The Housing Bubble

It’s Friday desk clearing time for this blogger. “The U.S. housing market is buzzing, pushed by a slim supply of homes for sale. And few metros have had the frantic energy of Portland. But the latter half of 2017 brought an unexpectedly cooler market than 2016. Now, bidding wars are no longer the rule. And sellers who have tracked the years-long upswing might now be overreaching. Brokers are reporting more listings that have had to drop prices after failing to attract a buyer. ‘Because houses have been just selling without much effort at all, and at crazy prices, there have been homes that have had to correct,’ said Kimberly Ainge Payne, a broker with Windermere Realty Trust.”

“Rick Kane, president of Westhills Ltd. Realtors in Fishersville, said he is optimistic about the new year. Unfortunately, Kane said, higher home prices means fewer sales. ‘Over $300,000, the sales are not where you would like them to be,’ said Kane, who added that once you exceed $500,000, sales in the Waynesboro, Augusta County and Staunton area are nearly non-existent.”

“Inventory levels for some markets in Atlanta are near two months. That is an all-time low. Most of the metro Atlanta area’s houses are priced below $400,000 so you can see why inventory in that market is at historic lows. But if you go over that price-point in most markets, the inventories are actually getting too high. Where buyers are fighting with each other for houses under $400,000 in most markets, they have the pick of the litter in housing priced higher than $500,000 in most markets.”

“The past year in the greater East Side Los Angeles market saw steady price appreciation. Prices today are about 20% higher than the 2007 peak and more than double what they were at the bottom of the Great Recession (2009-2012). The over $1 million market continued to cool locally in 2017. Only the most attractive and compellingly priced luxury properties sold in this more-discretionary market segment. Local real estate investment by ‘flippers’ has been on the wane for more than a year. I suspect fear of a correction—there will be one upcoming to be sure—and the cooling of the high-end market are on the minds of speculators.”

“The median Manhattan apartment price of $1.08 million in the fourth quarter fell 9.8% compared with the record it hit in the second quarter of 2017, according to an analysis of city property records by The Wall Street Journal. Brokers and analysts attributed the slide to an oversupply of expensive apartments in Manhattan, and uncertainty over a major overhaul of the tax code.”

“Foreign home buyers spent an average of almost 50 per cent more per real estate transaction in the Toronto region than Canadians in recent months, according to previously unreleased government data. The data, obtained by The Globe and Mail through a Freedom of Information request, bolster concerns that international investors drive up housing prices. Many housing analysts argue foreign investors, especially from China, have been a major factor in price escalation. ‘This is the dominant dynamic at play,’ said Josh Gordon, a professor at Simon Fraser University who researches Toronto and Vancouver’s housing markets.”

“After a public outcry about the role of international speculators in the Toronto area’s skyrocketing real estate prices – which were up by a dizzying 33 per cent in March compared with a year earlier – Premier Kathleen Wynne’s government implemented a foreign-buyers tax as part of a package of measures designed to cool the market. The province also began tracking international property investment. Prices in the GTA have fallen 17 per cent on average from the market’s peak in April, according to the Toronto Real Estate Board.”

“A Chinese court is auctioning a skyscraper on the country’s largest e-commerce website – with a sky-high starting price of 553 million yuan ($84.2 million). Photos of a dimly-lit underground parking lot and unfinished building interior with dusty floors piled with construction materials were posted by the court on the auction page. Apartment buildings, cars, confiscated jewelry and mobile phones are all being auctioned by authorities on the e-commerce platform. In November, a 28-floor building was put up for auction at a starting price of 219 million yuan by a local court in northeastern Zhejiang province. But the auction was not successful as no one bid for the item.”

“The property sector ended 2017 on a subdued note. ‘The market is so quiet. We have only had enquiries from a few interested people who want to buy land or homes to live in this year,’ said U Pyuu Gyi, a property agent from Pyigyitagun township, Mandalay. The way he tells it, investor interest in the local property market has trickled dry over the past five years. ‘This year, only those looking for new homes to live in have been active in the market,’ he said.”

“With the market weakening each year and demand at a six-year low, many existing investors are now desperate to sell. ‘Sellers know it’s a buyers’ market now so they have been more willing to negotiate and settle at reduced prices. So, there are a few sales transactions taking place, albeit it at much lower prices,’ said U Wanna Soe, a property agent from Phoe Lamin Real Estate.”

“Stakeholders in the real estate sector have taken a look into their crystal ball and submitted that the outgoing year for operators in the sector has been fair and not particularly fulfilling. Kayode Oyedele, an estate manager, recalled that his first shock in the year came from the position of his tenants who told him in clear terms to either reduce the rent or they vacate his house. He had no option than to take a 30 per cent cut in rent to avoid a situation where he would have a lot of vacancy in his property.”

“Experts like the Head, Property Management, SFS Capital Limited, Victoria Island, Lagos, Mr. Bolarinwa Odeyingbo, explained that the glut in the market did not really clear out in the year, making several properties across the country to remain unsold, abandoned and uncompleted.”

“Nordea Bank AB’s Swedish mortgage loan book continued to shrink in November after the biggest Nordic lender saw the first decline in at least 15 years the previous month. Following the publication of the October numbers in late November, Nordea said it had ‘chosen to be somewhat more cautious in the mortgage lending market during the year’ and that it has ‘not actively tried to gain market share.’ Sweden’s housing market is cooling after years of surging prices, raising concerns over a hard landing. Apartment prices in Stockholm slid a monthly 4.2 percent in November, the steepest decline since 2008.”

“Tenants are saving up to $120 a week in rent in some parts of Brisbane, where prices have fallen by as much as 25 per cent in the past year. The good news for renters comes as the inner-city market continues to suffer from an apartment glut, providing more options to choose from and an influx of landlords offering discounts and incentives as they compete for tenants. REA Group chief economist Nerida Conisbee said investor activity in Brisbane’s inner apartment sector had increased the supply of rental housing.”

“‘There are just so many more option for renters,’ Ms Conisbee said. ‘The majority of apartments are owned by investors and they are all competing for tenants.’”