A plugged in reader who’s in the market for a mid-seven figure home in San Francisco toured a few this weekend and reports that two agents “used the term “rushing for the exit” to describe sellers.”

In related news, the inventory of single-family homes and condos listed for sale in San Francisco, which doesn’t include the vast majority of new construction units on the market, ticked up another 8 percent over the previous week and remains over 50 percent higher versus the same time last year, while the percentage of listings for which the asking price has been reduced at least one is running around 17 percent, 5 points higher year-over-year and 110 percent higher in the absolute.

Expect all local brokerages to dedicate at least a few minutes of their office wide meetings to messaging and “media training” this week.

102 thoughts on “Have Sellers Started Rushing for an Exit in San Francisco?”
    1. You’re welcome to skip straight to the trend data in our second paragraph, or even provide an argument as to why the agents’ comments were misleading or wrong. Or you can simply whine.

      Regardless, we wouldn’t have used the quote for context if the identity of the reader wasn’t known or hadn’t previously been qualified as a reliable source.

      1. With all due respect, “sellers rushing towards the exits” on mid seven figure homes is an absurd notion. 1- there aren’t that many of these homes for sale to begin with. 2- if owned by the wealthy many can, and will, afford to go to the sidelines. 3- only place this could make sense is on high end flippers…and how many of those do we have? Few. Very few.

        I stand by what I said. Two comments from micro-tree-branch-leaf viewing realtors on a specific sub segment is anecdotal hearsay to the nth degree, and ripe for mis assessment.


        1. Listing don’t come online at the drop of a hat. There are inspections, staging, brochures and websites to make. So agents absolutely have visibility into the pre-listing pipeline. So it’s not at all absurd for agents to know if there’s a wave of properties coming down the pipeline.

          Now, there’s what people know and then there’s what they’ll say. And the industry tends to stick to the “there’s never been a better time to buy” party line very closely. But one thing about the very high end market is that there are fewer high end buyers and so relationships are more important than sticking to the party line. Who wants to be the agent that suckered a wealthy well known person with the “time to buy” line right before a wave of supply hits?

        2. According to Trulia, there are currently 641 homes in San Francisco for sale in the 7-figure range. There are a total of 1,274 homes on the market, so that’s a little over 50% of available RE and the other half are going to be pretty darn close to 7-figures. A lot of people who recently jumped into the SFRE market put everything they have into their investment and are scared of losing the proverbial farm. Not necessarily high-end flippers, but young families who thought investing in SFRE was better than a 401k, which is probably true IF you buy when the market is in a trough – not if you buy during a peak. The signs of the decline in domestic real estate returns have been present for over a year and the trend ever since last September has been downward.

          1. Historically, there has never really been a trough in San Francisco residential real estate. Not like other markets. There are plateaus, but even during the nationwide real estate crash in 2007/8, I don’t think overall SF values declined year over year. (Some neighborhoods did better than others.)

            The other problem is that I don’t really think it’s possible to know, at least with much certainty, when you are in a peak (a trough, if it happened, would be more obvious.) When I bought here in 2001, I was sure I was buying at a peak — there had been a significant runup in prices for several years — yet the value has at least quadrupled since then. Had I held off, thinking it would be financial disaster to buy at the peak, I’d have blown the single best financial decision of my life.

            I’m not saying values can never decline in SF, but I think if you can afford to buy in SF, and you’re going to live in your property indefinitely, you should not be scared away by where the market is. If you’d done so during any of the previous “peaks” you’d be very sorry now. And if values take a dip after you’ve bought — so what? Unless San Francisco somehow becomes a place that people know longer want to live — and I’d agree that our city policies sometimes seem intended at bringing that day closer — you’re not likely to lose money by sitting on SF real estate. It’ll come back (likely with a roar.)

          2. There are plateaus, but even during the nationwide real estate crash in 2007/8, I don’t think overall SF values declined year over year.

            That’s patently false. Home values in San Francisco proper dropped an average of 20 percent during the last decline and not a single neighborhood was immune.

      2. For a little extra context, the brokers did say that the $1-2m range is still hot with multiple offers.

        They said the “submit offers by X date” is now gone from the market and that people are doing inspections again.

        When we looked two years ago, folks were putting in multiple bids by X date and waiving the right to inspect the homes.

        I’m not super emotional about the whole thing to be honest. We’re lucky enough to be able to buy or rent something here or in the area surrounding the city, but I have to say the whole real estate thing is just horrific (and that’s coming from a New Yorker who spent a decade in LA — two very, very hot markets).

        We’re going to pound it for two more weeks, put in two or three offers and if we can’t get a reasonable deal done we’ll just rent something for another two years, as my gut tells me the market will be flat to down over the next two years (but modestly, like 10-20% from here).

        The Bay Area is still — by far — the most innovative place on planet earth. If you angel invest in startups or are involved in building them, it’s just 100-1,000x any other location.

        That being said, remote work and coming into the city two days a week seems to another very real trend I’m seeing (people working, literally, from home in Yountville and driving into the city 2 days week for meetings). Things like Hipchat, Slack and GoTomeeting are making remote work much more possible.

  1. I think most people listing in this end of the market are a bit late to the gate. Spring 2015 was probably the peak. There’s some consensus a recession is looming so there’s something of a last ditch attempt to cash in happening right now. The question is will sellers at the top end of the market compromise on price or will they simply pull the listings? My thought is that if sellers aren’t getting offers at the prices they want, they simply won’t sell. How many sellers either have to sell or are highly motivated to sell is anyone’s guess. I would expect a couple of years with much, much lower inventory at the top end.

    1. Though there wasn’t much inventory just recently back when sellers could get any price they wanted. So if you hold off on selling when prices are strong and then hold off when prices are weak…

      And overall, inventory does seem to be increasing as a downturn looms. Though it would be nice to see a breakdown by price tier.

    2. “My thought is that if sellers aren’t getting offers at the prices they want, they simply won’t sell.”

      In other words, the “law” of supply and demand doesn’t really tell the whole story about real estate prices.

    3. That’s exactly what the brokers we’ve spoken to have told us… the peak was this time last year and people are looking to cash in because they think the market is at a top (no one can know this for sure, but it feels directionally correct).

      On redfin i see 98 homes between 3-10m on the market and a LOT of them have just come on the market…

  2. The part of the market you are talking about is basically “the market of the 1%-ers”. Over whom, a rat’s patootie couldn’t be shed a tear. Given much of the ill-gotten gains of that social class are from under-taxed capital investments and not income, and given the recent volatility / flat-lining of the capital markets, its not surprising there’s a lot of volatility at the high-end of the market.

    None of which will translate into increased affordability in SF (or much of the Bay Area) for that great swath of society once called the Middle Class and now completely indistinguishable from what we once called the Working Class.

    1. Exactly, even if prices fell through the floor and dropped 25% minimum,, it would very barely affect the city’s affordability. It would help out some people on the “priced out margin”, which is, I dunno, maybe 275k household income?

    2. Do you know what classifies as “1%-ers?” And what makes you think that an entire group of people who are doing well have not paid their taxes and that it’s somehow ill-gotten? Small business owners, lawyers, doctors, engineers (on the high end) all easily fall into the 1% bracket. They also pay upwards of 45% on their taxes (I pay nearly 50%).

      1. Roughly $450,000 a year in annual household income puts you in the top 1% nationally. $230,000 per year in annual household income puts you in the roughly the top 5%. So yes, I do know. And the more people earn, the bigger percentage in taxes they should pay. Its called progressive taxation and a key feature of every developed, civilized nation on this planet.

        1. I think your numbers are off, everything I’ve seen is more like $160,000 to be in the top 5% nationwide. That is NOT going to get you the median condo in SF. I know doctors and lawyers who are struggling here.

          The fact is that only 11% of residents can afford the median home here. This tells me that there is some source of funding that is far outside the norm. Specifically, VC greed/irrational exuberance and foreign funny money. The definition of “demand” is a willing and able buyer. Even if these people can afford it, they are listening to growing chorus of smart guys like Icahn, Soros, Druckenmiller, Spitznagel etc who are predicting a hard landing, as seen by large net outflows from stocks/ETFs for the last 15 of 19 weeks. You’re simply not going to sustain these prices much longer in that scenario.

          If you think the economy is rosy then you are listening to the six corporations that control 90% of the media in America, but they are peddling fiction sorry!

      2. Ouch. Talk about inefficient tax strategy. You need to understand tax laws and use them to your advantage. My wife and I have a very meaningful combined household income and our combined 2015 federal and CA tax rate was 16.9%. As a percent of net worth, the tax rate was basically zero.

        1. Do you mind sharing broad, overview of some of the tax strategies you deploy? We are $450+, made up of wages and rental income. The go-to deductions (dependents, mortgage interest) have not been meaningful. We are nearing 27-29% combined tax rate.

          (what does tax rate as percent of net worth mean?)

          1. You need to buy a long-term investment property at a “loss” to offset your income. Something like a fixer upper at a low price but plenty of upside in the next 10-15 year time frame. You can reduce your income to almost zero if you want. Hire a good tax attorney.

          2. If your high income comes from W2 or K-1 earnings, there is not a lot you can do. You can’t offset rental property losses (although you could bank them and take the offset to any gains when you sell – big deal). Note that realtors misstate the rules on this all the time.

            The low tax rates are for passive income – capital gains, or tricks like hedge fund “carried interest” that treat working income as if it were passive income. About all you can do is try to increase the amount of passive income you earn. Or switch jobs and become a hedge fund partner. Working stiffs (like me) are chumps.

        2. I can understand income being great, large, or significant; but if I ever describe my income as being meaningful please just shoot me in the head.

          1. Yeah, I agree with Bud Mor. I read that and practically threw up a little in my mouth. The word choice implies (and probably demonstrates) incredible disdain for those whose income is (apparently) “meaningless”, regardless of the actual numbers involved.

            Someone earning such “meaningful” amounts should absolutely pay more than 17% in income taxes.

    3. You couldn’t give a rat’s patootie but you did need to comment — or at least spew. Too bad you didn’t add much to the conversation other than to show us that you are a bit unhinged and jealous of those who have been more successful.

      1. The idea that criticism of the upper social classes is about jealousy is complete hogwash. But a common distraction mouthed by the upper classes whenever they are criticized. Hell hath no skin so thin as that of the bourgeoisie.

        1. Like if there were no rich people, the poor would soak up the excess wealth? How ridiculous……no rich people in Cuba, EVERYONE is poor.

          1. But no homeless? And presumably no overpowering and life crushing envy?

            And are you sure it’s truly EVERYONE? Presumably government officials are fine as well as anyone having state licenses to perform business. Which may not be far off from 11%, which is the SF percentage of residents able to afford median home …

          2. Yeah, trickle down. Cheap money for rich people, expensive money for workers.

            Class war is acceptable and unnoticed when it’s top down, but when people who work for a living point out the unfairness of the system, it’s an unseemly class war!

          3. It’s not unfair that poor people pay higher interest rates than rich ones. Rich people don’t need the money, therefore banks have to give them an incentive to borrow. Poor people need money; they have to offer an incentive to the banks to lend. It’s the opposite situation and the market response you point out is reasonable and fair.

          4. Poor people need the money because housing costs go through the roof when the rich are supplied with cheap money to speculate with. Begging rich people to borrow money they don’t need does only one thing: it causes asset bubbles. And asset bubbles are ultimately disastrous for all but a few in the financial sector who exploit those bubbles, wreaking havoc on the economy, leaving workers with the bill.

          5. I have been to Cuba… lots of homeless because NOTHING has been built for 60 years and even the old building are literally falling down !

      2. Where did he mention jealousy? I make lower mid 6-figures, and can’t afford crap in this city. And if the price of these “mid-seven figure homes” plummeted by 10% or 25% or even more, I *still* couldn’t afford them – but HousingWonk is right that in that circumstance, there might at least be some cascading effect on other market segments that makes that somewhat less ludicrously UNaffordable than they are currently.

  3. Perceived market weakness means more buyers to the market means SELLERS market. BOOM. Brokerisim 101.

    1. Um, when affordability is at a record low, foreign buyers have disappeared, the stock market is making lower highs, a bunch of new construction is hitting the market, and tech companies are tightening the belt, you’re gonna have to drop those prices a lot more before the BUYERS get excited.

      Everyone is saying it’s the top end but that’s not true. District 10 is also showing

        1. MLS stats for D10 SFR, comparing Jan-Apr 2015 and Jan-Apr 2016: new listings -23%, pending sales -22%, sold listings -25%. This matters because during the last bust, declining volume was a leading indicator.

          Anecdotal but I think this is due to less investors and flippers buying. So when you have the high end and the low end slowing down, it’s called the “smart money” aka the wealthy and the investors sneaking out the exit.

          1. For what its worth the Caldwell-Banker house estimator for the Mt. Davidson area has dropped 4/5% since it peaked last fall. This is based on comp sales I assume. A number of people who live in the area as I do get an e-mail every month with the home estimate. Its available to anyone.

            Mt. Davidson is not considered a desirable area by many, but it certainly is not a low end neighborhood.

          2. To me, this sounds like a fall in supply (-23%). The fall in sales is largely in line with the fall in supply, which means no additional inventory is building up. To me, this sounds like a strong seller’s market and I would expect prices to go up. Btw, do you have any data on the prices?

          3. I think those stats ARE probably consonant with less investors and flippers. Might not be as bad as all it first appears though…for one thing all your stats are going the same way, so it doesn’t seem like more is sitting on the market much longer. You’d really have to get more deeply into the composition of the sales (fixers? fixed? median values?) to figure it out.

            Certainly anecdotally I’ve heard much more buzz about people either moving to, or thinking of moving to Bayview…and unlike the last boom when Bayview had a little moment, the people I know are actually excited (rather than resigned) to moving there. This space bears watching though, I would expect Bayview and Oakland to fall first if real estate really starts turning around.

          4. It’s both supply and demand slowing down together. If demand had remained steady with 25% less listings, then we’d see the other numbers improve, but DOM and SP/LP are flat too. Prices are up 11% but that doesn’t mean they are going up now- that means they went up somewhere between last April and this April.

          5. That is also looking at Jan-Apr.

            Look at the OP to see that there’s been an 8% rise just over the past week. And I believe that the week before that saw a large week over week rise.

            Also, if the entire market is showing inventory up 50%, I don’t know if the ultra high end of the market is large enough to account for that entire move. I wouldn’t think the mid seven figure segment could be that large a portion of total sales/inventory.

          6. “Mt. Davidson is not considered a desirable area by many” Why is that? I really do not know.

          7. Mt. Davidson is not “desirable” as some (many?) think its the burbs. Like if I wanted to live in the burbs I’d move to Burlingame.

            Specifically, not close to restaurants and shops (West Portal is the closest “in” shopping venue) – but there is Mollie Stones. Starbucks and Safeway DH. Plead guilty on the lack of restaurants.

            But for the few such as myself who like it, the lack of traffic, front lawns/yards, large backyards, windy streets and many detached homes more than make up for an over-priced and trendy restaurant not being close by.

  4. What does a seller “rushing for the exit” mean? Not a snarky, rhetorical question. I just don’t understand that phrase. Rushing to discount to sell quickly? Rushing to list now to cash in on record high pricing? Rushing to pull listings? Something else?

    The ed. has been tracking these things well. 630 Page just closed at $2,995,000 – down $455,000 from a year ago. But I still see wholly unexceptional places selling for psycho prices. All in all, I’d much rather be a seller than a buyer. I don’t think I’d buy at all in this market.

    1. Contact a home stager or someone who does home inspections for disclosure packets. If suddenly after years of slow home sales, they are booked solid you can infer that suddenly many people are preparing to list their properties.

    2. Having read the link from the OP – well not OP, exactly, as much as respondent who inspired this thread (RWITT??) – I think it might mean some people have met their new neighbors…and don’t like them very much.

    3. Right – depends on if the seller is trying to just achieve a nice but ultimately personally unnecessary gain, or if the seller is truly a non-wealthy mid- or long-term incumbent waiting to cash out (i.e. the folks who *need* the money).

    4. In the “mid-seven figure” market, there a quite a few people who likely own multiple homes and sensing a declining local market and tenuous US economy are trying to cash-in at the last minute, if they can, knowing that it could be several years before we see similar pricing. You can pretty much tell which listed properties have never been lived in. Likewise, there are a quite a few developer remodels out there and quite a few more that need to come online right now if they still want anything close to top dollar. We are already seeing developer projects move at 10% less than asking. High-end buyers aren’t biting unless the property is so insanely desirable (2600 Jackson, 3610 Washington) that money becomes no object. At this end, it’s not an affordability issue. HNW buyers just don’t want to buy close to peak. I expect more big discounts, some major losses and buyers staying on the side-lines even as supply grows tighter.

  5. I think that the ‘sellers running to the exits’ narrative only applies to the Top segment of 7 figure SF mansions.

    If you want some anecdotal evidence from the Bottom of the market, 1747 Palou Ave in the Bayview, just sold for 1.03 Million, up 29% from 799k listing price….

  6. I am thinking in the “lower end” (god, can’t believe i am saying that) of say 1.5M and below that market space is still going strong. It is the high end and condo market that is taking a breather…maybe?????

  7. 1 – when tech flutters they cash out their stocks and diversify into RE

    2 – yes, prices are high but interest rates are still very low. so, longterm, it’s still a structurally sound move.

    3 – when you remove $1M+ and starter SFRs that are complete run-down POS, protected tenants, etc, SFR inventory is not as high as it looks.

    As a current seller, my SFR is in the upper end of the “Goldie Locks” range. I bought in 2011 and expect to almost double what i paid (before commissions and taxes). And I plan to buy 2 more complete sh!t-holes. The point is I’m not a +1 to the inventory stats. I’m not even a break even (sell 1, buy 1). I’m actually a -1 on SF entry-level SFR inventory.

    I agree the market is adding DOM to closing stats but i think secondary markets (Oakland, Fremont, SFO) will fall before SF. Interest rates and our iron-jawed local economy keep us fighting forward tho.

    To say SF is topped out is premature and a bit sour grapes. Same song they were singing last year.

    1. “And I plan to buy 2 more complete sh!t-holes. The point is I’m not a +1 to the inventory stats. I’m not even a break even (sell 1, buy 1). I’m actually a -1 on SF entry-level SFR inventory.”

      And then what? Hold them vacant as POS’s? If not and you’re doing fix & flips, then you’re not actually consuming inventory steady state. You’re just moving inventory from the POS category to the move in ready category.

      1. @anon – if you must know, one to fix up a bit and move into. i’m a live-in flipper. i remodel mostly by myself, slowly over 2+ years and take the first $250K profit tax free. lowers my effective tax rate. but i’m single and live light. don’t even need a kitchen. just a fridge and microwave. that saves me a lot on the remodel upfront.

        2nd house is just to rent out until i need to move into, prior to selling 1st house. becomes next project. you just have to be ok to live in a “dated pooper” for some time before it starts coming together. i pay cash for improvements where i can.

        it’s a part time thing. i have a home office in tech. i only do SF bc i’m a native and know the nooks and crannies of most neighborhoods. i’m not crazy like that Joost Street guy with the parking spot, but there’s lesser things that can improve desirability a lot.

        1. Your sitch & modus operandi sounds very, very much like mine, except my venue is Oakland and I don’t do tech on the side anymore. I raise my glass in toast…

    2. Great post, love to hear investor thoughts. However, the “iron-jawed” local economy 100% is related to Fremont, for example, as it’s very convenient to SV and the SV market has the same issues that the SF job market does. I.e. if Fremont starts going down, SF is going to fall as well, just after a delay, that’s all. If anything, SF’s job market is less diverse than SV’s, since it’s fewer companies with larger blocks of space.

      1. “SF’s job market is less diverse than SV’s,”

        I agree. The gutting of SF’s blue collar base is going to bite SF in a big way. SF barely felt the Great Recession, while much of the rest of the country never left it. Now SF gets to bear the brunt of the second wave of the Great Recession, precisely because it was ground zero for housing bubble 2.

        1. “Now SF gets to bear the brunt of the second wave of the Great Recession”

          That’s a very extreme thing to say.

        2. Overstated per usual. And it’s not a housing bubble. If anything it’s a tech bubble. And yes, if it IS a bubble that pops, SF will feel it hard. But it’s not because the blue collar base has been gutted….that started happening post WWII in SF, and has not been a factor locally for 20 years, anyway.

        3. SF will feel a tech bubble more than most because it was close to the center of the tech boom in SV. And RE boomed here accordingly.

          SF’s economy is actually non-diverse and weak insofar as that.

          The blue collar jobs left long ago. And more recently the banking, insurance and brokerage jobs – Schwab abandoning it founding home of SF last year.

          Health care jobs, government jobs, service jobs. And the spillover from the SV which propped SF up recently as it did 16 years ago in dot.com days.

    3. “Same song they were singing last year”

      And the year before that. And the year before that….

        1. I mean the people commenting on and writing for this site. There is a group of people who have been sagely nodding their heads that we are in a tech bubble and wisely pointing out how they saw it all coming. Here is talk of the impending bubble from:

          2014: A Voyeur’s Dream Condo, Post-Bubble Buyer’s Dream Outcome

          2013: A Perfectly Average San Francisco Sale And Bubble Talk Revisited

          2011: The Economist Calls Another Rather San Francisco Centric Bubble

          1. Got it. So it’s not that there has been a consistent and ongoing narrative declaring that a bubble was just about to pop, but somebody, at some point, said something about a bubble.

  8. This isn’t rocket science. Inventory increasing and price reductions increasing are two very standard indicators of a real estate market normalizing or even correcting. Add to that the number of new condos (never been lived in) that are for rent, plus the large number of both rentals and condo developments either in the pipeline, under construction or in early planning stages and you have a nice basket of non-anecdotal piece of information to conclude the local market is entering a different phase. Now, layer on the anecdotes to fill in the picture.

  9. There were barely any IPOs in Q1. Let’s not kid ourselves, this is where the money comes from for non foreign buyers in this area. With a stuck in the mud stock market, not one is going to take Uber or AirBnB public.

    1. You can also find investors simply looking for the rental income. If a place sells for 750K and rents for 45K/Y it’s a workable rental investment. Maybe not as good as in 2010, but decent return nonetheless.

      Similarly, the rental value will attract the techies who have been renting for a few years and are tired of throwing their money into rent. Rents which seem to be pretty stable, by the way.

  10. If you are on welfare, you can get about $35000 a year in various cash and benefits, which puts you in the top 1% of income for the world.

    to say it again, if you’re on welfare in the US, you can be a one percenter, on a worldwide basis.

    1. Have you been to other countries? You can buy a bag of oranges, sell them on the street corner, and put a bowl of rice in your kid’s hand at the end of the day. In America the crony rules favor the big guy over the little guy, you want a bowl of rice you sign up for wage slavery, and you hand most of that over to monopolistic SaaS (Swindling as a Service) companies for your basic needs. The welfare trickles up here, make no mistake.

      1. Yes, Adolph E’s post amused me. One anecdote – we had a client (an individual) who received over $100 million in tax benefits in a single year through clever use of residency rules (yes, that we helped him devise – all legal). But let’s point the finger at food stamp and medicaid recipients for the peanuts they receive that put them ahead of the world’s impoverished masses (and, so what, by the way? We are a wealthy country – be thankful for that).

    2. The lower income folks are not the issue. Try to live on 35K in most US cities.

      The top tier are the one’s who have had tax laws set up for them specifically. All legal they are afforded advantages that the average middle income person does not get.

      The Clintons left the White House broke and are now worth 200 million. The world is different for the “establishment” folk. But they like to have the middle income people (who are the ones really getting the shaft) to look to the lower income people and place the blame there. It works only too well unfortunately.

    3. It’s worth noting that even if your 35k/year number is true, which I doubt, it would NOT put you in the 1% globally

  11. BFD. so the bubble deflates, it will just re-inflate later, like it has for the last 100 years…

    1. Your knowledge of economic history is deficient. Housing bubbles are a recent phenomenon. There were no systemic asset bubbles for over fifty years after the Great Depression. Serial systemic asset bubbles began when supply side economics usurped Keynesian policy in the 1980s. It went into high gear when Bill Clinton brought Wall St into his administration and slashed the regulations FDR put in place to keep the banksters from blowing up the economy every five to ten years.

      Without the low, low interest rates kept in place specifically to boost asset values, your cherished housing bubbles would go *poof*.

      1. Low interest rates will be with us for decades to come. Look at Japan — nearly thirty years after their economic bubble collapsed, interest rates are still at 1% or so and due to demographic changes there is not a single thing their government can do to boost growth. All Western democracies (and some Eastern ones) are now falling into this trap and they will be here for decades to come. A logical course of action is to accept reality and profit from it.

        1. That’s Japan’s low interest rates are a result of their economic collapse is one possible interpretation.

          Another conclusion you could draw is that having a policy of rock bottom interest rates to boost growth is a failed course of action. And some would point to Japan’s lack of success in reviving growth via prolonged interest rates as a reason not to keep trying the same strategy here.

        2. “there is not a single thing their government can do to boost growth”

          Ah, the good old TINA (there is no alternative) argument of the neo-classical/monetarist/supply side financial sector 1%ers.

          Funny, there’s always a lot the government can do when it comes to boosting asset prices (slashing interest rates, pumping trillions of dollars into failed banks), but the political will just aint there when workers need jobs and higher wages to keep up with the rapidly increasing cost of living caused by the hidden inflation of asset goosing.

          Sadly, your “logical course of action” is short-sighted and sociopathic behavior. Ever heard of the Prisoner Dilemma?

          1. Japan has the double-whammy of a protracted deflationary collapse and a long term demographic shift. They have no immigration, birth rates are extremely low– below replacement rate, and their population is aging rapidly. Economically speaking, they are literally in a death spiral. Unless the entire country suddenly converts to Catholicism, forgoes birth control, and starts pumping out kids, or they open their doors to mass immigration, they are basically on an irreversible course. I believe the problem in Japan is not a failure of monetary policy but an irreversible demographic shift.

            Monetary stimulus can and does work; my real estate portfolio is living proof that taking large, leveraged positions in high quality assets in a depressed market can very quickly yield huge rewards with no actual work done. Further loosening of lending standards will only accelerate the gains.

          2. “quickly yield huge rewards with no actual work done. Further loosening of lending standards will only accelerate the gains.”

            There’s enough bad fortune in this world, that I’d hardly begrudge you your personal spot of good luck. But your example also illustrates the macro economic problem this presents.

            Huge rewards with no actual work being done. And the only way to keep this going is to further and further lower rates, inject liquidity and/or lower lending standards.

            That’s the problem with this type of stimulus. It’s not low birth rates/immigration, it’s that while it may stimulation economic activity, it doesn’t stimulate productivity. And to keep economic activity rising without increased productivity requires increasingly larger and larger economic interventions.

  12. Jimmy, that is far from reality. Besides monetary stimulus, there is fiscal stimulus, and there is also the seldom mentioned option of restoring the free market… this radical idea involves sound money policy, taking away the Fed’s dual mandate from the 1970s which may be a failed experiment, and letting the market decide the cost of capital.

  13. Buyers have more properties to choose from in the market and Sellers are seeing less competition for the their homes. This will impact the overall market. If anything, it’s a healthy sign as buyers are finally able to secure a home without dealing with the psychological trauma of getting into ultra competitive bidding processes for what is arguably a shady process of gross under-pricing to drive emotional bidding. But that is another topic for another day. The economy remains strong and bay area tech is still driving the story but if we’ve learned anything its that the story can turn on a dime.

    Kudos to SS for continually taking the temperature and providing good data points along the way. Short answer is no one really knows anything other than there are some leading indicators that a slowdown could be on the horizon. We’re at the outer bounds of prices in the market so there is going to be a lot of resistance to break through as buyers and sellers come to grips with those boundaries. Rental prices seem to be holding steady as well. I think the balance between RE inventory, rental prices, (low) interest rates and the overall state of the macro financial market and micro tech markets will drive the issue long term. The only variable seems to be inventory at this point.

    Good luck out there.

  14. With a few well-written blog comments and a perfect clickbait quote amplified to headline status by the editor, does it seem like Jason may have knocked a couple percent off the price for the type of house he’s interested in? Admittedly he nudged it in the direction it probably wanted to go anyway, though his rationale for buying while expecting a 20% drop isn’t totally convincing.

    1. But agents for the sellers have the same visibility into the pre-listing pipeline. More even if they primarily work with sellers. If this is a bluff and there’s nothing coming down the pipe then any sellers agent worth their salt should be able to call the bluff.

      1. That’s what I meant about nudging it in the direction it wants to go, though I think it’s more about moving the demand curve than the supply.

        1. 1. Just to be clear, I had no idea comment #78 on a thread would becoming a top level post with 100 comments
          2. I think the data is all that really matters in any of this…. the inventory combined with the price reductions is all that matters right?
          3. Houses being pulled off the market seems to be an interesting data point, but that seems hard to track.

          Don’t think the comments here are going to push the market… there are thousands of folks looking for homes right now and I think a dozen of them will read these comments.

          The sellers and buyers are far apart right now it seems, so I think it’s one of those awkward times where deals will just take time (as opposed to the last couple of years of multiple offers on X date with no inspections).

          1. And just to be clear, I found your comments enlightening and entertaining, and I applaud the editor’s war on information asymmetry.

  15. If you’re hung up on the sourcing of the quotes in the OP being anonymous agents, here’s an article that has direct quotes with attribution.

    ““We’ve recently noticed a slowdown,” Jack Woodson, who works at Alain Pinel Realtors in nearby Menlo Park, said on a tour of the house in the Old Palo Alto neighborhood.”

    They call out reduced Chinese demand as one factor and still see strength in the $2M-$3M segment.

    1. When I saw that homes in Palo Alto over $5mm were sitting for 16 (SIXTEEN!!) days on the market, my jaw totally dropped…. This could be the end of everything.

  16. What might be more telling, the YoY change in DOM from April 2015 to 2016 was from 11 to 16. From April 2016 to the first two weeks of May went from 16 to 30.

    And from the VP of a company that provide real estate advice to the wealthy:

    ““The seemingly iniexhaustible well of very high-end buyers has proven exhaustible after all,” said Dean Wehrli, a senior vice president at John Burns. “The peak is behind us, and that’s becoming clearer and clearer to builders and buyers.”

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