July 19, 2015

Denying Us The Truth

A weekend topic on data. The news we read and how it’s interpreted. How numbers and statistics are used within it. From yesterday: “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.”

I’ll throw this out there; maybe the old six months inventory standard is out of date. With so much information available, and possibly not many buyers, if it doesn’t sell in a month it’s over-priced?

The Victoria Advocate. “In May, if every house on the market in Victoria were to be sold with no new homes added, it would take 3.6 months to sell them all, according to the Texas A&M Real Estate Research Center. This number is also known as month’s inventory, or inventory divided by average monthly sales, which is used as an indicator of the housing market. A balanced housing market for both buyers and sellers has about 6.5 months of inventory, said Mark Dotzour, chief economist and research director at the center.”

“The median home price in Victoria for May was $171,500 compared to $113,700 for the same month five years ago.”

“The low inventory is causing homes prices to spike, which will hurt more than just the consumers in the long run, Dotzour said. ‘I guarantee you Caterpillar across the street doesn’t hope house prices go up 10 percent a year in Victoria for the next decade,’ Dotzour said. ‘Because you know what? They won’t be able to hire people for the same wage level anymore.’”

Is he saying soaring house prices aren’t good for the economy? The same data, an about-face on what it means.

Then there’s what we are told and not told. First Coast News, “The housing market may appear to be on the upswing, but a new study finds that on average, one in 379 homes in Jacksonville will go into foreclosure. The study by Realtytrac ranks Jacksonville as the fourth worst market for foreclosures in the U.S. Seven other Florida cities ranked in the top 10, including Ocala and Tampa.”

“Vystar chief lending officer Kathy Bonaventura said the numbers may not reflect the current state of the housing market. ‘There was a shadow inventory of foreclosures that lenders really had not done anything with and they finally started to move those through the pipeline so we’re seeing that result now,’ Bonaventura said.”

“In short, the banks held onto foreclosure properties and waited for the housing market to bounce back in an effort to make money.”

The Tyee in Canada. “You could tell that famously leisure-obsessed Vancouver’s heated housing debate had taken a bizarre turn when 150 people bearing protest placards gathered outside the city’s library on June 24 to demand: ‘Give Us Data.’ The rally’s organizer, Eveline Xia, admitted it was all a bit ‘nerdy to be at the library talking about data.’ Nonetheless, ‘by denying us the data” about who’s buying what in the city’s housing market, she said, ‘they’re denying us the truth’ about why home prices are more out of line with incomes in Vancouver than almost anywhere else on Earth.”

The Asian Pacific Post piece is interesting because it takes a long look into the subject, which is an effort the MSM avoids. “The flood of money from China into Canada has not only distorted the Vancouver housing market beyond redemption, it has changed the sort of community Vancouver is going to be for generations to come. And, in a bizarre piece of absence of mind and lack of attention, it has hitched the future of Vancouver to the fate of the Chinese Communist Party.”

“The basic reason for the money flight is simple. After nearly 70 years in control, the Communist one-party state has almost exhausted its political legitimacy. Egalitarian ideology has been abandoned. The low hanging fruit of economic reform have all been picked and eaten, and the Communist Party has no intention of embarking on the political reforms necessary for the next stage of economic development. All that is left to sustain the regime is intensified repression — much in evidence in the last three years – and crass appeals to nationalism.”

“Lack of self-esteem has deterred Greater Vancouver from responding to warning signs about the money fleeing China. Part of this may be what a friend of mine calls ‘the Komagata Maru syndrome.’ That is the fear of singling out any ethnically identifiable group for fear of being labelled a racist. Just look at the city’s media. It has taken it years to pluck up the courage to say that it is torrents of money from China that is distorting Vancouver’s economy.”

“Some people, most of them in Vancouver’s economic and political ruling class, have been unwilling to look critically at what is happening because they are doing so well out of it. Developers, building contractors, engineers, lawyers, luxury goods retailers (or, often more accurately, retailers of goods with luxury prices), sellers of expensive cars have all done very well out of the Chinese cash tsunami. The municipal and British Columbia provincial government have also seen their revenues grow, making them reluctant to curb or even gather useful data on what is happening. Vancouver City Council is reported to make about $700 million a year on property transfers, and the province is making over $1 billion.”

From Bloomberg. “On June 10, as the Shanghai Composite Index was heading for a seven-year peak, Wan Xinjian borrowed the maximum he was allowed from his brokerage to buy more stocks. As the market started to plummet on June 12, the 49-year-old businessman had to make contingency plans and eventually sell a 7.8 million yuan ($1.3 million) flat he was renting out for investment income in Shanghai after Haitong Securities Co. called in his margin loans.”

“‘I’d rather keep the flat, but I have no choice,’ Wang said in a telephone interview, declining to specify how much he lost. ‘Where else can I get so much money?’”

“Wan, who had to break a lease with tenants as he rushed to sell his flat, said he was unlikely to go back to investing in the housing market anytime soon. ‘I still have place to live, so it’s hard to say whether I’ll buy flat again,’ said Wan. ‘Real estate is not a place to make quick money today.’”

Bits Bucket for July 19, 2015

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