March 28, 2014

Creating An Infinite Level Of Demand

It’s Friday desk clearing time for this blogger. “According to a new report published by real estate analytics firm Clear Capital, the national market has at last rebounded from the burst housing bubble, as evidenced by home prices rising within 2 percent of their inflation-adjusted long-run average levels. However, given the current quarterly rate of national growth — 1.2 percent — peak home prices won’t be reached until 2021, per the report. ‘The major finding of this report is that the days of arbitrary increases in the real estate market are gone,’ says Sissy Lappin, principal of Lappin Properties in Houston.”

“One Omaha husband-wife real estate team drops off custom packages to strangers they hope to nudge into moving. A competitor has started hosting office call nights where the mission is to drum up house sellers.Such ramped-up prospecting tactics reflect today’s local housing market where the selection of for-sale homes has hit a 10-year low. Factors keeping sellers at bay in turn have led to a reversal of a nearly three-year growth streak in Omaha-area home sales. ‘This is very unusual,’ said Mike Riedmann of NP Dodge Real Estate. ‘There are not enough listings; buyers are getting frustrated.’”

“What do sales of statues of St. Joseph tell us about the housing market? Broughton’s is the Canadian source for a St. Joseph Home Kit that sells for $10.95. Broughton’s keeps between 200 and 250 kits in stock, and, in its last fiscal year, sold about 1,500. According to Brian Broughton Jr., a sales representative at the Toronto outlet, real estate agents buy them in bulk. Individual home sellers purchase them, as well, notably when they’re having trouble selling their homes. But Mr. Broughton didn’t necessarily see a pattern. ‘When the market crashes, people tend to go back to faith,’ he said.”

“A senior government official has said the housing situation in Macau is ‘not bad,’ disputing complaints that there is not enough housing and that it costs too much. But the head of the Secretariat for Public Works and Transport, Francis Wong Chan Tong, said he understood that people were worried about the future. Statistics and Census Service data show the average price of residential space last year was 81,811 patacas (US$10,226.40) a square metre, 43 percent more than the year before. Mr Wong gave figures to support his assertion about the housing situation. ‘Macau right now has about 185,200 households, while there are nearly 210,000 finished homes here,’ he said.”

“The property market is such a complete mess that nobody could say with any degree of certainty that it has bottomed out. Since the last quarter of 2008, just after the peak of the housing boom, residential property prices have fallen by an estimated 23 per cent. Given the crazy prices at which land and apartments were selling for in 2006 and 2007 a 50 per cent plus decline in values would be a more realistic correction.”

“There is the habit of Cypriots to set a price for a property and refuse to sell for anything less even if there are no buyers at that price; the person would still claim that this was the value of the property. This is set to change over the next few years as the foreclosures begin. Is €700,000 a realistic price to pay for even a luxury 3-bedroom flat in a new block in Nicosia, given the average salaries and the tiny size of the economy? This is Nicosia, not Paris or London. But during the bubble years common sense went out the window.”

“Many of India’s real estate and construction companies — their finances already squeezed by a sharp economic slowdown — are diverting funds from housing and other projects to election campaign contributions. Many projects are stalled, at least temporarily. Meanwhile, potential home owners are seething at the delays in getting possession of properties they have already largely paid for as developers are running out of funds.”

“‘When we went to the site, it was dead. We could count the labourers sitting and relaxing. There was no machinery working and we saw no raw materials that would be used,’ said Ms Ashima, a single mother of two who was expecting to move into her new home in Noida earlier this year, but has now been told it will take another two-and-a-half years. ‘People say India is booming. Where is it booming?’”

“At a site where a planned California escapee has done some research, called Bend, Oregon No. 1 among ‘5 Incredible Places to Live That You Can Afford.’ Site founder Dale Partridge said he lives in Southern California, which some believe is perfect but that his family doesn’t ‘really enjoy it. Sure, the weather is great, but the traffic is insane, the people are rude, and everything is far too expensive.’”

“As usual, commenters on the site pick apart the rankings, with several saying Bend (and others) are not affordable or an ‘incredible’ place to live. ‘Bend is great if you’re retired from Silicon Valley, wear only North Face jackets, shop at REI and Trader Joe’s regularly, and can afford to drop around $400K for a house,’ Aaron writes. ‘Bendme’ chimes in similarly, calling Bend ‘pretty snooty at times and the housing is incredibly overpriced AND there are no jobs!’”

“Flood insurance for Teresa Secord’s modest La Crosse home cost her $525 last year. So when the bank told her she’d have to pay nearly $3,700 this year, she gave them an earful. ‘I told the bank the house was going up for sale. And they said, ‘You’re going to have a hard time selling it,’ Secord said. ‘And I said, ‘Oh, I’m not going to be the one selling it — you are. You can start foreclosure right now ’cause we’re not sticking another dime into the money pit.’ Then I hung up on her.’”

“Tim Lemieux always thought he would buy a condo in Toronto. He visited open houses. He plugged various numbers into mortgage calculators. But even with the down payment, he calculated that he would be almost doubling his monthly expenses with the mortgage, condo fees and property taxes; he now rents a one-bedroom apartment on the subway line for $900. ‘It seemed like I was tying a lot of money down with not much of a living benefit or quality of life benefit,’ says the 40-year-old Toronto resident who works at an insurance company. ‘You have to sell your house [to retire]. That’s everyone’s plan. If you don’t want to sell your house, it puts you in a bind as well. I invest and got a good financial advisor instead.’”

“Even from an investment point of view, David Kaufman, president of Westcourt Capital Corp, believes that your money may work better for you elsewhere. ‘We have 500 years of reliable real estate data and guess what the annual increase is [in real estate value]? It’s exactly the amount of inflation,’ he says. ‘Most people feel better when they own a home or when they think they own it — the bank owns it, right?’”

“Generous incentives including negative gearing and concessions on capital gains tax encourage investment in housing, to the extent that around one in seven Australian taxpayers now owns one or more investment properties. As there is no limit to how many properties local investors can negatively gear. Australia already has one of the highest levels of household debt in the OECD due to borrowings for property purchases, and this is growing fast. Overseas investors are adding to that demand.”

“The upshot is that local and global investor markets are combining to create what is essentially an infinite level of demand. Australian governments need to come to terms with the prospect that no amount of increase in housing supply will meet demand if there is no limit to that demand. The relation is complicated further by the fact that investment properties are often left vacant. Unofficial estimates from the City of Melbourne indicate that up to 90% are owned by investors and that a large number are unoccupied.”

“Last year the BC Globe and Mail ran a story about the closure of a two-year-old store called Green Design in Coal Harbour. The proprietors’ dream of supplying all those condo balconies in need of greening with space-saving wall planters, herbs and pot plants had come to naught, they said, because ‘a hefty share’ of the condos were empty most of the year round. The City of Vancouver estimates that at least 25% of new condos are owned by non-resident investors from less stable economies looking to park their wealth in a safe environment. The Green Design proprietors say these apartments are permanently empty. When the holiday-condos are included, many buildings are more than half empty.”

“High-density, high-rise, high-security and high-cost apartment towers are increasing housing supply, mainly for local and global elites to accumulate capital. A major consequence of the Australian government’s taxation and regulatory regimes regarding housing has been to increase prices by encouraging demand for housing as a commodity, rather than a place to live.”

Weekend Topic Suggestions

Please post topic ideas here!

Bits Bucket for March 28, 2014

Post off-topic ideas, links, and Craigslist finds here.