July 24, 2015

The Swift Change From Bidding Wars To Surplus

It’s Friday desk clearing time for this blogger. “The 114 homes sold in Delaware County in June is a 23.9% increase from the same month last year according to the Monthly Indiana Real Estate Markets Report. The median sales price increased 17.1% to $105,000. The average sales price increased 21% to $124,424. ‘It’s been years since we have seen activity and pricing at these levels,’ said Bruce Bright, 2015 President of the Indiana Association of Realtors. ‘Despite a continued lack of inventory and increasing prices, consumers across the state see the opportunities that low interest rates present and are confident about housing as an investment.’”

“Brooklyn’s real-estate bubble is inflating to astronomical new heights with the listing of a shoebox-sized Windsor Terrace bungalow for an astounding $1.25 million. Neighbors were stunned by the sky-high price. ‘I’m shocked. It’s pretty crazy,’ said one longtime resident who said she attended the bungalow’s open house last week. ‘The floors are slanted. It’s going to need some repairs. If you have somebody who’s thinking small with vision, maybe that would work.’”

“Homebuyers ramped up their activity in South Florida this summer as both sales volume and prices grew in June, according to the Florida Realtors. ‘With the continued growth in both sales and prices in Florida, it raises the question of whether the market is starting to overheat,’ said Florida Realtors Chief Economist John Tuccillo. ‘The decline in inventories to seller-market levels, and the decline in days on market, tend to suggest that possibility as well. But there are mitigating factors here.’”

“The Miami Association of Realtors is troubled that only 29 of the 8,523 condominium buildings are approved for FHA loans. Nationwide, 30 percent of condo buildings can quality for FHA loans with low down payments.”

“Imagine buying a home in Fitzroy for a fraction of its market price; or gaining priority access to a semi in Bondi because you worked in the area. It seems ludicrous amid Australia’s overheated property market but it’s the reality for ordinary people in the UK priced out of exclusive suburbs, who are able to buy property in prime spots through the notion of shared ownership. ‘Right now my lowest value one bedroom, full value is £160,000 (A$337,550). So you could buy the minimum shared value at 40 per cent and raise a mortgage on £64,000, (A$135,020)’ said Notting Hill Housing’s sales manager for shared ownership, Wendy Gordon.”

“Ray White Drummoyne director Chris Wilkins said he can’t see it happening here anytime soon. Instead of a change in policy, he said people need to adjust their expectations about what buying a first home might mean. ‘I see us following down the path of a New York or a London where we’re more aligned to a rental city or culture than we are of an ownership city or culture. People forget history really quickly. It’s a little bit like at the moment people are saying ‘we’re going to wait, it’s going to crash’ but without being disrespectful to those people, what planet do they live on? It can’t be planet Earth because when has that ever happened?’”

“Auckland house prices could hit $1 million within 18 months if interest rates continue falling, experts predict. Hugh Paveltich, the co-author of the annual Demographia international housing affordability survey, predicted the million mark would be hit by March 2017. ‘It is sitting at about the $750,000 mark now and [rising] at about $3000 a week, or $150,000 a year, so it should be at about $900,000 12 months down the track. So you are looking at about a year and a half from now,’ he said. ‘The whole thing is a complete circus and I curse the politicians for failing to articulate these serious issues with clarity.’”

“Regina’s housing market has benefited enormously from soaring prices for oil, potash and other commodities, sailing through the global financial crisis comparatively unscathed. Prices leapt more than 50 per cent between October, 2006, and June, 2008, alone. Real-estate speculators moved in, snapping up derelict buildings in the city’s impoverished North Central neighbourhood by the dozen, often leaving them vacant while waiting for prices to keep on soaring. That fuelled a spike in new construction, particularly among condos aimed at first-time buyers, many of which were originally planned during the boom years but came onto the market just as prices began slowing.”

“For rental landlord Boardwalk Real Estate Investment Trust, first-quarter results in Regina ‘weren’t pretty,’ said president Rob Geremia. ‘We’re now seeing pretty major corrections in Regina.’”

“Realtor James Wruth figures buyers have been scared off by the swift change in the market from bidding wars to a surplus of unsold listings. ‘The fact that buyers have plenty of homes to choose from, lower interest rates and lower prices, but still aren’t making an offer, makes me scratch my head sometimes,’ he says.”

“Agreeing with the view that property prices are slated to come down, Orbit Corporation MD Pujit Aggarwal said that though there was little room to cut prices due to high costs, builders were now willing to reduce prices and sell units even at a loss. ‘They will sell in order to meet cash flow requirements such as interest payments, overhead costs or further construction,’ he told CNBC-TV18. According to Aggarwal, prices in some pockets of Mumbai could fall about 20-25 percent. ‘Till now, builders had been reducing prices through indirect means such as the 80:20 schemes and interest free EMIs, but a direct price reduction is absolutely on the table now,’ he said.”

“Several institutional investors said the recent plunge in Chinese shares has had the biggest impact on China’s middle class, the 21st Century Business Herald reported. ‘The stock market has a greater impact on the middle class. It has millions of yuan in equities, and some of them suffered heavy losses because of margin trading,’ a general manager of a private equity fund in Shenzhen said.”

“A broker in Guangzhou said some investors have turned their attention to commodities since late June, while a private equity fund manager said he moved his money into gold, silver and private equity funds. A real estate broker in Guangzhou said, however, that investors do not have enough money to put into the housing market because of the losses they sustained in the stock market.”

“So far, the impact of dramatically lower oil revenues has been limited to the oil patch, but the potential for contagion is still present. Back in the 1980s oil bust, the drop in gasoline prices helped consumer spending and the mass entry of Baby Boomers into the housing market provided a source of broad-based economic stimulus. But what’s different this time is the $550 billion that has been loaned to energy producers.”

“What’s also different is a looming global recession, a $900 billion subprime auto-loan bubble that’s about to burst and an echo-bubble in housing that’s threatening to follow the first housing bubble’s trajectory of crash and burn. The row of dominoes swaying unsteadily in these stiff winds won’t take much to topple.”

“So after the housing bubble burst seven years ago, what now? The BIS warns low interest rates could spell ‘entrenched instability’ published by GMA news online, June 28, 2015. The BIS is the Bank of International Settlements. It is the Central Bank of the world comprised of 58 central banks. It has a core of 31 chiefs of central banks of the most economically powerful countries of course. The BIS is not controlled by any government, pays no taxes, and has its own police force.”

“What did the BIS warn about in the article? It warned about the persistently low interest rates. In fact, some countries such as Switzerland, Sweden and Denmark have negative interest rates. Japan, in recent years, also approximated negative interest rates. In fact, interest rates are even lower now than at the height of the 2007-2008 financial crisis. This monetary policy of lowering interest rates is, the BIS warned, ‘overburdened in an attempt to reinvigorate growth.’ This, the BIS said, resulted in ‘too much debt, too little growth and too low interest rates.’”

“And yet, governments still rely on the same monetary and fiscal policies that have so far been ineffective while retaining the same neoliberal framework and policies that caused the economic crisis in the first place.”

Bits Bucket for July 24, 2015

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