March 30, 2012

The Mother Of All Scams

It’s Friday desk clearing time for this blogger. “Donald Trump is sinking millions into real estate investments, taking large risks in 2012 for the first time since ‘getting clobbered’ in the 1990s, the Wall Street Journal reported. ‘In the 1990s Trump, previously one of the biggest risk takers in the real estate business, was unable to pay hundreds of millions of dollars worth of debt,’ the Journal said. But those days are over. ‘Call me in five years,’ Trump told the Journal. ‘I view my prior investment as a sunk cost.’”

“For Donald Trump, it was a stunning landmark of the 21st century: a luxury high-rise shaped like an ocean liner and bearing his name that would turn Fort Lauderdale Beach into an international draw. In splashy brochures, Trump beckoned investors to buy into a resort that would represent ‘the finest and most luxurious experience I have created.’ Now, with the hulking, empty tower casting a shadow over one of Florida’s most popular beachfronts, investors are demanding details of the massive project’s collapse and debts of $185 million.”

“Trump, who ended his licensing agreement with the developers in 2009, has asked to be dismissed from the lawsuits, saying he only lent his name to the project. But after reviewing a host of advertisements featuring Trump and the resort, two judges have refused to release the real-estate mogul from the cases. ‘He’s going to have a hard time explaining how he didn’t approve of those ads,’ said Alex Davis, a Michigan businessman fighting to recoup a $100,000 deposit on an oceanfront studio.”

“A Toronto developer has plans under way to develop what they believe will be the first condominium building comprised of safety deposit boxes. The price of the three-inch high, 10-inch wide, 24-inch deep gold box is $3,600, with an annual fee of $109, and taxes of $64. The platinum box, which is the same length and width, but eight inches high, has a price tag of $5,500, with an annual fee of $273 and taxes of $97. As is common practice with condos, Parallax is selling the boxes as presales. ‘You have a purchase price upfront, and when you sell it, you recoup it. There’s ability to make money off it,’ says Parallax Investment Corporation’s Nigel Lawson.”

“The only thing hotter than Winnipeg’s record-breaking spring temperatures is its red-hot resale-homes market. The average selling price of an existing home in the city grew at the fastest pace in the country during the first two months of 2012, according to the report from RE/Max Canada. The report said the shortage is sparking widespread bidding wars on properties priced under $500,000, which is helping to drive up selling prices at a surprisingly fast pace.”

“‘Existing homeowners have realized substantial equity gains, especially in recent years, and many are taking advantage of the combination of historically low interest rates and equity to upgrade,’ said Michael Polzler, an executive VP with RE/Max.”

“On the surface at least, the brutal crash in the U.S. housing market, which began six long years ago, shows few signs of abating. But some industry players say early signs of a rebound are emerging. ‘We think we’re probably past the bottom now,’ says Ralph Young, chief executive of Edmonton-based Melcor Developments, which has roughly doubled its U.S. property holdings over the past year.”

“Kimberley Marr, an Ontario based real estate broker, and the author of How to Buy U.S. Real Estate: A Canadian Guide, says if you’re interested in buying U.S. property, this is the year to do it. She says home values won’t fall much further, if at all. In particular, Marr says demand for homes in the $400,000-plus range in more desirable neighbourhoods is firming up fast. ‘Inventories are down dramatically compared to a year or two ago, especially in cities like Miami, Phoenix and Orlando. I am actually seeing bidding wars now for homes in the $450,000 to $460,000 range. I was in one bidding war earlier this year with four Canadians competing for a property listed in the seven-digit range,’ she says.”

“Lori Nelson didn’t choose to leave Phoenix’s construction industry - it left her. Her three-decade career in construction ended abruptly when she was laid off in 2009, as one of 93,600 people to lose construction work in Phoenix since the industry peaked in 2006. That was the largest job drop in a single market, according to the Associated General Contractors of America. The burst of the housing bubble was largely to blame, noted Ken Simonson, chief economist for the Associated General Contractors of America. ‘Up through about 2005, there was a widespread view that people could always sell a house whenever they wanted,’ he said. ‘And then the music stopped.’”

“The Lake Havasu and Kingman area peaked in December 2005 at 7,600 construction jobs and fell to 2,300, a loss of 5,300 workers or 70 percent. After benefiting from years of retirees moving to the Sun Belt, Lake Havasu is no longer building new homes because people either cannot afford to retire or cannot sell their homes and move. ‘They’re stuck up in iceberg-land,’ Simonson said of people living in cold climes.”

“Bank-owned homes in Middle Tennessee have been selling at an average markdown of nearly 40 percent from their original purchase prices, according to RealtyTrac. Local foreclosure expert and short-sale specialist Jim McCormack thinks the price declines reveal how exaggerated home prices were during the boom times, not how Middle Tennessee is flush with bargain deals. ‘The original purchase prices back then were phony,’ he said.”

“Jesse Hamby, who worked for a local subprime lender at the height of the housing bubble, said he understands why foreclosures have lingered. Communities were swiftly building homes for borrowers who were taking out no-money-down mortgage loans, he said. Some of those fixed rates Hamby saw in 2007 will expire this year. ‘Some people don’t realize they’re underwater until their homes are appraised,’ he said. ‘Every Saturday, you couldn’t traverse the roads without seeing moving vans. People couldn’t afford those properties, but they weren’t savvy enough to understand that.’”

“Not just buyers, but Mumbai developers too are feeling the pinch of the overheated real estate market owing to poor sales. This is evident as three property exhibitions have been cancelled in Mumbai until further notice. A study by real estate research firm Liases Foras had shown the weighted average price of a flat in Mumbai now costs more than Rs 1 crore. Liases Foras estimates that even if interest rates come down to 9 percent from the current 14-15 percent, the realty market needs to undergo a 33 percent price correction to go back to 2009 levels.”

“Pankaj Kapoor, MD of Liases Fores explains: ‘This tells us that land has almost been treated as a derivative that is traded with. It changes hand from owner to builder to PE funds and rises in value through the process. But nothing is created. With all capital being lost, realty has become the mother of all scams.’”

“Every Tuesday evening dozens of homeowners who cannot pay their mortgages gather in a cramped community centre near Madrid’s main bullring to discuss strategy to fight their banks. Newcomers, many of them immigrants from South America, take turns speaking about how close they are to eviction. In the early 2000s it was easier for a poor immigrant to buy a house than to rent. Landlords in Spain typically ask for a 6-month or even 1-year rental deposit, whereas banks pitched home loans with no downpayment.”

“Some brokers set up storefronts and painted themselves as non-profit groups aiding immigrants. ‘The risk management was zero. They gave loans for everything,’ said Jose Antonio Garcia Rubio, economic secretary for the United Left, a minority political party.”

“Carlos BaInos, whose Association of Victims of Foreclosures helps them negotiate with their banks, says a new law to allow people to hand in the keys to the bank with no penalties might set off a dangerous wave of defaults. ‘The banks are largely to blame, but the home buyers know they share the blame too. I tell my clients learn your lessons, don’t get over your head in debt. Everyone was buying a house, even people who shouldn’t have,’ he said.”

“London outperformed the rest of the country, with a monthly price rise of 1.4 per cent and an annual rise of 4.2 per cent, with average property prices now £354,300. A beach hut with unforgettable views, but no running water, has been put on the market for an eye-watering £145,000. The one-room wooden building on the beach at Mudeford Spit, Dorset has stunning views across to the Isle of Wight, but has no mains electricity or toilet. Despite this it is expected to attract a lot of interest after a neighbouring beach hut sold recently for £126,000.”

“To their friends and neighbours, Samuel and Lorna Moore enjoyed a lifestyle similar to the rich and famous, splashing out thousands of pounds on luxury status symbols including a helicopter and top-of-the-range rally car. Their company later went into liquidation, owing millions. Sister companies controlled by the family are believed to owe up to £20m to the Presbyterian Mutual Society (PMS), whose collapse required a bailout by the taxpayer.”

“The PMS also loaned money to Moore Associates (NI) and Li Developments — both part of the SHM Group controlled by Mr Moore — in early 2008, close to the peak of the property boom. But then the bubble burst, with the value of development land plummeting by up to 90% while properties saw their value halved. Last December the PMS appointed receivers to properties owned by Moore Associates (NI) and Li Developments. The portfolio, which stretches from Dervock in north Antrim to Fivemiletown in Co Tyrone, includes a row of vacant terraced houses in Ballymoney.”

“Yesterday the Belfast Telegraph spoke to Samuel Moore about his family’s financial situation. Mr Moore said he did not wish to comment on any of the issues put to him by this paper which included his family’s debts and their portfolio of empty properties strewn across Northern Ireland. But Mr Moore did say that the purchase of a custom-built World Championship specification rally car in January 2008 was made while ‘things were going well.’”

“The Anti-Eviction Taskforce protests are happening with ‘increasing frequency’ and argues that there is ‘no moral reason why any individual or family should be threatened with eviction from their home’. Independent TD Joan Collins says their aim is ‘that there will be no evictions or repossessions of family homes in Ireland.’ Does that mean that broke developers living in plush multi-million euro pads get to keep their ‘family’ home? Perhaps not – other protesters say that they are against the ‘forced removal of ordinary people from their homes.’ Still, how does one define ‘ordinary’? Does it include the accountant who made a ‘last-ditch bid to save €2m family home,’ as the Irish Independent headlined recently?”

“Similarly, the notion that people will be ‘removed, thrown out on the streets and left to fend for themselves’ is emotive nonsense. There is a welfare safety net in Ireland. Many people opted not to saddle themselves with massive mortgages during the bubble years. Instead, they rented. Will Deputy Collins give these people a free house as well?”

“Stories of individual difficulty can tug at the heartstrings, but the narrative being spun quickly unravels when one looks beyond the surface. Take the high-profile case in Laois recently, where a crowd of people prevented a repossession order being carried out. The property in question had been bought in 2003 and a top-up loan taken out in 2006. Shortly after that, the person fell into arrears. Despite being in arrears for six years – twice as long as he was meeting his mortgage repayments – he was allowed to remain on in his property.”

“Another person writes: ‘In 2008 I believed that if I didn’t get on the housing ladder now, I never would as prices were increasing by the day … the house I chose cost €315,000, very cheap for the time.’ One can sympathise, but the reality is that the bubble had burst by early 2007 and prices were tanking in 2008, when it became obvious that further big falls were inevitable. Nor was €315,000 ‘very cheap’ – average house prices peaked at €311,000 in February 2007.”

“Forget all the populist Land League rhetoric. Loans to Irish residents increased from €110 billion in January 2003 to €350 billion by December 2008. The mortgage market just went nuts. As for the banks, remember that the Irish taxpayer now owns AIB, Permanent TSB, EBS, Irish Nationwide and Anglo. The taxpayer has pumped billions into the banks, and it is in the taxpayer’s interest that as much of this money as possible is recouped.”

“That doesn’t mean turfing out people who have fallen into arrears – it is only right that an effort be made to accommodate those who may, in the long run, be able to emerge from their current difficulties. Many people borrowed sums that they will never be able to repay, however, and it’s time that everyone – house owners, bankers and politicians – faced up to this ugly reality rather than simply wishing it away.”




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70 Comments »

Comment by Cantankerous Intellectual Bomb Thrower©
2012-03-30 05:34:12

“‘In the 1990s Trump, previously one of the biggest risk takers in the real estate business, was unable to pay hundreds of millions of dollars worth of debt,’ the Journal said. But those days are over. ‘Call me in five years,’ Trump told the Journal. ‘I view my prior investment as a sunk cost.’”

Live and learn?

Comment by combotechie
2012-03-30 05:51:33

Donald Trump = Sargent Shultz

“I know nothing!”

Comment by Muggy
2012-03-30 06:20:11

Trump understands two things really well:

1. the cycle
2. using OPM

Comment by Cantankerous Intellectual Bomb Thrower©
2012-03-30 06:24:37

“1. the cycle”

Not so much.

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Comment by Muggy
2012-03-30 06:34:45

Really, I’ve never seen him talk like any of this is a surprise, and he licensing approach tells me that he understood not getting on the hook for too much.

 
Comment by combotechie
2012-03-30 06:43:23

Trump understands one thing REALLY well, and that is marketing.

Trump has successfully marketed himself - and his name - to the point where millions of people think/feel that (despite the evidence) he is a financial genius.

A financial genius he is not but a marketing genius he definitely is.

 
Comment by Ben Jones
2012-03-30 06:52:04

‘a marketing genius he definitely is’

Sorry, but I still think he’s a @#*^ing idiot.

 
Comment by Cantankerous Intellectual Bomb Thrower©
2012-03-30 06:56:23

Does successfully scamming hordes of people pver and over again and walking away with millions of dollars in your pocket qualify one as a marketing genius?

 
Comment by combotechie
2012-03-30 06:59:38

“Sorry, but I think he is a @#ing idiot.”

Nah, his followers are the idiots. His genius lies in convincing the idiots to follow him.

 
Comment by Cantankerous Intellectual Bomb Thrower©
2012-03-30 07:08:54

“His genius lies in convincing the idiots to follow him.”

There’s a sucker born every minute.

– P.T. Barnum

 
Comment by Ben Jones
2012-03-30 07:09:49

This is the thing about modern US media and the people that watch or listen; remember when Trump “floated” his candidacy for president? He still goes on TV and radio shows like Sean Hannity, where they quietly listen to his every word on things like bombing Iran. I don’t know where to even begin to explain how insane that whole situation is. I wouldn’t trust this duffus to water my lawn.

 
Comment by scdave
2012-03-30 07:36:20

“1. the cycle” Not so much ??

Spot on….He is a snake oil salesman that has some money….

when Trump “floated” his candidacy for president? He still goes on TV and radio shows like Sean Hannity, where they quietly listen to his every word on things like bombing Iran ??

Exactly Ben…When I see crap like this it just makes me wonder what the show planning director is thinking…Why would anyone want to know what Trump thinks about Iran ?? I mean, where are his qualifications to offer an opinion to a national audience ??

I concluded a long time ago that FOX is just a Barnum & Bailey circus…What they do best is sell “anger”…Tells a lot about some who worship at the throne of FOX…

 
Comment by aNYCdj
2012-03-30 08:21:29

Yeah bombing Iran may not have been his best idea…but why didn’t we get first dibs on Iraqs oil to help pay back our costs of war? He was right on that one.

So now what… we “win” in afgahnni and we let the Chinese control 100% of the rare earth minerals?

 
Comment by Ben Jones
2012-03-30 08:31:59

‘why didn’t we get first dibs on Iraqs oil to help pay back our costs of war? He was right on that one’

Yeah, with the Iraqis blowing up the pipelines every night. This idea that we can call dibs on Iraq oil never made sense. Do you know what the green zone was? We were paying 30k to escort one convoy in or out. How could the US take millions of barrels of oil out for decades?

How he got away with saying these things is beyond me. We can’t even get Splenda in to our embassy.

 
Comment by scdave
2012-03-30 08:47:00

but why didn’t we get first dibs on Iraqs oil to help pay back our costs of war? ??

Okay, so we go into a selective war and then demand the country that we conquer to pay for the cost of the war…hmm…

 
 
Comment by Ben Jones
2012-03-30 06:29:06

‘Trump understands two things really well’

What will he be remembered for in the housing bubble history books? Condo-hotels. Probably the stupidest RE idea outside of safe deposit box condos.

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Comment by Cantankerous Intellectual Bomb Thrower©
2012-03-30 06:32:41

“Probably the stupidest…”

Don’t forget about floating condos.

America’s Floating Communities

Explore The USA From The Comfort Of Home

If your retirement dream includes travel and variety, River Cities® is your ticket to a unique river lifestyle. Purchase one of our River Cities condominiums and make the river your home. Choose full or part time cruising options as you follow the seasons to your next adventure.

Cruise America’s 6,600 miles of inland waterways on a slow boat to everywhere.

 
Comment by Ben Jones
2012-03-30 06:40:32

This stuff is still going on:

‘Does Your Car Need A Condo? Huntersville Businessmen Say “Yes!” Think of it as souped up garage for your sweet, sweet ride. But those deluxe garages don’t come cheap, units start at $59,900 and range up to $199,900.’

http://www.foxcharlotte.com/news/top-stories/Does-Your-Car-Need-A-Condo-Huntersville-Businessmen-Say-Yes-142162063.html

 
Comment by Cantankerous Intellectual Bomb Thrower©
2012-03-30 06:51:53

“This stuff is still going on”

How does ‘real estate’ work without the ‘estate’? (Snark…)

 
Comment by Lola
2012-03-30 06:54:41

We have those here too … but they start at $285 K
http://www.thedens.ca/#home

Sheesh …

 
Comment by scdave
2012-03-30 07:47:38

Ditto here…We gottem…

 
Comment by Prime_Is_Contained
2012-03-30 11:41:01

Don’t forget about floating condos.

OMG! Amazing. Wow, somehow I had missed when that was posted…

$300K for a 500 ft^2 apt, and then you STILL get to pay almost $1200/mo in HOA dues! Un-freakin-believable.

Ok, PB, that is right up there in the race for stupidest…

 
 
Comment by Cantankerous Intellectual Bomb Thrower©
2012-03-30 06:50:28

“Trump understands two things really well”

…except he forgot one of the two things.

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Comment by Timmy
2012-03-30 09:36:47

Funny thing about Trump….

If he FAILS…. he always explains it away as “I wasn’t involved in the development… I only lent them my name”

I hope the judge fries him

 
 
Comment by Cantankerous Intellectual Bomb Thrower©
2012-03-30 06:23:37

“Trump beckoned investors to buy into a resort that would represent ‘the finest and most luxurious experience I have created.’ Now, with the hulking, empty tower casting a shadow over one of Florida’s most popular beachfronts, investors are demanding details of the massive project’s collapse and debts of $185 million.”

“Trump, who ended his licensing agreement with the developers in 2009, has asked to be dismissed from the lawsuits, saying he only lent his name to the project.”

Victory has a thousand fathers, but defeat is an orphan.

–John F. Kennedy

Comment by azdude
2012-03-30 06:48:41

trump is a wheeler and dealer.

 
Comment by snake charmer
2012-03-30 16:10:43

Trump made the same argument in Tampa, after his project here culminated in a similar debacle. At least we don’t have an unfinished building (the structure was to be shaped like a giant letter “T”) marring our skyline.

Even in an age where no ego can be too big, the fact that the media still gives this phony a platform is a disgrace.

 
 
 
Comment by Cantankerous Intellectual Bomb Thrower©
2012-03-30 05:35:40

“On the surface at least, the brutal crash in the U.S. housing market, which began six long years ago, shows few signs of abating. But some industry players say early signs of a rebound are emerging. ‘We think we’re probably past the bottom now,’ says Ralph Young, chief executive of Edmonton-based Melcor Developments, which has roughly doubled its U.S. property holdings over the past year.”

For how many years in a row have the stopped-clock bottom callers been wrong so far?

 
Comment by Realtors Are Liars®
2012-03-30 05:53:55

Associated General Contractors of America

You’ll find incompetence, graft and junk end product where ever you see this outfit. Watch your wallet. They’re nothing but problems.

Comment by Realtors Are Liars®
2012-03-30 06:00:57

Strike that folks. Associated Builders and Contractors is the clown outfit. AGC is fine.

 
 
Comment by Cantankerous Intellectual Bomb Thrower©
2012-03-30 06:29:46

“Kimberley Marr, an Ontario based real estate broker, and the author of How to Buy U.S. Real Estate: A Canadian Guide, says if you’re interested in buying U.S. property, this is the year to do it. She says home values won’t fall much further, if at all. In particular, Marr says demand for homes in the $400,000-plus range in more desirable neighbourhoods is firming up fast. ‘Inventories are down dramatically compared to a year or two ago, especially in cities like Miami, Phoenix and Orlando. I am actually seeing bidding wars now for homes in the $450,000 to $460,000 range. I was in one bidding war earlier this year with four Canadians competing for a property listed in the seven-digit range,’ she says.”

What does a Canadian real estate investor do with a $450,000 home in one of the Sand States? Buy, hold, and hope for the best? Land lordship from afar?

Or is there an uptick in Canadian immigration underway?

Comment by Al
2012-03-30 06:42:43

If they’re filthy rich, just a vacation home (thus not an investor). Otherwise, it’s a great way to dispose of money that could be better used elsewhere. If the ‘investor’ is from Vancouver, they’re probably amazed at how cheap sand state RE is, while not realizing the obvious implication.

Comment by Ben Jones
2012-03-30 06:45:38

‘just a vacation home (thus not an investor)’

Bzzz, wrong answer. We’ve addressed that a million years ago; Why wouldn’t these filthy rich people just stay in one of the many AZ resorts? It’s a lot cheaper and they don’t have to rake leaves when they get there.

‘amazed at how cheap sand state RE is’

More like this:

‘McCormack thinks the price declines reveal how exaggerated home prices were during the boom times, not how Middle Tennessee is flush with bargain deals. ‘The original purchase prices back then were phony,’ he said.’

Comment by exeter
2012-03-30 07:14:20

‘McCormack thinks the price declines reveal how exaggerated home prices were during the boom times, not how Middle Tennessee is flush with bargain deals. ‘The original purchase prices back then were phony,’ he said.’
——————————————————————————-

This comment jumped off the page in bold letters.

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Comment by Al
2012-03-30 07:56:12

For the filthy rich, they can’t tolerate living in a rental room, even a resort. They need their own space. And why would they rake their own leaves? But yah, that’s probably not a large group.

At $450,000k, sure the sand states aren’t really cheap, but have you seen Vancouver price tags? Most overvalued in North America.

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Comment by Ben Jones
2012-03-30 08:26:18

‘why would they rake their own leaves’

Because otherwise they couldn’t get in the door.

I say that about raking because back in the day, I used my Sedona neighbors to explain this. They lived in California, probably paid over $400k. They would show up every couple of weekends or so and spend the whole time raking, watering, cleaning out gutters. Then they would drive home. In Sedona there are a bunch of resorts that they could have stayed at for a fraction of what this was all costing them, especially if they had been paying someone to do these chores (which they couldn’t or wouldn’t do).

Basically, they were speculating. When I left Sedona they were still trying to sell that place.

 
Comment by Al
2012-03-30 08:40:08

There are some snow birds that don’t mind maintaining a house in both Canada and the US (usually Florida for some reason). They prefer to have both feel like home as apposed to using a resort. Some percentage of these folks can full on afford it, though I would guess it’s a smallish percentage. For some it’s a hybrid thing. They see their US residence as an investment as well as an escape from snowy winters. Depending when they bought they’ll be sadly disappointed in the investment aspect. For some it’ll be a disaster.

The worst case scenario I can envision is someone who tapped into their million dollar Vancouver crack-shack equity to buy their US property. Crash at home and flat to slowly declining in the US. This scenario could be a snow bird or a speculator.

 
Comment by Arizona Slim
2012-03-30 09:17:05

They would show up every couple of weekends or so and spend the whole time raking, watering, cleaning out gutters.

Wow! What a fun weekend! I’ll bet they were bragging about it all week after they got back to CA.

 
 
 
 
Comment by Ben Jones
2012-03-30 06:44:07

‘I was in one bidding war earlier this year with four Canadians competing for a property listed in the seven-digit range,’ she says’

One would hope they might look around and think, what’s wrong with this picture?

 
Comment by Arizona Slim
2012-03-30 09:15:22

What does a Canadian real estate investor do with a $450,000 home in one of the Sand States? Buy, hold, and hope for the best? Land lordship from afar?

All of the above.

And, I hate to break the news to them, but things down here in the sand states are not as rosy as they’ve been led to think. Not to mention the fact that they’ll have to find people to take care of their in-VEST-ments after they flee to avoid our baking-hot summers.

 
Comment by mattsmith
2012-03-30 11:31:16

“desirable neighborhoods like Miami, Phoenix, and Orlando”

LOL… desirable to whom?

Comment by Arizona Slim
2012-03-30 11:42:26

Desirable to people who are just itchin’ to overpay for houses in them.

Comment by mattsmith
2012-03-30 11:53:19

If you were going to overpay, wouldn’t you rather be in NYC, San Fran, or DC? any place with a little culture and not overrun with proles. Orlando is, in particular, disgusting. PHX and Miami are nice for short periods but not very good places to live.

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Comment by Cantankerous Intellectual Bomb Thrower©
2012-03-30 06:35:06

“‘They’re stuck up in iceberg-land,’ Simonson said of people living in cold climes.”

Except, presumably, not the Canadian real estate investors who are snapping up $450,000 investment properties around Phoenix, AZ.

 
Comment by Al
2012-03-30 06:49:34

“The real estate firm said Winnipeg was one of three major Canadian cities — Toronto and St. John’s were the others — to post a 10 per cent increase in average selling prices between the first two months of last year and the first two months of this year. Most of the remaining 12 cities surveyed saw increases ranging from 0.4 per cent to six per cent, with Victoria seeing a one per cent decline.”

You see. It is different here. Our sound lending practices are allowing the Canadian bubble to expand to heights never dreamed of in the US.

Either that or more realestate locusts moved into the area. If all you’re able to do is flip realestate, then that’s what you do.

Comment by Ben Jones
2012-03-30 07:01:20

‘Our sound lending practices’

http://www.bloomberg.com/news/2012-03-23/banks-tighten-condo-lending-amid-bubble-fears-corporate-canada.html

‘OSFI released new draft guidelines on March 19 for mortgage underwriting by Canadian financial institutions. Banks should take “reasonable steps” to verify a borrower’s income before granting mortgages, the agency said.’

‘Efforts by federal regulators to slow the condo market will prove fruitless, since smaller developers should still be able to tap “tier-two” lenders and foreign institutions for capital, he said. “It’s not like we’re not going to have funding for our projects,” said Lamb. “If you want to cool the market, raise interest rates.”

http://www.theprovince.com/business/Mortgage+rate+rock+bottom+buyers+rise+Royal+Bank+Canada/6364677/story.html#ixzz1qbnGE0Zu

‘Bank of Montreal’s record-low mortgage offers should help customers get out of debt faster, the bank’s CEO said on Tuesday, playing down concerns that the 2.99 per cent loans will spur unwise borrowing by already heavily indebted Canadians.’

‘BMO has been criticized for unveiling the cheap loans at a time when Canadian consumers are dealing with record high debt and when housing prices seem to be nearing bubble territory.’

‘BMO Chief Executive Bill Downe noted BMO’s low-rate offers are for a 25-year amortization only, rather than longer terms offered by competitors. “With a shorter amortization, homeowners are able to build equity faster and have the confidence of knowing what their monthly payments will be, no matter where interest rates go in the future,” he said.’

Comment by Cantankerous Intellectual Bomb Thrower©
2012-03-30 07:12:02

Sounds to me like the Canucks are swilling down the purple subprime kool-aide.

 
Comment by Al
2012-03-30 08:04:44

My point was that the less bad lending in Canada has allowed us to break the 150% debt to income ratio. The US came up a bit short. Now that’s something to be proud of. :) I suppose I should have put ’sound lending practices’ in quotes. 0% down 40 year ams aren’t exactly sound, nor is maxing out your mortgage on a 3 year term much better than teaser loans if interest rates go up.

It’s becoming common knowledge that Vancouver and Toronto condo’s are toast, even in the MSM. It will take a bit longer to realize that most other markets will have a reversion to mean too.

Good times.

Comment by In Colorado
2012-03-30 10:48:53

What I don’t get are the rising prices in Winnipeg. How hard can it be for builders to flood the market with new houses there? Unless the local gov’t is rationing building permits to keep supply low?

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Comment by Al
2012-03-30 12:11:24

Possibly speculaters chasing momentum. Compared to much of BC, Alberta and Ontario, Manitoba looks cheap. If I had staked my financial future on flipping houses I might be inclined to head there too.

There’s been a bit of an interest rate war going on amongst the lenders, with rates hitting new lows for fixed around 3%. At the same time there’s talk of CMHC cutting back on coverage. REIC types are good at spinning this type of stuff as a reason to buy now.

If that was combined with builders in the area are getting nervous and reducing spec building, it might explain the short term surge in prices.

Might as well blow that bubble that little bit bigger and maximize the damage from the fallout.

 
Comment by Lionel
2012-03-30 22:35:55

There’s a reason why Winnipeg is cheap. It’s a hellhole. I thank my parents every once in a while for having the good sense to have emigrated from that frigid, windy, mosquito-infested burg. For those not acquainted with Winterpeg, it’s built on a prairie. Miles and miles of sunflowers and flat land in every direction. I recall when Isaiah Thomas was there coaching many years ago he’d made some crack about his dog running away and he could still see it days later. There are no reasons why builders can’t expand outward. There are many stories that capture the absurdity of the bubble, but it’s hard for me to imagine a more personal and ridiculous one than prices skyrocketing in Winnipeg.

 
 
 
 
Comment by Pete
2012-03-30 12:51:41

“You see. It is different here. Our sound lending practices are allowing the Canadian bubble to expand to heights never dreamed of in the US.”

I was surprised by this and similar reports–I assumed ARMs weren’t as prevalent up there.

“Canadians worried about mortgage rate hikes”

http://www.cbc.ca/news/business/story/2012/03/28/bmo-mortgage-test.html

 
 
Comment by Realtors Are Scammers®
2012-03-30 07:19:00

Realtors Are Scammers®

Comment by Prime_Is_Contained
2012-03-30 08:45:17


“A Toronto developer has plans under way to develop what they believe will be the first condominium building comprised of safety deposit boxes.

AWESOME find, Ben!

I’m calling “peak ridiculousness” on the Toronto market.

How much more ridiculous can you get than a condo building made up of safety deposit boxes???

What a brilliant way to fleece idiots, though—the price per square foot has to be astronomical, since you’re buying only a small number of cubic inches.

Wow. Love it.

Comment by Arizona Slim
2012-03-30 09:19:43

And to think that my humble safe deposit box costs all of 60 bucks a year. I guess I’m not very aspirational.

Comment by Prime_Is_Contained
2012-03-30 11:53:27

+1, Slim.

Now you have the option of buying a box for $3K, and still paying $120/yr in HOA fees.

How could you possibly turn that down, rent a box at a bank, and miss out on the joys and appreciation of owning??

(Comments wont nest below this level)
Comment by Al
2012-03-30 12:15:26

When I first read the headline, I assumed that “safety deposit box” was a joke on the ever decreasing size of condos in Toronto. 300 square feet anyone?

http://realestate.yourmoney.ca/2011/09/smallest-condos.html

 
Comment by Arizona Slim
2012-03-30 12:21:05

How could you possibly turn that down, rent a box at a bank, and miss out on the joys and appreciation of owning?

My humble safe deposit box isn’t even upscale enough to be in a bank. It’s in a credit union.

 
Comment by ProperBostonian
2012-03-30 17:17:09

Oops, my reply went to the wrong place. Sorry.

 
Comment by ProperBostonian
2012-03-30 17:46:36

Comment to the article:

“I think this idea makes sense. I live in Markham and I am on a 5 year waiting list for a large safety deposit box.”

How can there be a 5-year waiting list for something as basic as a safety deposit box?

 
 
 
 
 
Comment by Joe
2012-03-30 10:29:38

“People couldn’t afford those properties, but they weren’t savvy enough to understand that”.

Hmmm. Here’s how much I make. Here’s how much this costs.

Oh yeah, I can see how you have to be real savvy to figure that out.

Comment by Cantankerous Intellectual Bomb Thrower©
2012-03-30 21:59:02

I call BS on that narrative.

The corrected version is, “Here’s how much I make. Here’s howmuchamonth this costs.

We can do this!

Then five years down the road, “Nobody told me my payments would more than double five years after I signed the papers.”

Comment by Cantankerous Intellectual Bomb Thrower©
2012-03-30 23:14:54

I just love this description of the subtitled version of the “Suzanne Researched This” infomercial (linked above, for your viewing pleasure):

Uploaded by palehorsepalerider on Jun 29, 2008

Heres a video with subtitles, showing a ball-less emasculated mouse man getting suckered into a giantic Mcmansion mortgage by his aggressive manipulative wife and the intrusive goading of a greedy real estate agent. Subtitles clue the viewer into the reality of each moment of this sad and all to true situation. Millions of credit unworthy morons like this, along with criminal mortgage and real estate agents have created the largest financial disaster in housing / banking history. The only bigger financial debacle of our times is the outstanding derivitives debacle yet to be unleashed onto joe public.

 
 
 
Comment by Doug in Boone, NC
2012-03-30 10:44:10

“Communities were swiftly building homes for borrowers who were taking out no-money-down mortgage loans.”

Whenever I would walk around town and see all the new houses and banks springing up like mushrooms, I would ask myself where is all this money coming from? Now, of course, that question has been answered.

 
Comment by snake charmer
2012-03-30 16:24:58

Interesting bit about the South American immigrants in Madrid. The main Bogota daily contained a large story recently about Colombians who had emigrated to Spain and were struggling to make ends meet.

 
Comment by ProperBostonian
2012-03-30 17:15:58

“How much more ridiculous can you get than a condo building made up of safety deposit boxes???” Yea, I laughed out loud when I read that so I went to the article to see if anyone had bought them.

“We have had huge demand,” he says. “I’ve been spending the last week giving presentations to all the brokerages. It’s amazing how many people are finding this such a novel concept and great way to meet market demand.”

Two questions come to mind: (1) How do you demo a safety deposit box? Um, you put the key in and turn. Wow. (2) What will they do with these after the crash? At least condos could be turned into rentals.

Comment by Prime_Is_Contained
2012-03-30 17:43:02

What will they do with these after the crash? At least condos could be turned into rentals.

I’m sure there is a market for rental safety-deposit boxes as well at _some_ price; banks seem to rent them out…

 
 
Comment by ProperBostonian
2012-03-30 18:01:44

It will be interesting to see how they spin this as a victim story three years from now when the bailouts start. “My broker assured me there was a large and growing market for safety deposit boxes. Now I’m underwater on my box.”

 
Comment by clark
2012-03-31 00:42:58

I don’t know, you guys, The Fed’s easy money seems to be lifting house prices. This guy here seems to know his stuff but good:

“If you are considering buying a house, now is the time, especially with interest rates are so low. Buy now and lock in a long-term fixed rate and you will be very thankful in three years. House price will be way up by then as will be interest rates.”

http://www.economicpolicyjournal.com/2012/03/dimon-housing-market-will-soon-head.html

P.S.
I’ve stopped reading HBB for the most part, but I do enjoy a Friday desk clearing every now and then.

Comment by Prime_Is_Contained
2012-03-31 10:57:37

Buy now and lock in a long-term fixed rate and you will be very thankful in three years. House price will be way up by then as will be interest rates.”

Too funny. If interest rates will be way up in three years, then I finally won’t be competing with idiots overpaying with OPM (other people’s money). That sounds like a good time to start looking.

Wait, scratch that. I’ll give prices a couple of years to crumble after that, then start looking.

 
 
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