October 19, 2014

A Point We Haven’t Started From Before

It’s Friday desk clearing time for this blogger. “Sure, home prices are rising across Greater Boston, but when it comes to really big gains, some suburbs and city neighborhoods are in a league of their own. To the north of Boston, Middleton is hard to beat, with prices up nearly 50 percent, hovering around $637,000, the Warren Group finds. Still, what goes up will come down at some point. There are signs sellers may be starting to overprice their homes, notes Matt Hanson, a Redfin agent who works with buyers in Woburn and other north of Boston areas. ‘The listing agents are pricing the properties higher,’ Hanson said. ‘It has gotten to the point where it is all the market can bear.’”

“A new forecast predicts that Southwest Florida’s single-family home prices will continue to inflate over the next three years into bubble territory. Local Market Monito’s president Ingo Winzer called the Naples-Marco Island metro area’s sizzling price increases justified because prices had fallen so far from their 2006 peaks, he now characterizes them as ‘worrisome.’ ‘It’s starting to look like a new bubble is building,’ he said. ‘The market is no longer underpriced.’”

“Seeing a growing disconnect between what they want and what they can afford, many buyers are starting to sit on the sidelines, said Naples real estate agent Dona Schrim. ‘I think the market is coming to a point where prices may not be able to be sustained,’ she said.”

“Homeowners across Southern California are getting hit with a fresh wave of foreclosures. KNX 1070’s Ed Mertz reports industry analysts say there’s been a 30 percent jump in foreclosures from August to September in Los Angeles, Orange, Riverside, San Bernardino and Ventura counties. Tens of thousands of properties across the Southland that were purchased before 2008 were delayed being foreclosed on due to the California Homeowners Bill of Rights, which was enacted in Jan. 2013, said RealtyTrac VP Darren Bloomquist.

“‘We’re looking at three to four thousand a month,’ he said. ‘That could take close to a year to clear that backlog.’”

“Colorado was one of several states where homes scheduled for foreclosure auction spiked in the third quarter of 2014, with the 2,919 homes set for auction, up 50 percent from 1,941 in the second quarter, and up 48 percent from 1,968 in the third quarter of 2013, RealtyTrac said. Scheduled foreclosure auctions also spiked year-over-year in North Carolina and Oregon, both up 85 percent; New Jersey, up 66 percent; Oklahoma, up 58 percent; New York, up 57 percent; and Connecticut up 51 percent.”

“Blomquist said the increased foreclosure activity ‘is not the result of underlying economic or housing market problems. The bad news is that Colorado’s housing market may have looked better than it actually was over the past 12 months because of these artificially held back foreclosure actions.’”

“One out of every 292 Atlantic County homes was in the foreclosure process in August, making the area’s foreclosure rate second-worst in the nation, according to RealtyTrac. ‘Our data shows the average foreclosure process in New Jersey is over 1,000 days, so I would say it’s probably too early (to reflect casino closings),’ said Daren Blomquist.”

“With a glut of foreclosed properties hitting the market, the trend could have dire ramifications for local real estate values, said Carlo Losco, president of Balsley Losco Real Estate in Northfield. ‘I think people need to pay attention and make some realistic choices,’ Losco said. ‘If they wait, all the figures could line up against them and decrease value. Or are they going to do the best they can now before all these issues come into play?’”

“Iskandar Malaysia (IM) has come under heavy fire in recent weeks from analysts, valuers and the media for the apparent free fall of the property market here. They claim developers who were eager to make their presence felt in IM early this year are now beating a retreat because prices have slumped to an untenable level. This scary prognosis is naturally turning away prospective investors.”

“Even giant China players with enormous capital at their disposal have not been spared, with reports suggesting that they may also be in trouble as they had been ‘over confident’ about prospects in IM and are now reeling with disbelief as they had become ‘over exposed.’”

“China does not have large independent labor unions, yet the world’s second-largest economy has witnessed an increasing number of worker strikes over the past year. According to an Oct. 14 report from the Hong Kong-based watchdog group China Labour Bulletin (CLB), the number of strikes and worker protests in the third quarter of 2014 was double the number of labor actions recorded in the same period last year.”

“Notable is the uptick in strikes led by construction workers, from just four demonstrations last summer to 55 this summer. Amid a slumping housing market, new home prices in August tumbled in 68 of 70 Chinese cities monitored by the government. As the CLB report explains, ‘Developers are saddled with declining sales, weaker credit availability, and continued pressure from local governments to buy land. In these situations, it is the construction workers who are always the last to be paid.’”

“Taiwan’s Ministry of Finance has asked eight state-owned banks to provide details on outstanding loans to Chinese companies as fears grow of defaults involving privately owned firms on the mainland. Taiwan’s banks are among Asia’s largest lenders of syndicated loans and have lent heavily to private and state-owned Chinese companies in recent years. The MoF move comes on the heels of similar action of the Hong Kong Monetary Authority, which stepped up its scrutiny of banks under its jurisdiction this year after their exposure to Chinese onshore companies soared in 2013.”

“The ministry also sought information on the terms and conditions of security and repayments on the loans, bankers said. ‘We are afraid there will be a ripple effect of loan defaults for Chinese companies. We are even cautious of lending to Chinese state-owned companies,’ said a banker at a state-owned Taiwanese bank.”

“Stakeholders in the housing sector opine that it is not wise for estate developers to construct houses and lock them up until buyers offer them the exorbitant amount of money they require for rents or sales of such houses. They argue that if the owners of such houses were a bit flexible with their terms, the high cost of rent would have been reduced in Abuja. Unarguably, many of the private housing estates in the FCT have remained unoccupied years after they have been completed by their owners.”

“‘What private estate developers are doing is to create a class problem in the FCT where only the wealthy can own and live in descent homes. I foresee a crash in the estate market, especially in the FCT, because the income of most Nigerians is not enough to enable them to purchase these houses,’ said Mr Emma Akeem, a resident of the FCT.”

“The global financial markets are dangerously stretched and may unwind with shock force as liquidity dries up, the Bank of International Settlements has warned. Guy Debelle, head of the BIS’s market committee, said investors have become far too complacent, wrongly believing that central banks can protect them, many staking bets that are bound to ‘blow up’ as the first sign of stress.”

“In a speech in Sydney, Mr Debelle said: ‘The sell-off, particularly in fixed income, could be relatively violent when it comes. There are a number of investors buying assets on the presumption of a level of liquidity which is not there. This is not evident when positions are being put on, but will become readily apparent when investors attempt to exit their positions. The exits tend to get jammed unexpectedly and rapidly.’”

“Mr Debelle, who is also chief of financial markets at Australia’s Reserve Bank, said any sell-off could be amplified because nominal interest rates are already zero across most of the industrial world. ‘That is a point we haven’t started from before. There are undoubtedly positions out there which are dependent on (close to) zero funding costs. When funding costs are no longer close to zero, these positions will blow up,’ he said.”

Bits Bucket for October 19, 2014

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