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Everywhere, It’s All The Same Story

It’s Friday desk clearing time for this blogger. “As the housing market has downshifted, more builders are offering sweeteners to close the deal. ‘We are really working a little bit harder … to get people in the door and to get people excited,’ said Mark Mullin, a real estate agent selling several new projects in the Los Angeles area. ‘These are things they were not having to do a year ago.'”

“John Mulville, the Southern California regional director for Metrostudy, said there’s more fear among companies that focus on pricier homes. Even in good times, there are few people who can afford a house above $1.5 million. Some have even used the ‘p-word’ — panic — Mulville said.”

“Builders may have gotten too aggressive on pricing. On a recent single-family project in downtown Huntington Beach, luxury builder WJK Development tried unsuccessfully to push prices up to $2.2 million, 10% above the previous per-square-foot record for the area. ‘We took prices beyond the realm of realty,’ said Grant Keene, chief executive of the Irvine company. ‘It made consumers balk.'”

“After six years of tilting toward sellers, the metro Atlanta housing market may be starting to even out. The trend of ever-greater competition for a shrinking number of properties seems to have peaked. ‘The kind of market we had before just couldn’t last forever and 2018 was the year it started to normalize a little,’ said John Rainey, Re/Max vice president for Georgia.”

“No, it’s not your imagination — some of those home ‘For Sale’ signs in your neighborhood are getting a bit long in the tooth. The average time it takes to sell a house in North Texas has gone up about 20 percent in the last couple of years. In some neighborhoods, the time those ‘For Sale’ signs are parked out front has grown even larger.”

“Chris Kelly, CEO of North Texas’ Ebby Halliday Realtors, says his firm’s agents are telling sellers not to be impatient. ‘At the time of the listing, we are showing them the stats from their articular market and telling them what to expect,’ Kelly said. ‘Unfortunately, what consumers expect is often delayed from reality.'”

“‘I think a lot of the buyers have gone to the sidelines,’ Douglas Elliman NYC CEO Steven James said. ‘If you look at all the areas, whether it’s Brooklyn, Queens, Manhattan, Riverdale, Westchester, everywhere, it’s all the same story. It’s about the reset. It’s about the changing the mindset of the seller. The buyer has already changed their mindset has already changed. They’re not buying into the story…The last to receive the message is the seller.'”

“The message, he says, is, lower your price to sell.”

“The stalemate in Washington is throwing a wrench into some people’s plans to buy a house, according to real estate experts. The housing market in Escambia County, Florida, was already slowing down over the last few months, said John Rickmon, a broker there. ‘This is the dagger,’ he said.”

“Spare a thought today for poor Chip Wilson. The Lululemon founder’s waterfront mansion lost nearly $6-million in value last year. It’s now worth just a little over $73-million, according to the latest B.C. property assessment figures.”

“But it’s not just the mega-rich witnessing a drop in the estimated worth of their homes. It’s a phenomenon occurring in the detached home market throughout Greater Vancouver. It’s happening in Toronto, too, where sales in 2018 fell off a cliff.”

“It’s not even just Canada. Some of the most expensive markets in the world, including Hong Kong and London, have seen recent declines. Singapore is in the grips of a slowdown as well; Australia, too. The great global housing slump is on, and how deep and devastating it becomes remains to be seen. The fact is, cheap money has been too easy to get the past several years. And Canadians have stuffed themselves on it.”

“Australian house prices have finally ceased their extraordinary run and started falling back down to earth. Housing price corrections that occurred in Ireland, the US and Europe resulted in falls, and although analysts like to think the Australian market is exceptional, and sometimes immune to these kinds of price shifts, that, according to financial analyst Martin North, is a fiction.”

“‘It’s not just the battling urban fringe … I’m more concerned about price corrections at the top of the market, where in some cases prices have already corrected more than 20 per cent from their previous peaks,’ North said. ‘We should get used to the fact that prices can go down, as well as up.'”

“For the past five years dramatic property price increases in Melbourne and Sydney have pushed up prices across the country, to almost alarming degrees in some areas. Sydney prices jumped 56 per cent in that time. Property reports at the end of 2017 were gushing that the national property overall growth rate was at the ‘fastest pace since 2009,’ A year later the same reports were gasping about the ‘weakest housing market conditions since 2008.'”

“There’s a lot of talk about property at the moment for different reasons, but looming elections would be fuelling some of it. Politicians worry when the property market gets the wobbles, and tend to shrug off the negatives that come with a boom.”

“Australia needed a correction in its upward property spiral, which largely shut out first home buyers and was fuelled by tax policies that still privilege existing owners, coupled with years of very low interest rates.”

“It could be argued that regulators took much too long to force financial institutions to put the brakes on investor lending. The banking royal commission has shown some lenders had little regard for borrowers’ capacity to pay or the likelihood that a market correction could leave people with loans greater than their properties are worth.”

“The reality for millions of Australians is that owning their own home remains completely out of reach. That should not be forgotten as we come back to earth after a period of property prices on steroids.”

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This Post Has 66 Comments

  1. ‘It’s not even just Canada. Some of the most expensive markets in the world, including Hong Kong and London, have seen recent declines. Singapore is in the grips of a slowdown as well; Australia, too. The great global housing slump is on’

    The media, always months or years behind the HBB, is finally catching on. But how can all these markets crash at the same time unless they had something in common? Like a global real estate mania perhaps?

    1. How about globally orchestrated central bank Quantitative Easing driving yield suppression, leading to a flood of easy money into every real estate market in economically developed countries across the globe?

      1. The inescapable conclusion is that QE has failed, miserably, and created much larger problems than the recession it was directed at:

        Central banks may do more harm than good, says head of India’s central bank
        By Greg Robb

        Published: June 18, 2016

        “Raghuram Rajan, governor of the Reserve Bank of India, has been leery of the unconventional monetary policy tools used by central banks since the financial crisis. Perhaps the most cogent critic of Fed quantitative easing policy, Rajan says the asset-price boost that comes with it may disappear if these assets can’t grow into their valuation. That risks still haunts the U.S. economy, he said.”

        “A bridge that relies on wealth effects, you better hope that you got enough growth to justify the asset price increase which created the wealth effect in the first place.” -Raghuram Rajan’

        https://www.marketwatch.com/story/in-interview-indias-rajan-says-monetary-policy-has-run-its-course-2016-04-15?siteid=yhoof2&yptr=yahoo

        1. “The inescapable conclusion is that QE has failed, miserably”

          Failure is a matter of perspective, and in this case assumes that the Fed’s end goal was to achieve a stable economy that could benefit all classes. I don’t believe for a minute that their goals have ever aligned with mine as a regular, middle class sap. If you know that the house always wins, then intentionally turning real estate into a casino game works out pretty well for a select few.

          1. Over 5 years ago Ben was posting stories where the very people who caused the first meltdown were then buying houses in bulk, for pennies on the dollar, then turning them into rentals.

            A few years later, when they were purchasing more, they were intentionally overpaying because it was juicing the comps for the properties they already owned, resulting in a massive boost to their balance sheets. And they talked openly about it, bragging. The entire system is fraught with fraud and corruption.

      2. a flood of easy money

        Don’t confuse an enabler with a mania. When borrowers couldn’t even repay the principal, easy cheap credit can’t actually have been the cause of their foolishness. The only reason this distinction is important is to warn that the crash will not necessarily follow the rules of logic.

        1. Don’t forget the role played by too-big-to-fail bailouts in the Wall Street Megabank, Inc business model:

          “Privatize profits, socialize losses.”

          Subprime lending schemes don’t work without an eventual bailout to externalize the economic damage to people who were neither borrowers nor lenders.

  2. ‘We took prices beyond the realm of realty’

    Notice he didn’t say the potential buyers couldn’t get the loans – they could. And maybe the “loans are sound” crowd would like to explain how a loopy price, even described as such by the snake oil salesman himself, could get financed at the top of the market?

    1. “And maybe the ‘loans are sound’ crowd would like to explain how a loopy price, even described as such by the snake oil salesman himself, could get financed at the top of the market?”

      Charlie Munger: “Never underestimate the power of incentives”.

      There is your explanation.

    2. I know these houses. There are 3 other homes for sale on the same street, and one two blocks further from the pier.

      The listing from the pier is the interesting one: it’s a comparable 3/2.5 for a full $1M less than the ones on 17th.

      Strange times…

  4. On one of our barrier islands here there have been 5 house sales in past 30 days and is averaging 7 per month over last 3 months. Currently 174 active listings.

    This equates to about 25 to 27 months supply and we are in peak season and this is a high demand area typically. This island is home to the beach which has been repeated awarded “best beach in USA” designation.

    Yet no one is reporting on this or other similarly affected areas. Still getting the BS “annual yoy figures decelerating a bit” line.

    It’s like giving people blindfolds rather than a warning when the wrecking ball is swinging toward them. They can’t keep this veiling bit going much longer. Or can they?

    1. “They can’t keep this veiling bit going much longer. Or can they?”

      Veiling is the name of the game. Same principle applies to pulling the wool over the proles’ eyes regarding the true state of the real economy. Nobody wants to buy stocks when they believe the economy is about to hit the skids, not even the robots.

      1. By the time this recession gets rolling, I predict a housing bust will be added to the list of drivers.

        The Wall Street Journal
        Economy
        Economists See U.S. Recession Risk Rising
        Survey finds more than half of economists see downturn by 2020, a presidential election year
        A container ship in Long Beach, Calif., in July. Economists surveyed in the past week see a 25% chance of a recession in the next year.
        Photo: mike blake/Reuters
        By Harriet Torry
        Jan. 10, 2019 10:00 a.m. ET

        Economists surveyed by The Wall Street Journal see a growing risk of recession in the U.S.

        Though few could identify a specific trigger—such as the business investment crunch that drove the economy down in 2001 or the housing crisis that caused a recession in 2007—economists pointed to a number of worries, including trade tensions with China, rising interest rates and a sharp stock market selloff last year.
        …

  5. ‘John Mulville, the Southern California regional director for Metrostudy, said there’s more fear among companies that focus on pricier homes. Even in good times, there are few people who can afford a house above $1.5 million. Some have even used the ‘p-word’ — panic — Mulville said’

    From here in Arizona, I can’t sense the panic John. Of course, I don’t have my butt in the sling like the people you give advice to, so maybe that’s the disconnect.

    2. “… there’s more fear among companies that focus on pricier homes.”

      Isn’t that pretty much all of them in SoCal?

  6. Could this guy get any worse?

    “H1-B holders in the United States can rest assured that changes are soon coming which will bring both simplicity and certainty to your stay, including a potential path to citizenship. We want to encourage talented and highly skilled people to pursue career options in the U.S.”

    Tweeting and stabbing middle class in the back. Only skills he is good at.

      1. Oh…

        The Times of India
        Business
        Donald Trump promises changes to H-1B visas, including path to potential citizenship
        Reuters | Updated: Jan 11, 2019, 19:35 IST

        WASHINGTON: US President Donald Trump on Friday said he is planning changes to H-1B visas, which are issued temporarily to highly educated immigrants so they can work in specialty occupations, that would create simplicity, certainty and a possibility that the workers could become American citizens.
        …

        1. Does anyone worry about H1-B Visa holders working in American industry for a couple of years, only to take the knowledge and experience they acquired back home with them? If I were a Chinese or Indian government leader, I wouldn’t let my brightest and best leave the country with no strings attached.

          1. Chinese may go back. Better or comparable opportunities back home. But at the same time, they may look to establish residence at both places….that’s probably the best option.

            Indians will stay and will bring their 10 relatives.

          2. By no means they are the best and brightest.
            That’s just a myth.

            They are young, cheap and more ‘educated’ than the general population. By no means the best and the brightest.

        3. A path to full citizenship for H1B workers is the worst thing that could happen to corrupt employers who rely on the precarity inherent in indentured-servitude guest worker programs to suppress wages and employee rights for H1B workers and Americans alike.

  8. Are you buying the baby bear dip today? I see no reason the Plunge Protection Team can’t get the headline indexes back in the green zone by day’s end. There’s never been a better time to be a day trader.

      1. Take homes:

        1. Once the bears enter the pool, they tend to stick around for a LONG time.

        2. They love tearing things up.

        3. They are fun to watch.

    2. Weekend roundup: How the Fed props up stocks | Broad effects of government shutdown | Dividend stocks that beat Dow and S&P
      By Philip van Doorn
      Published: Jan 11, 2019 11:02 a.m. ET
      …

  9. “The message, he says, is, lower your price to sell.”

    Unless you can’t, because it would be less than your mortgage(s), less than the development’s pro-forma for the bank, less than what you expected to finance your entire retirement.

      1. The great thing about dating homeless chicks is that after the date, you can drop ’em off anywhere.

    3. Thanks for the read. I see Hollywood progressives are sort themselves into those who have something at risk from the lawless mob of homeless, and those who don’t or have something to gain.

      “Honestly, I think we are a step and half away from vigilantism,” says a talent manager who has lived in the area for two decades.

      I am expecting this to start happening, and even explode, over the next few years. And I will be a bad, bad person for not condemning most of it. (Young spiffy spent some time living in on the edge in the rougher parts of the city and was victimized/robbed/assaulted more than once)

    1. https://www.sacbee.com/news/business/article224287285.html

      In other related news…

      “A John Burns Real Estate Consulting survey found that in December, 23 percent of builders lowered net prices, which would include list price reductions, as well as incentives such as money toward an upgraded wood floor that consumers previously would’ve had to buy. A year earlier, only 4 percent dropped prices.”
      …
      “Rick Palacios, research director with the John Burns consultancy, said builders prefer to offer deals such as money for upgraded appliances before cutting prices outright, because they don’t want people who signed contracts at a higher price to back out.”

      1. 49% decrea$e!

        (Will it $how’s up $oon in Thee New$hack builder$ $tock price$ perhap$?)

        New$hack Monkey-Pox $pread$

      2. Just in case people can’t connect the dots…START cutting the prices or sales will continue to collapse. Note that interest rates were way down in December vs 3 – 6 months ago. Its the PRICE, Stupid! Of course, cutting the prices will be like throwing last year buyers under the bus!

    1. Good article, thanks. The luxury hotel bubble is as mind-boggling as the luxury multi-family bubble:

      “If you’re in the best location with the best operator, you probably have a better chance at being financed.”

      How many more Ritz Carltons does the world need??

  15. Out in the Cupertino school district area in CA, last May/June there was a house that went to “Pending/Sold” status within 14 days of listing. Now, I see a similar house on the same street (priced at the same price per square foot) still on the market 7 or 8 weeks after being listed.

  17. This sounds ominous.

    Jan 10, 2019, 3:50 pm
    Chinese Government Turns Trade War Into Ground War
    Dipka Bhambhani, Contributor
    Energy
    I distill energy policy and technology movements.

    An executive from Pennsylvania lighting technology giant Lutron Electronics says Chinese customs policies are turning the U.S.-China trade war into a scrappy knife fight aimed at incapacitating American businesses trying to supply critical energy infrastructure and components to the Chinese economy.

    “China customs is holding our products and has taken a firm stand and said, ‘No they’re not allowed in,’” said Pekka Hakkarainen, vice president of Lutron. “This is a little bit new.”
    …

  18. The buyer has already changed their mindset has already changed. They’re not buying into the story…

    That’s because buyers have figured out that realtors are liars.

  20. Some have even used the ‘p-word’ — panic — Mulville said.”

    There’s that p-word again. Huh. As I sit here in my rent, munching popcorn and toasting the ongoing implosion of the Everything Bubble, I just can’t seem to conjure up any panic about cratering shack prices. Quite the opposite, in fact – I feel kinda euphoric about the whole thing.

    1. “The Coast Guard posted a memo online earlier this week offering stinging financial advice to its furloughed workers: holding garage sales, finding a babysitting gig or dog-walking for cash. Officials removed the memo Wednesday after The Washington Post asked about the financial advice.“

      I am companionate towards those effected by this shutdown but also want to extend the same advise above to all the RE experts out there as times will be getting awfully tough financially for them. Actually they just blamed the gov shutdown for the declining sales so hop to it realtor’s.

      1. Markets
        Realtors Say the Government Shutdown Is Sinking Home Sales
        By Prashant Gopal
        January 8, 2019, 1:08 PM PST
        – Deals delayed, canceled for some buyers with U.S.-backed loans
        – Prolonged shutdown will hurt economy, chief economist says

        The U.S. housing market, already losing steam, is taking another hit from the government shutdown, delaying closings and damaging buyer confidence, according to a National Association of Realtors survey.

        About 20 percent of 2,211 agents surveyed by the group said they had clients who were impacted in some way by the shutdown that began on Dec. 22, the organization said today.
        …

  23. Mortgage industry gets major relief in government shutdown (WaPo)

    IRS clerks, who are paid $13 to $18 an hour, process 400,000 tax transcripts a week — helping potential home buyers verify their incomes and the $1.3 trillion mortgage banking industry earn millions of dollars in fees

    . This process was shut down along with other portions of federal operations.
    WaPo went on to explain (who writes this stuff, anyway?:

    Under federal law, the government is not allowed to spend money that has not been appropriated by Congress, and agencies are allowed to retain only employees who perform essential functions critical to public health or national security… Treasury officials were not aware that the IRS’s closure was causing problems for mortgage lenders, in part because tax transcripts are now required far more often than before the recession.

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