January 25, 2013

Fire Cannot Be Covered With Paper Forever

It’s Friday desk clearing time for this blogger. “‘I haven’t been to a place that had fewer than five or six offers, and some had as many as 20,’ said Joe Camicia, a land use consultant in the San Francisco Bay Area who has been shopping for about a year and lost a bid on a San Jose home to an all-cash buyer last month. Neil Golke has found slim pickings while shopping for a home with his wife in the San Jose area Golke said he offered $1.09 million for a Menlo Park home in December — more than $100,000 above the asking price - but ranked in the bottom 10 of more than 30 offers. Golke, who plans to finance about 80 percent of his purchase, discovered the ultimate buyer agreed to pay $1.58 million in cash. ‘As soon as new listings come up, we sort of pounce on them,’ he said.”

“Central Texas home sales closed out 2012 at their highest level since 2007, the Austin Board of Realtors said. Buyers’ agent Cyndy Stewart said about 90 percent of the sales contracts she’s been writing are for houses that received multiple offers. In one case, Stewart said she met with a seller in Rosedale to list his property, and 30 minutes later ‘it was under contract, without ever having made it into MLS.’ ‘January has just been insane,’ Stewart said, noting that the market is seeing an influx of cash buyers from both the east and west coasts.”

“Despite the bitter cold we’re experiencing, Idaho’s housing market is looking nice and toasty! According to experts, people should buy now with the low interest rates. ‘When you compared an average history of 8 or 9, a 3.75% for a 30-year fixed loan, that’s almost free,’ said Tracy Kasper, Silverhawk Realty Co-Owner.”

“While things are looking up, it’s far from a housing boom, but realtors say that’s a good thing. ‘Otherwise, it’ll be a false market, another housing bubble,’ said Kasper.”

“While litigation is time consuming, it’s often where homeowners find the best resolution, said Bruce Richardson, a Manhattan-based foreclosure defense attorney. A Brooklyn man Richardson represents remains in his house six years after going into foreclosure and two years after the bank acquired it, he said. Richardson is now battling to overturn the sheriff sale in the appellate division. ‘The byproduct of an aggressive and zealous defense is that the homeowner gets to stay in the home much longer than they otherwise could have and actually gets to keep his home,’ Richardson said.”

“New York’s so-called shadow docket includes about 6,000 inactive filings in Brooklyn and Queens alone.”

“Craig Rivas bought his first house the day before Thanksgiving in 2007. Within an hour of signing loan papers, he yanked the ‘For Sale’ out of the lawn and did a little dance. ‘I did the, ‘Oh, my god, this is mine!’ thing,’ said Rivas. He took the keys out during Thanksgiving dinner and shook them in front of family members, his way of telling them, ‘I did it.’ For a few years things were great. Then paychecks became erratic at work. He suddenly lost his well-paying Web job as his employer struggled in a tough economy. Sixteen months behind, Rivas now owes $22,000. Multiple attempts to refinance or modify his loan have failed. Without help that he can’t see coming, he’ll lose his house.”

“‘The economy that ripped through the world has affected a lot of people in Maine,’ said Rivas. ‘I don’t want to cheat anybody out of the money I owe them. I’m just so far in the hole, I don’t qualify for anything. My credit is in the toilet. It was wonderful when I first had the home. It’s still wonderful. But now it’s such a disappointment.’”

“Florida ended 2012 with more than 377,000 open foreclosure cases, said Deerfield Beach real estate analyst Jack McCabe. Another 500,000 homeowners, meanwhile, have not made payments on their mortgages for at least 90 days but have yet to receive a foreclosure notice. An estimated 40 percent of Florida homeowners with mortgages remain underwater and many are expected to choose to walk away from their debt and become renters.”

“‘They can’t really put them up for sale,’ McCabe said. ‘Most people don’t want to pay money to sell their home.’”

“‘We went nearly a quarter of a century where there was virtually no difference between home prices in the U.S. and Canada and now, average home prices are nearly 50 per cent higher in Canada than they are in the U.S. That is not sustainable,’ Douglas Porter, BMO Capital Markets chief economist. ‘There’s nothing in the textbook that says home prices have to be identical, but a 50-per-cent gap is not sustainable.’”

“He expects the gap between the two disparate numbers will narrow in the next few years, but not via a crash in housing values in Canada. ‘Our view is that the lion’s share of the narrowing in that gap will be by a comeback in the U.S. market,’ Porter said.”

“Housing affordability is improving but Australia is still the second most expensive country to buy property, according to a global survey. However, Australian economist Dr Andrew Wilson criticised the Demographia International Housing Affordability Survey. Dr Wilson questioned the validity of the survey by making world comparisons. ‘You may as well be comparing the Australian housing market to the one on Jupiter, because they are different animals,’ he said.”

“‘If Sydney is so unaffordable, why do we have so much activity in the housing market? Why are prices rising?’ Dr Wilson said that unlike the US, Australia had some of the most stringent banking controls in the world. ‘If you can’t afford it, the banks won’t lend you the money,’ he added.”

“A report by the Communist Party’s powerful anti-corruption unit, the Central Commission for Discipline Inspection (CDIC), said ‘a wave of luxury home sales began last November and has accelerated since December.’ It said the volume of deals had intensified by ‘a hundred times” after Xi Jinping, the incoming Chinese president, warned that corruption could kill the Party and put one of the country’s most vigorous and resolute politicians, Wang Qishan, in charge of stamping out graft.”

“It also claimed that an astonishing $1 trillion (£630 billion), equivalent to 40 per cent of Britain’s annual GDP, had been smuggled out of China illegally in 2012. Economists and experts cast doubt on the figure, but said the flow of money from China was dramatic. ”

“Marco Pearman-Parish at Corporation China, a company in Beijing that helps clients find properties abroad, said there had been a strong rise in clients looking for homes in the Cayman Islands. ‘In Beijing, half our clients are government officials,’ he said. ‘Nine out of ten claim to be businessmen, but it emerges over the course of the deal that they have government jobs. What they are looking for is resident permits abroad so that if anything happens they can escape easily.’”

“Jiang Ming’an, professor at Peking University Law School and one of a select group of advisers called in to see Wang Qishan when he took over the anti-corruption brief, said it was important for the Party to force officials to publish their property holdings. ‘The Party should deal with this seriously. People will not take to the streets now because the economy is good. But when it slows down in the future, as the old saying goes, the fire cannot be covered with paper forever.’”

“Economist Steve Keen has delivered a damning verdict on the impact of first-home owner grants, saying they only serve to drive up property prices and push first-home owners out of the property market. Keen labelled the recent accusation levelled by acting NSW opposition leader Linda Burney that Premier Barry O’Farrell had abandoned first-home buyers by cutting the grant for existing home and removing stamp duty concessions (unless you buy or build a new home) as ‘bollocks.’”

“‘First-home buyers weren’t locked out by the ending of the first home vendors’ grant: they were locked out by the impossibly high prices that this grant has helped generate over the 30 years since it was first invented,’ says Keen.”

“Keen says former prime minister Kevin Rudd’s doubling and tripling of the first-home owner grant from 2008 to 2010 caused the last spike in house prices, with the real beneficiaries those vendors who sold their first homes to first-home buyers – hence why Keen calls it the ‘first-home vendors’ grant’ – and the banks that took the extra deposit and heaped first-home buyers with ‘initially three and ultimately over 10 times as much more debt.’ ‘The grant should be abolished, and governments should keep their hands out of asset markets.’”

“According to Keen, every time the government has introduced a first-home owner grant, the effect has been the same and can be observed by looking at house price before and after its introduction. He says without government-injected stimulus, house prices have risen more or less in line with inflation, but have diverged noticeably to deliver real growth on the back of first-home owner grants.”

“‘This is when the myth that house prices always rise took hold in the Australian psyche – without the awareness that this was not a natural phenomenon like sunrise, but took not only rising leverage from the banks, but also active intervention in the property market by both state and federal governments,’ he said.”

“Keen says the purpose of the first-home owners grant has never been to give first home buyers a helping hand, but has ‘always been used as a way of giving the economy the economic equivalent of a steroid injection.’ ‘First-home buyers have instead been the sacrificial lambs of an asset-price-inflation route to apparent national prosperity,’ says Keen.”

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