As The Euphoria Is Replaced By Fear
It’s Friday desk clearing time for this blogger. “By all accounts the Phoenix housing market is showing signs of stability and recovery as the value of a typical single-family home continues to rise. While investors are playing a role in Phoenix’s housing recovery, Mike Orr, Center for Real Estate Theory and Practice at the W.P. Carey School of Business director points out over the last few years that trend has slowed. ‘Ultimately these investors are not so much a player in the markets as you are talking about,’ he said. ‘The rental rates don’t vary much as property prices do … the landlord is not making money out of it.’”
“When asked if the investor-fuelled housing recovery could be one that could again topple on itself, Mr. Orr replied, ‘No, I think that is a completely fake myth.’”
“With popular property markets like Vancouver and Toronto showing significant signs of softening, Asian investors seem to be shifting their focus south of the border, according to Canadians who specialize in marketing bargain-basement Florida houses and condos to snowbirds. ‘Some of our clients got beat out recently because they were waiting to book flights. Some Chinese investors bought up 35 (townhouse-condo) units without even flying in first,’ says Wayne Levy of Toronto-based Florida Home Finders. ‘They looked at a picture. They wrote cheques.’”
“The Bay Area’s housing market is playing host to a growing numbers of foreigners — many from China — who are looking for a future home, a good investment or a safe place to park their money. Wei Luo, an electrical engineer-turned-contractor and real estate investor, said he has helped at least 10 friends from China buy about 15 homes and condominiums in the Bay Area starting in 2009, and they’re clamoring for more.”
“‘All my friends, they say this price is so low,’ said Luo. ‘Some of my college classmates went back to China, started a business and now they come back and invest. Some buy and just leave it. They don’t even want to rent them out.’”
“Their appetite for Bay Area real estate rises from a mixture of politics and a growing global market in real estate, according to professionals. China’s housing prices appear to have peaked, encouraging some people to sell and look for other investments. There’s widespread political unease as a new government is formed.”
“I tell all my friends, ‘You got money? Buy, buy, buy,’ Luo said.”
“It was a bargain China’s zealous real estate buyers couldn’t refuse: at the East Asia Impressions Lake compound in suburban Beijing, apartments were selling for just 13,000 yuan ($2,086; £1,282) per square metre. Three hundred apartments in the compound went on sale at 0900 on a Saturday morning in late November. Within three hours, all of them were sold. China’s sizzling urban housing sector has been a fact of life since the country’s private real estate sector opened in 2000 and it is not uncommon to hear of whole apartment towers selling just as quickly. But a large chunk of Chinese society has been left out of the buying frenzy.”
“Duan Libin moved to Beijing from her native Yunnan province for university and decided to stay after meeting the man who would become her husband. She is desperate to move into her own home. The couple are expecting a child and would love to move before their baby arrives in April. However, their combined monthly income of 8,000 yuan means they could never afford to purchase even a modest apartment like the ones at East Asia Impression Lake. ‘Every day I work so hard, and then I have to return to a small space after standing on the crowded train for a long time,’ Duan says.”
“The expectant mother jokes that she would be an old lady before she could ever afford a home of her own in Beijing without government help. So why not rent forever then? Owning a home brings a sense of stability, she says, that can’t be found elsewhere. ‘If I buy an apartment, I have a home of my own. Every day when I get off work, and I see the light from my own house, I will see hope.’”
“Fewer people are achieving the great Australian dream of home ownership despite a big jump in the number of people signing up for mortgages in the past decade. The number of homes owned outright dropped in every state between 2001 and 2011, a News Limited analysis of Australian Bureau of Statistics data has found. However, mortgage numbers surged almost 45 per cent nationally in that period, from 1.87 million to 2.71 million.”
“‘The old model of buying the first home at 25 and paying off the mortgage at 50 has been eroded,” said social analyst David Chalke. ‘The group who traditionally would have paid off their home are those aged 50-plus. In 2000 18 per cent of that cohort had a mortgage - it’s nearly doubled to 30 per cent today. The majority of them never plan to stop work entirely, and they have been upgrading.”’
“Mr Chalke said the great Australian dream was still alive, with home ownership ranking second only to a happy family as our biggest sign of personal success. ‘It hasn’t shifted over the 20 years we have been measuring it, but the reality is increasingly that’s less likely to happen,’ he said.”
“Foreclosures declined slightly in Wisconsin in 2012. And there are still many foreclosures in the state that have been languishing for at least a few years. Russell Kashian, a Professor of Economics at University of Wisconsin-Whitewater, says many of the foreclosures that are working their way through the system right now in the state are actually cases of delayed foreclosures or what he calls ‘reforeclosures.’ He says the typical foreclosure can take 18 months to two years, however some foreclosures in the state have actually been lingering for up to five years.”
“‘We’ve found that about 35% percent of people who had foreclosures filed against them in 2012, were people who in 2010 or ‘11 had a foreclosure lawsuit filed against them,’ he says. ‘And for some in some fashion they were able to forestall the inevitable.’”
“Many details of the $8.5 billion mortgage foreclosure settlement that federal banking regulators announced Monday have not yet been finalized. Here are some answers for borrowers. Q: Who’s eligible for compensation? A: You’re eligible if your primary home was in some stage of foreclosure in 2009 or 2010 and your loan was handled by one of the participating servicers. Q: Must I prove that I was harmed? A: Probably not.”
“Q: What if I didn’t suffer a foreclosure abuse? A: You’ll still be paid. But it will may be a small amount. Q: What if I think I should get more than what I do? A: No appeals allowed. You still could sue the servicer.”
“Charles Wanless, a homeowner in the Florida Panhandle who is fighting foreclosure proceedings with Bank of America, says he doubts the money will benefit many who lost homes. ‘Let’s say they already foreclosed on me and I lost my home,’ said Wanless. ‘What’s $1,000 going to do to help me? If they took my house away wrongfully, is that going to get me my house back?’”
“Five years ago, Joseph Keller, 10 months behind on his mortgage payments, received notice of a foreclosure judgment from JP Morgan Chase. The 58-year-old former social worker and his wife packed up their home of 13 years and moved in with their daughter. Joseph thought he would never have anything to do with the house again. Then it started to stalk him. First, in 2010, the county sued Keller because the house, already picked clean by scavengers, was in a shambles, its hanging gutters and collapsed garage in violation of local housing code. Then the tax collector started sending Keller notices about mounting back taxes, sewer fees and bills for weed and waste removal. And last year, Chase’s debt collector began pressing Keller to pay his mortgage, which had swollen, with penalties and fees, from $62,100.27 to $84,194.69.”
“The worst news came last January, when the Social Security Administration rejected Keller’s application for disability benefits; the ‘asset’ on Avondale Avenue rendered him ineligible. Keller’s medical problems include advanced liver disease, hepatitis C and inactive tuberculosis. Without disability coverage, he can’t get the liver transplant he needs to stay alive. ‘I can’t make it end,’ says Keller. ‘This house, I can’t get out.’”
“Consider it a New Year’s resolution for Montrealers selling their homes at a time when the words ‘moderation’ and ‘reasonable’ are in vogue. Several real estate brokers say sellers now recognize they’ll have to lower prices that are no longer realistic. ‘Sellers are asking for prices based on a five-per-cent to seven-per-cent increase in value per annum over the past two to three years,’ observed Royal Lepage broker Ray Singh.”
“Singh and other Montreal real estate brokers are now seeing examples of houses being sold for $200,000, or even $500,000 below the original listing price. One suburban Montreal home listed for $2.4 million boasted a ‘fabulous solarium-style outdoor living room,’ O’Hara style staircase. But five months later, the Dollard des Ormeaux home sold for $1.85 million, or about 25 per cent below asking price. In another recent case, a four-bedroom Hampstead home initially listed for $1,095,000 ended up selling for $810,000.”
“It’s not just Vancouver where realtors’ BlackBerrys no longer buzz. In Toronto, the city’s once insatiable demand for living in 650 sq.-ft. glass boxes has evaporated overnight. A housing correction—or, possibly, a crash—is no longer coming. It’s here. With few exceptions, the impact will be indiscriminate as the euphoria of rising house prices is replaced by fear. The only question now is how bad things will get.”
“As people watch their net worth crumble—at least on paper—they are less likely to spend money on everything from new dishwashers to automobiles. ‘We talk about having a strong housing market because we have a strong economy,’ says Ben Rabidoux, an analyst at M Hanson Advisers. ‘But it’s also true that our economy is strong because we have a strong housing sector.’ He estimates that as much as 27 per cent of GDP can be linked to Canada’s housing market, a disproportionately large number compared to other countries, including the U.S. at its peak. ‘Take it away and that alone puts us into a recession, given where we are,’ Rabidoux says.”
“Bay Street is getting nervous. Avery Shenfeld, chief economist at the Canadian Imperial Bank of Commerce, recently warned Ottawa to ‘be careful what you wish for’ when it comes to winding down the housing market. He argued in a report that ‘a five per cent per year drop in housing prices, for example, would shed roughly a half-point off GDP growth through its wealth effect on consumer spending.’ He added: ‘That makes it even more urgent that the global economy is healthier come 2014, when the full bite of a housing slump on domestic activity will be felt.’”
“It all amounts to a dramatic reversal of fortune for Canadians, albeit one we brought on ourselves. Back in 2009, our hot housing market acted as a life preserver in a sea of economic uncertainty. Now it feels more like a cinder block tied around our necks.”
“The rental rates don’t vary as much as the property values do… the landlord is not making money out of it.”
He is if he is using OPM. If done right he can show on paper that he is making some big bucks and from these big bucks shown on paper he can extract his two-and-twenty - plus his fees for being a landlord.
The two-and twenty he extracts is taken out in the form of real money and are taken out regularly; The big bucks that are shown on paper - the invesor’s share - remain on paper. Somewhere down the line this paper may be converted into real money and it is then that there might be an oops moment but, hey, that’s then and this is now.
Mr. Orr replied, ‘No, I think that is a completely fake myth.’”
A few years ago we established right here that Mr. Orr is the myth maker.
(he and his minions are quite active in their myth making in the e-world;) )
How many myths that Mr. Orr and his myth makers created weren’t fake?
The poor guy was obviously raised in an ‘Orr house.
HA!
Heard this guy speak a handful of times. He always says when he starts that he doesn’t do outlooks for the housing market that go out more than about 6 months. His conclusions are based 100% on data that he compiles himself from public records and he only studies Phoenix (Maricopa county). He actually counts the shadow inventory and counts how many sales are going to investors.
Last time I heard him speak a few months ago he said he thinks investors trying to get out at some point may cause a disruption in the market if the economy is still struggling, but his guess is that it won’t as investor activity has already slowed and inventory remains low. Also said there is very little shadow inventory in Phoenix likely due to the trustee sale process in Arizona.
‘Also said there is very little shadow inventory in Phoenix’
No, he told the media shadow inventory was a myth too. He must like that word.
Well, when I heard him speak he said there is very little shadow inventory in Phoenix. He didn’t say the concept was a “myth”. To be clear, his definition of shadow inventory is housing where the owner is significantly delinquent (I think he used 60 days) or foreclosed on and the house isn’t currently listed. He doesn’t include people that are underwater and still paying that are more likely to end up as a short sale or foreclosure.
Orr is an established liar.
There is very little shadow inventory in Phoenix. But there is no shortage of newbie landlords speculating with their retirement or government loans, sitting on a bunch of overpriced rental properties for which there is little or no demand.
I’ve read upwards of 30% of housing units are empty in the summer.
There is coming an oh-shit moment at the intersection of low demand, low incomes, and overpriced rentals that could wipe out these newbie landlords, especially if the large P/E firms decide to exit their investments.
There is very little shadow inventory in Phoenix. But there is no shortage of newbie landlords speculating with their retirement or government loans, sitting on a bunch of overpriced rental properties for which there is little or no demand.
Preach it, brother_jimmy! Same thing’s going on here in Tucson.
And, in the neighborhoods around the University of Arizona, there are quite a few apartment complexes running move-in specials. Also, many SFRs with “for rent” signs creaking in the breeze.
“…shadow inventory was a myth too…”
It’s really more of a meme than a myth, and I did my best to popularize it years ago right here on the HBB.
Memes tend to die off over time unless they are supported by real-world data. The same principal applies to other “memes” such as “housing bubble,” “bailouts,” “too-big-to-fail,” etc.
What surprises me is that the national “dream” concept exists in Australia too. And it includes house ownership. Imagine that! There is a Chinese Dream, and it involves owning a residence too.
The political imperative has nothing to do with democracy. Instead it’s for every person on the world to be burdened by interest payments. If the Earth still was inhabited by cavemen, they’d need to be sold a Paleolithic Dream.
An excess of greed turned the dream into a nightmare.
‘If the Earth still was inhabited by cavemen, they’d need to be sold a Paleolithic Dream.’
Fred Flinstone the Foreclosure King
“Q: What if I didn’t suffer a foreclosure abuse? A: You’ll still be paid. But it will may be a small amount. Q: What if I think I should get more than what I do? A: No appeals allowed. You still could sue the servicer.”
Does anyone who sticks out his hand qualify for foreclosure settlement money?
“As people watch their net worth crumble—at least on paper—they are less likely to spend money on everything from new dishwashers to automobiles. ‘We talk about having a strong housing market because we have a strong economy,’ says Ben Rabidoux, an analyst at M Hanson Advisers. ‘But it’s also true that our economy is strong because we have a strong housing sector.’ He estimates that as much as 27 per cent of GDP can be linked to Canada’s housing market, a disproportionately large number compared to other countries, including the U.S. at its peak. ‘Take it away and that alone puts us into a recession, given where we are,’ Rabidoux says.”
Boo hoo. We’ve warned here on the Canada bubble for years on end, and I am pretty sure we are hardly the only bubble warners on the internet.
I look forward to reading all the tough-luck stories about FBs whose real estate investments soured, and to watching Canada’s housing market melt down spectacularly from a safe distance to the south of the border.
The thing is, both the Canadian and Australian housing markets were in bubble territory, faltered in 2008, and governments of those countries then pulled out all the stops to revive the party. They deserve a disaster and they’re going to get one.
As does the U.S., I might add. A country that truly had recovered its senses would bestow no credibility on people like Mike Orr.
‘A country that truly had recovered its senses…’
Let’s take the Mercury News. Always the REIC cheerleader, there isn’t a hint of caution in this piece:
‘Kevin Kieffer of Keller Williams in Danville said…one client is looking for a home armed with $425,000 in cash wired to him by his mother in India. “That’s happening quite a bit, that money for a deal will come from many sources — parents or relatives abroad, or whatever it happens to be,” said Barbara Lymberis, president of the Santa Clara County Association of Realtors. “The seller and buyer could be domestic, but the money is global. Funds can be banked anywhere in the world and utilized anywhere in the world.”
“Jennifer Tasto, a broker at Property Services in Burlingame, said she has done $5 million in cash transactions in the past 12 months with Chinese buyers, becoming an expert in global money transfers along the way. One client is buying a home for her children even though they’re still in elementary school. Tasto said she lost one bidding war for a Palo Alto home even though her client offered $390,000 over asking price.”
“With fewer homes on the market than normal, the competition from investors paying cash continues to squeeze out first-time buyers. But it helps boost prices, which in the long run should persuade more would-be sellers to list their homes. Machinist Jason Poling said it took him and his wife from June to November, and 16 failed bids, before he finally got lucky on his 17th offer and snagged a $325,000 home in San Ramon. The competition was fierce with as many as 14 offers on some houses, he said. About half the bidders were investors, he said.”
“It’s really hard, because they have cash. It’s really hard to compete with that,” Poling said.”
So Poling didn’t have cash, meaning he borrowed the money to outbid “investors.” Guess who backed that loan? Isn’t it odd that a government that is considering all manner of cuts can find the means to back loans to compete with Chinese to buy our own houses? And like I said, not one word of caution.
“Isn’t it odd that a government that is considering all manner of cuts can find the means to back loans to compete with Chinese to buy our own houses? And like I said, not one word of caution.”
Ongoing real estate price supports in the face of steep budget cuts are clearly yet another example of American Exceptionalism.
And like I said, not one word of caution.
Perhaps we should craft up a form email (so it’s easy to modify to fit a given situation) and start sending letters to the editor to papers that print articles like this…A letter campaign to the nation’s newspapers.
‘One client is buying a home for her children even though they’re still in elementary school. ‘
What does this sentence mean?
“What does this sentence mean?”
That two spoiled Chinese kids will never know the value of a dollar.
‘What does this sentence mean’
It means the same as this:
‘Some buy and just leave it. They don’t even want to rent them out.’
It’s speculation. I recall seeing this not even renting stuff way back in 2005 or 06. I think I saw it first in THE Orange County. (That’s in California, for you hicks out there.) Something about renters might be a bother, and besides, it was gonna be flipped soon anyway.
What does this sentence mean?
It means that unlike us bootstrapping Americans who kick our kids out of the house when they turn 18, wealthy Chinese (and pretty much all wealthy people around the globe) keep the kids close.
I have a wealthy Mexican friend who fits this to a tee. When he finished college there was no question as to whether or nor he would work at the family business. And because he did that he never had to worry about things like mortgages or car payments.
His younger brother wanted to bootstrap and start his own business. His father told that unless he came back to the family biz, he would be cut out of the inheritance.
They might be made of gold, but they still are handcuffs.
They might be made of gold, but they still are handcuffs.
Same sort of thing happened in my family. And, had my mother been more interested in currying favor with my father’s family, she would have been all to eager to accept the family “help.”
But Mom was a working class kid from Buffalo. Dad’s family had money and then some. They weren’t too happy about my father’s choice of wives. Not of their social class and all that.
My mother thought that they were a bunch of whiny emotional cripples who lacked a work ethic. So, she and Dad turned down the money. And the handcuffs that came with it.
IMHO, my parents made the right decision.
Pesky assets and asset backed securities. Traders want them to be bought and sold as easily as a completely virtual financial product, like a stock.
from my Chinese Engineer friend in Santa Clara
I heard another story today at lunch that the parents of a Chinese student at USC bought a 1.2 Million luxury Condo for her.”
we export inflation and it comes right back
“The thing is, both the Canadian and Australian housing markets were in bubble territory, faltered in 2008, and governments of those countries then pulled out all the stops to revive the party. They deserve a disaster and they’re going to get one.”
Yup. And when the Canadian market plummets, what will that do to Canadians who ’snapped-up’ 2nd/vacation/investment homes here in Florida? Stand by for Round Two in the great Re-foreclosure Rumble! The Stampede in the Swamplands is ready to begin!
What does it mean when investors in Canada, Australia, and China can cash out in their own countries at the peak of their bubbles and outbid, in cash, in depressed price post-bubble property in areas in the US?
Does this sound like depressed post bubble property?
‘Jennifer Tasto, a broker at Property Services in Burlingame said she lost one bidding war for a Palo Alto home even though her client offered $390,000 over asking price.’
This sounds like nothing so much to me as the endgame of the Japanese “takeover” of heritage American real estate in the mid-to-late 1980’s. And we all know how THAT ended up….
“…and governments of those countries then pulled out all the stops to revive the party.”
That sort of policy response, known by various names such as “respiking the punch bowl,” “hair-of-the-dog hangover cure,” “doubling down,” etc., seems to be pretty common these days.
P.S. “The Crosby” development mentioned in the story posted below is within a couple of miles from where we live.
Real Estate
The Great Housing Rebound of 2012: How the Fed Helped Sellers Beat the Odds
By Christopher Matthews
Dec. 27, 201212 Comments
Sam Hodgson / Bloomberg / Getty Images
Construction crews work at the site of the Arista at the Crosby development in Rancho Santa Fe, Calif., on Dec. 21, 2012
Follow @TIMEBusiness
Without a doubt, the U.S. housing market has been the most successful sector of the economy this year, and Wednesday’s Case-Shiller home-price index report — which showed a fifth consecutive month of year-over-year increases in home prices nationwide — was a late Christmas present for homeowners across the country.
The housing-market “bottom” was one of the biggest business stories of 2012. After years of falling home values, the data clearly showed that the bleeding stopped somewhere in the first part of 2012 and that home prices have actually begun to slowly rise since then. In addition, other indicators like housing starts, new home sales and foreclosure statistics all point toward a healing housing sector.
These dynamics have gotten some economists and market analysts excited about the growth prospects for the U.S. economy in 2013. Robert Johnson, director of economic analysis for Morningstar, called housing “the big change factor in 2013″ and believes that “direct housing investment will be a meaningful contributor” to economic growth in 2013. He also sees industries related to housing — like furniture manufacturing and sales — adding to economic growth in 2013 as the housing market begins to pick up.
…
One amazing fact that comes out loud and clear from all these stories about governments throughout the developed world propping up their housing prices: No lessons have been learned yet from the housing bubble episode, and government leaders remain stuck in the denial stage of the housing bubble stages of grief.
“As people watch their net worth crumble—at least on paper—they are less likely to spend money on everything from new dishwashers to automobiles. ‘We talk about having a strong housing market because we have a strong economy,’ says Ben Rabidoux
Funny how stagnant wages never seem to enter the picture about why people aren’t buying stuff.
I’m with you, In Colorado.
I couldn’t care less about my net worth. But I care a great deal about the money in my checking account and the cash in my pocket.
Exactly, your net worth is something you save for when you retire.
I’m retired. I care. No riskless return over inflation. Or even close.
The Economist: Canada now among the world’s most overpriced housing markets based on rents and incomes. U.S. housing slightly undervalued by those measures after big drops.
http://www.economist.com/news/finance-and-economics/21569396-our-latest-round-up-shows-many-housing-markets-are-still-dumps-home
Of course that observation need not apply to New York and San Francisco.
From the article:
“Misalignments with our gauges of fair value can persist for a long time, of course. That may spare countries where house prices have clearly overshot from a painful bust, but it may also mean that some markets end up mimicking Japan’s long descent and badly undershoot. At some point, central banks will have to take away the balm of easy money. If housing markets remain so fragile when they are getting so much help, they may break when it is removed.”
Sacramento Article;
http://cl.exct.net/?ju=fe5b137870650c7c7710&ls=fe1b1d777d6c017e741275&m=fefc1172766306&l=fed1157376640678&s=fe35157277640d7d711074&jb=ffcf14&t=
Heard (second hand) about a builder in the central valley who built about 50% more homes last year than they had expected, and now they are concerned that they may not have any land ready for building in 2014 (that they will get through the land they have ready in 2013).
Based on the numbers they gave, they would need to have almost a doubling of activity in 2013 vs. 2012, so I doubt they run out in 2013. That said, builders are starting to see that their land holdings are finite and insufficient for normal forward planning.
We are working on a project in that region to obtain entitlements for additional housing (already in the general plan as housing, surrounded on 3 sides by housing, etc…a logical next step for the city). So far, it’s been nearly a decade; insane barrier to adding supply.
Right RentalPimp….. your “running out of land” meme is incredulous.
I never said we are running out of land…there is plenty out there.
Getting governmental approvals in California for building on that land is a different story.
‘Getting governmental approvals in California’
Or doing business in California of any sort. Lots of land should ensure cheap housing. And they wonder why people are leaving.
“Lots of land should ensure cheap housing. And they wonder why people are leaving.”
Bingo.
I saw some data a while back that showed in-migration fall like a rock during the bubble, and go up after the crash. Housing prices seemed a logical culprit.
Add on top of it high permit fees, “green” building codes, etc., and it’s hard to build new, inexpensive homes.
The problem in getting land entitled has been going on for a LONG time…and one major reason why CA, despite high unemployment, has low vacancy rates.
Lots of land should ensure cheap housing. And they wonder why people are leaving.
That is why we left, expensive housing, plain and simple. With crowds and traffic jams being reason #2
It was never about taxes or unions.
In CA we have Mello Roos These are taxes for ~20 years home buyers must pay to fund schools or whatever
Yeah, new home sales were up, probably because you can get a hell of a lot more new home for the same price as a run down crapshack elsewhere in town. Build quality is probably awful, but hey, they look nice, right?
Some Chinese investors bought up 35 (townhouse-condo) units without even flying in first,’ says Wayne Levy of Toronto-based Florida Home Finders. ‘They looked at a picture. They wrote cheques.’”
I wonder how you say Caveat Emptor in Mandarin?
‘They looked at a picture. They wrote cheques.’” ??
With money from where ?? Anyone that will part with their money that easy, came by it easy or illegally….No easier way to cleanse foreign money then in U.S. Real Estate because we have a huge clearing house called FNMAE/FREDEMAC…
From the Mercury News:
‘That’s happening quite a bit, that money for a deal will come from many sources — parents or relatives abroad, or whatever it happens to be,” said Barbara Lymberis, president of the Santa Clara County Association of Realtors. “The seller and buyer could be domestic, but the money is global. Funds can be banked anywhere in the world and utilized anywhere in the world’
Yes, but walk into a car dealership with $3,000 and you will be reported. Some will say, but it comes from a bank account. So what? Do we have any idea how these Chinese are getting enough cash to buy 30 condos sight unseen? What if they were Colombian’s loaded up with cash?
And more and more, it is reported that they are looking for a ’safe-haven’ or ‘getting their money out of China’. Look at how many billionaires are in the top of the communist party, where ‘to get rich is glorious.’ This while many millions of families are living in tiny one bedroom apartments. This whole situation is so screwed up it warrants a congressional investigation.
“This whole situation is so screwed up it warrants a congressional investigation.”
Perhaps, but if it is indeed helping to fuel a housing “recovery”, you ain’t gonna get one.
‘if it is indeed helping to fuel a housing “recovery”
Every once in a while, some issue like that crosses path with the global housing bubble. It’s impossible to ignore the incredible amount of money pouring out of China. So what does this mean? I’ve asked for a while now if the housing bubble might be the spark that burns down the chi-com government. Even a serious revolt in China would shake up financial markets, globalism, commodities, lot’s of things.
It’s impossible to ignore the incredible amount of money pouring out of China. So what does this mean?
The rest of the world ignored the incredible amount of money pouring INTO China for decades. IMO this means the amount flowing OUT will be ignored also. However, investments outside of the Party’s reach are subject to confiscation by a variety of means.
‘the amount flowing OUT will be ignored also’
China probably has the biggest housing bubble in the world. It’s likely that much of this exiting cash is related to that bubble. When China crashes, are these people going to sell this US property and take it back to China? I kinda doubt it. So what if the Florida condo they paid $150k can only be sold for $50k? They got $50k out, right? So they aren’t going to care if they lose money on the deal; it wasn’t about investing in the first place.
Then how do they get their hands on this $50k? Do they leave China and sell, or live off the rent? How do they get out, what about citizenship, etc? The whole little theory seems a bit precarious when one starts to think how it plays out. And that’s not even going into how will a few hundred million people react when they are plunged back into poverty, all at the same time.
how will a few hundred million people react when they are plunged back into poverty, all at the same time.
Should China go that way, the USA will almost certainly follow. Then Americans won’t have spare time or attention to wonder about the other side of the world.
what about citizenship
When people want to walk into the US, money can talk for them. There is more than one way to repatriate money the US owes to other countries. The US will most likely continue its no-borders policy. If enough years pass, there will of course be US citizen anchor babies born of Han Chinese from the Middle Kingdom. Chinese citizens will also acquire US citizen in-laws & other relatives.
it wasn’t about investing in the first place.
I agree with you. US real estate may become a ’safety net’ or place of refuge for Chinese citizens should turmoil break out in the old country. It’s not an investment in the popular sense of the word, but it may turn out to be money well spent.
We are going to become the host country of the world-wide Robber Baron-class
It should be obvious to anyone by now that the US of A operates under the “Golden Rule”, at least when it comes to policing the activities of white collar/entrepenuer-class criminals.
Our problems won’t be caused by the Socialist/communist-wretched refuse class voting themselves money.
They will be caused by the “Head rots first” Global elites/leadership class buying our government.
They will rip off the Chinese peasants, buy their way into our country, then use offshore tax shelters, and bitch about their tax rates.
If the Chinese want a safe house to escape to when China collapses, it seems to me that a $400K condo in Frisco is the worst place to fend off the zombie apocalypse. Why not buy 4-5 Oil City houses and plan a commune for the same price?
What would Sun Tzu do?
“And that’s not even going into how will a few hundred million people react when they are plunged back into poverty, all at the same time.”
Their government’s interest to avoid that scenario is the reason I expect household-level Chinese bailouts before it gets this bad.
“…a $400K condo in Frisco is the worst place to fend off the zombie apocalypse.”
You do realize, I assume, that San Fran has one of the largest, oldest, most self-sufficient expatriate Chinese communities on the planet?
I agree Ben….IMO, its part of the Out-of-sight Out-of-Mind…Or maybe just flat “Look the other way” in the interest of saving the banks a$$es…
The motivation doesn’t concern me as much as this house of cards they are building with house prices. Who is going to buy these houses at the prices these money launderers are paying?
Greater fools?
“China probably has the biggest housing bubble in the world. It’s likely that much of this exiting cash is related to that bubble.”
I view the present real estate investing dynamic as the global version of the internal U.S. housing bubble investment flow back when California real estate was always going up.
So long as California home prices rose, liberated equity inflated prices in nearby housing markets in Oregon, Idaho, Utah, Nevada, Washington state and the Baja. Once California prices tanked, these neighboring markets were left high-and-dry.
It’s just a matter of time until the cash currently flowing out of China into West Coast North American coastal real estate markets dries up, leaving these areas similarly short of residential property demand. Perhaps the Fed can step in at that point as buyer of last resort?
correct
how long we got ?
And more and more, it is reported that they are looking for a ’safe-haven’ or ‘getting their money out of China’. Look at how many billionaires are in the top of the communist party, where ‘to get rich is glorious.’ This while many millions of families are living in tiny one bedroom apartments. This whole situation is so screwed up it warrants a congressional investigation.
Well, it’s one way of repatriating all those dollars we’ve been sending them for WalMart junk.
That’s true. It seems like a pretty good deal for America to get all these manufactures from China in exchange for green paper with presidents’ pictures ascribed thereto, until you realize the other end of the trade is Chinese real estate investment on American soil.
Our land is going to outlive the truckloads of cheap manufactured crap we buy from them by a long time.
“…Do we have any idea how these Chinese are getting enough cash to buy 30 condos sight unseen…?”
By owning the factories that American “job creators” contract with to outsource our labor?
“Do we have any idea how these Chinese are getting enough cash to buy 30 condos sight unseen?”
I assume this is the cash that’s been flowing out the back door of Walmart and other retailers. Cash that used to be spent to buy US bonds, perhaps.
They pay cash. No involvement of Fannie or Freddie.
‘They pay cash.’
Not always.
‘For the nouveau riche in China with a portfolio of real estate assets, there is a certain appeal about buying overseas property. There are no limitations from banks on home loans, the returns are stable, ownership is permanent and some countries even throw in a package deal for a citizenship with purchase. But a big investment return always comes with high risk.’
‘Indeed, there are many stories from affluent Chinese who purchased properties in the United States or Europe but are then confronted with massive tax bills and high maintenance fees. Wang Min, owner of a textile company in Guangdong province in South China, bought an 80-square-meter apartment in Houston, Texas, for $100,000 two years ago. He thought he could just sit on it and count the dollars as it appreciated in price. But he quickly discovered there was a lot more to do after the down payment.’
‘It’s harder than you think to invest in the US real estate market,’ he says. ‘Apart from the payment of the house, there are so many invisible costs like monthly management fees, garbage fees and property tax every year, so basically you earn very little because you have to use the rent to cover those expenditures.’
http://thehousingbubbleblog.com/?p=7530
“The worst news came last January, when the Social Security Administration rejected Keller’s application for disability benefits; the ‘asset’ on Avondale Avenue rendered him ineligible. Keller’s medical problems include advanced liver disease, hepatitis C and inactive tuberculosis. Without disability coverage, he can’t get the liver transplant he needs to stay alive. ‘I can’t make it end,’ says Keller. ‘This house, I can’t get out.’”
I nominate this guy as the most effed of all FBs.
I hate to say this, but I think we’re going to be reading about this man’s death before too long.
And this is a story that his family will remember for many generations to come. Same way that story about my aunt and grandmother going to the bank one day is remembered.
It was during the Great Depression, the bank was closed, and my grandparents treated what happened to their money like a state secret from North Korea. None of us ever knew what happened, but we suspect that Grandma and Grandpa lost it all.
“Joseph thought he would never have anything to do with the house again. Then it started to stalk him.”
Real estate journalism at it’s best!
“‘The rental rates don’t vary much as property prices do … the landlord is not making money out of it.’”
Here’s the problem. Old people are afraid of what will happen to their money. The banks are paying almost nothing. Real life: old foggie has $350K in bank and if, big if, he could get 3.5%, would get a return of $12,250. Now old foggie buys a rental for all cash for $350K and rents it at the low rate here of $2200, it will throw off $26,400/yr minus $3500 taxes and allow 9% maintenance ($2400/yr). Income will be $20,500 or around 5.8% which is more than leaving it in the bank. I know this is a simple illustration but that’s what was happening early last year. Everyone is looking for a hard asset to park their money fearing inflation down the road and not trusting the banking system.
And then these old folks run into those professional tenants. Y’know, the house-wreckers who always have an excuse as to why the rent is late THIS month. Have fun evicting those people. Because they can play the courts like a violin.
Or something major breaks down in the house. Like the mechanicals. Or the place needs a new roof.
‘The banks are paying almost nothing’
Oh, for the days when we were all told the Federal Reserve ‘doesn’t control long term interest rates’. Now they get on TV and tell everyone how many years ahead they will keep rates where they want them. Do you suppose Bernanke doesn’t know he’s inducing people to buy houses, or stocks? And what about the seniors who really can’t handle being a landlord? Are they just out of luck after working and saving for a lifetime? Where are our “public servants” to defend against this “quasi-government” attack on people relying on fixed income? How many families out there will gamble on stocks or houses for years instead of being more prudent with savings?
‘Everyone is looking for a hard asset to park their money’
Like Apple stock, or Facebook. Don’t bother with the commissions being made, coming and going, or that super rich wall street firms make a killing underwriting this paper. We’ll all get rich renting each other houses or buying stock in little phones or websites made for picking up chicks.
Websites make for picking up chicks? Hmmm, I think I’m in the wrong business.
Me? I get website clients who do stuff like nutrigenomics, physics, toxicology, and science and math education.
“Websites make for picking up chicks?”
Wasn’t the original purpose of Facebook to rate Harvard chicks’ bodies? Who’d've thunk that would pan out as the foundation for a $40 bn corporation?
Good post Ben. But it is not just old folk who lose with a low interest rate scenario. Here are some more:
- University investment funds (that pay out the scholarships)
- Cemeteries that hold cash reserves for future maintenance
- Most Corporate pension funds that require added topping up
- Bond sinking funds - almost all need topping up
- Bank interest needs wider % spreads the lower the rate
- Municipal reserve assisted replacements almost extinct
- Corp savings hard to use which exacts added capital taxes
- Low rates allow higher loans for term purchases (false values)
- Consumables increase in real cost due to price statesmanship
- Insurance companies with fixed whole life policies (lots)
- Public utilities with long debt: cannot increase utility rates
- Canusa established equipment loans vs foreign new mfgr
- Laddered debt; early penalties add to current cost of sales
- Energy imports in USF; inflation push (a real area of concern)
- Average cost of capital harder to mix with current op costs
I will stop here. Anyone with added negatives please advise.
And what do we get out of these low rates:
- Assist the gov with their debt
- More cash for the stock gamblers
I thought governments existed for the benefit of the people, not themselves.
IMO, Here is the problem with your example Salinas…Old Fogie cannot trade the roof or fence boards on his rental for food or in home care…Old fogie’s will likely leave there money right were it is even @ zero interest rates…
This was Bernanke’s plan from the beginning. It’s no secret nor mystery just read his speeches.
Zillow has been much more entertaining since they added foreclosure data to the entries…
I discovered a nearby neighbor was listed as having a foreclosure auction around Thanksgiving. He’d been served a notice of default in the late spring. He bought the place in 2005 but for some reason re-financed in 2007. Bank is listed as BofA so that’s probably an inherited Countrywide mortgage from the 2008 takeover.
BofA actually took title after the auction was held. The neighbor moved out last weekend and the lockboxes went up Tuesday. There’s been a contractor squad in the place all week fixing it up. Usually in Boise if the bank takes title the house is up for sale quickly thereafter.
The neighbor is a sad case. He’s having a mid-life crisis in his 20’s. Over the last year or so he’s:
- dropped out of the LDS church
- got a divorce (after 5 kids)
- bought a tough-guy Harley Davidson (skull & crossbones on tank)
- picked up a skinny biker chick girlfriend
“- dropped out of the LDS church
- got a divorce (after 5 kids)
- bought a tough-guy Harley Davidson (skull & crossbones on tank)
- picked up a skinny biker chick girlfriend”
An inspiration to men everywhere. Bummer that I’ll first have to join the LDS in order to drop out.
He’s living the dream…….
<i<I discovered a nearby neighbor was listed as having a foreclosure auction around Thanksgiving. He’d been served a notice of default in the late spring.
You mean he didn’t get bailed out or get to live in it 5 years for free? That they threw him out after just 6 months?
The neighbor is a sad case. He’s having a mid-life crisis in his 20’s. Over the last year or so he’s:
- dropped out of the LDS church
- got a divorce (after 5 kids)
He and the wife were productive, I see.
“- dropped out of the LDS church
- got a divorce (after 5 kids)”
Is your neighbor my wife’s former BIL?
Generally foreclosures drag on forever around here. I was surprised to see him kicked out so quickly.
More typical is a place like this:
http://www.zillow.com/homes/79612249_zpid/#/homedetails/12651-W-Collingwood-St-Boise-ID-83709/79652490_zpid/
Or like this one:
http://www.zillow.com/homes/79612249_zpid/#/homedetails/6081-S-Acheron-Ave-Boise-ID-83709/79698201_zpid/
“He’s having a mid-life crisis in his 20’s.”
Oops — I see it is DennisN’s (Boise, not In Colorado) neighbor, and younger than my wife’s ex-BIL.
Guess there are lots of foreclosed, divorced LDS guys with 5 kids out there?
In most denominations, when someone “leaves the church”, it’s hardly noticeable. I know dozens of “ex catholics”. You would never know they only showed up at Christmas and Easter (”C and E” Christians). They use birth control and still consider themselves loyal members of the church.
The LDS is much more strict. When someone leaves the LDS church, there’s several decades of built-up resentment that all comes pouring out. The behavioural changes are immense. I first noticed something was up when his SUV’s back gate was open showing a case of beer inside.
This stuff can start while they are still members in good standing, in part due to the caffeine loopholes. For instance, some of our close LDS family members go through copious quantities of caffeine-laden diet Coke every week; I’m guessing they each consume more caffeine in a day than I do with my daily pot of coffee I brew first thing each morning. And my wife’s ex-BIL used to be my racquetball partner; after our games, he would tap into his secret stash of caffeine- and sugar-laden Mountain Dew which he hid in the trunk of his car.
Of course these minor infractions tend to escalate into more serious violations of the code if they leave the fold.
these minor infractions tend to escalate
with Amishmen who hide their cell phones in hay bales in the barn.
Evidently, the Mormon church is heavily invested in Coke, so the rules are relaxed with regards to their products.
Forgot to mention in my previous post, but my wife also has a cousin who works for the world’s most successful purveyor of carbonated, caffeinated, brown-colored sugar water. I’m sure he pays handsome tithes on all the income he earns off other people’s caffeine addiction.
But it’s all good, as the LDS theology says no to hot caffeinated drinks; so long as the drink is hot w/o caffeine or cold w/ caffeine, you are in the clear.
Except iced tea (or iced coffee). Because tea and coffee were “hot drinks” back in the day, it doesn’t matter if you make them cold now. They are still off limits.
Montreal condo buyers are expected to have an abundance of choices this year, with inventory soaring 30 per cent, on an annual basis, at the end of 2012.
Some of those developers have got to be a wee bit nervous. I would hate to be the devloper whose project is behind right now.
lf a couple of big ones default, it could bring down the whole house of card!
“low interest rates help the market sell shares” - presumably to fund corporate America.
Funny.
“corporate America has record cash reserves”
And a lot more in reserve than any sale of new shares would generate - net of fees.
“I tell all my friends, ‘You got money? Buy, buy, buy,’”
they always say that