Are We Doing This? Are We Having A Downturn?
A report from the Globe and Mail in Canada. “It has been two years since the provincial government, then led by the B.C. Liberals, slapped a 15-per-cent tax on foreign buyers in the Vancouver region. In February, 2018, the B.C. NDP minority government raised that tax to 20 per cent and also expanded its reach to include other urban areas in British Columbia. The price for detached houses sold in Vancouver in June averaged $2,550,708, down 12 per cent from $2,899,698 in the same month in 2016. The city’s condo market peaked in January this year and the townhouse segment hit new highs last August. The average price for attached properties sold in June was more than 15 per cent lower than the record highs.”
“Cohen Landherr listed his Vancouver condo in June in order to upgrade. The 29-year-old financial technology consultant hopes to make a decent profit on his one-bedroom unit in the Mount Pleasant neighbourhood on Vancouver’s east side. His parents helped him in 2014 with a large down payment on the presale condo that he agreed to buy for $326,000. He wants to sell the 615-square-foot unit for close to his current list price of $599,800, marked down from his original asking price in June of $648,000. Mr. Landherr said he missed out on the pricing peak of Vancouver’s condo market in January.”
“Brandan Price, an agent with Rennie & Associates Realty Ltd., said provincial and federal housing measures have primarily affected higher-end detached houses so far in Vancouver. ‘For properties below $3-million, I’m not seeing sellers panic or buyers lose consumer confidence,’ Mr. Price said. ‘But many buyers and sellers aren’t seeing eye-to-eye. A lot of sellers are in a strong financial position and they don’t have to sell and they will just stay put until they get a number that they like.’”
The Vancouver Sun in Canada. “High inventory of detached homes in Vancouver’s west side and in West Vancouver means prices are coming down. ‘Declining prices for detached properties in some areas, particularly Vancouver’s Westside and West Vancouver, are due to high inventories that have accumulated due to sustained falling sales volumes,’ according to a CMHC statement.”
“The CMHC’s housing market assessment provides an analysis of Canada’s housing market in 15 census metropolitan areas based on four main factors: the rate at which sales outpace new listings, housing price acceleration, overvaluation and overbuilding. ‘At the national level a high degree of vulnerability continues due to moderate levels of price acceleration and overvaluation,’ said CMHC chief economist Bob Dugan.”
The New Zealand Herald. “Former PM John Key grabbed headlines at the weekend warning that New Zealand faces an economic downturn. Then this week we saw sentiment on the ANZ Business Outlook slump to levels not seen since the global financial crisis. We saw unemployment start heading in the wrong direction after five consecutive monthly falls. We saw QV data showing the national average house price fell. And we saw a major construction firm go into receivership leaving a number of half-finished projects.”
“Are we doing this? Are we having a downturn? And if so how serious will it actually be? From a business point of view, there are some worrying signs, ASB chief economist Nick Tuffley told The Economy Hub this week. ‘Throw in things like Mycoplasma bovis for the dairy sector and the background noise globally and you can see why people are saying: what’s going on here?’”
The New Daily on Australia. “The housing downturn has picked up speed, with property prices across the country recording their largest combined annual fall in six years. The downturn appears widespread, affecting both cities and regional areas. Values slipped in five of the eight capital cities in the past three months, while regional housing markets – ‘where conditions have generally been more resilient to falls’ – also ‘turned negative,’ CoreLogic said.”
“‘We can’t see any factors that may halt or reverse the housing markets trajectory of subtle declines over the second half of 2018,’ said CoreLogic research head Tim Lawless.”
The Daily Telegraph on Australia. “Sydney’s inner west, Hills district, Blacktown and Ryde region have lead the city’s housing market downturn, recording the biggest falls in prices. Prices in the Hills region recorded the biggest falls over the year at 9.2 per cent — although they remain well over $1.1 million on average. Inner west prices recorded the second biggest average fall at 8.8 per cent, followed by the Blacktown region’s 7.8 per cent fall and the 7.7 per cent fall in Ryde regional prices.”
“Prices were falling particularly hard in these regions due to an oversupply of housing, coupled with a drop in housing demand, according to Mr Lawless. ‘Most of these are areas where prices are on the higher end,’ he said. ‘They were also where prices grew the fastest over the boom so it’s possible the prices overshot the market.’”
“Properties valued within the top quarter of the market had average falls off nearly 8 per cent for the year. This compared to only a 1.8 per cent drop in prices for properties valued within the bottom quarter of the market. ‘Banks are looking closer at buyers’ income levels and it’s the point where most can’t get a loan for properties priced at the middle or higher end of the market,’ Mr Lawless said.”
The Australian Financial Review. “LJ Hooker’s Peter Tannous has his work cut out for him in Sydney’s west, where he is now either coaxing desperate homeowners to close the sale of their properties quickly before the market dips again or consoling those who have sold at a loss. As Corelogic’s Hedonic Home Value Index confirmed that property prices are continuing to drift down, this week Mr Tannous sold a two-bedroom unit for a 30-year-old homeowner who ‘couldn’t afford his mortgage’ any more with a newborn arriving.”
“The apartment on O’Neill Street in Guildford sold for $450,000 even though the owner wanted $489,000. He bought the home for nearly $483,000 at the peak of the market in 2015. ‘The royal commission has done the west no favours as banks tighten their lending criteria and focus more now than they ever did on serviceability,’ he said. ‘One lender won’t even take into account potential rent when considering a purchaser’s ability to service the mortgage. The broker said to the borrower “what if you can’t find a tenant’?”
“Unfortunately, Mr Tannous and his colleague, LJ Hooker Merrylands principal John Contos have plenty more similar properties to sell especially for their investor clients facing pressure from rising rental vacancy rates and falling rents in Sydney.”
“Capital Economics warns the ‘worst is yet to come’ and anticipates a faster decline in house prices than initially expected. ‘Our relatively bearish forecast that prices will gradually fall by 12 per cent from peak to trough is starting to look a bit optimistic,’ said Chief Australia & New Zealand Economist Paul Dales. ‘Most worrying is that prices will soon be falling at an even faster pace. The further decline in the number of home sales in March to a seven-year low was larger than the fall in the number of new listings. In other words, demand is deteriorating at a faster rate than supply is improving.’”
‘One lender won’t even take into account potential rent when considering a purchaser’s ability to service the mortgage. The broker said to the borrower ‘what if you can’t find a tenant’?
Good old tightening credit. They never see it coming. Right California?
Monterey, CA Housing Prices Crater 6% YOY As Housing Recovery Begins
https://www.movoto.com/monterey-ca/market-trends/
I’ve been hearing commercials on SiriusXM for a lender offering loans using bank statements instead of tax returns, anticipated rental income etc to qualify. And lenders like RocketMortgage promoting instant qualification, blah blah. Maybe it’s just a lure, but made me wonder if we’re back to last gasp crazy lending.
Not that it will change the outcome.
“The 29-year-old financial technology consultant…”
WTF is that? Talk about a useless job…
Talk about a useless job…
I used to do that, in a cube farm of DoD contractors. Now I don’t.
https://www.bloomberg.com/view/articles/2018-08-01/too-many-jobs-feel-meaningless-because-they-are
The higher the pay, the less work people do.
To this day, I tell people that I “used to be” a scientist. In the past, I published a little, and presented a little, and contributed to the body of knowledge at least in a small part.
But now I now push paper — basically an advanced version of record-keeping — because that’s what people are willing to pay for.
I used to be in a BS job (operations analyst). I made good money, banked almost all of it, and felt incredibly useless to society (1st world problem, I know). After a bout of appendicitis an ER visit, I realized that the nurse who took care of me seemed really cool, and he was actually doing something that seemed useful. I decided I wanted to do that, so I changed careers and became an RN. The sad thing is that there is a good portion of my role that involves BS documentation, although not to the same degree as before.
Bullsh!t jobs and the yoke of managerial feudalism
The Economist
June 29th, 2018
“David Graeber: A bullsh!t job is one that even the person doing it secretly believes need not, or should not, exist. That if the job, or even the whole industry, were to vanish, either it would make no difference to anyone, or the world might even be a slightly better place.”
“Something like 37-40% of workers according to surveys say their jobs make no difference. Insofar as there’s anything really radical about the book, it’s not to observe that many people feel that way, but simply to say we should proceed on the assumption that for the most part, people’s self-assessments are largely correct. Their jobs really are just as pointless as they think they are.”
https://www.economist.com/open-future/2018/06/29/bullshit-jobs-and-the-yoke-of-managerial-feudalism
Jobs are the way purchasing power is distributed through the economy. Think of them as the capillaries, routing the blood of the economy.
There is an ongoing question: which is better, jobs or basic income?
Humans are physical beings, and have certain physical and mental requirements. There is variation obviously as one gets away from the absolute basics (all humans need oxygen and food and water), but there are generalities that hold as well. Jobs - optimally - provide a certain level of beneficial stress. BI does not.
At the dawn of the industrial revolution, the production of value was consolidated. The work of 100 farmers could be done by one, with technology. Today we are facing another “consolidation-of-the-production-of-value” (CPOV) event with technology.
When I see company executives willfully destroying jobs to consolidate profit, through mergers, LBOs, other - that is, IMO, extremely destructive for society.
As far as pointless jobs go, the purchasing power should be distributed in some way. Better a pointless job rather than a direct transfer payment, as the job provides some stress which is beneficial. It’s best IMO to have a job with a clear point (i.e. it clearly produces value (i.e. something that others value and will pay for, or society deems worthy of payment)), as humans also do best when they have a mission, it seems to me.
I agree with everything you’ve said. I think what the state could be is the employer of last resort where work could be tailored to the capacities of those who need it, or the income it would provide. The state could employ workers that are less desirable by the private market, though with the tight labor market we have now even the private market is taking a chance on workers will a scant job history or with a criminal background.
To me, a job is only as useful as the standard of living it provides. When politicians jump up and down and insist that their policies will create jobs, that is only half of the story. The question is, what kind of wages and working conditions do said jobs provide? The median hourly raise rose 2.7% last year, but official inflation is running at 2.9%. Obviously focusing on jobs is missing the mark. What we need are high paying (or higher paying) jobs, or less inflation, or both.
Another travesty is that the lion’s share of the recently passed tax cuts that are being used for stock buybacks. Not all stock buybacks are bad, but much of it is. Most of the stock buybacks now being executed are at at all-time highs, so it is hard to argue this is wise use of funds. What is more, most of this is executives, who have a large portion of their compensation in stock, are cashing out. This is happening at the same time when companies that are performing stock buybacks are doing layoffs. My thinking goes, if you don’t have enough cash to invest in higher wages, or capital expenditures to lead to higher productivity, well then maybe our stock buyback rules need to be adjusted to prevent the looting of the public company via stock buybacks.
Some of the LBOs and mergers which destroy jobs and result in the enrichment of the managerial class and shareholders at the expense of workers is what is contributing to the malaise towards capitalism in the US.
The person without debt has freedom.
The person with wealth has freedom. Debt may or may not effect your freedom.
We’re talking about honorable people.
Realtors are liars.
Other than (lower cost than LA) movie/tv, tourism and a few others, there is no real sustained industry in Vancouver.
This is a absolutely a result of foreign $s coming in - starting with Hong Kong in the late 90’s and Chinese in the 2010’s.
Unless you had a home and did not spend the equity — you could not purchase a house.
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“By contrast, the price for detached houses sold in Vancouver “in June averaged $2,550,708, down 12 per cent from $2,899,698 in the same month in 2016.
Federally, a stress test imposed this year by Canada’s banking regulator has reduced the amount that borrowers qualify for and slowed demand for real estate. Total sales of various housing types have tumbled to multiyear lows in Vancouver as a result of the B.C. NDP government’s housing policies and the federal stress test, which combined have made it tougher on borrowers already coping with higher mortgage rates, Mr. Saretsky said.”
Aside from the foreign money and equity, it sure seems these loan restrictions have done a number on the markets. It reminds me of a couple months after Vancouver collapsed. I found an article where locals were buzzing UHS and asking them if they had any Chinese buyers.
It seems to me that even more than tinkering with tariffs and quotas for China, we really need to clamp down on Chinese money coming in as investment and real estate transactions. Sen Rubio’s legislation sounds promising, I hope it goes somewhere.
One question I have about clamping down on Chinese money: When we sent them a bunch of IOU money in return for a bunch of cheap stuff, we knew that money would come back eventually…right? If so, isn’t this just an inevitable result of past decisions?
China can steal purchasing power from its citizens to run a mercantilist export driven economy by driving down the value of its currency, but it doesn’t mean we have to allow the gains that accrue from a trade imbalance to flood back into the US decimate the middle class by speculating on assets that necessary to survival such as housing.
Koch et al. was wrong to fight the border adjustment tax (e.g. destination based cash flow transfer) which would have solved a lot of these trade imbalance problems related to consumption, production, jobs, and taxes. But one major problem is that there are a lot of corporate US capitalists who are just as keen on expanding their own personal fortune and who are so far removed from the masses that they basically cheer on a status quo that benefits them but will hurt US labor.
Planet Money did a good story the other day on the Universal Postal Union and how it costs $1.39 to ship an item from China to US, but $4.25 to ship US to US via postal system. China can knock off this item (The Might Mug, in this case) and items to US for less than just the domestic US shipping cost. Stuff like this drives me crazy. It’s like a reverse trade barrier and it’s also how a ton of Alibaba and Wish.com junk gets over here.
Good post.
…. all the while ignoring the fact that all this borrowed chinese money will need to be repaid.
Thanks for the extra posts lately.
A lot of sellers are in a strong financial position and they don’t have to sell and they will just stay put until they get a number that they like.
Really? A strong financial position independent of their real estate that they are trying to sell? I’m skeptical.
He might mean that their lines of credit aren’t yet exhausted.
At least not yet….supply will continue to pile up and they will ride the market down. No more QE1-QE3, Operation Twist, 10 Trillions more in debt, etc.
‘ASB chief economist Nick Tuffley told The Economy Hub this week. ‘Throw in things like Mycoplasma bovis for the dairy sector and the background noise globally and you can see why people are saying: what’s going on here?’
The jury’s still out Nick, but the Magic 8 Ball says “quantitative tightening”.
‘We saw QV data showing the national average house price fell. And we saw a major construction firm go into receivership leaving a number of half-finished projects’
Imagine that. Half finished shacks in New Zealand. Sure we’ve seen those in the mining crater towns, but wow. The slope is getting slippery.
Mr. Landherr said he missed out on the pricing peak of Vancouver’s condo market in January.”
Fear not, Cohen. You’re about to get a lot of company in the “bitter regrets” category.
Remember he who panic first, panic best! It looks like there was a fire in the movie theater and only one exit door. The problem was the fire was lit 15 minutes ago…
‘For properties below $3-million, I’m not seeing sellers panic or buyers lose consumer confidence,’ Mr. Price said.
That’s because the sellers have no inkling of what’s headed their way. And any “buyers” in the current market are knife catchers and Greater Fools. But there’s a third category, Mr. Price: vindicated renters who are going to watch this carnage play out, then buy at the coming firesale.
Chasing the market down is pretty common.
I think the coming asset bubble crashes are going to be far more severe than in 2008, because the central banks have effectively used up all of their ammunition. Sure, they can embark on another round of deranged money printing, and risk creating the kind of hyperinflation and loss of faith in the currency that led to the Weimar Republic and a little corporal with a funny mustache who came to power on a wave of public fury over “Jewish confetti” as Germans called their worthless marks. The central bankers and their oligarch patrons might be wise enough to know that a “Weimar 2.0″ outcome is the worst of all possibilities, since we’ve seen this movie before and know what follows.
The central bankers and their oligarch patrons might be wise enough to know that a “Weimar 2.0″ outcome is the worst of all possibilities
I no longer believe they are that wise. I think sometime in the last 10-20 years they decided that Weimar 2.0 for us and a ranch in Paraguay for them sometime in the future, with the status quo for now, was the best option…for them.
anyone pissing all over themselves yet over aaples market cap about to hit 1 trillion?
Only you.
The real estate market in central Ontario has definitely slowed. The majority of listing prices are being reduced with only a couple being increased.
Apparently Toronto has a 41% reduction in their volume.
Banks are sending mixed signals - lower rates (2.46% for 7 years) - but harder to be approved. They seem to be signalling future bad news.
Interest rates on savings are improving though.
Oh dear….
https://wolfstreet.com/2018/08/01/house-price-bubble-sydney-melbourne-australia/
And 5%-8% is nothing compared to what’s coming.
In Sydney, Australia’s largest housing market and one of the world’s biggest housing bubbles, prices of homes of all types fell 5.4% in July compared to a year ago, and 5.5% from the peak in September. Prices of single-family houses dropped 7.0%, and prices of condos (“units”) fell 1.6%, according to CoreLogic’s Daily Home Value Index.
The psychology of the market is undergoing a paradigm shift from greed and fear of missing out (FOMO) to a sudden recognition that the bubble is bursting and shack prices could plummet. That is only going to begat more panic selling by the over levered and FBs, further accelerating the crash.
Got popcorn?
A full 33% of single-family homes are non-owner occupied in Memphis, Attom’s data shows,
Everyone in Memphis is an amature Elvis
Just fckn wow !
Boston,the final nirvana. Rent has lots of positive bias as new cool apartments hit the market.
https://www.apartmentlist.com/ma/boston#rent-report
Love to see what 30 yr old stuff is doing
Weekend repair $19 plus an hour of my time.
If an out of town pay retail would’ve cost $300
Hyannisport, MA Housing Prices Crater 11% YOY As Coastal Property Market Implodes
https://www.movoto.com/hyannis-port-ma/market-trends/
have any of those stock gains from the rich and connected trickled down to you yet?
Chinese investment banks are trying desperately to get more Greater Fools to sign on the bottom line in expectation of mythical future shack riches.
https://www.scmp.com/property/hong-kong-china/article/2157857/chinas-second-tier-cities-set-rapid-house-price-inflation