Today I decided to go through the recently sold houses in my city. I don't normally do that because I don't care - mostly. But there are starting to be lots of stories about housing being down roughly 10% in most areas of the Bay Area.
For example, one agent in my town is saying the average sale price in my city has declined 83,267. THE AVERAGE! And recently sold houses look to be mostly just a tale of misery. I would say that only about 10% of the houses sold above asking. One mobile home I was watching finally sold.
It was originally listed on 9/24/18 for 219.500. It finally sold on 8/9/19 for 125.500! I don't know what it looks like inside, but the outside is nice. That is almost a 50% discount!
If this is happening to mobile homes - the tiny house movement is dust. And if people don't think this bleeds into consumer spending.... well I don't even know what to say. When you take a 50% hair cut on a mobile home - this is getting serious. These are the new comps for that neighborhood.
The other thing that was interesting was a bunch of houses had barely had any price appreciation in 12 years. Less than 100,000 dollars. I like to go way back and look at price history. The reason this is significant is that there are a lot of headlines talking about the crazy real estate prices in the Bay Area are - but these price drops are really putting prices almost back down to pre-recession levels.
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That mobile that went for $125k, that didn't include the land did it?
ReplyDeleteNo. I don't think I've ever seen a mobile home in CA on it's own land. That is another state kinda thing.
ReplyDeleteRandom music link 1 (1080p WOOHOO!)
ReplyDeleteRandom music link 2
The wizard behind the curtain says: sit back and observe with wonder. :-)
There's a guy from the days of Old Internet Royalty, back when there was really no there there on what amounted to the Internet, who runs a night club I visited and happened to like over on the other side of the SF Bay from where you are ...
ReplyDeleteAnd he has some interesting things to say about San Francisco Real Estate Problems: Wherein a big glass box is moving in.
I've had a big glass box move in next to me, in fact a big glass hotel with valet service that still managed to fuck up parking for several blocks around it. What I did was the sensible thing: I bought out my lease and moved.
But let's focus on this night club owner and what he has to say.
"The development appears to be 'ground floor commercial', which almost certainly means that we can expect that storefront space to remain empty in perpetuity, as they do in all such new developments. Just look at all the empty storefronts on Folsom, Mission, King ..."
"You'd think that if you had empty property, the thing to do would be to lower your asking price until someone said yes, thus finding what the market would bear. But the landlords think they'll make more money by playing a long game, and leaving the place empty for years until they find one deep-pockets client -- which is almost always a soulless, characterless franchise of a national chain, not a local business."
There's a part of Downtown Chicago that I like to stay in because it has some character to it. This area is a few blocks away from State and Madison, but close enough that you can walk to pretty much anywhere in the Loop.
Over the years, funky old places to eat and to shop have been replaced slowly with national chains, with only a few of the hold-outs of the Jewelry District still surviving because jewelry is what they sell. And even some of the chains have become less interesting: the old Marshall Fields is now just another boring-assed Macy's.
There's a Nando's on South Wabash now ... incredible. And the South Loop, and the West Loop, and Michigan Avenue, just for what's within walking distance.
There still isn't one in the whole of Florida, let alone Miami or Northwest Florida in particular.
But Jamie's right: if you want the ground floor of all of these office buildings with mandated commercial retail zones to become a lot of Nando's, Chipotle's, and yogurt shops, just keep doing that shit.
Whatever's left can fill up with expensive restaurants with slow service for some of the marketing and C-level people who need to schmooze, and maybe there'll be an oddity like a "pet school" where you can drop off your pets during the day so you can go work next door.
But I get why residential and commercial real estate prices have been able to be so high over such a long time ...
ReplyDeleteIf the dollar's on a long-term slide, and it has been all that and a bag of chips, then when you buy a house that's at the edge of your budget now, you're gambling that future dollar depreciation and pay raises let you pay back that mortgage with cheaper dollars.
It's essentially the premise behind "Forever Stamps" at the post office: the actual contained value supposedly remains the same across the years because they can only raise rates to match the devaluation curve.
When your average sale price drops by 83k+ in a year, that may indicate that the trend of betting against the devaluation curve is starting to end as something that produces viable and expected results.
Which is why I've provided somewhat whimsical music: the Wizard of RE is being pulled from behind the curtain, kicking and screaming into reality.
The next bubble to pop will probably be commercial RE, not residential, and so that's why I'm paying attention to such observations as Jamie's.
So what am I doing in Chicago?
Had a look at the weather forecast for Florida and the Bahamas lately?
The expensive toy's been sold and I don't own any vehicles worth six figures now, so I did the sensible thing and flew out of the area. If any of my remaining vehicles get wrecked, that saves me time having to sell them, and maybe I can get a better check out of the insurance company than out of any of the dealers who don't want to buy these vehicles anyway.
One last thing: I took a look at my old house that I sold two decades ago.
The asking price now matches the sales price then, which means that in relative valuation terms the value of the house has declined substantially.
It would not surprise me at all then if a large portion of Suburban America essentially peaks this year and then begins an ugly slide downward in terms of relative valuation.
My little part of Northwest Florida has its nice scenery and walkable features to it, but do you know what would be much, much cooler?
Montpellier.
Luxury condos there cost only a fifth of what they do in San Francisco! :-)
"Zee Fronch" may be obnoxious about a lot of things, but they do know how to live, so there's that.
In the meantime, I have ample opportunities for exercise and I am avoiding having bucket loads of rain dumped on top of me with high winds ...
You bugged out to Chicago!?! LOL. That's funny. I'm not sure about living in a State where you have to evacuate every year and then find out you might not have had to. At least it will distort all of the financial data. So I guess there is that.
ReplyDeleteSometimes even I start feeling weak to move to a place like Florida. Then a storm comes in and I'm like -nope. Off the list.
During the recession I saw a lot of what you are describing. It stood out to me because I noticed the recession was going downhill fast. And the real estate market had seized up. I couldn't have sold even at a loss. So I crammed a renter into my rental after two months on the market. Crawled under a rock to hunker down. And took a monthly loss. Yes, my renter was NOT making my whole rent commitment. It seemed to me like others would rather lose their place than make up the difference. I didn't understand it at all. Now my rental has way more equity than my place. It's kind of been stuck in time. I only started getting any equity a couple of years ago. And now with the price cuts... even I probably have less than 100k equity after all these years. I'm in ~ that ~ pocket. But my rental has almost 100% equity. Surely I would feel very differently about things without the rental. But it's interesting to see one market vs. the other.
I have one helluva guest post on the local housing market once I manage to unload my crap shack, I’m leaving Calif for Texas. DF
ReplyDeleteOh! Even though we only met a couple of times I'm sort of sad to see you go. At least you meet the minimum requirements for entry into Texas being gun friendly and all. I would tell them you are from somewhere else though. They might never fully accept you. Get used to being called a yankee or some such derogatory term. They don't like us much.
ReplyDeleteI'd love to give you a guest post. I'm super curious about your crapshack. I'm surprised you still have it. Hit me up before you go and I will drive out to St. Helena. It would be nice to see you one last time and meet your baby. Is your brother going too?
There's a single Fry's Electronics in the state of Illinois, in the west suburbs of Chicagoland(ia) ...
ReplyDeleteIt's not conveniently located near transit.
Want to get there on foot? Take the BNSF to a stop before you think you'd want to get off and then trek about two miles through some so-so/so-boring suburbs without much of anything in them (let alone restroom facilities).
It's not a fun walk, especially when rain's threatening to come down, because there's pretty much nothing on the way in terms of shelter.
So is there anything different about this Fry's?
No, it's just as messed up as the ones in the Bay Area that you've described, and the rot's taken hold a lot more than when I went to the Fry's in A-Hole a while back.
The problem with the Fry's is that it's tucked into an otherwise not-so-lovely spot between a bunch of freeway ramps, and so the direct route from the south to get to it is not actually what you want to do. There's no DeadMall(tm) aspect to it (A-Hole Northeast), no DeadFactory(tm) aspect to it (Renton WA), nothing really amazing about this area except that there are an incredible number of big box retailers out there, which I suppose makes it like the Fry's in Austin.
But you see, I actually like Michigan Avenue.
I didn't actually make the trip just to see big boxes, but I can be tempted to go look at a dying electronics store, especially if there are good values.
Nope, not really any of those, not even so much as cheap storage for travel backups.
One thing that it looks like they're doing now is that they're refurbishing desktops that have been returned, exchanged, or something else by the hundreds, and they have a bunch of this OldCorpTech(tm) crap sitting around in stacks within some of the gutted rows with discounted prices.
The TV section is super low effort. It's like they're saying that you can pull up the specs online for these TVs yourself instead of trying them out on the floor, and that they can't even afford the wear-and-tear on a single sales unit now.
So I apparently sometimes have odd thresholds for what I think is going to be "entertaining" ... :-)
Know what this place really, really understands that a lot of the rest of the country doesn't?
How to prepare really incredibly good steaks.
So here's a surprise for you: while I lived in Austin, I could never get anything but a halfway decent steak. All of the great steaks never showed up because those cattle were being bid on for sale to top-end restaurants and butcher shops. Of course, those steaks will never be found in Northwest Florida as well.
But here? My hotel can do an excellent steak as room service.
So I'm sorta like Johnny Mnemonic in that movie: if it's dumping rain by the 55 gallon bucket load, I WANT ROOM SERVICE. :-)
Oh, DF, if you're actually moving to Austin, do not move to Bee Caves Road. Saying you live on Bee Caves Road is just Austin shorthand for saying that you're really from California. :-)
There are other spots along the Capital of Texas Highway (360) if you really want to be that close to the People's Republic of Austin. :-)
"One thing that it looks like they're doing now is that they're refurbishing desktops that have been returned, exchanged, or something else by the hundreds, and they have a bunch of this OldCorpTech(tm) crap sitting around in stacks within some of the gutted rows with discounted prices."
ReplyDeleteThat Frys store doesn't have a rental business does it? Might explain the weird inventory. I just read this morning that Best Buy now has a rental business for TV's and electronics. The story went on to say that there is no recession in sight because people are renting TV's by the mega load. Allegedly.
Of course I was not impressed by the shallow thinking reporter because having to rent electronics is not a sign of health. TV's are dirt cheap again now that everyone has a flat screen. And the fact that you pay up by a substantial amount for renting these items which are usually not the top or middle of the line. Yeah - I been poor! Even~ I~ figured out that renting stuff for your house makes you over pay. That's why I am not poor now. But everyone in their brother seems to carry a large credit balance. Imagine how much extra stuff people could buy if they didn't have to pay all that interest. But you can't get anyone to see the light of day on that. Completely normal.
My family was poor enough that we used to get stuff from a company called FingerHut. Which apparently still exists!
But room service steaks are fascinating. I can't even find a good room service salad!