The Housing Bubble

It’s Friday desk clearing time for this blogger. “For close to a year, investors have been locked in an epic fight to hold onto their units in a 1990s Miami Beach condo-hotel, amid claims they owe $9.4 million in unpaid assessments. Between December 13, 2016 and October 9, Port Orange, Florida-based Schecher Group has filed foreclosure lawsuits against 65 individuals and companies that own units in the Sixty Sixty Resort. Schecher founder Richard Schecher Sr. has posted videos of himself on Youtube in which he claims delinquent owners owe his company $9.4 million. ‘We have a bunch of owners who sadly have buyers’ remorse,’ Schecher said.”

“A 31,000-square-foot mansion in Bel Air, Los Angeles, is the latest astronomically priced house to get a sizeable price chop, having returned to the market with an asking price of $90 million. The sprawling spec house was first listed in July for $100 million. Opus, a Beverly Hills spec home also dropped out of the $100-million-club recently. The home is now asking $85 million, $15 million less than its original asking price when it was listed in February.”

“A surprising 46 percent of California homes sell below asking price, who knew? California pending home sales shrank for the fourth consecutive month in October to post the lowest level in six months, the California Association of Realtors said. Pending home sales have declined on an annual basis for nine of the last 10 months so far this year, CAR reported. Pending home sales were down 7.3 percent from October 2016 in Southern California. Los Angeles and Orange counties registered lower annual pending sales of 4.7 percent and 4.9 percent, respectively. Double-digit, annual pending sales drops occurred in Riverside (14.0 percent), San Diego (11.4 percent), and San Bernardino (10.4 percent) counties.”

“The share of homes selling above asking price fell from 28 percent a year ago to 23 percent in October, while the share of properties selling below asking price inched up from 44 percent to 46 percent, according to CAR. The 28 percent of homes that sold below asking price sold for an average of 12 percent below asking price in October compared to 9 percent a year ago.”

“For the first time in nearly 9 years the Austin Board of Realtors says the market is changing because of new home construction — but don’t expect to see a significant drop in prices. Between Sept. 2016 and Sept. of this year, 14,263 new homes were built. That’s up almost 8-percent from the year prior when 13,229 homes were built. Come 2018, a record-breaking 15,000 new homes are expected to be constructed because of more lots becoming available and current homes already under construction.”

“For buyers this may mean they don’t have to make an offer on a new home the first day it hits the market. ‘The builders are cranking these out as fast as they can around the city and county area but because of the job influx and the quality of life we have here the price has not really dropped that significantly so buyers have more options but I don’t think it’s being reflected in the price,’ says Steve Crorey, Austin Board of Realtors 2018 President.”

“Reverse mortgage foreclosures in 2016 surged 646% compared to the previous seven years, according to California Reinvestment Coalition (CRC), citing data it obtained from the Department of Housing and Urban Development (HUD) through a Freedom of Information Act request. CRC said that HUD data revealed 32,976 foreclosures on federally insured reverse mortgages from April 2016 to December 2016. In response to an earlier FOIA request, the HUD disclosed that there were 41,237 foreclosures in the HECM program during the seven-year period from April 2009 to April 2016.”

“Riksbank Governor Stefan Ingves said growing concerns over the state of the Swedish housing market didn’t come as a surprise but underscored his belief that the economy can withstand a slowdown. A series of reports in recent weeks point to a rapidly cooling Swedish housing market, raising concerns the country could face a crash like the one it lived through in the early 1990s. The krona weakened almost 2 percent last week, and has continued to slide as investors wonder whether a property market slump is ahead.”

“The reaction in the currency market is ‘difficult to understand,’ Ingves said in an interview after a press briefing on Wednesday. ‘But I’m not surprised that there is a conversation going on outside the country about our housing market given how we for years have mismanaged our housing market. Eventually that will lead to raised eyebrows abroad.’”

“Maria Sharapova is being investigated by police in India in a cheating and criminal conspiracy case involving a real estate company that used the tennis star to endorse a luxury housing project that never took off. Real estate firm Homestead Infrastructure is accused of taking tens of millions of rupees from home buyers for a project called ‘Ballet by Maria Sharapova,’ a luxury apartment complex with its own helipad, tennis academy and other amenities.”

“Lawyer Piyush Singh said his client, Bhawana Agarwal, paid Homestead Infrastructure 5.3 million rupees ($81,678) in 2013 because she was impressed by Sharapova’s association with the project located in Gurgaon, a suburb of the Indian capital. The cost of an apartment in the swanky project was 20 million rupees ($308,000). Agarwal spent the next three years chasing the builders for updates on the property and her investment in it, but they stopped taking her calls, Singh said. On Wednesday, several calls to the numbers of the building company’s website went unanswered. ‘The project never saw the light of day,’ Singh said.”

“New valuations issued by the Auckland Council yesterday showed the average property valuation in the region increased by 46 percent since the last valuations were done three years ago. But the housing market has cooled in the six months since the valuations were set, which meant some properties may be worth less than their value on paper, Loan Market mortgage advisor Bruce Pattern said. ‘We’re already seeing scenarios where the new CV [council valuation] has come in at $2 million-plus, but the house is realistically under $2m. One client texted me yesterday to advise that his valuation had gone up 214 percent. I would struggle to believe that that would be an accurate reflection of their true value,’ he said.”

“The new valuations would not be much help to anyone wanting to borrow money from banks as most lenders recognised they were out of date and would ‘ignore them,’ Mr Patten said.”

“Banks are stepping up home seizures as thousands of West Australians fall behind in their mortgage payments, with most pain felt in outer suburbs and the south-west coastal corridor. Property repossessions have surged to their highest level since the shakedown after the global financial crisis as the mining downturn rocks the last bastion for battlers. LMW Valuers director Rod Davidson said there had been a noticeable increase in bank repossessions in the south-western first-homebuyer suburbs from Baldivis through to Rockingham.”

“‘It’s probably the financial shake-out of the end of the mining boom because many of these are FIFO workers who have now run out of options,’ he said. ‘You don’t lose your house the day you lose your job, it usually takes 12 to 24 months.’”

“An Anglicare financial counsellor based in Rockingham, Jacky Hamilton, said the mortgage problems underpinned a worrying trend of underemployment. ‘Many people who were in full-time employment might now get the odd casual job, but it’s not enough to service their cost of living,’ she said. ‘They max out the credit cards, fall behind in their payments and then the bank moves in.’”

“The party is finally winding down for Australia’s housing market. After five years of surging prices, the market value of the nation’s homes has ballooned to $7.3 trillion – or more than four times gross domestic product. Not even the U.S. and U.K. markets achieved such heights at their peaks a decade ago before prices spiraled lower and dragged their economies with them.”

“Australia’s obsession with property is firmly entrenched in the nation’s economy and psyche, fuelled by record-low interest rates, generous tax breaks, banks hooked on mortgage lending, and prime-time TV shows where home renovators are lauded like sporting heroes. For many, homes morphed into cash machines to finance loans for boats, cars and investment properties. The upshot: households are now twice as indebted as China’s.”

“The increasing treatment of housing as a financial commodity has seen borrowers rush into a byzantine maze of mortgage-related products. That’s made banks very profitable, but very exposed. Aussie households have racked up record private debts and aren’t getting the pay rises to help service them. ‘Australia’s world-record housing boom is officially over,’ UBS Group AG economists declared at the start of this month. ‘The cooling may be happening a bit more quickly than even we expected.’”