February 28, 2015

Bits Bucket for February 28, 2015

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February 27, 2015

A Glaring Piece Of Hubris

It’s Friday desk clearing time for this blogger. “Some Puget Sound buyers are paying nearly $100,000 more than the list price for many luxury homes in this market. But that trend is all across the board, not just high-priced homes. Broker George Moorhead of Bentley Properties says a lot of sellers are hesitant to put their homes on the market. ‘There is no place to move to, there is no home,’ Moorhead said. ‘The buyers don’t win, OK, because they are having to overpay for something.’”

“Moorhead added that buyers have to be aggressive and be pre-approved for a mortgage before shopping around. If you settle on a home to buy, appealing to the sellers could give you the edge. ‘We are seeing pictures with families with dogs, very colorful letters, the plight of ‘I have been looking for over a year,’’ Moorhead said.”

“The run-down Desert Garden condominium complex has boarded and barred windows, dirt courtyards and a dirt-filled swimming pool. Unit No. 116, a two-level, 776-square-foot home with two bedrooms and one bathroom, sold for $10,000 cash last year. In a sign of just how bloated Las Vegas’ real estate market became, county records show that unit No. 116 sold for $62,500 in spring 2004 and then $82,000 in early 2007 — a 31 percent price jump in less than three years. The peak buyers, husband-and-wife investors from California, tried to sell the condo for $30,000 in summer 2012 but steadily dropped the price, to a low of $20,000 in fall 2013, GLVAR records show. They sold it last January to an investor for just $10,000, an 88 percent loss from their 2007 purchase price.”

“And in true Vegas fashion, the buyer already flipped the property. The investor sold it for $17,043 — 70 percent above what he paid — last June to a buyer from Los Angeles.”

“More Coachella Valley homebuyers are investing in new homes than they were a year ago, and they’re paying about 20 percent less for them. Buyers purchased 58 new homes in the Coachella Valley in January, up 29 percent compared to January 2014. They paid a median price of $357,000, down 21 percent from a year ago, according to CoreLogic DataQuick.”

“Year-over-year resale home and resale condo homebuyers purchased 408 existing homes, down 13.7 percent from 2014, and 223 condos, down 13.9 percent, according to DataQuick. The California Desert Association of Realtors reported that 3,553 single-family homes were on the Coachella Valley market in January — 20.5 percent higher than January 2014 and the highest number of homes on the market simultaneously since at least January 2013.”

“Ted Jones, chief economist for Stewart Title Guaranty Co., who formerly was the top dog at the Real Estate Center at Texas A&M University, said there may be something to reports that Austin has the most overvalued housing market. ‘Housing prices are pretty aggressive compared to the median income,’ he said. ‘It’s definitely being driven by upper middle class jobs and if you have a hiccup happen there, well…..’ One thing is for certain, he added. The market for homes priced at $500,000 and above is ‘oversaturated.’”

“Housing affordability surged for first time Maryland homebuyers in the fourth quarter of 2014, according to the Maryland Association of Realtors. MAR President Janice Kirkner said in a news release that starter home price declined almost $15,000 in the last three months of the year, the major contributing factor in the jump in affordability. ‘We ended 2014 on a very positive note in terms of affordability,’ Kirkner said.”

“The surging dollar is striking fear into business leaders who depend on foreign exports for profits. The same is true in Southwest Florida, an historically popular home-buy destination for Canadians, Britons, Chinese and Western Europeans. ‘I’m already starting to see it,’ said Roger Pettingell, a luxury specialist with Coldwell Banker on Longboat Key. ‘The idea that the U.S. is on sale because of the currency discount doesn’t exist anymore.’”

“‘Not only is the dollar stronger, but for a lot of the feeder nations to Florida, their home currencies have devalued, so the price they’re paying is now substantially higher,’ said Jack McCabe, a Florida real estate consultant. ‘Their finances have been decimated. We’re going to see a change in the amount of foreign nationals that come to Florida to buy property,’ he said. ‘It’s already happening.’”

“Calgary and Edmonton housing markets were ‘hammered’ in January, says the Conference Board of Canada. A report, by senior economist Robin Wiebe, released on Thursday, said the seasonally-adjusted annual rate of sales fell by 23.9 per cent on a monthly basis in Calgary to 20,100 and by 9.8 per cent in Edmonton to 15,372. Month-to-date in Calgary from February 1-25, according to the Calgary Real Estate Board, there have been 1,052 MLS sales in the city, down 33.59 per cent from the same period a year ago while new listings have risen by 11.78 per cent to 2,619. The average MLS sale price of $463,029 which is off by 3.98 per cent from a year ago.”

“The report classified both cities as being in a buyer’s market. According to the Conference Board report, the short-term year-over-year MLS price expectation is from zero to 2.9 per cent in Edmonton. In Calgary, the board classified the expectation as ‘falling.’”

“Mark Colvin: ‘It’s easy to think thart the global economy went back to normal after the global financial crisis but many of the underlying problems that led to were never truly fixed. Are we living in another bubble and is it about to burst, because so often the language of finance is hard to understand. The British writer John Lanchester is one of the most effective communicators on economics around.’”

“Lanchester: ‘I think the weird thing is we are and we’re both inflation and deflation at the same time. We’re in bubbles and we’re in panics almost sort of simultaneously. I think that when you talk to people who know a lot more than I do, the kind of IMF-type people, the Davos crowd, virtually to a man, everyone thinks that this system is in a very risky, very fragile state. And then there’s slightly a game play of pick a bubble, what’s your favourite bubble to likely go pop? The two I hear most about are something nasty in the euro zone which, I mean, trust me, the closer you are to the euro zone, the more likely that seems, or something going wrong in China.’”

“‘They’re both in a fragile and strange condition and then you get these data points coming out of China that you do a double take. People who are more confident about it say that since the Chinese government has full control of everything, full control of every aspect of the credit supply and access to money and all that, if there’s anyone in the world who can engineer what they call a soft-landing it would be the Chinese government.’”

“Colvin: ‘That does assume that the economy is one of those machines with levers and pipes and wires and things that you can control all of and that’s another long-standing economic argument. Where do you stand on that?’”

“Lanchester: ‘There seems to be a profound human impulse to believe that we can control things we can’t and the fact that the sheer complexity of all human interactions together, which is what an economy is, the fact that you can accurately model and control it is just very obviously, I mean to the non-economist which is what I am, it’s just very obviously a glaring piece of hubris.’”

Bits Bucket for February 27, 2015

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February 26, 2015

Accelerating The Burst Of The Bubble

Bloomberg reports on Denmark. “Here’s an example of some of the twists and turns that economies with negative rates might need to gird for. Seven years after Denmark’s property bubble burst, house prices in the country’s biggest cities are already higher than at any point in recorded history. Meanwhile, banks are trying to figure out how to navigate their way through the first auctions that will probably result in investors paying homeowners to borrow. In the leafy Copenhagen district of Frederiksberg, an average 140 square-meter (1,500 square-foot) house costs 1.8 million kroner ($275,000) more today than it did in 2009, according to Nybolig, a unit of Nykredit. That’s about 676,000 kroner more than at the height of Denmark’s real estate boom, which topped in 2007 and burst a year later.”

“House prices plunged about 20 percent from their peak through to their 2013 trough, triggering a community bank crisis and sending the economy into a recession. Realkredit Danmark’s 1 percent mortgage bond due April 2016 traded at about minus 0.6 percent on Friday, according to data compiled by Bloomberg. Its yield has been below zero since the end of January. Nykredit and Nordea say it makes no sense to offer new loans backed by bonds with negative rates, while Realkredit Danmark, the mortgage unit of Danske Bank, says it will continue issuance.”

“Swedes eager to buy a home in Stockholm must play by a new rule: Bid on the apartment before it’s shown to the public. The pace of housing sales in the capital city has quickened so much that buyers often have to make a deal almost immediately after the property is listed. The central bank’s move on Feb. 12 — lowering its benchmark rate to minus 0.1 percent for the first time in its 347-year history — threatens to further stoke demand in the housing market.”

“Hours after taking interest rates below zero, Riksbank Governor Stefan Ingves told Bloomberg TV that other policy makers need to tame household debt while the central bank focuses on deflation. ‘There are a number of things that others can do in order to ensure that things don’t get out of hand on the mortgage side,’ Ingves said. ‘Our households are borrowing too much, and the market is moving up, in my view, too rapidly.’”

The Globe and Mail in Canada. “Winnipeg, Montreal and Moncton are grappling with a surplus of unsold condo units driven by a surge in new construction and a dwindling supply of first-time buyers in the wake of Ottawa’s decision in June, 2012, to limit mortgage insurance to amortization periods of 25 years or less from 30 years. In Regina and Saskatoon, the number of unsold housing units hit a 30-year high, Canadian Mortgage and Housing Corporation said, the majority of them condos. Winnipeg has also seen a surge of new condo construction since 2012.”

“Montreal in particular has been grappling with a glut of unsold condos for the past two years as builders haven’t scaled back their plans in the wake of softening demand. There are now nearly 20 condo sellers for every one buyer in Quebec City and downtown Montreal, said Hélène Bégin, chief economist at Desjardins Group.”

“In downtown Montreal, a joint venture backed by Chinese investors recently broke ground on one of the city’s most ambitious condo projects, a two-phase, 800-unit project known as YUL Condominiums. ‘This is a world-class city which is still not seen as a condo market,’ said Steve Di Fruscia, CEO of Tianco Group, the Vancouver-based company developing the project with Montreal’s Brivia Group. ‘It’s just a question of time to get the local community out of the rental market and into [condos].’”

The Malaysia Chronicle. “Malaysia’s biggest reclamation project is raising concerns over a potential oversupply of homes in Johor, marine environmental damage in the Strait of Johor and the effect it may have on the livelihood of hundreds of fishermen. Some residents are making known what they think of Chinese developer Country Garden’s ambitious plan to raise four islands that total nearly three times the size of Sentosa at their doorstep.”

“Mr Samuel Tan, executive director of KGV International Property Consultants, said about 90,000 units are expected to be built by 2017. ‘Many developers in the area are already pulling their brakes. Some may cancel their plans,’ he said. Johor MP Liew Chin Tong from the opposition Democratic Action Party said: ‘There is already massive oversupply of high-end housing in Iskandar. This massive reclamation is going to accelerate the burst of the bubble… it doesn’t make economic sense.’”

Reuters on China. “The area of land used in new property developments in China fell by a quarter last year compared with 2013, state news agency Xinhua said, highlighting the extent of the country’s housing downturn. Land allocated to new real estate developments dropped 25.5 per cent last year to 151,000 hectares from 2013, Xinhua said, citing data from the Ministry of Land and Resources.”

“Squeezed by weakening demand and a glut of unsold homes, China’s property market started softening last year. Data earlier this month showed average new home prices in China’s major cities fell for the ninth consecutive month in January.”

The Australian. “Some of Australia’s most prestigious — and inflated — housing markets could come under pressure, with the government unveiling new fees and penalties for foreign buyers purchasing property. Melbourne real estate agent Jun Lu described the changes as ’short-sighted’ and the ‘wrong strategy.’ but said they would neither deter foreign investors nor fulfil the government’s purported aim of keeping houses affordable for Australian buyers. ‘This will not deter foreign investors from buying in Australia, but it will send a bad signal to the world, particularly China,’ Ms Lu said. ‘It’s saying Australia is not welcoming to investors. For most of these foreign investors, $5000 is nothing, so it won’t deter them, but it will have a long-term impact in making them think, ‘what’s the next step?’”

“As has been revealed by The Australian, the laws that prevent foreign investors buying established homes in Australia (in all but a handful of circumstances) are not being enforced. The Foreign Investment Review Board has failed to prosecute a single investor since 2006 and has not forced the sale of an ­illegally bought home since 2008. The FIRB has issued only 17 divest­ment orders in 11 years, during which time foreigners bought almost 30,000 established homes worth more than $23 billion.”

ABC in Australia. “A research company has found it is a renters’ market in Darwin, with prices diving in the past year and the number of vacant properties more than doubling. Managing director of SQM Research Louis Christopher said even with the big drop, prices in Darwin were still high. He said he thought rents could drop even further as Darwin’s commodity-driven economy weakened due to a softer mining and commodities sector.”

“Northern Territory Real Estate Institute’s CEO Quentin Kilian said the December 2014 report showed a jump in vacancies and a slump in rental prices, thanks to a saturated property market. ‘One of the reasons in the unit market is we’ve seen a large number of units come into marketplace over the last 12 months,’ he said. ‘That could have been driven by developers’ expectations several years ago of an influx of Inpex workers in the project’s early stages.’”

“However he said the number of Inpex workers looking to buy or rent was less than many expected, as workers tended to stay in temporary purpose-built workers’ villages. ‘The Inpex workforce they were hoping would come and populate those apartment isn’t doing that,’ Mr Kilian said. ‘There has not been the population growth that was expected. Therefore there is an increase in supply, but not an increased demand to go with it.’”

Bits Bucket for February 26, 2015

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February 25, 2015

Bits Bucket for February 25, 2015

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February 24, 2015

Declines From Levels That Were Inflated

The Edmonton Journal reports from Canada. “Home sales fell nearly 26 per cent year-over-year in January, the Realtors Association of Edmonton reported. The 666 homes that changed hands marked the lowest January number in five years. New listings increased nearly 30 per cent — a five year high. Ryan Henry wants to buy a house in Edmonton, but he’s not sure he should. The exercise physiologist has been looking since 2013 to invest in a rental property, but oil prices have plunged more than 50 per cent since June. In Alberta, that’s enough to rattle a homebuyer’s nerves. He worries about housing values and demand for rental accommodation. ‘I wouldn’t say I’m confident in the real estate market,’ he said. ‘I have no idea what’s going to happen.’”

The Wall Street Journal. “Concern about the effect of lower oil prices has contributed to a selloff in Canadian bank stocks in recent weeks. For the six biggest banks, a particular risk lies in their uninsured home loans, which account for 44% of the $187 billion of mortgages in Alberta, the province where Calgary is located, and aren’t backstopped by the Canadian government in cases of default. Although the numbers vary by bank, big lenders have on average 20% of their total Canadian loans, including credit cards and mortgages, in Alberta and other prairie provinces.”

“Property developers snapped up more of the city’s ubiquitous bungalows built for a mushrooming postwar middle class, demolishing them and building luxury homes priced at between 700,000 and 1 million Canadian dollars (US$558,530 to US$797,900) in their stead. Once a rich vein for developers, inner-city infills are sitting unsold. ‘There is a lot of that inventory, and I don’t know if there’ll be as many people moving up into that price range,’ said Glenn Herring, a real-estate agent in Calgary.”

From Bloomberg. “The pain of crude’s collapse is beginning to bite in Alberta. Sam Corea was the No. 4 Re/Max Holdings Inc. realtor in Canada by commissions in 2013, and 14th globally, selling about C$100 million worth of properties as oil riches helped fuel a luxury housing boom. That market is now rapidly reversing. ‘I haven’t seen this much inventory ever. There are so many more people who want to sell. They feel the market is dropping,’ said Corea, who has sold about 3,000 houses in Calgary since the early 1990s.”

“The two-story home his interior-designer wife outfitted with four sub-zero refrigerators and electronics to control security cameras and media in swank Altadore, sold for C$2 million last summer. If he sold it now, he’d be lucky to get C$1.75 million, he says. ‘Now we’re seeing a decrease in sales and prices,’ he said.”

Business News Network. “Clearly, it’s a bad time to sell your home in Calgary, yet those looking to sell are still clinging to hopes that oil will rebound. Sherry Cooper, the former chief economist at BMO, now at Dominion Lending Centres, says sellers in Calgary’s real estate market will be in for a rude awakening if they sit on the bench. She says 10 and even 20 percent price declines are on their way, but those deep cuts need to be contrasted against Calgary’s juggernaut gains. ‘Declines from what level? Declines from levels that were already inflated. The average price of a house in Calgary had increased dramatically. In fact, it was the strongest housing market in the country from that perspective,’ said Cooper.”

The Globe & Mail. “Stuart Ridgway isn’t suffering from buyer’s remorse, having purchased his Chestermere, Alta., house in January, right after the once hot real estate market took a hit due to a drop in oil prices. In fact, he sounds remarkably blasé. He and his wife purchased the large Chestermere house for their family for $560,000, and he got ‘a reasonable deal,’ he says.”

“They haven’t yet sold their 3,400 square-foot Calgary home that has been on the market for two weeks, listed at $440,000. But Mr. Ridgway is optimistic that once it gets close to the spring market, he’ll sell it off. ‘The house in Calgary won’t go anywhere till the end of the month. But people are looking,’ says Mr. Ridgway, an engineer who builds gas plants. ‘Nobody in Calgary, particularly in oil patch times, is going to want to shell out $600,000 when they don’t know next week if they will have a job. It’s very much a feast or famine type of thing.’”

Mortgage Broker News. “Brokers are already feeling the effects of tighter lending in one major market. The first to act was an insurer and now at least one major lender has followed suit by announcing it will tighten its lending standards in Alberta due to the effects the faltering oil industry are expected to have on the housing market. According to the Globe and Mail, Genworth will take a closer look at mortgages originated in Alberta. The insurer is also raising the target for its loss ratio, upping it to 20-30 per cent from the previous target of 15-25 per cent, in anticipation of possible losses.”

“‘I have just recently had a deal in Calgary that would have been a slam dunk six months ago get declined by both CMHC, and Genworth due to market risk and only 10 per cent down,’ one broker wrote on MortgageBrokerNews.ca.”

Bits Bucket for February 24, 2015

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February 23, 2015

Homeowners Have Decided: ‘Let’s Get Out’

The Fresno Bee reports from California. “Madera County is swimming in a nine-month supply of homes for sale, a jump from only five months at the end of last year, according to the California Association of Realtors. Home sales in the central San Joaquin Valley fell in January helping to replenish the housing inventory which tightened in recent years as homeowners waited for prices to rise. But it looks like homeowners — at least in Madera County — have decided its time to make a move. ‘One quarter we have nothing to sell and the next quarter we have a lot to sell,’ said Junia Painter, president of the Madera Association Realtors.”

The Arizona Republic. “New home sales and building across metro Phoenix fell back to a slower pace in January after December’s year-end surge. Last month, new home sales dropped to 620 from 1,006 in December, according to RL Brown Housing Reports. Home building permits declined to 799 from 977. Deals offered by builders trying to sell houses before the end of 2014 worked to draw more buyers in December, but the trend didn’t continue in January.”

The Standard Times in Texas. “Because rents were so high in 2014, sales of houses less than $200,000 were going strong. At the same time, said Max Puello, president of the San Angelo Association of Realtors, many investors saw the demand for housing and decided to buy properties to rent out. ‘There was a lot of pressure on under $200,000 homes,’ he said. ‘There were a lot of investors and homebuyers.’”

“The inventory of high-end homes over 2014, by contrast, seemed to stay on the market for longer, Puello said. ‘It’s like two separate markets,’ said Scott Allison, a San Angelo Realtor and broker. It was a seller’s market for houses below the $200,000 range, Allison said, whereas there are years of supply in high-end houses.”

The Billings Gazette on Wyoming. “A steep decline in oil prices has forced companies to stack rigs and curb their spending on new production. North Dakota’s rig count stood at 127 on Thursday, down from 189 a year ago, according to state information. ‘Moving forward, it’s OK to slow down and take a breath,’ said Wenko, who addressed a Billings energy forum. ‘Some say we’ve gone from insanity to just a little bit crazy.’ Wenko said oil service companies operating in the Bakken are trying to get lean and mean in response to lower prices. However, the local job service agency continues to report many openings. People searching for housing have more choices, and some landlords are discounting their rents.”

The Globe & Mail in Canada. “Although the National Association of Realtors (NAR) doesn’t have statistics about Canadians selling U.S. properties, some real estate agents south of the border have noticed an uptick in Canadian clients eager to sell. ‘Oh my gosh yes, I’m doing a lot of listings,’ says Diane Olson, a Canadian-born real estate agent who specializes in snowbird properties in Phoenix. ‘And a lot of them are making money.’”

“Ken O’Brian, a real estate agent based in Naples, Fla., says that while some of his Canadian clients are selling their properties, most are holding because they feel the market will get even stronger in future. ‘The projections we are hearing say that prices will be back to 2006 levels by 2019, 2020, so they are going to wait for a better time,’ he says.”

“‘Is it a good time to sell? If you are in upgrade mode and you have something on your radar, there is strong demand down there,’ says Don R. Campbell, senior analyst at the Vancouver-based Real Estate Investment Network and co-author of Buying U.S. Real Estate: The Proven and Reliable Guide for Canadians. ‘The economy for the country as a whole down south seems to be catching a bit more fire than it has in the past, and that means that you won’t be selling just to investors or snowbirds, also to locals. But it will be even hotter next year from a market point of view.’”

“On the other hand, says Mr. Campbell, some snowbirds may be feeling relieved after buying property a few years ago and then realizing that U.S. home ownership isn’t for them. ‘A lot of people did get caught up in the dream and now reality starts to kick in – maintenance and tax rates and Home Owners Associations,’ he says. ‘Some people are saying, ‘Thank goodness prices are up, I feel guilty whenever I go anywhere else except this property. Let’s get out.’”

The Press of Atlantic City in New Jersey. “This could be one of the best times ever to buy a house in South Jersey. There’s plenty of supply to feed any demand in this buyer’s market — although many local owners are either underwater on their mortgages or in foreclosure. Matt Dice, of Shore Living Realty in Ocean City, suggests that this combination of factors ‘has created a space in time that may never be seen again.’”

“Many buyers have been advised to avoid the potential headaches of short sales, but to Dice, those who are flexible on time — and can find homes that have been through part of the process — can get great deals. He was in on a short sale last month in which a home sold for 50 percent of what it last sold for in 2008.”

Bits Bucket for February 23, 2015

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February 22, 2015

The Boom Has Created The Conditions For A Bust

It’s Friday desk clearing time for this blogger. “RealtyTrac reported a marked increase in foreclosures locally and statewide in January compared to both a month and year earlier. That sparked blow-back from the local real estate industry and other housing market trackers, including Arizona State University economist Michael Orr. Blomquist talked to the Phoenix Business Journal about the Arizona blow-back and why RealtyTrac’s numbers differ from local sources. He said RealtyTrac compiles data not just from recorded foreclosures but also auction houses and other vendors dealing with home loan defaults. He said there were increases in Arizona foreclosure activity on that front. ‘They would have it before it was recorded,’ Blomquist said.”

“He also said some mortgage industry insiders are seeing more defaults related to second mortgages that may have been interest-only for several years but resetting with larger principal payments. ‘We are confident in it,’ Blomquist said of the foreclosure numbers.”

“The city’s latest idea for breathing life into ‘dead’ properties: Ask a judge to force them to auction. St. Petersburg is banking that it has standing with the court thanks to about $4 million in unpaid assessments and liens on the properties, with individual properties’ tallies often higher than the properties’ worth. As the city slowly shed its foreclosed properties — still between 4,500 and 6,500 at any one time— these speculators are the next target. ‘It’s part of the natural progression of the foreclosure crisis,’ said Matt Weidner, a St. Petersburg lawyer. ‘That’s one of the sort of shocking things,’ that cities got into the habit of not really pursuing these properties.”

“Most cities still are waiting passively for the market to get hot enough that private investors will snatch up dead properties, pay off the liens and build a house. But city officials are tired of waiting. ‘What is the final solution on this? We just can’t go on forever,’ said Todd Yost, the city’s codes compliance assistance director.”

“Connecticut house sales rose the final month of 2014, but 12-month sales wound up slightly below those of the previous year, The Warren Group says. The median price of a single-family home fell 2.1 percent to $240,000 in December, down from $245,000 a year earlier. Year-to-date, the median price for homes sold was $251,500, falling 3.3 percent from $260,000 in the same timeframe last year. ‘Median prices for both decreased but I think that will change in 2015 as we see more and more first time buyers hitting the market and looking for great deals,’ CEO Timothy M. Warren Jr. said.”

“Getting an apartment in Houston is about to get less expensive and that’s good news for renters. But the reason behind the drop is concerning. You’re bound to find large apartment communities, popping up across the Houston metro area and hundreds more are expected to be completed over the next year. And because of that industry analysts expect rent rates to drop and in some cases, it’s already happening.”

“According to Apartment Data Services, there are growing concerns for builders there may not be enough people to fill all of the units being built and that will drive rates down. ‘The recent concern is that the job growth has slipped because of the price of oil and job growth drives demand for apartments. That’s where there is a little anxiety out there,’ said Bruce McClenny with Apartment Data Services.”

“The oil that fueled Calgary’s housing boom has created the conditions for a bust. Genworth MI Canada Inc., the country’s largest non-government mortgage insurer, said last week it’s preparing for more losses this year and into 2016. More than five years of rising oil prices spurred thriving sales of million-dollar trophy homes in Calgary and a doubling of home prices in the last decade. As the oil crash forces energy firms in Alberta to cancel projects and fire workers, housing sales fell the most on record in December and January, with price declines expected to follow.”

“Vince Degiuseppe, a real estate agent in Calgary who sells about 20 homes a year, said demand is falling. Degiuseppe listed a home for a couple for C$500,000 in November amid oil’s slide, and they’ve cut the price several times to C$480,000. At an open house this month, the few offers were all below the listing price. Alberta ‘has gone from the top spot in the economic growth rankings to second from last on the provincial leader board,’ said Derek Burleton, deputy chief economist at Toronto-Dominion Bank, in a note to clients. ‘A significant softening in job markets will set the stage for a second major housing correction in Calgary and Edmonton’ not seen since 2008.”

“Stark reminders keep occurring of just how bad markets have become in mining towns and regional centres with a big reliance on the resources sector. The Hotspotting team came across a local newspaper article which recorded homes for sale as low as $49,000 in Blackwater, a coal-impacted town west of Rockhampton, with an average sale price around $150,000. Early in 2012 Blackwater had a median house price of $360,000, following a 17% rise in the previous 12 months.”

“A few hundred kilometres to the north is Moranbah, the quintessential boom-bust coalmining town. I’ve written about Moranbah’s demise in considerable detail over the past couple of years. Suffice to say that the median house price, once $750,000, is now $285,000 – and the median rental yield, once above 10%, is now 3.65. Experienced property analyst Louis Christopher wrote recently about similar agonies for markets in Western Australia. ‘For the property investors who got caught up in the mining boom, the sting will be very painful. It’s a reminder that if you are buying property, the risks of falling prices are very real if the economic cycle turns - especially in boom and bust mining towns where what goes up, invariably comes down.’”

“You have heard of property developers offering buyers in Dubai everything from furniture vouchers to luxury sedans. Now that trend has started in India as well. To get buyers, Indian developers have unleashed marketing campaigns offering lower home loan rates to free furniture and from cars to free studio apartments. And this is because there is excess inventory with Liases Foras, a property research firm, putting the unsold stock at 832.09 million square feet as of December 2014. And that’s not all, sales for the fourth quarter 2014 declined by eight per cent.”

“‘It’s a buyers’ market now. Expensive homes are not selling,’ Deepakh Parekh, Chairman of HDFC, told the newspaper.”

“China’s real estate industry, thriving just a few years ago, has seen a downward adjustment along with a reduction in end-of-year bonuses and salaries, reports our Chinese-language sister paper Want Daily. According to a report on end-of-year bonuses for 2014-2015, companies in the real estate sector, which previously gave the third highest amount in bonuses, fell to sixth place. This is due to a decline in sales, the accumulation of properties on the market and the collapse of the industry’s capital chain.”

“Not long ago, the real estate industry in mainland China was one of the most profitable for the new class of nouveaux-riches in the country, according to Shanghai’s National Business Daily. According to one employee of a real estate firm, end-of-year bonuses used to be in excess of 100,000 yuan (US$16,000), while a real estate agent at another company said he bought an Audi A6 with his bonus, but that this is no longer the case.”

“For the majority of people in the sector, worse than the reduction in end-of-year bonuses is the cut in salaries after Chinese New Year. A Beijing-based headhunter for the real estate industry said that salaries in the sector are set to plummet in 2015.”

“Jim Gray got his first job in the oil patch in 1956, when oil was trading somewhere south of $5 a barrel. Trained as a geologist, Gray founded Canadian Hunter Exploration in 1973 and built it into one of Canada’s largest natural gas companies. He’s lived through a few of these boom and bust cycles, enough of them to have some perspective on the current collapse.”

“Both the provincial government and many individual Albertans are feeling a little over extended right now. Gray says that’s a hard, but important lesson to learn. ‘For those people who bought big houses or leveraged their personal wealth, I bet that lots of those young people will look back in 20 years and say the life experience they got from this was the best they’ve ever had. We’ve had chequebook public policy in this province and with a lot of our people for too long and this cold shower that we’re having is not all bad.’”

Bits Bucket for February 22, 2015

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