Reality Has Struck
It’s Friday desk clearing time for this blogger. “According to the website RealEstate Business Intelligence (RBI), the average sold price of a Fairfax County home in October 2013 was $522,213 — a 10.13 percent increase for year-on-year. For Patricia Mancini of Avery-Hess Realtors, the sweet spot as far as value is concerned falls in the middle of the price range: The $300,000 houses are flying. In Centreville, homes listed in the mid 300s, were on the market for a 32-day average in October. But, she said, ‘The $500,000 is the new $300,000. You can’t get anything good at 300k like you can at 500.’”
“‘We had a strong spring market,’ Mancini said about Springfield. ‘Over the summer, things died off. Listings were on the market, but the demand wasn’t there. Everybody was furloughed. We were just dead in the water.’”
“Tempe-based Fulton Homes CEO Doug Fulton has a message for his colleagues: the Phoenix area new-home market isn’t nearly as hot as you think it is. Fulton said new-home closing figures are misleading out-of-state and unfamiliar homebuilders into believing the time is now ripe to enter the Phoenix market and strike it rich. ‘Other homebuilders need to realize that there is no getting back to the peak of 2005 and 2006. We’re not even back to new-home closing levels of 1990. There is only so much marketshare to go around. Any prediction that the Phoenix market is a gold mine could lead to new homebuilders generating very dismal results for Wall Street.’”
“South Florida home prices increased in October, but the region’s housing market is losing some of its sizzle, real estate agents say. Real estate agents and analysts say once-presumptuous sellers are lowering expectations. More homes are lingering on the market, especially if they’re overpriced. ‘Reality has struck,’ said Bob Melzer, an agent in Palm Beach and Broward counties. ‘Now if you want a better price, you really have to work for it. There’s a slight step back from the craziness, and that’s good.’”
“Nevada’s robosigning law took effect in fall 2011, forcing banks to provide more paperwork before they seize homes from delinquent borrowers. However, some believe that banks are avoiding foreclosure to limit the valley’s inventory of homes for sale, which in theory leads to rising home prices and helps bankers collect more money when they do repossess and sell properties. ‘They’re just stacking them up,’ real estate lawyer Benjamin Childs Sr. said.”
“Two new laws could upend the situation. The days of living at home without paying a mortgage are over, according to Noah Herrera, vice president of the Greater Las Vegas Association of Realtors. ‘Things are going to start moving,’ he said.”
“A new wave of foreclosures is hammering tony Westchester County. Last month, foreclosures vaulted 90 percent from the year-ago period, according to RealtyTrac. Foreclosures in New York plummeted in late 2010 after Chief Judge Jonathan Lippman responded to the robosigning scandal with new rules requiring banks’ lawyers to verify the accuracy of their foreclosure filings. But 2,046 foreclosure actions were started in the first three quarters of 2013 — outstripping the full-year totals of 1,812 in 2012 and 1,655 in 2011. ‘Boom, it came down like an avalanche this year,’ said Westchester County Clerk Tim Idoni.”
“The Prince George’s County chapter of the NAACP held a town hall meeting to hear complaints from Maryland homeowners facing foreclosure and to rally support for its lobbying effort to get Gov. Martin J. O’Malley to place a statewide moratorium on foreclosures. Laurel resident Scarlett Davis said she never got the information to help her avoid losing her home, despite making untold numbers of calls. It wasn’t until her loan was sold to Wells Fargo that she was told that because she was behind 19 payments, her home would be sold. It later appeared on a list to be sold on Dec. 6.”
“‘I am not a fan of merry-go-rounds,’ she said. ‘I want someone to help me get off this ride.’”
“The Malaysian property market is expected to slowdown over the next year, as the government’s attempts to prevent a bubble take effect. An easing of growth is already being noted and in the first six months of the year there was an overall 12.6 per cent decline in residential transactions in Malaysia year-on-year. Falls were even greater in some of the top hubs of Kuala Lumpur, Selangor and Penang, with drops of 47.5 per cent, 16.2 per cent and 28.1 per cent noted.”
“Rahim & Co Chartered Surveyors executive chairman Datuk Abdul Rahim Rahman said: ‘A lot of foreigners paid ten per cent deposit, but did not go through with the sale due to the economic downturn.’”
“As house prices in Auckland continue to rise, so too has talk that wealthy migrants are to blame. Scenes by people such as real estate agent Sam Yeung at TV3’s The Block NZ auction have probably not helped deter the belief that rich foreigners are outbidding everyone else at auctions. Mr Yeung made it abundantly clear the Chinese buyers he represented would not be outbid for the house they wanted. Laker Zhang, who brokers mortgage deals for many Chinese buyers, believes the new migrants have pushed up prices, but not because they are smart investors - he puts it down to naivety about the true value of New Zealand housing. ‘Friends keep telling each other ‘ok, I just got a new house, and my house just went up by $100,000 in price,’ he says.”
“Mr Zhang agrees it’s a bit like Chinese whispers, where everyone is talking up the market, but believes Chinese financiers who are ‘in the know’ are aware the market is over-heated.”
“The beauty of the disinformation is staggering. As house prices accelerate 7.6% nationally, poor housing supply continues to be blamed for the housing crisis. Meanwhile, the sixth Speculative Vacancies report found over 64,000 empty homes in Melbourne. Over $50 billion is given to property investors in tax subsidies each year. Those on Newstart receive barely $6 billion in welfare. We ask, is it perfectly natural for those who already own property to receive such significant subsidies?”
“Concern over vacant housing is rising. The UK has a property bubble double the size of Australia’s with over 1 million empty homes. The Chinese found a staggering 65.4 million empty apartments in 2010 - a sure sign the global property ponzi game is alive and kicking. In the USA last week, the Census Homeownership and Vacancysurveyrevealed a housing vacancy rate of 10.2%. The media enthused at the recent rise in US house prices, but rarely mention it is an investor led recovery, fuelled by the cheap money helicoptered in via quantitative easing.”
“The global trend is evident. Easy profits in real estate are luring more entrepreneurs into this lucrative field of tax loopholes and easy profits. They are comforted by the knowledge any meaningful reform resides in the too-hard-basket. ‘It’s political suicide’.”
“If one economy cannot use its monetary policy effectively, the global economy could be stimulated through collective monetary easing. Hot money sort of plays the role of exporting the United States’ monetary policy around the world. The trouble is that the main force behind hot money is speculation. Hot money earns a profit only if it creates a bubble and leaves a hot potato for others to hold. The Fed’s QE may have stimulated emerging economies, which in turn benefited the U.S. economy. It is mainly a bubble phenomenon. When the bubble bursts, the global economy tanks again, leaving behind collateral damage like bad loans.”
“The odds are that the world is experiencing a bigger bubble than the one that unleashed the 2008 Global Financial Crisis. The United States’ household net wealth is much higher than at the peak in the last bubble. China’s property rental yields are similar to what Japan experienced at the peak of its property bubble.”
“The disinflationary force from globalization, especially from East Asian economies driving down the prices of manufacturing goods, is the background for the serial bubbles over the past three decades. Despite its terrible record, the Fed continues to believe in the power of its policy in creating employment. It has created one bubble after another. Each bursting leads to a downturn, which justifies another round of monetary stimulus and the making of another bubble.”
“Activist monetary policy is possibly one of the most destructive forces in modern economic history. It creates the illusion of effectiveness during bubble formation, which justifies its relevance despite so many financial disasters.”
“Nevada’s robosigning law took effect in the fall of 2011 forcing banks to provide more paperwork before they sieze homes from delinquient borrowers.”
Ohhhh, the pain!
Wait, maybe not …
“However, some believe banks are avoiding foreclosures to limit the valley’s inventory of homes for sale, which is theory leads to rising home prices and helps bankers collect more money when they do repossess and sell properties.”
Lol! So I, the banker, because I am such a wonderful person, WANT to do the right thing and help my fellow man but the law won’t let me.
Baaahahahahahahahahah.
Buy for yourself a lawmaker and have him pass laws that benifit you and your cronies, it’s the best investment you will ever make.
Mancini said about Springfield.
I live here w the Simpsons- inventory dropped since august- bama is hiring again
Same article; “Listings were on the market, but the demand wasn’t there. Everybody was furloughed. We were just dead in the water.’”
Really…What was the furlough…One, two days a month and only for a short period of time and that shut down your housing market ?? Is that how fragile it is in this area ??
“Other homebuilders need to realize that there is no getting back to the peak of 2005 and 2006. We’re not even back to new-home closing levels of 1990. There is only so much marketshare to go around. Any prediction that the Phoenix market is a gold mine could lead to new homebuilders generating very dismal results for Wall Street.”
PHX demand has retrenched to pre-1990s levels, huh? This helps to explain one of my memorable RE-related air travel conversations with a fellow passenger earlier this fall. She was a nurse living with one foot in PHX and the other in SD who was also licensed to sell real estate in both locales, and apparently struggling to find a solid economic base in either field or location.
inflation is under 2% and she wants to help you find a job:
http://www.youtube.com/watch?v=dtmrTWh2pxY
Any unemployment problem that will be eased by her policies will be an unemployment problem that exists somwhere else because somewhere else is the place that most of the things that Americans want to buy are manufactured.
IMO, until this problem is addressed her monetary policies or anybody else’s monetary policies will not matter.
New homes????? Seriously? They’ve been building hand over fist for the last year. Now is certainly not the time to start on more projects. The ones being built aren’t selling. Neither are the used ones, unless prices fall again.
If prices fall again with enough of a pop for avg joe to notice, it will be like a cancer patient being told he is no longer in remission.
“In the USA last week, the Census Homeownership and Vacancy survey revealed a housing vacancy rate of 10.2%. The media enthused at the recent rise in US house prices, but rarely mention it is an investor led recovery, fuelled by the cheap money helicoptered in via quantitative easing.”
Where is the U.S. lame stream media on this? No ‘real journalists’ around to report on such stories?
And you know it’s at least double the amount they’re reporting. As it is NARscum, so it is with GovCorp.
“‘Over the summer, things died off.
Imagine that….. and from a realLiar.
What little demand there was just evaporated….. in a month and time period where demand always spikes.
Got cash?
So here we are…..
foreclosure moratoriums holding back the tsunami of millions of excess, empty and defaulted houses………
Every gimmick known to man to sucker people into buying houses yet housing demand at 1997 levels and sinking…
Grossly inflated asking prices crumbling as sales collapse…..
“Activist monetary policy is possibly one of the most destructive forces in modern economic history.”
It’s difficult to imagine what these monetary policy maker clowns will pull in the next downturn. Probably don’t have to wait long to find out.
62 million empty apartments in China. Wow. Talk about pulling resource consumption forward.
Think about it…. The federal reserve is buying $1 TRILLION of houses/year. Of course banks aren’t offering subprime loans. The Federal Gov is offering them and has been since 2008.
And you’re going to risk 30 years of earnings in that environment?
You need your head examined.
5 million houses sold at $250,000 each is the same number.
Biggest slave market in the world, and the volunteers just keep coming.
“5 million houses sold at $250,000 each is the same number.”
And there’s the simple math. It’s a fact.
There are no distortions or phony data or numbers in our analyses.
“The $300,000 houses are flying.”
So are pigs.
Wow, you could house the entire USA in those empty apartments. And they keep building more.
Add to that the ones they didn’t “find”. Add to that empty houses, empty stores, empty factories and empty cities.
We’ve exported the biggest credit expansion in history. Wonder who they will be pissed off at when the party stops.
You can see why they are ending the 1-child policy.
‘The People’s Bank of China said the country does not benefit any more from increases in its foreign-currency holdings, adding to signs policy makers will rein in dollar purchases that limit the yuan’s appreciation.’
“It’s no longer in China’s favor to accumulate foreign-exchange reserves,” Yi Gang, a deputy governor at the central bank, said in a speech organized by China Economists 50 Forum at Tsinghua University yesterday. The monetary authority will “basically” end normal intervention in the currency market and broaden the yuan’s daily trading range, Governor Zhou Xiaochuan wrote.’
‘Less intervention and smaller gains in foreign-exchange reserves may damp China’s appetite for U.S. government debt. The nation is the largest foreign creditor to the U.S.’
http://www.bloomberg.com/news/2013-11-20/pboc-says-no-longer-in-china-s-favor-to-boost-record-reserves.html
Is this an admission that they are no longer running a surplus?
…. of houses.
‘Less intervention and smaller gains in foreign-exchange reserves may damp China’s appetite for U.S. government debt. The nation is the largest foreign creditor to the U.S.’
It’ll also dampen our appetite for the product of the their sweatshops.
‘forget about the housing-debt conundrum for a moment, there’s another problem already with us — an export bubble that burst years ago. “For much of the past decade, the underlying weakness in Canadian export volumes, productivity and manufacturing was papered over by the boom in commodity prices,” says Mr. Porter in a report, titled Canada’s Biggest Challenge.’
“With prices drifting steadily lower since the spring of 2011, it seems safe to conclude that commodities are not going to bail us out this time,” he says.’
‘Out-of-country shipments of Canadian goods have fallen back to the same level they were at in 2000, after falling off a cliff during the 2008-09 recession. On Wednesday, Statistics Canada reported the country’s productivity level edged up by only 0.2% last year, compared to growth of 1.1% in 2011.’
“Looking at Canada’s performance in isolation ignores the fact that every OECD country was clobbered by the drop in global trade in 2009,” says EDC’s Peter Hall, vice-president and chief economist.’
http://www.theprovince.com/business/Forget+housing+market+export+slowdown+biggest+risk+Canada+economist+says/9190831/story.html
“‘I am not a fan of merry-go-rounds,’ she said. ‘I want someone to help me get off this ride.’”
Get some boxes. Ride’s over…
“The odds are that the world is experiencing a bigger bubble than the one that unleashed the 2008 Global Financial Crisis.”
Very sobering for anyone NOT liquid.
“Very sobering for anyone NOT liquid.”
Precisely.
You better have cash… you’re gonna need it. If you’re holding debt, you’re going to have a very rough ride.
‘Would you lend someone money if there was a better than even chance you would never get paid back? Of course you would—if you were today’s crazy junk-bond market. The stock market is setting record highs almost daily, unprofitable companies like Twitter are going public, and flavors of the month like mobile app Snapchat are turning down $3 billion takeover offers because the owners figure they can command more later. But the real irrational exuberance is in the credit markets.’
‘Look no further than Caesars Entertainment. Every gambler knows of this company. Less well-known is that Caesars has been on a long losing streak, unprofitable in five of the past six years and piling up about $10 billion in losses during that time.’
‘The recession is responsible for some of that, but most of the trouble stems from a sensationally ill-timed leveraged buyout in 2008, when Apollo Global Management and TPG acquired Caesars (called Harrah’s back then), for $30 billion. Years later, Caesars’ debt load is a monumental $24 billion. In September, Moody’s declared the company’s capital structure “not sustainable,” meaning Caesars could be headed for bankruptcy unless its fortunes change.’
‘Caesars’ balance sheet is so complex, with a maze of different subsidiaries’ assets going in and out the door, that “the company’s financials need significant pro forma adjustment, almost to the point of abstraction,” a CreditSights analyst recently wrote. That’s a financial pro’s way of saying he can barely make heads or tails of what’s going on.’
‘Nevertheless, last month Caesars completed issuing $2.1 billion in new junk bonds. Those bonds were rated CCC-, according to S&P Capital IQ LCD. A rating that low implies that there’s a 50% chance or better that the bonds will default.’
‘Junk-bond issuance is up 20% in 2013, including a record $56 billion in sales in September.’
http://www.crainsnewyork.com/article/20131117/FINANCE/311179976#
‘Non-financial companies raised a record 65 billion euros from junk bond sales in Europe this year, up from 31 billion euros over the same period in 2012, according to data compiled by Bloomberg. The worldwide default rate fell to 2.8 percent in October from 3.2 percent a year earlier, Moody’s Investors Service reported Nov. 8.’
‘Borrowers are benefiting from record low central bank rates, which are encouraging investors to take on more risk as default rates approach historic lows. Investors placed $19 billion in European high-yield credit funds this year, compared with $771 million in investment grade, according to a Bank of America Corp. report this month, citing EPFR Global data.’
“There’s still a lot of money coming into high yield funds as investors hunt for yield,” said Aengus McMahon, a credit analyst at ING Groep NV in London. “Investors are focusing more on expectations of continued low default rates as the economy grows.”
http://www.bloomberg.com/news/2013-11-21/snai-plans-euro-bonds-as-junk-borrowing-costs-fall-below-5-.html
‘Barely a year ago that Indonesia was considered one of the most attractive emerging markets in the world. What a difference a year makes. Today, Indonesia faces some serious economic headaches, mostly linked to an emerging markets bubble.’
‘With commodities accounting for more than two-thirds of Indonesia’s exports, any major shift in global commodities markets was bound to have an outsize impact. This came on two almost certainly related fronts: a steady slide in commodity prices and a shift in China’s economic model.’
‘In July, Indonesia’s trade deficit widened to a record $2.3 billion, considerably worse than had initially been expected, and compounded by the government’s subsidization of fuel.’
‘Possibly the most significant issue that Indonesia faces, is its severely weakening currency. Since the beginning of 2012, the rupiah has seen around a third of its value shaved against the dollar.’
‘If falling commodity prices and a shift in China’s model were the catalyst for the current situation, did Jakarta do enough to respond?’
‘The answer is actually quite clear: for the most part, the government’s hand had to be forced. Rather than instigate true preventative measures, it has only been able to react to developments as they happened.’
‘Concerns over a consumer credit problem were apparent two years ago. With cheaper credit comes the likelihood of property markets bubbles. In this case, prices have risen across the board, and Bank Indonesia has warned that the real estate bubble might be close to bursting.’
‘Of course, there was a response from the central bank in the form of compulsory down payments on second homes, but again, it appears to have been too little too late.’
http://thediplomat.com/2013/10/indonesias-economic-bubble/?allpages=yes
‘As with most other emerging markets now, the Philippines has a property bubble in addition to its credit bubble, which is creating a wealth effect that is boosting economic growth and optimism.’
‘Philippines’ housing prices, as measured by prices in the Makati CBD, have nearly doubled since 2004.’
‘Rising by a scorching 42 percent in 2012, mortgage loans are growing at an even faster rate than consumer credit. According to the World Bank, lending standards have been relaxed, with some local banks raising their loan-to-value ratio to 80 or even 90 percent in addition to waiving requirements such as proof of income. The proof of income requirement has been waived for many overseas Filipino workers or OFWs who are unable to provide proof of income, yet are able to pay the 20 percent down payment. There is also evidence that easy-pay mortgages are being offered to home buyers, such as those with zero down payment or low payments in the first few years of loan amortization.’
‘The IMF has warned that “real estate developers may (have been applying) less-stringent lending standards and more-generous loan terms than required of banks, including (a higher cap than the standard 60 percent loan-to-value) and by offering initial teaser terms.” The IMF explained that “about 80 percent of new residential construction (by number of units) is in the low middle price bracket. Of these, about half are reported to be purchased pre-construction by overseas foreign workers.” This poses a risk because “possible non-renewal of OFWs’ short-term employment contracts” could spell doom for some real-estate projects. According to the IMF, another reason for concern is the fact that “no institution has oversight responsibility for the housing sector from a macro-financial perspective.”
‘There are also reasons for concern about residential real estate overbuilding because many developers only start construction projects after receiving 60 percent in pre-sales, but only 10 percent of Filipino households have non-passive disposable income (excluding remittances) of at least 30,000 pesos or $648 dollars per month. According to the World Bank, “If 10 percent of these households are prospective end-user buyers, this leads to a projected demand of around 50,000 units, which is much less than the current and pipeline supply.”
‘Thanks to the growing property bubble, the Philippines’ construction sector is expected to expand by double digits in 2014, and account for nearly half of the country’s economic growth.’
‘Due to concerns about a property bubble, Bangko Sentral ng Pilipinas mandated a 20 percent limit on banks’ exposure to real estate loans, though many banks have already exceeded that limit.’
http://www.forbes.com/sites/jessecolombo/2013/11/21/heres-why-the-philippines-economic-miracle-is-really-a-bubble-in-disguise/2/
Where have I heard that term “economic miracle” before?
Builders large and mid size will remain cautious, many are now building up to 35 new homes per development only. The mega developments (Del Webb/Pulte) are only in the domain of very careful analyst of a regional planning.
New homes sales will continue on a path of a near normal market in early 2014, rates will hover at 4.25 to 4.75 till May. June, I see a spike to 5.10 and maybe 5.25 till the end of 2014.
Mortgage lending will be less stringent to combat the increase. The key going forward as always is the jobs picture and if health care collapses this spring all bets are recalled?
The Fed’s latest statement of jobs rate at 6.50 not being low enough to abandon near 0 % rates. ( They said all along 6.50 was the target?)
This signals very good to excellent paying jobs still are not on the table for 2014 or early 2015..
‘Invitation Homes. Welcome to America’s leader in single-family rental homes. Here you can search our extensive listings of high-quality, beautifully renovated homes throughout great neighborhoods across the metro area.’
716 Homes near Atlanta, GA
http://www.invitationhomesforrent.com/apartmentsforrent/searchlisting.aspx?txtCity=Atlanta,%20GA&txtDistance=50&cmbBeds=-1&cmbBaths=-1&cmb_PetPolicy=Indifferent&cmbSort=Miles^ASC&cmbNumResults=25&Sort=Miles&Order=ASC&sPageSize=25&PgNo=1&
Other searches:
382 Homes near Phoenix, AZ
168 Homes near Orange, CA
111 Homes near Sacramento, CA
230 Homes near Orlando, FL
211 Homes near Tampa, FL
147 Homes near Sarasota, FL
226 Homes near Miami, FL
And we’re going to keep building and adding inventory for as long as resale asking prices are 40% higher than our costs(lot, labor, material and profit).
See…. you’re catching on.
‘The bull market has five years ahead of it, Colony Capital’s chairman and CEO, Tom Barrack, said Wednesday. “I feel the exuberance, and I try to avoid the economists,” he said, noting that there were strong positives in the U.S. market: “Transparency, liquidity, the lack of corruption, a marketplace that we understand.”
‘Barrack, who oversees $48 billion in global real estate assets, said on CNBC that he wasn’t concerned about positive sentiment in the market.’
“Of course, you’re going to have bubbles, but the efficiency in the system is there,” he said. “I think this is a five-year, upward-only adjustment. We’re going to have some unforeseen intervening events, but it’s the best game in town.”
http://www.cnbc.com/id/101175873
it’s the best game in town
I’m sure it is…
“Of course, you’re going to have bubbles, but the efficiency in the system is there,” he said. “I think this is a five-year, upward-only adjustment. We’re going to have some unforeseen intervening events, but it’s the best game in town.”
It’s time to hunker-down and sharpen your bayonet and make sure your magazines are clean and fully loaded.
‘Almost weekly, I hear news about different central banks in the global economy cranking up the speed of their printing presses; they are fixated on printing money because these central banks believe they can solve their economic problems by printing. They are wrong!’
‘In its most recent monetary policy statement, the Bank of Japan reiterated it’s take on printing. It said the central bank will continue to work towards increasing the monetary base in the country by 60 trillion to 70 trillion yen per annum. The central bank will buy Japanese government bonds, exchange-traded funds (ETFs), and real estate investment trusts with the freshly printed money. (Source: Bank of Japan, November 21, 2013.) (Yes, the Bank of Japan is buying securities that trade on the stock market. As our next American financial crisis approaches, I wouldn’t be surprised to see the Fed do the same thing.)’
http://smallbusiness.yahoo.com/advisor/race-not-end-well-195613587.html
‘Stocks are ripe for a 2 to 4 percent pullback, one of the biggest bulls on Wall Street, Tony Dwyer of Canaccord Genuity, said Friday. “I think sentiment is too high,” he said. “I think the market’s too overbought, again, just on a very near-term basis.”
‘Longer-term, Dwyer said the market appears to have upside for the next couple of years. “Historically, you don’t get recessions in the U.S. without an inversion of the yield curve. We’re at 16 times earnings in a sub-3 percent core inflation environment. Historically should be at 19 times,” he said.’
“What I do know is this yield curve is not going to be inverted for at least two more years,” he added. “You’ve never gone into a recession post-World War II without an inversion of the yield curve.”
http://finance.yahoo.com/news/sentiment-too-high-canaccord-stock-181258908.html
Sorry Tony, QE has made the yield curve useless as the Fed is purposefully manipulating it. Just one more way markets are being blinded by the central bank.
‘Nasdaq stocks posting largest volume decreases’
http://finance.yahoo.com/news/nasdaq-stocks-posting-largest-volume-230826852.html
A comment:
‘An over inflated market with printed money being pumped in. Interest rates so low you may as well not have a savings account, which pumps more money into the market because there is no where else to go. Can you say BOOM?’
One wonders where the breaking point is in this full throttle race.