The Housing Bubble

It’s Friday desk clearing time for this blogger. “Mortgage companies have already started cutting their staff as business has dried up due to the decline in home refinancing. That’s particularly bad news for North Texas, which is one of the employment capitals for the country’s home loan business. ‘We are starting to see some consolidation — some of the smaller lenders are simply going out of business,’ said Rick Sharga, executive vice president with Carrington Mortgage Holdings. ‘We expect the mortgage volumes to be off by hundreds of millions of dollars. There are significant layoffs anticipated.’”

“Brian Simmons, one of the founders of an online mortgage platform, called Ask A Lender, said mortgage companies will have to find creative ways to lure homebuyers as they try to make up for the drop in refinancing. He also worries that, since the head of the Federal Housing Finance Agency is expected to step down soon as his term expires, the Trump administration could appoint a much more conservative overseer of the government-sponsored home finance companies including FHA, Fannie Mae and Freddie Mac. ‘This person could take a negative view on the government’s involvement on mortgages,’ he said. ‘They could make a number of moves to make it more unaffordable.’”

“A surprise surge in home inventory means some good news for house hunters in King County. The May numbers show an increase that’s late in the home selling season. ‘Big jump. 36 percent jump year over year in active inventory and so it’s almost 1,000 new units came online in King County,’ said Matthew Gardner, Windermere Real Estate Chief Economist. Rebecca Carlson, a Coldwell Banker Bain broker, noted as inventory was going up last month, she said many buyers took a break. ‘Depending on the area and the neighborhood, we’re just seeing fewer buyers looking.’”

“The boom in inventory shows developers meeting a demand for luxury high-rise living, with the market now listing 3,166 condominiums compared to 2,800 last year. The 30-month supply means about 100 condos are sold ever month. Fisher Island, South Beach, Surfside and neighboring Bal Harbour remain popular choices among luxury buyers. ‘The main reason we’re seeing this renewed activity is because our sellers have finally come to the realization that our inventory was growing and that we needed to reduce prices. The average single-family home this past year is sold for 79% for its original asking price. The average condo priced over $1 million sold for 82% of the original asking price. What we’re seeing is sale prices being discounted even 35% from the original asking price,’ said Ron Shuffield, president of EWM Realty International.”

“‘With our Northern Virginia local economy in a great place regarding employment numbers, we do not think our region’s economy is at risk to overheat any time soon, said Lorraine Arora, NVAR Chairman of the Board. Heather Embrey, associate broker at Better Homes & Garden Real Estate Premier, saw tons of action from her serious clients. ‘Sellers became over-confident and priced properties unrealistically, only to feel frustrated when savvy buyers passed them by,’ she said. Embrey remains optimistic that the June market will have a better balance, especially with her seller clients who have unrealistic expectations.”

“The failed Napa Oaks Subdivision proposal of 51 monster $2 million luxury homes above Old Sonoma Road is up for a City Council vote again next Tuesday, despite the Planning Commission’s vote against this unwanted and unneeded project. The Association of Bay Area Governments determined that the city of Napa needs 403 ‘Above Moderate’ units and it shows that there are 1,307 potential units within existing zoning. In the City of Napa, the available land supply remains adequate to meet future housing needs at all income levels. So why change the zoning of the Napa Oaks site and develop one of our last undeveloped ridgelines? This report proves there’s plenty of land available to meet this alleged demand without taking our ridgeline.”

“Realtors in New Canaan, Connecticut, have voted to ban For Sale signs throughout the community about 40 miles north of Manhattan where several high profile figures including David Letterman, Harry Connick Jr and Paul Simon have estates. Experts say the move may be a feeble attempt to cover up a real estate market that’s oversaturated with sellers. ‘I haven’t heard of anyone who thinks this is crazy,’ one local told Fox News. ‘If you drive around this town, it looks like a yard sale. It just looks bad. It starts to look ugly and desperate.’”

“In Greenwich, down the road from New Canaan, commercial signage has also been banned in residential areas under an ordinance for ‘cosmetic purposes and to avoid drive-bys’.”

“Even though tighter lending rules have helped cool the market, condos remain hot, particularly in Toronto and Vancouver, with evidence of potential speculative activity by rental investors, says the Bank of Canada. About 45% of those who have a mortgage and took possession in 2017 have negative cash flow, according to an April CIBC report. ‘They lose money on a monthly basis, at times a large amount of money—more than $1,000 a month,’ says CIBC deputy chief economist Benjamin Tal. ‘The big question mark is to what extent those investors will continue to buy, or even maybe they will start selling,’ says Tal. The answer is important, he adds, noting rental investors accounted for a record-high 80% of new GTA home sales last year.”

“The number of homes on sale for more than £1 million in London has risen to a record high as buyers walk away from ‘vanity’ asking prices, figures reveal today. North London agent Jeremy Leaf said: ‘This is definitely something we are seeing on the ground. More expensive properties have become harder to shift. It is probably taking double the time to sell them, and even that is only after there has been a couple of reductions in price to get it to a level where it is going to move.’”

“The rate of sales suggests it would take seven and a half years for all the £1 million properties to find a buyer.”

“Swedish apartment prices fell 8 percent in the March-May period from the same period a year earlier, data from an association of Swedish real estate agents showed. Property prices in the Nordic country has risen for almost two decades, making Swedish households among Europe’s most indebted. However, a surge in building and tighter mortgage rules has cool the housing market in recent months.”

“House prices contracted for a third straight month in March by 8.8%, the sixth contraction in the last seven months, Josephat Nambashu, Analyst at FNB Namibia announced. The decline meant the price of the average home was cut by N$109,941 from what it was this time last year to N$1,136,030. Meanwhile, Windhoek property prices fell for the second time in twelve months, whilst Okahandja prices contracted by as much as 13.7% y/y. Moreover, coastal property prices fell for the ninth month in a row- this time by 38.0% y/y.”

“‘Sellers seem to remain denial on pricing shifts, as 91% of homes sold in the period, sold for below asking price, which points to overly optimistic prices in an ultra-cautious buyers’ market,’ Nambashu explained.”

“Time has stood still for the ghost housing societies of Greater Noida. Three years ago when this correspondent walked the broad roads of Sector MU-I in Greater Noida, with their lovely service road trees leading to gated communities, he had found few people actually living in the fully finished housing societies. Now in June 2018, nothing much has changed. What looks like an ideal picture perfect housing dream—villas, trees, roads, parking, community centre, parks—has one thing missing: human beings. If at dusk, the sight of the empty lightless windows gives the ghost town its name, even in the bright June day there were hardly any people in the area to point out directions.”

“Four out of five houses are vacant and many of the empties are badly dilapidated. Despite the existing empties, a little ahead of the existing residential block, another block of low-rise government housing with about 1,000 apartments is under construction. Several private developers are also building high-rise residential apartments in the area. The multi-crore question to this correspondent came from the befuddled cab driver—if already people are reluctant to live, who will buy the new flats?”

“The ghost complexes of suburban Delhi are part of a larger pan-India story. According to the 2011 Census of India, out of 331 million houses in the country, 25 million were vacant. The highest number of vacancies were seen in Maharashtra with about 3.7 million vacant houses, followed by UP with 2.4 million vacancy. Above 95% of the houses surveyed were in a good and livable state, still there are so many vacant houses.”

“What’s going on? The demand for housing is very high,but the price point needs to be right. Why are there fully loaded homes in which nobody is living, why don’t prices come down?”

“There is a new clue about where the Australian housing market is headed, and it must be said, the outlook is ominous. About 100 people showed up at the auction and I reckoned $1.9 million was plausible. This guess was based on a bunch of auctions where I had thought the place was worth a bit over a million, and seeing them go for well over two (or more). Instead of $1.9 million, the place went for $1.76 million. (Which is a huge sum, don’t get me wrong. I sure as heck could not afford it!) When bidding began to dry up about the $1.7 million mark, I knew that I was seeing something. The market was defying my expectations still, but in a different direction to what I expected.”

“The evidence backs up my hunch. The property market in Australia has changed in a real way. We see prices falling slightly in Melbourne, Adelaide, Brisbane and Perth so far this year, but especially in Sydney where prices are down more than 2 per cent. That is dragging down the national average into negative territory. It has fallen for the last seven months.”

“That’s a sign of caution in the market but it also leaves the amount of new building being done at a high level. If prices start falling fast, there will still be a lot of new supply hitting the market. Builders and developers have probably taken into account that prices can’t rise forever with wages growth being so meagre. What they may not have considered — and fair enough because nobody really expected it — is the effect of the Banking Royal Commission.”

“Banks have to get back on the straight and narrow and that is going to mean handing out fewer home loans. That hurts first home buyers, and if prices of existing homes are falling too, that cuts into the amount second-, third- and fourth-home buyers can spend when they move. It is a tricky situation. If they had anticipated this, the building industry might have scaled back supply even more.”