The Housing Bubble

It’s Friday desk clearing time for this blogger. “Southern California real estate sales in December 2017 were up just under a percent from November and down nearly 4% from December of the previous year to a total in Los Angeles, Riverside, San Diego, Ventura, San Bernadino and Orange counties combined, according to Core Logic. ‘With inventory still tight, Southern California’s housing market closed 2017 with a year-over-year decline in December home sales, which were the lowest for that month in three years,’ said Andrew LePage, a research analyst with Core Logic.”

“Locally, there were 73 single-family homes and 13 condos sold in our coverage area this December. Of those, 27 single-family homes sold in the Hollywood Hills’ 90068 zip code. The median price for the area was down just under 2% from December 2016 to $1.451 million. The 90039 ZIP code, which includes parts of Silver Lake, Los Feliz and Atwater Village, had 20 home sales in December for a median price of $956,000, about 6.7% lower than the previous year. Condos in 90039 saw a nearly 20% drop in median price from last year to $728,000 for the five sold. Los Feliz saw 10 homes sell in the 90027 ZIP code for a median price of $1.43 million, roughly 17% lower than the previous December. The area’s condos saw a median price decrease of about 40% to $405,000 for the four sold.”

“Miami-Dade County has four years of luxury condo inventory – not including the glut of preconstruction condos being marketed for sale. Nearly 2,800 units are on the market asking at least $1 million, according to Condo Vultures Realty. In 2017, 681 luxury units sold in the county, meaning an absorption rate of about 57 units a month. About 152 luxury condos are under contract for an average asking price of more than $3.3 million, or about 1,100 per square foot as of Tuesday. The average closing price in 2017 was less than $2.4 million, or about $910 per square foot, according to the report. That’s 28 percent lower than the current average asking price.”

“According to Condo Vultures, there are nearly 47,500 units in the development pipeline in South Florida since the new cycle began in 2011. Developers, brokers and sellers in South Florida’s luxury condo sector have been forced to adjust their pricing, wait longer for units to sell and scour the globe for new buyers amid the luxury market slowdown.”

“The numbers are coming and they won’t be pretty. That’s what data-tracking realtor John Pasalis expects when the Toronto Real Estate Board issues its official February home sales statistics next week. Although prices appear relatively flat, house sales were down about 40 per cent over the last two weeks in the Toronto area compared to the same period in 2017, while condo sales dropped about 30 per cent, said Pasalis.”

“Even price drops such as the 4.4 per cent year-over-year decline that the Toronto Real Estate Board reported in January, are a result of statistics that are skewed by last year’s ‘out of whack’ Toronto region market, said Dana Senagama, an analyst with Canada Mortgage and Housing Corporation. ‘Yes, prices have started to slow down but it’s coming off an unsustainable peak,’ she said.”

“Real estate sales that now appear so disastrous compared to 2017 and 2016 are actually just returning to normal. ‘There was a bubble in the housing market. Speculative buying was rampant, especially in York Region, and York Region is the area that is getting hit the hardest,’ he said. ‘If you believe we have been in a speculative bubble, bursting those bubbles is never smooth,’ said Sheila Block, senior economist with the Canadian Centre for Policy Alternatives.”

“UK house prices have recorded their first month-on-month fall since August, according to the Nationwide. On Wednesday, estate agent chain Foxtons reported a slump in profits, saying that activity in the London housing market was near historic lows. Sam Mitchell, chief executive of estate agents HouseSimple, said: ‘House prices have gone off the boil, particularly in London, and activity remains subdued as we approach the crucial Spring period. Buyers are viewing but are not showing any urgency to offer.’”

“Real estate prices may have already begun to fall in this quarter as developers and agents prepare for slow business due to new visa rules, which restrict expats in Oman. A manager at Hilal Properties said: ‘Most expats cannot come to Oman for work because of the ban, so their numbers are down. Some expats are even returning to their countries, which is why a lot of properties are now on the market.’ She added: ‘For that reason, most owners are also reducing rents. This trend is apparent across Muscat.’”

“A representative from Taif Properties said: ‘Yes, it has had a drastic effect on real estate prices. We’ve even seen it in popular neighbourhoods such as Madinat Qaboos and The Wave. It is affecting all the places. Madinat Al Ilam, a villa that was rented for OMR1,500 in November, was rented for OMR900 this February.’”

“A drop in the number of houses available for sale is more likely a result of people pulling their properties off the market than a surge of sales, an analyst says. In February, there were 24,848 houses listed for sale, compared to 25,155 in January 2018, a drop of 1.2 per cent. It shows the number of houses for sale fell over the past month - down by 4.5 per cent in Auckland and 5 per cent in Wellington.”

“ASB economist Kim Mundy said, given how subdued sales activity had been recently, it seemed more likely that vendors were changing their minds about selling, than that there had been a rush of purchases. ‘Sellers withdrawing properties from the market is a natural response to the slowing in demand we have seen over the last six or so months. Those who do not need to sell are choosing to wait, rather than accept a lower than desired price.’”

“The Chinese economy managers have undertaken spring cleaning of the books of the debt ridden banks just days before the New Year Day. And slapped fines as frauds tumbled out of bank vaults. The Shanghai Pudong Development Bank, for instance, has been slapped a fine of $72 million (462 million yuan). The branch had long claimed to have ‘zero’ non-performing assets (NPAs) or bad loans. But in reality it advanced 77.5 billion yuan to 1,493 shell companies. Inspectors of the China Banking Regulatory Commission have found that the pile of bad debts could run to 10 billion yuan in losses.”

“Liaoning, the northeastern Chinese province bordering North Korea, reported an unusual 2.5 per cent drop in gross domestic product last year; it admitted cooking its books between 2011 and 2014 through forgery, tax refunds and taxation calendar adjustments. Another province, Inner Mongolia has revealed that two-fifths of the industrial production it reported for 2016 did not exist. The unvarnished truth from the above is what has been suspected all along that many, if not very substantial number, of Chinese provinces are exposed to what Xinhua reporter grandly terms as ‘house ugliness.’”

“Speculators are having a field day across China offering instant riches with a wide variety of pyramid schemes. The housing market has become a casino, as a New York Times headline puts. Real estate makes up nearly three-quarters of the assets of Chinese households. Average Chinese has no trust the country’s stock exchange. And has turned to the housing bubble to make a quick extra buck. Going by local media reports, a vast number of apartments in many cities are unoccupied. Many buyers have no intention of moving in or renting out; they bought them to sell once prices go up. In many cases speculators are said to have built homes that nobody wants.’”