The Easy Rise-And-Rise Days Are Over
A report from York Region in Canada. “What went way up just had to come way down. Lauren Haw, CEO of Zoocasa, who crunched York Region’s real estate numbers, said the biggest story is the steep drop from April 2017 through June 2017. ‘Over that period, we saw a 55.5 per cent decline in sales for detached homes and a 19.3 per cent decline in condo sales, as well as an 11.7 per cent decline in house prices and a 19.3 per cent decline in condo prices.’”
“Veteran realtor Darryl King said the reason for the drop was simple: a huge glut in housing supply on the market compared to earlier in the year and late last year. ‘The supply increased by 47 per cent. Everybody was waiting and wanted to cash out but some waited too long. Where before you only had one house, now you’ve got 10 on the market and now you can’t sell that house,’ said King.”
From Bloomberg on Israel. “Housing prices in Israel have been rising for so long that many residents don’t remember what it’s like when they fall. They may be about to find out. Signs are growing that Israel’s housing boom is sputtering, with fewer investors snapping up homes as mortgage rates rise. It costs about $920,000 on average to buy a three-bedroom apartment in Tel Aviv — more than in London or Amsterdam — and more than double the nominal cost a decade ago. That has priced many people out of the market in a country where the average salary is about $35,000 per year.”
“‘At some point, something’s gotta give,’ said Rafi Gozlan, chief economist at Israel Brokerage & Investments Ltd. ‘We’re now seeing the first signs of a market that’s starting to digest that prices can’t go up forever.’”
From The Hindu on India. “The National Capital Region was one of the worst-hit real estate markets in the country in the first half of 2017, with new launches, sales as well as prices seeing a sharp contraction, realty consultancy Knight Frank said. The overall inventory in the NCR could take over four years to liquidate, while this typically used to be just two years. Coinciding with a 20% correction in residential property prices in the NCR over the past 18 months, the current situation doesn’t make much sense for prospective real estate investors, as Gulam Zia, Knight Frank’s executive director said he is still not sure if things have ‘bottomed out’.”
“NCR prices are seeing lower growth rates than retail inflation, so effectively real estate in the region is giving negative returns, he said.”
The Epoch Times on China. “When the economy started to cool in the beginning of 2016, China opened up the debt spigots again to stimulate the economy. After the failed initiative with the stock market in 2015, Chinese central planners chose residential real estate again. And it worked. As mortgages made up 40.5 percent of new bank loans in 2016, house prices were rising at more than 10 percent year over year for most of 2016 and the beginning of 2017. Overall, they got so expensive that the average Chinese would have had to spend more than 160 times his annual income to purchase an average housing unit at the end of 2016.”
“Research by TS Lombard now suggests the housing bubble may have burst for the second time after 2014. ‘First- and second-tier cities have enacted such draconian measures that it is nigh impossible to buy or sell a property,’ states the report. ‘Unlike 10 years ago, when most Chinese households made a 50 to 70 percent down payment to buy a new apartment, more than 80 percent of borrowers in the past two years have put down 30 percent or less. With reduced mortgage funding availability, we believe it is unlikely that households will be able to finance their purchase through savings.’”
The New Zealand Herald. “Wow, what a day for property news - a one-two punch to the Auckland market. Just as QV data was confirming that the Auckland market is well and truly stalled, along come the Barfoot & Thompson statistics showing the average sales price in June dropped 3.1 per cent on the average for the previous three months, and was only 0.6 per cent higher than it was 12 months ago.”
“Boom, Auckland house sales have hit the canvas. When our optimistic friends in the real estate industry start to acknowledge a trend, we can be sure it has become an unavoidable reality. Most Aucklanders have been well aware of the change for a few months now. To use a slightly unscientific term, the vibe had changed. The conversation around central Auckland sports fields and dinner parties still gravitates to property because someone is always selling a house or knows someone who is.”
“Those property stories are now tinged with seller panic. The Barfoot & Thompson data confirmed the anecdotes. Peter Thompson’s commentary was clear and insightful. The slump in sales numbers has finally translated into prices. In other words, people who needed to sell were holding on, hoping that buyers would return to the market. They haven’t and now prices are falling.”
From News.com.au in Australia. “From Chinese billionaires through millionaires down to everyday workers trying to build a pot for their futures, the choice of investment had been expanded from apartments in Beijing and Shanghai to property in Melbourne and Sydney — and London and New York, Vancouver and Toronto, etc etc. Now, it seems property prices in some of those places have turned down: so, is the global property boom over and will ours be dragged down with it?”
“There is no easy answer to what is really a very complicated question but there’s a really easy way to start. To a real estate agent or a speculator, the ‘norm’ — indeed, the very expectation as a right — of not just prices going up every year, but the certainty they will. That is over. But that does not mean that instead of prices going up by, say, 10 per cent every year, they will now fall by 10 per cent every year. They could well go sideways for an extended period. To a speculator that would seem like a total bust — especially if the interest rate on their borrowings rose.”
“Oversupply in new apartments and cuts to the tax savings on off-the-plan buying could see apartment prices fall. But demand-supply dynamics should mean established property prices go sideways at worst. What happens in those — linked — overseas markets and inside China will be even more significant over the longer term. If prices plunge in, say, Vancouver or Auckland, their property will become more attractive to foreign investors. If the Aussie dollar plunges, an unchanged Aussie dollar price is suddenly discounted to a Chinese buyer. Bottom line: the easy rise-and-rise days are over. It’s become more ‘complicated.’”
‘To a real estate agent or a speculator, the ‘norm’ — indeed, the very expectation as a right — of not just prices going up every year, but the certainty they will’
This is a pretty good description of a mania mental state.
‘But that does not mean that instead of prices going up by, say, 10 per cent every year, they will now fall by 10 per cent every year. They could well go sideways for an extended period.’
Or they could fall in half in three years, like Darwin. And it’s still ridiculously over priced. I swear these Australians take the cake.
It’s amazing how many otherwise-bright people fail to grasp the old adage, “what goes up, must come down”, as it applies to their own preposterously overpriced real estate investments.
“… otherwise bright people …”
Bright enough to make some very big bucks, dumb enough to agree to send to me huge chunks of it each and every month.
It’s the demand and supply. Everybody wants to live here. 2008/9 never happened….the demand was real strong then. Blan blah blah….
People also tend to quickly forget or completely ignore recent financial history, especially if bailouts funded by others made them whole again.
Or is it that the memory of bailouts provides reassurance that financial imprudence will be richly rewarded?
How many FB’s were bailed out vs. the number that were foreclosed? I seem to recall that Ben posted many videos detailing neighborhoods full of empty houses, many vandalized by those foreclosed and evicted, after the previous bubble burst?
Saudis breaching an OPEC agreement? Inconceivable!
Those massively over leveraged shale plays are going to be in a world of hurt unless some exogenous event like missiles flying between Iran and Saudi Arabia intervenes.
Time to dust off the 1990s era joke:
Q: What do you call an oilman in Texas?
A: Waiter.
http://www.zerohedge.com/news/2017-07-11/wti-tumbles-back-43-handle-after-saudis-breach-opec-agreement
I drove through west Texas a little over week ago. It was booming.
I just got this in an email:
‘A recent June 2017 report from Credit Suisse estimates that between 20% and 25% of the nation’s shopping malls will close in the next five years as shoppers’ habits continue to shift from in-store to online buying. The report estimates that around 8,640 stores will close by the end of the year.’
“It’s now a known and accepted fact that online shopping has changed both the presence and the form of bricks-and-mortar retail outlets in the United States—including Florida – and it will continue to do so”, says Brian Andrus, President of the Florida Gulfcoast Commercial Association of Realtors. “Property owners and municipalities should not be caught asleep at the wheel. There are developers, entrepreneurs and municipalities today who can engage with the vast talent inherent in the commercial real estate professional community in Tampa Bay to take action.”
‘He continues to explain that it is negligent to do otherwise, and, thereby inherit the inevitable shuttered stores, vacant buildings and sites that can become blight and result in the decline of the physical asset’s value as well as that of property values.’
‘According to Morningstar Credit Ratings, the U.S. has the greatest amount of retail space per capita—23.5 square feet per feet per person—of any country in the world. Canada, with 16.4 square feet per person, is second, followed by Australia’s 11.5 square feet—less than half that of the U.S. Some feel there may be a longer way to fall before the industry hits bottom.’
I can’t stand buying clothing online. Until there’s some world standard in terms of size and fit, it’s a time-wasting endeavor which involves return shipping nearly every time.
Indeed. The struggle is real.
I recently starting buying my suits/ shirts from a different retailer. I had to visit a brick and mortar store first though to see which cuts and styles fit me best. Their online deals and selection are better than in the store. They have free ship to store and if I have to do a return, I just take it to the store.
ISTR hearing about how retailers have stronger online sales in areas where they have a physical presence. And I think ease of returns and touching/feeling the product is why.
The need for cavernous stores is waning. Store footprints are shrinking, and retailers will want to be in the strongest locations (highest foot traffic).
So, retail in tertiary locations is dead/dying. Secondary location retail is highly questionable. Primary locations will still need to deal with downsizing of tenants/cost of reconfiguration, but they will survive (and maybe even thrive if they can get more rent per square foot for the smaller stores…).
‘the U.S. has the greatest amount of retail space per capita—23.5 square feet per feet per person—of any country in the world. Canada, with 16.4 square feet per person, is second, followed by Australia’s 11.5 square feet—less than half that of the U.S’
It’s going to be another Twitter.
We also consume approximately 50% more per household than Canada and Australia.
I’m not saying the retail will be “just fine”.
For some types of retail, the number of square feet per capita has already been shrinking (and will continue to do so). The question is what the ramifications of this will be. In large part this is because development is at low levels, and retail is being repurposed to other uses.
My guess, as noted above is that tertiary locations will suffer dramatically. Large format stores in will be substantially curtailed, and all retail will favor smaller footprints in stronger locations.
My AV receiver recently died, so I needed to get a new one. I could order one, but I had the time to set it up over the weekend, and so I decided to actually buy one in a store.
My first stop was Fry’s Electronics. Large cavernous store, terribly organized. What used to be 50 registers 15-20 years ago is now 20 (of which 2 or 3 were ringing people up). There was a sparse population of customers in the store, but they did have what I needed–and it was close to home.
Unfortunately the unit was defective.
So, I looked online, and found that Best Buy had what I needed and I could buy it and pick it up in-store.
That store was dramatically different…smaller footprint (maybe 15-20% the size of Fry’s), helpful staff, in the store there were effectively mini-stores for other manufacturers/specialty (Apple, Microsoft, Magnolia Audio, etc.). Walked in, looked around, picked up the receiver, went home. There were lots of other shoppers in the store.
Fry’s Electronics was developed for a different era and is obviously dying. And when Fry’s lease is up, there will NOT be another retailer of that size to fill the space. My best guess is that it will go to another commercial use, or become housing.
Multiply that times lots and lots of similar stories, and you see why retail is going to be going through a really rough patch.
ISTR hearing about how retailers have stronger online sales in areas where they have a physical presence. And I think ease of returns and touching/feeling the product is why.
That’s part of it. The other piece is that B&M stores close due to an area no longer being able to support them, i.e. the region became poorer.
https://www.sellerlabs.com/blog/ecommerce-brick-and-mortar-symbiotic-relationship/
Yes, but other B&M stores are closing because their model (large footprints) is no longer competitive in a world with easy online shopping. Nothing to do with the area becoming poorer.
Instead of buying Whole Paycheck, maybe Amazon should set up small stores just for Amazon returns. You get your money back now, they take care of shipping. Maybe charge a small fee for non-Amazon vendors? That would be a HUGE boost to Amazon sales, especially clothing and shoes.
I use those Amazon return lockers when I have an Amazon return. They’re flippin everywhere. It is pretty simple, scan the bar code, a locker pops open, throw the box in and go.
I use those Amazon return lockers when I have an Amazon return.
Hmmm … must be a big city thing. In my neck of the woods I have to drop off the box at a UPS store. Either way you have to repack the box and drop it off.
I have bought and returned quite a few things through Amazon and the vendors were good about emailing free return labels. So, easy peasey.
Not every vendor follows the same policy however.
Somewhat related: A video of a robot-assisted Amazon warehouse: https://www.youtube.com/watch?v=6KRjuuEVEZs
The pick-workers will be next, shortly.
More businesses moving to the cloud. Just think how low residential housing prices will go once it’s possible for us to live there.
On a serious note, I disagree. I’ve adopted the Jobs/Zuckerberg approach to work attire. Two sets of 3 dress shirts (each set a different solid color), one set of jeans…all ordered online. Workout gear, same thing. It might take a few tries but once it’s dialed in life’s easy for a few years.
+1 I have my work attire cataloged at L.L. Bean.
Oil seems subject to the deflationary pressures caused by our economic “recovery” that is enriching the 1% while everyone else loses ground. But all bets are off if the 1,400-year-old Sunni-Shia feud flares up into open warfare.
http://oilprice.com/Energy/Oil-Prices/The-Major-Wildcard-That-Could-Send-Oil-To-120.html
They aren’t losing ground in Texas. I saw a billboard advertising $17/hour jobs at a McDonald’s in Pecos, which is south of Midland. Includes free rent.
This reminds me of the Bakken oil fields just 2-3 years ago.
Anyway, we’ll see if OPEC can beat the frackers this time in a race to the bottom.
Those massively over leveraged shale plays are going to be in a world of hurt unless some exogenous event like missiles flying between Iran and Saudi Arabia intervenes.
You have been following all the Qatar related drama, have you?
‘When the economy started to cool in the beginning of 2016, China opened up the debt spigots again to stimulate the economy. After the failed initiative with the stock market in 2015, Chinese central planners chose residential real estate again. And it worked. As mortgages made up 40.5 percent of new bank loans in 2016, house prices were rising at more than 10 percent year over year for most of 2016 and the beginning of 2017. Overall, they got so expensive that the average Chinese would have had to spend more than 160 times his annual income to purchase an average housing unit at the end of 2016.’
We watched this stock thing all along here. Remember the “save the A shares” quote? The Chinese government completely herded the public into that bubble. Who can forget the photos of square dancing ladies in group hugs crying? Or people jumping off mall balconies. I said at the time it showed the government was out of ideas, and only had bubbles to buy them time. This is the global behemoth? These central planners are idiots.
‘After home prices jumped by as much as 76 percent in China’s first tier cities from the beginning of 2015 through the end of last year, the country’s leadership came into 2017 determined to stop speculation and cool down the cost of housing in major cities such as Beijing, Shanghai and Shenzhen.’
‘Halfway into the year, however, the market for housing in China’s largest urban centres looks more frozen than cooled, with home sales transactions nearly disappearing compared to 2016.’
‘The drop off in home sales follows after Premier Li Keqiang told the National People’s Congress during March that, “Housing is for housing, not speculation.” During meetings that month, China’s Ministry of Housing and Urban Rural Development rolled out highly targetted guidelines seeking to fix housing prices in individual cities, limit the ability of buyers to purchase homes and eliminate the specter of ever-rising costs for basic shelter.’
‘Besides the arctic chill rolling through Shanghai, home sales are also taking a drive in China’s capital. Homelink data indicates that 8,918 secondhand homes were sold in Beijing in June, dropping 30 percent year-on-year and 17.4 percent month-on-month.’
‘Stricter housing rules are also dragging on the secondary housing market in Shenzhen, where sluggish growth was reported with 6,343 secondhand units trading in June compared to 6,283 units in May. Home prices in Shenzhen had risen 76 percent from January 1, 2015 through the end of 2016, according to official figures.’
‘Then in mid-March, central government officials pledged to tackle the housing bubble in big cities once and for all. The city of Beijing announced its toughest measures yet, raising the down payment requirement for most second home purchases to an unprecedented 80 percent. Dozens of cities across the country followed suit with their own tightening measures.’
Is there any hope the Trump administration might follow China’s lead with 80 percent downpayment requirements on second home purchases, in order to give our poor kids a fair shot at some day owning homes rather than favoring foreign speculators in our own residential markets?
Write him and ask. Enough people make noise, it might happen.
If you live in a blue state, you get “workforce” housing, where you cant make more than minimum wage. The left are truly twisted and when you realize they still want a plantation economy (like when they supported slavery), then you realize why its so important to tear down confederate statues and other symbols - in order to hide their history and culpability.
Could we dispense with the wingnut talk-radio memes of plantations and “the left” supporting slavery? These are deplorable memes and not applicable. The modern left/right and even Democrat/Republican emerged and changed long after the end of the Civil War.
When you boil it down, those talk radio guys are in the business of convincing working class and middle class people to support policies and candidates that benefit the wealthy. You can see what lengths they go to in order to accomplish that goal.
The old talk-radio meme was that Democratic politicians wanted to keep low-income Free Stuff Army dependent on Free Stuff so that those people would vote for more Free Stuff. I guess that’s not working anymore, so talk radio has to go to extremes.
But this plantation meme is ridiculous on its face.
Slaves were forced to work but didn’t get paid, but the Free Stuff Army gets paid but doesn’t work.
The Free Stuff Army is supposed to vote for Dems, but slaves didn’t even have the right to vote.
How is this comparable on any level?
Those comparisons could go on and on. The Republicans in those days were the virtue signaling PC SJWs, constantly crying about the poor slaves toiling away.
Polish is dead on - look at the fight over open borders and sanctuary cities. All that is about is cheap/slave labor and (often illegal) votes - same issue that the civil war was fought over. You may just be too dense to see the big picture but by all means blame it on the radio if that makes you feel better!
Republicans in which days? The run-up to the Civil War? Now you’re misapplying the meme. News Flash: The labels of Democrat and Republican have been so switched up and abused that I don’t even use them anymore. Much like “subprime” and all of the various “isms,” words like this are good for cheating and logical fallacies and not much else.
“…..dispense with the wingnut talk-radio”
Good call Oxy.
I think the *concept* of Free Stuff Army and wanting illegal immigrants to do the dirty work is a viable argument.
I just don’t like the use of the words “plantation” and “slavery” and linking them to modern political parties. Perhaps a better analogy is to sharecroppers, or to serfs on working the lands of the local lord.
Some always want to take advantage of others, and make a story to justify it. The grandchildren of the oppressed are no exception.
We’re celebrating 100 years of women’s suffrage up here along the Erie Canal, where it was hatched probably. They’ve got a water parade planned from town to town. We’re all advised that if they want any tieup being used by the commoners, we have to move off. To where who knows. It challenges my ideas of fairness.
I spy a propaganda troll. Polish/russian, doesn’t matter.
“If you live in a blue state, you get “workforce” housing…”
What happens when you retire and don’t own anything?
Excellent question which highlights part of the left’s desire to keep the slaves on their plantation - giving them no way to build wealth, much less pass it on to future generations.
This guy gets it:
https://www.youtube.com/watch?v=jHkC6UJlIaY
I guess those people just never retire. Look how many elderly folks are working in retail these days.
Great comment - should be made law.
“the average Chinese would have had to spend more than 160 times his annual income to purchase an average housing unit”
These guys are really going to hurt themselves.
‘Faraday Future, the electric-vehicle startup backed by LeEco founder Jia Yueting, halted plans to build a $1 billion factory in Nevada as the troubled tycoon fights for the survival of his Chinese car business. The plant in North Las Vegas that was due to build Faraday’s 1,050-horsepower FF 91 has been put on hold, according to an emailed statement.’
‘The halt marks another setback for one of China’s most outspoken and controversial entrepreneurs. Amid a cash crunch, Jia ceded the chief executive officer role at Leshi and last week said he would step down from its board to focus on serving as chairman of LeEco’s auto unit and Faraday Future. Jia asked in a Weibo post for LeEco to be given more time to repay its debts after a Chinese court froze billions of dollars in assets that he controlled.’
‘Construction on Faraday’s Nevada factory paused at one point late last year when the facility’s building contractor claimed payments had stopped. At least two other suppliers, including a car-seat maker and media-services provider, took legal action to force Faraday to pay its debts.’
‘Nevada Treasurer Dan Schwartz questioned Jia’s plans for the electric-car plant there last year. He called the billionaire’s strategy of borrowing to finance so many new businesses so quickly unsustainable. “This is all Fantasyland,” he said at the time. “The best analogy is the Emperor’s New Clothes. There’s nothing there.”
You know Dan, Mike says you want people to lose their jobs because you pointed out a problem. So I guess in Mike-Land it’s your fault, not this dumb Chinese billionaire (former billionaire?) with the kookie Jetson car factory.
‘Although APEX is about 53 miles away from Mesquite, local government and economic specialists have long touted that FF would have boosted the economy, bringing many of the FF workers to Mesquite to live and raise their families, since it is cheaper than Las Vegas and the drive is relatively simple. For now, the 13,000 proposed jobs will be on hold until the financial stability of FF can be improved.’
A comment:
‘Yada, Yada, Yada.. It is amazing that Nevada continues to fall for pie in the sky flim flan artists over and over. Will we ever learn the difference between legitimate business and snake oil salesmen? How do elected officials continue to promote this kind of hype?’
AZ is probably on the hook for Lucid’s never to be completed facility in Casa Grande. They also have significant ties to LeEco.
http://azbigmedia.com/azre-magazine/driving-in-manufacturing
You know Dan, Mike says you want people to lose their jobs because you pointed out a problem.
No, I never made any such claim. As I stated yesterday, there are quite a few people who have stated that they would welcome a recession, which would involve millions getting thrown out of work.
‘they would welcome a recession’
Recessions are periodic in the business cycle. It’s economic booms gone crazy that throw millions out of work. It’s housing manias that cause millions of foreclosures. It’s interesting that you can’t get your head around that.
Take Australia above: plenty of FB’s, unemployed miners and foreclosures in the commodity areas. These towns had run of the mill dumps selling for 900,000 Australian pesos in 2012-2014. I said that was a bubble. Does that make me welcoming of their recession? There isn’t anything anyone could have done to keep that insanity inflated.
Look a little further and you’ll find that resource boom was largely QE related, specifically Chinese QE. The fall out is hammering parts of Brazil, Australia, Africa and Canada. Unlike your appeals for economic happy talk, I’d say our time is better spent examining what’s causing these painful distortions.
And Israel: just how do shack prices get to 900k when they earn in the 30k’s? Could the same thing be happening elsewhere, like in the US?
It’s economic booms gone crazy that throw millions out of work. It’s housing manias that cause millions of foreclosures. It’s interesting that you can’t get your head around that.
Actually, I’ve never made a comment regarding that, so it’s not fair to say that I can’t get my head around it.
Also, recessions in American history haven’t all been caused by the same thing. The recession in the mid-70s was caused by OPEC driving up the price of oil.
Finally, all of this really has nothing to do with my point, which is that recessions cause great suffering for many people.
‘my point…is that recessions cause great suffering for many people’
And the flu season causes great discomfort. What I do is avoid people who are sneezing and wash my hands regularly if I’m in the public.
That confirms my other point. The assumption is that others will pay the price.
Oh you had two points? What you should really do is go on a crusade to eliminate the business cycle. Much has been written on the subject but not much has been done about it unfortunately. Until then recessions will come and go. One can shore up finances, avoid too much debt, lean toward work that isn’t subject to sketchy industries, etc. And it would help a bunch of people if housing/rent prices weren’t so high.
And Israel: just how do shack prices get to 900k when they earn in the 30k’s?
Not to mention that you are surrounded by enemies whose main goal in life is to annihilate you. You couldn’t pay me to live in a place like that.
Finally, all of this really has nothing to do with my point, which is that recessions cause great suffering for many people.
True. And my point continues to be that I think “saving” people from that suffering will eventually result in far more suffering than the honest business cycle would have subjected them to.
And my point continues to be that I think “saving” people from that suffering will eventually result in far more suffering than the honest business cycle would have subjected them to.
+100
True. And my point continues to be that I think “saving” people from that suffering will eventually result in far more suffering than the honest business cycle would have subjected them to.”
yea to strain the metaphor it ’s like not letting forest fires clear away the dead brush until it piles up so high..
I disagree. History is rife with instances where really bad downturns in the business cycle result in armies crossing borders and life and (more importantly) property being destroyed.
it ’s like not letting forest fires clear away the dead brush until it piles up so high..
Yep…and every time a fire springs up we spray lots and lots of water on it to put it out quickly…enough to grow a bunch more fuel. And the fuel just keeps stacking up…
History is rife with instances where really bad downturns in the business cycle result in armies crossing borders and life and (more importantly) property being destroyed.
True. So perhaps we should have things balance themselves out BEFORE the risk of a “really bad downturn” became so high. Now it’s basically a sure thing…just a question of when.
Sounds like… regulation… which everyone agrees is BAD!
Not me. I consider that the biggest flaw in libertarianism…the faith that capitalism will always self-regulate.
The reason capitalism often doesn’t self-regulate is that people assume the government will step in to save the day and/or that government regulation (or other entities) is looking out for them.
“Buyer Beware” is a thing of the past.
Case and Point: The subprime crisis wouldn’t have gotten nearly as out of control if buyers of subprime paper actually did analysis for themselves and didn’t take it as given that AAA meant AAA.
Having fewer large players in the economy is destabilizing.
Fewer large players are created through over-regulation.
The reason capitalism often doesn’t self-regulate is that people assume the government will step in to save the day and/or that government regulation (or other entities) is looking out for them.
I think people make occasional bad decisions due to that. But I don’t think it’s the reason that capitalism itself doesn’t self regulate.
Having fewer large players in the economy is destabilizing.
Fewer large players are created through over-regulation.
Hmmmm. Some kinds of regulation do favor scale. But I think the tendency toward monopoly is to be expected regardless of regulation. Even in a libertarian paradise I would expect a lot of monopoly and collusion in any industry with economies of scale.
I think what Mikey Mike was saying is true — there are a lot of people that are cheering not only for a recession, but a full-blown collapse of civilization — simply because they want to see people suffer. I don’t think these people really care about ‘being financially prudent’, or finance at all. They just want to see as many people in as much pain as possible. Maybe they got bullied as a kid or something and never got over it.
I don’t believe that. Sadists and psychopaths do exist but they aren’t that common.
A desire for justice for savers…I can totally believe.
The Filth is exaggerating, but there’s something of a point there. There may not be such intensity animosity towards those whose lives are thrown into chaos by unemployment, but is there the idea that it’s a price worth paying, if it’s other people who pay the price.
Carl — yes, I should not have said, “a lot”. There’s not too many psycho’s around here.
Maybe this a dumb analogy, but I kind of look at recessions like the winter we had this year in my town in Oregon. We had an uncommonly cold winter (so as I was told, this was my first year), with a deep freeze. All these beautiful trees in my neighborhood froze pretty deeply, and they were completely covered in ice. Some of the smaller trees died. Most of the the larger ones had branches die and fall off. Lots of power outages across town, etc. Then we had several inches snowfall, which was uncommon too.
All these beautiful trees looked so beat up and damaged, I figured it would take multiple years to recover. Wrong I was!
This spring and summer, they have gone absolutely bonkers with new growth. Truly impressed I am with the regrowth from all the damage over the winter. In a way, recessions are kind of like that, you sometimes get a very cold winter and the weak stuff gets cleared out, and it is painful, but it all comes back much stronger in the future.
But my point in using the word “justice” is that some of us have been paying the price for a long time already. It only seems fair that others should take a turn.
But to address your point head on, yeah, there’s some major pain in store. And it’s been allowed…nay, encouraged to get so out of hand that many if not all innocents will suffer as well. All bad things. But we’re making it even worse by continuing to kick the can. So from my perspective your (and my other people’s) desire to make it less painful is actually making it worse. And allowing TPTB to rob us all blind in the meantime.
“There may not be such intensity animosity towards those whose lives are thrown into chaos by unemployment, but is there the idea that it’s a price worth paying, if it’s other people who pay the price.”
When the Petrobras scandal broke, the FT plastered their front page with a huge photo of a queue of Petrobras workers who were laid off as a result. As if to say: if only the plutocrats’ multi-billion-dollar corruption scheme had been allowed to continue, these poor people would still have their jobs.
So is that a price worth paying? If you think it is, then the corrupt billionaires of the world will proclaim themselves your biggest fans.
We have trippled down on the subprime since 2009. It just has different names.
“Your desire to make it less painful is actually making it worse. And allowing TPTB to rob us all blind in the meantime.”
Beautifully put, Carl.
I had a whole long reply written about the less-visible suffering of the boom years that recession-fearers amongst us conveniently ignore (people thrown out on the street when their rent triples, retirees’ pension funds saddled with negative-yielding debt waiting to implode, jobs lost to M&A efficiency frenzies, jobs never created because zombie companies are propped up, stifling their competition.) But you said it far better and with such concision! Cheers.
“What you should really do is go on a crusade to eliminate the business cycle.”
Isn’t that Alan Greenspan’s crusade, started three decades ago and still underway?
All these beautiful trees looked so beat up and damaged, I figured it would take multiple years to recover. Wrong I was!
This spring and summer, they have gone absolutely bonkers with new growth. Truly impressed I am with the regrowth from all the damage over the winter. In a way, recessions are kind of like that, you sometimes get a very cold winter and the weak stuff gets cleared out, and it is painful, but it all comes back much stronger in the future.
That’s a big assumption, that the economy is like a forest and that “business cycle” is something inherent in the economy that allows it to heal itself. It’s something that many would like to believe.
armies crossing borders and life and (more importantly) property being destroyed.
Luvvin’ those priorities there…
‘my point…is that recessions cause great suffering for many people’
Withdrawal from an addiction is painful, but it is preferred over further excess, and earlier is preferred over later.
“Veteran realtor Darryl King said the reason for the drop was simple: a huge glut in housing supply on the market compared to earlier in the year and late last year. ‘The supply increased by 47 per cent. Everybody was waiting and wanted to cash out but some waited too long. Where before you only had one house, now you’ve got 10 on the market and now you can’t sell that house,’ said King.”
Isn’t amazing how quickly a perceived shortage can morph into a glut when short-time investors try to all cash in their holdings en masse?
Somehow we didn’t have a shortage of houses for hundreds of years, only to suddenly discover one in every city and small burg all over the world. Strange.
And notice that when these frantic shortages turn into gluts, the media or UHS never reflect on just how wrong they were? Jeebus it was just a few months ago they were saying this.
Once again I need help understanding this: Realtors complained that they couldn’t sell because there wasn’t enough supply. Now there is supply and nothing is selling…..and they are complaining.
———–
Where before you only had one house, now you’ve got 10 on the market and now you can’t sell that house,’ said King.”
————-
Well go sell it dammit! There’s your supply Mr. King!
SUPPLY MOTHERF**CKER!
“Now there is supply and nothing is selling.”
That’s because there is lots of supply. At this point the rules of Econ 101 begin to once again kick in.
If a desire for a product is directly related to it’s scarcity what happens to this desire when the product becomes plentiful?
I understand that, but there was so much ‘pent up demand’ according to these people!
There WAS pent up demand, but this pent up demand was related to scarcity and this scarcity was related to rising prices.
If prices of houses are rising then whomever owns a house owns a wealth generating machine. People do not want to sell a wealth generating machine, a wealth generating machine is something people want to buy, not sell. People only want to sell their wealth generating machine when the machine stops generating wealth.
Wanting something scarce is an absolutely basic human trait, exhibited even by toddlers.
Experiment: If you know a toddler, and say they don’t want to eat something on their plate. Take that thing away and tell them they can’t have it. They will immediately want it. I’ve seen this demonstrated and it’s fascinating.
Marketing 101.
“…only to suddenly discover one in every city and small burg all over the world. Strange.”
Coincidentally, the shortage manifest itself over precisely the time period when real estate prices rose at historically unprecedented rates for a protracted period of time.
I think that’s part of it, Bear. I zillowed the surrounding neighborhoods and there is almost nothing under $350K. They are now asking $400K+ for 1960’s era split-level shacks. That’s out of the range of two $50K teachers, so to speak.
The market naturally gets picked clean in the truly-affordable range. Pretty soon all that is left are homes just out of reach of the GSE conforming loan limits.
And notice that when these frantic shortages turn into gluts
I remember the discussion here back around 2008 about how the builder boys don’t stop building until they can’t get any more credit. That they build even as demand is collapsing because that’s what they do.
Daryl has found the perfect suit for a for a used house salesman, it emanates pure sleaze.
The purple is a nice touch too, moves the sleaze toward a Palpatine-like evil.
http://www.darylking.ca/about.cfm#meet-daryl-king
“We are here not to tax ordinary working people; we’re here to tax the rich,” Seattle City Councilmember Kshama Sawant said at the city council meeting.
“Seattle City Council approves income tax for high-earning residents”
http://www.king5.com/news/local/seattle-city-council-approves-income-tax-for-high-earning-residents/455499111
Really stupid. Instead of identifying the real problems and addressing them, these sorts of band-aids just pick a group to punish.
Not once has the greater Seattle area acknowledged that the lack of affordable housing has nothing to do with rich people in the area, and everything to do with reckless central bank policies.
This will almost certainly be defeated in court. The WA state constitution specifically prohibits cities from levying income taxes.
Same in VA, called the Dillon rules.
Wow,watching a HARP ad
=default city
And here in Denver - the mayor chimes in…….
http://www.denverpost.com/2017/07/10/michael-hancock-state-of-the-city-address/
I’d love to know where he’s going to get all that money to spend.
On a related note, the airport is planning on a very unneeded remodel, which will cost billions. The tenant airlines are opposed to it, as the costs will transferred to them. Passengers are opposed to it because it means higher ticket prices.
Does DIA management care what it’s customers say? Heck no! They’re saying that they’re going ahead with it. I suspect that some people are going to make a lot of money off this boondoggle, which won’t add a square foot of space to the airport.
“I’d love to know where he’s going to get all that money to spend.”
Ummm, taxes?
Nope. TABOR won’t allow raising taxes, unless voters approve.
Voters will approve. Just give it a little time.
Even liberal Denver voters have proven to be tight fisted with recent tax referendums, though I suppose that eventually they will fully de Bruce the city of Denver. It’s their funeral.
http://www.thedenverchannel.com/news/local-news/mayor-announces-rent-buy-down-program
Bless you, weak hands and Bitcoin rainbow-chasers, for gifting me AUY, HL, SSRI, and PALDF at firesale prices these past few days.
‘Expect more homes priced under $300K as D-FW sees one of its biggest building waves’
“Builders focused on house prices under $300,000 reported brisk sales throughout the quarter,” Ted Wilson, principal with the Dallas-based home consultant, said. “Sales activity over $500,000 was choppy.”
https://www.dallasnews.com/business/real-estate/2017/07/10/d-fw-builders-start-homes-decade
I’ve posted a few reports saying the builders are undercutting recent buyers there. Instant FB’s. Same thing is happening in Naples FL.
Ha-ha, that was one of the signs of the peak during the last housing bubble.
I remember a story about a woman who was buying a house in a development, pleading with the salesman to promise he wouldn’t sell other homes in the development under market. He solemnly promised he wouldn’t do that.
One of my favorite bubble 1.0 stories.
More businesses moving to the cloud. Just think how low residential housing prices will go once it’s possible for us to live there.
On a serious note, I disagree w Pitchfork. I’ve adopted the Jobs/Zuckerberg approach to work attire. Two sets of 3 dress shirts (each set a different solid color), one set of jeans…all ordered online. Workout gear, same thing. It might take a few tries but once it’s dialed in life’s easy for a few years.
“I never thought I would live to see the day that this would happen,” Rockwall-based Altura Homes president Donnie Evans said. “That kind of scares me quite honestly.”
http://www.nbcdfw.com/news/local/Wave-Goodbye-to-the-Affordable-Home-in-Dallas-Fort-Worth-433575643.html?_osource=SocialFlowFB_DFWBrand
‘As an example, Evans pointed to a 2,000 square foot-home his company is building in the community of Fate. “We would build a house really similar to this probably in the low $120,000s,” he said. “Fast forward four years later, we’re at $220,000 to $240,000 for the same house.”
‘Evans and others in the industry point to many factors to explain the sharp uptick. Chief among them is an increase in the price of land on which to build a new home, as well as increased costs for labor and supplies.’
Fast forward and Donnie is driving a really expensive car. Hey, stop paying too much for those cow pastures!
http://www.realtor.com/realestateandhomes-search/Fate_TX
Fate, TX Real Estate & Homes for Sale
198 Homes
http://www.realtor.com/realestateandhomes-search/Fate_TX/show-price-reduced
Fate, TX Price Reduced Homes for Sale
24 Homes
Chosen at random:
https://www.zillow.com/homedetails/916-Mangrove-Dr-Fate-TX-75087/80247339_zpid/
07/06/17 Price change $312,000-1.0% $94
06/13/17 Listed for sale $315,000 $95
Tax History
Find assessor information on the county website
Year Property taxes Change Tax assessment Change
2016 $6,323 – $244,680 +4.9%
2015 $6,323 – $233,270 +5.5%
2014 $6,323 – $221,120 +4.8%
2013 – – $210,980 -12.7%
2012 – – $241,630 –
Look here Donnie:
Compton Plan, Spring Meadow Fate, TX 75189
3 beds 2 baths 1,941 sqft
New Construction
$207,990
Ben,
Are you proving your supply is not constrained thesis?
Each and every day!
Remind me what thesis that is again?
“It costs about $920,000 on average to buy a three-bedroom APARTMENT in Tel Aviv ”
Did it reach that price to discourage ownership?
Close your eyes Mike.
‘Snap Inc shares tumbled on Tuesday after Morgan Stanley, the lead underwriter on the company’s initial public offering, downgraded the stock and raised concerns about the social media company’s ability to compete with Facebook Inc’s Instagram. The ratings move, a rarity by a lead underwriter so soon after a listing, came four months after the Snapchat owner’s public debut, which was the hottest for a U.S. technology company in years.’
‘Snap shares have tumbled some 45 percent from a high hit shortly after their debut and slipped under their $17 IPO price for the first time on Monday.’
“You have a one, two, three punch here: Slowing growth, advertisers are still favoring established platforms and a very, very threatening competitor,” said Philippe Collard, founder of management consulting firm Yabusame Partners, which specializes in the tech industry. “Probably, people are sitting on the sideline saying, ‘What do I do with Snap, is it going to be another Twitter?’”
“Probably, people are sitting on the sideline saying, ‘What do I do with Snap, is it going to be another Twitter?’”
Hahah…I’d say that’s the best case scenario.
I’m gonna use that one from now on. What is Rental Watch going to do with that REIT, is it going to be another Twitter?
It’s all demand and supply? They all wanna live here?
National Realty guaranteeing 10%. Ad on tv. Is Bernie out of jail? I’m going all in.
A quarter of Canadian FBs are already in over their heads, and the real housing bust hasn’t even started yet.
http://business.financialpost.com/personal-finance/debt/more-than-quarter-of-canadian-mortgage-holders-in-over-their-head-even-before-rate-hike/wcm/63f39678-8018-4899-af06-66bed7b41774
That slender hottie needs to play the hypergamous card.
It’s nice to be a renter and not worry about what rising interest rates are going to do to your mortgage. Meanwhile, two thirds of Canadians have belatedly figured out they’re in a housing bubble.
http://www.huffingtonpost.ca/2017/07/11/a-canadian-housing-bubble-two-thirds-say-its-real_a_23025516/
This is a worthwhile video.
“The Canadian Housing Bubble Explained”
https://www.youtube.com/watch?v=SK_JbaH2QX0
It’s bad enough to make a long term commitment like a mortgage, but to do it without a fixed rate makes it even scarier.
Americans can’t afford their homes? Well, nobody predicted this:
http://www.nbcnews.com/business/real-estate/americans-who-can-t-afford-their-homes-146-percent-n774106
Over 38 million American households can’t afford their housing, an increase of 146 percent in the past 16 years, according to a recent Harvard housing report.
Why not?
Most people I know owns 2 or more homes. They are knee deep in debt and mortgage. Oh, the collapse will be epic for these idiots.
I find your schadenfreude distasteful, Butters. Always remember, these soon-to-be FBs are victims and naifs who were duped and manipulated by evil bankers, realtors, and those earnest Real Journalists on TeeVee.
Most people I know owns 2 or more homes.
I only know a few people who own rental property. I’ve only ever met one person who owns a vacation home (in Steamboat).
Hey Mikey, it’s almost bedtime and I want a story. Tell me the one about how true socialism has never been tried in any country and how Stalin, Mao, Pol Pot, Kim Jong-Un, Maduro, etc. were all just aberrations.
http://www.zerohedge.com/news/2017-07-11/meanwhile-venezuela-real-mad-max-emerges
Here’s a well researched piece on Red China’s deep involvement in Commiefornia. Check out the photo of San Fran mayor Ed Lee raising the Red flag over city hall.
https://disobedientmedia.com/2017/07/chinas-shift-towards-californias-gold-mountain/
Grim future in store for commiefornia. Just look to Red Chynah to see what it is.
Even my 10-year old gets it.
She came to me one evening suggesting that maybe it would be better if everyone with money gave their money to the poor so that everyone would be equal.
I explained to her about incentives (why would someone take risk on creating something new with such high failure rates if there wasn’t reward for them with success?). It took about 5 minutes for her to fundamentally understand why socialism would make everyone poorer.
The great debate isn’t whether socialism is better than capitalism…it’s clearly not.
The great debate should be about the role of government within a capitalist society–but unfortunately that debate seems to be tabled for discussions about whether Caitlyn Jenner can use a public potty that has no urinals.
The great debate should be about the role of government within a capitalist society
Agreed. It might also make sense to debate what is and isn’t socialism, too. Is any government solution to a tragedy-of-the-commons issue or monopolistic behavior “socialism”? If so then we already have it because of regulated utilities.
I bring that up because I think basic health care may need to be a regulated utility at some point. Perhpas along with basic internet connectivity.
The bubbles are starting to burst in one Chinese “hot spot” after another.
http://www.atimes.com/article/rise-fall-hefeis-real-estate-market/
For fun I thought I’d toss this out there. Mr. Banker is right about the Pukes. From what I can tell, many times there are directional changes in markets when the pukes happen. The best pukes are the ones from the large market participants. Usually, the market does not reward puking.
We had a good example of both a big-seller and a big-buyer puke in AAPL earlier this morning. AAPL opened around $146 and dropped a buck to just below $145, even though the rest of the market was staying up. At the lows of the morning, we got a big Seller Puke — some big trader either got scared and was desperate to exit, or they really wanted to initiate a new short into a low (dumb idea usually). After the market punished that guy with a rally, it looked like maybe the worst was over — then the Buyer Puke happened. The market punished that guy too, by selling off. Who knows what may happen later in the day.
This is my order book volume chart showing the pukes. It’s a zoom-in of appx 20-30 minutes of trading time. Green is for the buy orders, red for the sell orders. The brighter the colors, the greater the volume. The near-white colors are the biggest ones.
http://imgur.com/a/cMzAB