May 15, 2015

It Was A Free-For-All And Speculation Was Rife

It’s Friday desk clearing time for this blogger. “Thousands of foreign buyers are snapping up U.S. properties across the country. Florida is the number one region for sales, holding twenty-two percent of the foreign market. The National Association of Realtors estimates total international sales from Chinese buyers were $22 billion in the twelve months that just ended in March, 2015. They report the Chinese are buying luxury homes in Naples and Southwest Florida because they are a bargain compared to the $1.5 million they might pay for a small condominium in Hong Kong. They report that some are paying cash and buying sight unseen.”

“‘Foreign buyers purchased $92.2 billion for houses in 2014. Thirty percent of U.S. real estate agents now say they are working with offshore clients,’ said an NAR spokesperson.”

“If you can afford the $8 million penthouse on the 41st floor of downtown’s Harbor Club, you can probably buy your own Tesla. But the person who snags the top-floor unit at one of San Diego’s iconic skyscrapers will get a custom ordered Tesla Model S P85D for free. Property owner Mark Weinzierl said he hopes the offer helps set the penthouse apart as he competes for buyers around the world. ‘There’s a lot of interest in other cities, New York, Vancouver, Miami, L.A. and we don’t necessarily think that San Diego has a lot of buyers coming in to look at the property,’ he said.”

“While San Diego’s real estate market is currently a sellers’ market, that doesn’t apply for ultra high-end units, said Greg Neuman, the property’s listing agent with Berkshire Hathaway. There aren’t enough local buyers and the ones that can afford those units look around the world, he said. It may take an international buyer,’ he said. ‘We don’t have a lot of high end sales in condominiums.’”

“Incentives for buyers also popped up just before the Great Recession, after home prices peaked. A spokeswoman for Tesla said Wednesday that its cars have been used more recently as deal sweeteners. Weinzierl said he’s selling at a price that is essentially a loss because he currently has other interests in mind. Neuman said if a buyer didn’t want the Tesla that he would be willing to negotiate different terms.”

“At the height of the housing bubble a decade ago, a home equity line of credit seemed like an answer to a prayer. La Mirada mother Liberty Gutierrez built two businesses, renovated her home and bought three more properties: ‘For the first 10 years, anything I borrowed and used was interest-only when I paid it back.’ But this year her $175,000 home equity line of credit (HELOC) resets. It’s not just the interest she now has to pay but the principal. Her payments will jump from around $400 to $1,700 a month.”

“‘I’m not behind, I’m not unemployed, I’m not underwater. But that still doesn’t mean I can afford such a jump in a mortgage payment every month,’ Gutierrez said. ‘I have no idea what I’m supposed to do with this property.’”

“She isn’t alone. According to RealtyTrac, 3.3 million homeowners nationwide have a HELOC that’s scheduled to reset in the next four years, and 250,000 of those are in Los Anglees and Orange counties. That’s the largest number of HELOCS of any metro area in the country. The biggest surprise for RealtyTrac VP Daren Blomquist was that found 56 percent of homes with a HELOC nationwide are underwater. In Southern California, 60 percent are underwater. He says the timing couldn’t be worse: ‘This is coming at a time when home price appreciation is slowing down.’”

“April brought some positive real estate news for the Fredericksburg region. April’s median sale price increased slightly, by 0.6 percent, to $251,500 year-over-year. However, the median price fell just over 3 percent from March 2015’s $260,000. There were 998 new listings in April, up about 11 percent from last year’s 894 listings in the same month. ‘We are in the full spring market and are experiencing an increase in sales,’ said Fredericksburg Area Association of Realtors board of directors member Erin Newbill. ‘There is still some shadow inventory out there, but overall, it is a strong market.’”

“With a faltering economy and a government in crisis, these are not happy days for Brazilians. Certain ocean-area condos are selling at cut rates – some of them by as much as 20 per cent less than this time last year. As the real-estate market cools as a result, however, now could be a prime time for Canadians seeking a vacation home or an investment property. ‘Brazil right now is in a bit of a real-estate recession,’ says Dale Ripplinger, a Regina-based real-estate agent. ‘It’s interesting because so much of this almost mirrors what’s happening in Saskatchewan. Prices doubled in Regina and Saskatoon from mid-2007 to the end of 2008 and then tripled between 2007 and 2011. We’ve overbuilt, and the oil slowdown is hurting us. It’s very similar.’”

“Rents in Moscow’s most coveted neighborhoods are plunging as demand withers with the exodus of U.S. and European executives. As foreign employees exit the expensive neighborhoods they favor, rents have fallen by about 40 percent on average in dollar terms over the last year, according to David Gilmartin, owner of Troika Relocations. ‘The rental market is being hit by two things,’ Gilmartin said. ‘It was overpriced to begin with, and the number of people looking has fallen dramatically.’”

“A Chinese property developer has claimed ‘Australia would not survive’ without Chinese migrants. During an interview with Hong Kong television station TVB on May 10, Chen Guo Jing, a commercial and residential property developer based in Melbourne, spoke out in a report titled ‘Mainland Invasion’ about the growing amount of Chinese investment in Australia. Mr Chen, who has been living in Australia for 27 years, reportedly said: ‘Australian treat Chinese with contradicting attitude. However, Australia can’t survive without us. Therefore, Australian keep the anti-Chinese resentment to themselves.’”

“‘Why? Luxury housing and expensive cars are all bought up by us Chinese. Mineral and energy resources are all bought up by us Chinese. If there were no Chinese, Australia couldn’t survive,’ he said. Reporter Melissa Gecolea’s report for TVB aimed to show how ‘the Chinese diaspora is impacting life in Australia where mainlanders now top the list of foreign investors in real estate, driving prices up.’ One Facebook comment on the video from a Canadian Aaron Lee said: ‘This is also happening in Vancouver as well. I don’t think I can ever afford to buy my own house.’”

“Speculators have dominated Johor’s Iskandar housing market in the last few years but a slowdown since the middle of last year amid a surging supply is putting the squeeze on them, consultants said. ‘In 2012 and 2013, it was a free-for-all and speculation was rife. Even Singaporeans were coming in, buying blindly, and that encouraged developers to launch bigger numbers of units,’ said Mr V. Sivadas, executive director of PA International Property Consultants.”

“There was an air of hesitancy at this week’s City Sales auction of Auckland apartments, which was held just a couple of hours after The Reserve bank announced proposed new mortgage lending restrictions on Auckland residential investment properties. There were only three apartments on offer but even so, the turnout was smaller than usual. Although all of the properties on offer received bids, the auctioneer struggled at times to extract them from potential purchasers and in the end none of the bids met its reserve and all three properties were passed in for sale by negotiation.”

“Only time will tell whether the Reserve Bank Governor gets his wish to cool the Auckland housing market.”

“The Reserve Bank has finally got off the fence and signalled it’s getting its giant pin out and trying to deflate Auckland’s housing bubble a bit. It’s more of a controlled deflation than a grand splat of course, but it’s interesting, considering we don’t actually have a property bubble in Auckland at all, according to the Prime Minister and his friends in the business elite.”

“This week we learned David Hisco, who makes $2000 an hour heading up ANZ, is in total agreement with BNZ chief executive Anthony Healy, who is in total agreement with John Key, about the fact that that there is ‘no bubble.’ The Government’s inaction has been given the blessing of the financially blessed. One might have suspicions that it’s in the bank’s interests to keep property prices ratcheted up, and people borrowing, and profits flowing. The top four banks made almost $2.3 billion in profits in the first half of this year, or $12 million a day; a third of that was reaped from property investors.”

“Add that to the fact that the top property-owning politicians are all from the National Party, and an unmistakable pattern begins to emerge. Or, as they like to say, a ‘conspiracy theory.’ According to detractors, people like myself are just glass half-empty types, because where we see crony capitalism and the buying of influence, they see the natural order of things. A natural order where ordinary people are locked out of owning a house, and poor people live week to week at the mercy of an unmediated rental market, in the service of ensuring legislation never unduly discomforts those who can most afford it.”

Bits Bucket for May 15, 2015

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