The Pathology Of Boom Bust Mania
It’s Friday desk clearing time for this blogger. “The U.S. housing market, entering its busiest season, is tipped so far in favor of sellers that almost a third of listings in areas from Washington, D.C., to Denver and Seattle are under contract in two weeks or less. One home in Washington attracted 168 offers in December and sold for almost twice the asking price. At the Solaire at Gale Ranch community in San Ramon, prospective buyers camped out in tents for as long as two weeks in August before the developer released nine houses for sale, said Sonal Basu, an agent with Redfin.”
“The builder, Shapell Homes, shifted to a lottery system this year after neighbors complained about people living outdoors for weeks, Basu said. Last month, about 70 people waited in line for the chance to buy four Solaire model homes, ranging from $729,000 to $989,900, she said. A few dozen families ultimately participated in the lottery. ‘In 10 minutes, they sold four homes for full price,’ Basu said. ‘Buyers were lining up like crazy because there is no inventory.’”
“There’s still a world of hurt in neighborhoods across Inland Southern California as thousands of homeowners remain in the thicket to resolve mortgage woes. This year, though, they are likely to see less push-back in as negative equity lessens, the California Homeowner Bill of Rights kicks in and program adjustments by Keep Your Home California gain steam. It’s been a difficult environment up to now, said homeowner Ronald Ensley, of Norco. ‘I had property that was foreclosed on in Arizona,’ he said. ‘We lost one through short sale, and one rental. Through it, there was very little communication at all. We were left in the dark, as the whole process went along.’”
“Mike Teer, broker of Teer One Properties in Riverside, said the numbers show there still is a group of people who aren’t being helped because they don’t meet the loan modification criteria. The National Settlement Report said 15,310 such borrowers in California got a solicitation, but did not qualify for refinancing because the loan-to-value exceeded 80 percent. ‘My personal experience with clients I’m talking to, many of whom have lost 30 to 40 percent of their equity, is that they hear they’re getting back 4 to 5 percent, and it makes them smile, but they’re still way in the hole,’ Teer said.”
“One in 34 homes in DuPage County had foreclosure paperwork filed against them in 2012, according to RealtyTrac. That’s about 2.9 percent, up from 1.9 percent of homes in 2011. The numbers in Will County also show a rise in foreclosures. Numbers are also bad in other nearby counties. David Field, owner of Home Field Realtors of Naperville, said the figures showing that foreclosures are rising don’t accurately portray the current market.”
“‘These figures are up due to ’shadow inventory’ as there were a number of homeowners that were going through the foreclosure process that the bank hadn’t caught up with yet,’ Field said. ‘Banks have an extensive loss mitigation process they have to go through, and it takes time to process the paperwork. There were houses in foreclosure months ago, but they didn’t show up on the ‘books’ because the paperwork wasn’t complete. There’s been a huge backlog.’”
“Nelson Chen of the Chen Agency in Fort Lee said he’s seen a rise in demand from buyers. ‘My schedule on Saturday was like 2006; I had appointments booked literally every half hour,’ Chen said. ‘There’s a million people looking. But they’re still very picky.’”
“The New Jersey MLS reports that the number of properties for sale in Bergen County dropped more than 25 percent from last January to January 2013. Inventories are also down nationwide. Many homeowners are apparently waiting for prices to rebound. ‘I had a meeting with someone who bought in 2004, and the home is worth less now,’ Chen said. So the homeowner decided not to sell, he said: ‘They’re not willing to take that loss.’”
“Sales continue to plummet in Canada’s most expensive housing market, but realtors in Vancouver insist sellers would rather not sell at all than for a discounted price. ‘It appears many home sellers are opting to remove their homes from the market rather than settle for a price they don’t want,’ said Eugen Klein, president of the Real Estate Board of Greater Vancouver.”
“Agent turned celebrity real estate critic, Andrew Winter, is rounding up his Selling Houses Australia team mates for the sixth season of Foxtel’s hit program. Mr Winter says the show is also an insight into how Australia’s regional markets are comparing with metropolitan areas. ‘I think the main lesson I’d like to get out there from this season is that all of you people sitting out there in your nice comfortable Sydney, Melbourne and Perth markets where you complain your house hasn’t sold after five weeks - and its value has maybe only gone up $500,000 in five years - have a heart! Think about a huge chunk of Australia where the housing market is really struggling,’ he said.”
“There is one thing the 10 corrupt officials reported by whistle-blowers in the past two months have in common: each owned more than a dozen properties. From local police heads to bank executives, officials who own an unusually large number of properties - in an extreme case, one is suspected of having 192. ‘In big cities there are plenty of rich people and corrupt officials, so someone owning 10 or 20 properties is hardly noticeable,’ said Professor Hu Xingdou, a political analyst at the Beijing Institute of Technology. ‘Property is a bribe less traceable than straight cash, which leaves clues in bank accounts.’”
“Yuan Gangming , a researcher at the Tsinghua University, said housing has the characteristic of being valuable but not high-profile. ‘More importantly, you cannot easily tell whether money used to buy property is clean or not, so it could facilitate laundering of illegal gains,’ he said.”
“Since November, a large amount of luxury housing has been dumped on to the market by sellers including government officials and senior managers of state-owned enterprises, spooked by the latest round of corruption busting, a source told The Economic Observer. Some 714 officials fled overseas between September 30 and October 7 last year, according to the Beijing newspaper.”
“On a quiet leafy street north of Toronto, Mr. Zhang – who asked that his full name not be used – taps the walls and inspects the furnace of a $2.68-million home. He’s looking to buy because his 15-year-old daughter will be attending private school in Canada later this year. The owner of a steel business in Beijing has applied to immigrate to Canada, and figures he may as well purchase a home now. ‘Canada is a beautiful country. It is good for living, for higher education and it is not that populated,’ said Mr. Zhang, who ultimately bought a $2.2-million home in Oakville, Ont.”
“Rumours are rife about foreign buyers. In Toronto, Russian and Iranian buyers, flush with cash, are snapping up condos. In Vancouver, Chinese investors are buying luxury apartments. In the Maritimes, wealthy Americans and Europeans are acquiring coastal vacation property. Estimates of the level of foreign buying are all over the map. In the Toronto and Vancouver markets, they can range from 3 per cent to – in some pockets of the condo market – upward of 60 per cent.”
“Canadians, meanwhile, are flocking to the U.S. market, snapping up holiday homes in the sun. They are now, by far, the biggest bunch of foreign buyers of American real estate. Each year, the National Association of Realtors publishes a study on international buying activity in the U.S. It shows who the biggest buyers are, the fastest-growing nationalities of buyers (Canada, China), where they’re buying (Florida, California), why (bargain vacation homes!)”
“Foreign appetite for Canadian homes will persist, says Michael Adelson, Toronto-based sales rep for ReMax Realtron, who recently represented a seller that sold their bungalow for $421,800 over asking to a foreign buyer. He has worked in the industry for 25 years, and seen interest from Hong Kong, Korea and Iran flourish. As someone in the industry, he’s happy to see such strong demand. As a citizen, he’s worried some local people might be getting priced out of the market. ‘People have recognized this is a relatively cheap country to buy,’ he says. ‘I think it will continue unless they put some controls in place.’”
“Tony Ma agrees. The agent in Markham, Ont., has hosted several groups of visiting Chinese buyers in recent months alone. They typically buy a house for $1-million or $2-million, either to live or as an offshore investment. Canada’s multicultural communities, affordability and democratic system will continue to lure buyers, he says. ‘I don’t see this market cooling any time soon.’”
“For anyone who has followed the global property market over recent years, it is difficult not to notice that central bankers are possibly the least reliable and most incompetent of all economists when it comes to identifying asset bubbles. Their record is truly terrible, for not only completely missing trillion-dollar bubbles that formed in their own backyard but they have continually put effort into denying these bubbles exist.”
“Central bankers cannot identify these epic asset bubbles for two primary reasons: lousy economic theory and an unwillingness to take responsibility. The former revolves around a non-empirical form of economics that is taught in universities and practiced in government and industry. If it did, why are so many countries generating the largest asset bubbles in their respective histories after undergoing reforms of privatization and deregulation?”
“The latter reason is simple: if a central bank warned about a housing bubble as it was forming, the market would react by changing its attitude from greed to panic, typical of the pathology of boom bust mania. Economists in the central bank are considered the foremost authority on the economy, so when they speak, everyone listens. This institution’s most powerful influence upon the economy is not the ability to print money or adjust the interest rate, but its loudspeaker.”
“If the Fed had warned about a bubble forming in the housing market in 2002, central bankers would have copped the blame for the financial and economic fallout, which would not endear them to political and economic elites, or the general population. Economists in the central bank are not going to put their substantial six-figure salaries and secure job placements on the line, including being subject to an immense amount of flak from the FIRE sector, for correctly stating the perfectly obvious that anyone with a modicum of knowledge of the financial and real estate markets would realize.”
“Every country that has suffered through a housing boom and crash in recent years had so-called ‘experts’ claiming prices were based upon fundamental valuations due to dwelling shortages. Take the US as a case study. Leading institutions such as the Federal Reserve, National Association of Realtors, California Building Industry Association and Harvard University’s Joint Center for Housing Studies produced sophisticated studies to show that the housing boom was caused, in part, by dwelling shortages. In this way, Australia is not different because there is no housing shortage here.”
“The RealtyTrac report shows that 1.39 percent of all U.S. housing units had at least one foreclosure filing last year, down from 1.45 percent in 2011.
In Illinois, 2.58 percent of the housing units were affected last year, ranking the state fifth in the nation, and foreclosure filings were up almost 33 percent in Illinois from 2011.
RealtyTrac’s report also noted that:
In January 2013, 10.9 million homeowners nationwide — representing 26 percent of all outstanding homes with a mortgage — were seriously underwater.”
If only slightly more than one in 100 U.S. homes had a foreclosure filing last year, is it safe to say the housing recovery is gathering steam?
Never mind Illinois’ 33 percent increase in foreclosure filings for 2012 over 2011…
I am not sure the amount of foreclosures and a housing “recovery” are the same thing. They will eventually run out of houses to foreclose on but until people are buying the foreclosed houses there will not be a housing recovery.
Forgot to include the sarcasm tags on that post…
brevity is the soul of wit
“There is one thing the 10 corrupt officials reported by whistle-blowers in the past two months have in common: each owned more than a dozen properties. From local police heads to bank executives, officials who own an unusually large number of properties - in an extreme case, one is suspected of having 192. ‘In big cities there are plenty of rich people and corrupt officials, so someone owning 10 or 20 properties is hardly noticeable,’ said Professor Hu Xingdou, a political analyst at the Beijing Institute of Technology.”
Up until I got down to Professor Hu’s name, I thought the article was about U.S. officials.
Sounds like a bubble to me. And, btw, central bankers are not willing to interfere with bubbles because THEY ARE IN ON THEM.
When will people wake up about the premeditation of central bankers in the housing bubbles?
‘More importantly, you cannot easily tell whether money used to buy property is clean or not, so it could facilitate laundering of illegal gains,’
I don’t suppose anyone suspects this is the source for boatloads of Chinese cash used to fund all-cash West Coast U.S. real estate investments?
Of course not!
We would never, ever suspect that ill-gotten gains are the source of boatloads of Chinese cash funding real estate purchases in America. Because nothing like that EVER happens here.
[Sarcasm off.]
“Canadians, meanwhile, are flocking to the U.S. market, snapping up holiday homes in the sun. They are now, by far, the biggest bunch of foreign buyers of American real estate. Each year, the National Association of Realtors publishes a study on international buying activity in the U.S. It shows who the biggest buyers are, the fastest-growing nationalities of buyers (Canada, China), where they’re buying (Florida, California), why (bargain vacation homes!)”
Too bad their bubble is collapsing and will soon take their equity down the crapper.
“Economists in the central bank are considered the foremost authority on the economy, so when they speak, everyone listens.”
I can’t believe Joe Sixpack follows the Delphic utterances from members of the Emperor’s New Clothes School of Economic Thought.
But then perhaps I underestimate Joe Sixpack’s level of erudition?
Why should Joe Sixpack spend the time to do his own thinking when these annointed PHDs guys will do his thinking for him?
Yet another reason why I love the HBB so much. Every day, I find new ideas that help improve my sarcasm.
Keep that tool sharp, little filly! -
“Leading institutions such as the Federal Reserve, National Association of Realtors, California Building Industry Association and Harvard University’s Joint Center for Housing Studies produced sophisticated studies to show that the housing boom was caused, in part, by dwelling shortages.”
Those were sophisticated, complicated models indeed.
They had to be. The simple metrics of price/rent and price/income showed the market had gone mad.
Geithner letting them off the hook;
Neil Barofsky: Geithner Doctrine Lives on in Libor Scandal « naked …
http://www.nakedcapitalism.com/…/neil-barofsky-geithner-doctrine-lives-o…21 hours ago – By Neil Barofsky, the former special inspector-general of the troubled asset relief … Cross posted from the Financial Times with permission …
Your HBB Librarian highly recommends Barofsky’s book, Bailout.
“[T]he housing boom was caused, in part, by dwelling shortages.”
Whatever shortages existed were narrow or shallow, and soon became totally irrelevant by guys like Casey Serin buying 8 houses for himself. Easy credit became a shortage amplifier. Then easy credit went national and speculation produced a “shortage” everywhere in the nation.
Today, instead of credit+speculation, we have shadow inventory that continues to sustain bubble behavior.
“Economists in the central bank are not going to put their substantial six-figure salaries and secure job placements on the line, including being subject to an immense amount of flak from the FIRE sector, for correctly stating the perfectly obvious that anyone with a modicum of knowledge of the financial and real estate markets would realize.”
It was the little kid in the story who had to point out that the emperor was parading around naked. The emperor himself was oblivious.
“Leading institutions such as the Federal Reserve, National Association of Realtors, California Building Industry Association and Harvard University’s Joint Center for Housing Studies produced sophisticated studies to show that the housing boom was caused, in part, by dwelling shortages.”
That is quite the short list of housing market liars, manipulators and scam artists!
Funny, that caught my eye as well. My family contributes large sums of dough to Lusk
R E/Business School (USC) and Anderson RE/Business School(UCLA). Developers owns those studies. Objective my arse.
I just heard the Anderson School’s Ed Leamer at the University of Arizona College of Business. Among other things, he said that the U.S. economy is not recovering because companies cannot find enough skilled workers.
Hogwash.
And, point of history, the same excuse was used by business interests during the Great Depression.
However, that unskilled, out-of-date workforce was just what American industry needed when it was time to gear up for wartime production during the late 1930s/early 1940s. And those incompetents also did a pretty good job of keeping the Allies supplied after we got into WWII.
Over in the military, those dummies that weren’t worthy of jobs fought bravely and well. ISTR that they helped win the war.
+1000
What they can’t find are CHEAP skilled workers.
Anecdote: A group I worked at in HP tried to steal two high level “Principal Engineers” from a competitor. What was laughable about that “steal” is that they low balled the guys, offering them 20K less than their current salaries. Needless to say they turned down the offers. We unwashed only found out via an accidentally leaked email where the hiring manager complained that he couldn’t hire the people he needed with those constraints and the bosses above him said “tough beans, you just need to try harder.”
When I learned this I knew HP was beyond saving.
What they can’t find are CHEAP skilled workers.
And I suspect we’re getting close to the end of being able to convince people to sign away a big chunk of their paycheck for the rest of their lives just to get qualified to maybe get such a job.
In Colorado said that HP said: “tough beans, you just need to try harder”
Well, this is prevailing management thinking, and unemployment is so high that they can continue to successfully insist (if not successfully succeed) that employees achieve the impossible.
Carl Morris said what I assume he meant is that we’re getting close to the end of the education bubble. I don’t agree. Desperation is only getting higher, credit for student loans is still flowing freely, and the bankers know they can collect on these loans no matter what the default rate is. Locally, we’ve had a minor fall-off of enrollments, but I live in an area with too many colleges and universities anyway. Our Governor seems to be promising us that he’ll close one or more of our state unis.
I don’t agree.
You don’t think people will ever figure out that the education cost them more than the additional salary it gained them? People can be kinda dumb, but I think they’ll figure that one out when they see people who didn’t go with higher standards of living than people who did. Now if the system responds by giving them a cheaper alternative that still gets them the credentials they need at small local colleges or whatever, then sure, they’ll keep borrowing those smaller amounts to go.
Carl, I think the system will respond by crying out for more H1-B’s and outsourcing to countries where higher education is at least partially paid for by the government.
That’s one solution. I don’t think it contradicts my original statement the Better Renter disagreed with.
“You don’t think people will ever figure out that the education cost them more than the additional salary it gained them?”
Of course they will — a few years after they finish their college degree and leave themselves with an albatross of unrepayable student loan deck hanging from their necks.
Housing Bubble 2.0
I guess firms like Blackstone buying up 16,000 homes (US alone) from the shadow invetory, tells us the housing business cycle is broken for our lifetimes. (I’m 50+)
I’m grateful we inked our deal, but I am concerned as a citizen for our once great country.
btw, thank you (whomever it was) for the lead to “The Untouchables”. Great documentary.
16,000 is a drop in the bucket considering there are 20+million excess empty housing units in the US today.
‘buying up 16,000 homes (US alone)’
Wow, 16,000 houses. That’s what percentage of the market?
I got into this a bit last Friday. Just how many Chinese are buying in Toronto? How significant is it? Or is it just propaganda, like one poster asserted? I don’t know, but it’s part of the bubble story.
Like the people camping out for houses. Oh my God, honey they have TENTS! They must know something we don’t! Get your sleeping bag now!
It’s like the shortage myth. Most people aren’t buying houses because they think there aren’t enough. They’re buying because they think they’re going to make money on it.
I know that 16,000 is nothing compared to the volume, but it’s a sampling on how many homes are being bundled. I understand it’s millions of homes off the market, turning into rentals, that were purchased at bargin basement prices.
“bargin basement prices.”
How do you know this? And what is bargain basement prices to someone who paid 300% greater than new construction cost for a used house?
They’re buying land.
LOLZ
Then why are they buying houses instead?
‘how many homes are being bundled. I understand it’s millions of homes off the market, turning into rentals, that were purchased at bargin basement prices’
I posted two Ventura County articles that went into depth on Blackstone purchases. They were paying an average of over 300k, with a built in “premium” (over asking) of 10 or 15%. They were buying them one by one, off the MLS, and putting another 30k in on repairs.
No bundling, no bargains, no millions of houses. Here’s a dead giveaway that this is media hype; why tell everybody and their sister what and where you are buying?
IMO, it’s just more propaganda from the REIC.
What I don’t get is, what don’t Blackstone’s investors get about massive future losses to those who buy houses today?
Blackstone is throwing big money at new development in Singapore, which is probably near the peak in prices. So this whole thing about foreclosures is just one little piece of what they are doing. Will they make money at it? Depends on if they can find enough greater fools. Which may explain the big PR push to try and stampede people into houses.
A lot less is made of the 100 condo towers planned in south Florida. Now that’s gambling! Buying a few hundred smelly old houses here and there is nothing.
why tell everybody and their sister what and where you are buying ??
There is the money statement right there…Spot On…You gotta
know your going to get hosed when someone is telling you their secrets to wealth…
Reminds me of the $99. real estate seminars (you know the ones that are on a 2:00 AM) that will give you the secrets of buying real estate with no money down…Interviews (at the beach house of course) with successful seminar go-er’s that have created $25,000. per month income in just 18 months…All yours for just $99. Bucks…
“Will they make money at it? Depends on if they can find enough greater fools. Which may explain the big PR push to try and stampede people into houses.”
It’s important to recognize that the way these hedge funds make money is on fee income from the greater fools who buy into their candy-crapping unicorn fairy tales about untold future riches.
If the sh!tty assets eventually drop in value, that’s the bagholder/investor’s problem, not Blackstone’s.
“What I don’t get is, what don’t Blackstone’s investors get about massive future losses to those who buy houses today?”
I had a conversation about 6 months ago with a guy who advises a large state-run pension fund on residential real estate. They were looking to get into the home rental business as an investor.
What was attracting them was the rental yield. Plain and simple. I asked this person if the pension fund was looking at prospective appreciation. He said “no”. That while he personally thought there would be some appreciation, the pension fund was not underwriting appreciation. What the pension fund cared about was getting to some inflation-protected cash flow.
‘a large state-run pension fund’
Possibly the dumbest money out there. Is this what we’ve come to? Hedge funds and pension managers, who probably haven’t cleaned a toilet in years, buying smelly foreclosures? By the time they pay for every little nickle and dime repair and maintenance, they will see what they got into and run for the hills, IMO.
Oh, and what is the return on 300k Ventura County houses? 7% or less?
I’m not disputing the “smarts” of pension funds…they are great folks to be buying whatever you are selling.
That said, they aren’t doing this themselves, they are investing through operators…the Waypoints of the world. That way they can keep their hands clean.
Wayne Hughes to my understanding is building his business through a series of offerings, apparently the Alaska Permanent Fund was one investor with him. Mr. Hughes’ employees clean the toilets, not the trustees of the investor.
At one point, self-storage was a messy, disaggregated business, mainly run by mom and pops, with people storing old tennis rackets, rotting mattresses, and stinky couches. Over time, it has become an institutional investment class.
People are still storing the tennis rackets, mattresses and couches, but there is a professional business running the show behind the scenes, and investors like the cash flow–regardless of how messy it is.
“Oh, and what is the return on 300k Ventura County houses? 7% or less?”
For a $300k house, probably less. More like 5-6%.
Other So Cal markets, where you can buy in the low to mid-$200’s, we are seeing 7%-7.5%. These are unleveraged returns, including an expense for management and repairs/maintenance. Leverage it 50% with 4% fixed, and you get that leveraged yield up to about 10%.
When the pension funds are trying to get 7.5%-8%, 10% with some inflation protection doesn’t look too bad.
The big question is whether they will be able to actually achieve that result in any sustained manner. Based on what I’ve seen, the early movers into the rental business will be able to get that 10% for early purchases. Over time, the leveraged yields on new purchases will fall as home prices are higher, and interest rates are no longer 4%. IMHO, rental rates won’t keep going up to allow later purchases the same higher yields.
If some of these businesses are able to scale to a point where they can go public, they might still be able to make sense of new acquisitions with lower yields, since they will have access to public capital markets. Based on yields that apartment REITs are trading at, the public’s capital may actually be the stupid money.
Oxnard and simi thats where the map showed Blackstone is buying. I bet Blackstone made a deal with Federal government to get housing under control and try and stop another deflation and more bailouts.
Smart or stupid it causes inflation for the rest of us who have to work for money to buy things.
When I was young people were proud to work hard. Now the feeling is you are stupid to work hard. I can see why this has changed.
“I bet Blackstone made a deal with Federal government to get housing under control and try and stop another deflation and more bailouts.”
Blackstone, as big as they are, are not big enough to move the market.
My “number of the day” around the office was 146,000 yesterday.
That was the number of all cash purchases in California last year, the highest on record, and over 30% of all purchases.
Blackstone is just the tip of the iceberg, with their 16,000 nationwide representing a teeny-tiny bit of the market. I fear the iceberg is mom/pops putting their retirement money in real estate since they are earning 0.1% in the bank.
“They’re buying because they think they’re going to make money on it.”
BINGO…although, unlike during the bubble, I think a fair number of them are aiming for cash flow, not appreciation. You can make an argument that there can be cash flow from rents…that argument was impossible to make in 2004-2007.
‘I think a fair number of them are aiming for cash flow, not appreciation.’
I never bought income property with the belief they would appreciate to any great degree. The whole goal was getting an above market return on the money invested and cash flow is certainly king. Not to mention these properties are going to have tax advantages.
I’ve read these articles on hedge funds. In every single one, they say they plan to sell quickly, in a few years or spin it off into a REIT. Not one said they would hold indefinitely. It’s just another version of flipping.
“In every single one, they say they plan to sell quickly,…just another version of flipping.”
Yep.
And on the other side of flipping activity are the falling knifecatchers. I wonder who the suckers will turn out to be in the current episode of take-the-money-and-run real estate investment activity?
I never bought income property with the belief they would appreciate to any great degree.
Me neither. I like the words I read once: “you make your money on the purchase, not when you sell”. The point being that if you’re buying something now because you think it will be worth more in the future you’re gambling/speculating. If you find something that’s worth much more than what it’s being sold for (because you know something the seller doesn’t) then you’re making money when you purchase it. Same goes for if you find something that immediately cash flows (or will after some fixes) at a rate you’re satisfied with.
Isn’t the spin off into a REIT a version of holding indefinitely? Yes, the investor sells out of the investment, but the home is held by an entity that will be collecting rent, not selling to an owner/occupant.
From what I’ve heard, I think the preferred route is forming a REIT, or selling to a REIT…it will be incredibly time consuming and expensive to re-sell thousands of homes after getting them leased and cash flowing.
As an example, I know a guy who went to work for Wayne Hughes (founder of Public Storage) in his new company, American Homes 4 Rent. Based on this person’s background, it wouldn’t surprise me one bit if Wayne Hughes is looking to take this company public at some point.
What do they see? An opportunity to get critical mass in a very inefficient business because of the foreclosure mess, followed by a massive aggregation opportunity. There are over 10 million rental homes in the US, mostly in the hands of individual landlords. I can imagine it being pretty attractive to offer an individual property owner a bunch of shares for their property on a tax-deferred basis.
And as you read these articles, keep it in the forefront of your mind that housing demand is at 1997 levels and falling. Essentially, demand is half of what it was at the peak….. and falling.
It’s nice not having housing worries.
The thing that boggles our mind is our supplemental property tax bill will take 9 months from the COE to get generated. I sent in the full liabilty and they sent the check back. Title hasn’t transfered at the Assessor’s office. I thought they were strapped for cash flow.
I’d rather have “housing worries” than financial losses from which I’d never recover.
Gotta pay to live somewhere. We made a good decision. We’re just different flavors, pimp.
Our liability w/ property taxes and insurance is under $700/mo including utilities. Most of the long term expensive maintenance is behind us. Got the 50 year roof at a 30 yr roof price. We did a bang up job fix’in up this comfy home.
“Gotta pay to live somewhere”
It’s the same old rusty lie so why invoke it knowing it’s a lies?
And you could have rented for a fraction of the cost of buying. Yet you made the same tragic error as the DC Dingbat and now you both want concurrence. You won’t get it here.
Typical house-debtor/House-pimp lie.
You could have rented for have of the massively inflated amount you paid…. but you didn’t.
That’s your funeral.
How do you know what the “full liability” is until the tax assessor whacks you?
Formula (within $50). The rate I used was 1.33% for the delta of the former owners and our liability. Works well. That’s how.
Interesting. Good luck with assessing your own property. Let us know how that works out. In this little town, the assessor knows if you replace a board on your back porch, even more if granite gets delivered.
“many home sellers are opting to remove their homes from the market rather than settle for a price they don’t want…”
Volume collapses before prices collapse. Some interpret this as a shortage.
Others interpret this as the last gasp of breath for a glacially-paced dead cat bounce.
The latter reason is simple: if a central bank warned about a housing bubble as it was forming, the market would react by changing its attitude from greed to panic, typical of the pathology of boom bust mania.
I don’t believe it. Every day we see people who are perfectly happy to knowingly buy into a bubble as long as they think they won’t get burned. The panic only happens when the burning begins.
It’s all about believing that you will somehow be able to cash in your gambling chips before the crash, isn’t it?
Or, in the case of systemically-risky too-big-to-fail institutions, that the Federal Reserve Bank and Treasury Department will step up to make you whole on your gambling losses…
“knowingly buy into a bubble…”
That is an oxymoron sort of. No one is knowingly manic, or knowingly deluded. Yes, we see them here every day.
Gravity works the same though, whether you belive you can fly or not.
‘No one is knowingly manic, or knowingly deluded.’
I met this guy who started a little microbrewery in Flagstaff recently. We talked about how there have been a bunch of breweries opening all over N AZ, the whole state and country. (There hasn’t been an increase in demand for craft beer much). He went on to say that he fully expects many of them to fail. So what’s his strategy? He didn’t say, but I guess he thinks he’ll be one of the survivors.
So what’s his strategy ??
Boat load of reserve cash ?? Be able to hurt competitors with loss-leaders ?? In it for the long haul ??
In the construction business I have seen this happen…Deep pockets continue to take jobs at a loss….I doesn’t take long…medium competitors are the first to go…Can’t get work…They move down the food chain by getting small…Now they are a big fish in a small pond…Small guy now can’t compete with the small guy that was once a medium size guy….
I have watched this exact thing play out here in Silicon valley over the last four years…Lots of people working half-weeks…People that were once owners of their successful small business now with a paint brush in their hand…
So what’s his strategy ??
He’s just so happy to finally live his dream. Hopefully it will all work out.
“He’s just so happy to finally live his dream. Hopefully it will all work out.”
If he can’t sell his inventory he can always drink it.
I have friends who own a craft brewery here in Tucson. A big part of their success is in creating a welcoming atmosphere that attracts and retains loyal customers. I know. I’m one of them. Guess where I’m going after the workday’s done.
Yes, they brew a good beer, but it’s the welcoming atmosphere that keeps people in their fold.
Be glad there’s one place in the world
Where everybody knows your name,
And they’re always glad you came;
You want to go where people know,
People are all the same;
You want to go where everybody knows your name.
source: http://www.lyricsondemand.com/tvthemes/cheerslyrics.html
“In Silicon Valley, demand is so brisk that some buyers are agreeing not to make deals contingent on successful financing, inspection or appraisal, and are accepting properties in ‘‘as is’’ condition, said Mary Pope-Handy, an agent in Los Gatos, California. ”
Shades of 2006 all over again.
With no contingencies, does this limit the market to cash buyers only?
With no contingencies, does this limit the market to cash buyers only ??
Not necessarily although common sense tells you the seller will go with the all cash…Some buyers are willing to go non-contingent, as long as they have enough escrow time because they are so well qualified that they do not have a concern about getting the loan…They also typically have enough cash down to overcome an appraisal that comes in below the sales price…
Shades of 2006 all over again ??
Yep…Except this appears to me to be a much darker “shade”…3% mortgages are the main culprit IMO…
While I agree the market is nuts…there are still no liar loans of any consequence, and the 3% rate at least is fixed, and not an Option ARM teaser (with neg am and bound to rise)–making the borrowers at least more stable borrowers…a base on which to build a bubble.
As the Northeast and FL crash (or at least have their rise dampened) since they are finally foreclosing, how long will the Fed decide to keep rates low? What impact will those rates have on places like CA/AZ, where the bubble is pretty clearly reforming already?
With no contingencies, does this limit the market to cash buyers only?
I think it means that you lose your deposit if you can’t close the deal.
20 years ago I had a buyer back out on a sale. When I asked the realturd why, she had no answer. “Fine, we’re keeping the deposit.” I said.
The realtor didn’t like that at ALL and tried to talk me out of it. I refused. Two days later she produced a letter from their mortgage broker saying they couldn’t get financing, which I thought was BS, but I let them off the hook as a I had a second offer.
how long will the Fed decide to keep rates low ??
The Billion dollar question…..
What happens when they raise them ??
The Zillion dollar question…
“What happens when they raise them ??”
Nothing, people have been buying houses at whatever rate they can get for many years. Too young to remember 11-14% loan rates ?
‘people have been buying houses at whatever rate they can get for many years’
Except, they aren’t:
‘Roughly 1.32 million new renter households were formed in the past year (including owner conversions), while the number of owner-occupied households declined by 175,000. Resident turnover and move-outs to homeownership remain near historic lows for most operators. Incoming leasing traffic is more than offsetting move-outs while paying higher rates.’”
“The home ownership rate declined yet again in the fourth quarter of 2012, according to a new report from the U.S. Census. It now stands at 65.4 percent, down from 66 percent a year ago and from a high of 69.2 percent in 2004. If you include the 5.3 million borrowers who are delinquent on their mortgages or in the foreclosure process, per LPS, the real home ownership rate is even lower.’
http://thehousingbubbleblog.com/?m=20130201
Mo Liar lied.
Too young to remember 1980 prices.
146k homes were purchased all cash in CA alone. How many in the US as a whole? 700k? 800k? 1 million?
Since CA is about 14% of the US as a whole, I’m going to say (unless someone has the data), about a million.
How many of those all-cash purchases were homes that were formerly owner-occupied and are being turned into rentals? I’m willing to wager way more than 175,000.
How many of those all cash, “buy-to-rent” buyers were able to squeeze out other bidders that needed to borrow money, but wanted to live in the home, not rent it out? Based on the reports of multiple offers, I’ll bet that most squeezed out someone who wanted to buy the house to live in it.
In other words, how much of the decline in owner households is due to the squeezing out of owner-occupants by all-cash investor buyers, and NOT by choice?
Demand is what you can and will pay for, not what you want. If the dynamic is shifting from “owning” to renting, these cash investors can enjoy some short term returns until they become toast.
Right now, there is demand from three broad groups.
1. All cash, quick close, buy to rent;
2. All cash, quick close, buy to live;
3. Need financing and contingency period to close.
#s 1 and 2 are closing more deals today that is historically normal, at the expense of group #3, who simply can’t compete with the speed and certainty of an all-cash buyer.
As #1 specifically goes away (as rental yields fall), there will be more of #3 that actually CAN buy.
You’re lying. Demand is at 1997 levels and falling.
Number of sales is not the same as demand, but if you are looking at sales numbers, you are right…here’s the raw data per Zillow.
2012: 3,690,760
2011: 3,735,505
2010: 3,977,077
2009: 3,970,202
2008: 3,988,122
2007: 4,684,269
2006: 5,547,150
2005: 6,247,377
2004: 5,962,574
2003: 4,914,373
2002: 4,540,333
2001: 4,198,628
2000: 3,945,481
1999: 3,991,195
1998: 3,642,921
1997: 3,104,479
1996: 2,082,005
Why do I say sales is not the same as demand? Because even with massive demand, you need to have supply in order to have sales. How can you tell if a market is adequately supplied to meet the demand? Check the direction of prices. If they are going up, then supply is not adequate to meet the demand.
Of course you will say that prices are falling, so that is even more evidence of weak demand. Fine. Go ahead and say that.
Who cares what you say? You’re a liar and nobody cares what a liar says.
What is your motive? Why lie?
In other words, how much of the decline in owner households is due to the squeezing out of owner-occupants by all-cash investor buyers, and NOT by choice?”
Lots of rentals are showing up in 93021 compared to this time last year
“Because even with massive demand, you need to have supply in order to have sales….”
Hmmmmm. Massive demand. Yet we read that many will not put their house up for sale because they cannot get the price they want, need, whatever.
“Yet we read that many will not put their house up for sale because they cannot get the price they want, need, whatever.”
Yes, so sales are not indicative of how many people would like to buy at current prices.
“…sales are not indicative of how many people would like to buy at current prices.”
Sales are not indicative of how many people are qualified, through federally-guaranteed loan programs, to buy at current prices and artificially low inventory level, due to the federal government’s and Federal Reserve Bank’s housing price support measures.
“Sales are not indicative of how many people are qualified, through federally-guaranteed loan programs, to buy at current prices and artificially low inventory level, due to the federal government’s and Federal Reserve Bank’s housing price support measures.”
It’s a good thing we have a President that is looking to change Washington and the status quo.
“If you include the 5.3 million borrowers who are delinquent on their mortgages or in the foreclosure process, per LPS, the real home ownership rate is even lower.”
Cool. We are only 5 million more foreclosures away from a housing bottom!
More like about 2.8 million short sales, modifications, and foreclosures.
Of the 5.3 million, approximately 2.5 million is a “Normal” level of distress (even in good times, people lose jobs, get divorced, have financial hardships, etc.). This number will never get to zero.
And, like a broken record, I’ll say it again, a disproportionate number of these homes are in judicial states, and the most pain will be felt in judicial states with high vacancy rates that speed up their processing of foreclosures.
Repeating a lie over and over again will never make it truth.
The data is pretty clear. A disproportionate number of the non-current loans are in judicial states. End of story.
The truth is clear. You’re an established liar.
Anyone from the Northeast/upper Mid-Atlantic on line at the moment? What’s it like on the ground up there? How bad is the blizzard? I see the news reports, but what’s the real situation.