The Whirlwind Of A Credit Squeeze In A Falling Market
A report from the Georgia Straight in Canada. “The latest numbers from the Real Estate Board of Greater Vancouver show that in August, the benchmark sale price for a single-family home in Point Grey was down 14.6 percent from a year ago. For detached properties in MacKenzie Heights, the annual drop was 14.4 percent. Elsewhere on the West Side, Kerrisdale was off 14 percent, Kitsilano was down 11.8 percent, and Quilchena declined by 9.3 percent for detached properties.”
From Better Dwelling in Canada. “Vancouver real estate is seeing the worst sales in years, and detached homes were no exception. Real Estate Board of Greater Vancouver (REBGV) numbers show detached sales continued to grind lower in August. The decline in detached sales, combined with a rise in inventory, helped to push prices tens of thousands of dollars lower.”
“The price of a detached home continues to get cheaper across Greater Vancouver. REBGV reported a detached benchmark of $1,561,000 in August, dropping a massive $27,400 from the month before. Greater Vancouver detached sales are coming in much lower than last year. REBGV reported 567 sales in August, down 11.9% from the month before. On an annual basis, sales are 37.1% lower than the same month last year. The monthly decline is seasonal and should be expected – the annual decline is not.”
“The sales to active listings ratio (SNLR) remained in ‘buyers market’ territory. The SNLR reached 9.2% in August, over 43% lower than the same month last year. When this indicator remains below 12%, prices are expected to fall further.”
From News.com.au on Austrlia. “The latest property figures show the residential property market is falling or, at best, stagnant in the better performing capital cities. With the Spring selling season now underway, it is a vastly different environment than a year ago. It has definitely turned into a buyers’ market while recent homeowners need to be careful these falling market values don’t put them on their financier’s watchlist.”
“Not only has the property market changed substantially but so has the lending market - as we touched on a couple of weeks ago. The last thing anyone needs is to be caught in the whirlwind of a credit squeeze coupled with a falling market. This softening market looks as though it is going to intensify with a flood of new listings coming on for spring.”
“According to SQM Research national residential listings rose 5.9 per cent in August to 332,678, with rises in all capital. Property listings rose 10.9 per cent in Sydney, to be up a whopping 30.4 per cent higher from a year ago. They are now at the highest level recorded since February 2009, surpassing the peak in listings recorded during the last housing downturn in 2010-12.”
“Values are generally falling and the supply of property coming on the market is rising significantly. Yes, it could start to look ugly over the next six months. Now add the financing layer to the equation. Regulators are forcing financiers to tighten their lending criteria who are, in turn, also putting up their home loan rates to cover rising interest costs from money sourced from overseas. Yep, ugly it could get.”
“At most risk are property owners who stretched themselves to make a purchase in the last two years. Say you were a buyer who took advantage of the various State Government funded First Homeowners Grants and bought a property worth $400,000 with a 5 per cent deposit when the banks were aggressively chasing home loan customers. If the value of that place falls by 10 per cent then your deposit has effectively been snuffed out. Instead of having $20,000 equity in the house, you now have none.”
“In fact, you’re in ‘negative equity’ where the value of the loan is higher than the value of the property. Your lender then starts to get very nervous. You are at risk of them demanding you pay down a big chunk of the loan to get back into positive equity, forcing a sale of the property or getting you to arrange finance with another lender. Believe us it will be a lot harder to refinance now than a year or two ago.”
“Mortgage Choice CEO Susan Mitchell has put out a warning about how banks have drastically changed their approach to lending, ‘our data reveals that home loans are taking longer to progress from application through to settlement, as lenders’ qualification criteria becomes more onerous in order to comply with responsible lending standards. We have found that lenders are conducting a more thorough analysis of home loan applicants’ monthly living expenses, requesting forensic detail on as many as 15 expense categories including clothing, entertainment, medical, transport, education, childcare and more.’”
“‘Lenders will ask to see a minimum of three months’ worth of spending which allows them to determine an applicant’s ability to service a loan. Some home loan applicants are having to justify their expenses in certain categories and are being told that they need to change their spending behaviour to increase their chances of getting a home loan.’”
The Australian Financial Review. “Chinese-backed developer Poly Australia expects to limit apartment settlement failures to 2 per cent in its 501-unit project in northern Sydney’s Epping. Title registration occurred at the end of July and with 95 per cent of the apartments in Poly Horizon now settled, the developer had a shortfall of about 30 apartments it was planning to lease out in the medium term, rather than sell at a discount, sales director Jay Carter said on Wednesday.”
“The downturn in the Sydney residential market that pushed housing values down 5.6 per cent in the year to August has put pressure on apartment buyers where values of off-the-plan units have fallen and also prompted developers to take steps to work with buyers to help them settle.”
“The wave of settlements of newly completed apartments is forcing tough decisions about unsold stock. Developers are reluctant to discount to clear unsold properties as this creates a devaluation risk for the whole project that could, in turn, create other problems, but that’s a luxury only available to larger players with deeper pockets. Smaller ones may not be able to.”
“In May, Sydney developer Ceerose said it was renting out 100 unsold apartments across Sydney’s inner west, north shore and the CBD. Poly, with projects such as a 100-dwelling development in Melbourne’s eastern suburb of Doncaster and a 67-unit, four-storey Tilia project in northern Sydney’s Lindfield, now has a pipeline of about 1200 dwellings nationally, across the land subdivision, townhouses, apartments and boutique developments, Mr Carter said.”
‘you’re in ‘negative equity’ where the value of the loan is higher than the value of the property. Your lender then starts to get very nervous. You are at risk of them demanding you pay down a big chunk of the loan to get back into positive equity, forcing a sale of the property or getting you to arrange finance with another lender’
Lender wouldn’t do that, would he?
What does the contract you signed say exactly?
You did read the contract?
Sagle, ID Housing Prices Crater 13% YOY As Boise Housing Bust Expands
https://www.zillow.com/sagle-id/home-values/
*Select price from dropdown menu on first chart
“Some home loan applicants are having to justify their expenses in certain categories and are being told that they need to change their spending behaviour to increase their chances of getting a home loan.”
I actually think that it makes some amount of sense to scrutinize spending patterns as well as income when banks determine whether or not to give out a loan. I haven’t heard of anything sort of spending scrutiny taking place on the part of US bankers though. It seems like a prudent practice, one that we might want to copy at some point if we were interested in the long-term health of the mortgage market.
EEEEEE Bolaaaaaaah!
Coppell, TX Housing Prices Crater 10% YOY As Lenders Flood Market With Millions Of Excess Empty And Defaulted Houses
https://www.movoto.com/coppell-tx/market-trends/
Are there really millions of empty houses in Coppell, TX? Or are you hyperventilating just a tad with your headlines….
Well it’s a big change from bragging in the newspaper about your liar loans.
September 14, 2017
A report from the Sydney Morning Herald in Australia. “I have a ‘liar loan’ – a mortgage based on less than absolutely factual information. I’ve pretty much always had liar loans. And I recently obtained a ‘liar credit card.’ So what? Given readers’ (and therefore the media’s) love of stories that combine housing and doomsday scenarios, investment bank UBS received saturation coverage with its idea that $500 billion in ‘liar loans’ are a hanging over the Australian housing market, set to come crashing down on the economy at the first hint of trouble and damn us all to hell.”
“How many people want to do the work to supply detailed financial information about their mortgage application and, apparently, admit they lied? Something isn’t adding up. And there’s the particular case of the ANZ which received the worst result: ‘Of those who took out loans with ANZ in 2017 (directly or through a broker), 55 per cent of respondents stated their application was completely factual and accurate (implying 45 per cent of customers misstated their application), down from 66 per cent in 2016.’”
“The most obvious point is, when applying directly to your bank, the bank should know more about your finances than you do anyway. For my ‘liar loans,’ all my income and spending washes through the bank cheque account. I’m Australian – near enough is good enough.”
http://thehousingbubbleblog.com/?p=10201
‘‘Of those who took out loans with ANZ in 2017 (directly or through a broker), 55 per cent of respondents stated their application was completely factual and accurate (implying 45 per cent of customers misstated their application), down from 66 per cent in 2016′
So how do you suppose these people are going to fare with refinancing when the lender is scrutinizing their Netflix spending?
2017?
‘At most risk are property owners who stretched themselves to make a purchase in the last two years’
Dong!
It all works with eva increasing housing prices.
It falls apart with decreasing (even in a normal market this happens) or stagnant housing prices.
The alligator cannot be fed on lies.
Only real cash.
“The price of a detached home continues to get cheaper across Greater Vancouver. REBGV reported a detached benchmark of $1,561,000 in August, dropping a massive $27,400 from the month before. Greater Vancouver detached sales are coming in much lower than last year.
Egads. Watching your shack shed $27K a month must make FBs wish they’d rented instead.
‘Vancouver real estate is seeing the worst sales in years, and detached homes were no exception’
It’s been falling for over two years now and appears to be getting worse. There was that outrageous 30% spike up in the spring of 2016 that turned on a dime and swooshed down. (Classic parabolic bubble top).
Spin that, used house salespeople.
Still - how is it still $1.5M - when there is really no industry in Vancouver. Oh well lots to drop
The last thing anyone needs is to be caught in the whirlwind of a credit squeeze coupled with a falling market. This softening market looks as though it is going to intensify with a flood of new listings coming on for spring.”
The ranks of the well and truly schlonged are going to grow exponentially as housing bubbles implode like supernovas from Australia to Vancouver.
Yes, it could start to look ugly over the next six months.
Ya think?
‘The downturn in the Sydney residential market that pushed housing values down 5.6 per cent in the year to August has put pressure on apartment buyers where values of off-the-plan units have fallen and also prompted developers to take steps to work with buyers to help them settle’
= cutting the price. And then they say they aren’t discounting prices.
“At most risk are property owners who stretched themselves to make a purchase in the last two years.”
You don’t say. Bet their lenders are sweating like a priest in a room full of cub scouts.
$500B of liar loans in Australia should weather any housing bubble downturn just fine.
Oh, wait….
http://www.abc.net.au/news/2017-09-11/500b-dollars-of-liar-loans-in-australia-ubs/8892030
Australian FBs who were provided “too much credit” by reckless and irresponsible lenders can turn around and sue lenders who enabled their own financial irresponsibility. What a delightful innovation for ensuring FBs drag their lenders with them on the train to Schlongville. Let’s hope regulators and enforcers who were complicit or criminally negligent can get sued as well, or better yet, hauled off to jail.
http://www.abc.net.au/news/2018-09-13/westpac-exposed-to-civil-action-over-irresponsible-home-loans/10238710
Westpac could be sued by its customers, funders and investors after admitting it breached responsible lending laws and a separate finding that it lacked appropriate lending controls
The bank recently reached a $35 million settlement with the corporate watchdog ASIC after admitting an “automated decision-making system” for home loans breached responsible lending laws, issuing more than 10,000 mortgages that should not have been approved.
“These admissions expose Westpac to civil action by individuals who were provided with too much credit — and inappropriately so — during their application for a loan,” Josh Mennen, a principal at the plaintiff law firm Maurice Blackburn, told the ABC.
I don’t think this whole mortgage scandal thing in Australia has been covered one bit in the US.
Australia’s banking system, like our own, is rife with mortgage-related fraud, aided and abetted by captured regulators and enforcers. But now we’re about to find out who’s swimming naked.
https://www.zerohedge.com/news/2018-09-12/australias-banking-system-may-be-bloody-big-butterfly-which-triggers-next-financial
What I’m about to show you is a re-enactment of the American sub-prime crisis in Australia. With two key differences.
In Australia, the lenders, not the borrowers, are the ones lying on liar loans. The lenders and their mortgage brokers fudge the figures, such as income, to get a loan past lending standards.
And secondly, only in Australia has the court system established a precedent where, if you can prove your mortgage broker or banker manipulated your loan application, you can keep your home and cancel your mortgage. It’s a free house for the victim of the fraud, and a whopping loss for the banks. Or the investors in the securitised mortgages.
In 2012, having signed on for a PhD on the topic, I considered doing a research project that tested all this. The plan was to get a loan I couldn’t afford with a mortgage broker who provided falsified documents, only to sue the bank and then get a free house.
And American banks foreclosed on folks with fraudulently papers and without deeds.
And the courts sided with the lenders.
Literally, the banks couldn’t produce a document that the FB signed that the bank would take possession of the house if payment was not made. Nor produce a deed to the house.
The banks usually always win.
There could be tanks in the streets!!!
“And American banks foreclosed on folks with fraudulently papers and without deeds.”
Ah, yes, good times.
“And the courts sided with the lenders.”
The best justice system money can buy.
“Literally, the banks couldn’t produce a document that the FB signed that the bank would take possession of the house if payment was not made. Nor produce a deed to the house.”
Details, details.
“The banks usually always win.”
God’s Plan.
“There could be tanks in the streets!!!”
… running over demonstrators just as it was done in Tiananmen Square.
For those of you with short me memories …
Tiananmen Square protests of 1989 - Wikipedia
https://en.m.wikipedia.org/wiki/Tiananmen_Square_protests_of_1989
Albany, OR Housing Prices Crater 6% YOY As Oregon Homeowners Sink Deeper Underwater
https://www.movoto.com/albany-or/market-trends/
Australian banking watchdogs committing large-scale fraud? I am shocked, shocked! to learn of such crooked regulators and enforcers.
http://www.abc.net.au/news/2018-09-13/former-apra-manager-accused-rorting-credit-union-in-lawsuit/10207860?section=business
I am shocked, shocked! to learn that Australia’s bank regulators colluded with the lenders they were supposed to be overseeing to hide massive fraud in mortgage lending.
Thankfully, our U.S. regulators and enforcers are scrupulously honest and vigilant in safeguarding the public interest against such systemic fraud and mendacity by the banksters.
Oh, wait….
https://www.macrobusiness.com.au/2018/09/apra-misled-senate-mortgage-fraud/
There is a case to be made that Australia’s bank regulator has colluded with the banks to hide massive fraud in mortgage lending. The Australian Prudential Regulation Authority’s (APRA) collusion includes suppressing its own research into lowered lending standards, and misleading Parliament about its knowledge of illegal misconduct by banks in mortgage lending.
“…Australia’s bank regulators colluded with the lenders…”
Must of attended a few Wells Fargo seminars in the states.
Overleveraged trolls who post their Realtorbabble on the HBB, you’re headed for divorce, bankruptcy, maybe even suicide. We tried to warn you that Realtors are liars, but you didn’t listen.
It’s probably because many of them *are* Realtors, bored due to a paucity of interested buyers.
Sydney housing prices fall the fastest in nine years. Coming soon to an overheated housing bubble near you….
https://www.afr.com/real-estate/sydney-property-prices-fall-the-fastest-in-nine-years-corelogic-20180902-h14udy
Higher borrowing costs and unaffordable prices have pushed the housing slowdown that started in Sydney across the country, with not even Hobart immune to the cooling.
While home values fell more in the NSW capital than any other city over the year to August, with a 5.6 per cent decline – a slump Sydney last experienced in March 2009 – the contagion spread, with Melbourne’s decline accelerating and values in the previously white-hot Hobart market slipping 0.1 per cent from July, CoreLogic figures showed on Monday.
The American retail investor:
1. Dumb ‘em down.
2. Profit.
“Introducing ‘Auto-Callable Notes’: Wall Street’s Latest Scheme To Rip Off Retail Investors”
(snip)
“The notes are often sold to mom-and-pop investors seeking higher-yielding alternatives to government debt, which is reliably safe. Offering documents say that buyers can earn fixed payouts of as much as 25% of the purchase price annually without taking on the risk of outright common-share ownership.”
“… buyers can earn fixed payouts of as much as 25% of the purchase price annually without taking on the risk of outright common-share ownership.”
25% annual return. Without risk. No red flag to be found here. Moving on …
“Yet many of these FANG-linked notes fail to produce returns anywhere near that stated range, according to an analysis of securities filings by The Wall Street Journal. Many times, the upfront fees banks collected were higher than the total returns earned by investors.”
What a surprise!
“That is partly because the notes—dubbed “auto-callable” because a rise in the stock price contractually triggers their redemption—are often redeemed in less than a year, and sometimes in as little as a month. In many cases the auto-callable provision leads investors to earn scant returns and receive their money back long before the stated term of the investment.”
There’s more. Go here if you are interested:
https://www.zerohedge.com/news/2018-09-11/auto-callable-notes-are-wall-streets-latest-scheme-rip-retail-investors
Oh goody…Bitcoin recently went up again!
Sep 4, 2018, 01:56pm
Bitcoin Reaches 1-Month High As Crypto Markets Rally
Charles Bovaird
Crypto & Blockchain
I am a financial writer and consultant who focuses on investments.
Bitcoin prices hit a one-month high today. Credit: Getty Royalty Free
Bitcoin prices have been rising lately, hitting their highest in roughly one month earlier today.
The cryptocurrency reached this level as the broader digital currency markets enjoyed gains.
The price of Bitcoin rose to $7,389.26 at 12:00 UTC (8:00 a.m. EST), according to the CoinDesk Bitcoin Price Index (BPI).
At this point, the digital currency had risen 2.2% in the space of 24 hours and attained its highest price since roughly the same time on August 4, additional BPI figures show.
[Ed. note: Investing in cryptocoins or tokens is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.]
…
OH BUGGER. What a difference a week makes!
Bitcoin crash: This man lost his savings when cryptocurrencies plunged
by Michael Kaplan
@CNNMoneyInvest
September 11, 2018: 7:59 AM ET
He bet on Bitcoin and lost nearly everything
An estimated $400 billion has been wiped off the value of major cryptocurrencies since January.
Sean Russell’s life savings were among them.
Russell rarely played the stock market and had little investing experience when he put around $120,000 into bitcoin in November 2017. He was stunned when that turned into $500,000 in just one month.
“I think there was one morning where I woke up, where I made about £12,000 ($15,600) in one morning on my investment and it just kept going,” said Russell. “I was thinking, wow, that’s mortgages paid, that’s holidays that I’ve always dreamed of.”
The dream didn’t last for Russell, who works as a property developer in the United Kingdom, buying homes and fixing them up. The price of Bitcoin surpassed $20,000 in December before collapsing. It now trades at $6,300.
Russell attempted to mitigate his losses by shifting money from bitcoin (XBT) to an offshoot called Bitcoin Cash and other cryptocurrencies including Ethereum and Ripple. But that didn’t work, and Russell says the paper losses on his initial investment have reached 96%.
“It was devastating, quite traumatic, really,” Russell said. “I’ve seen stories on the news of billionaires going bankrupt, and you think how can that be? How on earth did you lose that amount of money? And yet, here I am in that position.”
…
suckers
lefty conned them out of their cash:
https://www.youtube.com/watch?v=XmMQAuO62gI
Step 1: Suck ‘em in.
“Russell rarely played the stock market and had little investing experience when he put around $120,000 into bitcoin in November 2017. He was stunned when that turned into $500,000 in just one month.”
“I think there was one morning where I woke up, where I made about £12,000 ($15,600) in one morning on my investment and it just kept going,” said Russell. “I was thinking, wow, that’s mortgages paid, that’s holidays that I’ve always dreamed of.”
Step 2: Shake ‘em out.
“The dream didn’t last for Russell, who works as a property developer in the United Kingdom, buying homes and fixing them up. The price of Bitcoin surpassed $20,000 in December before collapsing. It now trades at $6,300.
Russell attempted to mitigate his losses by shifting money from bitcoin (XBT) to an offshoot called Bitcoin Cash and other cryptocurrencies including Ethereum and Ripple. But that didn’t work, and Russell says the paper losses on his initial investment have reached 96%.”
“It was devastating, quite traumatic, really,” Russell said. “I’ve seen stories on the news of billionaires going bankrupt, and you think how can that be? How on earth did you lose that amount of money? And yet, here I am in that position.”
What a dummy.
…
Matt Levine featured this story in his column yesterday. His advice was: “Don’t have done that.”
Bahahaha … this guy has the makings of a great realtor. Or perhaps even a banker.
😁
“‘Dine-and-dash’ dater allegedly left 10 women with hefty restaurant bills, telling one: ‘Order whatever you want’”
https://www.yahoo.com/news/apos-dine-dash-apos-dater-095558964.html
Where have you gone, Al Bundy, our nation turns its lonely eyes to you….
Orange County’s top homes languish on the market
Financial Times-3 hours ago
… gated community of Emerald Bay, Orange County, had languished on the market for more than 18 months before having its price slashed by $3.1m in August.
Snip from that article: Orange County’s priciest homes, meanwhile, have been hit over the past eight to 10 months by the pullback in Chinese buyers following the latest restrictions on taking money out of China, says Cote.
MSM decided its time to shed the light on Shell companies, foreign investors, money laundering, FBs, all recently popping up but been going on for a long time. Doesn’t look good from my end
Ditto for Turtle Rock / Shady Canyon, (Irvine) just a few miles inland and north of Emerald Bay.
Quite a few high end properties (>>$2mm -> $5mm or even more in some cases) that just can’t seem to get any sales traction.
What is interesting is that so many of these properties sit empty or are staged. (Based on open house visits).
IMO, have long suspected that many properties have been purchased with foreign cash to be laundered.
Whole scene just seems to have that fish taste to it.
Going to be really interesting to see how all of this washes out.
Tustin, CA Housing Prices Crater 7% YOY As Flood Of Housing Inventory Languishes In Orange County
https://www.movoto.com/tustin-ca/market-trends/
Your New Home……cool classy BIG and so reasonably priced
https://www.facebook.com/photo.php?fbid=2219941958015963&set=gm.1065126120326458&type=1&theater