The Housing Bubble

It’s Friday desk clearing time for this blogger. “Home sales across the Houston area broke a pre-recession record in 2013, as a booming economy and a buying frenzy in many neighborhoods pushed up prices. Realty agents who remember Houston’s real estate boom of the early 1980s - and the subsequent crash - say things are different this time. ‘It’s a much more sustainable increase,’ said Steve Hardcastle, a Re/Max Westside broker. ‘Back then, the prices were going up a lot, but a lot of it was because of inflation and the interest rates were 17 percent. … Right now, it feels like it’s more of a market correction in a positive way.’”

“South Florida’s housing market continued to cool down in December, with prices still rising, but at a slower pace than earlier in the year. Industry experts say the moderation in prices is necessary to prevent the market from overheating again. ‘When pricing goes too far, too fast, ultimately it hurts everybody,’ said David Dabby, a South Florida housing analyst.”

“Just over a week ago, I went to two ‘open houses’ in southeast London. The first flat, in Charlton, had originally been put on the market in November at £325,000. Just two months later the asking price was up at £370,000. The second flat was a privately-owned two-bedroom flat in Blackheath village. That was also on at £370,000 – up £100,000 (37%) on six months ago. Both properties had plenty of potential buyers lining up to view, including some from outside London.”

“Bank of England boss Mark Carney must be feeling a bit uncomfortable. Even if he’d like to, Carney can’t scrap Help to Buy. Having house prices crash months before an election would be political suicide for the government.”

“Blackstone Group LP, the private-equity firm that cashed in on Germany’s booming housing market last year, plans to join the ranks of investors shifting money into the country’s commercial properties, where financially-strapped owners are under pressure to make deals. ‘Residential is getting too expensive and they’re using the peak to liquidate,’ said Fabian Klein, the Frankfurt-based head of German investments at CBRE Group Inc.”

“In 2013, home sales in Montreal fell to their lowest level in nine years. Gone are the days of the booming market that flourished in 2011 and 2012, said Bill Palmer, an NDG real estate agent. Palmer said that houses nowadays are selling for less and taking more time to sell. ‘That was a serious sellers’ market,’ he said. ‘No matter what price we would put on something it would go for more – now, it’s not that.’”

“Investors’ love affair with Sydney’s property market could be over, with experts anticipating a slowdown in property speculation. ‘All the pointers are there showing that the Sydney investor market has overshot its fundamentals,’ said the senior economist at Australian Property Monitors, Andrew Wilson. ‘If you can’t get a tenant you have no cash flow’. Without cash flow ‘those that have gone short or have highly geared investments will have the sell.’”

“RP Data senior research analyst Cameron Kusher said a rise in unemployment also could start a sell-off. ‘The forecast data shows that the unemployment rate should start to climb,” he said. ‘If people lose their jobs and need some capital, the investment property will be the first thing to go.”’

“Fitch Ratings says almost one trillion rupees (S$20.7 billion) of Indian bank loans are at risk of turning bad as the economy cools while Goldman Sachs Group Inc sees distressed debt escalating. The nation’s top 100 businesses have a total of two trillion rupees of credit, equivalent to as much as 29 per cent of the banking system’s net worth, due in the next five quarters and they may struggle to refinance almost 50 per cent of that, according to India Ratings.”

“‘The ability of most Indian companies to generate cash and service debt is at the lowest level in five years,’ Deep Narayan Mukherjee, a Mumbai-based director at India Ratings, said. ‘Almost a trillion rupees worth of refinancing coming up in the next twelve months are for companies that will find it tough to get new funding. This could trigger a domino effect of defaults.’”

“Multiple rural credit unions in eastern China designed to improve financial services in the countryside have been unable to pay depositors since the start of 2013, yet another sign of rising financial stress as interest rates rise and the economy slows. According to the state-owned broadcaster China National Radio, three farmers’ financial cooperatives have closed operations, while several others have run out of money to pay depositors.”

“A depositor, identified only as Ms. Xue, told the radio station that since 2011, she has put more than 420,000 yuan ($69,391) in an account with one of the rural credit unions because a representative told her the operation has government backing and her money is safe with them. ‘I trust the government, so I trusted him [the credit union representative],’ Xue said. ‘How would I have known that he would come to me in November and tell me the credit union can’t pay me back?’”

“RealtyTrac reports that November 2013 marked the 17th month in a row of increased foreclosures in Maryland. According to Sheila Dodson, executive director of the Coastal Association of Realtors, the Maryland figures don’t reflect a sudden increase in homeowners not able to make their mortgage. ‘Those properties that were held in moratorium are just now coming into play,’ she said. ‘The moratorium was lifted late last summer. It’s taken a while for people to process their foreclosures. It was a way to prevent flooding the market with inventory.’”

“In Masachusetts, some financial observers think a bump in foreclosures may lay ahead as mortgage holders that delayed actions to absorb changes in Massachusetts laws restart activity to take properties. ‘The pipeline of delinquent loans that have been sitting there — at some point, that faucet’s going to get turned on,’ said Jon K. Skarin, senior vice president of the Massachusetts Bankers Association.”

“According to the Ipsos survey, 53.7 per cent of Australians disagree with the statement ‘rising house prices are a good thing for Australia,’ with 27 per cent ’strongly’ disagreeing. Only 13.2 per cent thought rising house prices were a good thing, with the rest ambivalent or ‘don’t know.’ Surprisingly, even though they stand to gain the most from rising prices, older Australians are even more concerned about rising prices than people aged under 30. ‘Even though as homeowners older generations tend to benefit from rising prices, parents are really worried about their kids capacity to enter the housing market,’ the director at Ipsos, Rebecca Huntley, told News Corp Australia.”