November 25, 2017

Yet Another Hole In That Sacred Claim

A weekend topic starting with this piece by Ben Phillips, a Principal Research Fellow at the Centre for Social Research and Methods at ANU. “One of the great mysteries in Australia is how and why did Sydney house prices get so high? A common explanation is that Sydney housing supply is just not keeping up with demand as strong population growth and a lack of land release combine to drive up house prices. We decided to test this hypothesis by comparing the underlying demand for housing in each region in Australia from the perspective of population growth and demographic change. We found that, contrary to popular belief, Australia as a whole has built more than enough houses to accommodate this growth.”

“In fact, about 164,000 dwellings more than was required since 2001. Much of this surplus of housing was found in our capital cities, particularly inner city areas and much of this surplus contained unoccupied dwellings. Sydney’s most over-supplied region is Inner Sydney with a surplus of around 6000 dwellings or 5 per cent of stock. The driver of over-supply is the new unit developments. A significant number of these dwellings are vacant. They may be for sale, a vacant rental, or left intentionally vacant by investors.”

“It may surprise that the current house price inflation in Sydney is not unprecedented. An equally strong period of house price growth was between 1999 and 2004, a time when population growth was about half current levels. During this period house prices nearly doubled in Sydney. Over the last five years house prices grew by 81 per cent.”

“If it’s true that our current record home-building levels are not balanced by a large housing shortage, then there is the risk that these current building levels and the associated economic activity will reduce in the near future. Policy makers will also need to place greater emphasis on other potential drivers of house price growth and housing affordability, such as a range of demand influences such as interest rates and housing taxation arrangements.”

From the Conversation in Australia. “As everyone supposedly knows, fixing housing unaffordability is simply a matter of boosting housing supply. But wait! With their just-published report on house-building and population growth, ANU academics Ben Phillips and Cukkoo Joseph have blown yet another hole in that sacred claim. By comparing housing demand and supply at a sub-regional level, their analysis highlights evidence that in many parts of Australia – not least inner Sydney, Melbourne and Brisbane – house-building has been running well ahead of local household growth for the past few years. Yet these are hardly areas where prices have dived.”

“Previous commentaries have highlighted the recently strong positive correlation between rapidly expanding housing supply and property inflation. But these correctives to the popular wisdom have failed to gain traction. This is partly because of the continuing seductive appeal of the common sense claim that rising prices reflect gross shortage. So, it’s reasoned, expanding house building will moderate the market.”

“As my Sydney University colleague Peter Phibbs recently observed, this ’supply mantra’ works for politicians seeking to connect with voters because ‘everyone is an economist now and more supply will bring down prices.’ More importantly, though, governments use their unqualified faith in equitable housing market solutions to get off the hook. It absolves them of the responsibility for playing an active role in managing and shaping these markets to deliver housing that meets everyone’s need for shelter. Instead, they facilitate development for speculation.”

From CTV Vancouver in Canada. “Politicians and developers have long pointed the finger at a shortage in supply as a root cause of Metro Vancouver’s skyrocketing home prices. A local academic, however, is now challenging what he calls the myth that simply adding more units will help solve the problem. John Rose, a geographer at Kwantlen Polytechnic University, studied the housing supplies in Canada’s 33 largest municipalities between 2001 and 2016. ‘The prices (in Metro Vancouver) escalated dramatically over that 15-year period. You might expect that supply might have shrunk during that period of time. In fact, the opposite is true,’ he told CTV News.”

“Rose uses figures from Statistics Canada census reports in his analysis. His number crunching found that for every 100 individuals or families who moved to the region since 2001, 119 housing units were also added to the market. According to those numbers, the professor said, the Vancouver area had the fifth largest housing supply of the 33 cities he studied.”

“‘The market has provided a lot of units, yet at the same time, we’ve seen affordability get degraded,’ Rose said. ‘We look back at this and we say, ‘If you’re trying to figure out what the cause of the housing crisis is, it doesn’t seem to be the product of adding enough units to the market.’”

“Instead, Rose contends that ’speculative investment’ has resulted in tens of thousands of empty homes and led to the region’s sky-high prices. He says as of 2016, the Metro Vancouver region had more than 60,000 vacant units. ‘We’ve got all this available supply that’s just sitting there unoccupied,’ Rose said.”

“Another study recently conducted by real estate marketing website Point2 Homes found that Vancouver is ‘in a league of its own’ as the most unaffordable housing market in North America, surpassing major U.S. cities such as New York and San Francisco. According to those findings, the average annual family income is $81,608, while the median home sale price in the City of Vancouver is more than 17 times greater at around $1.4 million.”

The Richmond News in Canada. “Kwantlen Polytechnic University human geographer Dr. John Rose has lived in Richmond for the past 20 years. It’s where the Vancouver-raised professor chose to start and raise his family. In that time, he’s seen the supply of housing soar, in the form of dozens of City Centre apartment buildings and hundreds of townhouse developments. And yet, in the past 10 years, housing prices have more than doubled. ‘It certainly seems the market has not been undersupplied,’ said Rose.”

“But, he thought, it has long been argued by the development community and politicians (most often financially backed by developers) that more housing begets lower prices. His new study pours very cold water on that supply/demand paradigm. And, at this point, further solutions to curb speculative demand, including a ban on foreign ownership of homes, should be ‘on the table.’”

“‘It doesn’t hold water the idea we have an expensive housing market because we don’t have enough supply,’ said Rose, who found that since 2001, according to census housing data, Metro Vancouver has seen 241,336 new (net) housing units built to accommodate 202,184 new households.”

“But if it’s the case we are transforming our city in such a drastic way to provide empty units for speculative investors, such costs must be questioned. ‘Supply hasn’t worked in past. Why are we assuming the continued approach will work in the future? More of the same,’ that’s what we’re being prescribed by the doctor,’ said Rose.”

“‘I think a lot of people are now coming to the realization that this (supply-oriented housing policy) isn’t working. It’s been so many years, we’ve built so many houses and yet housing costs just keep going up,’ said Justin Fung, founding member of activist group Housing Action for Local Taxpayers.”

“He refers, tongue-in-cheek, to a ‘Vancouver Real Estate Cartel,’ which ‘promotes a narrative’ that supply is the solution, at all cost. ‘The cartel is this group, the realtors, the property developers, the people who have vested interest in pushing this narrative that supply will solve everything; we just need to build more, build more. They’ve been profiting significantly from this; they’ve been profiting from land banking; they’ve been profiting from selling these units offshore to speculative investors,’ said Fung.”

“Rose said since his findings were published by media last week, he’s seen local university economists criticize it. ‘Now I’m hearing we need to accommodate investment. It’s basically accepting the idea speculation is going to happen. And that’s pretty problematic. I’ve literally heard the argument we need to pump up the supply so much that it creates a glut so that it drives down the prices,’ said Rose.”

“Rose is also concerned about a drastic market correction considering how dependent B.C.’s economy is on construction and real estate finance (housing as a commodity). ‘My concern is the situation has developed for 15 years and now we have a whole economy, or whole economic ecosystem, organized around this particular model. If there are dramatic measures taken, there would be a shock. I don’t envy policy makers to get us out of this mess.’”




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78 Comments »

Comment by Ben Jones
2017-11-25 07:59:48

‘I’ve literally heard the argument we need to pump up the supply so much that it creates a glut so that it drives down the prices,’ said Rose.’

When it gets long enough in the tooth, we hear it here too. Uh, what’s going to happen to those 3% down loans then?

‘He refers, tongue-in-cheek, to a ‘Vancouver Real Estate Cartel,’ which ‘promotes a narrative’ that supply is the solution, at all cost. ‘The cartel is this group, the realtors, the property developers, the people who have vested interest in pushing this narrative that supply will solve everything; we just need to build more, build more. They’ve been profiting significantly from this; they’ve been profiting from land banking; they’ve been profiting from selling these units offshore to speculative investors’

Don’t forget the mortgage brokers, central bankers and politicians who need an economic sugar high to keep their jobs.

Comment by oxide
2017-11-25 14:40:09

Create a glut? Do they think they’re going to run out willing buyers in China?

 
Comment by Mafia Blocks
2017-11-25 15:26:31

“Why Vancouver Home Prices Are Dropping”

http://www.bnn.ca/real-estate/video/why-vancouver-home-prices-are-dropping~934970

This is what happens when housing demand collapses.

 
 
Comment by Neuromance
2017-11-25 08:20:20

How did it get so high? A couple of interesting charts:

1) Central banks balance sheet chart: http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/06/04/CBs%201.5tn_0.jpg

2) Global house price index: https://www.economist.com/blogs/graphicdetail/2017/03/daily-chart-6

Note the blip, that’s intriguing.

Market movements are a result of a combination of factors, like a lock requires multiple tumblers lifted to the right height in order to turn the key. It’s not just one thing, it’s multiple things that have to come together.

Some of those things are:
• People searching for yield in a low-yield environment.
• People’s belief that real estate can only ever go up, on account of population increase.
• Central banks, both of the country and surrounding countries which can have an impact.

Real estate has a solid basic narrative, that, when the infrastructure fails, tends to bubble in the US. The misconception that a lot of people seemed to have is their primary residence is an income-producing asset. No, a primary residence is nearly always an expense (unless you are using it for income-producing activities, like roommates who pay rent greater than the monthly carrying cost). Here was an article about a fellow who learned the difference (he won a bunch of money, went on a buying spree, but found out it costs money to even own flat-out a primary residence).

This leads to another point: How do investment ideas and novel financial operations spread through the financial sector, down to the individual retail investor? Successful retail investors I know have people they trust, brokers, other wealthy individuals, who have better information, from whom they take investment cues. I think it was Dimon who said as long as the music is going, we gotta dance. That’s a little disingenous, because they influence the music. These guys at the top of the financial sector have access to the biggest investors of all, government and the central bank directors. Their brain trusts are scanning the landscape getting ideas, and then these ideas fan out, like from the trunk of the tree to its farthest root tendrils. The problem is that no one’s going to tell the retail investor when the tide has turned, and it’s time to cash out. The longer a bubble runs, the more people get sucked in and more complacent people get. Of course it’s very hard to identify a bubble since speculative demand is the root of a bubble and economists are unable/unwilling (think Yun) to clearly measure it.

Comment by Ben Jones
2017-11-25 08:36:36

Citigroup’s Chuck Prince wants to keep dancing, and can you really …
business.time.com/2007/07/10/citigroups_chuck_prince_wants/
Jul 10, 2007 - But as long as the music is playing, you’ve got to get up and dance. We’re still dancing,” he said in an interview with the FT in Japan. … Because they can never know for sure when the music’s going to stop, and they’d be …

The NAR is the worst, at least here in the US. Yun gets animated about the need to lower shack prices. But let some little tax change get proposed and the sky will fall.

Comment by Ben Jones
2017-11-25 08:38:22

August 28, 2017

“For decades, the ability to deduct the interest on a home mortgage has been one of the most untouchable sacred cows of the tax code. It is particularly revered in Los Angeles and other areas with high real estate prices, where the annual tax savings can be the difference between being able to afford a house or continuing to rent. Now, Republicans crafting legislation to overhaul the federal tax system and cut rates are considering placing new limits on the home mortgage interest deduction. And thousands of Californians could feel the pain.”

“The move comes as GOP lawmakers and Trump administration officials already have proposed killing another break — the deductibility of state and local taxes — that benefits California residents more than those in any other state. The housing industry strongly opposes efforts to place new restrictions on the deduction, arguing that would lead to lower housing prices because there would be less of a financial incentive to buy instead of rent. At the same time, Democrats from California and other states with high housing prices are gearing up to fight any change.”

“‘I think that harming the ability for Americans to own their home is like attacking motherhood and apple pie,’ said Rep. Judy Chu (D-Monterey Park), whose district includes Pasadena and much of the San Gabriel Valley. ‘I represent a district with homes that are very high-cost, so they have even more reason to be concerned about it,’ Chu said.”

“Diane Yentel, president of the National Low Income Housing Coalition, which advocates for more affordable housing, said the ability to deduct interest on mortgages as large as $1 million means the provision benefits mostly upper-income households. ‘We’re paying about $10.5 billion a year to subsidize the homes of some of the wealthiest people in the world at the same time that we have hundreds of thousands of people with no homes at all,’ she said.”

http://thehousingbubbleblog.com/?p=10186

Comment by BlueSkye ⚓
2017-11-25 09:18:17

“the ability to deduct interest on mortgages as large as $1 million means the provision benefits mostly upper-income households…”

No, the deduction “benefits” mostly average people where house prices are 10 x income. In my mind, encouraging (enabling) people to take on massive debt doesn’t actually benefit them.

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Comment by 2banana
2017-11-25 10:30:37

The data says otherwise.

+++++++

The Shame of the Mortgage-Interest Deduction
Derek Thompson - May 14, 2017 - The Atlantic

It might be one of the most important policies in the U.S. economy, but the mortgage-interest deduction sounds esoteric to most people. Perhaps that’s because, for most people, it’s completely irrelevant.

Although about two-thirds of American households own a home, only one-quarter of them claim the deduction, which sometimes gets abbreviated to MID. As Matthew Desmond, a sociologist at Harvard University, explains in a magisterial essay on the MID in the New York Times Magazine, this little fact has played an outsized role in the United States’ yawning wealth inequality.

Federal housing policy transfers lots of money to rich homeowners, a bit less to middle-class homeowners, and practically nothing to poor renters. Half of all poor American families who rent spend more than 50 percent of their income on housing costs. In May, rental income as a share of GDP hit an all-time high. Meanwhile, in 2015, the federal government spent $71 billion on the MID, and households earning more than $100,000 receive almost 90 percent of the benefits. Since the value of the deduction rises as the cost of one’s mortgage increases, the policy essentially pays upper-middle-class and rich households to buy larger and more expensive homes. At the same time, because national housing policy’s benefits don’t accumulate as much to renters, it makes it harder for poor renters to join the class of homeowners.

 
Comment by Professor 🐻
2017-11-25 11:17:51

“It might be one of the most important policies in the U.S. economy, but the mortgage-interest deduction sounds esoteric to most people. Perhaps that’s because, for most people, it’s completely irrelevant.”

As it should be. It will be great when the Trump tax reform measures make it even more irrelevant by capping it and by raising the standard deduction. Why descriminate against landlords in favor of Realtors by pumping up owner-occupied home prices with a government subsidy?

 
Comment by SFMF
2017-11-25 12:08:16

Most Americans are utter idiots when it comes to taxes. I have spoken to several people who think tax refund = they pay no taxes. Don’t expect such dullards to understand how MID works. They all assume they benefit from it thanks to the decades of propaganda from the r/e industry.

 
Comment by SFMF
2017-11-25 12:09:32

“Why descriminate against landlords in favor of Realtors by pumping up owner-occupied home prices with a government subsidy?”

The MID isn’t going anywhere for landlords. That’s a business expense and isn’t capped now, nor will it be capped in the future. Same with property taxes.

 
Comment by BlueSkye ⚓
2017-11-25 12:09:44

“households earning more than $100,000 receive almost 90 percent of the benefits…”

OK, but it doesn’t speak to what percentage of those taking the deduction are making less than $100K vs. those over $100K. It’s been a long time since I paid mortgage interest but I did take the deduction. Might not have if I didn’t have other deductions.

I always laugh when those in debt over a million bucks are automatically called “rich”.

 
Comment by tresho
2017-11-25 16:13:19

It’s been a long time since I paid mortgage interest but I did take the deduction.
Same here. When I regained consciousness & figured out that the deduction was a tiny fraction of the amount I was paying in interest on my 11.5% VA loan, I paid off the mortgage & watched my savings pile up rapidly from that point onward.

 
Comment by oxide
2017-11-25 17:46:02

The MID meant a lot more when interest rates were 11%. If they’re going to get rid of it, now is a good time, when interest rates are 4%.

 
 
Comment by tresho
2017-11-25 16:10:20

the ability to deduct the interest on a home mortgage has been one of the most untouchable sacred cows of the tax code.
When you find a sacred cow, milk it for all it’s worth.

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Comment by BlackSwandive
2017-11-25 17:49:33

“‘I think that harming the ability for Americans to own their home is like attacking motherhood and apple pie,’ said Rep. Judy Chu (D-Monterey Park)’”

This is a nauseating quote for more reasons than one. Does this low IQ limousine liberal even think before she speaks? What part of lower prices is “harming the ability for Americans to own their home?” Secondly, since her preferred policies are causing massive affordability issues for most, how does Judy Chu reconcile the fact that she’s a hypocrite who’s “attacking motherhood and apple pie?”

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Comment by oxide
2017-11-26 05:14:26

If an end-consumer can’t afford to buy a house, then a cash-flush investor will buy the house and rent it to the end-consumer. (This happened in volume in 2009-2012, and it’s still going on).

So, house prices do *not* need to fall to where consumers can afford them. They only need to fall to a point to where consumers can afford a cash-flow positive rent. I don’t know where that point is, but we need to stop thinking that consumer families are the only ones trying to buy houses.

 
Comment by BlackSwandive
2017-11-26 10:39:47

“If an end-consumer can’t afford to buy a house, then a cash-flush investor will buy the house and rent it to the end-consumer. (This happened in volume in 2009-2012, and it’s still going on).”

2009-2012 was when house prices WERE affordable.

“So, house prices do *not* need to fall to where consumers can afford them. They only need to fall to a point to where consumers can afford a cash-flow positive rent. I don’t know where that point is, but we need to stop thinking that consumer families are the only ones trying to buy houses.”

This is new paradigm thinking, and extremely foolish in my opinion. House prices will crater just like they did last time, maybe worse since it appears the entire global collapse may happen in concert. And what’s this “we” business?

 
Comment by rms
2017-11-26 16:40:19

“2009-2012 was when house prices WERE affordable.”

1996 was when house prices WERE affordable, IMHO.

 
Comment by Carl Morris
2017-11-27 11:18:01

1996 was when house prices WERE affordable, IMHO.

Exactly. In 2009 they were on their way to affordable when Congress and the Fed stepped in to prevent it from happening because it was looking like too many of their friends (and perhaps they themselves) would go broke if it was allowed to continue. They had the power to step in and they did. And the rest of us who didn’t benefit from it have been suffering the consequences ever since.

 
 
 
 
 
Comment by aNYCdj
Comment by SFMF
2017-11-25 10:13:50

This is nothing new. 0% loans for cars has been going on since I was old enough to drive I think. If lenders are giving away free money, go ahead and take, it. I leased a new evil German mobile for the mrs this summer. The effective interest rate was 0.28% for 3 years and a bigly yuugely big discount off msrp since it was a ‘17 with 2K miles on it and the ’18s were already on the ship somewhere in the Atlantic. She’s driving a $65K luxury car for less money a month than most people pay for a Camry.

Comment by BlueSkye ⚓
2017-11-25 10:45:18

It will be a $30,000 car in 3 years. You’re covering that much depreciation for less than $700 a month? Hmmmm.

Comment by SFMF
2017-11-25 11:03:51

More like $40K n 3 years. And the way leases work, the payment is based on depreciation but also the buying price. Get a big discount off MSRP, which is what I did and you only pay the depreciation between the buying price and residual.

Most people don’t understand how leases work so they get awful deals. If you understand it, you can get amazing deals.

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Comment by BlueSkye ⚓
2017-11-25 12:17:29

The rule of thumb is 50% over three years, so I heard once. Let’s say more like $30,000. Most people understand “How much a month” which was your reference above. As for understanding thrift, the buyer of a clean car after the three year lease understands.

 
Comment by SFMF
2017-11-25 12:50:30

There is no rule of thumb since the number can vary wildly from car to car. Even the same model can vary quite a bit depending on whether it’s RWD vs AWD, what options, etc. Some options depreciate better than others. How many miles a year makes a big difference as well. More miles = more depreciation obviously.

If you take the average, I’d say it’s 55% for a 3 year lease with 12K miles a year. Can be over 60% for some, can be under 50% for others. American brands are the worst, which is why leasing American cars is almost never a good idea.

That’s the residual value at the end of the lease which is what the lease is based off. It’s also the price a lessee can pay to buy out the car.

There’s an entire sub-culture of leasing hackers out there. I discovered it a few years ago. The rule of thumb is a lease should never be more than 1% of MSRP, with $0 down. That’s the absolute worst case scenario and some cars just don’t ever lease well. BMWs are notoriously bad leases. A good lease is .75% of MSRP the unicorn is 0.5% of MSRP.

Another rule of thumb is whatever the advertized price is, you can get that lease with $0 down. For example Lexus will offer $999/mo with $4500 down for the RX350. You should be able to get it for $399 with $0 down.

As for frugality, sure it’s cheaper to drive used than new. If you want new, leasing is better than buying.

 
Comment by BlueSkye ⚓
2017-11-25 13:19:56

“A good lease is .75% of MSRP…”

Seems like even if the residual value is over 60%, there is a serious loss taken by the dealer. Do they have that much margin in the MSRP?

Not sure what you meant by lease hacker….

My daughter in Virginia hit a rough spot. She threw her worthless husband out and he took her car. Dad sent her a check to get another car that wasn’t all tangled up in marital financing. My grandson asked her what’s in the fancy envelope. New car she told him. He held the check under his nose and said “Ah, new car smell.”

 
Comment by SFMF
2017-11-25 13:37:32

Lease Hacker is a term for people who “hack” leases, ie try to get the most obscenely good deal.

Deslers don’t generally lose money. There is always manufacturer support for leasing and remember, it’s all about volume for dealers. They make their money from making monthly quotas set by the manufacturer as well as holdback.

And residual isn’t set by the dealer. It’s set by leasing companies. A lease is no different than a sale as far as the dealer is concerned. When you lease a Toyota for example, you don’t lease it from the dealer. The dealer sells it to Toyota Finance, and then Toyota Finance leases it to you. Whether the residual is 50% or 60% has no effect on the dealer.

 
Comment by Prime_Is_Contained
2017-11-25 22:06:19

Dad sent her a check to get another car that wasn’t all tangled up in marital financing.

Hope he doesn’t end up asking for half of the value of the new car you bought her, Blue!

 
Comment by BlueSkye ⚓
2017-11-26 05:57:07

Prime,

Unlikely to be a worry. Property settlement already agreed to and under Commonwealth law a gift is not marital property.

 
 
 
Comment by oxide
2017-11-26 05:19:53

She’s driving a $65K luxury car for less money a month than most people pay for a Camry.

And she gets to give that $65K car back to the dealer. At the end of 3 years, that average person gets to keep the Camry.

Comment by Mafia Blocks
2017-11-26 06:03:36

Donkeylogic. At the end, the DebtDonkey has a run down old Camry ready for the scrap yard.

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Comment by oxide
2017-11-26 20:05:56

At the end? For my last car I made payment for 30 months and then went another 7 without a car payment.

 
Comment by Mafia Blocks
2017-11-27 08:37:02

…. and ended up right back in the scrapyard just like all depreciating assets do.

 
 
 
 
 
Comment by jeff
2017-11-25 09:42:00

Black Friday 2017 Compilation - Stampedes!

https://www.youtube.com/watch?v=wAqP8tfff_w

Comment by Professor 🐻
2017-11-25 12:18:53

“This video has been removed by the user.” :-(

 
Comment by Professor 🐻
2017-11-25 12:27:13

What you missed if failed to visit Walmart yesterday:

https://m.youtube.com/watch?v=_4krqMl6nRA

 
Comment by Professor 🐻
Comment by rms
2017-11-25 15:39:46

Nothing else to do in the red states especially in winter.

 
 
 
Comment by SFMF
2017-11-25 10:05:09

Starting around 1985, everyone with money in Hong Kong decided they would move to Canada, in fear of what would happen when China took control in 1997. The majority of the new arrivals settled in Vancouver. So every year for a decade you have thousands of ultra rich people moving to a city and buying property.

Gee, class, will prices increase or decrease as this process happens?

And then post 1997, mainland Chinese with money started doing the same. They figured Canada was a good safe place to park their money. And they started buying property in Vancouver.

Rinse and repeat for another 2 decades.

And here were are.

 
Comment by 2banana
2017-11-25 10:19:55

And then the music stopped…

++++

The Party’s Over For Australia’s $5.6 Trillion Housing Frenzy
ZeroHedge - Nov 24, 2017

As a whole, the Australian economy has grown through a property bubble inflating on top of a mining bubble, built on top of a commodities bubble, driven by a China bubble.

The party is finally winding down for Australia’s housing market. How severe the hangover is will determine the economy’s fate for years to come. After five years of surging prices, the market value of the nation’s homes has ballooned to A$7.3 trillion ($5.6 trillion) — or more than four times gross domestic product. Not even the U.S. and U.K. markets achieved such heights at their peaks a decade ago before prices spiraled lower and dragged their economies with them.

Australia’s obsession with property is firmly entrenched in the nation’s economy and psyche, fueled by record-low interest rates, generous tax breaks, banks hooked on mortgage lending, and prime-time TV shows where home renovators are lauded like sporting heroes. For many, homes morphed into cash machines to finance loans for boats, cars and investment properties. The upshot: households are now twice as indebted as China’s.

The increasing treatment of housing as a financial commodity has seen borrowers rush into a byzantine maze of mortgage-related products. That’s made banks very profitable, but very exposed. While the RBA is satisfied that lenders have adequate buffers to cope with any downturn, banks may find it harder to value their collateral in a falling market as investors look to consolidate their portfolios of multiple homes, said Blake.

Meantime, aside from tighter lending standards and fewer overseas buyers, the major Australian cities are poised to see a wave of new supply, especially apartments – as this chart shows.

Having called the end of Australia’s housing boom, UBS notes.

“The cooling may be happening a bit more quickly than even we expected.”

Comment by rms
2017-11-25 15:41:18

Good thing their beer cans hold 20oz.

 
 
Comment by 2banana
2017-11-25 10:26:33

From the “here is a beach house now go away” Sanders own website:

Support First Time Homebuyers. We should expand the Department of Housing and Urban Development and USDA Rural Development assistance programs for first time homeownership, particularly through down payment assistance, loan guarantees and direct loans.

Reinvigorate HARP. The Home Affordable Refinance Program was designed to assist homeowners who are current on their mortgage payments but owe more than their home is worth, by allowing them to refinance their underwater mortgages at lower interest rates.

++++

Democrats Say Crazy Uncle Bernie Is Their Top Pick for 2020 …He Will be 80
GATEWAY PUNDIT | Nov 25, 2017 | Jim Hoft

Bernie Sanders is the leading Democrat in the 2020 field.

Advisers to the senator are telegraphing that Sanders is eying a 2020 run — and his network is already ready to go, with supporters convinced that he was the candidate who would have beaten President Trump in 2016.

“His people have never gone away,” said Democratic strategist Brad Bannon. “And he has a loyal core following out there that will be with him come hell or high water.”

Also working in Sanders’s favor, Bannon said, is the leftward shift of the Democratic Party.

“The Sanders wing is becoming the dominant wing of the party,” he said.

Bernie Sanders will be 80 years old in 2021.

Comment by SFMF
2017-11-25 12:13:42

Democrat Party is the party of young people right?

Age in 2020:

Bernie: 80
Hillary: 73 (she is running again bet on it)
Liz Warren: 71

And Dem leaders of the house/senate

Pelosi: 77
Shumer: 67
Durbin: 73
Steny Hoyer: 78

LOL

Comment by Professor 🐻
2017-11-25 12:38:00

“Hillary: 73 (she is running again bet on it)”

She’s a glutton for punishment if she enters the ring again against Donald Trump.

Comment by SFMF
2017-11-25 13:04:06

The old hag is convinced the people love her.

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Comment by Professor Bear
2017-11-25 13:23:25

Why would America want the Clinton baggage back in the WH again? Makes no sense…

 
Comment by redmondjp
2017-11-25 20:53:17

Hillary? Nope. Now Michelle Obama? You can bet on it.

 
Comment by Carl Morris
2017-11-25 22:07:23

Now Michelle Obama? You can bet on it.

She’ll lose too. As would Chelsea. As would one of the Bush twins or any other Bush for that matter. The majority wants new blood, I believe.

 
 
 
Comment by GreenEggsAndSpam
2017-11-25 15:18:19

You forgot
Joe Biden: 75 (if Hillary is the crusty heart and blackened soul of the party, Biden is the brains o_O)
Feinstein: 84!!
Bloomberg: 75
Ginsberg: 84, been dead a few years though

I read that the party is just not able to raise money - maybe they can get a sponsor like, I dont know, Depends or some company that sells prunes.

 
 
 
Comment by 2banana
2017-11-25 10:34:32

So many previous “hot” markets seem to tipping…

++++++

Housing Bubble 2 Hits Rough Spot in California
Wolf Richter • Nov 25, 2017 •

San Francisco Bay Area: Pending home sales dropped 10.5% year-over-year in October, after having dropped 10.8% in September, 11.6% in August, 11.5% in July… the 13th month in a row of year-over-year declines. In the two counties that make up the core of Silicon Valley – the counties of San Mateo and Santa Clara – pending sales plunged 10.9% and 21.4%! San Francisco County was “the anomaly,” as the report put it, with pending sales jumping 15.1%.

Southern California: Pending home sales fell 7.3% after having fallen 7.1% in September, and 3.8% in August. In July, they’d still inched up 1.4%. The counties with the sharpest declines were San Diego (-11.4%), Riverside (-14.0%), and San Bernardino (-10.4%). But year-over-year declines also hit Los Angeles (-4.7%) and Orange (-4.9%).

In the Bay Area, pending homes sales have been plunging in the double digits for months. And even Southern California is no longer immune.

The statewide median price – half sell for more, half sell for less – of single-family detached houses declined for the second straight month in October to $546,430, after a record August, and remains up 6.1% from a year ago. Active listings dropped 11.5% from a year ago:

Across California, listing prices of the homes under contract got cut more often: In October, 32% had their listing price reduced, up from 26% in September.

Comment by Professor 🐻
2017-11-25 11:24:55

“Southern California: Pending home sales fell 7.3% after having fallen 7.1% in September, and 3.8% in August. In July, they’d still inched up 1.4%. The counties with the sharpest declines were San Diego (-11.4%), Riverside (-14.0%), and San Bernardino (-10.4%). But year-over-year declines also hit Los Angeles (-4.7%) and Orange (-4.9%).”

First comes the drop off in volume, with price declines soon to follow.

But this is just the warm-up act for the Trump tax overhaul and interest rate normalization. You ain’t seen nothin’ yet!

Comment by Bellinghouse
2017-11-25 13:56:59

You need an increase in the # of homes for sale (or a drop in employment) to get a drop in price. Inventory is at record lows all over California, hence the drop in homes going pending. Thus the prices going ever skyward.

Demand has not decreased. Population is growing 1% a year and employment at 1.5% a year. Although 180,000 housing units per year should be built to meet this demand, we build about 80,000.

Comment by rms
2017-11-25 15:44:13

“You need an increase in the # of homes for sale (or a drop in employment) to get a drop in price.”

Or a return to mortgages that actually have to be repaid.

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Comment by Professor 🐻
2017-11-25 17:09:46

Not at all. The Trump tax plan plus interest rate normalization would be enough. And it appears that the market is already turning over without these ancillary factors. All that is required is convincing evidence that outsized capital gains are ending, and the specuvestors will dump inventory on market and run for the hills.

PS I just ran an errand in a 55+ community near us. I couldn’t help but notice the For Sale signs on every block, which strikes me as unusual for the holiday season. I guess they couldn’t get the sales done during the red-hot summer sales season. Or perhaps Baby Boomer die-off is creating buying opportunities for the next generation of 55+ buyers.

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Comment by Bellinghouse
2017-11-25 18:56:20

I concur with you that rising interest rates would be bad news for sales prices. Around 2/3 of folks still get a mortgage, even in coastal CA. And rising rates won’t be pretty for stock values, which has a knock on for the priciest (i.e., Bay Area) housing markets.

But I wouldn’t worry too much about seeing a few extra For Sale signs in one community. The individual market inventory data is pretty reliable.

 
 
 
Comment by Mafia Blocks
2017-11-25 15:05:58

“You ain’t seen nothin’ yet!”

Thats right. With housing demand at 30 year lows and 4.4 million excess, empty and defaulted housing units, CA has a long up painful path down.

Comment by Bellinghouse
2017-11-25 19:03:20

The whole state will probably fall into the ocean! LOL. Wasn’t there a Time magazine cover 30 or 40 years ago, “Paradise Lost”? I should have left then, but I stayed and got rich. Painful indeed.

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Comment by Mafia Blocks
2017-11-25 20:22:49

Remember my good friend…. Nothing is more bullish and optimistic like falling prices to dramatically lower and more affordable levels accelerating the economy and creating jobs like nothing else can.

San Francisco, CA 94109 Housing Prices Crater 7% YOY On Skyrocketing Housing Inventory

https://www.zillow.com/san-francisco-ca-94109/home-values/

 
 
 
 
 
Comment by Avg Joe
2017-11-25 11:03:11
Comment by 2banana
2017-11-25 11:19:50

Why?

Public unions are largest campaign contributors of ALL TIME.

No democrat would get elected WITHOUT their money and muscle.

In return, democrats gave insane sweatheart deals to the unions - especially with pensions. Deals that made NO FINANCIAL SENSE.

Why should there be a subset of citizens with more rights than all the rest?

Why?

Absolute democrat corrupt power in the meantime until these deals blew up.

+++++

Pension commitments should be sacrosanct; governments or agencies should not be able to abandon their retirees just because the local economy hits a rough patch or a new governing board is elected with a different set of priorities. And under California law and court rulings, public employee pensions were long seen as precious close to untouchable. Once workers were hired, their pension benefits could not be reduced in value — they could only be improved.

Comment by Patrick
2017-11-25 11:54:33

“Pension commitments should be sacrosanct”

NO WAY should they be untouchable !

Most of these pensions were negotiated between high priced/ educated union reps against elected officials -

These unequal settings gave union employees incredible deals that now have to be priced properly.

Comment by tresho
2017-11-25 16:28:43

“Pension commitments should be sacrosanct”
You can “should” in one hand and “s–t” in the other, then see which hand fills up first. It’s a weasel word intended to change the subject & divert attention from the underlying idiocy.

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Comment by SFMF
2017-11-25 12:15:12

It’s not a blame game. It’s reality. Democrats take union money in order to get elected and in exchange give unions your tax dollars.

Now they have finally run out of other people’s money.

 
Comment by jeff
2017-11-25 15:37:19

A Disability Epidemic Among a Railroad’s Retirees

By WALT BOGDANICHSEPT. 20, 2008

To understand what it’s like to work on the railroad — the Long Island Rail Road — a good place to start is the Sunken Meadow golf course, a rolling stretch of state-owned land on Long Island Sound.

During the workweek, it is not uncommon to find retired L.I.R.R. employees, sometimes dozens of them, golfing there. A few even walk the course. Yet this is not your typical retiree outing.

These golfers are considered disabled. At an age when most people still work, they get a pension and tens of thousands of dollars in annual disability payments — a sum roughly equal to the base salary of their old jobs. Even the golf is free, courtesy of New York State taxpayers.

With incentives like these, occupational disabilities at the L.I.R.R. have become a full-blown epidemic.

Virtually every career employee — as many as 97 percent in one recent year — applies for and gets disability payments soon after retirement, a computer analysis of federal records by The New York Times has found. Since 2000, those records show, about a quarter of a billion dollars in federal disability money has gone to former L.I.R.R. employees, including about 2,000 who retired during that time.

http://www.nytimes.com/2008/09/21/nyregion/21lirr.html

Flaws Persist in L.I.R.R.’s Disability Claims, a Report Finds

By WALT BOGDANICHFEB. 21, 2014

A federal watchdog has concluded that the method of granting occupational disability payments to former employees of the Long Island Rail Road is still so flawed that roughly 96 percent of those who apply receive it, roughly the same approval rate as before a vast cheating scandal was first exposed more than five years ago.

https://www.nytimes.com/2014/02/22/nyregion/flaws-persist-in-lirrs-disability-claims-a-report-finds.html

 
 
Comment by Professor 🐻
2017-11-25 11:12:34

“As my Sydney University colleague Peter Phibbs recently observed, this ’supply mantra’ works for politicians seeking to connect with voters because ‘everyone is an economist now and more supply will bring down prices.’ More importantly, though, governments use their unqualified faith in equitable housing market solutions to get off the hook. It absolves them of the responsibility for playing an active role in managing and shaping these markets to deliver housing that meets everyone’s need for shelter. Instead, they facilitate development for speculation.”

Policymakers could test this theory by banning foreign, and perhaps even domestic, speculators in housing that is intended to be owner occupied. Any thoughts on what would happen to affordability if this were done?

Comment by 2banana
2017-11-25 11:24:47

How to have affordable housing without one expensive government program.

1. Government will no longer guarantee ANY mortgage or housing loans
2. Banks will EAT their bad loans
3. Banks will adhere to strict GAAP and fraud laws or the bankers will go to jail
4. Banks that have too many defaults will be audited
5. Banks that continue to have too many defaults will be shut down with the bankers going to jail

OVERNIGHT:

Affordable housing
20% down-payments
Fast and efficient foreclosures to get the house back on the market
Loans at 2.5 income (or lower)
And no more bubbles

Comment by Professor 🐻
2017-11-25 12:05:41

Sounds like you have the solution in hand for America’s housing affordability crisis! Are you applying for Mel Watts’ job?

Comment by 2banana
2017-11-25 12:16:53

The Free Sh*t Army says no.

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Comment by Professor Bear
2017-11-25 13:27:03

I have to hand it to the Trump team. They are the first executive branch in memory to have the grit to take on a tax reform proposal of which the real estate industrial complex does not approve. I can’t imagine any other recent U.S. President having the courage to do this.

For instance, it is absolutely certain that Hillary Clinton would march in lockstep to the NAR’s demands.

Comment by Bubblebot
2017-11-25 21:04:51

” I can’t imagine any other recent U.S. President having the courage to do this.”

I mean no offense, but weren’t you hammering Trump here during the campaign when we were saying he has massive huevos and will drain the swamp? Maybe I’m confused.

Comment by palmetto
2017-11-26 08:48:48

Yes, but that doesn’t mean he can’t change his mind, or change his mind about how someone handles certain issues. Just because someone approves of something that someone does, doesn’t mean they’ve changed their mind about the person overall.

For example, I was not fond of Obama by any means. However, he did do a couple of things of which I approved, and I called my congress critters to say that I supported the president on those issues and hoped they’d follow suit. But it didn’t mean I changed my mind about Obama overall.

One of the hallmarks of sanity in a person is the ability to change one’s mind when presented with new information. Many people are unable to do this and retreat into cognitive dissonance. Scott Adams, the Dilbert cartoonist (and Trump supporter), covers this subject frequently in his blog and Periscope sessions and interviews.

Comment by Bubblebot
2017-11-26 21:18:39

“Yes, but that doesn’t mean he can’t change his mind, or change his mind about how someone handles certain issues.”

Fair enough and eloquently defended Palmetto. I just don’t know how people misinterpret “restore the government of the people, for the people, by the people.” It sounds like a miracle to me.
MAGA!

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Comment by Senior Housing Analyst
2017-11-25 14:18:39

Albany, OR Housing Prices Plunge 8% YOY As National Housing Demand Craters

https://www.movoto.com/albany-or/market-trends/

Comment by Jingle Male
2017-11-26 03:55:45

HA? Is that you?

Median $/SF price up 19%! How do you define crater? HA!

Comment by Mafia Blocks
2017-11-26 05:48:26

DebtDonkey

Renton, WA Housing Prices Crater 5% YOY

https://www.movoto.com/bellingham-wa/market-trends/

 
 
 
Comment by azdude
2017-11-26 06:44:05

Im still dancing!

 
Comment by jeff
2017-12-03 05:54:10

Region IV

 
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