Supply of Homes Surges 20% to 90% in Many Markets Just as Pending Home Sales Drop

This is not good.

What’s causing the drop-off in pending home sales in the US, and in particular in the West?

  • Surging home prices that have outrun wage increases for years?
  • Mortgage rates that hover around 4.8% for the average 30-year fixed-rate mortgage, the highest since 2011?
  • The massive affordability issues that come with the combination of soaring home prices and rising mortgage rates?
  • A softening exuberance among homebuyers?

And it comes amid a sudden urge by homeowners and investors in many markets to put their homes and properties up for sale, while the market is still hot. And just as suddenly the supply is surging, in some of the metro areas by 50% to 90% from a year ago. More on that phenomenon in a moment.

One thing is clear, whatever the cause, the wind has changed in those markets.

In July, pending home sales fell 2.5% from a year ago, according to the National Association of Realtors this morning. It was the worst July in years.

This chart shows the trend of pending home sales going back through 2015, which each July marked. Note the peak of the sales enthusiasm: April 2015, when the index hit highs not seen since before “Housing Bubble 1” collapsed:

The index, based on a national sample of the transactions handled by the NAR’s members, is a leading indicator for actual sales. It tracks sales of existing homes, but not of new homes. A sale is listed as “pending” when the contract is signed but before the transaction closes, which usually happens within a month or two. Not all deals that are signed close.

The Pending Home Sales Index fell in all four regions, compared to July last year, but note the plunge in the West, fertile breeding ground for some of the most ludicrously overpriced markets in the US:

  • Northeast: -2.3%
  • Midwest: -1.5%
  • South: -0.9%
  • West: -5.8%.

The report explained: “The reason sales are falling off last year’s pace is that multiple years of inadequate supply in markets with strong job growth have finally driven up home prices to a point where an increasing number of prospective buyers are unable to afford it.”

And it added that “increasing inventory in several large metro areas, and especially many out West, will likely help cool price growth to more affordable levels going forward.” But the phrase, “increasing inventory in several large metro areas,” may be the understatement of the year.

In 25 metro areas (Metropolitan Statistical Areas as defined by the Census), supply of homes for sale in July skyrocketed by 20% to 90% compared to July last year. Some of the metros showed up prominently in my report yesterday: The Most Splendid Housing Bubbles in America.

Here are some select nuggets. The full list of the 50 metros with the biggest increases in supply is at the bottom.

Number on in the US: In the Santa Rose MSA, in Sonoma County, CA, in the northern part of the Bay Area, supply (active listings) skyrocketed 90%. Two weeks ago, I’ve done an anatomy of its deteriorating “subcutaneous” metrics that precede price decreases and have pinpointed the inflection point of the market in June.

And other select nuggets, scattered across the list of the top 50:

  • In the white-hot Denver-Aurora metro, CO, active listings surged 82% from a year earlier.
  • In the Vallejo-Fairfield metro, in the northern Bay Area, CA, active listings surged 69%
  • In the southern half of Silicon Valley, the San Jose-Sunnyvale-Santa Clara metro, active listings also surged 69%.
  • In the Seattle-Tacoma-Bellevue metro, WA, supply jumped 36% year-over-year.
  • In Southern California’s San Diego-Carlsbad metro, supply jumped 28%.
  • In the Nashville-Davidson–Murfreesboro–Franklin, TN, metro, active listings rose 24% year-over-year.
  • In the San Francisco-Oakland-Hayward metro, supply rose 22%.
  • In the Portland-Vancouver-Hillsboro, OR-WA, metro, supply rose 20%.
  • Even in the Dallas-Fort Worth-Arlington metro, which is at the bottom of the list in 50th place, supply rose 13% compared to a year earlier.

In other words, there are 50 metros where supply rose by 13% to 90%. Obviously, there are many metros where supply fell – and that’s why real estate, to this day, remains local; the dynamics in San Francisco simply don’t matter all that much in Boston – but they do matter in San Francisco!

The list below has the 50 Metropolitan Statistical Areas with the largest increases in active listings in July, compared to a year ago. It also shows the median price of the listed properties (half are listed for more, half are listed for less). The data comes from the residential listings database.

You can search for metros or cities via the search function in your browser. If your smartphone needs a little help figuring out how to display the table without cutting off the right column (%), hold the device in landscape position.

Metro Median Listing Price Active Listings Increase, Y/Y
1 Santa Rosa, CA 695,050 90%
2 Denver-Aurora-Lakewood, CO 450,500 82%
3 Vallejo-Fairfield, CA 465,050 69%
4 San Jose-Sunnyvale-Santa Clara, CA 1,171,550 69%
5 Columbus, OH 248,844 60%
6 Ukiah, CA 599,050 42%
7 Napa, CA 859,300 41%
8 Marinette, WI-MI 129,975 37%
9 Seattle-Tacoma-Bellevue, WA 552,550 36%
10 Lynchburg, VA 164,500 35%
11 Wenatchee, WA 448,800 32%
12 Macon, GA 162,500 29%
13 San Diego-Carlsbad, CA 678,964 28%
14 Providence-Warwick, RI-MA 349,950 26%
15 Baton Rouge, LA 239,950 25%
16 Nashville-Davidson–Murfreesboro–F. TN 356,048 24%
17 Modesto, CA 351,652 22%
18 Waco, TX 210,050 22%
19 Eureka-Arcata-Fortuna, CA 389,175 22%
20 Brunswick, GA 353,800 22%
21 Ames, IA 252,500 22%
22 Wooster, OH 162,025 22%
23 San Francisco-Oakland-Hayward, CA 898,272 22%
24 Grants Pass, OR 350,050 21%
25 Portland-Vancouver-Hillsboro, OR-WA 465,000 20%
26 Madera, CA 316,050 19%
27 Greeley, CO 379,900 19%
28 Colorado Springs, CO 367,000 19%
29 Great Falls, MT 214,050 18%
30 Opelousas, LA 140,800 18%
31 Lafayette, LA 211,700 17%
32 Yuba City, CA 320,050 17%
33 Auburn-Opelika, AL 276,300 17%
34 College Station-Bryan, TX 272,500 17%
35 Lincoln, NE 289,300 16%
36 Marquette, MI 179,500 16%
37 Fairbanks, AK 229,975 16%
38 Medford, OR 409,050 16%
39 Urban Honolulu, HI 699,525 16%
40 Alexandria, LA 179,025 16%
41 Hinesville, GA 174,800 16%
42 Hammond, LA 188,269 15%
43 Deltona-Daytona Beach-Ormond Beach, FL 295,050 15%
44 Stockton-Lodi, CA 397,550 15%
45 Bismarck, ND 271,223 14%
46 Chico, CA 313,398 14%
47 Santa Maria-Santa Barbara, CA 909,300 14%
48 Santa Cruz-Watsonville, CA 936,050 14%
49 Clearlake, CA 327,175 14%
50 Dallas-Fort Worth-Arlington, TX 340,050 13%


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  116 comments for “Supply of Homes Surges 20% to 90% in Many Markets Just as Pending Home Sales Drop

  1. JZ says:

    This is good.

    • andy says:

      Yes, everything is dropping, except for prices on stocks, houses, automobiles, healthcare, tuition, services, or everything else. But other things are dropping like there is no tomorrow.

      • alex in san jose AKA digital Detroit says:

        Dropping on luxuries, not dropping for necessities. So if you’re in the sector of the population that only worries about having the latest luxuries, it’s a great time.

        • Petunia says:

          The price of luxuries is not dropping, it’s just that the people who buy them have more money.

      • Jake says:

        It’s so good to be long multiple properties and stocks!

    • Otishertz says:

      The global phenomena of financializing basic housing to extract higher rents has lead to collateralized rents and hypothecated housing market that is increasingly comprised of financial instruments that further inflate the value of the underlying real property.

      The average global investment fund has a much shorter time frame for return on investment than the average homeowner. I do not see anyone in the financial press ringing this up as a potential cause of instability.

      I suspect there could be a self propelling feedback loop of sales from these weaker institutional hands (weaker in terms of time frame) such that if things turn the corner substantially in the housing market, these investors have the capacity to bring substantial price declines through the size of their potential selling pressure alone and the fact that they are obvious candidates to sell first.

      Macroeconomics is fun like a puzzle.

  2. Gershon says:

    First a glut of houses, then panic sellers trying to get out from under a crazily overpriced mortgage before the bottom drops out, then a surge of foreclosures and short sales. And then, 2008 redux.

    • Timothy J McLean says:

      This situation is not close to 2008. As Wolf posted, all RE is local. In most cases sellers have substantial cash equity in their homes. Since 2009, mortgages have only been provided to buyers who can evidence the ability to repay the loans. There may be some panic selling in California, as prices have gone crazy. However, the markets in most areas are pretty stable.

      • Spanky Bernanke says:

        How far will equity go, if your ass is unemployed….? Which came first, the chicken or the egg–a very useful metaphor to describe what will create the eventual collapse in housing, equities, junk bonds, corporate jet prices, Jason Bond’s “three easy patterns” trading seminar ticket prices.
        So WHY will this bubble popping be FAR worse than 2008, you ask? Easy. The Fed has broken ALL FIVE BASIC PRINCIPLES OF FINANCE…

        • sierra7 says:

          Homes are no longer “homes”….they are “future synthetic derivatives”!

      • Edwin says:

        It is a nice thing to have equity in your home until you don’t. That is the gamble. Who could have imagined that markets could have dropped 50% in 2011? Stability is relative.

      • Throbert Goulet says:

        @Timothy – sorry, but that’s wishful thinking. We’re in the largest debt bubble in history, and people can repay loans until a job loss recession hits and then they can’t.

        • Max Power says:

          Nope. This is a very different market that the run up to the 2006 housing bubble. Look at the size of the blue, red, and orange bars compared to today on this chart and you’ll get a perspective on just how crazy those days were (and hence the subsequent crash):

          Now that is not to say that there will be a significant correction to housing prices. There will surely be. However, it’s going to be more of a run of the mill corrections. In real terms, housing (national average-wise) is still 20% below the 2006 peak.

        • Gunther says:

          It does not need a job loss. What is different this time is baby boomers retiring, downsizing or having greater medical expenses. On the other side fewer college grads who are already burdened with educational debt.

      • Todd H. says:

        “Since 2009, mortgages have only been provided to buyers who can evidence the ability to repay the loans.”

        With rock bottom 30-yr fixed interest rates, 90-97% LTV and all sorts of down payment assistance programs, a trained monkey can repay a mortgage granted since 2009. Have a few hundred bucks and (maybe) a job? Great!!! Here’s a mortgage for you. I think we know how this will turn out.

      • NIck says:

        No you’re right it’s not…………..we have MORE DEBT as consumers and as a country that has piled on. The next “2008” will be twice as bad.

    • Ron says:

      “First a glut of houses, then panic sellers trying to get out from under a crazily overpriced mortgage before the bottom drops out, then a surge of foreclosures and short sales. And then, 2008 redux.

      Some of this glut has to be the rental homes that were purchased cheap and suddenly the owners want to cash in as they have seen the market move into a higher supply the last 3 months.

      • jb says:

        ya , that was what i was thinking . If your home is up for sale well you need a replacement . kinda zero sum game for those that use their residence to live in. I think this market will weaken from sales from investors and speculators , both domestic and foreign .

  3. BenX says:

    $320k median in Yuba City? Can that be right? Ditto Stockton and Clearlake –

    • Wolf Richter says:

      Yeah… Stockton home prices like about doubled since its bankruptcy.

      Bankruptcies are pretty good for cities. They’re just bad for stakeholders (such as, depending on the city, bondholders, pension beneficiaries, etc.)

    • California Bob says:

      Gotta wonder if the Clearlake prices are distorted by all the wildfires in the region; e.g. people who lost homes scrambling for replacements–with insurance money–or predatory buy-to-rent types buying those left standing?

  4. I’ve been banging this drum for so long I thought I broke it. Folks think I’m crazy to be renting and sitting on cash. I think we’ll get where we’re going pretty quick from here on out.

    I’ve never seen such an instant cacophony on a housing turn. Even in the last it seemed like Big Media was in denial. This time everyone is calling the top.

    I wonder if the echo chamber that is the Internet is accelerating the speed with which this correction happens.

    • van_down_by_river says:

      I think you’re crazy for sitting on cash and since selling out my stock positions about a month ago I also think I’m crazy. Central banks and central planning have driven us crazy. War is peace. Freedom is slavery (and apparently a cop-out). Ignorance is strength. So just accept it and move on.

      I would not count on a correction in housing to provide you with a reasonable entry point, why would bankers allow that to happen? How would the small percentage of wealthy asset owners profit from falling asset prices? Why would it be allowed? Various government agencies/GSE’s, politicians and central banks would never allow it. I think you’ve lost touch with reality.

      I too hoped, for years, that something would slow the collapse of currencies but the bleeding never stops. Currencies have been losing purchasing power at a furious rate all the while I have been told inflation is under 2%. Suddenly my life savings (900k) is a joke – with a dividend yield of about 1.6% the S&P would pay me just $14,400/year (way less than inflation).

      The gusher of money just continues. five years ago you could buy a nice house in a nice neighborhood of Seattle for 350k today it will cost you over a million – inflation under 2% indeed! Yet our brave new Fed chairman Powell is still just fiddling with an occasional, maybe will – maybe won’t – tiny rate increase of 1/4%. It’s been 10 years and the overnight rate is still pegged below 2% – need I say more – plus government deficits are officially out of control and the Fed needs to start funding government spending. If something has to happen it will happen – cash is trash and you won’t be picking up any bargains in the real estate market.

      This week Jeff Bezos proudly announced he would like every Amazon employee to wake up terrified. Bezos is just one of thousands of ultra rich who want you to wake up terrified. A terrified slave is an obedient slave.

      • Si says:

        You nail it with this post VDBR!
        The new order I think now is that the banks own everything and politicians can make sure the taxpayers bail out the vested interests. I have held on to some hope that ‘markets’ still exist and that there will be a swing to ‘normal’. Ask the people in Zimbabwe whether they think things will get better. They can hope.
        “we are not crushed by desperation, but by hope”
        Ha! more fool me. The bleeding will continue until we wake up in a land we hardly know, and see for the first time that we are slaves.

      • MOOMOO6576 says:

        Sitting on cash IS ridiculous. So is buying government bonds. And so is staying in housing… But money has to go somewhere, and it will.



      • Gershon says:

        Nice rant, VDBR. We will not have honest markets or sound money until we End the Fed and restore the Republic that has since the Fed’s misbegotten 1913 establishment has been subverted into a rapacious oligarchy.

      • steve says:

        van – your comments are dead-on.

        Housing is overpriced in many areas, but that is simply a part of the new reality. In the U.S, Fannie Mae allows borrowers to have a 50% debt to income ratio- that’s 50% of your GROSS income can go to paying your mortgage. In the 1990’s anything over 25% was frowned upon…32% was the absolute max. Borrowers over 30% DTI will refinance 1-2 years down the road to payoff the 10% “extra income” they needed to survive using credit cards. You cannot live in the U.S with a 40%-50% debt to income without accruing debt.
        “They” will not let housing crash again (history rhymes), but it may flatten out for a few years. IF housing prices start to seriously decline, the Fed will step in. The Fed is private – they work for the banks. People need to remember that.
        **Just because Fannie Mae allows DTI’s at 50% doesn’t mean the borrower has to take it, but unfortunately, housing prices are high, people actually have little choice.

        • NoEasyDay says:

          >”…people actually have little choice.”

          You can rent, or better yet, move away from the insanity.

    • Chris says:

      Sold my place in South Denver a few months ago and am doing the same XD

    • Steve W says:

      You will be fine sitting on that cash. If you look at the 2008 crash, even though the USA was the cause, there was a world currency flight to the dollar and it surged compared to other currencies. With Turkey’s troubles recently, we saw the same thing. The unknown, is what will happen after the surge in the USD….this time. So be prepared to buy assets should the dollar eventually crash itself

    • KFritz says:

      Savings are great, but there’s a long-shot caveat. All strategies need to include worst case scenarios. Since 20 January 2017, for the first time in 228 years, the US governmental apparatus is without adult supervision at the very top. This means that, in a worst case scenario, even the FDIC–the absolute bedrock guarantor of savings–could fail due to irresponsible behavior. Savings are as safe as the guarantor of last resort.

  5. dos tacos mas says:

    Family member lives in Aurora CO and is in the process of downsizing. Bought a smaller place also in Aurora. The initial listing for the existing place was exactly the median price – nice place, nice location. Took a couple of months to sell for $415K – a lot of very frayed nerves during the wait. Had several open houses with no bites.

    We drive the mountain canyons outside of Boulder on a regular basis, and the “Sale” signs have been sprouting like mushrooms.

    • NoEasyDay says:

      >We drive the mountain canyons outside of Boulder on a
      >regular basis, and the “Sale” signs have been sprouting
      >like mushrooms.

      The Denver metro was a sea of red ink in 2007, and it will turn red again as the losses will likely be higher this time. The front range is a high elevation, low income, barren desert where economic survival is the HELOC for too many households.

  6. Tom Stone says:

    If you are looking at property in Sonoma County keep in mind that there are quite a few sub markets.
    You need to get granular, especially with country properties.
    Santa Rosa has the bulk of the housing stock, and the bulk of lower priced homes.
    Our local MLS divides the town into 4 quadrants based on Hwy’s 101 and 12 and that’s a reasonable place to start.
    Location matters.
    As an aside I looked at 5 new listngs in Western Sonoma County this morning and did not think any of them were well priced.
    All too high.

    • Nicholas Weldon says:

      I used to live in S.R. starting in 2012 until 2015. It was beautiful.
      Was looking at the fire damage on aerial maps and just couldn’t believe several places I used to go are just gone. According to news articles, no one’s rebuilding. They lost all those buildings, yet few are rebuilding. I can understand. You’re entire neighborhood is lost, why would you rebuild. If it was just a few houses, there would be something to come back to, but the entire thing….. there’s no predicting anything. It’s a weird mindset, but understandable. I wonder how much fear there is of further fires. If that is propelling sales? Is it the same when one goes toward Guernville, for example? It was just so beautiful there.

      • Wolf Richter says:

        People are trying to rebuild. But there are issues (scandals), including with debris removal (paid for by Fema I think). A fire going through a neighborhood leaves behind a toxic environment. So this material needs to be removed and disposed of properly by specialists. But because the companies that removed that debris got paid by the ton, they also occasionally removed the foundations and large amounts of dirt… that’s the scandal part … making it much more complex to rebuild. And it adds new complications, such as who pays for dealing with the hole that has been left behind.

        There are all kinds of other complications — such as labor shortages for what is a sudden building boom. The fire was finally doused last November when the rains started. So it has only been about 9 months.

        Since this is your old hangout, I suggest you read some of the local news stories on this. It’s really complicated.

        • alicat says:

          Restrictions also due to substandard pvc water pipes leaching toxins into ground water (30 years with local water agency environmental division).

          Retired to Emerald Triangle with a gusher of a well;-)

  7. Gorbachev says:

    People selling to lock in gains different than people trying

    to get out from under. No Panic.

  8. Jack says:

    Isn’t much of this area of Northern California/SF/Napa area recently been on fire? Maybe people are trying to get out.
    Just drove from Berkeley to the town of Mendocino and much of this area reeks of smoke, fire damage etc. I wouldn’t want to live here.
    Maybe my boss would have the company buy my house and have me move to another area/division etc.
    I dunno.

    • unit472 says:

      I think you are on to something. California’s wildfires might be motivating people to move and their insurers might be encouraging them.

      Might see a spike in Florida’s SW Gulf Coast too as the red tide leaves a dead ocean off the coast from
      Pinellas to Collier County and I live on the coast in Sarasota. Its gross to see dead fish floating in the water and all the gulls, pelicans and ospreys gone!

      • Wolf Richter says:

        These fires hit mostly thinly populated rural areas, though on a couple of occasions, they also consumed some urban neighborhoods (Santa Rosa and Redding most recently). These are wildfires, not city fires for the most part.

        • Jack says:

          But the smoke? What about the Napa fires that burned vineyards to the ground? Love the area but I would do anything to get out. The next fire?
          The Montecito fires? Many, many homes burned to the ground.

        • Wolf Richter says:


          Fires are natural to California. They’re part of the natural cycle. That’s why we say that we have two seasons: rainy season and fire season. Like hurricanes and tornadoes in Texas. People know that. Those big fires get all the press outside California. But there are hundreds of major fires every year.

          Except for a couple of days when the wind turned, smoke hasn’t been a big issue in the densely populated areas along the coast (San Francisco, Silicon Valley, etc.) where the home listings have soared, because most of the time the wind comes from the west (Pacific) and blows that stuff inland. People in Reno, NV, complain about the smoke more than people in coastal California.

          Last year, when we had the deadliest and most destructive fire on record, active listings were low. This surge in listings is a new thing, and the fires are an ancient and annual problem.

          It’s like saying Texans are going to sell their homes and leave Texas because of the hurricanes or tornadoes. Not going to happen. People are tough. They rebuild and start over.

        • unit472 says:

          True, San Francisco is not going to burn down ( though the 1989 Loma Prieta earthquake set part of the Marina on fire) but the Berkeley/Oakland hill fire destroyed 3000+ very expensive homes in 1991 or Santa Rosa last October.

          I would be very concerned that some major fires will again break out in California’s urban woodland interface while the state’s inadequate fire fighting resources are already deployed fighting fires in those rural areas you mention.

          A 100,000 plus acre fire burning through a built up area is going to be catastrophic. Evacuations might not be possible either as the roads could be impassable!

        • alicat says:

          Wolf, the fires damaged more than property and homes: folks ranging from high school athletes to toddlers developed chronic lung conditions snd asthma; depression with PTSD; and other ailments.

          Friends are throwing in the towel, not rebuilding and downsizing to states with no tax.

        • economicminor says:

          Fire was natural but no longer.

          First the land has been changed due to grazing, logging and farming practices so vegetation is no longer what it was.

          Secondly, the climate has changed. Rainfall patterns are different. Fifty years ago springs were wet in the NW and spring lightening rare. Now rains stop in March and dry lightening started many of the current fires.

          Forest practices that were sold to sustain the type of forests we now have was never followed thru upon. They cut and planted but never came back and brushed and thinned. So forests are mono cultural dense with brush and limbs all the way to the ground.

          When modern man came to the forests, the trees were huge and the Indians burned off areas of brush regularly to facilitate hunting and herb gathering. The big trees withstood fires on the forest floor.

          None of this exists now… So that old hack about fires being natural is a wrong assumption in today’s world. And without serious attention to the problem we humans caused, these “Wild Fires” will continue until there are virtually no forests left.

        • QSoccermom says:

          Hmmm what if a large number of those fires were set intentionally to get billions in federal relief $$$ to make up for their bankrupt state? No one would do that would they?
          Also, we’ve had way too much rain in Sarasota for fires anytime soon.
          Wolf, I am a fan of yours but where did you get the Denver numbers? Denver has 23% fewer homes on market in July than same month 2017. Jefferson, Arapaho and Douglas counties are all negative as well (-5% – -10%) It’s on the Colorado association of realtors which pulls directly from MLS. I own a town home in Jefferson county and these numbers are important to me. Please tell me what I’m missing!

        • Wolf Richter says:

          I have no idea what kind of data you’re looking at.

          The Denver MSA had 14,495 active listings in July, which is 82% more than July last year. Which is what I showed in my article.

          The data I cited comes from the data base of the National Association of Realtors (NAR), which I linked, and here it is again:

          Choose “all residential” and “View Metro data,” which pulls up a spreadsheet with the listing data for all major MSAs in the US. The Denver MSA is about line 21. Go check it out.

          For example, it also shows that 4,342 listings had price decreases in July, which was up 22% from a year ago.

      • Nicholas Weldon says:

        It’s odd that none of the sales drops are in Florida.
        I still can’t believe how many people want to retire to sinkhole alley. It’s almost a metaphor. lol.

      • Gershon says:

        Years after the Waldo Canyon fire, homes that survived the blaze still smell like smoke inside. Some of the residual smoke absorbed by the homes has also been blamed for exacerbating pre-existing conditions of elderly people who lived in the affected homes.

  9. Rates says:

    Now if the President would kindly nuke the FAANGS, we’ll be ready for business carting ex millionaires out of their “homes”.

    • Escierto says:

      Why would he nuke the FAANGS? Their rising stock price is the evidence he keeps babbling about touting his misguided policies. The guy can’t stop foaming at the mouth about the stock market. I wonder if he is going to take credit when it craters?

      • Rates says:

        He now has a perfect excuse for the stock market to tank. He’ll just say: “Bad Hillary and the Dems are on the warpath to impeach me. They are crashing the markets!!!”

      • MOOMOO6576 says:

        I wonder who will ‘take credit’ for the collapse in state/local and fed bond markets?

        Surely not the ones who ran the deficit and borrowed ad infinitum for the past 50 years…

  10. Eray says:

    Been planning on this for years, wish I had some capital then. Have been renting while everyone we know has joined the buy train (many can’t even buy lawnmowers!). Currently finishing up a school bus conversion/ tiny home without debt. The market in WNC has been nuts. First buyers, vacation buyers, and Air B&B buyers will get crushed when the RE devaluation contagion spreads and tourism dries up…

    • Wolf Richter says:


      Don’t expect prices to change quickly. Real estate moves slowly. The last housing bust took 4+ years on the downward-side, and that was a crisis because it was so fast. In Japan, it took decades.

      • MOOMOO6576 says:

        In Turkey it only took a couple of years… because it was the currency that got ripped apart. Actually, the same is true with UK.

        …all depends in what terms your ‘asset’ is denominated.

      • Todd H. says:

        Looking at the Case-Shiller 20 city index, prices fell 34% from peak to trough in the roughly 6 years between April 2006 and March 2012. Cropping off the flat shoulders of the chart, the majority of that decline (31%) happened in a little over 2 years between February 2007 and May 2009. Some cities like Las Vegas, NV and Phoenix, AZ had a much steeper descent. In Las Vegas and Phoenix, prices fell 62% and 56%, respectively, from peak to trough. In those cities, the majority of the decline happened over about 2.5 years.

        Nationwide, prices never got absurdly low even at the trough, with the government pulling out all the stops to halt the decline. Prices were somewhat sane and fairly valued in 2009-2012, between bubbles.

        • MOOMOO6576 says:

          Yep. Things can go down very fast. Even in housing. Maybe not in SF… but across the board, they can.

          If the euro drops 15% vs. the USD in six months, and pxs ‘stay the same’ did their housing market not just crash?

          …in my book it did.

      • Eray says:

        Thanks Wolf, this brings comfort to my chosen path. A decline this long will serve me well. I’ll be in my tiny home work-trading for rent and pocketing virtually all my full-time salary. Hopefully a nice sum by the time things bottom out.

  11. Paulo says:

    Does the term ‘Home sales” in the article include condos, town houses, duplexes etc, or just single family detached?

    Thank you

  12. Bobber says:

    As a buyer, the deal killer for me is the real estate tax. When you buy a $1M shack on the West Coast, you pay $10k to $20k in real estate tax, and it may not be deductible from your federal taxable income. Ouch.

    Add in the real prospect of price drops and buying a house in this overpriced market seems like a stupid idea. If I were an owner of an overpriced home with downsizing on my mind, I’d be selling now and dropping my price aggressively to catch one of the last bagholders. One the slide starts, it will last for many years, maybe a decade or two, given larger macroeconomic and debt issues. The window for selling at today’s prices will close very fast. I think we will see a lot of listings in Fall and Winter this year before the Spring Liquidation Sale starts.

  13. Xypher2000 says:

    Can’t wait for this crash, then i can buy a house again at a reasonable price like I did in 2009 and then again in 13 after I got married and sold the first one.

    • Wolf Richter says:

      You’ll need some patience [>_<]

    • Todd H. says:

      Drawing a parallel between this bubble and the last one, we are probably in about the mid-2006 stage. The important question is if the government can halt a decline this time. Uncle Sam and the Fed were in a much better financial position in 2008 than they are today.

      • Max Power says:

        They couldn’t halt the decline last time (and they were in a much better financial position then). No reason to think they’d be able to this time either.

  14. Shawn says:

    The is a world of difference between these three cites in terms of house pricing.

    San Francisco-Oakland-Hayward, CA

    As well as

    San Jose-Sunnyvale-Santa Clara, CA

  15. Alex says:

    Marrinette Wi? Tiny town north of Green Bay.

  16. Lt says:

    I worry that this could be a “self fulfilling prophecy”… there is a fair amount of chatter on the main financial media sites about slowing home sales and rising inventory. It could spook sellers into rushing to sell and buyers from holding off. I guess we’ll see if it’s just a simple return to a balanced market or something more.

  17. Ron says:

    A large segment of the housing market has been dominated by rental companies of various sizes and when they decide to exit the market and take profits this is what it starts to look like. Also the boomers are trying to take large gains and downsize but its tough as any interesting place to live in the States has become pricey.
    Santa Rosa and Napa along with other burn areas are a mess as many people did not read there fire insurance policies and have been left with a burned out lot but no mortgage. Now they have to apply for a construction loan. Many of these folks quit work years ago and others don’t have the bank balances to even start the project. Any of these major fire areas such as Santa Rosa have significant infrastructure build outs including sewer, water.

    • Nicholas Weldon says:

      I was reading that there are few applications for building permits in the SR area. It’s one thing for a couple of houses to burn down in an established neighbor hood, but when the entire neighborhood is GONE, no one wants to come back. Their memories are gone. They neighbors have all scattered. It’s an fly ash mess. If they get an insurance pay out they probably just take the money and run. It’s creepy.
      Besides, buying a house is relatively easy. Building one is messy and takes time. Rebuilding in a burned out area, with literal and figurative skeletons everywhere one looks, that’s gotta hurt.

  18. economicminor says:

    This topping has been going on a long time. Seems like every time we get to a point where any market looks to like it will start down, it doesn’t. I wish I was good enough to be able to analyze the math. Have we finally reached the point where the ability to pay for what has been borrowed has hit a ceiling and there is really no more ability to leverage upward or is this just a fear and greed dynamic waiting for the next cue.

    • Uncle Bob says:

      That’s because this is basically the sign of a healthy market. You are going to see regional variation and price fluctuation. That’s normal. People taking this as a sign of a massive crash have no idea what they’re talking about.

      • economicminor says:

        You suggest that there isn’t a limit in the ability to repay/service loans. I understand that the banksters want to continue to lend and they have virtually unlimited ability to create money to lend out of the thin air. Isn’t there a mathematical limit to the ability to repay? Or is that an illusion because rising asset values can be continually re leverage to repay the expanding loan portfolios? Don’t real wages/incomes figure into this?

        I must be stupid to think that there are limits in exponential growth in a finite system. I must be totally misunderstanding basic math and physics.

        • a reader says:

          Your mistake is taking the number of payers a constant. Yes, there is a mathematical limit to how much the same payer can bear.

          But, it turns out, there is no mathematical limit on how many *fresh* payers can be brought into the fold.

          Once the lowering of credit ability standards was taken to its limit, we’ve had disadvantaged first-time homeowners with Federal assistance, then all kinds of work visa holders, then just plain foreign citizens, and now anybody at all.

          This can will be kicked further still.

      • Frederick says:

        Just your opinion Buffalo Bob and I disagree

  19. Truth says:

    You haven’t seen what is to come in SF Bay Area. Trump administration has filed in US Court its intent to not issued H4 EADs which are work permits for spouses of H1B holders. The trend was started by Obama by fiat without congressional approval.

    This has raised median household income for a lot of software engineers most of who are from India. As the H4 EADs go away so does 30-45% of household income for the same buyers who pumped up the prices.

    Now add delays in H1B transfers, rejections etc. and the recepie is all set.

    And yes, SALT limit in Federal taxes; the super-tech or really social media cycle are just gravy on top.

    Yes, Wolf this time it is different than fake income loans but this too will pass.

    When the recipe is finished- give 6 months I expect at least 30% drop in SF Bay markets of South Bay and East Bay.

  20. Mark says:


    It would do us well to get away from the idea that rising house prices are a “good” thing and the idea that owner occupied real estate is a good “investment”. Neither are true.

    • Paulo says:

      It’s all about location and timing.

      I bought a shack when I was 24, mortgage was cheaper than rent.

      Over the years new purchases were better but always mortgage was cheaper than rent.

      A paid off house set us up for retirement and a small rental is gravy, plus I cut a deal for the tenant. Owning a house allowed me to retire at 57. If I didn’t own a home I would have had to work forever. I still work because I love to build, but I only do what I want.


      • Mark says:

        True, maybe.

        Though, if you had taken the down payment and put it into an S&P500 index fund, and took your savings from rent vs mortgage and invested that also, you’d come out far ahead. Not many people have the financial discipline to rent and save up substantial financial assets though.

        Personally, I’d only buy a house if it was at a very good price. An index fund of US equities appreciates faster than housing, is extremely liquid, pays me dividends and costs nothing to maintain.

  21. LouisDeLaSmart says:

    My gut feeling tells me there is much more to this data then the naked eye sees. As if the data was unrigged suddenly after someone covered their investment with a financial safeguard. Not all areas can simultaneously show an increase…

    • Wolf Richter says:

      There are plenty of MSAs that show a decrease, some of them quite sharp decreases. That’s why the national averages are still relatively low. This stuff is really local. But it matters in those local markets.

  22. Phoenix_Ikki says:

    Guess LA/Long Beach and OC is still partying like it’s 1999 or rather 2006..not on the list at all….guessing listing and selling is still strong….don’t know what to make of that.

    • John Taylor says:

      Ya, LAs still terrible. I just got a hefty rent increase in my granny flat, and it’s still cheaper than moving anywhere else.

      I wonder though if it’ll ever be possible for a guy in the construction field to own a home here. While the bubble lasts, rents are crazy and purchase prices are totally out of reach. When the bubble ends I’ll probably get laid off like last time.

      • Shawn says:

        Proposition 10, the repeal of Costa Hawkins, giving back cities the power to regulate rent increases is on the Nov. ballot.

  23. Brian says:

    I’m going to hold onto my little 2 bed town home I acquired in 2009’s bottom. Refinanced to a 15 year 2.5% a couple years ago and it’s very manageable. I’m a Civil Engineer by trade and due to the soaring housing costs much of my competition has been gentrified and now I have more job opportunities than ever.

    I know the downturn is coming so my wife and I have been hoarding cash, gold and silver. Not to mention myself getting into guns and hunting ;) Just in case.

    The only thing that worries me is missing out on the bottom towards the end of the relatively short deflationary cycle that we’re about to face with the advent of QT and rising interest rates. Because all the reading I’ve been doing suggests that there will potentially be hyperinflation afterwards.

    Having said all that, we’ll need to catch this wave or risk being left behind… But it sounds like I might have to wait a 2-3 years before going in on a second home…

  24. roddy6667 says:

    The most meaningful statistic I have found in real estate is “Days On Market”. It is listed as “DOM” on an MLS listing. A Realtor can bring up the DOM for a large area. In CT I saw DOM go from 18 days in January 1988 to over two years by 1991. Home prices dropped 50% in many towns. It took a decade for the median home price to retrace to january 1988 levels.
    When Days on Market start to stretch out into weeks and months on market, you know things are on a downhill slide.
    I know, I know. It’s different this time.
    Get off my lawn.

    • Wolf Richter says:

      I have that data and should have included it. Good suggestion.

      With the understanding that “days on the market” is not an accurate reflection of the market any longer. “Days on the market” only counts the days of the current listing. But it is very easy these days to pull a home off the market and then relist a couple of months later. Electronic listings make this a breeze, and this happens all the time. You can see the history of listings and listing prices of a particular home sites like Zillow.

      It’s not a big deal, and it’s super-common, but it does distort the meaning of “days on the market.”

      • CRD says:

        It would be great to see an “Actual Days on the Market” metric created for situations like this. You wouldn’t need a sophisticated algorithm to detect these relisting scenarios.

        It would also be great to be able to search for homes that have had multiple price reductions, or that were relisted at a price lower than the price of the original listing.

        Of course, even though this data is readily accessible, no players in the retail market have an incentive to make it easier for average folks to identify evidence that the market is no longer filled with rainbows and butterflies.

        Everything is designed to promote higher prices, quicker sales and the reliance on agents who want both of those things. For example sites like Redfin will flag “Hot Homes” but they won’t draw your attention to the home that has been on the market for 100 days across two listings and that has seen its price reduced by 15%.

  25. Wendy says:

    One interesting thing that I have noticed is that with the inability to deduct state and local taxes, there are a lot of nearly retired people from high tax states such as NY, NJ, and CT that want to “cash out” and move to a lower tax state such as FL or TX, but they can’t sell their $5-10M homes, since buyers are not interested due to the loss of the SALT deduction. Lowering the price is the only way to move, but they don’t want to do that, so they sit there “waiting it out”. They want to go to a lower tax state, but have to sell first, and now they are stuck. Sales of high end properties have been stagnating. Eventually this log jam will break, but discounted sales in high tax states will need to happen first. With 10K baby boomers retiring every day, this pressure will be tremendous.

  26. Gershon says:

    “The sense of responsibility in the financial community for the community as a whole is not small. It is nearly nil. Perhaps this is inherent. In a community where the primary concern is making money, one of the necessary rules is to live and let live. To speak out against madness may be to ruin those who have succumbed to it. So the wise in Wall Street are nearly always silent. The foolish thus have the field to themselves. None rebukes them…

    It is difficult not to marvel at the imagination which was implicit in this gargantuan insanity. If there must be madness something may be said for having it on a heroic scale.”

    John Kenneth Galbraith, The Great Crash of 1929

  27. keepcalmeverythingisfine says:

    Keep in mind that we are coming off historic lows of inventory, especially when adjusted for population growth, so the data is going to be very choppy. We may see some wild swings in the data here. The pending home sales trend is without question heading down, but we need more time on the inventory increases and see prices actually heading south for a few months to call a top. Selling this fall could be premature, and the pending sales trend could reverse or flatten. Real estate turns slow and you have more time to watch things play out compared to say the stock market.

    • CRD says:

      “Selling this fall could be premature…”

      The problem with trying to perfectly time the top is by the time you have confirmation of a top, it’s usually too late.

      If you’re sitting on significant gains and are thinking about selling, you could do far worse than to sell a bit early. If you decide to sell a bit late when everyone else starts rushing for the exits, there’s a good chance those significant gains won’t be so significant, and there’s a risk that you will struggle to sell at all.

      Better to walk away with, say, a hassle-free double, than to take unnecessary risk trying to eek out an extra 10-15%.

      Greed is only good if you’re really Gordon Gecko.

      • Rates says:

        Agreed, you can only recognize a true top in hindsight. But then again, as I said, a lot of the problems of life can be traced to:
        1. People not growing up after high school.
        2. People having to go to dinner parties.

        Most people can’t stand the snarky comments like: “but oh dear, it’s obviously not the top, you are being silly”.

        Being a contrarian means ==> Be prepared to be lonely.

  28. Jon says:

    I am in the thick of San Diego and I can tell you multiple price reductions and homes taking longer time to close
    Housing market is like a titanic and it takes time to turn

    Its gonna be interesting…

    • RangerOne says:

      I live in SD too and home sales seem sluggish. Slower than last summer, and last summer was slower than the one before it. 2016 seemed to be the last time I saw a high number of sales in our condo complex and neighborhood.

      Haven’t seen enough sales this year to gauge if home prices have changed much. Seems flat compared to last jump….

  29. RangerOne says:

    Wolf, you mention housing moves slow which makes sense since sales and long and difficult and sales happen mostly for reasons unrelated to current home values.

    It is also very hard to find a home price metric that accuratly reflects moment to moment home values.

    But looking at metrics like the case-shiller index, its seems historically California home prices in SD, LA and the Bay have a habit of being more spikey than other areas. With swift crashes and large run ups. Perhaps due to the locations popularity when prices get low. And the weak new home inventory compared to areas like the mid west.

  30. Mean Chicken says:

    I’m not sure why “this is not good”, prices don’t grow to the moon and some correction is in order and has been for some time.

    SIVB looks quite pricey at 3.7 book as well but hey, short float is tiny and it’s a bank in Silicon Valley, ya know!

    • CRD says:

      “This is not good” because the behavior of so many people and institutions over the past ~decade has been based precisely on the notion that prices can go to the moon and beyond.

      When you see young couples with kids in Silicon Valley putting $300,000+ down on a $1.5+ million 3 bedroom, 2 bath “starter home” in Mountain View built in 1965, and sometimes borrowing from lenders willing to treat their stock options/RSUs as income so that they can qualify for the mortgage, you start to wonder just how much stress some of the hottest markets can really take before they falter. And once the hottest markets go, what are people in the other markets going to think?

      At some point, there’s so much excess in the system that the risk of a “crash” becomes higher than the risk of a “correction”. A lot of us think we crossed that point years ago.

  31. PS says:

    I am told we will be in a Recession in 18 to 24 months. The Housing Market will then get back to a “ Normal” market with normal inventory ( about 6 months) no multiple offers& realistic market price.
    I wonder what will happen with Wall Street rentals if interest rates go up to 5 or even 6 %. Will Wall Street start to dump homes since they don’t necessary put $ into maintaining rentals & the REITS aren’t as financially lucrative.
    Any feelers?

    • jon says:

      If anyone is getting 5-6% returns on their investment in form of CDs/interests with falling home prices, then selling these homes is a no brainer

  32. The great Chinese unwind. The Chinese turn everything into a pure ponzi so the west coast could fall two-thirds to three-quarters in price. I wonder if the average home price in San Francisco ever would have gotten to the $500,000 mark without the Chinese? Probably not.

    • John Taylor says:

      I still tend to think that the biggest price manipulators by far are the Fed, the ECB, and the BOJ. The Chinese had a part in these spikes, but their damage is insignificant compared to that of the Been Bernanke.
      Even after his tenure, Ben got Wall Street involved in turning housing into a global investment asset in a very permanent way. The problems with the buy-to-rent schemes are far worse for the ordinary worker than the collateralized mortgage debacle he had a part of in 2008.

  33. Gershon says:

    Looks like the long-deferred financial reckoning day, and true price discovery along with it, is about to show up with a vengeance.

    Be afraid, speculators and FBs. Be very afraid. Your recklessness and greed are about to cost you dearly.

  34. Tom Jones says:

    In Calif. the only long term direction of real estate prices is up. Yes, there are periodic crashes and overbuilds, but they ALWAYS recover eventually and go higher. I always tell people if you once get your hands on a house in California, NEVER sell it under any circumstances unless you’re already in escrow for another one. Even then, it’s better to also own the first one if you can possibly afford both. I tell people to leave their house to their kids with the stipulation that it can’t be sold. Even if the house is destroyed by fire or earthquake, the lot it sets on will continue to escalate in the long term. It is musical chairs. Once out, you can’t get back in. The lower paid workers never get in. Only the top 35-40% of earners can ever get to own property here unless inherited it from older relatives.

    • Mark says:

      Be careful with that assumption.

      In the late 80s, real estate prices in Tokyo were among the most expensive in the world. At the time, the land the Imperial Palace sits on was I believe worth more than all the real estate in California, combined.

      When the bubble collapsed, prices came back to normal. Even in hyper dense Tokyo, a middle class family home in central Tokyo can be had for about $300k USD. Times change, zoning laws change, preferences change. Nothing is a sure bet.

    • michael says:

      Perhaps this time will be different. What if the rentier economy is over. Just look to Japan. The only thing guaranteed to go up is taxes.

      • Mean Chicken says:

        I suspect the only thing that will be different is the depth of the decline. Corporations should, instead of buying back stock in the present, be planning to buy entire neighborhoods for constructing enviro-friendly corporate dormitories. Future employees can then live like robots or sardines in a can.

    • LessonIsNeverTry says:

      You know what could change this claim in a hurry? A persistent lack of water.

      Also, to counter the comment that you can never get back in… there have been two significant declines in nominal prices in just the last 30 years, especially in LA. Bottoms in 1996 and 2009.

    • Jon says:

      My friends who brought high in 2006 are still down when they consider the money needed to maintain the house and the commission you have to pay to sell the house and inflation

      Actually in California it’s all about buying at the right time otherwise you are screwed
      People who bought homes for a million dollar.. same homes were sold for half a million dollar after a year or two

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