March 21, 2014

When Easy Money Is No Longer Easy

It’s Friday desk clearing time for this blogger. “Alyssa Hellman, who lives in a historic condominium building in the West End neighborhood of Washington, D. C., gets letters from people interested in buying her home every few months. ‘I don’t exclude the idea of selling if the right person or offer came along,’ she said. But the right offer is a high one. ‘I’m not going to sell it at market rate, because I really don’t want to move. Sellers in this scenario can often name their price,’ Hellman said.”

“Home sales in West Michigan were down 16 percent during the winter months of December, January and February, according to the Grand Rapids Association of Realtors. Ryan Ogle, owner of Blu House Properties, said he’s eager to see if the warmer weather will generate new listings. ‘We have unlimited buyers right now, but we have nothing to sell them,’ Ogle said. ‘Whenever we do have a listing, it sells right away.’”

“The Namibian reported last year that on 10 May 1990, a three-bedroom house in Windhoek’s Khomasdal area was advertised for N$84 800. In May 2005, a three bedroom house in the same area was valued at N$400,000. Five years later in 2010, a similar house in the same area was valued at N$650 000. In 2012, however, the same house’s value nearly tripled to N$1.5 million. Today that figure has swelled further. Minister of Trade and Industry, Calle Schlettwein, admitted that Namibia’s real estate market is now one of the most expensive and ranked fourth in the world after Hong Kong, Dubai and Brazil. ‘Our concern is from a price point of view,’ he said.”

“A gleaming new Mercedes CLA is the latest enticement being dangled before Ottawa condo shoppers. The car itself sells for $33,900 retail. The deal is valid until the end of April and applies to all of the roughly 65 condos still unsold at the 200-unit SoHo Champagne. ‘We thought it was a good synergy with Mercedes because they are a luxury brand, and we are a luxury brand,’ says Mastercraft Starwood’s Jason Ryan.”

“The CEO of the property agency Midland Realty, Ronald Cheung, argues that capital outflow will be a greater concern for property buyers and speculators rather than the increase in interest rates. He was asked whether young people in Macau can afford to buy their own houses, to which he replied with a very straightforward: ‘Right now the property prices in Macau are extremely high, even more expensive than those in Hong Kong. Don’t think about buying houses! This is not a joke.’”

“The AFR ran a series of interesting articles over the weekend on the nascent glut of high-rise apartments being constructed across Australia’s major capital cities. ‘Even more supply is coming, with 41,400 high rise apartments approved last year, a 30 per cent increase on 2012. The surge is driven by Asian and local developers and is being encouraged by state governments, low interest rates, and changing demographics. Offshore investors and local self-managed superannuation funds have helped to prop-up demand but experts are now warning investors to keep clear.”

“‘We are beginning to see high-rise ghost towns,’ said Christopher Koren, former auctioneer and 30-year veteran of the property market.”

“China’s debt issues may continue producing negative noise in coming months, and repayment pressure is bound to increase as more debt matures and economic growth slows, experts said. ‘The challenge is to digest the stock of debt, formed mainly during the former economic stimulus plan, and not trigger systemic disruption,’ said Tang Jiangwei, a senior economist with Bank of Communications Co Ltd. ‘And how to support sustainable growth when easy money is no longer easy.’”

“If you look at Trulia’s estimates of price per square foot, you see San Francisco, New York, Washington and Boston now have prices above their 2008 levels. Now, I thought we all agreed that in 2008, prices were too high, and there was a big bubble. What are we to think of even higher prices in 2014, when the economy has been staggering along on life support for six years?”

“I can tell a story about these cities in which they’re somehow special and the money will just keep rolling in. But I can also tell a story in which people are paying more than they should for houses in my neighborhood on the assumption that today’s $750,000 house will be tomorrow’s $1.5 million retirement fund, even though incomes in D.C. can’t really support an entire city’s worth of seven-figure homes.”

“I might even tell a story where today’s ultra-low interest rates give several cities full of smart upper-middle-class professionals a badly contagious case of money illusion.”

“It was interesting to see Boston Mayor Marty Walsh man up to the fact apartment towers taking shape on the city’s booming skyline are out of reach for the vast majority of Bostonians. As I’ve noted, the new towers opening up in downtown Boston are aggressively seeking to push rents to next level, with $3000 a month studios and penthouses with a monthly tab of $12,000. ‘Eight-five percent of the people of Boston can’t afford to live in these buildings,’ Walsh remarked.”

“Purchases of previously owned homes in the U.S. declined in February to the lowest level since July 2012, figures from the National Association of Realtors showed. Prices rose 9.1 percent from a year earlier, the group said. The number of previously owned homes on the market rose 6.4 percent to 2 million. At the current sales pace, it would take 5.2 months to sell those houses, the highest since April 2013, compared with 4.9 months at the end of the prior month. Less than a five months’ supply is considered a tight market, the Realtors group has said.”

“‘Prices are rising much faster than people’s incomes,’ Lawrence Yun, NAR chief economist, said at a news conference. ‘The biggest factor is affordability,’ which has been declining. Faster job growth can help ease the sting of higher prices and borrowing costs, he said.”




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76 Comments »

Comment by Housing Analyst
2014-03-21 05:45:20

“Lawrence Yun, NAR chief economist, said at a news conference.”

Tens of billions of dollars of fraudulent and questionable transactions, lies, misrepresentations and deliberate obfuscation of data every month for years, and we’re expected to believe what these people say?

Comment by snake charmer
2014-03-21 07:58:25

He’s clearly trying a new approach this time. His job description continues to be propaganda instead of economics, but it’s a new approach. I’m still waiting for David Lereah to be resurrected. With this echo bubble, Lereah can re-publish his book with its third different title. He could call it “How the Fed and Other Central Bankers Will Keep the Real Estate Boom Going.”

 
Comment by "Uncle Fed, why won't you love ME?"
2014-03-21 08:58:02

He is lobbying for continued low interest rates.

 
 
Comment by Housing Analyst
2014-03-21 05:48:10

Herndon, VA Housing Prices Sink 17% YoY; Crater 7% in 30 Days

http://www.movoto.com/herndon-va/market-trends/

Comment by polly
2014-03-21 08:00:46

Median house size down 25% from a year ago. Price per square foot up 4% from a year ago.

Comment by "Uncle Fed, why won't you love ME?"
2014-03-21 09:00:02

Smaller houses sell for a higher per-square-foot price. The fixed costs are a higher percentage of the overall costs when there are less extras to add on top.

 
Comment by oxide
2014-03-21 09:30:06

Polly, any speculation as to why the median house size is decreasing so drastically? Are they selling more condos? Or older smaller houses? Non-condo new builds tend to be huge, so they aren’t selling more of those. Even the new townhomes can be upwards of 3000 sq ft (and dark as hell I bet).

Comment by polly
2014-03-21 10:35:14

No idea. For this link it was 2681 square feet to 2000 square feet, but that is just the median number. Distribution matters a lot when you are talking about small numbers. This stuff could all be skewed by not that many small places on the market now or not that many really big ones a year ago. And HAs favorite website shows list prices, not sold prices. Why he (or anyone else) would care about list prices, without some other information, I don’t know.

For what it is worth, I don’t think there are a lot of condos in Herndon. It is practically all the way to Dulles.

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Comment by Housing Analyst
2014-03-21 10:43:06

You seem not to like any data or evidence that suggest housing prices are inflated and falling.

Why is that Mz. Monitor?

 
Comment by Ethan in Norfolk VA
2014-03-21 12:59:46

Lots of townhouses up that way. Not sure as a renter I would want a 4 story tall narrow place like that. That’s a lot of work moving in and out, but they’re popular as developers can milk the most money out of the land.

 
Comment by oxide
2014-03-21 13:14:13

I did a quick check of Zillow in Herndon.

Condos for sale: 20. <—2/2, ~900-1100 sq ft for $250K
Townhomes for sale: 23. <—3/2 in the high $300’s.
SFH for sale: 79. <— runs the gamut in size and price.

Look at this BS townhouse. $360K for a 1989 3/4 single-wide townhouse with a paved front and back yard in the Dulles flight path. Not even an end unit.

http://www.zillow.com/homedetails/1455-Bluemont-Ct-Herndon-VA-20170/51703520_zpid/

Looks at this BS SFH. 4/2 1970’s frickin’ raised ranch with no garage. For $360K, which is less than Zestimate. So much for the furlough cutting prices. :roll:

http://www.zillow.com/homedetails/1103-Bicksler-Dr-Herndon-VA-20170/51706799_zpid/

 
Comment by Housing Analyst
2014-03-21 14:06:29

And our good friend “Ethan” shows up.

 
 
 
Comment by Housing Analyst
2014-03-21 09:39:06

So a newer smaller house is priced the same as an older larger house.

And the point is?

Comment by Albuquerquedan
2014-03-21 10:18:49

So a newer smaller house is priced the same as an older larger house.

She enjoys her trips to Home Depot. More maintenance more opportunities to see the forklift driver.

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Comment by Housing Analyst
2014-03-21 10:21:40

In Mz. Cratertons case, she has a smaller and older house at a larger newer house price.

 
Comment by polly
2014-03-21 10:44:15

Don’t get me confused with Oxide. She made a decision that was right for her (her job location, her desire for a yard, etc.), but I wouldn’t make that decision.

I renewed my lease for another two years in December. And when I got home late one night last week (lecture at the Air and Space museum I think, I go out a lot) I got the on-site maintenance guy to change the back up battery in the smoke detector for me. They do it, and I don’t keep that size battery around. Plus, I didn’t want to have to try to sleep with the darn thing beeping every 40 seconds. I’m pretty sure I am going to get them to reglaze my tub pretty soon too. The mint green is showing.

 
Comment by Housing Analyst
2014-03-21 11:12:09

Your motive is clear. No confusion at all.

 
Comment by oxide
2014-03-21 11:44:56

“smaller and older closer in house at a larger newer way out in the stix house price.”

Fixt.

I haven’t seen the forklift driver in Garden yet this spring, which is unusual. I suppose it’s not that surprising. I have the feeling that HD is gettin’ all Circuit City on their general floor employees. More emphasis on language diversity than knowledge. I had to explain to customer service what a “chisel” was. :roll: At least they seem to put the more knowledgeable staff in the special-order departments like Kitchen or Doors+Windows.

 
Comment by Housing Analyst
2014-03-21 12:02:55

The fact that you don’t disclose what you paid(any measure) tells us you paid too much.

Not our problem.

 
Comment by Albuquerquedan
2014-03-21 13:50:17

I had to explain to customer service what a “chisel” was

I am sure that at the corporate office they know all about “chisel” but they mean something quite different from you.

 
 
 
 
 
Comment by Housing Analyst
2014-03-21 05:55:39

Chantilly, VA(DC metro) Housing Prices Sink 5%; Housing Inventory Skyrockets 47%

http://www.movoto.com/chantilly-va/market-trends/

Comment by Ethan in Norfolk VA
2014-03-21 13:02:06

Hooray! I just interviewed (phone) with a company there. Rents ain’t cheap. Basement and garage abodes are generally $2400ish. It’s odd cause the big houses are all at $3000. Don’t want a townhouse that is 3 levels (they’re cheaper though.) If they had an open hole all the way up where you could use a forklift of electric scissor lift to move stuff upwards it wouldn’t be so bad.

Comment by Housing Analyst
2014-03-21 14:07:42

Rental rates are far cheaper than buying….. Ethan.

 
 
 
Comment by Combotechie
2014-03-21 06:03:34

“The challenge is to digest the stock of debt, formed mainly during the former economic stimulus plan, and not trigger systematic disruption.”

Good luck with that; If the economy morphed from an earned money economy to a borrowed money economy then the economy morphed from depending on earnings to depending on borrowings which means the economy is hosed if the borrowing stops because in a borrowed money economy borrowing is the only thing that keeps the economy chugging along.

Comment by Combotechie
2014-03-21 06:10:09

Oh, and this is China we are talking about, the country that had to go from being an earned money economy to a borrowed money economy because their customers in the West - the customers that had already gone from an earned money economy to a borrowed money economy - cut back on their spending, their spending of money that they didn’t actually have.

And so here we are.

Comment by Bill, just South of Irvine
2014-03-21 06:19:21

Almost 8 years since the bubble peak and now China will be affected by the small population of America not spending? We are small by comparison. And does China not trade with other countries?

Comment by Combotechie
2014-03-21 06:39:26

When I said the West I did not limit the term to just the U.S.

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Comment by Combotechie
2014-03-21 06:42:40

An China kept their economy going by - what? - by building such things as Ghost Cities?

 
Comment by Albuquerquedan
2014-03-21 07:20:52

China is still claiming 7%+ growth and we know that number is too high. However, even if you place its real growth at 4 to 5%, it is still humming along. Now, take off 2% for bubbles and you are down to 2 to 3% growth which is not bad for an economy without bubbles we would probably be negative without the housing and stock market bubbles. How is it doing it? You have a high IQ population equal to the Nordic European countries populations still getting paid like workers with a much lower IQ. China is moving on the economic food chain from low value added products to much higher value products.

China may have its booms and busts just like the U.S. had when it became an industrial power after the Civil war but people should not underestimate its growth potential just like they overestimated its growth potential just a few years ago.

 
Comment by Ben Jones
2014-03-21 07:37:03

‘It might be a humble third-tier city in one of the poorest parts of China, but by next year Guiyang will boast a seven-star hotel centred on a 67-storey, 400-metre-tall skyscraper. Yet the most ambitious aspect of the transformation of Guiyang - the largest urban redevelopment project in China - is the sheer volume of residential apartments it has lined up.’

‘More than 150 square kilometres of property floor space will be built and put on the market in the next three years, enough to house 3 million more people in a city with a population of just 4.3 million.’

‘Wang Shi, the chairman of China’s largest property developer, Vanke, said in September that property prices in China were ‘’strikingly similar” to what Japan experienced in its dark economic period in the late-1980s. In February, he said that while he was sure the property bubble would not burst in 2012 and 2013, he was not so sure about this year.’

‘And the richest man in Asia, the legendary Hong Kong tycoon ”Superman” Li Kashing, has been busy dumping 20 billion yuan ($7 billion) of Chinese property from his portfolio. ”This is a signal worth attention,” Wang says.’

‘Seated in his modern 15th-floor office overlooking Guiyang, Li Yongsheng says business at his P2P firm is booming. ”What we do is completely different from the banks. For people that want money very urgently, we can release the funds within 24 hours,” he said. Li effectively acts as middleman, finding borrowers for his investors’ loan book. Li charges 30 per cent interest to borrowers needing quick credit, and slaps on a service fee of about 8 per cent for his troubles. If those rates make the eyes water, Li says a flood of new entrants into the market have been able to charge twice as much.’

”We’re basically loan sharks, but with a fancier title,” he says cheerfully.’

‘As Li points out, the ”market is too big”, and he is able to pick and choose who he lends to. He says numerous property developers have approached him for loans of upwards of 50 million yuan, but he has chosen not to take their business.’

”All those iron ore and steel traders who have managed to survive are now at the brink of their anti-risk thresholds,” says steel analyst Yin Jimei. ”Many have already given up and turned to other businesses. The demand for iron and steel is OK, but there is no longer any profit. Almost every day there are stories of iron ore and steel traders running away from their debts or being arrested

 
Comment by Blue Skye
2014-03-21 07:48:58

“We are small by comparison…”

That is the point. China has used more leverage. It is grow or crash now for them.

 
Comment by snake charmer
2014-03-21 08:10:17

Jesus. Now they’re “cheerfully” engaging in loan sharking and having to fight borrowers off with a stick. I don’t think China is going to be able to control future events at all. Not that anyone can, but this is going to be a level of chaos and disorder that is just spectacular.

If I was Li Yongsheng, I’d be ready to depart for Vancouver on a moment’s notice. His family may already be there.

 
Comment by Whac-A-Bubble™
2014-03-21 08:31:41

“When I said the West I did not limit the term to just the U.S.”

Presumably ‘West’ includes Europe?

Law Journal
Europe’s Economic Woes Could Enrich Some
Those Who Bill for Bankruptcy Advice May Emerge as Winners
By Tom Corrigan
March 16, 2014 6:20 p.m. ET
Spain’s Fagor Electrodomésticos is among European companies facing hard times. Pictured, workers protested in 2013. Associated Press

Among those affected by Europe’s long-running economic malaise, at least one group is betting on boom times—the lawyers and others who bill for bankruptcy advice.

Europe’s economy is making some progress, but growth remains too weak to save many deeply indebted companies. The halting recovery hasn’t produced many jobs, and companies are struggling with weak demand and the weight of bad investments made before the bust.

 
 
Comment by "Uncle Fed, why won't you love ME?"
2014-03-21 09:03:43

It is delusional to think that China’s growth has been due to some other thing than favored-nation status at the WTO. It is also naive to think that the WTO doesn’t exist at the pleasure of US “multinational” corporations.

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Comment by Albuquerquedan
2014-03-21 09:14:16

I agree with that and Clinton cut all connections between human rights in China and WTO status. It was only after that China growth and the hollowing out of U.S. manufacturing began.

However, China still is growing at a rapid rate and one of the best ways to judge its growth is by increases in electricity demand, there seems to be less manipulation of this number and it seems to reflect what is really going on, if you take the first two months of this year it is still growing by 4.5% year to year, a due to increased energy efficiency electricity growth in both this country and China lags GDP growth:

(China Knowledge)
Updated: 2014-03-21 10:53
Counter:4

China’s electricity consumption reached 383.5 terawatt hours (TWh) in Feb this year, up 13.7% compared to the same period last year, according to statistics released by the National Energy Administration.

In the first two months of this year, the country consumed 824.3 TWhs of electricity, 4.5% more than that in the corresponding period of last year.

During the period from Jan to Feb, primary industry consumed 11.3 TWhs, reflecting a decrease of 7.8% year on year. The power consumption of secondary industry was 582 TWhs, 4.3% more than a year earlier.

The power consumption of tertiary industry was 109.4 TWhs for the two-month period, rising 5.0% from a year earlier.

 
Comment by Ben Jones
2014-03-21 09:55:09

‘people should not underestimate its growth potential’

They had a great chance to become something they aren’t. Access to markets, a large workforce at low wages. A historic opportunity. So why the empty cities? Why have bullet trains to empty cities? IMO, it came down to corrupt leadership. These guys in charge simply decided to stuff enormous amounts of (printed) money into their own pockets.

 
Comment by Albuquerquedan
2014-03-21 10:05:47

IMO, it came down to corrupt leadership. These guys in charge simply decided to stuff enormous amounts of (printed) money into their own pockets.

There is no question that is holding them back and the Chinese buying up real estate in the U.S. is related to that corruption. The only thing I would dispute is the use of past tense about their future. With the proper government both the cities and the bullet trains can be put to use.

 
Comment by Albuquerquedan
2014-03-21 10:16:47

As far as Clinton and Chinese human rights, it continues under Obama:

http://news.yahoo.com/michelle-obama-tours-beijings-forbidden-city-060755672.html;_ylt=AwrTWfwVZixT6zoAw2PQtDMD

So going back to my point, what happens as China moves up the food chain and it is Apple and Google being challenged by Chinese companies with much lower labor costs? At least people will not be complaining about Google buses in SF.

 
Comment by Ben Jones
2014-03-21 10:19:27

‘both the cities and the bullet trains can be put to use’

When in history have entire cities been constructed with the expectation that some day, some one will live there? Complete with malls, infra-structure, even amusement parks. All empty. I’m familiar with this idea that the masses will move in from the countryside. The alternative; that these cities will rot in the sun, is more likely.

 
Comment by Albuquerquedan
2014-03-21 10:36:44

The closest example would be the Brazilian capital but that was only one city. But my contrarian argument, and that is my natural way to look at things, is based on this:

http://www.bloomberg.com/news/2013-07-11/china-leverage-risks-bypass-super-saver-households-as-gdp-slows.html

The Chinese are still saving at a rate of 30% of their incomes. We actually went negative during our first bubble and are still below 5%, despite many people getting close to retirement. Internally, they can generate a lot of economic activity just by lowering their savings rate. During our bubble, people were actually taking money out when they bought homes. While there has been a lot of leverage used to build those Chinese homes, what percentage of a typical house was financed? I agree what has happened in China with the building of whole new cities is unprecedented in human history, however China’s economic growth in unprecedented. We created large subdivisions in the burbs during the 1950’s on speculation and they did sell despite many people thinking that the speculation was insane. If you have rapid job and income growth, you can justify things. Our housing bubble is insane because neither exists.

 
Comment by Blue Skye
2014-03-21 11:18:05

Subdividing is not the same as building empty cities. I saw those subdivisions in the US, more like in the ’60s. A model home was built on spec and the rest of the building followed as people moved in. These subdivisions were not out in the wilderness.

China has a 28 (or something) Trillion dollar brand new debt pyramid and defaults are mounting. it cannot be anything but ugly for them for a while.

 
Comment by Albuquerquedan
2014-03-21 11:49:29

From Wikipedia about Levittown:

Returning to the firm after war’s end, Bill Levitt persuaded his father and brother to embrace the utilitarian systems of construction he had learned, and with his architect-brother, Alfred, designed a small house on one floor and an unfinished “expansion attic” that could be rapidly constructed and as rapidly rented out to returning GIs and their young families. Levitt and Sons built the community with an eye towards speed, efficiency, and cost-effective construction; these methods led to a production rate of 30 houses a day by July 1948.[6] They used pre-cut lumber and nails shipped from their own factories in Blue Lake, California, and built on concrete slabs, as they had done in a previous planned community in Norfolk, Virginia. This necessitated negotiating a change in the building code, which prior to the building of this community, did not permit concrete slabs. Given the urgent need for housing in the region, the town agreed. Levitt and Sons also controversially utilized non-union contractors in the project. On the other hand, they paid them very well and offered all kinds of incentives that allowed the workers to earn extra money, making them often earn twice as much a week as elsewhere.[7]

The planned 2,000 home rental community was quickly successful, with the New York Herald Tribune reporting that half of the properties had been rented within two days of the community being announced on May 7, 1947. As demand continued, exceeding availability, the Levitts expanded their project with 4,000 more homes, as well as community services, including schools and postal delivery. With the full implementation of federal government supports for housing, administered under the Federal Housing Administration (FHA), the Levitt firm switched from rental to sale of their houses, offering ownership on a 30-year mortgage with no down payment and monthly costs the same as rental. The resulting surge in demand pressed the firm to further expand its development, which changed its name from Island Trees to Levittown shortly thereafter.

 
Comment by Albuquerquedan
2014-03-21 11:54:17

Also from Wikipedia:

Brasília (Portuguese pronunciation: [bɾaˈziljɐ]) is the federal capital of Brazil and the capital of the Federal District. The city is located along the Brazilian Highlands in the country’s Central-West region. It was founded on April 21, 1960, to serve as the new national capital. Brasília had an estimated population of 2,789,761 in 2013, making it the 4th most populous city in Brazil.[2]

Among major Latin American cities, Brasília has the highest GDP per capita.[3][4]

Brasília was planned and developed by Lúcio Costa and Oscar Niemeyer in 1956 in order to move the capital from Rio de Janeiro to a more central location. The landscape architect was Roberto Burle Marx. The city’s design divides it into numbered blocks as well as sectors for specified activities, such as the Hotel Sector, the Banking Sector and the Embassy Sector. Brasília was chosen as a UNESCO World Heritage Site due to its modernist architecture.[5]

 
Comment by Albuquerquedan
2014-03-21 12:01:03
 
Comment by Albuquerquedan
2014-03-21 12:03:51

Excerpt from another post about Brasilia:

Brasilia is not only a planned city. It is a planned capital.

Brasilia is one of
the host cities
of the World Cup 2014.
World Cup 2014

Brasilia, the capital of Brazil, was inaugurated on April 22nd 1960, in the central area of the country. Just five years before, the area resembled a desert, with no people, scarce water, few animals and plants.

President Juscelino Kubitschek, who became President in 1956, invited the best Brazilian architects to present projects for the new capital. Oscar Niemeyer, today one of the most famous world’s architects, combined straight and rounded shapes to create innovative architectural masterpieces. Lucio Costa, reknowned Brazilian urbanist, devised a lay-out combining beautiness, simplicity and functionality.

 
Comment by Ben Jones
2014-03-21 12:17:54

Belize did the same thing with their capital after too many hurricanes. You’re missing a key issue. These places were designed for what they became. The Chinese cities were built for speculators. The people can’t afford these places and there’s no work. Another big difference; someone moved into these places you cite. In China, they never did.

 
 
Comment by In Colorado
2014-03-21 09:55:07

Almost 8 years since the bubble peak and now China will be affected by the small population of America not spending? We are small by comparison. And does China not trade with other countries?

We are the consumer of last resort, with trillion dollar trade deficits. If that goes away, the house of cards collapses.

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Comment by Ben Jones
2014-03-21 06:22:34

‘Real estate prices have hit rock bottom over the past year and should now start moving upwards, a major property reseller has said. “Now is the time to buy, otherwise you’re going to miss the boat,” said Chris Hajikyriacou, sales director at BuySell Cyprus.’

‘Hajikyriacou, upbeat about the market’s prospects despite the depression, told the Mail that demand is about to outstrip supply. That could only drive prices up, he predicted, but added that the process would be a gradual one – six months to a year.’

‘The figures cited both by RICS and the Central Bank sync appear to be accurate, Hajikyriacou said. “Given inflated prices during the 2007 to 2008 housing bubble, a price correction of approximately 25 per cent sounds just about right.”

Comment by snake charmer
2014-03-21 08:12:44

Cyprus? Cyprus just had an unprecedented bail-in confiscation of savers’ money. I get that the banking system was popular with Russian criminal elements, but they weren’t the only ones affected, and the precedent has been set. I wouldn’t have liquid or non-liquid assets there for any reason.

 
 
Comment by Ben Jones
2014-03-21 06:27:24

‘Colombia’s economic growth beat expectations in the fourth quarter as a surge in spending on public works projects boosted demand. Fourth-quarter growth was led by construction as public works projects expanded 18 percent. The better-than-expected result could bring forward the moment when the central bank starts to pare back its monetary stimulus, said Camilo Perez, chief economist at Banco de Bogota.’

‘Construction was Colombia’s best-performing sector, expanding 8.2 percent from a year earlier. Home building increased 11.5 percent, boosted by the government’s stimulus package, as subsidized housing loans helped push outstanding mortgages up 28 percent in January from a year earlier.’

Comment by snake charmer
2014-03-21 08:33:09

And hilariously, Bogota’s mayor, the third person to hold that office in three years (his precedessor is in jail for corruption), was unceremoniously ousted and the entire municipal cabinet just resigned. Political stability and real estate prices should have a relationship, but in this brave new world, they don’t.

When I spent time in the city in 2012, I asked who was buying these apartments. No one could say. Some projects had an attached sales office with large windows facing the street, but I only saw one apparent transaction in progress.

 
 
Comment by Ben Jones
2014-03-21 06:34:20

‘South Africa’s two low interest rate periods of the past decade, 2004-2006 and 2009-present, have led to sharp housing price gains as well as a longer-term property bubble. Housing prices rose at a 15 percent annual rate from 2000 to 2002 and began to dramatically accelerate starting in 2003 after interest rates were aggressively lowered. Housing prices proceeded to rise by 21 percent in 2003, 32 percent in 2004, 22 percent in 2005 and approximately 15 percent in 2006 and in 2007.’

‘The combination of rising interest rates and the Global Financial Crisis caused South Africa’s housing prices to dip slightly in 2008 and 2009, until interest rates were dropped to record lows, which has fueled another housing price boom since then.’

‘According to the FNB House Price Index, South Africa’s housing prices rose by 145.2 percent in nominal terms and 42.6 percent in real terms from 2003 to 2013. Another housing price index published by The Economist magazine shows that South Africa’s housing prices increased by 193.5 percent in nominal terms and 67.6 in real terms from 2003 to 2013. South Africa’s housing prices rose by 10 percent in 2012 and 2013.’

Comment by In Colorado
2014-03-21 07:49:49

Utterly insane. South Africa is a cesspool where it is unsafe to go out after dark. And thenthrere’s the story about Namibia. First world prices in Third World countries. And yet, someone is paying these prices. I can only imagine what textbooks in the future (assuming that civilization is still around) will have to save about this madness.

Comment by snake charmer
2014-03-21 08:18:41

I was more nervous in Johannesburg than I ever have been in Colombia. The WSJ had a good story about Windhoek prices, but no indication of who was buying, once people coming from Angola with bags of cash were excluded.

“Four years ago, a bank teller could afford a house in Windhoek,” says Namene Kalili, a housing-market researcher at FNB the largest home-mortgage provider in Namibia. “Today, some bank managers cannot even afford a house.”

http://tinyurl.com/ot5gm2q

 
 
 
Comment by Ben Jones
2014-03-21 06:53:34

‘ Hawaii is one of two states with no forms of legalized gambling, the other state being Utah. The Aloha State has no casinos, poker rooms, ponies or even scratch tickets. We do, however, have lotteries—real estate lotteries that is.’

With real estate prices reaching record highs, tight inventory and strong demand, real estate lotteries have returned on Oahu. Here are some of the latest examples: DR Horton is accepting lottery applications until March 28 for 20 units at its Ka Malanai project in Kailua. This is the builder’s second public lottery for the condo project. Prices start at $520,155 for a one bedroom, $776,575 for a two bedroom and $875,290 for a three bedroom.’

‘Downtown Capital LLC is holding two lotteries for its second tower in Kakaako at 801 South St. Prices range in the affordable-housing complex are from $352,000 to $699,000. The deadline for the first lottery is March 28.’

‘So, why lotteries? On one hand, lotteries can be a fair way to give the greatest number of people a chance to secure a property without waiting in line. On the other hand, developers can use it as a marketing tactic to build hype, suggest overwhelming demand and make buyers feel they were lucky enough to have “won” something if selected. The “prize” is usually the right to buy into the project based on the developer’s terms and prices with no room to negotiate.’

Comment by Housing Analyst
2014-03-21 06:58:54

“On the other hand, developers can use it as a marketing tactic to build hype, suggest overwhelming demand and make buyers feel they were lucky enough to have “won” something if selected.”

And there are plenty of NumbSkulls, KnotHeads, EmptyPockets and
TireKickers out there to make it worthwhile.

Afterall….. EmptyPockets is a prerequisite to buying a house.

 
Comment by Ella58
2014-03-21 12:28:00

Wow, a lottery for a 700k shoebox in an affordable housing complex? I thought the blow-off top insanity was last year, but in retrospect I guess that was just amongst investors. From this week’s posts, it seems the blow-off phase has gone viral with everyday people too.

Investor mania is nothing compared to the lengths ordinary people will go to in order to buy at the very top.

 
 
Comment by Albuquerquedan
2014-03-21 06:59:23

“If you look at Trulia’s estimates of price per square foot, you see San Francisco, New York, Washington and Boston now have prices above their 2008 levels. Now, I thought we all agreed that in 2008, prices were too high, and there was a big bubble. What are we to think of even higher prices in 2014, when the economy has been staggering along on life support for six years?”

“I can tell a story about these cities in which they’re somehow special and the money will just keep rolling in. But I can also tell a story in which people are paying more than they should for houses in my neighborhood on the assumption that today’s $750,000 house will be tomorrow’s $1.5 million retirement fund, even though incomes in D.C. can’t really support an entire city’s worth of seven-figure homes.”

I agree that the cities named above are in a bubble and I expect the prices to fall especially in real terms. However, I suggest that people are buying them for exactly the reason, I identified in my bits post yesterday. We all know that if the government gives everyone a check for one million dollars housing prices will go up and the country as a whole will be no better off and probably worse off, however the politically corrected individuals will make money since they will receive their checks first and buy before the inflation. I suggest that in those cities they have received their cheap money from the Fed, due to their positions in finance or they have enjoyed the growth of government or lobbying in D.C., both groups are playing the Ponzi scheme hoping to ride the inflation caused by the easy fed money and jump-off just before the crash thinking their access to inside government information will allow them to time the market.

 
Comment by Ben Jones
2014-03-21 07:00:23

‘While Florida continues to put up alarming foreclosure numbers, Circuit Court Judge Howard Maltz of St. Johns County is starting to see stats he likes. That’s not to say there isn’t a lot of work to do. There were still 1,027 foreclosures filed in St. Johns County in 2013 and another 134 filed in the first two months of this year.’

‘Maltz said he’s seen some cases that slipped through the cracks for ridiculously long periods of time. He had one case that was 11 years old.’

‘It’s just the nature of a foreclosure case that thrives on delays, the judge said. The property owner, who sometimes stays in a house without paying the mortgage, is often in no hurry to complete the case. And the banks haven’t always been so eager to get a resolution, either.’

‘In civil court, Maltz said usually one side or the other is in a hurry resolve a case. But he doesn’t see much urgency in foreclosure cases. “It’s unlike any other civil case,” Maltz said. “No one wants these to move.”

‘With the loan servicers sometimes just as inundated as the court system, they can be reluctant to take over a property and start paying taxes and homeowner association fees. Also delaying things are the law firms that handle the cases. They are also overwhelmed and sometimes end up leaving the foreclosure business before a case is finished.’

 
Comment by Ben Jones
2014-03-21 07:43:02

‘More than 100 North Texas houses priced at $1 million have changed hands since the start of 2014. And there are another 857 homes in that price range still on the market, according to data from the Real Estate Center at Texas A&M University and the North Texas Real Estate Information Systems.’

‘The surge in high-priced home sales has caught the attention of economists and kept real estate agents busy. “We seeing the same thing in Houston as in Dallas – million-dollar home sales are way up,” said Dr. James Gaines, an economist with the Real Estate Center at Texas A&M. “We are in a housing recovery, and people with money recover faster than people without money.”

“They are taking money out of the stock market or they are simply people who have capital and don’t know what else to do with it,” he said. “Putting it into a luxury home is not a bad proposition.”

‘While many of these deluxe property buyers pay cash or finance only a percentage of the purchase, for buyers who need a mortgage, high-end home financing is now more plentiful and affordable, Gaines said. “Jumbo mortgage rates are now at or slightly below conventional loan rates,” he said. “And lenders aren’t as risk adverse as they have been.”

“Last year was unprecedented — the biggest year I have ever had,” said luxury home agent Erin Mathews. “And this year has seen that continue.”

“You have to be fast on your feet to make a buy,” Mathews said. “But nobody is being crazy with prices. Even though prices are inflated from where they were in 2008, buyers want to see what else has sold and at what prices in this boomlet we are in.”

Comment by Ben Jones
2014-03-21 08:18:05

‘Sales of luxury homes in metro Denver slipped slightly in February with fewer homes sold at cheaper prices than the year-ago month. According to a report from Coldwell Banker Residential Brokerage, the median sale price of luxury homes sold in February was $1,252,500, down 3.3 percent from February 2013. The median sale price in January was $1,389,300.’

‘High-end homes sold more quickly than they did a year ago, but sellers received a slightly lower percentage of their asking price, the report said.’

‘The Denver metro area ranks No. 7 nationally on the list of top U.S. sellers’ markets for homes, according to Zillow. Evergreen was the top buyers’ market and Northglenn the top sellers’ market within the metro area, according to Alexa Fiander of Zillow.’

‘Fiander said the top buyers’ markets tend to have substantial inventory, homes that languish on the market and then sell after price cuts.’

 
 
Comment by Ben Jones
2014-03-21 08:23:11

‘Last month’s snowstorm seemed to put the chill on Cowlitz County’s housing market, which slipped downward for the first time in almost two years. Home sales and median prices in Cowlitz County decline, and sales of foreclosed houses accounted for a larger share of total sales, according to the Northwest Multiple Listing Service and area brokers.’

‘The February median sales price fell to its lowest point in a year, to $133,950, NMLS reported. Last month’s median was down from the $139,950 in January and down from $143,500 in February 2013.’

‘Foreclosure sales represented more than 30 percent of houses sold last month, Thompson said, noting that sales of repossessed homes were only around 15 to 20 percent of all sales in 2013.’

‘Last April, amid the region’s tightest housing supply in a decade, a Wall Street-backed company stormed into the Seattle metro area and bought, on average, 10 homes a day. Invitation Homes, a subsidiary of investment giant The Blackstone Group, purchased the homes from banks, foreclosure auctions or individual sellers, and turned them into rentals.’

‘Jon Dillingham, a Kirkland mortgage banker, was impressed by how fast Invitation moved last March when buying a three-bedroom rental he and a partner owned in Auburn for $225,000.’

“They didn’t even look at it. They just bought it,” he said.’

 
Comment by Whac-A-Bubble™
2014-03-21 08:25:43

“A gleaming new Mercedes CLA is the latest enticement being dangled before Ottawa condo shoppers. The car itself sells for $33,900 retail. The deal is valid until the end of April and applies to all of the roughly 65 condos still unsold at the 200-unit SoHo Champagne. ‘We thought it was a good synergy with Mercedes because they are a luxury brand, and we are a luxury brand,’ says Mastercraft Starwood’s Jason Ryan.”

Is the car purchase financed out of the principle balance of mortgage loan proceeds?

Based on the details given, this seems like bank fraud, but I don’t claim to understand exactly how this works.

 
Comment by Whac-A-Bubble™
2014-03-21 08:26:56

“If you look at Trulia’s estimates of price per square foot, you see San Francisco, New York, Washington and Boston now have prices above their 2008 levels. Now, I thought we all agreed that in 2008, prices were too high, and there was a big bubble. What are we to think of even higher prices in 2014, when the economy has been staggering along on life support for six years?”

Exactly!

Comment by Ben Jones
2014-03-21 08:37:59

This is where it starts to get interesting. The Economist has an article out asking, “can a bubble pop twice?”

You could ask, is it possible to have two bubbles in a short time period? My theory is, it’s the same bubble, and that explains what we are seeing more satisfactorily. The media and government have a line they stick to. It was, “there’s no bubble; crap, it IS a bubble, but it’s over. Now to the moon Alice!”

The mania was never truly extinguished; not in California, not in Canada or Australia or New Zealand or China or Dubai. The current delusion is that prices can climb to greater heights with no risk of collapse, because the bubble is over and done with. It doesn’t make much sense, but you see posters say it here on this blog almost every day.

Comment by Albuquerquedan
2014-03-21 09:47:16

The media and government have a line they stick to. It was, “there’s no bubble; crap, it IS a bubble, but it’s over. Now to the moon Alice!”

The number they never want to look out is incomes vs. housing prices because it validates your point. My father, who had a variety of blue collar jobs actually made considerably more money in one year than his house cost him. I have a professional degree and when I bought my house it was 1.5 times my income. During the last eight years incomes have only slowly grown but now houses are above their 2008 levels in some areas. The same issues of affordability are present as in 2006-08 but now we are not in a bubble? Sorry, we are and in many ways it is worse than the bubble in China because their incomes have increased rapidly over the last eight years.

 
 
 
Comment by "Uncle Fed, why won't you love ME?"
2014-03-21 08:41:50

If Alyssa Hellman doesn’t want to move, then she isn’t a seller, so the point is moot. Are people really that stupid?

Comment by Ben Jones
2014-03-21 08:56:46

Let’s look at the by line:

‘Amy Hoak’s Home Economics Archives: How to buy a house that isn’t for sale’

And Alyssa is a, UHS!

Looking further:

‘ Some buyers are getting creative when low inventory levels threaten to crush their home-buying dreams: They’re writing letters to homeowners, asking if they’d be interested in selling.’

‘That’s what Will and Jung O’Donnell did last year. After unsuccessfully searching for a home in San Francisco for months, they switched real-estate agents. Their new agent helped them find listings that expired years ago — including the one they’d eventually buy. The agent then presented the owner with a letter of interest from the couple.’

‘The O’Donnells are now happily living in their Lower Pacific Heights home. Hey, if you don’t ask, you’ll never know, right?’

‘Sellers in this scenario can often name their price,” Hellman said. Of course, that doesn’t mean a buyer will pay it. But you can decide what price will make you move. And in highly competitive markets, you may get it.’

‘By listing a home on the multiple listing service and marketing it online, you have the potential to bring in more than one offer. But by dealing with a buyer who approaches you, there’s a danger that you could be leaving money on the table.’

Aw, so if I don’t use a UHS, I might be leaving money on the table, says Amy? (Sandwiched between NAR ads).

Comment by Housing Analyst
2014-03-21 11:34:21

They never fail to invoke the “low inventory” narrative. Denying the inventory is fundamental to managing the housing debacle.

 
 
 
Comment by Ben Jones
2014-03-21 09:05:47

‘The Winston-Salem metropolitan statistical area experienced another slight increase in residential mortgages considered as “underwater” during the fourth quarter. Many banks and mortgage lenders have accelerated the price of pushing unsalvageable mortgages through the foreclosure process in recent years. Their main motivation: provisions for potential loan losses on commercial and residential mortgages have a direct impact on banks’ bottom lines.’

‘Glenn Cobb, chief staff executive of the Winston-Salem Regional Association of Realtors, has cautioned that information on underwater loans can affect the real-estate market by undermining consumer confidence, causing some hesitation in purchasing or trying to sell a home now, and prompting an overreaction.’

‘Area housing glut good for retirees’

‘To the editor:
“New base housing starts not needed” was the headline on my friend Dennis Burgard’s March 2 letter. With over 2,000 rental houses available for rent, many vacant houses for sale and many empty apartments, I asked about a year ago why the base could not issue a stop-work order. The answer was that it would probably cost more to terminate the contract for convenience than to finish the new housing as the funds were programmed five years ago when they had a shortage of on-base housing. I guess we just need to live with the base’s program.’

‘What we need is the Realtors and apartment owners to start advertising in New England in the Army Times, The Navy Times and the Air Force Times that Onslow County is a great place to retire. We need to start a program that advertises our excess of available housing as an opportunity for retirees to move to Onslow County.’

 
Comment by Ben Jones
2014-03-21 09:37:08

‘During the housing bubble, lenders were handing out subprime loans with cheap teaser rates and little or no down payments. Now, lenders are charging interest rates of as high as 8% to 10% and requiring borrowers to make down payments of as much as 25%-35%.’

‘The premium price is worth it for some borrowers who are trying to build or repair their credit, according to Bill Dallas from Skyline Financial, of Calabasas, Calif. Skyline started offering subprime loans a few months ago under its NewLeaf Lending division.’

‘Among his firm’s subprime mortgage customers: young, first-time homebuyers and former homeowners whose credit was ruined in the housing bust. “They’re just Americans who want to buy homes but can’t,” said Dallas, who used to run First Franklin, a subprime lender that went bust in the mortgage meltdown.’

‘In addition to the small lenders who are issuing subprime loans, Wells Fargo recently lowered the minimum credit score it requires of borrowers to get FHA loans. Wells Fargo is now approving applicants who have scores of between 600 and 640 for FHA loans, which remains well within FHA’s guidelines, according to spokesman Tom Goyda.
Related: 10 Best Places to Retire

‘And Dallas points out that these borrowers don’t necessarily have to pay those high interest rates for the life of the loan. Once they demonstrate they can repay their loans regularly, their credit scores should improve and they should be able to refinance into a lower-rate loan.’

Click!

Comment by In Colorado
2014-03-21 10:00:37

10% interest? That’ll make for “affordable” monthly payments on a 500K “starter home”.

 
 
Comment by Ben Jones
2014-03-21 09:44:42

‘Arlington buyers enjoyed another good week of inventory with 66 new listings, mostly condos under $400,000. With more choices, buyers ratified 61 contracts in the last week. Total active listings for sale now stands at 390 properties, primarily condos.’

‘Heard on the Street: Lots of shadow inventory is about to burst on the scene over the next few weeks in all classes and locations and prices. Whispering agents tell of new listings being dressed up for debut. It’s about time!’

Comment by Housing Analyst
2014-03-21 11:41:03

‘Heard on the Street: Lots of shadow inventory is about to burst on the scene over the next few weeks in all classes and locations and prices. Whispering agents tell of new listings being dressed up for debut. It’s about time!’

But how can that be? There is no shadow inventory anymore. Right? Most certainly not in DC metro because afterall…… there is no ceiling to housing prices there!

 
 
Comment by Puggs
2014-03-21 16:16:38

Buy a house today and be priced out of saving for retirement forever.

 
 
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