January 11, 2015

Greed Is No Accident

It’s Friday desk clearing time for this blogger. “President Obama bragged Thursday it was ‘no accident’ that the housing market rebounded under his administration, saying his economic policies helped usher in a construction boom and the lowest foreclosure rate since 2006. The president used the speech to announce that he was slashing the fees charged by the government to insure federally backed mortgages — a move the White House says could save 800,000 homeowners an average of $900 per year.”

“Republican lawmakers have decried the move, saying they remained concerned the government insurance program does not have a cushion if the housing market again stumbled. ‘Instead of better protecting taxpayers from incurring losses through these government initiatives during a future economic downturn, the government is involved in a race to the bottom by reducing taxpayer protections to expand government credit guarantees,’ Sens. Bob Corker (R-Tenn.) and David Vitter (R-La.) said in a letter to the administration. ‘We are deeply concerned about placing the taxpayer in jeopardy by underpricing these government-guaranteed loans.’”

“For the second year in a row, Virginia tops the list of the 10 most expensive homes sold in the D.C. region. Michael Rankin, managing partner at TTR Sotheby’s was the listing agent for three sales of at least $6 million each last year, two of which were the same property. He sold a condominium at 3303 Water St. NW in Georgetown twice, once in March and then again in October for $6 million each time. ‘I haven’t seen that market before,’ he said. ‘You don’t pay $6 million for apartments in Washington. That’s a huge number. And to do it twice in [seven] months, I think that spoke to some of what was in the market last year.’”

“Chris Anderson, the 2015 president of the San Diego Association of Realtors, says the real estate market has stabilized. Expect prices to climb again this year, attracting interest. ‘It usually causes buyers to flood our market because they want to get in while they’re still low … and so we will probably have more sales and that will cause a little more appreciation,’ said Anderson. She cautions first-time homebuyers not to sit on the fence trying to save up more money even if they have enough for a down payment. ‘If you waited one year from ‘13 to ‘14, you’re paying about $30,000 more for the median priced home … you can’t save 30,000 in a year, so buy now and you can catch that appreciation,’ she said.”

“Prices across all property types and neighborhoods climbed 5 percent in the quarter to a median of $916,000, Corcoran Group said. ‘Everybody wants in,’ Pamela Liebman, president of Corcoran Group, said. ‘It doesn’t matter if you’re a single person, a couple, a family, someone from New York, someone from China, someone from Los Angeles, someone from the Midwest. This widespread demand has contributed to this run-up in prices.’”

“Many industry analysts believe smaller to midsize corporate investors will begin to sell their inventory this year to cash out on sharp gains in equity. ‘Smaller and midsize firms will begin selling this year,’ said Jack McCabe, a Florida real estate consultant who correctly predicted the downturn in the market that led to the recession. ‘But they will try to camouflage it, so they don’t overflood the market.’”

“A Herald-Tribune investigation in late 2013 showed these groups routinely outbid owner-occupiers by paying significantly more for houses than what the same properties fetched just months earlier. Colony, for example, bought some Sarasota homes for a markup of 275 percent from the previous price just months earlier.”

“The price of oil continues to drop, now at well under $50 a barrel. Because of that some oil companies have started to lay off employees, and the analysts say Houston’s economy is going to take a hit. We’ve already seen layoffs at Halliburton and the Civeo Corporation, and now there’s a second round of layoffs at BP. Patrick Jankowski at the Greater Houston Partnership says more jobs will be lost. ‘Our forecast calls for there to be a little over 9,000 jobs lost in the energy industry this year,’ Jankowski told KTRH News.”

“Jankowski says we’re getting to the point where you’ll notice the impact on Houston’s economy. ‘We’ll see slowing down in housing. There will be fewer fancy cars being bought, and you’ll start to see some slowdown in job growth,’ Jankowski predicted. Ultimately, Jankowski says the theory that Houston’s economy is diversified is about to be put to the test.”

“The same place the owners of that five-bedroom house were pocketing upwards of $5,000 per month just two years ago, and some homeowners were renting out their couches for $100 per night to workers flooding into the area. To put it bluntly, the real estate bubble that created such a frenzy in recent years in Labrador West, an area known as the iron ore capital of Canada, has officially burst. The worldwide market for iron ore, much like oil, has been in freefall, plummeting more than 60 per cent in three years.”

“Homes that may have fetched $50,000 a decade ago were selling for up to $400,000, and many new workers had little choice but to buy. Many newly unemployed mine workers in Labrador West are now stuck with mortgages that are far greater than the value of their homes, and dwindling job prospects. ‘A lot of people got themselves in a bad way,’ said Jason Penney, president of United Steelworkers Local 6285, which represented the workers at Wabush mines. ‘Two years ago it was a very difficult time to even find a house to purchase. Today, everywhere you look there seems to be a For Sale sign.’”

“Resale prices at luxury projects in neighborhoods popular among foreign buyers took a hit in 2014, raising concerns that foreigners could exit Singapore’s real estate market en mass. Last year saw several high-end apartments in the city-state’s exclusive enclave of Sentosa Cove and the highly sought after address of Orchard Road sell at hefty losses. ‘The concern around foreigners exiting en mass came about because resale values in foreign enclaves such as Orchard and Sentosa have dropped more than other areas,’ Ng Wee Siang, head of research at Maybank told CNBC. ‘While there have been more fire sales, some of them have their own peculiar reasons - we can’t jump to the conclusion that it is because foreigners are walking away.’”

“Aggregators have backed the role of interest-only loans despite a warning from regulators and a scare campaign by A Current Affair. The current affairs show slammed interest-only loans last week, describing them as loans that are ‘fast and easy to get from the banks,’ but which ‘can come at a huge cost.’ The Nine Network program reported that one borrower and her family ‘lost their dream home because they couldn’t keep up with their interest-only loan.’ Another borrower said he had lost approximately $150,000 from taking on an interest-only loan.”

“According to ASIC, interest-only loans as a percentage of new housing loan approvals by banks reached a new high of 42.5 per cent in the September quarter. ‘While house prices have been experiencing growth in many parts of Australia, it remains critical that lenders are not putting consumers into unsuitable loans that could see them end up with unsustainable levels of debt,’ ASIC chairman Peter Kell said.”

“Many factors account for the high vacancy rate estimated at 60-70 percent in Ikoyi housing market. Greed and the lingering petroleum industry bill (PIB) have been identified as major contributors to the situation in this upscale market. Ikoyi, a highbrow location in Lagos, is one of the most expensive property markets in Nigeria, where house prices and rents are not only out of reach, but also dollar-denominated in some cases. ‘Obviously, there are many vacant houses in Ikoyi and a major reason for this is that our people at a point became very greedy. Some of them started asking for $150,000 per annum for a three-bedroom apartment. So, immediately the Ikoyi-Lekki Link Bridge was done, many people realized that in Lekki, they could get a similar unit at half the price and that was it for the Ikoyi mansions.’ Omochiere Aisagbonhi, President/CEO of Omais Investment, confirmed to BusinessDay.”

“To Aisagbonhi, the situation in Ikoyi is a welcome development, explaining that it is part of the many things that have happened in the property market in the past three to four years that are giving power back to the consumer. ‘If you have money, you determine what you want to pay unlike in the past when the seller dictated the price. Now, there are many products in the market and so, it is buyer’s market. In Ikoyi, it is the tenant that determines what rent he wants to pay,’ he emphasised.”

Bits Bucket for January 11, 2015

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