December 30, 2016

Housing Bubble Predictions For 2017

What’s your housing bubble prediction for 2017? Nashville Public Radio, “Home sales in Nashville have surged in recent years. The median price for a single family home is up by nearly half since 2012. Most realtors and analysts don’t see the market slowing down anytime soon. But we talked to one who says he can predict the exact month that will happen. ‘The Nashville market is probably one of the best housing markets in the United States,’ says Edsel Charles, the chairman of Franklin-based MarketGraphics Research Group Inc.”

“Charles projects Nashville’s home sales will stay strong until 2020. Actually, May of 2020 to be exact. That’s when the economic cycle nationwide will begin to wane, pulling Nashville down with it. Until then, he describes the next few years as going something like this. ‘So we’re going to go from today, grow, come down a little bit and then go back up,’ he says.”

The multifamily market? “This year Nashville has seen a tidal wave of apartments being built and coming up for rent. And experts say the market is starting to get water-logged. Longtime apartment developer Marty Heflin says Nashville’s hit the peak of its apartment building boom. ‘I think we’re headed to the bottom right now,’ Heflin says.”

“Recent data from Colliers International, a commercial real estate firm, show more than 10,000 apartments are slated to come online over the next year — yet another record for new supply. And Germantown is ground zero for the onslaught, with roughly 4,000 of those apartments. But research shows the rate at which they’re being rented is beginning to wane. And Heflin says developers are working hard to find tenants as fast as possible.”

“‘In some of the higher-end developments around town, you are starting to see one, two, three months free,’ Heflin says. ‘We are not quite to clowns twirling signs in the streets yet for ‘come on in a lease right away.’ But I would say it’s definitely becoming a concessionary environment right now.’”

From Pound Sterling Live. “It may be the great irony of Trump’s presidency that when a property developer came into office the first thing that happened was that the bottom fell out of the property market. Yet that appears to be exactly what may be happening if recent data and forecasts from certain analysts are anything to go by.”

“Nordea Bank analyst Aurelija Augulyte has been expecting a slump in housing, and has forecast a full-scale downturn in the sector in 2017. She notes how history shows that it only takes a 100 basis point rise, or 1.0%, in interest rates (and mortgage rates) to cause a recession. A steady decline in residential investment is another early indicator of a slowdown in the sector.”

“‘Housing market is key, residential investment is one of the best leading indicators for the US economy. The recent rise in yields will dampen the housing market activity. In fact, it doesn’t take much – just another 100bp rise in mortgage rates, and we have a US recession? Yes, I think in some form or shape, we will have a word ‘recession’ as a theme and driver during 2017,’ said Augulyte.”

From six months ago. “Predictions: Major political or economic shock hits US in August/September. Recession is belatedly found to have begun in Q2 2016. High end housing inventory continues to pile up, putting downward pressure on mid-level housing prices. Median sales prices start to drift downward as high end properties taken out of the mix. Entry-level housing remains in high demand, especially in desirable neighborhoods.”

“Presidential election is close; Hillary prevails albeit not without scandals. Brexit is shelved…”

Another said, “This is the top and there is nowhere to go from here but down, I called it in ‘07 and I’m calling it now. Inventory is loading up in the key markets: Miami, Phoenix, Atlanta, Las Vegas. SF And NY are starting to see some inventory.”

One had this, “I predict that Donald Trump will continue to be Donald Trump and his campaign will continue imploding from now through November 2016 Election Day.”

From one year ago. “How much liquidity will they drain out, that is the trillion dollar question. I still think that NIRP is coming. From some of the articles I’ve read, surveys say that people will tolerate up to negative 10% interest rates before they really get upset.”

Another said, “I was thinking of a gold price target of $1,300 for the end of 2016. $1,500 in 2017. Low in 2018 or 2019 of $890. Up from there. Not sure on oil. Probably range bound closer to $50. Stocks: Slightly new lows by March. Sluggish but up a bit by the end of the year from there. New highs by late 2017, but a Fall CRASH. BONDS: not in good shape. Getting worse. Real Estate becomes more sluggish in the vast majority of areas. The Real Estate Wealth Effect goes into reverse. TRUMP wins.”

And another, “The more likely it is that Trump wins the Republican nomination, the more likely it becomes that the Democrats will win the 2016 presidential election. I still suspect that Trump and all you Trump trolls secretly work for the Clinton campaign. I predict that Trump will continue to tap into the populist anger vibe, but the Republican base will dump him at the convention through a brokered procedure.

And finally, “At the end of The Big Short, they revealed that new irresponsible bets on housing were introduced in 2015. If that is true, the bubble in housing has not fully even reignited yet. There is no way we are anywhere near the mania I saw in 2015, so nobody here has an ounce of proof that housing is in the process of crashing. Oh yeah, Hillary will win. That’s a hard prediction.”

A Very Widespread, False Belief

It’s Friday desk clearing time for this blogger. “Looks like all those reports of a luxury slowdown weren’t just speculative after all: The final Olshan Realty report of the year is out, and according to the real estate trackers there, ‘the golden years of new condo development’ are over. As Curbed New York columnist Jonathan Miller has noted in the past, ‘there’s too much development being built at 2014 prices, and that buyer isn’t there.’”

“Most of Edgerton’s tobacco warehouses were demolished years ago after the tobacco industry dried up. But in the past five years three of the cream-colored buildings were converted to apartments. All are full. Contrast that with the Orchard Heights subdivision for single-family homes on the city’s southern edge. It’s 12 years old but only about 20 percent full, developer Don Cosgrove said. ‘When we started out, we built maybe 30-some houses in the first few years, but it just went to nothing,’ Cosgrove said. ‘We thought it would be several years ago to fill the lot … Who knows when it will be filled?’”

“In the Bay Area housing market, supply and demand means not much supply and way too much demand. As a result, the cost of a single-family home has skyrocketed in recent years. Yet there were cracks in the market’s red-hot edifice; the volume of sales was way down from the previous year. New peak prices were recorded in April, May, June and July — and then the ’sluggish’ word set in and didn’t go away for the rest of the year. Sales were down. Buyers were digging in their heels. By fall, outside of hotly contested areas, sellers were making price adjustments unseen in a long time.”

“A new tax brought in to replace stamp duty is holding down house prices on the west coast, according to a leading estate agent. Will Banham, of Bell Ingram’s Oban office, said the Land and Buildings Transaction Tax has had unusual and unintended consequences for the west coast of Scotland. Mr Banham said: ‘This has simply caused downward pressure on prices, with most buyers explicitly discounting their offers by the exact amount of extra tax due. It is very much a buyers’ market, with vendors losing out.’”

“In the Yamuna Expressway authority area, 20 builders have failed to complete their projects and the investments of around 20,000 homebuyers is at stake. Noida, Greater Noida and Yamuna Expressway authorities are to recover a total of around ₹25,000 crore from builders in land dues. Many have turned defaulters, citing a dip in sales of flats. In Noida, the investments of around one lakh buyers are stuck in 50 delayed projects. There are 95 under-construction realty projects in Greater Noida. Around one lakh homebuyers in 80 of these projects are estimated to be impacted.”

“Australia’s booming market for purpose-built student accommodation, having caught the attention of some of the world’s largest investors, could be on the precipice of oversupply, with concerns among some of the industry’s largest outfits over the number of new beds in Brisbane. A report produced by commercial realtors JLL shows about 10,000 beds proposed in Brisbane, ‘the largest pipeline of beds in the country,’ adding to the existing supply of 9325 beds by 2020.”

“Iglu, which runs two ­student accommodation facilities in Brisbane, including one that opened months late, said it was ‘always a challenge’ to fill the properties. ‘There are a limited number of students, particularly at the higher price points,’ said company’s director Richard Smith. ‘Most of the new product is ­targeting a similar student demographic and we are concerned about the depth of the market to support all this new product. In our view Brisbane is the most oversupplied market in Australia … the student market is about half the size of Sydney and Melbourne yet has the largest development pipeline in Australia.’”

“Prices of completed private condominiums continued to fall in November suggesting recovery is still some way off for resale homes. November’s price fall was led by units in the central region, according to flash estimates from the NUS Singapore Residential Price Index. Mr Wong Xian Yang, head of research and consultancy at OrangeTee, said: ‘With rents still on a downtrend and the outlook on interest rates remaining unclear, buyers will continue to negotiate hard for lower prices.’”

“In China’s two-speed property market, prescriptions for deflating big-city bubbles are having unintended side-effects in smaller towns. ‘China’s property market has complicated, structural problems,’ said Wen Bin, a researcher at China Minsheng Banking Corp. in Beijing. ‘Bubbles in big cities have much to do with financial leverage, whereas oversupply in third- and fourth-tier cities epitomizes the lukewarm economy.’”

“Curbs are just buying time for policy makers and won’t fundamentally solve the crucial problem of regional imbalances, said Tommy Xie, an economist at OCBC Bank in Singapore. ‘They need to push forward the combined reforms as they’ve pledged in the statement,’ Xie said. ‘But to deflate a bubble while cutting oversupply really isn’t easy.’”

“Real estate prices will eventually collapse in Edmonton and prospective homeowners should consider renting for a few years, says an Alberta investment manager. ‘There’s lots and lots of issues with the Alberta economy, being a boom-and-bust economy. We’re not through the worst part of it yet,’ said Hilliard MacBeth, an Edmonton-based portfolio manager.”

“He expects some homeowners will be hit harder than others. For example, high-end properties on the outskirts of Calgary have already experienced a sudden drop. ‘Home bubbles and bubbles bursting and the explosion in the level of debt in Canadian society are totally tied together,’ MacBeth said in an interview with CBC Radio’s Edmonton AM. Because the market has been strong for decades, many Edmontonians believe the sector is recession-proof. MacBeth says this optimism is misplaced.”

“‘One of the big surprises to me is how widespread the belief is that owning a home is a really good thing to do,’ he said. ‘It goes through all levels of society, all kinds of people. The idea that prices always go up, it’s a very false belief, but it’s a very widespread belief.’”

“Renting is currently a bargain in Edmonton, MacBeth said. ‘If people think of a house as an investment, then everybody should sell their house and live in a rental place or move to a trailer,’ MacBeth said. ‘But if you think of it as a place to live, and accept that you will be consuming the value of that home over your lifetime, then it’s OK. It’s a speculator’s game, not an investor’s game.’”

December 29, 2016

A Wave Of High-End Units, Creating A Glut

A report from the San Francisco Business Times in California. “In 2016, around 5,000 units were completed in San Francisco, the highest level in decades. Will prices keep dropping? With supply on the rise, rents in San Francisco fell 2.1 percent in the past year, down to $3,390 per month for a one-bedroom, according to ApartmentList. That’s still the highest in the country, but a significant slowdown compared to the double-digit price growth of the past few years. The outlook for 2017 is uncertain: The city could see a continued cooldown, a major downturn or a rebound. What happens will affect billions of dollars in housing investment going forward.”

The Chicago Tribune in Illinois. “After experiencing a painful surge in rents during the last six years, Chicago tenants finally are getting a break. Rents have dropped in areas of downtown where there has been massive new construction of luxury high-rise apartment buildings, and rents are rising only modestly throughout the metropolitan area, according to Axiometrics. The trend in the Chicago area follows the same pattern as the rest of the nation. After years of record-setting new apartment construction, rents have begun to moderate. But Chicago’s slowdown is more pronounced.”

“Axiometrics analysts attributed the weaker rental market in Chicago to slow job growth, which is suppressing apartment demand at a time when new construction has produced a huge supply of rental units. n a report after the third quarter, Chicago-based Appraisal Research Counselors said the number of rental units in Chicago’s downtown had increased 150 percent since mid-2005. There were 6,880 units under construction downtown this fall. In 2015 and 2016, about 3,500 new units have become available each year, about double the annual average over the last 24 years.”

From Michigan Live. “Plans for a new 12-story student apartment high-rise on South U are headed to the Ann Arbor City Council for approval. The project includes 19 four-bedroom units, 17 five-bedroom units and 7 six-bedroom units geared toward U-M students. The apartments are expected to be priced from $5,500 to $8,000 per unit, according to plans. The four-bed units range in size from 1,334 to 1,581 square feet, while the five-bed units go from 1,503 to 1,898, and the six-bed units are 2,147 square feet.”

“Commissioner Alex Milshteyn raised the question of housing supply and demand, asking the developer to comment on whether there might be an oversupply of this type of housing geared toward students. Sean Havera, a representative for the development, said the development team looked closely at that and that’s why there aren’t one- and two-bedroom units, which are less in demand and the last to be rented in student housing developments. ‘There’s still a very big availability of those,’ he said.”

The Houston Chronicle in Texas. “A recent national report found further evidence of Houston’s apartment glut. Real Page, Carrollton, TX-based technology firm, found that Houston’s high-rise apartment rents declined the most out of the 50 largest U.S. markets surveyed. Houston saw a 7.1 percent decrease in high-rise apartment rents, the steepest nationally. A wave of high-end units are coming to the market, as job growth slows and weakens, creating a glut.”

“San Francisco, one the most expensive markets in the country, also saw a drop in rent prices with a 6.2 percent drop annually. The firm suggested that the pricing in the Bay Area may have been inflated in recent years. The average rent is still $3,400 a month, despite the drop in prices.”

December 28, 2016

The Good News Is You Can Get A Deal Now

A report from MarketWatch. “The number of investors who flipped a house in the first nine months of 2016 reached the highest level since 2007. About one-third of the deals were financed with debt, a percentage not seen in eight years. Now Wall Street, which was nearly felled by real-estate forays almost a decade ago, is getting back into the action. A number of banks are arranging financing vehicles for house-flippers, who buy and sell homes in a matter of months. ‘The floodgates have opened,’ says Eduardo Axtle, a 35-year-old former telecom entrepreneur in Oakland, Calif., who has taken out about 50 home loans over the past five years. These days, he is bombarded with unsolicited emails from brokers offering him access to financing, and fellow flippers invite him to get-togethers.”

“Some borrowers say they have been offered debt in excess of the value of the home, also known as the loan-to-value ratio. Others say some lenders are requiring bank statements to get a loan, but not standard documentation such as a W-2 tax earnings statement. George Geronsin, 36, a Southern California real-estate agent and house-flipper who has been in the business since 2008, said he recently sold the majority of the homes he was working on and is sitting on cash ‘until the next big correction’ in the housing market. ‘Anybody and everybody is getting into the business of house-flipping — that’s when you know it’s the end of the rope,’ said Mr. Geronsin.”

The Citizen Times in North Carolina. “Local renters weary from hunting for an apartment they can afford may now get some relief. Asheville and Buncombe County have eased out of a housing crisis, according to a newly released report commissioned by the city. The main change has come in market-rate apartments. While the area had a severe shortage on its hands in 2014, there are now 4,722 units proposed or under construction in the county. That could actually tip the scales to the point the vacancy rate exceeds 10 percent, said Patrick Bowen, whose Ohio-based company Bowen National Research recently updated its 2014 apartment report for the city.”

“If that happens, rents will go down, but apartment complexes may start failing. ‘Wouldn’t a renter like to see rents go down? Yeah, they would,’ Bowen said, but failing apartment buildings could cause a spiral of bad things, including loss of home values.”

From Bloomberg on New York. “The luxury Manhattan co-op, a longtime sign of real estate prestige and exclusivity in New York, may be losing its appeal. Blame a glut of newly built high-end condos. Contracts for co-op apartments priced at $4 million or more fell 25 percent this year from 2015, as buyers with means opted for newer homes with more amenities and fewer restrictive rules, according to a report published by luxury brokerage Olshan Realty Inc. It was the biggest annual decline since the firm started tracking luxury co-op contracts a decade ago.”

“‘The data right now has a big, red circle on it that says this sector is in trouble,’ Donna Olshan, president of the firm that bears her name, said in an interview. Next week, Jacky Teplitzky, a luxury broker with Douglas Elliman Real Estate, plans to list an Upper East Side co-op with an asking price that’s slightly below its market value — a way to stand out in a sea of other co-op apartments competing against the wave of shiny new condos. ‘The good news,’ Teplitzky said, ‘is that you can get a very good deal in a co-op now.’”

From The Rapidian in Michigan. “‘I’m watching strangers go in and out of my home,’ said Yvonne Johnson, looking out the window. While we talked at a neighbor’s house, Johnson’s home was filled with realtors and prospective buyers, there for a typical Sunday open house. It’s been a common sight on her block in the last ten months. The home, located near the newly desirable Wealthy Street corridor, is being sold to avoid foreclosure. Yet Johnson thought she was part of a protected low-income housing program.”

“‘I was under the impression that I was part of a home ownership program,’ Johnson said. ‘The house that I live in was built in 1998 by a grant through HUD. The city of Grand Rapids built homes in certain areas to raise the property values. At that time I understood that I would pay my part of it in ten years, because of the HUD grant involved.’ When the ten years passed, she didn’t receive notice, and so she kept paying. She’s been paying for 18 years total.”

“A look at Johnson’s documents reveals that the Grand Rapids Housing Commission (GRHC) applied a $19,000 down payment for the $65,000 home, contingent upon Johnson living in the home for a number of years. What wasn’t clear to Johnson was that the rest of the loan would be a typical mortgage with Mercantile Bank at the current interest rate, around eight percent in the late 1990s.”

“Most of all, though Johnson had been paying for years and hoped that would ensure her home ownership, that wasn’t to be the case. The bank said her home’s entire loan was over $150,000, and she still owed almost $30,000. Johnson said she was never told that the loan was going to amount to that much. Though she used to pay ahead on her mortgage, now that she’s struggling with a recent job loss and less reliable transportation, her options are running out.”

“She would like to move on her terms, and to a comparable place. ‘Now I’ve had such a bad experience, I just want to move. If all this hadn’t happened, I would have liked to stay. I raised my kids here. But after two years of trying to get answers, I’m just so drained and tired.’”

December 27, 2016

Staring At Empty Premises And Counting Their Losses

A report from the Australian Financial Review on the UK. “Never before in the history of London has there been so much uproar about so many buildings – many of them skyscrapers, and most built or approved during Boris Johnson’s eight-year reign as London’s Mayor. Investigative financial journalist George Turner – who fought an unsuccessful campaign to prevent the controversial high rise redevelopment of the Shell Centre on the south bank of the Thames – believes the high-rise horse has bolted. ‘Luxury apartments are stacked high and left vacant while housing is now unaffordable for most Londoners,’ he wrote. ‘Warped by financial interests, our planning system guarantees property developers huge profits but fails to deliver the buildings and services we need.’”

“Architect Barbara Weiss co-founded Skyline Campaign in February 2014. “There were 236 high rise buildings either built, approved or in the pipeline when we launched Skyline Campaign,’ Weiss explained. “Now there are 436: that’s 200 extra skyscrapers in two years. Around 75 per cent of the new skyscrapers are residential. That’s new for London. They’re being built very cheaply. Corners are being cut. And they are going to be very difficult to demolish once they have gone past their use-by date.’”

“‘We’re building ghettos of the wealthy in the sky,’ Weiss complained. ‘These towers are symbolic of how divided London has become. Sydney and Melbourne are being similarly trashed. It’s an international disease.’”

From The National on Dubai. “Dubai rents are set to decline further next year with more than 20,000 new homes entering the market, brokers say. After having fallen by up to 5 per cent this year in parts of Dubai, rents should drop by another 4 per cent in the suburbs next year amid the supply influx, according to the Core Savills 2017 forecast. Jesse Downs, managing director of Phidar Advisory, expects prices and rents across Dubai to weaken next year as the slowing economy forces companies to downsize, dampening demand.”

“She said banks continue to cut staff and the new jobs which are created are in lower paid industries – something which she says will depress rents, in turn depressing sales prices. ‘It seems stakeholders forget to ask the simple question: who will live here and why?’ Ms Downs said.”

The Daily Nation on Kenya. “The rapid growth of real estate saw Nakuru voted the fastest growing town in the region by UN Habitat. However, the current shortage of tenants for most of commercial and residential units seems to indicate that the anticipated economic growth was overstated. Some landlords are beginning to realise that investing in the town might have been a hasty decision. Many landlords in the central business district (CBD) are staring at empty premises as property agents count their losses.”

“A spot check by DN2 found that in most buildings, occupancy was concentrated on the ground and first floors, while the rest are largely empty. The situation is the same in residential areas such as Racetrack, Shabab, Naka, Section 58, Kiamunyi, Barnabas and Freehold.”

“According to Skylight Commercial Agency Managing Director Mr John Kiritu, the inflated landlords are to blame for the situation. ‘Some of the rents charged in the CBD are not affordable. For instance, two years ago, an office measuring 10ft by 10ft on Kenyatta Avenue was going for between Sh4,000 and Sh5,000 per month. It has now shot up to between Sh15,000 and Sh20,000,’ Mr Kiritu offered. ‘With so many building coming up, it is up to the landlords to review their rents if they hope to get new tenants.’”

The Bangalore Mirror in India. “The final quarter of 2016 has bad news for real estate players as the supply of new residential inventories in most metros including Bengaluru has exceeded the absorption rate, showing a slowdown in the industry. ‘Post-demonetisation, the affordable housing segment will get a much-needed boost. Confined to the fringe areas of metros, this segment is expected to get a boost as land prices will plummet in the next few years, especially in far-flung areas around Indian metros, as well as tier-II and tier III cities,’ said Anuj Puri, Chairman and Country Head, JLL India.”

The Gladstone Observer in Australia. “Sellers desperate to offload their Gladstone properties are offering massive price drops on homes on the proviso that buyers snap it up quick. The vendor discount in Gladstone, used to measure the difference between the original asking price and the eventual sale price, is the state’s second biggest at 10.6%, only beaten by Mackay at 11.4%. The discount has increased slightly in the three months to September from 9.6% in the June quarter. It was up from 8.1% in 2015, meaning the average buyer can expect to see $106,000 reduced from a $1 million home.”

“Real Estate Institute of Queensland Gladstone zone chairwoman Vicki Brown said she’d noticed a drastic ramp up of sales in October. ‘As you know it been a pretty bad year, but the last month has been crazy busy,’ she said. ‘The prices haven’t gone up, but we’ve sold a lot of houses and rented a lot of houses.’”

“Ms Brown said she’s sold to investors from Brisbane, Sydney, Melbourne, and Darwin, but a large portion of homes have been handed over to first home buyers that previously rented in Gladstone. ‘Tenants are buying now because it’s very affordable for them.’”

December 26, 2016

From Buy, Buy, Buy To Stop, Stop, Stop

A report from Harvest Public Media. “Cropland in the Midwest is losing its value as the downturn in the agriculture economy continues. Record-high crop prices contributed to record-high land values in 2012 and 2013. But now, that party is over. Iowa State University economist Wendong Zhang says across the Corn Belt, and into the Great Plains, farmers are now suffering from oversupply, despite strong demand. The result has been a drop in commodity prices, and a bust in the farmland bubble. ‘Because we had this really high profits, everyone is trying to increase productions,’ Zhang says.”

The Farm & Ranch Guide. “Land values have been on a slow, gradual decline since their peak several years ago, but Brent Qualey, accredited land consultant/rural appraiser for Farmers National Company, said the land market is very localized and varies depending on land quality. ‘Right now there’s a good balance,’ he said. ‘When something comes up for sale, there’s still an adequate amount of buyers out there. There hasn’t been much land for sale this year, and there wasn’t much land for sale a year ago, but if we all of a sudden start to see some lender-encouraged sales and we start to see some people say ‘well now is the time to sell,’ then there will be a big influx of land being put on the market. That could definitely lead to a softening in values.’”

From KPC News. “Farm incomes will likely continue to slump next year, with grain prices remaining at or near their lowest levels in about a decade, according to an analysis by agricultural economists at Purdue University. U.S. agricultural exports are expected to recover slightly after two years of decline, but not nearly enough to offset increasing global grain stocks, says Chris Hurt, editor of the Purdue Agricultural Economics Report. ‘In the last three years, U.S. production has outpaced usage for corn, soybeans and wheat,’ Hurt says. ‘Abundant inventories of grains and soybeans mean low prices.’”

“Livestock producers typically benefit when the grain they use to feed their animals is cheaper. But three years of steadily increasing production has kept beef cattle prices low with little recovery in sight, says Jim Mintert, director of the Center for Commercial Agriculture. ‘After averaging near $153 per hundredweight in 2016, prices for 500-600 pound steers in Kentucky could average in the $120s in 2017,’ Mintert says. ‘Calf prices at this level are below the break-even price on many cow-calf operations, which could bring herd expansion to a halt in 2017.’”

“According to the annual Purdue Farmland Value Survey, an acre of average Indiana farmland was worth $7,041 last year, down from a peak of $8,129 in 2013 — a 13.4 percent decline. ‘The primary force behind the farmland value decline has been the decline in crop production profitability,’ says Craig Dobbins, farm management specialist.”

The Alberta Farm Express. “Errol Anderson’s opinion on the global economic downturn isn’t one you’ll read in too many newspapers. ‘I’m going to make a bold statement: We are at the end of an 80-year capitalistic cycle that has already been prolonged 10 years by central bank manipulation. It has to be refreshed, and it will be,’ said Anderson, president of ProMarket Communications. ‘I believe that economics always rule. Central bankers can do whatever they’re doing to kick the can (down the road) but in the end, economics always rule. There’s no sense in denying what’s going on in these financial markets right now.’”

“Central banks have been trying to jumpstart the flagging economy by printing money and adjusting interest rates, Anderson said at the Farming Smarter conference in early this month. ‘Right now, the central bank stimulus bubble is three times larger than the dot-com and the U.S. housing bubble combined,’ he said. ‘We’ve got a very sleepy market right now. In 2017, we’re going to see it start to swing because economics are going to start to cut into these markets…. Something has to give.’”

“So what does this mean for agricultural commodities? ‘Demand is king — not supply,’ said Anderson, pointing to the plunge in cattle prices. ‘Cattle are in short supply, aren’t they? Shouldn’t prices hold? The cattle market was in tight supply, and we were told that these prices would continue to go higher into 2016 and 2017, and all of a sudden feeders went to half price. Why? Demand.’”

“People tend to think that supply and demand equals price, but ‘in reality, it doesn’t work that way.’ ‘It’s the guy with the chequebook and what he wants to pay that dictates that,’ said Anderson. ‘So when you see strong demand — even on the grain side — all of a sudden it will quit and come back down. We go from buy, buy, buy to stop, stop stop.’”

“For wheat, the story is ‘very aggressive’ discounting by Russia and Ukraine, he said. ‘The Black Sea region is really dictating where global wheat prices are going. Russia’s currency crumbled about a year ago, and that gave them a huge competitive advantage. It’s going to be tough’ if you’ve only got lower-quality wheat to sell.”

“‘Grief’ is a good word to describe the cattle market right now, said Anderson. ‘What’s bugging cattle? Hogs. The hog market just fell apart,’ he said. ‘The meat protein market in the U.S. went into a glut, and beef had to compete against that.’ Right now, the situation for feeder cattle is ‘ugly,’ he said. ‘Backgrounders took the brunt of this. It went from $240 a hundredweight down to $120. This feeding cycle was worse than BSE,’ said Anderson.”

“The boom years appear to be over, and producers — like those in the oil and gas sector — are going to have to adjust to the ‘new normal,’ said Anderson. ‘The new normal is prolonged, slow economic growth globally. Nothing is going to change that.’”

All The Signs Of A Housing Bubble Were Prevalent

A report from the National Post in Canada. “Since housing supply was a challenge in Fort McMurray long before the fires destroyed more than 2,400 buildings in what had been an overpopulated city, and since thousands returned after the fire to find their homes damaged beyond repair, you would expect housing to still be an urgent concern in the Alberta oil-sands capital. But the city was strangely prepared for an emergency like this after solving that 20-year-long housing crunch, and everyone in Fort McMurray is celebrating the holidays this year with a roof over their head.”

“By 2014 with the oil industry beginning to suffer, local urban development plans were put on hold. In the months before the fire, the downturn in oil prices left Fort McMurray with a new problem: the city actually had too much housing. ‘With the economic downturn, you have areas where houses are just sitting empty,’ says Tim Gensey senior public affairs adviser of the Canadian Mortgage and Housing Corp. ‘Homes that were selling for $800,000 dropped to $650,000.’”

The Australian. “In Lamington, a country area of Western Australia covering mining towns such as Kalgoorlie, 2600 households are suffering ‘mortgage stress.’ The pain is more severe in Harris­town in Queensland, about 130km west of Brisbane, where more than 4500 households are in difficulty. Research covering the top 20 postcodes with the greatest mortgage stress features many country areas but Melbourne’s Essendon and Preston each have around 2500 households in difficulty, as does western Sydney’s Bossley Park.”

“Despite record low interest rates and unemployment below 6 per cent, Standard & Poor’s said arrears ticked higher in October and the proportion of ‘non-conforming’ borrowers behind on payments was near record levels. Former Commonwealth Bank chief David Murray this month said all the signs of a housing ‘bubble’ were prevalent, such as ‘people’s behaviour … and ­defensiveness about any correction.’ Mr Murray told Sky Business that investors owning multiple properties that were cross-collateralised who could become forced sellers were the ‘risk to the system.’”

The Borneo Post on Malaysia. “In an economic climate as testy as Malaysia’s now, it comes as no surprise that less and less homeowners are buying properties. According to PropertyGuru Malaysia country manager Sheldon Fernandez, the residential property market to date has seen a decline in transaction volumes in tandem with the market slowdown. ‘It is typically a buyers’ market as buyers have more choices now, taking their time to find the best deals,’ Fernandez observed. ‘Horror stories on buying first home properties occur because many are not aware of the steps one should take or check before purchasing a home.’”

“Second-hand units are common in the scene, but as Daniel Hii Jun Chung discovered, things can go wrong just as easily. ‘My first home was a second-hand unit. The owner was always away during the daytime so I had to view the home at nights. This was one of the biggest mistakes I ever made,’ he explained. ‘At night, any stain — be it water marks or uneven paint colouring and wall tiles expansion — are very hard to notice. Furthermore, with artificial lighting, there are shadows everywhere so many imperfections were hidden.’”

From Frontier Myanmar. “It is not unusual to hear the word ‘weak’ used in connection with the high end of the real estate market in Myanmar. The market has been squeezed since 2014 and the consensus is that sales are unlikely to improve anytime soon. If realtors are saying the general condition of the real estate market is not good, you can be sure that the high-end situation is grim. That’s certainly reflected in the Colliers figures, showing that luxury and high-end units – with an average contract price of US$784,000 and $535,000, respectively – account for 62 percent of total pre-sales stock.”

“‘The market right now is focusing on the high-end; I don’t think that’s the market,’ said Mr Melvyn Pun, chief executive of Yoma Strategic Holdings, a big player in the real estate sector. ‘Very few people can afford them and that’s not the general direction of the country,’ he told journalists. ‘Now the prices are higher than Malaysia, even Thailand. We need real innovation, real thinking to bring prices down.’”

The Diplomat on South Korea. “A notable beneficiary of corporate lending for the last three decades has been the Korean real estate market. A popular outlet for capital accrued in better times, Korea’s property market has witnessed the construction of hundreds of new apartment complexes, resorts, and luxury hotels. Companies like Lotte, SKT, and Hyundai, which traditionally had nothing to do with real estate, invested heavily in new property. This investment has continued in 2015 at a record pace, despite the fact there has been a serious housing glut in recent years with tens of thousands of apartment units remaining empty, prompting concerns about the inevitability of a substantial property bubble.”

“In the last decade, average Koreans have been engaged in what can only be described as a borrowing binge. At the start of 2015, South Korea was one of only seven countries named by the McKinsey consulting firm to have unsustainable household debt. These reports, unfortunately, have fallen on deaf ears as Korea’s household debt has continued to balloon. When watching the current political scandals, one can only imagine how much incompetence and corruption might have been complicit in creating the various economic dangers outlined above. Taken together, the informed observer can only face the future with trepidation as it looks like a long series of dominoes have already been lined up, just waiting to fall.”

December 25, 2016

The Essence Of The Christmas Story

A report from SBS Comedy in Australia. “The New South Wales Government has announced that it is supporting Australians celebrating Christmas by turning the entire city into an enormous nativity scene by making it virtually impossible for any young couple to secure housing or accommodation. ‘This is the most audacious cultural program the city of Sydney has ever embarked upon,’ said Premier Mike Baird. ‘Australians love Christmas, and we’re recreating the conditions of Jesus Christ’s birth by making sure young couples are forced to stay in barns and stables. This, to me, is the essence of the Christmas story.’”

“‘It’s a fully interactive nativity experience for a modern city, and all we had to do to achieve it was make the meagre housing that does exist unfathomably expensive. Merry Christmas, Sydney,’ said Baird.”

The Daily Telegraph. “Residents of rural NSW are offering their spare homes for rent at $1 per week in a desperate bid to attract more families with school-going children into their communities. The reduced rent is almost 500 times cheaper than Sydney’s median rent of $520 per week and works out to about 15 cents a day. The catch is that most of the properties require some work and are often in isolated locations.”

“Properties currently available include a five-bedroom house on the outskirts of Cumnock, a town 60km west of Orange with roughly 275 people. The house needs a lick of paint and the main door requires mending. The home gets water from a large tank. A two-bedroom farmhouse located between Cumnock and Parkes, a bigger regional centre in the area, is also available for $1 a week rent. The house is located up 8km of dirt road and requires painting. The laundry, bathroom and garage require repair and the listing specifies that the tenant ‘needs to be a handy person with reno experience.’”

“Cumnock resident Christine Weston of, where many of the listings appear, said the cheap rents were part of an initiative to save the local schools. Many rural schools were in danger of closing or losing teaching staff on account of falling student numbers, she said. ‘We’re looking for big families with children to move in and fill up the schools. The bigger the family, the better,’ Ms Weston said.”

“The current stock of $1 rentals has attracted interest from as far as Scotland, she added. ‘The big cities simply don’t have affordable housing available,’ Ms Weston said. ‘Large families, especially those in Sydney, are struggling to pay rents each week, so moving out here is an appealing option. It’s not just cheaper, there’s more space and it’s a change of lifestyle.’”

December 24, 2016

Beyond The Light At The End Of The Tunnel

A report from the Sun Sentinel in Florida. “In May, Max Martin, an agent for the Keyes Co. in Fort Lauderdale, picked up a $1.25 million listing for a two-bedroom condominium with a direct oceanfront view at L’Hermitage in Fort Lauderdale. The owner recently authorized a fifth price cut in seven months, and now the unit is on the market for $899,000, Martin said. About 20 units are for sale in the building and nearly all have had price cuts, according to Martin, who says a new wave of condo construction in Broward is making it difficult for owners of existing units.”

“‘The luxury condo market is flooded,’ he said. ‘With all those new buildings in Fort Lauderdale, people want the brightest and the best. People who are selling luxury properties will have to be ready to make some major price drops.’”

The Daily Business Review. “When Newgard Development Group landed a construction loan for a high-end condominium in Fort Lauderdale, the financing came from Hall Structured Finance, a private lender — not your traditional bank. Howard Taft, who helped secure the $36 million loan for the Gale Residences, said only nonbank lenders like Hall were interested in backing the project. Traditional construction financing ‘is almost nonexistent’ for new condo and apartment projects across South Florida due to the large number of units already underway, said Taft, a senior managing director with Miami-based Aztec Group Inc.”

“Banks have all but exited that market. Taft said alternative lenders have stepped in to fill the financing void — but at a cost. ‘They are normally higher-priced, higher-cost loans, and [the lenders] are only dealing with the top-tier developers,’ he said.”

“In the past, Joshua Emory, a principal with Primrose Capital, would reach out to 10 of the usual lenders, including BB&T, BankUnited and Wells Fargo, among others, and generally all would show interest in financing the deal at hand. Today, however, the Miami capital broker has to reach out to 50 lenders to lure only a few term sheets. ‘Many of the banks we used to deal with to place construction loans are simply no longer originating construction debt,’ Emory said.”

“Miami-based TotalBank senior vice president James Venney noted an oversupply of condo inventory in specific markets like Miami’s Brickell and downtown corridor, Sunny Isles Beach and some parts of Miami Beach has been the main deterrent for lenders like TotalBank. ‘We certainly are here to serve the community, but we also need to make intelligent and thoughtful decisions on how we deploy money into the community,’ Venney said.”

From ABC Action News. “The latest real estate report shows housing prices around Tampa are continuing to get higher. The report, by real estate website Zillow, shows the cost of a home for sale around Tampa is up by around 11 percent year to year since 2006. The average home goes for around $177,000. However, that depends on where you’re looking. The average home in South Tampa sells for around $400,000.”

“Prices are inching closer to what they looked like before the housing bubble burst. ‘I think we’re beyond the light at the end of the tunnel,’ said Lisa Spencer, general manager at the Chadwick Group. ‘We’re actually in a full steam ahead market.’”

“Finding a home will cost more in popular areas like South Tampa, but she suggests people wanting to move there to consider other options, like purchasing an apartment instead. You could also rent. According to the Zillow study, rent prices are going down by around 10 percent, but the average rent remains at $1,300 a month.”

December 23, 2016

Hitting The Ceiling, Seeing Some Prices Fall

It’s Friday desk clearing time for this blogger. “Palm Beach County home prices softened in November, reflecting a shift away from the strong seller’s market of recent years. The median price of houses sold last month was just $300,000, the lowest point since March, the Realtors Association of the Palm Beaches said Wednesday. Sales totaled 1,225, the weakest showing since February. In a telltale sign of the direction of the housing market, the inventory of homes for sale is increasing. There was a 5.1-month supply of houses on the market in November, an 11 percent increase from a year ago. Mike Pappas, president of The Keyes Co., sees a shortage of homes priced at less than $300,000 but a glut of mansions listed at more than $1 million. ‘It’s a tale of two cities right now,’ Pappas said.”

“According to the report, average rents for a two-bedroom in metro Denver fell from $1,371 to $1,368 during the third quarter. When they released the report, experts attributed those dips in part to new luxury buildings keeping overall rents high. A boom in construction has also meant more inventory on the market, which has led to a vacancy rate of 5 percent, up from 3.9 percent two years ago. That figure means there were around 16,000 vacant apartments regionally. ‘We’ve seen more apartment units built in the last three years than in the 11 years prior to that combined,’ said Mark Williams, executive vice president of the apartment association ‘The long-term impact of the new supply on rents is unmistakable.’”

“Even if the dip last fall was a temporary one and rents only level off instead of dropping significantly, experts say that’s still a big moment. Teo Nicolais, a Harvard University instructor who specializes in real estate, called it ‘a milestone in Denver’s real estate cycle,’ because rents had been rising so steadily for so long. ‘In simple economic terms: demand far exceeded supply in recent years, but with all the new homes being delivered, supply is starting to catch-up,’ he said.”

“During the oil boom North Dakota had some of the highest rent prices in the country, but with the oil slowdown prices have dropped in commercial and housing rentals. ‘When we have more supply and less demand, it’s going to be cheaper,’ said Shirley Dukart, a broker with Home and Land Co. in Dickinson. ‘Whereas we had a lot of demand and less supply.’ Dukart said she would estimate that commercial rentals have dropped somewhere around 30 percent in the past year because of supply and demand.”

“Earlier this month, a report from Apartment Insights Washington showed that rents have peaked and begun to come down in some of the hottest parts of the metropolitan area. For example, rents downtown are 2.8 percent lower than the previous quarter and down 3.5 percent in the University District. Don’t expect Seattle to turn into Mesa, Arizona, anytime soon. This is a coveted superstar city and you get what you pay for. But hitting the ceiling, seeing some prices fall, and apartments offering incentives, too, are all signs that market forces can still work.”

“Vancouver’s long-awaited housing correction may be around the corner: prices are headed for a double-digit decline in 2017 as buyers drop out of the market, according to the head of Canada’s largest real estate services company. ‘Home prices had gotten so out of whack with the growth in underlying wages and salaries that there had to be a correction,’ said Phil Soper, chief executive officer of Royal LePage. ‘Thank goodness there’s going to be a measure of sanity returning to the market.’”

“The downturn in the Perth housing and construction market has claimed a high-profile victim with listed developer and builder Diploma Group collapsing owing creditors about $40 million. In November, Diploma Group reported to the market that Diploma Construction (WA) was likely to report a $32.5 million loss including $20 million of write-downs. In May, Diploma Group said it was reviewing its operations ‘in light of the current property and commercial construction markets it operates in, in Western Australia.’”

“There are two main reasons why Singaporeans buy property abroad. The first is as an escape plan. At the rate our cost of living rises, McDonald’s looks like a five-star restaurant to some retirees. The other reason is good old Asian values. We have a land ownership / property bias, and we want to own a house somewhere; anywhere. Last year, I could paint a red bullseye on a zinc shack in Syria, and a Singaporean somewhere would still give me his life savings for it. Fortunately, we may have developed more common sense of late.”

“Things came to a head last year, which was the worst year for foreign property scams and disputes. EcoHouse Brazil was not a property developer or seller per se – but they did convince Singaporeans to invest in social housing schemes to earn returns. They collected $65 million from 800 Singaporeans, between 2011 till their sudden disappearance in 2015. Then there was the shocking Kawarau Falls incident, in which some Malaysian and Singaporean investors were successfully sued for $33 million (they had previously already lost their deposit, when the developer went bankrupt).”

“This was one reason why Singaporeans began to cool off overseas property at the time – but this year, several more reasons came into play. Singapore property prices are at their lowest in years, and still falling. Iskandar is now facing an oversupply issue. No escape from loan curbs in Singapore or Australia. Weak economic conditions. Recall that one motivation to buy overseas was being priced out of the local market. That won’t be true for long.”

“Auckland’s huge $250 million St James apartment project has become the latest victim of tightening bank finance, the developer says. Steve Bielby of Relianz Holdings said the banks’ biggest concern seemed to be around ’settlement risk.’ Although the project was fully pre-sold, he said banks were aware that it was a very large development in an increasingly expensive construction market and that people only had to make a 10 per cent deposit.”

“Martin Dunn of City Sales apartment real estate agency said the Auckland apartment market was coming to the end of its current cycle next year ‘which was going to happen without [Reserve Bank governor] Graeme Wheeler’s input.’ This was despite escalating demand, given that all the CBD apartments expected to be finished next year were already sold. ‘Even good developers are struggling with funding. The big ones will get it but I think the frustrating outlook for us is we’ve got a drop in values at the moment,’ he said.”

December 22, 2016

The Issue Is This Price Ramp-Up

A report from CBS DFW in Texas. “Prices are rising seemingly as fast as the demand for newly built homes in Frisco. Ted Wilson’s company Residential Strategies, Inc. tracks the housing market in North Texas. Wilson said the median price of a new home in Frisco has now topped $500,000 for the first time. In 2010, it was $285,000, he said. ‘Frisco is one of the most sought-after suburbs in the Dallas-Fort Worth area,’ said Wilson. ‘We’re running out of land in this part of the world. So land prices have climbed dramatically and construction prices and labor have also increased dramatically.’”

The Denver Post in Colorado. “Home affordability in Colorado’s largest metro counties, with the exception of Mesa County, has dropped to its lowest levels in nine years, according to an analysis from ATTOM Data Solutions. ‘We are entering some thin ice for housing in markets like Colorado that have reached affordability ceilings,’ said Daren Blomquist, a senior vice president with ATTOM, parent of RealtyTrac.”

“If affordability reflects the thickness of the ice, then rising interest rates are akin to warming temperatures and people in places such as the Front Range need to listen for the sounds of cracking ice, Blomquist warns. ‘Higher rates could quickly put downward pressure on home prices by limiting demand,’ Blomquist predicts.”

“In metro Denver, home prices passed their housing bubble peak in early 2013 and haven’t looked back. Several years of double-digit home price gains combined with low single-digit income gains have eroded affordability to levels not seen since right before the housing downturn.”

From Worcester Magazine in Massachusetts. “The holidays are supposed to be relaxing and filled with joy from the company of family and friends. For far too many, however, the holidays are just another day spent worrying, if, and when, they will lose their home. The collapse of the housing market in 2008 left many lives in ruins and many families without their most personal and prized possession: their home.”

“Worcester is no stranger to the harsh aftermath of the collapse, and the city might not be seeing any significant changes anytime soon. According to The Warren Group CEO Tim Warren Jr., ‘Worcester hasn’t gotten past it’s heaviest load.’ He also thinks other parts of the state are still facing a similar distress.”

“Worcester, according to Doug Rawan, chief financial officer for Drew Mortgage, is ‘a tough market.’ ‘You ever see them put down a tar road? They put down the tar and these big rollers come by and it suppresses the tar,’ he said. ‘That’s what the big banks are doing to human beings, meaning people that own houses.’”

“‘Sixty-five percent of modifications,’ he continued, ‘are defaulting in the country for the second time … the big picture is it’s going to get worse … Once you become a payment late or two payments late, unless you can re-instate the mortgage, they’re not going to accept it. So, now what happens it get worse.’”

“If you look at the collapse of the housing market in 2008, a lot of people will point to sub-prime mortgages and say that caused the collapse. Worcester Anti-Foreclosure Team (WAFT) member Grace Ross confirms sub-prime mortgages’ role in the collapse, but also contends that what determines whether you will be foreclosed or not, is when you got the mortgage that the bank is foreclosing on.”

“‘It’s all related to the housing bubble,’ she said. ‘In Massachusetts, outside of Greater Boston, the home prices were ramped up to double their real value, so once the bubble burst anybody, regardless of what kind of mortgage you had, could be in trouble.’ ‘The issue,’ she continued, ‘is this price ramp-up.’”

“Ross contends the situation now is worse than during the Great Depression. ‘Somehow, in our society, when we’re running now with foreclosures at over three times the rate during the Great Depression people go, ‘Oh, the Great Depression was really bad,’ Ross said. ‘The Great Depression was a walk in the park compared to what we’re going through right now.’”

December 21, 2016

Sometimes Supply Gets Out In Front Of Demand

A report from MarketWatch. “Fresh data may confirm that the recent heyday for apartment construction is over. Fewer newly-constructed apartments are being rented out, according to figures released early in December by the Commerce Department. The ‘absorption rate’ — whether an apartment has been rented within three months of completion — was 58% in the second quarter of this year, down from 66% in the same period in 2015 — for a smaller pool of apartments. The National Association of Home Builders, crunching Commerce Department data, found that about 92% of all multi-family units were built-for-rent in the third quarter, much higher than the 80% share in the two decades before the housing boom took off.”

The Real Deal on New York. “In 2016, one of the biggest issues facing New York City’s residential market was the weakening demand for ultra-pricey properties. Next year, according to residential listings website StreetEasy, the biggest issue will be how that slowdown will adversely impact the rest of the market. ‘There’s a market correction coming in Manhattan,’ said StreetEasy economist Krishna Rao. ‘We’ve seen a lot of softness in the luxury market, and we’re going to see that trickle down.’”

“Landlords in Brooklyn and Manhattan have been dealing with stagnant rents throughout 2016. Brokers say it’s becoming harder to rent out the city’s most expensive pads. A recent report from Douglas Elliman found that just over 25 percent of all Manhattan residential leases signed in November included some form of concession.”

KUOW in Washington. “A new report predicts that rent increases in the Seattle area should slow down next year. The report was produced by Apartment Insights, a company that surveys the rental market. It finds that vacancy rates are increasing and that rents are dropping in the fourth quarter of this year. Peter Orser is the interim director of the University of Washington’s Runstad Center For Real Estate Studies: ‘Supply got out in front of jobs and immigration and that’s the way these things tend to go. Permits come in chunks. Buildings come in big increments, 50 or 100 units. Sometimes supply gets out in front of demand a little bit.’”

From Curbed San Francisco in California. “Like its competitors, rental site Zumper reported stagnation and gradual ebbing of rents in San Francisco all year long. Overall, the site recorded a 4.9 percent 2016 decline in rent prices. The biggest loser (loser in this case being a good thing): NoPa, where Zumper rents declined nine percent. Noe Valley dropped eight percent on the site, and even Nob Hill was down six. Zumper’s end of year heat map, showing the rise and fall of prices by neighborhood (again, a least as far as Zumper listings themselves go), only indicates activity, not prices themselves.”

“That means even ritzy ZIP codes in the likes of Pac Heights, the Marina, Russian Hill, Presidio Heights, Cow Hollow, and Hayes Valley ended the year down.”

From Curbed Washington, DC. “While Washington, D.C. having the sixth most expensive rents in the nation might not seem like something to be proud of, there is a silver lining; rents for one-bedroom units have dropped 3.2 percent overall in the past year, according to Zumper. Neighborhoods that dropped in price this year included the Radnor/Fort Myer Heights area, who decreased by 13 percent from this time last year, Eckington, who dropped by 10 percent year-over-year, and the Brentwood/Langdon area, which is now down nine percent from last year.”

The Mountain Xpress in North Carolina. “Third-quarter data released by two real estate research firms show an improving environment for Asheville metro area renters. After a late 2014 report showed a rental vacancy rate of less than 1 percent in Asheville and Buncombe County, local officials and renters have frequently described the area’s shortage of affordable housing as a crisis. Any easing of the rental market is likely to be received as welcome news — except perhaps by landlords.”

“In 2016, rent-price inflation slowed, and rental vacancy rates increased, according to Reis, a New York-based company. The Reis data for 2016 show a 6.8 percent vacancy rate during the second and third quarters and 7 percent for all of this year’s quarters.”

From Houston Culturemap in Texas. “The Houston rental market has been bonkers for a while, but there’s new proof that it’s finally starting to calm down. Online real estate investment management firm HomeUnion has identified the cities where rent growth has soared and sunk, and Houston ranks No. 6 among cities where rents have declined the most. Houston rents have fallen 2.8 percent, hovering now around $1,600 a month. El Paso has seen even greater declines: a 7.1 percent decrease year-over-year.”