Triple digit increases in real estate inventory: Las Vegas inventory up 106 percent year-over-year.

The housing market is in a state of adjustment.  Inventory is up dramatically in many places.  In the last housing correction, Las Vegas was a leading indicator for California and we are now seeing some dramatic increases in inventory in the area.  Las Vegas inventory is now up 106 percent year-over-year.  In Seattle, inventory is up 168 percent year-over-year.  For anyone looking to buy, the market has dramatically shifted.  There is no urgency anymore and the tides have turned as affordability has collapsedIn California, many counties are now renting majority areas and the government is looking to cater to the majority of voters.  Last time inventory rose this sharply price adjustments followed.  What is in store for the housing market in 2019? 

Las Vegas a canary in the real estate mine?

Markets across the U.S. are seeing a sharp rise in inventory.  One key area:

“(Calculated Risk) Active inventory (single-family and condos) is up sharply from a year ago, from a total of 4,352 in January 2018 to 8,957 in January 2019. Note: Total inventory was up 106% year-over-year.   This is a significant increase in inventory, although months-of-supply is still somewhat low.”

First, the Las Vegas market has been on an incredible uptrend like many markets:

Prices have more than doubled since 2012.  This market has been incredibly hot.  However, the Las Vegas market is highly dependent on the overall economy doing well.  The nature of Las Vegas employment is highly linked to people feeling wealthier to spend on vacations and entertainment.  This is a cycle that was seen in the last housing bubble as well.  Speculation has been happening for a couple of years now but to a lesser degree from the last housing bubble.

Looking at things as they stand today, why would you expect any sort of correction?  The only thing we are seeing is that inventory is rising sharply but prices are still holding steady.  However, having inventory rising by 106 percent year-over-year is definitely going to add more supply to the market which means buyers will have more options.

As mentioned before, a good portion of the employment in Las Vegas hinges on people spending freely:

Leisure and hospitality alone is 30 percent of the employment market.  The Las Vegas market reacts quickly to changes in the overall economy faster than other areas because it is a barometer on people’s non-essential spending.  Obviously someone is going to cut back on taking the family to Las Vegas first before cutting back on other essentials in the home.  And since this market is heavily tied to California, it also signals what is happening in the adjoining area.

Sales volume is tapering off a bit in California while inventory is up:

It will be interesting to see if there is any significant bounce in the housing market in spring as winter is usually a seasonally slower period as the chart above highlights.  The large rise in inventory in Las Vegas is very telling and signals that a slowdown is here.  The only question that remains is if this rise in inventory will translate into price corrections.       

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79 Responses to “Triple digit increases in real estate inventory: Las Vegas inventory up 106 percent year-over-year.”

  • Doctor,

    Thank you for posting the full inventory charts for California…. it’s ridiculous when people just site year over year without the context of how low inventory has been.

    Same goes for Las Vegas, inventory went to record lows. As your Calculated Risk quote cites, months of supply are still somewhat low in Las Vegas.

    The interesting thing about Las Vegas it that it was always recession proof until the housing bubble. Before 2008 Las Vegas sustained very well in all previous recessions. People still had their vices and it’s an easy trip. People may down scale to a Las Vegas vacation during a recession.

    I expect similar for Las Vegas in the next recession… Las Vegas will be less impacted than other areas, the economy will take a hit but it won’t be that big of a deal.

    The Las Vegas mass shooting tragedy is a good recent example… the next week it was back to business. Tourism is at record highs in Las Vegas.

    • The only problem with Vegas and other towns in the desert is water. I suspect water is going to be a long term concern for any cities to thrive for the next decade and beyond.

      https://www.express.co.uk/news/world/1005117/Las-Vegas-latest-news-drought-warning-colorado-river-nevada-news

    • Vegas did better in previous recessions because it was seen as a bargain town and a way for people to be able to vacation during the bad times still because it offered tremendous value. That simply isn’t the case anymore since it’s been overrun with corporate nickel and diming (resort fees, parking fees, lower gambling odds, etc.). Vegas is going to be screwed big time (at least The Strip) when the next recession hits as they have totally pivoted to the type of consumer they cater to.

      • turs12,

        You could be right about that. Las Vegas is still a bargain town but it is definitely not what it used to be. Nothing is.

  • Inventory here in Orange County is also up substantially since last year. This fact coupled with higher interest rates will definitely slow down price growth.

    • True, inventory is up, but it is not high. True, it will slow down price growth. I expect slow price growth, with the exception of lower priced well located properties … those should do very well with big price jumps. But, I expect the higher priced stuff to see slow price growth. Possible that higher priced stuff in inland locations that compete with new homes will actually fall a little in price. Higher priced stuff in coastal locations will likely see slow price growth. But low to moderate price homes in any location should be fairly hot. This is a good scenario for the first time buyer … possible their first purchase may gain a little ground on higher priced properties.

      But, lower end properties in high priced zip codes do seem to be doing well … possible tax law changes pushed wealthy buyers down market.

  • RE was in a bubble world wide not just in SoCal and Las Vegas. With interest rate increasing and QT on autopilot, liquidity started to be mopped out. The effect of that is felt everywhere world wide:

    https://sports.yahoo.com/vancouver-home-prices-fall-floor-194259360.html

    https://www.seattletimes.com/business/real-estate/seattle-area-home-prices-drop-to-lowest-point-in-two-years-down-116000-since-last-spring/

    https://www.businesstimes.com.sg/real-estate/home-prices-in-londons-most-desired-districts-at-6-year-low

    I think these examples are enough without going to Australia where prices are in free fall.
    The QE pumped too much liquidity in RE world wide. The QT will drain it. Yes, prices will hold somehow as long as unemployment stays low, but unemployment will be eventually affected by QT and RE. When and how much I can not tell because I don’t have a crystal ball. Not even the FED can answer these questions without waiting and watch.

  • The 30-year mortgage is about 4.4% and the peeps can’t handle it with affordability as it is. Something’s got to give.

    • The Fed has said they are open to a hike or rate cut depending on how the economy does. That’s a big change from the set schedule of interest rate hikes. so there’s that.

      • Lower housing costs in the Western States (where CA is the 800 lb gorilla) would make it less likely that the Fed would raise rates, since the inflation rates in the other 3 sectors of the country are already at or below 2%/yr.

    • I’m looking for a dip to high 3’s myself to refinance. I don’t mind price drops as well, I would buy a nicer home in a nicer location.

      • As far as limiting the amount of interest you pay it’s almost never worth it to refinance your house. If you do refinance the only real way to win is to lower the term length. Half of all interest paid on your 30 year mortgage is in the first 10 years.

      • Seen it all before, Bob

        My general rule was to refinance once the rates dropped at least 1%. Move to a 15 year loan if the payments were almost the same or less than the prior loan.

        Moving from a 30 year loan to another 30 year loan at less interest generally meant the payments were less (That may be OK if your spouse stopped working or you took a job with less pay), but in the long run, it took longer to pay off the loan and you likely paid more in interest over the life of the total home loans.

        I refinanced from 8% down to 3.25% in 3 refis. 30 year to 15 year. Refinancing saved money and made sense in this case.

  • When you have at least 20 shows on cable about flipping homes you know the bubble is about to burst

  • Maybe prices will come down because of higher supply and also because people will see prices coming down and want to sell at the top. This will cause more supply and even lower prices, hopefully. Great for buyers like us!

    I think there is no reason why prices should come down just because people can’t afford it. Since when does anything in this world care about the little people affording anything?!

  • This is taking to long TANK!!!! already……

  • As long as the gov keeps inflating the dollar there’s gonna be no tank, what’s the real rate of inflation?

    • It depends on which inflation index you are talking about. If we measure the inflation the way we did in the 80s, it would be really high. The way the government calculates today, it is low. They try to cap the the cost of living adjustments for entitlements.

  • The vast majority of potential home buyers do NOT have an unlimited time horizon. I don’t think this will ever change. People will buy because life happens not because numbers on a spreadsheet line up. This is why we will continue to have booms and busts in CA from here on out.

  • wasting time reading about things is keeping you from improving your income and obtaining those things. What have you done today to improve yourself towards your goals?

  • Interest rates will not go up because the federal budget can not handle it. Central banks will continue to print money to kick the can down the road. Keep on partying like there is no tomorrow.

    • It is true that interest might not increase. However, that does not mean that QT will stop. If QT continues at current rates, that is a moping of about 600 Billions/year. That is a lot of money to mop from the economy. The effect will be sizable and something will snap; then they will call it a black swan.

      Of course, the FED might crash the whole bubble and then start to inflate again with another round of QE. Actually, one of the FED top guys this past week said that FED might start to use QE/QT as a normal tool the way they used interest rates so far. We surely live in a bizarro world of market manipulations. With these manipulations nobody can plan anything with the exceptions of those connected at the very top (with inside information). They will get rich beyond imagination and the rest poor. However, this is not capitalism; this is typical of a communist market with the FED playing the role of the Central Committee.

      A smaller government would never have been able to do this level of manipulation, definitely not before 1913.

      • Seen it all before, Bob

        I compare government intervention with a pilot flying a plane.

        One you are in the air, someone has to guide the plane to a level flight. If you rely on capitalist random winds, the plane will likely crash. Or at a minimum soar to unstable heights never before see only to plummet 10,000 feet when an errant black swan flies into the windshield.

        Someone who actually knows how to fly with an unbiased point of view should be the pilot. That may be the problem today.

      • Seen it all before,

        If you want to use that example, based on historical data, I would compare the “pilot” with an Al Queda terrorist who will smash the whole plane into Pentagon. If you don’t like that comparison, then I would compare it with a pilot who gets a billion in the bank for every 10,000 ft drop or raise in elevation. I would never vest so much power in either of them. Power corrupts and absolute power corrupts absolutely.

        It is true you can get random winds in a capitalist system, but overall the system is stable and self regulating. We don’t have a capitalist system in reality, only on paper. A capitalist system implies free markets, which we don’t have. With the FED inserted heavily into the system, what we witness is a crony system for the oligarchs who are connected to the FED. It is a rigged system to the max. The 2008 exposed this system in all its glory. The owners of the FED were deemed to big to fail, although they became so big not by wits but because they own the FED and implicitly have the politicians in their pockets. I see that as a feature of socialism/communism/fascism (big government and massive amount of power concentrated in few hands) not capitalist system.

        None of us like what we see; we are on the same page on that. However, we look at the same thing from different angles.

    • Interest rates may oscillate to find some parity with growth and sustainability? Who knows. However, the FED probably likes large bell shape curbs to create crashes and signal to the tribes the gig is up.

  • son of a landlord

    Most expensive residential sale in U.S. history — $238 million for a New York City penthouse: https://www.nytimes.com/2019/01/24/nyregion/238-million-penthouse-sale.html?module=inline

    Blert said that record-breaking, big spending by the super-rich indicates an impending financial collapse. He said the late 1920s saw similar unprecedented spending by the super-rich.

    What ever became of Blert?

    • I miss Blert. Not the best writer but he was very perceptive. He always had good insight!…

      • And he was Always wrong, despite his flowery language.
        According to him we should have crashed and burned 8 years ago.
        Same with Mr. Slumlord. Life ain’t going quite the way he so arrogantly predicted.

      • Jed, you are wrong on these two bloggers. Bret was always doom and gloom like you say. However, Mr. Landlord was always bullish, exactly 180 degrees from Bret. Mr. Landlord is the eternal optimist and he always saw everything bliss. However, there was something you could learn from both of them. The reality was always somewhere in the middle between the two extremes, at least for the average guy like me. Personally, I enjoyed both of them even if I disagreed with them sometimes. After all everyone is entitled to his own opinion.

  • I am patiently waiting for Sacramento housing inventory to go up and prices to drop 30-50%. Now sure if that will ever happen or when. Would love to see the same for all of California real estate.

    • Same here, patience is key and will be rewarded (market crashes occur every decade).
      I am ready to buy (sitting on cash) and now that inventory is skyrocketing YoY you have the opportunity to check out open houses each week to identify the right neighborhood, floorplan etc. it’s also a great way to “shop for the right realtor”. I had contact with many, many realtor and test them (knowledge, strategy etc) I have only found about 3 out of 50 that qualify to be my guy/gal.

      In terms of discounts, i am buying when we see a 50-70% crash. Price cuts are the only way for seller to unload:
      https://wolfstreet.com/2019/02/11/liquidity-in-new-york-citys-housing-market-dries-up/

      • Millennial, 3 out of 50 good realtors is a very good percentage (6%) for SoCal (very liberal). In midwest (a more conservative area), you might be able to find a larger percentage (like 20%) because there are more honest people.

        Unlike you, I never bashed ALL realtors. They have a very large percentage of dishonest and uneducated, or not so smart ones in their group. They bring down the reputation for all of them. However, once in a while, you find a diamond – nice character, honesty, hard work, knowledge, experience, reliable in communication and brains. If you find all of them in one person, they are a goldmine. If you will be a good communicator to tell them what you want, they can help you all your life to become rich. Oh! I like also the one who are brokers and owners because they have a lot of flexibility in what they can do. Also, if they are too poor or full of debt, they tend to do dishonest things to stay in business and they are not going to look for you. Now, you can see why it is so hard to find very good agents; not impossible though. Most of the good ones I found, I can count them on the fingers of my hand. They were rich but they had a passion for what they did.

        My advise: don’t dismiss ALL because 90% are they way you describe them. You need a good one, trust me. Over decades, they helped me a lot.

    • Patriot, it is now certain that home prices in California are dropping and will continue to drop for many years. The only mystery is whether the drop will be 20, 30 or 40%. The bottom is at least 2 1/2 years away. Already, I see price declines of 4-5% in Orange Co. by the smart investors who sell before the greedy competitors realize that they will never sell at their high asking prices. The smart money is selling right now slightly before the asking prices of their competitors.

  • Inventory going up from record lows is hardly an indicator of an upcoming collapse. Introducing more volume to an already hungry market just means that multiple homes compete for the same buyer and over-bidding comes to an end. Big deal.

    Interest rates are low, unemployment is low, dual income household spiking, millennial and Gen Z potential buyers are ever-increasing, corporate profits are at all time highs, dollar is strong and loan delinquencies are low. IF the market goes into a recession, it will take quite a bit of major events occurring at the same time to throw it off it’s rails. And even then, housing prices won’t come close to the 2009-2012 depressed housing market. Inflation is much higher than what’s reported. If housing prices were adjusted for REAL inflation you’d see that prices are actually within a normal range. I can’t believe how quickly people forgot just how ridiculous the 2006 housing boom was with prices due to lax regulations. That’s a real bubble. A real estate market backed by real wealth is not my definition of a bubble. Go out and buy some property and take advantage of the many options it now presents compared to the years prior.

    • You must be a realtor because telling someone to buy in this market is the worst advice I’ve heard. Careless and downright ridiculous. Two people I know have sold their homes this month and both took the offers 20k under asking price(best offers). The ship is sinking.

    • Cute. I love hearing predictions of the future by looking in the rear view mirror.

      • Seen it all before, Bob

        Those who cannot remember the past are condemned to repeat it. To covet truth is a very distinguished passion. –George Santayana

    • I am not realtor, I actually have a great disdain for them. I am, however, a realist. I used to be just like you guys preaching about the “bubble market” since 2013 but then I realized I was just introducing my own emotion-based wishful thinking into my investment strategy so I started thinking about actual factors that drive the market up and down.

      • Basically you’re saying you bought a house and are now trying to justify your purchase. We get it.

      • Nope. I did, however, buy a 5 unit complex for $270K with severely low rental income and over a two year period built the rental income to $4500/month and just closed escrow on it for almost double what I paid. You can either sit on the sidelines and pray 2008 happens all over again or learn to play the game and win at it.

      • Congrats! You brought at peak bubble price! What timing? You’ve got to roll with it right!

  • Seen it all before, Bob

    This statement from the Good Dr is interesting.

    “Looking at things as they stand today, why would you expect any sort of correction? The only thing we are seeing is that inventory is rising sharply but prices are still holding steady. However, having inventory rising by 106 percent year-over-year is definitely going to add more supply to the market which means buyers will have more options. ”

    More supply typically would mean a drop in sales prices. I think there has been some drop sales prices in some areas. I haven’t seen hard numbers for S. CA.

    I don’t think a drop in asking vs selling means much (ie the greedy person who lists a house for $3M and only sells for $1M (66% drop Millennial!) doesn’t mean much when they bought the house a year before for 700K.

    Now that the stock market is roaring back to within 10% of new highs again, the people who held on to their stocks now have more money for a down payment. Will house demand soar again to meet the new supply in Spring? Or, will the stock market drop 18% again leaving buyers without a paddle?

    There shouldn’t be another rate hike before Spring and mortgage rates have been falling. We can’t blame that.

    If I was over weighted in stocks and saw my net worth plummet 18% in 2018 but is now back up again, I might consider diversifying into a rental house purchase if the rental parity made sense.

    This is like a slow motion roller coaster ride.

    • Seen it all before, Bob

      Having some experience with controls engineering, did you know a jetliner with a skilled pilot+computers can fly for awhile without one wing? As long as the air is smooth and their is some uplift all is good. Given a sudden downdraft, or a black swan taking out the pilot or remaining wing, a crash is likely.

      I think the stock market and housing market is in this position. As long as the economy remains good, and there aren’t any unforeseen black swans, or any intentional disturbances (ie war). The plane can keep flying.

      Where is the black swan? Who is the most likely to create a disturbance? These are the real questions.

      I don’t foresee an imminent crash yet. However, probability says we will have one at some point. I predict it will be a big one. Hold on to your parachute (enough cash) and hope it gets you to the ground (bottom).

    • “If I was over weighted in stocks and saw my net worth plummet 18% in 2018 but is now back up again, I might consider diversifying into a rental house purchase if the rental parity made sense.”

      THats the problem! It doesnt make sense!!! House on sale for 1.3 millions in Silicon Valley and the next house they are trying to rent for 3.1K per month. No way this math works…maybe if Chinese Money Launders speculating in the market but they are long gone…

      • Seen it all before, Bob

        I agree that at first glance, it is hard to achieve rental parity in the first year.
        Even the curmudgeonly Mr Landlord admitted that it may take 7-10 years to achieve rental parity.

        However,, with tax rules, it is a great long term investment. It is a business so you can write off repairs and improvements, all taxes and payments, and depreciate the house over 27 years. You will likely be putting money into the rental the first few years and taking a passive loss, but history shows, eventually, you will be making a profit. When it is paid off, it is a good retirement revenue income source.

  • The cheerleaders have all of the same excuses that they had prior to the last crash. “This time is different.” I guess some people just never learn.

    • What is your definition of a ‘cheerleader’. Most of the so-called cheerleaders were saying that 2011, 2012, 2013, 2014, 2015, 2016, were good times to buy a home. I was one of them. and they were good times to buy. Does that make someone a cheerleader? I would not say that now because I know the market moves in cycles and next few years wont be good times to buy.

      • Cheerleaders are those who make the argument that “real estate always goes up” and “you can’t predict the market so anytime is a good time to buy and hold real estate.” Also those in here who despite the mountain of evidence that the market has peaked and is headed south, continue to argue that it will go up from here.

        The ONLY reason it was “a good time to buy” from 2011 to 2016 is because the Fed was pumping the bubble up artificially. People who bought then (myself included) got lucky. I cashed out after two years and am waiting on the sidelines for the crash. Yes, I sold too soon, but I did not want to continue gambling that the Fed would keep things propped up like this. It’s ending soon, and it WILL crash, as it always does.

      • The Fed sure was pumping a decade ago, but that doesn’t take away from the fact that buying in 2010-2012 was an absolute gift. 2010 was almost a decade ago, these buyers have so much equity it will make your head spin. Even the people who bought back in 2015/2016 are sitting pretty now. Buy what you can afford and plan on owning for the longterm. Timing markets rarely if ever works.

      • Prices are going back to at least 2010 levels, most likely 2000 levels. So that “equity” only exists if they sell.

      • “Prices are heading back to 2000s levels.” Highly doubtful. And even if they did, most normal people would have zero chance at buying. The ultra wealthy would buy everything and the working stiffs would just be lifelong renters. Be careful what you wish for.

    • lol, it’s different this time, Yah, when people are kicked outta their homes, they wont have cars to sleep in. Inventory is climbing rapidly, incomes can’t keep up, we should see a nice 10-15% drop in prices, no crash, but a slide backwards.

  • Crash? not so fast. I spoke to a friend here in LA who is a broker and he said that despite the glum predictions, YOY home prices in LA did rise. He said the problem was that last Fall, sellers were coming up with ridiculous high prices for their homes due to the ‘blind sellers market’. These sellers have realized that they need to lower their prices to realistic figures and many of these massive price reductions were over-priced to begin with NOT softening of the market. He said a properly priced home is still getting 5+ offers, many over asking and many all-cash.

    Notice YOY for LA was +4%

    https://www.trulia.com/real_estate/Los_Angeles-California/market-trends/

    • QE – Your broker friend is only telling you the half truth. I’m not denying it, certain markets saw a slight rise in prices. But you have to look at the obvious rise inventories along with what the majority of the houses actually sold for.
      My area OC (Huntington Beach and Newport) saw a serious inventory uptick with majority of the houses being sold below asking.
      You could argue that’s because the houses are million++ that’s why they are sitting. But inland OC same situations.

  • Let’s be real and quit the crap. The stock market is roaring again, unemployment is at or near all time lows, majority of people are going to pay less taxes this year, inflation is a non-issue, mortgage and long term rates have gone down recently, the fed has turned dovish on future interest rate hikes….I can go on and on. The crash is not here and is still a ways off. Yes inventory has increased, but mostly in the higher end homes 1 million+. The inventory of starter homes is still non-existent. There are still plenty of buyers out there, but some can’t afford to buy where they want and/or are sitting on the fence waiting for a reduction. Meanwhile rents are still high.

    One thing that may start tipping the scales is the SALT deduction cap. I don’t think many CA property owners realize how this is going to effect their tax returns this year. Once the dust settles after April we may say inventory increase as some people unload their properties due to the tax burden, but again this will only have a real affect on people paying property taxes on homes assessed over a million+ or those owning 2nd homes and/or vacation homes.

    • son of a landlord

      but again this will only have a real affect on people paying property taxes on homes assessed over a million+ or those owning 2nd homes and/or vacation homes WHO BOUGHT RECENTLY.

      Don’t forget to add that bit.

      The SALT caps will NOT affect homeowners who bought long ago, and thus pay little property tax due to Prop 13. Indeed, these homeowners will be less likely to sell, which will further limit inventory.

    • Well said WheelinDealin. Despite all the doom and gloom we hear, the economy is firing on all cylinders. Low unemployment, high stock market, low interest rates, low inventory (relative to historic norms), record high rent. We’ll see what the new tax law changes do to high income areas. Just like all previous times, it takes YEARS to find a bottom in the RE market. I know guys like Millie have no problem staying put in their cheap apartments for another 5 years, I would bet money most potential buyers don’t have that luxury.

    • Seen it all before, Bob

      The stock market is roaring again. People with short memories have already forgotten the 18% loss in their net worth in 2018. Or, they remember and think about diversifying into real estate.

      IMHO, a primary home is taken care with Federal taxes thanks to the reduction in in the tax brackets. A second home can easily become an AirBnB where the remaining stockholders can throw their immense gains for a nice vacation. Now with a rental, there are no restrictions on deducting taxes paid. The sky is the limit since the place is a rental. Do you think Trump would have neglected himself with the new tax law? Business is good. A rental is a business and should be able to deduct everything.

      It is still the Roaring 20’s. Until it is not.

      • Exactly Bob. There is zero change to deductions for rental properties. Insurance, taxes, mortgage interest, etc. It’s all tax deductible. In fact the new tax laws have made owning rental property even more desirable while reducing the tax benefits of a primary residence. Isn’t Trump one of the biggest landlords in NY City? Go figure.

  • The lead story in the OC Register Real Estate section this week is that profits from selling houses is up for 2018 in California. The 5 top markets for sale profits are all in California, with 4 markets in the greater Bay area in #1-4, and LA/OC at #5. The average profit for our market was $227000. Nationally this was the biggest year for profits since 2006. Mr Lansner’s article quotes the source of his data (Attom Data Solutions) as saying that they are not expecting as big a gain in profits for houses sold this year with uncertainty and potential trouble in the future.

    Note, they aren’t talking crash, just a topping of profit increases. So waiting to sell if you are planning to sell anyway is not a good idea., but not a panic sale time if you want to stay put.

  • The spring housing market is looking decent. Not great, but decent. However, low end well located homes are doing great. Expensive inland homes are struggling. Everything else is somewhere in between.

    If the stock market stays up, the housing market will get hot again … but, that is if the stock market stays up. If the stock market shakes again, housing will slow. We will see.

  • Rates are down
    Inventory is up
    Sellers no longer in full control as before
    Ask vs offer prices really depends on many factors: realistic seller, location, turnkey or dated, etc….
    1 property may still get 3-5 offers as soon as it hits the market while another property may just sit for 3-5 months with no offers

    Lending:

    Conventional underwriting is tightening up.
    Had 1 yesterday:
    20% down
    600k loan
    Primary residence
    Plenty in reserves
    640 credit score

    The desktop underwriter (computer algorithm I’ve alluded to before) kept declining. It just didn’t like the credit profile. Buyer still moving forward but had to go FHA.

    Many FHA lenders have tightened up as well. More overlays which are lender instituted layered risk safeguards.

    On the other side of the spectrum there has been a loosening up of Non-QM guidelines. So far nothing crazy, but, I’m keeping my eye on that sector.

    All in all, no crash, but certainly some softening that’s for sure.

    • That 640 score won’t cut it. Both my Wife’s score and my score are over 800. Mine is 40 points higher than hers, maybe because we get the scores from two different credit card companies. If I were in charge of underwriting the nation’s loans, I wouldn’t make a home loan in CA to anyone under 700. Too risky. Of course I’m not in charge and I’m not currently looking for loans to take out or make.

  • son of a landlord

    Over-priced or a tank?

    Consider this Santa Monica townhouse: https://www.zillow.com/homedetails/954-14th-St-UNIT-5-Santa-Monica-CA-90403/55325162_zpid/

    Jan 2013 ….. sold for $1,200,000.

    May 2018 ….. listed for $1,995,000.

    Feb 2019 ….. sold for $1,595,000.

    Seller was hoping to gain nearly $800k. Instead he settled for a $400k gain. So, is this a HARD TANK, or merely a delusional seller who was hit with reality?

  • All the statistics point to Feb. 2019 in the real estate market being the equivalent of July/August 2006. Just one example is what Joe R. said:

    “The average profit for our market was $227000. Nationally this was the biggest year for profits since 2006.”

    If the pattern holds, large price drops are close at hand, but not yet happening.

    The rapid real estate market crash will not become obvious until the Fed. first drops interest rates, but that is probably a year away. Until then, the crash will be hidden in the delayed statistics and the fact that there are so few low priced homes to sell. If only $1,000,000 homes are for sale, prices will appear to be going up even if those homes are actually dropping in price.

  • Inventory seems to be piling up. I run the exact same query on Realtor.com periodically to how many listings there are: 3 bedroom SFR within 5 miles of Placentia. Around Thanksgiving, there were about 700 homes listed. As of right now, 831.

  • Any advice on housing situation in Redding, CA would be appreciated. As crazy as it may seem, with all the terrible fires, I may consider a job in the area. Looking to drop $250K on down payment on a house in the low $400k range. What areas should I avoid concerning the recent fires? What are areas in good high schools at that price range?

  • In the growing markets such as San Antonio and Phoenix, there is a glut in higher end homes. However starter homes are at about a 45 day supply. It is going to take builders another 3-5 years to meet that demand. Inventory may be up, but not the type that people want, so they are staying in apartments or not moving out of mom and dads house until starter homes become more affordable. It’s going to be a while.

    • The crash always starts at the top. The $2 million homes don’t sell and end up listing and selling for $1.5 million. Well the homes that were $1.5 million aren’t as nice so they have to lower their prices to $1 million. And on down the crash.

      Anyone who thinks that the starter home market isn’t connected to the luxury home market hasn’t been paying attention.

  • The Fed is trapped by its own earlier policies — the low interest rates spiked stocks and RE and now the Fed has to slavishly do anything to prevent asset deflation. Since all asset classes are artificially inflated, I think they are just trapped. I suspect the Fed will keep the money pumping until the entire system collapses as a result of lack of consumer demand/ability. It’s a horrible bind: the more money the Fed pumps into the system, the worse inequality gets, and the fewer consumers there are. I guess when the debt slaves collapse, we might see a universal minimum income, if only to protect asset prices?

  • Down $200k in 10 months, and it’s just begining House Bubble 2.0

    Address: 24386 Vista Point Ln, Dana Point CA 92629
    For Sale: $849,000
    3 bds • 3 ba • 1,689 sqft
    View this home on Zillow:
    https://www.zillow.com/homedetails/24386-Vista-Point-Ln-Dana-Point-CA-92629/25656229_zpid/

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