February 16, 2018

The Drum Is Starting To Beat For Investors In Denial

It’s Friday desk clearing time for this blogger. “There are signs that the long slide in North Texas home mortgage defaults may be over. ‘Dallas was one of the markets where we saw an uptick in foreclosure starts in late 2017,’ said Daren Blomquist, chief economist for Attom Data Solutions. ‘This surprised us. We saw it in Dallas, Denver, Nashville and Austin — great markets that are on fire.’”

“Blomquist said most of the home loan default increases he’s seen in the Dallas area came from low-down-payment mortgages made in 2014 — about the same time lenders started to ease some of their underwriting standards. ‘We have in the last few years seen a gradual loosening of credit,’ Blomquist said. ‘Some of those loans originated a few years ago are failing at a slightly higher rate than we had previously seen.’”

“Lee County’s housing market experienced a mixed year in 2017. Brett Ellis of Keller Williams Realty Fort Myers & The Islands, who has worked in residential real estate locally for 30 years, said it’s important to remember that the stats cover the entire year, so they’re not necessarily reflective of what’s happening now. ‘One thing that’s not in those numbers is that listing inventory is up 25 percent since October,’ he said. ‘That puts pressure on pricing, so I think you’ll notice in 2017 we had some upward pricing, but that started to fall off at the end of the year.’”

“‘The market got a little ahead of itself and people forward priced ahead of the market and the market said, ‘We’re not doing that right now,’ he said. ‘Interest rates are rising and wages have not gone up that much. The sellers have outpaced the buyers.’”

“Baton Rouge real estate has been in a yearslong seller’s market streak, which was thrust into overdrive after the August 2016 flood. Real estate agents say activity began slowing by the end of 2017, signaling a cooling off period, and this year inventory is expected to rise. Jerry Del Rio, a veteran agent of high-end homes says her phone has been ringing a lot less in early 2018 because the market for upscale homes has been inactive. ‘Right now the market is so dead that I’m concerned,’ Del Rio said. ‘I don’t know if it’s the holidays or the cold weather. In the past few years, we had such a good market that we saw no slowdown.’”

“After an almost Wild West-like atmosphere in the housing market last year, Dennis Roberts believes things are beginning to get back to normal. The Durham Region Association of Realtors reported the average selling price in January was $578,645, down $30,000, or roughly four per cent, from the previous year. According to Roberts, president of the DRAR, there is currently a much larger inventory of homes available for potential buyers. On Jan. 1, new mortgage eligibility laws, referred to as ‘stress test’ rules by Roberts, came into effect in Ontario. ‘There will be a number of buyers getting out of the pool, although in Durham Region it’s more of an ocean,’ he quipped.”

“Fresh data showed annual UK house prices fell for the first time in six years at the start of 2018 amid a slump in demand. The study revealed London suffered a sharp 4.3% fall in the fourth quarter of 2017, its worst performance since the depths of the financial crisis in 2009. Mortgage approvals dived to the lowest in three years in December despite efforts by the government to help first-time buyers. Acadata chairman Peter Williams said: ‘This is the eighth consecutive month in which the annual rate of increase has been declining, and now the dial is in the red zone.’”

“Property prices have plummeted in Sweden in the past year, according to fresh figures. The downturn began in earnest in August, after years of climbing house and apartment prices, according to Svensk Mäklarstatistik. In central Stockholm the price for an apartment (bostadsrätt) fell by 8 percent this winter compared to the same period last year. The average price in January was 86,553 kronor ($10,800) per square metre. ‘The general trend continues downwards,’ Per-Arne Sandegren, analyst at Svensk Mäklarstatistik, told the TT news agency.”

“Despite the prevailing oversupply of certain properties, real estate developers are unable to reduce home prices in Malaysia due to high construction and development costs, according to Rahim & Co International. ‘One of the ways to solve this problem is to reduce the cost of development. This will simultaneously reduce the overall asking and selling house prices,’ said the property consultancy’s director for its Petaling Jaya office, Choy Yue Kwong.”

“He said this amidst complaints that home prices have become so unaffordable for many Malaysians. Choy thinks that the authorities can further bring down development cost if they release more land for affordable homes and slash building-related expenses like legal and compliance fees. ‘If all of these measures are granted by the government, I am sure developers would be more inclined to push their products at a lower selling price.’”

“Regarding the faster growth of home prices compared to income, he reckons that it will be hard to substantially increase the take home pay of Malaysians as this requires boosting productivity and this could take a long time to accomplish. Rahim & Co’s Research Director Sulaiman Akhmady Mohd Saheh noted that housing affordability improved thanks to higher household income from 2014 and 2017. ‘“But ever since, income levels are growing at a slower pace compared to the growth in house prices.’”

“Meanwhile, its Executive Chairman Tan Sri Abdul Rahim Abdul Rahman highlighted that luxury home prices in Kuala Lumpur’s heart have declined significantly. ‘These units have seen prices dropping from RM2,000 psf to between RM1,500 psf and RM1,700 psf. I do not think pricing points of RM2,000 to RM2,500 psf bracket, which took centre stage three years ago would happen again, especially in the current climate.’”

“The distressed sale of a $2.5 million luxury townhouse with sweeping views of Melbourne’s bay and skyline should be a wake-up call for financially-stressed property buyers, say estate agents. Realtor Andrew Fawell has valued four distressed – or mortgagee – sales in the past two weeks for houses and apartments valued between $1 million and $2.5 million located around Melbourne’s coveted, prestigious and expensive inner south-east fringe.”

“‘The drum is starting to beat,’ says Fawell about home buyers and investors who might be feeling pressure from rising repayments, static incomes and stagnant rents. ‘I expect to be doing it a lot more often over coming months,’ he says. ‘But lots of property buyers and investors are in denial about their precarious situation.’”

“For the first time since 2012 when the global financial crisis hit local property markets, valuers are being routinely asked by lenders to do kerbside assessments of what properties might sell for at a mortgagee’s auction. ‘This is not happening on ‘Struggle Street’,’ says Fawell, whose Beller Real Estate buys and sell properties in many of Melbourne’s most coveted suburbs within a 10 kilometre radius of the central business district. ‘These are expensive properties in top suburbs that are being put under the liquidator’s hammer.’”

“Lenders liquidating a property typically avoid the term ‘mortgagee sale’ because they fear it will attract sassy bargain hunters looking to lowball their bids because they know the property has to be sold. Houses and apartments purchased for millions of dollars are being put under the hammer because owners can no longer afford their mortgage payments. Analysts warn some property owners and investors are under growing pressure because of static (or falling) prices and higher costs.”