May 5, 2017

Why Not Bet Big?

It’s Friday desk clearing time for this blogger. “Experts suggest that the inventory in Denver’s red-hot housing market is at an all-time low. But there’s no shortage of real estate agents looking to sell the homes that have been listed. Right now, there are more agents than there are properties on the market in Denver, and perhaps as many as ten times more. ‘Probably 15 percent of the licensees out there are driving in about 80 to 90 percent of the business,’ said Scott Grossman, board chairman for the Denver Metro Association of Realtors. That hasn’t stopped new agents from flooding into the market. ‘Everybody seems to know a real estate agent, or know somebody who knows one,’ Grossman says.”

“Defects, fraud and misrepresentation in mortgage loan applications jumped 3.9% in March, marking a four-month trend, according to new data from First American Financial Corporation. ‘After four consecutive months of increased defect risk, it’s fair to call this a trend. We are experiencing one of the strongest sellers’ markets in recent memory and the ‘speed-buying’ that is required for home buyers to make an offer and win a bid for homes they like may be contributing to the increase in defect, misrepresentation and fraud risk that we are observing,’ said Mark Fleming, chief economist at First American.”

“If mortgage fraud had a face during Tampa Bay’s last housing boom, it could have been that of Victor Thomas Clavizzao. In 2009, a federal judge sentenced Clavizzao to five years in prison for conspiring to fraudulently obtain nearly $6 million in mortgage loans. Now Clavizzao is out of prison and back in the loan business, this time using the names Victor Thomas and Victor Thomasino. In a phone interview this week, Clavizzao said that his current business is legitimate and has made ‘about’ 100 loans in the past two years.”

“Bonkers, nuts and crazy — those are just three words used to describe the Georgina housing market, the hottest in the GTA by a long shot. The prices in the municipality have risen by stupefying numbers — the average house has jumped 55 per cent in one year — from $439,603 to $683,373. One answer appears to be foreign buyers. Although no one would speak on the record about how many there are in the market, one mortgage broker in Georgina with more than 10 years experience said the number is staggering.”

“He added plenty of the money garnered to be able to afford these houses is coming directly from the Bank of China. ‘A lot of purchases are Asian, I would say 50 per cent or higher,’ he said.”

“Wayne Winch, a veteran real estate agent in the area and resident, said some rationality has returned to the market since the tax. He’s witnessed the situation switch back to more of a buyers’ market, with homes sitting for sale longer, providing further choice for people. Now prices are being listed between $50,000 to $100,000 less, he added.”

“The once super-hot central London market has turned into a ‘burnt-out core’ according to buying agents Garrington Property Finders, prompting developers to offer ever greater incentives to lure buyers. Property agent Henry Pryor estimates that there is a pipeline of 59,000 high-end apartments under construction in London alone, yet annual sales of new-build flats in the city are only 6,000. ‘Developers will sell their first-born to shift them. It’s last-chance-saloon stuff. About the only incentive they have not tried is a bogof [buy one, get one free].’”

“At yesterday’s Gladstone Regional Council meeting, Santoshi Development Consultants were given approval to develop a 22-lot subdivision. The approval sparked outrage in the Gladstone community, with residents questioning why the council would approve an application while many other housing developments were empty. ‘Wonder how it isn’t the Gladstone Regional Council’s responsibility to take into account the glut of empty houses, vacant land and plummeting land prices,’ said Peter Stone.”

“Tash Wallis said she couldn’t believe more houses were being built. ‘We have heaps of vacant homes…it may come in handy for another boom to keep rental prices down, but is there a boom in the near future?’ Paulette Flint had a different view of the argument, and said she couldn’t understand how a developer could be ’stupid enough’ to want to open a new subdivision in the region. ‘Don’t do it! You will lose all your money. Invest somewhere else,’ she said.”

“A 75-year-old man from China and his pet dog are the only gatekeepers of an abandoned ‘ghost villa’ located in eastern China. The Chinese man, surnamed Gao, gets paid 1,800 yuan ($261) per month to guard abandoned and unfinished luxury apartments that sprawl on a 130,000 square meters of land in Anhui Province. Gao was hired by the Sun Century Group in 2009 when the project first started. However, it was suspended two years ago.”

“This villa is just one of the many projects in China that has been left half-finished, usually the result of poor urban planning and hasty urbanization that’s happening all around the country.”

“Not my money? Not my problem. The City of Dallas is in the throes of learning that lesson the hard way as the Police and Fire Pension Fund approaches insolvency due to risky investments. The pensions of close to 10,000 civil servants and first responders are in jeopardy because someone else played poker with their money. A $200 million luxury high-rise has been beset with continual problems due to the glare it reflects onto a nearby art museum. Ultra-luxury real estate investments from Napa Valley to Hawaii comprise another $200 million of fund assets.”

“According to an article from the Dallas Morning News: ‘Together, these investments represent a $400 million bet by the fund on luxury residential real estate. It has been financed mostly with borrowed money. This leverage means that if it pays off, it could pay off big. But it could also lose big.’”

“In poker parlance, it seems that the trustees of the Dallas pension fund went all-in with a 2-7 off-suit. They bet big, and it hasn’t paid off. But then again, why not bet big? The pension officials had nothing to lose, proving that without personal risk, there is no personal responsibility. The problem in Dallas is not quite an example of the tragedy of the commons, but it is close. The shared theme is that, no matter how well intentioned, I will treat someone else’s property differently than I treat my own.”