Cash Negative From Day 1
A report from the Voice of San Diego in California. “In recent years, downtown San Diego has become an epicenter of a lot of that new construction at the high end of the market. But there’s a big problem: We need people to start living in those new apartments. As of April, MarketPointe Realty Advisors estimated that a glut of luxury rentals in downtown could account for as much as a full percentage point of San Diego’s approximately 4 percent rental vacancy rate. That figure came before the opening of at least two more luxury towers in East Village, and at least three more are opening in the near future, including the largest project to date, Ballpark Village.”
“But a statistical analysis of downtown residency is not necessary to know that plenty of housing units go unoccupied. Just look up at the towers that even years after opening, have half of their lights off in the evening. That’s not because folks are out at local restaurants, it’s because they’re sitting empty.”
From Bloomberg. “Isaac Sitt and Elliot Tamir had been investing in real estate for years when they stumbled onto the idea. They decided to put up ads at the nearby Wyckoff Heights Medical Center, expecting to lease to doctors. Instead, they got medical students. With jobs scarce, tons of people were going to school, they realized. Sitt remembers thinking, ‘Hey, this is a good business,’ even in a downturn. ‘Not only does it make sense, but I think we can raise equity for it.’”
“Today, Sitt and Tamir run Vesper Holdings LLC, one of the largest owners of student housing complexes in the U.S. It’s been a lucrative niche. One of the few dangers for the business is bringing back the draft, Sitt jokes. ‘That would be a problem for the college population,’ he says. The other, he adds, ‘is overbuilding.’”
“That second danger is no joke. Too many of those dollars flowed to projects around schools where there were low barriers to development, such as Texas A&M and the University of Oklahoma. Landlords in those areas have had to offer discounts and freebies to get ‘heads on beds.’ Some properties are going bust, leading to downgrades of bonds that backed the development. Now, veteran investors in student housing say they’re being careful about their next moves, even as money continues to pour into the industry.”
“Analysts caution that there’s a broader demographic shift under way that could hurt demand—or at least cluster it around a few flagship schools. Millennials, one of the biggest generations in the U.S., are aging out of their college years, says Hans Nordby, managing director at CoStar Portfolio Strategy. ‘The tide’s going out,’ he says. ‘There are fewer of these kids every day.’”
From News OK in Oklahoma. “Upperclassmen move into campus housing Wednesday at the University of Oklahoma, but many rooms will be vacant. OU’s efforts to entice more students to live on campus after their freshman year began last fall with the opening of two elegant residential colleges that together can accommodate 600 upperclassmen. Officials predicted there would be a waiting list to get into Dunham and Headington going forward.”
“But this fall’s occupancy for the two residential colleges is at 70 percent, OU spokeswoman Erin Yarbrough said. Another 1,230 beds for upperclassmen are available for the first time this fall with the opening of Cross Neighborhood, a luxury complex that has an occupancy rate of 28 percent for the fall semester. New OU President Jim Gallogly said earlier this summer the residential colleges were ‘cash negative from Day 1.’”
“They feature spacious dining halls, made-to-order food options, private courtyards, game rooms, comfortable lounges and libraries filled with books and artwork on loan from the campus museum. Before he took office July 1, Gallogly announced the university has been losing money every year. Total debt is nearly $1 billion at the Norman campus and debt service costs are almost $70 million a year, he said.”
“‘Our debt has more than doubled in the last 10 years as we’ve been on a building campaign,’ Gallogly said. ‘As a result of that, we have a beautiful campus and a lot to be proud of, but during that period of time, we spent approximately $730 million and that’s why the debt has gone up to that level.’”
The Colorado Business Journal. “The combined markets of Denver and Colorado Springs are major markets tracked by our national firm and, compared to the same period in previous years, 2018 has been strong. In the first six months of 2018, the markets added just under 5,500 new units. During the same span two years ago, that number was only 1,100. The area has been experiencing a new construction boom, and the flow still is increasing. In addition to the new supply delivered this year, 11,000 units already are under construction.”
“These likely will be entering the markets within the next 12 to 18 months. For reference, a total of 9,000 units have been delivered in the last 12 months. The areas absorbed almost 6,500 in the first two quarters and over 9,800 units year over year. After adding more units than were newly rented in the opening half of 2017, it’s a positive development that absorption has outpaced new supply by 1,000 units in 2018.”
“But, for markets still amid a construction boom, it bears noting that there appears to be less room to run than even two years ago. At the top of the segment, average occupancy ended June at about 78.5 percent. Because this is the segment with new construction activity, an average occupancy below the stabilization threshold isn’t a surprise.”
From North Jersey. “The luxurious new complex rising up on South Van Brunt Street in Englewood boasts a myriad of amenities, including a fitness center, cinema and putting green. But not everyone can move into this exclusive enclave: Prospective residents of The Bristal at Englewood must be at least 55. It’s the latest in a slew of cushy developments for senior citizens that have been cropping up throughout New Jersey and the nation as well-heeled baby boomers aim to age amid luxury: with swimming pools, five-star chefs, elegant decor and daily housekeeping.”
“But living the high life doesn’t come cheap. A two-bedroom at the Assisted Living in The Bristal starts at $8,300 a month. (Studios and one bedrooms are less.) That price includes meals, but not medical care or recreational costs. The average price for a unit in a Toll Brothers Active Living community, which features a golf course, tennis court and swimming pool, is $800,000.”
“And Arbor Terrace in Teaneck, an independent living facility, offers a full-service restaurant, a 24-hour concierge service and a movie theater at prices starting from $4,820 a month for a one-bedroom apartment. A three-bedroom goes for $6,700. But Teaneck Deputy Mayor Elie Katz notes that the more upscale senior housing facilities in town tend to have more vacancies, while the affordable senior apartments have a 10-year waiting list. ”
“Nevertheless, developers are confident they have found a lucrative niche. The luxurious properties are being built across the nation, said Steven Krieger, a partner of the Garden City, New York-based Engel Burman, which is developing and managing assisted living communities in Englewood, Woodcliff Lake, Wayne and Somerset. ‘We want to offer every single amenity that we can think of to make their lives more enjoyable,’ he said.”
From Globest on Florida. “Conventional wisdom dictates that investing in Miami area condos today is tricky because there’s a market glut throughout South Florida. But two reports this month indicate that when it comes judging factors such as supply, it all depends. That’s due to two considerations: What price level is being considered. And location, too.”
“CondoVultures Realty.com took a different approach to looking at condos. They were more selective about prices. Their August report found nearly a 70-month supply for condos. But those were costing at least $1 million. That included an area in the tri-county South Florida region of Miami-Dade, Broward and Palm Beach. CondoVultures, which regularly reports on the subject and long ago predicted a glut, says it only tracks Greater Downtown Miami condos listed for sale. It does not factor in the nearly 47,500 new condos currently in the development stage east of Interstate 95 in the tri-county South Florida region.”
“But the Miami Realtor numbers were not looking at the same basis for their numbers. ‘Miami condo home buyers are finding great opportunities particularly in the $250,000 to $600,000 range,’ Miami Chairman of the Board George C. Jalil said. One obvious conclusion is that a lot of condos are selling at prices under the luxury threshold of $1 million. And Naranja in Homestead north of Leisure City had only an 8-month supply with at least a few condos priced under $100,000.”
‘Some properties are going bust, leading to downgrades of bonds that backed the development’
Hey Bloomberg, it’s OK if you want to follow me around to see where this bubble is heading next.
‘Some properties are going bust, leading to downgrades of bonds that backed the development’
Downgrades of bonds = Money going poof.
Money going poof = A shortage of the stuff.
A shortage of money translates to desperation time for some people (mostly stupid ones).
Desperate people are my favorite kind. 😁
I like it when money is cheap and easy to get because this is the part of the cycle that sucks stupid people in.
Later on in the cycle money begins to tighten and thus is a bit tougher to get and this is the part that traps the stupid people who got sucked in during the first part of the cycle. I like this part of the cycle as well, in fact this is my favorite part of the cycle, one I like to think is as the Gotcha! phase.
😁
“Some properties are going bust, leading to downgrades of bonds that backed the development”
I imagine we’re talking about public pension funds as the bond holders?
Atlantic Beach, FL Housing Prices Crater 8% YOY As Homeowners Walk Away From Underwater Properties
https://www.movoto.com/parker-co/market-trends/
link correction
https://www.movoto.com/atlantic-beach-fl/market-trends/
Your data has price per square foot increasing slightly YoY. I’m back at this blog after 9 or so years. I’m not a troll for the record! I think prices are going down. But saying prices are cratering when price per square foot is increasing seems a bit misleading to me, and I come to this blog for the articles, but also the opinions of the people that comment here.
Over-dramatizing what is happening is a disservice to those who come here to understand what’s happening. So I’m going to continue to copy-past data from your own website that flatly contradicts your “Crater” proclamations.
Again.$/sq ft valuation is a poor performer as it excludes all items in the transaction except for the structure and the area of dirt directly under it.
Santa Monica, CA Housing Prices Crater 22% YOY As 2010-2016 Subprime Mortgages Fail
https://www.movoto.com/santa-monica-ca/market-trends/
Fair point. I mainly take issue with his editorialized headlines:
“San Diego, CA Prices Crater 1% YoY as orphans begin fist fighting in the streets over scraps of food as home prices fall into Satan’s unholy abyss”
Why don’t you use the joshua tree extension?
Thanks Ben, will do.
I agree with Magoo. Crater would be a 25%+ drop. Craters come from catastrophic events and 8% is not catastrophic.
Why don’t you use the joshua tree extension?
As one that has been a poster off and on since before the last bubble burst, I still think we need to see the mania spread from the “cool” cities to smaller cities, I think we are just beginning to see that now. Last time, we saw similar small corrections in the big trendy cities years before we really saw the bust, it was just some of the speculative money being transferred to other cites. This story just out I think supports my contention:
https://www.msn.com/en-us/money/markets/as-home-prices-rise-buyers-eye-smaller-cities/ar-BBLUjlh?li=BBnbfcN&srcref=rss
when BEND oregon bends ,then it’s over
WSJ headline to come:
BEND: OVER!!!
da bear
Outdoor pizza oven$ per capita / within city limit$ !
see the mania spread from the “cool” cities to smaller cities,
In Western NY it already did and appears to be slacking off considerably.
2019 Headline: Bend Buyers Bent Over
I can only hope Boise is also a “bent over” market in 2019.
“I still think we need to see the mania spread from the “cool” cities to smaller cities, I think we are just beginning to see that now.”
Not sure what rock you’ve been hiding under, but that happened 3 years ago.
“In Western NY it already did and appears to be slacking off considerably.”
Yep. Same for the west coast.
“…the “cool” cities…”
Does that mean real family supporting jobs within 30-min commuting distance, or where one can easily obtain a section 8 apartment, a snap card and a complimentary metro pass at the outset of each month?
I can only hope Boise is also a “bent over” market in 2019.
Boise housing market: Timber!
‘But Teaneck Deputy Mayor Elie Katz notes that the more upscale senior housing facilities in town tend to have more vacancies, while the affordable senior apartments have a 10-year waiting list.’
Should indicate caution!
‘Nevertheless, developers are confident they have found a lucrative niche’
And the Yellen bucks head for money heaven.
‘But, for markets still amid a construction boom, it bears noting that there appears to be less room to run than even two years ago. At the top of the segment, average occupancy ended June at about 78.5 percent. Because this is the segment with new construction activity, an average occupancy below the stabilization threshold isn’t a surprise’
Below the stabilization threshold = cash negative from Day 1.
And thousands upon thousands under construction. Seems irrational, no?
The Realtor koolaid in Denver is special. It’s different here.
‘But a statistical analysis of downtown residency is not necessary to know that plenty of housing units go unoccupied. Just look up at the towers that even years after opening, have half of their lights off in the evening. That’s not because folks are out at local restaurants, it’s because they’re sitting empty’
= cash negative from Day 1.
Airbnb apartment building opening downtown, after near-record sale
Nashville Business Journal-14 hours ago
“The Niido homeshare model is a gross misuse of housing units for the actual residents of Nashville. Let’s fight to make sure tourism is not prioritized over the …
I found this hilarious:
https://jalopnik.com/bumper-falls-off-brand-new-tesla-model-3-after-30-minut-1828306917
“Yep, that’s another Model 3 losing its pants in the rain.”
I honestly have never heard of a new car’s parts falling off, and this surely lends support to the rumors of hideous build quality.
Cut Elon a break, he has been hiring engineers with real car making experience. I am sure those former Yugo engineers will correct the problems soon.
Elon Musk is gonna make John Delorean look like Henry Ford.
da bear
Tesla is an apt metaphor for these Ponzi markets where valuations are completely divorced from any underlying fundamentals.
In 1996 I bought a new Chrysler Town & Country minivan. The first thing that went wrong was the plastic of the steering wheel. It started falling off in big chunks within the first 90 days I owned it. It was replaced under warranty.
Bahahahahahahahahahahahahahahahahahahaha.
Check out the fundamentals ….
https://finviz.com/quote.ashx?t=TSLA&ty=c&ta=0&p=m
= cash negative from Day 1.
Fundamentals haven’t mattered in years, thanks to trillions in Federal Reserve funny money “stimulus” pumped into these Ponzi markets and asset bubbles.
Given how generous investors have been to Elon, I don’t really understand why he wants to go private.
I was listening to a discussion about this on the radio earlier today. It is baffling that people have pushed their share price so high, given the company is losing money and now the big boys are moving into electric vehicles. It’s not clear that deep-pocketed individuals or institutional investors will pour their money into this company
If he can go private he can hide the dirt under the carpet a little longer. It’s hard to avoid scrutiny when you have to do those pesky shareholder meetings. Also those that advocate short positions on Tesla stock drive Elon absolutely nuts.
“Given how generous investors have been to Elon, I don’t really understand why he wants to go private.”
He doesn’t, he’s just engaging in a herculean effort to try to cover his azz from getting sued to the bejeezus after he sent out a braindead tweet without thinking, during one of his narcissistic fits, with the sole intention of burning short sellers, saying “funding secured at $420 per share.”
He did cause them great financial harm for a day or two, but that’s it. However, now he’s in a world of hurt because he’s got the SEC and lawyers by the score looking into his claims of “funding secured.” In my opinion, he is finished as CEO, it’s just a matter of time. In private, the board is disgusted with this guy.
I think the company is finished and what we’re seeing is the late stages of a megalomaniac completely losing control and going off the rails.
He’s been lying about production numbers.
“Given how generous investors have been to Elon, I don’t really understand why he wants to go private.”
Matt Levine over at Bloomberg basically came to the same conclusion and did a thoughtful write-up on the misguided Musk’s tweet was.
https://www.bloomberg.com/view/articles/2018-08-13/funding-for-elon-musk-s-tesla-buyout-wasn-t-so-secure
““The stock market has been kind to Elon Musk,” James Mackintosh wrote last week. If Musk wants to find a widespread pool of investors willing to take a gamble on his vision for Tesla, he has found them. The obvious mechanism for finding a large group of investors to buy shares in a company without expecting to control that company is also the correct one: You list the shares publicly, and let the people who want to buy them, buy them. You don’t need to travel to Saudi Arabia to find someone who’ll put money into Tesla without demanding any control rights in return. They’re right there in front of you. They’re the people who already own the stock.”
I’m still waiting for a self-driving car that can survive a normal car wash.
Ironically, Elon Musk has actually hurt the environment. This country would have turned to the proven technology of natural gas vehicles had he not promised affordable electric cars. All over the world NG vehicles are fairly common but we lag countries such as Iran. We have cheap NG in this country but it now Europe which is pushing NG for vehicles to clean up its diesel emission problems.
Heh. We’ve had this discussion, A-dan. We aren’t going to have cheap CNG for long if everyone starts putting it in their cars. And we’re going to run into peak fossil eventually.
Long-term, electric is probably better because there are several ways to make it. But we still need a 350-mile electric battery and 10 minute full recharge.
Or maybe a 350 mile extension cord? Oxide, we will run out of cobalt before the world runs out of NG. Electric cars will make sense when we have something different than lithium batteries. They have too many problems, toxic lithium, shortage of cobalt etc. Electricity can be produced numerous ways precisely why it is so wasteful to be using NG to produce it. Better to be using it to directly power vehicles. It is going on in a big way under the radar for trucks even in this country.
http://www.ngvglobal.com/blog/massive-natural-gas-filling-station-expansion-planned-for-italy-0807
I think the US economy would have expanded another 1% per year under Obama had he supported NGVs the same way he supported electric vehicles. Of course, the silver lining is if he had done that, it is likely Hillary would be president right now.
I don’t disagree. We need a breakthrough in battery tech. I mean a real breakthrough, not some incremental in-the-box crap just to get a new patent.
I don’t think we should be using NG to make electricity either. We should be saving NG to heat homes.
Neither internal combustion nor electric is the future. Hydrogen fuel cell vehicles are.
Hydrogen fuel cell vehicles are.
Right after walking. It’s just a conversion from electricity, which is a conversion from fossil fuels. Inefficient conversions.
Home/work/shopping in the same neighborhood is easy on the expenses, resources and the person. No technology breakthroughs needed. A thought breakthrough is needed.
+1000
Speaking of Tesla…
Hypocrit Elon Musk talking about accepting Saudi oil money to take his company private? LOLz
Lots of great quotes from him at the link…
=========================================
“From Musk’s email:
‘The oil and gas companies, the wealthiest industry in the world—they don’t love the idea of Tesla advancing the progress of solar power and electric cars. Don’t want to blow your mind, but rumor has it that those companies are sometimes not super nice. Then there are the multitude of big gas/diesel car company competitors. If they’re willing to cheat so much about emissions, maybe they’re willing to cheat in other ways? ‘
With Musk’s new disclosures about his talks with Saudi Arabia, it’s clear that this email was written long after he knew the biggest pool of oil money was interested in financing, not destroying, his company.”
https://www.bloomberg.com/news/articles/2018-08-14/elon-musk-s-vast-oil-conspiracy-ends-with-saudi-billions
Camarillo, CA Housing Prices Crater 7% YOY As Wiped Out Homeowners Sustain Crushing Housing Losses
https://www.movoto.com/camarillo-ca/market-trends/
‘this fall’s occupancy for the two residential colleges is at 70 percent, OU spokeswoman Erin Yarbrough said. Another 1,230 beds for upperclassmen are available for the first time this fall with the opening of Cross Neighborhood, a luxury complex that has an occupancy rate of 28 percent’
Remember the recent statement that students “demand” luxury airboxes?
That’s OK Erin, double your occupancy with freebies and you’ll only be losing as much money as those half-empty towers in Seattle.
And have you noticed we don’t hear the word shortage as much these days?
They’ll never admit that the shortage is because they overbuilt. They’ll blame it on “never seeing it coming” that they would one day run out of Millenials.
Meanwhile, does anyone have any kids in high school? Are you or your kids planning on borrowing to the gills so that the kid can live in a luxury student apartment? My understanding is that the toilets and light switches in a low-cost apartment work similarly to a luxe unit. Just say no.
Meanwhile, does anyone have any kids in high school?
Yes, senior this year.
Are you or your kids planning on borrowing to the gills so that the kid can live in a luxury student apartment?
Hahah.
As part of his education about the real world he was looking at places to stay at a college he was interested in. He excitedly told me that he could totally see how it could make it work for a rent payment of only about $2k a month. I tried to be polite…but still laughed and asked him where he was going to come up with that kind of money. I explained that his mom has a total monthly expense of no more than that (I know because I still pay it all in alimony) and she is paying less than $600/mo for housing. Now he’s at least starting to realize it’s more money than he thought it was. He also at least somewhat understands the advantages of a cheap dorm room with a meal plan now (if such a thing still exists).
Less than 10 years ago I was renting a 3/2.5 townhouse for $1800/mo. $2K is ridiculous… only in California(?) I guess.
He was looking in Colorado. It’s plenty bubbly there too. Also he was just latching onto the first desirable thing he saw, no experience yet with looking for deals.
How many of the people boo-hooing about their student loans spent part of that money on these “luxury” student residences?
I recall sharing a modest apartment with a roommate while I was in college. I guess kids these days are above that sort of thing?
I guess kids these days are above that sort of thing?
Or maybe due to the bubble we are letting in too many rich foreign kids “because they pay full freight” and not letting in enough poor American kids? Plus kids in general are pretty vulnerable to the dotted line special if you push it on them.
I keep coming across articles stating that college enrollment in the US has been declining for years. Even with a bunch of foreign students?
The frustrating thing is that there are enough Millenials old enough to vote now. They are likely to vote for politicians who are going to forgive the debt on all their party money.
IMO, college tuition should be partially dischargeable in bankruptcy. Tuition only (no books).
Basically oxide you agree that the debt burden that was allowed to be incurred by students was immoral and at least part of that responsibility lies at the feet of the lender (not just the borrower). If you agree with that, and it sounds like you do, then the second part is just figuring out who eats the loss. Politicians who offer debt forgiveness via government have society eat the loss whereas bankruptcy forces the loss on the lenders. I personally agree with your approach, but maybe we split the difference and impose losses equally on both.
Isn’t that what the builders are counting on, all that sweet student loan money?
‘Too many of those dollars flowed to projects’
‘Some properties are going bust’
‘even as money continues to pour into the industry’
Here you have the series of events that makes QE deflationary. There is something like $1.9 billion pouring into US student housing right now, mostly from overseas.
Maybe they plan to send their kids to the US schools? Colleges are BEGGING for overseas students because they pay full freight. No pesky FAF forms or scholarships. And you don’t have to be smart, or Asian. Asia, Southeast Europe, Middle East.
Albany, OR Housing Prices Crater 25% YOY As Failing China Economy Pummels West Coast States
https://www.movoto.com/albany-or/market-trends/
Ben, this is getting ridiculous.
His price per square foot on this link is up 3% and days on market is down 13% YoY.
You can’t see the forest for the trees.
I talked half of my friends and family out of buying during the last bubble. I have a very good handle on the trees, I’ve been visiting this blog since 2005. I am not a troll, just think it’s important to let the data speak for itself.
“I talked half of my friends and family out of buying during the last bubble”
Ah, having a “body.of.knowledge” sittin’ ’round the turkey table on Thank$giving celebration$… (Wishin’ you the best Magoo & eyes hope you get second servings 1$t! + your earned monie$ $avings de$$erts!)
Magoo is right. We all love to see the bear rear its head for various reasons but this kind of link does not depict much in the way of useful data.
If a nowhereville town goes from 2 sales/month to 1 sale/month and they have a total of 10 properties, is that 100% crash in sales relevant?
Give us the data so we know when it is time to “Buy all the thingz!!!”
You know… ‘tanks in the streets’ Hank the spank Paulson time.
“Ah, having a “body.of.knowledge” sittin’ ’round the turkey table on Thank$giving celebration$…”
When we visited family for Thanksgiving one year, my mother stopped me at the front door long enough to say, “Don’t talk about housing prices.”
Prices my friend.
Arlington, VA Housing Prices Crater 7% YOY As Housing Correction Blows The Doors Off The Homeowner Bus
https://www.movoto.com/arlington-va/market-trends/
Please do not confuse him with the facts. You know what we are missing this time around? Barney Frank. I never was a fan of the globalist W but when his administration tried to make minor reforms to the Fannie and Freddie, he was there to assure everyone that there was no trouble in housing. The media was there to support him and ignored any trouble signs in housing after that hearing until it was impossible to ignore the defaults. This time I think there are a number in the media looking for any storm clouds for the Trump economy thus are giving us bubble stories far sooner than last time. Housing prices really were falling for a considerable time prior to any media coverage last time.
Prices my friend.
Houston, TX (Braeburn) Housing Prices Crater 17% YOY As Oil Bust Ravages Suburbs
https://www.zillow.com/braeburn-houston-tx/home-values/
… and don’t forget to select price from the dropdown menu.
Funny, talking to local real estate agents they say it’s never been better to buy house in Albany and prices are going up. When I drive through that down I just shake my head at all the super jacked up trucks and long lines at Starbucks or Dutch bros. Once the easy credit dries up this place is going to get hammered.
Well…. As some of our more eloquent commenters say, realtors are liars.
“OOOOk-lahoma, where the deficit$ come$ $weepin’ down the plain, …”
” … Gallogly announced the univer$ity has been lo$ing money every year. Total debt$ is nearly $1 billion$ at the Norman campu$ and debt $ervice cost$ are almost $70 million$ a year, he said.”
Boomer Sooner, Boomer Sooner
Boomer Sooner, Boomer Sooner
Boomer Sooner, Boomer Sooner
Boomer Sooner, OK U!
Oklahoma, Oklahoma
Oklahoma, Oklahoma
Oklahoma, Oklahoma
Oklahoma, OK U!
I’m a Sooner born and Sooner bred
and when I die, I’ll be Sooner dead
Rah Oklahoma, Rah Oklahoma
Rah Oklahoma, OK U!
What was yer tuition co$ts in the good’ole day$ Mr. Ben?
Interesting activity going on in the real estate market. I think we may be misreading the numbers a bit. We have had a very good stretch in recent years, a pullback was needed as well as consolidation. I think we got that this summer. I have noticed an uptick in pending sales volume so far in August. Need to see the data that comes out over the next 2 months. Rent prices are still high and look to be increasing, at least in Los Angeles where demand is still high, especially with millennial’s who are finally starting to leave the nest. Job market is still going strong along with a few other macro factors. The loans they are giving out are still very strict. They will not give you a loan unless they know you can pay it. I think we would need a job market hit to impact the current housing market. Look at the recent earnings report from Home Depot and their outlook forecast for 2019, for an alternate perspective. I understand the bubble talk fears especially since we 10 years on from the housing crash but the fundamentals are not the same. I wouldn’t get to excited about a market crash. In order for that to happen it would hurt those on this board who are hoping for one to buy into the market low. Just my 2 cents. Other thing I would add is current homeowners are not tapping into their home equity so they can absorb a decline in unrealized home value. Remember, most people buy homes for long term living and to lock in a monthly payment they can plan around, not to just get rich or make a profit. I think most people learned this 10 years ago, otherwise you would see massive equity tapping. I could be dead wrong here. Thanks to whoever maintains this blog. Nice perspectives!
‘The loans they are giving out are still very strict’
May 25, 2018
“In his corner of American finance, where hard selling meets hard luck, Angelo Christian is a star. Each time Christian sells a home loan, the company he works for, American Financial Network Inc., takes as much as 5 percent. Many of Christian’s customers have no savings, poor credit, or low income—sometimes all three. Some are like Joseph Taylor, a corrections officer who saw Christian’s roadside billboard touting zero-down mortgages. Taylor had recently filed for bankruptcy because of his $25,000 in credit card debt. But he just bought his first home for $120,000 with a zero-down loan from Christian’s company. Monthly debt payments now eat up half his take-home pay. ‘If he can help me, he can help anyone,’ Taylor says. ‘My credit history was just horrible.’”
“Christian can do this kind of deal because he is, in effect, making the loan on behalf of the federal government through its most important affordable housing program. It’s a sweet deal: He gets his nearly risk-free commission. Taylor puts no money down. If things go south, the government ultimately bears the risk. Many borrowers ‘are living paycheck to paycheck and, if they lose their jobs, they go into default immediately,’ says John Burns, a housing consultant.”
http://thehousingbubbleblog.com/?p=10443
‘I wouldn’t get to excited about a market crash.’
This is the second time the subject was raised in 2 days. What does it matter who gets “excited” one way or the other?
‘In order for that to happen it would hurt those on this board who are hoping for one to buy into the market low’
And this matters how? It seems like you are attempting to manage attitudes. This thing is a bubble or it’s not. And what people say on blogs won’t change that.
You are very emotional Ben. I’m just pointing out that you may actually have no clue what you are talking about. Copying and pasting articles is no skill. Your over confidence is telling. Few years left to go in my opinion. 2022.
‘Copying and pasting articles is no skill’
Oh, a put down. The pain.
Here’s my suggestion Bob. Go buy as many shacks as you can using as much leverage as possible. Is that “bullish” enough for you troll?
Wow. The good news is I remember the trolls getting pretty angry last time and the crash came quickly after that. So for me this is a positive sign.
The braying of DebtDonkeys and cackling of Housing Hens began long after the 40% price collapse gained traction. They’re too stupid or blind to see it before hand.
Wow. The good news is I remember the trolls getting pretty angry last time and the crash came quickly after that. So for me this is a positive sign.
Yes, but I am not seeing enough angry trolls to think we are at the top on a national level. Leverage works both ways, if you keep cut the down payment from 20 percent to 10 percent, then only a ten percent house increase is enough to double the “investors” money. Cut it to 3% and it only takes a 3% increase. Of course it works the same way on the downside. Right now only the most highly leveraged in the bubble cities are getting truly pounded but it may change. But I still think unless the mania spreads we will not see the downturn we saw last time. Speculation occurred in too few cities this time around hence both the rents and income ratios to housing prices are much less inflated on a national level. Yes, we have some cities that are similar to the last bust but they are correcting now and the economy can absorb the slowdown.
‘I am not seeing enough angry trolls…’
And you don’t see them at all once I’ve identified them.
‘Copying and pasting articles is no skill’
Hey, eye resemble$ that remark, them’$ fightin’ word$ where’$ eye hail$ from Robbie!
“Few years left to go in my opinion. 2022.”
Only if the fed double-clutches and slams it into reverse.
‘I wouldn’t get to excited about a market crash.’
It isn’t a question of getting excited. It’s a question of recognizing bubbles and manias and steering clear, while trying to protect one’s hard-earned wealth, while mitigating the impact of the monetary malpractice and malinvestment carried out by the Fed and its Wall Street partners in crime.
Indeed.
What’s your definition of very strict in “the loans they are giving out are still very strict. They will not give you a loan unless they know you can pay it”?
This is what I thought because that is what I was told. But once looking into it, I think the lending standards have been loose since 2015.
But open to hearing how they’re strict.
Compared to 2005, American standards *are* strict. Yes, through FHA you can buy a house for very little money down, and I don’t think that’s ever changed.
But at the height of the bubble in 2004-2005 fog-a-mirror buyers could get ARMs, no-doc, no down, I/O, neg-am. In other words, mortgage where the buyers didn’t have to pay full PITI. A $50K household could live it up in a house traditionally priced for a $100K household. … at least for the grace period.
But since fall of 2008 and the creation of CFPB and Fannie/Freddie going into receivership (thank you Ed DeMarco!), suddenly, they had to pay the full PITI immediately, no grace periods etc. Regardless of down payment, that is still much stricter than 2005.
90%+ of all defaults during the last minor correction were prime mortgages.
Justice is still catching up with the worst offenders,
“Royal Bank of Scotland fined $4.9B for housing bubble role
Posted on Tuesday, August 14th, 2018 By The Associated Press
Royal Bank of Scotland will pay a $4.9 billion fine to settle allegations it misrepresented the types of mortgages it sold to investors during the housing bubble that ultimately led to the 2008 financial crisis.
The Justice Department said in a statement Tuesday that the penalty is the largest it has imposed for financial crisis-era misconduct at a single company.
The DOJ has issued billions of dollars in fines against Bank of America, Citigroup, Goldman Sachs and other big banks in the years following the crisis to settle similar allegations.
The government accused Royal Bank of Scotland and many other big banks of understating the risk and quality of the mortgages they sold to investors at the height of the housing bubble, in RBS’ case between 2005 and 2008. These investors bought up tens of billions of dollars in mortgages from RBS and other banks, and experienced massive losses when borrowers failed to repay and housing prices collapsed nationwide.”
Ehh, this is just governments making sure they get their cut of the loot.
Interest only back since 2015. Requires 20% down though.
https://www.cnbc.com/2015/07/20/interest-only-mortgages-theyre-baaack.html
Robert, you write inaccurate opinions as though they were fact and when Ben points that out, you call him “emotional” and proceed to devalue the
great contributions he has made. And trying to do amateur psychoanalysis of the readers is an overreach, to say the very least.
If you have credible points, supported with data, by all means present them. Otherwise, try to refrain from the argument ad hominens and the arm chair psychologist analysis. They are rather unbecoming.
Don’t feed the troll.
Prices my friends… Prices.
Sandy, UT Crater 12% YOY As Salt Lake Subprime Mortgage Meltdown Accelerates
https://www.zillow.com/sandy-ut-84093/home-values/
Don’t forget to select price from dropdown menu
“The loans they are giving out are still very strict.”
Oh yeah, zero down with prospective sublet income as a qualifier. Uh-huh, sure Bob.
Literally five minutes after reading the strict lending comments I get an email from the local credit union offering 3% down loans with no closing costs.
Was it an I/O neg-am ARM with a three-year grace period and no documentation?
“Remember, most people buy homes for long term living …”
Bug$; … “eh, I don’t think so Doc.”
No more 30 year$ job$ Robbie, … & people & job$ are $eldom co-joined twin lover$ for more than you can $cratch a 7 year$ itch.
What happen$ when the hou$e$ flipper$ relation$hip flop$?
Oh, Mr Banker, x2 set$ of $eparate e$crow paper$ with you loverly “Dotted Line$!”
¡Arriba, arriba! ¡Ándale, ándale! … $peedy Gonzale$
Most end consumers buy for long-term living, but where are the end consumers these days? All I see are speculators, foreign investors, flippers, and the like. And 0% of them buy for long-term living.
” buy for long-term living”
Well, ( chewin’ on a chunk of pepper jerky ) oxy, … eye gotta tell ya, iffin’ eye put marble$ in my one hand of everybody eye know that’s stayed put in x1 or x2 places, … verses … Everybodies eye knows thats moved “how.many.time$?” in the last 50 years, my other hand would be, full to over-flowing with many, many marble$
Denial
Anger
Bargaining <———————–
Depression
Acceptance
“The bargaining stage may occur prior to loss as well as after loss, as an attempt to negotiate pain away”
I understand the bubble talk fears especially since we 10 years on from the housing crash but the fundamentals are not the same.
“The fundamentals,” or rather a re-assertion of true price discovery, is what’s going to cause the next crash. Not correction, crash. The private banking cartel known as the Federal Reserve and it’s Wall Street accomplices use engineered boom-bust cycles every 8-10 years to plunder the middle and working classes and transfer their wealth to the Fed’s oligarch handlers. The only thing that has enabled the Fed’s Ponzi markets and asset bubbles to reach these ridiculous valuation levels is the trillions in funny-money “stimulus” conjured out of thin air by the Federal Reserve and central bankers and lavished on their bankster cronies so they can buy up the distressed assets of the proles and speculate with wild abandon. This has resulted in the same speculative excesses that give us Tech Bubble 1.0 and Housing Bubble 1.0, and it will end exactly the same way: imploding under the weight of its own fraud and fictitious valuations, while captured and complicit regulators and enforcers assure us that no one could’ve seen this coming or prevented it. And most assuredly, none of the criminals running this racket, or their political hirelings, will go to prison for their felonies and swindles.
Yes ^ this.
Ten years ago those who “could pay” defaulted because they weren’t going to make a profit by paying.
A mania isn’t driven by those who just want a simple place to live.
What I crudely tried to explain about liquidity yesterday is better explained here
Interesting stuff. I assume the EMs (emerging markets) they refer to includes China?
not clear on that. It seems to me that China should no longer be considered EM
Tank$!
$hortage of hou$e$ …√
$hortage of $tock$ …√
$hortage of Dollar$ …√
(Hwy chècks pantry, …)
No $hortage of Organic $weet popcorn … √
Portland, OR Housing Prices Crater 14% YOY As Maxed Out Home Equity Lines Of Credit Saturate Market
https://www.zillow.com/portland-or-97209/home-values/
*Select price from dropdown menu on first chart
“You gotta roll with it” — Caitlyn Vestal, Portland, OR
I think I am gonna do a cover of that at an open mic night in Memphis.
da bear
Daffy; … “that’$ de$piiiiicable!”
The cryptocurrency market has $hed more than $600 billion$ from its peak — what exactly happened?
By Aaron Hankin / Published: Aug 14, 2018 / MarketWatch
Expectation$ were not tempered
Heading into 2018, cryptocurrencie$ were on a tear. The price of bitcoin had $urged more than 1,000% in 2017 and it seemed if you weren’t trading bitcoin you were in the minority. “People were expecting great things heading into 2018,” said Charles Hayter, co-founder of CryptoCompare. “A lot of $mall-time investor$ were thinking if you can make money then why can’t I.”
The euphoria saw many analysts rush to stake their claim as the crypto-king with bold calls as to just how high bitcoin could go.
Crypto is this generation’s Y2K. Important work was done but very little survived the meltdown as Pets.com and friends got purged.
“The total crypto market capitalization has fallen by about $19 billion in the past 24 hours.”
https://www.cnbc.com/2018/08/14/bitcoin-price-below-6000-amid-wider-cryptocurrency-sell-off.html
Poor, poor alphonso. And I DO MEAN POOR.
A report from the Voice of San Diego in California. “In recent years, downtown San Diego has become an epicenter of a lot of that new construction at the high end of the market. But there’s a big problem: We need people to start living in those new apartments. As of April, MarketPointe Realty Advisors estimated that a glut of luxury rentals in downtown could account for as much as a full percentage point of San Diego’s approximately 4 percent rental vacancy rate. That figure came before the opening of at least two more luxury towers in East Village, and at least three more are opening in the near future, including the largest project to date, Ballpark Village.”
“But a statistical analysis of downtown residency is not necessary to know that plenty of housing units go unoccupied. Just look up at the towers that even years after opening, have half of their lights off in the evening. That’s not because folks are out at local restaurants, it’s because they’re sitting empty.”
Half? Try 20%, if that. I live in San Diego and my wife and I go downtown to eat once a month or so. Every time we go I look at how many dark units there are in every tower. It’s unreal. Maybe everyone just goes to bed at sundown.
“Maybe everyone just goes to bed at sundown.”
Josh, how old is you? … (Eyes bets you is old enough to know better than that!)
I thought the sarcasm was obvious. Lol
“Just look up at the towers that even years after opening, have half of their lights off in the evening.”
You think 20% are unoccupied and 80% are occupied?!
I used to live in East Village, total dump and really is a ghosttown outside of baseball season. Just a bunch of bums asking for money. I am not one who is scared to walk the streets at night, but walking to the supermarket on Market was terrifying, especially coming home carrying groceries.
No, I think 20% are occupied and 80% are unoccupied.
It’s really expensive to go upward. The tenants have to really well-off or section 8 rats in a projects bldg for the development to succeed.
Maybe Robert works at Home Depot? Everything is coming up roses according to them…
“…consumers are still investing in their properties to see prices appreciate.
‘If you are a homeowner and your home is continuing to go up in value, you feel much more comfortable investing back in that home,’ Oppenheimer analyst Brian Nagel told CNBC.”
CNBC has already been reporting about declines in the housing market. But their “retail reporter” who wrote this article hasn’t heard about it yet. Or couldn’t be bothered to mention it and point out the contradiction.
https://www.cnbc.com/2018/08/14/home-depot-earnings-q2-2018.html
Home Depot…. Where poor people go to get a whole lot poorer.
“Everything is coming up ro$e$ according to them…”
“The gra$$ alway$ grow$ greener over the $eptic tank$!!” … Erma Bombeck’s classic
It was either Thomas Jefferson – or maybe it was John Wayne – who once said, “Your foot will never get well as long as there is a horse standing on it.”
Marge was still on the drinking man’s diet. She required a bottle, a little ice, and a clean glass. (Marge hadn’t lost a pound, but it didn’t seem to make any difference to her.)
CNBC now has mediocre reporters that have no outside experience. For instance Phil Labow (sp?) who covers autos and aircraft companies just repeat the talking points from the companies.
The lady out of Cali that covers house builders is the same.
—————–
Speaking of other business news sites. CBS Moneywatch (the business site) used to be great. Now they got rid of the original business reporters - and have generic reporters that only want to suck up to wall street and bash Donald Trump
Is there some principle that says a given Enterprise starts with the best talent and then goes downhill as the original crew ages out?
Landlords in those areas have had to offer discounts and freebies to get ‘heads on beds.’ Some properties are going bust, leading to downgrades of bonds that backed the development.
My preliminary analysis of this environment leads me to tentatively conclude that perhaps someone might have overpaid.
Nothing wrong with fleecing a student’s accommodation budget since they’re already getting hosed for tuition. ‘Merica
Professor Steve Hanke: Turkey’s annual inflation rate is 101%, country needs to institute a currency board.
https://www.cnbc.com/2018/08/14/turkey-annual-inflation-rate-is-running-at-an-estimated-101-percent.html
What is the name of the blog reader Firefox extension? It was mentioned here the other day but I forget what it’s called. I’d like to try it out.
It’s called Joshua Tree. And on a side note, one advantage to using Chrome over Firefox is that when you use Chrome on multiple computers (home and work) if you sign into Google using the same account on both it will remember which posts you’ve seen on the other computer. Firefox can’t do that. Chrome can’t do it on your phone unfortunately.
Thanks. Trying it out now.
Is JT your creation? Apparently it was created by a fan of U2’s JT.
No, it was created by drumminj. I just spoke up in case it took him a while to see your question.
Actually the history of JT on this blog is more sordid and has nothing to do with U2 :-).
Yep, it’s my creation from long ago (2009 actually) that keeps on chugging on.
Chrome version
Firefox version
Carl, it should sync across firefox logins as well, not just Chrome. Guess I’ll have to do some more testing there!
Friday Harbor, WA Housing Prices Crater 10% YOY As Easy Lending Practices Of 2009-2016 Ravage Seattle Area
https://www.movoto.com/friday-harbor-wa/market-trends/
Got FONGO?
Cryptocurrencies
Bitcoin, Ether Sink as ‘Sense of Panic’ Grips Crypto Investors
By Eric Lam and Yuji Nakamura
August 13, 2018, 7:47 PM PDT
Updated on August 14, 2018, 5:21 AM PDT
Fear of missing out turns into broad digital coin sell-off
Ether and other smaller tokens are falling faster than Bitcoin
https://www.bloomberg.com/news/articles/2018-08-14/bitcoin-sinks-below-6-000-as-almost-everything-crypto-tumbles
Blockheads seem perpetually confused by the distinction between blockchain technology and Bitcoin. There are way too many different coin types in the cryptospace for any one species to retain its value unless there is something truly unique about it.
Realtor Pleads Guilty To Foreclosure Bid Rigging
https://www.usnews.com/news/best-states/mississippi/articles/2018-07-19/mississippi-woman-pleads-guilty-to-foreclosure-bid-rigging
https://www.realtor.com/realestateagents/Kimberly-A-Foster___319543_935999274
From her profile: “I am just a phone call away and ready to assist you with any purchase or sale.
*Integrity * Knowledgeable * Reliable * Professional”
…. in other news
“Second ‘Investor’ Pleads Guilty In Foreclosure Bid Rigging Case”
https://www.mypalmbeachpost.com/business/second-investor-pleads-guilty-foreclosure-bid-rigging-case/pk9NPb5g3XjX33wwuEZJyN/
Two of these fraudsters happen to own this outfit.
http://prodigycapital.com/
“We are a real estate investment fund”
There seems to be an whole bunch of fraud in this real estate thing. But afterall, real estate is a big wide field…. why does most fraud center around houses?
Call your attorney.
why does most fraud center around houses?
Because that’s where the boxes of stupid are?
Heheeheeehee √
“why does most fraud center around hou$es?”
Individual / Citizen Corpooration$ taxe$ … Ver$es … Real E$tate
All you mob$ter.fraud$ter gambler$ out there: place yer bet$!
Farm$ have hou$es & barn$ & truck$, & implement$, & crop input$ & $tudents … Oh, wait … these is “$pecial Farmer$”
Willie’s about to leave the left coa$t, enroute to the ea$y coast … (Hemp is now legal in the U$A!, ol’ Abe gonna rollover in his $weet Kentucky homesite)
Mapping The U.$. Farm $@ubsidy $1M Club
Adam Andrzejewski Contributor / Forbes / August 14 2018
It was never the intent of Congre$$ to create a new class of millionaire$ through federal farm $ubsidies. Yet, the subsidies continue to flow. Last year alone, a very fortunate 400 entitie$, including farmer$, corporations$, and agri-busine$$es, harve$ted between $1 million and $9.9 million each in federal farm subsidies
Note: The definition of “farm $ub$idy” used in this piece includes benefit$ from 60 federal farm program$ administered by the United States Department of Agriculture (U$DA). These government programs include marketing as$istance, agricultural ri$k, price lo$s coverage, live$tock forage, con$ervation, crop disa$ter and many more. Learn more download our oversight report, “Harve$ting U.$. Farm $ubsidies.” We requested comment from many of the top 10 recipients of farm subsidies and will update the piece with any comments, feedback, or context if they respond.
Adam Andrzejewski is the CEO and Founder of OpenTheBooks.com – one of the largest private databases of government spending in the world. Our mission is to post “every dime, online” of all local, state, and federal government spending
https://www.forbes.com/sites/adamandrzejewski/2018/08/14/mapping-the-u-s-farm-subsidy-1-million-club/#565dda943efc
Seattle, WA Housing Prices Crater 8% YOY As Housing Losses Scalp Homeowners
https://www.zillow.com/fairmount-park-seattle-wa/home-values/
*Select price from dropdown menu on first chart
“Few years left to go in my opinion. 2022.”
I compiled this set of charts while posting on a real estate investing forum that things might to be cooling off. Boy, they didn’t like hearing that.
Maybe its temporary, but something definitely changed around April/May this year….
https://imgur.com/ZCwgdf8