August 12, 2016

The Effects Of Overinvestment And Ridiculous Pricing

It’s Friday desk clearing time for this blogger. “During the recession, Fernley was one of the hardest hit markets in Nevada, if not the entire country. But Aaron West, CEO of the Nevada Builders Alliance, stressed that the community of almost 20,000 people could be ripe for exponential economic growth. The medium new single-family home price in Fernley recently went up from $175,000 to $188,000 while Reno-Sparks on average can be around $300,000-$400,000. He also put to rest concerns over the housing price bubble bursting again or over-supply of the Fernley market.”

“‘I would remind everyone, that the bubble was really triggered by access to free money,’ West said. ‘It used to be if you had a pulse you could get a loan. That’s not the case anymore. The demand we’re seeing right now is really driven by job growth.’”

“You may have noticed more for sale signs on homes around your town, that’s because there’s more on the market. ‘The economy in Northwest Arkansas this year is red hot, and people are moving here to get great jobs, it’s not surprising that housing prices are both going up and the volume of housing sales is going up,’ said University of Arkansas Economist Kathy Deck. She says although there is no guarantee in the housing market she doesn’t see home prices falling in our area anytime soon. ‘It is a great time to buy a house right now and it’s a great time to have a house, it doesn’t mean that we wont have some bumpy years you know down the road, so folks need to be aware of that,’ said Deck.”

“Because of unfavorable exchange rates and increasing U.S. home prices, Canadian buyers have been shying away from buying homes in Southwest Florida lately, a Canadian broker said. But that’s not because they’ve lost interest in the Sunshine State, according to Brad Henderson, president and chief executive officer of Sotheby’s International Realty Canada. And while some Canadians who bought during that golden time are now selling to reap profits, ‘very few people want to invest in additional U.S. real estate at this time,’ he said.”

“Lena White, chief operating officer of Premier Sotheby’s, said the lower exchange rate has not only dampened the enthusiasm of Canadian buyers but also cut back on the number of renters, as well — particularly since some visitors are older and on a fixed income. ‘We’re hoping it all levels out,’ she said.”

“The Realtors Association of South Central Alberta reports average sales prices in the region fell 8.2 per cent over last year’s figures, with Drumheller’s average house price dropping 23 per cent, down to $200,019 compared to $259,317 from the same time last year. Re/max Realtor Ian Cassels sees the impact of jobs in the oil and gas sector contributing to the market downturn. ‘People are a little worried about their jobs and it doesn’t look like a lot is being sold,’ said Cassels.”

“The Brexit vote helped knock more than £30,000 off the price of an average property in London during July and has sent prices lower nationally, according to estate agent Haart. The month-on-month decline is one of the biggest recorded by Haart. Postcodes stretching west from Mayfair through Hammersmith and Chiswick saw prices fall by an extraordinary 12.9% on the month alone, while in north London, prices plummeted by 9.3%, knocking £60,000 off the average home.”

“‘Sellers are cutting deals to bypass the uncertainty in the wider economy and plucky buyers are taking advantage,’ said Paul Smith, the chief executive of Haart. ‘While there is still some uncertainty, it won’t be long before the market bounces back. The only thing we have to fear post-Brexit is fear itself.’”

“Real estate developers said most brokers, who used to sell as much as 10 high-end buildings in one year, ranging from N100m upwards, could hardly sell one presently. The National General Secretary of the Real Estate Developers Association of Nigeria, Mr. Akintoye Adeoye, said the stock of unoccupied luxury apartments in Lagos, Abuja and Port Harcourt had risen significantly in the last few months. He said, ‘People are more careful about how they spend money now and even those who have the money are not willing to spend it. Unlike before when one person can buy about 10 luxury houses and keep the keys.’”

“Adeoye added that the situation had forced developers to reduce the prices of such apartments to woo buyers. ‘But even with the drop in prices, people are not interested. There are some developers that can’t even sell one in a whole year because there is no mortgage for this group of properties. Those who buy them get money from other sources but those sources are no longer available,’ he said.”

“There was a study by Hass Consultants last month that laid bare the status of Kenyan property market. The property market as it stands now in heavily saturated. It is starting to feel the effects of overinvestment and ridiculous pricing. It’s a bubble that is about to burst. The rush to turn once lush, green countryside in to concrete jungle around the areas bordering major towns is myopic decision Kenya will regret later. Just like investors on the Nairobi Stock Exchange who have lost billions in the last two years, current property owners will certainly not realize full returns on their investments.”

“The latest report on the state of Phnom Penh’s property market makes bleak reading for investors and those betting on a lucrative future in the short-term. Knight Frank noted that ‘a significant [price] decrease of 35.8 per cent quarter-on-quarter is observed’ on new property launches. And Knight Frank admits that there will be an ‘imminent glut in the residential sector’ in Phnom Penh. Stephen Higgins, managing partner of investment firm Mekong Strategic Partners, said ‘the segment of the market that’s really out of control at the moment and defies common sense is the condo market.’”

“In Sacramento, and much of the media, California is enjoying a ‘comeback’ that puts a lie to the argument that regulations and high taxes actually matter. If you look at the long-term employment trends, housing affordability, inequality and the state’s long-term fiscal health, the comeback seems far less miraculous. Silicon Valley flacks may insist that the ‘landscape now has been altered,’ so prosperity is now permanent, but this view is both not sustainable and deeply flawed.”

“The state’s current budget surplus is entirely due to a temporary tax and booming asset markets. The top 1 percent of earners generates almost half of California’s income tax revenue, and accounts for 41 percent of the state’s general fund budget. These affluent people have incomes that are much more closely correlated to asset prices than economic activity, and asset prices are more volatile than economic activity generally.”

“As Chapman University economist and forecaster Jim Doti recently suggested, the California boom is exceedingly concentrated in one region. ‘It’s not a California miracle, but really should be called a Silicon Valley miracle,’ Doti noted in his latest forecast. ‘The rest of the state really isn’t doing well.’”