Too Much Money Gets In And You End Up In Tears
A report from the Toronto Star in Canada. “A stomach churning drop of up to 61 per cent in the number of home sales in some municipalities around Toronto could translate to a single-digit decline in regional prices by the end of the month, says a realtor who has crunched the numbers. John Pasalis of Realosophy, found that Toronto region ground-level home sales — detached, semi-detached and town houses — dropped 26 per cent overall between April 20 and May 20 — the period directly following the provincial Fair Housing plan announcement designed to cool real estate speculation in the area.”
“‘Of all the sellers out there, half of them aren’t motivated, the other half are desperate because usually they’ve already bought a house. They weren’t planning for this slowdown and it’s very difficult because they need to sell and they have no options,’ said Pasalis.”
From Mmegi Online on Botswana. “The state of the economy has also affected the residential market where demand for high-end properties has severally diminished while low to medium housing is in low supply. Gaborone has a diminishing supply of low-to-middle income housing, with most people on average incomes finding it difficult to locate affordable housing or finance their own self-build homes.”
“‘Many residential buy-to- let investors are struggling to find tenants, particularly as expatriate workers have found it difficult to renew work permits. Sales at the high end of the market are far less frequent and likely to stay muted for some time,’ states the Knight Frank Africa 2017 report.”
The Daily Trust in Nigeria. “An Estate Valuer, Joe Nelson, has explained that landlords are cutting down on house rents in Benue State due to adverse effect of recession on tenants. Tenants in the state who are majorly civil servants are being owed salaries between five and 10 months. Nelson told our correspondent in an interview that house rents were seriously on the decline. ‘House rents have reduced drastically because in any recess economy, the first victim is property,’ Nelson said.”
“He, however, expressed optimism that the value of property would rise after the recession. ‘But, right now, landlords are reducing rents for tenants. Some of them have taken away 30 percent off their rents to enable tenants pay and even at that only few occupants could renew their rents,’ he added.”
From The Island on Sri Lanka. “Sri Lanka’s high-end luxury apartment developments may already be in trouble, according to at least two developers responding the Central Bank’s concern over a property bubble that could potentially undermine the entire economy. The private Iconic Developments, an apartment builder, said it was aware of at least two projects that failed to take off resulting in cautious lending to the sector while another condo developer, Fairway Holdings, acknowledged a ‘bubble’ in the high-end segment.”
“Central Bank of Sri Lanka Governor Indrajith Coomaraswamy announced earlier this month that they were closely monitoring the real estate sector after fears that excessive credit may have fuelled a property bubble that could cause distress to all. He said a low interest regime about three to four years ago encouraged money into real estate which at the time appeared to give the highest rate of return on investment. ‘What has been happening is that this sector has given a much higher rate of return than anything else,’ he said. ‘When that happens, in whatever sector, usually too much money gets in and then you end up in tears.’”
From The Edge Malaysia. “The residential property market in Johor will remain under pressure with the completion of several high-rise residential projects in the next few years, according to industry observers. About 9,500 ‘five-star living’ condominiums in Country Garden Danga Bay will be ready by September, putting more pressure on the rental market in Johor Baru.”
“However, Bursa Malaysia-listed Johor-based developer BCB Bhd is unfazed by the oversupply in Johor as most of the projects launched by Chinese developers were started in the past few years and most of them had been taken up by investors between 2014 and 2015. ‘As most of the buyers are from China, I don’t think they will resell their properties. They will likely rent them out, so the concern should be the impact on the sub-sector; the pressure will be on the rents,’ BCB executive director Tan Vin Sern tells The Edge.”
From AFP on China. “Quick and easy access to credit has encouraged many young Chinese to go into the red to buy cars and apartments they could not otherwise afford. When Wu Qi and her husband traded in their Mazda 3 for a more expensive Mercedes Benz sedan, they applied for a 200,000 yuan (US$29,000) bank loan to help pay for it. They got the money within minutes. ‘It is very easy - the car company encourages you to borrow the money and enjoy the car,’ said Wu, 39, adding the couple is also paying off a one million yuan mortgage for a three-bedroom flat in Beijing.”
“Since Chinese leaders turned on the credit taps in late 2008 to shield the country from the global recession, household borrowing has soared and pushed China’s overall debt liabilities above 260 per cent of gross domestic product - compared with about 140 per cent before the crisis hit. But slowing growth in the world’s second-largest economy has raised concerns that years of risky lending could lead to a disaster worse than the US sub-prime collapse.”
“Mortgages make up the bulk of household debt. ‘Other countries have usually taken decades to complete such an increase,’ said Chen Long, an economist at Gavekal Dragonomics. ‘For bank lending to households to rise very rapidly usually means lending standards are loosened so credit is extended to both more and less creditworthy consumers.’”
From ABC News on Australia. “Sign a lease, and get a free TV or an iPad. How about a $500 gift voucher, two weeks’ free rent? Or, a free gym membership? These are just some of the out-of-the-box incentives agents are offering renters in south-east Queensland to get them to sign a lease. The rental vacancy rate within five kilometres of Brisbane’s CBD has reached a record 4.4 per cent, driven by a glut of apartments. It is pushing rents down, some slashed by an estimated 10 to 15 per cent.”
“Real estate agent Gabrielle Trickey has taken over managing a three-bedroom Queenslander at Paddington that has been empty for three months at $600 a week. It had been going for $650. Tenants only swooped after Ms Trickey advised the landlord to drop the rent to $580. She said the owners are competing with flashy units, where the rent is the same, but they get pools, spas and saunas. ‘A lot of tenants are actually offering a considerable amount less … up to $50,’ she said. ‘That is a real shock.’”
“Beyond property management’s Heather Jopson offered a $500 gift voucher to entice renters to a townhouse in Jubilee Terrace, Bardon. It was a hard hit, but dropping the rent from $580 a week to $495 a week also stung. Vacancy rates outside the 5km CBD radius sit at 3.7 per cent, which is considered healthy by the REIQ. Nevertheless, outer suburbs are not immune to the price drops. Another of Ms Jopson’s properties, this time in Inala has gone from $350 to $320, after a tenant broke the lease.”
“‘It is tough time at the moment but I don’t think it is dire straits, it is just the new norm,’ she said. ‘I don’t think we are going to crash and burn from here.’ In the meantime some prospective tenants continue to name their own price. Ms Jospon said most owners were very realistic about the market being soft at the moment. ‘There are some cheeky ones out there,’ laughs Ms Jopson.”
‘He said a low interest regime about three to four years ago encouraged money into real estate which at the time appeared to give the highest rate of return on investment. ‘What has been happening is that this sector has given a much higher rate of return than anything else’
Much like luxury apartments in the US. We should remember that QE was supposed to be an emergency response to the housing bubble. I wonder if history will acknowledge the fall out of perpetuating it.
It appears low interest rates are gonna be here for a long time. With central banks able to create as much money as they want they can simply buy as many bonds as it takes to keep yields low.
Govts have racked up so much debt that rising rates would bankrupt everyone.
20 trillion x .05% rates = a trillion in interest payments
But what if the FED is the buyer of the bonds? That means there is no interest and they actually get money back after the FED’s costs are taken out.
In reality the bonds on the FEDS balance sheet actually create revenue to treasury. So whenever you calculate interest payments you have to separate the FED’s bonds from everyone else’s. Right now that is about 2.5 trillion.
Isn’t there a big incentive for the FED to keep creating money and buying bonds?
The US has been insolvent for well over 10 years now. And we’re the best looking horse at the glue factory.
We still have the most fingers left in the leper colony. Cuz we’re exceptional - ‘Murica!
I guess you could look at it as being highly leveraged just like everyone else.
A lot of the money the FED created to buy the treasuries is still sitting in accounts as excess reserves. Some of it is surely in the stock market.
They have to deduct the interest they pay on the excess from the revenue they get on the bonds.
I just don’t see why their balance sheet cant continue to expand to the moon. It sure looks like its a heck of a better deal if the FED buys the treasuries.
Doing so tends to shrink demand which is what the market is doing.
The problem with creating money is that wealth cannot be created, so it is like a bleeding. It cannot go on beyond bleeder exhaustion.
Ben Jones: Much like luxury apartments in the US. We should remember that QE was supposed to be an emergency response to the housing bubble.
If a society gets to the point where it needs QE, the game was lost long before.
Financial sector consolidation, followed by government + central bank fanning the flames of speculative bubbles, is nothing but a license to loot the public treasury.
The amusing thing now is that debt is also not separated into meaningful subcategories. Like putting one’s house up as collateral for a loan in order to take a vacation or buy a new Mercedes is considered as socially beneficial as a business taking out debt to expand.
So now, the government and central bank got into the business the debt guarantor of first resort. TALF was an interesting foray outside QE.
The economics field has an orthodoxy (like all social sciences) as rigorous as the Catholic Church. When a destructive management paradigm takes hold, which is very lucrative for the orthodoxy, but bad for the rest of society, it will take something like a Martin Luther to break the spell.
Who can forget when we got to the point where congress made money by borrowing? Or the new normal of paying people to borrow money?
‘The fastest speed imaginable…light speed is too slow! It is extremely dangerous to go to ludicrous speed. It may result in you going to plaid. Also, going from ludicrous speed to a dead stop will result in you being launched across your ship, flying straight into a wall.’
‘Prepare ship…prepare ship…for LUDICROUS SPEED!!!!’
Spaceballs
http://www.urbandictionary.com/define.php?term=ludicrous%20speed
‘After a stint of frugality, Americans have returned to their borrowing ways. But are they getting into the kinds of debt trouble that lead to recessions?’
‘U.S. consumers now owe roughly $12.73 trillion to banks and other lenders for mortgages, car loans and credit card spending, according to the New York Federal Reserve. That exceeds even the total before the last financial crisis.’
‘Economists generally say people’s willingness to borrow is a good thing, because it shows they’re more confident about their financial futures. And the economy is in far better shape than a decade ago, when economists called the debt unsustainable and the housing market crashed. That’s not the concern now.’
‘Dallas resident Taylor Green, 29, is using debt strategically. Green, who works in finance, recently opened a credit card to help him and his fiancé pay for their wedding. He hopes to use the points he earns from that to then help cover the cost of a trip to Europe.’
“We both have good, stable jobs with decent security, so we are a more comfortable taking on the debt,” Green said. “But we want to pay this debt down as fast as we can once the wedding is over.”
‘Green says he also has significant student loan debt, which is in forbearance, that he plans to tackle aggressively once the wedding is over.’
‘Am I eligible for forbearance?
It depends on the type of forbearance. There are two types of forbearances:
General
Mandatory
General Forbearance
Your loan servicer decides whether or not to grant a request for a general forbearance. For this reason, a general forbearance is sometimes called a “discretionary forbearance.”
You can request a general forbearance if you are temporarily unable to make your scheduled monthly loan payments for the following reasons:
Financial difficulties
Medical expenses
Change in employment
Other reasons acceptable to your loan servicer
General forbearances are available for Direct Loans, FFEL Program loans, and Perkins Loans. For loans made under all three programs, general forbearances may be granted for no more than 12 months at a time. If you are still experiencing a hardship when your current forbearance expires, you may request another general forbearance. For Perkins Loans, there is a cumulative limit on general forbearance of three years. There is no fixed cumulative limit on general forbearance for Direct Loans and FFEL Program loans, but your loan servicer may set a limit on the maximum period of time you can receive a general forbearance.
For more information, review the General Forbearance Request.
Mandatory Forbearance
If you meet the eligibility requirements for a mandatory forbearance, your loan servicer is required to grant the forbearance.
You may be eligible for a mandatory forbearance if”
-you are serving in a medical or dental internship or residency program, and you meet specific requirements (Direct Loans and FFEL Program loans only; Mandatory Forbearance Request: Medical or Dental Internship/Residency, National Guard Duty, or Department of Defense Student Loan Repayment Program);
-the total amount you owe each month for all the student loans you received is 20 percent or more of your total monthly gross income, for up to three years (Direct Loans, FFEL Program loans, and Perkins Loans; Mandatory Forbearance Request: Student Loan Debt Burden);
-you are serving in an AmeriCorps position for which you received a national service award (Direct Loans and FFEL Program loans only; request an AmeriCorps forbearance);
-you are performing teaching service that would qualify you for teacher loan forgiveness (Direct Loans and FFEL Program loans only; Teacher Loan Forgiveness Forbearance Request);
-you qualify for partial repayment of your loans under the U.S. Department of Defense Student Loan Repayment Program (Direct Loans and FFEL Program loans only; Mandatory Forbearance Request: Medical or Dental Internship/Residency, National Guard Duty, or Department of Defense Student Loan Repayment Program); or
-you are a member of the National Guard and have been activated by a governor, but you are not eligible for a military deferment (Direct Loans and FFEL Program loans only; Mandatory Forbearance Request: Medical or Dental Internship/Residency, National Guard Duty, or Department of Defense Student Loan Repayment Program).
Mandatory forbearances may be granted for no more than 12 months at a time. If you continue to meet the eligibility requirements for the forbearance when your current forbearance period expires, you may request another mandatory forbearance.’
https://studentaid.ed.gov/sa/repay-loans/deferment-forbearance#forbearance-eligibility
OMG!, the jokes just pour out, not-stop, from this blog, so many jokes that they might as well be numbered:
1. “After a stint of frugality…” bahahahahah “Americans have returned to their borrowing ways.”
2. “But are they getting into the kinds of debt trouble that lead to recessions?’” Bahahahahaha … one really has to ask this question?
3. “U.S. consumers now owe roughly $12.73 trillion to banks and other lenders for mortgages, car loans and credit card spending, according to the New York Federal Reserve. That exceeds even the total before the last financial crisis.”
These pukes owe $12.73 trillion.
4. “Economists generally say people’s willingness to borrow is a good thing” … Bahahahahaha. So do I! So do I think it is a good thing. “… Because it shows they’re more confident about their financial futures.” No, it’s because these people are willing to send to me huge chunks of their paychecks each and every month.”
5.”And the economy is in far better shape than a decade ago, when economists called the debt unsustainable and the housing market crashed. That’s not the concern now.”
The joke part of this statement is the “That’s not the concern” part.
6. “‘Dallas resident Taylor Green, 29, is using debt strategically.”
Strategically, he using his debt strategically. So, what does that mean? ”
Green, who works in finance…”
(Green works in finance thus he should know better)
“… recently opened a credit card to help him and his fiancé pay for their wedding. He hopes to use the points he earns from that to then help cover the cost of a trip to Europe.’”
Pure genius, no? Let’s move on a bit …
“We both have good, stable jobs with decent security, so we are a more comfortable taking on the debt,” Green said. “But we want to pay this debt down as fast as we can once the wedding is over.”
Okay so far, moving on …
7. “Green says he also has significant student loan debt, which is in forbearance …”,
WHICH IS IN FOREBEARANCE!
“… that he plans to tackle aggressively once the wedding is over.’
Bahahahahahaha … this is why I love this blog.
“The average U.S. household that has credit card debt owes $16,000. That number is $27,000 for auto loans, $48,000 for student loans, and $169,000 for mortgages.”
That’s a lot of interest the debt donkeys are coughing up, even at rock-bottom rates!
Is that for every household? Sometimes when they calculate average CC debt, they only look at households who keep a balance. 0-debt deadbeats aren’t figured in. This $16K is very high even for households with balances. Mortgage and auto sounds ok, but student loan is ridiculous.
“Is that for every household?”
Apparently not:
I’m not sure how households like ours, which use our credit card for the free float, courtesy of Megabank, Inc, and pay off our balance every month, figure into the calculation.
“I’m not sure how households like ours, which use our credit card for the free float, courtesy of Megabank, Inc, and pay off our balance every month, figure into the calculation.”
It is an excellent question.
The NY Fed report shows a pretty steady amount of CC debt outstanding over time (it does go up and down over time, but pretty gradually)…much more volatile is the theoretical maximum CC debt allowed.
Right now, we seem to be increasing CC debt overall fairly gradually, but the CC max is rising faster.
In other words, CC companies are giving consumers more and more rope…will consumers hang themselves with it?
“In other words, CC companies are giving consumers more and more rope…will consumers hang themselves with it?”
The credit card companies received a bail-out in the last financial crisis, and they probably will see another.
“If a society gets to the point where it needs QE, the game was lost long before.”
There was a class war. It’s over. Guess who won?
It’s never over.
Human history is rife with examples of beheadings, coups, upheavals, uprisings.
They will happen again. Possibly in the United States.
Checks and balances don’t have to be determined and driven by rule of law. We just hope they will be.
My dad was a Lutheran minister, which may help explain my inability and unwillingness to accept the established orthodoxy.
Of course anyone with half a brain can sniff out a club of self-righteous, self-interested academics infusing a heaping helping of propaganda into their monetary policy research findings in order to keep the grant money from Uncle Fed flowing.
“I wonder if history will acknowledge the fall out of perpetuating it.”
I’m guessing that the Fed, with their cadre of top academic economists in leadership positions, will do everything within their power to whitewash their complicity in extending and exacerbating the Housing Bubble.
Hopefully there remains enough freedom in academia to enable some independent scholars to get out the true story.
Academia hasn’t been interested in getting out the true story for several decades.
Why would they be now? They have hundreds of billions in their tills. There ain’t no way they are letting go of that kind of money and power.
“freedom in academia”
Bahahahahahahahaha … such a statement.
We are enjoying a measure of it right here.
What we are enjoying right here is freedom FROM academia.
“A stomach churning drop of up to 61 per cent in the number of home sales in some municipalities around Toronto could translate to a single-digit decline in regional prices by the end of the month, says a realtor who has crunched the numbers.
Funny, my renter’s stomach isn’t churning one bit at the prospect of these insanely overpriced housing markets crashing down to earth, or of seeing these FBs who bought into the bubble decamping for their new quarters in tiny apartments or cardboard boxes while I get ready to buy their now-properly valued shacks at the foreclosure auction.
‘When Wu Qi and her husband traded in their Mazda 3 for a more expensive Mercedes Benz sedan, they applied for a 200,000 yuan (US$29,000) bank loan to help pay for it. They got the money within minutes. ‘It is very easy - the car company encourages you to borrow the money and enjoy the car,’ said Wu.’
‘China is getting serious about weaning its economy off torrid credit growth, and data and financial markets already are showing early withdrawal symptoms. As regulators step up reforms, GDP growth could plunge 50% by 2020.’
‘Credit has been growing twice as fast as nominal GDP for years. The diminishing returns suggest that many loans are going to unprofitable ventures. They also signal that sustainable economic growth is far less than current growth rates. Such a rapid deceleration from the world’s No. 2 economy would sap demand and prices for raw materials such as copper, exacerbate overcapacity issues and act as a drag on an already-sluggish worldwide economy.’
‘China faces a basic math problem, which is evident from the diminishing returns of credit growth. “The change in the flow of new credit as a percentage of GDP appears to be providing less bang to output for each additional yuan of credit, underscoring questions over how much lending is going to unproductive ‘zombie’ companies,” wrote New York Federal Reserve economists Jeff Dawson, Alex Etra and Aaron Rosenblum in February.’
‘The Fed economists note that China’s mortgage loans increased by 35% in 2016. They also highlight a sixfold increase to $4 trillion in wealth management products from 2011 to 2016. Smaller banks have shifted from relying on traditional deposits to promoting investments that provide guaranteed higher returns.’
“In 2016 alone, credit outstanding increased by more than $3 trillion, with the pace of growth still roughly twice that of nominal GDP,” they wrote.’
‘When Wu Qi and her husband traded in their Mazda 3 for a more expensive Mercedes Benz sedan, they applied for a 200,000 yuan (US$29,000) bank loan to help pay for it. They got the money within minutes. ‘It is very easy - the car company encourages you to borrow the money and enjoy the car,’ said Wu.’
Case in point as to why a piddly little Mazda 3 costs over $30,000.
The Japonism
FINANCIAL TIMES
The Big Read
China
Is China’s economy turning Japanese?
Three decades after Tokyo’s property bubble burst causing severe damage there are fears that Beijing faces a similar fate
yesterday
by: Leo Lewis in Tokyo, Tom Mitchell and Yuan Yang in Beijing
There are few things studied as closely by the Chinese Communist party as how to avoid the fate of its Soviet counterpart. In an internal meeting after he assumed power in 2012, President Xi Jinping said no one in the Soviet Union had been “man enough” to stand up to Mikhail Gorbachev and glasnost.
But for Mr Xi another historical event from the same era may warrant more immediate attention. It is just over 30 years since Japan began inflating a property and stock market bubble whose implosion ravaged public confidence, cowed corporations and scarred an economy for decades. China’s priority today is to avoid that fate.
It is not a new concern for Beijing. In 2010, as China’s overall indebtedness was approaching 200 per cent of gross domestic product, Mr Xi, then the country’s vice-president, asked scholars at the Central Party School to research the subject, according to two Chinese academics familiar with his request. A subsequent paper outlined some of the lessons of the Japanese bubble, including the need for Beijing to raise awareness of financial risks, safeguard “economic sovereignty” and not give in to pressure to change its currency policy.
Seven years on, China’s total debt is 250 per cent of GDP and climbing, officials are trying to rein in sky-high real estate prices and the government is still grappling with the aftermath of a stock market bubble that burst in 2015. Mr Xi last month warned the country’s leaders of the need to “safeguard financial security”.
…
“The average cost of a 100 sq metre apartment in Beijing is Rmb5m — or more than 50 times the average annual income of local residents.”
This can only end badly, in a collapse of epic proportions.
The interesting thing is that the little boy in the story of The Emperor’s New Clothes has, at this point, noted that the emperor is parading around naked, yet the implications of the emperor’s nakedness have yet to register with clueless populous.
‘Of all the sellers out there, half of them aren’t motivated, the other half are desperate because usually they’ve already bought a house. They weren’t planning for this slowdown and it’s very difficult because they need to sell and they have no options,’ said Pasalis.’
One or two months ago, 15,000 people paid 150 Canadian pesos to listen to a religious type revival telling them to go all in on Toronto shacks and air boxes.
15,000 people paid 150 Canadian pesos to listen to a religious type revival telling them to go all in on Toronto shacks and air boxes ??
When the barkers start doing the $99. seminars you know its late in the game…
Oh how swiftly the tide turned. This is exactly what kept people like me out of the market. Buyers remorse will be remorseless!
Vancouver also saw a classic parabolic move up and down. It doesn’t always happen, but often enough to note. Same thing is setting up in Sydney. Also interesting is oversupply didn’t trigger it: a pullback in demand did.
“…a pullback in demand did.”
Attendant with a pullback in demand is a sudden end to the price appreciation which lured in speculators. Once speculators realize no further historically anomalous rates of return are forthcoming, their reason for being on the demand side of the market turns into a reason for dumping their holdings as quickly as possible on the supply side.
canadian peso
BAhhhhhhhhhhhhhhhhhhhhhhhhhhhhh
that’s looney,eh
I hope Toronto has free income soon
They weren’t planning for this slowdown and it’s very difficult because they need to sell and they have no options,’ said Pasalis.”
They always have options. It’s just that all the options are bad.
I make no apologies for my gleeful schadenfreude as I watch these greedheads and FB Greater Fools swallow their bitter pills.
“They always have options.”
My favorite is the fourth floor option.
“Quick and easy access to credit has encouraged many young Chinese to go into the red to buy cars and apartments they could not otherwise afford.
I wonder if Confucian virtues are going to be making a comeback after this credit binge results in China’s financial house of cards crashing down.
I also wonder when we’ll see fanatical new Red Guards parading the disgraced “capitalist roaders” who caused the coming crash in the public squares to be pilloried or worse.
Revenge of the Ant Tribes in 3-2-1….
“Since Chinese leaders turned on the credit taps in late 2008 to shield the country from the global recession, household borrowing has soared and pushed China’s overall debt liabilities above 260 per cent of gross domestic product - compared with about 140 per cent before the crisis hit.
Basic arithmetic is going to turn out to be the worst enemy of the Keynesian fraudsters running our central banks. These debt levels and the speculative greed and recklessness enabled by the Fed and its overseas counterparts are by any sane measure unsustainable and dangerous. The FBs who so heedless take on such irresponsible and imprudent levels of debt will have no qualms about walking away from their “investments” when it all goes pear-shaped, and this time around, the magnitude of the crisis will be too great to be solved with more bailouts and money-printing.
‘the magnitude of the crisis will be too great to be solved with more bailouts and money-printing’
That remains to be seen. But in the ongoing “will it be worse than 2008″ discussion, it should be noted there wasn’t a serious luxury bubble in Sri Lanka. And you didn’t have dozens of markets expecting broke Chinese to save their cookies:
‘Bursa Malaysia-listed Johor-based developer BCB Bhd is unfazed by the oversupply in Johor as most of the projects launched by Chinese developers were started in the past few years and most of them had been taken up by investors between 2014 and 2015. ‘As most of the buyers are from China, I don’t think they will resell their properties. They will likely rent them out, so the concern should be the impact on the sub-sector; the pressure will be on the rents’
I don’t think they will resell either. They’ll likely walk away, as they are already doing in London, Brisbane and Melbourne.
I was doing some reading about “net charge-offs”, this quote really irked me:
“Naturally if you have the ability to pay, then you should honor your obligations. But if you’re having financial difficulties and you just don’t have the money to pay, then you can’t pay. It’s that simple. If your credit report gets dinged in the process, so be it. Life will go on. It’s not the end of the world.”
Basically, get stuff you can’t afford on a promise, break promise, keep stuff.
Yep. Pretty disgusting.
Had a family member strategically default on a luxury rental house in 2009. Lost >$350k down payment, which currently looks like a bad move given what sales prices have done since.
I’m watching Home Capital’s stock as a proxy for Canada’s housing bubble. Methinks the “Oh dear!” posts are going to be coming fast and furious going forward.
https://www.bloomberg.com/quote/HCG:CN
1 Yr Return
-73.33%
BTFD!
I can remember when some Canadians said the country didn’t have subprime loans. Then someone pointed out they did. I posted an article recently on some little burg outside Toronto that had gone up 50% in the last year, only to fall 100k since the peak months ago. The UHS admitted most of the buyers were Asian.
seems like they r just printing money like crazy over there and buying up overpriced assets overseas. They have learned well.
If your downpayment is less than 10%, you are subprime.
Some buyers are definitely Asian, richer Chinese and Upper middle class Indian.
However, regular folks are being fooled. I have a few cousins in their late 20, early 30’s who got down payment Ss from their parents. This is not insignificant at $60K+ and in one case up to $150K.
These are the folks that are going to get screwed in a 20%+ drop. Their parents want them to start having kids and all the rest …
“seems like they r just printing money like crazy over there and buying up overpriced assets overseas. They have learned well.”
We did the same thing in Briton during the buildup to WWII. American GIs had the money, so they lived large and enjoyed their women.
“The markets” do not appear to have fully grasped the implications of Home Capital’s mortgage portfolio being valued at 50% of face value for collateral to secure the HOOPP $2 billion lifeline (of which HCG has already burned through $1.4 billion).
Let that one sink in, friends and neighbors. Something approximating true price discovery just asserted itself. That shack some FB borrowed $1M to buy is now demonstrably worth just half that for collateral purposes. And that’s in the current peak-bubble pricing environment.
Oh dear….
If I was a realtor, I’d be buying a stripper pole and brushing up on my post-bubble employment qualifications.
Maybe it will bounce back up into the stratosphere, as Bitcoin recently did. With monetary policy perpetually trapped near the zero bound, asset prices have little to anchor them to underlying fundamentals.
They know.
My sister is a senior professional with the royal bank of canada - they are cutting back on all sorts of expenses (especially getting rid of high priced folks)
A friend is branch manager which has a lot of commercial customers (but in the expensive suburbs - think Oakville for folks that know the greater Toronto area). They are apparently reducing business line of credits … he had a 42 year old man, who literally in tears and hyperventilating because his business expansion required continuous adding to his LOC for his re-model business.
“In 2016 alone, credit outstanding increased by more than $3 trillion, with the pace of growth still roughly twice that of nominal GDP,” they wrote.’
So nominal GDP still increased 1.5 trillion? That is almost twice as much as the US.
China is getting serious about weaning its economy off torrid credit growth, and data and financial markets already are showing early withdrawal symptoms. As regulators step up reforms, GDP growth could plunge 50% by 2020.’
So worse case scenario is over 3% growth? We should be so lucky.
Yeah, borrow 2 bucks to get one buck in useless assets. This is why you have the breath of crow.
A balanced article and the reasons the world treated the Moody’s downgrade with a collective yawn:
https://www.nytimes.com/2017/05/23/business/moodys-downgrades-china-economy-debt.html?_r=0
leverage the GDP!
Its like leveraging your paycheck.
If it doesnt work out go bankrupt and start over. That is the system we live in.
How many times have we read that China’s central planners are “serious” about cracking down on out-of-control speculation, capital flight, money laundering, etc.? And yet all these things continue more or less unabated.
And yet the systemic imbalances and dangers to the financial system keep ballooning to even more gargantuan proportions.
That crow diet is going to get mighty monotonous, Danny Boy. Even with plenty of soy sauce.
http://www.scmp.com/business/markets/article/2095530/sell-chinas-pledged-stocks-may-be-double-hong-kongs-gdp
“worse case scenario is over 3% growth”
Growth in GDP? It would be hard to tell since the numbers are “man made”, and the Chinese lie about this specifically to manipulate the minds of the likes of Dan. Besides, if growth is bought with shoddy debt, is it an asset or a liability? The debt needs to be repaid or defaulted upon. In either case the false “growth” vanishes with interest, down the road. Debt based growth is a cancerous growth.
Flipping houses adds to GDP and yet it adds no houses. I wonder how this works on the way down after the bubble. Probably adds to GDP as well. Falling prices of commodity stockpiles does not subtract from GDP, though it is a vanishing of wealth.
“In 2016 alone, credit outstanding increased by more than $3 trillion, with the pace of growth still roughly twice that of nominal GDP,” they wrote.’
This does not mean nominal GDP increased $1.5 trillion. Rate (pace) of growth != nominal growth. That $3 trillion could represent a 10% YOY rate of growth, indicating GDP grew at 5% YOY. If nominal GDP for year prior was $2 trillion, 5% growth is obviously nowhere near $1.5 trillion.
(numbers used are for illustrative purposes; I have no reason to look up lies about China’s GDP, nominal or otherwise)
I would not buy or rent from someone named Ms. Trickey.
“Hi, my name is Mr. Fraudé, wanna buy a house?”
And who pays for these green handshakes that are complimentary to every sale?
The sucker does.
Bubble stocks are starting to burst. Soon to be followed by bubble markets.
http://www.zerohedge.com/news/2017-05-29/turkey-bans-short-selling-online-trading-nations-best-performing-stock
“Given groupthink and the determination of policy makers to do ‘whatever it takes’ to prevent the next market ‘crash,’ we think that the low-volatility levitation magic act of stocks and bonds will exist until the disenchanting moment when it does not. And then all hell will break loose (don’t ask us what hell looks like …), a lamentable scenario that will nevertheless present opportunities that are likely to be both extraordinary and ephemeral. The only way to take advantage of those opportunities is to have ready access to capital.”
“You can shear a sheep many times but skin it only once.”
I suspect the world over, the PTB are starting to get chunks of flesh.
How many times can you roast a sheep on a spit?
http://www.msn.com/en-us/money/realestate/heres-how-the-trump-tax-plan-could-affect-your-home-value/ar-BBBCS2B?li=BBnbfcN
Do not listen to what the big boys say but watch what they do. This is a huge bullish bet on the price of oil no matter how they try to spin it:
http://oilprice.com/Energy/Energy-General/Is-Goldman-Sachs-Playing-With-Fire-In-Venezuela.html
Repear, rinse, repeat again. When the Fed sells their mbs and share purchases - what will the discount be?
The Goldmanites seem pretty bullish on oil!
Energy
Goldman Sachs lowers oil price projections on potential shale surge
Silvia Amaro | @Silvia_Amaro
2 Hours Ago
CNBC.com
Deepwater drilling is back to challenge shale, says Wood Mackenzie.
Goldman Sachs has downgraded its estimations for oil prices for this year, citing a potential rise in shale gas production, new projects and OPEC restrictions.
The investment bank now points to an average of $55.39 per barrel for Brent from its previous estimate of $56.76 a barrel. It also lowered its expectations for WTI to $52.92 per barrel from $54.80.
“We believe we are in a lower for longer environment until there is greater evidence shale deliverability is surprising to the downside or OPEC runs out of spare capacity,” a team of analysts at the bank said in a research note on Monday.
…
Doesn’t look like oil is heading back up to $60/bbl any time soon. How many years has it been since we were assured that oil would reach $60 “by this December”?
I do not think you could have come up with a better example of why you do not listen to the experts but you watch what you do. If oil does not recover sharply and quickly GS will lose that entire investment when the country implodes. The free advice it is giving to the world is contrary to its investment strategy. I will go with the way it is investing. I think you would have learned during the housing collapsed when evidence showed people were dumping investments as quickly as possible when at the same time they were telling the public to by them.
Speaking of doing as the big boys do and not say:
http://www.cnbc.com/2017/05/27/see-inside-warren-buffetts-laguna-beach-house-on-sale-for-11-million.html
Now I know this amount of money is pocket change to someone like Warren but everyone has an ego and wants to buy or sell something at the perfect time. So even though they are not making any more beachfront property, I think Warren sees a top.
Are crow omelettes considered a delicacy around Albuquerque?
Oil extends losses as traders still disappointed by less-aggressive OPEC cut
Published: May 30, 2017 11:00 a.m. ET
Analyst: ‘Summer typically translates to seasonal production peaks’
Getty Images
An oil company shown operating in the Gulf of Mexico.
By Myra P. Saefong
Markets/commodities reporter
Victor Reklaitis
Markets writer
Oil prices fell Tuesday, extending the recent drop that came as OPEC stopped short of taking more aggressive steps to cut production.
July West Texas Intermediate crude (CLN7, -0.80%) declined by 47 cents, or 0.9%, to $49.33 a barrel on the New York Mercantile Exchange, while July Brent crude (LCON7, -1.11%) gave up 77 cents, or 1.5%, to $51.52 a barrel on the ICE Futures exchange in London.
The crude complex “continues to look relatively weak” after the Organization of the Petroleum Exporting Countries “failed to provide any significant support during last week’s meeting,” said Robbie Fraser, commodity analyst at Schneider Electric.
…
“A stomach churning drop of up to 61 per cent in the number of home sales in some municipalities around Toronto could translate to a single-digit decline in regional prices by the end of the month, says a realtor who has crunched the numbers.”
The solution to the sudden dearth of sales is mindnumbingly simple:
MARK DOWN THOSE ASKING PRICES TO MARKET VALUE AND EAT YOUR LOSSES.
Not true.
Everybody wants to live in Tronto. Everybody wants to live in Cities. Everybody wants to live where yobs are. Millennials love that walk score.
“Real estate agent Gabrielle Trickey has taken over managing a three-bedroom Queenslander at Paddington that has been empty for three months at $600 a week. It had been going for $650. Tenants only swooped after Ms Trickey advised the landlord to drop the rent to $580. She said the owners are competing with flashy units, where the rent is the same, but they get pools, spas and saunas. ‘A lot of tenants are actually offering a considerable amount less … up to $50,’ she said. ‘That is a real shock.’”
That is a real SHOCK?!
G.D. it. I am really through with all these stories of incredulity. Two-hundred dollars off a $2600 (!!) monthly nut is a news item? That’s chicken feed. You mean there are “investors” out there who can’t handle an 8% drop in monthly rents? You don’t say.
Let me know when those said apartments go for $1200 monthly. Then we have a story, Ms. Trickey. I want to see you go out of business and for 80%+ of all real estate “investors” to go belly up, never to return. To lose their shirts and their access to prescription drugs.
Only an idiot would rent an apartment for $2400 monthly. Only an idiot would “invest” in a property expecting to get $2400 monthly in perpetuity. There are tens of thousands of idiots out there, apparently.
A bunch of these Australians are running negative cash flow. Many are up to their eye-balls in debt, like the Canadians when polled said they couldn’t handle minor expense items. And there are many thousands of units on the way in all of these markets. Wait til the people who buy the defaults really reset rents.
abfsolutely true
Wait til the people who buy the defaults really reset rents ??
That’s the money quote right there.
The bigger story is how much (or rather how little) Aussies make. By and large salaries are much lower than in the US. 2400/mo for a place in Brisbane is insane. I’m sure there are some elevated salaries right now - all a function of the RE bubble, nothing organic is going on to justify it besides chinese money pouring in for the last decade or so.
Just started a dead tree subscription to the Las Vegas Review Journal. It was almost free and really for my husband - an analog man in a digital age.
I don’t read any RE news any more. Just this site. However, I thumbed through it a bit before I chucked it out:
Investors are doubling down on rental properties in US
Like Las Vegas, Miami battles onslaught of squatters
If nothing else - could be a great reality TV show…
“Miami-Dade police encountered a house where squatters were growing marijuana on the first floor and operating a strip club on the second.At another, they arrested a high priest of Santeria, an Afro-Caribbean religion, who had draped a chain link across the threshold of a door to block evil spirits from entering.”
Financial Time
US banks
US banks pull back from $1.2tn car loans market
Overstretched consumers raise fears of bubble in echo of subprime mortgage crisis
2 hours ago
…
oh to be a car shopper w time to spare………
The subprime auto loan collapse seems to be playing into a useful timing for turning over our small fleet of Japanese automobiles which have already logged over 100k miles.
A slight bump as first college grads then hs. July should be prime.
Awesome quote!
Are you regulars on here familiar with the bigger pocket website which caters to REIers? It boggles my mind what you read on there. It’s as though the housing crash never happened.
Read one today where an investor who started in 2008 and ‘acquired’ 18 properties by 2013 and then decided to ramp it up. Now up to 63 rentals claiming a net worth of 2.5 mil. Not once have I read anywhere that perhaps a little caution is warranted. Amazing.
You think the lenders will find fraud when they foreclose?
“Life isn’t meant
to be lived in a cubicle”
The bank mosey at Home Capital has slowed but not stopped. For now.
http://www.homecapital.com/press_releases/2017/HCG%20Liquidity%20Update%20May%2029%202017.pdf
Did u folks see a lot of folks out consuming mindlessly today?
Every day. Nighttime too.
The Zestimate for this house is $524,334, which has increased by $3,181 in the last 30 days. The Rent Zestimate for this home is $2,550/mo, which has decreased by $42/mo in the last 30 days.
FACTS
How could both be true ?
“What is Truth?” - John 18:38
I’ll make a fortune flipping houses.- Tony, Tim, Dave and Dan….. And John, 2009-2017
Keep in mind that it was Pontius Pilate who said that.
Amazing: Here’s a money manager who actually cares about his clients’ money …
http://www.zerohedge.com/news/2017-05-29/market-crazy-hedge-fund-returns-hundreds-millions-clients-citing-imminent-calamity
What a jerk!
This puke sounds as if he reads this blog …
“‘Let me tell you I’ve never been more certain of anything in my life,’ Parker said. ‘I am absolutely certain we are in a bubble in this property market. Mortgage fraud is endemic, it’s systemic, it’s just terrible what’s going on. When you’ve got 30-year-olds, who have never seen a property downturn before, borrowing up to 80 per cent to buy three and four apartments, it’s a bubble.’”
We’ve reached the interesting point where everyone, from central banking cartel staff members on down to the unwashed masses, realizes there is a bubble, but not everyone is aware just yet that all bubbles eventually collapse.
Another tech bubble “in the making”? I think we’re well past that point, CBS Real Journalists.
http://www.cbsnews.com/news/another-tech-stock-bubble-in-the-making-yes-facebook-apple-amazon-netflix-google-alphabet/
What does it mean when Fed spokesmen talk down the stock market? Are they perhaps trying to let some air out of the bubble before getting serious about rate hikes, in order to avoid getting blamed when risk assets revalue to reflect higher rates?
Fed’s Kaplan: ‘Some correction’ for U.S. stocks could be healthy, but high levels not worrisome yet
Published: May 30, 2017 7:39 a.m. ET
By Rachel Koning Beals
News editor
Lofty levels in the U.S. stock market aren’t yet flashing worrisome signals of an imbalance that risks derailing the U.S. economy and that’s helped by actual evidence of earnings improvement, Dallas Federal Reserve President Robert Kaplan said Tuesday. Still, “some correction” in the stock market could be healthy for sustaining the economic expansion for longer, he said in an interview on CNBC.
…
Home-price growth accelerates to nearly three-year high in March - The smallest annual increase of any of the 20 cities is still about double the rate of inflation
http://www.marketwatch.com/story/home-price-growth-accelerates-to-nearly-three-year-high-in-march-2017-05-30