February 28, 2018

Some Markets Are Clearly Oversupplied

A report from Governing.com. “When it comes to housing, New York, Portland, Ore., Seattle and Washington, D.C., all have something in common. Prices are actually starting to come down. Many of the nation’s hottest real estate markets, construction booms have brought a recent reduction in average monthly rents. Last year, apartment construction reached a 30-year high, with much of the growth concentrated in major cities such as Dallas, Houston and New York. ‘We have seen an uptick in vacancy rates and that’s having an effect on rents,’ says Michael Neal, an economist with the National Association of Home Builders.”

“Seattle’s vacancy rate is now 5.4 percent, which is the highest it’s been since 2010. Rents are going down fastest in the neighborhoods in and around downtown, which have been the most in-demand and, consequently, have seen the most recent construction. But even a drop in rental costs of about 6 percent in those neighborhoods doesn’t feel like much of a break when prices have shot up by more than 50 percent over the past five years. In the major cities, the vast majority of apartments being built are designed to serve luxury or at least high-end markets.”

From Bloomberg on New York. “Sales of Manhattan investment properties are running ahead of last year’s pace, helping to validate the view of many commercial brokers that the snoozy market of 2017 wouldn’t be repeated. Commercial-building prices in New York are off 3.4 percent from their peak early last year, according to Green Street Advisors LLC. Rents are declining or, at best, flat, for offices and apartments. Buyers and sellers alike are getting more comfortable with what the market saying about building values, said Peter Hauspurg, Eastern Consolidated’s CEO.”

From the Pittsburg Post-Gazette in Pennsylvania. “The boom in apartment building in Pittsburgh could spell trouble for landlords of older stock as they try to hold on to renters who find the shiny new units and the amenities that come with them hard to resist. In a report CBRE found Pittsburgh is in the midst of a supply surge, with about 4,600 units being built within the last three years — more than in the previous 15 years combined.”

“As one example, CBRE cited the 2004-built Flats at Southside Works. Occupancy hit 99 percent in 2010 and the average rent peaked at $1.80 a square foot in 2014. Faced with competition from the newer Hot Metal Flats and Southside Works City Apartments, the complex is now 71 percent occupied with rents of $1.73 a square foot, according to the report.”

From Urban Land. “Investors continue to pour money into U.S. student housing projects. Despite shrinking yields and rising development costs, transaction activity in 2017 was ‘very strong,’ after a record volume in 2016, says Jaclyn Fitts, director of student housing for CBRE. About $8 billion was invested in student housing in 2017, compared with $9.8 billion in 2016, but that represents volumes three times higher than 2014, Fitts says. More than 40 percent of the deals in the last year were driven by international groups, she says.”

“Developers were expected to deliver 46,000 new student housing beds for the fall 2017 semester, with another 42,000 scheduled to come on line in fall of this year, according to Axiometrics, which tracks the industry. Many universities have gone through a building boom in recent years. For example, Florida State University added 3,000 beds and Texas A&M University 2,500 beds in the last year alone, Axiometrics reports.”

“As a result, rents in many markets are flattening as new supply comes on line and students—and their parents—push back on rising costs. ‘Some markets are clearly oversupplied,’ said Travis Prince, executive managing director of the National Student Housing Group for Colliers International.”

From the Marquette Wire in Wisconsin. “Milwaukee rent is up about 2 percent from last year, according to a Department of Housing and Urban Development study. However, it’s difficult to determine if this trend will hold true for the Marquette area. Andy Hunt, the director of the Center for Real Estate in the College of Business Administration, said Milwaukee is currently experiencing an ‘apartment boom’ where demand is outpacing supply, leading to more complexes being built.”

“This ‘apartment boom’ may not be good for Marquette campus landlords, who are trying to keep up with newly-built complexes that offer more updated features and amenities to potential tenants. The freshness of new buildings may lead landlords around the area to lower their rates so they can stay on a level playing field with the competition, Larry Conjar, a local landlord, said. Conjar, who has been the landlord for decades, said too many apartments are being built around campus. That leads to a high number of vacancies, especially during the summer, when few students are on campus.”

“‘Right now (Marquette campus) is overbuilt,’ Conjar said. ‘A lot of people, including myself, are suffering from vacancies for next June. They’re actually lowering the rates to fill up the units.’”

From the Los Altos Town Crier in California. “When asked in a Bankrate study last July ‘What is the best way to invest money you wouldn’t need for 10 years or more?’ 28 percent of millennials picked real estate and 23 percent chose cash. Only 17 favored stocks. This is the wrong way to build wealth. I’m not saying that real estate per se is a bad investment. But when it comes to investing your savings for growth, if you think real estate gives you the best returns with the lowest risk, you would be mistaken.”

“A study by the London Business School, cited by Taylor Tepper at Bankrate, revealed that housing returned only 1.3 percent annually (on average) above inflation from 1900 to 2011. Stocks, on the other hand, performed more than four times better. Even in the Bay Area, despite the tremendous run-up in home prices over the past seven years, real estate growth has still failed to outpace the growth in stocks.”

“What about the risk – or volatility – of owning real estate? Illiquidity, one of the factors that adds to the volatility of an asset class such as real estate, masks it at the same time. Unlike stocks, the media cannot report the daily change in the price of your rental property, because without a buyer, there is no way to determine it. So while you hear about the stock market soaring or plunging on a regular basis, the lack of reporting on real estate prices makes it appear to be a quiet and low-risk asset class. It isn’t.”

“Take San Francisco housing prices, for example. From 2000 through 2005, they grew by a whopping 12.7 percent per year (on average). A $500,000 house purchased at the start of the decade would have grown in value to $907,000 in just five years. But from 2005 through 2009, that $907,000 house would have dropped in value to $642,000, a -6.7 percent average annual decline. The data firm of Crandall, Pierce & Co. further identified three other periods (1969-1971, 1978-1981 and 1989-1992) when housing prices nationally plunged by more than 15 percent. That isn’t low volatility.”

“For every well-publicized, highly successful real estate investor, there are scores of investors holding poorly producing rental properties. Not to mention those who bought and sold for a loss. But you never hear about those in the media.”

From KCTV 5 in Missouri. “KCTV5 News investigators are exposing the truth about one of Kansas City’s biggest landlords. A company named ‘Raineth’ has been snapping up low-income property for years and that company is behind nearly $600,000 in property taxes. Raineth doesn’t just owe money to Jackson County. The company owes Cincinnati $600,000 in property taxes and St. Louis $1.1 million. Overall, the company owes over $2 million.”

“If any of the tenants and neighbors want to have a face to face conversation with Raineth’s owner, they’d have to hop on a plane to sunny, southern California. Ed Renwick lives in a $3 million home on the outskirts of a gated community. Renwick has paid his property taxes on his home. KCTV5’s sister station in St. Louis, KMOV, sent an investigative reporter to Renwick’s house to get the bottom of the millions he owes in back taxes in their area.”

“Renwick says he had the best of intentions. He wanted to turn a profit while giving low-income communities access to affordable housing. He admitted the company owes a lot of money and he’s not happy about it. Renwick blamed being ‘behind on profitability.’ ‘We bought a lot of houses and running the houses was more complicated than we thought,’ says Renwick. ‘We had a choice: stop investing in our tenants or fall behind in taxes and we chose to fall behind in taxes.’”

“But Kansas City neighbors point out that it’s hard to see the investment, especially since Raineth is still collecting federal housing dollars which is funded by tax dollars. Records show Raineth has collected more than $2.6 million in public housing funds in Kansas City. However, many of Raineth’s homes are empty, boarded up and not rental ready. When asked about the vacant homes, Renwick says he bought the homes in that condition and hasn’t had money to fix them yet.”

“Assistant City Manager John Wood, the man in charge of housing for Kansas City, says he’s shadowboxing big out of state, and sometimes out of country companies, buying up cheap properties and letting the homes fall into further disrepair. ‘I find them to be negligent,’” says Wood. ‘They aren’t good neighbors. I would prefer they weren’t here. They buy homes low, put a little money into it to make improvements, charge a certain amount to meet a rate of return. I think it’s criminal in my mind.’”

February 27, 2018

A Blueprint For Phasing Out The GSE’s

A report from the Washington Examiner. “Conservatives who are pushing for the elimination of Fannie Mae and Freddie Mac on Monday gave President Trump a blueprint for phasing out the government-sponsored enterprises by himself. Analysts with the American Enterprise Institute and other right-of-center think tanks began rolling out a guide for how the Trump administration could ‘eliminate’ Fannie and Freddie over the course of several years without any action from Congress. AEI also plans a conference Tuesday morning to discuss the paper, which could influence GOP lawmakers.”

“The plan is tailored for enactment by a Trump appointee to the Federal Housing Finance Agency, the government entity responsible for overseeing Fannie and Freddie.”

“The agency is currently headed by Mel Watt, an Obama appointee whose term extends to the end of the year. But a Trump replacement, the conservative authors argue in a 113-page paper, could wind down Fannie and Freddie by gradually lowering the size limits for the loans that the two entities are allowed to purchase and repackage into mortgage-backed securities, while at the same time preventing them from buying certain kinds of loans.”

“‘We believe that the election of Donald Trump has made it possible to break this logjam,’ they wrote, referring to the government-sponsored enterprises’ nearly decadelong stay in government custody.”

“Some of the new paper’s conservative authors, including AEI’s Peter Wallison and Ed Pinto, have argued for years that the government-sponsored enterprises and affordable housing mandates helped cause the financial crisis by inflating the housing bubble and helping cause the proliferation of risky mortgages.”

“The paper released Tuesday will lay out the case that government guarantees for mortgage-backed securities and affordable housing mandates haven’t helped first-time homebuyers afford housing in the past, based on homeownership rates. It will also note that just a tiny slice of Fannie and Freddie’s activities — about 1 in 10 of its loan dollars — benefit first-time homebuyers buying inexpensive houses.”

“Instead, the conservatives argue that paring back government subsidies for mortgage credit put downward pressure on house prices, bringing homeownership within the price range of more buyers. They’re betting that the private market will step up to meet demand for mortgage-backed securities as Fannie and Freddie back out.”

“To that end, they wrote, Trump’s appointee for FHFA director should reduce the limits on home loans eligible for GSE backing in high-cost areas on his or her first day in office, which could be as early as Jan. 1, 2019. For 2018, that limit is set at $679,650. The next year, the director should stop purchasing investor loans and loans for vacation homes. In 2021, he or she should cease doing cash-out refinances. The next step, in future years, would be to lower the regular limit on home loans. For 2018, the limit is $453,100.”

“The authors recommended lowering Federal Housing Administration limits at the same time, to avoid having the FHA pick up business dropped by Fannie and Freddie. Trump administration officials have expressed support for a bipartisan legislative effort to overhaul the housing finance system. But Treasury Secretary Steven Mnuchin has also said that the administration would have options for overhauling Fannie and Freddie.”

The live-stream can be found here.

February 26, 2018

The Glut Would Have Further Depressed Prices

A report from the Arizona Republic. “The five-story central Phoenix brownstone mansions known as Chateau on Central are being renamed, and the developer is lowering the remaining homes’ prices. The 21-urban home development will now be called The Arris. And prices for the 12 brownstones that haven’t sold yet will fall to the $900,000s. A couple of the mansions were listed for almost $2.5 million last year. A few years ago, one of the Chateau mansions sold for more than $4 million.”

From News Channel 5 in California. “A Del Mar home just made a housing market breakthrough, becoming the first San Diego County home since 2007 to sell for more than $20 million. $21,500,000 to be exact, down from the most recent listing price of $24,900,000. San Diego-based KGTV first showed you the home at 100 Stratford Court last August, when it was listed $1 million higher than the final listing price.”

From the Real Deal on New York. “Manhattan’s luxury market recorded 29 contracts at $4 million and above last week – the fourth week in a row contract activity topped 20 deals, according to Olshan Realty’s weekly market report. The No. 1 spot went to a 12-room co-op apartment across from the Metropolitan Museum of Art at 993 Fifth Avenue with an asking price of $17 million. That’s a nearly 32 percent reduction off the original ask of $24.9 million when the unit was first listed in May. The Met, meanwhile, is considering selling its executive apartment on the building’s 2nd floor as it looks to shore up its unsteady finances.”

“The week’s asking-price volume totaled $204.79 million, with a median asking price of $5.25 million. Luxury homes spent an average of 377 days on the market, with an average discount of 10 percent from the original ask to the final one.”

The Real Deal on Florida. “Lionel Gossaf arrived in Miami from Brussels on Wednesday evening to try to save his unit at a Miami Beach condo-hotel that has been at the center of an epic fight with the Port Orange, Florida-investment company Schecher Group. But he learned he had already lost the battle. Earlier that day, Miami-Dade Circuit Court Judge Beatrice Butchko approved the foreclosure of Gossaf’s unit and 35 others in the Sixty Sixty Resort at 6060 Indian Creek Drive.”

“Gossaf said he purchased his 10th floor unit in 2013 for $100,000 using savings from his pension. ‘I wanted to do a real estate investment in Florida because I wanted an asset in America and I thought it would be well protected,’ Gossaf said. ‘And my family and I come quite often to Miami.’”

“He said he spent $11,000 to pay for attorney fees against the Schecher lawsuit and a pending bankruptcy filing by the condo association. He spent another $1,500 to travel to Miami for the three-day trial. ‘I was very upset and angry when I learned the judge foreclosed on all of us without hearing our defense,’ Gossaf said. ‘This is not American justice.’”

From Realty Biz News. “In today’s hot real estate market, many buyers and investors have forgotten about the foreclosure market. The highest foreclosure rates are in Atlantic City, Trenton, Philadelphia, and Chicago. Overall, 28 major cities experienced an increase in foreclosures during 2017.”

“If you’ve been a student of the real estate market for a few years, you’ve likely heard of ‘REO Shadow Inventory.’ Shadow inventory are house the lenders took back during the foreclosure peak but didn’t put on the market for sale because the glut would have further depressed prices. Some of these houses are now coming on the market. Additionally, many houses remained with the original owners although they were way past the point when lenders could foreclose. This was allowed so that vacant houses didn’t further deteriorate.”

“U.S. properties foreclosed in the fourth quarter of 2017 had been in the foreclosure process an average of 1,027 days (2.8 years). Nationwide, 50 percent of all loans actively in foreclosure at the end of 2017 were originated between 2004 and 2008.”

February 25, 2018

Booms Powered By The Cheapest Credit In History

A weekend topic starting with the Daily Nation in Kenya. “The real estate sector, which accounts for about 9 per cent of Kenya’s GDP, has consistently outperformed other asset classes in the past decade, incurring minimal losses while consistently generating returns of between 25 per cent and 30 per cent, according to a 2016 report released by investment firm Cytonn. The sharp increase in returns has attracted both speculators and long-term investors to the local property scene. However, some skeptics and investment analysts have intimated that the huge increases in property prices might be the signs of a bubble that is likely to burst.”

“Mr Johnson Denge, the senior manager for regional markets at Cytonn Investments, strongly rejects reports that there is a real estate bubble in the country. He says those who believe that there is a bubble in the sector have not conducted any research and, therefore, have no facts. ‘Fifty to 60 per cent of our portfolio, which amounts to billions of shillings, goes to real estate investments. We have immense faith in the property scene because, over the years, our firm has been seeing returns of up to 50 per cent from such investments. We wouldn’t be doing all this if our data indicated that the property market is just but a bubble headed for doom,’ the senior manager says.”

“So, what is a bubble? A bubble, Mr Denge explains, is a phenomenon that occurs when there is a rapid rise in the price of an asset class above the product’s intrinsic value. In real estate, this means that a bubble would occur if there were a rapid rise in land and housing prices, to the extent that the properties retail at several times their worth.”

“A real estate bubble, the expert explains, usually unfolds in five stages: Displacement. For a real estate bubble to occur, there has to be an external factor that causes a great disruption in the market by changing the behaviour of investors. After the displacement, many people will decide to cash in on the property scene because of its perceived high returns. Here, the prices of real estate will rise at a higher-than-normal rate as more people join the craze.”

“Buoyed by the returns accrued in the boom phase, a bubble market then enters a state of euphoria. Here, all caution is thrown to the wind as investors sell other asset classes like equities and retail businesses and shift all their money to real estate. The Euphoria stage, Mr Denge expounds, is driven by over-speculation and the ‘greater fool theory.’ He explains that the greater fool theory is displayed when an individual buys a house or a piece of land without caring whether the property is overvalued. Unfortunately, this bubble will eventually burst when the greatest fool fails to get a buyer.”

“Currently, there are conversations on online platforms in which Kenyans are pointing out that rental apartments in upmarket areas such as Kileleshwa and Lavington have many vacant units. Do the high vacancy rates prove that the bubble — if there was one in the first place — has already burst? Mr Denge says it doesn’t, adding that what we are experiencing are not symptoms of a real estate bubble burst but simply a phenomenon known as market correction.”

From the San Francisco Chronicle in California. “When real estate agent Josie George arrived to show a rustic cabin in the Berkeley Hills for an open house, people were already gathered outside. For two straight hours, Ratoosh answered questions from eager prospective buyers. At first they formed a line behind her, waiting for a turn, but eventually George just stood on the deck and addressed the group as if she were giving a speech.”

“George says more than 200 people came to look at the 640-square-foot cottage at 2794 Shasta Rd. listed for $479,000 —and this was on the same day as the Super Bowl. ‘I’ve never been at an open house that’s so busy,’ she says.”

“In the San Francisco Bay Area where real estate has boomed for nearly 10 years, stories of mobbed open houses aren’t unusual. Well-priced properties with curb appeal or potential receive dozens of offers and go for hundreds of thousands of dollars over asking price. The University town of Berkeley draws hungry homebuyers. The median sales price in September 2012 was $648,00 and nearly six years later that figure has nearly doubled to $1.225 million, according to Trulia. Seven months ago, two-bedroom bungalow with a pretty garden was listed for $725,000 and sold for 53 percent over asking at $1.111 million.”

“But 2794 Shasta Rd. might be a little different from the typical listing that causes a frenzy as it’s the size of a master suite in a typical new suburban home and it’s simple cabin design has never been updated.”

From the Washington Post. “The notion of buying a home with no money down is understandably alluring. But what looks sexy in a lender’s advertisement does not always translate into what is best for your financial well-being. What is a zero-down loan? Also known as 100 percent financing, zero-down loans require no down payment to purchase a home. For those with little to no cash in savings, these loans are touted as a windfall for those who could only dream of owning a home.”

“As a real estate agent, buyers who lost their homes during the crash have been asking me for the past eight years whether they will ever be able to purchase a home again. Today, I can finally say yes. We are at 360 degrees in the cycle. Underwriting requirements to qualify for a loan have eased. I have also recently seen an increase in advertisements from lenders pitching creative loan programs, such as zero down.”

“Some of these creative loans include (1) zero-down payment, with extra fees for this privilege wrapped into the loan, and high interest rates; (2) piggyback loans, which consist of a first mortgage at market rate plus a second mortgage at a much higher rate (the funds provided by the second mortgage are used as the down payment); and (3) grants.”

“‘These programs are wonderful for those who can’t afford to buy,’ said Michael Chelst, branch manager of Norcom Mortgage’s office in Greenbelt, Md. ‘More people can buy homes now.’”

“‘I get lots of leads from buyers on Zillow and Trulia,’ said Juan Umanzor, a real estate agent based in Bethesda, with a high percentage of his clientele in Prince George’s County, which experienced a high foreclosure rate during the recession. ‘Most of them ask about zero-down financing.’ Umanzor encourages his clients to buy now. ‘Interest rates are low and values continue to go up.’”

From the Australian Financial Review. “For years the Reserve Bank of Australia dismissed our warnings that excessively stimulatory interest rate cuts – which bequeathed borrowers with never-before-seen 3.4 per cent mortgage rates that fuelled double-digit house price inflation – had blown a bubble that presented genuine financial stability risks. This manifested via record increases in speculative investor activity, interest-only loans and, more broadly, Australia’s household debt-to-income and house price-to-income ratios, which leapt into unchartered territory (notably above pre-global financial crisis peaks).”

“The RBA narrative was very different. ‘Our concern was not that developments in household balance sheets posed a risk to the stability of the banking system,’ governor Philip Lowe recently explained. ‘Rather, it was more that…the day might come, when faced with bad economic news, households feel they have borrowed too much and respond by cutting their spending sharply, damaging the overall economy.’ Nothing to see here when it comes to financial stability, if you believe the weasel words.”

“It turns out Lowe was privately ‘packing his dacks’ after unleashing the mother-of-all-booms powered by the cheapest credit in history. After the sudden deceleration in national house price growth – as documented here – from an 11.5 per cent annualised rate in May 2017 to just 1.9 per cent today, the governor revealed to parliamentarians that he’s now ‘much more comfortable…than I have been in recent years when I have been appearing before this committee, when I was quite worried.’ That’s central speak for petrified.”

“Lowe conceded that ‘housing prices were rising very, very quickly – much faster than people’s income – and the level of debt was rising much faster than people’s income’. (We forecast that would occur back in 2013.) Yet according to the RBA’s interpretation, the 50 per cent explosion in house prices between 2012 and 2018 was propelled not by the 11 interest rate cuts it bestowed on borrowers over the same period, but by a lack of new housing supply. You have to ignore the record building boom to believe this BS.”

“Along these lines, Lowe now claims that the bursting of the bubble in September 2017 (when national prices started falling gradually) was not really attributable to the 40 basis point increase in investment loan rates – and chunkier hikes for the 40 per cent of borrowers with interest-only loans –that flowed from APRA’s decision to crush speculative activity. ‘I don’t think the tightening of lending standards is the primary thing that has changed the dynamics of the Sydney housing market,’ Lowe says. ‘It’s the full supply, less foreign demand, [and] better transport.’”

“It is precisely this policymaking hubris that sowed the seeds of the last crisis, and gives one pause when considering whether Australia is prepared to deal with the next one.”

From the Globe and Mail in Canada. “Hot housing markets – and how to cool them – are challenging many governments. Australia, New Zealand and Hong Kong generally face the same issues as some Canadian cities. The story in Australia, particularly in Sydney and Melbourne, is similar to that of Vancouver: a housing price boom fuelled by factors that include a strong economy and overseas buyers.”

‘Last spring, the country’s banking regulator, the Australian Prudential Regulation Authority, made what looked like a small move, putting a cap on interest-only lending to 30 per cent of all new loans, down from about 40 per cent before. Australia’s Treasurer, Scott Morrison, in December called the move a ’scalpel-like change.’”

“Prices did not immediately fall but appear to have peaked. In Sydney, prices had surged about 75 per cent in five years – similar to Vancouver – but in the final three months of 2017 fell by 2 per cent, which is similar to what has happened to prices of detached homes in Greater Vancouver since last summer.”

“‘The market for housing in New Zealand is completely broken,’ Grant Robertson, the new Finance Minister, has said. The country has banned foreigners from buying existing homes. More measures are planned. Westpac, the country’s largest mortgage lender, predicts housing prices will fall 5 per cent in New Zealand, with a slightly larger decline in Auckland, over the next four years.”

From Think Pol in Canada. “Asking prices for homes in Metro Vancouver are falling ‒ in one case by as much as 73% ‒ suggesting that budget measures announced by the NDP government to promote affordable housing by tackling rampant crime, corruption and speculation in the real estate market is beginning to work even before they come into force.”

“For example, the asking price for a home on the 10000 block of Seaword Court in Richmond’s Ironwood neighbourhood has dropped from the original listing price of $5,880,000 on February 14 to $1,588,000 today, data sent to ThinkPol by an industry insider show. ‘This is just the tip of the iceberg,’ the industry insider who sent ThinkPol the data said. ‘Many sellers are delisting and relisting to hide price falls and reset days on the market counter.’”

“The asking price for a property on 11000 block of Blundell Road in Richmond’s McLennan neighbourhood, originally listed for $4,680,000, has dropped by almost half to $2,380,000, the data show. The third largest drop we found was in Burnaby’s Brentwood Park neighbourhood, where a property on 4000 block of Alpha Drive has seen its asking price slashed by a third from $2,980,000 to $1,998,000.”

“The industry insider warned that the industry reaction will go well beyond mere press releases expressing concern. ‘The industry is fighting tooth and nail to water down the budget measures,’ the whistleblower added. ‘They’ve hired troll farms to infiltrate social media platforms and push the real estate industry narrative that NDP is ‘punishing’ homeowners.’”

“The whistleblower is confident that Premier John Horgan’s government will prevail despite industry push back. ‘But I don’t believe any amount of narrative control is going to help the industry,’ the insider said. ‘The only reason the bubble kept going for so long was the fact the the BC Liberals turned a blind eye to crime and corruption in our fentanyl-fuelled industry.’”

“‘The criminals know that [Attorney General] David Eby means business,’ the whistleblower concluded. ‘They’re now cutting their losses and fleeing, and the market will correct itself to align with fundamentals.’”

February 24, 2018

The Climate Is Changing

A report from The Oregonian. “Portland’s apartment-building binge appears to be headed off a cliff. Applications for new housing developments have nearly ground to a halt over the past year, and there are plenty of reasons for that. Construction costs have ballooned, as have land prices. The glut of new construction, meanwhile, has taken the wind out of rising rents, at least at the high end. Developers say the market has shifted dramatically since offsets were created. Rents in high-end buildings have been stagnant over the last year, which has prompted some landlords to throw in a few weeks of free rent to land tenants.”

“Close to 10,000 apartments were in the development pipeline before inclusionary zoning took effect, said Tyler Bump, the city economist. Half of those are near approval to break ground. Those projects could keep a steady stream of housing coming online for the next two years. Some, however, may simply not happen. It’s not uncommon for developers to drop projects because of unforeseen logistical or financial problems.”

The Mountain View Voice in California. “For Freddie Farris, 60, the golden years aren’t going quite as planned. For years now, Farris’ family has resided on the second floor of the Del Medio Manor Apartments. But in recent days, the family has faced the harrowing possibility they soon could be out on the street. Her landlord wanted to raise her $1,200-a-month unit rent by $500. Then she saw the row with her sister’s $1,650-per-month, 2-bedroom unit. That would go up by $900 a month.”

“The rent increases come despite the Del Medio apartments already being quite profitable, even under the city’s new rent control program. Last year, the property earned more than $1 million after expenses, according to filings made to the city. The point isn’t the dollar amount, but rather the fact that the return on the property is now capped and will decrease over time, said Elizabeth Lindsay, who owns Del Medio with about 12 other investors. Her father, uncle and grandfather built the 105-unit apartment complex in 1974.”

“Lindsay points out that the cost of vendors, contractors, employees and pretty much everything else is steadily rising in spite of rents being restricted. She describes the push for rent increases as the only recourse left for her and her partners. ‘No investment that has a cap on it is a good investment. That means you can’t have upward mobility on your investment,’ she said. ‘Every month that I’m not getting rent increases, I’m just bleeding money.’”

“What about the $1 million in income after all expenses? Lindsay points out the the property is worth $60 million at least. Getting $1 million a year is like a 1.7 percent return on that value, she said. ‘This is only a little better than a savings account,’ she wrote in an email. ‘Why would any landlord go through what we do for a 1.7 percent return?’”

The Chicago Tribune in Illinois. “After setting a record for apartment construction in 2017, downtown Chicago will take a breather — but not for long. While only about 3,000 apartment units are expected to be completed this year, developers next year could challenge the record number of downtown apartments — 4,350 units — built in 2017, Integra Realty Resources executives said. The firm projects that about 4,200 units will be completed in 2019. The rate of downtown apartment construction is being closely watched amid concerns of an oversupply.”

“Years of ambitious construction of, and investing in, apartments have made the largest deals — $200 million or above — challenging to finance, said Ron DeVries, an Integra senior managing director. Some investors are looking to the suburbs in search of higher returns, DeVries said. After condominium development ground to a halt during the last recession, some of the first big condo projects in Chicago are under construction or marketing units for sale. That comes after just 1,800 condos were marketed for sale in the past seven years, said Gail Lissner, an Integra managing director.”

“One of the big new projects is 1000M, a 74-story tower designed by Helmut Jahn at 1000 S. Michigan Ave. Developers began marketing 323 units for sale in the fourth quarter of 2017. ‘We think the market was ripe,’ said Jerry Karlik, a principal at New York-based JK Equities, one of the tower’s developers. ‘With rental prices hitting $4 per square foot in luxury buildings, we think it’s the right market for a premier condo building,’ Karlik said. ‘It’s an underserved area, and there hasn’t been much built since the last (real estate) cycle.’”

The Express News in Texas. “The future is uncertain for a proposed apartment complex that was expected to bring new life to the near West Side after a partnership that includes local company 210 Development Group lost the property through foreclosure. 210 Development plans to buy back the property, at 700 West Commerce St., and continue to build Vitré, a $45 million, 242-unit apartment complex with 5,000 square feet of ground-floor retail, spokeswoman Holly Thoman said. They are pursuing a partnership with the San Antonio Housing Authority to bring an affordable housing component to the project, she said.”

“The city awarded the project a $3.8 million incentive package in September 2014, but the only part that has been disbursed so far is a $968,000 construction loan, said Veronica Garcia, interim assistant director of the city’s Center City Development and Operations Department. The 2.1-acre property was sold at foreclosure auction on February 6 to VDP Solutions, a company that shares an address with Brevet Capital Management, a New York investment company with a regional office in San Antonio, according to county property records. The sale price was $4.5 million.”

“The foreclosure concerned an $11 million loan that 210 Development’s partnership, Vitre Development Partners, took from another entity named Brevet Direct Lending-Short Duration Fund, according to the county records. The foreclosure sale was part of a ‘restructuring process,’ Thoman said. In 2016, the development partnership ‘paused its plans’ on the project in order to develop it as mixed-income housing rather than as a market-rate complex, according to a news release.”

“‘I don’t think we necessarily chose to go through (the foreclosure), but after discussion with the partnership and the other people involved, it was decided that this was the best path forward in order to achieve the structure we need in order to move forward,’ she said.”

From Bisnow on Texas. “Has San Antonio’s Multifamily Investment Market Peaked? The forecast for renters in San Antonio this year may be great, but a mix of economic factors already is making it tougher to invest in multifamily properties. The market is fairly good for renters. But a combination of factors — changes to the tax code, higher interest rates and a tightening lending environment — could spell the beginning of a more challenging investment picture. At Bisnow’s Multifamily Explosion event, those on both the finance and development side of the multifamily equation agreed the climate is changing.”

“‘Just over the past several months, Treasurys are increasing, spreads are slower to come in. It’s affecting our leverage,’ Westmount Realty Capital Managing Director Michael Anderson said. Westmount has always been a lower-leverage group, so interest rates are an issue, Anderson said. Lately, in some markets, the 10-year fixed rate is bumping up against cap rates. That provides no delta at all in Westmount’s deals.”

“CFH Investment Partners Vice President Benoit Rochard said he has begun to see deals with higher interest rates that are cash-flow constrained or debt-coverage constrained. Rochard has promised a client 80% financing, only to scrub the numbers and see it was only going to be 70% or 75% financing. ‘This is just within the last four to six weeks,’ Rochard said. ‘And it’s all due to interest rates.’”

“Bridge lenders like Pender Capital are less concerned with interest rates since they tend to fill a gap in financing a proposed project. Co-founder Zach Murphy is more concerned with overly optimistic underwriting for returns, especially out of equity lenders. Debt structuring is fine, but equity lending is unrealistic, Murphy said.”

“‘You start seeing ‘blue sky’ underwriting from equity over and over and over again,’ Murphy said. ‘The concept looks great on paper, in black and white, as long as you can underwrite 5% rent growth for the next 10 years. That sounds familiar — 2006, 2007 — but it’s probably not smart.’”

“San Antonio has had some amazing population growth, but it will not last forever, Murphy said. Suggesting the city is going to have 100% growth in rent is simply untenable. If the investment cycle was a baseball game, multifamily would be in the 14th inning, San Antonio-based GrayStreet Partners Managing Partner Kevin Covey said. The game is tied, and it looks like the outcome will be similar for the coming year, if not years.”

February 23, 2018

When You Tell Them The Price, They Don’t Come Back

It’s Friday desk clearing time for this blogger. “An investment company could score a major victory this week in its alleged hostile takeover of a 1990s Miami Beach condo-hotel. Miami-Dade Circuit Judge Beatrice Butchko has set a three-day trial beginning Tuesday to decide the outcome of foreclosure lawsuits the Schecher Group has brought against 35 unit owners at the Sixty Sixty Resort. The trial is moving forward despite a pending chapter 11 filing by the Sixty Sixty Condominium Association aimed at preventing the owners from losing their units for next to nothing, said association president Maria T. Velez. ‘Schecher has already taken 10 units for free from people who couldn’t handle the stress and gave up in lieu of foreclosure,’ Velez said.”

“Singer-songwriter Mary J. Blige is in contract to sell her gated estate in the affluent New York City suburb of Saddle River, NJ, for a big loss, Gimme Shelter can reveal. Blige bought the chateau-style mansion for $12.3 million in 2008; it was last listed for $6.98 million. The buyer, we hear, is paying less than $6 million — less than half of what she originally paid for it. ‘Someone is getting an incredible deal,’ says a real estate source.”

“The mystery buyer of Manhattan’s most expensive apartment has been revealed: the Wall Street Journal says it’s Dell Technologies founder Michael Dell, who purchased the property for its $100-million asking price. One57 made headlines in 2017 for being home to New York’s largest apartment foreclosure—the original owner was Nigerian oil tycoon Kolawole Akanni Aluko, who was implicated in a money-laundering scheme that included the unit for which he had paid $50.9 million. It was eventually unloaded by its mortgage holder at an auction for $36 million.”

“Then there’s One57’s Unit 83, a 6,240 sq ft spot sold at a $13 million discount in 2016: Bought for $58.5 million in 2015, it ultimately changed hands for $45.8 million. The spectacular price cuts at One57 reflect drops in the super-luxury market over the past few years in New York and across the US. Recent resales have been trading at 25% less than their peak in 2014, according to appraisal firm Miller Samuel. A similar problem was faced by London’s Shard building, the apartment tower built around the same time as One57, which has been trying to sell its ultra-modern, £50-million flats for five years to no avail.”

“Silicon Valley remains far ahead of other regions according to a new study. But high housing prices contributed to a loss of residents in 2016, something the Bay Area has not seen since last decade’s recession. Brian Brennan, vice president of the Silicon Valley Leadership Group, said that it’s a ‘dramatic shift’ from a year earlier. ‘What it does suggest is that we really need to take seriously the things that are causing people to leave, housing prices again being a big driver.’”

“British Columbians who bought homes last year in an attempt to borrow before a federal tightening of mortgage rules could be most at risk if the NDP government’s new housing taxes leads to a drop in prices. ‘The most worrisome is the people who bought in the last year, said University of B.C. professor and economist, Tom Davidoff. ‘Where it matters is when people can’t make payments … and then people start walking away. When people start walking away from their properties, that’s where you get the vicious cycle.’”

“Capital & Counties scrubbed £131 million off the value of its Earls Court development on Wednesday as it paid the price for a still-sluggish London property market. The latest hit, cutting the value of the regeneration scheme to £1 billion, means Capco has written down the scheme by 29% since 2015. Capco has sold half of the 186 flats in the second phase of its Lillie Square scheme. Of these 34 changed hands last year but just seven in the second half of 2017.”

“The number of housing starts in Sweden rose 8 percent to 64,000 in 2017 from 59,518 units the year before, the Statistics Office said. Sweden has seen a construction boom in the last couple of years as builders try to catch up with a rise in the population and cash-in on surging house prices. However, home prices have fallen during the last months, mainly due to a surge in building and new, tougher mortgage rules. In January, prices fell for the fourth month in a row.”

“A mini-survey has revealed a rise in advertisements of real estate worth billions of shillings due for distress sales. At least 50 properties are going under the hammer each week. Dr Adam Mugume, the executive director of research at Bank of Uganda, noted that the real estate sector has been thriving in some sort of a growth bubble.”

“He told The Observer how property prices grew by leaps and bounds up to around 2010. The promise of the country’s oil sector was still alive and demand for prime buildings was thought to continue pushing up. ‘There are those people who borrowed assuming property prices would continue rising and, therefore, sell their properties [at profit]. Those are the people we are talking about whose properties are being sold,’ said Mugume.”

“But even after they have taken on the properties, according to court bailiffs and several commercial banks’ officials we spoke to, there are no buyers. Naboth Apamba, an official at Excel court bailiffs and auctioneers, told The Observer: ‘The market has not been well. People are not buying. People don’t have the money. When you advertise the property, people come, make some inquiries and when you tell them the price, they don’t come back.’”

“He said if they had their way, they would cut the price of properties but by law, a foreclosed property is supposed to be sold at the market value. Another court bailiff said: ‘We have so many properties we haven’t sold that we may stop to take them on.’ Stephen Kaboyo, director at Alpha Capital, echoes similar views noting that people running the economy need to realise that something is not right somewhere. ‘I was reading one of the papers and found a property of someone working in one of the banks being taken over. That should worry us,’ Kaboyo said.”

“Sydney’s property market is set to face its first big test of the year on Saturday, with almost 1000 homes scheduled to go under the hammer. There are 942 properties scheduled for the bumper auction day, an 85 per cent increase on the 510 homes up for grabs last Saturday. Much of the action will take place in the city’s eastern suburbs, where a whopping 186 auctions are scheduled, but buyers will also be spoilt for choice in the inner west where there are 143 homes for sale.”

“Over the year to December the median house price in the inner west fell 2 per cent to $1.61 million, according to Domain Group data. On the lower north shore prices also dropped, falling 2.3 per cent. ‘If vendors’ expectations align with market, the new market, they’ll sell … if they’re trying to grab prices from 12 or 18 months ago, that’s not going to happen,’ said selling agent Brad Gillespie.”

February 22, 2018

They List To Sell, But Are Unable To Sell

A report from the Toronto Star in Canada. “The dip in Toronto’s housing market means there’s a different dynamic at play between sellers and buyers this year. An analysis by Zoocasa shows more neighbourhoods have become buyer’s markets — areas where there is enough competition among sellers that buyers have more choice and more room for negotiation — conditions that simply weren’t on the table in heated January 2017. Sales and prices have softened somewhat for detached and semi-detached houses and there’s slightly less demand for some of the hot east-end neighbourhoods. Penelope Graham, managing editor with Zoocasa, said the new mortgage stress test rules that took effect Jan. 1 and the lingering chill of the Ontario government’s Fair Housing Plan in April have reduced the pool of house buyers.”

“‘The areas where we’re really seeing an increase in balanced conditions were ones that were really dependent on detached sales — detached and single-family homes make up the majority of housing types in these areas that have seen the greatest change,’ she said.”

From Mortgage Broker News. “Calgary’s real estate market is flat with an overabundance of condos still listed and buyers having trouble securing mortgages. Croft Axsen, owner of DLC Jencor Mortgage Corporation, says refinances, in particular, have become difficult to obtain. ‘Refinances are not insurable, so all of the monolines are out of that market and there’s less competition because of government interference in the marketplace,’ said Axsen. ‘It’s a significantly smaller market than it used to be, which I assume is the government’s purpose, but I’m not sure restricting liquidity in Calgary is necessary at this time, but I understand their concerns about Vancouver and Toronto. Unfortunately, they want to use a sledgehammer instead of a needlepoint to fix what they’re concerned about.’”

“He has noticed an uptick in people forced to sell their homes because of an inability to get refinanced, as well as ‘move-up’ buyers with children on the way being stuck in their insufficiently-sized condos. ‘For many of them they don’t understand, because they’ve been able to get mortgages their entire lives, but now they’re being told they can’t.’”

“Gone are the days when seemingly everybody bought a new home every three to five years. Now move-up buyers are stuck in their condos, and with condos planned before the economy crashed coming to market, there’s too much supply. Julie Jeffery, a broker with DLC Elevation Mortgage, says realtor and consumer confidence is low. ‘They’re really, really nervous,’ she said. ‘They list to sell, but are unable to sell,’ said Jeffery.”

From the Calgary Herald. “In Canada Mortgage and Housing Corp.’s Housing Market Assessment for the first quarter of 2018, the Calgary census metropolitan area was one of four markets to earn a moderate degree of vulnerability. The other three were Edmonton, Saskatoon, and Regina. When it comes to rating overbuilding, two factors CMHC looks at include apartment rental vacancy rates and inventory.”

“‘Although it has come down over the previous year, it’s still fairly elevated, well above historical averages,’ says Richard Cho, principal of market analysis for CMHC in the prairie region, on vacancy rates in the Calgary area. For inventory, CMHC reviews numbers on both the single-family and multi-family ends of the market, but Cho adds ‘really, it’s the multi-family segment where we’re seeing high inventory levels, which is contributing to the evaluation around overbuilding.’”

From Metro News. “Alberta’s economic downturn has spurred thousands of workers to leave the oil patch. For the second year in a row, the Wood Buffalo-Cold Lake economic region posted the largest decrease in population in the country, according to Statistics Canada. For years, Fort McMurray saw skyrocketing home prices because the growth was unsustainable. ‘We are seeing more houses moved in the market, more homes are selling,’ said Fort McMurray Chamber of Commerce Executive Director Alexis Foster. ‘But the sale prices are going down … it’s sort of a double-edged sword.’”

“The situation is similar in Cold Lake, which is also heavily dependent on the oil patch, said Mayor Craig Copeland. Housing starts have ‘flattened’ since 2014, down 30 per cent for the third year in a row, he said. Hotels have been quiet, charities have been affected and housing prices are dropping rapidly. ‘In some cases houses have dropped over $100,000 in their value,’ Copeland said.”

From Reuters. “British Columbia moved on Tuesday to crack down on real estate speculators, expanding its foreign buyer tax and introducing a new speculation tax, as part of a wide-ranging strategy to cool housing prices in Canada’s most expensive real estate market. The left-leaning New Democratic (NDP) government, under pressure to address skyrocketing home prices and soaring rents, particularly in the Vancouver area, unveiled a 30-point housing plan as part of its first full budget.”

“The province also moved to clamp down on condo presale flipping - where units are bought and sold many times before construction completes - and to close loopholes allowing foreign buyers to invest through numbered companies and local proxies. In measures sure to appeal to frustrated voters, the province pledged to end tax breaks for mansions on protected farmland.”

From Bloomberg. “‘B.C.’s real estate market should not be used as a stock market. It should be used to provide safe and secure homes,’ said British Columbia Finance Minister Carole James. ‘That’s why we’re cracking down on speculators who distort our market.’ The levy, she said, will also capture ’satellite families’ — a term with Chinese origins to describe those families where the breadwinner remains in the home country while the children and spouse reside abroad to take advantage of educational and employment opportunities.”

“The foreign buyers’ tax will also be extended beyond the Vancouver region to properties in Victoria and other parts of the province. Taxes on the province’s most expensive properties will also rise — homes worth more than $3 million will pay a 5 per cent property transfer tax when sold, up from 3 per cent.”

From Casino Reports. “Casinos are often used by criminals as a front for money laundering crime. Money laundering and other corrupt activities have been the scourge that needs to be tackled by governments. Last year, a suppressed casino report unveiled suspicious cash transactions washing through casinos in the lower mainland in Canada. An RCMP investigation into underground banking and alleged laundering of drug cash in B.C. casinos unveiled an intricate terrorist financing system.”

“A Globe and Mail investigation has found out that 17 local residents are investing millions of dollars in Vancouver-area real estate in private lending and mortgages. The money is allegedly obtained illegally. The lenders, then, are repaid with wads of clean cash. In 2016, three of the lenders were caught red-handed, carrying fentanyl worth C$600,000 in cash.”

“The three lenders alone registered more than $20-million in mortgages and other debts against multimillion-dollar homes in recent years. The Globe and Mail found out that a total of 17 such lenders are involved in the scheme. They claimed a stake worth C$47 million. In addition to that, the lenders were found to have interest in 45 Vancouver-area properties in recent years.”

From Toronto Metro. “B.C.’s Attorney-General has pledged to crack down after an explosive investigation in the Globe and Mail uncovered what Vancouver journalist Kathy Tomlinson called Vancouver real estate’s ‘latest dirty little secret’: ’shady money’ from B.C. drug traffickers — funneled through property transaction loans and repaid to fentanyl suppliers in China. The exposé by Tomlinson and Xiao Xu showed that some profits of the deadly fentanyl epidemic — which killed a record 1,422 British Columbians last year, 43 per cent above 2016 — are being laundered through the province’s skyrocketing real estate market.”

“Over roughly the same period, as opioid deaths began to jump in late 2014, property values also soared, pricing many locals out of the housing market. University of Windsor law professor Bill Bogart refered to the realty-drug connections as an example of ‘narconomics and its tentacles.’”

“Richmond city coun. Harold Steves said he’s not at all surprised by the disturbing revelations about money laundering in the real estate market in his city. ‘We heard rumours for years that drug money was involved in some of Richmond’s big houses, and of other unsavory uses in the (Agricultural Land Reserve),’ he tweeted Friday night. ‘Now we know it is true.’”

From Macleans. “It’s a start, at least. And on the surface, it looks surprisingly bold. But it remains to be seen whether the 30-point housing plan British Columbia Premier John Horgan’s government unveiled Tuesday will begin to expunge the pathologies that have turned Metro Vancouver’s real estate market into an international housing affordability basket case and a global playground for white-collar criminals and fentanyl tycoons.”

“What is certain—and it has come as a delight to many West coast housing activists—is that after more than a decade of willful neglect by provincial and municipal politicians, and out of a political culture of persistent denial, indifference, self-dealing and outright corruption, there appears to be a government in Victoria that is giving the province’s distorted, overheated and out-of-control real estate business some long overdue attention.”

“‘I’m not happy, but I’m not sad, either,’ said Andy Yan, the director of Simon Fraser University’s City Program whose data analysis and public advocacy helped to shame Victoria into acting. ‘This will not make Vancouver affordable. But this is a nightmare we’re coming out of. It’s going to take more than one provincial budget to unwind the machine.’”

“Vancouver’s rental vacancy rate has fallen below one per cent. At least 20,000 Vancouver homes are vacant, and nearly 25,000 Vancouver households are declaring a taxable household income that is less than their outlay in property taxes, utilities and mortgage payments. Transparency International estimates that perhaps half of Vancouver’s high-end residences are now owned by shell companies or trusts.”

From Vice Money. “British Columbia’s move to increase the tax levied on foreign buyers of Vancouver property has been cast as ‘political’ by some housing experts, who argue that the new NDP government simply succumbed to pressure from a population that to a large extent, is blaming sky-high home prices on the influx of foreign money. ‘It was obviously a political move,’ Vancouver realtor Steve Saretsky told VICE Money. ‘They picked up a hot potato from the B.C. Liberal government that had done nothing about house prices for so long so they were under immense pressure to get real estate in order.’”

“‘I think the government was responding to the sentiment that foreign buyers are making money off the gain in real estate prices, and they aren’t paying any taxes on those gains,’ Hilliard MacBeth, author of When the Bubble Bursts: Surviving the Canadian Real Estate Crash told VICE Money. ‘I think the speculation days are now over in Vancouver. The whole climate is going to change.’”

“Regardless of the extent to which foreign money is driving Canadian real estate, housing experts like Saretsky warn that none of this might end well. ‘I don’t see a happy ending here. Somebody’s going to get hurt and it’s most likely the hardworking family that made enough money to afford property.’”

February 21, 2018

Banking On A Huge And Quick Increase In Equity

A report from the Star Telegram in Texas. “Patti Sue Kirkey makes decent money with periodic raises, as a project manager for a mortgage company. Kirkey’s experience illustrates an unfortunate reality in North Texas. By and large, wages are not increasing fast enough for residents to keep pace with the cost of housing. Her experience in Fairmount didn’t end well. She had hoped to buy the home she rented for two years. But during that time her landlord, who was apparently eager to capitalize on fast-rising home prices in much of Fort Worth, raised the asking price beyond Kirkey’s budget.”

“‘The last house I was in for two years, I wanted to buy it, but the price went up $75,000 for no reason,’ Kirkey said. ‘There were no improvements.’”

“Thao Truong said her family is interested in selling their six-bedroom home In North Richland Hills and downsizing. Truong said one of her neighbors bought a home for $215,000 about four years ago and recently sold it for more than $300,000, and her family wishes to make a similar sale and use the proceeds for a smaller, higher-quality home. ‘The prices are going to keep going up, so my advice is to buy now. Buy while you can,’ she said.”

“The situation is probably temporary, said Lawrence Yun, chief economist for the National Association of Realtors. Builders are moving quickly to build new homes to meet that demand. ‘I don’t anticipate such a misalignment trend can continue for the next five years. It’s just not possible,’ Yun said. ‘There needs to be … a situation of home prices tamping to let wages have a chance to catch up.’”

From KTVZ in Oregon. “It’s not cheap to buy a home in Bend, and those high home prices are continuing to rise. In January, the median price for a single-family home in Bend was $410,000. That’s up $15,000 from December. The cost of homes in housing developments is typically determined by the builders, and a big part of that comes from the cost of land, Bend Premier Real Estate Principal Broker Lynnea Miller explained.”

“‘I’ve lived in Bend since 1985, and I can recall, you could pick up a lot a really nice lot for $5,000 back in those days,’ Miller said. ‘Now that same lot, shrink it down to make it about 4,000 square feet, and the going rate for that is $85,000 to $95,000 for a developed lot. When you have to spend that kind of money for land, the home you build on it has to be at least $400,000.’”

“Miller also said most buyers are coming from out of town. ‘Bend has been found by an awful lot of West Coast people relocating from the Bay Area or Seattle, and compared to those markets, Bend is still very cheap,’ she said. ‘The thing I’m concerned about: We don’t want to become an Aspen, where the only people who can live here are the wealthy. Where do people with regular jobs live?’”

From The Stranger in Washington. “The owner of several Seattle condos appears to be learning for the first time that she owns the condos but not the air outside them. Londi Lindell owns several units in a five-unit, three-story condo building in Westlake with views of Lake Union. Now, a developer wants to build a six-story building nearby. Lindell appealed, asking the city council to consider additional evidence: a Redfin ad from when she bought the building advertising ‘THE VIEWS ARE INSANE.’”

“In her appeal, Lindell wrote that she ‘purchased the Marcus Condominimums in September 2017 principally due to the spectacular views of Lake Union from each of the condominium units.’ (The council declined to consider the Redfin ad.) Emily Badger wrote about this phenomenon in the New York Times last month. When homes are just another commodity, those who own them (whether a single family house or a building of condos) naturally see an investment to protect. ‘Zoning effectively invited homeowners to look beyond their properties in ways they hadn’t,’ Bagdger wrote. ‘And it helped create the expectation that communities would change little over time — or that homeowners would have a say if they did.’”

From The Real Deal on New York. “Manhattan’s luxury market had its most-active week in nine months, with 37 contracts signed at $4 million and above, according to Olshan Realty’s weekly market report. The week’s No. 1 contract went to late philanthropist David Rockefeller’s Upper East Side townhouse, which had an asking price of $27 million. That’s a 17 percent reduction from the $32.5 million it had been asking when it hit the market in June.”

“The 40-foot-wide home at 146 East 65th Street spans nearly 10,000 square feet and has eight bedrooms, eight full bathrooms, a library and 8 fireplaces. It needs a gut renovation.”

“The week’s asking price sales volume totaled $296.25 million, with a median asking price of $6.1 million. Luxury homes spent an average of 477 days on the market, and had an average discount of 8 percent from the original asking price to the final one.”

From MyPanhandle in Florida. “Bay County is in the midst of another construction boom. However, it’s not as big as the one back in the early 2000’s. In fact, you don’t have to look very far to find remnants of some of the projects developers started, but never completed when the bubble burst in 2008. The 60-acre Morningside housing development off U.S. Highway 231 long ago became a pipe farm.”

“‘There are subdivisions all over this county. Which most of them now are called pipe farms because they hadn’t been developed. There’s pipes out of the ground,’ said President/CEO, ERA Neubauer Real Estate, Inc., Tom Neubauer. Neubauer says the project was one of many that began in the early 2000’s, and ended shortly after the market crash in 2008.”

“‘It was really just a product of the recession,’ said Callaway Mayor, Pamn Henderson. Callaway has it’s share of disappointment with abandoned developments. The city actually extended water and sewer lines to accommodate several hundred houses planned in the Eastbay development. Then the housing market took a nose-dive. Without the new houses, there wasn’t enough sewage to pump through the lift station near Callaway City Hall. That was partially responsible for a potentially deadly methane gas dispute between that county and the city, that is just now being resolved.”

“City officials may have a reason as to why someone isn’t fishing for those projects with sewage and roads already in place. ‘It may be a funding issue. In some cases I think they just felt like the market’s not there anymore. So, why put anymore money into it to have units that are going to sit vacant,’ said Henderson.”

The Union Leader in New Hampshire. “Before Bear Stearns and Lehman Brothers, before Countrywide, before Fannie and Freddie, some in New Hampshire were seeing troubling signs. The real estate market here and nationwide was hot and credit was easy. Nobody wanted to miss out on home ownership - and lenders were all too happy to help, writing mortgage loans with no down payments, adjustable interest rates and no income verification. But what if the bubble burst?”

“It’s been 10 years since the 2008 crash. Unemployment is near record lows and the stock market is at an all-time high. Home prices in New Hampshire are back to where they were before the recession. We asked folks who weathered the crisis here to look back - and whether they thought it could happen again.”

“Consumers, with lenders’ encouragement, were buying bigger and better homes than they could afford, said Barbara Cunningham was the mortgage origination manager at St. Mary’s Bank in Manchester. ‘The consumers that got into these loans, for the most part, I think were banking on a huge and quick increase in equity.’ The housing market was so hot that everyone assumed they could sell their homes at a profit if something went wrong. And go wrong it did: house values started dropping, and once they started they didn’t stop. ‘That’s when the whole thing started to unravel,’ Cunningham said. ‘All it takes is a couple decades go by and people forget. Regulations get changed, get removed. And anything that’s happened once can happen again.’”

“Shannon Miller says she’s the first to admit she was naive 10 years ago when she took a home loan with a local mortgage company. ‘I trusted them,’ she said. She lost her house and her inheritance, and filed for personal bankruptcy. A decade later, she said, ‘I’m still angry.’”

“‘A substantial percentage involved people who had been in a home and were basically taking equity out, and frankly, the market was encouraging people to do that,’ said Dean Christon, CEO of New Hampshire Housing Finance Authority, And Christon said, ‘The reality is a lot of that could happen again.’ He agreed there are new regulations put in place to ensure that lenders verify that borrowers can afford their loans. But, he said, ‘As prices go up and as inventory tightens, there is always pressure from lots of actors to loosen up those kinds of rules,’ he said.”

February 20, 2018

Trouble Cooking In Paradise

A report from the Globe and Mail in Canada. “The Toronto housing market’s rotten January has thrown a scare into veteran mortgage broker John Cocomile. A lot of Mr. Cocomile’s business in recent years has been mortgage refinancings. What worries Mr. Cocomile is that the latest developments in housing make it much harder to refinance. This could be the year debt gets messy. A big reason why Toronto home sales fell 22 per cent compared with January, 2017, was the introduction of new mortgage regulations designed to make the housing market more stable going forward. The rules include a stress test that applies to anyone with a mortgage that isn’t insured against default.”

“At Mr. Cocomile’s office, a lot of people are flunking the test. He’s had 10 people contact him about refinancing this year who did not end up qualifying. ‘All 10 would have qualified a year ago,’ he says. Meanwhile, debt loads are getting heavier to carry. The Bank of Canada has increased its trend-setting overnight rate three times since last summer.”

“‘People could refinance because the value was there,’ Mr. Cocomile said. ‘They call me and say, ‘My neighbour’s house just sold for $1.7-million, can I pull some equity out? I want to do a refi.’ Toronto real estate’s rotten January suggest people may be a bit disappointed in what their homes are worth now. The price of detached homes in the city fell 9 per cent on a year-over-year basis, even as condo prices rose 14.6 per cent. Mr. Cocomile finds that home appraisers are reacting to the current environment by getting more conservative with their assessments of how much homes are worth.”

From the Daily Mail on the UK. “The asking price on one the country’s most expensive houses will be slashed after it was put into receivership. Cresswell House in Chelsea, West London, will have its price almost halved as the high-end property market continues to suffer. The home - which sits in the the exclusive Boltons enclave - will be put up for £20.1million after it was originally priced at £37.5million.”

From Bloomberg on the UK. “London’s property market has moved out of its boom phase and home sellers need to be more realistic about their price demands, according to Rightmove. ‘End-of-the-boom prices normally readjust more quickly if there is an over supply,’ Miles Shipside, Rightmove director, said in the report. However, ’some would-be sellers are holding back, preventing a glut of competition from forcing prices downward,’ he said. For those who need a fast sale, Shipside’s advice is to ’sacrifice some of the substantial price gains of the last few years.’”

From Haaretz on Israel. “Finance Minister Moshe Kahlon finally got his wish in the last quarter of 2017 as home prices fell, but he was soon under attack for risking a real estate slump and endangering government tax revenues. The Central Bureau of Statistics reported that home prices fell 1.2% in the fourth quarter. In the first regional breakdown of price trends, the CBS said Jerusalem led the quarterly decline, with prices slumping 5.1% from the third quarter.”

“Isaac Herzog, the Zionist Union MK and opposition leader, warned that slumping prices could undermine economic growth and dent tax revenues. ‘From the figures we have today, 50,000 unsold homes are sitting on the shelf,’ he said. ‘Contractors aren’t selling houses because they don’t want to lower their prices.”

“But Kahlon was he was sanguine. ‘Nothing will happen if there’s a big drop in home prices,’ he said. ‘We are seeing declines in the real estate market, which could bring a slowdown, but contractors’ profit margins are so large that they can afford to cede a little income.’”

“Builders are struggling to sell higher-end homes because buyers are now focused on cheaper properties, a phenomenon evidenced in figures released by the CBS: The average price of a home fell to 1.44 million shekels ($407,000 at current exchange rates) in the fourth quarter from 1.46 million in the third and the lowest level since the end of 2015. In Tel Aviv, the average price was 2.7 million shekels in the quarter, a 2.5% decline and the lowest since the second quarter of 2016.”

From Standard Digital in Kenya. “The artistic impressions and marketing lingo used on websites and brochures of Kenya’s surging gated communities can easily be confused with what paradise is supposed to look like. But hidden behind the high walls and big gates is trouble cooking in paradise, and signs are starting to appear. On Friday, 119 houses at Kitisuru Gardens in Kiambu went under the hammer after their developer, Homex Housing, faced difficulties in completing the project. An unspecified amount of money which prospective home buyers had paid through off-plan purchase went up in smoke.”

“At Kitusuru Gardens, the houses were valued at Sh10 million when the project began in 2012. Buyers paid Sh2 million to book the units courtesy of the plans they were shown. ‘They changed the designs of the houses mid-way and moved some units from where they were originally located. Then the dates of handing over the houses kept on changing,’ one buyer told Weekend Business. ‘Furthermore, some amenities in the brochure including a swimming pool, a club house and convenience shop suddenly disappeared,’ said the buyer.”

“Those in the know say Homex Housing had over-stretched itself by doing several projects at the same time, which caused cash flow issues. But the problem is not unique to Homex. Around Nairobi, a number of developers are struggling to finish their gated community projects on time as they battle problems ranging from inadequate finances, undelivered promises and unavailable buyers. Meanwhile, completed projects are taking longer to fill, throwing developers into a public relations and credit repayment nightmare. As international magazine Quartz recently put it, ‘Nairobi built shiny new business districts but not enough tenants have shown up.’”

From ABC News in Australia. “The Reserve Bank has warned that a wave of interest-only mortgages sold when standards were more lax and due to expire in the next four years may put borrowers into financial stress. RBA assistant governor Michele Bullock said the investor loans, made before a tougher regulatory approach was imposed in the recent years, were being monitored closely to ensure they don’t impact overall financial stability.”

“‘There is still a large stock of housing debt out there, some of which probably would not meet the more conservative lending standards currently being imposed,’ Ms Bullock said. Ms Bullock said the large proportion of interest-only loans set to expire between 2018 and 2022 was of particular concern. ‘There may, however, be some borrowers that do not meet current lending standards for extending their interest-only repayments but would find the step-up to principal and interest repayments difficult to manage,’ Ms Bullock said.”

“On APRA and RBA figures, by the end of 2017 roughly 40 per cent of outstanding mortgages did not require principal repayments, while the mortgage-to-debt ratio had risen to 140 per cent from 120 per cent five years earlier. ‘If housing prices were to fall substantially, therefore, such borrowers [with high LVRs] might find themselves in a position of negative equity more quickly than borrowers with an equivalent starting LVR that had paid down some principal,’ Ms Bullock noted.”

“Given investors were more likely to sell their rental properties in times of falling prices to minimise the their capital losses, Ms Bullock said this could quickly flow into the broader economy. ‘This might exacerbate the fall in prices, impacting the housing wealth of all home owners,’ she said. ‘As investors purchase more new dwellings than owner-occupiers, they might also exacerbate the housing construction cycle, making it prone to periods of oversupply and having a knock on effect to developers.’”

February 19, 2018

Rents Fall In The Face Of An Inventory Glut

A report from CNBC. “Scan the downtowns of the nation’s largest cities, and you are likely to see a staggering array of cranes. Most of them are helping to build luxury apartment buildings. In fact, multifamily construction is now at a 40-year high; the trouble is, developers are putting up the wrong kinds of buildings. The luxury market is largely overbuilt, while there is a shortage of affordable rental housing, and developers are hamstrung by the now record-high cost of construction.”

“Developers say they simply can’t afford to add anything but luxury. ‘The two-by-four doesn’t care whether it’s in a luxury building or in an affordable building. It costs the same,’ said Toby Bozzuto, CEO of The Bozzuto Group, a multifamily management and development company operating in the Northeast and Mid-Atlantic. ‘The differential of course, is the rent and there’s a huge disparity in high-end rent versus low-end rent. So the issue is for us to develop an economically viable, feasible project, it has to be, by its very nature, high end. The rents have to be high to support the cost.’”

The Longview News-Journal in Texas. “A shortage of affordable housing rentals in Longview is prompting developers to propose projects to address the need and seek federal tax credits to make them work economically. Others agree a demand exists for apartments for renters with moderate incomes — and that the market is saturated with higher-end apartments. Karen Holt, housing navigator with the East Texas Aging & Disability Resource Center, said in a recent statement that data show a majority of families in the area are paying ‘well over’ the customary 30 percent of their income toward rent or mortgages. The median household income in Longview is $49,013 a year, according to data from Longview Economic Development Corp.”

“Holt also said the supply of conventional or high-end properties is far greater than current demand. Teri Elliott, manager at Saddle Brook Apartments on H.G. Mosley Parkway, concurred. ‘We are so overbuilt right now,’ she said. ‘Because of it, the average occupancy in Longview is 85 percent.’”

The Colorado Real Estate Journal. “While outsized rent hikes and affordability concerns have dominated the headlines in Denver’s apartment market in recent years, our robust apartment data set reveals that the environment has become materially more favorable to renters in several respects over the last few years. Concessions and discounts have become far more prevalent in Denver over the last few years. Concessions were almost nonexistent in Denver a few years ago, but have normalized alongside substantial levels of new development.”

“Also pictured in the chart is Nashville, Tennessee, which saw concessions rise from almost nonexistent levels a few years ago to one of the higher rates in the country today. The uptick in concessions in Nashville promotes the case that the metro may have been overbuilt. Lofty discounts also are common in Cherry Creek, Glendale and Denver’s pricy southeast suburbs (such as Lone Tree), all of which have experienced substantial levels of development in recent years.”

“Concessions are likely to further escalate in 2018. In January, 27 percent of all rents were tied to a rent concession, up from a peak of 23 percent during the prior winter leasing season. That uptick coincides with Denver’s next supply wave, which kicked off in earnest during the second half of 2017. This supply wave will continue for another two years, as nearly 10,000 new apartments are expected to deliver in each 2018 and 2019.”

From the Arizona Republic. “Valley apartment rents have climbed about 20 percent since 2014, while wages in the Phoenix area are up by less than half that much. Longtime Arizona economist and real estate analyst Elliott Pollack recently told a group of builders what the Valley needs to continue to grow is more ‘worker apartments’ that people can afford. It’s not that there a lack of apartments in the Phoenix area, particularly new ones. Almost 17,000 were recently built, are underway or planned.”

“But most of the new ones are upscale apartments with rents above what the typical Valley worker can afford, even with more than two weeks of their earnings. Also, some affordable apartments were torn down to make way for new pricey ones. There is some hope for struggling renters. If too many new Valley apartments go up and don’t fill up, rents could fall.”

From Inman News on New York. “Average rental prices in Manhattan and Queens fell in January, and prices in Brooklyn rose modestly, as New York City landlords aggressively pushed a record number of concessions in the face of a citywide inventory glut, according to a new report. In Manhattan, where average rent for a two-bedroom apartment fell 5.3 percent—from $5,040 in December to $4,771 in January—as many as 49.3 percent of all new leases signed included hefty owner-paid concessions, up from 36.2 percent a month earlier, according to the report by Douglas Elliman.”

From the Alaska Star. “Anchorage zoning officials listened and changed course after hearing from Eagle River residents opposed to a plan that would have opened the door to a heavy-density housing development near downtown. Eagle River resident Darryl Parks, who has worked in concert with Quimby and others, said they want to make sure future development is in keeping with plans agreed to in the 2010 Eagle River Land Use Plan.”

“Eagle River already has seen a glut in the apartment-condo-townhouse style housing market, he added. Relatively recent developments are all the same type of units proposed for Carol Creek, Parks said. ‘Both are on the market and are in the process of being developed for the last 3-5 years. And they have not sold out. Here we are and yet the market isn’t there for it,’ Parks said.”

February 18, 2018

Chosen Option: A Generational Reckoning

A weekend topic starting with Western Farm Press. “Aggressively accommodative global governments and central banks have an agenda to extend the business cycle and to maintain global economic momentum at all costs. These actions likely will create market bubbles or excessive movements in financial asset classes like equities or stocks, fixed income or bonds, cash equivalents or money market instruments, real estate, commodities, and fine arts. Also likely are currency market distortions, expanding debt burdens and deficits through borrowing or simply money printing.”

“Globally, governments and central banks in 2017 found their fiscal, monetary, trade and regulatory policies at a crossroads, simplistically stated as: Option Not Chosen: They could allow markets globally to correct with hopes of managing a U.S. and global recession. Managing a U.S. and global recession even today would likely have a low probability of success for an array of social, economic and political reasons. So not choosing this option, as far as the near term is concerned, is very appropriate, but longer term, that is another issue.”

“Chosen Option: They could globally financially engineer an extended country-by- country growth cycle through accommodative government and central bank intervention policy activities.”

From the Progressive Farmer. “Craig Dobbins, an ag economist at Purdue, can show the trend line of land values in Indiana from 1910 through 2015. If the natural trend line were followed through 2020, the average per-acre price would be $5,396. Instead, the actual average Indiana land price now is $7,150. The implication is that land values could fall back another 24% if the trend line were to hold.”

“In the Purdue survey, 39% of respondents said they believed farmland values would rise during the next five years — but only by a total of 7%. What optimism there is for farmland values within the ag sector doesn’t spill over into the financial sector. Numerous commentators have suggested that the farmland ‘bubble’ is bursting. They cite weakening commodity and land values, as well as upticks in farm debt levels.”

“In the Federal Reserve Bank’s 10th District, including Kansas, Missouri, Nebraska and Oklahoma, 15% of bankers reported they denied more than 10% of applications for operating loans in 2016. The year before, only 5% of bankers reported they denied operating loan applications at that rate. In Indiana, farmland values were down about 9% from 2015 to 2016.”

From the New Food Economy. “America’s dairy farmers are getting a refund. So hopes Senator Kirsten Gillibrand of New York, who introduced a Senate bill to return millions of dollars from a disappointing federal insurance program. Known as the Dairy Premium Reform Act of 2018, her bill would refund leftover premiums to farmers who’d paid to cover their losses under a federal margin protection program. Currently, those leftover premiums go to the Treasury. But under Gillibrand’s plan, they would be mailed back to farmers in the form of a one-time check.”

“But Gillibrand’s bill is really a response to a larger issue. When the last farm bill was first passed, dairy prices, which are set by the federal government, were sky-high. New York was on its way to becoming the ‘yogurt capital of the world.’ The price bubble burst, however, and now milk is as cheap as it’s been in decades.”

“So while her constituents could certainly use some money back, Gillibrand’s bill is not a long-term solution to what’s emerging as a national problem, or generational reckoning, for dairy farmers. What Gillibrand’s pushing for is something like a stopgap or band-aid, until a more robust dairy ’safety net’ can be implemented, as part of the next farm bill later this year. So far, that’s looking like a billion-dollar cash infusion to dairy farmers, even though, in the midst of an oversupply, Americans don’t need any more milk.”

From Undercurrent News. “Chinese shrimp importers are sitting on product they cannot sell, according to an importer source based in the country. The source, who buys shrimp and then imports it to China through Vietnam, said this has led importers to renege on ‘many orders,’ forfeiting deposits. ‘Current prices are very low. It’s not possible to sell before Chinese New Year,’ he told Undercurrent News. ‘Though they’ve paid a deposit for the order, say for example 10%, due to the falling price they don’t want any container or their money back,’ he said. He added that after Chinese New Year, prices ‘will definitely crash.’”

“The comments correspond with a shrimp panel discussion in at the Global Seafood Market Conference held in Miami in January. At the show the panel said China ‘has high-priced stocked inventory for Chinese New Year. The market is in chaos [in China] because everybody wants shrimp but fear they are paying too much.’”

“China, from being one of the world’s largest exporters, is now a net importer of shrimp, industry sources say. Chinese consumers are willing to pay a premium for live shrimp, a second source with a Chinese processor based in Zhanjiang, Guangdong told Undercurrent. He said he expects prices to continue to rise at least until Chinese New Year and potentially thereafter. ‘Supply does not meet demand,’ he said.”

“Prices are being driven by the seasonal drop in production; the holiday season; a poor harvest; and Chinese inflation, according to Landy Chow, general manager of Siam Canadian China. ‘Last year in my city [Zhanjiang], an apartment cost CNY 8,000 [per square meter]. This year CNY 12,000 per square meter. That means [a] 40-50% [increase] in one year. I think such drastic increases will soon cause wider inflation especially food price inflation,’ he told Undercurrent.”

From the Tribune Star. “While farmland values are projected to decline this year, Indiana remains in the top five states in per acre value, according to a national agricultural landowner services company. Vigo County farmer Brad Burbrink said he’s not surprised land values are forecast to drop again this year. ‘I think farmland values will continue to go down,’ Burbink said, ‘but in no way shape or form compared to the 1980s,’ when thousands of farmers filed for bankruptcy after falling behind on high-interest land and equipment loans.”

“‘I think land values will have to come down some more because the farm economy is kinda stagnant right now, but there is not the fear that the bottom of the market will fall out,’ Burbink said. ‘From a grain farmer standpoint, we have a lot of inventory, not only in the United States, but worldwide, which is causing commodity markets to be depressed.’”

“High-quality Indiana farmland peaked at $9,765 per acre in 2014, according to the Purdue Agricultural Economics Report — 2018 Agricultural Outlook, while average farmland peaked at $7,976 per acre in 2014. The Purdue report lists 2017 high-quality land values at $8,529 and average land value at $6,928 per acre last year.”

The Marshall Independent. “While farmers struggle with dropping commodity prices, they are also facing agriculture land rent rates that are not coming down as quite as quickly. Paul Lanoue, dean of agriculture and business at Minnesota West Community and Technical College: ‘In recent years, there has been a major change in land ownership with a transition to the next generation who view the land and rent obtained for it more as an investment opportunity along with a belief that the renter got a good deal in 2010-2012,’ he said. ‘The current reality is that with crop prices drastically reduced from prior levels, profitability is near non-existent for many farms.’”

From the Farm Journal. “The cash rent line on your budget likely has been a point of relief for the past few years. As margins tightened, many landowners agreed to lower cash rents. For 2018, that trend is expected to continue—but don’t expect a big drop. Landowners are still willing to negotiate their rental agreements, but the focus on dropping prices might ease, according to Pro Farmer’s 2017 LandOwner Cash Rent and Land Values Survey.”

“These drops are helpful, but they likely won’t be enough for farmers to be in the black on cash-rented ground, says Gary Schnitkey, ag economist at the University of Illinois. In Illinois, state-average cash rents peaked in 2014 at $234, according to USDA. In 2017, the average was $218, a drop of nearly 7%. Statewide average cash rents will likely drop $5 to $10 per acre in 2018, Schnitkey says. This is because Illinois farmers face reduced net farm incomes and continued negative returns on cash-rented farmland.”

“‘Reductions of this size are not large enough to cause cash-rented farmland to be profitable,’ he says. ‘However, declines in cash rents resulting in profitability are projected to be long and protracted. As long as corn prices remain below $4 per bushel, there will be downward pressures on cash rents.’”

“‘Farmers buy 70% to 80% of all farmland,’ says Steve Bruere, president of Peoples Company in Clive, Iowa. ‘But when margins are tighter, bankers get nervous. If farmers’ margins get tighter, they will become less dominant buyers, and other buyers won’t pay as high of prices.’”

“For the next few months, Jim Farrell, president of Farmers National Company in Omaha, Neb., expects land values to remain stable. ‘But longer term, I feel that land values have not hit the bottom yet. We will still see more down movement in certain markets.’ Increasing interest rates and an uptick in farmland for sale could send land values lower. ‘The slow farm economy could push more land on the market,’ Farrell says. ‘Any increase in land on the market will likely pressure values at this point.’”

February 17, 2018

Regulators Are Again Asleep At The Wheel

A weekend topic starting with Fox 17 in Michigan. “There’s no doubt about it, Grand Rapids is a seller’s market. If you’re selling a home, people are virtually lining up with offers. ‘I never thought it was going to be like this. It’s like war,’ says Tanesha Gadlen. ‘We looked at eight houses this weekend. We looked at 10 last weekend. We bid on all of them over the asking price and didn’t get any of them.’”

From GoSkagit in Washington. “The median price for homes in Skagit County rose 10.75 percent in 2017, according to a report from Northwest Multiple Listing Service. With an average of 2.14 months on the market, 1,122 homes sold in the county last year for a median price of $313,000, according to the report. The double-digit appreciation rates have buyers and sellers wondering if the rapid increase could foreshadow a housing crash similar to the 2000s, said Realtor Jamie Yantis.”

”A lot of people are concerned about this being a bubble,’ Yantis said. ‘But if you look at the trend of appreciation historically, yes in 2008, 2009, 2010 we had a dump, but now we are just back on track to where the normal trajectory should have been.’”

From the News Press in Florida. “It was a cycle that repeated often — default, foreclosure, repossession, and eviction. All too familiar to thousands in Lee County beginning in 2008. Jobs were lost, incomes were reduced, homes became unaffordable. More than 40,000 foreclosures were filed in 2008 on homes in Lee County. More than 9,000 were filed in Collier County. The market glut led to lower prices at auction, and ultimately to the ghost of the Great Recession haunting people who thought the crisis was behind them.”

“Randy Johns, owner of Phoenix & Associates, a construction company in North Naples, said the impact fell on a company he worked more than 20 years to build. ‘We all extended ourselves too much,’ Johns said. ‘Investors were buying from other investors and not end users. It all came to a crash so fast we couldn’t liquidate. We lost all our cash.’”

“Since the deluge of foreclosures, housing markets have rebounded. The Florida Realtors’ association says demand once again is outstripping supply. The median price for a Lee house was $243,500 in 2017, up 7.1 percent. In Collier it was $434,900, up 3.5 percent.”

“Lisa Davidson, living and working in Southwest Florida, looks ahead to finishing paying off the deficiency judgment left from her foreclosed house. The payments have been on time, month after month, but for a while it was no help. ‘I’m optimistic,’ she sad. ‘I have two more years of paying these bloodsuckers, I just want it over with.’”

From Malaysia Kini. “Macroeconomic management is about anticipating and managing imbalances as they arise. It is certainly not just confined to describing and telling us the problems after they have become acute. This is my take on the story by Bank Negara Malaysia, on its recent narrative on affordable housing in Malaysia.”

“Why tell us now there is a mismatch of demand and supply of affordable housing? Why tell us now household income growth has not been able to keep pace with escalation in prices of houses? Why tell us now that developers have been focusing too much on high-end houses? And why tell us now that efforts by agencies set up to provide affordable housing have been too disorganised and dissipating?”

“May I ask for how long the imbalances mentioned above have been perpetuating? As far as I know, some of these problems have been in existence for decades. What were we doing during those years? What the authorities did in the past was not to correct the imbalances. Instead, they have often taken measures to make the situation worse.”

“Whenever the housing market experienced some slowdown, interest rates were lowered and loan eligibilities were relaxed to encourage more imbalances. After many years, of course the problems have become acute, as manifested today.”

“The preoccupation of our macroeconomic management is growth and political expediency, nothing else. We do not care about is the quality of growth or its sustainability. We do not care about the imbalances that will eventually sink us.”

From the Daily Sabah. “I have a Bear Stearns shirt that I purchased 10 years ago, following the collapse of the investment bank. I bought it as a novelty item as its collapse would be a once in a lifetime event I thought to myself. Little did I know many firms would suffer similar fates. Bear Stearns’ bailout by the Federal Reserve (Fed) in March 2008 was the canary in the coal mine that warned financial markets of the imminent collapse of all other holders of toxic mortgaged back securities.”

“What’s interesting then and what is still interesting to this day is that many of the same policies that allowed Madoff to run his Ponzi scheme and Bear Stearns to enjoy high credit ratings before its collapse are still in place today.”

“Ten years later, what has changed? What if any regulations and oversight do governments have to regulate credit rating agencies? Are their assessments based on quantitative rules that are free from the biases of employees of these agencies? Do business relationships with companies being rated by these agencies get in the way of their credit ratings? Ratings agencies are allowed to make whatever ratings decisions they want without fear of impeachment. No quantitative formulas have been offered to the investor public to satisfy its need for transparency.”

“As for Ponzi scheme-like acts of fraud, we are in the midst of one that may someday rival that of Madoff’s, the cryptocurrency bubble. While I have no evidence of a Ponzi scheme in the initial coin offerings of these ‘currencies,’ what’s clear is that regulators are again asleep at the wheel. Ignorant investors have been taken advantage of and are plowing their hard-earned money into ’securities’ they do not understand with the promise of quick riskless returns.”

“While many of these currencies have already gone completely bust or are down over 50 percent from their highs, bitcoin among them, the SEC and other government agencies have done nothing. By the time these regulatory bodies take any action it will be too late to reign in the ridiculous valuations that are certain to hurt thousands of investors. While nothing close to the housing bubble of the Great Recession or the losses of Madoff’s Ponzi scheme, this bubble will burst and with it, the hopes and dreams of thousands of investors.”

“It has been 10 years this month since the Great Recession’s first major event but we have yet to learn any meaningful lessons it appears.”