Commercial Real Estate’s Early Autumn: We Now See Price Cuts, Blown Deals, Widening Bid-Ask Spreads

We listed a 40-unit apartment building in the East Bay, a couple months too late, and a shopping center in Silicon Valley. Here’s what happened.

By John E. McNellis, Principal at real estate developer McNellis Partners, for WOLF STREET:

The Wall Street Journal reported last week that April’s commercial property sales were down 16 percent compared to April 2021. In detailing the market’s loss of velocity, the newspaper stated that the hotel, senior housing, office buildings and industrial sectors were particularly hard hit, while retail and apartment building sales remained robust. The cause? Rising interest rates, inflation and economic uncertainty. The piece concluded with this hopeful quote: “It’s now turning into a buyer’s market.”

Maybe. But if a buyer’s market were universally acknowledged, the sales volume wouldn’t have nosedived off the thirtieth floor. Sellers and buyers would have been on the same page. Let’s say that a hot seller’s market is the height of summer, and a bone-picking buyer’s market the depth of winter. What we have today is that seasonal no-man’s land, when summer’s lingering heat chases away the gathering chill for a day or two, only to be beaten back by the strengthening north wind.

In less poetic terms, we have a widening “bid-ask spread,” that is, sellers sticking with their summer prices and cagey buyers either spooked or looking for big wintry discounts. This disconnect is the root of the precipitous sales decline.

With the caveat that divining national trends from personal anecdotes is risky business indeed, let’s bring the Journal’s big numbers down to the small. We listed a forty-unit apartment building in the East Bay in May, a couple months too late. The bid date came with just one zombie offer, about 25 percent off the asking price. We declined.

Another offer straggled in a couple days later. The buyer—a born negotiator—chiseled harder than Michelangelo, wore us down and we finally accepted a deal about 7.5 percent off list. Then a week into her 10 day “free look”, this buyer dumped us with a text. No explanation, no complaints about the property, no further chiseling—nada. Bewildered, we could only conclude the buyer had become fearful and decided to keep her money in her mattress.

Another blown deal: We listed a shopping center in the valley late last fall. It languished over the Christmas holidays. Then it wall flowered throughout January and February. Then our broker broke the news that wasn’t news: interest rates had risen, anyone buying class B retail was yield-driven and we had to lower our price to maintain the property’s yield.

We dropped our price by 11 percent (a decent chunk of money) and an offer finally appeared. Once more, rounds of Mt. Rushmore chiseling ensued, and we went into escrow. To get this center off our books, we even agreed to carry a first mortgage for three years, thinking we would eliminate the reluctant lender issue. Despite our willingness to bank the deal, the buyer walked away two weeks into his initial review without a word of complaint about the property or a desire for a further price cut.

Thus, our personal experience tells us the Journal is on the money about the velocity drop-off, but note that our two properties—retail and residential—were among the subspecies that are supposedly still thriving nationwide. (Back to the perils of anecdotal evidence.)

Let’s return, however, to that shimmering mirage of a buyer’s market. We’ve been in commercial real estate for decades, and the only true buyer’s market we’ve ever experienced was during the early nineties, the time when the RTC took over the bankrupt savings and loan industry and conducted real estate’s greatest fire sale since France dumped Louisiana. During that period, real estate’s ownership underwent a seismic shift: The mom & pop investors and cowboy developers who owned over-leveraged properties were wiped out. In their place came the real money—institutional investors with pockets so deep they never had to sell out of economic necessity—owners that could ride out any market turbulence.

We’ve looked forward to buyers’ markets before: the recession of 2001, the Great Recession of 2007 and the Covid recession of 2020. None ever materialized. At best, a handful of good deals were picked off at the margin. The opportunity funds—the billions in vulture capital that Wall Street raised to snatch bargain-basement deals—did end up with an opportunity, that of paying full price for their acquisitions.

Real estate isn’t wheat, it’s not a perishable. Absent personal disaster, deep-pocketed sellers never have to sell. By John E. McNellis, author of Making it in Real Estate: Starting Out as a Developer.

Enjoy reading WOLF STREET and want to support it? You can donate. I appreciate it immensely. Click on the beer and iced-tea mug to find out how:

Would you like to be notified via email when WOLF STREET publishes a new article? Sign up here.

  151 comments for “Commercial Real Estate’s Early Autumn: We Now See Price Cuts, Blown Deals, Widening Bid-Ask Spreads

  1. Mendocino Coast says:

    Good Article :
    And this is just a start . The Vastly overblown RE Market created during the trump Era with Powell at the Fed has now imploded the market and the Starting Line is clearly visible now

    As such with Energy Costs now a Major Issue the R.E. Market imploding
    avoiding a recession marks Hi on the list

    One might ask which is the worst and exactly how will it effect the overall world economy

    • 2banana says:


      Cause QE and zero interest rates starting in 2008 had nothing to do with it.

    • economicminor says:

      Actually this mess goes back a long way before Trump and Powell. It goes back to the leveraged buyouts and the searching for yield that started waaay back.. The constant push to raise rents kept businesses scrambling. The increasing productivity that should have lowered most costs to the consumers were eaten up by the never ending rise in commercial rents. Then when the Bush era pushed us into the GFC, the outcome was that to stabilize the system, the banks encouraged at huge discounts, PE firms to buy up foreclosed mortgages to rent out. The system never cleared. Business as usual has been that the financial system has been eating our lunch for decades and calling it Free Markets. The only thing really free about it was that they got money much cheaper than the rest of us and used it to drive the system into more and more debt.

    • Morty Mc Mort says:

      Interest Rates my friend.
      They represent (Supposedly) the Time/Value and Risk factor of Money, borrowed, invested.. put to work.
      1. Pull the American Dollar off any Gold or real value link..
      Allowing Government and Corporations to Flood the market with “Dollars”
      2. Lower the Natural Interest rate, so that the Risk and Time Premium is completely distorted to a false, historic low…

      Stand back and watch the system blow up.
      Reap the Whirlwind.

    • gametv says:

      One point that the author does not explore is that we have been in a 30 year bull market for bonds, meaning 30 years of yields dropping. That is over.

      So the tailwind that kept owners as owners might be turning. When smart people see a headwind, they might actually decide that trying to walk into that headwind for a decade might not be a smart idea.

      Now we just need to get some tax reform that wipes out the preferential treatment for real estate investing.

  2. cb says:

    Good of you to share your experience. I have noticed that the tone of multi family syndicators has changed. Their “fully subscribed” deals seem to re-circulate again, looking for money.

  3. Synergy3000 says:

    In my market I am also seeing small office, retail and industrial commercial property sit. Multi-family in the 15-30 unit range is still getting bid up with multiple offers due to competitive cap rates in our flyover state. Great article John!

    • joedidee says:

      we sold 25 unit MH park this year
      instead of getting into some multi-family – bid up beyond ridiculous
      we ended up with 3 HOUSES
      making as much as before with no debt and 7% cap rate

    • cb says:

      What is a competitive cap rate? Cap rates I see are compressed in all states.
      The spread between cap rates in different states has continuously shrunk over the last several years. I speculate this is due to the internet, private equity and crowd-funding.

    • RH says:

      I also like this article. Reportedly, baby boomers are retiring, so the cost of capital will rise, and its availability will decrease in the coming years, so there will be less capital to start new businesses or buy commercial or other real estate among ordinary, nonbankster Americans. Also, the “Federal” Reserve’s tiny, interest rate raises so far will NOT tame inflation.

      Read what Volcker did in the 1980s. Maybe, the CCP’s crashing of the economy of China may reduce demand and thereby, reduce inflation.

      However, that might not occur for a while and the current rate increases are tiny. Keep in mind that there is a “conflict of interest” between the interests of Americans in taming inflation and the interests of the “Federal” Reserve’s bankster owners: assuming that the bank deposits that the banksters hold are now about $15 to 20 TRILLION, for every 1% per year difference that the banksters can keep between inflation and the interest rates that they pay the businesses, other, checking account holders, and gullible depositors, the banksters make $200 billion to $150 billion. (That is because continuing inflation effectively makes the rates that they pay their depositors actually NEGATIVE rates of 2% to 6%.)

      If they can just keep a 6% difference between inflation (say at 8.5% per y ear) and the interest rates that they pay on bank deposits (say 2.5% per year), they make $1.2 TRILLION to $900 BILLION. Hence, there is probably a temptation for the “Federal” Reserve banksters to delay and delay the taming of the current inflation.

      That inflation is working as a drag on our economy, because too many Americans think that disaster is ahead and labor costs are fluctuating as Americans want more money for their work (when they are in a position to demand it) as their living costs go up and up. The war caused an increase in fossil fuel prices that has driven those costs up and may drive them and later, food prices way, way up.

  4. 2banana says:

    The alligator has to be fed. Mortgage, insurance, taxes, upkeep, maintenance, utilities and your time.

    Time is on the buyers side when money is no longer cheap nor easy.

    “In less poetic terms, we have a widening “bid-ask spread,” that is, sellers sticking with their summer prices and cagey buyers either spooked or looking for big wintry discounts.”

    • BuySome says:

      Frank Zappa may have been right…the crux of the bisquit is the apostrophe, as in moneys cost versus Money’s Cost. And therefore, as Buddy sang to the bad deal, “Well you go your way, and I’ll go mine….Now and forever, till the end of time….I’ll find somebody new, and baby…..We’ll say we’re through…And you won’t matter anymore…No, you won’t matter anymore”.

      • Crazy Chester says:

        Odd. I kept hearing the relentless march of ‘The Empire Strikes Back’.

    • Djreef says:

      Exactly. If you’re in no hurry, then you win.

      • VintageVNvet says:

        VERY correct in my now extensive experience DJ:
        Was worned by one ”mentor”,,, and he illustrated THE POINT with a report of when he and his allies,,, just waited out those who left early and did what they wanted,,, EXACTLY what they wanted,,,
        IIRC, his clear example was RE: AMA meeting in SoCal…
        Seriously thinking it is, like totally dudes and dudettes” THESE DAYS.
        IOWs, do NOT give up in all of your attempts to bring ”reality” to the current very challenging situation…

    • Old School says:

      One of the five stocks I try to keep up with is the big outlet REIT. They have a good concept in they do triple net leases and pass most of the costs over to the retailers, they have standard 100 ft wide construction with moveable internal walls so they can reconfigure space easily when retailers leave and they provide low rent to sales cost to client at just over 10%. It’s a low growth or no growth business, but sometimes nobody wants to own the shares and you get can dirt cheap. Got to make sure you understand the balance sheet and how they will do as interest rates rise.

      • cb says:

        If you are going to discuss a company, why not name the company and the ticker. (Just don’t pump to dump.)

  5. Boatwright says:

    There is one problem however for “deep pocketed investors”. They swim in a sea of other deep pocketed sharks, and just because we try to pretend that the powerful force towards monopoly doesn’t exist, eventually will all be eaten but one.

    • 2banana says:

      Except deep pocketed investors sell all the time. And they sell without emotion and in large quantities if the ROI numbers ain’t working out and there are better ROI investments somewhere else.

      “Absent personal disaster, deep-pocketed sellers never have to sell.”

  6. 2banana says:

    This is called chasing the market down because you “didnt want to give it away.” And is very common.

    In hindsight, you should have initially listed 15% below market and sold it quick with a bunch of folks interested.

    It is greed not to always be closing.

    “we finally accepted a deal about 7.5 percent off list.

    We dropped our price by 11 percent (a decent chunk of money) and an offer finally appeared.”

  7. 2banana says:

    In normal times (before the cheap and easy money era) this is PERFECTLY NORMAL in real estate transactions (and cars too!)

    If you can’t negotiate or, worse, get insulted, you are in the wrong business.

    – chiseled harder than Michelangelo

    – rounds of Mt. Rushmore chiseling ensued,

    • JJ says:

      2banana, I had to post in agreement how being insulted by offers is a handicap which definitely must be suppressed or overcome.
      I learned this lesson as a teenager trading collector coins at coin shows. How dare the coin dealer insult my carefully selected and collected coin I want to sell!
      Emotional detachment from objects, including primary homes, can be a difficult ask for some people at the negotiating table, yes.

      • LGC says:

        This is exactly why despite the realtor industry being a giant money sucking scam (6%) NOBODY wants to deal with FSBO’s. (for sale by owners). They are way too attached to whatever and can’t or are unwilling to deal.

        There’s a scene in trading places where Dan Ackroyd goes to pawn his million dollar watch and he describes it in detail and the pawn shop guy says “in Philadelphia it’s worth fifty bucks”

        What you think your item is worth and what the market thinks your item is worth is two separate things.

        • 2banana says:

          FSBO are definitely a mixed bag.

          The alligator eventually forces them to deal but they usually are way too slow in a declining market.

          If they were smart, they would price slightly below comps and then offer 3% in closing costs (splitting the 6%).

          They usually do the opposite. Way overpriced and they want all the 6%.

  8. Rob says:

    We’ve been in a lowering interest rate environment for 40 years. That includes all the periods you mentioned. Deeper pockets always have an easier time weathering economic storms. But what if long term rates keep rising, putting downward pressure on asset prices. Agreed the rich can hold on, but at some point, other yield producing assets will likely look more attractive. Lock in +15% yield on the Dow with appreciation upside or mess with the physical realities of being a landlord in a politically unfriendly climate? On a long enough timeline… It’s not always up up up.

  9. matthew says:

    One of the many sites I follow besides Wolf ,, had a in depth article on PREIT yesterday and why they are guaranteed to file bankruptcy again. It will apply to most cmbs

  10. AG says:

    After watching Louis Rossmann channel on youtube regarding NY commercial RE, I realized that deep pocketed investors do not have to sell quickly, but they’ll keep bleeding until they eventually go bankrupt and have to sell. It may last a while, but not for too long.

    • 2banana says:

      There is no “magic dirt.”

      NYC real estate has sold for pennies on the dollar before and will again.

      And, what most people can’t grasp, there are times when real estate has a negative value. The cost of holding is actually greater than the worth of the asset.

      • phleep says:

        > The cost of holding is actually greater than the worth of the asset.

        An awful lot of fairly recent buyers will get this realization in the pit of the stomach. Easy money and paper gains blunted the sense of risk.

      • Rob says:

        >And, what most people can’t grasp, there are times when real estate has a negative value. The cost of holding is actually greater than the worth of the asset.

        That’s why God invented lighter fluid. Just a joke. I don’t think the author studied the real estate market of the 70’s. There’s historical reasons why wall st doesn’t already dominate the real estate sector. Real estate isn’t new.

        • perpetual perp says:

          Ahhh yet another ‘propensity’ in economics, the ‘propensity to use lighter fluid!”

        • cb says:

          @ Rob –
          What about the real estate market of the 70’s?
          It went up in Los Angeles.

      • MarkinSF says:

        This article discusses commercial real estate. The author, a veteran in this market, states that he hasn’t seen a buyer’s market in CRE since the early 90s.

        Your conjecture seems to dispute that. My personal on the ground observation here in San Francisco leads me to believe a CRE collapse is imminent The same signs were apparent back in 2008-2011 and I think CRE held it’s own.

        Hard to know how this plays out.

    • ru82 says:

      Leading up to housing bubble 1, I saw 4 strip malls built near me. I thought that is over capacity. I would say these 4 strip malls had room for a total of of 5 business each or 20 business. Right before the bust in 2007 each strip mall had 1 or 2 businesses for about a total of 6. I would say 3 of those businesses disappeared or went bust by 2010. One strip mall was empty in 2010. I expected to see for sale or bankruptcy signs on these malls.

      Never happened. The around 2015 they started to actually get business into these strip malls. One sat empty for 5 years. Another had 1 tenant for 5 years. Even by 2017 they were only 50% occupied. I figured someone had deep pockets.

      Now they are 90% full.

  11. SeanDF says:

    Actually, the commercial market is leading the implosion, even in so-called impervious markets, like NYC. Tons of see through space of all flavors in AAA locations, rents dropping like a rock. Masters of the Universe, like Blackstone and Simon, dumping properties BEFORE the interest rates doubled, at huge losses. CMBS is just another bond proxy, getting hammered by that wonderful mixture of rising rates and shitty collateral, a perfect formula for a cascade of Non Performing Loans, as far as the eye can see. Let’s see: my deep pockets own tons of junk bonds and priced for perfection buildings- oops! Even the stupid money is jumping off the Titanic to risk the sharks.

  12. Jren says:

    And possibly some localized market softness. Seattle CRE, multi-family is still strong and getting multiple offers on good properties. Theres some dogs sitting around overpriced..

    • cb says:

      Jren said: “multi-family is still strong and getting multiple offers”


      This has been a steady pace in many markets. Private Equity firms have had a hand in driving it. Other Peoples Money, combined with suppressed interest rates and Government programs, like low interest HUD loans. What a joke. Hopefully that private equity welfare party comes to an end.

      • AJ says:

        I must have heard a half dozen commentators in the last week say that Black Rock is still buying up full subdivisions that are not yet complete. I hope they eventually move on to other assets so I can buy RE again. Zillow and other cash buyers pushed up our prices locally- beyond all reason.

        • Wolf Richter says:

          If they’re buying anything, it’s “build to rent,” which is the hottest segment in RE. Entire subdivisions are built to rent, using materials and finishes that are designed for rentals. Usually, tenants are already in these units before the developer sells them to a pension fund or similar. This is a super-hot trend, and everyone is doing it.

  13. SpencerG says:

    I want to thank Wolf for these excellent guest articles that he allows on his site. I can’t begin to tell you how much I learn from them.

  14. Cytotoxic says:

    We’d have buyers’ markets if local governments would stop strangulating development with zoning laws and other insane regulations. Let us build!

    • Apple says:

      Yeah, who doesn’t want a single family house being bulldozed and a 10 unit complex put up next door.

      • Dan Romig says:



        Minneapolis has the “2040 Plan.” It was passed a few years ago by the city council, but has been kicked around in civil court, “in a circuitous years-long journey,” which went through the Minnesota Supreme Court, and just a couple days ago, it was back in District Court to be blocked — for now.

        The plan is to get rid of single family zoning and allow multi-unit taller buildings to be put in, pretty much anywhere.

        It was sold as being a way to increase density and make lower-cost housing available. But in fact, it would do the opposite. And it makes no allowance for environmental issues.

        Cytotoxic’s “let us build!” is not OK if a high-rise gets put up next to me on the south side and blocks the sunlight for my gardens and home. If I lived downtown, or in an industrial part of the city, it would be OK, but the 2040 Plan is an invitation to have any single family home in Minneapolis bulldozed down, and a multi-unit, light-blocking structure put in its place.

        I am a “Moderate Libertarian,” so I am for an individual’s rights and freedoms, but there is a reason for zoning laws. The 2040 Plan has, once again, divided the people of my city into two partisan sides.

        • Dan Romig says:

          It will increase density, but turn starter homes into tenement housing.

        • Cytotoxic says:

          “The 2040 Plan has, once again, divided the people of my city into two partisan sides.”

          Yes, it’s put sensible people on one side and ‘moderate libertarians’ who like individual rights except when they don’t on the other side. You’re getting the condo for a neighbor tough cheese. You don’t have a right to sunlight. It’s going down your throat.

        • HowNow says:

          “I’m a ‘moderate Libertarian’… but there’s a reason for zoning laws.” There’s something about this Libertarian idea that smells badly. Could it be that there’s no such thing as “Libertarian” except a person who wears a fig leaf of morality to conceal their utter and complete selfishness? If it works for my benefit, it’s good. If it benefits others but not me, it’s bad. “Give me liberty and give the rest of you… well, nothing really, unless I’m going to get something out of it.”

        • HowNow says:

          Yeah, I can relate: Taxes: I’m a Libertarian. Zoning laws: I’m a moderate Libertarian. Marijuana: I’m an occasional Libertarian, but only once in a great while.

        • Dan Romig says:

          Yes, as the replies indicate, this issue divides myself into two pieces as well.

          1) If someone buys the property on the south side of my lot, they should be able to do whatever the hell they want with it.

          2) When I bought this property, 27 years ago, it was in a zoning area that did not allow a neighbor to do whatever the hell they want. That was a factor that made me buy my home in the first place.

          Don’t like it? Move out and sell. Perhaps, but there is a point where the rules should not be changed. The Courts are trying to figure this out, and they have not done it yet — fours years on.

          There is a reason to have, for example, distinctions in zoning between residential and industrial areas. A sudden, much higher residential density has to be accommodated for, with more than just a change of zoning regulations; water, sewer, electricity, etc.

          I do like having sunlight, and growing my own food on my 51′ by 126′ city lot in the Longfellow neighborhood of south Minneapolis.

          And in reality, whatever the Courts decide, it will not affect me or my immediate neighbors; nor will it drastically change the city overnight. But it is a template for changing the structure of how people live in the residential parts of my city.

          I guess that I am selfish in wanting to keep things as they are.

          “Life is good in Minneapolis.” -DanBob

        • El Katz says:

          You can always buy the property next to you at which point you control your “border”. You can raze it and put in your own truck patch (which will likely violate the zoning laws).

        • cb says:

          @ Dan – “I am a “Moderate Libertarian,”

          Isn’t that what a Libertarian would refer to as a socialist?

          sorry, couldn’t resist

        • Cytotoxic says:

          ” this issue divides myself into two pieces as well.”

          This is called ‘hypocrisy’.

          “That was a factor that made me buy my home in the first place.”

          That’s really not my problem. This isn’t even using a past injustice as a rationalization for a new injustice, it’s even lazier than that. It’s just ‘it was like this before so it has to stay that way’. No it doesn’t. You’re getting the condo, buy the plot next door if you don’t like it.

          Minneapolis has already seen a surge in units and a drop in rental prices, and it’s largely due to deregulations aside from the end of single-home zoning. That has been a minor contributor so far.

        • Dan Romig says:


          There are a few “grey issues” out there in life.

          In computer code, there is a one or a zero.

          As I watch the Formula 1 race soon, I will take note of which race engineer has put on more downforce for cornering speed, and which engineer will put on less downforce for more straight-line speed.

          The engineers are not able to do whatever they want though. There are rules in Formula 1. There are rules in residential building code in Minneapolis. Yes, rules change.

        • RookieEMT says:

          I’m sorry but being told straight faced by the planning department after Charlotte’s own ‘2040 Plan’ that a four unit apartment building within walking distance of light rail is inappropriate is the peak of planning insanity.

          My old lot was also within walking distance of a greenway and less than a mile from downtown.

          I might also be required to have one unit as affordable and I’ve seen the council and department approve 300 unit apartment buildings several blocks away without a single affordable unit.

          Meanwhile, a 1,200,000$ house can be built by right and get permits within a week.

          This is called class warfare and cronyism. It’s made my politics shift left as I see how rigged everything is.

        • cb says:

          California YIMBY is a community of neighbors who welcome more neighbors. We say “Yes In My Back Yard”—yes to affordable housing, yes to inclusive, equitable
          the above is the definition I found. I would bet it’s a community of developers and merchants and perhaps renters with the welcome matt out.

        • cb says:

          @ RookieEMT-

          affordable unit requirements are generally a bad idea. Just build more units and affordability will work itself down the daisy chain.

        • “Moderate Libertarian”: I hate regulations, except for the ones that benefit me.

          Which is actually all libertarians.

        • Dan Romig says:

          E F,

          There are many things that a “Moderate Libertarian” believes in; speaking for myself.

          One of those things is not lying the USA into war.

          And not using economic warfare on other nations who do not want to conduct business in the petrodollar. Like Libya for example, except the economic war was added along with NATO bombing to destroy the nation in 2011. Moderate Libertarians do not advocate for, or support the actions of President Obama eleven years ago in this regard.

          One of those things is not conducting regime changes in other sovereign nations, such as was done in Iran on 19 August 1953; as was done on Chile on 11 September 1973; as was done on Ukraine beginning on 7 February 2014, and the list goes on.

          One of the things that a “Moderate Libertarian” believes in is a flat tax that treats all income equally and has no federal liability for any income earned at or below 2,000 hours multiplied by the minimum wage. Therefore, my long term capital gains tax rate is the same as everybody else’s wages earned tax rate — regardless of how much either number is. And workers who are employed full-time at minimum wage have zero taxes due the IRS.

          Yes, I am a Moderate Libertarian.

        • Cookdoggie says:

          This string of comments on the demise of single family zoning reminds me if Grandpa’s advice to me when I was a boy: buy yourself 60 acres and put your house right in the middle. I didn’t get the cynicism then but I sure understand it now.

        • Dan Romig says:

          And Minneapolis just requested an injunction from Judge Joseph Klein in District Court, via a 23-page motion and memorandum.

          The State Supreme Court had remanded the case back to the district court for a ruling. The City argues in the motion filed today: ” …his ruling has already created “unnecessary” disruption and uncertainty.”

          A Hennepin County district judge, not Judge Klein, had previously signed off on the deal, and that was fought against, and taken up the ladder until it hit the Supreme Court.

          Judge Klein: “The City has not put forth any evidence showing that a full build-out will not have any potential adverse environmental impacts.”

          He also criticized the city’s defense for “vaguely” dismissing the risks that the 2040 Plan presents to the environment.

          So, again, four years after the city council passed this plan and the mayor signed off on it, it is still rattling around in the Court.

      • Cytotoxic says:

        No one sensible would object to that. YIMBY will not be stopped.

        • Rob says:

          Lmao. Like sensible gun laws, who dare be against it?

        • Dan Romig says:

          After looking up what YIMBY means, I find it ironic.

          The 2040 Plan will encourage tear downs of low-cost starter homes by developers who’ll replace them with multi dwelling rental units.

          It will take away affordable starter homes to be bought by young families to live in and build equity for their future.

          “YIMBY” rose from a movement in the San Francisco Bay Area to help aspiring first-time home buyers. But, YIMBY will be stopped by the 2040 Plan.

          “Isn’t It Ironic” -Alanis Morissette

      • Kenny Logouts says:

        This is the issue.

        It won’t get bulldozed for a 20 unit complex if everything is opened up for development, because supply vs demand will balance very quickly.

        It’s the same in the UK. Rather than regulate the quality of what’s built, so it’ll last a lifetime or longer and isn’t just there to make someone rich… we just get expensive rubbish that isn’t what people actually want.

        Let it all crash and burn, again. The market needs it.

    • Lynn says:

      Septic in rural areas is the worst. $10K in permits alone to install a new one where one has failed. Not including any cleanup. Some of the Building and Planning and some of the Water/Sanitary depts are corrupt which makes it even harder.

      We’re talking places where the median income is $40K..

      • Rob says:

        What state/county?

        • Jon says:

          Trumbull County Ohio is insane for septic costs new or replacements. Even more than 10k

        • El Katz says:

          My son and DIL spent $50K to replace a failed leaching field and septic tank in Austin, TX. And that was 5 years ago.

        • Lynn says:

          California. Far northern. They are also heavily promoting the major PITA and expensive ones above ground ones that require a county inspection once every year or 2. There are some towns that are practically un-buildable unless you agree to those systems.

      • phillip jeffreys says:

        I had a rental in Maine (Mt Desert Island) back in the day. One time the septic tank gave away (it was an old but beautiful property) and renter’s six year old son fell in. Customer was good about it as there were no injuries.

        I refunded the entire rental and passed “One day you can tell your son he was always getting into deep **** as a child”. Renter came back the next season.

    • Mr. Ginastera says:

      If it were up to me Mr. Cytotoxic, I would never let you build in a million years. I’ve made my living going after people like you. Good luck with your building, right?

      • Cytotoxic says:

        Well let’s be glad it’s not up to you and make sure it stays that way. Get YIMBY’d.

  15. Lynn says:

    I think you did about as well as could be. If you had put it on the market 2 months earlier you might have had the same results. I’ve seen several places go off and then back on the market in the past 4 to 5 months, pending 2 or 3 times especially if they needed maintenance or repair. In either case, if you are selling within 2 months of the peak it is extremely good.

    Asking prices went down over 45%, near 50% in some parts of California during the GFC. It was most definitely a buyers market, especially in places that had been “hot” before. Cash buyers, many with Chinese, Bulgarian or Russian (etc) backing, scooped them all up in 2013.

  16. Marbles says:

    From Denver, I’m still seeing a lot of dirt moving, and tilt-ups following. Might just be my area. I also have a waiting list of potential tenants on my industrial property. The taxes are the biggest problem.

  17. Jdog says:

    The only reason the RE markets did not correct much worse than they did in 2001 and 2007 was the governments interference in the markets.
    Drastic drops in the interest rates allowed institutional investors to step in and offset any risk with what amounted to a government subsidy. It was a mistake for government to do it, because it reinforced moral hazard and ensured a reckoning at some point in the future much worse than had they allowed the market to correct at those times.
    Of course the government was not confronted with massive inflation destroying the economy in 2001 or 2007, and so they had that option, as unethical as it was.
    Today, they do not have that option. Inflation is threatening to destroy the dollar, and its lure as a reserve currency. More QE will just increase inflation which is already out of control.
    No one is coming to bail out the RE industry this time….

    • Marbles says:

      I agree with this but I would add, in many cases the bailouts strengthened the hands of those still holding. Might not need a bailout this time. Same as some of the big banks.

      • phillip jeffreys says:

        Unless phenomenally leveraged derivatives start tanking.

        • NBay says:

          TBTF, TBTJ, the Corporatocracy and dynastic wealthotocracy marches on. If you can’t afford to go to Davos and Jackson Hole every year it’s a safe bet there will always be things that don’t go your way…..more all the time. Do what you can for your health and sense of humor.
          Good article.

    • Ghassan says:

      Well said Jdog

    • Jay says:

      I would love to know the total amount of loan & rent forbearance kept by renters & owners over the course of the way too long, multi-extended period they were offered. That’s a lot of stimulus. Add that to stimulus checks, PPP monies and trillions of dollars in 90% refi’s and, again, that’s a lot of inflation. And no one ever spoke about what total amount of the $53B in landlord reimbursement monies approved by Congress. The last I heard only about $6B had been doled out.

    • David Hall says:

      Before the GFC new home completions were high. Rental vacancies were high as people left rentals to buy their own homes. Apartments were converted to condos. A shopping center at Edsel Rd and 395 in the VA DC metro inner suburbs was torn down and multifamily housing put in its place. Mortgage brokers gave loans to people without jobs – NINJA loans. With so many new homes on the market and few buyers, the real estate market started to crash. Construction shut down. Unemployed workers gave their homes back to the banks. The Federal government had to rescue the banks after Lehman Bros. became insolvent. AIG had so many worthless mortgage backed securities on their books, they had to be recapitalized. The stock market was down for years.

    • Twinkytwonk says:

      You need to speak to the UK government who are about to start allowing people on benefits to buy houses using their monthly benefit payment.

      I swear that if the only options were to
      1. Allow house prices to fall.
      2. Kill 50% of the UK population.

      The government would choose 2 and I’m pretty sure the population would support it too 🤣

    • cb says:

      Jdog said: “It was a mistake for government to do it,”
      Excellent and truthful commentary Jdogg. With the caveat that it was a purposeful mistake. Our government and FED have no reservation to “socialize” the system when it bails out the “right” constituents.

    • ru82 says:

      In 2009 the Government bailed out the Big Real Estate Home builders.

      Almost all of them would have gone bankrupt and we could have seen even better land deals.

      The Government created an tax law just for home builders that let the home builders redo their taxes current and previous taxes. It allowed the builders to take the big losses of 2008 and 2009 as write offs against profits of previous years. Up to 4 years I think. So basically the government paid the builders billions in tax refunds which allowed them to cover their cash flow and keep some of their future home lots.

      I wish the government would allow me to take one of my rental loss and apply it to a gain the previous year or too.

      ON Nov. 6, President Obama signed the Worker, Homeownership and Business Assistance Act of 2009 into law,

      tucked inside the law was another prize: a tax break that lets big companies offset losses incurred in 2008 and 2009 against profits booked as far back as 2004. The tax cuts will generate corporate refunds or relief worth about $33 billion, according to an administration estimate.

      Before the bill became law, the so-called look-back on losses was limited to small businesses and could be used to counterbalance just two years of profits. Now the profit offset goes back five years, and the law allows big companies to take advantage of it, too

      • ru82 says:

        I was short the builders but this ruined my short. Lobbying does pay off.


        On Tuesday, Pulte, the housing industry’s largest builder, reported that its earnings loss for the three months ended Dec. 31, 2009 had narrowed to $116.9 million. That improvement in no small measure resulted from a whopping $800 million tax refund that Pulte gained from a law change that now allows companies carry back net operating losses up to five years.

        The net operating loss (NOL) carryback provision was one of the key lobbying points—the other being the extension of the federal tax credit for home buyers—that NAHB and its largest members pushed Congress hardest for to resuscitate the housing sector. Pulte’s tax benefit, which helped offset $925 million in quarterly land impairments and other writedowns, is the largest among the almost $2 billion in total NOL refunds that 10 of the industry’s publicly traded builders reaped in their latest quarters. (See chart below.)

        Two other public companies, Hovnanian Enterprises and Toll Brothers, ended their latest fiscal years before the law went into effect, and therefore reported losses for of $250.8 million and $78.8 million, respectively, in their fourth quarters. Both builders, however, intend to take full advantage of the law change. Larry Sorsby, Hovnanian’s CFO, told investors that his company is “now expecting a $275 million to $295 million tax refund in our second quarter of 2010.” Toll believes it will recover $161.8 million in 2010 from filing its 2009 tax return.

        Indeed, the tax refunds that large public builders have received so far could be just the tip of the iceberg. D.R. Horton, for one, has submitted a claim for a $352 million refund for the current quarter.

        During their first quarters of 2010, Ryland Group is counting on refunds of $99.4 million, Meritage Homes $93 million, KB Home $190.7 million, and Standard Pacific $103 million.

        Lennar is also banking on a $320 million tax refund in early 2010. “Our improved balance sheet enables us to continue to capitalize on distressed land-buying opportunities, which will improve our operating results in 2010 and beyond,” said its CEO Stuart Miller.

  18. Rowen says:

    Nice, after 250 years, we’re going full circle back to a landed gentry society!

    • Bethbeach says:

      Or “The little house on the prairie “ mode…

      • Apple says:

        In Little House on the Prairie, they moved to an area and killed off the current land owners and appropriated the land.

        You might be right.

    • VintageVNvet says:

      never really stopped Rowen:
      ”Family” has been in RE ”services” in FL since mid 1930s, and had connections to some of the ”old money” families who continued to buy and either fix up or build new to rent…
      Old money has and has had ownership of ”most” of their RE continuously since ”the war between the states” at least, if not since the revolutionary period.
      It’s one reason that folks such as D Boone, etc., were so willing to walk away from ”civilization” and some still are.

  19. Ghassan says:

    You seem a little biased today. I don’t think you will get what you hoped for just few months ago anytime soon. You might have deep pocket but others don’t, and they will sell for less and you have to follow eventually.

    Off topic; it seems that Canada’s and Sweden’s residential market are already down at least in Toronto suburbs and Stockholm according to Bloomberg… Who is next!?

    • Volvo P-1800 says:

      Certainly hope you’re right. My apartment in central Stockholm is up 1200% [yes, that’s one thousand two hundred percent] since I bought it in 1993.

      • rick m says:

        Volvo P-1800- my brother’s house in Mölndal appreciated big-time in the same period, he cashed out several years back and bought a boarding stable/horse farm outside of Gothenburg, which he now has to heat.

      • Ghassan says:

        Volvo P-1800

        You seem unhappy that your place appreciated! Don’t you feel rich, or at least lucky that you own a place in Stockholm? That you could sell and buy a whole dying Italian village for your retirement!

        • Volvo P-1800 says:

          Don’t want a village in Italy. I’m staying in my apartment, my monthly cost for a two bedroom apartment (90 square meters, or 970 square feet) is about $350, taxes and charges included. But I feel really sorry for all the young people who have no hope of finding a place of their own.

  20. Phoenix_Ikki says:

    Crossing my fingers and toes, in due time, this will also happen to residential RE market as well. Sellers would be begging for buyers to come.

  21. bigpic says:

    no-one really has to sell in commercial. never be a true buyers market, just a quite market. cap rates to the 10 yr spread is still 300bps. in apts, rents are still high and climbing. yields on investments will always be higher than the cost of capital.
    about inflation, the fed will keep reading the data and will keep rising int rates making the same mistake in the 70s. what we should do is turn the keystone pipeline back on and stop meddling in wars that isnt ours. int rates trying to flatten inflation caused by high energy cost. the cpi, cpe, the 10 year treasury all shot up after closing the xl. of course we will see rise in cost of cars, iron, building materials, shipping, because the cost to power these large factories are just too high. but if you want to believe in the microchip story be my guest, keep voting on the left.

    • Jim411 says:

      Possibly polluting one the largest underground freshwater aquifers in the US spanning 7-8 states in the middle of America’s bread basket. Only, if exclude corporate limited liability subsidies for the project and require insurance and reinsurance against losses, and claw back provisions for all executives and management involved. In other words, only a partnership would be allowed to build and operate the project. No shell corporations.

      The Canadian pipeline would profited Canada, and the oil would have been shipped overseas.

      • Cytotoxic says:

        There’s no evidence it would pollute anything. Your irrational fears are not our imperative.

        • Apple says:

          Except for all the times pipelines have broke and polluted .

        • COWG says:

          “ Your irrational fears are not our imperative”


          Near as I can tell you speak for a crowd of…


          And not very well at that… many of your arguments are all over the map with spouted generalities without much basis or substance for your arguments…

          Maybe you’re trying too hard to appear intelligent…

          Oh, yeah…

          jus’ sayin’….

        • El Katz says:


          Maybe we should get rid of indoor plumbing too. Just think of all the times that there has been sewage overflow into the Pacific in SoCal, Lake Michigan from both Michigan and Wisconsin, the rivers in Wisconsin and Michigan……

        • Apple says:

          Terrible straw man argument El Katz.

        • El Katz says:

          Apple: it’s well documented that pipelines are safer than rail or trucks as far as spills go.

    • cb says:

      of course, digitizing trillions of dollars and passing it around has nothing to do with our current inflation

  22. Michael Engel says:

    SPX might form an inverse H&S. The Head is Fri low. The neckline around
    4100 -4200.
    If correct : a new all time high.
    If failed : more bad news.
    Happy Father’s Day.

    • rick m says:

      Happy Father’s Day! none of my own, ten nieces and nephews, and their kids, im good.

    • cb says:

      I love you chartists –

      might be this or could be that

      and if pigs could fly and horses could sing

  23. JeffD says:

    Here in Orange County CA, I believe that many, many jobs will need to wiped out before sellers lower prices significantly, irrespective of interest rates. There is a combination of delusional thinking and deep pockets here that will support prices through a huge amount of pain.

    • VintageVNvet says:

      they be moving to FL JD:
      Was just mentioning to another old/elderly FL native that I wish folks would come and visit FL in July and/or August BEFORE deciding to move here,,,
      as it would certainly dissuade any reasonable person from coming here…
      SO hot every day,,, EVERY DAY for at least SIX MONTHs…

      • Anthony A. says:

        FL is almost full. Many are heading this way to Texas. For some reason, they skip over Louisiana,

        • Robert (QSLV) says:

          Texas in July. Good time to see if you like the heat and humidity. I know Texans swarm into the Sacramento Mtns in New Mexico this time of the year to escape the heat. And they bring lots of money!

          Hole In The Wall Gang

    • Phoenix_Ikki says:

      Yeah it pains me to agree with you on this. Saved a listing in Long Beach, old house, recently renovated probably from flipper. Build in 1954, did a price cut for $50k from 1.1M to $50 shy of $1M. I think it lasted maybe a week or two and not it’s under contract.

      Either still plenty of money in SoCal or no endless supply of tards..either way, it feels hopeless out here to get something close to fundamentals anytime soon, only saving grace is knowing the ship will turn slow and when it does, perhaps SoCal will swing violently hard the other way around, just late to the party for now.

    • No1 says:

      Lol, they say this everywhere, they say this in Melbourne too. Every bubbly market in the world supposedly can’t go down short of economic catastrophe. Vendors will drop their prices when they get nobody biting because the credit isn’t available anymore.

  24. steve bellagio says:

    Deep pockets don’t have to sell. That’s true. I never sell.
    But when you get a rate reset at the wrong time.
    And those absurd states (like NY and NJ) have to fund the armies of lazy inept workers with pensions, they just sue and raise taxes: as in double them.
    Then the cash flow that you bought becomes a trickle and you ask yourself: is it worth it?
    I have a few in that area that’s going socialist rapidly.
    I don’t have to sell, but I might.

  25. unamused says:

    There is something to be said for stable markets, and something to be said about stable markets, and something to be said about why markets aren’t stable, and something to be said about the relative merits of stable, unstable, and disrupted markets, and of systems generally, but if I were to say it somebody is bound to take it the wrong way.

    And that’s all I have to say.

    • Old school says:

      Probably the most important simple ratio in where public markets are at any time is price to sales. The average is 1 and if you think about it for a while you can understand why that is the long time average. Fed blew it up this time to 3.2 and look at what we have.

      • cb says:

        @ Old School –

        so how do you account for the fact that different companies and industries have different profit margins, required capital investments, etc. ?

        • Old School says:

          I am saying public stock market as a whole has long term price to sales is about 1. Individual companies may be different.

          Excess profit margins should be competed away over time so if net profit margin averages about 7% then you get your long term average PE of about 15. Government and central banks can goose things for a while, but not forever.

        • cb says:

          @ Old School –


          I assume, by citing citing a net profit margin as 7% and equating that to a 15 PE, you are talking about net profit as a percent of stock purchase price?

          How does this relate to net profit as a percent of Sales?

          If you are willing to pay 1 times annual sales, and 15 times earnings (P/E), it seems to imply that the net profit margin on sales is also 7%. Is this a standard rule of thumb net profit on sales?

  26. Gabby Cat says:

    Our residential, suburb in Central Ohio, market had less then 40 houses listed in January-February. We now have over 200 listings. Most of the houses were for rent. Now, there are over 9 pages of foreclosures in a separate website not listed with MLS. Amazingly enough most houses that were for rent ended up in foreclosure. Some of these were Offer Pad related. Ironically, non-builder homes dropped 15% in prices and builders are not offering discounts or incentives. I think I will sit and stack for a few years. This reminds me of 2008. Only time will tell if it will be as bad as the GFC.

    • cb says:

      @ Gabby Cat –

      The bigger issue is will they bail it out like the GFC

      • Wolf Richter says:

        The banks won’t be in trouble this time since the securitized the bulk of the mortgages into MBS and CMBS, which are now held by investors. And many of these residential MBS are guaranteed by the taxpayer. So if the Fed wants to let housing go into real price discovery, it can without having to fear for the banks. Investors and taxpayers will take the bulk of the losses.

        • MarkinSF says:

          But this is about CRE loans which, I believe, is still held by the major banks. The question is whether there will be a cascade of defaults. The author seems to be of the opinion that CRE will hold up.

        • cb says:

          Wolf said: “And many of these residential MBS are guaranteed by the taxpayer.”
          and there is the crime. at least one of them.

    • RockHard says:

      If there are landlords getting blown out for cash flow this is big. I believe that this is where the unwinding starts, investors who over levered to get into rental income

      • El Katz says:


        Or the rent moratorium took them out. No rent = no cash flow. If they were leveraged out the wazoo, “it’s curtains”.

      • cb says:

        @ Rockhard –
        couldn’t happen to a more over-subsidized group. They have been bailed out by interest rate suppression and other methods since 2008.
        might get another bailout.

        • ru82 says:

          Big landlord companies will probably be bailed out. The have lobbying power.

          Mom and Pops. Good luck. The big guys will pick up your distressed rentals.

        • cb says:

          Lots of small players got bailed out through interest rate suppression after 2008.

    • Brent says:

      There is a nationwide site for foreclosured houses with photos and satellite views:

      foreclosure dot com

      I would recommend Markham, IL: 375 foreclosed houses for sale in $50K – $60K range.

      As to commercial property I am watching former BorgWarner plant in Muncie, IN.This place is tremendous, 1/2 × 1/2 miles(!) building, solid red brick walls…

      Last time it changed hands for $30K ( no sh.t !)

      Still sits empty from 2009…

      • Alku says:

        don’t show a lot and pushing a free trial :(

        • Brent says:

          Imagine being forced to buy ticket to VISIT a Graveyard of Foreclosures – I mean Just f… VISIT, not to be BURIED there !!! 😀

          If I were a heavy-duty Realtor I would sign for & pay whatever it takes for MLS.Master is only as good as his tools.

    • Brent says:

      Sorry, “foreclosured” is not a scrabble word 😀

  27. sunny129 says:

    When the prices have gone up & up insanely, no wonder, they fall, really hard! No tears here!

    it is their karma catching up with their past ‘deeds’!?

    • notdeadyet says:

      Its sort of like the child’s game, “Musical Chairs”, Sunny129. When the music stops, you need to be seated to win. And those who sell at the right time are seated on a pile of cash…. no karma involved, just instinct and hutzpah.

  28. The Bob who cried Wolf says:

    A month or so ago I had said this real estate pop (albeit it a residential prediction) was going to be a slow leak, like the tape on the balloon magic trick. I was wrong, way wrong. These guys are accelerating the interest rate hikes really fast. This means a couple of things: the fed knows they screwed up so badly they now have to do a panic brake as we all brace to plow right into the car in front of us; and this bubble is gonna ferociously bubbliscious pop and it’s gonna be a big mess all around. The media lapdogs and economists will start setting the narrative that we all knew all along a recession would be necessary, but the bigger problem is how they’re gonna sugar coat a possible depression, and all of this right before an election. These next few months will be very interesting.

    • Seen it all before, Bob says:

      They certainly stepped on the gas with interest rates.

      It will continue until the wheels start popping off and someone with a heavy Scottish accent shouts: “She can’t take it anymore Captain! We’re breaking up!”

      At that point, we’ll drop out of warp speed, interest rates will drop dramatically, and almost everyone will be fine.

      I predict this will happen before the November election.

    • Santos says:

      The faster things break the more cover they will have for hyperinflation.

  29. J Aster says:

    How many developers are leveraged? How many properties have debt exceeding the current market-clearing price? Developers won’t sell at prices that wipes out their equity. It’s in their interest to hold on to properties and hope the property can generate minimum required payments.

  30. Michael Engel says:

    BA-4/5 hit the lungs, not the throat, more contagious, more dangerous..

  31. Seen it all before, Bob says:

    They certainly stepped on the gas with interest rates.

    It will continue until the wheels start popping off and someone with a heavy Scottish accent shouts: “She can’t take it anymore Captain! We’re breaking up!”

    At that point, we’ll drop out of warp speed, interest rates will drop dramatically, and almost everyone will be fine.

    I predict this will happen before the November election.

    • Miller says:

      Not happening that way this time. The whole reason for the Fed’s more aggressive posture is that inflation is out of control, and runaway inflation is a greater threat to the powers that be than any other economic problem, even a deep recession, and a mortal threat to the viability of the United States as a great power, to the US dollar and to US financial institutions. And inflation like this feeds on itself. So the Federal Reserve has no choice but to go full pedal to the metal and continue raising interest rates and Quantitative Tightening with full determination, until they break the back of inflation across economy. JPow has to become the Paul Volcker of 2022. Likely result is a deep recession in early 2023, then recovery starting later that year. A whole lot like what Volcker himself did in the early 1980’s. Short-term pain for long-term gain to pop the housing bubble and asset bubbles, and now there’s no way around that.

  32. gametv says:

    It seems to me that the ability of workers to live anywhere and telecommute along with the collapse of retail sales channels would be a headwind to price increases, as people move to areas with more buildable land. I think the only thing that prevents this is the lack of building supplies and high cost of building.

  33. Block_Squared_Paybud says:

    It was real bad when the yeoman farmers had extensive exposure to the junior tranche of the BNYMT_1803-C50.

Comments are closed.