The Glut Would Have Further Depressed Prices
A report from the Arizona Republic. “The five-story central Phoenix brownstone mansions known as Chateau on Central are being renamed, and the developer is lowering the remaining homes’ prices. The 21-urban home development will now be called The Arris. And prices for the 12 brownstones that haven’t sold yet will fall to the $900,000s. A couple of the mansions were listed for almost $2.5 million last year. A few years ago, one of the Chateau mansions sold for more than $4 million.”
From News Channel 5 in California. “A Del Mar home just made a housing market breakthrough, becoming the first San Diego County home since 2007 to sell for more than $20 million. $21,500,000 to be exact, down from the most recent listing price of $24,900,000. San Diego-based KGTV first showed you the home at 100 Stratford Court last August, when it was listed $1 million higher than the final listing price.”
From the Real Deal on New York. “Manhattan’s luxury market recorded 29 contracts at $4 million and above last week – the fourth week in a row contract activity topped 20 deals, according to Olshan Realty’s weekly market report. The No. 1 spot went to a 12-room co-op apartment across from the Metropolitan Museum of Art at 993 Fifth Avenue with an asking price of $17 million. That’s a nearly 32 percent reduction off the original ask of $24.9 million when the unit was first listed in May. The Met, meanwhile, is considering selling its executive apartment on the building’s 2nd floor as it looks to shore up its unsteady finances.”
“The week’s asking-price volume totaled $204.79 million, with a median asking price of $5.25 million. Luxury homes spent an average of 377 days on the market, with an average discount of 10 percent from the original ask to the final one.”
The Real Deal on Florida. “Lionel Gossaf arrived in Miami from Brussels on Wednesday evening to try to save his unit at a Miami Beach condo-hotel that has been at the center of an epic fight with the Port Orange, Florida-investment company Schecher Group. But he learned he had already lost the battle. Earlier that day, Miami-Dade Circuit Court Judge Beatrice Butchko approved the foreclosure of Gossaf’s unit and 35 others in the Sixty Sixty Resort at 6060 Indian Creek Drive.”
“Gossaf said he purchased his 10th floor unit in 2013 for $100,000 using savings from his pension. ‘I wanted to do a real estate investment in Florida because I wanted an asset in America and I thought it would be well protected,’ Gossaf said. ‘And my family and I come quite often to Miami.’”
“He said he spent $11,000 to pay for attorney fees against the Schecher lawsuit and a pending bankruptcy filing by the condo association. He spent another $1,500 to travel to Miami for the three-day trial. ‘I was very upset and angry when I learned the judge foreclosed on all of us without hearing our defense,’ Gossaf said. ‘This is not American justice.’”
From Realty Biz News. “In today’s hot real estate market, many buyers and investors have forgotten about the foreclosure market. The highest foreclosure rates are in Atlantic City, Trenton, Philadelphia, and Chicago. Overall, 28 major cities experienced an increase in foreclosures during 2017.”
“If you’ve been a student of the real estate market for a few years, you’ve likely heard of ‘REO Shadow Inventory.’ Shadow inventory are house the lenders took back during the foreclosure peak but didn’t put on the market for sale because the glut would have further depressed prices. Some of these houses are now coming on the market. Additionally, many houses remained with the original owners although they were way past the point when lenders could foreclose. This was allowed so that vacant houses didn’t further deteriorate.”
“U.S. properties foreclosed in the fourth quarter of 2017 had been in the foreclosure process an average of 1,027 days (2.8 years). Nationwide, 50 percent of all loans actively in foreclosure at the end of 2017 were originated between 2004 and 2008.”
‘prices for the 12 brownstones that haven’t sold yet will fall to the $900,000s. A couple of the mansions were listed for almost $2.5 million last year. A few years ago, one of the Chateau mansions sold for more than $4 million’
Tell us Arizona Republic, who was the lucky $4M winner?
john cena , nikki bellas hubby the bella twins are from scottsdale.
i bet u the FED balance sheet goes up. They are gonna finance trumps trillion dollar deficits.
Without govt spending the economy goes into the sh@tter.
I for one will not be in the least bit surprised if the Fed turns tail and runs away from the plan to unwind its balance sheet in favor of further continuation of extend-and-pretend. Wall Street fully expects this, as evidenced by day after day of multiple hundred point gains in the Dow, ever since the recent supposed “correction.”
The Fed
Fed’s Bullard says the stock-market correction was ‘benign’
By Greg Robb
Published: Feb 26, 2018 3:50 p.m. ET
St. Louis Fed president’s forward guidance on interest rates: They should stay ‘relatively unchanged’
St. Louis Fed President James Bullard said Monday the recent sharp stock market sell-off was relatively benign given that it was not driven by a sudden negative shift in investor perceptions about the economic outlook.
The Dow Jones Industrial Average (DJIA, +1.58%) fell sharply at the beginning of February into a technical correction, though it’s recovered much of those losses since then.
“One thing about this sell-off in equity markets that just occurred, it did not seem to be associated with a re-think of global growth prospects or U.S. growth prospects, so in that sense, I think the sell-off was relatively benign compared with other ones that had been associated with some kind of market reassessment of risks globally,” Bullard told reporters after a speech to the National Association for Business Economics in Washington.
“That didn’t really happen this time around, so that is an encouraging sign,” he added.
…
Is it just me or is the high end cratering much earlier than it did last crash?
how do u like your crater taters?
Now I’m craving tater tots.
Mmmm tater tots. Central Ave was a ghetto when I grew up in Scottsdale in the 80’s. How is it now?
Nice in the 50s. LOL.
Ruh roh……
Data Watch
New Single-Family Home Sales Declined 7.8% in January
Brian S. Wesbury, Chief Economist
Robert Stein, Deputy Chief Economist
Date: 2/26/2018
New single-family home sales declined 7.8% in January to a 593,000 annual rate, well below the consensus expected 647,000. Sales are down 1.0% from a year ago.
Sales fell in Northeast and South, but rose in the Midwest and West.
The months’ supply of new homes (how long it would take to sell the homes in inventory) rose to 6.1 months in January from 5.5 months in December. The gain was due to both a slower sales pace and an increase in inventories.
The median price of new homes sold was $323,000 in January, up 2.5% from a year ago. The average price of new homes sold was $382,700, up 7.0% versus last year.
Implications: New home sales disappointed in January, coming in below even the most pessimistic forecast by any economics group to start 2018 off on a weak note. Sales of new homes fell 7.8% in January, and are now down 1.0% from a year ago. However, don’t read too deeply into January’s weak headline number. Last year posted the highest annual sales total in a decade, a trend we expect to continue. The biggest drag on today’s number came from the South, as sales continued their return to trend after Hurricanes Harvey and Irma caused many people in that region to buy new homes to replace those destroyed in the aftermath, temporarily driving up activity. Going forward it’s important to remember that new home sales are volatile from month to month, but prospects remain good for further growth over the next few years. Sales of new homes were typically about 15% of all home sales prior to the end of the housing bubble in the previous decade. They fell to about 6.5% of sales at the bottom of the housing bust and now have recovered to about 10%. And if there’s plenty of room for growth in new home sales, that means plenty of room for home building to grow as well. At first glance, inventories sitting at a post-crisis high and a corresponding rise in the months’ supply to its highest level since 2014 would seem to refute this. However, completed units are now at their lowest portion of overall inventories since 2006, which means builders still have plenty of room to expand. With jobs continuing to grow at a healthy pace, wages accelerating, and a tax cut taking effect, we maintain our optimism about home building in the years ahead. Although the new tax law trims back the mortgage interest deduction for some high-end homes, the value of the mortgage interest deduction was affected more broadly by the marginal tax rate reductions in the 1980s, during which housing did well. Yes, the new tax law also trims back state and local tax deductions, including the property tax, but we think that’s going to affect where people live, not overall home building nationwide. The US economy is looking up and home sales will rebound in the near future.
‘Gossaf said he purchased his 10th floor unit in 2013 for $100,000 using savings from his pension. ‘I wanted to do a real estate investment in Florida because I wanted an asset in America and I thought it would be well protected’
Welcome to America Lionel! Now leave your wallet and go home.
Never, ever, ever in my life would I purchase a condo. I recently heard of someone who just had a special assessment of $35,000 for some massive building repair/upgrade.
Cash calls on any investment are the ankle biters most don’t budget for.
And this is where I come in.
Mr. Banker, your newest best friend and financial savior, to the rescue!
😁
It is amazing how willingly people set themselves up so as to be financially destroyed.
People have absolutely no fear of debt, absolutely none.
“…It is amazing how willingly people set themselves up so as to be financially destroyed….”
All too common, actually. To me one of the great mysteries of life is why such situations occur.
I have personally known quite a few individuals who are talented, smart with good jobs (and often) great incomes who somehow make major bad life decisions.
Not just for matters of real estate, but relationships, personal health and life skills in general.
Just don’t get it.
Just don’t get it.
Talent, intelligence and income =/= wisdom
It’s all about the marshmallow……………circa 1960
https://en.wikipedia.org/wiki/Stanford_marshmallow_experiment
Or in Wimpy’s vernacular “I’ll pay you Thursday for a hamburger today”.
I have personally known quite a few individuals who are talented, smart with good jobs (and often) great incomes who somehow make major bad life decisions.
I read a very intriguing article in the WSJ some years ago back when Madoff’s ponzi scheme was unraveling. The gist of the article was that many intelligent, smart money investors were taken for a ride. The basic idea was that being financially literate or even sophisticated doesn’t inoculate oneself from fraud. Indeed, many extremely brilliant engineers, scientists, or programmers get scammed all the time because they assume that their narrow technical expertise translates to some other domain (it doesn’t). Furthermore, they are often loathe to share their plight with friends and family because they are ashamed. This is of course understandable, but it also does a disservice because when people are more open about fraud, it can serve as a cautionary tale. I know a very successful dentist who was had several hundred thousand taken from him in a real estate investment scheme. It was a case of affinity fraud.
People have absolutely no fear of debt, absolutely none.
Nothing a BK can’t fix.
Fix? Why try to fix a Gift from God?
From the comment section in the article:
“Don’t forget, “the dues” are $3,200 per month, if not paid by the 5th of each month, 100% penalties & 18% annual rate. Those units are under 350 sq. ft. They are Not oceanfront units.”
I was wondering why that condo was only $100K. You can’t even find a 2-bed CBS for under $200K in Miami. This guy was clearly banking on the appreciation, not for the value of living in the unit.
I don’t think you can live in a condo-tel.
Is that what this is? What a maroon. Definitely an appreciation hog. He’d get better returns with the Russell 5000.
“… the Russell 5000.”
He’d certainly get better diversification!
Problem with rising rates: Corporate America has binged on debt
http://money.cnn.com/2018/02/26/investing/corporate-debt-rising-rates/index.html
Corporate America, egged on by ridiculously-low borrowing costs, has built up more debt than any time since the end of the Great Recession.
“Removing the easy money punch bowl could trigger the next default cycle,” S&P Global Ratings wrote in a recent report titled “Debt high, defaults low — something’s gotta give.”
So, when things start to unravel, what will the Fed (and other central banks) do? More QE or will everyone be forced to take their medicine?
Sell high!
Today I did just that. By about noon, the market looked like it was going to have an up day, so I transferred some equities to some retirement-based bonds. I needed to rebalance a little anyway, and it looks like interest rates are going to pendulum upwards for a while. That will be enough to tank the DOW.
The DOW is only 800 or so points from erasing that entire, shall we say, “hiccup” from the other week. DOW 30,000, here we come?
Maybe, but I’m not good at timing the market so thin. Better to take a few gains now. There’s the old saying “I got rich by selling to soon.” Not that I’m getting rich, of course, I didn’t move much and I don’t have much to move anyway.
I’m very underweight equities at the moment, but if I were close to retirement and I had a large equity stake, I would take a long hard look at rotating into a more defensive position (not a long-term bond fund though!). Selling into a rally doesn’t seem like a bad proposition when the CAPE is higher than it was on Black Tuesday.
I’m going to let the 3 hikes happen then do the same
let the 2019 recession roll in
buybacks to enrich themselves via options.
“Debt high, defaults low — something’s gotta give.”
This is where shareholders become useful.
This gets to my point about irreversibility of the Fed’s interest rate suppression program. The longer the policy is kept in force, the larger the resulting overhang of consumer, corporate and government debt that would be negatively impacted by a return to normal (unsuppressed) interest rates. The requisite pain from unwinding extraordinary accommodation is hence ever-increasing in the size of the debt buildup. This creates a strong temptation for the FOMC to continue footdragging indefinitely until the point of outright collapse, with too-big-to-fail bailouts to follow for every individual and corporate entity who chose to wrecklessly burden themselves with unrepayable debt.
Should be some good opportunities for savers later this year…
Business News
February 27, 2018 / 5:34 AM / Updated 10 minutes ago
Fed’s Powell nods to ‘gradual’ rate hikes, close eye on inflation
Howard Schneider, Jason Lange
WASHINGTON (Reuters) - Federal Reserve Chairman Jerome Powell, pledging to “strike a balance” between the risk of an overheating economy and the need to keep growth on track, told U.S. lawmakers on Monday that the central bank would stick with gradual interest rate increases despite the added stimulus of tax cuts and government spending.
Fed policymakers anticipate three rate increases this year, and Powell gave no indication in prepared remarks to the House Financial Services Committee that the pace needs to quicken even as the “tailwinds” of government stimulus and a stronger world economy propel the U.S. recovery.
“The [Federal Open Market Committee] will continue to strike a balance between avoiding an overheating economy and bringing … price inflation to 2 percent on a sustained basis,” Powell said in his first monetary policy testimony to Congress as Fed chief.
“Some of the headwinds the U.S. economy faced in previous years have turned into tailwinds,” Powell said, noting recent fiscal policy shifts and the global economic recovery. Still, “inflation remains below our 2 percent longer-run objective. In the (FOMC‘s) view, further gradual rate increases in the federal funds rate will best promote attainment of both of our objectives.”
…
3.2% 5 year CDs being advertised in my neck of the woods.
my county raises taxes and Zillow trims predicted price increase a few days later
coinki dink?
I think not.
Oxide? what u got
Guess my rent will be going up.
boots
Inventory still very low. A couple of auctions, then a big price jump to flipper specials which are $25K+ over comps. Flipper special = a pull-and-replace kitchen, $6K bath redo, hot pink and/or wallpapered main bedrooms illegal bedroom in the basement leftover from circa 2006 illegal flophouse.
If you’re a regular joe looking for an adequate house to just live in, it’s slim pickings. Recently sold houses are more regular so to speak, selling at near Zestimate.
Once you factor in capital gains, these flippers are taking it up the pipe.
A lot of these johnny-come-lately flippers are levered to the teeth. They NEED to get a certain price. And time is not on their side because their carrying costs are massive. If it doesn’t sell quick and the market turns, they’re screwed, blued and tattooed.
An all cash investor can afford to ride out a downturn and just rent the place out for whatever the market will bear. They may not like it, but it’s doable. Not so for the infestors who are levered up. They can’t rent at a loss for long, and the rents generally don’t support the purchase price so there’s no way not to hemorrhage cash monthly. I see the same trail of tears coming that we saw last time.
I see the same trail of tears coming that we saw last time.
Yeah. Any reason to believe there won’t also be the same bailouts for Mr. Banker when they default?
Yes: Dodd-Frank. The Republicans never got around to repealing those crushing regulations. Banks still have to submit their resolution plans, also known as living wills, which “describe the company’s strategy for rapid and orderly resolution in the event of material financial distress or failure of the company.”
In other words, the bank has plans for *how* they plan to go bankrupt. I guess there’s still room for a bailout, but at least there won’t be the time pressure that there was in 2008, which forced/allowed Paulson to act nearly alone (and to feather his own nest at the same time). This time Congress will get involved and have time to deliberate, and we all know how that goes…
You can read the public portion of the big boyz’ living wills here:
https://www.federalreserve.gov/supervisionreg/resolution-plans.htm
I’m not near as concerned about the banks, which have increased capital buffers, as I am about the non-bank lenders whose balance sheet is thin-to-non-existent.
You shoulda been here back in 08. It was interesting watching who actually had real buffers and who didn’t. But right when it was getting interesting the Fed stepped in and saved the rest.
It might not go down the way it looks at the moment. It didn’t then.
“But right when it was getting interesting the Fed stepped in and saved the rest.”
Every bailout creates moral hazard incentives for heightened participation in unproductive, wreckless gambling activity in the future. Exhibit A: lux condo overhang in every major city in the developed world. Pretty soon, the gamblers are over their heads in a plethora of highly leveraged, utterly useless projects, resting assured that they will get a share of the bailout proceeds in the next systemic collapse.
Yup. Previously “buy the dip” was a gamble. Now it’s gospel.
I was asking about tax hikes
fxco is 5% w assessment and rate change
I don’t know about any rate changes… haven’t heard much from my local gov. My taxes did go up a little a couple years ago, but that’s because they did their periodic re-assessment, not a tax hike.
Monkey see, monkey do…
Threatening messages spray-painted on Rancho Bernardo High walls
Posted 7:57 AM, February 26, 2018, by FOX 5 Digital Team,
Updated at 08:44AM, February 26, 2018
Well… there goes the neighborhood.
There goes the country. This phenomenon is widespread.
“‘I was very upset and angry when I learned the judge foreclosed on all of us without hearing our defense,’ Gossaf said. ‘This is not American justice.’”
First mistake: Assuming Miami is America
From a guy who isnt even an American. I love it.
If I went to Brussels and complained about their judicial system I’d have every EuroTrash Hipster yelling at me.
Hialeah Gardens, FL Housing Prices Crater 17% YOY On Plunging Housing Demand
https://www.movoto.com/hialeah-gardens-fl/market-trends/
That’s a nearly 32 percent reduction off the original ask of $24.9 million when the unit was first listed in May.
————————————————————————————
Look for Fibonacci retracements.
“A Del Mar home just made a housing market breakthrough, becoming the first San Diego County home since 2007 to sell for more than $20 million. $21,500,000 to be exact, down from the most recent listing price of $24,900,000. San Diego-based KGTV first showed you the home at 100 Stratford Court last August, when it was listed $1 million higher than the final listing price.”
About 25 years ago your intrepid correspondent rented out half of a townhome less than 5 minutes walk from this house for a whopping $550/mo. I was fresh out of school, worked at the oceanographic institute just a few miles down the coast, and surfed everyday before work at the beach out front - and sometimes after. Dolphins in the water almost every day with me. Often after work I’d ride my bike over to the reserve and hike in the canyon which has some amazing flora and fauna like the venerable Torrey Pine. I would also kayak up the lagoon and even tried to build an artificial reef there with a friend which was admittedly pretty weak (it was an old skateboard ramp) but there was a red tide and it was nighttime so the water was glowing all around us from the dynoflagellates while we tried to get it situated for testing without having to answer any awkward questions from cops.
Even back then the place was pretty snobby - I saw the insides of a lot of noses whenever I had to go grocery shopping. I wonder if the richie riches that have stunk up that area even more are partaking in any of the simple things? Camels and needle eyes comes to mind.
heh its only gotten worse, parking meters everywhere, they closed down the train to keep out of towners from using the beach, banned smoking on the sidewalks, refuse to put in proper stop lights, and constantly trying to buy the Racetrack/Fairgrounds to stop people from coming in or getting more power to approve shows/uses. They LOVE the “DEL MAR GUNSHOW” billboards that go up LOL, 2nd Amendment protected gatherings with some 1st Amendment advertising to go with it. Luckily they’ve been thwarted from being able to buy it since its state land, but they keep trying to buy botes in Sacramento.
“…banned smoking on the sidewalks…”
Is that really possible?
https://www.cnbc.com/2018/02/26/rising-mortgage-rates-hit-new-home-sales-hard-a-bad-sign-for-builders.html
No surprise there. Median home sales price January 2018 (existing $240.5k), median home sales price January 2018 (new-$323k).
Almost 35% premium for new homes. It’s not sustainable and way off the historical norms.
I posted this a while back:
Why ‘new’ costs so much
By: Connie Yoshimura
Wed, 09/28/2016
‘the disconnect between “new” and “pre-owned” continues to widen. Nationally, the gap between the new and existing homes since 2012 is now $72,100 compared to just $20,000 between 1990 and 2008.’
‘No wonder new homebuyers are faced with sticker shock.’
http://www.alaskajournal.com/2016-09-28/why-new-costs-so-much#.WpRNbnllBLN
More than triple. This is the greedy bashtards thing.
“That increase includes building codes, environmental issues (SWPPP), wetland permitting, labor and zoning. National Association of Home Builders research finds that 24 percent of the final cost of a new home is due to direct and indirect regulatory costs.”
some argue the high costs in CA are a way for folks to bring in more revenue due to prop 13 capping annual property tax hikes.
The local governments are where the real graft, corruption and nepotism occurs. They’re not going to waste any opportunities in this once-in-a-lifetime boom. They are swimming in revenue right now, and instead of just enjoying the windfall profits they realized from rising prices, they added new fees and charges, and raised rates on top of all of it. It seems there’s no accountability at all, they just do what they want and the people take it laying down.
The national mouthpiece talks a good game but as we all know, contractors are profitable all the way down to $50/sqft.
Lies as usual, Mafia? You can’t even buy the dirt for that much, unless you’re 50 miles outside of Oil City.
And I’ll install a $50 precast catch basin just for you my good friend.
Apollo Beach, FL Housing Prices Crater 30% YOY
.https://www.movoto.com/apollo-beach-fl/market-trends/
Ok, I can buy the argument for higher prices due to lumber and labor shortage, somewhat. But high land prices? In my neck of the woods, I’ve only seen one builder actually develop new land from scratch. All the building that’s going on is in the developments that went belly up in the last bust, and builders bought land for dirt cheap, pun intended.
‘higher prices due to lumber and labor shortage’
When I’ve gone to shoot video at these places it sure is a lot of Spanish speakers. When did we have a shortage of those? There isn’t that much wood in a shack. It’s mostly air. Oh and Styrofoam.
‘developments that went belly up’
That’s what this Phoenix debacle above is. These builders are a lion. Scarcity and urgency are the oldest snake oils in the book. After all these years, and they can’t throw up some shacks? That excuse is wearing thin. But somehow we can simultaneously have a 4 decade high in apartment construction. No labor there? Jeebus, the crain is the national and global bird.
If you look at single family inventory currently for sale, it certainly appears there’s a shortage of houses. However, when I can drive down almost any street and find a zombie house, rotting away neither for sale nor for rent, what’s really going one? “I’ll take ‘what’s collusion for $1,000,’ Alex.”
The FED and the banks are sitting on tens of millions of houses. Audit the FED, mark to market, and put ‘em in jail!!
So, if lending institutions were holding onto tens of millions of homes, AND home prices are high, AND there isn’t a large inventory of existing homes for sale, what exactly is their motivation for holding the homes rather than selling them?
At a minimum, holding the homes costs the banks property taxes…but if that’s all they’re spending, they also face deterioration of the property the longer they hold.
If they sell the homes, they get cash, which they can then turn around and lend for net interest margin.
I understand that in theory, they can make more if they hold out for higher and higher prices…HOWEVER, if prices are already high…why hold out longer? Because they expect homes to go up in price forever?
Smell check: at $100k per home…10 million homes on the books of banks would be $1 TRILLION of REO. And that’s a modest price, and only 10 million homes (not “tens of millions” as you note)…where exactly do banks hide TRILLIONS of REO on their balance sheets?
Wells Fargo had $706MM of foreclosed assets at the end of Q3 (and reported both selling and foreclosing during the quarter).
Bank of America had $236MM of foreclosed properties on their books at the end of 2017.
So, two of the largest residential mortgage lenders in the US have less than $1B of REO combined on their balance sheets. That leaves $999 Billion to find…for the first of many $ Trillions.
“…where exactly do banks hide TRILLIONS of REO on their balance sheets?”
On the FED’s balance sheet. Duh.
Rental Watch: So, two of the largest residential mortgage lenders in the US have less than $1B of REO combined on their balance sheets. That leaves $999 Billion to find…for the first of many $ Trillions.
Fed has 1.8 trillion of MBS, certainly a certain amount of that is defaulted. They’re acting as a “bad bank”, for which they’re perfectly suited due their near inability to become insolvent: p. 39 actual, 33 numbered: https://www.federalreserve.gov/monetarypolicy/files/20180223_mprfullreport.pdf
That’s one place to look. No proof though, would have to look for indirect evidence.
https://www.federalreserve.gov/aboutthefed/files/quarterly-report-20170930.pdf
Sure, a certain amount of the $1.8T has defaulted…like any lender with a large amount of loans. But that’s a far cry from noting this $1.8T as being reflective of vacant housing.
The $1.8T is MBS guaranteed by Fannie/Freddie…with a net interest rate of 2.69% (Table 12).
There is ~$12B of quarterly net interest income from these GSE MBS…which is about what you would expect based on the rate reported.
The Fed is not sitting on empty homes…they own debt, of which the vast majority appears to be performing.
“The Fed is not sitting on empty homes…they own debt, of which the vast majority appears to be performing.”
How in the bleep do you know? You can’t see the FED’s balance sheet.
Answer me this: How is there a shortage of housing in almost EVERY market in this country despite the fact that there are NOT population increases in most areas?
“Answer me this: How is there a shortage of housing in almost EVERY market in this country despite the fact that there are NOT population increases in most areas?”
I’ve had this very thought myself. The only explanation is if everyone owns two or three homes… and needs another.
Rental Watch: The $1.8T is MBS guaranteed by Fannie/Freddie…with a net interest rate of 2.69% (Table 12).
To me, that seems rather low for interest payments. I mean even 15 year mortgages got down to the mid-3’s for a while. I would think the Fed would be buying as much junk as it could to improve the solvency of less magical-balance-sheet entities.
If the Fed is not a profit making entity, and it’s actively trying to work with, to support financial companies, to help them lend, and it’s not trying to behave in any punitive way, why wouldn’t it take as much junk debt off their hands as possible?
Junk asset-based debt is tied to assets. On the Fed’s balance sheet, it’s in limbo.
“…what exactly is their motivation for holding the homes rather than selling them?”
1. Price fixing measures, such as interest rate suppression and withholding of inventory from residential markets, results in fantastic portfolio appreciation for all real estate HODLers, including your firm. Why sell when you are getting double-digit appreciation on homes held off the market!
2. Uncle Fed has their backs.
‘They’re acting as a “bad bank”,…’
of last resort. I recall lots of discussion during the 2007-2009 bailouts of what financial entity would play this role. It’s interesting that the (Bernanke) Fed stepped up to the task when no other individual or corporate entity was up for it.
To me, that seems rather low for interest payments. I mean even 15 year mortgages got down to the mid-3’s for a while. I would think the Fed would be buying as much junk as it could to improve the solvency of less magical-balance-sheet entities.
The Fed isn’t lending money to homeowners…they are buying bonds backed by the Federal Government…there is a spread over what the borrowers are paying that goes to Fannie/Freddie. With the explicit guarantee of the Federal Government, exactly why should folks get interest payments meaningfully higher than what the government pays on its debt (it is notable that many of the bonds get paid back well before the 30-year duration of the loan)?
Lastly, there are approximately 90 million single family homes (attached and detached) in the US. For there to be “tens of millions” vacant doesn’t mean that there is an empty house on every street (which there isn’t…because there isn’t one empty on my street).
It means that 2 or 3 of every 10 are vacant–and that’s simply not true.
Incorrect.
There are 130 million housing units in the US which is grossly understated. Of that, they admit 18 million are empty excess housing units. Of course it’s understated but by how much? 40%? 60%?
Isn’t it also an easier financing thing too? I seem to remember reports at the end of the last bubble, after credit had already started to contract, that financing through the developers’ subsidiaries was still the loosest credit around. Developers knew they could charge a huge premium because they were the last/only chance for the totally unqualified to get financing.
C’mon, Ben, you forgot the money quote from your link - there’s a shortage of land in Alaska!
“Nationally, the average single family lot size is 8,589 square feet. In comparison, the Municipality of Anchorage zoned R1 single family lot size is 6,000 square feet and there is continued discussion about a small lot ordinance which would lower that size due to our lack of available land for residential development.
Nobody is putting a gun to any buyer’s head and forcing them to overpay for a new home…
They will roll out the old tried & true option. Hold the price, buy down the rate and plaster 3% fixed rate all over the place.
I wish the cratering would hurry up. Earlier in the year the 600k+ stuff in the Folsom area seemed slow. This weekend it seemed like a feeding frenzy though. There have been some price drops here and there, but houses that never sold last year and just came back on the market seem to be getting a lot more attention than they did last year. At the moment the bubble is still on, multiple offers coming in quickly for the best deals.
There is no hurry when you’re renting for half the monthly cost. Sit back relax and buy it later after prices crater for 75% less.
Sacramento, CA Housing Prices Crater 5% YOY
https://www.zillow.com/east-sacramento-sacramento-ca/home-values/
https://snag.gy/m5EzRB.jpg
But you’re a REALTOR, right Carl?
Not yet :-). I should have a license in a few more weeks. As I said in my other message, it may be pointless if I really can get the whole buyer commission back without having a license.
“At the moment the bubble is still on, multiple offers coming in quickly for the best deals.”
And the same is true in Atlanta.
One other new thing…so I’m scheduled for my realtor exam in a couple more weeks just in time to see a new site/app called Reali that promises to refund the whole buyer’s agent commission back to you if you use them. Anybody heard of it? I wonder how they make their money?
Until you figure out how they’re getting paid, in reality, beware.
Rowlett, TX Housing Prices Crater 9% YOY As Mortgage Defaults Expand
https://www.movoto.com/rowlett-tx/market-trends/
Slick marketing website linked from the Continuum Partners site:
http://theoapartments.com
Seattle, WA 98109 Rental Rates Plummet 16% YOY As Housing Inventory Floods Market
https://www.zillow.com/seattle-wa-98109/home-values/
*Select price from dropdown menu on rental chart
Meanwhile in Orange County, California:
“Trash trucks and contractors in hazmat gear have descended on the camp and so far removed 250 tons of trash, 1,100 pounds of human waste and 5,000 hypodermic needles.”
http://www.foxnews.com/politics/2018/02/26/los-angeles-burbs-crack-down-on-huge-homeless-camp-near-disneyland-fearing-new-skid-row.html
““It’s becoming part of the permanent landscape in those communities and there is no way we are going to allow Orange County land that is supposed to be used by residents to be occupied by the homeless,” said Todd Spitzer, who sits on the Orange County Board of Supervisors.”
Todd found his middle finger and it still works. Good job Todd, except I think you meant to say: “…no way we are going to continue to allow Orange County land…”
Todd’s ancestors probably had about the same thing to say of the people living in tents on land they wanted to use.
I do wonder how you cannot be a resident if you are living in a place. Perhaps you need a mailing address which is a building with a CoO.
The homeless and their tents (and needles and feces and trash) were there first and the city sprang up around them? Is that what you are saying?
Native Americans.
Americans born on American soil today are just as American as today’s Americans of native American descent.
Sure, but they are not as native. Gotcha.
Yesterday I received a lovely insult:
Caring for an asian family is still cheaper than 1 brain damaged feminazi. Add up all the anti-psychotic drugs, yoga retreats, car wrecks, lawyers, etc. You can have a couple asian families for the same amount - its just math. But I wouldnt expect a feminazi to understand basic economics. Enjoy the smell of cat pizz.
FYI for those not familiar:
“Feminazi” was coined by Rush Limbaugh (or some other radio host) to refer to what would now be referred to as “third wave feminism.”
———-
First-wave feminism: women fighting for the right to vote.
Second-wave feminism: women fighting to be allowed to enter college and careers other than “pink collar,” on the basis of merit. The movement was fueled by the release of the birth-control pill in 1960, and associated with the sexual revolution.
Third-wave feminism: Reverse sexism. Characterized by women demanding special treatment, or at least an abundance of pity and goodies, just because they are women. Associated with identity politics and social justice warring. Extra connotation with body positivity.
————-
For the record, I’m a second-wave feminism, along with most other women. I pretty much have to be. Any woman who is not a nurse, teacher, or secretary is a second-wave feminist by definition. Any guy with a wife who is same likely agrees with second-wave feminism.
A brain-damaged ex is happy to live far away and not bug you as long she gets her money. But family of the Asian hottie moves in with you and takes over. (this is happening to a co-worker.) That’s got to even up the basic math somewhat.
And no insult is complete without the stereotype of the spinster and the cats.
That’s one area where there is still a gender gap: single men are considered a success for resisting the siren song; single women are considered failures for not landing a man. Eh well, whataryagonnado.
Hey Donk
“Caring for an asian family is still cheaper than 1 brain damaged feminazi.”
Ran across this …
http://www.telegraph.co.uk/expat/education-and-family/expat-wives-biggest-fear-in-south-east-asia-hubby-running-off-wi/
This too …
http://www.dailymail.co.uk/femail/article-3058748/She-spoke-sex-like-housework-Confessions-men-paid-thousands-marry-mail-order-brides-lived-regret-it.html
Not just bar girls. There’s also a lot of that that goes on with “normal” Asian women. It’s interesting to listen to the expat wives talk about it in my wife’s coffee shop in Shanghai.
From the article:
————
“Whereas in poorer parts of Asia the strumpet’s mum is likely to be grateful she’s guaranteed the family an income, at least for the duration, and her friends will hope to emulate her in winning themselves a walking wallet.
“It’s about the strong Thai attitude of a girl looking to do the best she can for her family, by marrying up or into wealth; i.e. a farang, or foreigner.”
————
This is very strong in the Asian cultures, and the Hispanic cultures too. This is not about love, this is about providing for the family. Or, more accurately, getting Uncle Sam to provide for the family. Did you notice how Trump’s offer to (eventually) grant citizenship to 1.8 million DACA kids was summarily snubbed when it became clear that Trump was going to demand an end to chain migration in exchange?
If chain migration is ever ended, that will make a huge dent in the mail-order bride business, as much of the economic incentive disappears.
Keep dreaming. Didn’t Trump’s both marriages were to mail-order-brides?
Nbody’s proposing to ban Spouses and young kids.
Oxy:
I have a buddy - an elderly man still living in the paradise known as ILLANNOY who married a Latina from Guadalajara some 20 years ago (she worked in his company plant) - this after divorcing his first wife by whom he had two kids and had his clock cleaned pretty good back then. Guess what - after the second wife rifled through most of his trust and company holdings in place for his retirement - she no longer put out - no longer was ‘in love’ with him and now with no money my buddy is left holding the empty bag and on the prowl for another one - poor guy he just never learns!!!
I agree with those who have been posting here over the years - there has been a meme among some on the HBB that it is better for a man to remain single than to have his clock cleaned in later years by some hussy on the prowl. WAY too much of that going on these days me thinks.
“Guess what - after the second wife rifled through most of his trust and company holdings in place for his retirement - she no longer put out - no longer was ‘in love’ with him and now with no money my buddy is left holding the empty bag and on the prowl for another one - poor guy he just never learns!!!”
“The problem is, God gave man a brain and a penis and only enough blood to run one at a time.” ― Robin McLaurin Williams
(RIP)
I have a lady partner. She has her own money and I have my own means. It’s not like we don’t help each other but that’s not the basis of the relationship.
It’s companionship.
The making children phase of life was rather complicated.
“She has her own money…”
That’s a HUGE benefit.
I only date women who have more money than me. Then there are no expectations in that regard.
Oh it’s a HUGE benefit all right. One loser wanted to marry me largely because he knew that I had income. Meanwhile he was a lucky ducky who fell for every MLM scam that advertised during late-night commercials. But the woman making the money was fine with him, because he was of the persuasion that the man ran the family finances regardless.
And *I’m* the one getting the spinster cat insults.
I don’t especially like cats.
In the barn OK, but not in the house.
The wage earner never runs the finances. The dependent does and the wage earner just trys to keep up. It’s an awful lot like being in debt.
When my uncle and aunt got married some 20 years ago, the individual who performed the marriage gave him some advice. He said, “The key to a happy marriage is to give your wife a little spending cash every week and don’t ask her what she does with it.”
Well, this was obviously a guy from a different era. My aunt became a high powered, high earning consultant who vastly exceeded my uncle in earning potential. At their anniversary many years later he repeated the story of the advice he was given on his wedding day and said, “I’ve kept that advice. Every week I ask my wife for some money, then I give it to her, and I don’t ask what she does with it.”
When a coworker got divorced he was expected to maintain her in the manner in which she had accustomed.
…in which she had become accustomed.
…in which she had become accustomed.
…even if that’s what caused the bk+d in the first place.
the final phase is on wymin accuse a guy of asking them out 2x and the guy is fired, women gets his job
rinse ,repeat
+1,000,0000!!!!
Look at it this way. When one is a young man, unless he is extremely handsome, he has little to offer to women. No money, no established career, etc. As he gets older he moves up in the world. His career moves forward and his savings and paycheck grow (assuming he’s not a loser). Once he gets to this point his average looks and personality (or worse) are overlooked as his six figure income and ample savings make him “husband material”. Now, add in the current scenario of no fault divorce and large child support checks and to a lot of men staying single makes more and more sense. But the fact that he is now in demand does not change.
With women, for whatever the reasons, as they age, they’re marketability as “wife material” decreases.
Is it fair? Perhaps not, but it is what it is.
It is far easier for a single female to get social welfare than a male providing that mental health issues are not present.
Nice post oxide. You haven’t by chance read the amazing short story “Cat Person” in the New Yorker by chance? It’s definitely worth a read. Talk about double standards…
Second wave here, too oxide.
I have a straight divorced male friend who owns a cat. Where does he fit on the tree of denigration and humiliation that some of today’s HBB regulars thrive on?
“I have a straight divorced male friend who owns a cat.”
Does he drink boxed wine?
Probly… I am afraid to ask him.
The fewer things I take personally, the happier I am.
The more things I personally take, the happier I am.
😁
The fewer things I
take personallyhave, the happier I am.Why would the banks hold unto homes? Is it because they may not be able to substantiate clear title? Maybe they flipped the paper to an investment group and are fee managing it.
Has all of this flipped paper now been accounted for?
There seems to be a disproportionate amount of empty homes in the States. Why?
Patrick does it have to do with realized losses? If the property is not sold the bank will not have to realize the loss and take a hit on bank collateral. Then again BofAs multiple hundred million in foreclosed assets doesn’t seem that high compared to the rest of the balance sheet.
Was this the result of the CountryWide merger for BofA? Then again I thought the loans were largely pawned off to investors.
Sell everything. Everything. Sell your stocks, your bonds, your house, your expensive cars, your collections, your musical instruments, your RVs, your guns, just sell. SELL, SELL, SELL!!
It’s time to go all cash. It’s time.
I’m tuning up the old Airstream for a trip to the beach down south. My car isn’t expensive and I use it alot. If I sold my guns I’d look pretty silly next hunting season. Believe it or not, I actually am using my house as I write this. The only stock I have is canned goods and art supplies.
I do have cash. I calculate that since I don’t need much and want even less, it will last me beyond the drooling in a nursing home stage. So if I sell stuff now what am I supposed to do with all the money? Buy stuff?
At least I’m glad you didn’t say sell your yacht. My summer plans would be totally shot.
“…your musical instruments…”
I need to offload a guitar before the next crash, but otherwise I’m HODLing my instrument portfolio.
Better start the offload now, Gibson is going bk as we speak :-).
Wouldn’t Gibson ending production freeze the supply of existing Gibsons, increasing the scarcity value of the remaining ones in good condition, like my 1965 LG-0? I realize that sounds a bit like the Bitcoin HODLers’ rationale, but acoustic guitars have a lot more personality than imaginary money has.
According to the analysis I heard, they are still making money on guitars but they lost crazy money on all the side business stuff they tried to get into. If that’s the case I wouldn’t expect guitar production to drop as they go through bk. Just teasing about the offload though. Who knows.
James Tracy still has it.
Santa Clarita, CA Housing Prices Crater 15% YOY As Residents Flee Failing Economy
https://www.movoto.com/santa-clarita-ca/market-trends/
Atomic Homefront Official Trailer (2018) | HBO
Published on Jan 19, 2018
Atomic Homefront documents the citizens of Coldwater Creek in Bridgeton, Missouri who want answers about the radioactive waste dumped in neighborhood landfills.
https://www.youtube.com/watch?v=Ix1Tz7c1DTw
Kahron Spearman— Feb 18 at 3:11AM
Consider the cruel irony in the careless dumping and mismanagement of radioactive waste, virtually turning the West Lake Landfill into an ongoing dirty bomb.
https://www.dailydot.com/upstream/atomic-homefront-hbo-review/
I grew up hiking along Coldwater Creek. I wonder if I am radioactive?
You deposited a few successful swimmers, IIRC.
Gulp…
California green lights fully driverless cars for testing on public roads
New rules open the door to companies like Waymo and GM that want to test vehicles without safety drivers
By Andrew J. Hawkins
Feb 26, 2018, 6:14pm EST
…
Bitcoin, new home sales, and durable goods orders were all down in January. What could it portend?
One thing is certain: The stock market will brush off this news and go up. Because the stock market always goes up.
Durable-goods orders sink 3.7% in January and businesses trim investment again
By Jeffry Bartash
Published: Feb 27, 2018 8:34 a.m. ET
Core orders fall two straight months for first time since early 2016
…
Stawk futures are flashing red. Was it something Powell said, or the durable goods number that riled up Mr Market?
reits down 13% off peak (VNQ) and 10 yr bond where its ever been
,so not having clients matters
sht near me has been vacant for 10 years
The losses are gonna be huuuge when interest rates normalize.