A weekend topic starting with the Colorado Sun. “Back in 2015, the median sales price for a house in Colorado was $285,000, according to the Colorado Association of Realtors. Between January and September, the median price averaged $575,000. ‘As you can see from the report, it would take pretty considerable drops in values in order for us to get to a level of ‘affordability’ that the state enjoyed back in 2015,’ said Phyllis Resnick, the CSU’s Colorado Futures Center’s lead economist. ‘I use that word in air quotes because I don’t think people thought 2015 was a terribly affordable era. But in retrospect, it actually was because interest rates were almost historically low and the run-up in prices hadn’t happened yet.’”
The Salina Journal in Kansas. “While many of the current developments already underway are for housing in the higher ranges of prices, Mike Schrage, city manager for the City of Salina, said getting more housing on the market, no matter the size, is good for the community, particularly as people upgrade from their existing properties. ‘It may seem odd to (bring in) $400,000 homes, but that move-up housing creates capacity somewhere else on the housing ladder,’ Schrage said.”
The Miami Herald in Florida. “Miami-Dade County’s housing market barreled through September with another double-digit annual price jump, marking an astonishing 130 consecutive months — almost 11 years — of year-over-year price increases. The dwindling demand is expected to force sellers to eventually lower prices. And median prices fell slightly month-to-month in July and August. ‘Sellers are still anchoring their expectations from the early 2022 demand. They are not moving sufficiently down,’ said Mariya Letdin, a business professor at Florida State University. ‘That typically happens. People are quick to raise prices, but adjusting down takes longer.’”
“In recent months. real estate agent Phillip Calloway has noticed more homes are staying on the market longer. Buyers have more ability to negotiate prices and face fewer competitive bidders for homes. ‘Now, if I’m a first-time homebuyer, I don’t have to worry about 15 offers competing against me,’ he said. ‘In most cases, I haven’t written a contract putting money over appraised value in a few months.’”
From Boca News Now in Florida. “Just like everything else in 2022, you can interpret the latest housing sale numbers for Delray Beach and Palm Beach County any way that fits your own personal narrative! Are you a ‘glass half empty’ person? Sale prices are down quarter to quarter! Are you a ‘glass half full’ person? They’re up year to year! BOCA RATON: The average sales price in Quarter 3 of 2022 is $1,264,596. That’s down 14.2 percent from Quarter 2, but up 18.4 percent from Quarter 3 of 2021.The average price per square foot in Quarter 3 is $377. That’s down 6.9 percent from Quarter 2, but up 24 percent from Quarter 3 of 2021.”
“DELRAY BEACH: The average sales price in Quarter 3 of 2022 is $1,063,897. That’s down 13.4 percent from Quarter 2, but up 1.4 percent from Quarter 3 of 2021. The average price per square foot in Quarter 3 is $444. That’s down 8.5 percent from Quarter 2, but up 16.2 percent from Quarter 3 of 2021.”
The Manteca Bulletin in California. “There is still $1 million dollar home buyers out there. But there are not just as many. And they’re favoring newly constructed homes. Even with 270 plus listings for stand-alone homes new and existing under $950,000 in Manteca, there are 42 homes that are pending. Thirty-two of those are existing homes.The other 10 are new homes and reflect a trend by new home builders that happens when the market slows. New home builders list homes on the Metro List and are willing to pay commission to make deals.”
“It creates a situation where prices may still drop after homes have been listed for a while and don’t get offers but the lower you go the pressure to reduce prices softens. A check of the housing market in Manteca, Tracy, Mountain House, and Lathrop confirms the buying slowdown for both new and existing homes. The biggest change is in the $1 million plus market. There is just one existing tract home in the seven figure range with a pending offer between the four communities.”
“It’s a far cry from five months ago when there were 10 pending sales of existing homes in excess of $1 million in the three cities. As of Thursday, there were 21 existing homes above the $1 million mark listed in Tracy. None had offers. Mountain House also has the only $1 million plus tract home foreclose listing in the area. It is for a home built in 2005 on Sanrise Street with five bedrooms and 3.5 bathrooms in 3,634 square feet where the asking price is $1,249,990.”
KRON in California. “Every night in San Francisco, more than 4,000 people sleep on the streets without any form of shelter. In the same city, tens of thousands of homes are vacant without a single person sleeping inside. A new report released Thursday by the city’s Budget and Legislative Analyst Office revealed that a staggering 61,473 homes were vacant in San Francisco in 2021. The number of vacant homes skyrocketed from 40,000 in 2019 to over 60,000 in 2021 — a 52 percent increase in just two years.”
From Market Watch. “Dylan Malitsky has been listing his Denver-area home on Airbnb Inc. since moving to Miami for work nearly a year ago. Things went extremely well in the beginning, he told MarketWatch. ‘I had zero experience in real estate,’ Malitsky said. ‘I thought I was the most successful entrepreneur of all time. I thought it was my ticket to building equity and making money.’ But after bringing in about $60,000 since he started renting his property on Airbnb he said his bookings ‘fell off a cliff’ in August. His property hasn’t been booked for any dates in November and beyond — not even for the start of the ski season in December and January.”
“He is not alone. Airbnb hosts are commiserating with one another about declining occupancy rates in Facebook groups, on Reddit and on Twitter, where a screenshot of a Facebook post went viral last weekend. Jim Ewing is the Airbnb host whose Facebook post about his lack of bookings went viral when someone else posted it on Twitter, and said ‘The Airbnbust is upon us.’ He started listing his Palm Springs, Calif.-based property on Airbnb last October, and told MarketWatch he is looking to get out and is interviewing long-term tenants for his property.”
“Ewing said his property — which he and his wife bought as investment with his mother-in-law — had about 80% occupancy until April. Then in May, ‘we went from 80% to zero.’ So they slashed their prices in half and managed to get more bookings. But they have had no bookings since July. And just one booking for around New Year’s Eve, which he said they’ll probably cancel if they find a long-term tenant. ‘My hope is that I’m not making the wrong move,’ he said. ‘That I’m leaving the market in time — before everyone else says [they] need to find long-term tenants.’”
“In Houston, Amber Melenyzer told MarketWatch this past summer was the slowest for her guesthouse in five years. Melenyzer said that in her area Facebook group, ‘a lot of people are trying to dump furniture from their Airbnbs… I think a lot of people may have jumped into it thinking they were going to make money.’”
The Dallas Morning News. “If you are young and have recently become a homeowner, we need to talk. In addition to the usual list of concerns, you now have a new worry. Home prices can actually decline. Yes, this means you. The value of your house can decline. In fact, data from the Texas Real Estate Research Center at Texas A&M tells us that home prices likely peaked in May. And they have been falling since then in every major Texas city.”
“If you bought your house in the last few years, this is new. You’ve known only the joy of homeownership. Maybe even the ecstasy of homeownership. If you stretched to buy a home at four times your annual income, there’s a pretty good chance that your home has made as much money while you were sleeping in it as you did while working. If your home value rose 25% in any 12-month period — and many did — the appreciation was as much as your salary!”
“Other than marrying well or winning the lottery, minting money doesn’t get much easier. But the other side of homeownership isn’t so grand. With mortgage interest rates now at nearly 7%, we’re at an ugly standoff in housing. Fewer buyers qualify. Many owners will find themselves locked in.”
The Globe and Mail in Canada. “Investing certainly isn’t easy, but if we take a step back for a moment, it is easy to see how cheap money has fuelled excess, how prudent valuations got extended and how return expectations swelled. It’s also easy to see how the can got kicked down the road. Now, some of those excesses need to be allowed to return to fundamental valuation levels, reflecting the current social and economic environment. This is not a Harry Hindsight missive. This difficult market environment may be unfortunate, but it is natural, overdue, and healthy.”
“Investors abandoned fundamental valuations, which are not unquestionable rules but are excellent guides, by expecting emergency-level interest rates to fuel valuations for some time to come. Ask the equity analysts how they learned to support stock prices that had fully decoupled from traditional valuation. Ask home buyers about their experience. Sure, allow for the effects of momentum and sentiment and new models, but we need to be wary of true distortion. Current market behaviour continues to reflect more of a fear of missing out (FOMO) on the upside than a fear of the more likely downside.”
“The market can’t go up until this learned bad behaviour and the FOMO stop. For the market to bottom and reflect fair value, thereby becoming attractive again, it has become apparent that it is going to take quite a shock. Investors have been conditioned to not sell – and in fact to buy – the dip, after being saved or supported by cheap money so many times in the past 14 years. It is understandable why it may be natural to rely upon that same approach again this time, but we need to consider if this time is different.”
From Mises.org. “The year 2022 has certainly been a tough one for the Federal Reserve. The Fed missed the emergence of the runaway inflation it helped create and continued for far too long to pump up the housing bubble and other asset price inflation. It manipulated short- and long-term interest rates, keeping them too low for too long. Now, confronted with obviously unacceptable inflation, it is belatedly correcting its mistake, a necessity that is already imposing a lot of financial pain.”
“Sharing the pain of millions of investors who bought assets at the bloated prices of the Everything Bubble, the Fed now has a giant mark-to-market loss on its own investments—this fair value loss is currently about $1 trillion, by my estimation. It is also facing imminent operating losses in its own profit and loss statement, as it is forced to finance fixed-rate investments with more and more expensive floating rate liabilities, just like the 1980s savings and loans of Paul Volcker’s days as Fed Chairman. In short, the Fed, along with other members of the international central banking club, sowed the wind and is now reaping the whirlwind.”
“It is often argued, especially by economists and central bankers, that central banks should be ‘independent,’ thus presumably practicing by themselves the vigilance against inflation, making them something like economic philosopher-kings. Indeed, inside most macro-economists and central bankers there is a philosopher-king trying to get out. But the theory of philosopher-kings does not fit well with the theory of the American constitutional republic.”
“Those who support central bank independence always argue that elected politicians are permanently eager for cheap loans and printing up money to give to their constituents, so can be depended on to induce high inflation and cannot be trusted with monetary power. But if the central bank also cannot be trusted, what then? Suppose the central bank purely on its own commits itself to perpetual inflation—as the Fed has! Should that be binding on the country? I would say No. The U.S. Constitution clearly assigns to the Congress, to the elected representatives, to the politicians, the power ‘to coin money [and] regulate the value thereof.’”
“Along similar lines, I have previously recommended that Congress should form a Joint Committee on the Federal Reserve to become highly knowledgeable about and to oversee the Fed in a way the present Banking committees are not and cannot. I argued: ‘The money question,’ as fiery historical debates called it, profoundly affects everything else and can put everything else at risk. It is far too critical to be left to a governmental fiefdom of alleged philosopher-kings. Let us hope Congress can achieve a truly accountable Fed.”