“The number of houses for sale has climbed dramatically in recent weeks, from 1,380 in November 2004 to 2,700 last month to 3,050 today. Real estate agents say many people, sensing values are peaking, have staked ‘for-sale’ signs in their yards…

“In some cases, sellers are lowering expectations, agents said. ‘The price reductions have been amazing,’ added Paula Conner of London Properties…

“More supply means more choice, and more choice means less pressure on prices. That, in turn, will likely lead to slower price increases or even a leveling off…

“In September, only 19% of the households in Fresno County could afford a median-priced house, down from 27% a year before…

“In March 2004, Fresno’s appreciation rate was the greatest in the nation. In August, an economist at economy.com pegged it as the most overpriced real estate in the country.

“Those rates cannot be sustained, and a slowdown is welcome, said Scott Leonard, president of Guarantee Real Estate…

“Although the real estate market appears to be slowing, homeowners should not fret. Their residences turned out to be nice investments over the past five years, and sellers who have to lower the price should still net a sizable profit…

“The California Association of REALTORS has estimated that values in Central California will climb 10-18% next year, instead of the 20%-plus homeowners experienced in the past few years.

“Leonard thinks appreciation rates in the Fresno area will be 5-7%. ‘People will have to be realistic,’ he said. Sellers ‘can’t choose a number out of the air. It won’t work..’”

Anyone notice how silly these articles sound even while admitting a top?:

• “Although the real estate market appears to be slowing, homeowners should not fret”
• “California will climb 10-18% next year, instead of the 20%-plus homeowners experienced in the past few years”
• “Leonard thinks appreciation rates in the Fresno area will be 5-7%. ‘People will have to be realistic,’ he said. Sellers ‘can’t choose a number out of the air. It won’t work.’”

Housing Bubbles: “People Will Have to Be Realistic.”

I guess that is my favorite line in the above commentary. How about a little realism from those forecasters? Something like, “Prices may fall for 3-8 straight years.”

No, instead, we see “California will climb 10-18% next year, instead of…20%.”

At any rate, please add Fresno to the list of cities that have without a doubt peaked.

Here is an incomplete list representing major markets that I am aware of:

• New York
• Boston
• San Diego
• Washington
• Los Angeles
• Fresno.

Inquiring readers are no doubt asking, “Mish, you got any proof of that?”

Well, yes, indeed I do. Here goes:

The above chart is from Dr. Kash at Angry Bear.

Please click on the above link to see his complete thoughts, as well as a nice graph depicting what those markets may have in store for them. The interesting thing to me is how national averages seem to be holding, while some markets are clearly getting hammered. In that regard, it’s a subtle start to a housing bear market.

Housing Bubbles: Who Is Next up on the List?

I think Florida is a prime candidate. OK, Mish, why is Florida next?

Once again, inquiring Mish bloggers deserve solid answers. I invite everyone to Google “Florida Condos Preconstruction.” If you see what I see, then you see 40-plus pages of preconstruction offerings (10 pages at a time).

Who is buying this stuff, anyway? “Investors” or “speculators at the peak of a bubble”?

Bear in mind that there is a 10-year supply of condos (based on historical sales) coming on the market in the next 1-2 years. If there is one thing I am absolutely positive of, it is that the condo market in Florida is going to CRASH sometime in the next six months to a year.

Mish, is there any other evidence of a dramatic slowdown in Florida? Well, yes, there is. Thanks for asking.

TheStreet.com is reporting, “Lennar Looks to Revive Florida Sales”:

“Recent data show the South Florida real estate market, like much of the country, may be slowing down. Some blame the recent hurricanes, others blame the departure of speculators from the market. Either way, Lennar hopes to boost sales in its Palm Beach division by raising its commissions to outside real estate brokers, after reducing them less than a year ago.

“For its communities ranging from Boca Raton to Vero Beach, Lennar and its U.S. Home division are now offering a ’3-4-5′ program to outside brokers.

“The program works as follows: If a broker sells one home, he gets a 3% commission; if he sells a second home, he gets a 4% commission; and if he sells a third home, he gets a 5% commission, according to a fax promoting the program that was sent to local brokers. Lennar’s local sales offices confirmed that the program allows brokers to combine the sales across any of the nine communities in Lennar’s Palm Beach division.

“The move is a swift reversal from earlier this year, when sales were fatter and Lennar dropped its commission to real estate agents from 3% to 2%.

“‘They dropped commissions from 3% to 2% a year ago. They said we don’t need realtors as much…Now that sales have dried, they didn’t just go back to 3%, they went up to 5%,’ says Mike Morgan, broker-owner of real estate brokerage firm Morgan Florida.”

Let’s finish up with some pertinent thoughts from Dr. Kash:

“Looking at individual markets, it seems that prices in some continued to boom. But those markets that were the first to experience the surge in housing prices are now clearly indicating that they’ve reached the end of the boom…

“The big question will not be answered for a while yet; however, how far will the lines in the chart above fall? Will they stabilize at 5-10%? Will they go to zero? Or will house price changes follow the pattern of previous price surges, and actually turn negative?…

“I have heard no convincing argument to suggest why the end of the house price surge this time will be any different from the last time around.”

Finally, at long last, someone is arguing, “It’s not different this time.”

Thank you, Dr. Kash.

Mike Shedlock / Mish
December 6, 2005

Housing Bubbles: Housing Peaks in Fresno (and Other Places) was originally featured on Whiskey and Gunpowder. Visit Laissez Faire Books for the best selection of libertarian book titles.