July 17, 2015

It’s Tulipomania All Over Again

It’s Friday desk clearing time for this blogger. “Erica Luna’s commute eats almost four hours out of her workday, and means no messing around with the snooze button at 4 a.m. She’s a San Francisco Bay area exurbanite, one of the legions trading convenience for a mortgage on the fringes of the most expensive U.S. housing market. Erica and her husband, Jesse Moncayo, paid $435,000 for a Lennar Corp. three-bedroom within walking distance of a new school. ‘You have to go to the valley to see the prices go down,’ Moncayo, 34, said on the train home from his job. ‘Even if there’s another housing crash, we have good enough jobs that we can wait it out.’”

“Sonoma County’s median home sale price hit $550,000 in June, as tight supplies and ongoing demand have helped increase the median for four straight years. And correct pricing has become more important today than two years ago when buyers sharply bid up the values of properties. Stephen Liebling, manager of the Coldwell Banker office in Sebastopol, said he is cautioning sellers against setting the price too high for their homes. ‘They really need to be priced at or below market to generate interest, even with the constrained inventory,’ he said.”

“Several agents and brokers said they’ve been surprised this year to see some homes garner offers for far more than the expected value, while other properties with seemingly fair prices failed to draw a single bidder. ‘It is a strange pricing market,’ said Trish McCall, an agent with Keller Williams in Santa Rosa.”

“Triangle home sales picked up in the second quarter, surging 22 percent in June alone, as buyers jockeyed for a dwindling supply of listings. One thing that isn’t going away despite the hot market is the payment of financial concessions by sellers. Financial concessions, such as paying a buyer’s closing costs, were paid on 65 percent of all the existing homes that sold in the second quarter, up from 48 percent during the same period last year. Stacey Anfindsen, a Cary appraiser, said the continuing payment of concessions remains one of the most baffling aspects of the local housing recovery.”

“‘With a two-month supply of housing, it’s economically illogical that somebody should have to incentivize someone to buy something when there’s a shortage of something,’ he said.”

“The lower Hudson Valley’s residential real estate market continues to show good health and ’sustainability’ through the first half of 2015, according to the Hudson Gateway Association of Realtors. At Houlihan Lawrence, a leading brokerage in the luxury homes market, brokers have seen a 21 percent jump in Westchester’s inventory of homes priced at more than $2 million. Pending sales in the luxury market have declined 8 percent, Houlihan Lawrence reported. Brothers Stephen Meyers, CEO of Houlihan Lawrence and Chris Meyers, said demand from buyers is especially weak in the $4 million-plus segment of the market. ‘There is plenty of competition, and buyers have a wide selection to choose from,’ they wrote. ‘It may be time for sellers to re-think the value proposition offered by their property.’”

“Fluctuations in the prices of all three major housing types across Saskatoon are no cause for alarm, according to a Royal LePage broker. ‘On the heels of several years where we saw appreciation greater than the level of income, we’re finally seeing some flattening of prices,’ said Norm Fisher, owner at Royal LePage Vidorra. ‘We typically have been seeing four per cent increases on average over the last five or six years. That’s just not happening (now).’”

“According to Fipe-Zap, for the thirteenth month in a row rental prices across Brazil rose well below the inflation rate, and in June rental rates actually went down. It is the first time this has happened since 2008 when the Fipe-Zap index was created, marking a turn-around from the rampant increases seen in the real estate boom years of 2009-2014. Rio de Janeiro had the largest decrease of 4.65 percent in listing prices, and when adding inflation to that it means property owners looking for rental income will not enjoy the same profit margins they became accustomed to. For renters, the trend means housing is becoming more affordable.”

“Rents for homes in prime areas of Dubai fell in the second quarter of this year as residents sought out more affordable property. Residential sale prices also dropped by 2 per cent on the previous quarter, mirroring a similar decline in the first three months of the year. Again, the biggest drops in value were in prime areas. Asteco’s managing director John Stevens said that with many more units due to be handed over ‘the 2 per cent quarter-on-quarter decline is not going to be a temporary blip, with more pressure on owners to review their selling price still to come.’ Asteco also said there was an emerging trend by a ‘limited number of purchasers’ offloading off-plan properties at a discount as they get close to completion and final payments become due.”

“A survey of 120 developers in Delhi and National Capital Region has revealed some scary facts about one of the most sought after residential property markets in the country. Demand for properties in Delhi-NCR region has fallen by 30-35 per cent over the last year. The ticket price of 3-bedroom, 2-bedroom and single-room flats has corrected by 30 per cent in Noida, 25 per cent in Gurgaon and 15 per cent in some key areas of Delhi. There are no takers for 1.70 lakh flats in key markets of Delhi, Noida and Gurgaon. New launches have dropped by 30-35 per cent because property developers are hard-pressed for cash.”

“‘The sentiment in the housing market is really at a low key,’ said DS Rawat, secretary general of Assocham. ‘One of the issues afflicting the sentiment is the high level of debt with the real estate developers and their poor valuations in the stock markets, limiting their avenues for repair of the balance sheets.’”

“Sydney recorded its lowest clearance rate of the year at 80 per cent on the weekend, according to Domain’s latest auction data, which is the first sign of a slowing market. ‘Over the last six weeks we have seen five drops and the trend is clearly down,’ Domain’s senior economist Andrew Wilson said. ‘Not only is the clearance rate falling, it’s starting to converge with the rates we had the same time last year. If we see the trend continue we may see the clearance rate fall below where they were a year ago and that would be a very interesting reflection of where we are in the market.’”

“In official housing lending figures, investors showed themselves to be the key borrowers for homes purchases. Australia’s biggest wholesale mortgage broker AFG reports a large decline in investor property loans over the month of May giving the clearest signal yet that Sydney’s housing market is starting to cool.”

“The roller-coaster ride of the Chinese stock markets in the past 13 months reveals the snowballing effect of the actions of disparate players. Wharton emeritus management professor Marshall Meyer, a long-time China expert, says that ‘the theory that the market was pumped up to help SOEs to reduce their debt is plausible.’ ‘Someone has called this the world’s biggest debt-to-equity swap,’ says Meyer. ‘But it went out of control. The government thought this would be a clever way out of the debt problem, which remains huge.’”

“As for bubbles, it was ‘Tulipomania all over again’ in the Chinese stock markets, says Meyer, referring to the 1600s Dutch speculative bubble of investors chasing up prices of tulip bulbs before they crashed. In China, the government’s conviction that stock values should be higher was the chief driver. ‘Against all reason, everyone was pumping stocks in China because the government advised them to buy stocks,’ he adds.”

Bits Bucket for July 17, 2015

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