Once The Market Starts To Soften: ‘Get Out Of Dodge”
The Real Deal reports on New York. “Forget about aspirational pricing. Sellers serious about offloading their luxury apartments will need to slash prices to find buyers who have plenty of new development alternatives to choose from, top brokers said. After a slow start to the typically busy fall, agents said they’re just beginning to move product – and only when their sellers get real about asking prices. ‘Most sellers are absolutely not realistic,’ said Dolly Lenz, speaking at a conference hosted by the magazine Haute Living. ‘They’re buying into the hype and they’re bringing it to the brokers and saying, ‘Oh no, my apartment will sell for $15 million.’ Well, the last sale in your building was for $8 million.’”
“Some sellers appear to have gotten the message. Approximately 650 New York City listings lowered their ask by at least 5 percent over the last 30 days, compared to 419 listings in the previous 30-day period, according to StreetEasy. A total of 29 of those homes were priced at $10 million and up. ‘Everyone expected there to be an uptick in activity coming back from Labor Day but there wasn’t,’ said Compass’ Leonard Steinberg. ‘In November, all of a sudden the email inboxes are cluttered with price reductions.’”
The Miami Herald in Florida. “Pop star Pharrell Williams is giving the sale of his downtown Miami penthouse another try — and he’s willing to take a $1.6 million hit to get rid of it. The 42-year-old singer relisted the 40th-floor penthouse at Bristol Tower after more than a year off the market. According to MLS listings, Williams now wants $10.9 million for the three-floor, 10,000-square-foot crib. One drawback: Property taxes currently are about $60,000 a year.”
“Williams bought the place at the height of the real estate boom for $12.9 million. He has been trying to unload the digs for more than two years. The singer first listed it in November 2012 for a whopping $16.8 million, but the sale price melted steadily until Williams pulled it off the market a year ago.”
The Mercury News in California. “Home sales slowed in October across the Bay Area, dropping by just under 2 percent from the year before even as prices kept going up. Median sale prices rose, though not by the double-digit margins that had become routine for some parts of the region during the frenzy of the past several years. In Santa Clara County, a typical home sold for $869,000, up 6 percent from $820,000 in October 2014 — though down from $910,000 in September 2015.”
“Pleasanton-based agent Steve Mohseni, described ‘a general softening of the market. We may be heading into a period when appreciation will slow down compared to what we have been seeing over the past five years. Buyers are rethinking, pausing.’ After years of record prices, he said, ‘their willingness to pay more into new highs will be somewhat limited.’ The situation is pushing some potential sellers off the fence: ‘Once the market starts to soften, then people start thinking, ‘Well, let me get out of Dodge.’”
The Press of Atlantic City in New Jersey. “Atlantic County may be at ground zero for people losing their homes, with the nation’s highest foreclosure activity, but it is not alone in facing scores of abandoned properties. The was clear this week at the New Jersey State League of Municipalities meeting in Atlantic City, when a workshop called ‘Creative Solutions for Vacant Properties’ attracted more than 500 local government officials from all over the state. The huge crowd forced organizers to move the session from a regular room to a cavernous conference room.”
“‘In all my years of coming here I have never seen anything like this,’ said Michael L. Zumpino, CEO of the consulting firm Triad Associates, of Vineland, a member of the panel. ‘This large crowd shows it’s not just an urban city problem, it’s a problem for all of us,’ said Walter Denson of Trenton’s Housing and Economic Development office.”
The Herald Business Journal. “The symmetry of housing price history is disturbing to some investors and economists. In 2006 home prices reached their apex and began to decline. Five years later, the decline reached its nadir and prices began to recover. Next year, five years into the housing price growth, housing prices will probably have returned to their 2006 level. What bothers some analysts is the five-year down phase approximately matched by the five-year up phase. The question they are asking themselves is whether this is some sort of market cycle that will soon bring another housing bust?”
“There is general agreement that the housing price situation was a bubble. And when that housing bubble burst, it took Wall Street and the rest of us with it. Which is it, then? Is it a bubble now? Is the five-year pattern a fearful symmetry or just a coincidence?”
“There certainly is an eerie resemblance between where we are now and those pre-crash days. A report published by the New York Federal Reserve Bank in 2004 was entitled, ‘Are Home Prices The Next Bubble?’ and addressed the concerns of investors and economists at that time. What their research indicated was that, ‘A close analysis of the U. S. housing market in recent years, however, finds little basis for such concerns. The marked upturn in home prices is mostly attributable to market fundamentals. Home prices have essentially moved in line with increases in family income and declines in nominal mortgage interest rates.’”
“Researchers at the Federal Reserve Bank of San Francisco analyzed the current housing market and found that both the loan and the household financial data are encouraging. In a report entitled, ‘What’s Different About The Latest Housing Boom,’ they write that, ‘…conditions in the latest boom appear far less precarious than those in the previous episode. The current run-up exhibits a less-pronounced increase in the house price-to-rent ratio and an outright decline in the household mortgage debt-to-income ratio, a pattern that is not suggestive of a credit-fueled bubble.’”
“The Federal Reserve efforts to find a bubble definition sturdy enough to support monetary policy, though, have produced disappointing results. It is still not clear how to distinguish a bubble from a rising price environment caused by shifts in supply, demand, or both. And, worse, it is not clear what kind of Federal Reserve intervention would deflate a bubble efficiently enough to avoid widespread collateral damage throughout the economy.”
“In the end, it may be about symmetry after all. The current housing market is different from the bubble of last decade, but home prices still might stall or even decline. And because the Federal Reserve cannot really lower interest rates that are already near zero, our economy will have to respond on its own as best it can. That would be different from last time, too.”
“What haven’t changed are the imbalances in the overall economy, and in the housing market, due to wage stagnation and artificially low interest rates. Those factors provide enough symmetry with the pre-crash markets to make the prospect of a faltering housing market worrisome.”
“What bothers some analysts is the five-year down phase approximately matched by the five-year up phase. The question they are asking themselves is whether this is some sort of market cycle that will soon bring another housing bust?”
The question I am asking myself is, ‘Are we currently witnessing the longest, largest, most policy-exacerbated dead cat bounce in history? ‘, at least back to the South Sea bubble, when Sir Isaac Newton lost his personal fortune as the second tsunami wave of the bubble collapsed and washed many naked swimmers out to sea.
I think we are… nobody learned anything from the first leg down. Just look at all the red ink on usdebtclockdotorg.
Credit card debt above 2008…check
record student loan debt…check
auto loans just surpassed 1 trillion (a new record)…check
“The Federal Reserve efforts to find a bubble definition sturdy enough to support monetary policy, though, have produced disappointing results. It is still not clear how to distinguish a bubble from a rising price environment caused by shifts in supply, demand, or both. And, worse, it is not clear what kind of Federal Reserve intervention would deflate a bubble efficiently enough to avoid widespread collateral damage throughout the economy.”
Maybe experiment with slightly higher interest rates?
Nah…too risky.
What a lame and impotent analysis by the writer. “Efforts to find a bubble definition sturdy enough to support monetary policy have produced disappointing results.” I’m sure they have. Trying to define bubbles in such a way as to exclude those caused by current monetary policy is an ideological task, not a mathematical one.
When I look at simple graphs, bubbles are pretty easy to spot. Usually there’s a parabola involved. But I’m stupid that way.
“In the end, it may be about symmetry after all. The current housing market is different from the bubble of last decade, but home prices still might stall or even decline. And because the Federal Reserve cannot really lower interest rates that are already near zero, our economy will have to respond on its own as best it can. That would be different from last time, too.”
Here’s another similarity to the first Housing Bubble tsunami wave of real estate investment:
This time it’s different, same as last time.
Not as leveraged as last time e cost the oil patch
meant except for the oil patch
False.
Home-Debtors today are using far more leverage than anytime in the past.
Millions of loan-owners underwater. Millions of vacant houses in zombie status. But the biggie; no China multi-trillion $ QE/debt-based spending spree around the corner.
Maybe the Indian slum dwellers will suddenly become wealthy and pick up the slack.
‘Ten years after moving into a quiet Anaheim neighborhood to raise his five boys, Fred Cornejo is thinking about leaving. Because of the Disneyland resort in this Los Angeles-area city, seven nearby houses, including the house across the street, have been converted recently to short-term rentals, booked through online sites such as Airbnb, VRBO and HomeAway.’
‘Some have bunk beds and converted garages to pack in large groups. Late-night parties, loud music and traffic are routine on his tree-lined block. “It’s totally destroying the neighborhood,” Cornejo said.’
‘More than 40 percent of the homes that have permits to rent in Anaheim are owned by real estate companies, investment firms or the owners of multiple properties, according to city records. “These are basically unsupervised mini hotels in our neighborhoods,” said Cornejo, who has called the police on his neighbors several times for late-night noise.’
He should get with the act and join the “sharing economy” and rent his house out too. Disneyland is crowded year round, wall to wall people almost everyday.
Plus why even live in Anaheim anyway? If you drive just a few blocks away from the “Disneyland Resort Area” you will notice most houses have bars on the windows.
‘The owner of a California mansion alleges that she was duped into renting out the property via Airbnb to a firm that produces hardcore gay porno films and left the 1920s property awash in enema kits, various “sexual devices,” and assorted bodily fluids, according to a lawsuit.’
‘Knapic claims that “enema kits were found throughout the house–on the floors, in the beds, in nightstand drawer and in the trash.” Additionally, “various sexual devices were found in the beds and in the trash,” linens were stained brown, and the “hot tub water was brownish in color.”
‘The complaint alleges that “urine, semen, and fecal matter” were found on “linens, carpets, upholstery, walls, ceilings, and in the hot tub.” Knapic, the lawsuit states, is concerned that “pornographic images and films made at the Property will damage” its “reputation and image.”
‘Knapic alleges that she attempted to clean the property, but quickly became concerned that the mansion may have been seriously damaged. “Many of the films Lucas Entertainment produces depicts men urinating on each other and giving each other enemas,” the lawsuit states. “These activities were not being conducted in a bathroom, but rather on beds, floors, and furniture.”
‘When Knapic resorted to the use of a black light while inspecting the home, she discovered “the presence of bodily fluids throughout” the property, according to the complaint, which notes that Knapic has “replaced soiled linens, drained and bleached the hot tub, bleached and painted all walls, steam cleaned the upholstery and shampooed the carpeting.” The complaint contends that Knapic “continues to clean and sterilize the Property.”
http://www.thesmokinggun.com/documents/revolting/porn-mansion-airbnb-lawsuit-746389
‘In case you have the itch for a new home but want to stay in the area, here are some new and exciting housing developments in Ahwatukee. For anyone who purchases by Dec. 31, Rosewood is currently offering the following incentives:
• Fifty-percent off any lot premium.
• $5,000 to spend on options.
• Washer-dryer-refrigerator.
• Twelve months HOA dues for the sub-association.
• Lender incentive toward closing costs.
The old “give away canary” is lying on the bottom of the bird cage…
‘In case you have the itch for a new home but want to stay in the area, here are some new and exciting housing developments in Ahwatukee. For anyone who purchases by Dec. 31, Rosewood is currently offering the following incentives:
Yeah. That subdivision is silly. Right behind a strip mall on
pathetic sized “lots”. Packed in like cord wood for $300k.
Tarzana, CA Housing Prices Crater 6% YoY
http://www.zillow.com/market-report/11-15/47950/tarzana-los-angeles-ca.xls?rt=14
Just the other day Related said they wouldn’t do this:
‘Related Group has slashed deposits on a second Brickell area project, in a move to spur sales on remaining units as the condominium tower approaches sell-out.’
‘Miami-based Related, the dominant developer in South Florida’s preconstruction condominium market, cut deposits on units at SLS Lux to 30 percent. It’s a sizable reduction from the 50 percent requirement that has become standard this cycle.’
‘Other developers have also cut their deposit requirements. Swire Properties announced earlier this year that it was lowering down payments for a condo at one of its Brickell City Centre residential towers, Rise, to 35 percent. And Property Markets Group also offered some foreign buyers deals that allow them to pay 50 percent deposits in installments prior to closing for units at Echo Brickell, Echo Aventura, Muse in Sunny Isles Beach, and Sage Beach in Hollywood.’
‘Top developers on the panel said Miami’s preconstruction condo market is still forging ahead despite lower deposits, canceled projects and foreign buyers downsizing purchases. Amid a weakening of foreign currencies, such buyers have downscaled their purchases: while they previously bought five or six units, they now buy one, Rosso said. Yet, as long as they can rent the unit and cover their costs, they prefer to park their money in South Florida real estate, rather than place it in a bank, he said.’
That’s because they’re money-launderers, pin-head.
“Existing Home Sales Tumble, Weakest Annual Growth Since January”
http://www.zerohedge.com/news/2015-11-23/existing-home-sales-tumble-weakest-annual-growth-january
“median home prices have now dropped for 4 months in a row.”
*Note-YOY price declines are showing up in a wider area
‘Yun and other housing economists are hoping that the interest rate increases – which could start as soon as December – will result in gradual mortgage rate increases that won’t bash the housing market. The Realtors are predicting that 30-year mortgage rates will average about 4.5 percent next year. That’s up from an average 3.8 percent in 2015.’
‘But residential sales agents are understandably nervous about higher interest rates. “We are in a rising interest rate environment,” Yun said. “There will be eight or 10 rounds of rate increase over the next two or three years. Mortgage rates would have to go up to about 6 percent to have meaningful pull back in buyers.”
‘Yun is hoping that lenders will relax mortgage standards a bit which would bring more buyers into the market and make up for any shortfall caused by higher interest rates. Chris Deritis, senior director with Moody’s Analytics, said mortgage companies need to reduce hurdles to financing a home. “We are going to have to see some loosening of lending standards,” Deritis said. “But not all the way back to the mortgage boom level. “Lenders will be encouraged to think about loosening up those standards a little bit.”
‘Yun said the prospect of higher home finance costs and clouds in the global economic picture make home forecast tricky for 2016. “Mortgage rates could spike quickly or there could be a gradual increase,” he said. “There is more uncertainty for 2016.”
“National Economic Activity Contracted For 3rd Month In A Row, Chicago Fed Signals”
http://www.zerohedge.com/news/2015-11-23/national-economic-activity-contracted-3rd-month-row-chicago-fed-signals
“Under the surface the biggest problem is the collapse in the sales-to-inventories index to cycle lows (contracting 7 of the last 8 months).”
Like housing 2000-2015, massive excess inventory as a result of overproduction due to misallocated investment and falling demand as a result of grossly inflated prices.
OT, but very interesting
If United HC quits the ACA
http://www.vox.com/2015/11/19/9763946/united-obamacare-map
quiet unraveling of obamacare
http://theweek.com/articles/589920/quiet-unraveling-obamacare
http://thehill.com/blogs/pundits-blog/healthcare/260948-obamacares-predictable-collapse
We’re working on some form of “safe exit” from our outrageous insurance premium hike! I really enjoyed the euphemistic letter from my current insurance company with no real attempt to soften the blow.
Linda Vista, CA Housing Craters; Prices Plunge 9% YoY
http://www.zillow.com/market-report/11-15/116213/linda-vista-san-diego-ca.xls?rt=14
compared to a 8.8% rise for Glendora as a whole
per Zillow
they have some hoods in FL going up over 6% next yr
Glendora is in San Diego over two hours away.
San Diego, CA Housing Prices Fall 5% YoY
http://www.zillow.com/north-park-san-diego-ca/home-values/
Once the market starts to soften, then people start thinking, ‘Well, let me get out of Dodge.’” ??
As always, it depends…Where you going ?? Some will choose to cash out and move out of the area but for those who want to stay (for whatever reason) you may just be trading dollars…So you sell your house for a million bucks…Then what, rent a house for $5,000.+ a month…Buy a townhome for $750,000.
Then there is the older group that have a additional issue to deal with…The ones that have been in their houses for 30-40 years or more…Their basis in their properties are so low that even with a $500,000. tax free exemption, their FED & State taxes will be very significant…If one of them pass away, they get a stepped up basis (Thanks ibbots)…
When they are exposed to possibly $400,000.+ in taxes at this stage in their life, they just stay put, live out the remainder of their life and preserve the $400,000.+ for their heirs…
The problem with that flawed theory is this;
Who are you going to sell to at that price?
So you hold onto the depreciating asset as prices revert back to the mean as additional losses accrue from depreciation.
The point: There are massive losses to be taken. And they will be taken either now or later.
‘They’re buying into the hype and they’re bringing it to the brokers and saying, ‘Oh no, my apartment will sell for $15 million.’ Well, the last sale in your building was for $8 million’
That’s going to cut into the Christmas spending.
Obamacare Gift Cards are gonna be HOT, HOT, HOT!!!!
‘even as prices kept going up…In Santa Clara County, a typical home sold for $869,000, up 6 percent from $820,000 in October 2014 — though down from $910,000 in September 2015′
Why even mention 2014? And Mercury News reporter; there should never have been a multi-year “frenzy” in the first place. That was a little clue something was very wrong.
My Silly Valley colleagues think the crazy prices are normal. Tell them that the place is way overpriced and you will be rewarded with a chorus of eye rolls; so I don’t bother anymore.
that the place is way overpriced and you will be rewarded with a chorus of eye rolls; so I don’t bother anymore ??
They inherently know it…I don’t even like using the words “over priced”…Overpriced is a opinion…Its expensive…Very, very expensive…Particularly for what you get…
I am sure many say a Mercedes or Ferrari is overpriced…I mean, doesn’t a VW bug accomplish the same thing getting you from here to there…Or some types of cloths…What about the $5,000. woman’s hand bags…$20,000. watch or $150,000,000. painting…Are those overpriced…
But its not unique to Silicon Valley…We have seen Ben’s post from throughout the world and had comments from many throughout the country on expensive housing markets being driven for many reasons starting with interest rates…And, IMO its starts with interest rates…If we had 7-8% rates we would be seeing a very different market place…
“My Silly Valley colleagues think the crazy prices are normal.”
Hence the reason we all understand CA is the land of the uninformed and indebted.
It really is kind of a generic, crowded area. I had offers down there, but didn’t think it was worth it.
It really is kind of a generic, crowded area ??
Crowded ?? Yes and has gotten much worse in the last two years…
Generic ?? You must not have sent much time here…Nothing could be farther from the truth…
Pop star Pharrell Williams is giving the sale of his downtown Miami penthouse another try…”
I guess all the “Happy” dancing isn’t enough to unload the place.
It can come down to one house over instead of one block away. The fundamentals are thrown out a window in housing today. If you even get a showing and somebody is interested then you listen, because you may not see another buyer for many months. With the internet and public records readily available you don’t have to listen the lies of the friendly real estate agent anymore.
What the guy got 4 months ago for same house means nothing to buyers today, they will research your home and decide if they can make a profit when they go to sell it in 5 years or less.
luxury homes, small homes, it all comes down to perceived value, the decorated model is a thing of the past, your granite, and stainless steel is nice but not the deciding factor.
If you bought right and can escape with a small profit good for you, for most, they are still going down a path of losing a lot of money on their dream home they brought especially if they purchased it in 04′ to 06′?
California you say is a different animal not really, they just play in bigger numbers, but still comes down to the same thing, how much did they really lose on the overpriced turkey home, the figure you see in the closing price is not the story. Like the business you want to buy, grosses one million dollars great what is your profit, we won’t talk about it, the potential is there for big money, and you run a fast as you can from a deal like that folks, because it isn’t a deal?
Not really. Not at all.
It comes to to production cost.
Realtor Arrested On Bribery Charges
http://www.nj.com/essex/index.ssf/2015/11/bloomfield_councilman_arrested_on_bribery_charges.html