Here comes the inventory: Southern California unsold housing inventory now at 6-year high. Housing starting to plateau.
It was only a matter of time before inventory started hitting the market and unsold homes started to pile up. Not that home sales ever saw big volume increases but given the low inventory, any normal amount of homes sales pushed home values into the stratosphere. So here we are with unsold housing inventory now hitting 6-year highs. The problem of course is affordability causing a decade long shift for households into renting. The Southern California News Group came out with 36,923 listings in the four-county region which amounted to a 22 percent year-over-year increase. Housing markets are slow to shift and this bull market is getting close to celebrating a decade of moving up. The troubling sign is that real estate is now in a boom and bust cycle and with rates still near historical lows, there is little ammunition from the Fed should things go south.
Inventory is back in SoCal
 “(OC Register) New cracks in the housing market are demonstrating that the cooling trend is here to stay,†wrote Steven Thomas of ReportsOnHousing that tracks homebuying patterns found in real estate broker networks.
Thomas’ biweekly report found a stark change in the market for existing homes as of Sept. 20 vs. a year ago: selling time was 26 days longer as listings grew by 22 percent. ReportsOnHousing watches supply (active listings); year-to-date increase in supply; demand (new escrows in past 30 days); and “market time†(a measure of selling speed, estimated days it takes a typical listing to enter escrow).â€
Inventory is moving up in many California areas:
Part of this has to do with slowing sales and also people trying to cash in while values are high. The market is incredibly frothy and sellers know this. There is now almost a uniform consensus that home prices will not go down or the other variant that believes home prices will moderate down in a controlled fashion. Of course as we now know the market is highly unpredictable but what we can derive from the data is that recent buyers are using high levels of leverage to buy. There are many artificial barriers in California that have pushed prices up and now we hear talks about rent control. One of the largest issues in California is the high levels of NIMBYism
Sentiment is important in housing and the tide is now turning. You have to remember that housing values are hovering near current levels thanks to near full employment, extremely low interest rates, constricted supply, and tax cuts. Yet we do have major issues pending in that we are running ridiculous deficits, have a national debt that will never be paid back, and continue to have this insatiable addiction to uncontrolled debt. In a complex economy as our own, Black Swans are itching to come out.
Want an example? Here is what you get for $1.4 million:
Nice place for you. And of course we have a price cut here:
$100,000 off the original list price. The market is shifting. Inventory is back. Buyers are being more cautious with their tight resources. Market cycles are real and we are definitely seeing signals of a plateau.
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387 Responses to “Here comes the inventory: Southern California unsold housing inventory now at 6-year high. Housing starting to plateau.”
Tide has turned. Peak was this summer.
Its just a gully 😛
What an amazing experience for us millennials. We have seen the last crash in 08, started our careers, profited from the bull run and have now the perfect set up for the next big crash. Just ten years later! I can hardly wait.
How quickly the story changed. I remember just a few month ago RE cheerleader called me crazy because I said the low inventory story is a myth. Here we are: every RE website is reporting rapidly increasing inventory. It shows very clearly that housing data is lagging and slow.
RE cheerleaders also told us day in day out how interest rates will have no impact to house prices. ROFL. We haven’t even entered a recession yet and the market is already turning so quickly. I enjoy visiting open houses, look around and chat. Every single agent is telling me the seller is very motivated. Some even say, “in this market we can low ball emâ€. Agents, especially those who have seen this all before, know exactly what’s to come. They also tell me how sellers base their unrealistic expectations on comps from several month ago. Again, lagging indicator. Sellers haven’t gotten the memo yet. This is going to be so fun to watch how some sellers/flippers will chase the market down (first it sits too long as ask for premium dollars, than you see price reduction after price reduction and open house after open house. Eventually, it has written “no one is interested in buying me†all over the listing).
Let’s see what RE cheerleaders come up with next or if they just disappear/remain in the background. Can’t describe this as a “normal slowdown after summer†forever; especially if summer itself was slow. Lol
Millennial, I know at face value it might be better for you if house prices were to crash. However would your job be secure? Would the money you have be safe? Not disappear with stock market falls or ATMs refusing to work? Would you be able to get a mortgage?
I’m not throwing the gauntlet down at you. Im just really interested to see if you have thought about my comments.
Cromwelluk,
good questions.
“However would your job be secure?”
The short answer is no. And thats exactly the reason why I dont buy before the crash otherwise i might lose the job AND the house.
The longer answer:
I have almost been ten years at my current employer, got several promotions and are well known in my field. During a recession, the company has an excellent opportunity to clean house (get rid of non-performers and older employees who cost too much and can be replaced by younger ones that perform the same and cost less).
If i happen to be laid off, i would just find another job (my field of work is always needed but i might have to take a pay cut). Or, if i cant find another job, i can ride it out. My overhead costs are very low. No debt.
Would the money you have be safe?
I am sitting mainly on cash in several bank accounts (FDIC insured)
Not disappear with stock market falls or ATMs refusing to work?
I hope for a hefty stock market crash so i can buy in cheaper. I dont care much about my 401k. The company contributes 100% of my contributions. Just dollar cost avg. if the market goes up great. if it goes down, even better.
ATM’s not working
If we get a bank run, i will not buy a house, i will buy guns 🙂
Would you be able to get a mortgage?
Sure, there are always lenders, family or someone else that has cash and would lend me money. And if not, i simply dont buy. If i cant get a loan, the majority of people wont get one. I have no debt, cash and 800+ credit score. If we get a massive crash, i wont even need a loan. I just go all in.
Thanks for answering all of my questions. I say respectfully that you have thought it through clearly.
I laughed out loud at your answer to ATMs not working and society collapsing.
If things got that bad would you consider going to work for Tina Turner(Mad Max Beyond Thunderdome)? I assume she lives in California?( Sorry being sarcastic and abit silly 😉 ).
It’s cute the millenial has so much resource yet is one of the few that doesn’t already own the smartest investment asset that they could’ve had for the past decade. ThirtyKMilllionaire is the term
Sigma,
I was desperately trying to find a reason to buy! I think over the past few years I heard every sales pitch in the book. There was no financial reason to buy as renting was so much cheaper (rental parity). Now, that the market is turning quickly I might have a reason to buy within the next 3 years when the market is down (way down).
Can you provide a bit more than buying is the “smartest investment� Any numbers that back this claim? Any examples? Anything but an empty phrase? I already know you won’t reply. RE cheerleaders are very easy to predict.
Not a cheerleader, I actually agree there is a big potential the prices have topped out. If you haven’t already seen the proof that real estate in the past decade was the smartest investment, no amount of data will convince you. My returns in RE investments the past decade has net’d millions and astronomical % but you can convince yourself that you didn’t miss out. It’s cute.
Missed out!? Rofl. Stocks? crypto? (my litecoins made 5,000% in 2017). By not buying overpriced real estate I saved a ton of money each month. I have now a nice war chest ready to invest. People who recently bought RE will be screwed financially and most likely default strategically when we get the crash. And sure, all REal estate cheerleaders are millionaires and none ever lost money. But somehow they hang out here on housing bubble websites and tell everyone now is a great time to buy. That’s not cute but laughable.
Oh stop kidding yourself. Even with your petty crypto investment how good could it be when you still yet to own the most basic investment any amateur investor should even have. It’s laughable, but again, very cute.
You are correct, Real Estate is still missing in my portfolio. I havent had a buying opportunity yet. As soon as we get another 2009-2012 buying opportunity i will buy real estate 🙂
Although I suspect the market has topped out, the probability of there being a 2008 like burst is highly improbable. Even 20% drop in prices off would be extremely optimistic. And if that happens it will be because of the interest rate increases, which means your monthly won’t change anyway. It’s all a give and take. The black swan is the Chinese. If they all dump their holdings all at the same time then maybe something amazing will happen in your favor but if you wait for that you might as well wait for the lottery.
Your statement actually shows me you don’t understand California real estate cycles. Now, I thinking you highly exaggerate your wealth. Or, you are just like all other RE cheerleaders that need to tell everybody including themselves that everything is fine and this time is different.
In 2005/2006 people said buy now or be priced out forever. Now, people say, there might be a drop but it’s going to be very small. It’s all geared to have joe avg buy now instead of wait. You know what, it actually works with joe avg. but even if a thousand people tell me this all day, for 365 days, I would still keep saving and waiting for the reset.
The longer I wait the more I see it play out. Just look at the market now. It only took a few tiny rate hikes to peak the market. We don’t even have a recession yet and sales and loan apps are way down. Lending staff is being laid off, inventory is increasing and asking prices are going down left and right. Again, if you are in denial about these facts it shows you are not what you claim to be. Or you are heavily invested and your emotions don’t let you accept the facts. Denial is actually very common at this cycle phase.
Cute! The guy who doesn’t even own the most basic investment asset is accusing others who do of not knowing how it works! HAHAHAHAHAHAHHAAHHAHAHA CUTE!!!!
Buying alone doesn’t make you an expert. Why would have 7MIO lost their home during the last crash – they all bought? Anybody can buy something overpriced. They offer zero down payment loans with bad credit again.
You gave it away with your comment about interest rates (“its all a give and take”). You seem to not understand the basic principle that it is much better to buy a lower priced home with higher interest rate instead of overpriced home with lower interest rate. I have explained it many times here. In your head its the same because your initial monthly payment might be the same. That’s an indication for me that you are not that savvy as you claim to be.
House prices were ‘too high’ 5 years ago… They are ‘way way way too high’ at the moment. So anyone who bought 5 years ago and sells today made a nice profit, plus bragging rights about using the real estate asset class to great effect! If I were about to sell, I would probably not mention the possibility of a big crash though – not until the deal is closed. So you both make sense. 🙂
Most millenials I know are broke as shit. There certainly are a few that are in good financial shape (chose the correct career path, super disciplined savers, help from parents, etc). Woohoo, the highest inventory in 6 years. The fact is that inventory is still VERY low relative to historic norms. That is all you need to know. We’ll be fighting over that beach close property when the 70% off sale starts. 🙂
Blankfein,
i dont know why anyone would “fight” over a property. The moment a property goes up in price due to a second bidder i am out.
Houses are not like Musk’s flamethrower, were you have limited supply.
BTW, I wanted one but the 20k sold out too fast. He promised, “Works against hordes of the undead or your money back!” You can basically buy one and turn around selling it for a nice profit.
https://www.cnet.com/news/elon-musks-flamethrower-is-real-and-yours-for-just-500/
https://www.boringcompany.com/not-a-flamethrower/
Fighting over a house makes no sense. You just skip that one and look at another one.
However, once i have a portfolio of houses and unload some during a peak, i would def. welcome a bidding war on my property. But participating in one? No way.
Milli: What an amazing experience for us millennials. We have … profited from the bull run and have now the perfect set up for the next big crash.
You speak for all millennials? From what I hear, many are in debt, with less than a months’ rent in savings.
How quickly the story changed. … every RE website is reporting rapidly increasing inventory.
I’m not aware any website is reporting “rapidly” increasing inventory. You added that word.
the market is already turning so quickly.
“so quickly”? Again, you added that phrase.
I see some rising inventory. And a decrease in the asking price for homes. Which is not the same as decreasing prices.
Consider this scenario:
2010 — House sells for 1 million.
2014 — House sells again for 2 million.
2018 — House is listed at 3 million. Won’t sell. So seller cuts price to $2.5 million. Then it sells.
Seller One got $1 million gain in 4 years. Seller Two hoped to also get a $1 million gain in 4 years, but had to settle for $500,000.
That’s not a crash. That’s a slowing in the rise of home values.
SOL,
Dont be a debbie downer 🙂 I dont think you appreciate the change in direction of the market.
Who said anything about asking prices? Just look at this one, posted by Woody. (Median Sales Price of Houses Sold for the United States). If it doesnt help I’ll provide more.
https://fred.stlouisfed.org/series/MSPUS
I am somewhat glad you are still denying. During the peak you have euphoria, after the peak you have anxiety and then comes denial. Its absolutely normal behavior.
https://images.search.yahoo.com/search/images?p=psychology+stages+market+cycle&fr=mcafee&imgurl=https%3A%2F%2Foptionalpha.com%2Fwp-content%2Fuploads%2F2011%2F04%2FInvestor-Cycle.png#id=3&iurl=https%3A%2F%2Foptionalpha.com%2Fwp-content%2Fuploads%2F2011%2F04%2FInvestor-Cycle.png&action=click
And that all sounds totally sustainable and NOT a fucking bubble………..god damn are we in trouble….you’re talking fucking millions to people who barley have enough money for fucking $1,000 a month rent.
I’ve said it a million times, some here are delusional.
Try starting your list in 2006. Now how does it look.
I am not quite sure about your scenario, I have been looking at homes in SJC and Coto, I see houses purchased in 2002-2004, and 2013-2105 selling for 25% less
@Truth….Evidence please. Post links to listings where homes in San Jose just sold for 25% less than they were purchased for in 2002-2004 and/or 2013-2015….We’ll be waiting
“I am not quite sure about your scenario, I have been looking at homes in SJC and Coto, I see houses purchased in 2002-2004, and 2013-2105 selling for 25% less
@Millenial
“What an amazing experience for us millennials. We have seen the last crash in 08, started our careers, profited from the bull run and have now the perfect set up for the next big crash. Just ten years later! I can hardly wait.”
Nearly all Millennials are still poor though and all are still much much poorer than their parents were at the same age. They’re generally not financially positioned to be able to take advantage of any low prices at the bottom of a crash, the rich are. In fact most Millennials will be hit badly by the economic downturn induced by a crash.
And “just” 10yr later???? WTH a decade is a very long time!! That is a large chunk of the average worker’s money earning time period. And they’ve spent that time mostly just barely scraping by. They’ve got no savings generally and tons are still forced to live with their parents for a reason man.
This is gonna get ugly.
Hey Doc:
let us know when that Black Swan event comes… in the meantime, there will be no crash.
Well median prices of sold homes have fallen all the way back to the Q4 of 2016.
https://fred.stlouisfed.org/series/MSPUS
Months of supply of homes is the highest since Jul of 2014.
https://fred.stlouisfed.org/series/MSACSR
It’s not a crash yet but there has been a pretty significant correction.
Let me tell you why this signal is likely incorrect: (even though I am not even questioning the validity of the data)
1) Decrease in national median is most likely increased volume on lower priced properties and decrease on higher priced properties. Nation-wise. This is mathematical definition of median, and many on this forum are not strong in math. If anything, it might indicate a significant increase in volume of lower priced homes Nation-Wide.
2) Such things must be tracked locally AND preferably per category.
Example:
If I have:
1) 20 condos priced at 200 and sold
2) 20 townhomes priced at 500 and sold
3) 20 SFRs priced at 1mln and sold
median = 500k (middle point)
If all of the sudden, I have 30 condos sold at 300, only 10 townhomes at 600 and homes are going for 1.2mil now.
All prices increased, but median is 450k now.
In this case, price increases are driving more volume on lower end.
Decrease in median across nation/price category is not even close to telling the whole story.
First off your being obnoxious now.
So let me tell you why you are wrong. If the sampling size were smaller like an individual neighborhood or maybe a small city your argument would hold weight. When the sample sized used is every house sold in the entire country the errors you are talking about are negligible.
You are confusing mean and median.
Mean over large samples size will “absorb” errors.
Median on the other hand can create significant (or reduce) significant noise.
The result can be interpreted as rising prices are pushing more and more people to consider lower cost alternatives (1 bedrooms, condos, different areas). Relative Volume (and price) for lower cost areas is increasing significantly, while relative volume for prime areas is low (Because of affordability and availability). Some sort of price compression.
Basically, buyers are lowering their expectations.
To truly track prices, you need to track them “Prices Sold” and narrowed down to specific market AND property category.
QE abyss,
No need to search for the black swan. When it’s here you will see this on every news channel. Just be patient. The RE market is headed downhill already without a black swan.
Every time a Republican President transfers wealth through TDE we have a crash. Each time it happens quicker too.
AJP,
That’s a bold statement……to bad for me I bought in 1991 and lost value every year until Bush 2.0 come on scene……so it appears the partisan in you is making shit up, lying or trolling……you pick which.
The president might have influence on employment but zero on interest rates. The FED already raised the interest from the low of Obama years many times and they will continue to do so till they crash the economy. Then, all people will blame Trump for telling Powell many times not to raise the interest.
Please… please… no more “Black Swans”! I posted this link before but I’ll do it again:
https://curiousmatic.com/top-black-swan-events-recent-history/
Another Real Estate Bubble Pop isn’t a Black Swan event, but something that happens periodically. There are enough people predicting it to make it not unexpected. Stock market crashes and other such economic crises happen cyclically and we should all plan for them. Martian invaders (Sic Fi notwithstanding) would be a Black Swan in that our current scientific understanding of Mars is that it is uninhabited.
Yeah I can’t help but feel like RE peoples optimism is bullshit. I was buying my current condo in December 2017 and the RE guy is like, you can refi in like 6 months if you hit 75% LTV to get the better interest rate. And I looked at him and said, “I am happy with my current rate, rates wont be this low in 6 months.” He replied, ” That it wasn’t likely they would rise”. Or some stupid shit like that. All I could think is we have had almost a year of fed rate hikes, you can pretty much count on interest rates going up….
Then bullshit blogs were saying that higher interest rates do not mean lower prices… which obviously too felt like bullshit. Its like they couldn’t even ponder the possibility that maybe the current price hikes were in part due to years of astronomically low interest rates and that a reversal of that would dampen enthusiasm.
The same thing can be said with the stock market as well.
Spot on RangerOne.
You can spot a RE cheerleaders pretty quickly. Its bullshit phrase after bullshit phrase with just one intend…..to get you to buy now.
I have a good bubble 1.0 story that I’m sure could be reproduced now as bubble 2.0 starts to implode.
I sold my house – was way ahead of the crowd and chose to downsize and rent closer to work so I was also selling lots of “stuff” on craigslist. Its amazing how much you can accumulate just to fill the space you have. Anyway, a guy calls me up interested in a few things and we meet in the evening. Turns out hes early 20s and a RE agent (I’m early 30s at the time) and he asks why I’m selling the stuff. Told him I’m selling my house and renting. He tells me I blew it, I should have refi’d, bought another place and rented out my current house – he could have “gotten me a deal”, lol. His car was full of stuff – he had just “bought” his place and was combing craigslist all day and driving around buying stuff to fill his new digs. When he showed up he asked “what were you selling?” – he had so many people he contacted he couldnt keep track of it all.
My house was bought by a flipper who sank 100K+ into it and even with that it took a good 6-8 years to get back to the price I sold it for. I always wondered what happened to that kid, mr. slick RE agent kid.
Oh yeah, I’m still just chilling in a rental. Picture a house like the one in this article, but bigger, nicer and in a much, much, much nicer location. Grand a month. Yeah I may not get to paint the walls (for those that are into that sort of thing – do you get high off of it?) but I get plenty of living in, and I think thats what its all about.
thanks for sharing Govinda.
Many people that are in the field of RE dont see whats happening. They are like most people, spend too much, dont live frugal and cant take advantage from downturns. You would think they read the signs the market is giving or have better insight. Some RE I talked to (and i talk to a lot – each weekend i meet new ones) are very aware of whats to come. One even told me he sold his house for prime dollars earlier this year and is now renting and waiting for the big one to buy back in.
Another anecdote, from last week.
Was taking a walk after work, saw a house which has a good design, I look up the property records online to get an idea of size and layout. Cost of construction wasnt too bad, but that was in 2011 so I looked at some comps and noticed costs are up 50% +. In that same time frame my rent has gone up 5%. NOT 5% per year, 5% since 2010. I have no idea what people are thinking nowadays.
Still not tired of winning!
Guy who bought in 2011; he is winning, his capital is well protected as there is a lot of downside protection from next crash.
Landlord who has not raised your rent (most likely an individual landlord); he is also winning, he is probably cash flow neutral yet probably a massive equity in that home.
If savings few hundred bucks a month is winning for you, ok.
@Govinda, you timed your sale prior to bubble 1 perfectly. But you totally blew your chance to re-enter the market back in 2010-2012 before the big run up. What have we been saying about market timing? It’s nothing short of guessing and gambling. Buy a house you can afford and plan on staying for the long term, then tune out the noise. This is what the VAST majority do.
Back in the late 70’s and early 80’s when mortgage rates were increasing into the double digits, housing prices did not crash. They kept going up but at a much slower rate.
The reason for that was inflation was also rising at a double digit rate and people were getting raises at a double digit rate. Even Social Security was rising at nearly a double digit rate. Everything was rising at near double digit rates except for property taxes of people who owned homes since they were capped at 2% increase by Prop 13.
Housing prices went up but not at the rate of inflation at that time.
This could happen again if wages start increasing again.
If that is the case then housing will not crash though it may overshoot and until wages catch up.
Our Millennial will not find a good deal in housing if this happens. However, someone who bought a house recently will benefit with a fixed rate mortgage at 4%, a wage increase, and a cap of 2% on property tax increases.
IMHO, I think the Fed is turning the inflation and interest knobs up to make this happen in a controlled way. Inflation also helps with the national debt. However, any disturbance during this time could cause instability and a crash.
People like myself and Our Millennial may be sorry to be holding cash during slowly rising inflation.
I fear at times that I am watching this like a frog in a pot of water on a stove under low heat.
Seen it all before, Bob,
In the eighties the median house was 47k. I take 13% interest any day for buying at 47k. Median California household income rose 96% to $35,798 between 1980 and 1990. The house price back then wasnt even 2 times your annual houshold income.
Nowadays, house prices are 5, 6, 7 times more what people make per year. Asset prices are already highly inflated today and have a long way down.
Increasing wages across the board will just be a dream.
https://www.motherjones.com/kevin-drum/2018/08/chart-of-the-day-inflation-keeps-going-up-but-wages-are-going-down/
BTW,
If you havent gotten a raise during this bull market its very unlikely you will get one during the upcoming crash….
During the boom, you can negotiate if you are in a field of high demand. Negotiation can sometimes mean you need to interview externally, get an attractive offer letter and go back to your employer. Meet with the right people. Its incredible how quickly things can change if they fear you are inches away from leaving. That worked for me but it was a bit risky. In case they tell you, we regret your decision and dont try to counter offer, you know they dont value you much. Than you should leave.
Millennial, you weren’t born yet but the reality in Santa Barbara in 1988 was 35K for an engineering salary and we bought a 200K 3 bd 2 bath 1960’s tract home with a 11% 30 year/10 year adjustable mortgage.
The ratio of income to home prices was 1:6.
Not far from today so I’ve seen it all before.
Seen it all Before bob.
You are either lying or whoever wrote that mortgage should be in jail. You make 35k before tax as an engineer and yet just the interest payment from the first year is 22k.
Seen it all before bob,
Can you prove that you bought a house at that time for 200k? You must have bought the most overpriced house during that time if that’s true.
131 total comments so far. 24 of them from ‘Millenial’, without counting how many posts are either responding to ‘Millenial’ or talking about ‘Millenial’.
We have a problem.
Millennial says:
“Can you prove that you bought a house at that time for 200k? You must have bought the most overpriced house during that time if that’s true.â€
LoL, basic middle class homes in freaking south Orange Country were selling for $250-350K in 1990. With double digit interest rates.
$200K in Santa Monica in 1988 is no big deal. Learn something, please just once Millenial.
Nope, this ain’t an alternative fact.
My wife and I bought a 200K )160K mortgage) house in June 1988 . As a starting engineer, I was making 35K. We needed my wife’s parents to co-sign on the loan or we wouldn’t have got it. My wife was making about 16K after she graduated and started working. Total income was about 51K a year after we bought. No kids or fancy cars at the time.
Santa Barbara where I worked and got my first job out of school was very expensive.
We sold in 1993 for 260K. For tax purposes, that was breaking even with the improvements we put in. For rental parity, the interest was killing us at 10.1% and our PI payments were about 1.5K per month. Taxes and insurance were about $300. Total was about $1800 per month.
First year at 10,1%
Interest: $16.1K
Principal: $870
Compared to the first year of a loan at 3.5%
Interest: $5500
Principal $3000
Just think though, if we were like Our Millennial we never would have purchased at this rate. However, 3 years after we bought, rates dropped to 8% to give us some relief. We sold in 1993 due to 2 kids and very cramped space and had about 80K in cash on the deal to spend on the next house.
Now this 1000 square foot house is going for 800K. We should maybe have kept it. It did drop to 350K in 2011, so it would have been possible to buy it back but we would have had to wait 13 years for a crash.
There were no housing crashes between 1988 and 2008. The biggest drops during this time were about 10%
I hope Our Millennial does not have to wait 10-13 years to buy.
Sorry about my math.
There were no crashes from 1988 to 2008 more than 10%. That is 20 years (not 10-13 years). I hope Our Millennial doesn’t have to wait that long to buy.
For proof, here a a good link. It doesn’t show interest rates but you can get that elsewhere. In 1988 we got a 10 year adjustable for 10.1%.
http://www.michellecook.com/blog/a-brief-history-of-median-sales-prices-for-santa-barbara-montecito/
One more thing. I just can’t stop.
Santa Barbara and S.CA was not that expensive in the early 70’s.
My Silent Generation parents sold a 35K house in the Midwest and bought a house in Santa Barbara for about the same price in 1972. That same house recently sold for $900K
Interest rates were about 7% in the 1970’s. I was jealous because our house was 7X the cost and we were paying 10.1%
My point is that the people able to buy a house in the early 1970’s had a great deal. The late Boomers and early Gen-X generation were seeing a 6:1 house/income ratio and to top that, a 13% fixed rate mortgage by the late 80’s.
You Millennials have it good now with such low rates and the same income ratio.
The Silent Generation and early boomers had sane prices.
Millie is a modern version of energetic vampire
Affordability has 3 components, housing average price, average income and average financing cost. If financing cost goes up, then income has to go up or price has to come down to maintain the same level of affordability. Of course California affordability is so low that normal economic truths don’t seem to apply now. Either we are in for a very rough ride, or the one number that is most difficult to track (income) is bogus in today’s statistics (underground economy anyone?).
Definitely more inventory BALANCING the market. It really all depends on the property, listed price and location.
Have 2 different escrows right now. First one sat for 60 days at around 300k (Inland Empire) and dropped the price to 290k and buyer came in and got offer accepted.
Second one, (in Orange County) first weekend open house; 3 offers at or above asking price. My buyer got it at 605k; original ask was 595k.
Generally I don’t see this as a completely tilted sellers market like the last few years, and buyers are a little more picky now, but, I would hardly call this a “crash”. It’s nice to see a little more balance where the seller doesn’t have such control.
“Have 2 different escrows right now”
I feel so sorry for those 2 people right now, been there, done that. Good for you to get out at the top though.
Still amazed on how quickly things changed from just a few month ago. I would have never thought the RE market can turn the other way that quickly. Fascinating to experience this in real time.
Dan, do you have stats on increased inventory YoY and price reductions MoM?
I love being flooded with emails from zillow, redfin and others telling me price drop here, price drop there. Thats fun!
I received 10 notifications from Zillow today about 1% – 4% price drops in the Temecula area. My dream house with my dream weather may become a reality. 🙂
There’s also the possibility of a 20-40% drop and then go sideways for three or four years. Don’t celebrate just yet Mille.
Milli: Still amazed on how quickly things changed from just a few month ago. I would have never thought the RE market can turn the other way that quickly. Fascinating to experience this in real time.
It’s easy to be amazed when you’re fantasizing. In “real time” there’s been no “quick” change. A slight change, at slow speed.
I love being flooded with emails from zillow, redfin and others telling me price drop here, price drop there. Thats fun!
There’s no “flood.” And it’s only fun if you’re buying. Which you’re not and won’t.
The problem is the banking sector has removed the natural business cycle and replaced it will a credit cycle. Credit is either expanding and causing an economic boom of mal investment or it’s crashing. Whenever I hear people talking about leveling out I just laugh since they clearly have no understanding of how money works in our current debt based dollar system.
Millie,
No, I don’t have those stats. I will leave those to the statisticians on here or the doc. I can only report what I am seeing and hearing from the 30-40 agents I work with.
Yes; inventory is rising and sellers generally do not have the power or leverage they once had. Buyers can be more picky or ask for seller credits or repairs to be done where before sellers would balk, they now are agreeable. Some sellers are unrealistic and list high which causes the property to sit.
Overall, from what I see, there is definitely more balance in this market right now. Some areas property may just sit, while other areas properties will go fast (if priced right). It is interesting to see as it became noticeable about 5-7 weeks ago.
Turn what other way? You’ve been denying the inventory data for months and suddenly you’re acknowledging it? The only thing turning here is you.
SOL,
a “slight change” huh?
First we heard its the “normal after summer slowdown”. (except that summer wasnt hot, it was quite the opposite of hot)
Now we are hearing its just a slight change.
Keep in mind, a few month ago, we were told this spring season is going to be epic.
Maybe an epic fail was meant by that?
A few questions:
Have you visited an open house lately or talked to agents? 6 months ago they sounded A LOT different from what they are saying now. You havent noticed a change in their message? (what they are telling me is “Sellers havent gotten the memo yet, they base their asking prices on comps from 5 months ago. the market has changed/cooled/turned/shifted”.
Does inflection point mean anything to you? https://www.geekwire.com/2018/redfin-ceo-warns-slowing-national-real-estate-market-frustrated-buyers-sitting/
You are not being flooded by zillow, redin emails about price reductions? Are you signed up with these sites? Do you save favorites on these sites? Are you sure the email you entered is correct? Have you visited any new home models, signed up for their newsletter and receive their emails about increased incentives and price reductions?
“Turn what other way? You’ve been denying the inventory data for months and suddenly you’re acknowledging it? The only thing turning here is you.”
What you see with your own eyes (more open houses, more homes for sale, more inventory in new homes, houses sitting longer on the market) can be very different from what you read on blogs dominated by RE cheerleaders. The current state is a confirmation for me.
Month ago when the market started to turn I challenged the There-is-no-inventory myth. Its one of the RE cheerleaders remaining sales pitches to get you to buy high. Here we are, months later, and the news are reporting it (rising inventory). The delay in reporting is somewhat expected due to lagging indicators.
If you dont believe the market is turning (despite all the articles/recent news), just put your house on the market. Base your asking price off of comps from 5-7 month ago and see how many offers you get.
Last year you would have gotten 10 offers flying in. That’s no longer the case. Houses (not just in Temecula) sit much longer, listings expire or sellers give up and take it off the market and try to rent it out.
Millennial is a dishonest shill. The very same inventory data he denied a while back he now is acknowledging. I point it out and he then spins the truth of what he claimed in the past. He has an agenda to sell just like jt and lord blankmind.
I would say it this way: I denied the fabricated story during summer that there is no inventory. That’s because i saw more inventory, more listings, more open houses, more new construction, houses not selling as fast as last year and a change in communication when talking to agents. I don’t deny data, I use it. But as i often say, housing data can be a lagging indicator. “boots on the ground” see that earlier, before you see it on your screen. These agents see that foot traffic at open houses slowed down, less buyer interest, less offers etc. Some agents are transparent, some dont. But by talking to a lot of agents and lenders you filter out the generic sales pitch and identify the trend.
3 Month ago, RE cheerleaders were repeating the same line about inventory. You dont hear that anymore, do you? Some here give me credit, some are sour grapes. That’s ok. Just move on and adjust to the changing market.
If you need to sell, you might want to price a bit below the market and throw in incentives. Otherwise, you might find yourself chasing the market down. Prices are only going down from here on now. (due to rising inventory, higher financing cost, bull market cycle ending, upcoming recession, impact by new tax laws (SALT, increase of std deduction).
Millennial is still pathetically spinning and shilling hard. He’s so deep into it that there’s no way out aside from admitting it so he spins even harder.
The way he does it is by putting up a strawman argument against something no one was actually saying. No one who is anyone was saying there was no inventory. What was claimed is that the inventory was historically low. It’s called months’ supply and that’s the common metric which has been used for decades. Millennial wouldn’t know this first hand because he was still shitting in diapers only two to three cycles ago. Instead of saying LOW inventory he says NO inventory. See how he does that? It’s a distinction with a difference.
The other thing he does is that he won’t clarify which market he’s referring to when making claims. He makes general sweeping statements as if it applies to housing across the country. Maybe he’s talking about bumbfuck central valley CA or maybe he’s talking about wannabe manhattan beach adjacent…..who knows? He purposefully won’t be specific and when cornered defaults to bitching and moaning about real estate agents in order to distract the conversation. Just a bumbling moron this guy.
https://www.corelogic.com/blog/2018/06/us-economic-observations.aspx
Darn it! Now there is another Millie and nobody will know who we are insulting anymore.
Our Millennial has been trolling us for over a year but he has excellent points. He is almost the only person on this housing bubble blog who thinks there is a housing bubble.
Our Millennial and I agree that there will be a housing drop. With the economy the way it is, I think 10-30%. An 80% drop will require more than stagnant wages and record employment.
But Hey! If Trump starts a real war with bombs, well, that will cause at least a 50% drop.
Why else do we need the Presidential Alert to be online and functioning?
We will all suffer to MAGA because there will be some very good reason that it is justified. WMDs or something else. Our Millenial and I will be buying our homes at this point and hopefully not be labeled war profiteers.
Otherwise, housing will drop 20% and then flatten and inflation will rise at 8% for the next 8 years and like frogs in a simmering pot of water, we will endure like good Americans have done in the past.
Bob,
Millie is just a copycat. People try being like me. Not surprised.
Insults? Lol, what insults?
And I thought you said before I am just semi-trolling… what changed?
I’m sorry, Millennial. That was a typo.
You are still a lovable semi-troll in my opinion with many good points coming from your naivety. This housing bubble blog has many housing bubble deniers. You are standing your ground and doing a great job. Keep it up!
“lovable semi-troll in my opinion with many good pointsâ€
🙂
I think Trump;s trade wars are hurting the Chinese market. It will take some time but the interest rates have to keep going up.
I think I’m getting in tune of how and what is playing out and China is a big part of it..
We have seen this play out before in California and other states before. Cycles play out over and over again….a correction in housing with chinese market cycle down will force margin calls, a lot of them….
The Chinese were big time buyers in Vancouver, too. Now Vancouver just experienced 44% (Y-O-Y) drop in sales during peak selling season. Same for Hong Kong, Seattle and NY. These are prime international markets not flyover country.
China is going to play a big part in this move down, I see some cycles repeating, think I have a good handle of outcome. A different player to push hard….
Same thing is happening in NYC (as reported a few weeks ago):
https://streeteasy.com/blog/price-cuts-hit-record/
The most listings posting a price cut since 2009. Good for the little guy I guess: if the real estate market doesn’t take everything else down with it and we all lose our jobs again…
1.4 million for a 500 square foot house? A real home of genius it is! If that doesn’t make me want to pick up and move to SoCal I don’t know what will.
Respectfully, the house is a shabby tear-down. Go to Zillow and look at the photos. Also, per Google Street View, it’s next to an older 40s-50s apartment house, so it’s a possibility for a multi-family. The neighbours will almost certainly object to that, so the the likely alternative is a substantial update and expansions in line with the other houses on the street, many of which seem to have been updated as well.
Supposedly it’s in a low crime area of the Hollywood Hills, so that’s probably driving a good bit of the price as well.
That doesn’t mean that there’s not a bubble in process overall. Rather, it merely highlights that it’s in a relatively good area
Hope this helps.
Just a thought.
VicB3
I’m waiting for a nice crash so I can buy a nicer home and rent mine =). This is the reason why I bought my current home solo and my wife kept her credit and income separate on everything!
I’m waiting for a nice crash so I can buy a nicer home and rent mine =). This is the reason why I bought my current home solo and my wife kept her credit and income separate on everything!!!!
Ummm. This is NOT even fun yet. Wake me up when RE is down 30%. These tiny little reductions are meaningless. Most people are overextended and can’t afford either rent or a mortgage.
Irvine prices continue to increase. Although there is definitely more inventory prices are not showing any signs of slowing down.
Irvine, compared to a number of high-profile markets, is driven more by employment/housing balance and less by speculation (though far from none). So it’s a little more resilient to the sentiment shift lately. It will follow if things continue, though.
Same here in San Mateo county, no price slow down in sight and still low inventory. Still $1mil. for a 1,200 sq ft. outdated crap shack. It seems the most desirable locations in CA are bullet-proof during and since the last crash and even if prices fall elsewhere they will stay strong, even within the same county or region.
For example if the Big Millie crash does happen places like Anaheim and Garden Grove will drop 40% or whatever and Irvine and Laguna Beach will only drop 0-10% or up here in the Bay Area Petaluma and Santa Rosa May drop 40% but San Mateo, Hillsborough and San Francisco will probably hold strong,etc. I could be wrong but it seems that some of these areas are so desirable with limited inventory even a crash can’t hurt them much at this point. Im sure there will be plenty of areas near and far from these spots where prices significantly enough to open the market back up to those of us that are priced out but then other issues such as reasonable lender financing and competing with investors,etc. will come into play.
According to Millie, those 1M houses will be going for 300 to 500K after the collapse. Just be patient and keep your money in that 2% CD. What could possibly go wrong with that plan. Interest rates may be approaching 5%, if home prices aren’t budging that means monthly payments are going up and up for new buyers. Those 3.5% rates from a few years back with home prices 30% lower look like absolute bargains now!
Lord Blankmind,
yes, 5% mortgages are almost here. I am sincerely hoping for 6-7% mortgage rates for the 30y conventional. Remember, you want to buy a lower priced home with a high interest rate. not the other way around (inflated home price and low interest rates).
Some here know this already: low interest rates inflate asset values. High interest rates are no issue. You just re-finance later. To say that low interest rates are a bargain works only on fools.
We’re targeting the peninsula and are starting to see price reductions in Belmont and Burlingame. There are many more houses in the 1.3-1.6 million dollar range than there have been in years because these didn’t sell at 1.8. The Peninsula is slower than say Santa Clara, but it’s far from immune. A stock market crash and 6% interest rates in 2019 will knock it down to size.
“Some here know this already: low interest rates inflate asset values. High interest rates are no issue. You just re-finance later. To say that low interest rates are a bargain works only on fools.”
Millennial is the one with a blank mind on this point. High rates means less paid down toward principal over time for borrowers so it’s a real issue especially now that you won’t be able to claim it in high tax states…gee the timing must simply be coincidence that the Trump reward goes to the low tax states.
Either way high prices low rates or low prices high rates there is no free lunch it’s the same suck at both ends. Good lord blankmind this Millennial guy has the gall to talk about fools!
Your statements show you must be new here or you simply don’t understand basic real estate principals. I’ll help you with it, one by one.
“Millennial is the one with a blank mind on this point. High rates means less paid down toward principal over time for borrowers”
Over time? Over time the borrower has the opportunity to re-finance when rates are lower. Higher rates mean lower purchase price. Lower purchase price means you pay less interest over the duration of the loan. In case you struggle with this, i’ll make it even clearer: Think of the purchase price as your base. Unless you pay in cash you pay interest on that base (loan). If the base is lower, you pay less interest, if the base is higher you pay more interest.
The beauty of having a low base (derived from a low purchase price) is that your overall cost will be lower. Less property taxes and less interest (just re-finance down the line).
“so it’s a real issue especially now that you won’t be able to claim it in high tax states…”
That’s not an issue, its a bonus. Taking away subsidies is a good thing. Subsidies and artificial low interest rates inflate the market. In an artificially inflated market you overpay for the same house. We want a deflation of the market so that i can buy in at a low price.
“Either way high prices low rates or low prices high rates there is no free lunch it’s the same suck at both ends.”
That’s a fallacious argument. Low prices and high interest rates are much better financially for the above reasons. To say it in other words (sometimes that helps): A purchase price can never be changed once you signed. Interest rates change over 30 years – constantly.
You might have a certain agenda or its just poor analysis which makes me believe you must be new here. Lack of experience is another potential reason but in that case you should probably post less and research more.
Meant “principles“. I blame my phone for the typos.
IrvineGirl
Could you kindly share your data source(s)?
Can you cite just of couple of MLS #’s that have posted recent price increases?
I have lived in Irvine for 40 years and follow the market.
For all the MLS listings I track (mostly in Turtle Rock and Shady) I note a steady stream of price *reductions* on a daily basis.
Rarely see a price increase anymore, and even then I think these increases are Realtor fantasy maneuvers.
I get my daily feeds from Redfin and Coldwell.
I’m not an expert in the Irvine RE market but I do have some experience there which should lend me a little bit of credit. I used to work as a quality control manager for Ol’ Man Donald Bren and Irvine Company from 2013 to about 2015 and Irvine was absolutely BOOOMING during those years. We did a market study because this was unusual compared to the surrounding areas and found that 90% of buyers were from mainland China and 75% of those buyers were buying 2 or 3 houses at a time, all cash. Obviously this isn’t very surprising but one can deduce that Irivne is largely driven by the Chinese economy and their monetary policy. I haven’t been back in Irvine since then but I would imagine a slowdown in that market is likely considering the current state of the Chinese economy. However, Irvine has always been and will continue to be highly desirable by the Chinese and they will continue to fuel that RE market. I’ve always said that Irvine is like the SF of Socal (in terms of price movement). SF didn’t drop much during the Great Recession and I simply can’t see RE prices dropping in Irvine either.
If you look at the banking, corporate, and consumer debt in China you realize none of these houses were purchased with cash. There are loans on top of loans financing those things. It probably looked like cash because of the complicated financing they used to get the money out of China.
If you go on zillow and do a search u can then toggle show price reductions. I. Consistently seeing 20% or more of listed homes showing price reductions. Just ran this search for Santa Monica up to $10million and then down to $1m and points in between. Consistent reductions across the pricing range.
You have to be careful with price reduction stats. In markets like this, many sellers get greedy and price their homes well above comps. After a few weeks, reality sets in and the price is lowered to market value and the home sells. Here in the South Bay, anything at market value goes quick. No rocket science here.
I rent in Monterey, Ca. I moved out of my last home on June 30th, because the homeowner wanted to sell the home. The for sale sign went up on July 2nd, listed at $798k. I thought it would sell within 30 days. It sat on the market for almost 3 months, and the seller lowered the price 3 times. I drove by the house about one week ago and it was no longer for sale. It was for lease. The owner didn’t want to lose any more money. The market is turning! Big time. It’s 2008 all over again.
How is this 2008 again when owner decided to keep the home because he cul not fetch the price (inventory not increased)?
If you are renting, it is likely that you will never own a decent SoCal home. You would be better off moving to a home on the outskirts of SoCal, or head to a different metro area. Just to get a 50s ranch house with a back yard on in a decent location starts at 1.5M. You need a 150K down payment. Then, you will be making payments of around $8600 per month which includes taxes. Add in PMI, and you are north of 9K per month … for 30 years. Good Luck with that one.
There was a shot in 12 and 13 to get in. For example, east Manhattan Beach was at 900K for fixers, Now, those are approaching 2M. Even the 700K deals in South Redondo from back then are now starting at 1.3Ms. Still possible to squeak into west Torrance for 1Ms, but you are usually fighting multiple offers over there.
If you missed your chance, you can move somewhere like Texas. I just visited someone who moved there last year … they cashed out their SoCal home and moved after a job loss. Their new situation is very nice. Nice people. Fun places. Beautiful women. Great dance floors. And, their payment is reasonable. jobs are good. Sounds like a better life if you missed the SoCal housing market. Don’t waste your time here. Get on with your life. Life is short and you will be old with health problems before you know it. It is dumb to waste your life waiting for the unlikely huge price drop.
Sounds very tempting. Who doesn’t want to move to greener pastures…eh greater dance floors.
I’m gonna pass though, stay put, rent cheap, save and wait for a nice crash.
It was a good try though JT.
So us recent grads just starting to save are just going to forget about living in SoCal and leave? If that’s your theory then there will be reduced demand for housing and no one to buy your 1M+ shack. With wages not keeping up, there’s no way the price increases can sustain.
That is not right. If you are young and out of college, and you are a success, then by all means stay. A portion of people your age will land up making more than 300K per year. I would grab a small beach house and stay.
But, if you land up below 200K with no hope, then forget it. Not worth the trouble. Find a more affordable city.
We’ve been priced out forever
“We’ve been priced out forever.â€
Pretty much this^
Funny seeing people here comment on price reductions on houses over $1mil. Lol.
The issue in reality is that so many houses here in CA are close to or over $1mil. and aren’t even close to worth that and no normal people can afford to buy a home in that price range. Let me know when “price reductions†aren’t a $1.4 mil listing reduced to $1.2 mil but when a $950k crap shack rancher is reduced to $350-450k or a price that is feasible for anyone making under $250k a year etc.,etc. blah blah blah
“We’ve been priced out forever”
That is what people were saying in the late 80’s when S. CA prices were 200K and starting professional wages were 35K.
How can anyone afford a house when their PITI at a 12% fixed is over 20K and the wages are 35K?
This is how we overcame it in the late 80’s
1)Have a relative who will co-sign the loan.
2) No kids for the first 5 years
3) No fancy cars, boats, vacations for the first 5 years (10 years if you have kids).
4) Hope for high wage inflation. Us late boomers and Gen-X were lucky to have 10% yearly wage increases due to inflation In 5 years, the 35K yearly wage is now 51K and the mortgage is easier. Will the priced out wage earner who makes 200K today be making 350K in 5 years?
5) It won’t be as extreme now, but hope interest rates fall and the PITI drops to 15K/year. Our interest rate fell from 11% to 8% in 4 years.
6) Huge mortgage interest deductions helped at 17K+ per year. Prop taxes were relatively low at around 2K.
That’s how people my age overcame the “We are priced out forever” We squeaked in and then with the economy and luck with high inflation, high wage growth, and lowering interest rates, life became easier in 5-10 years. Rental parity was blown away at that point since rents were 3K per year in less than 10 years due to infation.
Strange to say, but we were lucky with high inflation and high rates. It is likely we will see high inflation again and I hope wages rise at at least that rate. If rates go to 6%, they may fall again in 10 years and today’s Millennials can repeat.
We bought in 2013 and our house price has nearly doubled. We barely got in at that time. Our wages have gone up somewhat these past 5 years however based on today’s house prices, we would not be able to afford our house.
Wages increases have not been keeping up with true inflation rates. We barely make ends meet with regular life as everything has gotten so expensive to buy.
The Feds have done a good job of pushing housing and stock market prices with money out of thin air these past 10 years. However, inflation is roaring at 12% a year in Los Angeles. Check out the Chapman index.
Fed’s need to quickly raise interest rates to slow down the ridiculous rate of inflation. This will certainly cause housing and stock market prices to plateau of go down I think. Not sure.
The recession is still years away. Maybe 2020, maybe 2022.
It’s funny to watch amatures like Mellinial in real time.
A few months doesn’t make a housing market especially if you are comparing inventory over the last 6 years.
There have been several periods of softness in 2013, 2014, and 2016.
The question is how much will the housing market and rent run up before the next recession. Trump wants 1970s style inflation and he may get it. The next recession will see 15-25% price drops in the prime areas of Orange County and LA. In the less desirable areas you are looking at 25-50%.
The current state of the economy and housing is a giant nothing burger. There are still blue skies in sight. It won’t last forever though, follow websites like calculatedrisk if you want to time it correctly… still years away. I am not even on recession watch currently. I will change my name when that happens.
Notankinsight,
“The recession is still years away. Maybe 2020, maybe 2022.”
Nice, that’s not too far out. More time to invest and save.
“It’s funny to watch amatures like Mellinial in real time.”
Its amateur and Millennial or just Millie 🙂
May I ask what makes me an amateur and what makes you a Pro?
Because you read on https://www.calculatedriskblog.com/ and know exactly what will happen within the next 2-4 years?
“A few months doesn’t make a housing market especially if you are comparing inventory over the last 6 years.”
Nobody said that. You are looking for a change in trend (Inflection point). The hot spring season 2018 was supposed to be epic, remember?
I wouldn’t make fun of those following Calculated Risk for economic info… it’s a very very very dry boring site compared to this blog. Most of the data would go over your head. But, he nailed to the exact month when the housing market turned south and headed north. I always make sure to check in occasionally on his blog to see when he’s predicting the next downturn.
That’s good to know! I will check it out. I don’t think I made fun of the website. I am trying to understand why notankinsight thinks of himself as a pro.
My opinion is a recession just around the 2020 mark. But, that is a guess. And, I agree with the 15% to 25% price drop … but, this time there is a possibility that the price drop could be smaller if inflation gets rolling. With the trade wars, you might see an inflationary recession, which means the 15% to 25% price drop might be more like 5% to 15%.
The real problem is banks tighten lending standards during a recession. So, it takes a much much larger down payment to get in because lenders want protection against falling prices. During recessions, the appraisals come in very low, and you will be required to come up with a much larger down to cover the gap. That is a tough situation.
WOW, even JT jumps on my train now? Talks about recession in about two years and even mentions up to 25% price drops! A few month ago he told us that we need to buy now or be priced out forever.
“My opinion is a recession just around the 2020 mark. But, that is a guess. And, I agree with the 15% to 25% price drop … ”
“The real problem is banks tighten lending standards during a recession. So, it takes a much much larger down payment to get in because lenders want protection against falling prices. During recessions, the appraisals come in very low, and you will be required to come up with a much larger down to cover the gap. That is a tough situation.”
I would hardly call that a tough situation! Thats the perfect situation for someone who has cash. That’s why i have been living frugal, kept expenses low the last decade and saved, saved, saved. A low appraisal is a beauty! You negotiate the price down even more and cover the gap between price and loan with cash.
NoTank,
I would agree with your assessments. The environment we are currently in is NOTHING like 2006 right before the last big crash. We’ve had the most qualified buyers EVER the past decade. Add in super low unemployment, record stock prices, homeowners swimming in equity, an administration that is pro business…all this combined will make it very difficult for an all out housing collapse.
Sometime in the future, there will be a recession and home prices will decline. When and how much, nobody knows. And just like last time, strong hands will come in take what they want. To think your average joe sixpack will come out on top this time is laughable.
The administration is OK, but it scares me what the FED (Powell) is doing. He is maybe .25% from neutral rate. He said he is planning to go way over neutral rate into tightening territory. Add to that about 50 Billions monthly QT and he may blow up the bond market which is 3 times larger than the stock market. He may even blow up the treasury market which is the most senior asset class, the bedrock of the whole financial system.
With these people you never know what they pursue. For sure it is not the well being of the middle class. I know they pursue wealth concentration and transfer and for that they might create another depression.
The credit profiles have nothing to do with what is going to come. What we have is the most INDEBTED buyers of all time. That debt is what is going to cause the crash when they are no longer able to service it and creditors start to fail causing the monetary base to collapse. The collapse of the monetary base which was created by the banks occur all assets will get repriced.
housing always tops before the recession…..pti, dti and ltv too far out of whack….now you have Paulson and Geithner actively discussing rental pricing is killing the economy….expect housing to go down for a while….the fed has a new mandate…..
Berkshire Hathaway Home Services ? …….You might as well give up the fight right there Doctor. Vested powerful interests have high motivation to keep this bubble inflated….money printing, taxpayer funded bank bailouts (again), whatever it takes, but the housing market ain’t going dowm much.
“Did you ever get the feeling you’ve been cheated?” – Johnny Rotten
yep, same story on each cycle. This time is different. This time its a soft landing.
A little off thread, but wanted opinions..
Two interest rates I see often, my Bank’s CD rates and the Cap rates I get on commercial RE email offers I see daily in my inbox.
A few years ago, Bank CDs were 1% and the NNN Cap Rates I would see were 3.5% (on a bank branch lease, shopping center etc.) Now my bank’s CDs are in the low 2s and Cap Rates are being advertised in the mid 5% range.
If I can get 5% on a CD (which prior to 2005 was normal) what would the Cap rate need to be on commercial RE?
You know, even if real estate crashes, I’m not sure that I want to buy a house here any more. The housing stock is old and even if you do (expensive) updates, there’s no guarantee your neighbor’s ancient property won’t pass on the termites and rats it’s hoarding — I know that from renting. There’s also no guarantee somebody won’t build a McMansion or worse a 5-7 story apartment building 200 feet from your bedroom window. And of course there’s no guarantee that an earthquake won’t completely wipe you out. I’m starting to think I’d rather rent, save my money, and buy something nice someplace else for an early retirement.
“…neighbor’s ancient property won’t pass on the termites…”
Termites or no termites, the major killer these days as far as I am concerned is the traffic.
I have lived in SoCal (OC) my whole life. (70 yrs)
In the 1960’s I could drive the 5 freeway to WestWood to see a movie under a hour no problem.
Last Thursday, I went to Pickford Center for Motion Picture Study (near Hollywood and Vine) to see a documentary. Took me 2:45 (I logged the time). Average about 20mi/hr.
Parked and then attempted to walk down Vine St to grab a hamburger before the show. Just about add to trip over homeless people.
Maybe its me, but I keep asking myself if it is worth it anymore.
Would be interested in hearing from other long time SoCal residents about their own quality of life and does anyone have a solution?
I used to live in SoCal, but not for 70 years like you. Based on my travels, it did not take me too long to figure out that Flyover country offers a far better quality of life than SoCal.
However, if people love to be slaves to the banks with a millstone of debt around their neck to sink in despair, that is their choice. That means they really love their air pollution, traffic bumper to bumpers and all the homeless around them. Who am I to take that pleasure from them?
Productive normal middle class people have been leaving for years. Increasing numbers of established wealthy are leaving more recently. Third world poors, clueless young dreamers, and nouveau riche douchebags have been moving in. Any questions?
With the olympics coming up they are building out mass transit fast.. so you will soon have options besides sitting in heavy traffic.
I did 17 years in SoCal, was burnt out after about 10-12. Traffic is too much and I would shine going to lots of events the last 3-4 years because the traffic would add 2-4 hours to everything. I even visited my family less because I dreaded the traffic. In retrospect maybe I should have taken the train more for those norcal/socal traverses, but I wasnt clued in to that at the time.
Its funny because I moved to “flyover” and while my commute was still high for a while (30-40 mins) there was never any traffic so I felt much less stress plus it was beautiful scenery – ocean, mountains, etc.
Bottom line, I think there are places in flyover that are much more attractive to live in than the “trophy” places such as much of coastal CA – unless youre already wealthy. I cant fathom spending so much time in traffic and working every second of my life to rent/own a shack I dont get to see that much anyway.
How do you get ocean on a fly over state? AZ, TX, LA?
Goodtimes – “How do you get ocean on a fly over state? AZ, TX, LA?”
You don’t. If you like ocean, you stay on the coast – Atlantic or Pacific. Just be ready to pay for it.
This is the difference between Calculated Risk blog and this one – due to the combination of participants on this blog, this one is very entertaining.
On top of getting information and opinions, I get a good laugh. Each one is funny in his own way.
“With the olympics coming up they are building out mass transit fast.. so you will soon have options besides sitting in heavy traffic.”
That’s the best joke we’ve ever seen on here….thanks for the laugh! Soon we’ll have more options to stand around waiting for an opportunity to be shoved up against the smelly general public in a box to somewhere that isn’t quite our destination! The third world lifestyle of dependency is gonna be so worth waiting for. Maybe we’ll get to star on a youtube video of ghetto degenerates berating fellow passengers. Private transportation is for squares!
I consider flyover to be any state where there are few to no elites who are high on their own “smug” (southpark reference). That could be Louisiana, Alaska, or a number of other states/territories.
millie called it..slum lord et all will still spin this info to benefit them…its their mo…remember millie, they’re soooooo smart…lol
🙂
Increase in price drops does not mean median prices are dropping. Just means sellers are too un-realistic (“greedy” for those who prefer to be childish).
Example:
Last year, home is purchased for 1mil.
Same home is placed on the marked for 1.1, but sold at 1.05 (price reduction)
You get both, price reduction (bears are orgasming) and YoY price increase (bulls are climaxing).
Price drops and time on market are transnational noise which is increased due to incorrect pricing.
Median YOY price change is what really matters (Among with affordability). Former is increasing, while latter is decreasing. (Although at slower pace).
The median price has fallen about 10% from Q4 2017 to Q2 2018 (it should continue into Q3 of 2018 but we won’t know till end of November). This is inline with the math on higher interest rates. As the bond rates continue their climb (which has increase lately) home prices are going to get pummeled.
not sure which locality you are referring.
Just about every county in California has experienced a price increase from Q4-2017 to Q2-2018. Does not mean it won’t turn at some point (of course it will), just has not happened yet and prices still growing.
I am referring to nation wide based on federal reserve data.
https://fred.stlouisfed.org/series/MSPUS
Due to the Trade War with Red China, the real estate market has peaked.
It was always and forever dominated by Red Chinese political criminals hiding their loot.
They drove Vancouver to the Moon… and many another place.
Now both the Russians and the Red Chinese no longer feel save parking their assets in the West: London, California, New Zealand, Australia, Canada.
Indeed, some are looking for buyers so as to move their assets further on.
This is the crowd that didn’t need to obtain a mortgage.
They shut out all ordinary buyers in those markets they wanted.
Just as predicted here… YEARS AGO.
That is true. I said the same thing before. Add to that the constant increase in interest and the QT (instead of QE) and it is not surprising that many markets suffer.
I am not sure how high the interest will go and how long the QT will continue. That will determine how fast and bad the markets will turn down. Powell is saying “a lot”. Remains to be seen – bluff or trying to emulate Volker?!?….The higher interest to be paid from the Main Street for the mountain of national debt will crowd out everything, including housing.
oh god it’s you again with the inane ramblings… do you have a point? If so would you please let us know what it is?
The Chinese have blown the largest bubble in the history of humanity. They are going to pay the highest price ever for it.
You also predicted Obamacare would tank the economy. You and Jim Taylor should start a blog and keep predicting the future. Lol.
This Santa Monica townhouse is typical of Milli’s “rapidly changing market”: https://www.redfin.com/CA/Santa-Monica/931-10th-St-90403/unit-B/home/8143000
2010 – sold for $1,350,000
2018 – listed for $1,995,000
2018 – sold for $1,860,000
Milli might say, “Wow! A price plummet of $135,000.”
When in reality, it’s a price increase of $510,000.
Milli gloats over lowered list prices (as though a list price means anything) and ignores the increase in sales price.
SOL,
I believe I can help with your confusion a bit.
Yes, the market is changing rapidly. We hit a wall in May/June. Affordability issues, a slowdown in foreign investors, rising interest rates are contributing to that rapid change.
Here some help to clarify things for you:
Sales volume:
Has plummeted. If you google it, you will find many articles.
https://www.cnbc.com/2018/07/24/southern-california-home-sales-crash-a-warning-sign-to-the-nation.html
No matter how hard RE cheerleaders try to sucker in the last buyers….the facts show there is an unbelievable reduction in sales volume.
Seasonality:
usually, spring/summer is the hot season. Not this year. Instead of houses selling above asking, we see houses sit longer on the market, asking price reductions, more open houses and increasing inventory. In the past you would see a slowdown in Aug/Sep after a red hot summer. This has been echoed from different locations (e.g. Seattle) not just SoCal.
Interest rates:
When rates go up, prices go down. Higher interest rates have translated into higher mortgage rates (there is a lag, meaning it takes a few month until you see the impact in dropping demand due to higher rates).
Asking prices:
Yes, its a great sign to already see drops in asking prices. That’s a sign that the market is no longer going up. Real Estate agents call it cooling, turning or shifting. Again, that happened during the “hot season”. Sure, that doesn’t mean we have a buying opportunity yet. The RE market is like a cruise ship, it takes a few years of price reduction until we have a nice buying opportunity.
Median sold prices:
They dropped to 2016 levels nationwide:
https://fred.stlouisfed.org/series/MSPUS
I hope this helped. Let me know if i can assist with anything else in terms of terminology.
Milli: “I hope this helped.”
No, because you contradict yourself. Above you say: “The RE market is like a cruise ship, it takes a few years of price reduction until we have a nice buying opportunity.”
Yet in an earlier post you said: “How quickly the story changed.”
So is the crash coming rapidly, or is it a cruise ship?
Anyway, my point was that there is NO “price reduction.” The SALES price of that house INCREASED $510,000 since its last sale. A reduction in ASKING price is meaningless. It’s an indicator of unrealistic sellers, rather than of a crashing house market.
SOL,
“So is the crash coming rapidly, or is it a cruise ship?”
Happy to elaborate. I can see how this confused you.
The answer is: Both.
The RE market moves like a cruise ship (Stock market is like a fighter jet, ups and downs daily). Once the RE sets a course, it stays there for a while (years).
It feels like the change in trend/housing story changed rapidly due to several reasons. Just look at this blog and how the conversations changed over the last month. We are now discussing if we already see price reductions (YoY) or just reductions in asking prices. Thats huge compared to what we discussed before and during summer! RE cheerleader no longer say its just zerohedge and its doom and gloom porn. Now, the news about a slowdown is reported everywhere. Not just in SoCal but also in other states and other countries!
As we see, the slowdown during summer (hot season) wasn’t expected by RE bulls. Also, many RE cheerleaders have disappeared from this blog or remain passive.
Maybe they are in shock over this rapid change or they are busy with open house after open house in order to still sell at a profit before its too late?
For me its not a buying opportunity. The market is way overpriced. Lets wait until next year for the market to adjust to further increasing mortgage rates and the trump tax changes. Its going to be an exciting journey for our RE ship.
“Lets wait until next year for the market to adjust to further increasing mortgage rates and the trump tax changes.”
He won’t say which market. He uses generalizations like “adjust” which doesn’t tell us much of anything.
You seem a bit hangry. What exactly is the issue? Did you bet on the market going up? You want all the details from me but who the heck are you and what’s your agenda or goal?
In terms of market specifics. It doesn’t really matter, everywhere you look the market is going down (Seattle, SF, Ventura, San Diego). There is not much you can do to change that. Let’s join the party instead of being so crumpy.
Nice try but you’re not fooling any of us. You won’t get specific because you know we’d tear you apart on the details.
Mhm, somehow you don’t answer any of my questions yet you asked me many things and I have provided answers and data back up. How can we have a real conversation if it’s so one sided? I am really trying to help but can’t if you won’t answer.
Btw, who is “weâ€. I noticed you mentioned “we†a lot. Do you carry a parrot on your shoulder or have a mouse in your pocket?
That’s cute. I guess your dream of tearing me apart on details will remain a dream. You already lost the “ low inventory battleâ€, what’s next? What’s you projection for the market? I know…..silence. Like on any other question i ask you 🙂 scared to answer?
This run isn’t like the early 2000’s so it will NOT be 2008 all over again. Millennials weren’t old enough to have experienced it first hand so they really don’t know what they’re talking about.
gov and fed put significant stops in place since 2008 therefore the water will breach in other ways.
Trump nailed California bigly and there’s gonna be some pain felt. Welcome back to all real estate is local and watch the low tax states’ reeling in the benefits for the remainder of this cycle.
Surprises,
exactly, when the last crash happened i was in school. Now we can experience this next crash very closely and profit from it.
“fed and gov put stops in place” muhahahahaa, yeah, this time is different. Keep telling yourself that.
Well, after visiting SoCal, looking at many different areas, wife and I have decided to stay in ATL, starting to appreciate the strong position we are in and looking at taking advantage of whats coming. EVERYWHERE we went, traffic, homeless, trash, smell, crowds, streets lined with what look like abandon cars/campers, but people were actually living in them. Urine and schitt everywhere, needles mostly around camps. BUT, i did like Ventura, still a sleepy surf town, not much traffic, homelessness, trash, and housing was still high, but doable. Came back and had lunch with 2 friends who wholesale/flipp/Buy-Hold property, they are killling it and dont see much of a slow down in ATL, so I might do some investing, if the numbers look right. My .02, be great today
Somehow I feel you are bullshitting about so. cali.
And I have been to ATL.
SoCal is largely a shithole. He dodged a bullet.
This market is starting to bleed out. Even a baby could see that.
There are some really dumb comments here from people that haven’t lived through cycles, or that have but did not make money through them.
There is no ‘soft landing.’ It has never happened. Savings and loan crisis, 2006, none of them. There are two sides to the mountain young grasshoppers. What goes up must come down.
Your synapses aren’t firing properly if you think that these values (which are in no way tied to underlying economic fundamentals like that pesky thing called household income) are sustainable.
Millie Vanilli can be mocked for many things, but he/she/ze/zer is right about the market shifting right now. I have some bonds to sell you if you think the inflection point is in 2022.
Buck your seatbelts my ninjas, fools gonna get hurt.
” but he/she/ze/zer is right ”
LOL. Well played.
But no he’s not right. He’s a perma bear that every 10 years is less wrong. He’s been screaming about a 75% real estate crash for years and years. So far all that’s happened is 10-15% yearly appreciation of the past 7 years has stopped. For him to be “right”, to get to 75% off 2014 prices let’s say, we’d need a 90%+ correction from today’s prices.
Landlord, i think he’s referring to the change in direction (inflection point). I called that out many times and keep saying since summer the no-inventory-story is just fabricated. Yes, i also said, that we will see 55% haircut from the peak. We are headed that direction. Housing prices are already adjusting down from the peak. Within the next two years we will have our buying opportunity. Its not too late for you to accept reality.
Where is Jim Taylor when you need him when he is right?
Without the knowledge of any radical unknowns out there, (ie war, plague, accelerated global warning, meteor strike, unknown loosey goosey major mortgage fraud), it is hard to predict the future on the when’s, where’s, and how much.
Darn the Northridge quake and my broken crystal ball!
We do know unemployment is at record lows, spending to drive the economy is at record highs, taxes are at record lows, and housing is still at record highs.
We also know personal debt is at record highs, wages are at record lows, the stock market has be flat since February, interest rates are rising for the moment until the FED decides to reverse course and lower them, and for some reason, under a Republican President and Republican Congress the deficit and borrowing are increasing at a record rate.
When is s balance point? When is the tipping point?
Hey Nor Cal. You could be right – What will be the cause for the next crash? lowest unemployment in 40 yrs and no NINJA loans and corporate profits booming.
Good news from Denver and SF.
Substantial drop in sales volume. Its only a matter of time until increased financing cost and rising inventory will pull down prices further.
https://www.zerohedge.com/news/2018-10-05/realtors-warn-metro-denver-housing-market-now-pulling-back-big-way
“The number of single-family homes sold in September, across all price ranges, dropped 30.5% from August and is down 21.4% compared to September 2017. Condo sales fell a dramatic 42.9 % on the month and are down 17.3% year-over-year,” said The Denver Post.
SF prices fell 11%. Not time to cheer yet but its going in the right direction.
https://wolfstreet.com/2018/10/05/san-francisco-house-price-condo-price-bubble-trump-bump-peak/
Exactly which market are you looking to buy in? That’s right you won’t say. What you will do is cherry pick markets you have no intention to buying in and use those as proof of something happening in the market you won’t tell us about. It’s hilarious how you refuse to get specific about anything.
“Refuse to get specific .. says the guy who names himself after me? that made me giggle. I have shared a whole lot here but we don’t know anything about you?
I don’t see any reason to share where I want to buy. You seem pretty obsessed with me.
You’re still desperately trying to change the subject and not provide any specifics.
The FEDs focus is no longer on artificially inflating real estate. When you listen to the feds meeting this year, the path is clear, increase rates. Investing in RE becomes harder and harder. Flippers feel the pain already. Imagine your bet was to make 100k profit over the hot selling season and you put money into buying the flip, fixing it up and now cant sell for the target price? Imagine you did this not only on one but two investments or even more?
If flippers slow down activity, foreign cash buyers are gone, mortgage rates keep going up, who is left to buy at heavily overpriced levels? As we are experiencing right now, you dont even need a job-loss recession to see a dramatic slowdown in sales volume.
I said this many times before and i see this in an even more extreme way right now:
walk around in different neighborhoods and check out how many houses are completely empty/uninhibited. Check on the history of these empty houses. What is mind boggling is that the sellers still havent gotten the memo yet. You see asking prices plummet and sit on the market for months. These sellers often end up trying to put the house for rent. Of course, their rent must be close to what the mortgage cost is plus maintenance, taxes & Hoa’s. Many cant rent it out to cover their cost and remain empty. I am watching a few of those and i am curious to find out what happens next. You cant sell for the price you want, you cant rent for the price you need. So you end up eating the cost all together? How long can you do that? And why not drop the rent, eat the difference but at least cover say 80% of your expenses?
Its almost like, sellers are refusing to accept the reality of a changing market. You can see it very nicely on this blog here too. Some people’s ego wont allow them to accept the turn of the market. Its fascinating to experience / follow this and see what happens next.
Your ego prevents you from telling the truth about inventory claims and data. That’s been fascinating to experience.
I must have really upset you. Are you a flipper/investor who is overburdend with debt and ran into trouble selling at target price? Now, you are projecting your anger at me?
Or did you sky high buy recently and have buyers remorse but instead of blaming yourself you are blaming someone online (me)? I am getting more curious in learning about your story? Maybe we can give some honest advice to help?
“So here we are with unsold housing inventory now hitting 6-year highs†see Dr housing bubble blog above!
Every recent news article about housing in about any market talks about increased inventory. I made the call month ago and now you have it black on white. It seems you are bitter I got it right? Why? Higher Inventory is good for everybody, no? You should be happy i was right instead of lingering in the past 🙂
Naw I just don’t like people who lie and it’s fun calling you out on it.
Something tells me you can accept the fact that I was right about the market peaking, a crash every ten years and the low inventory myth. 🙂
Millennial
I think your overall analysis is spot on.
Case in point:
“…Imagine your bet was to make 100k profit…”
A neighbor of mine (real nice guy, BTW) is a fulltime realtor who is flipping a house a few streets over from us.
Coincidentally, his bump for his flip is 100K (about 8%)
Been on the market for months, and zero takers.
Price reduced a few times also. (his margin is now about 80k)
A year ago, I’m sure the place would of sold easily in days.
It’s almost as if a Cat 5 hurricane came out of nowhere and froze the market.
“..What is mind boggling is that the sellers still havent gotten the memo yet…”
Indeed, human nature is a funny thing.
Getting thru to some people that the endless bounty of real estate riches is over is not unlike convincing people that UFO’s don’t really exist.
Purchased 2 Dana Point rentals in 2011, and own a few others. Have been looking for a several months to buy a new primary residence and rent out current, but prices have gone up so much it just doesn’t make sense. With the Fed undoing QE and raising short term interest rates, as well as massive federal deficits adding to Treasury supply, it looks like we’ll finally get a healthy correction. As much as I’d like to see a repeat of the 2008 crash, I just don’t see it. I’ll be happy with a 20% price drop from current levels.
LOL…unemployment rate fell to 3.7% last month, the lowest number since 1969. And people here are talking about a depression.
They call it a top for a reason. If the unemployment rate was sitting at all time highs and housing… stock market… at all time lows, we might be calling it a bottom.
Barry O’Bumbler gave us an 8 years recession. There is a lot of catching up to do.
By the way wasn’t Trump’s trade was supposed to destroy the economy over the summer? Whatever happened to that? And weren’t tax cuts supposed to destroy the economy last year? And wasn’t Trump’s election supposed to destroy the stock market? Paul Krugman of the NY Times said we may never recover. He said this on the day after the election.
Aren’t you guys starting to see a pattern? Every single prediction the left makes, is wrong. Not just a little wrong. But 100% wrong.
Mr Landlord,
Give Trump some time. The stock market and housing markets are teetering now under the Trump policies.
Remember, it took Bush almost 8 years to crash the economy with the stock market and housing market dropping nearly 50%.
Trump just needs another year with his tax cut/deficit spending to do the same,
The we can finally elect Bernie to restore sanity.
Give it a break slumlord. Dow down over 800 points today. Obama’s fault. Hey look over there, Benghazi. Hillay’s Emails. Shiny objects everywhere.
I view Millie like someone trying to lose weight. He was 200 lbs in 2011. Everyone else around him started eating real estate and losing a few pounds a year. Millie said nuh uh, I’m sticking with my rental diet. And by early 2018 Millie was up to 250 lbs while everyone else around him was a nice slim 175.
By fall 2018, Millie suddenly lost a few lbs, down to 245 and everyone around him gained a few, up to 178.
And now Millie is telling everyone how he’s an expert at weight loss and everyone should listen to him. But he forgets that he’s obese, while everyone around him is still looking great.
LOL, to expand on the analogy:
Millie says there is breakthrough Weight Loss Cure will come which will help him lose 50% of weight instantly. So, he keeps gorging. Others, starting healthy diet (not waiting for a miracle) and all but ignore the absolute weight (rather focusing on other things such as heart rate, overall wellness).
The Weight loss Cure will come, but it might be only 20% weight loss and by then Millie will be 250lbs.
That is actually a really good analogy.
Except that I think Millie is wafer thin in real life and drinks lots of Kombucha.
Nor cal,
You are almost spot on.
I do like the analogy as well. As I said before he is pretty entertaining.
I am pretty thin and my wife actually loves kombucha. I am pretty boring when it comes to liquids. Mainly mineral water and one cup of coffee in the morning. Maybe one or two beers per month.
ha! this! he’s definitely a lightweight
It’s nice to see some posts from you. I Thought that the change in the RE market might discourage you. I am glad to see you are still at it!
Believe it or not I am actually in great shape. Had my physical done last month and no action needed. Looks all great according to the doc.
Millie, when and if you ever buy your very own house, we will all breathe a great sigh of relief. All of us. There will be no necessity for this blog to exist after you buy your home. I also presume you will have no further need to comment here. Am I correct?
Millie my friend, I was away for a while, went on vacay with the mrs (no kids, thank you grandma and grandpa). On a remote beach out in the middle of the ocean. Too much paradise to worry about housing prices.
Ned,
it almost sounds like you are not enjoying my contributions. Have I ever said something you disagree with? I am providing data and was spot on with debunking the inventory is low myth. What’s not to like? This blog is a great reflection of market participants. You need different voices to have an exciting dialogue. The real fun is going to start when we have our recession (1-2 years from now).
Upon my first purchase I will most likely work on my second purchase. This blog has been very helpful. I present my strategy and viewpoints and depend on people voicing their opinion. Based on the feedback I might re-evaluate or gain confirmation. That’s how I nailed down my successful strategy in coming ahead during the bubble and buying during a nice downturn.
Stop overdoing your rebuttals to Millennium. It makes it pathetically obvious how scared you are.
millie is so flat in his thinking he even responded to an obvious humorous analogy with something like “oh, I went to the doctor”
Nah… poking at blabbering fools is too much fun.
In a sense the comments here reflect the market. Some posters show signs of the anxiety, denial and fear. It’s very normal behavior (see market cycle psychology). Put yourself in their shoes. If you bought high and your bet was the market will continue to go up you are in a tough spot at the moment. It’s understandable that you post your frustration here and show a bit more emotion. Some RE bulls already left the playing field. Maybe the anxiety was getting to high. People who bought high must dislike when we post data and stats about increased inventory and asking price reductions. I feel kinda bad but I have been saying don’t buy high for a long time now. Not everybody allows you to help.
I think everything ( not just comments) are reflecting a market for you. Because you think too much about it. A bird shits a certain way -> a sure way market is going down for you
Thinking too much without doing anything = unhappy millie
You guys know Logan Motashami? One of the biggest American bulls out there. Even he is softening his tone….â€we are def. in a later stage of the cycleâ€, “we are not quite there yet for a recessionâ€. “A few of my recession indicators flashedâ€.
What a quick change. If even the biggest bulls start talking like that….
https://www.cnbc.com/2018/08/10/california-sees-china-impact-soft-job-growth-but-no-sign-of-recession.html
https://www.cnbc.com/2017/08/07/chinas-crackdown-on-money-fleeing-the-country-looks-like-its-working.html
Mr. Vanilli,
As any decent trader/analyst on Wall St understands, you don’t worry when people say a recession is coming. You worry when nobody says a recession is coming. And vice versa, when everyone says the bottom is here, the bottom is still a long way off. The fact a bull is getting cold feet means nada to me.
The day I start worrying is when I see a positive economic story on ZeroHedge. Until then…all system go my man.
Zerohedge is not in the business of posting positive stories ever.
Milli, Logan is the ultimate perma-bull spamming troll doucher. Every single real estate website on earth has his incoherent ramblings splattered all over.
Is he really turning bearish? If true, I would fully agree that is a great contrarian indicator. It would be like Carlton Sheets coming to Jesus and stopping flipping.
Since the only thing you do is point to qualitative commentary in order to back your theories, provide a link to where Logan said or wrote what you quoted. We’ll be waiting.
https://wolfstreet.com/2018/10/08/sonoma-bay-area-housing-bubble-price-declines/
“101 new listings, 101 price reductions.â€
Who doesn’t love waking up to an inbox overflow of reduced prices?
What happened to the inventory-is-low myth? #theNewNormal
“quipped Thomas Stone two weeks ago”
Thomas Stone isn’t Logan Mohtashami. You can’t even get your lame bull turned bear sources straight.
Huh? The wolf street article has nothing to do with the Facebook live that Logan did. I did not answer your question because I don’t have to 🙂 you can figure it out by yourself if you are really interested in finding the source.
I am glad you read the 101 listings article though. It’s a great read.
Logan Motashami used to spam a lot on the doctor’s site. Logan would always post a brief remark, then provide a link to his site for the “evidence” or argument underlying his remark.
Logan never argued any points, or offered any substance, here. You had to click the link to his site to see his arguments.
Logan Motashami was a SPAMMER. I’m glad he no longer spams here.
Dang, September data is coming in.
San Diego, “months of inventory 63% above last September’s level.â€
That says it all folks. Sales are down, financing costs are up. Inventory keeps rising.
Almost time to party!
You already missed the boat. Prices in good areas have easily doubled over 6 years. You blew it.
Totally blew it. I could have bought in Texas and make my moves on greater dance floors right now! Or, I could have bought between February and may 2018 in California when the market peaked.
Now, that I blew it I am left with all my cash that I have to invest in real estate when it’s down 55% (within the next 1-3 years).
If that’s how losing looks like, I hope I lose every ten years 🙂
Crypto down. Cost averaging over the last year = what happened to all my money? You can listen to JT, who owns multiple properties in desirable areas, or listen to Milli Vanilli who saves money by living in his parents basement…and then loses it in crypto. Some quick math…for $1M house, 20% down, $800K mortgage, a 1% increase in interest rates is roughly equivalent to $100K of mortgage. So, in round numbers, a 10% price drop is a wash given a 1% rate increase. In desirable areas, competition heats up quickly if investors get a whiff of “deals to be had”. Saw this first hand in the last downturn when good friends were dealing with multiple offers in 2009. I like JTs advice about buying in a good area and holding for the long term. Hold out for a good property in a desirable area, trying to time the market is a fool’s errand. It’s similar to Buffet’s advice on stocks.
Robble, your advice is to buy Real Estate now? After we already peaked and while you see price drops left and right? If that’s your advice, you should capitalize on it and put your money where your mouth is! Don’t waste your time here! Go out and buy a flip! It’s seems like a great time to buy, no? Interest rates are still so low (historically speaking). By being on this blog telling us we should buy now you are missing out on buying real estate yourself!
Not in the market to buy, since I own my home BUT if you want to go in on a duplex, let’s do it ;)….here’s the thing, inventory is up but is still constrained in desirable areas. Will it exceed what is considered normal (6 months of inventory) in the near future…who knows? Wages are up, unemployment is down, and banks have been much pickier with loans. I would guess a 10-15% drop will occur in the next few years, but if prices go up another 5%, then it’s a 5-10% drop from today. If your time horizon is short, I would run away from the market, but if it is long and you find the perfect property in a desirable area, buying could pay off. There is value to being settled and paying down a mortgage.
Yes, there is lots of value in getting settled. All you need to do is wait for a nice crash (its around the corner). When you buy low, you get a 50% discount. Waiting pays off nicely.
Measured in gold the median house price in the US has barely recovered to average historical levels.
http://pricedingold.com/us-home-prices/
In 2008-11 and coming up to the present not only banks, but home owners the world over were bailed out with massive monetization by the Central Banks. This was so because property owners are the biggest voting block there is. While it is true that without the bail outs fiat denominated savings could have been at risk as collateral disappeared, over time, home owners have benefited tremendously by these policies.
That central banks will devalue the currency, over and beyond the official rate of inflation, is a given in anybody’s decision when buying a home. I find it very disingenuous to talk about ‘inflation adjusted’ prices or quoting USD prices from the 80s to talk about property when principal is paid on the original nominal price.
I guess that for many people who indebt themselves to the hilt, with little or no downpaypment, the current interest rate is all that matters, but they still pay based on the nominal selling price. This is why people only look at rent vs buy monthly cost, because they assume, correctly for the past few decades, that long term the nominal price will not matter. It will be diluted away by the CB to the cheers of the majority.
Will this continue that the the massive labor glut in East Asia is fading away, taking with it the inflation narcotic on manufactures? It will be interesting to see over the coming years.
I am one of those buyers who honestly just looked at the monthly mortgage within the context of knowing I will live in a house perhaps the rest of my life. I bought a 1800 sqft house in 2012 near Culver City. I bought the house for $470K, I qualified for $640K but was not about to take out a loan with a $3K per month PI, even though the brokers pushed me to max out my loan approval. Since I was a first time buyer, I qualified for FHA 3.5% down payment (in 2012, Mortgage Insurance did not ride with the life of the loan like it does now). However, during escrow the FHA appraiser said the house was only appraised at $440K. So I made up the different with $30K of my own cash. I of course took on a mortgage insurance of $400 per month. 18 months later, I refinanced out of FHA and got rid of the $400 per month mortgage insurance on a 4% fixed mortgage. My mortgage is now $1950 per month and taxes, insurance another $600 per month. I dont know much about finances however, it seems that I will be able to afford those payments no matter how F’d up the ekonomy gets and with inflation I should be in better shape than if I was renting a 2 bedroom apt in WLA for $2500 per month (todays prices). If I had to sell today, the house would fetch $850K min.
Very good perspective (for this type of blog). One problem though is that Gold itself should be any “price” standard, because itself is highly speculative.
With fiat, money is just a vector. Nominal price does not matter per say, it is all about Rent vs Monthly-PMT (which in itself are vector). Assuming inflation, it is ok to accept the short term disadvantage of PMT vs Rent when buying a home.
In deflationary environment, you might be stuck with disadvantageous position for a while Plus increase risk of initial capital investment.
If I had Tina Turner’s money, I’d move to Switzerland, too. Or one of the smaller French cities. Or maybe Barcelona.
Laura,
I travelled in all those places. Barcelona and french riviera used to be nice. Have you been lately? The same forces acting here, act there, too – massive influx from Africa and ME. Those are “balkanized” places (except Monaco) like South Chicago, with drug dealing. What the unelected bureaucrats in Brussel did to EU is sick; so many nice places destroyed in the name of “multiculturalism” and globalism.
Monaco and Switzerland are still nice because they are not part of EU; they have their own policies. Switzerland prefers to keep Switzerland for Swiss people, the same way, Israel, China and Japan keep those countries for their own people. That homogeneous (relative to US and other EU countries) population gives stability and a sense of community with common values – people are not ideologically so different like in US were they just tear one each other till they degenerate into a civil war. Yes, you can have some differences on few issues but they don’t act like they are from other planets.
Monaco is nice but if you are not a billionaire, you are a pauper. Switzerland still has many beautiful places reasonably priced and they still look like heaven. Just try to stay away from the french side with their french policies. The german speaking side is very different – I love that place. Most of the political power is at the local level – very decentralized.
I am always amazed that people here think it is ok to pay $1 Million for a house that is basically a construction site trailer and live in greater SoCal area that has potholes and crappy infrastructure (Water, electricity) everywhere and think it’s a deal because the sun is shining again today. It’s great to make $150K in SoCal but CoL is so high that it basically knocks you down financially to someone making $30K per year in Texas. The stress associated with living in SoCal (Traffic/Taxes/Water) seems to be knocking that $30K down to basically $0 by the end of the year. Working poor! BTW Tina Turner moved to Switzerland a long time ago!
All stress being equal (150k in cali) or 30k in texas…
With Cali – you hav choices, you can retire in Cali and leave modestly or move and live like a king
Stay in texas and you only have texas or similar as an option
🙂
I’m seeing price drops left and right in my area for the past 3-4 months.
Used to see 1 a week, now I’m seeing 15-20 per week.
Sales prices are still 10% higher than this time last year. At this point I see prices stalling for the next 3 years.
I don’t see prices falling as long as it’s the about the same to buy vs rent but the rise will pause for now.
Who is moving into and out of Cali?
http://snip.ly/238jh#http://markrobertson.mortgage/2018/01/25/people-move-california-states-leave/?utm_content=social-okge4&utm_medium=social&utm_source=SocialMedia&utm_campaign=SocialPilot
California received 514,500 new residents from other states in 2016, a number equal to 1.3% of the state’s total population. The states from which California experienced the largest population gain were:
40,900 people from New York;
39,100 from Texas;
33,800 from Arizona
28,000 from Washington;
25,400 moved from Florida;
24,700 from Nevada;
22,500 from Colorado; and
21,500 from Illinois.
However, 1.7% of California’s population emigrated to another state in 2016, which amounts to 657,700 individuals exiting the state. The states receiving the most former California residents in 2016 were:
69,900 people who moved to Texas;
64,800 people who moved to Arizona;
51,500 people who moved to Washington;
45,500 people who moved to Nevada;
43,800 people who moved to Oregon;
28,400 people who moved to Florida;
27,000 people who moved to Colorado;
23,000 people who moved to Utah;
22,700 people who moved to New York
Editor’s note — Within the U.S., more people moved out of California than moved in. However, California netted 42,600 individuals from other countries in 2016. When considering both types of immigration, the total population increase via migration was 33,500 new residents.
So it’s lose net Americans but gaining net illegals.
What could wrong?
This has been going on for years. A steady flow of normal productive people continue to move out while more of the third world and confused resistors are moving in.
I was just in SoCal last week, I go usually once a year to visit family. This time Santa Barbara area. I swear, every time I fly into LAX it looks more and more like a supersized Vegas – endless sprawl surrounded by desert. Dry, dry, dry. Every visit a bit less green, and a bit more brown. 37 million mostly idiots not enough for you? I cant believe I lived in that dump for 17 years. People drive like maniacs, even in parking lots – although there is a certain skill to driving like that and not crashing I suppose. Many drive very nice cars which I guess makes sense when you’re practically living in them. Stressed out people everywhere you look, dont get me started at trying to shop at a trader joes. Building everywhere too, mostly ugly looking dorm style buildings or mcmansions with 5′ between them. All about the “good life”, starting at the high 800s, LOL!
Keep chasing after that cheese!
What happened to CalExit? It was the hotness for a few weeks post election. Did anything ever come of it? Imagine the utopia you guys could have. No borders, 99% tax rates, no more cars, no more A/C, everyone forced to live in apartments.
Get that sucker on the ballot kidz.
Calexit†is just click bait. A headline people will jump on. Reminds me of some of the stuff we heard here on this blog. “Upcoming pot boom†in California was a thing for a while and how prices will sky rocket. The guy who said it ( an OC lender) is now lingering in the background while the market is turning the other way. Some of these headlines are short lived. “Interest rates will never go up again in our lifetime†& “we have no inventoryâ€.
Don’t fall for it. Do the research, sit back and wait.
What da heck is going on in OC!!! Check these inventory increases out for OC:
https://www.ocregister.com/2018/10/09/orange-county-homeowners-rush-to-sell-listings-up-34-in-a-year/
Active listings are 34 % up YoY!!!
Dang is this ship turning quickly…. if someone would have said during the summer that the low-inventory story is a myth you would have said this guy must be nuts! Oh wait…. sounds familiar??
Bob who has seen everything guy — Millennial is Jim Taylor. He’ll probably come along soon and say who is that? no that’s not me! Of course it’s him.
Sure, whatever you need to tell yourself to make you feel better and find peace. It’s fine by me. I can be for you whatever you need me to (troll, shill, Jim Taylor, or the millennial who pays 18 dollars for avocado toast).
You got three out of four correct.
Nope, Jim Taylor has been predicting “Housing to crash soon” before both our Millies were born.
Have you guys read the OC housing market report for September?
Titled “Oktober-Housingfest Cancelled”
Closed sales down 24% YoY
“That’s down a staggering 24% compared to 2,734 closed sales last year”
Comparison to last bubble
“Today’s housing market looks a lot like 2006 in terms of sales”
Rest of the year forecast
“muted buyer demand, longer market times, a lingering supply of homes and a large drop in closed sales…()”
Demand
“Demand is down 15% compared to last year”
“Demand now totals, 2050, the lowest demand reading for this time of the year since 2007”
“The market has shifted (…) to a demand problem, not enough sales”
“Demand peaked in Mid-May at (…)”
Market time
“The expected market time has risen to 105 days, the highest level since September 2011. It was 67 days last year”
Active listing inventory
“And, the active listing inventory is at 7,201 homes, 34% higher than last years 5,382.”
Price reductions
“64% of all closed sales in September reduced their asking price at least once”
Wow, I know…..to end it…”There is very little of 2018 that remains”
I hate to saw it, but it appears that the real estate market has topped out. I thought it would be delayed until next summer, but I was clearly wrong. There should be a really good buying opportunity in real estate–beginning in about 3 years.
How low will prices go? Whatever home prices are 3 years from now will be at or near the price bottom. The timing will tell us the amount of the decline rather than the other way around.
Based on the last crash, housing peaked in 2007/2008 and bottomed out in 2010/2011, I agree. The bottom will be in 2021/2022.
Hold on Millennials! Only a few years to go before you can be like us Boomers and fight for Prop 13 while the next bubble expands for those poor Gen Z’ers.
Most Unrealistic Seller Award: https://www.redfin.com/CA/Santa-Monica/1787-Sunset-Ave-90405/home/6776045
Sold in 2012 … $975,000
Offered in 2018 … $2,849,000
A nearly 200% price increase over six years? Does the seller seriously expect to get that price, or is this some sort of ploy? Maybe overprice so as to drop the price later? Or test the market?
House is not new. Built in 1944. It’s nice. Not a crapbox. But there’s nothing to indicate that the seller even remodeled since buying it in 2012.
That’s a nice house! I could see myself paying in the 900’s for it. I agree the asking price can be disregarded. I suggest to wait a few more years and buy during or close to the bottom of the market. A low ball offer at this point would be a waste of energy. Sellers haven’t realized where the market is headed to and still base their comps off of bubble prices from a few month ago (when we peaked).
Stupid housing market since I have been investing, please folks run from these homes, if you buy at these ridiculous priced homes, you get no sympathy from anybody nor should you expect it?
That house looks like cr@p from the outside, no wonder they only show one pic from a distance. 1944 is OLD, probably riddled with termites, bad electrical and plumbing. No doubt some dumb NPC (redundant, I know) in that cr@phole state will buy it though – orange man bad, CA real estate good, lol!
Right on Q, I’m sure DumbLord an SonofaDumb will tell us the stock market is just in a slight sell off instead of a bear market..lol..greed always clouds the thought process..can’t wait till their tenants stop paying rent…but but but Millie can’t be right??!!! Blahhaaaaa
I wonder what happened to Prince of Heck and Hotel California. Anybody know?
Good news renters. That million dollar home only rose in value by 75K in LA county. You must be sooo glad that you are only down another 75K over the last year. Could have been so much worse. Break out the champagne. Time to party. Only out 75K.
https://www.ocregister.com/2018/10/03/southern-california-house-prices-see-5-to-7-gains-in-august-corelogic-reports/
That’s crazy talk and fake news. Your “data” might say prices went up, but anecdotal evidence from anonymous posters on a blog say prices are actually in free fall. And I also know Millie would never lie to me.
I have to admit reading the fights between Millie and Milenial is kind of confusing, LOL
I agree, he should just go back to his old name Lord b
No need to be confused. Millennial is Jim Taylor tank hard with more words and less specificity. Millie is having fun calling out Millennial’s smoke and mirrors approach.
“having fun”
That’s good! That’s what it is all about, having fun (and sharing infos) while watching the market crash.
Michael Moore, the working class hero and darling of the limousine liberal crowd got divorced not long ago.*** So why is this relevant to a housing blog? Well in the divorce proceedings it was revealed this simple working class man from Flint, owns 9, yes 9, homes. This includes a 10,000 sq ft lakeside compound in Michigan, valued at $2M.
You know who also has a massive home on a lake. Why none other than Bernie Sanders, who in fact has 2 lake homes in Vermont. Why you need 2 homes on the lake in such a small state is beyond me, but whatever makes you happy Bernie.
I always find it fascinating how the biggest cheerleaders for socialism are also the most capitalist. I don’t care if Moore has 900 homes. He earned the money, he can spend it however he wants. But it’s the hypocrisy of the guy who pretends to be FIGHTING THE MAN, while living a life of luxury and comfort most people can only dream of.
*** I’m shocked any woman would marry him in the first place, but hey the heart wants what it wants, right?
Socialism is such a stupid term to throw around. Ignorant trumpet supports love to use this term to look like they are smarter than everyone. What it really does is make them look dumber than before they opened their mouths. Socialism is not communism and there are only a few communist countries in the world and they are not russia or china.
Disccgman@”Socialism is not communism and there are only a few communist countries in the world ”
Here it is straight from the parent of communism:
“The goal of socialism is communism.”
Vladimir Lenin
To avoid any confusion between democratic socialism, communism, fascism, statism and any form of state control, just call it – TOTALITARIANISM.
I lived under it and I can tell you that it is an ideology from the pit of hell where you have few plantation owners and all 99.9% are slaves. The government can not give you anything, except money and money are not wealth. If giving money to people would make a country prosperous, Venezuela and Zimbabwe would be the richest.
Follow the Money@ “This is why people only look at rent vs buy monthly cost, because they assume, correctly for the past few decades, that long term the nominal price will not matter.”
I am trying to follow the money, but they look that they disappear in a black hole. Yesterday, the market dropped 1000 (continued after market) – not much percentage wise. In the past, when the stocks dropped the bonds went up. However, yesterday, both went down. That is really strange; I never saw that before.
I am trying to follow the money but it looks like the QT became a black hole where 50 billion dollars disappear every month. China is even a bigger black hole.
Surge and Bob tried to tell us what happened to RE prices in the last 3-4 decades trying to extrapolate for the future. However, during the past decades, the interest rates dropped overall (with all the temporary noise) from about 21% to about 3%. If you look at the long term line, cutting through the “noise”, it had a major inflection point moving upwards – it broke the decades long line.
What scares me is that everything goes down at once – bonds, stocks and RE. Usually bonds go up when RE and stocks go down. Of course, we never had QE and QT before. I kind of expected the FED to give some rope to Trump to hang himself with it. The FED is a cheerleader of globalism. Contrary to popular opinion that Trump nominated Powell, the reality is that the US presidents don’t nominate anyone of the FED. The owners of the FED (a private corporation) nominate the FED president and the US presidents just give their “blessing” to give them legitimacy; in reality they have zero choice. The FED (money creators) control both – the White House and the Congress.
Feedback is welcome. I don’t have a horse in this race. I am not a bull or a bear. I am just trying to observe what is happening and I see new things every day – just when I thought I’ve seen it all before.
The Treasury auction is one thing “they” can’t control. Either buyers show up and bid or they don’t. So if few buyers show up, the rate goes up to entice more folks to buy. If a lot of buyers show up, the rate goes down as people compete for the bonds. Money coming out of stocks moves into bonds and the yield goes down because of demand. Stocks go down due to more selling than buying. This is what markets do. Same with RE… too many folks are trying to get out at the “top”.
The Government would prefer to pay as little interest on their bonds as they can. If this keeps on, Trump will get his wish on that no matter what the Fed does.
“What scares me is that everything goes down at once”
Of course, everything goes down at once. Every crisis is related to liquidity, especially in the debt based economy.
Why do you think prices home prices drop? Because would be buyers have either no jobs or have significantly lower equity position due to stock market declines. AND existing overleveraged owners cannot pay mortgage anymore due to job loss.
Crisis is caused by everybody selling everything to continue to service their debt: Bitcoin, stocks, gold, equity and finally home if everything goes wrong.
I never said what happened to RE prices in last 3-4 decades…like I said, Price is not as critical long term. What happened is that cost of ownership drops significantly relative to inflation
If home prices stay flat, but inflation is 10% -> homeowner will come ahead after few years.
If home prices drop, but inflation is 10% (which is conundrum) -> homeowner will come ahead (unless forced to sell)
Surge, you are correct that most of the time stocks and RE have the same direction; very rarely when the stocks went down RE went up from investors rotating their investments. Again that was a very rare phenomena decades ago in times of high inflation.
The real surprise was from stocks and bonds going the same direction this past week. That is what really shocked me. Usually when the stocks go down, the bonds go up; but it didn’t this time.
I think bonds go down because rates are going up
Surge, you are right again. Given that the bond market is 3 times the stock market, it will take down with it the everything bubble.
The T-bills, the bedrock of the whole financial system, are also bonds. Those will be decimated, too. The implosion will be epic. Scary times!….just in time for Halloween.
I think what we’re looking at is a ‘black swan event’, which is “an event in human history that was unprecedented and unexpected at the point in time it occurred. However, after evaluating the surrounding context, domain experts (and in some cases even laymen) can usually conclude: “it was bound to happenâ€.” From Wikipedia:
The theory was developed by Nassim Nicholas Taleb to explain:
1.The disproportionate role of high-profile, hard-to-predict, and rare events that are beyond the realm of normal expectations in history, science, finance, and technology.
2.The non-computability of the probability of the consequential rare events using scientific methods (owing to the very nature of small probabilities).
3.The psychological biases that blind people, both individually and collectively, to uncertainty and to a rare event’s massive role in historical affairs.
It looks like bonds did go up a bit these past few days as stock plunged. I don’t know which direction they’ll go over the next few months. I don’t have any money on either so my interest is only as a bellwether for the whole economy.
When it comes to housing though, it’s hard not to have a horse in the race. We all need a roof above our head and if you’re lucky you’ll have some savings. So most people are necessarily invested in either. I think that’s why RE captures the imagination like nothing else.
My contention was that a lot of the monetary expansion these past few decades was fueled by low inflation on durable consumer goods, which were mostly produced in Asia. This I call an inflation ‘narcotic’ because other goods are still inflating, from gas to housing to services. This is not to say that the actual inflation numbers are not massaged, but it just makes it easier when 40 dollars or euros still buys you a regular sweater for 20 plus years.
But the labour cost differential between the West and Asia has reduced and other regions of the World don’t seem to have the capacity or the numbers to make up for that. So like I said, it will be interesting to observe the consequences on inflation and interest rates that this will have in the future.
Follow the Money,
It is true that for most people it is hard not to have a horse in the race. However, in my case I look at housing news just as news. For the near future I am not planning to buy anything; I have a house. Also I am not planning to sell anything; I already sold what I had to sell. At this point, the news is just news – for people looking to buy, it is a good news (to buy something on sale). For people looking to sell, it might be bad news if the market drops and they are forced to sell. For those not planning to buy or sell, if the price goes up or down, it does not make any difference. If the price drops to half, you do not lose anything if you don’t sell; you realize the loss ONLY if you sell.
My house is paid and I care less if the price drops to half or doubles; I still have the house.
Do you know how bad the 2 day stock market “crash” was? YTD S&P 500 is only up 2%. That’s how bad!!
LOL
Dumb and slum are triggered!!!
https://www.zerohedge.com/news/2018-10-12/wells-just-reported-worst-mortgage-number-financial-crisis
Housing to tank hard soon.
You know it little brother, you know it!
It’s going to make 2008 look like a kids birthday party! The big one is coming.
Saddest Bagholder Award goes to this Santa Monica condo: https://www.redfin.com/CA/Santa-Monica/2011-Idaho-Ave-90403/unit-6/home/22691452
Sold in 2012 ….. $1,375,000
Sold in 2015 …. $1,895,000
Listed in Nov 2017 ….. $2,095,000
Sold in Dec 2017 …..$2,215,000
Listed in March 2017 ….. $2,335,000
Reduced listing March 2017 … $2,245,000 (3 weeks later)
Reduced again June 2017 ….. $2,198,000
Some poor fellow overbid last December. Then he tried to sell it for a $120,000 increase after only 3 months (no remodel). Now he can’t even sell it for less than he paid for. It’s been on the market for nearly 8 months.
I saw the place last year, and spring. No remodel.
It’s a two building condo community. This particular condo is on the second floor of one of the buildings. No shared walls, but a shared floor. So it isn’t really a townhouse, though that’s how it’s listed.
It was built in 2008. Fairly new. But still, $2,2 million for a condo.
99 Homes is a great movie and based on true events. Remember the scene when carver and his eviction team is at the house to do their thing just to see how the previous home owner backed up the sewage? The single dad who lost his home a day earlier needs the cash and shovels the sewage out the door. People come up with all kinds of nice ideas to surprise the eviction team:
https://investinganswers.com/personal-finance/homes-mortgages/8-insane-ways-people-destroyed-their-foreclosed-homes-4603
Obviously, today we have very little foreclosures but that’s about to change in the next recession. 99 homes is a great forecast of what we will see in within the next 2-3 years.
I have learned a lot from this site, especially from Flyover and Mr. Landlord. I appreciate you guys coming on here and giving your take on things of the past, present, and future. And I can’t forget Millenial for his argumentive nature. (I think) Some of his figures are right but to think the market is going to drop 70% seems like a huge stretch. However, the area matters more. I am from the Inland Empire and the homes around here have not gotten above 2006 levels, but OC has risen far above many 2006 numbers.
Toll Brothers and I few other builders are planning to lay off 5% as they have seen a slight drop in the next few years and are looking to stay ahead of the curve.
I think that Millennial took that 70% drop number from an example I gave some years back. However that number was for a condo not SFH. The fluctuation for condos is greater than for single family homes. I did buy a foreclosed condo in 2010 for 100k, which was sold in 2006 for 360k (county records). SFH in very prime areas did not drop that much. Also, the foreclosure was from a regional bank which was trying to stay alive. The big banks were TBTF and were bailed out. I already mentioned the qualifications for that deal. Also, although in a very prime area (walking to the ocean), it was poorly maintained (no attraction for potential buyers). I spent another $15k to make it look nice. Still it was a good deal.
That being said, I am not sure how the market will behave in the next few years. If it drops, I am not sure how much. I am just watching like everybody else. I always look for deals. I found another deal in May this year, but it was land; not house or condo. I am always looking for RE deals. When I find it, I buy, regardless if it is house, condo, land or commercial RE. I have enough experience to see a deal when I find one. These days, they are harder to find. 2009-2011 were very good years for deals and I found many. When the market goes high, I sell and pay off debts and get ready for the next downturn.
I just read a real estate report … the market is different. Homes below 1M are slowing down, even though a pickup in inventory has occurred below 1M. However, the higher priced end of the market is roaring ahead. I was wondering why I was not seeing a drastic change in my zip codes. This explains it. I would guess the higher mortgage rates are hitting the people without any money. I guess this shows my strategy of buying fixers in expensive areas is the way to go.
Activity above 1M is still decent … because when the stock market heads lower, some will sell stock and buy a home. So, in the short term, the higher priced homes can get a small bump in activity. After that, it all depends on the election. In the near term, Homes, Stocks, and Bonds will move based on the election result. Just before to just after the election, some good deals will happen. Question .. will you be sharp enough to spot deals before they are in the rear view mirror?
Funny article about price cuts and social unrest in China
https://www.zerohedge.com/news/2018-10-13/violence-public-anger-erupts-china-home-prices-slide
“Price cuts have become increasingly unacceptableâ€
“Price cuts of up to 30%â€
Buckle up. It’s going be fun when we get the 55-75% crash I am predicting.
I hate to admit it but Millennial was correct when he said on
October 11, 2018 at 4:24 am:
“… A low ball offer at this point would be a waste of energy. Sellers haven’t realized where the market is headed to and still base their comps off of bubble prices from a few month ago (when we peaked).”
Yes, the current housing cycle has peaked. Prices are likely to decline at least 3 years, but the size of the decline is unknown. Prices will likely drop about 25-40% during that time period. In any case, if you buy in the last half of 2021, you will not regret it. It will probably be the best buying opportunity during the lifetime of anyone posting on the board.
The stock market will likely make a temporary bottom soon and then rally for 6 months or more, making new all-time highs, and then also start declining. The real estate/stock market crashes and recession might not be obvious in Nov. 2020 so Trump might get re-elected.
What rising interest rates mean for real estate. Listen to this Moe Ansari podcast as he speaks with an advisor of one of the biggest real estate investor groups. http://marketwrapwithmoe.libsyn.com/what-rising-interest-rates-mean-for-real-estate
She says be wary of topped out coastal California and look to the low tax states where people and jobs are moving to. Inexperienced missed the boat millennials can only respond by mocking how it’s not different this time but what those simple minded types don’t know from experience is that there are always differences every time. We’re back to all real estate is local. For those millennials who were still in diapers the last time real estate was local just know that last time in 2008 it was different that time in that real estate wasn’t just local.
Jonathan Landsner, the OC Register RE columnist, has an article today whose headline is taken from his summary statement: ” ‘Affordability’ proposals are anti-homeowner and anti-landlord.” His thesis is that driving down rents artificially or massive increases in housing supply are both bad for the rental real estate business.
His article also discusses the Prop 10 opponents’ appeals to homeowners to fight the repeal of Costa-Hawkins limits on rent control of single family homes. The argument is that Prop 10 will hurt rental property values, which will spill over into non-rental home values as RE becomes a less desirable investment.
From what I see in Prop 10, only cities with a large majority of renters will make changes to their rent control laws. I think I can state that putting post-1995 construction and single family homes under a rent control board’s regulation will not make those places more attractive for building new units. But towns with homeowner majorities will fight any attempt to start non-Costa-Hawkins rent control. This will lead to a two tier California with areas where no one will want o build new units due to rent control, and areas where builders will want to build but with a lot of NIMBY-ism, where existing homeowners will want to protect their monopoly.
Real estate historically has gone through boom and bust cycles, and is itself not a reason to panic. The reason to panic in California is that everything necessary to sustain more than 1/10 the population of the U.S.A.,is in some stage of decay, financial stress, or has mounting unfunded liabilities! Everything that can be taxed will be, those taxes and fees will need to rise significantly, services will need to be cut much further, and much of the decline in services already visible, will just get that much worse! That is what will impact the future desirability of California ….
In my area, the shadow inventory is rapidly increasing.
Def.:
“Shadow inventory refers to uninhabited or soon-to-be-unininhabited real estate that that has yet to be put on the market. It’s most often used to indicate properties that are in foreclosure but have not yet been sold, but it also encompasses homes that owners are waiting to put up for sale until prices improve.”
Sellers tried to sell at top dollars during the spring/summer. After many month, the sellers tried to reduce asking price, had open house after open house, eventually took the house off the market and tried to rent it out. I drove by several of these houses. They just sit there….empty. Apparently, sellers dont have to sell yet and nobody wanted to rent it for the asking rent price. So the sellers eat the mortgage on these empty houses instead of lowering rents…..What that also shows is that rent don’t go up. There must be enough other places to rent for a lower rent price. Too bad the low-inventory-myth is just that…..a myth!
How long can you eat the cost for an empty house? Do they wait for a miracle? Do they think the FED is miraculously reversing course?
Maybe these sellers listened to RE cheerleaders who told them the next spring selling season will be epic?
Hey, we are only 2 month away from 2019! It will be interesting to see what happens over the next six month.
I’ve seen this play out as well. I browse Redfin in hopes I see a nice dream house in the 500k range but we are still way off. Dream house is 4/2 bath 2k sqf, 7k lot for a nice yard and better than avg schools. I’m not asking for the moon here. I been looking in the north Glendale / La Crescenta area. I own a home in the SF Valley 5/3 bath, 1550 sf, and 5k lot, and I would be ready to sell it at a cheap price if it meant I can turn around and buy one cheap as well, even if I paid more I would more happy to to do so and be done with moving for at least a decade.
I’ve seen this play out as well. I browse Redfin in hopes I see a nice dream house in the 500k range but we are still way off. Dream house is 4/2 bath 2k sqf, 7k lot for a nice yard and better than avg schools. I’m not asking for the moon here. I been looking in the north Glendale / La Crescenta area. I own a home in the SF Valley 5/3 bath, 1550 sf, and 5k lot, and I would be ready to sell it at a cheap price if it meant I can turn around and buy one cheap as well, even if I paid more I would more happy to to do so and be done with moving for at least a decade.
Have not seen any hint of a sales price drop where I live. I have seen homes take a little longer, but no deals here at the beach. You must be mistaken the difference between a sales price drop and an asking price drop. These days, many people price their homes up 10% over the last sale only to reduce it to less then 3% before the deal goes off.at a sales price which is grinding higher. Does not look bearish to me. Of course, 2020 or 2021 might be a recession … but it might be 2025 or 2026. Good luck timing that one. The trick is, when ever you buy a home, make sure you can answer the question “Do I want this home for decades because I expect it will be a good investment?” with a yes, or forget it. Forget the market timing. Pick up the right deals only when you have the money and the deal makes sense.
“Doesnt look bearish to me”
Oh really? I think the market could go right down the toilet and you would say that. You said at the beginning of the year this spring selling season will be epic. It looks more like an epic fail.
You also said a few month ago that houses priced at 1MIO will soon be 2MIO.
You also said that prices doubled from 2005 levels. The truth is that on pretty much any home i look at you see that the price today barely made it back to 2005 levels. And its headed down again.
You are a great indicator actually….the exact opposite of what you are saying becomes true. I haven’t heard a single thing from you that actually became true.
A year ago it was “Dont fight the fed”, “Interest rates will never go up again in our lifetime”. Now this all has changed and the next rate hike is around the corner (December-most likely).
Therefore, if you say “forget the market timing”, than I take that as a confirmation that waiting and timing the market is the right thing to do.
Millie actually writes down the opinions of posters here so that he can quote them back to the person, sometimes months or even years later. You really need to get a life Millie.
Jed, spot on. I actually look at statements and try to validate them. Waiting is also a good way of measuring if the statements turn out the way described or not. You start to see patterns. That’s actually one of the reasons why i am on this blog. I want to see what reasons there are that speak against my strategy. So far I haven’t found a good reason to buy now instead of waiting for a reset. Just look at the statements I quote. They all turned out to be cheap sales pitches trying to fool the avg joe.
Millie, in the SoCal beach cities, prices are far higher than 2005. For example, Manhattan Beach. Corona Del Mar. In many cases 50% to 75% higher. And, interest rates are only a little higher than they were in 2014. They are very low and not much different than 2014. You just wait your life away for the deal that will never appear.
Correct, many properties have not been back to 2005 levels. And they won’t for a while. Now we are entering the next downturn. Maybe in 2035-2040 houses bought in 2005 will finally show some appreciation. When you buy at the top you usually wait a very long time until you see significant gains.
Millennial, you are twisted. I said beach close properties are much higher than they were in 2005. You could have bought the top and you are way way ahead. And, it is not just beach cities. I am hearing many westside properties are also much higher. As are many areas just west of downtown LA. Those are the properties I know about. I am sure there are more. Boston homeowners are also way way ahead. Now, if the economy stays hot while the stock market shakes, you will see a flood of money headed into real estate. According to older realtors, that happened after the 87 crash. Prices spiraled upward after the stock market drop because the SoCal economy did just fine.
I’ll bet a lot of these potential sellers either own outright or owe so little that they can afford to hold out more or less indefinitely. I know of several people in that category.
Joe,
lets think about that for a moment. You are saying people who own outright can afford to carry the monthly cost of an empty home. Property taxes, maintenance, hoas.. Sure some can do that. In your mind, whats the reason that someone would let their house remain empty even if they own it outright? Would you do that? If so, why?
If i own a second home outright and i cant sell it for the price i want, why wouldn’t i rent it out? As i mentioned above, these sellers TRIED renting it out. But, their asking rent was higher than market rents. Why in the world would you rather leave your home empty instead of renting it out for market rent or BELOW market rent? You are basically throwing away money each month instead of making money.
I do know an investor (I am indirectly related to him) This guy controls several millions worth of real estate. He is fine renting a property out even if he temporarily makes a small loss because he thinks long term and other investments offset it. He can also just write it off. But to not rent it out and leave it empty makes no sense UNLESS you need to sell it and think the market is going back up in the short term. Its much harder to sell a home if there is a renter in it. So, if you are in denial about the market stage or if your realtor tells you the market will soon go back on track, you might eat the costs and let is sit.
The houses i am referring to are empty for various reasons (re-location for jobs, owner died, owner moved out of state, etc). I always try to find out as much as i can about the situation. When the realtor tells you the owner put in certain improvements, had to move for his job and is actually at a loss if sold for this price than you would think he must sell eventually. The first of the month comes very quickly / the bills come flying in. The longer you wait the bigger the loss becomes. To me, trying to rent it out for a horrendous price does indicate that the owner doesn’t own the property outright! The owner CANNOT commit to a rent that is below the mortgage cost and property taxes. And the owner DOESNT WANT to sell at a loss so he is stuck. Your last hope is that the market somehow reverts course and goes back up. Until then, you eat the second mortgage. Any other ideas / scenarios ?
I know someone who may be doing just that. They will have an empty house they will eventually sell at the right time and one they live in, both owned outright. I own houses in two states, and I had times when I had to put money into the one I was renting and have it vacant for a while, and I didn’t go broke because of it. That’s the advantage of paid off real estate and deep pockets. Maybe my experience is not that common, but then neither is what you’re talking about.
Millenial,
As per usually your comment is complete ridiculous. What you describe is true for any housing market in the history or California at any time.
Apples to apples inventory is still low, below 3 months. If we get to 6 months that would be a normal market.
For those of us who have been around the monopoly board a few times and have piles of cash to buy multiple properties during the next recession….. I would recommend you buy as soon as the cost to buy is below the cost to rent. Don’t wait for some fantasy.
“What you describe is true for any housing market in the history or California at any time.”
Huh? For the last few years we did not see asking prices drop left and right, increasing inventory and expiring listings. If you are telling me you don’t see a change in the market you prove to me that you are either new to the RE market game or you don’t pay much attention to detail.
“have piles of cash to buy multiple properties during the next recession”
So we are actually on the same page. We are waiting for a buying opportunity.
You remind a lot of Blankmind, telling everybody to buy now but yourself, you are waiting for the deals during a recession. Dont wanna share the bargains?
I think you mentioned you rent in the shitty area.
Yes, shittier areas can behave like this and are first to show weakness in the market
In my prime area, shit is still flying off the shelf, modest price gains and takes a little longer. Very low vacancy rates. +100k since end of 2017 based on actual sold price comps. Price does not mean much but I will take the increase (along with primeness) for downside protection in eventual turn around
Crapshack is still a crapshack even at 70% off.
Prime home is still a prime home
Surge,
The apartment I rent is actually in a great area for ME.
Schools are not very good, which keeps rents down. Parking isn’t great and I suspect a lot of low income people in my neighborhood. It’s crowded too and some people actually sub-rent of one their room. I rent from a private landlord and the old lady has never increased my rent. She loves my wife and Me and tells us we are her best renters. Lenders and RE agents almost don’t believe me when I tell them my rent rate. I just don’t fit the profile. With my income people rent much nicer places for a lot more money. Renting a nicer place defeats the purpose for me. My goal is to continue to stash away money while having a short commute to my job at the same time. My current place allows me to do that.
I am tracking the market for a few zip codes. I am looking to buy in a great neighborhood with good schools, great location, not far away from the beach. I do track crappy areas as well but that’s not my focus. The above findings are all derived from tracking good areas.
Where are you located? Maybe I have some stats you haven’t seen yet?
Millie has mentioned that he rents in a non-prime to save money many times. Just like last time, non-prime areas will get hit the hardest when the slowdown comes. The buyers in these areas aren’t the strongest from a financial perspective. As time goes on, the prime areas get stronger and stronger and will weather any storm with little issues. Just like Millie, I’ll still be anxiously waiting for a 50-70% off sale in the beach cities. Hopefully soon!
Mille,
So your apartment is in a great neighborhood with bad schools and no parking?
Millie you are a national treasure.
Correct Mr Landlord,
I would phrase it slightly different though.
A great area to rent (for ME personally) is when its dirt cheap (most importantly) and when the commute is short.
I don’t care about parking or schools as I am a professional making over 100k at a tech company with no kids.
Obviously, I wouldn’t buy in this area. I selected areas with great schools in which i am going to invest in when the market tanks 50-70%. (Its no longer 55-75% as we already dropped a few percentage points from the peak).
https://www.zerohedge.com/news/2018-10-16/achuthan-warns-housing-market-raising-serious-red-flags
Serious Red flags…..music to my ear!
Things do look bad for the real estate market, but there is still no sign of actual price declines. Until that happens, one cannot say for sure that the real estate bubble has popped. It might be 6 months or more before one sees 10% drops in asking and selling prices. A good buying opportunity is at least 3 years away.
Zerohedge again????……hehe
…far more credible than CNN, Washington Post and other propaganda MSM.
Softening in housing wont stop the thousands from lining up for ZIRP loans!
coming soon to a town near you.
https://www.cnbc.com/2018/10/12/thousands-line-up-for-zero-down-payment-subprime-mortgages.html
excerpt
The event is one of several being held in cities across America this year, run by the nonprofit, Boston-based brokerage Neighborhood Assistance Corporation of America, or NACA.
“It’s a national disgrace about the low amount of homeownership, mortgages for low- and moderate-income people and for minority homebuyers,” said Bruce Marks, CEO of NACA. “In the loans that we’ve originated in the past 6 years, zero foreclosures.”
QE Abyss,
ZIRP loans? You seem to confuse zero down payment with zero interest loans.
Zero interest-rate policy (ZIRP) is a concept describing conditions with a very low nominal interest rate. The mortgages with zero down payment in this CNBC video references 4.5% interest rate.
Anyways, we had “3.5% down payment” for the longest time and now that the market has topped out and the last suckers cant even come up with 3.5% down payment (!!) we need to lower it to zero down payment! A few month ago I visited an open house and the lender (also at the open house) told me about 0% down payments. Back then I couldn’t find much info about it but now its going mainstream.
I love this video/article. There are so many treasures in this one….
“borrowers with poor credit were offered no-down payment, low interest rate loans.”
“It’s a national disgrace about the low amount of homeownership, mortgages for low- and moderate-income people and for minority homebuyers,†Says the NACA CEO.
There it is, our beloved BofA:
“NACA were front and center during the subprime mortgage crisis, holding mass mortgage modification events across the country with banks and servicers. Bank of America was there then and the bank is with NACA now, backing the program with $10 billion in mortgage commitments.”
I love what the BofA person said:
“It’s total upside,†said AJ Barkley, senior vice president of consumer lending at BofA. “We have seen significant wins in this partnership. Just to be clear, when we get those loans with all the heavy lifting here, we’re over a 90 percent approval, meaning 90 percent of the people who go through this program that we actually underwrite the loans.â€
“So far more than 10,000 potential borrowers have shown up at various NACA events in cities like Charlotte, North Carolina, and Atlanta, according to Marks, and more are planned. NACA receives a $3,000 commission on each loan.”
What!? No PMI on these loans??
“Most low-down payment programs require mortgage insurance, which can be costly. The NACA program does not.”
Makes total sense! If you pay 19% down on a conventional loan with 800+ credit score you get hit with PMI. If you go with the NACA “no down payment” loan and low credit score you DONT pay PMI.
The lady who wants a home:
“I think a home, 10, 15 years from now, that’s an investment,†she said. “Homeownership is freedom.†Says the lady who got up at 4am to be first in line. She also said in the video, she went through foreclosure years ago. Now she buys again (right after the market peaked)……sadly, I would be surprised if that lady is still in that house 5 years from now.
We really learned a lot from the past. You have low credit and no skin in the game and when the market crashes your next step is strategic default? Some of these people are trained strategic defaulters. They went through it last time and know how this works. You buy high, dont pay anything down, stop paying the mortgage and stay in the house for free since the eviction might take a while. Not a bad idea. Yeah, you screw your credit (wait, your credit was already low) and might not be able to rent anything after you have been evicted. Maybe you end up living in your leased car for a while? Well, we are all about forgiveness and third chances. Eventually, your credit recovers a little bit and you can rent again. Then 8-10 years later you meet with NACA/BofA again and buy high. Because everyone deserves a home – at least for a while!
Anybody know how it works with the closing costs?
Zero downpayment loans are not the same as ZIRP loans. ZIRP is the acronym for the Federal Reserve Board’s nearly 90-months of “zero interest rate policy.â€
Try to keep the two separate to avoid confusion. The loans you are talking about have zero downpayment but do have interest.
Increasing foreclosures is the last thing to show up in a housing crash. Both buyers and bankers do not want to it, Foreclosure is a last resort. It is a process which can take years.
There is going to be a slow down over the next couple years it seems. this does not mean a recession or crisis though. With interest rates rising it could drop the price further but nothing I have seen so far points to a crash.
My theory about Real Estate cheerleaders
Obviously, your goal is to make money in RE. How do you make money? You buy low, sell high or rent high. Are you able to do that if the masses are trying the same? No, not really. You need the masses to buy whenever, preferably have them buy at the top. Than their cash is tied up and they dont compete with you during the times of bargains. The window of bargains can be short.
Demand is going down the toilet. Affordability has never been that bad. On the other hand you read about tens of thousands of people who line up for a subprime loans. (see NACA/BofA events – 0% down loans).
Tens of thousands…..think about that. Do they care about charts, fundamentals, investments, timing, rental parity? Hell No! These poor souls have bad credit for a reason. They dont know how to handle their finances and they wouldn’t come here on this blog to research the market or make any attempt to learn. No online post will prevent them from leasing the next 1,000 dollar iphone, leasing a new expensive car or trying to buy a house with zero down. They have never been able to resist their urge to spend money.
My point is, your efforts in trying to change the view of market participants by posting all day how great the economy is and how we should buy now if we can afford it are totally unnecessary.
The masses dont visit this blog and they will get screwed either way. They buy high with no down and will never be able to compete during downturns. Their drive-thru mentality (wanting to have everything now) will not allow them to change. Sadly, they will probably foreclose a second or third time.
“…No online post will prevent them from leasing the next 1,000 dollar iphone, leasing a new expensive car or trying to buy a house with zero down. They have never been able to resist their urge to spend money….”
A form of addiction, I think.
Welcome to our instant gratification society.
People spending money that they don’t have on things they don’t need to impress people they don’t know.
When you get right down to it, Madison Ave has done a genius job of convincing Joe Average that you will be a nobody, will never have any friends, will never enjoy life, and will never get laid unless you buy all the latest junk.
“People spending money that they don’t have on things they don’t need to impress people they don’t know.â€
Exactly! Great line!
++++1
Good summary!!!!….
Renting strictly because of Rental Parity “analysis†is one of the forms of instant gratification mindset
@Mille
Give credit to Deepok Chopra from 10 years ago for that line.
So. Incredibly. Boring. Wake us up when you’ve got new material.
Housing is slowing down that too in the strongest economy.. Let’s see what happens when the recession hits and there are job losses along with rising interest rates.
It’s gonna be interesting for sure.
I
Price declines? Pfffft. I wish here on the Westside of LA!
I finally dragged my ass down to see a listing down the street that I was eyeing for a rental. Thinking I might see if I could lowball as I heard a rumor the homeowners were getting a divorce. Nope. Was in escrow after one week, and closed for $150K over ask.
Move along sonny…nothing to see here. No slowdown in Santa Monica
I also see no sign that housing prices are dropping in Southern California. The rising inventory consists mostly of homes that are priced 5% higher than last year and even higher than they were this summer. Prices are actually rising–not falling!
Sales are down because there are no low priced homes left to buy. Those who are waiting for bargains may have to wait a long time or give up and buy at prices which are higher now than they were this summer.
Real estate doesn’t drop overnight. The RE market is like a cruise ship, remember? Of course, prices have already dropped nationwide and in local markets. However, for a buying opportunity you got to wait a couple more years. What we see at this point is the inflection point. The trend is going down. That is all you can ask for now. Let it play out, patience and discipline are key.
Hello relators ha ha
I have lived in Socal (LA) for over 20 years and have been through the last RE crash as an investor. Additionally, I have worked in banking and real estate finance for the last 12 years giving me a pulse on the market both from the retails sales level and also back-end credit/lending.
I can say that major cities such as Santa Monica, Manhattan Beach, El Segundo etc have not experienced a slowdown just yet as these areas have strong jobs, great schools, proximity to beach and amazing year around weather. The demand is way too strong and inventory is quite limited. One factor that many miss is the demographic shift that is occurring in California. Many residents are leaving to other states such as Nevada, Texas, Ariz, that have substantially lower living costs and good jobs. However, these tend to be lower or middle income families that are leaving. On the flip side, they are being replaced with wealthier residents from other states and many foreign investors who can easily afford to live in CA and have chosen to relocate for better weather, lifestyle, schools, etc. The net effect is negative in population growth however new residents are much more wealthier and can afford RE here. Further, these prime beach areas will not be immune to crashes, but values will be more resilient and less pronounced.
However, I have noticed that most areas in California are experiencing a slight cooling as buyers have waned due to a combination of factors (higher interest, seasonality, economic outlook, less desirable homes on market, etc). In addition to this, banks and appraisal firms are factoring in a potential downturn and market values are not as high and forgiving as they used to be, thus requiring larger down payments. Any prudent investor/buyer knows that we are at the peak of the cycle. As the FED stays hawkish, higher interest rates will reprice asset classes lower and buyer/investor demand in RE will wane. No one wants to catch a falling knife. When and how bad the decline in prices will be? Who knows. However as inventory slowly creeps up and demand slows in the coming days it is simple economics.
Data and history shows that places with the most inventory will experience the most volatility in prices, ie Inland Empire, San Diego, some places in OC. I will say that next year we will see noticeable shifts in the overall RE market downward. Unless some govt. intervention occurs, I do not see anything that can prop up this semi-artificial RE market
LANative you should try being a CPA for a couple of decades and you’d see the demo shift is bigger than just the borrower cohorts you’re aware of. Tons of people are moving to those states as a tax strategy and they have capital. They aren’t all borrowers and they aren’t all income earners. You’d be surprised.
I see prices dropping all over San Diego county. The tide has turned. Even my buddy’s gf, who is a Redfin realtor here, said the market made a major shift back in April/May, and she’s a real house-humper.
Wait a second. I just read online that the inventory of homes for sale in San Diego Co. is dropping. If that is so, it seems seems unlikely that home prices would be dropping there. Are homes really selling for less than they were last year at this time? I doubt it.
SD home SOLD prices up ~5%-7% from last year. That is for comparative homes.
So, SOLD prices still increased from 1 year ago.
It is not RE cheerleading or any projection in the future, just observing reality for a specific region/period.
The OC Register columnist Lansner’s headline today is “Will Rising Mortgage Rates Crash Housing Market?” Apparently the California Association of Realtors is worried about the rising rates will cause a drop in prices. The columnist took data from mortgage rates and housing prices and found that rather than a negative correlation, there was a positive correlation with prices and interest rates rising together and falling together. He compared the 20 quarters with the biggest increases in interest rates with the 20 quarters with the biggest drops in interest rates and found across the board that home values increased far more in the rising rate periods than in the falling rate periods. 8% vs 0.4% in LA Co, 9% vs 0.3% in OC and 8% vs 1% in SB/Riverside Counties. This is because rising rates happen during expanding economies and falling rates occur during contracting economies. He sees falling growth and less hiring as the biggest threat. I agree on this with him as that is what triggered the big crash. Layoffs leading to foreclosures in a frothy market. He gives the market a three bubble rating on a 0 to 5 scale. I might give it a four but I won’t argue the point. I do agree that interest rates aren’t going to be the trigger.
Definitely seeing a market turn in North OC. Check out this listing in Placentia:
https://www.realtor.com/realestateandhomes-detail/905-Cobb-Ave_Placentia_CA_92870_M17747-05176?view=qv
This house is nothing amazing, but it appears to be in nice condition. $499K asking price as of today. This kind of house in this condition sold solidly in the $600s a year ago.
Every comp in the neighborhood (SFR, 800-1800 sq ft, roughly same agef, etc.) that has sold in the last 3 months went for over $600K except for a flip which is now rehabbed and listed for $679,900. Now we’re seeing a listing for less than $500K. Wow.
The last housing downturn started in 2007 when Nancy Pelosi took over as speaker of the house. If Dems win again this year, Nancy takes over again in 2019. Mille just might get his wish.
Landlord, are you changing your view of the market? Is it no longer the strongest and best economy ever?
He was too embarrassed to sign his whole name. Lol.
And how’s that Amazon stock you bragged about?
Bash Milli Vanilli all you want, he is actually right. The CA market has shifted. Even major house jockeys out here will admit there has been a shift. It doesn’t mean prices are in the toilet, but you folks gotta understand the difference between a leading indicator and a lagging indicator.
Empty open houses now with sad looking house jockeys trying to convince seasoned investors like myself that it is a ‘seasonal slowdown.’ I try educate some of them but most of the time it is like talking to a baked potato. They have no historical perspective and are too caffeinated to listen. I honestly like mentoring/chatting with inexperienced house jockeys, but again, it is normally full ‘baked potato’ expression status.
This winter will finish off this market and this spring will be slow. I will eat my shirt if we aren’t full Bear Market just about everywhere in 2019. And I did a difficult terrain waterfall hike with a full ruck and a 2.5 year old strapped to me. The shirt is nastay. I’ll eat it and swallow.
Say what you will. I am seeing a decent number of beach close properties being picked up. If the stock market keeps shaking, but the economy stays hot, a lot of money leaves the stock market and lands up in beach close properties. Feel sorry for those that did not enter the market.
I agree! You got to feel very sorry for those who bought high or even buy now. They will deeply regret this soon. Market is turning quickly and the next crash is around the corner
I went to one of those empty open houses, with a sad looking realtor, two weeks ago: https://www.redfin.com/CA/Santa-Monica/1043-11th-St-90403/unit-5/home/6772944
I was the only person there.
They were asking $1,799,000.
A week later, they lowered the asking price to $1,728,000 — and it SOLD!
This townhouse was last sold in 2010 for $1,050,000.
Doesn’t look like a slowdown to me. The townhouse was initially overpriced. But it eventually sold for a hefty profit.
True, the sales might still fall through. And we don’t yet know the actual sales price. Though it sold within days of lowering its price, it’s likely close to the new asking price.
The majority of houses sit longer but why come with data if some real estate cheerleaders pick an example of someone buying at the peak or right after the peak. You will find those just like you find some people who bought during the last peak on 2005. We actually have some of those buyers on this blog (Surge). One of the reasons they are here is to constantly trying to convince others NOW is a good time to buy. If you buy high it makes you feel a little bit better if others do the same mistake. At least you share the space on the sinking boat?
Yes, believe it or not, it was better for me to buy at peak (2005) and in 2017 (not quite the peak). Timing was right for reasons beyond the depths of your mindset.
With prices like this…. ($1.7M for a 3bd condo South of Montana Ave) I think rather than be shocked at the prices….. we should be shocked at how much money there is in the world. Since 2012, home price increases has been on steroids (and corresponding completion of transactions, ie close of escrow) tells us the enormous amount of people there are out there will that kind of money.
QE Abyss: With prices like this…. ($1.7M for a 3bd condo South of Montana Ave) I think rather than be shocked at the prices….. we should be shocked at how much money there is in the world.
Which is why Millennial will never get his SoCal beach house at 70% discount. His crypto nest egg will never be able to compete with the deep pockets that will rush in should prime area home prices dip.
Yes, Milli, sometimes you can say “never.”
Time will tell Son of Landlord! Patience!
RE cheerleaders on this blog were wrong with basically all their statements:
Two years ago: interest will never go up in our lifetime
Six month ago: there is no inventory
Now: there are no price reductions
Btw, I am totally fine with a 50% discount 😉
Zillow summary for SD…nice format.
https://files.zillowstatic.com/research/public/realestate/ZHVI.San%20Diego.395056.pdf
Zillow summary…nice format if you delve into the metros (tried to post SD but couldn’t get it to work).
https://www.zillow.com/research/local-market-reports/
Nationwide the inventory of homes for sale has been dropping for months. The same month inventory is almost the same as it was in 2017 and is much lower than it was in 2014, 2015 and 2016. A crash in home prices may be coming, but it has probably not started yet. I expect to see significant price declines to start appearing in about 6 months.
Sept. 30, 2018 1.88M
Aug. 31, 2018 1.91M
July 31, 2018 1.92M
June 30, 2018 1.93M
May 31, 2018 1.87M
April 30, 2018 1.80M
Sept. 30, 2017 1.86M
Sept. 30, 2016 2.03M
Sept. 30, 2015 2.19M
Sept. 30, 2014 2.28M
Source: https://ycharts.com/indicators/us_existing_home_inventory
YoY US existing home inventory for Sept. has increased. Historically this has not happened for the last 6 years. We are seeing an inflection point where the tides are turning.
The housing market goes up and down with time and we are entering a down period. Now the question is how low can prices go.
Underwriting update from the lending world.
DU (Desktop underwriter); Fannie Mae’s automated underwriting tool used to analyze risk on loan files and essentially be the deciding factor on an approval vs a decline on most loans written today is TIGHTENING up a bit.
Just got an update today that starting in December:
“DU 10.3 is intended to help Fannie Mae customers effectively serve their borrowers in a manner that is reflective of
current market realities. We anticipate DU 10.3 to yield a slight reduction in loan casefiles receiving an Approve/Eligible recommendation, with the most noticeable reduction for loans with multiple high-risk factors.”
So essentially it means that those borrowers that were marginal but were able to qualify by sliding by with multiple risk factors b/c they got an “Approve/Eligible” through this underwriting tool may no longer qualify. It is NOT cut n dry as it is a computer program with many different variables, but, it does seem that this change coupled with higher rates would sqeeze those marginal buyers further down the qualifying totem pole and put pressure downward on housing prices.
This impacts Conventional, FHA and VA loans but NOT jumbo loans. These are typically defined as loans that are greater than $453,100 depending on the county.
As I have said in prior posts, a peak in housing prices does not mean a crash is imminent.
Housing could track the stock market. The stock market has been relatively flat since the beginning of 2018. Housing which typically lags the stock market, could be relatively flat for the next 5 years.
Since down payments are typically obtained from the stock market, I suspect housing will track.
Housing did this in the 80’s and 90’s with 5-10% oscillations in pricing around inflation for close to 20 years.
In order for a major crash to happen, a major pseudo-Black Swan is needed like in 2008.
Since if it happens, it will be a pseudo-Black Swan, and when and what it is will be a surprise to us all. Except in retrospect.
I’ve been saying all along that it doesn’t have to go up or down. SIDEWAYS is also a direction. Could follow that trajectory for years.
A ‘black swan in 2008’????
Sir, what in the world are you talking about? There was no ‘black swan’ in 2008. It was a big fat ugly bubble that inflated until it finally burst into pieces. There was no ‘black swan’ whatsoever. Sorry Robert, you haven’t ‘seen it all before’ if you have that critical piece of history so wrong.
Fella,
There certainly was a pseudo Black Swan in 2008.
Nobody predicted major banking institutions would go bankrupt and millions of people would lose their jobs and their houses. The housing and stock market dropped 50%. This was due to loose lending practices that even an idiot could foresee as causing a problem but the Republican Presidency and the majority Republican Congress chose to ignore. Free Market.
The lending practices are tighter now but wages have not grown under this Republican Presidency and majority Republican Congress so if this continues, any idiot can foresee a crash. If it levels off and goes sideways, we might be saved from another Republican disaster.
I count that as
So the Lehman bankruptcy (largest in history) is an everyday occurance? I suppose the crash of ‘29 was just a normal correction as well.
Oil peaked in 2008 at 145bbl. It cost my company hundreds of millions of dollars and over 6 billion to the industry. I can tell you no one saw that coming.
“The lending practices are tighter now but wages have not grown under this Republican Presidency and majority Republican Congress ”
Actually, wages were stagnant during Obama and increased under Trump. Check again the statistics.
From “The Hill”:
California renters pay an average of $1,440 per month, much higher than the national average of $1,010 per month. In 2015, more than 40 percent of Californians spent over 30 percent of their income on housing. Today, 29 percent of them spend over half their earnings on housing. Median home values, at $529,000, are more than double the national median of $239,800. Residents who can afford rent or a mortgage are on the hook for electricity rates burdened by green initiatives and regulation that grew 500 percent faster than the national average from 2011 to 2017.
“Not In My Backyard†development and construction restrictions mean that California cities are much more expensive for the poor, with Los Angeles having the highest proportion of income going towards rent in the nation. The state and its cities use environmental and zoning laws to restrict housing, which often disallows large scale development of apartments. The result? Less access for middle class residents.
On top of a burdensome state income tax, California has the highest sales tax in the country along with property tax rates that disproportionately punish the poor and lead to housing problems.
Traditional left wing prescriptions simply have not worked in the state, which an opinion column in the Los Angeles Times dubbed the “poverty capital†of the United States. Housing vouchers increase the cost of living. The number of those with no health insurance in California fell by more than half after the state expanded Medicaid, yet poverty remains near historic highs. California spends the third most per capita on welfare programs, yet its economy continues to fail the poor and middle class.
Despite having just 12 percent of the national population, California represents nearly a third of all Americans on welfare. Federal taxpayers shell out more than half of the $6.7 billion in the California Work Opportunities and Responsibility to Kids program. In Texas, 6 percent of families in poverty receive welfare. In California, the figure is 66 percent. Can you guess where the poverty rate is lower? Not California.
The combination of government overreach and ineffective programs creates a brutal dichotomy of very rich and very poor. California is the fourth most unequal state in the union with so many homeless who face diseases like typhus and hepatitis. The number of people living on the streets in California increased by nearly 14 percent to more than 130,000 in 2017. Mark Zuckerberg is worth $70 billion, while San Franciscans have an app that helps them track human feces on the sidewalk.
In many ways, California has long been an example for the rest of the nation. But the middle class conservatism that propelled national figures like Richard Nixon and Ronald Reagan is gone. It has been replaced with virtue signaling and policies by the wealthy that hurt struggling families. Both sides of the coin, from technology executives to families unable to pay rent, vote for Democrats that only make the problem worse.
The robber barons and artificially high real estate values in California brought its economy back to the fifth largest in the world. However, for the average person, Sacramento represents systemic political failure.
Is SoCal still part of the US?
Jeff Bishop, the principal of Santa Ana High School, claims his school’s football team faced insensitive and racist signs during a football game with Aliso Niguel High School. Bishop claimed one of the signs allegedly said, “Build the wall,†and another that read ‘Love White.’ Bishop claims the pro-American themed posters were racist and that he demanded the opposing school understand that they were playing against ‘Dreamers.’
In a statement, Aliso Niguel principal Deni Christensen told CBSLA that Bishop came to Aliso Niguel’s sideline after the first quarter.
“He reported that his students and fans had seen the sign referencing President Trump before the game, and a sign that said “We love red, we love white, we love blue,†along with our students arriving dressed in red, white and blue, and he felt that the entire atmosphere was inhospitable to his school and community,†Christensen said. The Aliso Niguel Wolverines posted a flyer on Instagram for Friday’s game asking fans to wear “Red, White, And Blue†in honor of the game.
Bishop recounted his comments to the Register: “I told her ‘You’re playing Americans. You’re playing ‘Dreamers,’ I don’t understand the USA pride thing when you score. And if I hear it one more time, I am walking off the field with the team.’ â€
According to Christensen, neither she nor other Aliso Niguel administrators saw a “Build the Wall†sign. School officials removed two politically charged signs from the event: one that said “Bring back Obama†and another that said “We’re going to Trump youâ€.
In a post Saturday on Facebook, Bishop referenced only the “We Love White†poster without acknowledging the other two posters.
Roughly 99 percent of students enrolled at Santa Ana HS are Latino, compared with Aliso Niguel, where about 56 percent of students are white and 19 percent are Latino, according to the Los Angeles Times.
After making a huge deal out of the signs, Bishop later admitted to the Orange County Register that he could not actually see most of the posters, but spouted that “there was something about Trump.”
https://conservativedailypost.com/ca-principals-duel-over-alleged-racist-signs-at-football-game/
https://losangeles.cbslocal.com/2018/09/10/high-school-football-game-trump-signs-racist-santa-ana/
Check it out.
Robert Shiller, the famous housing economist who won a nobel prize, does not expect a sharp downturn in prices. I think he might be correct.
https://www.cnbc.com/2018/10/26/robert-shiller-i-dont-expect-a-sharp-turn-in-the-housing-market.html
And Alan Greenspan said in 2008 that the housing market will stay strong for a long time.
I agree with JT, Robert Shiller says that this RE market looks like 2006 and that we are overdue for a recession. Can’t disagree with that.
https://www.marketwatch.com/story/housing-market-now-reminds-me-of-2006-robert-shiller-says-2018-10-30
Restoration Hardware furniture stores are expanding in Marin with a new 10000 sf building under construction. Apparently, they expect a healthy real estate environment for quite some time as home furnishings usually are purchased when homes are acquired.
I see so many permabulls here in denial it’s just ridiculous. Oh but they have seen it all before lol or not, at the end of the day it comes down to trend. Sellers are getting the message that if they want to sell, they better reduce their price even just 3% will do and that itself starts a lower trend, even at 3% reductions, prices are very high so it’s not like sellers are cashing in. Some people here talk about random black swan events, sure that can happen but it is not needed for prices to keep going down.
Also someone here needs an education on using retirement funds to buy a home. It’s not common and only dummies think this is normal. The most common way ppl do this is through stock they have earned and becomes vested (like tech) that is not in retirement accounts which is not as common. Gosh ppl are stupid.
https://money.usnews.com/money/blogs/on-retirement/articles/2016-04-20/buying-a-home-with-retirement-savings-pros-and-cons
Soft landing! Where have we heard that before?
I am with Millennial. We are in a housing bubble and a stock market bubble some people are calling it the everything bubble. The FEDs since 08-09 recession have pumped the markets to rescue the banks with cheap dollars. Ben Bernanke dropping dollar bills from helicopters. First it was QE1 QE2 QE3 then ZIRP for about 9 years. Money from the helicopter went all over the place but they didn’t necessarily control where the money went. This cheap money flowed into emerging markets stocks us housing bubble student loans high risk junk bonds auto credit cards. The emerging markets are having a real hard time paying off the cheap dollars they got some years ago due to a rising dollar and rising US interest rates now. The FEDs with zero interest policy for nearly a decade has made a huge distortion in nearly every sector of the economy from federal governments to corporation to households. us government 21 trillion in debt double 2008 levels. Corporate debt is 6.3 trillion. Household debt is 13.3 trillion with 9 trillion in mortgage debt and 1.5 trillion in student loan debt. these debts can only be serviced with low interest rates.
The FEDs are unwinding their debt holdings by 50 billion a month and raising rates. FEDs taking money out of the system will create an opposite effect of what we went through for last 9 years.
https://www.cnbc.com/2018/10/30/southern-california-suffers-its-worst-housing-slump-in-over-a-decade.html
Told y’all the new tax plan was going to spark the kindling. Low tax states will benefit while high tax coastals suffer. It was by design. Flyover is becoming moving into country. Only fools get left behind.
This article is hysteria … if you read closer, they say the 18% sales drop is due to 1 less business day last month. If you adjust for the 1 less business day, then the drop is 13%, and that is the same sales level as 2014, which was considered a hot market. Prices are not crashing. In fact, there is very little inventory available. The economy is hot. Prices continue to grind higher. Inflation is cooking. Rent at your own risk.
Article says prices are rising. How can prices rise during a crash? Fake news.
Decreasing volume on increasing prices is a classic bearish signal.
Dude, i cant believe this. I am seeing so many more pre-foreclosures and auction homes in my area. Hundreds of homes for sale. This market is crashing. Fast and hard. This is going to be epic….
Schadenfreude
Agreed. And I am so sick of everyone saying they didn’t see the last downturn coming. BS. I did and so did many people in RE I worked with. I sold many of my apartment buildings prior to the last bust and also quit my job as an apartment broker in 06 because I knew the market would be imploding. It was so obvious a baby could see it. Please let’s not call it a ‘black swan event.’ Everyone I knew with basic perception abilities saw the last crash coming. One is happening now too. Hope that helps in case you are the driver unable to read the large orange reflective signs.
The market is crashing? Auction homes? What fantasy world do you live in?
There is still no recession in sight.
Epic? It will be anything but epic. You will just get a normal recession maybe 2020,maybe 2021, 2022 or beyond.
Almost everyone will be miserable.
The bulls will be miserable for obvious reasons. The cheerleaders will be losing money, losing their jobs, losing business…
The bears will also be miserable.. the drop won’t be anywhere near what they want or need. They will be waiting for a bottom that never reaches the level they expect or need.
The only people who will be happy are the ultra wealthy, you will see even more investment properties and the home ownership rate is going to drop even further. This has been playing out for a long time in Southern California. The home ownership rate is only 40%. It will be dropping further, the typical bear and bull will be miserable as per usual in the next recession.
Epic? LoL. You won’t see another 2008-2009 in your lifetime in the USA. Maybe 60-80 years from now if you live long enough, not likely.
in recession, bears will also be miserable because they will lose their jobs. (not businesses, bears typically do not have businesses).
“What fantasy worldâ€
Reminds me of summer ‘18. RE cheerleader said I am delusional and live in a fantasy world when I stated the low inventory myth is just that…. a myth. Fast forward, no RE cheerleader spreads the low inventory lie anymore, do they?
Shortly after, in alignment with mortgage rate increases, asking prices started to drop. Something that RE cheerleaders told us will not happen. According to them increased interest rates means higher payment and no price drop. As we can see, the opposite is happening. Prices drop left and right.
You seem to be confused by pre-foreclosures versus foreclosures. A pre-foreclosure can come on the market multiple times. Sometimes they are able to catch up with their past due balance.
I am telling you: I haven’t seen that many pre-foreclosures in my area since many, many years. I couldn’t believe it and reached out to three of the agents I am emailing with since a couple years. I looked for confirmation and to see if I am missing something here. They all confirmed it more or less. I will continue to do my research on this and keep you posted.
Maybe in your area pre-foreclosures are not up. Where are you located?
Or maybe you don’t track the market at all and are just in denial (which is actually a very common response to this market turn by RE cheerleaders).
“Miserable†lol. I so hope you stick around for a few more years. You haven’t seen bears cheer yet.
I am starting to think you are not the expert you claim to be. You never tell us about any findings or research or data. What you are good at is denying the current state of the market.
According to some of the well respected advisors I read (Logan Motashami, Robert Shiller) there is no crash expected in housing. A softening of the market or mild price drops, sure but thats about it.
And anyone who cheerleads a crash in housing is also cheerleading their own loss of job because arent all housing crashes coinciding with job-loss recessions???
Wow. Can you pick my lottery #s? Who will be President in 50 years?
You completely discredited yourself with your post.
“Will never see a 2008 in our lifetime again†That statement should be archived!
NoTankInSight,
What else has to happen until you change your name to tankinsight? Do you even have a clue to what’s happening at the moment?
http://theeconomiccollapseblog.com/archives/in-california-home-sales-are-plunging-like-it-is-2008-all-over-again
The only thing epic is his trolling.
QE Abyss,
Schiller expects a recession and downturn:
https://www.zerohedge.com/news/2018-11-05/bubble-watcher-bob-shiller-warns-were-primed-repeat-2008-housing-momentum-slows
Logan:
several of his recession indicators are checked off:
Interest rate hikes, super low unemployment and rising wages, LEI (look at the chart, it went straight up….when it starts to roll over for a couple of month you have your recession), housing starts are slowing, home sales are way down everywhere YoY, RE inventory is increasing rapidly, demand for housing fell off a cliff, over investment in car industry (subprime auto loans) & commercial real estate.
It’s all coming and moving together. Keep repeating everything is awesome if that makes you feel better 😉
“And anyone who cheerleads a crash in housing is also cheerleading their own loss of job because arent all housing crashes coinciding with job-loss recessions???”
A job-loss recession would crash the artificial inflated housing market. That’s why I am sitting on cash. Patience….
Also noticing lots of major price reductions here in they East Bay Area and foreclosures
I’ve been seeing this in the East Bay too but when I check back to see what they sell for, they are still going for quite a bit over asking….
https://www.zerohedge.com/news/2018-10-31/san-diego-home-sales-collapse-lowest-level-11-years
Great news from San Diego. Median house price down. Sales waaaay down. Fantastic!
Zillow’s Sept. 2018 report for SD:
Median Price: +7.5% y-o-y
Monthly Increase: .7%
1 year forecast: +4.6%
Foreclosures – down
Black Swan, massive tank in progress! To the bunker!
the forecast seems off. Prices are already lower now. Next year we will probably get 20% discounts and then a recession. During the bottom you can probably pick up some nice houses at 50-70% off.
Aaaand rates are higher so more of your monthly will be going toward interest pay down. We all know you won’t have the cap to buy all cash.
Yes, higher rates means more pressure on house prices. I hope we get back to 6-7%. That would be a dream come true. I probably buy in all cash at that time!
First the nut cases preached crypto currencies. They would tell us anyone above 30 does not understand. Crypto crashes. Then, they tell us it is smarter to rent while investing in tech stocks. FB, APPL, AMZN, … OUCH again. I will tell you one thing … anyone would rather own a Manhattan Beach cottage than FB, APPL, or AMZN. After the last 1 month, everyone agrees although many will never admit that. Next, comes stagflation. Watch. Prices on many things grind higher while after inflation economic growth slows. Sounds like more rental pain for me. SoCal beach homes or bust.
jt, south bay RE is juggernaut. Anything priced accordingly sells quickly. Unless we have the mother of all recessions, I don’t see SFRs in Manhattan or Hermosa EVER selling under 1M again. Supply/demand in those areas is out of control.
Trying to be a market timer is nothing short of gambling. Putting all your eggs into crypto or tech stocks is insane. AMZN lost 25% of its value in less than a month. I hope that wasn’t some poor renter’s down payment. Buy quality RE that you can afford and make it a long term proposition. Then enjoy life. Doesn’t sound too hard.
Blankmind, A declining stock market is an incredible strong signal for a bearish housing market.
Don’t post and drink JT. 😉
Since the market hit a wall JT seems to be more active in posting BS. Someone must be worried 🙂
On the other side our Mr Landlord fell off the cliff. We won’t hear from him unless stocks recover.
Can’t wait for the OCT numbers to come out.
Mr. Landlord will be back soon and he will attribute his absence about his absence to exotic beach travels. In that same reply he will work in that he has an excellent FICO score and is super wealthy and that the US economy is not fake and is the greatest in world history.
And then he will call me a socialist for typing this even though I’m a vet and a libertarian and a capitalist.
Rinse and repeat.
WTF? I think I’m dumber having read your post.
Millenial you seem to be on top of your game .You have some really good insight into the RE market.
Is love to get together with You one day and brainstorm. I think there is much to be learned from you
Hey folks, I have been investing in real estate since 1976. I have seen the market go up, go down, go flat, go up etc. In my experience, loans and the ease of obtaining one is the most crucial part to any real estate market. Money is used everyday and each time a transaction is executed with money, a certain percentage is moved off to cover taxes. In a perfect world the tax money and spent money would re-circulate into the economy and keep cycling, but that doesn’t happen because some people hoard money and keep it out of circulation. With that being said, how does one inflate markets if money is constantly being removed off the table? The easy answer is loans. In the past 10 years, obtaining loans has been very tough, stringent guidelines and tough underwriting has formed a very solid foundation in the real estate market. This market has been fueled by honest money, not easy money, its a healthier market than most in the last few decades. This foundation seems much stronger than what I saw in the bubble era’s of 1979-1981, 1988-1990, 2004-2007. At this point of the market, the tax rules have hit values to the tune of 4-7%. One example, Having a loan less than $500,000 no longer has a tax benefit, this has hit values as there’s no real benefit of owning a home with a loan of less than $500,000. Second thing hitting markets, interest rates, the higher they go, the more downward pressure on prices “unless†ease of financing is implemented. Los Angeles county will see a sharp price decline in the next 2-4 weeks as new sale comparables will be recorded and become public. I see a 7-10% hit on the market within the next month and half. If interest hikes keep coming without easing financing guidelines, we will continue to see prices decline in the market but with a floor being rent vs buying cost balance. The reality is the following, if buying a house cost 15-20% more than renting, then it’s probably a good idea to buy but only if you love the home and don’t want to deal with landlords and possible rental increases for the term of your life while renting. At this current time, buying vs renting figures are not way off, a little drop in real estate prices will effectively bring everything to a balance. I don’t really see any more than a 15-18% drop and that will be for a very short period, the buying opportunities will be here soon just do the math (buy vs rent)
This market has been fueled by honest money, not easy money, its a healthier market than most in the last few decades. This foundation seems much stronger than what I saw in the bubble era’s of 1979-1981, 1988-1990, 2004-2007. At this point of the market, the tax rules have hit values to the tune of 4-7%. One example, Having a loan less than $500,000 no longer has a tax benefit, this has hit values as there’s no real benefit of owning a home with a loan of less than $500,000. Second thing hitting markets, interest rates, the higher they go, the more downward pressure on prices “unless†ease of financing is implemented. Los Angeles county will see a sharp price decline in the next 2-4 weeks as new sale comparables will be recorded and become public. I see a 7-10% hit on the market within the next month and half. If interest hikes keep coming without easing financing guidelines, we will continue to see prices decline in the market but with a floor being rent vs buying cost balance. The reality is the following, if buying a house cost 15-20% more than renting, then it’s probably a good idea to buy but only if you love the home and don’t want to deal with landlords and possible rental increases for the term of your life while renting. At this current time, buying vs renting figures are not way off, a little drop in real estate prices will effectively bring everything to a balance. I don’t really see any more than a 15-18% drop and that will be for a very short period, the buying opportunities will be here soon just do the math (buy vs rent).
interest rates, the higher they go, the more downward pressure on prices “unless†ease of financing is implemented. Los Angeles county will see a sharp price decline in the next 2-4 weeks as new sale comparables will be recorded and become public. I see a 7-10% hit on the market within the next month and half. If interest hikes keep coming without easing financing guidelines, we will continue to see prices decline in the market but with a floor being rent vs buying cost balance. At this current time, buying vs renting figures are not way off, a little drop in real estate prices will effectively bring everything to a balance. I don’t really see any more than a 15-18% drop and that will be for a very short period, the buying opportunities will be here soon just do the math (buy vs rent).
5-7% decrease in values by January 2019, pending sales will close and show real numbers soon enough. If interest rates rise, downward pressure on values with a floor being rent vs buy balance. Overall foundation of market is strong but divorce, probates and desperate sellers will dump and drag values down. Market may dip down 15-18% from highs but not much further unless interest rates go up dramatically and only if underiwriting standards stay tough, if subprime comes into play, then stupid money will hold things together and we may see appreciation for a while but eventually we will approach a cliff.
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