The Sound Of The Pincer Grip
It’s Friday desk clearing time for this blogger. “Low inventory has caused home prices to rise and forced prospective homebuyers into bidding wars, which in some cases has produced another side effect: appraisals that come in lower the contracted sales price, according to Allison Bartholomew, president of the Greater Louisville Association of Realtors. ‘The prices have increased so much and so quickly that the appraisers are having a hard time justifying the sale prices,’ Bartholomew said. ‘It’s not that the houses aren’t worth it,’ but it does create a problem for homebuyers.”
“The homebuyer’s options are to come up with cash to pay the difference, renegotiate the sale price, make a compelling case for why the appraiser’s valuation is wrong, or walk away. On a single day this year, she said, 38 houses that had been pending came back on the market. ‘It’s sort of a conundrum,’ Bartholomew said.”
“It’s clear from up here that downtown San Jose is ascendant, with activity in all directions: cranes swinging, bulldozers digging. Now, as developers build more high-rise housing with luxury amenities — the most downtown has ever seen — they expect the well-heeled residents moving in will lure more restaurants and coveted retailers. Downtown San Jose’s luxury housing generally gets built in response to new jobs. But while Silicon Valley’s job market has enjoyed a strong recovery from the recession, the area’s job growth has been up and down these last few months. ‘The party can’t go on forever,’ Mike Kim, chief investment officer for Simeon Properties observes with a shrug.”
“Maria Sicola, the CEO of Integrity Data Solutions, says Portland is in the midst of a real estate boom, but approaching the end. ‘I think we’ll see a slowdown in 2019, but I don’t think that we are in a position economically to have the great recession or anything like the great recession that we saw in 08 and 09,’ Sicola says.”
“Christopher Lee, President of CEL & Associates, has predicted the previous two housing cycles, and says that if you think of this real estate boom as a baseball game, we’re probably in the 7th or 8th inning. ‘We’re in a place where we’ve got a little more oversupply, we have not enough demand for that supply, and so we’re gonna slow down,’ Lee says.”
“Areas north of Tallahassee are seeing fast sales, while properties south of the city aren’t seeing the same amount of traffic. Realtor Joe Manausa he believes there are more sellers than buyers, especially in the median price range, and that specifically is causing property values to drop at the high end. Manausa said that homes below $350,000 are in a sellers’ market, which means there are more buyers than sellers. But once the price goes over $500,000, there becomes a ‘glut of supply.’”
“In New York City, first-quarter property sales plummeted 58 percent, to $4.3 billion, compared with a year earlier, according to data from brokerage Cushman & Wakefield Inc. It marked the lowest quarterly sales volume in six years. Nationwide, the picture wasn’t much better. Sales dropped 18 percent, research firm Real Capital Analytics Inc. found.”
“As sales of existing properties languish, developers are mired in a glut of hotels, condos and apartment complexes following a construction boom. Landlords are cutting rents and prices, and spooked lenders are holding back. In Manhattan, even the biggest names in real estate are scrambling. Concern is mounting that real estate prices have peaked following six years of record-shattering growth, and there are signs of overbuilding in large cities such as New York and San Francisco—the biggest beneficiaries of the recent boom. ‘People are just not making decisions quickly at all,’ said Robert Verrone, a principal at Iron Hound Management Co. ‘Everything in real estate is taking longer.’”
“Tick. Tick. Tick. That’s the sound of the inner-city apartment market. There are 15,000 brand-spanking-new apartments due to settle before June 30 this year. Many of these apartments won’t settle … because the buyers can’t come up with the balance of their money after paying a deposit. This week I caught up with Li Ming, a co-director of Aussiehome, who specialises in selling Aussie property to Chinese investors. Ming: ‘The Melbourne off-the-plan apartment market is the worst I have seen in the past 10 years.’”
“Ming believes that about 80 per cent of Chinese buyers won’t be able to settle on their Australian apartments. Here’s a real-life example of one of Ming’s clients: Three years ago his client bought a yet-to-be-built, off-the-plan, two-bedroom apartment in Southbank for $750,000. They put down a $75,000 deposit (10 per cent) and planned to organise a loan for $675,000 (90 per cent) in three years’ time when the apartment was built.”
“Because of the oversupply of inner-city apartments, the Aussie banks are now being cautious about how much they’ll lend (and they’re also charging investors a higher interest rate for their loans). They told Ming’s client they wouldn’t stump up 90 per cent of the purchase price — only 80 per cent. Bottom line: he was $75,000 out of pocket.”
“So where does he find the extra money? Well, that’s the second part of the pincer grip: the Chinese Government. For the past year, the Chinese Government has been clamping down on investors taking money out of this communist country. Investors used to be able to take out $US50,000 per person per year … yet now many state-owned banks are lowering the amount, or outright blocking the money going overseas.”
“‘So what did your clients do?’ I asked Ming. ‘They had no choice. They walked away … and lost their $75,000 deposit.’”
“Ming told me he has other clients who flat-out couldn’t get finance from the banks. ‘They managed to negotiate to flip their apartment for a 7 per cent loss … but even that is getting harder to do. Everyone is getting desperate,’ he said.”
Better to lose a $75,000 deposit than to buy and lose $375,000.
they could have gone w 3% smelly mel watt
or pretend farmer FDA 0 down
wtf ?
“‘So what did your clients do?’ I asked Ming. ‘They had no choice. They walked away … and lost their $75,000 deposit.’”
Talk about a depreciating asset!!! They never even got to live in the place.
Real estate is risky. Plan accordingly.
$75,000 would pay for many months of rent. Just sayin’….
“They walked away. They had no choice.” And lost their $75K deposit.
Ming the Merciless….
https://www.youtube.com/watch?v=cJOmUW5QyqQ
Your first loss is your best loss! No sense to keep feeding it.
Your first loss is your best loss if it’s your only loss.
The first cut is the deepest….
In New York City, first-quarter property sales plummeted 58 percent, to $4.3 billion, compared with a year earlier
=wow
I remember the 1989 slump
started in Bahstin and headed on down to “it can’t happen here” DC
says Portland is in the midst of a real estate boom, but approaching the end. ‘I think we’ll see a slowdown in 2019,
bahhhhhhhhhhhhh 2019
“There’s a new sign in the Dallas housing market: “Reduced.”
More than 14 percent of the homes for sale in the Dallas area are now sporting price reduction signs, according to a report by Trulia Inc.
Dallas and San Antonio are on the list of major U.S. housing markets seeing more asking-price reductions this spring in the real estate agents’ multiple listing service. Austin and Fort Worth also made the top 10 list of markets with accelerating price cuts. Houston has the largest share of price cuts — 15.2 percent of listings.
https://www.dallasnews.com/business/real-estate/2017/05/18/mark-downs-growing-dallas-area-home-market
In my uber expensive coastal California market I’m seeing at least 30% of listings with around 5% reductions. The market has definitely turned.
I am not seeing any reduction in the under $600k range. And no supply.
You are not looking hard.
Maybe more like leveled off instead of turned. Looks like realtors took a chance on listing a property at a wishing price that even they knew was too high. The 5% off is coming down to reality.
the offer you get is always less then the buyer thinks the real value is.
In my uber expensive coastal California market ??
What zip ?
I don’t know what zip he’s referring to, Dave, but here in Santa Clara, houses are still selling in only a couple of weeks.
Three very ordinary tract houses built in the 1950’s in my neighborhood (95050) sold recently for around $1 million. Each was sold in only a few weeks for more than the asking price.
It’s still crazy around here.
Coastal CA….the wonderful wife and I poked around North San Diego yesterday at the urging of PB. Here is one listing we saw which will make you all chuckle:
https://www.zillow.com/homes/for_sale/2475-Jefferson,-Apt-204,-Carlsbad,-CA_rb/?fromHomePage=true&shouldFireSellPageImplicitClaimGA=false&fromHomePageTab=buy
Basically, it is a 1975 walk up 1,200 SF apartment, probably converted to a condo in 1987. If the whole place sold as apartments they would probably go for $60,000/unit in central CA. Here? asking price $579,000! The tax assessment has it pegged at $63,966, but it can only go up at 2% a year after a purchase in CA, so the seller paid $36,000 in 1987. Given the new listed price, it would have to appreciate 9.5% annually for 31 years to get to $579,000! Wow!
I found one (unit 407) that sold for $520,000 in 2007. I wonder how much he has enjoyed the ride? They dropped to about $250,000 in 2010. I wonder when the market is going to turn again?
It’s clear from up here that downtown San Jose is ascendant
Really? I suppose that depends on the starting point. I was just there a couple of weeks ago for a downtown festival thing. It was OK, but I can’t imagine actually wanting to live right there in the middle. The area is mostly empty after business hours and it strikes me as something that could easily get dangerous if times got tough. Not enough of a herd to be safe in the middle…I think you’d be a target.
I remember driving around there in 1989, and it was sketchy.
Downtown is empty, sketchy and full of homeless people. It drops off really quick once you get away from San Pedro Square.
Cannot blame them for not wanting to buy that steaming turd, the rest of the article is BS trying to avoid the rush to the exit:
https://www.bloomberg.com/news/articles/2017-05-19/hsbc-canada-not-interested-in-home-capital-assets-ceo-says
we need more QE so stawks and homes rise in value and everyone has money to spend.
The stock market managers cant let this market go down.
OPM running out even with the stock market rally:
https://www.wsj.com/articles/connecticut-nations-wealthiest-state-may-be-tapped-out-on-taxing-the-rich-1495186203
With the exponential growth and ever-growing demands of the Free Sh*t Army, as well as the ever-rising costs of feeding municipal patronage and graft rackets, there will never be enough taxes.
You want to hear a giant sucking sound. Just watch if tax reform eliminates state income & property tax as a deduction. I remember the carnage that happened after 1986 tax changes.
Ben missed the best part of the article:
Ming: “The Melbourne off-the-plan apartment market is the worst I have seen in the past 10 years.”
Barefoot: “How long have you been in the market?”
Ming: “Five years.”
Oh the irony……cute.
This one is for you 2-fruit…Kinda goes against your meme you put out here regularly particularly how it reflects on California;
The Lone Star State has more state and local employees per capita than Illinois or California
Moreover, Texas voters are overwhelmingly conservative. Both houses of the Texas legislature have lopsided Republican majorities, and for decades, only Republicans have been elected to statewide office
From City Journal;
Lone Star Lilliput
Do you think it actually has police and correction officers? It also has a young population so it needs lots of teachers.
Read the article…
http://city-journal.us4.list-manage.com/track/click?u=b75d222a8ff4ade269f9efd3b&id=6e596700d4&e=cc5188f607
I did it explicitly stated public safety and teachers. Not saying that the public unions in the cities run by Democrats have too much power but the article confirmed my guess that it was law enforcement and teachers that accounted for most of the extra workers. Probably the least wasteful government employees.
Just got curious. Looks like California has less kids (from Census Bureau).
California:
Persons under 5 years, percent, July 1, 2015, (V2015)
6.4%
Persons under 18 years, percent, July 1, 2015, (V2015)
23.3%
Texas:
Persons under 5 years, percent, July 1, 2015, (V2015)
7.2%
Persons under 18 years, percent, July 1, 2015, (V2015)
26.3%
People in Texas are a lot richer than those poor Californians.
People in Texas are a lot richer than those poor Californians ??
Maybe because they receive a lot more government cheese than California does…
https://wallethub.com/edu/states-most-least-dependent-on-the-federal-government/2700/
Which states benefit most from the cheap money?
That’s the most important stats since Ray-gun.
They’d better be, because those property taxes in Texas are scary!
Still no income tax though, right?
“The median household income for Texas was $55,653 in 2015.”
http://www.deptofnumbers.com/income/texas/
“The current median household income for California is $64,500.”
http://www.deptofnumbers.com/income/california/
The US average is $55,775
Some other states:
At $63,909, the median household income for Colorado was at a new inflation adjusted high in 2015.
The current median household income for Illinois is $59,588.
The current median household income for Maryland is $75,847.
The current median household income for Massachusetts is $70,628.
The current median household income for Minnesota is $63,488.
The current median household income for New Jersey is $72,222.
The current median household income for Utah is $62,912.
The current median household income for Virginia is $66,262.
At $64,129, the median household income for Washington was at a new inflation adjusted high in 2015.
At $75,628, the median household income for District of Columbia was at a new inflation adjusted high in 2015.
At $60,214, the median household income for Wyoming was at a new inflation adjusted high in 2015.
2-fruit believes that increasing military is not increasing government.
2-fruit believes that government contracting is a private (cough cough) sector.
I know we can all sell each other real estate and finance it:
http://www.reuters.com/article/us-usa-fed-williams-idUSKCN18F28E
Globalist turd.
will any heads roll? will anyone lose their jobs?
6 Baltimore schools, no students proficient in state tests
http://foxbaltimore.com/news/project-baltimore/6-baltimore-schools-no-students-proficient-in-state-tests
If I lived in Baltimore the first thing I would do is……move.
You should try it out for a few months before making that decision.
Move where? To cali, no stay in ‘bmore, much worse here.
“Navon Warren grew up in West Baltimore. He was three months old when his father was shot to death. Before his 18th birthday, he would lose two uncles and a classmate, all gunned down on the streets of Baltimore.”
Baltimore Mayor: ‘Gave Those Who Wished to Destroy Space to Do That’
April 25, 2015 10:32 PM
BALTIMORE (WJZ) — After days of peaceful protests in honor of the 25-year-old black West Baltimore man who died in police custody on April 19, demonstrations took a violent turn in Baltimore Saturday.
Baltimore Mayor Stephanie Rawlings-Blake held a press conference Saturday alongside community and religious leaders and asked for peace as hundreds marched in Baltimore in honor of Freddie Gray.
But when one reporter asked to comment on how Baltimore police responded to the protestors she said she instructed officers to allow protestors to express themselves and that “we also gave those who wished to destroy space to do that as well.”
https://www.youtube.com/watch?v=gh1jdJK6VU4
Australian economy among the walking dead of debt-loaded economic disasters waiting to happen.
http://www.news.com.au/finance/economy/australian-economy-among-walking-dead-of-debt-economics-professor-argues/news-story/e8003e976e4c5c596189d79e2e319b8d
Interestingly, China does not even make the list of countries with a large amount of personal debt.
But something is rotten in Denmark.
China’s household debt:
http://www.tradingeconomics.com/china/households-debt-to-gdp
“Households Debt in China increased to 43.20 percent of GDP…”
Alarming is that a decade ago it was only 11%.
This 43% of (fake) GDP amounts to over 100% of household income. The pincer is that half the urban household income is from real estate investments. The price of housing is 14x urban household income. Were the parabolic house valuation trend to reverse, the household income part of the equation would start to collapse.
It’s not the biggest vulnerability built into China’s credit bubble, but it is high on the CROW index.
You call any number you don’t like fake and then cite any number you do like as gospel. There is no reason to any try to debate something with people like you. Yes Chinese debt is rising but both household and federal government debt is extremely low. Corporate debt is high but it is backed by assets which even if a bankruptcy happens will largely cover the the debt. China is a long way from having the type of debt Japan has and its overall debt situation is far better than the US since our debt is far more consumer and government debt with the overall percentage being around the same as China but our debt being far more externally financed due to the fact that the Chinese saving rate is almost three times our level. You will still being eating Peking crow three years from now.
Gross national savings of China 46%, Gross national savings in the US 17.6% ignore that fact at your peril and the country’s peril:
https://www.cia.gov/library/publications/the-world-factbook/geos/ch.html
China is running a $400 billion dollar trade surplus with the United States per year. To keep that going it has to recycle the money just like OPEC did. For years both did it by buying US treasuries. Now, no one likes having to do it, they both are buying US assets directly. More evidence is this decision by the Chinese sovereign fund, hard to tell by the article how much will be invested in real estate but this is far more money than has been coming to the US on safe haven demand by Chinese engaged in illegal activities in China:
http://news.xinhuanet.com/english/2017-05/20/c_136299467.htm
This is the result of a much stronger China both militarily and economically than it was just a few years ago:
http://www.aljazeera.com/news/2017/05/duterte-china-xi-threatened-war-sea-oil-170519205258874.html
“You call any number you don’t like fake…”
Sorry Dan, you are wrong. You yourself assured us that the Chinese lie about their GDP, to manipulate global sentiment and commodities prices. If Adan says it is fake GDP, then why does Adan have a hissy fit when it gets repeated? One day it fits the narrative and the next day not?
The parabolic rise of household debt in Bubble Central is something to watch. To go from 20% to over 100% of income in a decade is simply astounding. This is how credit bubbles set people up for destruction. When asset prices or salaries skip a beat, the debt remains.
House prices 14x income! That is not “savings”, it’s ether.
I wonder what creative ways people come up with to prove the 2 out of 5 yrs primary residence to avoid cap gains?
Probably never asked to prove it. Too much trouble for such small things when it is not even possible to ask for citizenship verification.
dont cha love they spend tens of millions revamping the high line only to let a builder put up 2 towers right next to it and block a great view.
https://therealdeal.com/2015/08/19/ceruzzi-chinese-partner-plan-1b-condo-project-at-520-fifth-ave/
http://newyorkyimby.com/2016/12/520-fifth-avenue-revealed-ceruzzis-new-71-story-midtown-tower.html
“‘The prices have increased so much and so quickly that the appraisers are having a hard time justifying the sale prices,’ Bartholomew said. ‘It’s not that the houses aren’t worth it,’ but it does create a problem for homebuyers.”
Problem 1 –> appraisers trying to “justify” the sales price. I’m all for letting someone pay what they want for an item, but not when it automatically “creates” equity in another home down the street due to stupid sales-comp appraisals. If I was a lender I’d steer clear of any dipsh!t attempting to “justify” a sales price.
Problem 2 –> Actually, Bartholomew, failure to appraise is the definition of houses not being “worth it” to the lender. Should be a sign to the buyer as well.
https://www.bloomberg.com/news/articles/2017-05-19/toronto-housing-market-slows-after-new-tax-home-capital-woes
Tallahassee median household income 2015: $44,295
http://www.deptofnumbers.com/income/florida/tallahassee/
Tallahassee median home value 2015: $152k
https://www.zillow.com/tallahassee-fl/home-values/
home/income = 3.4 in 2015. It works and is a LOT better than many areas. I’m thinking greater San Francisco.
Still, the 2016 median home is $167k. This is a 10% increase in less than two years. Not sustainable.
Regards,
Roidy
P.S. Tallahassee has two Universities - FSU & FAMU - and City/County/State govt. If you do not work in these areas, it is hard to understand the increases this quickly. BTW, University and Gov’t does not change much over that short a period of time. People might be pulling back from the coast on the assumption that sea-levels will rise.
At least there’s abundant natural protein sources in Tallahassee.
http://knuckledraggin.com/2017/05/wisco-goes-to-town/
Lunch!
be careful of the nachos
http://abc7news.com/health/5-confirmed-cases-of-botulism-from-norcal-gas-station-food/2010398/
This isn’t the nasty nacho cheese stuff (you gotta be crazy to eat that stuff from a gas station)… but, there was this one locally owned gas station + beer + wine shop in my old place in California, which also sold prepackaged saran-wrapped sandwiches. Every once in a while, I’d pick up a sandwich when buying beer. It’s a very good idea with prepackaged sandwiches, even from a regular grocery store, to always inspect the sandwich completely before eating — open it up and look inside at all the slices of everything to make sure there’s no moldy stuff. I used to think I was paranoid for checking, but no joke, one time from the gas-station shop, I checked later at home and it WAS all moldy inside, even though it was still prior to the expiration date. So my paranoia wasn’t unfounded.
Agricultural loan delinquencies are soaring. But not to worry, lenders. The Fed and middle class taxpayers have your backs.
http://wolfstreet.com/2017/05/19/commodities-bust-hits-farm-lenders-delinquencies-surge-225/#comment-85274
The comments are worth a read.
Whoa…Plugs just threw Screech under the bus.
http://www.cnn.com/2017/05/19/politics/joe-biden-hillary-clinton/
Nut job Joe.
Yes but the sanest member of the elite of the Democrats.
worth the time to explore
http://www.brooklynvegan.com/
‘The party can’t go on forever,’
It was never supposed to be a party you moron.
Un-f-ing-believable…
Americans Are Paying $38 to Collect $1 of Student Debt
Student loan defaults are a bonanza for the debt collection industry.
by Shahien Nasiripour
May 19, 2017, 6:39 AM PDT
The federal government has, in recent years, paid debt collectors close to $1 billion annually to help distressed borrowers climb out of default and scrounge up regular monthly payments. New government figures suggest much of that money may have been wasted.
Nearly half of defaulted student-loan borrowers who worked with debt collectors to return to good standing on their loans defaulted again within three years, according to an analysis by the Consumer Financial Protection Bureau. For their work, debt collectors receive up to $1,710 in payment from the U.S. Department of Education each time a borrower makes good on soured debt through a process known as rehabilitation. They keep those funds even if borrowers subsequently default again, contracts show. The department has earmarked more than $4.2 billion for payments to its debt collectors since the start of the 2013 fiscal year, federal spending data show.
…
“New government figures suggest much of that money may have been wasted.”
Wrong! The money wasn’t wasted; It went into the pockets of the debt collectors.
This may seem to be a waste of money to most people but that’s because most people aren’t debt collectors.
why is it acceptable for central banks to meddle in markets? Haven’t they cost people a lot of money? Is there a level playing field in the market?
This makes me sad, the San Juan Islands are on my list of places to retire:
http://www.msn.com/en-us/money/realestate/san-juan-islands-the-hottest-luxury-home-market-in-the-country/ar-BBBgSGf?li=BBnbfcN
“Former Amazon executive Rick Ayre, the owner of the $20 million house, says the price reflects the property’s distinctiveness.”
Rick got housed.
You’ve been housed
http://www.urbandictionary.com/define.php?term=hosed
This dude really got housed.
https://www.youtube.com/watch?v=20n-cD8ERgs
PAT BENATAR - Show Live In New Haven ( 1983 )
https://www.youtube.com/watch?v=n2sHt4cmB2Q