The Housing Bubble

It’s Friday desk clearing time for this blogger. “Not counting carrying costs and real estate fees, Canadian-born ‘Austin Powers’ franchise star Mike Myers took a hair-raising, $675,000 blow to his bank account when he sold a four-bedroom and 4.5-bathroom condo in New York City’s TriBeCa neighborhood for $14 million just four months after he bought it for $14.675 million. The never-occupied 4,241-square-foot apartment, flipped back on the market at $15 million just a week after Mister Myers bought it.”

“A spike in delinquent mortgages last year contributed to Baton Rouge’s fall in a national ranking of the overall health of 400 housing markets across the U.S., according to a Nationwide Economics report. This time last year, around 3.5% of Baton Rouge homeowners were more than 90 days delinquent on their mortgages, says Nationwide Senior Economist Ben Ayers, one of the report’s authors. In the second half of the year, the number jumped to 5%. ‘That’s a lot more people in a short period of time that said, ‘Hey, I can’t afford my mortgage,’ Ayers says.”

“‘The general trend is still very good. We still feel like the economy is going to be growing over the next few years,’ Ayers says. ‘The main concern we have, particularly in the larger markets, is unsustainable house price gains.’”

“Is Silicon Valley’s seemingly unstoppable economic engine finally starting to slow down? Tech companies in San Francisco and San Mateo counties lost 700 jobs from January to February and tech employment has dropped by 3,200 jobs since hitting a peak last August, according to Ted Egan, San Francisco’s chief economist. Q: What are the weakest spots in tech? A: Venture capital has peaked and has been going down steadily since 2015. A lot of the employment in our tech sector is in companies that are not profitable.”

“Q: What about housing? A: What I’m hearing from people in the housing market is that the upper end, the luxury stuff, is really taking longer to sell. In terms of rents, we hit a peak a year ago and we are around 5 percent down from there.”

“Apartment landlords across the U.S. struggled through a tough first quarter as a slowdown in the rental market grew worse. Across the U.S., apartment developers delivered 100,000 more new units than were leased in the quarter. ‘We didn’t get a lot of demand and at the same time we got a lot of supply,’ said Greg Willett, chief economist at RealPage Inc. ‘To some degree it looks like operators have panicked in the Bay Area and New York.’”

“This spring it is likely to be overwhelmed by increasing supply. The average number of new apartments finished in each of the next few quarters is expected to climb to 102,000 from 82,000 in late 2016 and early 2017, according to Axiometrics. ‘Houston, you are experiencing concessions or just flat-out adjustments of the effective rent,’ said Brad Taylor, managing partner for the central region at JPI, an Irving, Texas-based real-estate developer. ‘The amount that someone has been writing their rent check for has been dropping.’”

“Still convinced that the city of Toronto needs to build more housing to bring down prices? Unfortunately there’s no data to support that. Actually, the data shows the opposite. Basic analysis shows the city might be overbuilding by over 40% for the current rate of growth. From 2012 to 2016, Toronto CMA saw 175,825 homes completed. This represents a 9.75% increase from the period prior. That’s a home for every 1.96 people that moved to the area, and 41% more than the average household size. That would have to be a pretty wide margin of error from all levels of government for there to be a ’shortage’ of homes.”

“So what’s happening with those extra units? Well let’s see. A few months ago our robo-researcher identified 1 in 3 homes listed for resale in Toronto were being sold as never having been occupied. Then there’s the 99,236 vacant homes in the city. The latter is a number so large that Paris, a city with just a few thousand more vacant units, is calling it an emergency. That considered, this sounds a lot like plain ole speculation. The fact that China’s capital outflows are reversing this year, also means it’s most likely domestic speculation.”

“Confusion reigns in one corner of Brisbane’s challenged apartment market, with a marketer offering discounts of up to 39 per cent – apparently without authorisation – in a newly completed residential development. David Carter, from Landmark Asset Services, this week emailed clients offering discounts such as two-bedroom apartments marked down from $805,000 to $490,000 and three-bedroom penthouses cut from $1.2 million to $960,000 in The Hudson development in the inner-ring suburb of Albion.”

“‘The funder has taken the project off the developer and has given us four weeks to sell the remaining 50 or so apartments,’ Mr Carter wrote in the email, which included a flyer offering ‘Sizzling Hot Deals.’ ‘I have never sent an email like this to friends and family but this is a damn good opportunity for anyone if they are looking for an investment and a fire sale price.’”

“Phnom Penh’s mushrooming property market is set for a massive crash with new apartment prices set to plummet by up to 50 per cent over the course of this year compared with March 2016 prices, says the director of EPenh, Nigel Miranda, in the Cambodian capital. According to Mr Miranda the effects of the oversupply will be felt across the entire Phnom Penh property market, with construction also tipped to be scaled down.”

“Asset valuation company VTrust Appraisal said that in 2016 there was a big increase in housing completion, with 14,539 units completed across numerous projects in the capital, a 106 per cent increase over the 7,054 units completed in 2015. Additionally 2016 saw 11,550 new units released for presale, with link type houses accounting for 89.1 per cent, or 10,290 units. However, only 51 per cent were sold. Of the 100,278 strata housing units available at the end of 2016, VTrust says only 67 per cent or some 68,190 had found buyers.”

“Signs that the Phnom Penh property market balloon is reaching bursting point first began to emerge last August. Claiming that developers and real estate agents are creating an artificial price balloon and benefiting from the absence of any property price index, Mr Miranda said. Phnom Penh condominium prices exceeded comparable properties in Thailand, Kuala Lumpur, and Jakarta. ‘I expect foreigners who have bought condominiums (foreigners can not legally own land in Cambodia) in the expectation of flipping them and making a profit in a couple of years, or even on completion, may instead see losses of between 30 and 60 per cent should they try and sell in the next couple of years,’ he said.”