If Problems Arise, They Will Be Hard To Deal With
A report from the Denver Post. “As the listing agent for a new development near the University of Denver, Liz Richards has sold six row homes since December — and who was buying them came as a surprise. ‘Half of them are Chinese buyers with cash — there seems to be a lot of cash,’ said Richards, a broker with Kentwood City Properties in Denver. ‘This is a brand-new trend.’”
“Chinese buyers paid a median price of $425,000 for their U.S. home purchases in 2012, according to the NAR, more than double the $183,000 median price shelled out by Canadian buyers. Golden Realtor Jim Smith, after hearing the pitch at the NAR convention in San Francisco in November, signed up and hired a student from Colorado School of Mines to translate his listings into Mandarin. ‘There is a factor here of them wanting to export their dollars,’ Smith said. ‘They want to move their wealth out of the country before the Communists seize it if there is a change in attitude.’”
The Wall Street Journal on China. “China’s red-hot property market is showing its strongest signs yet of a cool-down, as price growth eases, credit for many developers dries up, and some start to cut prices at new housing projects. In some markets, developers are also worried about an oversupply of homes. Developer DoThink Group last week said it cut prices by 12.2% at its North Sea Park project in the eastern Chinese city of Hangzhou to 15,800 yuan ($2,592) per square meter from 18,000 yuan per square meter.”
“Analysts said the price cuts in Hangzhou and in the nearby city of Changzhou are an indication that those places have an oversupply of housing, which could spread to larger cities. In Changzhou, the developers of a 21-tower project announced discounts last week. Prices were reduced to an average of 7,000 yuan per square meter, with some units selling for 5,380 yuan per square meter, down from an 11,000-yuan price tag in December, according to property broker SouFun Holdings.”
“‘The risk in the property sector is currently underappreciated, and the price cuts in Changzhou and Hangzhou are worrying signals worth investor attention,’ said Nomura economist Zhiwei Zhang in written comments. ‘A sharp slowdown in property investment is possible and would increase systemic risks.’”
Global Time on China. “Share prices of property developers plunged on Monday. A private survey of 100 cities by Soufun, China’s largest online property consulting company, indicates five more cities witnessed falling prices compared with December. The sliding share performance was also in response to recent reports of falling prices in the southern Chinese cities of Hangzhou and Changzhou, signaling a downturn in the property market.”
“‘Minimum price of apartments for sale is now 11,800 yuan ($1,935) per square meter, down 6,000 yuan from before,’ Zhang Yu, a saleswoman at a newly built residential community named Champs Elysee located in north Hangzhou, Zhejiang Province, told the Global Times. ‘Our rivals have also cut their prices,’ Zhang said.”
“StarRiver, a high-end property in Changzhou, East China’s Jiangsu Province, went further by offering almost a 60 percent discount to as low as 5,380 yuan per square meter during the past three days, said a saleswoman who declined to be named.”
Xinhua on China. “The average monthly increase for new homes slowed slightly to 0.49 percent last month from 0.51 percent in December, with the average in the four first-tier cities — Beijing, Shanghai, Guangzhou and Shenzhen — slowing 0.1 percentage point from December, the National Bureau of Statistics said in a statement. Prices of existing homes also moderated, declining in 13 cities, as opposed to only five in December.”
“Senior NBS statistician Liu Jianwei partly blamed tighter credit. Since the beginning of year, commercial banks have become wary of lending to the property sector after a liquidity crunch last year. Industrial Bank suspended loans to some property projects until the end of March, as well as steel, cement, construction and other sectors related to property. Industrial Bank’s unilateral action is a reminder of risk in the property sector this year.”
“‘Due to tight liquidity, if problems arise, they will be hard to deal with,’ the Shanghai Securities News cited a minute from the bank as saying Monday.”
The Hong Kong Standard. “Rumors that the Industrial Bank will curb lending to the property sector drew heavy selling in real estate and banking stocks in Shanghai and Hong Kong. Although Industrial Bank and other mainland lenders denied the rumors, skeptical investors rushed to sell. Things do not look favorable this year. As the US Federal Reserve will certainly continue to taper its bond-buying, funds are leaving emerging markets.”
“Local developers are queuing up to clear inventory, while land auction prices in Tin Shui Wai hit a 12-year low. Hangzhou was the first to lower the price of new flats, which saw those who bought at higher prices damage the sales office and showroom.”
Want China Times. “Hong Kong’s property market bubble may burst as local tycoon Li Ka-shing’s Cheung Kong Limited and the special administrative region’s largest commercial real estate agency Sun Hung Kai Properties have been underselling their inventory and price decline is up to 45%. Lee Chun, a manager at Click Property Agency Limited, a local real estate consultancy firm, said that transaction volume, which was earlier pegged at about 300 a month, had now dropped to 10-20 a month.”
“Louis Chan, Centaline Property Agency’s head of residential sales also stated that the secondary market had declined by 75% to 2,000 from 8,000 a month. The falling house prices and plummeting transaction volume have led to property agencies facing bankruptcy and have boosted the unemployment rate in the sector.”
From Al Bawaba. “I remember visiting Hong Kong in the depths of the property bust in 2008, when one-fifth of all homeowners were underwater on their mortgages and, more recently, when there is a vibrant secondary market for garage space in office towers in Central! Hong Kong property prices have doubled since their post-Lehman lows. The spectacular rise in Hong Kong property was due to the Federal Reserve’s epic monetary printing spree since the Hong Kong dollar is pegged to the US dollar, the legacy of a past Deng-Thatcher era crash in the 1980s.”
“Property bubbles distort the competitiveness of even a post industrial services economy. Yet property is the most dangerous, illiquid asset class of them all, a lesson the Gulf learned the hard way in 2008 (and many times earlier, but professional amnesia is an occupational necessity for bankers, property developed and home flippers!). It is entirely possible for property prices to plummet by 50 per cent to 70 per cent when a property bubble explodes due to a global macro shock. Sadly, Hong Kong now faces such a macro shock as China’s credit/shadow banking system deflates and the Fed taper triggers a protracted rise in global liquidity.”
“Financial crises triggered by a property crash can poison a nation’s banking system, corporates and homeowners for at least five to seven years. Five years after the Wall Street subprime crisis, the US economy can deliver barely two per cent GDP growth despite the $3 trillion money printing spree of the Bernanke Fed. Japan was devastated for two ‘lost decades’ after its property bubble peaked and crashed in 1990, when the Imperial palace in Tokyo was worth more than all the land in California.”
“The 1997 currency meltdown in South-east Asia led to property crashes, bank runs, IMF lifelines and even regime changes from Jakarta to Bangkok, Seoul to Hong Kong. In a world of hyper-kinetic, leveraged, cross-border capital flows when panic spreads at the speed of light across the electronic arteries of the global financial markets, a property collapse in Hong Kong will create havoc, systemic risk and contagion across Asia. Nor will a financial and property market havoc be limited to Asia. As an investor, I cannot forget the malign ghosts of 2008 when the angels of darkness spread misery across the world. It can so easily happen again.”
The rush to build in Hong Kong before the money stops flowing is obvious. In my neighborhood alone 5 new projects have broken ground since January. These five plats consist of 18 towers with 2500+ flats total.
There is no phasing. They are building them all at the same time.
Lucky us, we’re getting China’s One-percenters:
“‘There is a factor here of them wanting to export their dollars’, Smith said. ‘They want to move their wealth out of the country before the Communists seize it if their is a change in attitude.’”
Loot & scoot. China’s going to lose the looters & the scooters and the U.S. is going to pick them up.
I am compelled to repeat what I wrote yesterday: the price an American pays for a house in the United States should not be affected by foreign corruption and looting.
The country whose political leadership needs a change in attitude is this one.
It’s poetic justice for your American. He did this to hisself!
Your American ran up the biggest debt tab in the history of the universe. He bought all sorts of made in PRC crap with borrowed money. The PRC crap is all in the dump, your American still owes the debt and the money is splattering back at him bidding up the price of his necessities of life. Totally unexpected?
It is the country with the enormous pile of debt that needs a change in attitude. You can’t cheat an honest man.
Maybe we can hire a student to write some mandarin and nark em out. Won’t their government execute them for being bad?
Maybe we can hire a student to write some mandarin and nark em out. Might be a better idea for you to study Mandarin so you can survive in the New World Order.
‘Hangzhou was the first to lower the price of new flats, which saw those who bought at higher prices damage the sales office and showroom’
That must have been an interesting sight.
That must have been an interesting sight.
Stress-induced vomiting and diarrhea can do that to most any room.
This is more stone soup hucksterism and cherry picking by the media looking to craft a bullsh$t narrative. Chinese buyers, Canadian buyers, whatever, these can’t sustain a neighborhood and they don’t provide the kind of organic demand needed to keep prices up. They are drops in the bucket.
“China’s red-hot property market is showing its strongest signs yet of a cool-down, as price growth eases, credit for many developers dries up, and some start to cut prices at new housing projects. In some markets, developers are also worried about an oversupply of homes. Developer DoThink Group last week said it cut prices by 12.2% at its North Sea Park project in the eastern Chinese city of Hangzhou to 15,800 yuan ($2,592) per square meter from 18,000 yuan per square meter.”
Will the Chinese real estate market slowdown potentially impact the Chinese investors in U.S. residential real estate, or is it still safe to assume these economies are decoupled?
“StarRiver, a high-end property in Changzhou, East China’s Jiangsu Province, went further by offering almost a 60 percent discount to as low as 5,380 yuan per square meter during the past three days….”.
That is $82/SF.
We are getting to the point where even HA won’t be able to build for a profit. HA is a prophet.
It doesn’t take a prophet to expose a fraud like you.
“Chinese buyers paid a median price of $425,000 for their U.S. home purchases in 2012, according to the NAR, more than double the $183,000 median price shelled out by Canadian buyers.”
How do they know this? Is there some HUD form that requires this disclosure?
other than austin.boston.ny.dc.miami
are any markets positive now?
‘Weekly data from China Index Academy, a research body with the nation’s biggest real estate website, SouFun Holdings, show that 39 out of the 42 cities it monitored from Feb 10 to 16 saw a fall in transactions compared with a year ago. Transactions in Beijing dropped by 91.8 percent, while those in Shenzhen fell by 89 percent.’
‘A report by property brokerage Centaline China compared turnover data in 54 cities it monitored during the Spring Festival period (15 days before and after Lunar New Year) for the past three years. While data for Spring Festival in 2012 were the worst, this year’s were the second-lowest. In first-tier cities, turnover fell by nearly 40 percent.’
‘In Hangzhou, capital of Zhejiang province, prices at a property project were cut by 2,000 yuan ($328) per square meter, while in Changzhou, Jiangsu province, prices were reduced at a project by 5,000 yuan per square meter, Chinese media reported.’
‘The tightening of national monetary supply also took its toll on mortgage policies. A number of major banks canceled their 15 percent discount on first-home mortgages, while some smaller banks even raised their mortgage rates to 130 percent of the benchmark rate.’
‘Yang Hongxu, vice-president of the E-house China R&D Institute in Shanghai, said turnover and price rises will moderate this year, but he remains upbeat about China’s property market. “The price gain will narrow, but it will still be a gain. Prices in major cities will not drop,” he said.’
“will not drop”
Apparently you forgot to send them the memo.
US Housing Demand Falls 6% YoY
http://www.zillow.com/local-info/#metric=mt%3D30%26dt%3D1%26tp%3D6%26rt%3D14%26r%3D102001%26el%3D0
Video:
‘Raghuram Rajan, governor of the Reserve Bank of India (RBI), says emerging markets have received an “unintended” message from developed economies that they are “on their own”. CNBC’s Oriel Morrison reports.’
Yep….I would not call it a trade war (yet) but in some ways its a currency war…Not sure how that plays out because I am not smart enough…
I will say this, we have talked on this blog and society has as a whole about turning inward regarding our economy and people…I think we are seeing the signs of just that starting with the cutback in personal in the military…Unthinkable 10-15 years ago…Next up, shuttering some military bases both at home & abroad…All the talk of our failing infrastructure…The grid…The Airports…High Speed rail…The need to get unemployment down….
Fracking appears to be the game changer for our energy needs…Conversion away from oil…I think we are here….
If we turn inward we leave the middle-east to fend for themselves…We are already doing it by staying out of the Syria conflict….
Wild-Card; Israel…..
FOMC to emerging market economies: “DROP DEAD.”
I have a hard time understanding Beijing housing prices for many reasons, not the least of which is terrible smog like this:
http://tinyurl.com/myl9os3
It’s not out of the question that, in the future, the city will become uninhabitable for large parts of the year.
Back in the 1980s — I can’t speak beyond that — Mexico City had badly polluted air. It got to the point that reporters would put a caged canary in the center of the Zocalo and the bird would be dead within hours. Living in Mexico City, it was said, was the equivalent of smoking two packs of cigarettes a day.
This appears to be much worse. And the ecocide occurring in China might be the worst in world history.
Why are you so “business unfriendly”?
shiller data is ? 2 months old - sale to settlement
And excludes short sales and foreclosures.
But for that reason includes upward bias and for the aforementioned reason is already out of date when released.
Case-Shiller/S&P already has a negative second derivative with the first derivative soon to follow.
‘Several signs of slowing housing market, including a Tuesday report showing home price growth slowed down at the end of 2013, have raised investor worries heading into Home Depot’s earnings release, but the largest U.S. home-improvement retailer managed to ease some of those worries, sending the Dow component’s shares up 2.4%.’
‘Chief Financial Officer Carol Tome said that while the general housing market rebound contributed 2.5 percentage points to the company’s growth in 2013, it expects that contribution to decrease to 2 percentage points this year.’
“We continue to believe we are in the moderate stage of housing recovery,” she said. She added she’s pleased to see Wells Fargo loosening its mortgage lending terms. “That’ll be good for new households buying their first house,” she said. “Credit availability was the big driver of the housing recovery curve. We need to get millennials getting their first home.”
It’s hard to describe how these people, and the media, look at us. Deep down, are we just robots that need programing so we borrow huge amounts of money to buy a house because that’s what Carol “needs”? I realize people in DC and the central banks think they sit at an economic control board, where they pull levers, push buttons, and make the economy go. But now we even have pencil pushers at big box stores suggesting what all the peasants should be goaded into doing?
“…she’s pleased to see Wells Fargo loosening its mortgage lending terms….We need to get millennials getting their first home.””
Another sociopath executive…. bleed those sheeple dry… feed me my bonuses….feed me….
Another sociopath executive…. bleed those sheeple dry… feed me my bonuses….feed me….
I see the situation as more resembling the plot to D. H. Lawrence’s
“The Rocking Horse Winner”
As an investor, I cannot forget the malign ghosts of 2008 when the angels of darkness spread misery across the world. It can so easily happen again.
It’s funny that people would see market forces trying to find the real value of something prior to being manipulated back to “normal” as “angels of darkness” :-).
Yeah though I walk in the shadow of the valley of malign ghosts and the angels of darkness, I shall fear no evil.
America is so A.D.D. It’s memory span is about 5 minutes. The specter of 2008 will return and people will be so befuddled. Silly America.
“Befuddled America”. Sounds like a SNL skit…
Yeah, the main character Buffy would be waiting for gas in her Escalade pissed because the sign reads “out of gas due to Peak Oil” and can’t get to Starbucks for a triple decaf no fat latte.
‘This is a brand-new trend.’
When do we start calling it the ‘Peoples’ City of Denver’ or would they rather plain old ‘New Bejing’?
Wait until all the signage, conversations and restaurants are Chinese, at which point you will know.
Maybe the Chinese restaurants will get better? But after Shanghai I’ve given up hope of that. It cemented my opinion that of all Asian cuisine, Chinese is my least favorite. Even in China.
The best Chinese food I ever had was in Japan.
It cemented my opinion that of all Asian cuisine, Chinese is my least favorite.
One of the best restaurant meals I ever had was in 1967, in a Chinese restaurant in L.A.’s Chinatown near the theater. I missed a meeting with an old Chinese friend of mine due to traffic delays, he had to leave a couple of hours before I was even able to show up. The place was a minimalist storefront operation, looked more like a private home than a restaurant. He told me to order whatever was on the menu, that I couldn’t go wrong there. Was he ever right! I was the only non-Chinese speaker in the place, the menu was nearly all ideographs, with just a few headings in English. The server knew only a few words of English. I asked for “fish” “stew” “rice” and got a wonderful meal for very little money, unlike and much better than any other Chiense food I’ve ever had in the USA.
As always, YMMV.
Mortgage broker I know just back from a business trip to San Jose CA. Up there talking to Chinese clients. I asked are they still buying and he said “No RE available to buy”
Some economists say the Case-Shiller figures overstate recent price gains because they include foreclosures.
from yahoo- got editing ?
don’t you mean “exclude”?
from yahoo- they don’t read their own sht
Yes, but per Case Shiller, the number of excluded transactions from REO is actually relatively small.
From the CS Methodology:
“Although the number of excluded transactions will vary from market to market, depending on how much detailed information is available in recorded deeds, usually less than 5% of non-duplicate transaction records are identified as non-arms-length and are removed as possible pairing candidates.”
Another ~5% are removed because sales were too close together (6 months or less).
So, they exclude the bid price when a lender takes back a property via foreclosure (because it is non-arms length), but they DO include it when the home is sold back from the lender to the market (because it IS arms-length).
And they EXCLUDE flippers who complete the whole transaction within 6 months. So, if a flipper buys a home for $100k, puts $20k into it, and resells within 6 months for $140k, this sales pair is EXCLUDED.
‘Another sign that the housing market slowed down during the fourth quarter: Fannie Mae, the nation’s largest mortgage guarantor, saw demand for foreclosed properties dip at the end of the year.
Fannie reported last week an $84 billion annual profit for 2013 on the backs of large home-price gains and a series of one-time legal and accounting benefits. But the report also showed that its inventory of foreclosed homes increased for the second straight quarter as it begins to take back more properties in Florida and other states where foreclosures have been tied up in courts.’
‘And the report showed that the prices Fannie received on those properties, as a share of the underlying mortgage balances, declined slightly from the prior quarter for the first time in 2½ years.’
‘the report offers the latest clue that reduced affordability is leading housing markets to downshift from the sales frenzy of one year ago. Foreclosed properties have been bid up aggressively over the past two years by investors, including institutional buyers that have acquired tens of thousands of properties with the goal of converting them into rentals.’
‘Asian markets got off to a cautious start on Wednesday following a flat finish on Wall Street and as concerns over opaque policy moves in China kept investors on edge. China’s CSI300 index of leading Shanghai and Shenzhen A-share listings suffered its largest one-day loss in seven months on Tuesday, on renewed credit worries and a sharp drop in the yuan. The Shanghai Composite lost 2 percent.’
‘The retreat came as the People’s Bank of China engineered a vicious drop in the yuan.’
’some analysts believe the PBOC may be preparing the markets for more reforms.
“Putting such a warning shot over the bows of the FX community could also be seen as a sensible move ahead of any possible widening of the CNY’s trading band,” said Patrick Perret-Green, an analysts at Australia New Zealand Bank.’
‘He also cautioned that the weakness was not confined to the yuan and equities. Prices for copper and steel had fallen sharply while money markets rates were broadly lower, a risk-off shift that suggested growing worries about the economy.’
“So far, the reaction of other global markets has been remarkably relaxed, if not perverse. It is questionable how long this can persist.”
So, the Chinese think their central bank controls the universe.