A Seemingly Limitless Amount Of Cash
The Union Tribune reports from California. “With the number of service veterans who choose to call San Diego home, their use of financing from the U.S. Department of Veterans Affairs play a huge role in the local housing market. Many veterans can take advantage of financing from Veterans Affairs to obtain their dream home in San Diego. Michael Deery, mortgage specialist with Citywide Financial Corp., noted that VA loans are the only program that allows 100 percent financing in any area. He also shared that many lenders may have easier qualifying and credit guidelines for veterans.”
“‘Most VA lenders only need a 620 credit score to offer 100 percent VA financing,’ said Deery. ‘We can also give a VA buyer a 3 percent lender credit to cover all their closing costs.’”
“For veterans buying in San Diego, the VA offers 100 percent financing on homes up to $500,000. VA loans of more than $500,000 are available but require a downpayment. Deery noted that it’s a good idea for a veteran to submit a personal letter with his or her purchase offer to tell the seller why they want to buy the property. ‘Some sellers will take great pleasure in having the opportunity to help our veteran families,’ said Deery.”
The Modesto Bee. “Even with the tougher lending requirements, there have been plenty of eager buyers in Stanislaus. ‘This past spring and summer was the craziest real estate market I’ve ever seen,’ said Bob Brazeal, who has been selling homes for 33 years. ‘Real estate values in our Valley dropped too low. As values firmed and started to rise, the investors came out of the woodwork. Local and Bay Area all-cash investors bought 50 and 100 homes at a time.’”
“Brazeal said fairly priced Stanislaus properties were getting a dozen or more purchase offers within a week of being listed for sale. ‘Now the market is catching its breath,’ Brazeal said. ‘We still have a lack of inventory, but it’s nowhere near as bad as it was.’”
The Sacramento Bee. “The tail end of the housing bust brought a frenzy of real estate investors to the Sacramento region, including multi-billion-dollar hedge funds. Now that the dust has settled, investors own about 80,000, or roughly one in four, detached, single-family homes in Sacramento County, according to a Bee review of parcel data from the county assessor’s office.”
“Investors have effectively taken over the real estate market in several economically depressed neighborhoods. In south and central Oak Park for instance, investors own about 55 percent of single-family, detached homes.”
From NBC News. “At a brand new housing development in Irvine, Calif., some of America’s largest home builders are back at work after a crippling housing crash. Lennar, Pulte, K Hovnanian, Ryland to name a few. It’s a rebirth for U.S. construction, while the customers are largely Chinese. ‘They see the market here still has room for appreciation,’ said Irvine-area real estate agent Kinney Yong. ‘What’s driving them over here is that they have this cash, and they want to park it somewhere or invest somewhere.’”
“Brian Yang, speaking from his home in China, said he purchased a home in Irvine this year, but he will wait five years, until his daughter turns 10, before moving his family to the U.S. He has several reasons for taking the leap. ‘Education in America is very good and world class, so the first one is for education, and I think the second one is for the property appreciation,’ explained Yang.”
“Yang and many of his colleagues, are also concerned about China’s political instability, inflation, even pollution. They are paying all-cash for real estate in California, using it as a safe-haven for their wealth. Yang was reluctant to talk about the money, but he admitted, ‘I feel the same way to some extent.’”
“The homes range from the mid-$700,000s to well over $1 million. Cash is king, and there is a seemingly limitless amount. ‘The price doesn’t matter, $800,000, 1 million, 1.5. If they like it they will purchase it,’ said Helen Zhang of Tarbell Realtors.”
As our CNBC camera crew interviewed Zhang, another group of potential buyers roaming the neighborhood models raised their brochures to hide their faces when they saw the camera. While no one would say specifically why certain families were shying away from the media, some alluded to the fact that many of the buyers don’t want any questions about where the cash is coming from.”
From Tom Dispatch. “Since the buying frenzy began, no company has picked up more houses than the Blackstone Group, the largest private equity firm in the world. In neighborhoods across the country, many residents didn’t have to know what Blackstone was to realize that things were going seriously wrong.”
“Last year, Mark Alston, a real estate broker in Los Angeles, began noticing something strange happening. Home prices were rising. And they were rising fast — up 20% between October 2012 and the same month this year. In a normal market, rising home prices would mean increased demand from homebuyers. But here was the unnerving thing: the homeownership rate was dropping, the first sign for Alston that the market was somehow out of whack.”
“The second sign was the buyers themselves. ‘I went two years without selling to a black family, and that wasn’t for lack of trying,’ says Alston, whose business is concentrated in inner-city neighborhoods where the majority of residents are African American and Hispanic. Instead, all his buyers — every last one of them — were besuited businessmen. And weirder yet, they were all paying in cash.”
“It’s also paved the way for the company to purchase a lot of homes very quickly, shocking local markets and driving prices up in a way that pushes even more families out of the game. ‘You can’t compete with a company that’s betting on speculative future value when they’re playing with cash,’ says Alston. ‘It’s almost like they planned this.’”
The San Francisco Chronicle. “In April 2012, I wrote a column about taking my eight-months-pregnant sister on Muni and the rudeness she encountered. Just one well-mannered rider out of dozens offered to give up his seat. Now, my sister is having an even more quintessential San Francisco experience: leaving.”
“No, it’s not because of that disappointing Muni experiment. It’s because my nephew, James, is getting too big for the closet his crib is wedged into in their one-bedroom Lower Pacific Heights apartment. Because rents and housing prices are increasingly out of reach unless your paycheck is signed by Twitter or Google.”
“And because in San Rafael, she and her husband are in escrow on a four-bedroom house with a nice backyard, a wrap-around deck with views of Mount Tamalpais and the guarantee that James will enter kindergarten at a top-notch, nearby public school. And they’re getting all this for the price of $376 per square foot.”
“In San Francisco, the closest match to that price is in the Bayview, where homes are selling for $361 per square foot, according to Patrick Carlisle at Paragon Real Estate Group. Homes in more traditionally desirable neighborhoods for families might as well be on the moon for my sister, a fifth-grade public-school teacher in Marin, and her husband, an accountant. The Marina? $1,074 per square foot. Noe Valley? $955. Cole Valley? $937.”
“My sister lives on California Street, barely in District 2 and a stone’s throw from District 5. The supervisors of those districts - Mark Farrell and London Breed - grew up in the city and intend to stay. But they lament that so many of their childhood friends have left.”
“Breed grew up in public housing in the Western Addition, where children were plentiful. Just two of those childhood friends remain in the city. The 39-year-old said she wants to have children, but can barely afford living here on her own - even on a supervisor’s salary of about $107,000 a year. ‘I miss what real diversity is,’ said Breed, who is African American, a group that has seen huge numbers of families leave. ‘Real diversity is families. Real diversity is kids outside playing and hanging out. Real diversity is poor people, rich people, middle-class people. Everyone feels the difference in San Francisco now.’”
“‘Real estate values in our Valley dropped too low.”
Really? Interesting.
Do you always make broad, sweeping generalizations without any substantiation?
One need go no further than reading this group of articles about California. It’s nutso. Obviously nutso. And still they don’t listen or learn.
But why should they? We always bail them out.
“We always bail them out.”
To quote Rev Ike: “You can’t lose with the stuff I use.”
False! California contributes far more in revenue to the federal government than it receives.
That’s a BS contorted stat. Pimps like you pushing it are the reason the rest of the country subsidizes CAs mortgages. Also you are still pretending the score at halftime is the final score. Ignore those woefully underfunded Calpers and STRS pensions. They are massively in debt and way underwater.
Sound familiar?
they aren’t making any more modesto. thousands of rich canadians and chinese move to modesto every year. buy modesto now or be priced out forever.
I remember at the bottom in 2007 or 2008, “aladinsane” (who was always funny and a big gold buyer) said all the banks had write down the value of their housing inventory and defaulted loans. He coined the term……
“Mark to Modesto”
I had a good laugh on that one.
Gold was at $600-700 an ounce and he was still buying. I thought he was insane. I never purchased any gold.
I cry over that one.
Don’t cry. He gave all his gold to a monastery in Mexico.
…so you are saying he IS insane?
If you think “the bottom” was in 2008, you’re in for the surprise of your life.
The housing bottom in 2008 was no surprise to me. I read the Housing Bubble Blog and used that as my guide.
The housing recovery of 2012 has been no surprise either, because I read the Housing Bubble Blog…..lots of recovery to come. Just ask the Chinese!
There will be more bubbles and bottoms and recoveries….it is human nature. You should read more and post less! HA! Burdbrain.
And that explains your losses.
What are they up to now….. $150k? 200k?
‘lots of recovery to come. Just ask the Chinese!’
From Blue Skye’s link:
“After I’m done selling all this stuff, I’ll be gone,” said Qiu, briefly lifting his eyes from a TV and casting a careless look at the half-empty shelves. “The workers didn’t have money to spend anyway because there’s no work to be done, and many of them haven’t been paid for months.”
‘China’s biggest banks are already affected, tripling the amount of bad loans they wrote off in the first half of this year and cleaning up their books ahead of what may be a fresh wave of defaults. Industrial & Commercial Bank of China Ltd. and its four largest competitors expunged 22.1 billion yuan of debt that couldn’t be collected through June, up from 7.65 billion yuan a year earlier, regulatory filings show.’
“In the next three to four years, industries with excess capacity will be the main source of credit loss for banks and their nonperforming loans as China cleans up the legacy,” said Liao Qiang, a Beijing-based director at Standard & Poor’s. “The speed of the process will depend on the government’s determination and whether they are willing to incur short-term pain for long-term gain.”
“In the next three to four years, industries with excess capacity will be the main source of credit loss for banks and their nonperforming loans as China cleans up the legacy,”
Would millions upon millions of empty housing units qualify as ‘excess capacity’?
My thoughts exactly. I would put it into the same category.
‘I cry over that one.’
A lot of people are crying over bitcoins. Is it bad to have schadenfreude if bitcoins crash bad in price?
At the recent rate of price appreciation, within a couple more days you will be able to trade your Bitcoins one-for-one with ounces of physical.
Bitcoin is in; gold is out.
Is Bitcoin going up, or is the dollar going down? I guess time will tell.
Nov. 27, 2013, 10:25 a.m. EST
Bitcoin hits $1,000 on trading exchange Mt. Gox
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Bitcoin jumps to record of $947
Gold pares gains after deluge of economic data
By Saumya Vaishampayan
NEW YORK (MarketWatch) — Bitcoin hit $1,000 Wednesday on the trading exchange Mt. Gox. The virtual currency rose as high as $1044 on Mt. Gox, the second-biggest exchange by volume, and bought $1,041 in recent trade. Bitcoin pushed above $900 for the first time last week in the wake of a Senate hearing on virtual currencies, another sign that the virtual currency is becoming a bit more mainstream. Federal Reserve Chairman Ben Bernanke has said virtual currencies like bitcoin “may hold long-term promise” while noting possible risks to law enforcement. The recent surge in bitcoin has been attributed to a growing sense of legitimacy, demand in China, venture capital investments in bitcoin companies, and an open-ended bitcoin trust run by SecondMarket. Bitcoin has no central bank and is created through a process called mining in which a computer solves a cryptographic problem, which become more difficult over time. That is key because the supply is capped at 21 million. Bitcoin traded around $13 at the beginning of 2013 and its rise has come even as gold has fallen this year.
“Right now, there are 11 million bitcoins in circulation, and the algorithm will eventually create around 21 million of them. And that will be the lot — production will stop, and there will be that amount of digital money available, and no more.”
Is there a law which says that once no more bitcoins are going into circulation, nobody else can develop and disseminate other virtual currencies?
Nov. 27, 2013, 5:01 a.m. EST
Bitcoin, not gold, has the Midas touch
Commentary: Digital currency is far more appealing than precious metal
By Matthew Lynn
It’s an alternative to paper currencies. It can be traded anywhere in the world. It has a limited supply. And it should be a secure haven if financial markets start to crash. That is a fairly accurate description of gold. It is also an accurate description of bitcoin, the digital currency that is gaining in popularity all the time.
But here’s a puzzle. The price of gold has been falling for most of this year, and it would be a brave investor who called this as the bottom of the market. And yet the price of bitcoins has been soaring. The goldbugs will tell you that the price of gold is being suppressed — it would be a lot higher if it was not being manipulated downwards. Others will argue that bitcoin is a faddish bubble, a nerd-ish equivalent of 17th century Dutch tulips. Its soaring price tells us nothing — except that people are as easily fooled as they always have been.
Is bitcoin another flash in the pan? Or are the early investors onto something that will make them rich? WSJ’s Jason Bellini has #TheShortAnswer.
The actual answer is more interesting. Clearly there is a demand for alternative currencies, and bitcoin is in many ways a better product for that market. The price divergence is an illustration of how bitcoin is edging gold out of the “alternative money” market — and that is hardly bullish for the precious yellow metal.
For the few people who have not yet heard of it, bitcoin is a purely digital currency, minted in limited quantities by a pre-determined algorithm. No one knows who invented it, and no one controls it. Right now, there are 11 million bitcoins in circulation, and the algorithm will eventually create around 21 million of them. And that will be the lot — production will stop, and there will be that amount of digital money available, and no more.
At the start of this year, you could pick up one of those bitcoins for $13. Looking back, that was the steal of the year. The virtual currency jumped to a record of $947 Tuesday on the trading exchange Mt. Gox.
The point about bitcoin is that it is designed to be all the things that gold was back when the precious metal was a currency. It has a limited supply. It is not controlled by governments or central banks. It is not anonymous, as some people occasionally claim, but it is a lot more private than money held in a bank account. It is a store of value.
All things being equal, you would expect bitcoin price and gold prices to move in tandem. They should be driven by the same forces: a safe haven from turmoil in the markets; a hedge against inflation generated by central banks printing too much money, and a desire to diversify away from the dollar or the euro.
But quite the opposite has happened.
While bitcoin has been soaring in price, gold has been falling. At the start of this year, gold was trading at $1,700 an ounce. Now it has fallen below $1,250. The two-decade bull market in the metal looks to be decisively over. A few brave investors might be buying , but with inflation subdued and the Federal Reserve planning an end to quantitative easing, gold looks unlikely to recover any time soon.
…
I figure when I start hearing at work how other co-workers netted an easy 20 grand because they bought one bitcoin @ some paltry amount of $200 and the bitcoin went stratospheric then I will know how a bubble has formed. Multiply that scenario times thousands of workplaces and you can see how bitcoins will be pumped. There will be guys like me that have envy and decide wth, I’ll just buy a $1000 worth and it has to be better than leaving cash in a bank that pays 0.01% . Now, whether bitcoins have staying power and will be a convenient currency for the future, well, unless there can be something other than people trying to flip it based upon arbitrage like we kind of see with forex, then it will have zero future IMHO. I don’t think you could do arbitrage with bitcoins unless it is from USD to bitcoins or some other currency to bitcoins. But then what would bitcoins be other than measured in dollars and if it fluctuated in price too much then would it ever be accepted wholely?
Bitcoin and gold prices are converging, as bitcoin goes up by alot every day while gold drops a little further. At what point will gold owners trade away their holdings of physical for a bitcoin stash?
Gold price-fixing scandal: UK’s FCA scrutinises $20 trillion gold market
By Bloomberg | 27 Nov, 2013, 10.41AM IST
LONDON: Every business day in London, five banks meet to set the price of gold in a ritual that dates back to 1919. Now, dealers and economists say knowledge gleaned on those calls could give some traders an unfair advantage when buying and selling the precious metal.
The UK Financial Conduct Authority is scrutinising how prices are set in the $20 trillion gold market, according to a person with knowledge of the review who asked not to be identified because the matter isn’t public. The London fix, the benchmark rate used by mining companies, jewelers and central banks to buy, sell and value the metal, is published twice daily after a telephone call involving Barclays, Deutsche Bank, Bank of Nova Scotia, HSBC Holdings and Societe Generale.
The process, during which gold is bought and sold, can take from a few minutes to more than an hour. The participants also can trade the metal and its derivatives on the spot market and exchanges during the calls. Just after the fixing begins, trading erupts in gold derivatives, according to research published in September. Four traders interviewed by Bloomberg News said that’s because dealers and their clients are using information from the talks to bet on the outcome.
“Traders involved in this price-determining process have knowledge which, even for a short time, is superior to other people’s knowledge,” said Thorsten Polleit, chief economist at Frankfurt-based precious-metals broker Degussa Goldhandel GmbH and a former economist at Barclays. “That is the great flaw of the London gold-fixing.”
…
“they aren’t making any more modesto.”
There are so many empty or dieing strip malls there; once the anchor store is gone it’s only downhill. So much obesity, and angry tattooed males stomping about with that junkyard dog stare. Yeah, I want to buy there; NOT!
California needs an cleansing enema; insert the nozzle in Modesto.
“….Do you always make broad, sweeping generalizations without any substantiation?….”
You mean like Housing Analyst does! HA, Burdbrain to the max.
How far underwater are you now Jingleballs?
$150k?
Underwater? You need to post less and read more, Burdbrain.
$1200/Mon cash flow, $3100/Mon principal pay down, and $20,000/Mon appreciation.
I am not going to tell you again. HA.
You’re underwater.
America 2 centuries ago - we will take your poor and your huddled masses
America today - we will take your corrupt oligarchs and their ill gotten wealth any time of the day
“we will take your poor and your huddled masses”
That quote came from a plaque in front of the Stature Of Liberty. It is not part of our historical documents. However, I agree with your sediment.
“Immortalized in the poem of Emma Lazarus, the Statue speaks eternally the words of compassion: “Give me your tired, your poor, your huddled masses yearning to breathe free.” These words from the “The New Colossus,” written in 1883, appear on the Statue’s pedestal.”
I have always advocated placing another similar statue on the West Coast, perhaps in the San Francisco Bay. It would be the Statue of Responsibility. Responsibility is necessary to balance liberty.
Perhaps with this quote: “Freedom makes a huge requirement of every human being. With freedom comes responsibility. For the person who is unwilling to grow up, the person who does not want to carry his own weight, this is a frightening prospect.”
For the person who is unwilling to grow up, the person who does not want to carry his own weight, this is a frightening prospect.”
Growing up and carrying your own weight don’t necessarily go together. In fact, being rich and having a high status job allows a person to live like a baby, seeing himself at the center of the planet with all of his needs taken care of by others.
Don’t tell me, tell Eleanor Roosevelt, she said it.
“many of the buyers don’t want any questions about where the cash is coming from…”
It doesn’t matter. We know where the cash is going.
POOF!
‘In order to offset the lack of loan creation by commercial banks, the “Big 4″ central banks - Fed, ECB, BOJ and BOE - have had no choice but the open the liquidity spigots to the max. This has resulted in a total developed world “Big 4″ central bank balance of just under $10 trillion, of which the bulk of asset additions has taken place since the Lehman collapse.’
‘How does this compare to what China has done? As can be seen on the chart below, in just the past 5 years alone, Chinese bank assets (and by implication liabilities) have grown by an astounding $15 trillion, bringing the total to over $24 trillion, as we showed yesterday. In other words, China has expanded its financial balance sheet by 50% more than the assets of all global central banks combined!’
‘And that is how - in a global centrally-planned regime which is where everyone now is, DM or EM - your flood your economy with liquidity.’
http://www.zerohedge.com/news/2013-11-26/chart-day-how-five-short-years-breakneck-liquification-china-humiliated-worlds-centr
And the comments make for an interesting read as well.
“China’s credit quality started to deteriorate in late 2011 as borrowers took on more debt to serve their obligations amid a slowing economy and weaker income. Interest owed by borrowers rose to an estimated 12.5 percent of China’s economy from 7 percent in 2008, Fitch Ratings estimated in September. By the end of 2017, it may climb to as much as 22 percent and “ultimately overwhelm borrowers.”
Meanwhile, China’s total credit will be pushed to almost 250 percent of gross domestic product by then, almost double the 130 percent of 2008, according to Fitch.”
http://www.bloomberg.com/news/2013-11-18/credit-driven-china-glut-threatens-surge-into-bank-crisis.html
When this thing blows, it’s going to rock our own house of cards.
How many Chinese billionaires are there by now?
Think about it this way: Each billionaire Chinese oligarch can afford to snap up 500 $1+ million dollar California homes as all-cash investments, and have $500 million dollars spending money to cover living expenses and other investments. And our federal government has opened the doors for these people to come here from Red China and turn our residential neighborhoods into gambling casinos.
Go figure…
‘And our federal government has opened the doors for these people to come here from Red China and turn our residential neighborhoods into gambling casinos.’
In the context of it, the Chinese THINK they are the smartest investors ever and we cheerfully let them pay high prices. Didn’t Japan go along similar lines once? Bottom line is the money is made or laundered as suggested. Real estate has all the attraction of a pharmaceutical company investment.
I have run into a few of these Chinese people as of late, and I’m not impressed. They come off as rude, clueless, and out of place.
If you moved to China people there would think the same of you.
You’ve got that right. Consequently, I won’t be going there, EVER.
‘In other words, China has expanded its financial balance sheet by 50% more than the assets of all global central banks combined!’
Apparently they have also figured out how to transform virtual electronic money into vacant cities! And the Chinese real estate investor class has discovered a fundamental economic truth for our time, which is that quantitative easing flows straight from the central bank balance sheet into the value of their real estate investment holdings.
Kenneth Rapoza, Contributor
I cover Brazil, Russia, India & China.
Investing | 9/24/2013 @ 5:27PM
What Investors Really Think About China’s ‘Ghost Cities’
The Chinese housing bubble. It’s on every investors mind. We’ve all heard of the new developments in China, entire cities built to look like mini-Paris downtowns in some cases, complete with Eiffel Tower replica with one stark difference: they’re mostly empty.
What do investors think about these cities? More importantly, will the bursting of China’s housing bubble be as big, and as economically devastating, as America’s?
“I think they certainly have their issues in the property sector,” says Marc Tommasi, head of international equity strategy at Manning & Napier in Rochester, NY. ” It’s more an issue of oversupply in some cities, but not all. I’m not worried so much about debts related to the property sector because, quite simply, unlike here there is not a ton of debt driving property pricing.”
Most investors I have interviewed over the last year about this tell me China’s housing bubble is a problem, but it’s a different sort of problem than the American and European one. There’s no mortgage backed security crisis in the works threatening investment banks. There’s no army of subprime buyers biting off more than they can chew.
“ The strong hands purchasing housing in China are mostly cash buyers, and they have put a floor on price drops on developed properties,” thinks Joel Smolen, a hedge fund manager at Axion Capital outside of San Francisco.
To say leverage in China housing is a non-issue would be to sweep a pulled hand grenade under the rug. Just because you can’t see it, doesn’t make it isn’t explosive. Leverage exists primarily in the municipal banking sector. But investors have an answer for that too. They say that those banks are really a branch of the government and if there ever was a popping of the bubble, the government has the resources to clean up the mess.
Is China housing a ticking time bomb? No, investors overwhelmingly say.
The Bomb Squad
Take a look at what happened this summer with the usually boring Shanghai Interbank Offered Rate. The Central Bank of China has been warning municipalities to ease up on development spending. It said that it would no longer back stop non-performing loans made to projects with no revenue to speak of. The SHIBOR quickly became a water cooler acronym spoken at every water cooler in brokerage houses worldwide. Rates shot up. Investors worried that muni banks would fold. It was like every little city and state in China was Orange County, California circa 1994, when it filed for bankruptcy.
“Investors have one big problem with China,” says Chris Ruffle, an old Yorkshire-born China hand living in Shanghai and managing the Open Door Capital Group. The problem? “They look at China through Western eyes. They think that what’s happened there will happen here. That it’s only a matter of time.”
So what happened with that boring SHIBOR rate. After it shot up with the Central Bank told municipalities they were on their own, the government’s most important bank turned the corner, saw the panic, and quietly told the states that they would save them. The SHIBOR became boring again. Which is great, because who wants to talk about the SHIBOR?
“A Chinese chap trying to preserve his wealth has nowhere to go beside the market,” says Ruffle. Property is gold to them.
Shanghai residents will tell me that sometimes they drive around and city residential towers completely in the dark at night. No one lives in them. That’s because it’s nothing but a gold mine, and all the miners are asleep elsewhere. The mine is vacant. But it has an owner.
For all the ghost towns out there, there are many more neighborhoods in the most populated areas of the country — Goungdong province, Fujian province — both with a combined population of more than 112 million (10% of China’s population) — that have housing shortages. It’s not that there are no buildings to be had; it’s just that most of them have an owner. That’s driving up prices. Housing in cities like Shanghai is becoming unaffordable because there’s not enough housing, and second- and third-home owners are still buying.
The government can’t stop it. Prices are still on the rise, even with requirements for at least 20% down and high taxes on second home purchases.
One way to solve the housing bubble crisis at the state level is to institute property taxes. Shanghai and Chongqing have rolled out property tax initiatives, but they have run into some problems. Prices haven’t cooled much either.
“At some point I think (President) Xi Jinping just says to everyone, ‘look, nationwide, we’re doing this. Everyone is going to pay property taxes whether you look it or not’. I think that we are close to that day coming” says Ruffle. “There is risk in China. But the real risk is political, not real estate. That is the only thing that can create the kind of chaos that all these short sellers have been calling for,” he says.
One of the most famous of the China short sellers, Jim Chanos, said recently that his investors were happy for his call on China despite the fact that the market has beat the MSCI Emerging Markets index year to date and most of the big banks are up on the year.
The hard landing theorists out there have made a real meal of the China housing and lending story. Some of their argument has merit. Others prey upon people’s lack of knowledge of the country, maybe for attention, maybe to sell something.
Or maybe they are right and the majority of investors I speak to, from Nomura to HSBC, from Shanghai to London, are wrong. It’s happened before. It’s hard to know China from afar. One has to be on the ground, like Ruffle, to get it.
“At the moment China is one big emerging market,” says Ruffle, former hedge fund guru behind the China Fund and now running three new funds for local China and Taiwan shares. Where is China heading beyond these ghost cities?
One could say that they will either be knocked down, left empty, or slowly populated. Building in the provinces keeps people employed. But “in five years’ time, China will be different. For investors, it will be like a separate asset class, much like the United States is today,” Ruffle says.
Here’s to hoping they can avoid a United States-style housing crisis.
…
Hey, there are 1.35 billion Chinese people.
$15 trillion in debt is nothing? That is only $11,500/person.
If they make $1/day (and save it all), they should dig there way out of this mess in about…….31 years.
What seems to be the problem?
“Instead, all his buyers — every last one of them — were besuited businessmen”
is he implying businessmen couldn’t be black? RACIST
” ‘I miss what real diversity is,’ said Breed, who is African American, a group that has seen huge numbers of families leave. ‘Real diversity is families. Real diversity is kids outside playing and hanging out. Real diversity is poor people, rich people, middle-class people.”
Real diversity failed to buy in Burlingame and now has been priced out forever.
RE: San Francisco, repost from two days ago, rich geeks ruining the city:
http://www.nytimes.com/2013/11/25/us/backlash-by-the-bay-tech-riches-alter-a-city.html
‘If there was a tipping point, a moment that crystallized the anger building here toward the so-called technorati for driving up housing prices and threatening the city’s bohemian identity, it came in response to a diatribe posted online in August by a young Internet entrepreneur.’
‘I wrote a column about taking my eight-months-pregnant sister on Muni and the rudeness she encountered. Just one well-mannered rider out of dozens offered to give up his seat.’
But the weather is nice.
AND its in a catastrophically-active seismic zone, so you’ve got THAT going for you. Which is nice…
“And because in San Rafael, she and her husband are in escrow on a four-bedroom house with a nice backyard, a wrap-around deck with views of Mount Tamalpais and the guarantee that James will enter kindergarten at a top-notch, nearby public school. And they’re getting all this for the price of $376 per square foot.”
Wow- is that ALL?!? Just $376 per square foot? That is only $3,384 per square yard!! And 1 square yard is just enough area to curl up into a fetal position and sob quietly, rocking back and forth as you try to figure out how you can possibly make those payments for the next 30 years.
It’s offense that these fraudulent numbers even get published.
Think about it….$60/sq for lot, labor, materials and profit. What could a 20 year old structure possibly be worth? 30 or $35/sq?
‘And 1 square yard is just enough area to curl up into a fetal position and sob quietly, rocking back and forth as you try to figure out how you can possibly make those payments for the next 30 years.’
You don’t need a house mortgage for that. Life in general can do that.
At only 1600 sq feet that is $600,000.
Look at these reports:
‘For veterans buying in San Diego, the VA offers 100 percent financing on homes up to $500,000′
‘investors own about 80,000, or roughly one in four, detached, single-family homes in Sacramento County’
‘Local and Bay Area all-cash investors bought 50 and 100 homes at a time.’
‘The price doesn’t matter, $800,000, 1 million, 1.5. If they like it they will purchase it’
‘they’re getting all this for the price of $376 per square foot’
‘In a normal market, rising home prices would mean increased demand from homebuyers. But here was the unnerving thing: the homeownership rate was dropping…’You can’t compete with a company that’s betting on speculative future value when they’re playing with cash,’ says Alston. ‘It’s almost like they planned this.’
I recall we thought it was nuts in 2005 that Bay Arean’s were driving out to Merced and buying 5 houses.
The blog Housing Pygmies are silent on that one too.
‘In a normal market, rising home prices would mean increased demand from homebuyers.’
Huh! I guess the graph in my freshman microeconomics textbook that shows demand decrease as prices increase is a misprint. Or perhaps housing is different?
One thing seems certain, which is that when the next leg down happens, the bubble denialists at the Fed will find themselves sitting on their hands and watching. The real estate investment craze has become too big to bail.
But…but…but….It’s different this time!! (says with eye twitch)
BAHHHHHHHHHHH !
curl up now !
Reading that No Ca sq ft costs were $361-$376 a sq ft was a jolt. (average home) That is one pricey dig.
We bought our former spacious McMansion from Ryland Homes. By far the worst experience as a new construction homeowner. ( i.e. Irvine article ref)
Is Leslie AppletonYun a liar?
the old motto was you cant go wrong with CA real estate!
Explain that to 5 million underwater loan owners in CA.
isnt harp there to help them? there even running adds on radio and tv to help these people who were duped by angelo.
‘The primary focus of Silver Bay Realty and American Homes 4 Rent has been whether these collectors of rental properties will be able to generate strong rental yields. For now, the question might be whether these stocks can even generate positive cash flow, much less a high yield.’
‘In the end, investors might not need to be overly concerned about a strong rental yield if Silver Bay can continue growing its NAV. The NAV sits at $19.50, while the company’s stock is stuck near lows below $16. Investors need to remember that housing price appreciation can be as important as cash flow, especially if one believes in a housing recovery and the rental houses were purchased at depressed prices.’
‘Silver Bay claims that a rental property with an average cost basis of $129,000 has a replacement cost of $200,000. Note that the cost basis is after the company has spent roughly $20,000 renovating the house. Using an estimate of 2.5% inflation over the next five years, the forecast would be for replacement costs to jump to $225,000.’
‘Silver Bay would generate annual returns on investment of 12% for the period based on price appreciation alone. In general, any cash flow from renting houses would all be gravy for investors.’
‘The biggest issue in the rental market continues to be whether the formative stage will actually give way to lower expenses once stability takes place. For its part, Silver Bay has decided to prove out this concept by eliminating housing purchases during the third quarter. The company spent the quarter renovating and leasing properties at a record pace, however, expenses continued to add up. ‘
http://www.fool.com/investing/general/2013/11/25/silver-bay-realty-growing-nav-despite-high-expense.aspx
‘eliminating housing purchases during the third quarter’
Ha!
‘would generate annual returns on investment of 12% for the period based on price appreciation alone’
Ha ha!
Think about it….. Cap rates are negative based on the prices they paid for every last one of the shacks they bought.
How in hell is there ROI on negative cap rates??????
“..How in hell is there ROI on negative cap rates?????? ….duh, it’s a negative ROI. Stupid questions get stupid answers.
I ran the cap rates for you a week ago. They were in the 5% range.
Burdbrain.
You didn’t “run” anything Jingleballs.
We’ve demonstrated over and over again that AMH’s cap rates are negative.
They paid a massively inflated price…. just like you.
Don’t bother with Jingle. He’s getting angrier and angrier by the day as his specuflips go up in smoke. He cashed in on one, so he says, but the remainder are CRATERRRRRR!!!ing, and that’s starting to sink in.
will take great pleasure in having the opportunity to help our veteran families,’ said Deery”
taxpayers will luv it !
The VA loan program has always been self sustaining. Never cost the taxpayers a nickel. The use real underwriting and make sure the borrowers have actual income. Slight difference from the wall street “fog mirror, get a loan underwriting”.
‘Slight difference from the wall street “fog mirror, get a loan underwriting”
Yeah, the military pays a housing allowance that covers the mortgage, tax free. Pretty hard to go wrong when the lender is making the payments. But when they transfer or leave the service, oops! Look back at this blog for all the FB’s in the DC area a few years ago.
A VA loan guarantee basically amounts to free PMI for the borrower, they guarantee the loan up to 20% if the borrower defaults and they did indeed check me out carefully when I got one in 1997 with 0% down (and FWIW I always paid on time and eventually paid off the loan when I sold in 2007 thanks to this blog and a few others)…but good luck buying anything in California with one in the current feeding frenzy, I was ignored when I made several bids with a preapproved loan and enough cash for a conventional 20% down (and a VA loan is even less competetive when you are up against cash), I gave up last year…but perhaps after Bubble 2.0 pops VA loans will be actually be useful in the Golden State again
HOUSING PRICES CONTINUE TO CLIMB
But September’s numbers show the pace of growth still slowing
By Jonathan Horn 12:01a.m. Nov 27, 2013
San Diego County housing prices rose once again in September, but the pace continues to slow.
The S&P/Case-Shiller Home Price Index showed Tuesday that from August to September, the index grew 0.9 percent, which is down from 1.8 percent from July to August.
“As we head into the fall, we should normally see a slowdown in the rate of activity in the housing market, with probably some easing of house price increases, just as a normal seasonal factor,” said Michael Lea, a real estate professor at San Diego State University.
Annually, prices rose 20.9 percent on the index from September 2012 to September 2013, slightly below San Diego’s post-Great Recession peak of 21.5 percent from August 2012 to August 2013. The county’s September year-over-year gain ranks it fourth on the 20-city index. The national average yearlong gain was 11.2 percent.
…
Lea said the number of sales is still below normal levels, which is causing the higher yearly price gains. He noted that rising interest rates would contribute to lower affordability and therefore lower demand and put a strain on prices. In September, the average 30-year fixed mortgage rate was 4.49 percent, up from the 3.47 available in September 2012, according to Freddie Mac.
Las Vegas had the highest year-over-year gain on the index, rising 29.1 percent from September to September. San Francisco jumped 25.7 percent and Los Angeles was up 21.8 percent.
The index works by comparing repeat-sales prices of single-family homes. In September, it reached 193.51 for San Diego, below the peak of 250.34 in November 2005.
…
DataQuick, another home-price monitor, reported that the median price in the county in September was $422,000. The median price fell to 412,750 in October. “Seasonal factors are behind that,” Lea said of the drop. “It’s certainly not something I would get overly concerned about.”
“The median price fell to 412,750 in October.”
It’s worth recalling that the pre-bubble-collapse peak median for San Diego was around $517K. Humpty-dumpty is not back together again, as San Diego prices are still off peak even after every housing market stimulus program under the sun was attempted.
‘The CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) today issued the following statement in response to the Federal Housing Finance Agency’s (FHFA) announcement to keep the 2014 maximum conforming loan limits for mortgages acquired by Fannie Mae and Freddie Mac at $417,000 on one-unit properties in most areas and a cap of $625,500 in high-cost areas:
“C.A.R. applauds the FHFA for keeping with the law and retaining the existing Fannie Mae and Freddie Mac conforming loan limits,” said C.A.R. President Kevin Brown. “The FHFA recognizes that home prices have rebounded in California, especially in the high-cost areas, where lowering the loan limits would have reversed the housing recovery.”
http://goldrushcam.com/sierrasuntimes/index.php/news/mariposa-daily-news-2013/165-november/11048-california-association-of-realtors-report-fhfa-keeps-fannie-mae-and-freddie-mac-conforming-loan-limits
It would be absolutely AWFUL if houses cost less than $625,500. Especially in areas where most people earn less than $50K.
That would be the end of affordable housing as we know it!
‘San Francisco buyers are now spending an average of 32 percent of their monthly gross income, said Svenja Gudell, director of economic research at Zillow, a real estate information service.’
‘The historical high for San Francisco is about 38 percent and with rising mortgage prices, it’s possible that figure could reach 42 percent in the next few months if home prices keep going up.’
“That’s getting to be in dangerous territory because affordability is much less than it used to be,” Gudell said. “Homes are more expensive than they’ve ever been in San Francisco.”
http://www.bizjournals.com/sanfrancisco/blog/real-estate/2013/11/san-francisco-home-prices-up-26-percent.html
‘San Francisco buyers are now spending an average of 32 percent of their monthly gross income, said Svenja Gudell, director of economic research at Zillow, a real estate information service.’
That sounds like a downward biased estimate compared to what we know about San Francisco living costs.
everybody wants to be in san fran. last time I was there the homeless had taken over the streets. not a family friendly atmosphere.