The Housing Bubble

It’s Friday desk clearing time for this blogger. “I love it…Many so-called ‘experts’ are now worrying about a property bubble here in the U.S. History says our opportunity in housing is still great. And all this bubble talk is way overblown. The thought of a property bubble today in the U.S. just makes me laugh. I was just in Hong Kong, where the typical residential property sells for over $1,000 per square foot. At that price, a tiny 500-square-foot apartment sells for over $500,000! By comparison, the median house price in the U.S. is less than $100 per square foot. Which sounds more like a bubble to you? The U.S. is cheap!”

“I’m heavily investing in Florida real estate myself. I suggest you get to know your own market and put money to work. This opportunity won’t last forever.”

“Motivated by dreams of real estate prosperity, nearly 100 investor hopefuls gathered Monday at the Hyatt Regency Hotel to learn how flipping houses could lead to financial freedom. The event was promoted by the host of A&E’s reality TV series ‘Flip This House,’ who touts a three-step process in radio spots as a way to ‘learn how to make money flipping houses, in your spare time, using other people’s money.’ The seminar opened with a video clip almost cut from the popular A&E TV show: A couple of guys find a bargain-priced short-sale, give it a quick facelift and walk away 90 days later with $138,000 in net profit.”

“One attendee told the Herald-Tribune that during the company’s three-day seminar, he was pitched on still more expensive training. He said attendees were taught how to increase their credit limits to buy houses through what he characterized as reckless borrowing habits.”

“State officials said that Maine is on track this year for a record number of pre-foreclosure notices to homeowners. Thomas Cox, a lawyer in Portland who has represented Mainers facing foreclosure, said the national decrease in foreclosures is ‘just a temporary hiatus.’ He said hedge funds have ‘propped up the market’ by buying up foreclosed homes, especially in California and Florida, and those investments have run into trouble because the companies have had difficulty finding people to occupy the homes.”

“In 2009, Cox exposed the practice of ‘robo-signing.’ He said he remains in touch with foreclosure lawyers around the country. ‘I wanted to believe that we are getting near the end of it, but in the next three to five years we could see millions of foreclosed homes (nationally) coming back at us,’ he said. ‘I think we have many more foreclosures in the pipeline.’”

“Seattle housing officials estimate about one-fifth of the city’s homeowners are underwater on their mortgages. According to city council, these homeowners roughly owe between $65,000 and $130,000 more on their mortgages than their homes are worth. One of those homeowners said she missed her first mortgage payment this month and she’s terrified. ‘People don’t deserve this. We didn’t do anything wrong. In fact, we did everything right. And yet, we’re here,’ said Joelle Craft.”

“After Standard Chartered published its report noting that Singapore households had borrowings worth 151% of their annual income in 2012, making them among the most indebted in Asia, the bank warned that as interest rates rise, debt servicing may become difficult for home owners. The Monetary Authority of Singapore (MAS) responded quickly, assuring that the local banking system was sound, while cautioning ‘about 5% to 10% of borrowers have a monthly debt servicing burden greater than 60% of their monthly income. It is reasonable to consider them as over-leveraged.’”

“Thus to mitigate risk on housing loans [housing loans make up more than 70% of household debt, MAS decided to apply the Total Debt Servicing Ratio (TDSR) framework to the granting and re-financing of property-related loans for a start. ‘A large property-related loan can lead to serious over-borrowing, and applying the TDSR will mitigate that risk,’ noted the authority’s spokesperson.”

“Housing prices in Norway fell an average of 1.3 percent from October to November, marking the third month in a row of price declines of over 1 percent. After years of rapidly increasing prices, the decline illustrates a big change in housing market dynamics. The biggest problem facing homebuyers in Norway, is the price level. NRK reported that housing price increases have far exceeded salary increases during the past 10 years. While inflation has otherwise been low in Norway and pay raises solid, employees’ paychecks haven’t been able to keep up with the jump in housing prices.”

“‘We’ll enter 2014 with greater uncertainty about housing prices than we’ve had for many years, Vammervold Dreyer, the leader of the national real estate brokers’ association conceded, noting that condominiums (flats) have registered the biggest price declines.”

“Chu Kin-lan has already shuttered six of 11 offices of her Hong Kong real estate agency, whose Chinese name translates as Precious Prosperity, and let go half of her 70 employees amid the city’s toughest curbs on home buying in its history. The worst pain may be still to come. ‘We’re getting killed by the government here,’ said Chu, who now sees some of her vacated branches replaced by eateries. ‘This is by far the worst I’ve experienced. Almost every agency I know is losing money and closing shops.’”

“‘The government is getting stuck in the middle,’ said Eddie Hui, a professor in the real estate and construction department at Hong Kong Polytechnic University. ‘They understand what the agents are going through, but on the other hand, if they don’t go hard with the measures, the bubble will burst at some point and the property market will be in for a hard landing.’”

“Maybe there is one temptation out there to get Canadians to stop buying homes. Cheaper rent. Even the chief executive of Century 21 Canada, Don Lawby, said there’s no question housing prices in Canada have made renting attractive. But, in defence of housing, he wonders whether people renting will just spend all the savings. ‘Rent for 20 years and what will do you with that money?’ said Mr. Lawby.”

“Bay Area home sales continued their divergent trajectories in November, with median prices rising while sales volume dipped, according to a report. Realtors say another complication is that some sellers have unrealistic expectations. ;Some sellers are overreaching; with their pricing, said Ron Abta of Paragon Real Estate Group. ‘I represented a buyer recently who offered an insane amount of money - $2.3 million - for an upscale South Beach condo that was listed for $2.5 million. Even though we were the only offer, the sellers wouldn’t take it, and said they would wait to see if they could do better.’ Four weeks later, those sellers are still waiting, he said.”

“Completion of a luxurious three-foot casino, topped with a dense layer of icing and a gift-packed sleigh—teetering above a European-themed
 high-end shopping village—has boosted consumer confidence as far upward as the heavens. This addition of decadence to the Strip (as only Wynn can orchestrate) means two beautiful things: We’re in the money again, and ginger mania is afoot. Time for another building boom, ushered in with the generous (and sudden) onslaught of gingerbread, gumdrops, marshmallows, frosting and candy canes flying off supermarket shelves.”

“Forget about critics arguing that new housing construction blasts a middle finger to the foreclosure rates and short sale problems and hurts the multitude of ginger manses sitting empty. Why buy a cracked, stale, molasses-covered den (with dog hair stuck to the candy cane terrace) when fresh honey is being poured into a new home just down the street? It’s not like us to learn from lessons past, anyway. Bring on that moist loaf, that crunchy cookie and hearty biscuit. Let’s build! And quickly. Ryland Homes’ November purchase of 38 acres on Sunset Road means lots of sweet ginger coming our way.”

“It’s not likely to hurt the Realtors selling vintage and mid-mod homes Downtown who say there’s demand from buyers not wanting the ‘aesthetic banality’ of the cookie-cutter ’hoods rising on the outskirts. As for Steve Wynn’s gorgeous and ‘entirely edible masterpiece’ (weighing more than 295 pounds and displayed at the hotel’s buffet), all we can say is, ‘Viva Las Vegas!’”