September 18, 2015

Overcapacity Has Led To A Vicious Cycle

It’s Friday desk clearing time for this blogger. “The latest foreclosure numbers contain some troubling news for the St. Louis area. RealtyTrac shows that foreclosure activity was up 128 percent over last year in Missouri, and 140 percent in the St. Louis area. RealtyTrac VP Daren Blomquist tells KMOX that while much of that is due to banks finishing the foreclosure process on properties, the number of properties entering the process is also up, 77 percent statewide. Another concern, according to Blomquist, is that 43 percent of the loans entering foreclosure, were written after 2008, ‘That is again, another red flag that this isn’t all just tied to the last housing bubble 10-years ago, but there are more problems with more recent loans.’”

“Connecticut’s home foreclosure picture brightened again in August, but troubled home loans still might be holding back the recovery in the state’s housing market. ‘The percentage of loans in foreclosure tied to the housing bubble years is still disproportinately high, with 56 percent of loans in the foreclosure process originated between 2004 and 2008,’ said Daren Blomquist, VP at RealtyTrac. Blomquist said he would consider 30 percent of loans in foreclosure tied to those years to be closer to normal. ‘That is some cause for concern that a shadow inventory of bad loans continues to linger over the Connecticut housing market, and the uncertainty of when and how that shadow inventory will be released could be hobbling the housing recovery to some extent,’ he said.”

“‘We did see a 49 percent increase in bank repossessions in Sacramento in August,’ says Blomquist ‘and that was the fifth consecutive month with an increase from a year ago.’ Meanwhile, Nevada posted the country’s highest home foreclosure rate in August. ‘That was the first time Nevada had been ranked number one since September 2014,’ Blomquist says. He says the state’s four percent annual increase was driven by a jump in bank repossessions, which more than doubled in August. ‘The majority of the problem in Nevada, in fact 70 percent of the loans in foreclosure, are linked to loans that were originated back between 2004 and 2008,’ says Blomquist.”

“A report by Zillow indicated 18 percent of Phoenix homeowners had underwater mortgages, when homeowners owe more than their house is worth, in the second quarter of 2015. Sue Klima, president of the Phoenix Association of Realtors, said the Zillow data is close to what she’s seeing in the Phoenix market. Klima was underwater on her mortgage and recently put her home on the market. She said she paid $435,000 for a 2,400-square-foot home in 2006, which is now worth $355,000. However, she was fortunate enough to put down a large down payment, reducing negative equity.”

“She advises homeowners with underwater mortgages between $10,000 to $15,000 to wait it out. ‘I really think the whole area is going up in value, and we have a shortage of inventory,’ Klima said.”

“A city sitting on the border of Alberta and Saskatchewan is starting to feel the effects of the down-turning oil market. ‘Our local market from last year is down ten per cent – (sometimes) fifteen per cent right here in the city. So, when you’re talking a $350,000 house, that’s a $40,000 to $50,000 hit on the house. You know, it can be significant,’ said Michael Dewing. a real estate agent in Lloydminster. ‘We’re not quite double but almost double the inventory we usually see and we just don’t have the buyers to support that.’”

“The Executive Director of Lakeside Estate, Mr Salah Kweku Kalmoni, has advised prospective homebuyers to take advantage of the current grim economic outlook to acquire properties rather than waiting for things to normalize before they do that. Using Lakeside as an example, Mr Kalmoni said the company had been forced by the challenges to reduce its prices in order to sell. ‘In actual sense, now is the right time to own properties. The challenges present a buyers’ market to consumers and I think people who want to own properties are better off buying them now,’ he told the GRAPHIC BUSINESS in Accra.”

“Realtors hate to admit it, but there is a bloodbath in residential real estate, especially in smaller tier-II and-III cities. The prices are down between 10-25 per cent across markets like Chandigarh, Surat, Dehradun, and Delhi’s Dwarka Expressway, and Gurgaon’s Golf Course Extension. In bigger markets like Delhi NCR, Mumbai, and Bangalore, builders are struggling to find home buyers. Most real estate experts say that around 80 per cent of the unsold inventory today is held by re-sellers. According to Acquisory Consulting founder Sumchit Anand, ‘If during festive season, October-December, there is no improvement in sales in the residential segment, the developers may be forced to reduce prices and sell out unsold inventories,’ feels Sumchit.”

“Mackay has returned to a local buyers’ market as investors shy away. That’s the message from Real Estate Institute of Queensland zone chairman Peter McFarlane after seeing the results of the June quarter. He said he was taken aback by the figures in front of him. Mackay’s housing market dropped 20% in house sales activity, in comparison to the previous quarter. The number of houses sold totalled 165 for the year throughout the region, with an average median sale of $355,000. About 3000 properties are for sale throughout the area and 1200 are available for rent.”

“‘The investment market has declined to almost to a halt. Our market has transitioned from an investment market to a home buyer market,’ he said.”

“A $5 billion business and financial district for the coal city of Luliang was scheduled to open next year. But today, the area, which was to house at least 300,000 people, remains mostly grass and cornfields. A few workers are trying to finish what would have been the district’s main boulevard — which is now a road to nowhere. ‘The economic situation now is very bleak,’ says a low-level manager named Gao. ‘The construction industry, the entire real estate market is bankrupt. Our company can’t survive, so the workers were laid off.’”

“One residential development, China Culture Garden, has just been completed — but there is no sign of tenants, furniture or potential buyers. Wu, a real estate agent, says overcapacity has led to job and salary cuts and nobody seems to have much spending power these days. Luliang is trapped in a vicious cycle. ‘There are many people in the city just sitting around. They have nothing to do,’ says Wu. ‘People have no place to work. There are more homes under construction than the number of buyers. How can they sell? They can’t.’”

Bits Bucket for September 18, 2015

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