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Sellers Understand That They May Need To Lower Prices In California

A report from the San Francisco Business Times in California. “Bay Area home sales plummeted by 22 percent in December, marking the largest year-over-year decline in sales of for any month since at least 2016. ‘The early year rush led to quite a bit of (buyer) fatigue,’ said Selma Hepp, chief economist at Compass and author of the report.”

“Hepp stressed that the late slowdown didn’t necessarily pose troubling indications of the 2019 market. Ultimately it might benefit homebuyers, she said, in helping balance out home prices inflated by a ‘very undersupplied’ market. As it stands, the monthly supply is still less than half of the six-month benchmark for a balanced market in most regions, the report said.”

“‘We’ve seen that the economy is not going to fall off the face of the Earth in 2019,’ Hepp said. ‘Sellers understand that they may need to lower prices and negotiate, and that’s a positive sign for buyers.'”

The Press Democrat. “Sonoma County’s housing market hit the skids in 2018, beginning a slowdown over the summer as buyers rebuffed fire-inflated home prices and ending the year with a thud. The county’s median home price peaked at an all-time record of $700,000 in June, then started to decline before ending the year at a median price of $639,000 in December. That price was an uptick from the year’s lowest monthly median of $615,000 in November, but a drop of 5.1 percent from $673,500 in December 2017.”

“Rick Laws of Compass real estate brokerage said the shift in the local housing market that began at the end of last June was caused by buyers pushing back against sellers’ asking prices. He said it remains to be seen how much the Sonoma County market will be affected by the negative domestic and international economic factors already felt in other parts of the Bay Area and the state.”

“The number of homes sold in Sonoma County from September through November plunged to low levels not seen in at least eight years. Then sales slid by almost 15 percent more in December, according to The Press Democrat’s latest housing report.”

“‘We’re going to have to watch that trend into next year to see how much of a trend it is,’ Laws said of the potential for outside economic forces such as interest rates, trade wars and stock market volatility to push the local housing market into a tailspin. ‘It’s time for the market to shift. We’ve been seeing large appreciation in this economic recovery for a good number of years. We’re not anticipating that we’re going to see that kind of appreciation.'”

This Post Has 78 Comments
  1. ‘helping balance out home prices inflated by a ‘very undersupplied’ market’

    Still slinging that old snake oil, eh Selma?

    ‘As it stands, the monthly supply is still less than half of the six-month benchmark for a balanced market in most regions’

    Wa happened to the 15 days thing? And why would sellers be a sawin’ and a slashin’ after three months? How many decades have you guys been putting out this six months is balanced stuff?

    1. One more thing about San Francisco. The percentage of price reductions is the same as one year ago. This bubble popped long ago and the REIC covered it up as long as they could.

      1. I have two children living and working in the city. It is their experience that the market is shifting slightly. However, there is not much change in pricing or availability. It is an important story, but a hard one to measure in value.

        They both recently entered long term leases and are paying $4,200 and $4,500/month in rent as we all wait for better opportunities.

        The housing market is quite elastic, meaning both supply and demand can change quickly. When the dot com industry shakes out again in the Bay area and all the stock option fly over country kids head back to Mom’s basement in Des Moines, traffic jams will lesson and housing availability will increase.

        1. 42X rent in any corporate high rise in NYC to qualify….so both are making $175- 200K, what kind of work do they do?????

          1. Hey, I just got back on this thread. Both are married, so dual incomes, $300k/couple. They are in finance and dot com jobs, but a downturn could effect both of them.

            They really can’t buy a house, or shouldn’t, given the goofy pricing. When your last dollar earned is taxed at 50% (state & fed), it chews up a big part of the earnings. Thus they rent and plow money into savings and accumulate stock. They do feel lucky, but have never experienced a downturn or oppression of debt, so I just try to counsel them to be thrifty and patient.

    2. ‘As it stands, the monthly supply is still less than half of the six-month benchmark for a balanced market in most regions’

      Did Selma decide to change the benchmarks here?? Last I remember 3 or less would be a sellers, 3-6 balanced, 6 or more a buyers. The spin these used shack sellers put on real estate is horrible

  2. From the last link:

    ‘The local housing market already was experiencing “price exhaustion” before the 2017 blazes that forced sellers to ponder reducing the price tags on houses. Then the fires jolted the market, catapulting prices steadily upward on sharp demand for several months after the fires.’

    And then it sank like a turd in a well. This bubble popped in 2017.

      1. $950K for Encinitas? You gotta be kidding me! This is where all the young enlisted surfers used to live when I was stationed at NAS Miramar because it was cheap and dumpy but the weed was plentiful. No thanks.

        1. The listing has been trying to sell for years dating back to 2015 with no indication it sold. Starts in mid 500k and a slough of pending and relisted transactions. The latest dream price is 950k which I agree is no thanks!

        2. Encinitas still has those vibes but has become more desirable and expensive as traffic on I-5 worsens.

  3. ‘It’s time for the market to shift. We’ve been seeing large appreciation in this economic recovery for a good number of years. We’re not anticipating that we’re going to see that kind of appreciation.’”

    Exactly what he’s been telling buyers 6-9 months ago… Oops never mind

    1. “We’ve been seeing large appreciation in this economic recovery for a good number of years.”

      Translation: We’ve been seeing large amount of equity wealth creation in this economic recovery for a good number of years. This wealth creation allowed for a lot of spending, and this spending in our seventy-percent consumer-based economy created and supported a lot of jobs, not just locally but globally.

      “We’re not anticipating that we’re going to see that kind of appreciation.”

      Translation: Moving forward we’re not anticipating that we’re going to see that kind of wealth creation. This means we are not going to see that kind of spending that we have been seeing, which means the jobs that have grown dependent on this spending, this equity cashed-out spending, are going to go away.

      So sorry.

    1. If you tax wealth, less wealth will be created. Is that the goal of this attorney-envisioned economic policy?

      1. Well the issue we have now isn’t that there aren’t enough folks with net worth north of 50 million, the issue is that there are too many folks with net worth south of 10k.

      2. If we taxed the richest 26 people in this country 50% of their wealth they would remain the richest 26 people in this country. And we could rebuild our infrastructure and provide virtually feed every homeless child in America. Sounds like a noble and moral thing to do.

    2. This is Fauxahontus’ “me, too” bid to rebrand herself as an AOC-style progressive to capitalize on the latter’s popularity. Epic fail, Senator Running Deer. Your record of turning a blind eye to Wall Street and bankster malfeasance and aligning with corporate Democrats like Hilary speaks for itself.

    3. Lucky you if you are affected. Will force the uber wealthy to invest their $ rather than pluck it down on non-productive assets like houses or yachts. So good for the economy

      1. No it won’t. Businesses are wealth as are stock market holdings.
        It will force the rich to hide their money. Make everything and everybody less productive.
        A different article mentioned taxing wealth at 1 or 2 MM.
        The nanosecond that happens I quit working and my money goes into hiding.

        1. “It will force the rich to hide their money.”

          Offshore, no less.

          Someone should send Democratic Congress critters copies of the fable about the Goose That Layed Golden Eggs, before they accidentally kill the goose when trying to carve it up.

          1. Again, the key assumption here is that the Geese that are laying the golden eggs are the wealthy. In reality, both capital and labor are needed for a functional economy. But labors split of the economic spoils has been declining for decades. Just pass more laws to protect and promote economic gains that come from labor and we’ll be on the right track. Re-enthrone work and savings, not speculation and riding asset bubbles.

  4. “‘We’ve seen that the economy is not going to fall off the face of the Earth in 2019,’ Hepp said.”

    And since it’s still January you state this a a fact.

    1. The WaPo
      Business
      Stocks slide on renewed fears of a global economic slowdown
      U.S. stocks slipped Tuesday as global growth worries were resurrected. (Brendan McDermid/Reuters)
      By Thomas Heath
      January 22

      U.S. stocks slipped Tuesday as global growth worries were resurrected on news out of China and the World Economic Forum in Davos, Switzerland.

      The Dow Jones industrial average sank 462 points, or almost 2 percent, at its low — dragged down by DowDuPont, 3M, Boeing and Caterpillar, companies with significant exposure to the Chinese economy.


      The Standard & Poor’s 500-stock index fell about 1.4 percent, its biggest drop since Jan. 3. The S&P slid back into correction territory, with 10 of 11 sectors down on the day. A correction is a 10 percent retreat from a recent high. It was the first S&P decline in five sessions.

      The Nasdaq composite was well off its recent highs, down 1.9 percent, as technology stocks suffered.

      The renewed volatility after several weeks of relative calm followed weekend reports from China that its official economic growth for 2018 came in at 6.6 percent, its slowest in 30 years. There was also news earlier this month that German industrial production had sharply slowed, in part because of declining exports to China.

      “China is dealing with something very new, which is consumer-driven slowdown in growth,” said Glenn Youngkin, co-chief executive of the Carlyle Group during an appearance on Fox Business Network with anchor Maria Bartiromo. “One of the great recognitions is that China, which used to be this big export economy, is really driven by this giant consumer class that’s been created over the last 20 years.

      “And that consumer class is nervous,” Youngkin said. “They’re nervous for all the same reasons that other people in the world are nervous, and that’s reflecting itself on the Chinese economy.”

      Data released Tuesday morning also indicate U.S. homes sales are at a three-year low.

      Adding to the pessimism in the markets were additional forecasts out of Davos that global growth, including for the United States would be less in 2019 than it was last year.

      “It’s going to be globally a slow-up,” billionaire investor Ray Dalio told CNBC during a Tuesday interview from Davos. Dalio, co-chairman of Bridgewater Associates, warned that the country could slide into a recession in 2020.

      It’s not just the United States. It’s Europe. And it’s China and Japan,” Dalio said on CNBC’s “Squawk Box.”

      A letter from respected investor Seth A. Klarman warning of a potential financial crisis, rising out of global debt, international trade tensions and a retreat of the United States from the world stage, added to the gloom coming out of Switzerland.

      Klarman runs the Baupost Group, which manages about $27 billion. His letter was reported in the New York Times by DealBook columnist Andrew Ross Sorkin.

  5. “the shift in the local housing market that began at the end of last June was caused by buyers pushing back against sellers’ asking prices”

    That is exactly when things began to “turn” visibly in California, not counting the rarefied market of trophy mansions of the uber-rich that began to show signs of exhaustion a few months before that. But you really had to have your ear on the ground or read this blog.

    This week the story of the “housing slump” was in the front page of the paper version of the WSJ and all of a sudden it’s vox populi.

    A friend mentioned a conversation she overheard today outside school between a wanna-be realtor mom and a realtor mom : the realtor was telling the wannabe that she has not sold anything in the last six months.

    Another friend has had her house on the market since April and no takers yet at the wishing price. That house would have gone in two weeks only a year ago.

    I have no idea how this story is going to play out, if there are going to be bailouts or no bailouts, or how much prices are going to drop. But I do know that the cracks began to show in late June. And that NO ONE is calling it a bubble in the media. Not yet. The day I see the word “bubble” in the cover of the WSJ, that’s the day I go shopping. In the meantime, our rental is just fine.

    1. “Small dogs go missing in upscale California towns as Realtors resort to barbecuing Shih-Tzus and Morkies gaucho-style as housing market nosedives into a dark abyss…”

      1. “…gaucho-style….”

        I visualize a yapper rotating over a fire on the high plains of a suburban soccer field…..

        Thanks for the belly laugh.

    2. ‘The day I see the word “bubble” in the cover of the WSJ, that’s the day I go shopping.’

      Try not to catch yourself a falling knife. Once everyone knows there is a collapsing bubble, it normally takes years to bottom out.

      1. Window shopping is good. Just go get the free cookies and enjoy some realtor babble. When the realtors stop offering snacks at open houses is when you may want to dive in

      2. I agree with your argument in theory. Reality is complicated by timing the bottom then competing with flippers.

        1. Clarification: Professor Bear’s falling knife argument. Previous comment didn’t nest where I thought it would.

          1. It’s also complicated by bailouts. Lots of posters on this board were predicting affordable prices by 2013, about the time the Bernanke housing bailout sent prices skyward once again.

  6. I guess the self-driving car craze will have to remain on hold until the next time central banks loan out money for free (ZIRP) or less (NIRP).

    1. Technology Intelligence
      Apple cuts hundreds of employees from secretive self-driving car project

      Apple has reportedly cut 200 employees from its secretive self-driving vehicle project
      Tom Hoggins
      24 January 2019 • 11:59am

      Apple has cut more than 200 employees from its self-driving car team, known internally as ‘Project Titan’.

      Project Titan has been a significant but closely guarded project at the iPhone creator for nearly five years.

      At its height, it was said that over 5,000 employees were either working on or aware of the self-driving car projects reportedly lead by Ford and Apple veteran Bob Mansfield since 2014.

      The latest dismissals come as the company restructures its autonomous technology projects. Apple acknowledged the cuts, initially reported by CNBC, but said that it still sees a ‘huge opportunity’ in the sector.

      1. Did you notice these self-driving cars always have one or even two guys sitting there in case the software fails? How is that self driving? And what happened to the self driving flying taxis? And the amazon drones dropping $5 cans of almonds on my patio? It’s almost like these are a bunch of expensive dopey solutions looking for a problem.

        1. Some of the worst incidents have occurred due to coordination failures between the self-driving cars and their human baby sitters.

          1. I’m proud to say that I have never bought into the Apple mystique nor owned one of their dearly priced products, ever.

        2. Except for the fact that drones are already, in some instances, doing important deliveries in parts of Africa with poor infrastructure. They are shuttling blood products and organs to medical facilities and to patients who are desperately in need of them and could not get them in a timely manner in any other way. In some cases it is 15 minutes vs 4 hours. Not all crazy idea concocted by futurists will stick or have practical application, but some will.

    2. The problem for Apple is that they need the next thing. The iPhone has about run it’s course as sales have been dwindling and we’ve reached peak smart phone. They tried with the watch and there will be good medical application for that. But they know that transportation is the next war for eyeballs. Everyone knows that, even Google. Tech companies know that driving represents a ton of idle time and attention that can be monetized if ever full self driving becomes a reality.

  7. I think jobs is the #1 factor for home buyers. What is so interesting to see is the softening of this housing market while employment is full and more jobs are being created.

    When the job market softens and people cannot find work…..then the housing market will head south.

    Buyer fatigue is nothing a little rest won’t cure. Lack of employment is fatal to home buying.

    1. So long as the Fed keeps interest rates suppressed to near historical low levels, and unemployment remains at or near historically low levels, there should be no problems.

      What could possibly go wrong to end this happy coincidence of factors underpinning epically high housing prices?

      1. x-Tesla employees describe the abrupt way they were laid off and say questions linger
        Mark Matousek and Linette Lopez
        Jan. 23, 2019, 6:28 PM
        Tesla laid off 7% of its employees on Friday. Spencer Platt / Getty
        – Tesla laid off 7% of its employees on Friday.
        – Tesla employees who were let go on Friday described to Business Insider an abrupt, impersonal process that left them wondering why they had been chosen.
        – One former employee expressed both sadness at having to leave the company and relief that she would not have to deal with the aftermath of the layoffs.
        – Another employee described the layoffs as yet another one of Tesla’s “purges,” and described turnover at the company as the fastest she’d ever seen.
        – And another employee said: “I worked hard, I got a great bonus, and they just took it away from me.”

        1. Tesla is doing what they need to do. Look at what Ford announced a couple of days ago:

          “Ford posted a fourth-quarter net loss of $116 million, or 3 cents a share, down from a net profit of $2.5 billion, or 63 cents a share, in the same quarter in 2017, largely because of one-time pension costs and other charges.”

          Ford is basically overhauling their entire European operations. They have a major demand problem. GM is doing massive restructuring. Auto is entering a stagnation phase and is about to get a whole lot trickier, including for aspiring startups.

      2. Is 7% the lucky number for staff cuts?

        Tech
        Verizon Media Group is laying off 7% of its staff
        Published Wed, Jan 23 2019 • 2:07 PM EST Updated Wed, Jan 23 2019 • 2:59 PM EST
        Sara Salinas
        Ryan Ruggiero
        Key Points
        – The Verizon Media Group includes media, advertising and technology.
        – The layoffs affect approximately 800 employees of the Verizon division, and follow company-wide buyouts in December.

      3. We have nothing to fear but fear itself.

        — Franklin D. Roosevelt

        In Another Recession, It Could Be Tough For Washington To Boost The Economy
        January 24, 20195:01 AM ET
        Danielle Kurtzleben
        Traders and financial professionals work on the floor of the New York Stock Exchange after yet another bout of recent stock market volatility.
        Drew Angerer/Getty Images

        It just might be time to start thinking about a recession.

        Not a recession in the immediate future, of course. The latest jobs report was unexpectedly strong, and the economy is growing at a good clip.

        But there’s reason to get nervous. A majority of economists surveyed by the Wall Street Journal predict a recession by the end of 2020, and a majority of Americans appear to have the same fear.

        1. Who says that Janet Fallen doesn’t have a sense of humor? …

          (snip)

          “One potential trouble spot is with corporations. Former Federal Reserve Chair Janet Yellen has been warning that companies that have taken on too much debt could worsen any downturns.”

          Bahahahaha … after Chairing the Fed and driving interest rates down to close to zero Janet is now warning us that companies have taken on too much debt.

          Bahahahahahahahahahahahahahaha.

          1. “After Chairing the Fed and driving interest rates down to close to zero”

            In fairness, it was Ben Bernanke who spearheaded the policy to drive rates to zero. Janet Yellen’s role was to hold them at that level for an inordinately long period of time.

          2. That’s ok. She also assured us that there will not be another financial crisis in our lifetimes.

      4. The Wall Street Journal
        Heard on the Street
        China Risks Real Hard Landing This Time
        Beijing’s crackdown on shadow banking has gone overboard. Some backtracking looks necessary.
        By Nathaniel Taplin
        Updated Jan. 23, 2019 6:15 a.m. ET

        China’s economy is at risk of its long-feared “hard landing”—a rapid slowdown in growth that would hit employment hard and could trigger big problems in global debt and currency markets.

        The reason isn’t, as the Trump administration would like to believe, the U.S.’s trade offensive. Instead, Beijing has overdone its own crackdown on nonbank “shadow finance”—without opening alternative channels for private-sector borrowers, who often struggle to obtain bank credit. As a result, Chinese credit growth has continued to decelerate,…
        To Read the Full Story
        Subscribe

        1. Only China can save earnings for Wall Street (and the world): Bank of America
          By Barbara Kollmeyer
          Published: Jan 25, 2019 7:56 a.m. ET
          Critical information for the U.S. trading day
          Getty Images
          Great Wall of worry

          Beleaguered chip-makers — excluding Intel — get an A for effort this week, but still won’t save Wall Street from the first weekly loss of 2019.

          The holiday-shortened week has been peppered with global growth and shutdown worries. And as investors wait for the federal government to get back to work, “let-them-eat-loans” comments from Commerce Secretary Wilbur Ross (h/t the Heisenberg Report), likely raised serious concerns the administration may be out of touch over the economic blowback from a lengthy shutdown.

          Bank of America Merrill Lynch, for one is worried, as they shared a chart Friday with clients that shows a worsening drag on first-quarter GDP the longer a shutdown stretches on. The direct impact will be made up, but lost private spending is gone forever, they warn.

          It’s back to earnings for our call of the day, also brought to you by Bank of America, whose strategists have declared a global earnings recession that can only be cured by a recovery in Asian export growth.

  8. “Sundance: Documentary dives deep into the fraud of Theranos”

    (snip)

    “Everyone was convinced that if they talked to us and said critical things about the company, that David Boies would sue them,” Gibney said. “It’s evidence to how the legal system too often works. David Boies likes to say that the law defends the poor, the infirmed, the underdog. No. Most often the law is there to buttress the powerful. And that’s how he was used in this case, to silence the whistleblowers. Nobody wanted to come forward. It was very hard.”

    https://apnews.com/cb19fc49318f4d4f83ed24c255e2407d

  9. How far is LaGuardia airport from Wall Street?

    Business
    LaGuardia Flights Halted as Shutdown Hits Air-Traffic Staffing
    By Mary Schlangenstein
    January 25, 2019, 8:56 AM CST
    Updated on January 25, 2019, 9:09 AM CST

    The Federal Aviation Administration halted flights into New York’s LaGuardia Airport because of a shortage of air-traffic control staff, escalating the pressure on President Donald Trump and lawmakers to end the government shutdown.

    1. Chess my professor high stakes chess. I would like to see Cali made a sanctuary state pull out all ICE and immigration, and let Cali taxpayers pay for all of it. They voted those people in. When it gets too expensive they will move.

      Place ICE at the AZ NV and OR borders for a immigration check, just like police do for a sobriety check. Stay in Cali and no worries about being deported. See Easy solution, that’s fair to the rest of us.

    2. It seems altogether meet and proper for this shutdown fallout to land in DJT’s backyard.

      Close
      US airport delays – live updates: Major disruptions at LaGuardia, Newark and Philadelphia airports as Trump’s government shutdown continues

      As Donald Trump’s government shutdown reaches its 35th day
      Clémence Michallon
      New York
      7 minutes ago
      The Independent Travel

      Donald Trump’s government shutdown is creating havoc at airports across the US at the busiest time of the week.

      Flights at LaGuardia airport in New York are being severely disrupted due to “staffing issues”.

      The US FAA says there are also departure delays at Philadelphia and Newark.

      https://www.independent.co.uk/travel/us-airport-delays-live-laguardia-flights-newark-philadelphia-update-government-shutdown-latest-a8746821.html

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