September 17, 2018

Many Investors Now Panicking Under Financial Strain

A report from the Ballina Advocate in Australia. “Australia is facing a ‘debt crisis’ - and the property market and our entire economy are at risk as a result. That’s according to the sobering 60 Minutes segment Bricks and Slaughter which aired last night, revealing the country’s property downturn was just the tip of the iceberg. According to reporter Tom Steinfort, the current slump is actually ‘more like falling off a cliff,’ with a number of real estate and finance experts claiming houses could plummet in value by up to 40 per cent in the next 12 months.”

“Mr Steinfort spoke with data scientist Martin North from Digital Finance Analytics, who said Australia was uniquely vulnerable when it came to an economic crash tied to a property downturn. ‘At the worst end of the spectrum, if everything turns against us we could see property prices 40-45 per cent down from their peaks, which is a huge deal,’ he said. There’s $1.7 trillion held by the banks in mortgages for owner-occupies and investors. And that’s about 65 per cent of their total lending. That’s higher than any other country in the Western world by a long way. We are uniquely exposed at the moment.’”

“Mr North said Australia was now in the same position as the US was back in 2006 and 2007 - a position which triggered an economic collapse. ‘As a society, and as a government, and as a regulatory system, we’re all banking on the home price engine that just goes on giving and giving and giving. It’s not going to,’ he said. ‘We’ve got a debt bomb, we’ve got a debt crisis and at some point it’s going to explode in our face.’”

“It’s a sentiment shared by Laing and Simmons real estate agent Peter Younan, who said the median house price in his patch in Granville in Sydney’s west had dropped from $1.2 million to $1 million in just one year - a shocking $200,000 plummet. He said foreclosures had also risen by 600 per cent in the region. ‘The mortgage stress is definitely being felt especially in this area,” he said.

“60 Minutes also spoke with several Aussie homeowners who gave harrowing details of the stress they faced trying to pay off their mortgages, including having their power turned off and being ‘hounded’ by their banks. But property investor Bushy Martin said the blame lay squarely at the feet of buyers who ‘mortgaged themselves up to their eyeballs’ in a bid to snap up dream homes before being able to afford them.”

“However, the segment has also sparked backlash online, with some claiming the situation had been exaggerated. One Reddit user branded the report as an example of ‘alarmist journalism and scare tactics,’ while another said it was ‘dramatic and cringe-worthy.’ And some said it was unfair to blame the banks for the situation, and that homeowners needed to take responsibility for their own decisions.”

“That was in response to comments made by one homeowner on the program, who said the bank had ’suddenly switched the mortgage to interest and principal,’ raising his repayments by 57 per cent. ‘The interest only part annoyed me the most. The bank didn’t ’suddenly change’ your repayment from (interest only) to (Principal and interest) your IO term expired. You a) knew this would happen and b) assumed the bank would renew it when it expired. I hope this speculator gets burnt first,’ one Reddit user said.”

“However, others slammed the banks for handing out multiple interest-only loans to buyers. ‘They raked in the cash from dodgy loans for years and are crying wolf now. It’s negligent beyond words,’ one Reddit user said.”

From Domain News. “Experts have questioned claims of a 40 per cent drop in Australia’s house prices, made over the weekend on 60 Minutes. Experts have rubbished the claims made on Sunday night, saying the very worst case scenario was presented. ‘Mortgage stress and falling prices were the primary factors of concern on the program, which claimed the number of foreclosures was rising, and the banks were obfuscating the real numbers.”

“Market Economics managing director Stephen Koukoulas said this was a weak claim. ‘There’s a whole lot of reasons to suggest prices are going to be weaker for a shorter amount of time, but it’s remarkably orderly,’ he said. ‘People aren’t rushing in to hand over their keys.’”

From ABC News. “Stagnant house prices are likely the new normal for property markets in much of Sydney and Melbourne, analysts are warning as prices fall for the 11th month in a row. Keiran Edwards is experiencing the new reality first hand. He is trying to sell the family home in Penrith on Sydney’s western fringe.”

“‘I thought we might sell it in the first week,’ he told 7.30. ‘Someone would come in and go, yeah, that’s mine. It just hasn’t happened.’ He bought the house six years ago and renovated it himself. Until it went on the market, he thought its value had doubled. ‘I just assumed that people would straight away walk in and love it, like I loved it all those years ago when I bought it,’ he said. ‘But even saying that, they maybe do love it but are having trouble getting finance.’”

The Daily Mail Australia. “Home borrowers are being warned to brace for bad news with the proportion of houses and units selling for a loss at the highest level in five years, new figures show. Across Australia, one in 10 homes sold during the June quarter fetched a lower amount than the purchase price, data from Core Logic showed. The proportion of loss-making sales, at 10.2 per cent, was at the highest level since the three months to October 2013, with apartments more likely than houses to burn the seller.”

“In some Australian capital cities, more than half of all units sold were being offloaded at a loss, with six of the seven mainland capitals seeing a double-digit proportion of apartment owners losing money at sale time.”

“In Perth, 23.4 per cent of homes sold at a loss, followed by 20.1 per cent in regional Queensland. Inner-city apartments fared particularly badly, with 53.4 per cent of central business district Perth units selling at a loss during the three months to June 30. Brisbane’s inner-city was also a bad place to invest with 32.4 per cent of units fetching less than the seller had previously paid, compared with 22.3 per cent in Melbourne’s inner-city.”

“In Darwin, a whopping 71.1 per cent of units sold at a loss during the June quarter, a jump from 51.9 per cent during the same period a year earlier. Sydney, however, was the least risky capital city market to buy a unit, with only 3.1 per cent of units in the city and the inner-south selling at a loss, in Australia’s most densely populated locality where 71 per cent of dwellings sold are apartments. ”

“Across Australia, 9.4 per cent of capital city properties sold at a loss compared with 11.6 per cent in regional markets. Investors were more likely to get assaulted financially, too, with 10.1 per cent of them making a loss, compared with 9.8 per cent of owner occupiers, following an Australian Prudential Regulation Authority crackdown on investor loans.”

From ABC News. “You know things are tough in the property market when a seasoned real estate agent sells his own family home and chooses to rent instead. Greg Rossen has been selling homes in Perth’s wealthy western suburbs for decades, but even he doesn’t have the confidence to invest in housing at the moment. And he can’t see it getting better anytime soon.”

“‘No-one can predict the future, but for my own self I have sold out of the market and I am renting a family property because I don’t see any light on the horizon,’ he said. ‘Investors need to be mindful of where they think the cycle is and make up their own mind. But there is a body of thought, that I subscribe to, that conditions are not good and I believe they could well get worse.’”

“After strong price rises across 12 suburbs — largely at the premium end of Perth’s property market — the Real Estate Institute of WA recently claimed ‘aspirational suburbs are really leading the way in the property market’s recovery.’ ‘It’s lovely to quote certain suburbs where you have what appears to be an increase in price, but in reality, if we look at the total metropolitan market, those are almost anecdotal,’ he said. ‘We are coming off a low base so statistics can lie and they need to be very closely looked at.’”

“Mr Rossen said those price rises were attributable to ‘pent-up’ demand but the broader market ‘is generally in a bad condition.’ He noted that while prices in Nedlands have risen 15 per cent over the past year, he recently re-sold three properties in the area for 10 per cent less than he sold the same houses for a decade ago. He said a ‘devastation’ in commercial rents as well as tenant vacancies in both the residential and retail sector continued to point to poor market conditions.”

“LJ Hooker Rockingham Baldivis director Paul Baird-Murray said the area south of Perth in which he worked was currently saturated with properties for sale, the majority of which were bought as investments, ‘Some of them have actually said ‘but I thought rents just kept going up, I thought property prices would just continue,’ Mr Baird-Murray said. Many investors were now panicking because they were under financial strain or feared further market falls. But Mr Baird-Murray said they were unrealistic about the value of their property in the crowded market.”

“Local resident Steph Moses said ongoing land development in the area was exacerbating the problem. She and husband Daniel have an investment property in Port Kennedy, between Perth and the regional city of Mandurah. They had intended to keep the property for the long term, but were recently forced to list it for sale. ‘I was given the diagnosis that I had stage four cancer so we had to change a lot of things,’ Mrs Moses said. ‘I have had to stop work because of my illness.’”

“The only offer they have had on the property was $70,000 less than they paid for it. ‘If you want to build a house, you get $10,000-$15,000 for building a new home, so there is no incentive for the first-home buyers market to buy an established property,’ Mrs Moses said.”




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42 Comments »

Comment by Ben Jones
2018-09-17 17:53:27

This is really a historic moment in the world of mania watching. Australia, possibly having the biggest bubble per capita on the planet, has been gobsmacked with its bursting.

But notice they can’t bring themselves to use the word.

Comment by Boo Randy
2018-09-17 18:40:50

It’s going to get harder and harder for the REIC and the MSM parrots on its shoulder to conceal or obsfucate the extent and rapidity of these bursting bubbles, which all have the same root cause: central banker “stimulus” and resultant hot money flows and unchecked speculation. The “it’s different here” mantra is also going to start ringing hollow to even the dullest and most brainwashed of the sheeple as this thing spreads like…well…ebola.

I think I’ll make a Costco run this weekend and refresh the food pantry.

Comment by Albuquerquedan
2018-09-18 07:28:10

Donated my old spam and picked up new spam just last week. Yes, the new spam was from Costco.

Comment by oxide
2018-09-18 12:14:30

Don’t forget the bulk toilet paper.

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Comment by MGSpiffy
2018-09-17 20:04:54

There was a thread on reddit the other day discussing Australia, and people were asking why there weren’t any LCOL areas there. Some people chimed in with answers and apparently the laws and lending there have some significant differences than here, creating an even worse system for abuse and going over the cliff…

 
Comment by Professor Bear
2018-09-17 20:42:46

“Many investors were now panicking because they were under financial strain or feared further market falls.”

At least MSM writers recognize panic when they see it.

 
 
Comment by Ben Jones
2018-09-17 17:56:55

‘I was given the diagnosis that I had stage four cancer so we had to change a lot of things’

They could have picked among thousands of FBs, but chose a cancer victim. Hmmm.

‘The only offer they have had on the property was $70,000 less than they paid for it’

That’s not going to make things better. And Perth crashed 4 or 6 years ago, and it’s still sinking like a turd in a well.

Comment by Neal Woods
2018-09-17 21:29:12

What the heck is an FB for crying out loud.

Comment by Ben Jones
2018-09-17 21:36:43

F^cked Borrower. Very widely used in real estate blogs and informal circles. Refers to a formerly credit-rich but resource-strapped consumer who’s collateral, savings, and foreseeable future income are below the value and terms of a loan they cannot sustain, refinance, or renegotiate. FB’s face a bleak future of certain losses, and nearly certain bankruptcy, credit destruction, and long term cascading/follow-on financial and opportunity losses.
All those FBs and their greedy idiot lenders who bought houses with 100% down NINJA adjustable-rate mortgages in the so-called housing boom are dropping like flies!

https://www.urbandictionary.com/define.php?term=fb&page=2

Comment by Anonymous
2018-09-17 21:37:41

F’d Bagholder could be an alternative definition.

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Comment by Mafia Blocks
2018-09-18 06:36:55

And the most accurate and realistic definition of a homedebtor in the last 20 years?

DebtDonkey

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Comment by oxide
2018-09-18 07:44:38

DebtDonkey

You talkin’ to me? I’m doing ok, actually.

 
Comment by Albuquerquedan
2018-09-18 07:49:44

Good to hear. Mr. Banker wants to bring in illegals who have no money but also have no debt and turn them into debt burros

 
Comment by Mr. Banker
2018-11-30 09:25:01

Just so they have harvestable body parts.

 
 
 
Comment by Get Stucco
2018-09-18 06:31:42

You could say a FB is someone who got stucco.

 
Comment by Mr. Banker
2018-11-30 09:22:53

FB = My favorite type of human bean.

 
 
 
Comment by Ben Jones
2018-09-17 17:59:46

‘I thought we might sell it in the first week…Someone would come in and go, yeah, that’s mine. It just hasn’t happened.’ Until it went on the market, he thought its value had doubled. ‘I just assumed that people would straight away walk in and love it, like I loved it all those years ago when I bought it’

In the video he says he already bought another shack and he’d be “stretched” (got three kids BTW) if he can’t sell. Here’s the video:

https://www.youtube.com/watch?v=oRe83vtp13g

Comment by Avg Joe
2018-09-18 09:55:01

And he’s… a landscaper.

 
 
Comment by Ben Jones
2018-09-17 18:00:52

And BTW I didn’t realize I posted a link to the 60 Minutes show this past weekend. It’s at the bottom of this link:

https://www.9news.com.au/2018/09/16/03/13/60-minutes-housing-market-prices-mortgage-economy-property

 
Comment by Ben Jones
2018-09-17 18:03:53

‘Peter Younan said the median house price in his patch in Granville in Sydney’s west had dropped from $1.2 million to $1 million in just one year - a shocking $200,000 plummet’

It’s like San Jose, except the Californians gave that much up since April.

‘He said foreclosures had also risen by 600 per cent in the region. ‘The mortgage stress is definitely being felt especially in this area’ 60 Minutes also spoke with several Aussie homeowners who gave harrowing details of the stress they faced trying to pay off their mortgages, including having their power turned off and being ‘hounded’ by their banks’

Oh dear…

Comment by Mr. Banker
2018-09-17 20:08:08

“… being ‘hounded’ by their banks.”

😁

 
Comment by Albuquerquedan
2018-09-18 07:44:58

It is interesting how the price of electricity seems to have been the straw that broke the camel’s back. It is similar to how $4 gas was the spark that set off the 2008 inferno in the US. Rising house prices create more and more people living paycheck to paycheck and then an unexpected expense brings the house of cards down.

Comment by Carl Morris
2018-09-18 09:07:41

an unexpected expense brings the house of cards down

Nothing can bring it down as long as you can pull more money out at any time. Which means the clock starts ticking the moment prices stop going up and all the equity is tapped. High energy cost is just the last snowflake that happened to fall before the avalanche started.

 
 
 
Comment by Mortgage Watch
2018-09-17 18:04:40

Coppell, TX Housing Prices Crater 11% YOY As Buyers Discover They Got Burned By Defective Inflated Appraisals

https://www.movoto.com/coppell-tx/market-trends/

 
Comment by Boo Randy
2018-09-17 18:10:22

One Reddit user branded the report as an example of ‘alarmist journalism and scare tactics,’ while another said it was ‘dramatic and cringe-worthy.’

Doesn’t take much to bring the REIC shills and touts out of the woodwork.

Comment by Apartment 401
2018-09-17 23:52:52

Reddit is a hugbox. Not as bad as the city-data forums, but it’s pretty bad.

 
 
Comment by Ben Jones
2018-09-17 18:20:04

‘After strong price rises across 12 suburbs — largely at the premium end of Perth’s property market — the Real Estate Institute of WA recently claimed ‘aspirational suburbs are really leading the way in the property market’s recovery.’ ‘It’s lovely to quote certain suburbs where you have what appears to be an increase in price, but in reality, if we look at the total metropolitan market, those are almost anecdotal,’ he said. ‘We are coming off a low base so statistics can lie and they need to be very closely looked at.’

‘Mr Rossen said those price rises were attributable to ‘pent-up’ demand but the broader market ‘is generally in a bad condition.’ He noted that while prices in Nedlands have risen 15 per cent over the past year, he recently re-sold three properties in the area for 10 per cent less than he sold the same houses for a decade ago.’

So here’s a member of the real estate industrial complex saying the REIC will lie right to your face hoping you’ll borrow gobs of money for a falling shack so they can take a slice.

Comment by Anonymous
2018-09-17 21:39:27

Yeah, that was impressive, him openly stating that renting was currently a better deal. You’ll never hear Yun or his disciples publicly admit that.

 
 
Comment by Boo Randy
2018-09-17 18:25:56

I hope this time around things get so bad that everyone who was culpable for causing these bubbles - especially the central bankers, their investment banker accomplices, and captured regulators, enforcers, and policymakers who enabled such monstrous malinvestment and speculative manias - ends up facing tribunals and swift, severe justice. Nothing less is going to fix this entrenched corruption and fraud.

 
Comment by Mortgage Watch
2018-09-17 18:55:02

Littleton, CO Housing Prices Crater 11% YOY As RV Industry Prepares For The Worst On Plunging Demand

https://www.movoto.com/littleton-co/market-trends/

 
Comment by hunkydory
2018-09-17 19:45:15

I said before - its so widespread that the aussie govt in conjunction with the banks will choose to not go after outstanding loans. Everybody was doing it - its a nation of convicts after all ;)

Comment by Albuquerquedan
2018-09-18 07:34:13

Most of them from debtor’s prison. It is interesting how history repeats.

 
 
Comment by rms
2018-09-17 20:26:47

“Australian housing market - property Bubble & Banks, 2018 Insights”
https://www.youtube.com/watch?v=0lrdxpKPocY

Comment by rms
2018-09-17 20:39:56

Here’s a world-class hyena waiting for the indebted to stumble.

 
 
Comment by BubblevilleCA
2018-09-17 20:44:44

what realtors rely on as news from there chief and commander himself for, mr. Yun

https://magazine.realtor/news-and-commentary/economy/article/2018/09/recession-talk-heats-up?sfid=sf197674565&sfchnl=twitter&sfinitv=Realtor%20Magazine&sfpln=&sfmsgtitle=Rmag:%20recession&sfaccnt=realtormag&sfdt=180917&sf197674565=1

His article got this whooping 1 comment on his post

Avatar
ochilink
2 days ago
Why are prices sky Rocketing
Ramone Walker
Realtor Miami
954-696-2732
United Realty Group Inc

Makes one wonder if realtors really do believe the lies they spew out there mouths.

 
Comment by Anonymous
2018-09-17 21:26:01

Regarding Australia, I’m thinking back to something I read here a few days ago. If you can prove that the bank fudged the application to get you your mortgage, not only do you not have to pay, you get to keep the house too!

I’m waiting to hear about someone actually achieving that.

 
Comment by Get Stucco
2018-09-18 06:36:08

Business
Alibaba’s Ma Warns U.S.-China Trade War Could Last 20 Years
By Lulu Yilun Chen
September 18, 2018, 2:12 AM PDT
Updated on September 18, 2018, 3:31 AM PDT
- Jack Ma says there won’t be short-term solution for dispute
- Ma expects trade tensions to continue after Trump presidency

 
Comment by Boo Randy
 
Comment by Boo Randy
2018-09-18 07:23:30

Nice spin, MSM: Homebuilder confidence hit by tariffs, not a bursting housing bubble.

https://www.marketwatch.com/story/home-builder-confidence-stalls-as-tariffs-bite-2018-09-18?mod=bnbh

Comment by Albuquerquedan
2018-09-18 07:35:59

Yes the globalists are good at spin.

 
Comment by Chino
2018-09-18 10:56:39

Gonna blame Trump for the unintended consequences of QE. Nice.

What building materials do we buy from China anyway, besides formaldehyde-laden drywall?

 
 
Comment by jeff
2018-09-18 16:18:29

Betters

 
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