The Prices Were Fantasies
A report from CNBC. “The most expensive real-estate in America just became a little less expensive — with $1 billion in price cuts among America’s top listings over the past few months, according to a CNBC analysis. The high-end real-estate market has seen steep price cuts in recent months as foreign buyers dry up, new tax laws bite the wealthiest states and sellers realize the market peak of 2014-2015 isn’t coming back anytime soon, luxury brokers say.”
“According to RedFin, the real-estate brokerage and research firm, fully 12 percent of homes listed for $10 million or more saw a price drop in 2018 — double the levels of 2016 and 2015. Just over 500 listings in the U.S. had a combined price cut of $1 billion in the second quarter, according to RedFin.”
“Some of the price cuts have reached tens of millions of dollars, according to the listing. The Ziff family estate in Manalapan Florida cut its price in May by $27 million, from $165 million to $138 million. That follows a previous price cut, from $195 million last year — so it’s price has dropped by $57 million over the past year.”
“A 10-bedroom mansion on Miami Beach’s posh Star Island cut its price by $17 million in May, from $65 million to $48 million. A giant apartment at New York’s Sherry Netherland had its price cut by $18 million, falling from $86 million to $68 million.”
The cuts follow a spate of even bigger cuts earlier this year. The $250 million mansion in Bel Air California known as ‘The Billionaire’ became America’s most expensive listing when it came onto the market for $250 million in 2017. In April, the price was cut by a massive $62 million, to $188 million. A spec home in Beverly Hills, called Opus, was listed in August of 2017 for $100 million, but the price was cut to $85 million a month later. The late Johnny Carson’s estate in Malibu, Ca. saw its price drop by $16 million, to $65 million from $81 million.”
“Even homes that see big price cuts are selling for less than their discounted prices. A 20,000 square-foot mansion in the Hamptons, once owned by fashion mogul Vince Camuto, was first listed in 2008 for $100 million. Its price got chopped to $72 million, and it sold this spring for around $50 million – half of its original listing price.”
“The reasons for the price drops are many. In some cases, the prices for the homes were fantasies. Sellers had irrational expectations or they were using the sky-high prices to attract attention to their properties. The luxury real-estate market has fallen since its peak in 2014 and 2015, and many sellers are finally adjusting to a different market.”
“Supply of homes at the high end is also high, especially for newer condos and spec homes in New York, Los Angeles and major metro areas. ‘There could be an over-supply of these high-end homes,’ said Taylor Marr, a senior economist at RedFin.”
‘In some cases, the prices for the homes were fantasies. Sellers had irrational expectations or they were using the sky-high prices to attract attention to their properties. The luxury real-estate market has fallen since its peak in 2014 and 2015′
Yep, this went along with the “safe deposit box in the sky” bubble phenomenon. Now it’s in its fourth year of crater and picking up speed. What kind of fool builds a $250 million spec shack? But at the time the media was ooh, ahh!
“Some of the price cuts have reached tens of millions of dollars, according to the listing. The Ziff family estate in Manalapan Florida cut its price in May by $27 million, from $165 million to $138 million. That follows a previous price cut, from $195 million last year — so it’s price has dropped by $57 million over the past year.”
This was one of those fantasy listings. It was never “worth” anything close to what they were asking, and nobody ever paid that for it.
Bellevue, WA Housing Prices Crater 13% YOY As Double Digit Price Reductions Envelop Seattle Area
https://www.movoto.com/bellevue-wa/market-trends/
timberrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr
‘Scared to go outside: Some downtown Denver residents say crime is growing along with homelessness’
That’s what I posted about earlier. Hipsters are moving into expensive condos and townhomes in gang ridden areas next to housing projects and homeless shelters, and then complain about the crime. Don’t get me wrong, there are a lot of kind poor people, but there is also a higher concentration of extreme addicts, felons and unemployable people who must commit crime to stay alive. Who doesn’t know this?
https://www.zillow.com/homes/for_sale/Five-Points-Denver-CO/pmf,pf_pt/_type/268662_rid/600000-9000000_price/2404-36055_mp/globalrelevanceex_sort/39.784333,-104.945527,39.734518,-105.029383_rect/13_zm/
Those are listings in what was previously known as unlivable gangland, but now one of our trendiest areas (Little 5 Pts, Curtis Park and RiNo).
concur with this. They have started gentrifying mini-neighbourhoods near Denver General. Then they complain when they move into renovated $600K small houses and have people that they consider not worthy of being around.
Where do they think these people would go
“Where do they think these people would go?”
If it were up to me I would load them into a bus and send them to the welcoming arms of San Francisco.
Nevada tried something like that, SF didn’t like it too much:
http://www.sfexaminer.com/sf-reaches-400k-settlement-proposal-in-nevada-patient-dumping-case/
Thanks NV, I think they sent the other 1476 loonies here to Santa Cruz 😡
I thought they wanted that gritty urban experience?
Denver, CO Housing Prices Crater 15% YOY On Surging Violent Crime
https://www.zillow.com/speer-denver-co/home-values/
*Select price from dropdown menu on first chart
Nashville, TN Housing Prices Crater 16% YOY As Panic Selling Begins
https://www.zillow.com/charlotte-park-nashville-tn/home-values/
*Select price from dropdown menu on first chart
Should say ” as Nashville runs out of guitar strings”
‘the prices for the homes were fantasies…Sellers had irrational expectations’
Sounds kinda bubbly CNBC.
‘Supply of homes at the high end is also high, especially for newer condos and spec homes in New York, Los Angeles and major metro areas. ‘There could be an over-supply of these high-end homes’
Shortage?
Home prices rise 3X faster than rents. Remind me again why I should overpay for a house vice renting and being a popcorn-munching spectator for the implosion of Housing Bubble 2.0.
https://www.builderonline.com/land/local-markets/home-prices-rise-3x-faster-than-rents_o
Well if its your last house, your toe tag house spend it all, live it up, spend all your equity…..and your kids and family will curse your grave for pissssing away their inheritance.
I am amazed at how few people understand interest rates, I keep trying to explain it to my inlaws. 2 years ago, a million dollars would have generated you $2500 a year in interest in a short term money market. Now that same million can generate you $20,000 a year. Thats quite a difference. At some point that is going to get more people to choose bonds over housing and stocks, or at least that was how it used to work.
Stocks have been averaging 10% or more per year for the last decade. The problem is that houses have also going up 10% or more per year. Note that its not a wash because even with 20% down on the house you could leverage debt so that you actually were making a 100%+ ROR (i.e. its measured against the 200k you put down on that million dollar property, not the million dollar price tag). No one would ever allow you to buy stocks on 80% margin. As property prices fall, such leverage works in reverse which results in a foreclosure crisis as people that bought near the top get crushed. I don’t like to buy long term bonds until they are over 5% as they fall in value as interest rates rise. In addition, regardless whether people understand what investment is the most sound at any point in time, rising rates cap the affordability of a home at lower prices. Thus, the decision is made for them as they don’t qualify for more house. Note that I’m not disagreeing with you, I just wanted to point out that leverage and caps are the real key.
“Stocks have been averaging 10% or more per year for the last decade”
This is true but a decade ago (2008) stock prices were historically low. If one were to buy stocks today he would be paying prices that are historically high.
Here’s a chart …
https://en.m.wikipedia.org/wiki/Cyclically_adjusted_price-to-earnings_ratio#/media/File%3AS%26P_500_Shiller_P-E_Ratio.png
Here’s an informative read …
“Market Cycles: The Key To Maximum Returns | Investopedia”
https://www.investopedia.com/trading/market-cycles-key-maximum-returns/
I understand what you are saying. Leverage makes you money fast and takes it even faster when you realize that trivial 4 % loan still needs to be paid back. Been there, done that. I fell very lucky that I learned that lesson when I was young. I was very into internet stocks and am thankful for the lessons I learned when I was young.
I know many ppl that bought tech on margin during the bubble. Hope you did ok. You would think some people would learn after getting burned, but those that lost during the first bubble jumped right back in as soon as they could get the fianancing, and the government was not only complicit but encouraged it.
“…Note that its not a wash because…”
Yes, but. Stock certificates don’t pay property taxes nor do they require a coat of paint or new roof.
I agree with the spirit of your calculations, but a real world typical R/E buy/hold/sell transaction is a lot less lucrative than Mr. REIC would lead you to believe.
Even Warren Buffett can’t get his greedhead wish price.
https://www.marketwatch.com/story/warren-buffett-drops-price-on-laguna-beach-house-after-more-than-a-year-on-the-market-2018-08-31
Billionaire investor Warren Buffett is slashing the price of his California beach house to $7.9 million, after putting it on the market for $11 million in February 2017, according to a spokeswoman for the listing agent.
If the property sells for its new asking price, Mr. Buffett will still make an impressive return, having paid just $150,000 for the home in the early 1970s.
Oh dear…pity the FBs that just had to get up on that housing ladder.
https://www.theguardian.com/business/2018/aug/31/uk-house-prices-record-biggest-month-on-month-fall-in-six-years
UK house prices record biggest month-on-month fall in six years
UK house prices have had their biggest monthly fall for six years, lopping more than £2,200 off the typical price tag, according to Nationwide.
The average property value fell by 0.5% – or £73 a day – in August, the biggest month-on-month decline since July 2012, Britain’s biggest building society said. In July, house prices increased by 0.7% month on month.
The decline is likely to have been driven by falling prices in London, which is in the grip of a slowdown. Earlier this month, Office for National Statistics data showed prices in the capital were falling at their fastest annual ratesince the depths of the financial crisis.
FBs there can hide their shame by wearing burkhas. An additional benefit is they wont be a target for getting stabbed, run over, or have acid thrown in their faces.
#NewNormal
‘fully 12 percent of homes listed for $10 million or more saw a price drop in 2018 — double the levels of 2016 and 2015. Just over 500 listings in the U.S. had a combined price cut of $1 billion in the second quarter’
A billion! And that’s after falling for years. Where’s Outlier Man? Have I got some crow for you!
Here’s an idea for a franchise in a growth industry …
“Crows for sale”
Perhaps the franchise owner could offer customers recipes to go along with their purchases of crows.
https://softbillsforsale.com/crows-jays.asp
Sounds like a lot of Chinese real estate investment proceeds are vaporizing about now.
“UMich Economic Conditions Worst Since Election As Spending Plans Plunge”
(snip)
“Home buying conditions were viewed less favorably than anytime since December 2008
“Vehicle buying conditions were viewed less favorably than since late 2013
“Buying conditions for household durables were viewed less favorably than since late 2015.”
https://www.zerohedge.com/news/2018-08-31/umich-economic-conditions-worst-election-spending-plans-plunge
“Blanket of uncertainty.” Another term to add to our REIC lexicon of woe.
https://www.telegraph.co.uk/property/house-prices/house-price-growth-falls-six-year-low-amid-blanket-uncertainty/
House price growth fell to a six-year low in August as subdued economic activity and stretched household budgets dragged month-on-month growth down by 0.5pc, the largest monthly decline since the London 2012 Olympics.
On an annual basis, growth fell to 2pc, down from 2.5pc in July, according to Nationwide.
Greenville, RI Housing Prices Crater 21% YOY As Providence Housing Bust Expands To Suburbs
https://www.zillow.com/greenville-ri/home-values/
*Select price from drop-down menu on first chart
Lots of black swans taking wing. Who knew that the trillions of Yellen Bux that fueled speculative bubbles in “emerging markets” would one day have to be paid back. Or not. Can you spell “systemic contagion risk” boys and girls? I knew you could.
https://www.bloombergquint.com/opinion/2018/08/31/this-emerging-market-selloff-looks-contagious#gs._XHpk9g
“A 10-bedroom mansion on Miami Beach’s posh Star Island cut its price by $17 million in May, from $65 million to $48 million.”
Well of course, no one wants to buy a house on the beach, it will soon be underwater (literally) due to rising sea levels!
https://www.cnbc.com/video/2018/08/29/climate-gentrification-altering-home-values-miami.html