California homes sales crashing... so goes the nation

California is about to do it again, crash the economy. It's already teetering on the brink of failure. I've been watching this closely recently.

"As goes California so goes the nations" - no idea

California homes crash

Sales of both new and existing houses and condominiums dropped 11.8 percent year over year, as prices shot up to a record high, according to CoreLogic.
The median price paid for all Southern California homes sold in June was a record $536,250, according to CoreLogic, a 7.3 percent increase compared to June of 2017.
In the past, California, one of the largest housing markets in the nation, has been a predictor for the rest of the country.

LePage points to the rise in mortgage rates over the past six months, increasing significantly a borrower’s monthly payment. Rates haven’t moved much in the past month, but are suddenly going higher again this week, pointing to even further weakness in affordability.

Seattle is having a similar issue.

Seattle inventory rises finally

In the Seattle city limits in June 2018, NWMLS saw 1,246 active listings, a 75.5 percent increase from the year before. Seattle ended last month with 1.2 months of inventory—a figure based on number of homes for sale and typical sales time—which is nearly double what the market had the previous year.

Seattle experienced a 75% increase in inventory in what's been essentially one of the hottest markets in the country. This may be nothing. It's not really a trend yet but it's a smaller piece of a larger puzzle.

NYC inventory increases

There were 2,629 closed sales in the second quarter — a nearly 17 percent drop from the same period last year, according to a new Douglas Elliman report. That is the lowest number of spring sales since 2009, when the market was stifled by the recession, said Jonathan J. Miller, the real estate appraiser who prepared the report.

There is also political motivations behind this, increased local taxes and a growing government burden that's become unsustainable.

Debt to GDP

Here is a website with the debt to GDP ratio for the US. Hint: It's sky high right now. This is one of my major concerns. As someone who works in commercial and residential construction something I've anecdotally noticed is the amount of banks we've been working with the last 2 years. I know Trump loosened some of the lending policies and I can see it happening in the market. This has me worried.

US Savings rate

Some of you may not notice from your bubbles but the savings rates are low. A lot of this is due to increased energy cost, inflation on goods and services, higher taxes on homes and other hidden taxes and generally everything costing a lot more. If you think the nationally calculated CPI is the true inflation rate you aren't paying attention. I've watched some food items nearly double in the past few years and others get quiet the markup.



Here is a good channel and video regarding the topic of real estate.

a reply to: toysforadults

This is what we get from a 2 party system that refuses to fix problems and the last time around (2008) banks and rating agencies execs didn't go to prison. That maybe by design.

Everything is now an investment (gamble), cars, 401k's, homes, property, commodities and paper metals. It seems to be all fixed and the regulations fail to address it. That maybe by design.

a reply to: atsgrounded

there's very little natural resources left in our country so now we have to rely on housing and manufacturing

Pretty sure it will just be California all on it's own crashing. The nation will sit by and watch, largely unaffected.

California housing is preposterous, 400 grand for what would be a hovel in most inner city neighborhoods. Large billion dollar corporate hqs literally surrounded by third world # covered streets.

This round is all California, it's going to be a solo act.

a reply to: MisterSpock

Yeah right. California is the 5th largest economy in the world the entire country will feel the California market fluctuations.

a reply to: [post=23617837]toysforadults[/post


Depend on housing and manufacturing for what? There is a crap ton of speculation on everything from apples to zinc.

a reply to: atsgrounded

The majority of our market is built on manufacturing and real estate. Speculative investments is not how the average American experiences the market

a reply to: toysforadults

Its unrealistic to compare a state in a country to other countries economically. States have costs they dont have to incur that countries do. Like national defense.

If California had to have a national defense budget, and pay millions(billions?) In costs to fight their wildfires then they would have a much poorer balance, economically.

Will a California collapse be visible on the national stage, probably. But it certainly wont drag the other 47 contiguous states with it.

I'm sure a few large tech companies would flee, and suck massive amounts of capital out of the region. California will spiral down, it will survive but will continue on its quest to solidify itself as the anus of the US human body.

This is what was called "white flight" in the 70s and 80s, only today it covers anyone with the means to move, regardless of race. A handful of states are regulating and taxing their citizens right out the door, driving them to other states.
www.cnbc.com...

He said the latest Census Bureau data, from July 2016 to July 2017, show "more people moved out of California to other states than moved in from other states. In other words, California lost people due to domestic migration."

The only real difference between California's fleeing population and those leaving places like Illinois and New York in droves is the folks leaving California seem to include working class Americans, while Illinois and New York are seeing their upper middle class and wealthy residents hot foot it out in droves.

This won't impact the federal economy unless DC allows it to.

Those damned bubbles. Always with the popping.

a reply to: toysforadults

The average person experiences speculative investments every time they buy anything. Investment bundling, hedge funds and micro trades make this a brave new world.

a reply to: burdman30ott6

I think the top 5 states everyone is moving out of are all Democrat strongholds.

There's no doubt about it. However that doesn't change the growing burden of inflation and dwindling savings rate. There has to be substantial wage growth across the board for the economy to really bounce back otherwise the average American has no purchasing power, they are debt slaves.

a reply to: MisterSpock

Real estate is super localised in a lot of respect, but I think there will be a general dip (to various degrees depending on the locale).

I moved my family from the DC area (absurd prices) to Texas, bought and sold out place there and now are renting in middle Tennessee waiting to see what the market does. Rising rates, crazy prices, and tax changes will have some kind of impact. How much - who knows.

All the homes in our price range (300-400k) are staying listed or slowly dropping prices. Granted here that'll get you around 3000 - 3200 sq ft on about a third of an acre for newer construction, but I am thinking a 5-15% dip is coming here. Granted - there is tons of space, tons of new construction, and this is one of the fastest growing areas of the country. Just depends on if median income ever gets close to the crazy home prices.

Even if there is a dip, timelines are not so mathematic because of the emotional / psychological factors in real estate, and agin the numerous variables related to real estate.

Overall I would be surprised (despite my constant reading on zero hedge and Wolfe street) if we are another major real estate bubble pop. I think the economy is bubblier as a whole compare dot 08, but I think lending is still a little tighter... just my personal observation from Tennessee. YMMV

a reply to: toysforadults

Since California is so completely super duper awesome, of course you should pay 3x the national average for a cardboard box.

a reply to: atsgrounded

Well, they aren't buying anything. I know everyone claims Amazon is why the retail apocalypse is happening but really it's Amazon + no one has money to spend.

By no one I mean the majority not the rich pricks who roll around bragging.

We should have been in a deflationary period but the Kensyian's don't want that so they create easy money lending policies to keep the bubbles going.

If they let things crash and allowed for deflation and prices to come down the economy would be far more stable. That doesn't happen though they prevent it by government spending and lending.

a reply to: toysforadults

Go do Amazon Prime for a few months, then come tell everyone how there's any room in the future for anyone who isnt their lacky minion.

a reply to: MisterSpock

Actually, it only a matter of time before the whole country crashes due to decades of failed policies.

a reply to: toysforadults

Agreed.

It's California. No one can afford to live there, so they are all leaving.

There was a similar period in history called the Great Migration.

a reply to: IgnoranceIsntBlisss

I use Amazon as little as possible. Same day delivery. I still have to try on clothes before I buy them due to my build. People don't shop anymore, or see movies, or go to Starbucks because they wallet is tight not because of Amazon.