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).”

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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249 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.

  • 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 em”. 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.

    • 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.

    • son of a landlord

      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.

    • @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!

    • Seen it all before, Bob

      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.

      • Seen it all before, Bob

        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.”

        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.

      • Seen this all before, Bob

        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.

      • Seen this all before, Bob

        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/

      • Seen this all before, Bob

        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!

      • Seen it all before, Bob

        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.

      • son of a landlord

        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

      • Seen it all before, Bob

        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?

      • Seen it all before, Bob

        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 points”
        🙂

  • 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.

    • 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.”
        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

      • Seen it all before, Bob

        “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.

  • 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…..

  • Wizard of Barstow

    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

  • Boca Condo King

    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?

      • why are you still sticking around?

        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.

  • 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.

  • son of a landlord

    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.

      • son of a landlord

        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 “we”. 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 battle”, 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

  • 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.

      • Seen it all before, Bob

        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.

      • Seen this all before, Bob

        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.

  • You guys know Logan Motashami? One of the biggest American bulls out there. Even he is softening his tone….”we are def. in a later stage of the cycle”, “we are not quite there yet for a recession”. “A few of my recession indicators flashed”.
    What a quick change. If even the biggest bulls start talking like that….

  • Dang, September data is coming in.
    San Diego, “months of inventory 63% above last September’s level.”
    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!

  • Follow the money

    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!

  • 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.

  • 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 inventory”.
      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).

  • 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.

    • Seen this all before, Bob

      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.

  • son of a landlord

    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?

  • 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?

  • jtx12@hotmail.com

    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.

  • 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.

    • Follow the money

      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

  • 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.

  • son of a landlord

    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 unacceptable”
    “Price cuts of up to 30%”

    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.

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