A Disappointing Price Might Be A Great Escape
A report from the Financial Post in Canada. “Internal mid-month statistics for June from the Toronto Real Estate Board show average prices in the Greater Toronto Area shed almost 6.4 per cent in just two weeks with sales down about 50 per cent from a year ago. The average home sold for $808,847 from June 1 to 14 — a sharp drop from the average of $863,910 for May. The peak of the market in Canada’s largest city now appears to be in April when the average price soared to $920,791, the same month that Ontario brought in its 16-point Fair Housing Plan, which included a 15 per cent non-resident speculation tax. Average prices have now declined just over 12 per cent from the peak but Craig Alexander, chief economist of the Conference Board of Canada, said it might not be the measures themselves that have cooled the market as much as the perception of their impact.”
“‘I don’t think that many buyers have been pushed out of the market,’ said the economist. ‘One of the biggest effects of tighter government regulations is that it creates a psychological response by potential sellers and potential buyers. It ends up like a wait and see approach. If everybody waits and sees what happens, you get a significant pullback.’”
From First on Ultra on India. “With IT sector witnessing subdued sentiment amidst pressure on hiring and annual pay rise for employees, the country’s software and services hubs such as Bengaluru, Hyderabad, Chennai, Pune and Noida-Gurgaon in NCR are expected to see 10-20 per cent reduction in the housing rents over the next three quarters, according to an ASSOCHAM paper. ‘The IT and other services like financials are among the sectors which pay well. Besides, the age profile of these employees is quite tempting for the marketers. They are good spenders and want good life. These factors kept the markets for rentals pushing up, especially in gated and well-equipped housing complexes and societies in Bengaluru, Gurgaon, and Hyderabad. There is certainly a pause visible,’ ASSOCHAM Secretary General Mr D S Rawat said.”
“In any case, the markets for real estate has gone down in major micro markets owing to a combination of factors. With a large inventory of even ready flats which would be available for use in the next few months, the supply for the rental markets would further improve.”
The China Economic Review. “Chinese real estate developers find themselves squeezed by government curbs on bank lending that aim to deflate the housing bubble, as well as a regulatory campaign to force the financial sector to deleverage and improve risk controls. According to Caixin, one by one, regulators have restricted the sources of funding available to builders. Now, with even the costliest and riskiest form of borrowing - via trust companies - under scrutiny, companies are running out of options.”
“The government began to restrict the flow barely a year after it opened the spigot in the second half of 2015, when it was making an effort to revive investment in property development following its collapse during the previous round of tightening. But issuances collapsed again this year - with just 152 billion yuan of bond sales as of June 15, down from 614 billion yuan over the same period last year, Wind data show.”
From Asia Times on China. “Employees in loans divisions in China’s banking industry are facing increased pressure after interest rates were raised, making it harder for them to approve loans and make commissions on already low wages. ‘Our basic salary is only 2,000 to 3,000 yuan per month, so we have to depend on commissions,’ said a client manager in a commercial bank. ‘Most client managers saw a significant drop in their volume of loan operations, so it is quite common that many of us fail to maintain our previous wage levels.’”
“Banks have cut the monthly quota on housing loans and increased interest rates amid tightening credit policies. ‘If you want to make a loan, better do it now,’ said a client manager at one of the four giant state-owned banks. ‘It’s uncertain if there will be any quotas next month and the lending rate could probably see a 10% rise from the benchmark by then.’”
“The China Securities Journal reported that China Merchants Bank, Industrial and Commercial Bank of China, China Minsheng Bank and China Guangfa Bank had all raised the interest rate above the benchmark on first home loans. While some branches of Ping An Bank and Industrial Bank have stopped issuing housing loans.”
From Your Property Investment in Australia. “Housing finance and credit data released earlier this month by the Australian Bureau of Statistics (ABS) and the Reserve Bank of Australia (RBA) make it clear that investor interest in the housing market is starting to decline. Philippe Brach, CEO at Multifocus Properties & Finance, believes it’s the current climate of uncertainty that is causing many property investors to hold back and wait for the market to stabilise.”
“‘I believe it’s the uncertainty that has been created with the banks changing their lending policies every five minutes. It’s pretty much on a daily basis,’ he said. ‘You almost need a full-time guy in your mortgage broking office to keep up with all the changes that the banks are putting together. Every day, we get three to four press releases outlining the latest changes. Banks are raising interest rates and some are changing their assessment standards. This is causing investors to hold back.’”
From Domain News in Australia. “Sydney’s housing market has reached a turning point, with buyers no longer willing to match sellers’ expectations, according to a leading sales agency. The ’seasonal impact’ of winter and higher interest rates for investors were having a ‘double whammy effect’ on auction clearance rates, said Domain Group chief economist Andrew Wilson. This was then being compounded by ‘extraordinary numbers’ of sellers going to auction. ‘We have never seen auction numbers at this height – was a record May and it will be a record June. It will have an impact,’ he said.”
“In a note to sales staff BresicWhitney director William Phillips said it was ‘clear that we have entered a new phase in the market.’ He said it was an ‘opportune time to sell.’ ‘What might seem like a disappointing price today might be market value or a great escape in three months’ time,’ Mr Phillips said.”
In all the above markets (Toronto, India, China and Sydney):
Q: For $500, dropping real estate prices, building inventory and massive leverage.
A. What is a FB Alex?.
Meanwhile, in the middle of bubble central San Fran…
——–
The Fate of the 2 Shuttered Macy’s Stores in San Francisco
by Wolf Richter • Jun 26, 2017
Caught up in the middle of the brick-and-mortar retail meltdown, Macy’s announced wave after wave of store closings. The 100 store closings it announced in August 2016 included Macy’s Men’s store in San Francisco. The 68 store closings announced in January 2017 included its store at Stonestown Galleria in San Francisco. Macy’s owned the buildings of both of them. This brought Macy’s store count in San Francisco from three to just one store.
That’s how bad the meltdown is!
In January 2017, Macy’s sold its 280,000-square-foot store at Stonestown Galleria for $41 million to mall REIT General Growth Partners, since renamed GGP, whose shares have plunged 26% since the end of July 2016. According to the San Francisco Business Times, which has obtained the plans submitted for the project, GGP is planning to redevelop the store into something – again the scary words – different this time…
The 263,000-square-foot eight-story building of Macy’s Men’s store faces a different fate. It’s in the Union Square area in the center of San Francisco, in a prime location. Five floors used to be occupied by the Men’s store. The top three floors are office space that was occupied by Macy’s West Coast headquarters, which was shut down in 2012. The office space has remained vacant ever since.
The new owners intend to redevelop the building into art galleries, high-end restaurants, and flagship retail – with Union Square being San Francisco’s flagship retail area. The upper floors will house office space. And as Bisnow put it, “A rooftop amenity with panoramic views also is under consideration.”
280,000-square-foot store at Stonestown Galleria for $41 million ??
$146.00 per square foot including the land for prime Union Square location…How far below replacement cost you think that is…??
Sorry…My bad…Mistook the Stonestown for the Union Square property
Sorry…My bad…Mistook the Stonestown for the Union Square property…
Too bad about the Union Square store, that was a pretty cool store.
The retail apocalypse is just starting imo. I see it practically everywhere. I went to Fry’s on Friday to get a new wireless router and there were like 7 -10 people in the whole store.
The retail apocalypse is everywhere.
To include Madison Avenue, NYC. Ground zero for retail.
++++
Haunting Photos of Shuttered Stores on Madison Avenue
http://wolfstreet.com/2017/06/24/haunting-photos-of-shuttered-stores-on-madison-avenue/
Right. They say online sales currently account for 8.5% of all retail sales.
If we adjusted retail sales to exclude things like groceries, beverages, bars, cafes, auto service, gas, hair cuts, etc. then the % would likely be much higher.
The poverty is spreading.
From
Haunting Photos of Shuttered Stores on Madison Avenue
Petunia
Jun 24, 2017 at 12:19 pm
Billionaires Row condos are now experiencing foreclosures in NYC. There have now been two in one of the most expensive buildings in NYC. The poverty is spreading.
“things like groceries, beverages…”
Search for Census + retail.
Enjoy!
Industrial real estate. All that stuff needs to go from point A to B to C to your door…and in the process will be occupying warehouse space rather than racks in stores.
Another reason that people dont want to go to malls - packs of ferals:
http://sanfrancisco.cbslocal.com/2017/06/25/brawl-shuts-down-san-francisco-westfield-mall/
Need to nuke it from orbit, just to be safe
Same thing here. I went to Nordstrom Rack to get a new pair of sunglasses - probably five people in the whole store.
With house prices 10x income, it’s no wonder people are not out shopping for clothes.
Pukes will dress themselves in rags and they will like it.
They already are.
Nothing like few green handshakes to keep prices at astronomical levels. General Growth Partners is the latest greatest fool.
Macy’s brought on its own doom when it bought out all those other department stores in the early 2000s. Instead of having a mall with a Macy’s and a Kaufmann’s, you now had a mall with TWO Macy’s in it. And half the selection of women’s apparel. Macy’s tried to rejigger those double stores by making one store all women’s apparel, and the other store menswear and home stuff, but it never caught on because the Great Recession hit.
At the same time, Casual Friday turned into Casual Every Day, and people began buying rags from Wal-Mart, as Blue says.
I don’t think online shopping brought down Macy’s. I think that society has simply lost interest in quality clothing with lasting style — and other goodies from the mall, along with the crater in disposable income.
However, I think that online shopping *did* kill the stores on Madison Avenue. Since those were luxury stores, the recession probably didn’t hurt them. But, now that you can buy those luxury goods online, even from those same retailers, the brick and mortar stores simply don’t get the foot traffic. (However, it does surprise me that luxe places would close a store on Madison Avenue. They usually like to keep a flagship store even if it operates at a loss.)
Some interesting numbers from Sacramento:
Sacramento, CA
Median home value: $299,200.
Mean family income: $64,500.
Ratio: 4.6. Not affordable, but not as bad as San Francisco.
Regards,
Roidy
Plus sac is all gov goons that get paid no matter what
The homeownership rate in Sacramento County is approximately 55%.
If you assume that renters’ incomes are skewed lower, and “owners’” incomes are skewed higher, then Sacramento is more affordable than the 4.6 ratio might otherwise indicate.
Does that imply that dumb people earn more money?
“‘One of the biggest effects of tighter government regulations is that it creates a psychological response by potential sellers and potential buyers. It ends up like a wait and see approach. If everybody waits and sees what happens, you get a significant pullback.’”
This is what happens in a Price = Value market. In such a market if the price is reduced then the value is also reduced.
This doesn’t happen when department stores have sales. When department stores have sales the prices are reduced but the values - the perceptions of values - remain the same, hence a frenzy of activity. In a Price = Value market there is no frenzy when prices are lowered; The frenzy occurs in the price run-up, not the price decline.
After wait and see comes see and fear.
‘Our basic salary is only 2,000 to 3,000 yuan per month, so we have to depend on commissions,’ said a client manager in a commercial bank.
Nothing like incentivizing employees to make loans to the manifestly non-creditworthy to ensure a bank’s long-term viability.
“Sydney’s housing market has reached a turning point, with buyers no longer willing to match sellers’ expectations, according to a leading sales agency. The ’seasonal impact’ of winter and higher interest rates for investors were having a ‘double whammy effect’ on auction clearance rates, said Domain Group chief economist Andrew Wilson. This was then being compounded by ‘extraordinary numbers’ of sellers going to auction.
It’s as if a million FBs screamed out in unison, and were suddenly silenced.
Buffett buying low?
Store Capital, a real estate investment trust, said Monday that Berkshire Hathaway invested $377 million in the company.
That amounted to 9.8% of outstanding shares purchased at $20.25 apiece, Store Capital said in a statement. Its shares gained by as much as 11% to $23.10 in premarket trading.
Store Capital invests in single-tenant real estate for profit.
“An investment in our company from one of history’s most admired investors represents a vote of confidence in our experienced leadership team and an affirmation of our profit-center real estate investment and management approach,” said Christopher Holk, Store Capital’s CEO. He was referring to Berkshire Hathaway Chairman Warren Buffett.
Buffett has said real estate was a solid investment that was less volatile than stock prices and likely to produce gains. In 2016, he said
https://finance.yahoo.com/news/warren-buffetts-berkshire-hathaway-just-124900545.html
‘What might seem like a disappointing price today might be market value or a great escape in three months’ time,’ Mr Phillips said.”
Let’s just say this then: “It’s always a good time to sell.”
For example, say I wanted to sell my house, but the market would not give me the same price as two years ago. I’m compelled to reduce my expectations and align them with reality. However, I’m reluctant to leave money on the table, so I set the price I want. Let’s say I have to wait a year or more with a mortgage payment of $2200/mo. along with taxes, insurance, and upkeep. I’m out of pocket by upwards of $24k when I may have sold it by reducing my price accordingly. Now, the local price is falling, and I need that “Great Escape” of three months ago on a house priced for a year ago with continuing costs of everything associated with it.
After some time has passed, I’m looking up the price of a DIY bankruptcy on the internet. Now, I cannot afford that either.
Really? Hmmm…
Regards,
Roidy
But…but…not giving it away.
the Greater Toronto Area shed almost 6.4 per cent in just two weeks with sales down about 50 per cent from a year ago.
and tor is not a cow town
ouch
july 5 double death cross
like 2005 ,but now as bad
No “pent-up demand” for $500,000 starter homes happening here:
http://www.marketwatch.com/story/this-is-why-millennials-cant-have-nice-things-or-save-any-money-2017-06-26
I love the comments from the old people who have to brag:”Well, this is what I did and you should too!” Just like when they come back from a casino - you’ll always hear of how much they won, never how much they lost.
And diamonds? Who buys jewelry these days? I bought one diamond in my life and promptly gave it to my girlfriend and asked her to marry me. I have no plans to buy future diamonds.
“you’ll always hear of how much they won, never how much they lost.”
Just like housing!
And just like housing, they don’t understand the extra money involved. A friend of the family bragged about winning $1000 in Vegas. When I explain “but you bought airfare and hotel rooms and meals to get you there” it was like a deer in headlights.
“Preparing meals at home and brewing your own coffee can add up to big savings.”
If you have a home.
Comment: “They don’t make enough money so they just spend what they make without thought of tomorrow because there may not be a tomorrow… not with this fragile economy and the associated societal breakdown along with this economy.”
Nailed it.
‘As upstart companies rushed into the business of shared workspaces last year, chasing $20 billion industry leader WeWork, one of the pack drew notice for its unusual spin on the concept.’
‘Bar Works introduced the dubious idea of combined bar and co-working spaces that allowed members to both work and imbibe. Now the company is the subject of an FBI investigation and at least two lawsuits alleging fraud. Amid the allegations, Bar Works did not appear to be operating Monday. A visit by Crain’s to its two Midtown locations—on West 46th and West 39th streets—found the retail spaces dark and empty. A padlock had been installed on the front door at 47 West 39th St.’
‘Landlord Alexander Brodsky, said his family’s real estate firm, the Brodsky Organization, had begun eviction proceedings against Bar Works. “They seemed cooperative at first, but then when we asked questions about why they weren’t paying rent, no one could be reached,” Brodsky said.’
‘Twenty-seven investors from China launched a joint lawsuit in State Supreme Court June 16 seeking repayment of more than $3 million the group invested in Bar Works that it alleges was pilfered by Bar Works executives in a Ponzi scheme. That suit, along with news that another investment group had filed a similar case against Bar Works in Florida in recent weeks and that the co-working company was being investigated by the FBI, was first reported by Law 360.’
‘One of the mysteries surrounding the firm is who is responsible for the alleged fraud.’
‘The average home sold for $808,847 from June 1 to 14…The peak of the market in Canada’s largest city now appears to be in April when the average price soared to $920,791. ‘I don’t think that many buyers have been pushed out of the market,’ said the economist. ‘One of the biggest effects of tighter government regulations is that it creates a psychological response by potential sellers and potential buyers. It ends up like a wait and see approach. If everybody waits and sees what happens, you get a significant pullback.’
Besides the blow-off 30% it added at the end, it should be noted that in a normal housing market hardly anyone would be paying attention to shack prices.
‘In a note to sales staff BresicWhitney director William Phillips said it was ‘clear that we have entered a new phase in the market.’ He said it was an ‘opportune time to sell.’ ‘What might seem like a disappointing price today might be market value or a great escape in three months’ time,’ Mr Phillips said.’
Bill (can I call you Bill?), don’t get too far ahead of yourself. First the slight suggestion that they accept the lower amount while the getting is good. Later scold them for being greedy. After that scare them that the floor might be falling through (you jumped right to this one). Then you can become a foreclosure expert and start kicking them out and sell their shacks for the banks.
“Chinese real estate developers find themselves squeezed by government curbs on bank lending that aim to deflate the housing bubble, as well as a regulatory campaign to force the financial sector to deleverage and improve risk controls. According to Caixin, one by one, regulators have restricted the sources of funding available to builders. Now, with even the costliest and riskiest form of borrowing - via trust companies - under scrutiny, companies are running out of options.”
Any thoughts on when U.S. regulators will step up with active measures to deflate our housing bubble?
My guess would be long after it falls in of its own weight, when everyone is asking how such a bubble could have ever happened.
Then the next generation will remove any such regulations and give it another go, thinking only the boomers could be so stupid.