September 27, 2013

The People Who Get Hurt Are Holding The Bag At The End

It’s Friday desk clearing time for this blogger. “As most local Americans in Miami haven’t fully recovered from the crisis, international investors are filling the void. ‘Ninety percent of my clients do not live here at all,’ said Miami-based realtor Andy Katz. ‘I go out and shoot the video of five properties that they may like. If there is one that they really like, they get on a plane, but most of my clients do not get on a plane, they just say ‘hey I am going to purchase let me wire the money,’ he said.”

“Those looking to gain a foothold in Metro Vancouver’s already pricey housing market are facing another hurdle as key financial institutions across the country move to hike mortgage rates. Credit Counselling Society’s Scott Hannah advises homeowners in tight financial situations to adjust their spending habits so that they can meet mortgage payments. Better to let go of the car altogether than go into consumer debt and risk losing a house, which in the long-term will earn equity, he said. ‘The worst thing you can do when the rates go up quicker than the housing market cools off is now be in a position where you have to sell your home,’ Hannah said. ‘You’re going to lose money.’”

“In August, Jonathan Stilley, an Austin realtor, addressed the state licensing board about a complaint he submitted involving a possible appraiser mistake that could have over-valued a home in a north Austin neighborhood. According to real estate records reviewed by the KVUE Defenders, the home sold in April for $325,000. That’s $50,000 more than the second highest priced home in the area. Since the home sold, home prices in that neighborhood jumped. In 2012, the average home listed for about $204,000. Homes are now listing for nearly $60,000 more. ‘These kind of things can cause real estate bubbles,’ said Stilley. ‘This is exactly what happened in Phoenix and in Scottsdale and in Miami and in Los Vegas, and the people who get hurt, are the ones holding the bag at the end.’”

“Of the 39 first-time foreclosure filings this year in Flossmoor, 46 percent were conventional mortgages, 23 percent were adjustable rate mortgages and about 31 percent were Federal Housing Administration loans, said assistant village manager Patrick Finn. He said the overwhelming majority of FHA mortgages were taken out well after the housing market’s collapse. ‘This is suggestive of a pattern where individuals may have attempted to capitalize on depressed prices but still borrowed beyond their means,’ he said.”

“Gary Pleskac paid too much for his house in Chesterfield County. Pleskac bought his house for $166,500 in 2005. A Realtor told him she could list the property for $139,000. ‘I didn’t buy at the top of the market, but you could see it from there,’ he said.”

“Clayton Gits of Keller Williams Realty in Richmond said the housing market is skittish. It stalled this summer after the interest rate on a traditional mortgage loan rose a full percentage point to about 4.5 percent since May, he said. ‘The housing market is addicted to these low rates,’ Gits said, adding that rates are still low by historic standards but have been kept artificially low through the Federal Reserve buying bonds and mortgage-backed securities via the printing press. That, along with the nation’s high deficit and debt levels, does not bode well for the housing market or the economy in general, he said.”

“This shadow inventory of homes that are vacant — or soon to be — totals anywhere from 40,000 to 80,000, a conservative estimate, according to Dennis Smith, president of Home Builders Research, a Las Vegas consulting firm. Yet just a few miles away, backhoes and bulldozers are breaking ground for new homes. Buyers stream into sales offices and model homes. ‘In this town, if they’re empty now, chances are they’ve been occupied by squatters,’ Smith said. ‘And if they’re empty now, the upkeep on that house is zero.”’

“Tighter credit and falling housing prices in the eastern Chinese city of Wenzhou have led to a wave of mortgage defaults and abandoned properties in the city, where persistent property-price drops have flown in the face of a national upturn in prices. ‘The loose credit environment in the previous years caused many people in Wenzhou to be excessively leveraged. The party is over and some people are being forced to sell off their assets,’ said Johnson Hu, an analyst at CIMB Securities.”

“Home buyers at two housing projects on the city’s fringes are in dire straits. The two projects - one in New Town and the other in west Howrah - had been launched with much fanfare around the same time in 2006, both endorsed by the government. Seven years on, they remain hopelessly unfinished, having failed to meet several deadlines. Souvik Das, who lives in Dubai, said his loan application was approved on February 8, 2013, days before the bank printed the auction notice. ‘Why did the bank not warn us about the project status? We would never have bought apartments in a project mired in financial difficulties,’ said Souvik, who continues to pay Rs 55,000 as EMI fearing he will otherwise be declared a defaulter.”

“Developers of several high-end housing projects in Ho Chi Minh City are making large price cuts to spur demand as the prolonged property slump continues. The high-end segment suffers from excessive supply while there is great demand for housing among low-income earners. Official data shows that in HCMC the number of unsold apartments has crossed 12,610. Economist Tran Du Lich said the high-end segment should not be aided since the market has to resolve itself with developers lowering prices, which is ‘the best solution’ to improve liquidity.”

“Real estate agents are working with second-tier lenders to organise finance for borrowers with small deposits amid fears of the house market seizing up once new lending restrictions are imposed. Australian lenders coming into New Zealand fell outside the restrictions while non-trading banks were already here. Professionals Lower Hutt owner John Ross said his firm is so concerned about the impact of the restrictions it is working with alternative lenders to help buyers into homes.”

“‘We have gone straight to some lenders,’ he said. ‘We need to have finance so we can keep selling houses.’”

“At what point did things become so unsustainable that none of my friends in high-paying jobs in Sydney can afford the deposit on a house without their parents’ help? And even then, if they are lucky enough to have wealthy parents, they are lumbered with huge mortgages as the average house price is about $700,000 and the average unit $500,000. You see ‘entry-level’ houses advertised for $1 million.”

“Where does the bubble end? With 100-year mortgages that we pass onto our grandchildren? Somewhere along the line our parents’ generation became enamoured with debt. The very notion of debt is that it is OK to have, until it’s not. Debt is not growth. Our grandparents didn’t believe in debt and were debt free in the 1970s. Why should our parents have more right to an investment property through tax breaks than a young person to a first home? Why does our government feel compelled to protect the status quo?”

“Remember the last stage of any bubble is the fear of missing out. If we are indeed here in Sydney property now, it might not be such a good thing for our parents or the politicians, but it might just help those of us forgotten by them too.”

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