A Boom No Longer Supported By Cashed-Up Buyers
A report from CBC News in Canada. “The Canadian real estate industry is used to disregarding gloomy predictions. But now, after a decade of laughing in the face of repeated false warnings that a housing slump was imminent, most Canadians affected by real estate — in other words, just about all of us — have suddenly become a little more wary. No one disputes the meteoric rise in Canadian house prices has come to an end. The latest figures from both Vancouver and Toronto, which come out before the national data, indicate the boom is over.”
“Those who bought recently also have a bigger stake because the mortgage represents a bigger chunk of their house. That means a combination of rising rates and sharply falling home prices could make recent buyers feel nervous, knowing that a sudden job loss or a forced move could make them swallow a big, and perhaps unsustainable, loss.”
From Better Dwelling in Canada. “Real Estate Board of Greater Vancouver numbers show July saw inventory surge. The rise in inventory was met with big declines in sales. The month-over-month decline, works out to a loss of $3,700. This is the largest monthly decline since August 2012. The total number of active listings in Greater Vancouver made a huge climb. REBGV had 3,952 active condo listings in July, up 66.96% from last year. This brought the sales to active listings ratio to 27.3% for condos, compared to 62% last year. When the ratio falls below 20%, the industry considers the market ‘balanced.’ If the ratio falls below 12%, it becomes a ‘buyers market,’ and prices rapidly decline.”
From Troy Media in Canada. “The Calgary Real Estate Board says stricter lending criteria, higher interest rates and a slow economic recovery weighed on housing demand in the city over the first half of 2018 and MLS sales have dropped off more than first anticipated. The drop in demand has been coupled with rising inventory. New listings are up five per cent from a year ago to 24,492 and as of Wednesday, active listings on the market of 8,551 have risen by 24.87 per cent.”
“‘Easing sales combined with rising inventories has pushed the market into an oversupply situation for all products, affecting pricing for all products, which include detached, semi-detached and row, and apartment,’ said Ann-Marie Lurie, CREB’s chief economist. ‘Prices were not expected to improve this year. However, supply has not adjusted fast enough to weaker than expected demand. This is causing us to make a downward revision from earlier estimates.’”
From Urdu Point on Australia. “Australia’s largest city Sydney’s vacancy rate reached 2.8 percent, the highest level in 13 years, while rental property vacancies across Australia rose 2.2 percent in July, with a total of 72,458 properties sitting empty across the country. General manager of SQM Research Louis Christopher said there shouldn’t be any panic from property investors.”
“‘I don’t think there’s going to be a big fall,’ he said. ‘I think it is very unlikely we will see a steep crash in rents.’”
From Nine Finance in Australia. “The number of empty vacant properties in Sydney is at a 13-year high as a construction boom creates more investor-purchased apartments than there are tenants to fill them. Across the city 19,114 properties lay vacant, unable to find a tenant willing to pay the asking price of rent. Louis Christopher, Managing Director of SQM Research, said the oversupply of new properties in Sydney did have one upside for tenants: cheaper rent.”
“‘The supply of rental accommodation, especially of new units, has jumped following the building boom in the city,’ Christopher said. ‘Sydney has also experienced slowing population growth, which has helped to push asking rents lower, as landlords increasingly struggle to fill properties.’”
“But Sydney isn’t the only market to suffer the symptoms of a building boom which is no longer supported by cashed-up buyers. Perth has the unenviable title of boasting the most vacant properties – proportionately – of any capital city. The West Australia capital has 8,146 empty homes, or 4 percent of the market, unable to find residents.”
“In Darwin there are 1,030 properties left unattended (comprising 3.4 percent of the market), followed by Brisbane with 9,503 properties (2.9 percent) and Melbourne with 9,043 empty lots (1.6 percent).”
The Australian Financial Review. “Selling agents are starting to reveal the truth behind recent listings in Sydney’s west with Belle Property Strathfield’s Jimmy Kang saying up to 50 per cent of his clients were asking him to sell their homes in Sydney’s western suburbs because they can no longer afford their new principal-and-interest mortgages. A couple asked him to sell a two-bedroom weatherboard home in Veron Street in Wentworthville, 27 kilometres west of Sydney, for $950,000 when it was only worth about between $820,000 and $830,000. They bought the home for $790,000, two years ago.”
“‘I asked them where they got that number from and they said that was the number they need to pay back the $200,000 they borrowed from family to buy the home as well as repay their interest-only loan,’ he said. ‘A lot of them initially paid $2000 to $2500 a month on their interest-only loans, and now they have to pay $4000. Many owners are going through loan issues. If they let the banks take over, the bank will sell their homes for a lesser amount than if they try and sell it now.’”
“LJ Hooker’s Peter Tannous says about 25 per cent of his current listings are struggling interest-only sellers. In Guildford, a couple – a teacher and a factory worker – with two children asked him to sell an apartment they paid $385,000 about three years ago. It is on the market for $428,000 after an initial price of $438,000 did not attract buyers.”
“‘In another week, we will have to adjust another $10,000,’ he said. ‘They’ve tried to roll over their interest-only loan but unfortunately they had no luck. There is stress out there, and it takes a lot to coax the truth out of the sellers.’”
‘Those who bought recently also have a bigger stake because the mortgage represents a bigger chunk of their house. That means a combination of rising rates and sharply falling home prices could make recent buyers feel nervous, knowing that a sudden job loss or a forced move could make them swallow a big, and perhaps unsustainable, loss’
Their words, not mine, I think shacks are just wonderful! Great for getting out of the sun in Arizona for instance. And sleeping! Much better than a park bench.
But I sure wouldn’t want to be one of these “recent buyers” discussed above.
Washington DC Housing Prices Crater 14% YOY As Crushing Housing Losses Clobber Homeowners
https://www.zillow.com/washington-dc-20003/home-values/
*Select price from dropdown menu on first chart
‘I asked them where they got that number from and they said that was the number they need to pay back the $200,000 they borrowed from family to buy the home as well as repay their interest-only loan’
That’s going to make for an awkward Christmas dinner.
“interest only loan”
This is part of the Suck ‘em in phase. After this phase is complete the Shake ‘em out phase will commence.
Life is good (if you are a banker).
Bahahahahahahahahahahahahahahahahahahaha.
(oh, is this a good time to discuss the meaning of the term “adjustable”?)
“interest only loan”
My first DBLL loved him a NegAm loan from Washington Mutual back in 04.
A ha! So there *are* interest-only loans… in Australia. Seriously, didn’t they learn their lesson from the US I/O train wreck? Australia should have banned I/Os in 2009 before they dug in deeper.
Well, I guess “it’s different” in Australia. After all they had natural resources that were so in demand.
‘Easing sales combined with rising inventories has pushed the market into an oversupply situation for all products, affecting pricing for all products, which include detached, semi-detached and row, and apartment,’ said Ann-Marie Lurie, CREB’s chief economist. ‘Prices were not expected to improve this year. However, supply has not adjusted fast enough to weaker than expected demand. This is causing us to make a downward revision from earlier estimates.’
Ann-Marie, you really should read this blog. I could’ve told you things were only going to get worser and worser.
Ann-Marie is well aware of what the true situation is, Ben. But frightening off prospective muppets means no more ABC - always be closing. And remember, coffee is for closers.
https://www.youtube.com/watch?v=r6Lf8GtMe4M
classic movie moment. Couldn’t stop laughing
Those who bought recently also have a bigger stake because the mortgage represents a bigger chunk of their house.
No, it means they’re staring insolvency in the face when the bottom drops out of the housing bubble.
Hmmmm … the higher goes the price the closer to the top the price gets.
and …
The higher goes the price the greater is the chunk of income needed to make the mortgage payment.
Soooooooo … at the top, when the top is reached, is the point of MAXIMUM chunks that are extracted to make the mortgage payments WHICH DO NOT SHRINK IN SIZE no matter what happens to the price.
This is the “Are we having fun yet?” phase of home ownership during the final stage of a housing bubble.
Popcorn?… Anyone?
Easing sales combined with rising inventories has pushed the market into an oversupply situation for all products, affecting pricing for all products, which include detached, semi-detached and row, and apartment,’ said Ann-Marie Lurie, CREB’s chief economist.
So in layman’s terms, Ann-Marie, what we have here is a glut.
My grasp of market forces is somewhat rudimentary, but when you have a glut of anything, don’t prices drop sharply?
Oh dear….
“My grasp of market forces is somewhat rudimentary, but when you have a glut of anything, don’t prices drop sharply?”
Except money.
I think one could argue that if there is too much money its value drops sharply as well. No?
If there is too much money then prices (which is what we are talking about) go up; they do not drop sharply.
It is true that too much money dilutes it’s value which means more money will be needed in order to buy previously lower priced items which is another way of saying prices go up.
If money is simply printed into existence and distributed then prices will go up an they will continue to go up (think Weimar Germany and Argentina).
But if money is borrowed into existence and distributed then prices will go up and they will continue to go up only as long as the borrowing continues. If the borrowing ceases and reverses itself (loans begin to be paid off) then the supply of money will decrease and thus prices will decline (think Great Depression).
Regarding real estate, prices go up because money is easily borrowed into existence and this easily borrowed money is used to bid up prices.
In the early years of this century rediculous amounts of money was borrowed into existence by idiots and this money was then thrown at the real estate market and the result of all this rediculous behavior was rediculous real estate prices. When the borrowing stopped then these stupid and rediculous real estate prices began to roll over and decline. But not to worry, the government stepped in and saved us all.
And the government is still stepping in and it is still saving us all and hence we have rediculous real estate prices. But we are lucky that this is so because these rediculous prices are interpreted as wealth - equity wealth - something that can borrowed against and spent - no small thing is a seventy-percent consumer-based economy.
“If the borrowing ceases and reverses itself (loans begin to be paid off) then the supply of money will decrease and thus prices will decline (think Great Depression).”
I need to revisit this statement: If loans are paid off and/or are defaulted on (not paid back) then the supply of money will decrease. This, loans being defaulted on, is largely what happened during the Great Depression
Here’s a current example of the economic wonders that can result from a government simply printing up money …
“Swamped in Inflation, Venezuela Will Cut Five Zeros from Currency”
https://www.wral.com/swamped-in-inflation-venezuela-will-cut-five-zeros-from-currency/17774600/
No, prices only fall when you have a glut on the SUPPLY side of anything. If you have a glut on the demand side (which includes desire and money), then the price increases.
General manager of SQM Research Louis Christopher said there shouldn’t be any panic from property investors.”
Hmm…there’s that “p” word again that keeps cropping up. Now why do you suppose these REIC insiders keep telling me not to panic, unless they’re stealthily making their way to the exits and don’t want to stampede the herd?
Remain calm - all is well!
https://www.youtube.com/watch?v=zDAmPIq29ro
“That means a combination of ri$ing rate$ and $harply falling home price$ could make recent buyer$ feel nervou$, knowing that a $udden job lo$$ or a forced move could make them $wallow a big, and perhaps un$u$tainable, lo$$.”
Nervou$? … That’$ rich!
“Oh, Canada”
Framingham, MA Housing Prices Crater 18% YOY As Boston Housing Correction Expands To Suburbs
https://www.zillow.com/framingham-ma-01702/home-values/
*Select price from dropdown menu on first chart
“There is stre$$ out there, and it takes a lot to coax the truth out of the $eller$.”
Guess they don’t po$t eviction$ notice$ on front door$ …
“The number of empty vacant properties in Sydney is at a 13-year high as a construction boom creates more investor-purchased apartments than there are tenants to fill them. Across the city 19,114 properties lay vacant, unable to find a tenant willing to pay the asking price of rent.
Gosh, in that environment, I fear that someone might’ve overpaid.
‘But now, after a decade of laughing in the face of repeated false warnings that a housing slump was imminent, most Canadians affected by real estate — in other words, just about all of us — have suddenly become a little more wary’
So you aren’t laughing now?
Those warnings weren’t false. Those were the few honest voices in the wilderness, calling out the systemic fraud perpetuated by the central bankers and their lunatic Keynesian monetary experiments. The illusion of “recovery” was a chimera propagated by the oligarchs who were the sole beneficiaries of the Fed’s “No Billionaire Left Behind” financial chicanery since 2008.
True price discovery has been long deferred, but now, like Yeat’s rough beast, it is slouching toward Bethlehem to be born. And the central bankers and their oligarch accomplices and political prostitutes are terrified, knowing their financial house of cards is about to come crashing down, and then the pitchforks and torches, screwed out of their retirements, houses, and savings, are going to come looking for them. And they won’t be in a forgiving mood or bend over with the same docility they displayed in 2008.
I just thought of something. I’ve been posting about crater in Canada and Australia for years and there were no trolls. But all of a sudden, oh no, California! Seattle!! And here they come. I wonder why? Nobody in Canada or Australia has said anything. Except for Bob “the-biggest-asshole-in-Canada” Rennie.
I sometimes wonder what motivates the trolls. In many circumstances (the general interwebs), trolls are just seeking attention - angry little fellas who want a reaction. My impression is that the HBB Trolls are motivated by either ego or fear. Ego when they think they understand something and they see a counterargument and cannot resist the urge to comment. Fear when they have skin in the game or are leveraged with dreams of yachts and beachfront homes. Either way, they are seeking the same thing. Control. The desire to control outcomes on a global scale is irrational, but we see it all the time. In serious topics like global warfare and trivial topics like sports. People all over the world voice their little opinions like baby birds chirping for a worm from mama bird.
On a large scale, I think this is why so many people fall so deeply into the grip of political or ideological parties. It provides an adequate team of people to wield power. It provides a collective feeling that you are in control, when in fact you have only made yourself into a non-thinking and disposable entity. It takes courage and creativity to plot your own course. This is the reason why I respect this blog. It grew out of an original thought that challenged the opinions of almost everyone. No troll could ever accomplish as much.
What type of comments do you consider trolling?
Housing my friend…
Littleton, CO Housing Prices Crater 11% YOY As Denver Area Mortgage Meltdown Accelerates
https://www.movoto.com/littleton-co/market-trends/
Nobody in Canada or Australia has said anything.
The stories coming from Canada and Australia seem charming in their old timey expectation that laws matter and it’s your own responsibility to cover your debts no matter how difficult, and if you made your bed then you gotta lie in it. Reminds me a little of how Americans used to talk before 2008.
This is starting to get good. For renters, that is.
https://www.cnbc.com/2018/08/16/housing-tipping-back-to-a-buyers-market-as-sellers-cut-prices.html
Oakton, VA Housing Prices Crater 11% YOY As Failing 2010-2016 Interest Only Mortgages Ravage DC/NoVA
https://www.movoto.com/oakton-va/market-trends/
‘up to 50 per cent of his clients were asking him to sell their homes in Sydney’s western suburbs because they can no longer afford their new principal-and-interest mortgages’
https://en.wikipedia.org/wiki/Wile_E._Coyote_and_the_Road_Runner
‘One running gag involves the Coyote trying in vain to shield himself with a little parasol against a great falling boulder that is about to crush him. Another running gag involves the coyote falling from a high cliff. After he goes over the edge, the rest of the scene, shot from a bird’s-eye view, shows the coyote falling into a canyon so deep, his figure is eventually lost to sight. This is followed a second or two later by the rising of a dust cloud from the canyon floor as the coyote hits.’
Chinese non-performing loans hitting record highs. But I’m sure China’s wise and omniscient central planners will ensure this doesn’t spill over into the country’s housing or stock market bubbles or accelerate capital flight and loss of faith in the currency.
https://www.bloomberg.com/news/articles/2018-08-13/china-banks-bad-loans-surge-most-on-record-amid-deleveraging
Do you begin to suspect that Bitcoin is in a bubble?
Bitcoin investors are panicking after 50% price fall this year
Edward Sheldon, CFA | Friday, 17th August, 2018
Image source: Getty Images.
Bitcoin has had a terrible 2018. Hyped beyond belief in the latter stages of 2017, and nearly reaching $20,000 in mid-December, the cryptocurrency has since fallen to $6,500 today. Year-to-date, it’s down over 50%. And it’s a similar story with other cryptocurrencies. Ethereum was trading near $1,500 in January yet today is under $300. Ripple was trading above $3 in early January but today’s it’s trading for $0.30, a decline of 90%. The entire market has lost almost £500bn in 2018, according to a recent article on Yahoo Finance.
Unsurprisingly, crypto ‘investors’ (I’d call them speculators) are panicking. Indeed, according to several recent articles, many are even on ‘suicide watch’. Earlier this week, one of the top posts on the popular Reddit bitcoin forum was information about suicide prevention hotlines. Make no mistake, it’s all gone wrong very quickly, with many people losing a fortune in the cryptocurrency market.
Beware a bubble
Yet bitcoin’s crash doesn’t surprise me. In fact, back in November and January I posted a couple of articles warning serious investors to steer clear of cryptocurrencies.
You see, as someone who has been investing for 20 years now, I’ve experienced a number of wealth-destroying ‘bubbles’. I’ve seen the dotcom boom back in 1999/2000 and had several friends who lost thousands there. I also personally lost a lot of money in the mining bubble of 2007, in which hundreds of small-cap mining companies soared in value, before crashing dramatically as commodity prices plummeted.
Bubbles really aren’t that hard to spot. So when bitcoin rose spectacularly from below $1,000 to nearly $20,000 last year, naturally, my bubble alarm went off.
https://www.fool.co.uk/investing/2018/08/17/bitcoin-investors-are-panicking-after-50-price-fall-this-year/