August 30, 2018

The Craze Has Calmed Down

A report from the Ventura County Star in California. “Home sales and median housing prices slightly declined throughout Ventura County and the rest of Southern California last month. Ventura County sold 947 homes at a median sale price of $595,000 last month, according to CoreLogic. The county’s home sales and median housing prices slightly declined from June to July. Ventura County saw a 0.5 percent drop in home sales during that period, though the difference was only five home sales, while the median home sale price decreased by 3.3 percent from June’s $615,000.”

“The same holds true for the rest of Southern California, which also saw slight declines in median housing prices and number of homes sold. Southern California’s median housing price was $530,000 last month, a 1.3 percent decrease from June’s $537,000 median housing price. There were 21,277 sold in Southern California last month, a 6.6 percent decline from June’s 22,786 homes sold.”

“Buyers may be hesitant to buy into Southern California’s pricey housing market, which could be responsible for the middling year-to-year sales growth, said Andrew LePage, a CoreLogic research analyst. ‘While low inventory is still constraining sales in some areas, the overall trend in recent months has been toward more listings, suggesting that sales also remain weak relative to current housing demand because more and more would-be buyers are unable or unwilling to buy,’ LePage said.”

The Los Angeles Times. “The Southern California median home price slipped in July from June’s record high, but it was still up 5.8% from July 2017, according to CoreLogic. The report showed that last month’s median price — the point at which half the homes sold for more and half for less — clocked in at $530,000 in the six-county region. That’s down $7,000 from June’s all-time high. Some agents say the market is slowing as families increasingly find it difficult to afford a home.”

“‘The craze has calmed down,’ said San Fernando Valley real estate agent Matt Epstein. Epstein said more homes are coming up for sale in the southeastern area of the San Fernando Valley he specializes in. As a result, buyers are being more selective, causing some properties with ‘unrealistic’ asking prices to sit. ‘I have seen a more patient-level buyer instead of that feeding-frenzy buyer,’ Epstein said.”

“Unless there is a recession, economists generally expect prices to continue rising. Gains may slow as more people become priced out. The economy is too healthy and the shortage of homes for sale is too severe to expect a drop, they say. ‘I definitely don’t foresee a dip,’ said Selma Hepp, chief economist with California brokerage Pacific Union International. ‘It goes back to the inventory question — there continues to be a lack of inventory.’”

From the Orange County Register. “Another curious puzzle in the purportedly supply-short Southern California housing market has popped up: Why are sales sluggish and inventories rising as local builders construct homes at their fastest pace in a decade? According to data from MetroStudy, builders completed 3,336 homes for sale in Los Angeles, Orange, Riverside and San Bernardino in the second quarter. That’s up 19 percent in a year and the highest standing inventory since the early days of the economic recovery in 2012’s second quarter.”

“But the added inventory comes amid an unusual year for existing homes coming to market and depressed overall sales activity. Inventories for existing homes actually rose during the prime homebuying season. ReportsOnHousing found an average 29,684 existing homes listed for sale in the four counties in the second quarter, as inventory rose by 1,922 homes since the start of the year. In the previous five years, the traditional springtime homebuying rush lowered supply by an average 1,739 homes through June.”

“A key reason for bloated supply? Buyers balked. CoreLogic reports sales of all residences — new and existing — in the four counties in the April-to-June period were down 4.8 percent vs. the previous year.”

“But developers aren’t blameless in their current supply dilemma. In their return to serious homebuilding, they may have misread the market’s thirst for higher-end new homes. Note: The median price of a newly constructed Southern California home sold in June: $581,000 vs. $537,000 for the overall market.”

“This all translates to builders now controlling a swollen share of homes for sale. Across the four counties, newly constructed residences made up 10.1 percent of all homes — new and existing — available to buy as of June. Two years ago, builders controlled just 6.8 percent of regional supply.”

“Orange County has seen the biggest swing. Builders had 1,022 homes for sale as of June, up 340 homes or 50 percent in a year. That meant new builds made up 15.7 percent of the options for house hunters. Two years ago? Just 6.5 percent. The growing inventory of unsold homes might create painful flashbacks of the real estate bubble that burst a decade ago.”

The Half Moon Bay Review. “Let’s face it, everybody wants a deal. It’s human nature. The Bay Area and particularly the Peninsula has been hot for years. So, are there any deals out there in real estate today? I’d focus on homes that have had price reductions and have been on the market for more than 30 days.”

“As I write this, there are 66 available homes and 96 homes in total on the coast. Inventory levels have been low for a few years now. In fact, today’s levels have been relatively the same for the past 3 years. Of the total inventory, 28 percent have had price reductions and 52 percent have been on the market over 30 days.”

“Not surprisingly, the market gets softer as the price gets higher. More than one-fourth of all the price reductions have taken place in homes prices over $2 million, another 30 percent have taken place between $1.5 million and $2 million, 37 percent between $1 million and $1.5 million and only 7 percent are under $1 million.”

“The same thing can be said for homes sitting on the market more than 30 days. The market gets softer as the price gets higher. The difference between the percentages of homes having price reductions and lengthy days on market has to do sometimes with seller reluctance to making adjustments based on lack of activity over time. While there can be many reasons why homes sit on the market such as style, condition, location but it usually boils down to one thing: price. Everything will sell at a price.”

“If you look for homes that have been on the market longer I think you will find less competition or possibly be the only bidder. The seller may be starting to realize that the asking price isn’t going to happen or it would have already sold. And best of all, instead of paying over asking price with little to no contingencies, you can buy it for below asking price on your terms. Isn’t that a nice change?”


A report from Bloomberg on New York. “When a three-bedroom condo in Tribeca got its fourth price cut in a year, the sales broker, Steve Snider, didn’t leave it at that. He also spiced up the listing to make sure potential buyers didn’t miss the news. ‘New price. Motivated seller. Bring offers!’ reads the pitch for the 2,287-square-foot (212-square-meter) apartment at 71 Laight St., revised last month. The current asking price, $5.795 million, is less than what the seller paid three years ago.”

“The days when Manhattan homes practically sold themselves are over. Now, buyers fearful of overpaying are on the sidelines, and sellers and their brokers are looking for ways to coax them off. Agents are reworking their listing texts to signal that their clients’ attitudes have shifted after years of clinging to lofty price goals — that they are, in no uncertain terms, willing to make a deal.”

“Phrases like ‘Price improvement!’ and ‘Bring all offers!’ — even the promise of free cupcakes — are being deployed to lure shoppers to lingering properties. ‘PRICED TO SELL RIGHT NOW! $200,000 MASSIVE PRICE CUT! OWNER SAYS TODAY!’ reads a listing by Corcoran Group’s Laurie Lewis for a Chelsea condo that’s been for sale since the end of 2017. The actual price cuts — two since it was first offered at $3.195 million — generated much more response than anything in the descriptive text, Lewis said in an interview. But every bit of cheerleading helps at a time when buyers won’t bite unless they feel they’re getting value, or a steal.”

“Especially with properties that have been on the market for a while, ‘buyers are coming in and doing tremendous lowballing — and I don’t mean 10 percent,’ Lewis said. ‘Even when the asking price can clearly be recognized and comped out as a real value, buyers are still insisting they get more for their money.’”

“That’s what prompted Kimberly Jay of Douglas Elliman Real Estate to tout a Greenwich Village townhome, now listed for $4.99 million, as a bargain. ‘Over $1 Million Dollar Price Drop! Originally $6.1 Million. Rare opportunity!’ the broker wrote after a July reduction for the four-floor property on West 11th Street.”

“Expect the come-ons to keep on coming. A surge of inventory is predicted for September, when listings that were pulled from the market make their eventual return, said Grant Long, senior economist at StreetEasy. Ultimately, the words mean nothing if the price isn’t attractive enough to back them up, Snider of Core said. ‘You’ll see a listing that says ‘Best Value in Tribeca,’ and it’s been on the market for 158 days,’ Snider said. ‘You’d think you might want to update your text, dude.’”

Prices Are Falling Even In Longtime Hot Spots

A report from the Downey Patriot in California. “Financial Partners Credit Union hosted its second annual Gateway Cities Economic Forum last Thursday at the Rio Hondo Event Center, featuring economist Christopher Thornberg as its keynote speaker. Thornberg noted the slowdown in the rate of job growth within the region, and the related factors contributing it. ‘The slowing we’re seeing boils down to a lack of bodies…if you don’t have a person, you can’t hire them, and we hit that wall,’ said Thornberg. ‘Labor force is basically growing at a fairly slow basis.’”

“Some of this issue boils down to homes, or as Thornberg alluded to, a lack thereof. ‘Everybody talks about housing, and you should. But how we talk about it is fairly important,’ said Thornberg. ‘It’s not a bubble; bubbles are over-building or over-borrowing; nothing like that is occurring. We need more housing, and we’re just not building it.’”

The Orange County Register. “Orange County homebuilders are trying to sell their largest supply of completed new homes in 12 years. According to Metrostudy, local builders had 1,022 newly constructed residential units ready for immediate sale in the second quarter, up 340, or 50 percent, in a year. That’s the highest level since the end of 2006. For those who get antsy about overbuilding, builder inventories averaged 458 in the previous boom years of 2004-2007.”

“Metrostudy found 2,780 residential units under construction, off from the recent peak of 3,087 in last year’s third quarter — the fastest development pace since 2006. Note: Construction averaged 3,012 units in 2004-2007. And builders have amped up their inventories of ready-to-build lots. The 6,208 available in the second quarter was down 841 (12 percent) in a year but lots counts averaged 2,385 in 2004-2007.”

“Builders aren’t the only home sellers facing rising inventories. ReportsOnHousing says there were 7,001 existing homes and condos listed for sale as of Aug. 23, the largest supply of resale housing on the market since September 2016.”

From NBC Bay Area. “The government says pending home sales in the United States are down for the seventh straight month. In the Bay Area, that translates to more time on the market and fewer bidding wars. For Robert Hernandez, a longtime renter in the Bay Area who works in tech, the drop in bidding wars gives him hope he now has a chance to purchase a home.”

“‘That is amazing news for us,’ Hernandez said. ‘But it’s great to hear that there’s not so many bids going in per house anymore.’”

“Realtor Mike Gaines said prices on large properties are falling too, even in longtime hot spots. He called the housing shift a correction in the market.”