Thinking Of It As A Gold Mine
A report from the St Catharines Standard in Canada. “After more than a year of soaring real estate values in Niagara, ‘the feeding frenzy is slowing down,’ says St. Catharines realtor Randy Mulder. Although the region’s real estate market has yet to be hit as hard as the GTA, he said the impact of measures introduced by the provincial government to rein-in escalating house prices will eventually trickle down to Niagara. Brock University business accounting professor Feyez Elayan said home values in Niagara are catching up after decades of being undervalued, which may help protect them from fluctuations in the market.”
“‘People are starting to figure out the value of the Niagara region,’ he said, referring to amenities and events that make the region a desirable place to live. ‘We are sitting on a gold mine. The prices will come down and settle, let me put it that way. But it’s not going to go back to the previous level.’”
From News.com.au. “The picturesque city of Vancouver took inspiration from Australia by clamping down on foreign buyers purchasing existing homes in the seaside city. But unlike Australia, Canada has no restriction on foreigners buying real estate — and in a country where property taxes are very low, that was driving prices skywards. So, in August last year, Vancouver’s provincial authority, British Columbia, the equivalent of our state governments, moved. From January 2016 to January 2017 house prices in Vancouver fell 18.9 per cent.”
“While foreign investment is often demonised as contributing to Australia’s escalating house prices, the University of Sydney’s senior lecturer in urbanism, Dallas Rogers, said it has been far easier for foreigners to invest in Canada than it has in Australia, hence why the new measures in Vancouver have had such an impact. On the opposite side of the country, Toronto is now also looking at introducing similar measures.”
“In Australia, he said, the major problem is the evolution of property as a means to make money, rather than as simply a place to live. ‘It comes down to the way we think about homes and the way we are still thinking about homes,’ he said. ‘From about World War II we’ve had this changing view of a house as a place to live and to raise a family, to, increasingly, thinking of it as a source of capital.’”
The Vancouver Sun. “Massive and risky home loans are increasing in number across Metro Vancouver, while mortgage fraud cases are also on the rise, connected to the growth of so-called ’shadow banking,’ a Postmedia investigation shows. The trend of increasingly risky loans underlying Metro Vancouver’s high home prices is illustrated by Bank of Canada figures that show the rapid growth since 2014 of large mortgages made to people with relatively low incomes.”
“There is also evidence of growing links between shadow banks and traditional banks, according to the Bank of Canada’s June 2017 report, as people borrow large amounts from shadow lenders to use as down payments in order to qualify for lower-interest loans from federally regulated banks. Shadow lenders identified by Postmedia through a review of B.C. civil court filings, lending documents and regulatory filings, include mortgage investment corporations, hedge funds, and private lenders such as realtors, crowdfunding companies, real estate lawyers and mortgage brokers.”
“For Hilliard MacBeth, an Alberta-based author and wealth manager, the Bank of Canada loan risk statistics and the related growth of shadow banking in Vancouver and Toronto herald a crisis. ‘These properties in Vancouver are so expensive that you need people either laundering money or loan fraud or people borrowing such large amounts of money that should never be allowed, in order to keep it going,’ MacBeth said. ‘If everyone is reporting their incomes honestly in Vancouver, there is no way that housing prices can stay where they are.’”
“Postmedia’s review of Ficom enforcement hearings shows an increase in the number of alleged mortgage fraud cases in B.C., mostly linked to private mortgage lenders and mortgage brokers. ‘We have experienced an increase in mortgage broker complaints in the last few years,’ Chris Carter, acting registrar of mortgage brokers, confirmed. ‘About a third of our investigations relate to application fraud.’”
“As a result of the flood of money pouring from Mainland China into Vancouver real estate in recent years, some financial experts say they believe Canadian banks are directly exposed to shadow lending in China and the risks of so-called ‘ghost collateral’ — meaning collateral that may not exist or is used continuously to secure loans for multiple borrowers. Postmedia confirmed that Canadian banks are allowed by the federal regulator, the Office of the Superintendent of Financial Institutions, to accept collateral from China to secure real estate mortgages in B.C.”
“One U.S. hedge fund manager, who did not want to be identified, said: ‘We all know that the ghost collateral is a huge deal, and we all know that the shadow banking and other Chinese influence in Vancouver is profound. The issue it that the ghost collateral ends up re-hypothecated and laundered. So by the time it shows up in Vancouver, it will likely just look like a rich Chinese cash buyer with a suitcase of money.’”
From Macleans. “A year after getting married, Alex Taylor and Rachel Tuttle decided it was time to buy a home and start a family. But soon after starting the hunt in 2015, their hopes were dashed. Detached homes were averaging $1.2 million, and even though Taylor and Tuttle qualified for a mortgage, they would have faced steep monthly payments of $4,000. They adjusted their expectations and set their sights on a townhouse on the outskirts of the city. Still, the cost was too high. ‘It felt very risky to put that much of your savings into one investment,”’ says Tuttle.”
“Taylor is tired of talking about the issue. ‘I know it’s mean to say and I know it would hurt those of our friends who completely over-extended themselves,’ he says, ‘but honestly, we’re praying for a crash.’”
“He’s not the only one. In May, sales dropped 20 per cent compared to the year before in the Greater Toronto Area while active listings surged 42.9 per cent from a record low. Those are the kinds of numbers that cause indebted homeowners to sweat, but serve as a balm for those on the sidelines in Toronto: like Taylor in B.C., many now openly cheer for the market to collapse.”
“The Financial Consumer Agency of Canada found the number of households with a HELOC and a mortgage against their home has increased nearly 40 per cent since 2011, prompting commissioner Lucie Tedesco to caution this month the trend ‘may lead Canadians to use their homes as ATMs.’ Last year, Canadians withdrew $12.8 billion in home equity to fund renovations, according to Scotiabank Economics, and another $3.6 billion for ‘other’ purposes.”
“‘A lot of people have these totally unsustainable lifestyles they’re only able to pull off because, by doing nothing but sit on their ass, their net worth goes up by a few grand every month,’ says Toronto resident Phillip Mendonça-Vieira. ‘I don’t think there’s anyone who doesn’t own property who’s not secretly, like, ‘F–k you, guys. This is unsustainable.’”
From The Tyee. “You’ve heard it a million times. The reason so few of us can afford Vancouver is because there aren’t enough new homes being built. This is the version of reality that real estate industry leaders and their political allies want us to believe. But an investigation of the industry by The Tyee has revealed reality to be much more complex.”
“Over the past six months I spoke at length with financial analysts, economists, industry consultants, realtors and many others to learn the true causes of Vancouver’s housing crisis and who is profiting from it. They were in broad agreement that real estate is at the centre of a massive realignment between our society’s rich and poor — and one that few leaders in the industry seem willing to publicly acknowledge.”
“Real estate has historically been a local industry. The people who buy and sell a city’s homes tended to live in that city. Yet that all began to change a decade or so ago. And one of the major reasons for it is a big shift in our global financial system. It’s a complicated subject. But what you need to know is that the global capital investors use to invest in things is growing much faster than the actual economy. There is so much capital, investors don’t know what to do with it all.”
“Desperate for quick financial returns, many investors are pouring this capital into real estate, turning local markets into global investment opportunities. One of the results, according to trackers such as Bain & Company, is ’skyrocketing home prices.’”
“The real estate industry is aware social mobility is declining. Its leaders know there is huge demand for cheaper homes. But they prefer to profit from income inequality rather than doing anything about it. That’s one takeaway from a major real estate industry trends report produced by PwC and the Urban Land Institute. ‘The middle class has been hollowing out,’ it concluded.”
“With land prices going up in big cities, the industry is increasingly focused on building luxury homes for wealthy people. Not everyone thinks it’s a wise strategy. ‘Time will tell if that’s going to come back to haunt us,’ said one CEO. ‘Not everybody makes $75,000 to $100,000 a year.’”
“Real estate has historically been a local industry. The people who buy and sell a city’s homes tended to live in that city. Yet that all began to change a decade or so ago. And one of the major reasons for it is a big shift in our global financial system. It’s a complicated subject. But what you need to know is that the global capital investors use to invest in things is growing much faster than the actual economy. There is so much capital, investors don’t know what to do with it all.”
Doesn’t seem very complicated: Yellen bucks are seeking toe tag homes.
“Desperate for quick financial returns, many investors are pouring this capital into real estate, turning local markets into global investment opportunities. One of the results, according to trackers such as Bain & Company, is ’skyrocketing home prices.’”
The ‘experts’ are co-opting the discussion which has occurred here on a daily basis for well over a decade already.
I wonder if the ‘experts’ can connect the dots between the Fed’s successful housing price reflation program and the army of homeless people wandering the streets of America’s cities, or the many thousands of millennials living in their parents’ basements?
I doubt it.
Experts only take notice of things long after they are obvious to their audience. Otherwise they are “Cranks”.
The people who buy and sell a city’s homes tended to live in that city. Yet that all began to change a decade or so ago
How many Londoners an afford a 40 million pound flat in “The Shard” or any multi million pound flat in a more conventional building?
Illinois on death watch. Just default. Tell the judges to go take a hike. What’re they gonna do about it? Arrest the state?
If they obey the judges they will be allowed to continue borrowing and maybe get a bailout or two.
The judges prevented IL from the 45 age pension cuttoff
Send the pols and union thugs to live in puerto rico. We need to bring back penal colonies, although PR is probably way too nice. How about we set one up in . . . Joshua Tree!
Heh, I’ve thought about this from time to time. Penal colonies, exile, that sort of thing. I’d hate to dump that kind of hell on Puerto Rico, though.
Mexico actually has one:
https://en.wikipedia.org/wiki/Islas_Mar%C3%ADas_Federal_Prison
Send the pols and union thugs to live in puerto rico.
I suppose that there’s no need for charges and trials an so forth.
Famous last words.
It can do much more than go to previous levels. It can go well below those levels.
++++
‘We are sitting on a gold mine. The prices will come down and settle, let me put it that way. But it’s not going to go back to the previous level.’”
Sorry for the long link:
https://www.worthpoint.com/articles/estates-2/can-you-live-in-a-collectible-if-it-is-a-100-year-old-catalog-home-you-can?utm_source=WhatCountsEmail&utm_medium=WorthPoint%20MasterNewsletter%20List&utm_campaign=06-19-17%20WP%20Insider%20No%2012&_wcsid=D4399FBAECADB6DF9C47C06EC38D4364D330FB1E9E5BBFDA3B9709638483E5E8
An article about catalog homes from back in the day. Check out “The Magnolia”, wow! A ten room colonial for $6500. From Sears Roebuck. Toll Brothers can kiss my grits.
Absolute Beginner posted a tiny house container home for $40,000 yesterday.
I think a lot of what’s called “innovation” these days is basically “devolution”.
Amazon has nothing on Sears when Sears was in its prime…
Amazon is part of the whole devolution process. Devising ever newer ways to deliver crappier crap. Genius.
Amazon, is the wonderful return to the sweatshop days of old. I refuse to buy anything from those A-holes. Just google Amazon PA abuses. Imagine, keeping ambulances outside your distribution center to take workers to the hospital when they pass out from the over 100 degree temps inside the building.
Ah, but now that Amazon bought Whole Foods, those warehouses that store food will be kept nice and cool.
The warehouses that store food will be called “grocery stores”.
I walked through an Amazon distribution center that delivers within 2 hours, and the Manager noted to me that Amazon had set up shop in a local grocery store because there was high demand for delivery from the grocery store.
I suspect that will be the strategy…direct delivery from the existing Whole Foods stores.
Some “strategy”.
Someone with an IQ of 76 could develop such a strategy.
Amazon is hoping you will go online to order your grocery product. Put in boxes by robots. Big whoop.
Amazon = Catalog Company.
Personally, I miss Service Merchandise.
I interviewed for a job at Service Merchandise when I was 16 or 17. There a long questionnaire with odd questions, like this one I’ll never forget:
“I sometimes feel like hurting people for no reason.” (true / false)
I lied and circled false.
I suspect that will be the strategy…direct delivery from the existing Whole Foods stores.
Delivered by droids or “contractors” who provide their own vehicles?
+1 colo. Just like those Uber drivers who make $2/hour when you factor in the expenses* for the car.
[IMO the youtube video describing this was a bit misleading when they included car insurance in the cost of the car. Drivers pay insurance whether they drive Uber or not, so insurance doesn't really count against Uber.]
Sod, that’s pretty interesting about the Service Merchandise questionnaire. Was this the 1970s?
A true/false question like that sounds suspiciously like an MMPI question. MMPI is the Minnesota Multiphasic Personality Inventory, which is a 500-question T/F standard mental health test used to make preliminary general diagnosis. It makes me wonder if Service Merchandise was actually performing a stealth psych evaluation on you.
In which case, Service Merchandise would have been ahead of their time for the 1970s. This sounds exactly like something that the FANG companies would do. I could easily see GOOG and AAPL use such a psych test to weed out undesirables, and then SELL the results of those thousands of psych test/job applications to Big Data.
All without your knowledge or consent, of course.
Sad - instead of treating the contract PA warehouse workers humanely - they just made robots to replace the humans. See, no more abuses. Just no more jobs either. Fewer people to afford their super convenient crap. I’m so conflicted about this whole foods acquisition!
I refuse to buy in a brick and mortar store from a robot checkout. So, that is where I draw the line. If amazon replaces the humans at whole foods checkout. I’m OUT. Fresh and Easy has not human cashiers and I don’t shop there. It’s small but you have to make a stand somewhere.
“The catalog house was also very popular because of the easy financing from the catalog company itself like Sears and Montgomery Ward rather than financing through a bank (Sears actually forgave $11 million worth of loans during the Depression instead of foreclosing).”
Holy Cow, financing was provided by the catalog company, not a bank. And Sears forgave loans during the Depression! Yah, try getting loan forgiveness from a bank.
Can’t wait to see the Amazon kit homes! Bet they look like prison cells.
It is kinda hard to imagine nowadays.
Buying, building and financing a house - all without ONE government worker or agency.
And, it seems, this kept houses affordable.
Maybe there is a lesson in there somewhere…
And most importantly, without a BANK. Which is really what kept houses affordable. No banks, no need for government agencies, although from the article, it seems Sears had to answer up to the Senate at one point regarding the quality of the homes.
Historical question: Why did these go away after 1942?
I’ll take WW2 for $100, Alex!
Sooner than that. The Depression severely wounded kit houses and the war killed them off entirely. It was only after the war that companies could develope entire blocks of housing on a large scale, starting with Levittown.
The home ownership rate was lower back then.
https://dqydj.com/historical-homeownership-rate-in-the-united-states-1890-present/
“Toll Brothers can kiss my grits”
Ha! The average wage back then was $1.50 a day, so it’s 16X average income, just for the pieces parts. And like Absolute Beginner said; wouldn’t you have to find your own piece of land to put it on?
That container home was pretty funny. It’s half the size of my boat.
Yah, I don’t think a dollar fitty a day worker was buying a ten room colonial, even from Sears.
But well within reach for the average Joe working in a factory…
Average hourly pay of manufacturing production workers in 1999 was $13.90; in 1909, the first measured year, it was about $3.80 (in 1999 dollars)
U.S. BUREAU OF LABOR STATISTICS
COMPENSATION AND WORKING CONDITIONS
American Labor in the 20th Century
https://www.bls.gov/opub/mlr/cwc/american-labor-in-the-20th-century.pdf
Looks like an Iron Worker made about $100 per week in 1917.
https://fraser.stlouisfed.org/scribd/?item_id=476873&filepath=/files/docs/publications/bls/bls_0286_1921.pdf
Consider that the “100″ in the report is an index reference, not “$”.
“$3.80 (in 1999 dollars)”
Which translates into about $400 a year in 1909 dollars.
Or you could say the kit was $115,000 in 1999 dollars. Tripple that for cost installed? Is that well within reach for an $8,000/yr (1999 dollars) salary?
Many of those Sears kit homes were Craftsman bungalows and are highly sought after today.
To make things even worse, that $40K container home is on the LOW end of the Tiny House price scale. Tiny Homes are easily running $70-$80K now.
About a year after Hurricane Katrina hit, urban planner Marianne Cusato designed some lovely small cottages. For a while, her company had a partnership with Lowe’s where you could buy a Katrina Cottage plan and all the materials at Lowe’s, and have a contractor build the small house. That’s probably as close to a kit house as we will see nowadays. Unfortunately, the Katrina Cottage idea fizzled. In the 2006 boom no one wanted a small house, and then the recession hit.
You can still order blueprints for Katrina cottages: https://www.mariannecusato.com/copy-of-order-plans
she’s sure got that shotgun shack (not necessarily a pejorative) thing down pat.
https://en.wikipedia.org/wiki/Shotgun_house
Plan KC 544
Seventeen Summers….and no one complained.
—Planet Past
Yup. I have a lot of experience with 100-year-old homes, having several in the family and there are still a few holdovers in my own neighborhood.
People were so poor that they saved up used wood from wherever they could get it, for several years if need be, in order to add another room onto their house. Two of the most common upgrades to original farmhouses were to 1) enclose the back porch, and 2) add a bathroom.
All done without the bank’s help.
Bitter clingers to their Bibles and guns.
We are much more sophisticated today…
Way back I had a friend who took home used packing crates from work and after years built a three bay garage/workshop from the lumber on his inherited land. He died a millionaire.
Great story.
All done without the bank’s help.
FWIW, I seem to recall reading that a lot of people were foreclosed during the Great Depression, so I guess some people were taking out mortgages. Also, the FHA was formed in 1934.
I mean, I know it’s fun to believe that back then everyone owned their house outright and built it themselves.
I don’t think anyone believes that and I never said that. This is what I wrote:
“The catalog house was also very popular because of the easy financing from the catalog company itself like Sears and Montgomery Ward rather than financing through a bank (Sears actually forgave $11 million worth of loans during the Depression instead of foreclosing).”
Yah, a lot of people were foreclosed during the Depression. My point was, Sears forgave $11million worth of loans, so those customers caught a break, which I don’t think anyone got from a bank.
“…the existing depression was due essentially to the great wave of credit expansion in the past decade.”
“…outstanding mortgage debt grew by more than eight times from 1920 to 1929, according to Persons.
“Martha Olney at Berkeley examined the rise in purchases of cars and other durables during the 1920s, and concluded that “societal attitudes toward borrowers changed radically between 1900 and 1920; by the mid-1920s, buying on credit was considered normal, not sinful.”
Persons concluded his 1930 article with a statement that is eerily similar to many we here today: “The past decade has witnessed a great volume of credit inflation. Our period of prosperity was based on nothing more substantial than debt expansion.”
Charles Persons 1930
http://houseofdebt.org/2014/03/15/household-debt-and-the-great-depression.html
People were so poor that they saved up used wood from wherever they could get it, for several years if need be, in order to add another room onto their house.
A portion of Traverse City, Michigan is still called “Slabtown” to this day. Would be homeowners simply scavenged the cutoffs & otherwise wasted material from one of the many sawmills in the area to construct new homes. The sawmills generated large amounts of this material, considered new but unsaleable. Many of these homes still stand, have been extensively remodeled, and are no longer cheap.
A pretty long but very good article
++++
Mark Hanson: Housing Bubble 2.0 - The End Is Nigh?
Zerohedge - Jun 19, 2017
Bottom line: The Fed, during Obama, did everything in its power to surge all asset prices — stocks, bonds, real estate, collectables, et al — with no regard for its own guidance, as to when it would take its lead-foot off the accelerator. Now, under Trump, they are doing the exact opposite; looking “through” all the obvious coincident and near/mid term, economic weakening trends in an effort to raise rates as quickly as possible. If, the past 8-years of a Fed in Armageddon-mode created the “everything bubble” (hat-tip Wolf Richter), what will shifting monetary policy into reverse do to said asset price levels?
Back in Bubble 1.0, the helium came out of house prices when the “unorthodox credit and liquidity” was forced out of the markets all at once precipitated by the mortgage credit market implosion. Quickly, house prices “reattached” to end-user, shelter-buyer employment, income, and credit fundamentals…or, to what end-user, shelter-buyers could really buy using a traditional, 30-year fixed rate mortgage, and a truthful loan application, which was about 30% less.
Just because there are no NINJA loans that turned every ma and pa into a millionaire for the purposes of qualifying for a mortgage to buy a house, which pushed prices through the roof, doesn’t mean the housing market hasn’t been similarly, artificially goosed over the past five-years beginning when millions of legacy mortgage were “modified”.
“Loan Mods” — used to fight the very de-leveraging that would have once and for all “fixed” the excesses in the housing market — were so exotic (DTI’s of 70%+, credit scores below 600, LTV of 150%+, payments of 2% interest only) they made Angelo Mozillo blush. Loan mods made WaMu’s 2005 vintage Pay Option ARMs look safe and sane!
In closing, this housing Bubble always needs constantly lower mortgage rates; stable to increased flows of unorthodox demand, credit and liquidity; and/or increased leverage-in-finance vis-a’-vis easing of mortgage credit to keep house prices detached from end-user, shelter-buyer fundamentals. All three of these engines of house price inflation have been running at max RPM’s for years.
But, if a Fed in reverse takes shuts down two of the three engines, there simply isn’t a way for the GSE’s — who do 90% of all mortgages — and the banks to ease mortgage credit quickly, or dramatically, enough to prevent house prices from once again re-attaching to end-user, shelter-buyer fundamentals, which could be 30% less than where they stand today. AND, if during this de-leveraging cycle the economy dramatically weakens, then end-uer, shelter-buyer fundamentals weaken and house prices could even fall further.
Oh, gawd, I hope so. This panic buying at the lower end seems to be getting more intense in some of the markets I follow.
It would be interesting to see some of those million plus shacks in Fairfield County, Ct go to a value of 25% of their original purchase price.
Around here, about a third.
“I think that the Fed is going to do whatever it takes to prevent wage inflation from getting away from them, and shrinking the balance sheet is going to be a vital part of that tightening, maybe the most important part.”
Way different analysis of the Feds actions than I’ve heard elsewhere.
Does someone have an example of one of these blush-worthy exotic “loan mods” from the past 5 years? Show me these 150% LTV 2% interest-only mortgages. These are a far cry from 0% down. And who’s buying this paper on the secondary market? Not Fannie Mae, not after 2012.
‘A critical part of Fannie Mae’s role in the Making Home Affordable® Program is the Home Affordable Refinance Program (HARP), available for refinances of existing Fannie Mae (and Freddie Mac) loans. The goal of the refinance effort, as announced by the President, is “to provide access to low-cost refinancing for responsible homeowners suffering from falling home prices.”
‘The expectation is that refinancing their mortgage will put responsible borrowers in a better position by reducing their monthly principal and interest payments or moving them from a more risky loan structure (such as interest-only or short-term ARM) to a more stable product. Our solutions provide mortgage refinances with no limits on LTV, and mortgage insurance flexibilities.’
https://www.fanniemae.com/singlefamily/making-home-affordable
BTW, the re-default rate on these is around 30-40% in the first two years.
https://www.treasury.gov/initiatives/financial-stability/reports/Documents/1Q17%20MHA%20Report%20Final.pdf
Here’s the data for HAMP.
24 month Default rate for the most recent vintages of restructured loans (those restructured in Q2 2015) is 20%. For all loans, within 2 years, the redefault rate is 24% within 24 months.
That number used to be approaching 30% (a bit over for the very first restructures).
Other things worth noting:
1. The volume of loans restructured has come down considerably…it used to be well over 100k loans in a quarter. Q1 2017 was less than 2k loans.
2. The re-default rate after five years is OVER 40%. The number has trended downward, but even the latest mods that fit this category still have a 33% re-default rate.
3. The re-default rate after 7 years (tracking among the earliest modifications) is ALMOST 60%.
Looks like I was looking in the wrong place for volumes…still over 50k per quarter over all programs.
Thanks Ben! I forgot about Hamp and Harp and all the runway foaming. It’s clear that the goal wasn’t to keep people in their homes, not permanently. The goal was to stagger the foreclosures over a period of 5-7 years (instead of one year) to give time for the FED to buy up the crap paper via QE.
I though banks were in sht if commercial loan defaults were over 2%
I realize morts have MORE RESIDUAL VALUE ,BUT wtf !
looking “through” all the obvious coincident and near/mid term, economic weakening trends in an effort to raise rates as quickly as possible
LOL
But, if a Fed in reverse takes shuts down two of the three engines, there simply isn’t a way for the GSE’s — who do 90% of all mortgages — and the banks to ease mortgage credit quickly, or dramatically, enough to prevent house prices from once again re-attaching to end-user, shelter-buyer fundamentals, which could be 30% less than where they stand today.
Only 30%? I’m looking for 30% less than the lows after 2008. Maybe with some allowance for a small amount of inflation. None of those problems ever got fixed. But I realize that if/when that happens I probably won’t have a job for long.
But I realize that if/when that happens I probably won’t have a job for long.
There’s always a catch.
“…the industry is increasingly focused on building luxury homes for wealthy people. … ‘Not everybody makes $75,000 to $100,000 a year.’”
1- Are wealthy people now being defined as making this income?
2- Where does $75K qualify you for a $1million house?
Canada.
California
New York
Anyplace, USA
And they tell us lending is tight. LOL
If only I made what I made now, 15 years ago… hehe.
Yesiree.
From 1965 to now…. add a zero to every purchased item.
“Home builders, home sellers suddenly shy”
http://www.marketwatch.com/story/home-builders-home-sellers-suddenly-shy-2017-06-18
Feeling camera shy?
Why?
I investigated Tiny Home movement some five years ago and keep an eye out on new develops since then. I spoke to a new City of Camp Verde, Arizona town hall employee who is an enthusiastic proponent of Tiny Homes in Verde Valley area. Outside of a big change in town thinking, along with a wealthy donor of land for tax favors - unlikely we’ll see badly needed housing community for younger people who want to stay in area close to their families, want their own home - but cannot afford prices of site-built SFR’s at today’s high prices. Developing a Tiny Home community is not much less complicated than building out a regular SFR site-built community. It can easily get costly connecting and running electricity lines, sewer and water to many of these Tiny houses that will be sited onto purchased lot. There are all those costs and requirements the county demands and gets their take for as well. The Tiny Homes where Tiny Home owners rent a site space aren’t much different than mobile home parks in many ways, that is where owner of the property where you rent your home site is the usually the only one coming out ahead. Yes many of these trailer transportable homes can be moved, but the costs to do so can be considerable and multiple moves can increase chances of damage to the Tiny Home or any mobile home moved with a trailer to another location (a reconfigured shipping container, or several connected as one home, are interesting build for Tiny House as they are very structurally strong to storms and can be customized with sufficient blown-in insulation to make them very energy efficient). I have no doubt that most of these Tiny Homes owners who will rent their site will have to sign a contract with landowner which has been drawn-up by attorney so as to favor the landowner. I personally know more that a few fellow seniors here Central Arizona who are dying to sell their manufactured/mobile homes in 55+ parks to escape the onerous (and growing) land lease fees and aggressive park manager harassment. For starters checkout “Sedona Shadows” online to get an idea of the acrimony, and I know plenty more who bought into other 55+ land lease parks in the Verde Valley who are praying to get out of where they are. Tiny Homes can be a good idea but the devil is in the details. If Tiny Homes community is just another land lease scheme to enrich a single billionaire, or a consortium of investors looking to diversify their portfolios - it is nothing really different than what we already have with traditional trailer parks. The better Tiny Homes involve expenses that move a better Tiny Home (were owner also owns their land) closer to the cost of a regular site-built SFR house, which begs the question, “Tiny Home at what cost?”
Yeah, unless the zoning allows you to put one in the backyard of the parent’s McMansion or on land somewhere that’s mysteriously cheap, it’s not going to be any different than a trailer park.
It would seem that the real “thing” about them is that it’s a way to downscale people into trailer parks who are otherwise horrified by the idea.
Many tiny homes are indeed sited in backyards of larger homes. This has been discussed often in books about tiny homes.
Thinking those in communities who organize speak with more persuasive voice than individual voice(s) without large cohort of likeminded support. Those in higher socio-economic positions, those in communities who provide more tax revenue have more sway, admitted to or not, over city council members.
I still think you’d be better off buying a $4,000 storage shed at Home Depot. Live in that instead.
But what about the granite and stainless steel?
Some of those tony houses actually DO have granite and stainless steel. But I guess it’s all so small that the materials aren’t really all that expensive.
Brynn is 100% about tiny houses not being a viable plan for mass housing. Yes, if you were idealistic, you could build a community of tiny site-built houses on foundations on tiny lots for about $50K. In fact, there a couple of organizations trying to do that in Destroit.
http://www.detroitnews.com/story/news/local/detroit-city/2017/05/25/tiny-homes-tour/102157990/
The houses are cute as a button, no doubt about that. But low-price houses will attract very low-income people, and the low-income segment just has too many people bent on destroying things. Another problem is taxes. Houses that cheap simply don’t pay enough in taxes to support themselves for fire, police, even basic education.
But low-price houses will attract very low-income people
Which in a nutshell is why nobody wants a mobile home in a trailer park even if they think tiny houses are great.
Another problem is taxes. Houses that cheap simply don’t pay enough in taxes to support themselves for fire, police, even basic education.
Interesting point, and probably why they will never be allowed in civilized areas. As our standard of living gets crammed down everybody wants a cheaper way to live. But the existing communities want everybody to ante up at the old rates so that nothing has to change. But in the end the old level of fire, police, and basic education spending may not be possible to sustain.
That’s right. HBB likes to tell me to “live below my means.” As if the residents of a neighborhood of cheap houses are all just happy responsible professionals living below their means. Nope. Cheaper housing is usually populated by losers living at or even above their means. You can see this just from the yards and the cars. I even saw it in the apartments I rented.
But even in the more expensive neighborhoods, it’s getting worse anyway. Poorer people (read: illegals and/or legal Latin/Asian culture) are getting away with living lower-class in higher class housing simply by packing 8-10 people in a house. If the house is a rental, they can cobble the rent from 8 incomes without needing a single high-income breadwinner to get a mortgage. And again, you can see it from the yards and the cars… as especially on trash day. I’ve never seen so much trash out at the road.
I have advised to live below one’s means from time to time. What a concept! Impossible for some to embrace for whatever rationalization.
Not to get too philosophical, but some of the most decent neighbors I’ve had were in modest settings and some of the trashiest, dishonest, inconsiderate in more expensive surroundings. As you point out, spending more than you have on a house doesn’t get rid of the trash.
It’s more pronounced on the boat. The more expensive boats seem to have the more offensive inhabitants. The best thing there is the ability to up and move at the drop of a hat.
“Cheaper housing is usually populated by losers living at or even above their means. You can see this just from the yards and the cars. I even saw it in the apartments I rented.”
Living large and spreading their seed far and wide. Survival.
Well my sister has bad credit and her/hubby only make 40k a year and were unable to buy a 200k home so not sure who is getting loans right now?
Corelogic produces a “Housing Credit Index”. The way they measure the availability of credit over time is by comparing back to 2001/2002 originations with 6 metrics:
1. Low/No Doc share
2. Credit Score less than 640
3. LTV over 95%
4. DTI over 43%
5. Non-Owner occupant share
6. Condo/Co-Op Share
The implication is that each of these metrics indicates a risky loan. If all of these numbers, are equal to 2001/2002, then the index would be set at 100.
The index today is at about 44. Seems like a pretty tight mortgage market.
However, how they utilize the 6 metrics to come up with 44 is a bit of a black box…luckily, they break down the data.
Long story short, numbers 3-6 are all generally back to (or above) levels seen in 2001-2002.
HOWEVER, numbers 1 and 2 are barely at 10% or less the levels seen in 2001/2002.
So, to answer your question, loans are being made to pretty much everyone EXCEPT people with a credit score below 640, or people trying to borrow with a no/low doc loan.
It is interesting that Low/No doc is low even compared to 2001/2002, which I thought was before such loans become popular.
In any event, CoreLogic must believe that low credit scores and Low/no doc loans are more meaningful indicators of loose lending than high LTV/high DTI, etc, which is why the metric is at 44, NOT more than 66% (which it should be higher than if each metric were equally weighted in a simple fashion).
FWIW, the following metrics are interesting:
1. The credit score for the lowest 1% of borrowers (ie. 99% of borrowers had a higher credit score than this) was 628 in Q4 2016. This is up from ~500 in 2001/2002.
2. 48% of borrowers had an LTV of more than 95%…up from 36% in 2001/2002.
3. 26% of home purchases had DTI of more than 43%, up from 24% in 2001…I would have expected it to be higher relative to 2001 based on interest rates today.
So, a KEY question:
Has there been “grade inflation” for credit scores? In other words, is a 500 credit score in 2001 the same as a 500 credit score in 2017? If so, it would indicate that lenders are being more discerning.
IF NOT, well, then garbage in, garbage out…the metric of 44 is worthless.
Corelogic is a REIC cheerleader. All these comparisons are designed to downplay loosening loans standards - for years. Why cut them at all? Why the drip drip since 2014? If the market is so strong and so hot, why goose it at all? Good gravy, the REIC is massive and will pound the table getting people into shacks they can’t afford right up until they start scolding sellers for being unrealistic and then they become REO specialists.
It’s all fun and games until someone loses an eye.
Niagara/St. Catherines was working class and agri
Now they are all real-estate and other folks getting rich … it will end very badly
Yes, let’s put all our gubmint data up in the cloud, along with detailed info on every single citizen. What could possibly go wrong?
http://www.zerohedge.com/news/2017-06-19/records-198-million-us-voters-accidentally-exposed-rnc-contractor
Brock University business accounting professor Feyez Elayan said home values in Niagara are catching up after decades of being undervalued, which may help protect them from fluctuations in the market.”
No, professor. Home values reflect tons more debased FedBux sloshing around in search of yield. Home values are no grotesquely overvalued considering the median income in our so-faux “recovery.”
“Massive and risky home loans are increasing in number across Metro Vancouver, while mortgage fraud cases are also on the rise, connected to the growth of so-called ’shadow banking,’ a Postmedia investigation shows. The trend of increasingly risky loans underlying Metro Vancouver’s high home prices is illustrated by Bank of Canada figures that show the rapid growth since 2014 of large mortgages made to people with relatively low incomes.”
And when it all goes pear-shaped, the Usual Suspects will chorus in unison: “Nobody could’ve seen it coming.”
File under “I’ll believe it when I see it.”
http://www.scmp.com/business/banking-finance/article/2099031/chinese-banks-may-raise-mortgage-rates-tightening-drive
Even the MSM is finally forced to admit that the costs of housing have become excessive and unsustainable.
http://www.marketwatch.com/story/another-part-of-the-real-estate-market-is-starting-to-crumble-2017-06-19
The olds are moving out of my building. C (retired Navy) is moving to Tuscon soon. B (age 55 on SSDI) is moving to a cheaper, less desirable location in Dumver.
“The olds are moving out of my building.”
Little Feat Old Folks Boogie 1977 Special
https://www.youtube.com/watch?v=Q_nFwwjBlEc
Old Folks Boogie
And Boogie We Will
’cause to Us the Thought’s As Good As a Thrill
http://www.azlyrics.com/lyrics/littlefeat/oldfolksboogie.html
Bonus Feat
https://www.youtube.com/watch?v=d5nRlYZOAmc
I just got an email about this listing, cuz they think I might buy it maybe?
3410 Serra Rd, Malibu, CA 90265
6 beds 5 baths 5,600 sqft
For Sale
$14,998,000
Price cut: -$302,000 (6/18)
Zestimate®: $13,381,130
https://www.zillow.com/homedetails/3410-Serra-Rd-Malibu-CA-90265/20552730_zpid/
06/18/17 Price change $14,998,000-2.0%
04/29/17 Listed for sale $15,300,000
04/19/17 Listing removed $70,000/mo
03/24/17 Listed for rent $70,000/mo
10/19/16 Listing removed $14,788,000
08/10/16 Price change $14,788,000-9.8%
06/17/16 Listed for sale $16,388,000+397%
10/21/14 Sold $3,300,000-2.9%
09/18/14 Pending sale $3,400,000
08/08/14 Price change $3,400,000-6.8%
05/30/14 Price change $3,650,000-3.9%
04/04/14 Price change $3,800,000-5%
03/18/14 Listed for sale $4,000,000-61.6%
01/09/13 Sold: Foreclosed to lender $10,416,760+17.7%
07/09/11 Listing removed $8,850,000
09/02/10 Price change $8,850,000-6.8%
12/23/09 Price change $9,500,000-13.6%
12/19/09 Price change $10,995,000+15.7%
10/01/09 Price change $9,500,000-13.6%
09/27/09 Price change $10,995,000+10.4%
09/24/09 Price change $9,955,000-9.5%
08/31/09 Price change $10,995,000+0.4%
08/29/09 Price change $10,955,000-0.4%
08/14/09 Price change $10,995,000-14.8%
02/03/09 Listed for sale $12,900,000
I think they deserve to triple their money in 3 years.
The ad says it was completely renovated. So why did the FB think it was it worth 13M in 2009?
“walls & floors of white/yellow jade adorned w/amethyst.”
plus a golf cart!
2 1/2 acres.
This is a house for someone with no friends.
Bill in LA?
Admit it, you miss his constant updates on his body fat index and how 57 is the new 19.
Not really. I was pining after his master swimmer comments myself.
Oh, and how a guy who made his living first by working in the government and then by milking his security clearance as a contractor could tell repeatedly tell us that “taxation is theft.”
People with mortgages can’t afford to rent houses in Malibu for $135,000 a month, or something like that.
24380 Malibu Rd,
Malibu, CA 90265
4 beds 5 baths 3,188 sqft
FOR RENT
$135,000 /mo
Rent Zestimate®: $45,700 /mo
You can try and ask $50,000 for your Honda Accord:
https://wyoming.craigslist.org/vac/6162156998.html
Premium river front camp sites available during the Solar Eclipse. No hook ups, but sites have easy access, are grassy and level with a beautiful view. Nightly rate $500.00.
BYO hook up! You can find them on tindr.
Hehe… no accommodation and inclusion?
‘People are starting to figure out the value of the Niagara region,’
Blue Sky country?
“Niagara” is across the river from Buffalo, NY, and Niagara Falls, NY.
It’s truly a rustbelt region, and just because you’re on the Canadian side of the Niagara River, that doesn’t change.
Reread the article and substitute “Buffalo” for “Niagara”.
The Serious Fraud Office has charged Barclays, its former chief executive and three other former top executives with fraud over the way it raised billions of pounds from Qatar during the financial crisis.
This is the first time any senior bankers have faced charges for events dating to the 2008 crisis. The SFO charged former Barclays chief executive John Varley and three former colleagues – Roger Jenkins, Thomas Kalaris and Richard Boath – with a series of offences after a five-year investigation into the events surrounding the £11.8bn emergency fundraising conducted by the bank during the height of the 2008 financial crisis.
At the time, Barclays raised billions of pounds from Qatar in a move that allowed the bank to avoid taking a taxpayer bailout.
The SFO said the charges related to the two fundraisings the bank embarked on in June and October 2008 and a US$3bn (£2.3bn) loan to Qatar acting through the ministry of economy and finance in November 2008.
https://www.theguardian.com/business/2017/jun/20/sfo-charges-barclays-bank-executives-ceo-2008-qatar-fundraising
Sorry but “Serious Fraud Office” sounds like something out of Monty Python. Is there a “Silly Fraud Office” for small-time offenders?
rust,
That would be the Small Fraud Office, which was discontinued on the grounds it was not cost effective. Only Serious Fraud is cost effective and then only after eight or nine years, giving the suspects time to spend the money and shred the evidence.
For the past six years, there have been two Arab worlds. The world of violence and tragedy; and the world of glitz and globalisation. Syria, Iraq, Libya and, to a lesser extent, Egypt - have been engulfed by conflict. But Qatar, Abu Dhabi and Dubai have prospered as global hubs for travel, leisure, business and finance. The booming Gulf metropolises seemed untouched by the violence in the rest of the Middle East. They even profited indirectly, as safe havens in a region in turmoil.
But the wall between the two Arab worlds is breaking down. Saudi Arabia, Bahrain, Egypt and the United Arab Emirates (which includes Abu Dhabi and Dubai) have imposed a blockade on Qatar - claiming that the Qataris have been supporting jihadi movements across the region, and particularly in Syria and Libya. As a result, the illusion that the wealthy Gulf could remain uncontaminated by the wider conflicts in the Middle East has been shattered.
The obvious question is whether the dazzling rise of the Gulf states could be followed by an equally dazzling fall. If that were to happen, the implications would be global.
One of the reasons that the world has been able to look on with chilling indifference as Syria and Libya disintegrate is that neither country plays a major role in the world economy. But that is not true of the Gulf states. A security crisis there would be felt in boardrooms and finance ministries all over the world.
http://www.irishtimes.com/opinion/gideon-rachman-the-qatar-crisis-has-global-implications-1.3126419
Will Beijing be the first housing bubble to burst?
http://www.scmp.com/property/hong-kong-china/article/2099210/cracks-appear-beijings-housing-market-80-pc-sellers-lower
Not while the central bank has a magic money tree. They will need to take that tree out of their cold dead hands.
Speculators are buying these crazy bond issues knowing that in our crony capitalist wonderland, any and all bankster and speculator losses will be made whole by taxpayers.
http://www.zerohedge.com/news/2017-06-20/argentina-100-year-bond-sale-35x-oversubscribed
Oil prices are the closest thing left to an unrigged, free market. And they’re telegraphing a downturn.
People “out of the work force” (but not counted as unemployed, oh heavens no!) don’t appear to be doing much driving or spending in our so-faux “recovery.”
http://oilprice.com/commodity-price-charts?1&page=chart&sym=CL*1
Ordered more platinum & silver bullion coins at these firesale prices. Because methinks our rigged, broken, manipulated markets are vastly discounting the potential for serious geopolitical risk, and because nothing stirs fear in the black hearts of the evil bastards at the Fed like the Spector of proles ditching their FedBux for real, tangible wealth that the Fed can’t debase away.
“The best thing there is the ability to up and move at the drop of a hat.”
It sure is a plus in uncertain times, and times are always uncertain are they not?
Brynn is 100% about tiny houses not being a viable plan for mass housing. Yes, if you were idealistic, you could build a community of tiny site-built houses on foundations on tiny lots for about $50K.
Myself and two close acquaintances have discussed small (500-750 SF) site-built houses with numerous builders in our area (Central Arizona) to educate ourselves for discussing affordable housing issues with town council members. The answers we’ve received suggest that scale alone does not equate to commensurate build cost savings. Apparently building (500-750 SF) site-built houses is not really economical and is certainly NOT a matter of cost of the building materials and labor alone.
Suspect real estate, mortgage and residential rental property owners are no fans of tiny home movement and will seek to block its growth wherever possible.
I have to smile that you asked builders — of all people — whether it’s economical to build a small house.
One of the commenters on the Detroit article complained that: “Those cute tiny homes cost $138/sq ft to build. If they were larger houses they would be comparatively extremely expensive.” Yeah right. Really, the expense is in kitchen, bathrooms, and corners. It costs very little to add a bedroom, or make a bedroom bigger. That’s why McMansions with their idiotic “sitting areas” in the bedroom were so profitable.
I don’t have any good numbers, but my guess is that the most ideal affordable detached home for a family, which gives you the most function (not profit) for your buck, is the ~1100 sq ft ugly raised ranch on a 5000 sq ft lot. 3/1.5 with garage under the living area. Rectangle box, single roofline. Of course that’s too darn logical. I will be surprised if any builder ever builds a blockof houses like that again. Heck, they can’t even build plain-jane apartments anymore. It’s all luxe.