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We Knew We Would Have To Chase This One Downhill A Little Bit

A report from USA Today. “If you’re hunting for a house this spring, say goodbye to frenzied bidding wars. And if you’re selling, get ready for good, old-fashioned negotiations. ‘Sellers in the areas where we saw the highest appreciation, they can’t expect to see that now,’ says Jennifer Johnsen Cameron, a vice president with Coldwell Banker Bain in Bellevue, Washington. ‘Sellers need to be realistic about pricing. They can no longer name their price.'”

“Some of the steepest drops occurred in markets that were once the hottest in the U.S. In San Francisco, the share of sales drawing multiple offers fell from 82 percent to 18 percent; in Seattle, the share dropped from 69 percent to 15 percent;and in Boston they slid from 53 percent to 14 percent.”

“Paul Danis, a small-time homebuilder in the Bellevue area outside Seattle, noticed the market winds had shifted three to four months ago. The last home he sold closed in February 2018 without ever going on the market. He put another house on the market four months ago. No bites. He dropped the price by 5 percent and it finally just went into contract.”

“‘My wife is a realtor, so she already knew things were adjusting in the market,’ Danis says. ‘We knew we would have to chase this one downhill a little bit.'”

The Denver Post in Colorado. “Outside of California’s biggest cities, no other housing market is cooling as quickly this year as is metro Denver’s, according to an analysis from Zillow. ‘It is no surprise that the markets which pushed the bounds of affordability over the housing recovery are now experiencing significant cooling,’ said Skylar Olsen, Zillow’s director of economic research.”

“In metro Denver, it found that 18 percent of listings took a price cut in January, compared with 11 percent in January 2018. A monthly update from the Denver Metro Association of Realtors also reported that the median price of both homes and condos sold in metro Denver in February turned negative for the first time in seven years.”

“None of those shifts are extreme, but they show a change is underway. Combine the three Zillow measures and metro Denver’s housing market ranks fifth overall for how fast it is cooling down, behind the California metros of San Jose, San Francisco, San Diego and Los Angeles. Behind Denver on the cooling scale are Dallas, Seattle, Sacramento and Portland, Ore.”

The Real Deal on New York. “Hong Kong-based Euro Properties was supposed to be the first Chinese developer to build — not just finance — a condominium tower in Manhattan, when it acquired 118 East 59th Street in 2013. But construction on the 38-story tower never got going, and pre-development sales of its 29 units never made it to the closing phase. The developer also never obtained a construction loan, city records show.”

“On Monday, Euro Properties announced it had sold the managing stake in the property to its investment partner, an affiliate of Xiamen-based Yuzhou Properties Group. The $26 million sale marks Euro’s complete exit and values the total site at $74 million, the company said.”

“YIMBY reported in November that excavation at the site had never been completed and was ‘replete with its own lake and new surrounding greenery,’ due to the lack of activity.”

“Euro Properties looked to compete at the high-end of the Manhattan condominium market when it was at its peak, targeting average unit prices of $9 million, much more than the new development average for both the Midtown East and the Upper East Side submarkets.”

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This Post Has 77 Comments

  1. A troll masquerading as two posters tried to get this in within a few minutes of each other, using the same IP:

    Dave
    In reply to Doomed.

    “It’s time to finally concede that a real estate crash is not going to happen outside of NYC and San Fran Bay area. The job market is strong and there is too much political pressure to keep interest rates from rising above what the market can bare.”

    “At 4.4%, real estate is still affordable in 99% of zip codes in the country. Betting against the Fed to expand credit and increase the money supply has rarely worked in the past 100 years. We are not going to be lucky enough to have another real estate crash in our lifetimes. That opportunity happens once in a lifetime, not twice in ten years.”

    Here’s the second one:

    John
    In reply to Doomed.

    “The housing market seems to have bounced back sharply all throughout the country in February. The interest rate spike to 5.1% and the stock market selloff sunk home sales lower in the second half of the year. Rates are back to where they were last spring and the stock market is booming again.”

    “Some parts of the Western US seem expensive right now, but I’d going to finally concede that there will be no real estate crash outside of the NYC metro and SF Bay Area. The rest of the country is still very affordable to the average bozo, and there is shortage of prime real estate that high income people will continue to battle over.”

    “I’ve been rooting for the real estate market to collapse to pick up a bargain some where but I’m confident now that this will never happen. The Fed still has plenty of ammo to drive down mortgage rates to 2.5%-3.5%.”

    “Betting against inflation is a dangerous bet in America that has been failing for close to a century at this point. The only way to hedge inflation is to buy land and the stock market. End of story.”

    2. Dave / John can’t stop the crater that is taking place by simply posting wishful words. Likely a specuvestor attempting to flood in some rosey babble about RE. Eat your crow flavored ramen DJohn

      1. Probably should have saved those commission checks during the bubble years….now just spreading lies and misinformation to catch knife catchers … Ramen noodles and Crows for you!!!

    3. Time to get a “NO RAGRETS” tattoo, Mr. Dave/John. It sounds like you may have a few.

    4. “That opportunity happens once in a lifetime, not twice in ten years.”

      1989-1997 real-estate crash.

      2008-2011 real-estate crash.

      2018-20?? real-estate crash.

      “Dave” is lying….. must be a realtor.

    5. “The rest of the country is still very affordable to the average bozo”

      Hey Dave.John.Boy … What patch of prairie in Oklahoma does you re$ide @?

    6. “The only way to hedge inflation is to buy land and the stock market. End of story.”

      With so many too-clever-by-half fellows doing just that, prices can get to such lofty levels that almost nobody can afford them. At that point, one little pin prick can cause the whole thing to blow up!

      1. Right. My view is that the financial sector doesn’t get in trouble by doing things that are inherently stupid.

        It gets in trouble by doing things that are smart until too many people do them too much, and then become stupid.

        Every asset is overpriced. Later born generations have been left poorer in this county, and have less income to spend.

    7. If they really believed that, why would they be posting on a housing bubble blog? I smell fear and desperation…

  2. Another report from USA Today.

    Using debt as a “vehicle” to buy owner-occupied things, ie – liabilities. Dumb ’em down, for sure. Well played, Mr Banker.

    Why Americans are suddenly paying $550 per month for new cars

    “The average price of vehicles hit an all-time high of more than $36,000 in 2018, according to Kelley Blue Book – and with interest rates rising, car shoppers are now borrowing more than ever and extending their loans to record lengths.

    New-car buyers agreed to pay an average of $551 per month for 69 months in January, according to car-buying advice site Edmunds. That’s nearly 10 percent more per month than three years earlier.

    Car debt has risen 75 percent since the Great Recession in 2009, reaching an all-time high of $1.2 trillion, according to the U.S. Public Interest Research Group.

    “Easy credit and longer repayment terms have coaxed many consumers into buying more car than they can really afford,” said Ed Mierzwinski, U.S. PIRG’s senior director for consumer programs, in an email. “It’s even worse for those who have been subjected to deceptive and predatory lending practices at auto dealers.””

    1. I can’t believe the hyperinflation in vehicle prices. Even if the payment is $550 per month, that doesn’t even begin to scratch the surface of the total ownership cost, which takes into account fuel, maintenance, repair, licensing and insurance. Those costs alone can add another $400 per month to the “nut.” This stuff is mind-blowing.

        1. If the economy is red hot, why is the Fed ending QT and stopping the rate hikes? Something’s not adding up.

        2. Economy is red hot, and the consumer successfully deleveraged in 2010

          You misspelled “releveraged” and fat-fingered “2012”. All-time highs in every segment of consumer debt kinda paints a different story. The boom is fueled by cheap money, but unfortunately humans are too stupid to figure out it has to be paid back until it’s too late. BTW, it’s now too late. This sucker is going down.

    1. Eh, mortgage watch, with 62 units listed and a one percent distressed percentage, that means there is one distressed listing. Skyrocketing? I suppose if there are two next month you will say default rates are increasing by 100 percent a month.

  4. After yesterday’s story on the Testaverde house, I was expecting a lull, but there’s another sad/amusing housing-related story in today’s paper. Worth a read in full.

    “Florida officials used a federal fund designed to help struggling homeowners as a ‘deep pocket’ for travel and stays in high-end hotels, a new report says.

    Between 2011 and 2016, officials of the Florida Housing Finance Corp. charged the Hardest Hit Fund all or part of the cost of attending conferences in San Diego, Orlando, Miami, Boston and Nashville, Tenn., even though less than two hours out of four days of meetings in each instance appeared to be related to the Hardest Hit mortgage relief program.

    In other instances, housing officials used Hardest Hit money to pay for routine agency meetings at four-star hotels including the Vinoy Renaissance St. Petersburg Resort & Golf Club and the Hyatt Regency in Orlando, according to a report released today by the Special Inspector General for the Troubled Asset Relief Program.

    Many of the expenditures, which totaled more than $40,000 and violated federal regulations, came at a time when Florida had one of the highest rates of denying Hardest Hit help to homeowners who couldn’t pay their mortgages.

    …

    Two officials of Florida Housing billed nearly $1,000 for stays in the Vinoy, Tampa’s Epicurean Hotel and Orlando’s Castle Hotel to conduct ‘Realtor training.’ The agency provided no documentation ‘of what the training was about or whether it related to [the Hardest Hit Fund].”

    https://www.tampabay.com/business/florida-officials-used-hardest-hit-mortgage-relief-for-luxury-hotel-stays-20190307/

    1. Checking Redfin, a surprising spate of homes in my San Diego zip code went contingent in the last few weeks. All four of the properties I pass by on my evening walk went contingent in the space of about a week. Two of those had been on the market since last fall. A small data set which may not be representative but maybe the pull back in interest rates is boosting sales at the moment. Maybe March and April will see an uptick in sales that will have the real estate shills blanketing MSM with proclamations of a turn around and claiming victory over nay sayers.

        1. No. Even bubbles can have feints and nuances as they evolve. The great stock market crashes often display significant retracements before they completely unwind. I am just relating what I’ve seen in my area which was a dead market for about five months (posted about previously) and a sudden uptick in activity in recent weeks. So, no, It’s not John/Doug. No doubt we are in a bubble but that does not mean the bubble will deflate uniformly over time and across geographies. This has taken much more time than your snarky comment deserves.

          2. Don’t see how my original post could be seen as trolling. Was just pointing out we may have an uptick in sales that will result in a lot of crowing in the MSM about a “turnaround” in real estate. Is this somehow an unimaginable or impossible outcome?

  6. Does anyone follow David Stockman’s tweets?

    In 2 months we have gone from 3 more hikes and QT being on “autopilot” to ending QT, starting up QE and negative rates…

    2. You see why they (Felon Yellan or Bernanke “Butcher of the Middle Class” ) couldn’t raise rates during Obama summer of recovery? This fake Boom is brought by DEBTS up the ying yang. No matter who is in office, the chicken is coming home to roast!

      Interest rate cannot increase! Asset bubbles everywhere will POP! However, this is like kicking the can down the road!

      1. I’d say the RE bubbles have popped. In the past 24 hours I’ve read about new QT in the EU, the US and China. That’s coordinated central bank action.

        3. Going up, the roller coa$ter goes; … clickty-clack, clickty-clack, clickty-clack … then a calm rea$$uring $olthy pau$e, … then $udden like: whooooooo$$$h!

          (Yeah, ol’ Jeremry was a yappin’ a clear 14 month$ ago, that’$ a problem $ometimes, being forward thinkin’ & cautiou$!)

          “Why Is No One Li$tening to Jeremy Grantham?”

          “When legendary investor Jeremy Grantham heard a colleague recount sharing a bus ride from New Hampshire to Boston with a young woman who wanted to hen legendary investor Jeremy Grantham heard a colleague recount sharing a bus ride from New Hampshire to Boston with a young woman who wanted to $ell her hou$e to inve$t in $tocks, alarm bell$ went off. This, he thought, signaled the euphoria seen before a market cra$h.”

          It was late January, and the U.S. stock market had roared into 2018 posting new highs for six straight trading days. The woman wasn’t satisfied with her $300,000 house crawling up a few percentage points in value when stocks had risen by double digits annually since 2009. “She wants to be in the market,” says Grantham, who co-founded GMO in 1977, from his office on the Boston Harbor. And she was reaching for a 20 percent return.

          To the mind of Grantham, who called the major bubbles of 2000 and 2007, this story was more evidence of a “melt-up” in the stock market, which he had warned about just weeks before. This is when the market shoots up after several years of rising prices, signaling the final stages of a great bubble near to bursting, according to the 79-year-old

          As a value investor, Grantham has done plenty of homework on the stock market over the past half-century. He was not alive to witness the 1929 bubble, but has studied it closely. It’s true that data can flash warning signals that a bull market is heading for a steep fall, but it’s the “touchy-feely” — the traces of euphoria in ordinary situations — that is particularly telling, Grantham says.

          “The stories are more important than the price,” he says. “Be prepared for the fact that the market can break your heart on the upside.”

          The psychology of a bubble can be incredibly painful for asset managers with careers at stake, according to Grantham. In normal times it’s reasonable to believe clients are concerned about how well a manager can handle a downturn. “But in a bubble, forget it,” he says. “Clients care much, much more about underperforming all their friends on the golf course.”

          By Christine Idzelis | February 28, 2018
          Institutional Investor

          1. Going up, the roller coa$ter goes; … clickty-clack, clickty-clack, clickty-clack … then a calm rea$$uring $olthy pau$e, … then $udden like: whooooooo$$$h!

            Like Disneyland’s Thunder Mountain!

    1. “If you think about Seattle long-term, I don’t think buyers should have cause to think that if they buy now, they will be underwater in five years.”

      Man, that’s a lot of words.

      1. Something is up around here. Total number of listings in my zip is down, but I’m seeing a number of existing (not new construction) listings where the $ per sq ft being asked has spiked up compared to what I was used to seeing all last year.

        On the other hand, the couple that I’ve seen sell around my place recently accepted 10-15% price reductions from the initial listings (no pity for the sellers hoping for bidding war). Perhaps the spike in asking price is so they can issues a few price cuts to make it seem like a deal and stay at the top of the listings?

        Still haven’t seen anything remotely comparable come down to what I paid per sq/ft (ignoring lot size). Plenty of room for prices to fall (assuming they aren’t underwater).

  9. Zillow emails me listings for rentals now, more than once a day. Is this new or is the rental supply blowing up? It was not a thing, 12 mos ago.

    1. They are emailing me a lot too while the inventory changes very little in the area I’m watching. Every time the get to add a new place to the list it’s a big celebration. I can’t tell if everybody has piled into rentals or if this is the lull before the school year ends.

      I’m a little frustrated because one place became available that seemed to be exactly what we wanted and I inquired and filled out the application but expected to hear back from them before going further. Turns out if you don’t also paypal the deposit immediately you end up at the back of the line…live and learn. The good stuff seems to be in high demand.

  11. Why would investors HODL stocks at returns lower than Treasurys offer? Makes no sense…

    Investor credited with calling the 2008 crisis says the next 20 years in the stock market will ‘break a lot of hearts’
    Published: Mar 7, 2019 5:57 p.m. ET
    Jeremy Grantham on CNBC
    By Mark DeCambre

    Jeremy Grantham, an investor credited with predicting the 2000 and 2008 downturns, told CNBC on Thursday that investors should get inured to lackluster returns in the stock market for the next two decades, after a century of handsome gains.

    “In the last 100 years, we’re used to delivering perhaps 6%,” but the U.S. market will be delivering real returns of about 2% or 3% on average over next 20 years, the value investor and co-founder of Boston-based asset manager GMO told CNBC in a rare interview.
    …

    1. Here’s a chart that illustrates the Dividend Yield Theory …

      https://goo.gl/images/WAUeBz

      When stock prices are high then the dividend yield is low. When stock prices are low then the dividend yield is high.

      Buy low/sell high means buy when the dividend yield is high and sell when the dividend yield is low.

      Here’s a historical chart showing the dividend yield for the DJIA …

      https://goo.gl/images/9Z3DbR

      FWIW.

    2. If he’s right, a lot of people trying to approach retirement are going to be farked, and we’re going to see some even crazier return chasing behavior.

    3. Well, he will cheri$h his Bo$ton Harbor view, as the firework$ are going off. ( eye’s like ol’ Jeremy … )

    4. Investor credited with calling the 2008 crisis says the next 20 years in the stock market will ‘break a lot of hearts’

      That’s what we said 10 years ago too. And then the Fed got involved.

      1. But then the Fed never quite finished unwinding stimulus before more stimulus was on the way. I guess we’ll just have to wait and see whether or not it is really turtles all the way down.

  14. “Some of the steepest drops occurred in markets that were once the hottest in the U.S. In San Francisco, the share of sales drawing multiple offers fell from 82 percent to 18 percent; in Seattle, the share dropped from 69 percent to 15 percent;and in Boston they slid from 53 percent to 14 percent.”

    This is against the backdrop of an economic boom with near record low unemployment. It’ll get a lot more interesting when there are multiple houses on the market for each prospective buyer, and bid wars are a lingering memory of the Bubble years.

    1. an economic boom with near record low unemployment

      Well that’s confusing. If you subtract debt from growth we’ve been in free fall. Did those famous 10 million who left the official workforce all suddenly get jobs? I know a couple of engineers who landed gigs at the hardware store.

      1. Point taken. I was referring to the official statistics, and what will transpire when they deteriorate.

      2. Did those famous 10 million who left the official workforce all suddenly get jobs?

        I gave up as did a friend/colleague in the same profession. After years of being out of work, she’s now got a part-time gig with a law firm doing something slightly different. Another friend/colleague isn’t happy either.

    1. Really?, Quit pickin’ on towns that have been “burned” in other way$. geez, you’re worse than Lucy holding the football for Chuck to kick!

  16. Let’s same interest rates peaked and down we go again to lower lows. Now what? Mo cheap money, mo bubbles… Or NIRP forcing people to spend?

  17. “It’s even worse for those who have been subjected to deceptive and predatory lending practices at auto dealers.”

    Just STFU USA Today. Deceptive practices my arse. We’re back to calling people who overextend themselves victims again, eh? How long before AOC and Bernie call for auto loan forgiveness. Hey man, it’s not your fault you signed up for a $800/mo BMW lease. It’s that darn deceptive and predatory lending practice at the BMW dealership. They put a gun to your head and forced you to sign on the dotted line. Right?

  18. Really?, Quit pickin’ on towns that have been “burned” in other way$. geez, you’re worse than Lucy holding the football for Chuck to kick!

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