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Despite All The Hype, Prices Did The Unthinkable

A report from Realtor.com. “After years as one of America’s hottest housing markets, California is showing some chinks in its armor. Many overzealous sellers who listed their homes at unrealistically high prices are now being forced to reduce them. The state experienced the nation’s biggest increase in the number of homes seeing list price reductions. Santa Clara County, the heart of Silicon Valley, saw the biggest jump in the number of homes on realtor.com seeing price reductions.”

“There, the number of homes where prices were lowered zoomed up 171% in August, even as the number of listings surged 77%. The likely culprit: rampant overpricing. Santa Clara–based real estate broker Rick Smith is seeing the most price reductions for higher-end properties in the $3 million-and-up range. But prices on homes located farther away from the bigger companies are also falling. ‘People are concerned if we hit peak and I buy now, what happens?’ says Smith, of Windermere Real Estate. So they’re waiting to see what happens.”

“Median prices in Seattle, the birthplace of tech behemoth Amazon, aren’t coming down. But that doesn’t mean sellers these days can slap whatever price tag they want on their residences—and add some extra zeros. Many may have gotten overzealous in what they wanted to fetch—the number of listings on realtor.com with price reductions was up a whopping 76% in August year over year. That’s the second-biggest jump among the 100 largest metropolitan areas in the country.”

“‘A lot of people think that the market is peaking and are looking to potentially cash out’ while they can still fetch the most money, says Windermere Real Estate’s chief economist, Matthew Gardner. ‘We’ve been on double-digit price growth for years, and that is clearly unsustainable.'”

“Then there are the smaller cities, like Austin, TX, and Nashville, TN, that burst onto the national scene just a few years ago—poster children for the supercharged housing recovery. And then, despite all the hype, list prices did the unthinkable—they began to fall.”

“Four years ago, real estate agent Jason Bernknopf was seeing move-in ready homes in desirable central Austin fetch six to 10 offers. Two years ago, similar homes were getting two to six offers. Lately, multiple offers are more rare. ‘Now things don’t go in the first day necessarily. You have to wait three to four days,’ says Bernknopf. ‘Sellers are having to reduce some of their prices.'”

“It’s time to address the T. rex in the room: Could lower price appreciation, an increase in inventory, and more price cuts on individual homes spell imminent disaster for the U.S. real estate market? Could we actually be primed for another housing bubble?”

“‘It’s hard to see this as the bubble popping in any way close to what we saw 10 years ago,’ says Daren Blomquist, senior vice president at ATTOM Data Solutions. ‘I see it more as a deflating, letting some air out of the balloon … [so there isn’t] a bigger pop down the road.'”

This Post Has 35 Comments
  1. ‘The state experienced the nation’s biggest increase in the number of homes seeing list price reductions. Santa Clara County…saw the biggest jump in the number of homes on realtor.com seeing price reductions…There, the number of homes where prices were lowered zoomed up 171% in August, even as the number of listings surged 77%’

    Now hold on. This is shortage central. Why it’s so hard to find a shack people poop in the bushes. Are you telling me loan owners are slashing prices after not getting a bite in just a few days?

  2. ‘Median prices in Seattle, the birthplace of tech behemoth Amazon, aren’t coming down. But that doesn’t mean sellers these days can slap whatever price tag they want on their residences—and add some extra zeros’

    But there’s no bubble. Prior to “these days” you could “slap whatever price tag they want on their residences—and add some extra zeros”.

    Do the UHS even listen to their “hype”? Why would there be hype around the shack market?

    I’m still amazed at the prices in Davis (yesterday). Just because there’s a CA behind the towns name, what would buy you a ranch elsewhere get’s you a condo.

  3. “Median prices in Seattle, the birthplace of tech behemoth Amazon, aren’t coming down.”

    Oh, yes, yes they are.

    1. but Seattle prices are coming down slowly [for now]. I would estimate 5% for condos

      When spring goes badly – thats when things start to accelerate.

  4. I don’t consider a bubble a given. But how does this situation look?

    ‘Many overzealous sellers who listed their homes at unrealistically high prices’

    Where are they going to live? Were they planning to leave all along?

    ‘‘A lot of people think that the market is peaking and are looking to potentially cash out’ while they can still fetch the most money’

    Wow that sounds kinda like speculating. Matthew.

    ‘‘We’ve been on double-digit price growth for years, and that is clearly unsustainable.’

    Here’s a big difference between you and me. I’ve been saying it was unsustainable for years, and you were cheerleading. And it’s not just Seattle, but “super-charged” markets like Nashville and Austin. Which brings up the question: where did all this money come from?

    1. Where are they going to live? Were they planning to leave all along?

      I’ve been wondering this myself. Who has been living in all this hidden inventory all this time? Amazon workers? Retirees finally cashing out? Nobody — meaning Chinese/Russian speculators buying property just to get the appreciation from being near Amazon?

      1. Were they planning to leave all along…

        I don’t think it matters. If you believed house prices would drop by 50% or more over a few years and rents were falling, would stick with the mortgage or rent?

    2. And all along… even to the point of failing under its own weight… the bubble is called a “recovery” over and over again by the REIC. Always a recovery. Recovery of what?

    3. Here is the deal, sometimes RE goes up, sometimes it goes down. This should be obvious to anyone who is paying attention, except for some reason realtors. RE has gone up quite a bit in the last 7 years, and I bet it is going to go down from here.

      Interest rates going up
      loss of state and local tax deductibility
      China problems (may cause temp spike in demand due to capital flight)
      Trump is going to steer the economy into a ditch
      I can sell my house now and even with aggressive underpricing walk away with a huge profit. The problem is if I guess wrong I will be trapped in an RV with one very angry woman. The run up in RE only benefits me if we are pulling up stakes and moving to the boonies. Since my son would someday like to own a house, I am not sure actually that the run up in RE benefits my family at all.

  5. The title of the article says a lot

    Housing Slowdown? Softening? Whatever You Call It, It’s Real and It’s Here

    Hold on to your seats!

    1. The REIC is in full damage control now. After years of alternatively describing it as “insane” and “crazy”, then periodically saying there’s no bubble, now they’re trying to get out in front of it and deny there’s a problem so the public doesn’t panic.

      There never was a shortage. Prices should never go up double digits, much less month after month for years.

      Oh, remember the lessons of compounding from school days? What does monthly double digit percentage gains get you after say 60 or 80 months? A bubble.

      1. Try compounding after 40 years. I can’t get over the data I crunched last week on a house that had not changed hands since 1979-now, +9,900%. And that’s a small middle class house in an average development, not some “unique” beachfront shack in Malibu.

        It’s either a bubble or hyperinflation. Middle class housing up almost +10,000% in less than half a lifetime, in America? While incomes were up only 200%? No one would have believed it if someone had predicted it 40 years ago. And even if someone had predicted it, it would have been a symptom of something gone extremely, cataclysmically wrong.

        1. ‘Now thing$ don’t go in the fir$t day nece$$arily. You have to wait three to four day$,’

          Well Ja$on, … hope you have a plan “b” for yer monthly ca$h depo$its to feed yer$elf … The hou$ing land$cape is headin’ toward$ more barren land$ …

          “catacly$mically” … Intere$ting word when knot applied to weather related event$.

      2. Strictly speaking, the REIC was right. There *was* a shortage of housing, that is, of housing available to buy and live in. Yes the structures were standing, but they were being bought up by speculators to lay empty. Very similar to the 2005-2006 “shortage” of buildable land. There was empty land everywhere, but it had all been bought and/or optioned.

        Even with all the houses being put on the market now, ISTM there is still a shortage of affordable housing. I don’t think those price drops have trickled down to the middle classes yet, much less the lower classes.

        1. Donk,

          There was no more a shortage of housing than there is land. There has to be demand for there to be a shortage and housing demand has been at 21 year lows for years now.

  6. ‘It’s hard to see this as the bubble popping in any way close to what we saw 10 years ago,’ says Daren Blomquist, senior vice president at ATTOM Data Solutions. ‘I see it more as a deflating, letting some air out of the balloon … [so there isn’t] a bigger pop down the road.’

    ‘Are you seeing any evidence that in so-called hot markets where home prices have risen rapidly — and also borrower leverage levels has increased — that there’s been an uptick in foreclosure activity?’

    ‘Yes. I would say that in some of these hot markets, the pressure has been on for borrowers to buy, and to stretch themselves financially; and lenders, to a certain extent, to accommodate them. Some of the markets seeing increases [in foreclosure starts] are not markets that are economically weak or experiencing some type of economic downturn — places like Los Angeles, Miami, San Diego, Orlando. Austin is a prime example of this. It is probably one of the darlings of the housing market right now. To me, that we are seeing [an uptick in foreclosures] in those hot real estate markets is evidence that those markets have become so red hot that there has been this extra risk introduced that is resulting in an uptick in foreclosures. That tells me there has been this loosening of underwriting. It doesn’t have to do with some massive economic job loss situation in those markets. It has to do with borrowers stretching themselves financially, and living a little bit more on the edge. It takes less to push them off the edge into foreclosure. ‘

  7. Another good one. Referring to conditions not being a bubble or declining but “a little air out of the balloon” will tell my wife when she gets home. We always get a good laugh out of these.

  8. ‘People are concerned if we hit peak and I buy now, what happens?’ says Smith, of Windermere Real Estate. So they’re waiting to see what happens.”

    Smithy-boy, WE are know whats gonna happen. It’s not like we haven’t seen this before. They are not waiting to see what happens. It 100% clear what will happen. The smart buyers today just don’t want to be the knifer catchers like the buyers in 2007-2011… There wont be a third bubble after this double bubbles. The buyers today will be f**(ked for decades….yes decades!

    1. Are you saying that buyers in 2011 were knife-catchers? This newest bubble didn’t really start inflating until mid-2013. Those who bought in 2011 are doing fine.

    2. This does not make sense. Whoever bought in 2011 with a 15 year mortgage is halfway done or more with the loan, and if they sent an extra payment here and there, they could be 3-4 years away to be mortgage free.

      That was a great time to buy a home.

  9. Seattle housing prices are crumbling….meanwhile cranes keep building more and Chinese buyers have disappeared…I wonder how this plays out? HAHA

  10. OK, so the FIRE cartel can say what they want (and do), but asset bubbles don’t behave this way on the downside: “I see it more as a deflating, letting some air out of the balloon”. Things are just getting started here, but look at the leading indicators for a better perspective.

    https://confoundedinterest.net/2018/09/24/lumber-futures-nosedive-along-with-home-building-stocks-when-the-musics-over/
    Lumber Futures Nosedive Along With Home Building Stocks (When The Music’s Over?)

    “In God we trust; all others bring data.” – W. Edwards Deming
    “Facts do not cease to exist because they are ignored.” – Aldous Huxley
    “If we have data, let’s look at data. If all we have are opinions, let’s go with mine.” – Jim Barksdale
    “Whoever controls the media, controls the mind.” – Jim Morrison

    1. “That’s why they call it the American Dream, because you have to be asleep to believe it.” – George Carlin

  11. ‘People are concerned if we hit peak and I buy now, what happens?’ says Smith.

    Well, then those bubbleonians are well and truly schlonged, aren’t they.

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