Where Have All The Buyers Gone?
A report from Curbed Los Angeles in California. “For the first time since January, home prices in Los Angeles County fell month-to-month in July, according to CoreLogic. The median sale price for the month was $607,500, down 1.2 percent since June, when home prices soared to a record-high $615,000. LA’s all-time price record had been shattered in each month leading up to July. But real estate experts have predicted that Southern California’s hot real estate market could be cooling off. A recent analysis from Zillow found that the number of homes on the market with price cuts is up since the beginning of the year, suggesting that buyer interest may be waning.”
“Rising mortgage interest rates are making even small jumps in sale prices significantly more difficult for buyers to cover. Factoring in interest rate growth, median mortgage payments were around 13 percent higher in July than a year ago, according to CoreLogic analyst Andrew LePage. That may also be contributing to an drop in the overall number of home sales. In LA County, 6,971 homes sold in July—down from 7,607 a month earlier. LePage says declining sales can’t be explained by the number of houses on the market.”
“‘The overall trend in recent months, has been toward more listings,’ he says. Instead, it’s possible that many home shoppers are simply ‘unable or unwilling to buy.’”
The Orange County Register. “Todd and Jennifer Martindale wanted to sell their starter home in Whittier and buy a home with a bigger kitchen closer to family and their son’s school in Placentia. After eight months, they abandoned their search. Rising prices and higher interest rates made it impossible to afford a new home in that area — even with the added cash they’d get from the sale of their old house.”
“‘Our mortgage payments would go up $400 or $500 a month, which we just couldn’t swing,’ said Todd Martindale, 43, a software developer. ‘We saw the grass was not greener on the other side.’”
“Discouraged home buyers may be behind the current market slowdown that’s transforming Southern California from a clear seller’s market into one where homes sit longer and owners are dropping their asking prices, market watchers said. After three years of smoking-hot sales and soaring home prices, Southern California has seen year-over-year sales drops in eight of the past 12 months, according to CoreLogic. The California Association of Realtors, which tracks sales of single-family homes, reported year-over-year declines in 10 of the past 12 months.”
“As a result, the number of homes on the market mushroomed. Southern California listings increased to nearly 46,000 homes by Aug. 23, up by nearly 7,100 — or 18 percent — from the same period last year, according to Steve Thomas’ Reports On Housing. ‘For years, sellers have been in control of the housing market. Multiple offers were generated almost instantaneously after hammering in the for sale sign,’ Thomas said in his latest report. Today’s market, Thomas wrote, ‘does not favor sellers or buyers.’”
“So, where have all the buyers gone? Market analysts say many are being priced out. ‘High home prices and rising interest rates combined to crimp housing affordability, which in turn is subduing home sales,’ California Realtor President Steve White said. ‘Some of the reluctance by buyers appears to be driven by fears that the market may be peaking.’”
‘For years, sellers have been in control of the housing market. Multiple offers were generated almost instantaneously after hammering in the for sale sign’
Gosh, I hope no one overpaid in such an environment.
Multiple offers were generated almost instantaneously after hammering in the for sale sign’
And now the winners of those bidding wars get to see their shack values plummet, while their mortgage payment and debt stays the same.
They must feel so clever to not be throwing away money on rent.
“… while their mortgage payment and debt stays the same.”
😁
‘Southern California has seen year-over-year sales drops in eight of the past 12 months…The California Association of Realtors, which tracks sales of single-family homes, reported year-over-year declines in 10 of the past 12 months’
‘As a result, the number of homes on the market mushroomed. Southern California listings increased to nearly 46,000 homes by Aug. 23, up by nearly 7,100 — or 18 percent’
And just as the builders went into overdrive (which we were told was unpossible).
Come on Ben, didn’t you get the memo? We need to build more houses!
/S
“‘The overall trend in recent months, has been toward more listings,’ he says. Instead, it’s possible that many home shoppers are simply ‘unable or unwilling to buy.’”
I hope CoreLogic is paying Andrew LePage the big bucks that such penetrating market analysis and insights deserve.
‘Some of the reluctance by buyers appears to be driven by fears that the market may be peaking.’”
No, Steve-o, it’s crystal clear that the peaking has already occurred. With inventory rising and prices dropping, no one wants to be a knife catcher, except, of course, those who are bound and determined to become cautionary tales.
I heard on the radio this morning that the problem is the Trump tariffs on lumber from Canada! It’s now much more expensive to build homes in the US.
Are you listening to some liberal radio? https://www.nasdaq.com/markets/lumber.aspx?timeframe=1y
Prices have gone up temporary but have crashed back to almost where they are at before. As Ben said, the problem isn’t the lumber cost, it’s the land cost. Most of these builders brought land during the bubble days and it’s too expensive for them to build and sell anything other than luxury units. The problem is supply and demand. There is an oversupply of luxury everything and the crash is only beginning! Grab some popcorn and take a seat.
I had a close relative decide to pull the trigger on building a new home they can barely afford because the homebuilder showed them the lumber chart and said lumber prices were never coming down. So stupid.
I’m sure when new home prices drop, they will default on this new home, but only after securing a new mortgage on one of the new lower priced homes.
So I looked into it and lumber costs in a home is like ~$4,000. So prices going up 50% is nothing.
I love the lumber excuse because it’s super fabricated, but the average person doesn’t know that lumber is 1%-3% of the cost of home.
Just ask a random person what % of the cost of a new home is lumber and people will guess 25%, 50%. No one guess anything close. That’s why it’s part of the narrative.
Thanks for the insight Patrick.
This makes no sense. Lumber scarcity would mean fewer houses which would drive up competition and demand, not lower it, yet we are seeing the opposite.
Ahem …
https://finviz.com/futures_charts.ashx?t=LB&p=d1
Today’s market, Thomas wrote, ‘does not favor sellers or buyers.’”
-In a few months, it will not favor realtors either.
“So, where have all the buyers gone? Market analysts say many are being priced out. ‘High home prices and rising interest rates combined to crimp housing affordability, which in turn is subduing home sales,’ California Realtor President Steve White said. ‘Some of the reluctance by buyers appears to be driven by fears that the market may be peaking.’”
- You mean no one wants to buy at the top of the housing bubble 2.0? On come buyers! You need to grow a spine you cowards!!! Where is Steve gonna get his commission checks to pay for his Tesla and Rolex watches?
‘Market analysts say many are being priced out…
…Some of the reluctance by buyers appears to be driven by fears that the market may be peaking.’
Buyers priced out + other Buyers not willing to catch knives = look out below!
Imagine a scenario where buyers all but disappear, while inventory surges and FB sellers who belatedly realize they way overpaid want to get out from under their plunging “asset” at all costs.
Say, isn’t that what happened the last time around?
also = lots of opportunities for those with patience and cash.
Today’s market, Thomas wrote, ‘does not favor sellers or buyers.’”
The REIC needs more artful dissemblers. Today’s market certainly doesn’t favor buyers, because prices are way too high and the downside risk vastly outweighs the upside potential. Sellers who can snag the last of the Greater Fools or the first wave of knife catchers can congratulate themselves for dodging a bullet. But as inventory surges and prices drop, the ranks of underwater FBs desperate to cut their losses and get out from under their alligator are going to grow exponentially, until the tipping point is reached and the bottom drops out of the market, just like the last time around. Only this time, no Fed bailout is going to be forthcoming, since that ammo was all shot up already.
Nice to be watching all this from the sidelines, ay, fellow renters?
LOL.
People here at HBB have talked about buyers ruled by emotion, not reason, when deciding on a home purchase. I’d say this provides some evidence for that.
—————
“Millennials put pets first when buying a home”
https://www.cnbc.com/2018/08/31/millennials-put-pets-first-when-buying-a-home.html
San Francisco, CA Housing Prices Crater 13% YOY As Banks Choke On Toxic California Mortgages
https://www.zillow.com/san-francisco-ca-94109/home-values/
*Select price from dropdown menu on first chart
‘LePage says declining sales can’t be explained by the number of houses on the market. ‘The overall trend in recent months, has been toward more listings’
And that’s an about face. For a long time declining sales were cuz da shortage! Now you have supply pouring in from every angle and sales go crater even more.
Let’s review: when prices were shooting up like a rocket: multiple offers over asking. The opposite of how supply and demand works. Now there’s plenty of inventory and prices are falling, buying dries up. Again, the opposite of how supply and demand works.
It’s is however clearly explained by a speculative market, which is what we got here.
And who would have thought 6 months ago we’d be reading “So, where have all the buyers gone?” in the Orange County Register? Similar rapid turns happened in Toronto, Vancouver and Sydney.
“It’s is however clearly explained by a speculative market, which is what we got here.”
Indeed. From Wikipedia …
“Speculation is the purchase of an asset (a commodity, goods, or real estate) with the hope that it will become more valuable in the near future.”
(snip)
“Many speculators pay little attention to the fundamental value of a security and instead focus purely on price movements. Speculation can in principle involve any tradable good or financial instrument. Speculators are particularly common in the markets for stocks, bonds, commodity futures, currencies, fine art, collectibles, real estate, and derivatives.”
Bitcoin, anyone?
I ain’t done much mathin’ in school but I feel like there should be an equation where demand is affected by interest rates more dramatically as home payments consume a higher percentage of household income. You might stretch a payment to go from 30% of your gross to 35% percent, but when you’re looking at going from 50% to 55% it’s much more painful. Marginal pain.
On the other side, price to rent ratios are at 2004 levels so new home buyers are reading the Audacity of Nope. And nobody is dumb enough to move up into a bigger home given the higher interest rates.
The production possibilities curve (frontier) is the graph you’re looking for as it accounts for increasing opportunity cost.
Er… don’t you mean the household budget constraint?
“Update on Rental Bubbles & Crashes in US Cities | Wolf Street”
“Rents plunge in Chicago & Honolulu, spiral down in New York, Washington DC, & others, but surge in many markets”
(snip)
“Every market has its own dynamics”
https://wolfstreet.com/2018/08/31/1-2-bedroom-rents-new-york-san-francisco-los-angeles-chicago-100-most-expensive-cities/
Note it’s worse than the numbers would suggest. For example, Denver has the most apartments being constructed per person than any other city in America. They are almost all in the luxury category with insanely high rents. Although your link has Denver with the highest rent increase, I rent in Denver at ground zero, union station. I know for a fact that rents are falling (often disguised in the form of free months rent, etc.) because I know the rents in most of the buildings here. The mean rental rise is due to all the new buildings having much higher rent than existing buildings, but they are giving all sorts of concessions.
https://wolfstreet.com/2018/07/24/biggest-apartment-construction-boom-towns-are-not-what-you-may-think/
Thanks for the boots on the ground insight Tim.
Washington DC Housing Prices Crater 22% YOY As Crashing Housing Market Sinks Homeowners Deeper Underwater
https://www.zillow.com/washington-dc-20007/home-values/
*Select price from dropdown menu on first chart
With apologies to Pete Seeger:
Where have all the buyers gone, long time passing?
Where have all the buyers gone, long time ago?
Where have all the buyers gone?
Realtors hosed them, everyone.
Oh, when will they ever learn?
Oh, when will they ever learn?