November 22, 2013

Reality Has Struck

It’s Friday desk clearing time for this blogger. “According to the website RealEstate Business Intelligence (RBI), the average sold price of a Fairfax County home in October 2013 was $522,213 — a 10.13 percent increase for year-on-year. For Patricia Mancini of Avery-Hess Realtors, the sweet spot as far as value is concerned falls in the middle of the price range: The $300,000 houses are flying. In Centreville, homes listed in the mid 300s, were on the market for a 32-day average in October. But, she said, ‘The $500,000 is the new $300,000. You can’t get anything good at 300k like you can at 500.’”

“‘We had a strong spring market,’ Mancini said about Springfield. ‘Over the summer, things died off. Listings were on the market, but the demand wasn’t there. Everybody was furloughed. We were just dead in the water.’”

“Tempe-based Fulton Homes CEO Doug Fulton has a message for his colleagues: the Phoenix area new-home market isn’t nearly as hot as you think it is. Fulton said new-home closing figures are misleading out-of-state and unfamiliar homebuilders into believing the time is now ripe to enter the Phoenix market and strike it rich. ‘Other homebuilders need to realize that there is no getting back to the peak of 2005 and 2006. We’re not even back to new-home closing levels of 1990. There is only so much marketshare to go around. Any prediction that the Phoenix market is a gold mine could lead to new homebuilders generating very dismal results for Wall Street.’”

“South Florida home prices increased in October, but the region’s housing market is losing some of its sizzle, real estate agents say. Real estate agents and analysts say once-presumptuous sellers are lowering expectations. More homes are lingering on the market, especially if they’re overpriced. ‘Reality has struck,’ said Bob Melzer, an agent in Palm Beach and Broward counties. ‘Now if you want a better price, you really have to work for it. There’s a slight step back from the craziness, and that’s good.’”

“Nevada’s robosigning law took effect in fall 2011, forcing banks to provide more paperwork before they seize homes from delinquent borrowers. However, some believe that banks are avoiding foreclosure to limit the valley’s inventory of homes for sale, which in theory leads to rising home prices and helps bankers collect more money when they do repossess and sell properties. ‘They’re just stacking them up,’ real estate lawyer Benjamin Childs Sr. said.”

“Two new laws could upend the situation. The days of living at home without paying a mortgage are over, according to Noah Herrera, vice president of the Greater Las Vegas Association of Realtors. ‘Things are going to start moving,’ he said.”

“A new wave of foreclosures is hammering tony Westchester County. Last month, foreclosures vaulted 90 percent from the year-ago period, according to RealtyTrac. Foreclosures in New York plummeted in late 2010 after Chief Judge Jonathan Lippman responded to the robosigning scandal with new rules requiring banks’ lawyers to verify the accuracy of their foreclosure filings. But 2,046 foreclosure actions were started in the first three quarters of 2013 — outstripping the full-year totals of 1,812 in 2012 and 1,655 in 2011. ‘Boom, it came down like an avalanche this year,’ said Westchester County Clerk Tim Idoni.”

“The Prince George’s County chapter of the NAACP held a town hall meeting to hear complaints from Maryland homeowners facing foreclosure and to rally support for its lobbying effort to get Gov. Martin J. O’Malley to place a statewide moratorium on foreclosures. Laurel resident Scarlett Davis said she never got the information to help her avoid losing her home, despite making untold numbers of calls. It wasn’t until her loan was sold to Wells Fargo that she was told that because she was behind 19 payments, her home would be sold. It later appeared on a list to be sold on Dec. 6.”

“‘I am not a fan of merry-go-rounds,’ she said. ‘I want someone to help me get off this ride.’”

“The Malaysian property market is expected to slowdown over the next year, as the government’s attempts to prevent a bubble take effect. An easing of growth is already being noted and in the first six months of the year there was an overall 12.6 per cent decline in residential transactions in Malaysia year-on-year. Falls were even greater in some of the top hubs of Kuala Lumpur, Selangor and Penang, with drops of 47.5 per cent, 16.2 per cent and 28.1 per cent noted.”

“Rahim & Co Chartered Surveyors executive chairman Datuk Abdul Rahim Rahman said: ‘A lot of foreigners paid ten per cent deposit, but did not go through with the sale due to the economic downturn.’”

“As house prices in Auckland continue to rise, so too has talk that wealthy migrants are to blame. Scenes by people such as real estate agent Sam Yeung at TV3’s The Block NZ auction have probably not helped deter the belief that rich foreigners are outbidding everyone else at auctions. Mr Yeung made it abundantly clear the Chinese buyers he represented would not be outbid for the house they wanted. Laker Zhang, who brokers mortgage deals for many Chinese buyers, believes the new migrants have pushed up prices, but not because they are smart investors - he puts it down to naivety about the true value of New Zealand housing. ‘Friends keep telling each other ‘ok, I just got a new house, and my house just went up by $100,000 in price,’ he says.”

“Mr Zhang agrees it’s a bit like Chinese whispers, where everyone is talking up the market, but believes Chinese financiers who are ‘in the know’ are aware the market is over-heated.”

“The beauty of the disinformation is staggering. As house prices accelerate 7.6% nationally, poor housing supply continues to be blamed for the housing crisis. Meanwhile, the sixth Speculative Vacancies report found over 64,000 empty homes in Melbourne. Over $50 billion is given to property investors in tax subsidies each year. Those on Newstart receive barely $6 billion in welfare. We ask, is it perfectly natural for those who already own property to receive such significant subsidies?”

“Concern over vacant housing is rising. The UK has a property bubble double the size of Australia’s with over 1 million empty homes. The Chinese found a staggering 65.4 million empty apartments in 2010 - a sure sign the global property ponzi game is alive and kicking. In the USA last week, the Census Homeownership and Vacancysurveyrevealed a housing vacancy rate of 10.2%. The media enthused at the recent rise in US house prices, but rarely mention it is an investor led recovery, fuelled by the cheap money helicoptered in via quantitative easing.”

“The global trend is evident. Easy profits in real estate are luring more entrepreneurs into this lucrative field of tax loopholes and easy profits. They are comforted by the knowledge any meaningful reform resides in the too-hard-basket. ‘It’s political suicide’.”

“If one economy cannot use its monetary policy effectively, the global economy could be stimulated through collective monetary easing. Hot money sort of plays the role of exporting the United States’ monetary policy around the world. The trouble is that the main force behind hot money is speculation. Hot money earns a profit only if it creates a bubble and leaves a hot potato for others to hold. The Fed’s QE may have stimulated emerging economies, which in turn benefited the U.S. economy. It is mainly a bubble phenomenon. When the bubble bursts, the global economy tanks again, leaving behind collateral damage like bad loans.”

“The odds are that the world is experiencing a bigger bubble than the one that unleashed the 2008 Global Financial Crisis. The United States’ household net wealth is much higher than at the peak in the last bubble. China’s property rental yields are similar to what Japan experienced at the peak of its property bubble.”

“The disinflationary force from globalization, especially from East Asian economies driving down the prices of manufacturing goods, is the background for the serial bubbles over the past three decades. Despite its terrible record, the Fed continues to believe in the power of its policy in creating employment. It has created one bubble after another. Each bursting leads to a downturn, which justifies another round of monetary stimulus and the making of another bubble.”

“Activist monetary policy is possibly one of the most destructive forces in modern economic history. It creates the illusion of effectiveness during bubble formation, which justifies its relevance despite so many financial disasters.”

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