The Housing Bubble

It’s Friday desk clearing time for this blogger. “If you haven’t looked lately, you may not have noticed he real estate market in Franklin and Gulf counties is on the rebound. Gloria Salinard, director of the Realtors Association of Franklin and Gulf Counties, said the picture seems to include a growing number of fulltime residents, as well as some ‘flippers.’ ‘As soon as it becomes a buyers market, as prices start going up, you’ll have buyers who will buy it as an investment and turn around and sell it immediately,’ Salinard said. ‘In the heyday, when the market was so hot, speculators were putting in developments in hopes of selling the land, and several sold several times over. Unfortunately the bottom fell out of the market and some individuals who bought high are holding on. Unfortunately there they sit.’”

“Home sales were up heading into summer compared to last year in Oklahoma City, but as usual, activity varied depending on price range. Sellers at $300,000 and up still have challenges and ‘are still needing a Realtor with a strong marketing approach,’ said Michele Corral of Crossland Real Estate. ‘Those holding out for the highest price in the neighborhood are still holding.’”

“With The Woodlands moving closer to residential build-out, new trends have emerged in the area’s real estate market in recent years. Between 2005 and 2015, the median sales price for homes in The Woodlands more than doubled from $252,055 to $562,000, a 122 percent surge, according to The Woodlands Development Company. Median annual household income during the same period increased by 32 percent, from $136,000 to $180,000, according to the data.”

“Somer Padilla, a real estate agent at Beth Ferester & Company, said builders are hurting, because insufficient buyer demand has led to an oversupply of houses recently built around The Woodlands. ‘The surrounding area is overbuilt, and there are not enough buyers,’ she said.”

“Is the recent downturn in the Greater Toronto Area’s real estate market a blip or the start of a severe correction? John Andrew, a professor at Queen’s University and executive director of the Queen’s Real Estate Roundtable warns that a series of rate hikes in Canada would put pressure on a lot of households – especially in Toronto and Vancouver, where many people hold massive mortgages. ‘What a quick transition we’ve seen from a very strong sellers’ market to a very strong buyers’ market,’ Prof. Andrew says of the abrupt decline in sales.”

“He figures if the central bank were to raise rates two or three times, housing markets across the country would slump. ‘By about the second increase, the response will be ‘the gravy train has stopped.’ I think we would see a decline in house prices right across the board,’ Andrew said. Rather than be out of pocket every month while hoping the unit rises in value, the investor is more likely to sell and take any gains from the appreciation above the purchase price. ‘A lot of investors will do the math at the same time and they’ll dump them,’ he said.”

“The more China tries to rein in its roaring housing market, the more obsessed people get about buying. An article of faith is that the Communist Party won’t allow housing prices to collapse. ‘The government will spare no effort to make sure there are no big swings in the property market,’ says Ni Pengfei, a housing expert at the Chinese Academy of Social Sciences, a government think tank.”

“In Shenzhen, the average home sells for 45 times average annual household income, compared with around 12 times for homes in New York City, according to Zhang Ming, a senior economist at the Chinese Academy of Social Sciences. The boom in Foshan hasn’t cooled things off in Guangzhou. Zhang Ying, a 27-year-old web designer who makes about $1,500 a month, bought a two-bedroom apartment in another development in January. Her mortgage payments amount to nearly 80% of her income. ‘I’m essentially a slave to this property now,’ she says.”

“The prospects for upmarket properties in Penang look uncertain. Checks showed that there are several luxury properties in George Town sitting in the market for more than a year now. Property agent Danny Khor said the increased difficulty in obtaining bank loans is a cause of concern as property transactions are declining. He sighted a case where at least eight potential home buyers had their loans rejected in the past six months. A majority of them had applied for housing loans of not more than RM400,000 each.”

“‘They feel that once their application is rejected by one bank, there is no point in applying from other banks. When this happens, the house is put back in the market for selling,’ he said.”

“The prospect of a ‘reasonable correction’ in Auckland house prices ‘grows by the day,’ according to BNZ economists. BNZ senior economist Craig Ebert said that, importantly, the recent decline in Auckland house prices was now getting significant media coverage. ‘This can be self-fulfilling to the extent that folk fearful that a market might correct are more likely to withdraw from it (buyers that is) and sellers will either delist their properties, simply not sell or, if under pressure, accept lower prices than might otherwise be the case. Certainly, there is already anecdotal evidence of speculators looking to exit the market for fear of getting burnt. All of this can lead to a sentiment-driven price correction over and above what market fundamentals might dictate.’”

“Reader, I solemnly regret to inform you that America is indeed back on that bullshit. The McMansion is back. A recent article by Ana Swanson in The Washington Post states that after the recession and the general evacuation of Pleasantville following the financial crisis, ‘Americans have started to flip houses again,’ which means they’ve started to flip McMansions, which has resulted in this: ‘Since 2009, construction of these homes has steadily trended upward, data from Zillow shows.’ Have we learned nothing? Why are we doing this again?”

“Economist David Harvey lays out the pre-crash thinking like this: ‘I buy a house for $300,000 and three years later its value has appreciated to $400,000. I can then capitalise upon the extra value by refinancing for $400,000 and walk away with the extra $100,000, which I can use as I wish. The enhanced exchange value [Marxist for 'a commodity’s worth on the market'] of housing becomes a hot item. The house becomes a convenient cash cow, a personal ATM machine, thus boosting aggregate demand, including, of course, the further demand for housing.’”

“The proof is in the pudding: the housing crash resulted in 4 million people losing their hopes. ‘The pursuit of exchange value,’ Harvey writes, ‘destroyed access to housing.’ And almost ended the world economy. Let’s not forget that part. So this whole pursuit has a level of financial precarity hiding behind its glossy aspirations. Whatever the dream promises in terms of security, financial and domestic, is a false promise.”