October 27, 2017

The Desperation Of The Highly Leveraged

It’s Friday desk clearing time for this blogger. “Just outside Macomb city limits is the Georgetown subdivision with a look reminiscent of the colonial era. However, also part of the landscape — lots of ‘for sale’ signs. Real estate agent Steve Silberer said a few years ago, townhomes in the Georgetown subdivision would have gone for $90,000 on average, but today some are selling in the $50,000 range. ‘If I had a house on the market and I had to sell it, I would probably think there’s a crisis, there’s no doubt about it,’ Macomb Mayor Mike Inman said.”

“But Debbie Kendrick, president of the Mark Twain Association of Realtors, thinks the biggest issue in northeast Missouri is low inventory. She said there needs to be more available housing programs. ‘I’m not talking about apartments,’ Kendrick said. ‘We need more single-family homes.’”

“A new analysis puts Nashville as one of two cities most at risk for seeing home prices decline, elevating the threat level for Nashville’s housing market. Prices look to be softening already. In the past three months, median home prices have steadily declined from $294,000 in June to $280,000 in September.”

“Just in time for Halloween — Tampa Bay has plenty of zombies. Not the reanimated corpses of Walking Dead, but vacant houses that are in some stage of foreclosure but that have not yet been repossessed by the bank. According to ATTOM Data Solutions, the bay area is littered with 477 zombie foreclosures, ranking it fifth among the 150 largest metro regions. Only New York-Newark, Philadelphia, Chicago and Miami are more zombie-infested.”

“A prime example: a zombie in St. Petersburg’s Shore Acres neighborhood that first went into foreclosure in 2008. Several blocks way is a current zombie that has been in foreclosure since 2009 and vacant for years. Throughout the Tampa Bay area, a total of 26,132 homes were vacant as of this fall, ATTOM reported. Many of those are owned by investors who are renovating them or already have them on the market. In Hillsborough County, for example, 4,427 of the 5,974 vacant homes are investor-owned.”

“Nationally, ‘there is evidence that the ultra-tight inventory environment in some red-hot markets is beginning to ease just a bit, with vacant property rates nudging higher in markets such as San Jose, San Francisco, Los Angeles, Boston and Denver,’ said Daren Blomquist, ATTOM’s senior vice president.”

“Preconstruction sales of new low-rise homes fell 73 per cent in the Toronto area in September compared with a year earlier as the home-building sector faces major headwinds from the region’s housing-market downturn. The market for new condominiums also faced a drop across the GTA in September, with builders selling 1,749 units, down 37 per cent from 2,782 units last September. Combined sales of high-rise and low-rise homes dropped 48 per cent to 2,101 homes from 4,077 last year.”

“‘The launch frenzy that had characterized the market over the past year is over,’ said Patricia Arsenault, executive vice-president at Altus Group, which provides data on new home sales for BILD. ‘Buyers now feel that they can take a bit of time to shop around, without fear of losing out.’”

“The first signs of a potential correction in Sweden’s housing market may well appear in the country’s property-management industry. For Sweden’s biggest mortgage bank, Swedbank AB, that means its 221 billion kronor ($27 billion) in loans to property-management firms pose a risk that investors should watch closely, according to Danske Bank A/S senior analyst Matti Ahokas. These are ‘big exposures,’ he said. ‘Nobody really knows what’s happening’ with that market, he said. ‘If they end up in trouble, the banks end up in trouble as well.’”

“In Stockholm county, the average debt-to-income ratio for new mortgages is between 490 percent and 550 percent, according to figures from the regulator. But as Swedish authorities gradually introduce measures to cool the market, the risk of a correction grows if tightening is too sudden or coincides with higher mortgage rates. Ahokas says ‘it’s not easy braking,’ when the market is out of balance. ‘You can’t just tone it down a bit. Markets don’t work that way.’”

“Two-fifths of private homes coming up in Singapore, or 17,178 units, have not been sold, but the market could be flooded with close to the same number of new units soon, largely from the en-bloc fever seizing the market in the past year or so, data released by the Urban Redevelopment Authority (URA) shows. International Property Advisor chief executive Ku Swee Yong felt that there was an oversupply in the market, and this would continue to be a problem down the road. ‘If there is already oversupply, and we’re not able to bring in fresh demand, then it’s more sentiment, rather than real demand,’ he said.”

“Significant parts of the Sydney apartment market and the associated apartment land markets have cracked and are now suffering serious falls. The level of decline is much greater than most were predicting three to six months ago. The repercussions of what has happened in Sydney will quickly spread to Melbourne, although the blows may not be as severe in the southern capital because apartments are already much cheaper than Sydney. Brisbane is already in trouble so may be insulated from further big falls.”

“Apartments sold as used apartments in the big Sydney apartment estates have fallen by at least 20 per cent. The fall rate for individual sales can rise to 25 per cent. The price fall in new apartments bought either off the plan or as the developer sells a completed apartment are down in the vicinity of 12 per cent. A hypothetical apartment bought by an investor or a residential buyer for, say, $1 million in the boom (most two bedroom apartments were selling for between $1.2 million and $1.4 million) is now selling for $800,000 — a 20 per cent decline. If I want to buy that hypothetical $1 million apartment off the plan or as a completed unit it would cost about $880,000 — a 12 per cent decline.”

“The apartment land market in many areas of Sydney is in chaos. About a year ago prime apartment land in Sydney (with approvals) was selling between $350,000 and $400,000 per apartment that could be developed on the site.”

“Now anyone who bought that land would be lucky to get $280,000 and the desperation of highly leveraged selling and the lack of buyers can result in some land going for $230,000 per apartment — a fall of above 33 per cent. The losses are sickening. Again the great danger is that a vicious circle will develop, creating even bigger falls.”

“The Labour-led Government’s move to restrict foreign speculators from taking a chunk out of the property market is being questioned given a similar policy across the Tasman has done little to curb prices in Australia. Prime Minister Jacinda Ardern has said a Bill to stop overseas buyers from buying existing homes would be introduced by Christmas.”

“Auckland real estate agent Ollie Wall said if a cooler market was the idea behind the foreign buyers policy, that had already been achieved. ‘It has been achieved by the previous government through traditional ways and loan-to-value restrictions. It’s sort of flogging a dead horse.’”