock market when investors buy the dip.

      1. “If stocks are as overvalued as widely reported, then aren’t lower share prices desirable?”

        Sounds logical; This is why it’s wrong.

  11. This new tax law is quite a wild card. I wonder how many Coastal States businesses and people will actually relocate (as the Forbes article suggests)?

    If they pile into Las Vegas, that might counteract the downward trend in home prices that I hoped to see there.

  13. Just enjoyed a Christmas Day family outing to the new Mary Poppins movie, which features Colin Firth as an evil banker in regular life, and a sinister wolf in fantasy land. Poor bankers can’t shake their reputations as avaricious debt collectors.

    1. The root cau$e damage is when they make the loan$, knot when they $ucceed in getting taxpayer$ to complete their 1$t mis$tep.

      1. Exactly. And this point is glossed over by Hollywood tearjerkers like It’s a Wonderful Life. (However, Colin Firth’s character in Mary Poppins is depicted as a sinister criminal…the kind of bank manager who destroys ownership record documents to incresase foreclosure results…)

        1. One apparently real back story for “It’s a Wonderful Life” was that Jimmy Stewart served as bomber pilot over Europe for 15 months, and had a lot of men he knew personally die around him. He was grounded and discharged before the war ended. Probably had PTSD. His unhinged acting in that movie was probably based on real life, for him. An outmoded definition for “comedy” (such as “The Divine Comedy”) is a medieval narrative that ends happily. Some modern therapists are putting their PTSD patients into plays, and this has shown some promise.

          1. More on the filming of that movie:

            While he was making that film, he was questioning the superficiality of Hollywood and acting in general, and Lionel Barrymore (who plays Mr. Potter) said to him, “So, are you saying it’s more worthwhile to drop bombs on people than to entertain them?” And that really hit Stewart

          2. Plot objections aside, that’s a beautiful story about Jimmy Stewart’s rehabilitation through acting.

  14. For example, a small house in New Jersey may pay just property taxes of $25,000. But with the $10,000 cap, taxpayers are going to be shelling out a lot more to the tax man

    I’ve seen it mentioned here and there that New Jersey has really high property tax rates but have never researched it – mentions of $1k-2K a month for basic middle class homes. Is that correct? Does it apply for all the state or just near NYC? (not to mention NJ has a state income tax that starts at 5.5%) How do people retire and stay there?

    If property taxes are that high on working to middle class homes, then there is a huge problem lurking there, much like Chicago and Illinois has with pension and other govt liabilities they can’t pay for. Another recession and it’ll get super ugly there.

    I know, I know… just one of countless lurking fiscal time bombs plaguing local and state governments coast to coast…

      1. Some of the nomads are more free than this guy will ever be. Needing to get approved for a refinance after working for 35 years? SAD 🙁

        1. Yeah, it is sad, but he’s working, which I respect. The article itself is quite good really. There is a certain air of unvarnished truth in what he’s saying. He’s being real, which I find refreshing. A very good social commentary on where we are at. I see guys like him every day coming through my leasing office, though most of them aren’t white and they don’t speak English very well.

      2. “This proved problematic when my wife and I decided to refinance our home. Although Gina, an attorney, earns plenty, we needed a bit more income to persuade lenders to work with us. It quickly became clear that for us to qualify, I would need more than occasional gigs as a freelance writer; I would need a steady job with a W-2. “

        A wagecuck’s swansong.

        1. I may have mentioned this before, but it bears repeating. It was a major life lesson for me. When I was a medical resident one of the attending physicians sat us down for a quick lesson on “making a living as a physician”. At the time we were in the most expensive housing market in the USA. He had been working full time for some years. Again and again, when he tried to qualify for a loan he didn’t have a large enough income to qualify. Eventually he understood that local housing prices would continued to increase faster than his income and savings ever would. So he left town & moved his practice to a small town in NC a lot like Mayberry RFD (as he said), and very different from where we were at the time. Months later he wrote us a letter, he had purchased a house for a portion of the money he had been saving for a down payment. No mortgage necessary.

  18. This is just my own opinion based upon my own analysis of one particular market, one which I believe is in a much larger price bubble than the first time. Take it for what it’s worth.

    The previous bubble median price high was $365k, a departure from the normal median of $150k. This is in an area of low wages, a city of less than 500k people. During the last bubble, the high was reached January of 2006. The duration of prices above $300k was 34 months.

    This time around, the median stands at $377k. The high of $387k was reached in July. Currently, it has been 31 months above that $300k median price level. This will prove to be a much longer duration above $300k than last bubble, because prices have a long way to go to get below that $300k. I’d guess it’ll be well over 12 months.

    There have been far more houses sold per month during this bubble than the last, and the duration of these price increases is much longer than last time. Last bubble hyperinflated in 3 years. This current price bubble has gone on for twice as long. When you factor in the duration and the number of houses sold, there are FAR more purchasers exposed to overpaying this time than last time. And this is in a town that cratered worse than most last time, roughly 65%. If the past is any indicator, and my analysis is right, the future looks extremely grim, and the meltdown will be unholy.

    1. Interesting. Sounds like my location exactly. Either we are in the same location or there are many alternate bubble universes. Care to say what town you speak of or wish not to? Merry Christmas!

      1. How has the median wage changed since the last bubble peak?
        I’d like to read an article summarizing this, for the entire USA, and comparing it to housing prices, region by region.

  19. How would you like to have the future tenure of your employment depend on the stock market going up?

    1. As markets slide, Trump shifts ire from Powell to ‘very talented’ Mnuchin
      By Margaret Talev
      26 December 2018 — 4:21am

      US President Donald Trump expressed confidence on Tuesday in Treasury Secretary Steven Mnuchin, who is struggling to contain his first real crisis but has failed to assuage investors unnerved by turmoil in Washington.

      Trump told reporters at the White House on Christmas Day that Mnuchin is a “very talented guy, very smart person”.
      …
      Trump’s frustration with Powell over the market’s performance – expressed in tweets and interviews – may turn to his Treasury chief, who recommended Powell’s nomination. Before Tuesday’s comments, one person familiar with the President’s thinking said that Trump had weighed dismissing Mnuchin, while another said that Mnuchin’s tenure may depend in part on how much markets continue to drop.
      …

    2. Are you buying the Plunge Protection Team’s financially engineered stock market rally? Market manipulation hasn’t worked that well in China, but maybe America knows better.

      1. They kicked it up at the opening bell, but the force of gravity is unusually powerful in current market conditions, exacerbated by openly visible political chaos.

        Try not to catch yourself a falling knife.

  20. This situation is sad, messed up, and prototypically Californian.

    L.A.’s Housing Crisis Hits Hollywood: The Entertainment Workers Living in Their Cars
    by Katie Kilkenny
    December 19, 2018, 6:00am PST

    In response to exorbitant rents, many assistants, craftspeople and working actors are adopting a transient lifestyle, some by choice, some less so: “It’s hard for me to say this because I don’t think of myself as in need of help, but right now I need help.”

    Even by Los Angeles standards, Noelle spends a lot of time worrying about parking. A writers room production assistant for a major streamer and script reader for a premium cable network, Noelle wakes up at 6 a.m. on weekdays to secure a spot close to her jobs in West L.A. After work, she moves her white, unassuming Ford Transit to another spot, carefully chosen to be located in a non-residentially zoned area without nightly parking restrictions and far away from any schools, daycare facilities or parks. She is constantly rotating these “day spots” and “night spots,” as she calls them, so as not to annoy neighbors or attract too much attention. These days, Noelle jokes, she’s more worried about a cop knocking on her window than getting “murdered or attacked.”

    Noelle, 25, who is using only her first name because she signed a no-publicity clause for one of her jobs, is one of the 15,748 Angelenos currently living in his or her vehicle, according to the Los Angeles Homeless Services Authority. Their ranks are growing amid a worsening income inequality and homelessness crisis: As of January 2018, 9,117 vehicles were being used as homes, up 600 from 2017.
    …

    1. “…15,748 Angelenos currently living in his or her vehicle, according to the Los Angeles Homeless Services Authority. …As of January 2018, 9,117 vehicles were being used as homes,…”

      15,748 / 9,117 = 1.73 occupants per car!? Yegads…

      1. I’ve said this before and I’ll say it again, living in an RV is a viable strategy for avoiding skyrocketing rents and/or mortgage payments for some segment of the population. I have seen this first-hand with my father. He did this for 3 years until he started his company. It’s amazing how much extra capital you can save when you are saving $1000 to $1500 per month. It’s not glamorous or ideal by any stretch of the imagination, but it’s like the Grapes of Wrath: sometimes you just do what you gotta do.

    2. “This situation is sad, messed up, and prototypically Californian.”

      It is very sad. Perhaps opening “park and sleep” facilities could work for the ones who live out of there vehicles. Like a rest stop with bathrooms so waste doesn’t get dumped on sidewalks or streets. I know here in Santa Cruz the county pay many thousands of dollars a day just cleaning up after our homeless. We are very accepting of it and our problem is out of control

      1. I spent a few days in Santa Cruz last summer (2017). I was duly impressed by widespread evidence of homelessness, especially down by the touristy boardwalk area. I doubt the presence of a large homeless population in a beach resort area is that great for the tourism industry, especially considering the sanitation issues.

        1. That’s why they call us a “sanctuary city”. On a rainy Christmas Eve day every street corner was filled with panhandlers that in the short time I saw waiting at each light, get many “donations”, likely feeding a drug habit. Not all, but most of our homeless have serious drug problems and with a good climate it makes SC a great place to live, even if it’s in a tent on the side of the freeway…

          2. every street corner was filled with panhandlers ‘…that in the short time I saw waiting at each light, get many “donations”, likely feeding a drug habit.’

            That’s why I can’t bring myself to hand over money to the guys who work traffic stops. There are appropriate places to get help with basic needs, and traffic lights are not among them, especially given that you have no idea of where the money gets used.

  21. If the Plunge Protection Team’s market intervention fails to hold at current levels, how much farther will U.S. headline indexes drop before taking a breather?

    1. The Wall Street syndicate is having a very hard time holding the Dow above the zero bar, despite recent reports of ample liquidity.

      1. It seems like the liquidity providers have rigged the market to trigger buy orders whenever the Dow dips below zero. Is such collusion to manipulate atock prices legal? And doesn’t it lead to permanently overvalued stock prices, relative to fundamentals?

      1. Mnuchin calls in the “Plunge Protection Team,” and summons the ghost of 2008
        By Rachel Layne
        Updated on: December 24, 2018 / 4:15 PM / MoneyWatch

        U.S. Treasury Secretary Steve Mnuchin surprised Wall Street by arranging a phone call on Monday involving the so-called President’s Working Group on Financial Markets. But if the stated purpose was “to assure normal market operations,” for investors the move seemed to deepen their anxiety amid a deepening slump in stocks, ongoing government shutdown, and growing tension between the White House and Federal Reserve.

        But just what is the working group, known as the PWG and more informally as the “Plunge Protection Team?”
        …

  22. It’s officially time to buck up and buy the dip!

    There are only 2 things you need to do to survive when stock prices are falling, according to Warren Buffett
    Tanza Loudenback
    2h
    Warren Buffett When stocks are falling, it’s a good time to buy at a bargain. REUTERS/Rick Wilking
    – We may soon be entering a bear market, but it’s not time to panic if you’re an investor.
    – As Warren Buffett wrote in his 2017 letter to shareholders, investors should do two things when stocks are falling: stay in the market and buy at a bargain.
    – President Donald Trump also said now is “a tremendous opportunity to buy” stocks.

    Stocks may be teetering on the brink of a bear market, but now is not the time to panic.

    While the Dow and S&P 500 are both on track for the worst losses in a decade, as Business Insider’s Callum Burroughs reported, it’s important to remember the oft-repeated advice of Warren Buffett: “Be fearful when others are greedy and greedy only when others are fearful.”

    As MoneyTalksNews reported, Buffett, the billionaire investor and founder of Berkshire Hathaway, reiterated some of his best advice for sustaining wealth during a bear market in his 2017 letter to shareholders: stay in the market and buy at a bargain.

    Buffett wrote:

    “During such scary periods, you should never forget two things: First, widespread fear is your friend as an investor, because it serves up bargain purchases. Second, personal fear is your enemy. It will also be unwarranted. Investors who avoid high and unnecessary costs and simply sit for an extended period with a collection of large, conservatively-financed American businesses will almost certainly do well.”

    In other words, don’t fall into widespread panic and begin selling off stocks, because wealth-generating investments are long term.
    …

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