International Bits Bucket For January 30, 2008
Please post items of interest from outside the USA here.
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Name:Ben Jones
Location:Northern Arizona, United States
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At the request of our international friends, I am going to experiment with the timing of this thread.
For our international friends, an introduction to the American Legal System, which you will probably be reading a lot about on this blog in the near future:
COYOTE V. ACME PRODUCTS CORP.
“Live by the Super Slick Jet Propulsion Automated Explosive Metal-Shearing Heat-Seeking Laser-Guided Razor-Edged Boomerang, die by the Super Slick Jet Propulsion Automated Explosive Metal-Shearing Heat-Seeking Laser-Guided Razor-Edged Boomerang.”
I just know those were ACME CDOs your banks bought from the Wall Street Catalog.
I don’t know if this is related to the link, but I very vaguely remember that was once an episode where Wile E. Coyote did indeed sue ACME.
(And I once heard a rumour that the guys at Looney Tunes, who by all accounts were a pretty anarchic bunch, bootlegged an episode where Wile E. caught the RoadRunner. Ended with him sitting at a campfire brandishing a whopping great drumstick in one front paw and holding up a sign saying “I only have to win once” with the other.
Probably apocryphal, alas, but that episode I would have paid to see.)
I used to watch this cartoon as a kid. Never seen the coyote catch the bird, he did come close in a few episodes. Id love to see any showing him winning a great dinner!
I still like to watch the Looney Tunes when they are shown on TV. Foghorn Leghorn one of my favorite Looney Tunes character.
Indian housing market is toast. People there don’t realize what is coming. Houses in the capital city New Delhi are more expensive than NY city. With a very low per capita income I’m thinking when the shit hits the fan there, a lot of India rising stuff would be history.
Could you imagine the Curry smell in those cramped condo towers?
I was in India in december, there were areas going for $1000/sqft, even areas 2 hours from downtown were going at $150-200/sqft. People were buying half a dozen condo’s at a time. I went to this one area where they were building atleast 10,000 condo’s. The dust was unbelievable.
And let me guess, 100% financing and none of them have money for the first mortgage payment? Basically 6 month free rent.
I heard stable power and water supply is not very common. Will be funny to sit in a $1000/sqft condo and have no power and water several hours a day.
I think it is very likely that the really expensive condo towers would have backup generators.
Its funny that you mention, there was an article in the local newspaper while I was there which said that most of these places have no power or water for 18 hours a day (varies based on election season…long story). So, yes, most of these places have backup power. However, as soon as you step out of the building complex, there’s no roads to speak of, the traffic is killer (literally). Its kind of living in a five star prison.
Oh, did I also mention that when you are landing at Delhi airport you always notice a thick layer of smog surrounding the entire city. The airport itself looks like a bomb just fell on it, but thats a different story. When you are on land, there is dust everywhere (I mean everywhere). For the first couple of weeks, don’t be surprised if you get watery eyes and a burning sensation in the nose due to air quality.
Indiaocracy
I hope they become known as Indiaocracy and not the birthplace of Indian Flu. The bird flu virus scares the crap out of me, and India right now has the Keystone Kops in charge of policing their current outbreak.
–
You guys can guess all the angry responses I get from Indians in the US for negative views of India and its future prospects.
Jas
F ‘em!
What kind of crazy world do we live in when land barely outside Chandigarh costs more than prime real estate on Park Ave.?
–
But, Chandigarh is special city designed by a great French architect. Land is worth its weight in gold. I was there on a tour just to see the city a long time ago. I bet that it looks more Indian today than 35 years ago.
Also, you forget that there is no more land being made in India and the population density is 6-8 times that of the US. I would say that land prices in Chandigarh should be 6-8 times that in the Park Ave. in NYC.
India is going to be the next economic superpower!
Jas (with his colorful I-am-proud-to-be-an-Indian-bubblehead hat)
My own family do not believe me when I say Indian Real Estate is going to be toast in near future.
Not one article on MSM which says that, and people have become rich overnight that they afford million dollar condos in major cities.
Whatevaaaaaa!
Tell them to dance with some cymbals, or fast on Tuesdays, and maybe then real estate in India won’t collapse?
Also, ask them if they know what the Plaza Accord is, and what happened to Japan and why.
Good evening.
I live in the Toronto, Ontario area of Canada and would like to tell you a story of something that happened up here lately. I have an opinion that as soon as RE agents start entering and helping to create a buying frenzy, than that’s pretty much demonstrating the top of the market.
This happened recently for a condo at Bloor & Yonge in Toronto. In fact, the agents paid individuals, in some cases, up to $2,000 to line up for them in order not to lose their place in line for when the condo opened for sales.
The line up was huge and got a little rough when some people tried to butt into the line. Police were called to cool out the crowd.
The developer, who had previously listed the condos from $500k to $2M, seeing the pent up demand, shortly raised the prices from $2M to $8M.
Perhaps you’ve heard this story from other sources and comments can be found elsewhere.
To my way of thinking this is the equivalent of the mailman telling people to hop into the stock market. In others words, Toronto is at the top and now it’s time to take profits if possible.
By the way, I read this blog almost every night and, even though I’m no where near CA or NV or even FL, I still find the situations in the US RE market fascinating and I particularly enjoy some of your most creative and vociferous writers. Many times I’ve almost spilled my drink, the humour has caught me so off guard.
PS: I wish you had spell checker.
RE friend of a friend in SD had 8 props in closing with BofA with one day left just a month ago, the BofA pulled the rug and all 8 props went kablooy. RE agent is losing her condo in SD.
Don’t know more of the particulars, but just heard it tonight.
Gosh 4x the price? Did any fool still buy?
Even if you insisted on buying in Toronto, why pay millions for a condo when you can get a 1500 square feet house for “only” half million? My dad’s cousin is spending $400k on a starter house. He is going to lose the entire $200k downpayment. I told dad to warn him but dad said it was not my business and he thinks it’s a fair price anyway. *sigh*
this is good, just removes some more idiots from the market for good
(assuming that there will be no bailout for those buyers).
I don’t feel so bad about my nephew who is moving into a condo next month in Scarborough. He is paying $ 250 K for it…it’s either 600 sq ft or 800 sq ft…he bought it at least a year ago so I wonder what they are selling for now.
Use Firefox - it comes with a built in spell checker.
Hi Diane,
My husband grew up in Guelph. We were there over the summer visiting his mom and we couldn’t believe how built up it was just from the previous summer. I asked one of his friends, whom we had lunch with and also happens to be a mortgage loan officer at Scotia, who they thought would move into these homes and where everyone worked and so forth. She claimed the university was the draw, along with other factories and so forth. Considering U of Guelph is not big or prestigious or particularly desirable, I wondered why the admissions must have increased to such a degree that they had so many new-hires. I’m still wondering…
Warning over one million homes at risk in UK
“The warning comes as surveyors predict today that 123 homes a day will be repossessed this year. The FSA cites three warning signs on mortgages:
· The loan was taken out for longer than 25 years;
· It is worth more than 90% of the home;
· The amount borrowed is 3.5 times or greater than income .
Over a third of all mortgages sold between April 2005 and September 2007 fall into one or more of these categories. This suggests that more than 2m of the 5.7m mortgages written during this period are of potential concern.
It is the 1.04m customers whose mortgages contain two or more characteristics who most concern the FSA. It calculates that the number “most likely to default on loans” - those whose mortgage falls into all three categories - is 150,000.
The regulator is concerned that many borrowers are badly prepared for worsening economic conditions. It believes homeowners may have become too reliant on cheap credit and rising house prices to sustain levels of spending.”
Sound familiar?
I don’t see how that first ‘warning sign’ is significant, except in conjunction with one of the others.
Loans over 25 year amortization pay off the principal very, very, slowly so the buyer will stand a higher chance of being underwater (and walking) during a down cycle. It also means it’s much harder to trade up later so people at the higher end have nobody to sell to.
Even London is starting to drop in price. How much will it fall? The bears say 30%, I say easily 50% if not more. Most properties can’t be touched for less than a few million dollars/pounds!
keep in mind that prices might drop in other ways, e.g. by splitting up bigger homes so you can squeeze more people into the same space. I see this happening more and more in the Netherlands in the more desirable locations. e.g. instead of a big 1-1.5M euro canal home you get four 400-500K apartments.
London has an epic appointment with the Mighty JT!
They have nothing but a FIRE economy. It’s gonna be entertainin’ that’s fer sure!
strange … if you exclude the first condition, I guess that it applies to more than 50% of Dutch homes (and more than 75% of all homes with a mortgage).
Regarding the first condition: most recent Dutch mortgages are probably 5-15 year fixed rate (we do have 30/40-year fixed and even generation mortgages too), but many of them are interest only which IMHO is even worse than a standard 25-year fixed rate contract. And on top of that there are often more speculative constructions like leverage through the stockmarket.
The Canadian real estate market is toast. Just a year or so behind the US market. Toronto always seemed expensive to me, for a fairly generic megapolis. But at least it has jobs. When I heard that Saskatoon was in a real estate boom, I knew that the bubble had made it to Canada. Yeah, I’ve heard that it’s Calgary oil money or something along those lines. But have you ever looked at a map of Saskatchewan? I think they actually are making more land there.
BTW Firefox has a built-in spell checker.
I have a friend living in Saskatchewan who pays $540/month to rent a $150k shack(around 800 square feet) he said he would not pay even $50k for it(neither would I!) also it gets bitter cold down to -40 degrees!
People give me a hard time with Pennsylvania and their balmy 30 degree winters. Try -30 instead!
People in British Columbia (Canada’s Pacific coast) actually believe that the global financial crisis will be good for their RE, because people will buy it as a “safe refuge”. The license plates there say “The Best Place on Earth”.
They should ask themselves how amenable the Canadian immigration authorities will be (widely known to be the most an*l-retentive document-hoardin’ bee-yatches that this planet has known!)
unless you are a deserter from the US miliary. Then they welcome you in with open arms.
Things are getting bubbly here in Saint John NB. With the LNG terminal, potential new oil refinery, nuclear plant refit, and potential second reactor, the builders (and the prices) have gone crazy. Plus some company is looking to build 600 apartments (luxury of course) - in a city which has a declining population (the metro area is increasing). But if we do have a recession, and demand for energy drops, then a lot of people are going to have some egg on their face.
Good morning,
For the more detailed news on the Netherlands you should wait for NHZ. I’m more a lurking dutchman. I just saw, however, that the average price of Dutch homes has risen to 360K USD, a rise of 5.3%. I can add to that that most of these houses are a lot smaller than the average home in the US.
How big is the house, how much $ per square foot and what is equivalent rents?
the Dutch median home price is around 250K euro or $370K (8.5x median income).
If I look in my area all homes around this price have 100-150 m2 (1100-1600 sqft) of living space. The living space is probably an inflated number, as the realtors now often include the walls and other unusable space in this number. Also, I live in a low income area so in most of the country you get even less living space for this median price.
Look at the bright side: less than 100 years ago, the average Dutch home had around 400 sqft of living space, with at least 5-10 people living there …
equivalent rents do not exist in the Netherlands.
Most of the rental market is controlled by semi-gov corporations (gov. entities until recently, now private corporations). Rents in this part of the market are fixed by politics. Most of the renters have big rental subsidies and increase in rental prices is capped at maximum 1.5% per year. There is a small free rental market, mostly in the bigger cities, where rents can be 2-4x higher than in the subsidised part of the market (not even taking the subsidies into account); and of course, you get no subsidy at all.
To give an idea how this works out: in my city there is a development with older homes that probably have a little over 100 m2 living space. These homes were built in the early sixties for 18.000 guilders each (EUR 8200,-) and would now sell for 200-250K euro (close to median price). Most people there are renting and they pay EUR 360,- per month; many of them get subsidies so they effectively pay even less. But you can only rent there if you fit a certain ‘disadvantaged’ category like unable (or not wanting …) to work, single moms, elderly people, (formerly) illegal migrants etc. If you have a real job, or you are a small business owner, the waiting list is at least 4 years.
Now that the housing corporation is no longer under government control, they have started offering some of these homes on the free market, which basically applies for all homes renting above about EUR 600,-. If you are willing to pay around EUR 1000,- monthly you can rent a home from them without any waiting list. Also, all rental contracts for existing renters that expire (e.g. because a home has to be renovated - nothing fancy, just basic upkeep) are renewed at a price of EUR 640,- instead of EUR 360,- per month, take it or leave it …
regarding the price gains from EUR 8200 to EUR 200.000 in 45 years: that represents an average gain of 7.5% every year for the last 45 years. Nnice, but in reality the gain is far bigger, because all these time the homes were rented out and the corporation already got at least 5-10x the building cost over that time …
yes, that is the latest number from Kadaster which is the most reliable source for Dutch housing statistics. I have to add that even these numbers are influenced by several factors that severely underestimate gains in a boom, and probably underestimate losses in a crash as well).
The 5.3% rise is compared to same month previous year; this is a bit higher than recent realtor numbers which are a little over 4% yoy. However, Kadaster numbers are lagging actual sales by 2-3 months, and over the last months prices seem to be flat or slightly declining. There latest monthly number is a -0.4% decline from november to december 2007 (keep in mind those are sales from around october 2007, so three months ago).
I can relate to the housing markets both in UK and Canada as I lived and owned homes there. Both markets are super-toast as wages are low and taxation high (mainly in Canada). And there is no mortgage interest deduction. What cracks me up is the amount of delusion and denial in the media. They follow the US very closely and quick to point out that this cannot happen here. They will give you a myriad of reasons but nobody has the guts to link prices with incomes. BTW, actualy the median prices are both higher in Canada and UK than in US.
I think ‘this cannot happen here’ is extremely common and heard in all bubble countries until the bust is well on its way; especially if you listen to economists and politicians.
Its funny you mention this but in Kelowna yesterday the front page of the paper mentioned that affordability in terms of prices to income is the 13th most expensive in the world at median prices 8.5 times average earnings. The word is starting to get out there.
http://www.kelownadailycourier.ca/stories.php?id=88706
Russia got rich by oil and there is a huge investment into real estate. In Moscow the tallest building of Europe is built (http://en.wikipedia.org/wiki/Federation_tower). Condos there are sold for $2000-3000/sqft. In the suburbs of Moscow you pay $400/sqft, while the median household income is $33,000.
now we have to guess how much of the new richess is going to evaporate in the bust (although I think most of it will evaporate when the Russian gangsters in London get their share of the UK property bust).
Is $33.000 the median household income for all of Moscow? That seems very high to me, not much lower than for the Netherlands (I think our most remote regions have even lower household incomes). I would guess the S33K income applies only to Moscows inner city or business district?
That sounds way too high to me, minimum wage is only about $500/month and there are loads of people like schoolteachers who make less than $1500/month.
Really only private sector professionals make that kind of money. The figure must be for inner Moscow (the most expensive part) or one of the affluent suburbs.
That’s a number from the Russian census bureau, $33k is the median household income. Since housing is so expensive (Moscow is the most expensive city in the world) I guess a typical household has more than 2 income earners. If a teacher makes $1500 then $33k is a reasonable number. A high share of the population are academics and Moscow is more a government and service city. A few hours out of Moscow it is probably completely different.
sure it is not AVERAGE income? I could imagine that…
US recession will dwarf dotcom crash
By Edmund Conway, Economics Editor in Davos
Last Updated: 11:48pm GMT 29/01/2008
The recession facing the United States is of a scale that dwarfs the dotcom slump.
The slowdown will cause a damaging regulation backlash as governments attempt to compensate for the financial pain facing families. Britain faces a similar plight, though it may avoid as deep a slowdown as the US.
The views of Stephen Roach, one of the world’s leading economists, now heading the Asian wing of Morgan Stanley, would have seemed outrageous at last year’s World Economic Forum.
It is a sign of the times that they are now close to the consensus.
http://www.telegraph.co.uk/money/main.jhtml?view=DETAILS&grid=&xml=/money/2008/01/28/ccusecon128.xml
I wonder if his views have changed in the intervening days?
The Fed did not panic
Posted by Ambrose Evans-Pritchard on 23 Jan 2008 at 17:39
Tags: US, Davos, Bank of England, Morgan Stanley, Nikkei, Fed, European Central Bank
Let us scotch one foolish and dangerous notion already gaining acceptance. Those who accuse the Fed of acting out of panic in slashing rates 75 basis points on Wednesday do not grasp the seriousness of the situation.
The Fed had to prevent a disaster
The move was imperative to prevent a grave financial crisis spiralling into disaster. The threat of a melt-down in the $2.4 trillion market for US municipal bonds had suddenly moved from possible to imminent. No monetary authority could ignore such risks.
As skittish markets showed today, more will undoubtedly be required, and soon. But at least the US authorities are facing up to the predicament that they created in the first place by fixing the price of credit artificially low for year after year, and failing to regulate banks, derivatives, and structured credit with a minimum of common sense.
“Central banks have lost control,” said George Soros to the chastened elites in Davos today, so humbled from the hubris of last year.
http://blogs.telegraph.co.uk/business/ambrosevanspritchard/december07/thefeddidnotpanic.htm
I’m convinced that Ambrose Evans-Pritchard has all his money tied up in something that profits from lower rates. His stories are often a good read, but in the end it all comes down to the same: government must lower rates NOW and FAST. Basically just the same as Mad Cramer, maybe the UK version of it.
Stock market turmoil spells trouble on the horizon
By Peter Koenig
Last Updated: 12:17am GMT 27/01/2008Page 1 of 3
After a stormy week in the markets, just how gloomy is the outlook as the financial crisis rumbles on Peter Koenig takes the temperature
At 10pm on September 13, as he does almost every night, Denis Norton was settling down to watch Sky News in the first-floor living room of his recently built townhouse in Kingston upon Thames.
Having just returned from his summer holiday, he had spent most of that Thursday catching up on household admin and chores, and was expecting the news to be dominated by the foot and mouth crisis.
Instead, he found himself watching with increasing horror as Sky led the broadcast with the news that the Bank of England had agreed to give emergency funding to Northern Rock, the bank in which he and his wife, Marie, had their life savings.
Norton, a retired director of a logistics company, called upstairs to Marie, who had just got out of the bath. “Put Sky News on! It’s about Northern Rock!”
The next morning at 8.30 the couple, both in their 60s, boarded the number 65 bus for the 10 minute journey into Kingston town centre and then spent the next seven hours in a queue. “We’d like to close our accounts,” they said when they finally reached the cashier. They needn’t have bothered. Slipping their pink passbooks under the security grille, their expressions told the haunted Northern Rock employee all she needed to know.
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/01/27/cnsoros127.xml
Warning over one million homes at risk
Economic slowdown would leave many borrowers vulnerable, says FSA
Jill Treanor The Guardian, Wednesday January 30 2008
More than a million homeowners could be at risk of serious financial difficulty and possibly losing their homes in an economic slowdown, the City regulator warned yesterday.
The Financial Services Authority is preparing for a tougher climate of rising inflation and a slower economy. It fears that many homeowners with large mortgages who have borrowed three and a half times their salaries or more could be at risk.
The warning comes as surveyors predict today that 123 homes a day will be repossessed this year. The FSA cites three warning signs on mortgages:
· The loan was taken out for longer than 25 years;
· It is worth more than 90% of the home;
· The amount borrowed is 3.5 times or greater than income.
Over a third of all mortgages sold between April 2005 and September 2007 fall into one or more of these categories. This suggests that more than 2m of the 5.7m mortgages written during this period are of potential concern.
http://www.guardian.co.uk/money/2008/jan/30/mortgages.housingmarket
12.15pm GMT
House prices down by 0.4%
Hilary Osborne
guardian.co.uk,
Tuesday January 29 2008
House prices in England and Wales fell by 0.4% in December, the Land Registry said today - the first time in two years it has reported a negative monthly change.
The fall, which follows a 0.6% rise in prices in November, is the first recorded by the Land Registry since August 2005, and takes the annual rate of inflation down to 6.7% from 8.1% the previous month.
In December, the average price of a home in England and Wales fell to £184,469, down from £186,009 in November.
Although year-on-year growth remained positive, the Land Registry said the fall was “evidence of a downward trend in house prices” and “a clear indication of a weakening market”.
http://www.guardian.co.uk/money/2008/jan/29/houseprices.property
PB,
Still up also. WIth the IBB, don’t know if I will get much sleep. Love hearing from other people from around the world.
I sold my house in Camarillo, California in 2004. I bought some gold and lots of Asian stocks. I also bought a house in the San Telmo area of Buenos Aires, Argentina. It was a complete cash deal where the monies were counted out by the bank and given to the buyer. (No 100% mortgages down there) I then received the deed. At the time all my friends thought I was mad. Buying a house in another country even though none had visited Argentina and investing in gold. At that time I wrote a long litany on what I saw in the US in the next five years. Ben, actually printed it twice. I predicted the building industry would come to a virtual standstill. This has happened in many areas. I saw hundreds of thousands of illegals walking the streets in search of work. This is happening. (We have four sets go through our trash weekly now. And many wander our small town looking for work) I saw crime escalating and the dollar weaken. I saw the stock market at 10,000+ and foreclosures the norm. I saw Israel nuking Iran and the US mired in Iraq but winning in Afghanistan. Above all I said that sooner or later the US will learn the hard way that you cannot earn one dollar and spend two indefinitely. We are still just starting a long rollback and I am no seer but the future back then was as obvious as it is today. Going forward, Israel will take out Iran’s nuke facilities unless our war president makes up a reason for us to do so in what is left of his time in office. Gold in four figures. The bond markets will suffer next as companies lose their ratings. The pittance given by the President will not work. Six hundred dollars apiece will all be spent on Chinese manufactured goods at Walmart and the Hispanics (The few legal ones) will wire it Western Union down south. Not much of a boost for the US economy. Many Middle Eastern States will flee the US dollar and go to a basket of currencies or metals. The US could be stuck in a mini-depression for at least four years all the time property rolls back and the dollar falls. Food will go through the roof but that does not count in the governments stats. Russia will again saber rattle and destabilize smaller neighbors before moving in again. China will take over tiny disputed islands in South China Sea (forgot names) with potential oil. Vietnam and Phillipines both claim area. Thousands of Mexicans give up on the US and head south to a better construction industry. No gringo’s will be allowed to work in Mexico and the government will be very strict on those caught. Hillary will be next President and Saturday’s winning numbers are 1. 7. 12. 19. 22. 23 bonus 8
Excellent, Marc Faber has been advising exactly what you did, gold and real estate in Argentina. Faber mostly liked farmland, however Doug Noland also advocates buying in Buenos Aries. If I could speak the language I would love to do it but for now I will have to stick with gold. Please keep us advised on the situation in Argentina as I consider it a possible bolthole if things get intolerable in the Corporate States of America.
Did you foresee the death of new paragraphs?
Just messing with you — I agree with most of that stuff.
LOL
I’ve been watching real estate in Argentina for some time. Can you provide any details about the how you found and purchased your property? Also been watching Chile. It seems that Asian stocks are highly correlated to US stocks at the moment though a 2004 purchase of Shanghai would have yielded 5x? Thanks for your commentary.
http://ukpress.google.com/article/ALeqM5jQEej_eLCADHZGgufeN3ZD4zS8ZQ
Nearly 45,000 ‘to lose home in 2008′
Still low
Around 123 homes will be repossessed every day this year as people struggle to keep up with mortgage repayments.
The Royal Institution of Chartered Surveyors (RICS) said just under 45,000 people will lose their homes during the year as the cost of servicing a mortgage remains close to record levels.
Still low by historic standards.
Where does this bubble end? US, UK, Ireland, Spain etc, etc
This going to be one painful experience once this is all played out.
Luckily so far, it’s contained to only the 1st world.
Tricom debts cover in doubt
THE solvency of broking house Tricom is in question after it was unable to cover the cost of yesterday’s trades, halting settlement on the Australian Securities Exchange for more than four hours.
It is believed the margin loan specialist took heavy losses in trade on Tuesday last week, when the worst sharemarket fall in 18 years brought a record number of margin calls.
Tricom’s most recent financial statements, lodged with ASIC in September, show total bank loans and overdrafts grew from $926 million in the year to June 30, 2006, to $2.38 billion a year later.
http://business.theage.com.au/tricom-debts-cover-in-doubt/20080129-1our.html
Sorry for no link, my local paper (The Northern Advocate) doesn’t have this story online, only in the dead tree edition. Our local market:
Russell: median price $615k, median household income $42k, ratio 14.5
Paihia: $470k, $39.2k, ratio 12
Kerikeri: $480k, $43k, ratio 11
*prices and incomes in NZ dollars
Woohoo! We are more unaffordable than Los Angeles! Was it always like this? No. If we take a quick jaunt in the wayback machine to December 2001, the median house in Russell was only $212k. Prices up 190% in just six years! And that was starting from an already high California style price/income ratio of 5. Yet people think I am a crazy person to suggest that a 65% price drop (back to 2001 prices) is needed just to get back to historical affordability. There is no chance of income growth here, it is similar to the California central valley in that respect. And tourism is dying. My partner and I were ALONE at Rainbow Falls yesterday at the height of tourist season.
Well, I guess I will just have to continue staying in my $400 a week 190m2 SFR 4/2 brand new spec house rental and hope my specuvestor (failed flipper) landlord doesn’t get foreclosed.
sure, prices around the Bay of Islands are off the scale … but you should compare them to the most desirable locations in US/CA for example which are probably similarly overvalued if you just look at national income. The amount of nice homes on top locations is limited, so international buyers (people who have more cash than they can spend, and RE speculators) are driving up prices there. I don’t think NZ median household income applies in Russell, many of those trophy homes in the area are from people that may have no official income at all. I think the most important factor for RE in NZ is going to be the end of the Yen (US Dollar?) carry trade, if that ever happens.
Cheers from Old Zealand (another Bay of Islands, until 20th century), where the median home costs just 10x median local income
correction:
after reading again I noticed that the story refers to median local incomes; still I doubt if this number has much to do with the income/capital of the people that buy the more expensive homes.
Enzed renter…
Ever consider the South Island instead?
The people are much more real there, and view Auckland & surrounding areas with great trepidation, for good reason.
I’m guessing from what I hear about RE fever down under that the ratio in cities like Nelson and some parts of ChCh is not much better than in ACK or Russell …
South Africa: Forced Sales Surge 75%
Our friends in SA just got robbed at gunpoint again last week. Third time this has happened to them. Not a very safe place even if you live in a GOOD neighborhood
I would love to find an english-speaking country for my planned early retirement. South Africa had been on the list but the problems with crime and electricity may force me to rethink.
Anyone who thinks moving to an exotic locale to retire would be romantic or … well…. exotic, needs to remember that most of those places are third world and are run by corrupt, thinly-spread governments that could not care less if a from-away is the victim of a violent crime. And God forbid you took the law into your own hands and injured one of their citizens in an attempt to defend yourself or your loved ones. You would never see the light of day.
Amen!
Better have some serious dough to bribe the police.
Please note that it’s trivial to “stage” an accident when you are driving, and once it’s you against them, you better fork out the dough, or else it’s “bedtime for bonzo”.
And so it goes. They will learn.
I don’t believe South Africa is the third world, but they do have a crime problem. As for government corruption, I would put the USA high on the list.
South Africa is the third world.
There is a thin veneer of first world which rapidly collapses once you venture out of the “specified” areas. By comparison, large parts of the third world are actually safe.
Don’t just listen to me! Talk to Nadine Gordimer.
Pussycat, if you think SA is the third world you must not have seen the third world. SA is the most modern nation on the continent. I would rather like in SA than almost anywhere in South America, Mexico, or many parts of America. They don’t call Philadelphia ‘Killadelphia’ for nothing, and how safe do you feel in DC?
Crime happens everywhere and America has a high rate of violent crime relative to most other countries on Earth.
Yes it does, but almost all of that is members of the underclass killing other members of the underclass, or domestic disputes involving people who own guns.
In SA the underclass goes after the middle class. You can’t avoid the risk by choosing the right company.
Pussycat grew up in the third world.
Well aware of reality, mon cheri!
(Thank you, yogurt for pointing out the obvious that in the third world, the underclass gun each other, not the upper class ’cause that would cause the police to come for a looky loo.)
With all due respect, you are CRAZY if you think our law enforcement is anywhere near as corrupt as ANY of the countries in South Africa, not to mention, the human rights violations most of the countries there enjoy, (can you say “genocide”?) And I’m not talking about Oprah’s School for Girls scandal, either. You might want to just peek around the internet for some recent news out of the area before you pack your bags.
watcher: SA is the most modern nation on the continent.
And Rhodesia was the breadbasket of Africa. The unfortunate reality is that governments matter. Talent matters. And the record of native governments in Africa is thin. Very thin. White South Africans have decamped en masse for English-speaking locales, leaving behind comfortable lives in SA, for one and only one reason - they fear for their future in SA. Confiscation of assets, racial pogroms, political persecution, quotas - they’re all on the menu. As to crime, the interesting thing is that the only person I personally know of who was killed by a carjacker was killed in SA - with an AK-47. He wasn’t a gang member - just a white, middle-class motorist minding his own business.
Writedowns of 14billion for UBS, Twice Estimates
“Jan. 30 (Bloomberg) — UBS AG, Europe’s largest bank by assets, reported a record loss after about $14 billion of writedowns on assets infected by subprime mortgages in the U.S.
The fourth-quarter net loss of 12.5 billion Swiss francs ($11.4 billion) was almost double what analysts surveyed by Bloomberg were estimating, and brings the total decline for the year to about 4.4 billion francs, the Zurich-based bank said today”
and that is from a bank that is supposed to be one of the most conservative in the world… just imagine how big the losses must be at the far more risk savvy banks in UK and Netherlands.
The UBS isn’t conservative anymore.
There are still conservative banks in Europe. They don’t do investment banking. You will never read about them in this context.
The Kantonalbank Schaffhausen might be an example.
UBS is filled with the biggest bubble-believers this side of the Mississippi. Their days of being “conservative” are so in the past.
Dutch bubble update:
Dutch central bank president Wellink is speaking today in the Dutch parliament. This is extremely unusual, and the reason is that the government keeps saying that the Dutch economy is recession proof, doing extremely well and it is not necessary to take measures for a possible downdraft. This is in line with the Dutch banks and other financials, who claim they have zero exposure to the US subprime problems (but we know they are heavily invested in the US market, so this sounds contradictory). Probably Wellink knows that something is wrong with one or more Dutch banks. Wellink also published some very negative remarks recently about the role of S&P and Moodys in the subprime crisis, and there were some hints at liquidity problems in the Dutch financial sector.
Keep in mind that the Dutch central bank has a very limited role nowadays (mostly dumping Gold for the FED, most other central banking was transferred to the ECB); usually he is an obedient serf for the FED masters.
45% of the german population see an economic downturn, 22% see the economy getting better, the paper SPIEGEL tells.
Oh, by the way, the next state bank (WestLB) is in deep trouble.
nhz..
Does your parliament have an easy access “coffee shop” on site?
Somebody’s smoking the kind.
well, last year some reporters checked the toilets of the parliament and found out that several politicians must be using something that is a lot stronger than the stuff you get in a coffee shop…
Now that’s good old-fashioned, down-to-earth reporting!
chinese stagflation?
BEIJING (Reuters) - Freak snow and a global downturn are posing a harsher challenge to China’s economy than expected, threatening the country with a spike in inflation just as growth slows.
http://www.reuters.com/article/ousiv/idUSPEK7570420080130
is this what they call a snow job?
It’s because the Chinese do not believe in global warming.
Could the Middle East crisis be solved with a snow ball fight?
“The weather in Jerusalem topped local newscasts, eclipsing a government report on Israel’s 2006 war in Lebanon.
Men in long Arab robes pelted each other with snowballs in the Jordanian capital, Amman, and the West Bank city of Ramallah, seat of the Palestinian government, came to a standstill.”
From a post yesterday:
“From the merc:
Santa Clara County Receives $12 Million to Assist First Time Home Buyers
SANTA CLARA COUNTY (KRON) - First time Home Buyers in Santa Clara County may be receiving help soon, thanks to a state mortgage assistance fund.
County officials say they were given $12 million to provide Mortgage Credit Certificates to qualified first-time homebuyers. The certificates will allow buyers to receive a federal income tax credit of up to 15 percent of the interest they pay on their mortgage”
How can the State of California give out a Federal Income Tax Credit?
Sorrry, wrong bucket!
difficult to keep up with all these defaults; before you know CA is no longer part of the USA
Just think of California as Aztlan.
–
“How can the State of California give out a Federal Income Tax Credit?”
But it can pay money that is the same as credit.
Jas
a very low basis:
An Australian hedge fund that collapsed amid the subprime crisis last year is being valued at just 2 cents in the dollar by its former sister fund at Sydney-based Basis Capital, which ran both.
Basis was one of Australia’s biggest hedge funds before its Yield Alpha fund - worth $700m at the start of last year - was hammered when investments in structured credits backed by subprime mortgages went sour and banks called in loans.
http://us.ft.com/ftgateway/superpage.ft?news_id=fto012920081728515574
Anyone have info on the German housing market? Bavaria/Munich?
probably the only part of Germany that has a bit of a bubble; the posters from Germany can probably tell you a lot more.
In Bavaria, there is no bubble.
Munich and its region is the most expensive part of Germany, about three times as expensive as the Bremen region, but that’s old news and was similar fifteen years ago.
Munich has some price grow, but ist is in the region of inflation.
There was a building boom after the reunification fueled by euphoria, tax incentives and government/EU subsidies. In contrast the population is declining (birth rate is below 1.3) and the immigration is moderate due to political reasons. Also the German economy did not well until 2006 (unemployment rate above 10%). Except some hot spots like Munich, Frankfurt, Duesseldorf and Hamburg there is no shortage of housing. Traditionally the ownership rate is much lower than in other countries or the US, especially in the east of Germany and in big cities. Prices are flat since the mid 90s. Income and home prices are in a healthy relation. I guess the ratio is about 4 (at much better building standards compared to the US) in most areas.
A recent photo of Angelo Mozilo after the announcement of Countrywide’s most recent loss:
http://www.nypost.com/seven/01302008/photos/biz035.jpg
My weekend homework. The long term cost to society.
“More Men, More Crime:
Evidence from China’s One-Child Policy”
ABSTRACT
More Men, More Crime:
Evidence from China’s One-Child Policy*
Crime rates almost doubled in China between 1992 and 2004. Over the same period, sex ratios (males to females) in the crime-prone ages of 16-25 years rose sharply, from 1.053 to 1.093. Although scarcity of females is commonly believed to be a source of male antisocial
behavior, a causal link has been difficult to establish. Sex-ratio variation is typically either small or related to social conditions liable to also affect crime rates.
This paper exploits two unique features of the Chinese experience: the change in the sex ratio was both large and mainly in response to the implementation of the one-child policy. Using annual province-level
data covering the years 1988-2004, we find that a 0.01 increase in the sex ratio raised the violent and property crime rates by some 5-6%, suggesting that the increasing maleness of the young adult population may account for as much as a third of the overall rise in crime.”
Lena Edlund
Columbia University and IZA
Hongbin Li
Chinese University of Hong Kong
and Tsinghua University
Junjian Yi
Chinese University of Hong Kong
Junsen Zhang
Chinese University of Hong Kong
and IZA
Caution 47 pg pdf.
http://tinyurl.com/2awpt9
Hoz,
What about India? I’ve heard there are more males in India now than females.
What are you doing up? LOL I get up this morning and see that you are still posting, do you ever sleep?
I have not seen any papers on India dealing with this subject.
If you know of any studies linking population in India to M/F ratios - I would be interested in seeing.
Thanks
hoz
My dear sir,
I was in bed by midnight PST and up at 8:30 am PST. I got my beauty sleep as needed.
Here’s a couple of links for you:
http://www.abc.net.au/rn/healthreport/stories/2006/1560763.htm
http://www.idrc.ca/en/ev-95719-201-1-DO_TOPIC.html
Darling SF Gal,
I Thank you.
hoz
NHZ,
That’s what I mean
Funny thing s that I practically know nothing about the Dutch housing market, but every conceivable detail of the US market, as dedicated reader of HBB and CR since 2005.
yes, and the Dutch realtors try to keep it that way. Official home price data for Netherlands is very difficult to get, except for some very general average/median numbers. You have to trust the statistically manipulated NVM numbers, or pay for more detailed Kadaster data. I have tracked available data for some time and have plenty of old (from 1990 or so) RE magazines, so they can’t fool me
Exactly, and I’m convinced that NL has a huge bubble just like the US. Except that I think in NL there will be less liar loans and more fixed rate loans. Many loans will have insufficient amortisation in the end, but that pain will only be felt after 30 years ! Plenty time left to inflate, if it weren’t for contagion of US and UK financial markets.