The Housing Bubble

It’s Friday desk clearing time for this blogger. “Metro Denver home prices are about 18.3 percent higher than what income gains can explain and justify, according to a first quarter update from Arch MI. That’s on the high side among metro areas and above the excess appreciation rates seen a decade ago during the housing boom. In fact, they haven’t been so high in Denver since the oil boom days of the early 1980s. But the odds that metro Denver will suffer a home price decline over the next two years remains at a low 2 percent due to a strong economy and the region’s continued popularity among those relocating, according to the Housing and Mortgage Market Review from Arch MI.”

“Arch MI, which is based in Walnut Creek, Calif., provides mortgage insurance, giving it a motivation to stay on top of home price trends. ‘Don’t expect Denver home prices to go down. Everybody wants in. It isn’t a bubble and it will continue to be like this,’ predicted Ralph DeFranco, global chief economist with Arch MI.”

“You don’t have to be an industry insider to know that Central Ohio real estate is on fire. You’ve surely seen reference to the skyrocketing home prices in Columbus. Neighborhoods like Upper Arlington, Bexley, Clintonville and Grandview have risen nearly 50 percent since the economic recovery began in 2012. But it’s not just those pricey neighborhoods, where median home values are now exceeding $300,000, that are hot.”

“Jim Hilz, executive director of Building Industry Association of Central Ohio says, ‘We’re not building what the consumers want.’ He says the average sale price of an existing home in Central Ohio in 2016 was $202,000, while the average cost of a new home was $333,000, ‘and on the north part of town, that average new home price goes well over $420,000.’”

“It is no secret Bay Area housing prices are expensive. Recent data revealed three counties now have average housing prices above $1M. While USC Lusk Center for Real Estate Director Richard Green said he does not think there is a housing bubble, he is concerned about tech companies that do not technically make any money, like Uber. The Bay Area is filled with tech companies that are doing good things, but the industry does not know what they are actually worth. ‘The question about a bubble is not about the real estate itself, but about the users of real estate,’ Green said. ‘How solid are they? How long are they going to be around?’”

“Home sales in the Greater Toronto Area plunged more than 56 per cent during the first two weeks of June, compared with a year ago, according to the latest numbers from the Toronto Real Estate Board. Meanwhile, the number of new listings rose to 9,988, which represents a 22 per cent increase. Juliette Fergus, of Keller Williams Referred Urban Realty, told CTV News Toronto it’s too hard to say whether these listings are truly new listings or ones being relisted.”

“‘We’re seeing homes that are listed for multiple offers…. They stay on the market for a week, they don’t sell, they’re being pulled and relisted,’ she said. ‘Homes are now being listed at what the actual price is.’”

“Rental prices have significantly dropped in the UAE capital within the last year. However, property experts predict that prices will slide further, suggesting that supply is increasing while demand is decreasing. Jalal Mamdouh, leasing coordinator at Prime Capital, said that landlords are finding it difficult to compete with one another, adding: ‘They are desperate to lease their apartments,’ particularly those who have bank loans. Today, a one bedroom apartment in the Gate Towers has an average of Dh75,000, decreased by approximately Dh15,000.”

“‘You can find brand new apartments for Dh70,000 now, which has not happened in the previous years,’ he said. ‘Landlords listing their one bedroom apartments for Dh90,000 and above will never have them rented out.’”

“The differential between the listing price and selling price of homes in the current market can be as much as 30%, according to Cameron Jansen, Manager of RE/MAX Central, whose office services the central Gauteng region. ‘Buyers are aware that market conditions are in their favour and as such, are looking for a bargain where possible, often putting in offers that are 25%-30% below the seller’s listing price,’ says Jansen.”

“He adds that this is not something that is unique to any particular price range, but is a phenomenon that is across the board. ‘It is not that we just see the trend developing in one sector of the market – it is from one end of the market to the other, from the affordable housing sector right up to the luxury market,’ says Jansen.”

“Thailand might encounter a repeated economic crisis like the one which occurred two decades ago, said a former governor of the Bank of Thailand. According to Prasarn Trairatvorakul, Thailand’s property sector has been growing so fast and widespread that it is apparently oversupplying the consumer market. Such oversupply might possibly trigger a new economic crisis, following the one unofficially called Tomyum Kung crisis (hot soup with shrimps) in 1997.”

“The Tomkun Kung crisis prompted the country’s economic bubble to burst, causing property developers and their customers as well as banks, financial firms and their clients to suffer enormous losses. ‘Nobody can assure that the Tomyum Kung crisis will not be repeated but certain measures may be taken to prevent it,’ he said.”

“Australia’s looming apartment glut has prompted panicked developers to offer potential buyers significant incentives, including discounts with rental guarantees, free furniture and appliances, upgrades to fixtures, and significant stamp duty concessions. An estimated 25,500 apartments will be completed in Sydney this calendar year, with a further 17,090 in Melbourne and 10,300 in Brisbane, according to property advisory firm Charter Keck Cramer.”

“A plethora of banking, regulatory, and additional factors are turning the tide for property developers. This has lead to panicky developers resorting to offering incentives to try and get apartments moving. Regulatory measures, combined with the Chinese government’s curbs on its citizens buying property overseas, has caused a dramatic slowdown in off-the-plan selling, according to developers.”

“Feedback from our Australian Property Conference and mystery shopping highlight a clear change in the apartment market, particularly so in Perth, Brisbane and to a greater extent in Melbourne,’ said Citi analysts David Lloyd, Adrian Dark, and Suraj Nebhani.”