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Buyers Looked Decidedly Less Enthusiastic, As Sales Dropped Despite More Discounts

A report from the Los Angeles Times in California. “After nearly seven years of sometimes fevered price hikes, the Southern California housing market has slowed markedly in recent months. A belief that the price slowdown will lead to a price drop could become a self-fulfilling prophecy, experts said. ‘It’s a feedback loop,’ said Yale University professor Robert J. Shiller. ‘Excitement can’t last forever — and that’s what drives a boom.'”

“‘There has been this anticipation of another 2008’ among some home shoppers, said Mark Cianciulli, a Los Angeles real estate agent. ‘They are expecting that to happen again, or they are at least suspecting a less severe version.'”

“‘We don’t have a debt problem. We don’t have an overbuilding problem. We don’t have an economic problem — prices are not going to fall,’ said Christopher Thornberg, founding partner of Beacon Economics, who called last decade’s housing crash.”

From Mansion Global on California. “Buyers in the typically ferocious San Francisco Bay Area real estate market looked decidedly less enthusiastic in December, as sales dropped despite more discounts, according to Compass. The median home price in December in the Bay Area was $860,000, a 2% decline from the same time in 2017.”

“Housing stock rose 31% across the entire Bay Area, led by homes priced below $1 million, which logged a 35% increase in stock in the year to December. The inventory of homes between $1 million and $2 million saw inventory levels rise 37%, according to the data. On a county level, Santa Clara County logged the largest inventory increase in the Bay Area (66%).”

“In December, Bay Area homes sold in an average of 28 days, almost two weeks longer than at the same time last year. In response, sellers reduced asking prices to lure buyers. Across the Bay Area, the share of price reductions doubled, increasing to 33% in December 2018, from 15% a year earlier, the report said.”

The Wall Street Journal on Texas. “Young professionals and families are discovering the charms of Fort Worth. Professionals coming from pricey cities outside of Texas are looking for larger luxury homes with a ‘yard for their dog,’ says real-estate agent Martha Williams.”

“But the market is cooling. With more inventory recently, ‘the prices are softening a bit, especially in the high-end market,’ Ms. Williams says.”

The American Statesman in Texas. “The Austin-area housing market, on a roll for years, is in store for another solid year, though there could be some bumps not seen in a decade. That’s the forecast by Eldon Rude, a local housing industry expert.”

“Last year, the median home price was $318,200 and the median family income was $91,862, he said. Dividing those numbers yields a multiplier of 3.5; in the 15 years from 1995 to 2010, the multiplier was between 2.3 and 2.5. With escalating home prices, ‘it’s becoming more and more difficult for people to afford to buy a home,’ Rude said. ‘And it puts us at a greater risk for prices declining during the next downturn.'”

“Rude noted that the disparity between incomes and home prices in the Austin market is still well below some other cities with major tech hubs, such as Denver, Seattle, San Francisco and San Jose. ‘The same thing is happening here, we just haven’t gotten to the point those markets have,’ Rude said.”

From Crain’s Chicago Business in Illinois. “Sales of Chicago-area homes at $1 million and up grew far more moderately last year than in the boom year that preceded it, according to a new report. For people who are downsizing at empty-nest time or moving into the Chicago market from another region, ‘if they don’t think they’ll be in this home for more than five years, they don’t want to buy,’ said Janice Corley, who owns Re/Max Premier in the Gold Coast. ‘Nobody buys real estate to break even.'”

The Press Herald on Maine. “Maine’s red-hot real estate landscape will likely cool in 2019. In some cases, Maine developers have decided to postpone or scrap their planned projects because the cost of construction was deemed too expensive, said Roxane Cole, commercial broker at Roxane Cole Commercial Real Estate LLC. ‘Some people are saying, ‘I’m just not going to do it,’ Cole said.”

“Brit Vitalius, president of the Southern Maine Landlord Association, said rising interest rates coupled with escalating prices have squeezed returns for some investors in the multifamily housing market and prompted them to take a breath. Certain parts of the sector had been seeing 20 percent year-over-year growth in sale prices.”

“‘There’s still a lot of money and a lot of activity in the market, but the numbers are starting not to make sense,’ Vitalius said. ‘I’d say things are beginning to settle, and that’s a good thing.'”

From Westfair Online on Connecticut. “The average sales price in Fairfield County for all residential properties during the fourth quarter was $592,933, down from $659,259 in he third quarter and down from $696,086 one year earlier. The median sales price of $375,000 was below the third quarter’s $425,000 and the $390,000 price from the fourth quarter of 2017.”

“The number of closed sales for the fourth quarter totaled 2,632, a drop from the 3,339 sales in the third quarter and the 2,743 from the previous year. The average number of days on market totaled 113 in the fourth quarter, compared to 82 in the third quarter and 129 in the fourth quarter of 2017. Listing inventory in the fourth quarter totaled 4,172, down from 5,535 in the previous quarter but up from 3,839 in the previous year.”

“The average sales price for a single-family Fairfield County home in the fourth quarter was $677,398, a drop from $763,162 in the third quarter. The average during the fourth quarter of 2017 was $810,272. The median single-family sales price in the fourth quarter was $420,000, down from the $500,000 in the previous quarter and the $457,000 price from one year earlier.”

“In the county’s luxury market, the average fourth-quarter sales price was $2.3 million, a slide from the $2.39 million in the third quarter and the $2.98 million price from one year earlier. The median sales price of $1.8 million was under the $1.9 million level from the third quarter and the $2.2 million level one year earlier.”  

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This Post Has 41 Comments

  1. ‘We don’t have a debt problem. We don’t have an overbuilding problem. We don’t have an economic problem — prices are not going to fall,’ said Christopher Thornberg’

    ‘The median home price in December in the Bay Area was $860,000, a 2% decline from the same time in 2017’

    And the used house sales people said Santa Clara was down 11%. Somebody has some crow to eat.

        1. Opinions are never considered to be lies, which is why there are so many liars posting on many sites.

  2. ‘escalating prices have squeezed returns for some investors in the multifamily housing market and prompted them to take a breath. Certain parts of the sector had been seeing 20 percent year-over-year growth in sale prices’

    In red hot Southern Maine! Of course, the egg heads at the fed couldn’t see that something like this should never, ever happen.

  3. Top trending article in WSJ this morning. Noticeably absent is the massive increase of home prices and the air pollution that is caused by massive growth all along the I-15 corridor due to the mountains trapping vehicle emissions. Still, the luxury apartment complex I manage has 3 vacancies and we’ve leased up in about 9 months, much quicker than Apartment 401’s luxury apartment complex over in CO.

    Utah Shows How Labor-Force Growth Fuels Economic Growth
    Wall Street Journal
    January 18, 2019

    “Utah has had the fastest-growing labor force of any U.S. state since January 2010—a key ingredient for economic growth and one that provides an example for the nation as a whole as it seeks to fuel a more rapid expansion.”

    “By these measures, Utah is on a roll and the country is on a slog. The state’s labor force—the number of people ages 16 and over holding or seeking a job—has grown an average of 1.9% a year from 2010 through January 2018, more than triple the nation’s 0.6% pace, according to Labor Department data. Its workforce is more educated than the country’s, on average, making it more productive and thus appealing to many employers.”

    “Utah’s spending on cars, clothing, education and the arts are all climbing faster than the nation’s, as are home prices.”

    1. The media was pumping these same talking points concerning Utah and it’s growing labor forces before the last crash. We ended up just as screwed as everybody else. The Hospital, the Government, and construction jobs are responsible for most of the only jobs that provide a decent, livable wage here in Washington County (SoUtah).

      It’s mostly the construction work that provides a paycheck for local young, male workers.

      That work dried up overnight in 2008, unemployment hit a record high of over 14% and for the first time in history Washington County showed a negative population growth rate for the quarter. All those entities feeding off the construction bubble like engineering firms, furniture stores, tile and granite countertop stores, HVAC guys, etc, etc, fell apart too.

      Second homes flooded the market filling the County with large amounts of inventory which caused house prices to collapse. Foreclosures skyrocketed and the newly arrived Californians, Arizonians and Nevadians fled back to wherever town they originally came from.

      This time will be different.

      Pre2008 most arrivals here had sold their houses for huge amounts of money then came here where they proceed to buy a newer and better house for way less than they could ever have imagined. They would then bank the leftover profits. Cost of living, like taxes and fees, were also much cheaper here so it was very easy for them to live on their fixed income.

      It’s different now. Houses here are no longer cheap. Local labor is no longer cheap and those local taxes and fees have gone up considerably over the last few years. All these increases are being blamed on new growth by the local politicos and media. Whatever the reason it isn’t cheap to live here any longer.

      I know at least 20-30 individuals (mostly retired) who moved here with their equality from a prior home sale and put pretty much everything into their new “custom-built” house. I’m talking about $750,000.00+ houses. I’m involved here locally where I have to interact with these people at times and all I ever hear are complaints about “how much money they spent to get here” and how disappointed they are with the quality and cost of the local services that they require. Some have told me that they are sorry that they moved here. Many of them are on some sort of public pension.

      Attitudes about our economy have changed here over the last year. Local building guys I know are telling me that they are feeling the slowdown. They’re saying that the hope is to “finish up their projects before things get worse”. I talked to a cabinet shop owner recently who told me that their business has “totally stopped”.

      Check out the Utah Workforce Services chart below. Take out construction, retail and manufacturing (much of which is housing/construction related) and you will lose about 50% of Utah’s economic drivers.

      https://jobs.utah.gov/wi/data/library/employment/emptrends.html

      1. “Check out the Utah Workforce Services chart below. Take out construction, retail and manufacturing (much of which is housing/construction related) and you will lose about 50% of Utah’s economic drivers.”

        Shiller missed all the wreckless tail chasing on the production side.

      2. As Ben has been so accurately harping on for years – you can’t have an economy based entirely upon building or flipping shelter for workers, you need the jobs for the workers first, then the housing demand follows. This whole clusterfu*k is bass ackwards. It works for a little while until the whole thing just implodes. Then you’re left with ghost cities. See Chinbabwe.

        Utah is a prime example of an area that is going to be absolutely eviscerated. It ain’t different there, even though you’ve got some extreme Kool-Aid flowing through the veins of people like Rental Watch 2.0 above, and his supposed “No Vacancy” BS.

        You can pretty much pencil in AZ, CO, UT, ID, OR, WA, NV, CA as states which are going to get destroyed by high unemployment one this crater really takes shape. CA will probably fare the best of all of them. Again, it ain’t “different this time” insofar as economics are concerned.

        1. Excellent post, 100% concur about WA OR UT ID CO AZ and NV getting smashed when this shakes out. All of the funny money that was pouring into those markets from CA and Seattle sellers is drying up. I am watching it happen.

      4. “I know at least 20-30 individuals (mostly retired) who moved here with their equality from a prior home sale and put pretty much everything into their new “custom-built” house. I’m talking about $750,000.00+ houses.”

        Assuming “equality” means equity I only have one question.

        How did you come to know that many stupid people?

      5. Steadykat,

        I live in St. George, so I’m in your neck of the woods. I work in SLC right now. I would say your observations on Washington County are spot on. I run about 70-100 miles a week, so I literally run the entire cities of Ivins, Santa Clara, Bloomington, Washington, and St. George. I see every new development and everything that is for sale as I vary my routes. Washington County is completely different from Utah County and Salt Lake County because our economic growth is so tightly clustered around tourism and construction. Out in Hurricane a good friend who is a bricklayer had their business decimated in the last recession. The problem I see with Washington County is that they are addicted to building massive 2nd homes for CA and NV equity locusts and for wealthy northern Utahans wanting their winter retreat. When CA starts to really feel some pain, then I think we will see it spread to southern Utah.

      6. Hey, as long as Hill AFB (with those thousands of good-paying civilian jobs) stays open, Utah will be fine, right?

        1. And the IRS in Ogden, and the new NSA data center, and Facebook, and the high-paying tech jobs migrating here. I think Utah will be fine. Southern Utah stands to get shaken up because it is so extensively tied to construction aside from the university, Skywest, and the hospital. Hospital revenue is pretty safe though.

      7. Surprisingly, my daughter just got home from work (9 PM here, started at 11 AM, MGM corporate Vegas.) She deals with paperwork coming in from all the properties. I’m amazed at the overtime she gets and she’s saved $10K in three months on the job at a low salary (we’re not hitting her with any rent/other expenses yet.) How often she has overtime varies, but I’m surprised how frequent it is.

        1. Good on her, and you for giving her that gift. The times when I was able to save significant amounts of money involved the type of assistance you are providing. It was a blessing to be able to live with my mom during university. I came out of school with a 4-year degree and significant savings as opposed to debt. This was all thanks to my choice to live at home and my great (undeserved) luck of being able to do so.

  4. ‘Sales of Chicago-area homes at $1 million and up grew far more moderately last year than in the boom year that preceded it’

    There’s that B word again. Did it boom like Maine?

    ‘Nobody buys real estate to break even’

    They sure don’t. Everybody is a flipper or shack renovator for flipping or the like.

  5. “We don’t have a debt problem. We don’t have an overbuilding problem. We don’t have an economic problem — prices are not going to fall,” said Christopher Thornberg, founding partner of Beacon Economics, who called last decade’s housing crash.

    The koolaid is strong over at the Thornberg’s party!

    1. “We don’t have a debt problem”. Who’s this “we“ you are speaking of sir? 40 percent of adult Americans don’t have $400 to their name. A fifth of Boomers have zero saved for retirement.

      Housing is going to be crushed by the ‘how much a month’ club. Bank it!

  6. Microsoft’s Leap Into Housing Illuminates Government’s Retreat
    The New York Times
    Emily Badger
    January 18, 2019

    “The government spent about three times as much on housing programs in the 1970s as it does today, according to the National Low Income Housing Coalition. In the years since, the government has gotten out of the business of building public housing. And capital funds to repair the remaining public housing stock have been cut in half over the last 15 years.”

    “Microsoft says it plans to spend $25 million on grants to local nonprofits working on homelessness. But the bulk of the money will be invested, some in affordable housing developments that use tax credits, and others in middle-class developments that wouldn’t be financially feasible without lower-interest loans.”

    “Ed Goetz, a professor at the University of Minnesota who has studied the history of public housing in America, said: “I don’t want to diminish the magnitude of what they’re doing. I think it’s important, and it will help. But it won’t solve Seattle’s problem.””

  7. I’ve been thinking about homelessness a lot lately. I run 15 short-term rentals in our high-end apartment community. The mix of people that we get are all across the spectrum. I have a gentlemen renting for about 6 months who makes well north of $300k annually and at the same time I sometimes get people who I would consider to have precarious housing situations, and may be functionally homeless for lack of a better definition. One thing that I am convinced of is that the free market has not solved housing and I don’t see it solving it anytime soon.

    1. the free market has not solved housing

      We’ve been discussing here for many years how the government does everything possible to support, promote and perpetuate unaffordable housing. Where is this “free market” you are complaining about?

    2. There is no free market or else in NYC there would be no RE 20 year tax abatement for anything called luxury apts. and we would have tens of thousands of average apartments for average wage earning people and families. A freer market would be granted tax abatement’s only if you sell/rent for your 3x income standard Over that luxury people pay full price..

  9. “A belief that the price slowdown will lead to a price drop could become a self-fulfilling prophecy, experts said.”

    I guess it has nothing to do with flippers losing interest after double digit appreciation ended?

    1. This is by far the most impressive table. In most other places, the median square footage has dropped by about the same price as the list price, and that gives the housing bulls a convenient excuse (even though the *lot* size should matter as well and even if the current median lot size is lower, it probably is not a whole lot lower).

      But this Campbell data is an apples-to-apples comparison and clearly shows prices have been falling. And Campbell is pretty close to the heart of the Bay Area so there cannot be any other excuse – like it is too far (like Dublin or Livermore etc.) from the Si Valley.

  12. “Maine’s red-hot real estate landscape”

    Maine is so desperate for new residents they are actually paying people to move there (tax credits for student loan payments), yet there is a red hot housing market?

    1. I’ve been to Maine many times (Portland and Augusta specifically). There isn’t anything “red hot” about it. Classic New England charm with old timey people, bars and farms. Very beautiful place with nice people, but it isn’t “red hot” by any means.

  13. Worried about stock market volatility? Why not dump your stocks entirely and invest the proceeds in perfectly safe real estate investments?

    5 Ideas to Build Wealth Outside the Stock Market
    YieldStreet
    MILIND MEHERE – FOUNDER & CEO

    Having passed the 10th anniversary of the start of the Great Recession, we are now in the longest bull run in the American economy since WW2. Historical data reveals it is only a matter of time before the market pulls back.

    With the U.S. unemployment rate at lows near 4%, the federal government has executed on a fiscal stimulus package which, according to Ben Bernanke, former Chairman of the U.S. Federal Reserve, “is going to hit the economy in a big way this year and next year, and in 2020, Wile E. Coyote is going to go off the cliff”.

    Today, many investors are unaware of new alternative investment options with typically low correlation to the stock market that can be added to their portfolio to protect against the fluctuations in the broader economy.

    Rather than putting all of your hard earned money in the same basket, consider these 5 strategies outside the stock market:
    …

    1. Worried about stock market volatility? Why not dump your stocks entirely and invest the proceeds in perfectly safe real estate investments?

      😀

      1. Found a site for Las Vegas that’s very informative if you are so inclined, mucho charts from Equity Nevada:
        ninedots.net

        The Las Vegas real estate market experienced a dramatic slowdown throughout the last quarter of 2018 with closed sales falling 5.5% from 2017 levels. In fact, it 2018 SFR closings resemble 2016 or 2005 levels. All price points declined, but price points below $250,000 are on a downward decline with only negative momentum. Price points above $250,000 continue to enjoy positive, upward momentum despite the soft last quarter. December Single Family Residential (SFR) closed sales were down 6.7% from November 2018 and down 18.3% for the same period last year. The SFR median sales remained nearly flat at $296,250 while the SFR average closing price advanced to $346,965 for a 1.5% increase from last month. Residential inventory also dropped this past month, but with lower demand – the SFR market increased to 3.3 months of inventory. Once again, the amount of SFR overpriced listings rose sharply and now makes up 74% of what is available. So let’s take a closer look at a breakdown of that!
        Then more charts from Equity Nevada.

  15. “‘We don’t have a debt problem. We don’t have an overbuilding problem. We don’t have an economic problem — prices are not going to fall,’ said Christopher Thornberg, founding partner of Beacon Economics, who called last decade’s housing crash.”

    From Mansion Global on California. “Buyers in the typically ferocious San Francisco Bay Area real estate market looked decidedly less enthusiastic in December, as sales dropped despite more discounts, according to Compass. The median home price in December in the Bay Area was $860,000, a 2% decline from the same time in 2017.”

    So is Thornberg ignorant of falling Bay Area prices, or is he just a lion? I suppose telling lies to bamboozle the sheople does represent standard best practice in the real estate business.

  16. It’s not nice to look under the high priest’s frock.

    Warren Presses Mnuchin Over Christmas Eve Call With Regulators
    Saleha Mohsin
    Bloomberg
    January 18, 2019, 11:13 AM PST

    (Bloomberg) — Senator Elizabeth Warren has asked Treasury Secretary Steven Mnuchin to explain his emergency phone call with financial regulators on Christmas Eve that spooked investors, triggering memories of a market liquidity crisis.

    In the final weeks of December, the S&P 500 was in the midst of a 7 percent drop — bringing equities to the brink of a bear market. The U.S. government’s partial shutdown had started, and Bloomberg News had reported that President Donald Trump had discussed firing Federal Reserve Chairman Jerome Powell. The Fed had drawn the president’s ire after a hawkish statement signaling further rate hikes that roiled markets.

    Read more: Trump Said to Discuss Firing Fed’s Powell After Latest Rate Hike
    …

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