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Many Residents Are Loathe To Sell For 50 Cents On The Dollar

A report from Mansion Global on California. “Realtors who spoke with Mansion Global in January reported a slump in sales and a decrease in median home values between Q4 2018 and Q1 2019, which they attributed in large part to the wildfires.”

“Sonoma County has always been popular with affluent Bay Area residents looking for a weekend retreat from the city, but the number of sales dropped about 8% in 2018, closer to the volume last seen in 2010, according to Compass. Median house prices peaked in the middle of 2018 and then dropped off as the year wound down.”

“‘Nobody has to buy a second home, so if you’re going to put anything on hold, financially as far as a big investment, that’s what you’re going to put a hold on,’ said Patrick Carlisle, chief market analyst for Compass.”

“The gloomy combination has prompted a few ‘unintended sales’ this winter, said Jerel Taylor, president of the Malibu Association of Realtors. ‘It’s been very daunting to people and that’s causing some people to sell their homes,’ he said.”

“Still, many other residents are loathe to sell their property for ’50 cents on the dollar,’ as Lea Johnson, an estate director for Sotheby’s and a long-time Malibu resident, put it. ‘Right now, the market is very soft, and it will take a while to rebuild our market and rebuild our town and rebuild the burned out properties,’ she said.”

From Curbed Atlanta in Georgia. “By now, most real estate observers around Atlanta have heard the anecdotal horror stories: The choice Midtown condo that can’t move despite discounts. The $1-million Chastain estate that’s hearing crickets. The gorgeous Va-Hi bungalow nobody will touch for $800,000.”

“Is it winter’s fault? Seller greed? Are rising interest rates, economic uncertainty, or political unrest to blame? Or is the homebuying and selling landscape not really as bad as some examples can make it seem?”

From Curbed Boston in Massachusetts. “The number of closed condo sales in downtown Boston declined 19.3 percent in the fourth quarter of 2018, to 555, compared with the same period in 2017. The number of sales were also down 42.6 percent in the fourth quarter compared with the third quarter.”

“Some neighborhoods saw particularly pronounced sales drops. In Beacon Hill, sales dropped 41.9 percent annually in the fourth quarter. In Charlestown, they we’re off 25 percent; in Southie, 19.9 percent. Those yearly and quarterly sales drops in the fourth quarter were the most striking facet of the report. And it’s those drops that led to what Miller Samuel and Douglas Elliman described as the highest fourth-quarter inventory of unsold condos in downtown Boston in five years.”

From This Is Reno on Nevada. “According to Randy Roesch, with Sierra Sotheby’s International Realty’s Reno office, ‘The higher end of the Reno market is much more balanced with certain top-tier price points even falling into a buyers market. Top-of-the-market buyers have plenty of inventory to choose from so sellers at this level need to price their homes competitively or be comfortable waiting to attract the right buyers,’ says Roesch.”

The Grand Forks Herald in North Dakota. “There was a time when a new house on the market was snatched up within hours of being put up for sale. But real estate agents and homeowners say that’s not happening anymore. Many real estate agents in the Grand Forks area recalled the years between 2012 and 2016 as extremely busy. While agents may say this change is normal, for those struggling to sell a home it can be extremely frustrating.”

“Mike Grossbauer’s home was on the market for 15 months before it finally sold. ‘Those were honestly the worst 15 months of my life,’ Grossbauer said. ‘One mortgage isn’t fun, but having two mortgages held over your head?'”

“The housing market in Grand Forks has become more of a buyer’s market, according to Ruth Ann Halvorson, the 2018 president of the Grand Forks Area Association of Realtors (GFAAR). A balance between buyers and sellers is preferable, Halvorson said. ‘It could be considered ‘bad’ if one or the other has more power,’ Halvorson said. ‘This is definitely not a time to panic though.'”

“One cause of this change could be an increase in the number of homes built in the past couple of years, Halvorson said. Grossbauer said his agent told him Thomsen Homes had built so many homes in the same price range as his and it made selling his home more difficult. Coldwell Banker Real estate agent Phil Vanyo said an increase in the number of apartments on the south end of town also could have had an impact.”

“‘This may have led to some of this slowness. People might have been renting homes and now have the option for a brand new apartment building with a gym and a pool,’ Vanyo said. ‘I’m not saying we’re over building, but we’re certainly in a different time than we were a few years ago.'”

“Larry Hondl, an agent at Oxford Realty, said he has to explain the shift in the market to people selling their homes. Hondl said those selling their homes need patience. ‘A lot of people were used to listing their house and it was gone in week and had two or three offers on it,’ Hondl said.”

“Hondl remembers 2016 as a ‘crazy’ year in terms of the volume of houses he sold. He also said he remembers experts saying it wasn’t healthy for homes to be selling as quickly as they were. ‘It was kind of an anomaly there were so many people looking at the same time,’ Hondl said.”

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This Post Has 64 Comments

  1. ‘There was a time when a new house on the market was snatched up within hours of being put up for sale. But real estate agents and homeowners say that’s not happening anymore’

    When people discuss “how bad” it will get, we should remember that irrational behavior reached into many little towns like Grand Forks.

  2. ‘Sonoma County has always been popular with affluent Bay Area residents looking for a weekend retreat…‘Nobody has to buy a second home, so if you’re going to put anything on hold, financially as far as a big investment, that’s what you’re going to put a hold on’

    We’ve long discussed the folly of second shacks. Why not stay at a resort? Then you can change it up, go somewhere different to waste your money. Oh, right it’s an investment! And dreams of that sweet equity swim around in their head as they rake leaves and brush spiders out of the bedding.

    1. So true! Every time I dream of a vacation home I get out the pencil and paper and it quickly turns into a nightmare!

    3. I live about 45 minutes south of Wine Country and both Sonoma and Napa valleys are loaded with fabulous places to stay and dine out.

      I also have to believe the MID and SALT caps that started with the 2018 tax year put a second home in the deep freezer on affordability for plenty of potential buyers.

      1. “I also have to believe the MID and SALT caps that started with the 2018 tax year put a second home in the deep freezer on affordability for plenty of potential buyers.”

        That’s good. Its kind of ridiculous to create incentives for the very wealthy to own multiple homes when the lower end of the population sleeps and defecates in the streets, thanks to a lack of affordable housing units.

        1. Well said professor. I’ve kind of wondered why we don’t have progressive property taxes. It seems to me that you could really nudge the market in the right direction to creating affordable housing if the property taxes on dwellings between 2x and 3x the median income were significantly less in percentage terms than McMansions and those in the multi-million dollar range.

          2. Many locales give the resident owner of a house a good-sized tax break compared to what a non-resident owner has to pay for the exact same valued house. That is a form of graduated tax.

          3. I challenge this notion. As a self made millionaire that was born into the bottom of the pyramid in life, I have met many poor and struggling to make ends meet families that:

            1.) Drive 2 new cars parked in their driveway of their tack house where as I still have the same very nice used car I purchased in 2005
            2.) Have more children that all have cell phones and X-Boxes where as I delayed starting a family until I knew I would be able to support one and have 2 children. I married a partner who is agreement that we would only have 2.
            3.) They have land lines, Cell Phones, Full Cable Packet – this family has had no land line since 1999 – cell service has always worked just fine in a storm and we always keep the phones charged and are responsible with extra batteries so running out is no excuse. We have minimal plans and do not go over the evening/weekend/data limits so we pay zero extra. We also have Netflix and cancelled cable back in 2008
            4.) Their children often struggle in school, many of the kids now days are overweight but they have the XBOX and Cable. When I was kid, we were really poor and really skinny because there was really no extra food. I got an after school job as soon as the law allowed, with “the struggle” imprinted in my brain so I took actions early on in the hope that I would not be poor…this is the American way…to “incent” people to want more through hard and smart work
            5.) Many of today’s poor I meet work menial jobs, never imagine much else, don’t sacrifice much either as they feel entitled to eat lunch out and entitled to have someone else subside their life choices and complain a lot about their situation – victimhood – and really don’t do much to change it.

            I know it’s not the same for ALL Poor but I was poor for 1/3rd of my life and pulled myself up by the straps and if I had not struggled, I doubt very much I would have the success I do today. These lessons of survival, I pass on to my kids…but younger because kids cad do far more younger. We baby them and do not teach them lifeskill early enough. Just because we want them to be kids, does not mean that we should not teach them the best lifeskill.

            Both my kids, 10/7 are already learning about money, how to be entrepreneurs, how to be accountable in the household, and how to make choices about their future. They have started a “future fund” with me where they contribute much like a 401K to the fund and I match dollar for dollar. When they turn 18, they can use this to either go to school, travel, start a business, it’s their choice but by then they will have a strong understanding about economics and how money works so that they can make the best choices for their future.

            I went thru the struggle, that is what America is all about. Social programs should be reserved (Other than SS) for extraordinary circumstances. We have greatly diluted human potential by trying to bail out every problem of every person that feels they don’t have what the other guys has.

            Instead of taking from one family that has made better choices, the tax dollars in the pot should be optimized through lean principles and reallocated to programs that teach children and their parents life skills so that they make better choices. The desire and incentives to make better choices and learn from those who are successful must be sustained otherwise we have defeated the spirit of America.

            If those in the lower earning spectrum can’t afford the taxes for housing, move to a lower cost location. If their job does not support them, move to a new job – no excuses. I did it many times when I was a kid and bettered myself every time.

  3. “Vanyo said. ‘I’m not saying we’re over building, but we’re certainly in a different time than we were a few years ago. ‘”

    HAHAHAHA

  4. ‘the highest fourth-quarter inventory of unsold condos in downtown Boston in five years’

    What happened to my shortage?

    ‘The higher end of the Reno market is much more balanced with certain top-tier price points even falling into a buyers market. Top-of-the-market buyers have plenty of inventory to choose from’

    Plenty, in Reno?!

  5. “Still, many other residents are loathe to sell their property for ’50 cents on the dollar,’ as Lea Johnson, an estate director for Sotheby’s and a long-time Malibu resident, put it.

    If you’d rather chase the market down and sell for .25 on the dollar, that’s fine by me, greedheads. I’ve got all the time in the world. You don’t.

    1. What does ’50 cents on the dollar’ even mean in this context? Are they comparing what sellers can get now to peak bubble prices?

      1. Yes. It’s about as useful as comparing to, say, 20 years ago and saying they are “loathe” to sell for 500 cents on the dollar.

  6. ‘A lot of people were used to listing their house and it was gone in week and had two or three offers on it’…Hondl remembers 2016 as a ‘crazy’ year in terms of the volume of houses he sold. He also said he remembers experts saying it wasn’t healthy for homes to be selling as quickly as they were. ‘It was kind of an anomaly there were so many people looking at the same time’

    Yeah, and it might have been better in the long run if someone at the central bank didn’t have their head in their a$$ in 2016.

    1. “Yeah, and it might have been better in the long run if someone at the central bank didn’t have their head in their a$$ in 2016.”

      Oh, they didn’t have their heads in their a$$es, these central bankers knew exactly what they were doing.

      And what they were doing was sooooo easy for them go pull off because the vast multitudes of ignorant pukes who fell into their financial traps were so properly and sufficiently dumbed-down by our wonderful and glorious educational system.

      Candy from babies.

      1. I’m not exactly sure they knew what they were doing. When I bought as a junior HODLer in 2010 My 23 year old self was so confident in econ 101 that I figured QE would heat up inflation so hot that I would my 30 year fixed monthly payment would be peanuts in a few years. I was pretty psyched. But instead, inflation was mute and my house doubled in real terms. This was even better but I was definitely scratching my head. Yellen has called it the “mystery of the missing inflation.” My guess is that poor people couldnt even get credit so QE only impacted kuxury prices (and cars) and didnt touch consumer staples (i.e. the real economy) at all. But thats just an opinion.

        1. The goal was to get everyone to pay grossly inflated prices for depreciating assets. They succeed in it.

          1. “The goal was to get everyone to pay grossly inflated prices for depreciating assets.”

            These grossly inflated assets created “wealth”, wealth that could be cashed out and spent.

            This cash-out-and-spending kept the economy humming along. The trouble was/is the grossly inflated prices need to forever become increasingly grossly inflated; If the gross asset price inflation ever stops or (the horror) reverses ifself then the humming part of the economy stops humming and thus it is screwed.

          2. If something cannot go on forever, it will stop.

            — Herbert Stein

            What cannot go on forever can continue much longer, and end much more quickly, than expected.

            — Professor Bear

        2. The Economist magazine this week ran a good article calling the QE to date “fat cat QE”, which has basically enriched the holders of capital. They predict a “people’s QE” which will come from populists. I sincerely doubt that the power brokers will let this happen, although Italy seems like they are going to give it a go with the League and M5S. If we ever get this type of QE then maybe we will have serious inflation at the consumer price level and not just in assets like stocks and housing.

  8. ‘Sonoma County…sales dropped about 8% in 2018, closer to the volume last seen in 2010…Median house prices peaked in the middle of 2018 and then dropped off as the year wound down’

    That peak was around the same time as San Jose. A little later than Seattle. Maybe the fires didn’t have anything to do with it?

  9. The Fed is a one trick pony. Asset bubbles work for a time on the way up, but leave a path of financial destruction and ruin on the way down. Of course they’ll say that “they never saw this coming”. If taxpayer bailouts were banned, these nefarious schemes wouldn’t exist. The Fed is unelected an unaccountable, and no more a federal gov’t. entity than FedEx, but considered by many to be the fourth branch of government, even though they represent the banking cartel and not the people.

    “It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.” – Henry Ford

    1) https://www.investopedia.com/articles/stocks/10/5-steps-of-a-bubble.asp
    5 Steps Of A Bubble | By Investopedia Staff | Updated Jun 2, 2010

    The term “bubble,” in the financial context, generally refers to a situation where the price for an asset exceeds its fundamental value by a large margin. During a bubble, prices for a financial asset or asset class are highly inflated, bearing little relation to the intrinsic value of the asset. The terms “asset price bubble,” “financial bubble” or “speculative bubble” are interchangeable and are often shortened simply to “bubble.”

    Five Steps of a Bubble
    Minsky identified five stages in a typical credit cycle – displacement, boom, euphoria, profit taking and panic. Although there are various interpretations of the cycle, the general pattern of bubble activity remains fairly consistent.

    2) https://www.hussmanfunds.com/comment/mc181128/
    Bubbles and Hot Potatoes | John P. Hussman, Ph.D., President, Hussman Investment Trust | December 2018
    “The fact is that while yield-seeking speculation is a powerful force, it only operates when investors are actually inclined to speculate.”

    “See, creating a mountain of zero-interest money works only if safe, low-interest liquidity is viewed by investors as an inferior holding compared to riskier securities like stocks and long-term bonds. If investors are instead inclined toward risk-aversion, safe, low-interest liquidity is a desirable asset, not an inferior one, so creating more of the stuff does nothing to encourage speculation.”

    1. “The Fed is a one trick pony.”

      So? You use what works. As long as this red pony of theirs works why should they try using something else?

      “Asset bubbles work for a time on the way up, but leave a path of financial destruction and ruin on the way down.”

      I like to think of this “asset destruction” as “asset redistribution”. Position yourself correctly and an asset that once belonged to somebody else magically ends up belonging to you. 😁

      “Of course they’ll say that ‘they never saw this coming’.”

      Again, you use what works.

      “If taxpayer bailouts were banned, these nefarious schemes wouldn’t exist.”

      Hence you make sure they never become banned. Easy pie.

      “The Fed is unelected an unaccountable, and no more a federal gov’t. entity than FedEx, but considered by many to be the fourth branch of government, even though they represent the banking cartel and not the people.”

      Which means:

      (ta da)

      Life is good.

      😁

    2. “See, creating a mountain of zero-interest money works only if safe, low-interest liquidity is viewed by investors as an inferior holding compared to riskier securities like stocks and long-term bonds.”

      The more interest rates normalize, the more shaky risk asset valuations will become. This is why I don’t expect the Fed to get very far down the path of rate normalization before they stop.

  10. Opinion: Never mind the Social Security increase, seniors are in trouble — here’s why
    By Paul Brandus
    Published: Jan 20, 2019 10:49 a.m. ET
    It’s getting harder for retirees to avoid poverty
    Getty Images/iStockphoto

    You might have heard that Social Security checks are going up 2.8% next year, the biggest rise in seven years. That translates into an average benefit of $1,461 a month, up $39.

    While welcome, it’s necessary to remember that the increase is tied to inflation. Higher payouts will simply enable retirees to keep up with the rising cost of living. It doesn’t mean that anyone’s standard of living will go up—as if an extra $1.28 a day will do much in the first place. Think of a treadmill: You’re not going anywhere.

    In fact, retirees and those who are eyeing retirement risk going in a different direction: backward. A study by the Schwartz Center for Economic Policy Analysis at the New School finds that about 40% of middle-class Americans will live close to or in poverty by the time they reach age 65. “Golden years?” For millions, it’s doubtful.
    …

    1. “’Golden years?’ For millions, it’s doubtful.”

      For others, it’s a sure thing (thanks to the stupid decisions of the millions whose future becomes doubtful).

      Millions of pukes work so that others may reap.

      1. Being the genius that I am I just thought of a comparison between illegal thievery and the legal kind.

        Illegal thievery is like when somebody breaks into your car so they can steal something of value. If the thief causes you one-thousand dollars worth of damage in order for him to profit by one-dollar then, hey, for him it is a no-brainer.

        Legal thievery is when the thief CONVINCES you to willingly hand over to him one-dollar and as a result of this you may end up experiencing one-thousand dollars of damage to your financials and for him, this legal thief, this too is a no brainer.

        For a real live demonstration of what I am talking about I suggest you drop by my bank and inquire about my Dotted Line Special.

        😁

        1. “When plunder becomes a way of life for a group of men in a society, over the course of time they create for themselves a legal system that authorizes it and a moral code that glorifies it.”
          ― Frédéric Bastiat

          1. This is pretty much why usury was banned by the early Christian church and why strict Islamic finance doesn’t allow interest.

        2. In addition to laws against usury there were once laws against price gouging. Price gouging was defined as selling something for more than it cost you. There was no such thing as a fair markup.

    3. up $39…You’re not going anywhere

      Of course I am. With gas under $3 I’ll be doing quite a bit of going.

      $39 will give me a hearty pot roast dinner twice a week all year long. That’s not bad. Or it can upgrade me to a nice bottle of single malt once a month. The price of these things has not gone up at all. Actually, having paid in more over the years I get more than $39.

      Don’t get me wrong, I’m very lucky to live in a country where with a little modesty most people should never fear where their next meal will come from (poverty).

      Nothing brings on poverty like having a mortgage on a Bubble Era house.

      1. “Nothing brings on poverty like having a mortgage on a Bubble Era house.”

        Nothing brings in easy money like a dotted line or two signed by some ignorant puke, dotted lines that commits him/her to send to you huge chunks of his/her hard-earned money each and every month, just like clockwork, for … for … for DECADES!

    1. arrggg …. there is not a lot of industry in BC – government, film, some natural resources, some high-tech.

      The avg selling price cannot be $712K without foreign money (either legal or some version of fraud esp from China) seriously impacting the price.

      People are clueless

        1. I have a friend who spent more than thirty years working tow trucks and wreckers up on Donner Pass on highway 80 (7,000-ft) near Truckee, CA. He has seen everything from ladies in cocktail dresses stuck in below zero conditions to mangled corpses.

  14. CR8R

    China posts slowest economic growth since 1990
    By Lingling Wei
    Published: Jan 20, 2019 10:16 p.m. ET

    BEIJING– China’s economic expansion languished to its slowest pace in nearly three decades last year, as a bruising trade fight with the U.S. exacerbated weakness in the world’s second-largest economy.

    The 6.6% growth rate for 2018 reported Monday is the slowest annual pace that China has recorded since 1990. The economic downturn, which has been sharper than Beijing expected, deepened in the final months of 2018, with fourth quarter growth rising 6.4% from a year earlier.
    …

    1. 6.6% growth is large for a huge economy – does anyone believe this official stat. Everything seems to indicate slowing – so governments needed to spend a lot of $s to make up the difference

      1. Most economic analysts in the know have a rule of thumb that says take China’s official data and cut it in half when it comes to GDP growth. Their data is highly suspect which is why there are myriad alternative measurements (e.g. electricity usage) that analysts use to try and uncover the true picture.

    2. 6.6% growth

      As always, this is a meaningless number. They can post any “GDP” number they want to, even if it’s followed by the word “downturn”.

      Bleeding out a couple million manufacturing jobs and cranking up another Trillion Dollar stimulus program do not spell growth.

    2. Was it really a “price decline ” (decrease in market value) or just a case of a seller reducing an initially unrealistic list price?

  17. Oh dear. What happens if every one-party blue state starts seeing the productive portion of the population don yellow vests and start talking about succession of those fed up with having the fruits of their labor involuntarily expropriated to pay for their state’s social parasites and collectivist “leadership’s” patronage and graft schemes?

    https://www.theepochtimes.com/new-california-yellow-vest-movement-joins-french-citizens-against-socialism-and-globalism_2741403.html

    1. The gilet jaunes are an eclectic bunch. They seem to want three main things:

      1) Raise the minimum wage
      2) Re-instate the wealth tax that Macron rolled back
      3) Roll back fuel taxes

      I speak French as a second language and follow French politics pretty closely. Personally, I would be okay with 1 and 2, but I think 3 is a huge mistake.

      They also seem to be upset about immigration and the impact it is having on wages. A few want more direct democracy and a say on cultural issues such as abortion, the death penalty, and gay marriage.

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