December 17, 2017

Those Bubbles That Have Been Saved

A weekend topic starting with the Squamish Chief in Canada. “It is hard to imagine where we go from here, but we have to try. Squamish reached a real estate milestone last month with the benchmark price of a detached family home topping $1 million for the first time, clocking in at $1,013,000, according to the Real Estate Board of Greater Vancouver’s November figures. That is an increase of 105 per cent over five years ago. No other community in the Lower Mainland experienced that much of an increase over five years. It is possible the proverbial real estate bubble will burst and housing prices will go down, but it isn’t likely. The horse is out of the barn, so to speak.”

“Yes, it would be nice if we were still an inexpensive town with trails up to our doorsteps and no buildings over two stories. But either we accept those days are gone and try to accommodate ‘lower income’ earners, or we acknowledge we have become something else: a resort where only the upper middle class and wealthy live comfortably.”

From the Associated Press. “In the decade since the recession began, the nation as a whole has staged a heartening comeback. Yet the rebound has been uneven. It’s failed to narrow the country’s deep regional economic disparities and in fact has worsened them, according to data analyzed exclusively for The Associated Press. A few cities have grown much richer, thanks to their grip on an outsize share of lucrative tech jobs and soaring home prices. Others have thrived because of surging oil and gas production.”

“Max Versace, CEO of artificial intelligence startup Neurala, who arrived in Boston in 2001 from Italy, has watched the city transform itself into a boomtown, filled with innovative companies working on robotics, AI and self-driving cars. Boston enjoyed the 11th-best income gain in the past decade, Moody’s data shows. ‘I have never experienced a slowdown in Boston,’ said Versace, whose company is based in Boston’s Seaport neighborhood, a formerly rundown industrial area now crowded with startups and high-end restaurants. ‘Boston is one of those bubbles — good bubbles — that have been saved by the two locomotives of computer sciences and biotechnology.’”

From Chuck Jaffee. “It has been so long since Americans last suffered through a bear market that they can’t remember how it felt to go through such financial pain, and they’re uncertain how that downturn — the financial crisis of 2007-08 — actually affected their finances. And yet, a large group of those investors are still letting that downturn affect their financial lives and futures.”

“That is the stunning dichotomy of a recent survey from the Hartford Funds, which found that many Americans don’t believe the financial crisis had any impact on their life, and yet — a decade after the last big recession — they still don’t trust the stock market.”

“For the 40 percent of respondents in the Hartford Funds study who said the crisis had no impact in their life — and for everyone else who may not remember the depths of despair they likely were feeling — here’s a refresher: The Dow Jones industrial average peaked in October 2007 north of 14,000, before entering a bear market that saw it decline all the way to 6,600 by March of 2009.”

“Along the way, the housing bubble — fueled by subprime and predatory lending practices — burst; major financial players like Lehman Brothers were wiped out. Right now, according to the Hartford Funds study, it seems like people are disconnected from their senses, and maybe from reality.”

The Gainesville Times in Georgia. “Today, as Hall County seems to be thriving, with housing and retail growth springing up in all corners, ‘there were hard lessons learned … that a lot of small business owners still remember very vividly,’ said Tim Evans, vice president of economic development for the Greater Hall Chamber of Commerce. ‘One of the things we learned was how important it is to have a very diversified economy. Where we probably caught a bad cold, some other communities had severe flu.’”

“Not that a bad cold was an easy pass. ‘It was a tough few years, for sure,’ said Brian Daniel of Carroll Daniel Construction. His firm deals in commercial construction, a sector that typically lags behind residential building in terms of economic trends. ‘2008, at the time, was the best year we had ever had,’ Daniel recalled. ‘We’d go home every night and turn on the TV and know that (the recession) was coming.’”

“He remembers during that time that ‘people would say we would all be better off because of this (downturn). It got to the point I didn’t want to hear that … from one more person.’”

“Frank Norton Jr. of The Norton Agency said a longtime consultant told him in March 2007 that the recession on its way. ‘He was seeing some pretty ugly signs in California,’ he said. ‘Before it got here, we had downsized in the spring and summer of 2007 and (otherwise) battened down the hatches.’”

From Toronto Life in Canada. “Sale of the Week: The $5-million Forest Hill home that proves mansions aren’t selling for quite as much as they used to: Address: 8 Silverwood Avenue. Neighbourhood: Forest Hill. Previously sold for: $3,200,000, in 2011. The house spent a month on the market before finally attracting a lone offer, dramatically below the house’s list price. The sellers initially balked, but a week later they accepted $500,000 under asking. Their agent says it took time for them to adjust their expectations after the housing market’s downturn earlier this year.”

From Domain News in Australia. “While temperatures soared outside, the signs of Sydney’s cooling property market were evident for all to see at the auction of a Maroubra apartment on Saturday. It had all the makings of a hot Sydney auction: a prime beachfront setting, gorgeous views and apartment hunters keen to buy before Christmas. But that wasn’t enough to secure a new owner for the ground floor, two-bedroom apartment at 1/458 Maroubra Road.”

“Auctioneer Glenn Farah, of N G Farah, was greeted with silence when he called for an opening bid for the apartment, which records show last sold for $600,000 in 2002. ‘Let’s start it low and watch it go,’ he said, after a bidder eventually piped up with a $1 million offer. And go the bidding did, jumping up in $50,000 increments as three bidders — an investor and two owner-occupiers — battled for the keys.”

“But after hitting $1.2 million the bidding slowed. By $1.28 million, it had come to a halt and the property passed in more than $100,000 short of the reserve. It wasn’t a surprise to selling agent Martin Farah, also of N G Farah, given the current market. ‘The market has definitely been hit by a cooling effect,’ he said. ‘There’s also a lot of property for sale, buyers have a lot of choice, and the market is finding its own level between [the price expectations of] vendors and buyers.’”

“Listing numbers over spring and summer are up 20 per cent compared to the same period last year, and clearance rates have taken a hit. Last weekend, Sydney’s preliminary auction clearance rate dropped to a two-year low of 58.2 per cent. More than 100 vendors also got cold feet, meaning 13 per cent of auctions scheduled for December 9 were withdrawn.”