From A Boom To Bust And Then It All Crashed
It’s Friday desk clearing time for this blogger. “The Federal Reserve is watching asset prices closely, but sees no sign of a housing bubble, said Minneapolis Fed President Neel Kashkari, on Thursday. ‘We don’t think there is a new housing bubble the way there was in 2006,’ Kashkari said in a talk at the Minnesota Housing Finance Agency in St. Paul, Minn. Kashkari said the lack of affordable housing was widespread across his region, which includes Minnesota, Montana, North and South Dakota, and parts of Wisconsin and Michigan. This indicates ’something is broken’ in the market, he said.”
“Let’s jump in the time machine and head back to 2005. Nevada’s economy was the second-fastest growing in the country. The median price for a single-family home in Reno was $350,000. Unemployment was low, at 4.1 percent. And housing was hard to come by, with available inventory far below demand. Stop me if this sounds familiar. The median sales price of a single-family home in Reno is now higher than it was during the peak of the housing boom just before the Great Recession. This surge in pricing is reminding many in the region of the thriving market of the mid-2000s, as well as the devastation the ensuing crash caused to Northern Nevada.”
“If you’re house hunting in Memphis, you already know why experts say this is the hottest market we’ve seen in decades. You’re competing with investors from all over the globe who see Memphis as one of the best cities in the country to buy a house. County property records show California investors have bought the most properties here, but investors from the East Coast and down to Florida also are snatching up properties. Even foreign investors are in on it: from Asia, Australia and Europe.”
“‘We’re seeing things in this market, we have never seen before,’ said investor Michael Stansbury. Stansbury buys, renovates, and then sells homes in Memphis. He is also mentoring people on how to flip homes. Alaina Vanaman is one of Stansbury’s students. She’s renovating a house in Bartlett. Vanaman wants to ‘fix and flip.’ She stays busy being a mom and house flipper. ‘Gotta get things done. When my kids are at school, try to knock out my big projects,’ said Vanaman.”
“The summer months are peak home buying season in Bryan and College Station. The number of homes for sale has started to grow in recent months. Jen Zweiacker with Zweiacker and Associates Real Estate said inventory has increased significantly. It’s almost double from January 2016. ‘You know we’ve got your $150,000, which is kind of rare now, into the kind of $250,000 mark. Anything above that is moving a little bit slower though because we have some over-saturation,’ said Amy DuBose, with the Bryan / College Station Regional Association of Realtors.”
“It’s tough to make a profit if you bought a Manhattan condo at the height of Midtown’s luxury frenzy. Consider the top apartment to go into contract last week: a four-bedroom condo at the Baccarat Hotel & Residences on West 53rd Street that found a buyer after 388 days on the market, according to Olshan Realty Inc. The asking price at the time of the contract was $18.75 million, after a reduction in January. The seller bought it in 2015 for $20.6 million. A townhouse also listed at $18.75 million tied the Baccarat condo for top deal of the week. The sellers of that property didn’t do any better. They bought it in October 2014 for $22.5 million, according to the report.”
“‘The increasing negotiability is the single biggest factor in motivating buyers off the sidelines,’ Olshan Realty said in the report. ‘It all comes down to price.’”
“Home prices in Connecticut have yet to rise above their peak more than 10 years ago. Local media reports only 12 of the state’s 169 municipalities have reached or gone above the annual median sale price in 2007. Data shows the median sale price of a single-family home was at $248,000 in March — 15 percent below the peak of $295,000 in 2007. Fairfield County fared the worst, with home prices down 24 percent compared to its peak. Hartford County has recovered the most, but it is still 11.5 percent below 2007 levels. Longtime real estate agent Joanne Breen says this is the worst housing downturn she has seen ‘by far.’”
“The average price of a Canadian home declined by more than 11 per cent in the 12 months up to April, the Canadian Real Estate Association said. The realtor group said the number of sales plunged by 13.9 per cent compared with the previous year’s level, and fell to the lowest April showing since 2011. ‘This was a disappointing report,’ TD Bank economist Rishi Sondhi said after the numbers came out. ‘Sales fell during April while revisions to March painted a weaker picture of activity than originally thought.’”
“New data from London Central Portfolio has shown that annual new build sales have fallen 13.8% in Prime Central London with quarterly transactions plummeting to 88. LCP found that average prices in prime London have fallen by 12.7%. Naomi Heaton, CEO of London Central Portfolio, comments: ‘The fact that 30% of new tower starts are for the rental market compared with zero four years ago is also encouraging for the burgeoning generation of renters.’”
“Under the new plan, Hainan’s development is expected to be driven by tourism, modern services and high-tech sectors, shifting away from the previous model’s reliance on the property industry. Huang Qionghua, general manager at local housing developer Youcaihua, told the Global Times that thousands of people in his industry have lost their jobs following the housing purchase restrictions last month. Some of them have resorted to selling fruit or other food to make a living.”
“‘Maybe the local government, while rolling out new policies, also needs to find a solution for those who become unemployed,’ he said.”
“Back in the boom days of 2013-2014 – the heady period following then Myanmar President Thein Sein’s economic and political reforms – Sakura Tower was asking and getting Manhattan-level rents. ‘The prices at Sakura Tower were about US$110 per square meter,’ recalled Dan Davies, managing director of Colliers International/Myanmar. Nowadays, Sakura’s rents have dropped to about US$35 per square meter. ‘We don’t like to say ‘crashing.’ They are just ‘correcting,’ Davies said of the rent free-fall, which in turn has had a contagion effect on falling land prices in the capital and nationwide.”
“For many cities, a sign of success is how many cranes dot the skyline. Sydney and Melbourne are a sea of cranes as residential and commercial towers shoot up, fuelled by a multi-billion dollar infrastructure boom. But a new report has warned that this very symbol of success could be harming Australia’s economy and, with it, a million jobs. Sydney, in particular, could be heading from a construction boom to a building bust. ‘When markets get heated like this there’s a threshold that’s reached where projects stop preceding. They might get as far as the development stage and then they are put on hold while they wait for the price to drop,’ said Arcadis’ Matt Mackey. And that means work in the industry can start to dry up. ‘That’s boom and bust, with the bust being a correction in the market.’”
“Brisbane’s laggard position was an acknowledgment that a forest of recently built residential apartment has created a glut in the market. Nearly one-in-five flats are empty, prices are tumbling and projects are stalled. Mr Mackey was at pains to say that simply being in a boom didn’t mean a bust was inevitable. But if Sydney wanted a lesson in what not to do, it only needed to look west. ‘In Western Australia, during the resources boom it was like ‘let’s build everything now’ and then in three or four years it all crashed.’”
“Erez Cohen, former head of the Israeli Appraisal Association, told The Jerusalem Post that the loss of interest by foreign builders and a sharp decline in overall construction will put Israel at risk of suffering a recession in the real estate industry. ‘Foreign investors – mostly Jews from Europe – are running away from the market and taking their projects elsewhere in the world,’ Cohen said.”
“He added that ‘what (Finance Minister Moshe) Kahlon is doing is focusing on the mass production of cheap and subsidized apartments in the periphery that nobody wants. But the reality is that the market is in crisis and that many construction companies have been backing out of projects due to instability in the market and in the government.’”
“However, Kahlon sees the overall drop reflected in the CBS report as a victory for young couples searching for an opportunity to own a home in Israel. Kahlon said: ‘At first everyone said that this was impossible – the housing market was in flames and there was no chance that anything could improve – but we did it. This isn’t my victory or anyone else’s – this is a victory for young couples, who after so many years are finally able to afford a home of their own,’ he said. ‘And to all of the skeptics who attacked us for the past three years and said this couldn’t be achieved, I suggest you come to terms with this new reality – the housing market has relaxed and prices will continue to fall,’ concluded Kahlon.”
Rancho Cordova, CA Housing Prices Crater 9% YOY As Housing Depreciation Advances At Record Pace
https://www.zillow.com/rancho-cordova-ca/home-values/
*Select price from dropdown menu on first chart
Realtors are liars.
You should probably wait more than five minutes before giving an echo-chamber reply to your own post under a different name.
‘Huang Qionghua, general manager at local housing developer Youcaihua, told the Global Times that thousands of people in his industry have lost their jobs following the housing purchase restrictions last month. Some of them have resorted to selling fruit or other food to make a living’
That’s embarrassing Huang. Probably had to ditch the mistresses and bail on the Vancouver shack too.
The only shame in the loss of bubble jobs is that they were ever created in the first place.
‘Brisbane’s laggard position was an acknowledgment that a forest of recently built residential apartment has created a glut in the market. Nearly one-in-five flats are empty, prices are tumbling and projects are stalled’
Remember when Brisbane was booming and Chinese investors were buying out entire towers in 2 days? Dumbest speculators in history.
More than that.
Article posted here that these places were not even designed for human habituation in mind.
Bathroom doors that could not shut because the toilet was in way come to mind…
I was in Brisbane just a week ago. This monstrosity is still under construction:
https://en.m.wikipedia.org/wiki/Brisbane_Skytower
Part of Australia’s problem:
https://wattsupwiththat.com/2018/05/15/time-to-wake-the-odd-man-of-asia/
Interesting, not sure I agree with all or even much of it, but food for thought - by offshoring all blue collar labor that can be offshored to asia, you essentially have white collar jobs (doctors, lawyers, engineers) and service jobs and you inevitably grow government - either to employ people as it “administers” things, or by handing people welfare to keep growing its adminstering. I think you see this with all the affordable housing kooks that get paid big $$$ to shove a few hundred in tents and a few dozen in super overpriced (but subsidized, both in construction and in the rents) “affordable” housing.
Easy to brainwash fools who couldnt pass high school calculus or physics that oil and other stuff is “evil” - they cant and dont do their own taxes - logic? Forget it. Ruled by their pleasures and fear of pain, just like Huxley/Orwell foretold.
“Mr. Greenspan emphasized that he sees no sign of a nationwide housing bubble, but he acknowledged concerns over ‘froth’ in the market and pointed to a big increase in speculation in homes – particularly in second homes.” -2005
“The Federal Reserve is watching asset prices closely, but sees no sign of a housing bubble, said Minneapolis Fed President Neel Kashkari, on Thursday. ‘We don’t think there is a new housing bubble” -2018
“Real home prices have been rising strongly since the mid-1990s, and have continued to do so even as the economy has weakened. This has sparked the concern as to whether there is a bubble in the housing market, the collapse of which could harm the overall economy. Taking into account fundamentals—including more appropriate price indices and interest rates—aggregate home prices are relatively high but not yet out of line.” -2005
“Ed and his team found that, nationally, the median household can afford the median house. So overall, housing in the U.S. is affordable, and that was not the case back in 2006.” -2018
https://www.youtube.com/results?search_query=tell+me+lies+fleetwood+mac
Yes, indeed (sarc). The median household in California can afford the median house in Oklahoma. That is one significant problem: The median job is nowhere near the location of the median house is not in Oklahoma. And there are millions of such “median” jobs that cannot move to a median location.
In the 2003-2008 bubble, a cumulative 7% reduction in home ownership was observed. That means that a CUMULATIVE foreclosure volume of 7% was enough to bring down the whole house of cards.
Summing up, what the US median can afford is not a good predictor of whether a housing bubble exists.
And there are millions of such “median” jobs that cannot move to a median location.
And if they can move, they will pay a lot less at the new location (which is why they moved). You aren’t gonna get San Jose wages in Topeka, KS.
Why Don’t People Who Can’t Afford Housing Just Move Where It’s Cheaper?
By Emily Badger
The New York Times
May 15, 2018
Many San Francisco renters I met while reporting an article on affordable housing lotteries had responded to the region’s housing crisis by putting up with great discomfort: They crammed in with family; they split apartments with strangers. Some even lived out of their cars.
Why, lots of readers wanted to know, didn’t they simply move away instead? Many have. High-cost California has long been losing population to domestic migration, particularly its poorer residents (who head to cheaper places like Arizona, Nevada and Texas).
For many, however, the calculation about whether to leave is not primarily about economics.
Ms. Mack, who works as a phlebotomist, applied to every housing opportunity she could find. She checked the city’s online affordable housing site on her phone as reflexively as she looked at Facebook. She questioned construction workers when she saw what looked like new apartments rising around town. But when I asked if she had ever considered moving somewhere much cheaper, that solution was off the table.
“It would be foolish for me to do that, because I would be struggling,” she said. “Not financially. But I would be struggling with my daughter. Who’s going to babysit? And I’m a single mom.”
People who struggle financially often have valuable social networks — family to help with child care, acquaintances who know of jobs. The prospect of dropping into, say, Oklahoma or Georgia would mean doing without the good income and the social support. Those intangible connections that keep people in places with bad economies also keep people in booming regions where the rent is too high.
https://www.nytimes.com/2018/05/15/upshot/why-dont-people-who-cant-afford-housing-just-move-where-its-cheaper.html
This is ridiculous. People used to move to better jobs and such. But we never had to have mass migrations cuz of rents and shack prices. Someone should ask the NYT why they don’t report on their bubble having popped.
It does seem absurd that people have to move because they are getting priced out of housing. But I do know people who seem like they would be objectively better moving to a lower cost of living area but stick around for reasons that are less economic in nature (e.g. family ties, weather, water, cost of moving, fear of losing social bonds, etc.). I probably underestimated those areas before I was married and had my son. We will probably move in the next 2-3 years, but there are some things we will be sad to leave.
On it’s face, the the “drive ’till you qualify” mantra is basically arbitraging of housing and wage discrepancy at a shorter distance. While you can’t live in Topeka and make San Jose wages, that Cal Matters article you posted yesterday highlighted realtors that specialize in this sort of house price/wage arbitrage:
Sacramento saw the largest population growth of any major city in California last year, breaking 500,000 residents for the first time. Where did they come from? Topping the list were L.A. and Santa Clara counties.
Why? A five-bed, three-bath home in Elk Grove, an affluent Sacramento suburb, goes for $490,000. Realtor Veronica Nelson specializes in showing what middle class Bay Area families can get 90 miles East.
“I’ve had teachers, Kaiser employees. They commute [to the Bay],” says Nelson. “Spend a night or two with a relative in the Bay Area, and make the best of it.”
Realtors are liars.
…stick around for reasons that are less economic in nature (e.g. family ties, weather, water, cost of moving, fear of losing social bonds, etc…
I suspect that is not the truth in most cases. You don’t willingly endure poverty because you fear water or missing your favorite auntie or sports team. Moving costs? I think it is more likely too much debt from buying crap that you don’t need and can’t justify moving because it isn’t worth the moving costs. Generations moved for a better life with what they could carry and left the rest of the baggage behind.
Also the cost of relocating long distance is usually prohibitive if they are barely squeaking by in the first place.
If you are going find a new place to rent that’s local, you can take some time to hunt, check out the area (which you probably already know the reputation of), apply at places, wait for the background check, then move most stuff yourself over a weekend or so. All this while able to keep your job.
Moving far out of state? You have to fly out there, and put yourself up somewhere while you interview for jobs and hunt for a new place (without a good idea of the area). Plunk down deposit(s) on a place, and to your new utility companies. Then you have to move everything out, usually in a single trip by a moving company or van. Multi-day travel, unpack etc.
Bottom line - moving far away is usually much more expensive than a local move, and much more time consuming . The people on the edge are less likely to have the resources to do so.
“But we never had to have mass migrations cuz of rents and shack prices.”
Looking back twenty years from now, people will be astonished by this aspect of the housing mania, which the untutored masses have currently accepted as normal.
Bottom line - moving far away is usually much more expensive than a local move, and much more time consuming . The people on the edge are less likely to have the resources to do so.
This jives with the conclusions that have been reached in the United Ways ALICE survey (assets, limited, income, constrained, and employed). Moving in the US is at an all-time low despite job openings being very high.
http://www.wwlp.com/news/massachusetts/nearly-half-of-all-us-households-can-t-afford-basic-needs/1187652174
Better question: Why don’t these COMPANIES move? What is keeping these tech giants in California or Washington? Instead of packing 50,000 people (and their poop) in San Fran, why not fan out?
I’ve said this before, but really, how many coworkers do you need to interact with, *in person,* in your office over a given year? 500, 1000? Google could create 50 different offices of 1000 people each, one in each state, and pay a LOT less in taxes, regulations, salaries, etc. Take advantage of lots of underused roads, schools, SFH, live in biking distance, whatever. Any tech can easily set up Skype for meetings between offices, let people work from their tiny homes, etc.
The company would also get the benefit of bringing jobs to many states, which means they can extract perks from the majority of Congresscritters. That’s the Lockheed strategy. Spread the wealth and Congress will never vote you down.
Better question: Why don’t these COMPANIES move? What is keeping these tech giants in California or Washington? Instead of packing 50,000 people (and their poop) in San Fran, why not fan out?
I think you definitely are seeing this at the margins. Many companies are starting to move from the city centers to some of the surrounding suburbs closer to where their commuters are. This is a recent trend.
I read an interesting piece this morning on Bloomberg which looks at a related question:
In 2016, Michael J. Hicks and Dagney Faulk of the Center for Business and Economic Research at Ball State University — located in the small and shrinking metropolitan area of Muncie, Indiana — set out to answer a question: “Do people follow jobs, or do jobs follow people?” After surveying the academic literature and studying population and employment growth in Indiana over several decades, they concluded that, while things were different back in the 1970s, it was now almost entirely the latter:
The clear implication of this finding is that policies that focus on relocating capital investment, in order to move people to jobs, will be ineffective. In contrast, policies that effect the relocation of people to regions will also increase employment availability.
Their take-away:
Make your city a place that location-first movers would want to move to, then, and good things may follow.
One obvious attraction for location-first movers is affordable housing.
“…stick around for reasons that are less economic in nature…”
We left California in the thick of the *.com mania. When we visit family and friends many of them think we live a different world a la Fargo where everyone looks funny and has conservative mores. FWIW, they are comfortable in the bosom of California’s “anything goes” mentality despite choking traffic, obvious financial suicide and serious physical threat from the many disenfranchised suffering Intermittent Explosive Disorder who should be locked-up.
Why don’t these COMPANIES move?
If they were in danger of going out of business and that would save them, they would. But they’re not. So far it’s not that hard to replace the people that leave or make do without them, especially with the help of H1Bs.
So, since they can get by ok, it’s all about inertia and where the bosses and super senior techies that lay the golden eggs would like to live. These are people with no desire to give up amenities and weather to be an even bigger fish in an even smaller pond in flyover country. And the few who would consider it probably have spouses who would not.
5/2005 was the peak
+1 True in California!
Fed economists produced a report back during the housing bubble that said housing prices were justified.
When these guys make statements like this, why are they never asked, “just which bubble has the Federal Reserve seen in advance?”
I’m convinced they know exactly what’s going on, but put on a false front to keep the scam going. This is nothing but a giant wealth transfer. Look who’s gotten fat off of these policies - all of the usual suspects.
The wealth transfer is accomplished primarily by increasing indebtedness. There’s two willing sides to the transfer, regardless of the lies they all tell each other and even themselves.
Which bubbles have they seen in advance? All of them, I would bet. But which ones did they publicly acknowledge? Now that’s a different answer.
They also identified Fed-manipulated interest rates as a “fundamental” factor in home price determination — a grave conceptual error.
Fungible Fed Fundamentals, now that’s a new concept.
Predictions?
+++++
Shaquille O’Neal lists 31,000 square foot Florida mansion for $28 million
Zachary Kussin - New York Post - 5.18.18
NBA legend Shaquille “Shaq” O’Neal is listing his tricked-out estate outside Orlando, Florida, for $28 million — and it’s just as supersized as the 7-foot-1 baller himself.
The massive 12-bedroom home, on some 3 acres in Windermere, measures approximately 31,000 square feet, according to the Wall Street Journal, which first reported the listing. The square footage is just the start of its over-the-top features.
O’Neal’s master bedroom, for instance, has a round, built-in bed frame that measures about 15 feet across. Elsewhere, there’s the “Shaq Center” — a sporting facility that includes an approximately 6,000-square-foot basketball court replete with bleacher seating and a logo of the Miami Heat, the basketball team O’Neal played for from 2004 to 2008.
The perks extend outside, where a Superman statue stands at the end of his dock. Not only are there two garages that together can fit some 17 cars, but there’s also an area that O’Neal has dubbed “Shaq-apulco.” A riff on the name of the coastal Mexican city, it has a 95-foot-long swimming pool with a rock waterfall and a hot tub. It also has a swim-up bar that abuts an outdoor kitchen.
A Newark, New Jersey, native, O’Neal bought the property for $3.95 million in 1993 during his time with the Orlando Magic, and subsequent years saw further expansions and customizations.
I just got this email:
1000 SOUTH POINTE DR, UNIT 2604, MIAMI, FL | $4,395,000
Originally offered at $4,995,000. No expense spared on this brand new turnkey furnished/decorated lavish pre-penthouse high floor 3 bed, 3 bath unit with direct private elevator entry, cutting-edge home automation and top of the line interior finishes. Sweeping large terraces off of every bedroom with 270-degree views of sunrises and sunsets, the ocean, the beach… watch ships sail to and from the port of Miami. Building features private beach club with saltwater pool and poolside cafe, heated pool and spa, sauna and steam rooms, fitness center, tennis courts, media and multi-purpose rooms among many other luxury amenities available exclusively to residents of Murano at Portofino.
I looked it up:
https://www.zillow.com/homedetails/1000-S-Pointe-Dr-APT-2604-Miami-Beach-FL-33139/60794421_zpid/
Date Event Price
05/16/18 Price change $4,395,000-6.4%
03/19/18 Price change $4,695,000-6.0%
09/05/17 Listed for sale $4,995,000+56.1%
07/13/16 Sold $3,200,000
05/11/16 Listing removed $21,000/mo
04/18/16 Listing removed $21,000
03/28/16 Listed for sale $3,675,000
02/19/16 Listing removed $3,675,000
01/25/16 Price change $3,675,000-7.0%
01/15/16 Listed for sale $3,950,000
12/15/15 Listed for rent $21,000/mo
12/14/15 Listing removed $3,950,000
07/28/15 Price change $3,950,000-7.1%
03/28/15 Listed for sale $4,250,000
02/25/15 Listing removed $4,250,000
02/11/15 Listed for sale $4,250,000
12/03/14 Listing removed $19,000/mo
08/16/14 Listed for rent $19,000/mo
08/16/14 Listing removed $4,100,000
04/19/14 Price change $4,100,000+5.1%
04/15/14 Listed for sale $3,900,000
04/07/14 Listing removed $17,000/mo
02/04/14 Listed for rent $17,000/mo
12/06/13 Listing removed $17,000/mo
10/01/13 Listed for rent $17,000/mo
07/01/02 Sold $1,100,000
A couple of thoughts.
What does “pre-penthouse” mean? The 2nd highest floor?
Sold in July, 2016 for $3.2 million. The new owner (flipper) probably thought they had a steal with nearly a 25% reduction from the original listing price of $4.1 million.
The monthly alligator is at least $35k. Or about $450k a year.
What does pre-penthouse mean?
In my day growing up it meant National Geographic.
… ‘lil brown sugar balancing a basket?
Been trying to rent or sell it for 5 years now…
2 years ago, it was up for rent for $21k/month. I mean, ok. If I was a C-level exec and had failed hoop dreams, that3 acres, 17-car garage and 6000 sq-ft ball court and all might entice me..
Now take a look at this rental listing in my neck of the woods that just popped up - $20k a month - and tell me how many times you used the word “Wishing Price” and “(what are they) Smoking”?
https://www.zillow.com/homes/for_rent/Mercer-Island-WA-98040/house,mobile,land_type/48691475_zpid/99525_rid/paymenta_sort/47.619239,-122.162819,47.508852,-122.313366_rect/12_zm/
And what the listing and photos is careful NOT to show you - the property is just under 100 yards from the I-90 freeway / Bridge - 11 lanes worth of constant noise.
Don’t mock people who overpaid at a higher level.
I’ll mock who I want and where I want..
Best to avoid mirrors then.
Twelve million if he’s lucky, although I suppose he could sell it to somebody who currently plays for the Magic. Here’s what happened to a similar property in the Tampa Bay area owned by a pro basketball player:
https://professionalathletehomes.com/2011/03/24/matt-geiger-sells-his-28000-sq-ft-house-in-tarpon-springs-fl/
I really can’t understand why pro-athletes go broke a few years after retirement…
++++
The home comes complete with a shark tank, a 330,000 gallon pool with a rock diving cliff, a 5000 sq-ft guesthouse, a putting green, several lavish bars, hot tubs, a DJ booth & dance floor, pizza oven, wine cellar, cigar room, movie theater, spa, tennis & volleyball courts, an outdoor kitchen, 40 TVs… 18 of which were hooked up with XBOX’s, and an artificial lake stocked with 2,500 bass.
Geiger also at one point had a herd of 12 buffalo, 11 Watsui cattle, two donkeys, a miniature horse, and a cow.
Geiger and his girlfriend recently had a baby and apparently decided a move into a more family-oriented residence that thought would better suit them. Or maybe Geiger thought it might be a good idea to cut down on his expenses and save a little more money each year, considering the property taxes alone for this palace were up to $177k a year at one point.
It must take a small army of people to keep that place ship shape.
I always wondered how Alfred Pennyworth keeps Wayne Manor (and the Batcave) humming all by himself.
Took 10 mins a week to mess around with the ph balance. I had one of those snake auto vacuums that did all the cleaning and the filter swap was a breeze. In autumn by the time the leaves started to fall, the cover was already on. It really was a very low amount of effort to maintain. Cost was $10-20 a month for chemicals and maybe another $25 for electricity for the pump. Bought chemicals in bulk, avoiding the pool store robbery. Well worth the money relative to enjoyment. I was in the pool 2 or 3 times a week during the season.
I’ve heard that Realtors are liars!
“…The home comes complete with a shark tank…”
Are sharks these days considered to be an “emotional support animal” ?
https://www.huffingtonpost.com/entry/chris-pratt-bryce-dallas-howard-service-raptor_us_5afb8fc9e4b06a3fb50ba42f
Athletes are like lottery winners…dirt poor and uneducated people who suddenly have money. And they almost all squander it away on stupid stuff like 330k gallon pools.
I owned a house once with a 45k gallon pool which was a yuuge pool. At least so I thought. I was a piker I guess. To put it in perspective an olympic pool is 660k gallons.
I know of people in Malibu that feel they own the Pacific Ocean.
“I owned a house once with a 45k gallon pool…”
I rented a spec rancher w/swimming pool years ago. The monthly chemical bill and upper body workout got old. If you can’t afford the pool service… you can’t afford a pool.
“Geiger and his girlfriend recently had a baby…”
without rings and papers, of course. Then again, if the guy has real money, she could eat off the kid’s meal ticket.
‘Elsewhere, there’s the “Shaq Center” — a sporting facility that includes an approximately 6,000-square-foot basketball court replete with bleacher seating and a logo of the Miami Heat, the basketball team O’Neal played for from 2004 to 2008.’
Predictions? That’s gonna be hard to move, due to a very small number of potentially interested buyers for that kind of personalized custom feature who are looking, wealthy enough, and sufficiently motivated to pay anywhere near that asking price.
Reminds me of a childhood tour of Roger Marris’s home in Independence, MO. I found the baseballobilia in the bathroom floor tiles somewhat strange.
‘You’re competing with investors from all over the globe who see Memphis as one of the best cities in the country to buy a house. County property records show California investors have bought the most properties here, but investors from the East Coast and down to Florida also are snatching up properties. Even foreign investors are in on it: from Asia, Australia and Europe.’
‘We’re seeing things in this market, we have never seen before,’ said investor Michael Stansbury. Stansbury buys, renovates, and then sells homes in Memphis. He is also mentoring people on how to flip homes. Alaina Vanaman is one of Stansbury’s students. She’s renovating a house in Bartlett. Vanaman wants to ‘fix and flip.’ She stays busy being a mom and house flipper. ‘Gotta get things done. When my kids are at school, try to knock out my big projects,’ said Vanaman.’
This is like the Wylie Coyote thing.
Alaina meet Neel, Neel, Alaina.
‘We don’t think there is a new housing bubble the way there was in 2006,’ Kashkari said in a talk at the Minnesota Housing Finance Agency in St. Paul, Minn. Kashkari said the lack of affordable housing was widespread across his region, which includes Minnesota, Montana, North and South Dakota, and parts of Wisconsin and Michigan. This indicates ’something is broken’ in the market’
When locals (officials, builders, agents, etc.) all start going on and on about “outsiders” coming in and saving the (financial) day, it’s time to move towards the exits.
Kashkari said the lack of affordable housing was widespread across his region, which includes Minnesota, Montana, North and South Dakota, and parts of Wisconsin and Michigan. This indicates ’something is broken’ in the market’
Those are some pretty empty and flat locations with low COL - I agree that something has to be ‘broken’… or more likely corrupt(ed). They’ll be on the front lines of the next downturn like they were last time.
Few in the media ever seem to grasp the impact of out-of-towners, out-of-staters, foreign nationals, and private equity speculating and bidding up residential housing stock to the point that local people working local jobs at local wages can’t afford to stay in their own town. The Fed doesn’t grasp it either.
And even local people like Ms. Vanaman don’t grasp it. She thinks she’s on the road to riches, just like the Australian investors who, of course, finally have discovered how awesome Memphis is.
I kinda wonder about these reports out of Memphis. But it doesn’t matter from a mania point of view. True or half true, some locals think foreigners are buying there and the speculation ensues. Same thing happens every time. Chinese are buying in Vancouver, then poof, the stuck locals are begging UHS to find them a Chinese buyer.
But this leads to why I think it’s the same bubble. If a bubble deflates, many participants get spanked, hard. They don’t forget and they sure as heck don’t go right back to speculating like drunk sailors within a few years.
We’ve frequently discussed ’shadow inventory’ and houses being bought up both foreign investors as well as the Blackstones, etc.
Is there any way to accurately total up the ownership status of homes in a given area to figure out what amount are ‘owned’ by the people living in them as opposed to 2nd/3rd/nth homes, Rentals, etc. I think right now all we have census surveys and the like.
The only way I can explain Memphis (See Colorado’s comment below) is that the number of homes available to individuals for primary/sole home occupancy has fallen faster than the population of said individual/families. That could happen if enough have been bought up for rental/investment or remain in bank limbo, torn down, etc.
I imagine it would be a task for university researchers or the like to get accurate data as even occupying individual owners are using trusts, LLCs, etc and it would take a good amount of effort to sort it out correctly.
MGSpiffy,
I watched the New Zealand documentary that RMS posted here the other day and I think it is maybe one of the best pieces that explains various aspects of how speculators (foreign, out-of-state, private equity, Chinese, etc.) are inflating the Kiwi market. The narrator of the documentary basically comes to the conclusion that they (Kiwis) really have no idea who owns New Zealand’s housing stock in the aggregate. I suspect the US is roughly in the same predicament. We truly lack a beneficial ownership register so it is kind of a mystery around these kinds of things. I suspect that this is by design as it allows the wealth to be laundered and the bubble to extract wealth from the local residents who incur the cost of inflated prices and speculation run amok.
LLCs can own one house, which is owned by another LLC and so on to the umpteenth house. That can then be owned by an agent in a foreign tax haven (like Sean Hannity was doing with Micheal Cohen).
@OneAgainstMany,
I suspect you’re on to something there, along the lines of “If we truly had an accurate and complete picture of all home owners - imagine something like a zillow map & database” and made it freely available, I think it would change many of the conversations being had.
Mentioned this yesterday..
Memphis the city is a sewer. There are some nice areas surrounding it like Collierville and Germantown and Cordova. In those 3 towns houses go in hours if priced right. It isnt Chinese buying it’s people escaping the city of Memphis and their decrepit schools. It’s kind of White Flight Part 2 plus a growing black middle class that wants nothing to do with the city and is moving out, hence the population decline of the city. South of the city, in Mississippi, it is also growing fast.
So you may see these stories as “Memphis Real Estate is On Fire” but it’s really Memphis suburbs.
Ive said it before there was no white flight, instead parents saw the next generation of kids on a Jail track and not a college one and moved, black parents did too, at least those who cared about their kids education and future.
Memphis is the speculators’ version of “drive until you qualify.”
The Fed turned the spanking into love pats.
“Few in the media ever seem to grasp the impact of out-of-towners, out-of-staters, foreign nationals, and private equity speculating and bidding up residential housing stock to the point that local people working local jobs at local wages can’t afford to stay in their own town. The Fed doesn’t grasp it either.”
What are you talking about “few in the media”? I’d say roughly and third to half of the people on this board can’t seem to grasp it.
Numerous comments here about $300-$600K abodes being “cheap”. WTF?
Comments today about the northern Plains/upper Midwest being low COL. No, no longer true. Not for those who have lived there for years.
Until the late 1990’s, a $250k house was considered extremely expensive, and only attainable for an upper middle income family. You had to have $50k down, and a solid, verifiable income.
Until the late 1990’s, a $250k house was considered extremely expensive
Not in places like California. Even in the early 90’s it was considered average.
I remember reading predictions back then in the San Diego Union Tribune that the average price in San Diego would hot 500K. It seemed risible at the time, yet here we are.
You had to have $50k down, and a solid, verifiable income.
Again, this fairy tale. I vividly recall in the 1990’s that you could get a non .gov loan for not only just 10% down, you could get one with an interest rate that was lower in the first 2-3 years. The San Diego Union was chock full of ads for such loans.
Incorrect.
With very few exceptions, the CA median back in the 80’s and early 90’s was well under 200k.
I don’t give a rat’s ass about California. CA is not the USA.
Neither do I. Just pointing out the flat out misrepresentation.
Downtown Memphis, TN Housing Prices Crater 6% YOY As Housing Bubble Pops In The Heartland
https://www.zillow.com/downtown-memphis-tn/home-values/
https://snag.gy/m5EzRB.jpg
I wonder how Neel is doing.
“Neel”
…the cuck?
“Got Popcorn” Neal.
IIRC, he spelled it “Neil’; a quick Google confirms that from his old posts. I had forgotten that Neils also had an RE blog, which his handle on old posts linked to: http://recomments.blogspot.com/
Looks like he moved on to other interests, as his last post on his own blog was in 2009.
I wonder if he bought a house…
You’re competing with investors from all over the globe who see Memphis as one of the best cities in the country to buy a house. California… East Coast and down to Florida…Asia, Australia and Europe.”
And this is Memphis. Gosh I hope they get frustrated and sell. Airboxes in Miami is one thing, but, flyover…
Hey Donk
Saw this in Wikipedia:
One other thing to consider concerning interest rates.
Currently margins on mortgages are very slim and companies are not making much per loan.This means mortgage rates can also go up even if the 10 year does not.
It has been a quite a few years since I was involved in tracking spreads, but my guess is mortgage vs. 10 year treasury is about 150 bps.
I remember the spread routinely in the 175 range and over 200 a time or two . If companies, like let’s say hedge funds decide their capital isn’t earning the ROR they could exit and decrease the competition for mortgages thus allowing margins and rates to increase
looks like 150 points is the max these days
The Financial Times
US Treasury bonds
Dollar steady as US Treasury yield climbs to new 7-year high
“Daddy, tell me again about the three percent mortgage?”
The year was 2014. The rate on the 5/1 ARM at the Credit Union was 3%. But, alas, it was an adjustable.
Two years later during the Spring of 2016, following Brexit, the rate on the 10 year U.S. Treasury fell below 2%. That’s when pappy traded in the ARM for a 30 year fixed rate at 3.625%.
“Time is on my side, yes it is.
Time is on my side, yes it is.
You’re searching for good times but just wait and see,”
The Boiling $tones
REIT And Homebuilders Sink As Treasury Yields Climb
May. 18, 2018 10:18 PM
Summary
After rallying 6% over the past three weeks, REITs retreated by 3% this week as the 10-year yield climbed to it’s highest level since 2011. Homebuilders dipped nearly 2%.
…
‘We don’t think there is a new housing bubble the way there was in 2006,’ Kashkari said
Stated exactly the same way it was in 2006, by one of the original cast of characters no less.
Boston, MA 02114 Housing Prices Crater 14% YOY As Rental Rates Plummet Coast To Coast
https://www.zillow.com/boston-ma-02114/home-values/
*Select price from dropdown menu on first chart
What no one is factoring in is the fact that in the Generation Greed era public employee pensions were underfunded to cut taxes, and retroactively increased, state and local debts were run up, but the infrastructure was allowed to deteriorate.
The result will be collapsing services and rising taxes. Just about everywhere. The only difference between places is who stole more in the past, and who will be stuck worse off than average in the future.
In a conference on the disaster in Illinois three Fed economists suggested a statewide property tax to pay off just the state pension liability — over 20 years.
http://midwest.chicagofedblogs.org/?p=3096
“In our view, Illinois’s best option (actually least awful) is to impose a statewide residential property tax that expires when its unfunded pension liability is paid off. In our baseline scenario, we estimate that the tax rate required to pay off the pension debt over 30 years would be about 1%. This means that homeowners with homes worth $250,000 would pay an additional $2,500 per year in property taxes, those with homes worth $500,000 would pay an additional $5,000, and those with homes worth $1 million would pay an additional $10,000.”
There are several good reasons to pay off Illinois’s pension debt through a statewide residential property tax:
“Fairness: Illinois residents who have benefited most from the past services of governmental employees are more likely to be homeowners, so it seems reasonable that they should pay a larger share of the costs.”
“Efficiency: Standard economic theory predicts that home values go down in response to new property taxes (that is, they are “capitalized” into home values). Current homeowners would not be happy about this, but it would be a good result for the Illinois economy. That’s because the new taxes wouldn’t affect people thinking of moving to Illinois. While they would have to pay higher property taxes, that would be offset by not having to pay as much for their new homes. In addition, current homeowners would not be able to avoid the new tax by selling their homes and moving because home prices should reflect the new tax burden quickly. (We included this “tax penalty” effect in our calculations below.)”
Estimated property value decline — 20 percent immediately, before a slow recovery.
“Transparency: The payment amounts and duration of the tax would be known in advance.”
“Certainty: The property tax would be dedicated solely to paying for the state’s unfunded pension liability.”
But Generation Greed doesn’t want the generations to follow to know exactly how much extra they are paying with nothing in return. If they did, New Jersey would have adopted my suggestion for its own bottomless pit, as would NYC and New York’s MTA.
https://larrylittlefield.wordpress.com/2017/12/03/will-new-jerseys-phil-murphy-be-the-first-to-tell-the-truth-about-generation-greed/
I have to say that I agree with the Federal Reserve Bank of Chicago on this one. I’ve long believes that property taxes can take out some of the speculative appeal of housing. I think CA house prices would be less distorted if prop 13 hadn’t been passed. This is one reason why China is on the cusp of implementing a property tax to curb their mania.
While it might indeed do that, I feel that it would be rewarding all the knowing decisions made over the years that got them in the mess in the first place.. and what your reward, you get more of.
I’ve long believes…
The thing is, if government manipulation has caused a massive problem, more government manipulation is not a likely solution. Could all of those who want to control us just take a long vacation or something?
“…if government manipulation has caused a massive problem, more government manipulation is not a likely solution.”
It’s a version of the hair-of-the-dog hangover cure.
China has been on the cusp for a number of years now. It does make you wonder in such a top down society what is causing the delay? Perhaps party officials having too many properties? Chinese are starting to rent their prroperties so I guess there is some cash flow now. Previously they just wanted the appreciation and to keep them looking like new.
Chinese are starting to rent their prroperties so I guess there is some cash flow now. Previously they just wanted the appreciation and to keep them looking like new.
AFAIK Shanghai rental rates are still very low compared to the cost of buying the house. At least if you’re getting any kind of deal. I could totally see why they didn’t even bother trying to rent. If that’s changing I suspect it has more to do with desperation than with actually making any money off renters.
AFAIK Shanghai rental rates are still very low compared to the cost of buying the house.
All the more reason for the bust to be epic, as these historical relationships return to the scene.
That will just crater the price of houses, and more people will move away. What do you do then, raise the rate even more? It’s like a failing restaurant who decides to raise their prices to make up for the lost gross income. Yeah, that’s gonna work great - not.
The answer is simple: “Sorry about your luck, but your pension does not exist.” There’s simply no good moral or ethical reason the young people of this country should be forced to pay a bunch of their hard-earned money so some old fogey can live like a king in retirement. Nope.
Most Illinois public employees, and all teachers, don’t get Social Security.
They better start saving, or plan on working until they die.
That will just crater the price of houses, and more people will move away. What do you do then, raise the rate even more? It’s like a failing restaurant who decides to raise their prices to make up for the lost gross income. Yeah, that’s gonna work great - not.
The answer is simple: “Sorry about your luck, but your pension does not exist.” There’s simply no good moral or ethical reason the young people of this country should be forced to pay a bunch of their hard-earned money so some old fogey can live like a king in retirement. Nope.
Part of the solution, perhaps the biggest part, will have to be acknowledging that pensions that were guaranteed were over-funded, overly-generous, and cannot be paid out. But there is going to have to be shared pain all around, including an increase in taxes. The major difference in your failing restaurant analogy is that the restaurant patrons are mobile. Houses are not mobile.
So if people do decide to sell and move away, the loss in housing values are already baked in. That is why the Fed model shows an immediate hit of 20% to the price of the house. This hurts the housing-haves, but will help those looking to get into a place at an affordable rate. It is possible that if the housing price decline is larger than the anticipated outlay in taxes, then affordability will increase on the whole.
Of course, this doesn’t answer the question of whether or not one feels that there was a societal benefit to having public services that were paid for by having extra civil servants (firemen, teachers, policemen). Five very red states have raised taxes to pay for teachers whose tax cuts were spurred by the Koch brother’s Americans For Prosperity. Now the retrenchment is happening and the teachers are getting raises and school is being funded, without unions. Pensions are not going to be meaningfully written down, there will be taxes.
oops, meant to say pensions were “under-funded”.
Public pension defaults are right on the horizon.
Most defaults are a direct result of federal reserve command and control economy. Returns and tables were designed with a presumed 7-8% return.
One of two things will happen, this you can count on;
1) Public pensions will default
2) Lending rates will be founded on actual risk and will return to the long term trend of 9-12%.
“Public pension defaults are right on the horizon.”
Already dawn for some municipalities.
The only difference between places is who stole more in the past, and who will be stuck worse off than average in the future.
Not to mention who promised more, like retiring early with a pension that dwarfs most salaries.
The exodus from irresponsible, highly taxed states is only beginning.
Houston, Dallas and Fort Worth are pretty much broke as a result of past retroactive pension increases.
In the case of Dallas, at least, enacted by the state at the city’s expense after most of the city workers, police and fire in particular, had moved to the suburbs, leaving an increasingly poor and darker skinned population behind.
The response was to drastically slash wages and benefits for new hires, who are mostly minority, to the point where they have trouble getting people to take the job.
This cycle happens everywhere. It just depends on where you are. The Texas suburbs have relatively few retirees, because 30 years ago they had relatively few people, and they have a lot of taxpayers and current workers paying in. What will we find about the extent to which they pre-funded 20 years or so after they are built out, and the number of retirees soars relative to the number still on the job?
“Kashkari said the lack of affordable housing was widespread across his region, which includes Minnesota, Montana, North and South Dakota, and parts of Wisconsin and Michigan. This indicates ’something is broken’ in the market, he said.”
No bubble here…just a broken market, thanks to a decade of financial waterboarding with QE1, QE2 and QE3.
Did your emerging market stock gambles submerge?
Try not to catch a falling knife buying the dips.
Economics
Worse Than 2008? Here’s What the Emerging Market Numbers Show
By Enda Curran
and Cormac Mullen
May 16, 2018, 10:19 PM PDT
- Harvard’s Carmen Reinhart gives a downbeat assessment
- Exposures and vulnerabilities vary from economy to economy
UBS Says Markets View EM as `Catching a Falling Knife’
Harvard economist Carmen Reinhart turned heads this week with her comments on emerging markets, saying they’re in worse shape now than during the global financial crisis in 2008.
Her assessment comes at a time when investors are turning more cautious on the asset class — and downright bearish on markets like Argentina, Indonesia and Turkey. But opinions differ on whether the recent turbulence is just a blip or the start of something bigger. The picture also varies from economy to economy, with some in better shape than others.
Below is a look at how some of the key emerging-market indicators have evolved since 2008.
…
A good article …
“Thirty Blocks Of Slavery”
https://www.theburningplatform.com/2018/05/16/30-blocks-of-slavery/
(snip)
“Another fascinating observation on the 30 Blocks is the presence of H&R Block, among other national tax preparation firms. Why would this be? With average household incomes below $20,000, most of the people in West Philly pay no Federal Income taxes. Chalk it up to another welfare scam designed to help the poor and downtrodden. The Earned Income Tax Credit is available to people who don’t work and earn no income. You, the taxpayer, pay your taxes so they can be handed as tax refunds to people who pay no income taxes. The fine folks at H&R Block fill out all the forms, charge the poor people outrageous fees and then lure them into borrowing against their refunds at Shylock level interest rates.
“This is how corporate America extracts their crops from the plantation. H&R Block utilizes the rampant ignorance in West Philly to generate profits. They capitalize on their lack of impulse control and delayed gratification abilities to offer them their refunds before the IRS sends the check. Meanwhile, H&R Block extracts a “fee” that equates to north of 50% interest. It’s the same story with the $70 billion food stamp program. JP Morgan administers the program and extracts hundreds of millions in fees. Wal-Mart and the other corporate mega-retailers reap the windfall of the spending. Corporate America loves the welfare state.”
And so do I.
😁
“The fine folks at H&R Block fill out all the forms, charge the poor people outrageous fees and then lure them into borrowing against their refunds at Shylock level interest rates.”
… A Corporay$hun of unconscionable men, is a Corporay$hun/Citizen that require$ more than the average amount$ of toilet ti$$ue$ …
Pathogen$ and pe$t control
Crop rotation is also used to control pest$ and disease$ that can become established in the $oil over time. The changing of crop$ in a $equence decreases the population level of pest$ by (1) interrupting pe$t life cycle$ and (2) interrupting pe$t habitat$.
& the beat goe$ on, … & the beat goe$ on …
“The fine folks at H&R Block fill out all the forms, charge the poor people outrageous fees and then lure them into borrowing against their refunds at Shylock level interest rates.”
The worst of the worst wear suits.
I prefer the color of my suit to be Undertaker Black.
Didn’t the 1997 financial crisis begin with emerging market currencies that submerged?
https://en.m.wikipedia.org/wiki/1997_Asian_financial_crisis
Emerging-Market Malaise Won’t Be Going Away Anytime Soon
Unless U.S. bond yields reverse and start to fall, the pressure on developing-nation financial assets will continue.
by Steven Englander
May 16, 2018, 10:00 PM PDT
The dollar is wreaking havoc with emerging markets.
Photographer: Chung Sung-Jun/Getty Images
By my count, emerging-market currencies are in the midst of their fifth major weakening trend since 2011. The origins of the current downturn are broadly similar to the earlier four episodes, which is to say that a combination of rising U.S. Treasury yields, sluggish equity markets and risk aversion are to blame. What’s different now is that these factors may not dissipate as quickly.
…
The real question for taxpayers is, “What is the extent of Wall Street’s exposure to emerging-market currencies?”