Making Money Off Mass Delusion
The Sun Sentinel reports from Florida. “Some buyers are solving their house-searching woes through prose. They’re not writing poems or romantic novels — just notes to sellers, telling them how happy they’d be to buy their homes. Writing a letter probably is one of the easiest things buyers have to do to land a home these days, said Samantha DeBianchi, a Fort Lauderdale real estate agent. Sometimes even pets are part of the deal. One of DeBianchi’s clients had to adopt the seller’s cat as part of the purchase. The client was a dog owner, but she agreed to the deal. ‘This is just how it is,’ DeBianchi said. ‘Sellers are completely in control.’”
“Rick Rapp, a real estate agent in Broward and Palm Beach counties, said a client made at least 10 offers at or above the asking price, but all were rejected for being too low. Investment firms are driving up prices by paying 20 to 25 percent higher than the list price, Rapp said. His client finally closed on a three-bedroom home for $238,000, but even that deal was in jeopardy. The seller, an investor, had a better offer and wanted out of the contract, but Rapp refused.”
“‘This reminds me of 2005,’ said Rapp, of Travers Miran Realty. ‘The bubble is coming.’”
The Miami Herald. “Jacque and Stephan McLean, who have been house-hunting near Miramar since December, have submitted five offers, all in vain. The McLeans, who are renting a home, plan to make a 20-percent down payment and get a conventional mortgage for the rest. ‘The last offer was $20,000 more than the listing price and we still didn’t get it,’ said Jacque McLean. ‘There is a lot of greed going on. We’re going right back to what happened in 2006 and 2007 in Florida.’”
The Tampa Bay Times. “‘Lots of times we run into people who already lost out on one or two deals and are now incredibly motivated to purchase,’ Keller Williams agent Lonnie Orns said. Added Re/Max Bay to Bay agent Rae Catanese: Buyers ‘can make an offer within an hour, but even that’s no guarantee.’”
“‘Every time something comes on the market and it’s decent, there’s instantly five or six other offers,’ broker Melody Stang said. ‘It’s hard for the buyers to really find a decent house. … It feels like 2003 to me, all over again.’”
The Herald Tribune. “Some contend that these investors are overpaying for their Southwest Florida holdings. Some critics contend that will come back to haunt them, or whoever ends up eventually taking ownership of these properties in the next generation of sales. ‘We have never seen hedge funds and large companies dominating the real estate market like this before,’ Jack McCabe, a real estate consultant in Deerfield Beach who correctly predicted the bust, lamented in our April report on regional home sales. ‘These companies are involved in 70 percent or more of recent sales — many of them at artificially inflated prices.’”
The News Journal. “Volusia Property Appraiser Morgan Gilreath released a rosy pre-preliminary tax roll estimate that showed the area’s property values increasing to the tune of more than $800 million this year. ‘If someone is interested in purchasing real estate in Volusia County, they’re already a little bit late,’ Gilreath said Thursday after releasing the early numbers. ‘Because the market has started to go back up. They missed the swing a little bit. If they’re interested here, they might want to talk to a Realtor ASAP.’”
“‘We still have a lot of foreclosures out there,’ he said. ‘The percentage of bank-owned transactions is about 10 percent. A typical year is about 1 percent. So we don’t have a normal market yet, and until other signs of normality start showing up, it’s not going to be a truly normal market. It’s just acting like one now.’”
“City officials would like a recount, please. They’re skeptical of Property Appraiser Mike Wells’ figures showing the property values in New Port Richey fell another 4.2 percent this past year, even as the county remained flat and a couple other cities saw an uptick in value. Wells told the Times he sticks by his numbers. The city has old and deteriorating housing stock, especially along U.S. 19, he said, and New Port Richey lost its biggest taxpayer last year when Community Hospital moved to the Medical Center of Trinity campus outside of town.”
“‘The fact of the matter is the city has very little growth right now,’ Wells added. ‘If you combine it all, that’s the reason for our assessed value.’”
The Palm Beach Post. “In Florida, the more than $1 billion Hardest Hit program has been operating for two years, awarding struggling borrowers 12 months of mortgage payments and between $18,000 and $24,000 to bring a mortgage current. But some homeowners exiting the program are finding themselves still in debt and on the same path to foreclosure after their lender subtracted legal costs from the Hardest Hit stipend. ‘Those are the credit union’s expenses, not mine,’ said Sandra Morales, about the court costs included in her arrearage by Florida Central Credit Union.”
“In 2005, after the death of her husband, Morales refinanced to a five-year balloon mortgage believing she would sell the home and downsize. Then the real estate market crashed. ‘I wish I had never done that,’ she said about her refinance.”
The Orlando Sentinel. “Orlando resident Jose Polanco considered himself lucky when he was one of the few chosen to receive mortgage assistance from Florida’s billion-dollar Hardest Hit Fund. The unemployed computer-repair technician said he is thankful the program recently began paying his $1,617-a-month mortgage. But when his slice of assistance runs out later this year or early next, he will still be left with a $350,000 mortgage on a house now worth about $190,000.”
“‘We’re looking for the bank to reduce the principal,’ said Polanco. ‘If the funds for the principal come from the Hardest Hit fund, I don’t care. If the money comes from heaven or wherever, I don’t care. Just drop down the amount to the point where it reflects the real amount that the house is worth.’”
“The unemployed father of two said he looks for jobs daily and would like to stay in his neighborhood, but it will be difficult to find a job making the kind of earnings he made back when he bought his home. At that time, at the height of the homebuying frenzy, he was selling condominiums.”
“Apparently, house flipping is once again the cool thing to do in Orlando – the clever man’s way to easy cash. RealtyTrac recently reported that last year Central Florida was the most profitable market in the country for flippers. My finely tuned sense of financial paranoia can find little good news in this. Couldn’t we all just curl up with a drink and breathe for a bit before jumping into bed with some ‘can’t-miss’ deal on a ‘cozy 3 bdr. 2 ba. with lots of potential?’ Who’s up for a little ’steady as she goes?’”
“If the Great Recession taught us anything, shouldn’t it be that house flipping is not for the faint of heart – or anyone short of disposable cash? It’s the real-estate version of golf. It looks easy when you watch it on TV, but in reality, it can claim your sanity and your fortune. Of course, it’s easy to lose sight of that when you’re drunk on home values that seem to know only one direction. And much of Central Florida was pretty snockered before the bottom fell out.”
“The upside to all this is that real-estate investors – big or small – tend to have more stomach for the risk involved. The downside is that their willingness to burn cash can cause the market to overheat. Right now, no one seems overly concerned by that because their presence has helped clear out some inventory and boost home values. But if the market is going to fully heal, we’ll have to hit that sweet spot where prices make sense, credit is available and flippers make money off solid investments, not mass delusion.”
“Investment firms are driving up prices by paying 20 to 25 percent higher than the list price, Rapp said.”
This same thing is happening in the Phoenix area today. I offered 5k more than the asking price on a house in 85382. I got outbid by one of “three cash offers”. This was for a house in $160k range.
Why are you participating? You are part of it.
Answer the question.
Stay calm Lip, and exercise patience, keep your cash dry and this too shall pass. Personally I’m giving it till end of this year till the PHX market returns to sanity - that’s just my opinion. Essentially if you look at the ARMLS data, there is abnormally low supply at the moment which is driving the feeding frenzy.
I went through that (my bids were ignored because flippers and speculators offered 100%) on six offers on houses around $250K in a years time, finally gave up a year ago and hope some of these parasites have their heads handed to them soon. And for those here that think buying NEVER makes sense for anyone it is cheaper to buy then rent (or would be if I could close a deal) where I live and I’ve owned once before and liked it for many reasons (but sold in 2007 largely due to what I learned here). Anyway, am sitting it out for now and waiting for this bubble to pop….
I meant the flippers and speculators offered 100% cash on several houses I attempted to buy, sorry for the typo…also FWIW all my bids were full price or slightly above
They’re not writing poems or romantic novels — just notes to sellers, telling them how happy they’d be to buy their homes.
Gag me with a spoon.
Ask and ye shall receive. I was checking Zillow Orlando for tax rates* and happened across this lovely blurb:
“Active with contract, pending inspections, seeking back up offers. I’m located in the Ventura Country Club. I have a great view, as I’m by the Canal overlooking the 6th Fairway. Ventura Country Club is a gated and guarded community, there is a lot of activity in this community for example, an 18 hole golf course, playground, tennis courts, fitness center, club house, olympic sized swimming pool, a full service restaurant and more and more. I need a little TLC as my floors are getting a bit worn, but overall I am a great house and I would love to have a new owner. Come on down and see me!…”
http://www.zillow.com/homedetails/3439-Clear-Stream-Dr-Orlando-FL-32822/46097557_zpid/
Maybe the houses cut out those peksy middle-humans and just write notes to each other.
——————–
*Looking to see if Jose Polanco’s $1617 mortgage on $350K included taxes.
C’mon now Michael the Realtard….. that’s right up your alley.
A same day flip. Note who the buyer is. Smart money?
‘A look at the newest list of homes with Chinese drywall shows it has topped 1,900. The 2013 database, released to The News-Press on Friday, contains 1,938 homes reported to the Lee County Property Appraiser as having the defective building material. Bruce Basiliere, a field analyst who handles drywall claims for the property appraiser’s office, believes there are twice as many homes with defective drywall throughout the county. Some are not reported because they have been purchased with intention to flip them, or sell them quickly at a discount, he said.’
Some are not reported because they have been purchased with intention to flip them ??
Anybody familiar with Florida state disclosure laws ?? A known defect, or a “should have known” defect in California must be disclosed…
This is awesome. Nice to know that the realtors have got your back and are really looking out for your best interests.
http://www.floridarealtors.org/legalcenter/askanattorney/disclosure-legal-faqs.cfm
“Q: I represent a seller in a transaction. The seller learned after buying the property that it was the site of a murder-suicide years ago. Must this event be disclosed to a prospective buyer even though this murder-suicide did not occur during the seller’s ownership of the property?
A: No. Under Section 689.25(1)(b), Florida Statutes, a homicide, suicide, or death that occurred on the property is not a material fact that must be disclosed in a real estate transaction. “
All three of those must be disclosed in California…
Yeah, but it’s Florida — it’s a given that your house, at some point, had a dead person in it.
it’s a given that your house, at some point, had a dead person in it ??
Really ?? Even a one year old house ?? How about a 5 year old house ?? 10 ? 15 ?
Besides…You are just talking about a dead person…You think you would like to know if it was Jeffrey Dahmer’s house you were buying ?? I would…
“His murders involved rape, dismemberment, necrophilia and cannibalism”
8/22/2012 Bath Twp, Ohio: The childhood home of serial killer Jeffrey Dahmer is up for sale.
The three-bedroom, 2,170-square-foot house on West Bath Road is listed for $329,000 by Keller Williams Realty.
Ok Jose What if they reduce the principle from $350K to $190…refi the loan let you pay that …you will have a nice home to live in for a long time and any “profit” whether you sell or die from 190K-350K goes back to the government and anything over $350K you keep….
“‘We’re looking for the bank to reduce the principal,’
The principal reduction deals I’ve seen have the debtor sharing in some of the upside above the reduced principal amount…75/25, or something like that (with 75% going to the lender).
buy a house today get an ATM card tomorrow.
Where is the symphony attending harpsichordist today?
Liberace where are you???
Why would a love for classical music make someone less worthy of commenting? And why the false dichotomy between sexual preferences and masculinity? I’m not gay, but if I was, what would that have to do with being “manly”?
I probably dislike baroque music more than anyone here, yet recognize that it was a necessary antecedent of the flowering of classical music in its classical and romantic periods. Here’s a tip - classical music is probably highly correlated with an ability to appreciate nuance and subtlety, something your posts are notably lacking.
Relax Lib.
“Making Money Off Mass Delusion”
Yup…gotta keep dancing, and never sit down until the music stops…
Bulletin Dow industrials up 150 points as U.S. stocks kick off week with big gains
U.S. home prices rise at fastest pace in seven years
• Commentary: The punch bowl is still here, so the party continues
Melt up.
Hmm….where have I seen this before?
We had another realtor leave a note in our mailbox asking if we would sell our house (which we rent). That’s twice in a month.
I look around in astonishment at what is happening, not just here in Florida, but around the country and world.
There’s big trouble on the way.
“We buy
goldhouses!”P.S. The number of signs around our area that actually say “We buy gold” is on the increase, as well. The Fed has everybody and his dog racing into physical anything.
May 28, 2013, 9:52 a.m. EDT
Gold prices drop after forecast cut, firm dollar
By Barbara Kollmeyer and Sara Sjolin, MarketWatch
MADRID (MarketWatch) — Gold prices dropped on Tuesday, feeling the pinch from strength in the U.S. dollar and strong gains for equities, as well as a forecast cut from J.P. Morgan Cazenove.
Gold for August delivery (GCQ3 -1.21%) lost $5.20, or 0.4%, to $1,382.50 an ounce on the Comex division of the New York Mercantile Exchange, after swinging between small gains and losses.
Floor trading was closed for Monday’s U.S. Memorial Day holiday.
Gold prices on Tuesday came off stronger levels as the U.S. dollar rose against key rivals, including the Japanese yen (USDJPY +1.4943%).The yen over the past three sessions has gained against the dollar on concerns about rising yields on Japanese government bond, although the Bank of Japan has been trying to push yields lower to aid economic growth.
…
If the dollar is strengthening then why is oil spiking?
and world ??
Gratitude to Ben for researching and posting this for us all…We now can see that this is a world wide mania…
And, as we watch each weekly report, we can now see that we are on the verge of a currency war led by BOJ…Unchartered territory and unintended consequences are a understatement….
Along with the postings of housing bubble froth should be posted the high end jobs being lost at the same. I know big pharma is. Job loses and cuts are being distracted by the facade of housing mania.
I agree Salinas…Look at the jobs GS is moving to Utah…50 cents on the dollar for wages ?? Less ??
“Writing a letter probably is one of the easiest things buyers have to do to land a home these days, said Samantha DeBianchi, a Fort Lauderdale real estate agent.”
I’d rather land a fish than to kiss a home seller’s ass by writing a smarmy letter extolling the special virtues of their home.
How much longer until Fannie Mae and Freddie Mac are finally wound down?
Oops…
A black nominee with this attitude towards race relations in a Democratic society has a license to get appointed.
Obama nominee: Most whites won’t vote for blacks
‘I’ve got no use for them in the democratic process’
Published: 05/03/2013 at 2:58 PM
(DAILY CALLER) President Obama’s pick to head the Federal Housing Finance Agency once said that a “majority of white voters” would never vote for a black candidate and that they should be excluded from “the democratic process.”
The White House announced Wednesday that Obama will nominate Democratic North Carolina Congressman Mel Watt to take over the FHFA, which regulates Fannie Mae and Freddie Mac, the country’s government sponsored mortgage companies.
Watt, the former chairman of the Congressional Black Caucus, has in the past accused white Americans of racism.
…
Educated guesses about how this plays out from here:
1) Fed stops spiking the housing market punchbowl some time soon.
2) Revitalized GSEs step up to take handoff of housing market punchbowl spiking duties from the Fed, resuming business as usual before their Fall 2008 collapse.
3) Status quo where the federal government IS the mortgage market continues unbroken.
4) Cramdowns on GSE debt finally really do come.
5) 99% of the American electorate is oblivious to the change of plans from a couple of years ago, when the discussion was to restore a private mortgage market.
6) Propaganda is floated to convince the populace that the GSEs are private corporations, not government agencies with unlimited taxpayer backing.
May 28, 2013, 9:42 a.m. EDT
Fannie, Freddie climb 25% to continue surge
By Steve Goldstein
WASHINGTON (MarketWatch) — The over-the-counter common shares of mortgage giants Fannie Mae (FNMA +25.93%) and Freddie Mac (FMCC +25.62%) each leapt over 25% on Monday, extending the 40%-plus gains seen Friday. Both companies are under government conservatorship, and the Treasury gets all their dividends. Investors have poured into both stocks on the hopes the firms will be able to buy their way out of government control once the dividends they have sent to the government exceed the $187 billion injected into them. Year-to-date, Fannie Mae shares have leapt 1351% and Freddie Mac shares have gained 1246%.
…
Every mass delusion contains the seeds of its own destruction.
May 28, 2013, 9:38 a.m. EDT
Treasurys fall after housing; 10-year nears 2.06%
U.S. to sell $15 billion in 2-year notes Tuesday
By Ben Eisen, MarketWatch
NEW YORK (MarketWatch) — Treasurys fell Tuesday as bond investors priced in the possibility that an improving economy, bolstered by strong housing data Tuesday, could push the Federal Reserve to begin winding down its bond purchases.
The annual output of college graduates keeps growing in China, and the number of jobs isn’t keeping up. Economist Albert Park of Hong Kong University of Science & Technology says that with the economy slowing, grads’ prospects are getting even worse.
The benchmark 10-year note 10_YEAR +2.29% yield traded 4 basis points higher at 2.055%. If yields close above 2.06%, that will be their highest closing level since April 2012, according to FactSet. Yields move in the opposite direction to prices.
The 5-year note (5_YEAR +4.03%) yield traded 2.5 basis points higher at 0.920% while the 30-year bond (30_YEAR +1.42%) yield was 3.5 basis points higher at 3.210%.
Treasury yields have been rising since the beginning of May as investors continue to speculate over when the Federal Reserve will act to taper the pace of its bond purchase program, which has served to artificially hold interest rates down. Fed Chairman Ben Bernanke added more uncertainty to the mix last week by indicating that the Fed could begin winding down its purchases during the central bank’s next few meetings if economic data show a continuing economic recovery.
Yields on the 10-year Treasury note have risen over 40 basis points in May.
Treasurys held to losses after The S&P Case-Shiller index of home prices posted its largest year-over-year growth since 2006. The index, a composite of U.S. home prices in 20 cities, rose 10.9% in March over the same month last year, indicating that low housing inventory and pent-up demand had a positive effect on prices. The index was up 1.4% from the previous month.
…
Rapidly inflating bubbles very quickly stretch the membrane which contains them beyond the breaking point.
Bulletin U.S. consumer-confidence index hits highest level in five years
May 27, 2013, 4:17 a.m. EDT
Japan’s Nikkei ends down 3.2%; rest of Asia mixed
By V. Phani Kumar, MarketWatch
HONG KONG (MarketWatch) — Japanese stocks suffered deep losses Monday on the yen’s strength and further profit-taking after concerns about a rise in bond-market volatility helped stoke extreme swings late last week.
The Nikkei Stock Average (JP:NIK +1.20%) tumbled 3.2% to 14,142.65, falling significantly more than the 0.9% it picked up after Friday’s roller-coaster ride. The broader Topix (JP:NIK +1.20%) plummeted 3.4% to 1,154.07.
Still, both benchmarks had recovered from lows earlier in the day, when the Nikkei Average sank as much as 4%.
“The sharp rise in Japanese equities this year has been matched by the pace of the fall in recent days, with the relative strength of the yen again having a dramatic impact on the performance of Japanese exporters,” said Tim Waterer, a senior trader at CMC Markets. “The Nikkei will likely remain under pressure in the short term with offshore investors pulling funds amid the current yen unpredictability,” he added.
…
Bulletin Dow industrials extend Tuesday gain to 200 points in wake of confidence data
May 28, 2013, 9:08 a.m. EDT
What happens to your Bitcoins when you die?
By Jack Tatar
By now, you’ve probably heard about Bitcoins. They’ve been in the news regularly these days and the reports range from describing how Bitcoins will replace paper money in many countries to how Bitcoins are being used as a way to pay for drugs, gambling and sex.
Bitcoins are virtual currency that are generated from a computer based network of individuals that manages Bitcoin balances and transactions. They’re “mined” from computer networks through the process of solving a complex mathematical problem.
Bitcoins are traded on numerous exchanges across the globe and converted into the accepted currencies in these countries. They are used to pay for products and services, albeit some illegal. The interesting aspect for me is that they are still being “mined” (or created) today, but at some point in the near future the total amount of available Bitcoins will ultimately be a finite number. This may create a huge demand and value for them in the future.
…
‘Sarasota Golf Club was part of a larger trend during the mid-2000s housing bubble, in which developers bought struggling golf courses for land to build homes on. In all, about half a dozen Southwest Florida courses were converted into residential communities during a three-year period beginning in 2005. As the market sputtered, though, so did the concept. Until now. Keith Pope, the owner of Pope Golf which managed the course, said the closing was strictly due to his five-year lease expiring at the end of this month, while the property owner finalizes plans for a new residential development.’
“That’s why we’re closing,” said Pope, whose company will be removing its equipment from the property the rest of this week.’
It looks to me like the Fed is pouring fuel on raging wildfires already underway in the stock and housing markets. Buy now, or get priced out on the sidelines forever!
“Of course, it’s easy to lose sight of that when you’re drunk on home values that seem to know only one direction. And much of Central Florida was pretty snockered before the bottom fell out.”
Who’d've thunk the hair-of-the-dog hangover cure would lead to public drunkenness?
Things have cooled off in our nabe. Not many houses for sale, but of the few that are on the market, not one has sold in the month so far. No buying frenzy here. That said, I hear that it still is red hot in Broomfield, CO (where I work)
“‘This reminds me of 2005,’ said Rapp, of Travers Miran Realty. ‘The bubble is coming.’”
In the second half of 2005, Tucson’s resale inventory shot through the roof. This after several years of being described as tight.
And, like In Colorado, I’m not seeing a buying frenzy. Hey, on yesterday’s bike ride, I even saw one block with FIVE houses for sale. One had been on the market before.
And that’s another thing I’m seeing. Listings that failed to sell are now being re-listed. At stratospheric prices.
There are innumerable debt anchors listed at 2005 bubble prices throughout this country. Few, if any, will ever sell at or near the listing price.
“But if the market is going to fully heal, we’ll have to hit that sweet spot where prices make sense, credit is available and flippers make money off solid investments, not mass delusion.”
And what would be required to get to this state? Exactly what we are determined to avoid…a big crash and no more funny money. Both in houses and stock.
Maybe we should ask this guy:
‘We still have a lot of foreclosures out there,’ he said. ‘The percentage of bank-owned transactions is about 10 percent. A typical year is about 1 percent. So we don’t have a normal market yet, and until other signs of normality start showing up, it’s not going to be a truly normal market. It’s just acting like one now.’
It’s just acting like one now.
Based on our twisted definition of normal.
So, I’ve now been to a few parties hosted by tech folks pretty recently. In pretty much all cases, conversations turn to housing (people getting outbid, crazy all-cash buyers, bidding $100k-$250k over and still not “winning”, etc.).
In many ways, it feels like 2005 in the SF Bay Area in that respect…however, one hallmark of 2005 that I remember vividly was the prevalence of Option ARMs as the main way that people were buying. Now, the Option ARM buyer seems to have been replaced by the cash buyer.
In any event, the mania is firmly back.
You paid an inflated price for a house in 2011, thus you have a stake in the direction of prices.
How much did you pay for your depreciating debt dump?
You are telling it like it is RW….I did ask several people I know that are long time successful realtors that work the single family market…There answer on the current market vs. 2005 was just what you said…They said that even if someone is getting a loan, 30%-50% down payment is pretty common so unlike the liar loans of 2005, if what they say is accurate which given my relationship with them I expect that it is then these buyers (at least around here) have a lot of skin in the game…
With that said, that does not change the fact tha IMO, it is full blown out-of-control in ways that are even worse than 2005…We did not have 3% mortgages in 2005…We did not have ridicules low inventory in 2005…Either of those two things change (or both) it will have significant negative impact on values…Letters to the seller with pictures of the dog & kids will go bye-bye…
I think a lot of the “all cash” buyers are buyers who have access to enough cash to close quickly (margin loan, rich relative, etc.), but backfill with more traditional debt later. So, the prevalence of “all cash” buyers in the Bay Area is not necessarily indicative of people who don’t ultimately need a loan–so the stability of owners based on “all cash” transactions is overstated. That said, down payments for jumblo loans are generally still quite reasonable at 25%+.
The jobs picture is also stronger than in 2005…mobile/social’s epicenter is in the SF Bay Area…Twitter/Google/Facebook/Apple (and startups related to their ecosystems), with all making major real estate investments in the area recently or planned (ie. long-term commitments).
I wonder if this is one of the reasons we have seen an increase in margin borrowing. It is full blown out of control though, that’s for sure.
Yep…I agree…
‘these buyers (at least around here) have a lot of skin in the game’
Much attention is given to the way things are now. Does any of this look like it’s going to stop anytime soon? Heck, in China the PTB have been actively trying to slow their market down for over year, and it keeps churning. Here, the central bank hardly dares to mention slowing things down and the President is pushing subprime loans.
What really pushed things into overdrive in terms of madness in 2005-2006 was:
1. Mortgage fraud–claiming a home as a primary residence when it was not, lying about income to get a loan, etc.
2. Creative finance being considered “normal” and being used as a tool to make homes more affordable (option ARMs and other ARMs with “teaser” rates)
3. Second home loans being utilized on acquisition to allow more rampant 100% financing.
The ObamaLoan phenomenon may be the first domino to fall for the next round of the mania. I think that soon we will see #1 occurring with more frequency. I hope we don’t see #2 (a very high percentage of loans currently seem to be fixed-rate…which is good), and I think #3 will take the longest to come back–those lenders got crushed.
My personal hope is that as judicial states start to foreclose faster (they can’t get much slower), and builders begin to add more supply, buyers start to feel less immediate pressure to purchase, and home price increases begin to slow. In this regard, I think Phoenix is the canary in the coalmine…they were the first to commence the rebubble and first to start building anew with any significance–I hope they soon start seeing prices flatten.
I can’t even believe what I’m reading here, it’s like some sort of crazy replay. Promising to feed the squirrels if you buy the home and that sort of thing. Hedge funds buying up property, it’s gotta be a pump and dump, except I don’t understand quite how they’ll accomplish this, because unloading homes is a lot harder than unloading securities and that sort of thing. We haven’t even resolved the last bubble and look what’s happening.
I smell a huge rat here.
Hedge funds buying up property, it’s gotta be a pump and dump, except I don’t understand quite how they’ll accomplish this, because unloading homes is a lot harder than unloading securities and that sort of thing.
They’ll securitize them. You don’t have to sell the houses, just the shares in the companies the own them.
They’ll securitize them. You don’t have to sell the houses, just the shares in the companies the own them.
Interesting concept. And the game of hot potato continues. Somebody is going to lose a lot of money, but everybody thinks they can make money and get out first. And some are right. But what a disaster. So far it seems that the taxpayer ends up on the hook every time. Will that continue forever? Can it?
It’s just another way of selling them.
Yep…We have seen that movie before after the S& L crisis…Bulk sales…
There have been many comments on this board about how when the buy-to-rent buyers dump all their houses on the market, prices will fall. However, if they way they are “dumping houses” is by selling shares in the landlord/owner entity, there will be no additional listings, and thus no affect on local housing markets.
However, if they way they are “dumping houses” is by selling shares in the landlord/owner entity, there will be no additional listings, and thus no affect on local housing markets.
So the entity will never sell no matter how much money they are losing?
“So the entity will never sell no matter how much money they are losing?”
If they are losing money, they will be dumping the houses.
Therefore, if you assume that the buy-to-rent strategy is a sure-fired loser, then you will be proven right–eventually these owners will dump the homes…whether it moves markets depends on how quickly they sell.
If you assume that if you buy homes for the right price, you actually CAN get positive cash flow, then you will not be proven right.
Owning rental homes is not new, there are more than 10 million rental homes in the US as a whole, a teeny-tiny fraction of which are held by large institutions.
It is a curious world indeed if the 10 million or so landlords were being totally irrational in their owning of rental homes. It would not be so curious for larger institutions to grow by buying these individual rental homes over time and more efficiently manage them.
It’s happened before with mom-and-pop dominated real estate…storage used to be owned predominately by individual owners…and frankly, still is. Public REITs came in and made it a more institutional asset class, buying from the mom and pops.
One of the entrepreneurs trying to do the same with single-family rentals is the founder of Public Storage through American Homes 4 Rent.
‘there will be no additional listings, and thus no affect on local housing markets’
It’s doesn’t matter if it is in the rental market or for sale. Either way it is supply.
It is supply the way you and I understand supply (ie. roof/address for an occupant to live in), but it is not supply in that it is a home available for a person to purchase (a listing).
In some markets, investors buying distressed housing and turning it into a rental means taking an empty home and bringing it back into the market as supply. +1 supply, +0 demand.
In other markets however, the investor needs to kick out an occupant first, in which while some supply is added to the market (one home available for rent), there is also the POTENTIAL for there to be one more user of a home (there is also the potential that the prior occupant lives with someone else). +1 supply, +zero to 1 demand.
‘it is not supply in that it is a home available for a person to purchase’
Rents have a relationship to house prices in many ways. If rents are lower, it makes buying less attractive. If rentals are vacant, landlords may be pushed to sell, etc. There isn’t any question thousands of empty houses are being converted into rentals and for sale listings every month.
I did ask several people I know that are long time successful realtors that work the single family market…
And you’re gullible enough to believe them.
What is wrong with you?
May 28, 2013, 1:33 p.m. EDT
Prepare for another round of wealth destruction
By Thomas H. Kee Jr.
I have been advising clients and prospective clients to engage in proactive strategies that can work in both directions since I developed Stock Traders Daily in January 2000. At the time, I had moved from Morgan Stanley and created my business with the opinion that buy-and-hold strategies were far less productive; at least they would be, than proactive strategies going forward. I believe we are now in another period where this thinking is especially true, and I have been pounding the table trying to convince people of this.
What I am not doing is telling people to adopt my strategies, although I think many would benefit, but what I am telling them is that we are in a bubble, and all bubbles end badly. You are far better off in cash than you are invested. I would sell everything, that includes excess real estate, and I would get liquid and nimble immediately. My recent cautious comments on Google (GOOG +0.91%) that suggested investors look to sell and maybe even short prove that I believe even the best companies can see their stock prices fall.
…
You are far better off in cash than you are invested.
Key point from the above.
Like I’ve said: you really can’t fix our kind of stupid.
There has been word that Larry Summers may be the next Fed Chairman (at least his name is being thrown out). Does anyone have any insight as to whether he would run the ship any differently than the Bernanke?
Say what you will about Bernanke, but he’s a very well-mannered man. That description does NOT fit Larry Summers.
Bernanke seems like a pleasant guy. Unfortunately, his practices are destructive and deadly.
Apparently, everyone except for me is falling for the Fed’s QE-reduction bluff, hook, line and sinker.
Asian shares pause as U.S. rally raises Fed QE doubts
Employees of the Tokyo Stock Exchange (TSE) work at the bourse in Tokyo May 20, 2013. REUTERS-Toru Hanai
Traders work on the floor at the New York Stock Exchange, May 16, 2013. REUTERS-Brendan McDermid
Office workers are reflected on a screen displaying share prices as they walk past the Australian Securities Exchange building in central Sydney September 23, 2011. REUTERS-Daniel Munoz
By Chikako Mogi
TOKYO | Tue May 28, 2013 11:12pm EDT
(Reuters) - Asian shares and the Australian dollar eased on Wednesday as strong economic data rallied U.S. stocks to record highs, throwing market focus back on to the possibility of reduced Federal Reserve monetary stimulus in the future.
MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.3 percent at 467.33, moving towards Friday’s five-week low of 464.99.
But losses were limited, with sentiment underpinned by the rise in the Dow Jones industrial average to another record high on Tuesday after data showed U.S. home prices accelerated by the most in nearly seven years in March while consumer confidence picked up in May to its highest in more than five years.
The rally in global markets overnight was driven by bets on some funds would leave emerging markets go back to their home countries, and investors choosing to focus on the growth implications of strong U.S. data, ignoring that it could add to speculation of the Federal Reserve scaling back its bond-buying program, said Credit Agricole CIB’s senior strategist Frances Cheung in Hong Kong.
“So, back in Asia, investors may be more worried about expectations for the Fed’s tapering off because Asian markets have been benefitting a lot from the easy money from the U.S.,” she said. Asian equities markets were likely undergoing a consolidation and moving sideways while investors try to sort out their story, she added.
Australian shares eased 0.1 percent while South Korean shares rose 0.4 percent. Hong Kong shares .HSI fell 0.8 percent but Shanghai shares were up 0.1 percent.
“The falling Australian dollar is leading offshore investors to offload some of those local assets, that’s leading to price declines. They’re trying to avoid getting negative real returns as the Australian dollar continues to weaken,” said Tim Radford, global analyst at stockbroker Rivkin, of Australian stocks.
…