November 13, 2015

It Couldn’t Last, And It Didn’t

It’s Friday desk clearing time for this blogger. “Short supply has been underpinning skyrocketing resale prices in both Collier and Lee counties, Naples real estate economic adviser Michael Timmerman told a group of about 50 builders and developers. The biggest surge in new home starts seems to have abated in Collier County. ‘Starts are getting ahead of household formations in Collier County,’ he said. Maureen McAvey, an executive vice president with ULI in Washington, D.C., warned that even though builder optimism is at levels that have not been seen since the housing boom, ‘black swans,’ like a stock market correction or an overseas shock, could have a negative impact in the future.”

“Timmerman agreed, saying that the 10 to 12 percent price increases Southwest Florida has been experiencing the past few years is not sustainable. ‘We’re six years into a seven-to-eight-year expanding cycle,’ he said. ‘I’m not saying we should run for the hills, but we’re due for a healthy correction.’”

“The storm clouds are gathering even as deals chug along. One major investment broker, on condition of anonymity, confided, ‘I’m telling clients — and not making public — that we think we are past the peak and they should get realistic and drop the price, take the bid and move on.’ Manhattan is still strong, our source noted, but secondary and tertiary markets and projects are taking the hit. Cap rates, which are indicative of the going-in return on investment, had been plunging, but are just starting to rise again as some prices fall.”

“There are thousands of pricey, available residential condo units, and he pointed to Gary Barnett’s decision to market a group of rental units at One57 through Eastdil Secured at a large discount as a move that will send shivers through the market. ‘If one developer does it, will others?’ he wondered.”

“Houston-area home sales tumbled 10 percent in October, leading to the worst decline in more than four years as the city’s slowing economy reverberates across the real estate market. The sharp drop, the first double-digit plunge since spring 2011, played out among all price ranges, the Houston Association of Realtors said. The softening sales remind Realtor Sissy Lappin of tougher times in 2008, when the national economy was trying to pull out of a major recession. ‘We call this the unspoken recession. Nobody wants to talk about it,’ she said. ‘Nobody wants to use the ‘R’ word.’”

“Kelly Carter listed her five-bedroom house in Woodforest in May, and she’s had fewer than 10 showings. She thinks part of the reason it’s been slow is because she’s competing with new construction in the area. She doesn’t want to drop her price because she put in a $100,000 pool and spent at least another $10,000 on window treatments, shutters and automated blinds. She is, however, considering renting the house. Carter also owns a house in The Woodlands that she’s been renting since she and her family moved out a couple of years ago.”

“At that time, she said, ‘I could have sold in a day. It was tougher to find a renter than a buyer at that time. Now it’s kind of flip-flopped.’”

“Newly started foreclosures rose 12 percent in October from September, according to a new report from RealtyTrac. That is the largest monthly increase since August 2011, and more than twice the gain from September to October in the last five years. More than half (57 percent) of new foreclosures in August were re-defaults, according to Black Knight Financial Services, the largest share of repeat foreclosures on record. That is likely continuing into October’s numbers.”

“‘A representative of one of the major banks told me that many of the properties they are taking back are highly distressed in terms of condition and in neighborhoods with virtually no buyers, so they are having trouble even giving some of those properties away to land banks etc.,’ said RealtyTrac’s Daren Blomquist.”

“While scandals such as the one at Home Capital occasionally shed light on the dark side of Canada’s $1.3-trillion mortgage industry, much of the problem of mortgage fraud remains hidden from public view. ‘It’s happening on such a level that the consumer is aware that this is something that can be done,’ says an Ontario mortgage broker who didn’t want his name used and who once complained to federal and provincial regulators after being referred a deal that involved a family looking to buy three homes without any reportable income. ‘It’s happening on such a level that some bank reps, mobile mortgage reps, have said: Call a mortgage broker, they can probably find a way to make your income higher.’”

“Home buyers in Rio de Janeiro used to get into intense bidding wars as they tried to secure even a modest apartment in one of the city’s exclusive beachfront districts. Not anymore. Developers in Brazil’s second-largest city are now scrambling for ways to unload apartments, offering enticements like paying maintenance fees for years, slashing payments by 50 percent and giving away trips to New York. ‘This was supposed to be Rio’s moment of splendor on the global stage,’ said Rubem Vasconcelos, the president of Patrimóvel, one of the city’s largest real estate agencies. ‘Instead, properties are going for the price of a banana.’”

“High value homes in the north east of Scotland are proving harder to shift with an increasing number coming on the market at lower prices than before, according to property experts. Monthly rental of a typical four-bedroom family home in Aberdeen has dropped nearly 20% in the past 12 months. The price of an average detached home has fallen 1.7% in the same period. ‘We have certainly seen an increase of top end properties on the market. You just need to drive round to see the ‘to let’ and ‘for sale’ signs all over the west end of Aberdeen,’ said Adrian Sangster, national leasing director at city law firm Aberdein Considine. ‘Aberdeen has lived in its own little bubble the past few years.”

“Mary Smith, managing director of Relocation Scotland in Aberdeen, works with many of the oil majors and big service companies in the city. She said the market was experiencing a ‘correction.’ ‘But it needed a correction, last year before the slump was crazy and the market was overheating. I think a lot of buy-to-let speculators who mortgaged to acquire property are finding it tough. They need to get rental income in and there just aren’t the people there anymore.’”

“China’s economic troubles have dropped on the doorstep of a sun-weathered house at 18 Edgar St. in Port Hedland on Australia’s northwest coast. Four years ago, the 50-year-old home, fabricated from cheap asbestos cement, sold for the equivalent of $1.3 million. It’s now for sale again - recently priced at $310,000. What happened to $1 million in home equity? It vanished down the China sinkhole. It couldn’t last, and it didn’t. John Briggs of Port Hedland’s Pilbara Heart Real Estate says he’s never seen a bust like this: ‘It’s been dramatic, mate. Absolutely dramatic.’”

“From Australia to Zambia, Chile to Indonesia, the pain of China’s sharp economic slowdown is being felt in the form of depressed commodity prices, elevated unemployment and shrunken home prices. Chileans are suffering. The mines are retrenching. ‘They cut the workforce in half due to the lower prices of copper and less demand because China is no longer buying,’ said Juana Mejias, who heads the mine’s local union. ‘Things are looking bad here in Chile.’”

“Glencore, an Anglo-Swiss commodities company and one of Zambia’s biggest employers, is cutting 4,000 jobs at the Mopani Copper Mine. The Konkola Copper Mine has laid off 150 and is expected to cut more. The Chinese-owned company CNMC Limited has suspended operations at the Baluba mine in Luanshya, laying off 1,600. Spokesman Sydney Chileya blamed plummeting copper prices. Adam Zulu of the National Union of Miners and Allied Workers says closing the mine ‘will bring untold misery to this town.’ ‘If the mine is not running,’ Zulu said, ‘this town is going to die just like a ghost town.’”

“Abandoned stucco and fibreglass unfinished housing decorations litter Xuefu Hany’s workshop in Qiqihar, a second-tier city in north-east China’s Heilongjiang province. Further down the road from the workshop, other plants and ateliers have completely closed, leaving behind unsold window panes and mounds of coal. ‘Difficulties began a few years ago,’ says Guo Taixi, one of the managers of Xuefu Hany. ‘Before, there were queues of people wanting to buy apartments. This is no longer the case.’”

“On the outskirts of the town today, 40 or so cranes still continue to dig and build what will be yet another ‘new town.’ Several real estate projects are planned as well as schools, a sport stadium, lakes and parks. For the moment, most of the buildings remain empty. ‘It’s nothing but a bubble to create economic activity,’ says Mr Guo. Several people interviewed in Qiqihar are convinced no-one would move in. The city lost 180,000 people last year, and recent research published by Tsinghua University said that two million people leave the region every year as qualified workers and young people look for work further south.”

“‘We did not know how to adapt to the new growth model,’ says a retired agricultural worker who wanted to be known only as Feng, 80. All of his four children have left the city. His daughter is running a taxi company in Xiamen. ‘There is no work in the factories anymore,’ he says.”

Bits Bucket for November 13, 2015

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