The Housing Bubble

It’s Friday desk clearing time for this blogger. “Denver’s housing market has been red hot for the past few years. But as indicated by the presence of a ‘Price Reduced’ sign on a home in a sought-after part of Centennial, this situation may finally be about to change. Janene Russeau of Madison & Company, who’s handling the house — it was originally priced at $639,000, but is currently going for $599,000 — feels that ‘it’s turning a little bit more into a buyer’s market, as opposed to a seller’s market.’ Already, she says, ‘houses are definitely staying on the market a little bit longer.’”

“Homes sales in Cedar Park and Leander decreased 0.8 percent year-over-year in July, and the median price of a sold home fell 4.5 percent to $291,273, according to the July 2017 Central Texas Housing Market Report. ‘In years past, the high demand of the summer selling season has further constrained inventory levels and further pushed up home prices,’ said Brandy Guthrie, president of the Austin Board of Realtors. ‘This year has been different, with steady gains in sales volume as well as listings and inventory throughout the summer.’”

“A Miami real-estate analyst sheds light on the wonderfully stupid way South Florida operates: For the past handful of years, condo prices in the area have been criminally high, so condo developers have laid waste to any undeveloped piece of land they could find, stacking buildings into the sky regardless of whether anyone would buy them. Now they’ve finally built so many they can’t possibly sell all the multimillion-dollar condos.”

“‘It is worth noting this report only tracks those Sunny Isles Beach condos formally listed for sale,’ Peter Zalewski’s Condo Vultures realty firm wrote. ‘The report does not factor in the nearly 47,550 new condo units currently in the development pipeline east of Interstate 95 in the tri-county South Florida region.’ By 2020, Miami-Dade will have a truly remarkable glut of properties to sell, and Zalewski’s report suggests we really didn’t need many of them in the first place.”

“The property bubble in Malaysia is set to burst, but the government must resist the temptation to intervene and allow market forces to coordinate supply and demand, says a think tank. In an interview with FMT, the Institute for Democracy and Economic Affairs’ senior fellow, Carmelo Ferlito explained the two ‘economic dynamics’ which have resulted in the current property situation in the country, where the prices of homes are beyond the reach of most and the oversupply of such homes, has led to many being left unsold.”

“‘Malaysia is undoubtedly experiencing a housing bubble and the unsold properties are a natural consequence of this bubble,’ Ferlito said. The number of unsold properties was a sign that the property bubble may have reached its final stage and that the property market was close to crashing. ‘But the property market crashing can be seen positively if we’re looking at the goal of reducing housing prices. In a situation where there is over-supply and high prices, we should let supply and demand do its job and let the market affect prices to the levels they should be.’”

“Expensive property markets, soaring levels of household debt and predatory lending practices have come under fire with experts warning thousands of households are on the verge of mortgage stress. Australia now has the second highest housing debt in the world, after Switzerland, and almost twice that of the US. Another expert who expressed concerns about household debt was Jonathan Tepper – founder of London-based research house Variant Perception, known for his bearish views on the housing market. ‘The dream run is about to end. Price to income ratios are very high,’ Mr Tepper said. ‘Anyone with a pulse could essentially get a mortgage.’”

“Sizzling property prices, a groaning debt load, wealthy tourists and tycoons willing to slap down eye-popping sums for art: China is starting to look like Japan before its economic bubble burst in the early 90s. ‘What’s scary is that people in China are thinking, ‘China is special, so we are OK.’ That’s exactly how people felt in Japan during the bubble era,’ said Kokichiro Mio, senior economist at NLI Research Institute.”

“‘In some small ways, the madness continues.’ That’s the view from Durham Region, where real estate agent Shawn Lackie sees sellers who are deluded about the current real estate mood in the Greater Toronto Area and surrounding towns. They’re pushing for lofty sale prices that are no longer realistic. In most cases, he’s setting an asking price around the estimated market value with no deadline for reviewing offers. Other agents in the area are still trying to generate bidding wars with asking prices as low as $1, but he thinks such tactics aren’t luring buyers at the moment.”

“At the same time, lawyers are still sorting through the wreckage the madness in the spring caused, he says. Many buyers need an extension to the closing date, while some deals are not closing at all. Some sellers are being pressed to agree to a discount to the sale price that was originally agreed upon. ‘Abatement seems to be the word of the day.’”

“Economic experts are raising concerns over the province’s financial reliance on B.C.’s booming real estate market and the new government’s promise to try and cool the market down. Tsur Somerville, a professor of economics at the University of British Columbia is concerned that during the most recent provincial election campaign the B.C. NDP promised to cool the hot housing market.”

“‘If you slow down the real estate industry, because it’s an overly large part of our economy, you’re going to have some repercussions,’ said Somerville. ‘It’s not a healthy situation to be that dependant on real estate, so the adjustment is going to be a little bit painful no matter what happens.’”