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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