You Are Starting To See Too Much Inventory
A report from the Wall Street Journal. “Owners of an apartment complex near Pittsburgh, who wanted to take out a mortgage on the buildings, allegedly made vacant units look occupied by turning on radios, placing shoes and mats outside doors and in one instance having a woman tell inspectors her boyfriend was asleep inside. The owners obtained a $45.8 million loan, which was wrapped into mortgage securities and sold to investors.”
“Practices such as these—which were alleged in a federal search-warrant application—have sparked one of the largest mortgage-fraud investigations since the financial crisis. It focuses on whether income from commercial properties was falsified, a move that would enable owners to get larger mortgages and take out cash or expand their businesses faster.”
“Still in its early stages, the investigation has so far yielded a fraud-conspiracy indictment against four real-estate executives in upstate New York. Loans that some or all of them were involved with totaled about $170 million, the indictment alleges. Investigators have sought mortgage data on dozens of other apartment buildings, according to documents reviewed by The Wall Street Journal and interviews with people familiar with the probe. Investigators have looked at student housing and self-storage facilities in addition to apartment complexes.”
“About $1.5 billion of securities issued by Fannie Mae and Freddie Mac are backed by mortgages from just one developer who has been under scrutiny, according to a Journal analysis of loan data from Thomson Reuters. The 2010 Dodd-Frank financial overhaul required home borrowers to document their income, and home lenders to verify it. The rule doesn’t apply to multifamily housing.”
“‘All the systems will work fine as long as people are being honest,’ said Sam Berns, senior vice president at NorthMarq Capital LLC, one of about two dozen firms licensed to originate and sell multifamily mortgages to Fannie Mae and Freddie Mac. If borrowers or their mortgage brokers choose, they can easily submit and certify false numbers, he said. ‘It’s a fault and a failure within the system.’”
“One owner of properties investigators reviewed is Robert C. Morgan, the founder of a suburban Rochester, N.Y.,-based apartment development company. He built a business of more than 140 properties with over 34,000 rental units across 14 states, according to its website. ‘There’s a lot of money chasing the multifamily assets, more money than deals,’ Mr. Morgan said at a Freddie Mac housing conference last year.”
From Crain’s New York. “Some 8,278 condo units are in the Manhattan development pipeline and around 2,000 of those are expected to hit the market within the next year, according to Halstead Property Development Marketing. The new development market has grown increasingly soft, especially for the priciest product, as projects planned after the height of the market in 2014 now come up for sale—joining many existing new buildings that have not moved all of their units.”
“As a result, supply has grown. Halstead’s first-quarter report showed around 6,000 apartments available in the borough, though some of those were being held off the market by developers until they can unload more units. How quickly these units will sell depends on the location, according to Halstead.”
“‘The supply-constrained neighborhoods that are most in demand are still seeing healthy absorption,’ said Robin Schneiderman, managing director at Halstead’s new-development arm. ‘When you go into the second-tier neighborhoods that have a lot of product and the pricing is not meeting the market, that is where you are starting to see too much inventory.’”
“However, sales volume has been declining and absorption—the amount of time it would take to sell all available supply at the market’s current pace—has been on the rise. If existing product does not sell, adding more will balloon inventory and put downward pressure on prices.”
From Long Island Business News. “For some time now, year-over-year home sales prices have increased while sales have declined. National figures for new and existing home sales confirm this. Some observers even worry that another housing price bubble – a rapid and unsustainable run-up on prices – is on the horizon. With homes being the major purchase for most consumers, this would be harmful for Long Island and elsewhere.”
“A confluence of factors has contributed to declining sales. Clearly, rising mortgage interest rates have given potential home buyers pause. Changes in the deductibility of mortgage interest and property taxes have likely been contributing factors as well. On Long Island, the situation is similar to the national experience. In Nassau County, year-over-year sales prices have increased every month for at least the past year. But year-over-year sales have declined for nine of the past 12 months. The steady growth in prices in the face of declining sales seems unsustainable. But evidence suggests that home sales inventories are finally starting to rise, both nationally and on Long Island.”
‘One owner of properties investigators reviewed is Robert C. Morgan, the founder of a suburban Rochester, N.Y.,-based apartment development company. He built a business of more than 140 properties with over 34,000 rental units across 14 states’
I’ve been all over this case for a couple of months. Hey WSJ, if you want to follow me around to see where this bubble is going that OK.
‘There’s a lot of money chasing the multifamily assets, more money than deals’
I spotted this apartment bubble in the fall of 2014 based on statements just like this.
Not to worry: “All the systems will work fine as long as people are being honest.”
Google: golf + taxe$ + Mar-a-Lago + Will Rogers
turning on radios, placing shoes and mats outside doors and in one instance having a woman tell inspectors her boyfriend was asleep inside.
You posted this story a long time ago. Who knew the WSJ was just an archival retrieval service.
Yeah, for their big breaking story. The Rochester Democrat did way more right away. I asked at the time, where’s the MSM? This played out over a week.
Ebola.
‘On Long Island, the situation is similar to the national experience. In Nassau County, year-over-year sales prices have increased every month for at least the past year. But year-over-year sales have declined for nine of the past 12 months. The steady growth in prices in the face of declining sales seems unsustainable. But evidence suggests that home sales inventories are finally starting to rise, both nationally and on Long Island’
” …. both nationally and on Long Island”
The FBI has warning$ out about an imminent ATM withdrawl$ $cam acro$$ the entire U$!!!
Yike$!
What are “home sales inventories”? Are those sales, or is that inventory? Those are opposites.
Ipswich, MA Housing Prices Crater 15% YOY As Mortgage Crime Tears Through New England States
https://www.zillow.com/ipswich-ma/home-values/
*Select price from dropdown menu on first chart
‘Investigators have looked at student housing and self-storage facilities in addition to apartment complexes’
The article mentions the student apartment foreclosures I’ve been posting here as well.
Good gawd! .. “Mar$ attack$” ha$ landed!
We come in peace. Ack Ack Ack.
Twight Zone: “it’$ a cook book!”
Love that episode!
‘All the systems will work fine as long as people are being honest,’
So in other words we’re screwed.
It’s hard to describe the scale of activity I see in searches everyday. Dozens and dozens of complexes selliing, reselling (flipping), refinancing. Billions of dollars every week. They brag about not having skin in the game. Being non-recourse. They’ll tell you straight up: it’s the holy grail of investing.
With that environment, and the government backing the loans, massive fraud is almost assured.
$parked one of the large$t mortgage-fraud inve$tigation$ since the financial cri$i$ …
$imple, follow the $ $igns …
If true, it shows another thing: these guys were loaded, with assets at the middle of a bubble. But they apparently couldn’t resist grabbing even more when they thought they could get away with it. One of the complexes had been refinanced for 2.5 to 3 times what it was worth. Now how do you pull that off without help from banks, appraisers, or someone inside the GSE’s even?
As I’ve told Jingle, the fraud comes out later.
Naked swimmers hate it when the tide goes out.
” …the fraud comes out later.”
Why do eye have vi$ion$ of my tax geniu$ brother $miling?
( hwy refills his comfort cup )
August 14, 2018
‘Too many of those dollars flowed to projects around schools where there were low barriers to development, such as Texas A&M and the University of Oklahoma…Some properties are going bust, leading to downgrades of bonds that backed the development’
‘Analysts caution that there’s a broader demographic shift under way that could hurt demand—or at least cluster it around a few flagship schools. Millennials, one of the biggest generations in the U.S., are aging out of their college years, says Hans Nordby, managing director at CoStar Portfolio Strategy. ‘The tide’s going out,’ he says. ‘There are fewer of these kids every day.’
http://thehousingbubbleblog.com/?p=10541
And consider they are starting with “cash negative day 1″!
“Naked swimmers hate it when the tide goes out.”
Nudi$t colonie$ $wimmers might knot bee so bothered. Just saying.
“ca$h negative day 1″!
Unlike Uncle Warren$, this is how eye started the summer after finishing high school. … In 1974 my father “gifted” me a 1955 Stud.e.Baker pickup with a Ca.did.alac 500 cu in engine & tranny, pumpkin orange …
Crui$ing the boulevard, eye was ca$h poor, but torque rich!
(Well, my best friend worked @ the local liquor store! Can that bee consider a “dividend”?)
This was “pre $ynthetic oil$” … But, during the ga$ price$ of an “oil embargo” …
Eye don’t think this has anything to do with nothin’ … Sorry, Mr.Ben
Now how do you pull that off without help from banks, appraisers, or someone inside the GSE’s even?
Jeff Sessions will get right on that.
I’m sure the GSE bond markets have heard by now that millions in fraud can be concealed by sandals in front of a door and a radio left on. The 2 main guys were sitting on 4 billions in RE. I imagine the feds want to see how much of this is out there pronto.
In 1974 my father “gifted” me a 1955 Stud.e.Baker pickup
In 1968 my father “gifted” me a 1960 Chevy with a 350 in it. Broken coil spring & etc. “If you can figure out how to get that to pass inspection son, you’ll have something to drive.” How that car evaded police checkpoints with beer stowed in it and an underage driver is another story…
“How that car evaded police checkpoints with beer stowed in it and an underage driver is another story…”
One eye’d love to hear! … (In person!)
OK, you guys forced me. My Dad raced cars, (motorcycles when he was young). He finished up with Super Modified. He had a few engines around and put a 350 in a 1967 Chevy short narrow. Hurst shifter, dual exhaust but most importantly the full inch cam that came with the engine. I won a few street races with that thing. Had a few beers afterwards too.
I think it got 5 miles to the gallon. Built for speed.
In 1974 my father “gifted” me a 1955 Stud.e.Baker pickup with a Ca.did.alac 500 cu in engine & tranny, pumpkin orange …
Nice. My dad has a 72 Chevy 3/4 ton 4wd that had a 350/350 combo that got updated to a 427 out of a 69 Impala SS back in the early 80s. Had a ton of fun in that truck. I could probably have it now if I wanted it but I don’t need any projects. If I did it would make more sense to LS swap it and sell the 427 to a collector anyway.
Hurst shifter, dual exhaust but most importantly the full inch cam that came with the engine. I won a few street races with that thing.
Interesting. My dad ran way too much cam in the 427 too. Rather than change it he just put Rhoads lifters in it to bleed some of it off at low rpm. Worked pretty well when the oil was warm. But cold start with a poorly functioning automatic choke on a Quadrajet was a bear.
“…As I’ve told Jingle, the fraud comes out later….”
I guess I better start looking around and identifying fraudsters. I will re-open my dialog with the FBI agent assigned to me in 2008.
LOLZ
HA, you shouldn’t laugh….you weren’t around in those days when I posted as Paladin.
I was. Came to nothing back then didn’t it?
“Paladin” … Wow … Ju$t, Wow!
Eye go try to save some trees, everyone renames themselves!
We busted a few fraud rings. Edwinna and her sister got a free room at the Dublin Federal Corrections Center for Women before being deported back to the Philippines!
Those were interesting times. I don’t see that kind of fraud today. I’ll start looking more closely now.
‘Some 8,278 condo units are in the Manhattan development pipeline and around 2,000 of those are expected to hit the market within the next year…as projects planned after the height of the market in 2014′
Yep, it’s been falling that long.
‘now come up for sale—joining many existing new buildings that have not moved all of their units’
Not only haven’t they sold, we just learned the other day they are taking out “inventory loans” just to sit on them!
” they are taking out “inventory loan$” just to $it on them!”
Trick$ter$ !
Native American trick$ter figure$:
In mythology, and in the study of folklore and religion (& $cam$), a trick$ter is a character in a $tory (god, goddess, spirit, man, woman, or anthropomorphi$ation), which exhibits a great degree of intellect or $ecret knowledge, and uses it to play trick$ or otherwise di$obey normal rule$ and conventional behaviour$.
Something is seriously wrong when it’s cheaper to keep a unit empty than to cheapen the unit itself. Aren’t we seeing the same thing with commercial LL’s jacking up the rent on restaurants and storefronts from Main Street USA to Fifth Avenue?
Something is not free about the free market.
‘it’s cheaper to keep a unit empty than to cheapen the unit itself’
It’s not that. They are postponing the loss a market rate sale would bring. These lenders (who are just replacing the previous short term lenders) are going to end up with the airboxes. Everybody involved probably knows that: loan to own.
‘the same thing with commercial LL’s’
They are getting whacked month after month and not just in the US.
So now we have the thousands more coming. Why? Because when planned and financed, the prevailing idea was “safe deposit boxes in the sky.” No long term rent or mortgage paying occupant required. Which was complete madness.
Is this game the reason for all the empty CRE in mixed unit developments? The places sit unleased for years. But they keep mandating it.
I just don’t get how anyone makes money, but the planners just gotta have their jane Jacobs live-over-the-store fantasy.
Meh, my belief is that companies know, a few years ago, a storefront in Manhattan is a loss leader. Take a brand: American Girl, Uniqlo, Tommy Bahama. They’ll never sell enough junk to make THAT store viable, but it’s about recognition and getting their name out. Go to the M&M Store in Times Square, and it’s plastic junk and candy that cost more than double what you’d pay back home, but with the luster of waiting inline in TS just to visit one particular store. Now the luster has worn off. No one cares anymore if you went to NYC to shop on 5th Ave. The Social Media craze of the selfie in Bloomingdales Shoe section has jumped the shark. Let the LLs increase the rent - no one will lease it out anyways
You should look at the graphs at this link:
http://www.rstreet.org/2017/07/24/is-the-real-estate-double-bubble-back/
NYC is even more exaggerated.
Go to the M&M Store in Times Square, and it’s plastic junk and candy that cost more than double what you’d pay back home, but with the luster of waiting inline in TS just to visit one particular store.
They had one in an expensive part of Shanghai for the same reason. It’s gone now.
Million Dollar Listing New York finally acknowledged a buyer’s market. The most recent episode included a low ball of $8M for a Upper West Side property that was originally listed (over a year ago) for $15M. They settled at $9.3.
I noted that the GSE’s are pro-cyclical the other day. I came up with a metaphor: The GSE’s are a machine designed to pour a steady stream of kerosene on the fire that is the housing market. In downturns they boost the market. But in upturns they boost the market too, continually pouring kerosene on the fire. Until the fire burns bigger and bigger till it explodes the GSEs. Cleanup, rinse and repeat.
Of course, this is not happening in a political vacuum.
Somewhat humorous note: The design of the GSE’s reminds me of Simone Giertz’s “Sh•tty Robots” (she’s an Internet-famous builder of robots which do household tasks very poorly).
I imagine a system which detects the temperature of the fire, turns an arm to pour kerosene on it if a detector drops below a certain temperature, but no off switch
Why is it designed this way? Politicians listen to those with the best lobbyists (professional persuaders, with access) for one thing. Because the RE market is as closely tied to government spending as defense, the people in that industry realized long ago the importance of lobbying.
The $739k asking in Boise just went pending in 4-5 days… crazy.
https://www.zillow.com/homes/for_sale/Boise-ID/pmf,pf_pt/79684755_zpid/3737_rid/1_open/globalrelevanceex_sort/43.648529,-116.175056,43.616846,-116.229987_rect/13_zm/
Another one going back to the mortgage company.
Boi$e … They can alway$ have 1$t dib$ on potatoe$ … Fries, tater tots, hash browns … waiting in the free food line$
Should I move to Boise? It sounds like an OK place to live. I mean only after the prices go down, though.
One of today’s threads mentioned Winston-Salem, NC. The outskirts are practically an Oil City. Probably a pretty nice place to live.
It gets hot in the summertime here in NC.
Well, yer a big $tate, what’s it like @ kill.devil.hills?
DC area isn’t much better. We’re famous for our humidity.
Seriously I can see why a place like Asheville is so popular. Southern and flat enough for a mild winter, but the mountains are cool and shady.
Alta Loma, CA Housing Prices Crater 7% YOY As Mortgage Fraud Ravages Los Angeles Area
https://www.movoto.com/alta-loma-ca/market-trends/
Oh dear. Hong Kong’s largest developer just cut the prices of its flats by 10%. I’m sure their neighbors who overpaid will be gracious enough to welcome the new arrivals with open arms. And when the price gets cut by another 10%, they’ll both chuckle at the fact they overpaid and take it all with good grace. Because that’s how burned Chinese investors roll.
https://www.scmp.com/business/article/2159904/sun-hung-kai-cuts-new-flat-prices-again-hong-kong-developers-face-headwinds
‘A number of articles on how to change one’s lifestyle to save money have gone viral on Chinese social media this year. ‘No afternoon tea, just use the time to diet,’ one article advised. ‘No more taxis or ride hailing, buses and shared bikes will do. And no new clothes; after all, work uniforms should be fine.’ One question posted on Zhihu, the Chinese version of question-and-answer site Quora, about ‘how to downgrade consumption to survive 2018′ has attracted more than 1,300 answers and 17.5 million views.’
‘The responses offered suggestions such as ‘no food delivery, no milk tea and no electronics upgrades’ as well as ‘cooking your own food, eating Lao Gan Ma chilli sauce (only 10 to 30 yuan) and pickled mustard.’
http://thehousingbubbleblog.com/?p=10543
‘No afternoon tea, just use the time to diet’
Jeebus, no tea in China?
China’s high housing prices are depressing China’s birth rate. China’s race to get rich before it gets old has another impediment. Of course, Trump is the real speed bump:
https://www.sfgate.com/world/article/China-s-drive-to-raise-birth-rate-faces-13149236.php
Trump is the real speed bump:
Not really. Things you were told and believed were not true. they borrowed their way and will pay the consequences.
Just what was I told that I believed were not true? Trump believed the same things and unlike Obama he saw the threat and took action.
More winning:
https://www.bloombergquint.com/markets/2018/08/16/hong-kong-spends-2-1-billion-this-week-to-defend-currency-peg#gs.NRJFRNc
China has used capitalism to obtain wealth. Blue, you deny the wealth even exists. You have tried tp pass off monthly income as yearly income and it was not just recently when I nailed you on it. Yesterday there was a story of a debt donkey. However glossed over was the fact that this drone was making more than $50,000 per year after taxes. Ten years ago it would have been closer to $15000. The communists running that country and it clear that they have no intention to change are vehemently anti-religious and anti-private property. Many Chinese are willing to get money out of the country by any means necessary. That drone probably put 20 to 30 percent down on the condo and financed it with a ten year loan. Why the rush in China to make money? Many know when China gets rich enough, communism is coming back full bore. Nobody owns land in China, they own a 70 year lease or less. The communist Government debt is secured by all the land. Thus it may seem stupid to overpay for houses overseas but compared to leaving money in China which will is someday going to get seized, it is very smart. BTW, data out yesterday showed some stabilization of Canadian housing prices. Since there are tens of millions of wealthy Chinese looking for the door that does not surprise me.
dumb.borrowed.money is dumb.borrowed.money irrespect of source.
when I nailed you on it
I believe you were shown to be in error. Nevertheless, we shouldn’t argue about it here.
HA! A guy taking home $50K in China can’t afford tea. Sad sad debt donkey. That’s not wealth.
Jeebus, no tea in China?
One of the most ironic things I’ve ever heard.
Poor poor Debt Donkeys.
And no new clothes; after all, work uniforms should be fine.
This sounds vaguely Soviet, or perhaps out of 1984. You are here to serve the state…
If existing product does not sell, adding more will balloon inventory and put downward pressure on prices.”
Sometimes you mount the property ladder. Other times, it mounts you.
“The size of the average mortgage payment in Denver has increased by 20.5 percent over the past 10 years, the largest increase of any U.S. city.
Some 34.8 percent of households earning between $45,000 and $74,999 a year spend at least 30 percent of their incomes on housing, one of the largest shares nationwide.”
https://www.usatoday.com/story/money/personalfinance/real-estate/2018/08/15/cities-where-middle-class-can-no-longer-afford-home-prices/37105219/
Current air quality in Denver:
https://www.airnow.gov/index.cfm?action=airnow.local_city&zipcode=80210&submit=Go
From the article about South Florida:
“Renters in the Miami metro area are not spared. Some 61.2 percent of renters across all income brackets spend at least 30 percent of their incomes on housing, the highest rental housing-cost burden rate of any metro area in the country.”
Try to sit in a chair, listen to this song and not move your head and shoulders like Stevie Wonder.
https://www.youtube.com/watch?v=Fi0xN499IXE
Bend, OR Housing Prices Crater 5% YOY As Construction Costs Fall To 1995 Level
https://www.movoto.com/bend-or/market-trends/