So How Is It A Buyers Market?
It’s Friday desk clearing time for this blogger. “Barbara L. Pearce, president of the North Haven-based real estate firm Pearce Co., said the oversupply of luxury-priced homes in Fairfield County has a negative impact on similarly priced homes in the New Haven area. ‘It’s hard to predict which homes are priced well and will go quickly and which will linger on the market,’ Pearce said. ‘There’s a lot of demand for luxury homes in East Rock (section of New Haven) but the price is pretty much capped at $850,000.’”
“Affordable luxury homes continue to dominate the market in South Florida, with less expensive areas inland and north of Miami seeing strong activity, according to Douglas Elliman. It’s a different tale on Miami Beach and barrier islands. The median price of a luxury condo on Miami Beach fell to $2.283 million, a nearly 20% drop from a year ago—though the number of luxury sales are as strong as they were then. ‘The market still remains softest at the top,’ said Jonathan Miller, chief executive of Miller Samuel.”
“Despite a steady wave of indicators that suggest Calgary’s economy is on the mend after a bruising recession, data shows the city is dealing with a glut of housing that hasn’t been so big in two decades, perhaps longer. City hall reported in its latest census that nearly 23,600 housing units are vacant, up by 2,700 over last year’s levels. ‘Every indicator is showing that things have bottomed and bounced off the bottom,’ said Bob Dhillon, chief executive of the western Canadian landlord Mainstreet Equities. ‘The challenge is, how long will it take to absorb the vacant units?’”
“A slump in super-prime home values in London is rippling down the luxury-property market. Sales values per square foot for houses priced between 2 million pounds ($2.6 million) and 5 million pounds fell by 8.4 percent in the second quarter from a year earlier as political uncertainly deterred potential buyers, according to researcher Lonres. Selling prices for super-prime properties — those over 5 million pounds — fell 3.2 percent. ‘There is a lack of urgency in the market which, combined with considerable buying costs, means many who would have transacted have stayed in their current properties instead,’ said Marcus Dixon, head of research and data analysis. While sales across the prime central London market are similar to 2016, they’re down 40 percent from three years ago, he said.”
“It’s a buyers’ market. Or so say analysts tracking the real estate market. Reams and reams have been written about how anyone planning to buy a house can pick and choose from the large stock of unsold inventory and pay lower than what was the price a few years back. But Delhi resident Simi Mohan isn’t convinced. ‘I don’t want to book a flat in any upcoming project because I don’t know when I will get it. And the prices of the already built flats are not in the affordable range for me. So how is it a buyers’ market?’ asks the 32-year-old paramedic.”
“Mohan has a point. The unsold inventory is piling up, developers are sitting on unfinished projects and the consumer is nowhere in sight.”
“At Bogyoke Market in the centre of Yangon, commerce proceeds very much as it has since the times of British colonialism. But it is a very different situation when it comes to residential developments. A glut of high-end properties now sit either unfinished or empty as the envisioned influx of wealthy foreigners expected to rent them has failed to materialise. The Colliers report notes that the total completed condominium stock is estimated to have exceeded 6,000 units at the end of 2016 with more than 10,000 units in the pipeline.”
“However, the report warns that ‘inadequate sales take-up along with the rising number of defaults from buyers could mean delays in completion or even the possibility of project cancellation.’ David Ney, managing partner at York Road Realty in Yangon says that high-end rents have fallen by around a third. ‘Properties that were renting for USD5,000 per month are now going for USD3,000 or even USD2,000.’”
“A property downturn could dent the big banks and Australia’s financial stability because home loan customers could not quickly funnel cash out of other investments, economists say. Australian Securities and Investments chairman Greg Medcraft this week described hybrid securities as ‘ridiculous’ products for retail investors. University of Melbourne finance professor Kevin Davis said the securities could prove problematic in the event an Australian bank was in financial difficulty.”
“While they looked on the surface ‘like a really good idea, in practice they’d be an absolute nightmare,’ he said. The complexity of hybrids was also a concern, he said. ‘With the global financial crisis 10 years ago, one of the problems was too many complex instruments being sold to investors. What have we got now? Really complex financial instruments that people can’t value being sold to retail investors.’”
“The downturn in the residential property market that began in Auckland late last year has now spread throughout the country, shaving $100 million from real estate agency commissions in the second quarter of this year. The Auckland market has borne the brunt of the downturn, with the number of sales in the region down by just over a third, dropping from 8731 in the second quarter of last year to 5756 in the second quarter of this year, a decline of 2975 (-34%). But the downturn has spread well beyond Auckland with sales throughout the country well down in the second quarter of this year compared to the same period of last year.”
“Average sales rates at the major Auckland auctions are still running at less than half of what they were during last year’s peak. And there are increasing signs that vendors are accepting that the market has softened and are starting to be more realistic in their price expectations, which will help expedite sales. However buyers are increasingly prepared to play hardball on price, and some investors who over-extended themselves and took on high levels of debt during the boom will be starting to feel squeezed. Others that aren’t feeling the pressure yet are likely to be getting nervous.”
‘The Auckland market has borne the brunt of the downturn’
Hottest market on the planet not that long ago. As was Toronto. And London and Lagos.
‘Delhi resident Simi Mohan isn’t convinced. ‘I don’t want to book a flat in any upcoming project because I don’t know when I will get it. And the prices of the already built flats are not in the affordable range for me. So how is it a buyers’ market?’
Note the lack of profit making in his thinking.
And Vancouver, and SF, and Miami, and and and.
All dead, or dying. Even heard my local news say big city apartment rents are coming down, something unheard of the past few years. All this while something like 11K new units under development. And you know when the media admits to reality 6 months to a year after the fact.
Time to start foaming those runways yellen!
“Beware the Jabberwock, my son!
The jaws that bite, the claws that catch!
Beware the Jubjub bird, and shun
The frumious Bandersnatch!”
Lewis Carroll
I really enjoy Lewis Carroll. Such great fiction. That is what these housing bubble forecasts feel like to me in my market today (Sacramento foothills): Pure fiction!
There is good housing demand, prices are reasonable, builders are cautiously producing, and inventory is tight.
This market is nothing like the smoke & mirrors, frothy exhuberence, investor fraud I reported to you in 2006 & 2007. It might be a bit overvalued in these conditions, but I’m not holding my breath for a big correction. I see a stable market into the foreseeable future here.
And Folsom Lake is a lake again.
It always has been a lake and it does have more water in it this year than last year. Things like this usually do balance out.
“I see a stable market into the foreseeable future here.”
Probably that is not looking too far into the future. What is the ratio of house price to household income? Something like 6:1? Paying 20+ years of gross income for a place to live isn’t sustainable.
Prices could easily drop off 50%.
Here’s the problem:
‘For 62 straight months, Southern California home prices have gone in one direction. Up. Five years ago, you could snatch up a median-priced condo in Orange and Los Angeles counties for about $280,000, 76 percent less than today’s prices. A median-priced house cost $323,000 in L.A. County five years ago and $495,000 in O.C., about $260,000 less than today’s prices in both counties…Luxury homes, priced at $2 million and up, may have reached a price peak and are facing an oversupply of listings, analysts said.’
http://thehousingbubbleblog.com/?p=10145
You think this is sustainable.
“You think this is sustainable.”
And the area he’s in has NO JOBS. You have to commute to a low wage gig.
Jingle
The median home price in Sacramento is $270,000 and the median household income is $58,000. The ratio is 4.65 to one.
I am not saying everything is perfect. It isn’t and never will be, but we are creating jobs, the population is growing and incomes are rising. Will there be another recession? Certainly. I just don’t see it coming any time soon. I think the housing market will be stable in 2018 and probably into 2019. Beyond that time frame, anything is hard to predict.
The big difference I see today versus 2005 is the lack of widespread sub prime wall street securitized financing allowing anyone to buy with 80% first, 20% second, with low interest teaser loans and no impounds.
The sales I see today are with legitimate buyers. This creates a big, big difference in a downturn. The downdraft is much less drastic.
‘The median price of a luxury condo on Miami Beach fell to $2.283 million, a nearly 20% drop from a year ago—though the number of luxury sales are as strong as they were then’
Strong if a 20 year supply is strong.
Realtors are liars.
‘The downturn in the residential property market that began in Auckland late last year has now spread throughout the country’
Auckland is a very interesting case. All the domino’s were lined up: it’s an island. Lots of in migration. Interest from foreign speculators. Can’t build enough, robust economy, the usual stuff. What changed? The government started to clamp down. What was an impossible to change shortage went into bust in no time.
You have a housing crisis in California? Cut back on the lending and watch it vanish. I was listening to a shack investing radio show last week. These guys mentioned California had the entire national bottom section of appreciation filled out. One said, “these investors are bleeding cash. They pay $500,000 or $700,000 for a house and can only rent it out for $2,000 a month. So they cash out refinance every couple of years.”
“They pay $500,000 or $700,000 for a house and can only rent it out for $2,000 a month. So they cash out refinance every couple of years.”
Bahahahaha … burning stupidity. (Oh, am I ever glad!)
Bahahahahahahahahahahahahahahahahahahahahahaha.
Do you have a link for this California quote Ben?
I’m pretty sure that at least a couple of the $700k+ homes in my neighborhood were bought with little to no money down by investors. The rents are only $3k per month. I assume they must be pouring money into it every month. The only other option is they paid all cash. Either way it’s a poor return on investment.
It was on the radio.
California Property Tax Rates
County Median Home Value Median Annual Property Tax Payment
Santa Clara $645,600 $5,121
Santa Cruz $557,500 $3,797
I found this site:
https://smartasset.com/taxes/california-property-tax-calculator#xUnVRxcpjk
$700,000
Average Tax Rate
0.793%
(Los Angeles County) Property Taxes
$5,551
This pushes returns under 5% before maintenance and insurance.
There is a place up the road from me that was purchased less than 2 years ago, and the foreclosure notice was just posted. This, when prices are much higher than 2 years ago.
Those people aren’t “investors,” they’re speculators who are getting their asses handed to them. It used to be a rental house penciled out at a max 100x monthly income. Those places aren’t even getting half that. There’s no money to be made there, only tears.
The idea that the Auckland (and NZ) economy is robust doesn’t really stand up to examination. It’s based on nothing more than debt, wishful thinking, repetition of lies, the housing bubble, and porking the GDP figures with excessive immigration. The fundamentals and supporting productive industries aren’t there. If there hadn’t been that lucky rescue package of insurance money after the earthquake, things would look very different.
I’m referring to the idea, not what’s true. For instance, Silicon Valley is supposedly a hot bed of jobs. But without the tech and housing bubbles, where would it be? And those things can go away quickly. People do speculate on ideas, and most manias have a grain of truth to them. The weather may be nice in some coastal areas, but it was nice 30 or 40 years ago and house prices were the same everywhere.
Some coastal areas are downright awful, like places in Oregon where the trees grow sideways from the insane winds, the fog is in almost every day, and you’re lucky to ever see 70 degrees.
Yup. And the people who visit for three nice days in the summer think that it would be wonderful place to live.
I spent three days over on the Olympic Peninsula a week ago camping, and I noticed the same thing - you look at the tops of the trees (most of which have snapped off at least once from the winds) and see that they are all distorted and growing at a weird angle - there is a darn good reason for that!
Plus no jobs.
Australia at least had a real mining boom, even if it’s fallen over now. Auckland never really had anything to base this on, except an extremely relaxed attitude to money laundering. Gold rush without any gold.
New Zealand’s a shocker for cargo cult thinking and running off madly after whatever the hot commodity of the hour is. At least in the past when it was ostriches or angora goats it was possible to opt out and wait for the madness to pass. Can’t do that with housing.
I was talking with a Texan years ago about the 80’s bust and the housing bubble. He said, “you know, back then at least we DID have oil.”
I was talking with a Texan years ago about the 80’s bust and the housing bubble. He said, “you know, back then at least we DID have oil.”
Oh, but now we have TOYOTA, etc. moving here.
But we have fracking now, which has given us both ‘produced water’ and earthquakes as side benefits.
“People do speculate on ideas, and most manias have a grain of truth to them.”
People have to speculate on ideas if a mania is to take off. If the mania was firmly attached to fundamentals then it wouldn’t become a mania because fundamentals can’t change fast enough to drive a mania.
But ideas about fundamentals can (and do) change fast enough, so fast that these ideas can become completely detached from fundamentals. Ideas about “grains of truth” can (and do) take on lives of their own, and then - presto! - a mania is formed.
“……30 or 40 years ago and house prices were the same everywhere….”
I disagree!
I lived in the Bay area 40 years ago. Prices were much higher then than in other areas.
but it was nice 30 or 40 years ago and house prices were the same everywhere ??
We were the “Valley of Fruit” back 50 years ago Ben…Pretty much a AG economy back then with some industry/manufacturing…Everything changed after Fairchild…
I rented a house just like that in 2006, instead of buying (thanks to the HBB). The LL paid $710,000 and we rented it for $2,000/month. Recon Trust foreclosed 12 months later in 2007.
Here is the interesting part: it sold for $380,000 in 2008…..then foreclosed again in 2011 and sold for $287,000. They were curious times.
Today, that same model is in escrow at $450,00. You can look at this many ways:
40% less than in 2006 or…
55% more than in 2011 or…
18% more than in 2008.
It is still a curious market! It now rents for $2,350!
It’s a money sinkhole at any of those prices.
Actually, if you bought in 2011 for $287,000 and sold today for $450,000, your gross profit of $163,000 (probably $120,000 after all costs) is quite nice. Plus you paid less to own the house than it cost to rent it for the last 6 years.
Housing ownership can be a great deal if you plan correctly.
‘Home owners who have been wrestling with their mortgage repayments are about to find things can get a whole lot worse as the Reserve Bank and the financial regulator hand the big banks two more reasons to hike rates.’
‘The worst hit will likely be those who waded into frothy capital-city housing markets at the tail end of the boom. In its latest meeting the RBA warned that as many as eight official rate hikes are on the way as the cash rate heads for a new normal of 3.5 per cent, while the Australian Prudential Regulation Authority has raised bank equity targets by 150 basis points to 10.5 per cent.’
‘This is happening in an environment where the gap between variable mortgage rates and the official RBA cash rate has doubled in 10 years and is the widest it has been since 1994. Experts say this gap is likely to widen.’
‘In April the RBA warned in its Financial Stability Review that about one third of Australians had built up little or no buffer to higher interest rates or are less than one month ahead on their repayments. Recent UBS research shows 85-90 per cent of mortgages are variable, so this could see millions feel serious debt stress.’
‘Add to that several big-name economists calling the peak of capital-city house price growth and the latest NAB research showing a spike in activity from first-time buyers. Simply put, if wages growth doesn’t get its act together then bleak times lie ahead.’
‘The problem is these rate hikes are on the way in a country with household debt sitting at a record-high 190 per cent of income and wages growth wallowing near record-low levels.’
‘A lot of Australians made their bed, financially speaking, towards the end of a once-in-a-lifetime house price boom in Sydney and Melbourne and now won’t be able to afford to sleep in it, especially if banks are being given the chance to out-hike the RBA.’
‘So, how did we land on this path? The reason in a nutshell? Recent moves to restore some normality to our major housing markets by APRA. By restricting investor and interest-only lending the regulator has effectively pushed banks to reprice those loans, and now all variable rates are seen to be on an upward path.’
‘While all this is going on in APRA, RBA and big-bank board rooms, a fleet of young Aussies have just committed to a mortgage at the tail end of the house-price boom and can expect to service a large debt load in a rising interest rate environment, where banks move out of step with the RBA. If Australians don’t somehow manage to squeeze mass pay rises out of their bosses, we could be heading for serious strife.’
“So, how did we land on this path?” How about greed?
‘towards the end of a once-in-a-lifetime house price boom’
They never use the B word.
“Simply put, if wages growth doesn’t get its act together then bleak times lie ahead.”
This is one of the dumbest things I’ve ever heard. Wages don’t magically catch up to housing prices. In fact, historically, housing prices tracked inflation at best, and were tied to local wages. This stuff is just nutty.
“blah blah . . . in India . . . yadda yadda ”
as soon as you see the word “India” all bets are off.
The big factor in turning Auckland around isn’t futile government clamp-downs on lending, or anything like that. It’s the disappearance of Chinese money-launderers. Plenty of locals in the mania, but most of it’s probably echo effect of the influx of dirty foreign money.
New Zealand speculators haven’t made it out of the Denial stage. It’s like this blog in 2006 - desperate rationalisations about how everything will be all right, something will come to the rescue and start throwing money at our overpriced mouldy shacks, Chinese New Year, Spring, Baby Boomers, Immigrants, the World Cup, the Election, Australians.
You forgot the Super Bowl.
Here’s a picture of people on the Ultra Boom lift working on installing a new bridge from the parking garage (existing structure that was part of the University of Colorado medical campus until a few years ago when it moved to Aurora) to the building I’m building:
http://www.picpaste.com/20170721_115910.jpg
There will be two more identical apartment buildings on this site. And an office tower. And a hotel.
Fear of heights + boom lift = NO GO.
No, Bill Gross. Central banks won’t lead the world into recession. They will merely escort it there.
After all, no one forced all those debt donkeys and speculators to overpay for insanely overpriced shacks, farmland, stocks, etc.
http://www.cnbc.com/2017/07/20/bill-gross-worried-that-central-banks-will-lead-world-into-recession.html
‘Gross charged that the adherence of central bankers to hard-and-fast rules that govern when they should tighten policy has “distorted capitalism as we once knew it, with unknown consequences lurking in the shadows of future years.”
‘For instance, he cast doubt on the belief it takes short-term interest rates exceeding longer-term rates — a condition known in economist as an inverted yield curve — to produce a recession.’
“The reliance on historical models in an era of extraordinary monetary policy should suggest caution,” Gross wrote. “Logically (a concept seemingly foreign to central banks staffs) in a domestic and global economy that is increasingly higher and higher levered, the cost of short-term finance should not have to rise to the level of a 10-year Treasury note to produce recession.”
We’ve talked about these things over the years. Specifically, there was a time when the bond markets and various yields “told us” this or that. Especially about recessions or expansions. For instance, I’ve asked what people in the 1980’s or even the 90’s would say about negative interest rates. Probably IMO they would have concluded only a great plague or nuclear war could bring that about. Yet we were there in mid-2016, in the whatever year of a huge stock and housing boom.
Same with the yield curve: it warned us of recessionary pressures. Well the central banks bought the yield curve. It will do what they direct it to do, and we’ve lost one more measure of where we are. Is the economy healthy or sick? Who knows?
I’ve mentioned before that there was a time when a recession would creep in, central banks would ease a little and with time we’d bounce back up. Now we’ve had emergency measures for a almost a decade.
Gross did revert to the central planning gang when his cookies were in the fire years ago. And here he is saying “you’ve screwed everything up, but please don’t stop.”
“Is the economy healthy or sick? Who knows?”
It’s sick, very, very sick. It’s like a junkie who’s built up such a tolerance to a drug that they’re using 10 times the amount which would kill a normal person, and they’re dancing on the ceiling at a concert with everybody saying “wow, look how awesome and happy they are.” Little do they know, that junkie is going to be DOA at the local hospital in short order.
Well said.
“Little do they know, that junkie is going to be DOA at the local hospital in short order.”
Let’s hope not.
(Psssst … the efficient parasite does not kill the host.)
All hosts eventually die. Efficient hosts keep em alive as long as possible before finding new hosts.
Should have said “Efficient parasites keep em alive…”
When will Yellen the Felon be forced to defend the dollar by hiking interest rates?
http://www.scmp.com/business/global-economy/article/2103683/dollar-falls-its-lowest-level-more-year
But…but…Krugman told us debt doesn’t matter.
https://www.bloomberg.com/news/articles/2017-07-21/game-of-twister-awaits-t-bills-as-debt-ceiling-anxiety-deepens
What could possibly go wrong?
https://www.thesun.co.uk/tech/4067800/china-vows-to-become-artificial-intelligence-world-leader-by-2030-but-will-it-spark-a-killer-computer-arms-race/
I laughed so hard muh dinner almost came up.
Young WSJ editorial writer found dead. Hmm. Could it be Clinton-related?
https://www.nytimes.com/2017/07/21/business/media/wall-street-journal-editorial-writer-is-found-dead.html
You won Palmy…Get over the obsession with the Clintons…
I’m pretty sure that crimes are not absolved by simply losing an election. Maybe the system sweeps them under the rug, but that’s not something to cheer lead for.
Hi. Well it seems in Austin, TX we have a CA mirror or something. Prices have been going up since we moved here over 13 years ago & show no signs of stopping. Our modest working class neighborhood, just over 8 miles from the “river” in town, has seen $100,000.00 added to the prices of the homes in just 6 years. Wages in this town are anemic at best, unless you are a trained professional or a successful business owner. It seems like our market is driven mostly by CA/east coast transplant & out of town speculator money. Of course now, the average price for a modest house in any kind of “walkable” or interesting neighborhood is well north of 300k. Realistically probably more in the 400k levels, on average. The stats that paint Austin as “affordable” lump in areas that are far from the city and most even include other cities near Austin probably to tweak the numbers, I guess. But, if you are selling a Cali or NY shed for 800k, then I guess 450k for a 2/1 fixer seems like a bargain.