When Too Many Decide To List At The Same Time
A report from Boston.com in Massachusetts. “Home prices may be setting new records across the state, but not on Cape Cod. One of the country’s favorite vacation spots, the sandy spit has seen home prices fall during the first six months of 2016, according to The Warren Group, publisher of Banker & Tradesman. The median home price in Barnstable County, which covers towns on the Cape from Sandwich to Provincetown, fell 1.4 percent compared to the same period last year, to $345,000. In fact, the decline was as high as 3 percent through the end of May, before narrowing to 1.4 percent at the end of June.”
“Orleans saw one of the biggest drops since last year, with the town’s median home price plunging 11 percent, to $563,000, Warren Group numbers show. Dennis fell 7.1 percent, to $325,000, while Wellfleet fell 6 percent, to $492,000. Other towns saw smaller but still significant declines, including: Eastham, which fell 4.5 percent to $397,750; Harwich, 4 percent to $350,000; Truro, 2 percent to $615,000; and Marston Mills, 3 percent to $319,000.”
The Palm Beach Daily News in Florida. “Sir Geoffrey and Lady Sylvia Leigh have had a busy week, at least as far as Palm Beach real estate goes. They sold their Midtown house and bought a lakefront condo via two deeds. The Leighs sold their five-bedroom house at 219 Clarke Ave. to a land trust for a recorded $9.77 million, according to the deed recorded by the Palm Beach County Clerk’s office. Broker Lawrence Moens of Lawrence A. Moens Associates had listed the house in November 2014, first at $13.9 million and more recently at $12.8 million.”
“Their new home is a lakefront condominium, No. 302 at the Parc Regent on Bradley Place, which they bought for a recorded $4.184 million. That unit had been under contract since June 3, listed for sale at just under $5 million, a search of the Palm Beach Board of Realtors Multiple Listing Service shows.”
From Construction Dive on Texas. “A Houston developer backed by New York investors has changed direction on a 24-story, 550-unit microcondo project that has failed to draw the attention of its targeted market of millennials and empty nesters, the Houston Business Journal reported. After seeing predominantly investor interest during a presales period, Novel Creative Development shifted to a condo hotel concept, or ‘contel,’ where owners will rent out their units to visitors when they’re not using them.”
“If the project comes to fruition, it will be one of the first condo hotel developments in Houston. Developers thought millennials in particular would snatch up the 304-square-foot to 1,001-square-foot-units but said they found that demographic was ‘not ready yet’ for the concept. The Ivy Lofts development featured built-in ’space-saving’ furniture like Murphy beds and other convertible pieces but was able to secure deposits from only 68 buyers, most of those investors.”
From Park Cities People in Texas. “The first half of 2016 saw a dramatic increase in the number of houses on the market. The number of active listings in the Park Cities increased 81 percent between December and June. The increase was even more striking in Preston Hollow, where active listings nearly doubled over the same time period.”
“According to Briggs Freeman Sotheby’s International Realty agent Tom Hughes, the usual increase in spring home sales started later than normal this year. ‘Usually when you have a big run like we had in 2014 and 2015, sellers see opportunities for higher prices,’ said Hughes. ‘When too many decide to list at the same time, it sometimes causes a glut of inventory.’”
“There may be more inventory, but much of it remains in the upper tier of housing prices. ‘I think the buyers are pickier,’ said Paige Elliot of the Elliot and Elliot Real Estate Group. ‘With the properties out there, many of them want open-concept and move-in ready houses, but they don’t want to overpay for it.’”
My UHS contact in the Dallas area has been telling me the Park Cities were seeing big price reductions. This would be Highland Park and University Park, near Southern Methodist University, IIRC. HP is where Bush the second lives. Preston Hollow is where Mark Cuban lives.
November 18, 2015
Greedy Bastards Selling At Inflated Prices
From Park Cities People in Texas. “Home sales in the Park Cities and Preston Hollow declined sharply in September compared to June, for example, and prices showed a modest drop as well, according to statistics from the North Texas Real Estate Information System. ‘I think we’re seeing a little bit of a market adjustment. I don’t think it’s a downturn,’ said Michelle Wood, an agent with Briggs Freeman Sotheby’s International Realty.”
“Sales in the Park Cities dropped by more than 50 percent from summer to fall, and almost as much in Preston Hollow. So it makes sense that as fewer people are buying, inventory is on the rise. The number of local active listings reached their 2015 peak during September, and available properties are spending longer on the market, especially in the Park Cities. ‘We’re starting to see a lot of reductions,’ Wood said. ‘It’s a great time of year to buy.’”
“Wood said that sellers can still get good value, but they might not be able to take advantage of the market as they’ve done previously. ‘Seller expectations on price got a little out of line with reality, so now we’re seeing those properties sit that were overpriced,’ Wood said. She said an influx of new construction is also having an impact on the health of the market. ‘It’s making the houses that are not new have to compete a little harder,’ Wood said.”
http://thehousingbubbleblog.com/?p=9354
Earnings may be signaling a ‘sell the house, sell the car, sell the kids’–type bear market
http://www.marketwatch.com/
So far as I am aware, you can’t legally sell your kids in America. Of course, giving them up for adoption or foster care has long been a cost-cutting option to those who can’t afford to raise them.
To me the oil market is a simple example of how too much money creation drives down prices.
‘Opec’s worst fears are coming true. Twenty months after Saudi Arabia took the fateful decision to flood world markets with oil, it has still failed to break the back of the US shale industry. The Saudi-led Gulf states have certainly succeeded in killing off a string of global mega-projects in deep waters.But this is a bitter victory at best.’
‘North America’s hydraulic frackers are cutting costs so fast that most can now produce at prices far below levels needed to fund the Saudi welfare state and its military machine, or to cover Opec budget deficits.’
‘Scott Sheffield, the outgoing chief of Pioneer Natural Resources, threw down the gauntlet last week - with some poetic licence - claiming that his pre-tax production costs in the Permian Basin of West Texas have fallen to $2.25 a barrel.’
“Definitely we can compete with anything that Saudi Arabia has. We have the best rock,” he said. Revolutionary improvements in drilling technology and data analytics that have changed the cost calculus faster than almost anybody thought possible.’
‘His company has cut production costs by 26pc over the last year alone. Pioneer is now so efficient that it is already adding five new rigs despite today’s depressed prices in the low $40s. It is not alone.’
‘The Baker Hughes count of North America oil rigs has risen for seven out of the last eight weeks to 374, and this understates the effect. Multi-pad drilling means that three wells are now routinely drilled from the same rig, and sometimes six or more. Average well productivity has risen fivefold in the Permian since early 2012.’
‘It has been an article of faith among Gulf exporters that hedging contracts had kept US shale companies on life-support and that there would be a brutal cull as these expired in the first half of this year. No such Gotterdamerung has occurred.’
‘The crucial mid-tier drillers have weathered the downturn. Many are still able to raise funds at low cost.’
“To me the oil market is a simple example of how too much money creation drives down prices.”
First comes the price runup, then the glut.
Once a glut has materialized, it is hard to erase it without price slashing.
Yeah, mega QE all over the world juiced China around 2008, a century of concrete gets poured in 3 years (and all the related activity), commodities soar. Mines are opened, ships built, you get the idea. China runs out of steam, commodities collapse. And with oil, the dry cleaner effect has kept producers going so the glut remains.
I’m thinking it is applicable to more than just oil.
First comes the price runup, THEN COMES THE INVESTMENT IN CREATING MORE SUPPLY, then comes the glut.
The comes the price slashing, then investment in new supply dries up, then comes the price rebalancing.
Rinse, repeat.
‘then investment in new supply dries up’
The opposite is happening. the frackers are developing new methods to extract more. They would have been out of business months ago if the junk bond market wasn’t keeping them alive.
It’s artificial demand. Like apartments; what’s driving it isn’t demand for housing, but a demand for yield. China didn’t need to pour all that concrete. They were trying to keep their economy from collapsing. Now we get the overcapacity, useless ships, stockpiles of commodities and empty cities. Sure, they have Yellen bucks. They run off to Australia and buy entire buildings in one day (see yesterdays post) which aren’t needed. More oversupply/overcapacity. To find equilibrium in pricing the markets need liquidation.
The opposite is happening. the frackers are developing new methods to extract more. They would have been out of business months ago if the junk bond market wasn’t keeping them alive.
That’s not the same. They already have already invested too much in drilling of the wells, now they are trying to get the most out of their investment by investing marginally more.
It’s like someone overpaying for a house and then in order to try to pay the mortgage, they spend a little bit of money to fix up a room in the garage so they can rent it out to the local community college student.
That’s not investment in new supply. That’s trying to maximize value for the supply that has generally already been created.
‘They already have already invested too much in drilling of the wells’
They haven’t invested too much if they survive and someone else doesn’t. The easy money prevents the winner from emerging, or at least delays it. In the meantime, everybody has a lower return or a negative return. I’m trying to understand how money creation has resulted in deflation, instead of the inflation economics tells us should happen.
The mechanisms vary. For instance uber; is handed Yellen bucks and/or borrows money cheaply and drives down taxi returns for all. Airbnb, similarly funded, simply takes money from traditional short term housing suppliers, driving down returns for all. Amazon operates at a loss or near loss year after year, sowing deflation near and wide.
“The opposite is happening. the frackers are developing new methods to extract more.”
This is exactly right. And I got *first hand* information last week fracksters are ramping up in Permian basin
So, we got disruption in taxis, hotels, gasoline supply, online widget sales and data storage. But the big three things, like housing, healthcare and education are going up in price YOY.
There is another school of thought that you are ignoring:
There is generally weak demand for investment capital, and that is driving the natural rate of interest lower. The implication is that rates are not “artificially” held low by Yellen and posse, and THAT is why inflation has not emerged.
There’s record weakness in demand for houses and oil and record supply.
That’s why prices are cratering.
And I got *first hand* information last week fracksters are ramping up in Permian basin
I heard this from a friend at a large investment firm in January. They are profitable in Texas below $40 per barrel.
I’m not ignoring anything. There’s a lot of moving parts.
‘generally weak demand for investment capital’
Weaker than supply. Consider this: central bank buys trillions in MBS and bonds. Those returns go into the central bank black hole instead of into pension funds etc. Pensions go chasing yield because they’ve got an obligation to return something. Dubious deals get funded that otherwise wouldn’t.
Japan’s central bank now owns huge amounts of government bonds and stocks!
Instead of creating higher wages, new money simply drives asset prices in the short term, which results in mis-allocation of investment and eventually (long term) overcapacity and losses/lower prices. If I am not earning as much on investments, I have less to spend. So the shop down the street earns less and so on.
We’ve been at this one way or another for decades now. Along the way we’ve been conditioned to accept perverse economic concepts like jobless recoveries, negative interest rates and the now often mentioned helicopter money. All because the misunderstanding of artificially low interest rates, QE, causing deflation rather than stopping it.
Here’s a great rant:
‘Billionaire casino magnate Steve Wynn, the CEO and chairman of Wynn Resorts, went on a tirade about the US presidential election during his company’s second quarter earnings call.’
“Now, the issue about what’s going to happen with the election isn’t so much an issue of Trump versus Clinton at the moment. It’s a question of whether the House and the Senate and the Executive branch can get together and make Americans feel safer and have a fiscal and monetary policy that isn’t self-destructive, which currently it is.”
‘He added that both sides are “making all kinds of promises and declarations” that will only exacerbate the “problems that are currently plaguing the country.”
“Well, when the Affordable Care Act was passed and it was going to have a negative impact on the deficit, which its sponsors had promised it wouldn’t, the sponsors went looking for a way to offset $8 billion or so in additional deficit and they came up with the kind of a stunt that we did with Fannie Mae and Freddie Mac when we eliminated mortgage brokers and we just took the loans directly into Fannie Mae and Freddie Mac and that led to the collapse of $5 trillion off the system. Well, they did the same thing with the Department of Education. They gave the student loans directly from the Department of Education and eliminated any middle people. And then they charged 6.5 points or 650 basis points for student loans instead of passing the savings because the Department of Education doesn’t really have a cost of money. But they’re making the student loans direct since the Affordable Care Act. Bernie Sanders didn’t talk about that. But that 650 basis points, that carry is being made by the government to offset what would have been an even greater impact on the deficit by the Affordable Care Act. Well, if you really were sincere about making a better life for the kids, you would have passed the loans from the Department of Education to the kids at cost, which would have been interest free,” Wynn said.’
‘He said if this doesn’t stop, the American consumer is going to feel the impact elsewhere.’
This is the government pulling profits out of the system and into a black hole:
‘they came up with the kind of a stunt that we did with Fannie Mae and Freddie Mac when we eliminated mortgage brokers and we just took the loans directly into Fannie Mae and Freddie Mac and that led to the collapse of $5 trillion off the system. Well, they did the same thing with the Department of Education.’
And none of it would have been possible without endless free money.
“As Oil Tumbles, Just How (Massively) Overpriced Are Energy Companies? Here Is One Answer”
http://www.zerohedge.com/news/2016-08-01/cash-flow-plunging-and-debt-rising-just-how-overpriced-are-energy-companies
Considering producers are profitable in the $6-$7/barrel area, oil prices have a long way to fall yet.
‘Scott Sheffield, the outgoing chief of Pioneer Natural Resources, threw down the gauntlet last week - with some poetic licence - claiming that his pre-tax production costs in the Permian Basin of West Texas have fallen to $2.25 a barrel.’
‘Shareef don’t like it’
https://www.youtube.com/watch?v=bJ9r8LMU9bQ
Condo hotels.
Brilliant. With multiple owners I can imagine a variety of levels of cleanliness. You go to a Hilton and you expect uniform cleanliness. Why would someone opt for a place where it’s a surprise once you get there? And you cannot get a different room if the one you got is not clean.
Condo of the Week: $590,000 to live in a floating house in Scarborough
By Josh Dehaas | July 15, 2016 AT 11:05 am
Address: 7 Brimley Road South
Neighbourhood: Cliffcrest
Agent: Denise Doucet, Royal LePage Signature Realty, Brokerage
Price: $589,000
The place
A floating home (don’t call it a houseboat) in the Scarborough Bluffs. It has two levels of indoor living space and a 600-square-foot rooftop deck. It’s not technically a condo, but the monthly fees—which pay for garbage, water service and electrical hookups, among other things—are similar to maintenance fees.
…
Floating condo hotels are the peak of peak indicator
Like when a tech co builds a a new office
So what cities r still hot?
Seattle / Portland
I’m sure the hotel manages all the units so they would be cleaned by the central staff.
Owning anything, especially real estate, more than 10 miles from where you live is a huge risk.
Paying 300% premiums or paying double construction cost for a depreciating asset like a used house is a financial death sentence.
THAT is certainly true!
The problem is the people who find out they have to get their next job more than ten miles away or downsize. I have known many over the years who chose to downsize. One kindly older man whose wife was ailing converted to a hire after being a contractor and his salary dropped to $80k while I had to get my next gig across the country in New Jersey to maintain $60 per hour plus special tax shelters. Sometimes family obligations or personal health concerns limit your mobility and make you take what you are offered. And I got in that position in 2013. As long as you can continue saving more for a rainy day and you still get a paycheck, you are doing well.
“Orleans saw one of the biggest drops since last year, with the town’s median home price plunging 11 percent, to $563,000, Warren Group numbers show. Dennis fell 7.1 percent, to $325,000, while Wellfleet fell 6 percent, to $492,000. Other towns saw smaller but still significant declines, including: Eastham, which fell 4.5 percent to $397,750; Harwich, 4 percent to $350,000; Truro, 2 percent to $615,000; and Marston Mills, 3 percent to $319,000.”
Given the Fed’s policy bias towards inflation, with special measures adopted starting in late 2011 to specifically ensure that housing prices inflate, it was perfectly rational for the financial industry and foreign investors alike to make huge investments in U.S. residential real estate to capture the effect of the implicit subsidy on future returns. U.S. residential real estate has hence been one of the best investments for the past five years thanks in part to this policy bias.
The question ahead for the financially savvy is that of the Fed’s commitment to its revealed priority of maintaining real estate price appreciation. If price declines take hold over a broader range of locations than just a few isolated spots, such as Cape Cod or the oil patch, will they cook up some new, bigger intervention to increase price support? Or is there a point where the policy measures of interest rate suppression and MBS purchases reach a point of exhaustion, beyond which prices will have to correct to their natural level?
It depends on who is in power come January and whether s/he is listening to the advisers. Clinton will most likely maintain the status quo and keep feeding the fire. We have absolutely no idea what Trump will do.
I’m also unsure whether prices have a “natural level.” Rents have risen with property prices this time, so in the coastal cities, prices make sense—however unaffordable they are.
‘I’m also unsure whether prices have a “natural level.” Rents have risen with property prices this time, so in the coastal cities, prices make sense—however unaffordable they are.’
You are forgetting to consider the effect of so many Wall Street firms and foreign investors buying U.S. residential housing for the sake of capturing short-term above-trend returns, which is driving the latest parabolic bubble spike. When price appreciation eventually stalls out and starts to go into a tailspin, you can be sure all those homes which the owners only purchased for short-term gains will come back on the market. There will be a massive glut, similar to the oil glut except that you can’t store houses on tankers at sea.
Miami:
Flipping at Faena? Nearly $150M worth of condos on the market
Billionaire Leon Black has his unit on the market for the same price he paid: $16.5M
August 01, 2016 10:30AM
http://therealdeal.com/miami/
Been in New England (Maine/Mass) for 2 summers now, and still haven’t been to the Cape. Let the prices hit rock bottom. It’ll be interesting to see the increase in heroin addicts at that point.
I’ve seen a decrease in listings in my neck of the North Shore. There was a decent surge in listings in the early Summer…maybe realtors are telling them to pause.
Mark Hanson @MrMarkHanson 8m8 minutes ago
Mid-to-High end housing, Big Trouble Dead-Ahead. Beware, CA, FL, NY and TX. Be scared; everywhere else.
http://mhanson.com/7-31-hanson-mid-high-end-housing-big-trouble-dead-ahead/
“Note, my piece below on one of the stiffest headwinds to hit hot, momo, mid-to-high end housing markets since the loss of exotic loans in 2007/08 — published for clients last week — is timely, as the month of July formally ends today and I am getting reports from sources in mid-to-high end regions all over the nation that after a strong June, July sales were down between 15% and 50% with Pendings down as much as 60% from a year ago. One large West Coast brokers with whom I talk said they are recommending to clients with mid-to-high end properties on the market over 30-days with no offers to cut list prices aggressively in order to get in front of the market versus the process of small, frequent price cuts that look bad optically and keep sellers constantly behind the market.”
http://mhanson.com/7-31-hanson-mid-high-end-housing-big-trouble-dead-ahead/
“Developers thought millennials in particular would snatch up the 304-square-foot to 1,001-square-foot-units but said they found that demographic was ‘not ready yet’ for the concept.”
Their was a typo on the bidness plan: Should have been ‘midgets’, not ‘millennials’.
“Developers thought millennials in particular would snatch up the 304-square-foot to 1,001-square-foot-units but said they found that demographic was ‘not ready yet’ for the concept.”
Their was a typo on the bidness plan: Should have been ‘midgets’, not ‘millennials’
I almost never agree with you Russ but that one made me laugh till I teared up. Thanks.
we know the cape has popped and Movoto gives you this
http://www.movoto.com/dennis-ma/market-trends/
gold rush type numbers
boots !
Median per square foot down 8% YOY. The charts at the last link above show PPSF declines as well.
I was just on the Cape two weeks ago and was struck by how many for sale signs there were.
The Cape is a vacation/retirement community; there are very few good-paying professional jobs there. Some towns there lose nearly half their population in the winter.
People in the Northeast can’t afford to retire or buy vacation property because they are faced with such high costs in their expensive cities (Boston/NYC). The same things is happening in the Hamptons, where sales were recently reported to be down 21%. Palm Springs, California, another resort town, has had a soft market so far this year.
The gravy boat is running low…
They either paid down their 30 yr note, or if they were smart, they sell/cash out and move south. Friend of mine’s family sold their house north of Boston, moved down to Raleigh-Durham and bought a 5 yr old palace and still had cash left over.
The only people I hear at work or out and about that own something on the Cape is through their grandparents, who obviously bought them at reasonable prices before the market went ape$h!t 30 yrs ago
“before the market went
ape$h!t 30 yrs agofull tilt fraud.Elaborated.
Boston Metro Housing Prices Crater 12% YoY As Housing Bubble Deflates
http://www.zillow.com/ma/home-values/
Opec’s worst fears are coming true. Twenty months after Saudi Arabia took the fateful decision to flood world markets with oil, it has still failed to break the back of the US shale industry.
http://www.telegraph.co.uk/business/2016/07/31/texas-shale-oil-has-fought-saudi-arabia-to-a-standstill/
When Too Many Decide To List At The Same Time
LOL..the “loanowners” did the same thing when purchasing, too. Everybody wanted to buy at the same time. Freeking idiots!
“This sucker could go down” — George W. Bush
“You teach a child to read, and he or her will be able to pass a literacy test.” - George W. Bush
“The best real estate deals are made at the buy”. And the best time to buy is when prices are being slashed….dramatically!
Vienna, VA(WA DC) Housing Prices Plunge 7% YoY At Peak Of Selling Season
http://www.zillow.com/vienna-va/home-values/
Had to go to Bakersfield this past weekend. Yuck, 111degrees with poor air quality.
Gas at Costco: $2.28 / Gal.
nice place to live, loved it there!
110 in the summer,28 in the winter, everything air conditioned, and low home prices.
Grew up not too far from there. Never could get used to the summers. Miss the Tule fog in winter (but not driving in it). Being a couple hours drive from either the ocean or the mountains was a nice feature on those 110 degree days.
I wouldn’t want to move back there, but all things considered it wasn’t too bad a place to live. I’d rather live there than a lot of other places with similar climates.
I went to public school in Fresno third grade through high school.
The valley would be the world’s best place to live if it was not for the bad air quality.
Pleasanton, CA Affordability Surges As Housing Prices Dive 4% YoY
http://www.zillow.com/pleasanton-ca/home-values/
Brooklyn Heights, Brooklyn Housing Prices Crater 12% YoY
http://www.zillow.com/brooklyn-heights-new-york-ny/home-values/
Honduran Rapist Arrested at Texas-Mexico Border
Agents apprehend convicted rapist a second time
Adan Salazar - August 1, 2016 33 Comments
Border Patrol agents in South Texas arrested an illegal alien from Honduras last week who had previously been deported and convicted of rape.
On Wednesday, agents working near Hidalgo, Texas arrested Madai Gamaliel Amaya, who claimed he illegally entered the US earlier that day.
Upon requesting a record check, agents learned Amaya had been deported from New Orleans on July 26, 2013, and was “instructed not to return to the United States without permission from the US Attorney General and/or the Secretary of Homeland Security,” according to US district court documents obtained by Infowars.
“On August 11, 2009,” the record states, “the defendant was convicted of Rape Second Degree and sentenced to ten (10) years confinement, two (2) years six (6) months suspended and three (3) years probation.”
Further records show a US magistrate judge ordered Amaya be placed in detention due to “a serious risk that the defendant will not appear” to future court hearings.
Amaya is charged with illegal entry after deportation.
“Amaya is charged with illegal entry after deportation.”
Snerk