It Gets Real: Manhattan Apartment Sales Plunge

And Manhattan condo prices plummet 14.5% in 3 months.

Real estate is local. And so housing bubbles are local. When enough of them happen, they coagulate into a national phenomenon. This has already happened. In March 2013, we started calling this phenomenon Housing Bubble 2, and we’ve watched in awe how it bloomed, nurtured by ultra-low mortgage rates, government subsidies, the Fed that is relentlessly “healing” the housing market, yield-desperate investors, private equity firms, Wall Street, a surge of foreign buyers who want to get their money – however they’d obtained it – out of harm’s way, and a million other factors. All of it has been accompanied by a national boom in hype.

Now there are signs that our awe-inspiring Housing Bubble 2, like all housing bubbles, is beginning to unravel. This too is local, here and there, while still booming in other places. It shows up in some key markets. Then it spreads. When it spreads far enough, the unraveling of Housing Bubble 2 becomes a national phenomenon.

It has now started to unravel in some markets that were among the hottest and craziest until last year: Miami, San Francisco, and Manhattan. All three are bogged down in a condo glut.

So here’s Manhattan. Sales of apartments in the second quarter dropped 10% year over year, to 2,281 units, the lowest since crisis-year 2009 (when 1,482 unit were sold), according to The Wall Street Journal, which had dug up the data from city records.

Sales of condos rose 10%. But this includes a large supply of new units in high-rise developments that went into contract months or years ago during the early stages of the development, and that, as The Journal put it, “no longer reflect current market conditions.”

Sales of co-ops plummeted 26% year-over-year.

In a new twist, and until recently a bastion of strength: sales of “lower priced” apartments – which in Manhattan are units that sold for less than $1 million – plunged 20%.

Second-quarter apartment sales had reached a post-Financial-Crisis peak in 2014, but then fell off in Q2 2015, and fell once again in Q2 2016.

At first, the weakness in the Manhattan housing market was in the luxury sector. It became visible last year and got more serious this year. In May, we reported on the Lower Manhattan  luxury condo glut – with 261 penthouses on the market – and plunging prices. At the time, the meme was that this is impacting only the very high end. Now that meme has been obviated by the market.

“I think it is a correction, a serious correction,” Hall Willkie, president of brokerage Brown Harris Stevens, told The Journal. In the quarter, the number of new contracts signed at his firm plunged over 20% year-over-year. He blamed the uncertainty over the US presidential election and the turmoil ahead of the Brexit vote. Other brokers blamed the stock market that has stubbornly refused to set new highs this year and has unnerved some folks with its volatility.

A big part of the problem is pricing. As is usually the case in real estate, when high prices become an obstacle, unit sales plunge, as buyers dig in their heels, while sellers are reluctant to cut prices and just sit on their units.

And prices have soared for years. The median price – half sell for more, half for less – jumped 13.7% from a year ago to $1.12 million. The average price hit a record of $2.08 million, pushed up by a small number of units that sold for tens of millions of dollars. The Journal observed: “Many brokers said asking prices were set too high….” Um, suddenly.

But condo sellers got the message that this is a glut and that prices need to come down to move these units. While the median condo price is still up 12.2% from a year ago, that boom is over, and prices have plunged 14.5% since Q1, a huge drop in just three months (“figures based on an analysis of documents filed with the city’s Department of Finance as of June 27”: The Journal).

This includes 13 sales with an average price of nearly $20 million at the brand new 432 Park Ave mega-tower. The most expensive of those sales: $59.1 million. But it had gone into contract in December 2014, reflecting realities of a bygone era.

432 Park Ave.

“The luxury market has been choking on quite a bit of overpriced inventory,” broker Donna Olshan told The Journal. “Fantasy and aspirational pricing just doesn’t cut it.”

Ms. Olshan’s tabulations show properties valued at more than $4 million that went into contract in the second quarter stayed on the market for an average of 277 days, 19% longer than the 232 days a year ago. The average price cut from the original asking price to the last asking price was 7% in the second quarter, up from 4% a year ago, she said.

An example: At the San Remo on Central Park West, a 17-room triplex penthouse – listed at $75 million in April 2015 – had its price slashed by $17 million (!), or 21%, to $59 million, still waiting for a buyer.

And there are cracks appearing in the US market on the other end of the money spectrum, where the New York Fed is worried about “astronomical” default and loss rates. Read… NY Fed Warns about Booming Subprime Mortgages, now Insured by the Government

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  64 comments for “It Gets Real: Manhattan Apartment Sales Plunge

  1. OutLookingIn says:

    Housing bubble explosion two point oh!

    As in the price increases, the current hyper-correction seems to be happening in stages. Down in stair step fashion, starting with the high end real estate first.

    The main street regular three bedroom bungalow starter home, is still increasing in price in most areas. As the article states, “real estate prices are local”, until the value downturn becomes general.

    This time around, the amount of derivatives containing “mortgage backed assets” have government backing through the tax payer, if the worst happens and they go upside down. Lucky tax payer. No?

    • Wolf Richter says:

      Yes, in the end it seems, taxpayers are always the lucky ones.

      • polecat says:

        If this gets as bad as I think it will, the public at large will not take any bailout shit lying down. They will come unglued !!!!!! After experiencing the results of TARP,HAMP, et al I can’t say I blame them…….

    • Dan Romig says:

      Yes, across my street in the Longfellow MPLS neighborhood, there’s a small 3 bedroom bungalow for $210,000 which hit the market a month ago at an initial listing of $220,000.

      This house has been upgraded since it was bought in February for $110,000 by someone who’s hoping for a tidy profit flipping it. Still, a nice house in a nice location near the light rail in south Minneapolis can be had for a $750 month/30 year mortgage after a 20% downpayment!

  2. Agnes says:

    Denver is hiring people to decrease the amount of time it takes to get building permits. I am very pessimistic.

  3. Meme Imfurst says:

    Now are we some example for the world…

    The rich weep a single tear, and it is a catastrophe that requires socialism to the rescue. The poor live in doorways and laws are passed to stop you from helping them.

    Now are we some example for the world…

    A 10 or 15% real estate discount, we used to call that the “preachers discount” now we call it a catastrophe that requires lower interest rates to save the buyers and make homeless the savers.

    Now are we some example for the world…

    Prices that stall from gaining higher altitude, growth that can’t get kick started, call in the algos, the FED, the magic media, and Walt Disney to get this fantasy just one more day of life.

    Now are we some example for the world…

  4. Ehawk says:

    Well I don’t see the bear market or recession. all I see is people with new cars, packed restaurants, high rents, pending home sales, I don’t know anybody that lost a job…oopps I know one, but the got another job with bigger paid (I’m SJC)… California is in full employment… money everywhere ! It will get real when…

    neighbors and acquaintances are:

    a) facing layoffs and can’t find another job after 3 months.
    b) cars are being repo’d
    c) Foreclosures are up and more for sale signs pop up.
    d) The waiting lines at cheesecake factory and BJs are 1 min and not more than 30-45

    In others words until Main Street feels it, is it not REAL.

    • illumined says:

      Give it some time. Even though the last housing bust started in 2006 it wasn’t until 2008 that mainstreet felt it. It takes time for bubbles to unwind, and they do so little by little and then all at once in a spectacular bang.

      • Golden Nugget says:

        Give it some time??? Yeah, I guess doom and gloom always need more time. Until then enjoy it, it might take “some time”.

        • Wolf Richter says:

          We don’t do doom and gloom here. We do analysis. We turned bearish on housing in SF, Miami, and Manhattan late last year and earlier this year (respectively). We still think prices are going to rise in many other cities. We keep our eyes on it. And we analyze it and report it.

          It is a housing bubble, and prices rise during a bubble, so this is bullish. When it deflates, we turn bearish. The trick is to identify the turning point when it happens, not three years after the fact with hindsight.

        • Thomas Malthus says:


          Remember 2008? Hundreds of thousands of jobs being shed every month… international trade seizing up … the financial system threatening to collapse…

          And then … like magic… the central banks gathered … and they agreed to backstop the financial system …. and they agreed to pump trillions of dollars into the system to keep it growing… and they pushed interest rates to zero.

          And now interest rates are still at zero – and in some instances below zero. The stimulus tap continues to pump blood into the system.

          But in spite of all of this the beast is weakening…

          Surely it is obvious that we are headed for another 2008 — but this time the problems are exponentially larger…. we’ve not got a housing bubble — we’ve got bubbles roiling across the economy…

          The central banks are giving it all they have trying to prevent growth from going negative — absolutely everything.

          Yet as we can see — the economy is faltering….

          At some point we will get our recession — that is guaranteed.

          And the central banks will have used up every last bullet in the arsenal.

          The normal tools such as lowering interest rates and stimulus — will have been exhausted…. we will at some point Push on a String.

          And of course we will get the mother of all collapses.

          This is not Great Depression 2…. this is an entirely different world — with Just in Time supply chains… banks that are all connected…

          This is uncharted territory …. this is beyond dangerous.

          I have read that some people can’t wait for this to unwind.

          All I can say is – be careful what you wish for. I guarantee you — it will not be what you expect.

        • illumined says:

          “Doom and gloom” is what people said to disregard Roubini, Schiff and others who warned of the last housing bubble, even though the fundamentals supported their view about there being a bubble. There’s always reasons why “this time is different”, why “it can’t happen here”, etc. A lot of it just comes down to wishful thinking, the idea that prices can rise way faster than income indefinitely is absurdity at its finest.

    • d'Cynic says:

      The situation you describe would be ripe for an interest rate of around 5-6%, maybe more. In the meantime, it is 0.5% with no increase in sight. Until then, everything is a mirage. Sad, but true.

    • Emanon says:

      Here in Pittsburgh, PA, things are not good.

      Two news items from just today, learned by word of mouth:

      A local supermarket chain is soliciting “voluntary layoffs” from July 5 to November 5. That’s their slow season, with not much happening between Independence Day and the Thanksgiving-Christmas holiday season. Labor Day and Halloween aren’t big deals for supermarkets. A few extra sales of hamburgers and bags of candy aren’t enough to require full staffing.

      This indicates that sales are not good.

      Voluntary layoffs are often precursors to involuntary layoffs.

      A person I talked to said that his wife, who works at a manufacturing plant that makes valves and fittings for nuclear power plants (among other things), was notified that the managers are getting a 10% pay cut and the rank and file are getting a 5% pay cut.

      These things are too small to show up in newspapers but they are indicators that things are getting worse, not better.

      The ‘real’ economy of people who make or sell or support necessary items, such as food and electrical power, is slowly grinding down to a halt.

      The ‘fake’ economy of government and finance and mismanaged healthcare is slowly but surely consuming the ‘real’ economy.

    • Si says:

      I am assuming you live in Cali? No?

      Simple question – how ‘mainstreet’ are the people around you, your friends?

      • Ehawk says:

        Yeah I’m in San Jose, and work in Santa Clara California. It’s two different worlds out here in Silly con valley… you see the opulence and the misery!

        100K salaries ain’t shite out here with after tax monies and 2.5K for a crap apt… everything is marked up higher from burritos to haircuts.

        I told my landlord that I’m moving out, and he told me that half the people in the 9 unit bldg are always late close to 2 weeks in paying the rent…he said that he was raising the late fee from $20 to $85 if your late after 3 days… he said Fvk it look everybody has a pretty new car, they need dump the car and pay rent on time…

        My friends and myself are millennials and pretty “mainstreet”… with different incomes but all employed!… so far and no body wants to buy stocks or condos right now… not that we have lots of money but we could buy with low 5% DP… but hell no

    • Michael Fiorillo says:

      It’s boom and blight/misery at the same time, and the latter is a function of the former.

      I live in NYC, am a life-long New Yorker, and a public school teacher. Manhattan is, and has been for years, a wealthy inferno overrun by every type of neoliberal cartoon character imaginable: strutting Oligarchs and those aspiring to same, insufferable trust fund hipsters, savage yuppie technocrats (“I’m a social liberal and fiscal conservative”), and a global lumpen bourgeoisie that correctly knows that every State has its back covered, until they don’t…

      Manhattan (believe it or not, most of which was very economically mixed until it’s neoliberal colonizing after the Bad Old Days in the ’70’s and 80’s) having long been a caricature of Overclass privilege and entitlement, the pathology is now metastasizing all over the city, with preliminary symptoms showing even in the South Bronx.

      Meanwhile, amid the wine, juice and craft cocktail bars serving this heedless and complacent lumpen bourgeoisie, I have a good friend who, nearing sixty years old and discarded after thirty years spent in publishing, is on the verge of homelessness and is virtually unemployable.

      Boom and blight/misery: in this system and ideology, one needs the other.

    • LG says:

      “California is in full employment ”
      Many people and college grads hold two part time jobs! Think again and open up your eyes little more so you can see the forest behind the tree!,

  5. Thomas Malthus says:

    Alas we have Brexit — this will be the excuse to unleash a new hurricane of stimulus….

  6. VegasBob says:

    Why would the New York Fed be worried about “astronomical” default and loss rates?

    If push comes to shove, won’t they just surreptitiously print whatever amount of money it takes to make the problem go away?

  7. EVENT HORIZON says:

    Just to let you know, When the condo I’m looking at drops to $25 Million, then I’ll sign.

    • Wolf Richter says:

      If we get into a bidding war over it, you and I, that’s a sign that the condo bust has ended (and that I’ve lost my mind and sold my Wolf Street media mogul empire or something while winning the lottery). If you can walk up and just sign the contract, and they’re ecstatic that someone finally signed the dang thing, then maybe you could have bought the same unit for 30% less a year later.

  8. Paco says:


    Real estate is always local. I report from South Florida as a local builder. My niche is high end homes not condos. I have has seen a few cycles. No doubt the GFC was the most difficult time of my life. The crash really began to accelerate in 2008, we did not begin to bottom until about late 2011 early 2012. There was zero credit available for real estate development!
    This up cycle has been the most spectacular I have lived through! This echo boom was no doubt aided by the previous crash and the FEDs 4.5T balance sheet. Locally we just witnessed a crack up boom! This cycle peaked some time last year after the dollar rally got too painful for our South American/ European 1 %ers.
    From having no new supply of homes of 2009 -13 vintage. We now have a huge supply of 2015 2016 spec homes that will have to clear the market. I don’t think we will see the same peak to trough moves this time around because the properties are in stronger hands. Also helping temper the downside are things are really bad in South America, Brazil in particular. I think the Olympics will set off further social unrest unleashing another wave of flight capital, the strong dollar notwithstanding.

    • Wolf Richter says:

      Thanks for the insights, Paco. I’ll keep my fingers crossed for your business.

      I’ve heard from other sources that houses in Florida are still doing well, even in places where the condo bust has already started – that in fact, there’s tight supply of houses. I’m not sure what to make of it, especially after what you said about the coming supply of 2015/16 spec homes.

      We have a similar bifurcation in San Francisco. Many thousands of high-end condos and apartments are coming on the market (62,000 are in the pipeline!), but essentially no new houses were built. So condos and rents have started to slide, but houses are still holding up.

      • nick kelly says:

        The condo is cheaper but wow does that savings disappear with strata fees ( or whatever you guys call them)
        Then you have all the problems that arise- here in BC the leaky condo-
        I know one lady who opened an envelope and it says” Please pay 35, 000.”
        BTW: she never wants to hear the words ‘strata council’ again.
        Who wants a fourth level of government in their lives?
        To me a condo looks like a way to screw up your life.

        • Wolf Richter says:

          Yes… “To me a condo looks like a way to screw up your life.” For some people, that’s definitely true.

          I owned a condo for 10 years (23rd floor). It was mostly great … except the leaks from pipes in my ceiling (pinholes fr. corrosion) that they had trouble fixing … should have replaced the pipe, but no.

          In big cities, if you want to buy in/near the center, they may be hard to avoid.

        • nick kelly says:

          Bit of trivia but true- I don’t know US terminology but here in Canada a lot of people seem to think a condo, i.e., ‘condominium’ is a type of construction. So they will say I don’t know whether to get a condo (meaning apartment) or a town house.

          Both are condominiums- a word meaning shared ownership. At least here in BC, there is also bare land ‘strata’ (our other term for condominium)
          In bare land strata, only the land is jointly owned, your house (building) has nothing to do with the neighbor. But the land too is a condominium. All the above will fall under the Condominium or strata regs.
          The strata fees will usually be minimal in bare land strata- garbage etc. But I have seen shockingly high fees usually associated with shared septic fields, and/or a developer who is trying to disguise the price by burying it in the strata fee.

          The word ‘condominium’ predates its real estate use.
          In the 1890’s or so- Britain and France jointly ruled Egypt- this period is known as the Anglo-French Condominium

      • Mark says:

        What about guy whose house rent went up 400% yesterday in SF, I just finished reading story (from $1800 to $8000 in one day).

        • Wolf Richter says:

          Yes, but for $8,000 a month he can go to any of the brand new mostly empty towers and pick and choose, maybe a 3-bedroom 1,400 sq. ft palace, view, the whole bit, one month free rent, or maybe free garage for a year….

          A lot of people live in rent-controlled apartments (multi-unit buildings), sometimes for decades, and their rents haven’t moved much since. So if they want to or have to move and have to pay market rent, they’re in for a rude surprise.

      • Lee says:


        Similar situation here in Melbourne, although for some strange reason, apartment/condo prices are holding up.

        In my little area the knockdown and build activity is going crazy.

        One street had six houses sold last year. One project has almost completed – six townhouses on that lot.

        Two more planning petitions went up this week on two other sold houses: one is getting seven townhouses and the other six.

        So just on those three lots we are going from three housing units to 19 housing units.

        The local governments here love it: more taxes!!

        The gas/water/electricity utilities love it too: from 3 meters to 22 meters (one extra for each common property area plus the individual properties.)

        In our area just to connect to the grid costs about $500 a year. So the local electric utility will increase their fixed income from $A1500 a year to A$11,000 a year just from those properties.

        Prices for the almost completed townhouses are in the A$850,000 area.

        Too many units, too many cars (Mostly Mercs, BMW’s, and Porsches), and too many people are completely changing the area characteristics.

        The RBA is expected to keep rates unchanged next week, but a rate cut in probably on the cards for August. Variable rate mortgages will not see cut for a about two months after that though as the banks like to hold off passing the cut – pads the bottom line………..

  9. Ptb says:

    These things always take time. I’m guessing that somewhere around 2017 it started to hit.

    • Mark says:

      I feel sorry for Trump, all blame will be on him.
      He will be scape goat for all misery that will hit next year and after.
      Poor guy I really like him.

      • nick kelly says:

        You mean like what happened to Obama in 2008?
        Worst crash since 29, GM and Chrysler bust, banks going under.
        Yet another lost war to wind down.
        And yes, people blame him.

        • Markar says:

          Don’t shed a tear for Obama. He did nothing to fix the problems he inherited. On the financial side he let the banks double down on the fraud and he put Bush’s insane Mid East foreign policy on overdrive. Then there’s that Obamacare thing.

  10. michael says:

    Wolf I saw an article today that would have been a surprise if I did not read your site:

    Buy the rumor, sell the news.

  11. BradK says:

    Median price is still an elastic figure as it depends on what type of properties make up the sales in the time frame measured. Even attempting to subdivide it into high/low end condos can still be misleading.

    Price sq/ft I would think would be a more accurate snapshot of the market, especially in an ultra-high density market such as Manhattan. And broken down by neighborhood.

    Or you can wait 3 months for Case/Schiller.

    • AL Dente says:

      That is only true with a small sample size. With a sample size of thousands, sometimes many thousands, depending on the market size, the median is quite stable. It takes a lot to move it with a large sample size. For example, the median sale price here in Vegas was flat for an entire year, and just started to move up last month.

  12. nick kelly says:

    !4 % in 3 months is a crash. But the really scary thing- it’s happening with the cheapest money in who knows.. centuries?
    Imagine if mortgage rates return to the average of the last 50 years ( 6%?)
    Then we have a Florida 1920’s crash.

  13. Chicken says:

    We’ve been bombarded with misleading negative articles daily without relent or mercy, ever since SPX hit 666….. Whatever happened to going with the trend, picking tops and bottoms are a surefire way to forfeit a fortune.

    For instance, the SRS ETF reached a new low today.

  14. nick kelly says:

    Wolf- forwarded this to my sister. Both her kids rent in Vancouver and are drooling over RE. The daughter especially seems convinced it’s a no brainer to buy- “but I know people who’ve done it and made money!’

    BTW: the province of BC has just announced the RE industry will no longer be self-regulating. It hit the fan a few months ago when an outfit got caught with training materials to get folks to list below market etc.
    Also. there have been complaints about condo projects being advertised that really aren’t available- all sold to insiders.
    We also have projects marketed offshore (Poland?) excluding locals

    • d'Cynic says:

      I wish there was any substance to it, but do not keep your hopes high. Election time smokescreen for the gullible. At any rate, the horses have already left the barn. Corruption is the new normal.
      BTW, I like your codeword for the most populous country – Poland. That’s divine inspiration.


    so, can anyone tell me what is happening in houston?

    the hydrocarbon industry has been torpedoed. official figures say that in the state of weird taxes only 80,000 have been laid off. i think that is a fraud. i think that the figure is closer to 250,000-500,000. tejas may be much like the BLS.

    still and all, thousands of houses are still going up on spec. new cars race around my elderly classics. some restaurants are virtually empty. others are full. and i care to note that it has nothing to do with food quality.

    but, i also notice that hotels that i have stayed in recently are virtually empty unless there is a convention.

    i supply critical components to the hydrocarbon industry. and my firm has done this for over one hundred years. but, outside of the great depression, i have never seen such a downturn in business. and the number of companies that entered the field with the fracking boom, with large amounts of leverage[debt] are now gone.

    even baker-hughes after its merger with halliburton was denied is now talking about liquidation.

    still more and more apartments/homes are being built in the satellite counties to harris county. and the traffic continues to be more and more congested.

    can anyone explain this to me?

    • Wolf Richter says:

      Thanks for your observations, Albert.

      And excellent questions! Over time, I hope we’ll find some answers. There are a few things I’ve covered so far, including:

      In terms of commercial real estate, Houston is already in BIG trouble. This is for Q1 (Q2 figures will come out in a little while):

      Here’s on retail sales in Texas:

      I hear that home prices and rents have begun to slide in Houston. I will report on it eventually.

      I also hear that the Dallas housing market is crazier than ever before. Two different cities, two different markets.

      • John S says:


        I am noticing largely the same and I agree with you on the actual number of job losses. Companies that I interact with and know about have cut anywhere from 20% to 40% of their staff, probably more to follow.

        Construction is continuing though, almost everywhere. The explanations that I have found for Houston’s miraculous strength are as follows:

        1) Refinery expansion and other projects on the east side. It is supposed to be multi-billion dollar construction projects. Don’t know much about it since I don’t waste hours in traffic to go there.
        2) There is a doctor or some kind of medical facility in literally every strip mall. Old Chinese buffets are closing only to reopen as a medical branch of some hospital. Anecdotally I have heard some of these locations get very few patients. Doctors just sit around for most of the day and handle a few appointments. I guess Obamacare is that good for the medical field.
        3) People close or at retirement age who have been forced out or offered buyouts are just sitting on their homes waiting for prices to go even higher before they sell. I don’t know how that will pan out but 2% property tax hits every year.
        4) People are moving to Houston just because other people are moving to Houston. I have no explanation for this phenomenon, many of these people don’t even have a job.


        I don’t know about prices sliding but rents have become softer. I was able to extend my lease for the first time in few years without an increase. New apartment complexes are starting to pile up with incentives becoming more common.

  16. Jimmy Smith says:

    Great stuff Wolf!

  17. Ptb says:

    I just had one of my houses go into escrow. The buyers wants me to reimburse her for the 3% down that FHA is requiring. I’m paying closing costs as well ….. FHA is ok with this. So the buyer is getting into the house for nothing down and no closing costs, but I’m getting my full asking price. Is this a great country or what?!

    • EVENT HORIZON says:

      And the originator’s of the loan can sell it to a Detroit Teachers Pension Fund.

  18. TK says:

    I live in San Francisco (Noe Valley). Just up the street from me,3 spec home were completed.All 3 are selling for just under 5 million. These home’s have been on the market about two months now. Further up the hill is a home remodel that has run out of money. Further down the hill is a steep lot that just finished its foundation.That site appears to shut down,empty of workers.

  19. chris Hauser says:

    it’s called oversupply hits underdemand.

    it’s called scarcity of discretionary funds hits surplus of opportunities.

    it’s called sugarplums need to be cooked and sold before everybody gets into the business.

    it’s called a rising tide leads to boat sales, ah, thats enough for now.

  20. Saylor says:

    I’m ‘in the business’ as an appraiser. I spent a few years up in the Bay Area, a few years in San Diego and now in a coastal region. One ongoing event that I notice is causing a distortion in the market is the rush for ‘vacation housing’. Many properties are being sold and used for vacation rentals. Specifically in my area renting a vacation house for one week would pay the mortgage for a month (roughly speaking). This takes more dwellings off the market for people that rent or buy to live full time. This in turn drives the prices up more due to less inventory. And quite often the owners of said rentals do not live anywhere near the area so these dollars go ‘out of town’ and even ‘out of country’. I’m to understand that the air bnb industry in S.F. is being challenged for this very reason. It is yet another ‘surface coating’ of skewed market conditions that hurts the fundamental strength of the economy. I am convinced I am witnessing a ‘hysteria’ rise in prices that are at least in part supported by this ‘vaca-nomics’. Another name for the ‘hysteria’ is ‘blow off top’. As I did a lot of R.E.O. work (foreclosure asset valuation) after the last crisis and got to hear a lot of heart break stories from people about to lose their homes and holding the N.O.D. in their hand, this next round has the potential to be a LOT worse.

    • Ptb says:

      Back in 2005 I sold several beach condos in San Diego. All were bought by people from out of town as vacation rentals…they use them for a while in the summer and rent them out the rest of the time to pay the mortgage……so this ha been going on a long time.

  21. Thomas Malthus says:


    If your wife is asking you why you didn’t mow the lawn…. you can tell her that Brexit is to blame.

    If you had a bit too much to drink over dinner — blame it on Brexit.

    If you are in a bad mood at the office and you snap at someone — just blame it on Brexit.

    If you gained a few kg last month – blame it on Brexit

    If you have skipped the gym every day this week — Brexit is to blame…

    If you have a headache – Brexit is the cause

    If you are having problems ‘performing’ — tell your gal that you are stressed over Brexit

    If you have smelly farts on the plane — just say to the person ‘sorry mate — it’s this Brexit thing’

    If you feel depressed – you know Brexit is the cause

    Brexit – the one stop scape goat for everything.

    I was planning to buy a Ferrari this weekend — but that darn Brexit has convinced me not to

  22. Lee says:

    So take a look at a suburb in Melbourne: Box Hill. This explains why the price of Australian real estate is high and keeps going up:

    “Historically considered middle suburbia and far from a prestige postcode, the distinctive multicultural hub of Box Hill is growing up – and getting tall quickly.

    Box Hill will soon be dotted with towering skyscrapers filled with million-dollar apartments boasting views across the flat, quiet east.

    A handful of towers will house thousands of apartments when completed, aimed at meeting a 26 per cent population boom forecast for the next five years. More than 1200 units were approved in Box Hill by Whitehorse City Council last year alone, including the now-under construction 36 and 26-storey Whitehorse Towers.”


    And just for a change, take a look at the following house in Queensland. The photos are really neat and the night view of the Gold Coast is fantastic:

    • BradK says:

      Wait…that gorgeous house, which is worth of a Bond villain’s liar, is only $500K AUD — which is $375 USD??? How soon can I move in?

      Never mind the 17 acres, that property on 1/2 acre here in a La-La land would be easily $3 – 4 million. And just wait until you see the tax bill.

      • Andrew says:

        No, it probably went for several million – the payment app just defaults to an amount of 500K.

        I’ve lived in Aus, worked and schooled there and visited back in March. Things are truly insane there. My fear is they will open the flood gates to more immigration to keep the ponzi going there.

      • Lee says:


        That “A$500,000” was just a loan example in the ad.

        The price of the house is going to be in the A$2.5 to A$3.5 million range.

        For A$500,000 this is what you would get there:

        • BradK says:

          Lee and Andrew, thanks both for setting me straight. That’s the first time I’ve ever used that site — or even looked at RE in AUS — so that was quite shocking.

          I feel a bit better knowing that the entire globe is in on the insanity and it’s not just us Yanks.

  23. Paco says:

    Wolf thank you for your response. After reading more comments, I wanted to further add on some other anecdotal observations from Miami but Am sure applies in other locals. I mentioned there was no credit for building as we were bottoming from the previous peak. Only builders with cash or end users were building. So there was no new supply.
    That began to change about 24 – 18 months ago. That is when I 1st started seeing signs from banks in front of projects. Not the big banks but little small community banks that I had never heard of. They had no choice because there is not much industry here other than RE for banks,the FEDs ZIRP and their own declining NIM. They need to write loans. It is just funny how these cycles work.
    One particular neighborhood of McMansions i.e. Acre lots 10000sqft homes in 3-5mm price point had 1 new completed home listed in the 1qt of 2014. Today there are 42 at various stage of completion listed not counting those still not listed or 2nd market supply.
    I am remained of the adage, the worst loans are written in the best of times. As the construction loans come due, we will see how strong the hands are of these developers.

    • Petunia says:

      I just moved out of south FL, I couldn’t afford the rent any more. In 2015 I was hearing ads on the radio telling people that money was available for mortgages, bad credit no problem, no money no problem. I suspected these were the same people financing the car loans to anybody. Everything in my development sold close to asking price last year.

      I was just on zillow looking at the rentals and saw houses for 7K a month and higher. Many were very close to the everglades, the formerly undesirable areas. Who has the money to rent these places, nobody with a job. Most people with money already own.

  24. Paul says:

    Wolf, thanks for your articles on real estate. I live in the SF Bay Area with my wife and two kids. Even though we have lived with her parents during those years rent-free (at least $2,500 in savings a month) housing prices have escalated even faster than our savings.

    Anyways, I was wondering if there was an easy way to compare numbers for year-over-year: average listing time and listing vs selling price are numbers I think are very important. Anecdotally, it seems like list times are longer and houses are selling for their list price (with only a couple of bids instead of a dozen).

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