History Repeats, First As Tragedy And Then As Farce
It’s Friday desk clearing time for this blogger. “Katrine and Stephen Campbell were up against stiff competition from 10 other bidders for the Reading home they wanted to buy. So, instead of making a specific offer, they promised to top whatever turned out to be the high bid by an additional $5,000. The increasingly popular tactic, known as an escalation clause, worked. The Campbells bought the four-bedroom house late last year for $597,000 — or $18,000 above the original list price, including the extra $5,000. ‘We must have looked at 50 places before making a bid on a house,’ said Katrine Campbell. ‘We made only one offer — and we got it.’”
“‘It sounds a little risky to me,’ said Peter Ruffini, president of the Massachusetts Association of Realtors. ‘It sounds sort of like issuing a blank check to sellers.’”
“A pattern of low inventory and rising prices has taken hold in the San Francisco Bay Area and Southern California real estate markets, DataQuick reported. A still-shaky economy and job uncertainty are preventing many homeowners from selling and moving up, said Stuart Gabriel, director of the Ziman Center for Real Estate at UCLA. Others are holding on to homes in the hope that prices will continue to appreciate as they did in last decade’s housing boom, the economist said. ‘Whether those bets will come through or not remains an open question,’ he said.”
“Ilkley MP Kris Hopkins has clashed with a fellow minister after welcoming the latest hike in house prices. The Housing Minister raised eyebrows after suggesting rising property prices were a ‘good thing,’ telling an interviewer: ‘I bought a house and I expect the value to rise.’”
“But Vince Cable, the Liberal Democrat Business Secretary, warned that home ownership was now ‘unaffordable’ to people on middle incomes. Mr Cable said: ‘A family on an average income is nowhere near able to afford a house at the average price.’ In the mid-1990s, the average house price was three times average earnings, Mr Cable added – but that ratio now stood at about 5.5.”
“Prime Minister John Key has agreed with Housing Minister Nick Smith that Auckland home owners should expect flatter house price inflation for some time as the house price to income multiple measure of affordability improves from a multiple of around seven now to the Government’s new target of around four. Key rejected the idea that the improvement in affordability could come through a fall in prices.”
“To get that multiple back to four would imply house prices remaining flat in Auckland for 19 years with average annual wages growth of 3%, as is currently the case. Or it would imply house prices dropping 43% for the multiple to be rectified, or a combination of both. ‘It’s unlikely there’ll be falling prices. In my view what you’re likely to see is a flattening out of those increases. The Government’s view is a modest increase in house prices makes sense. Rapidly escalating prices are not good for anyone,’ Key told his weekly post-cabinet news conference.”
“China’s latest message about the property market is simple and aimed at the man on the street: The home you’ve bought isn’t a one-way bet. Deal with it. That message has been pumped out through China’s state broadcaster as part of Beijing’s efforts to curb people’s enthusiasm for homes as an investment tool. One segment featured a woman in Shenmu county, who told CCTV that she earned more than 100,000 yuan from flipping two apartments in 2009 and 2010. Times are harder now, though, and she’s working as a taxi driver while struggling to pay her 3,463 yuan monthly mortgage for an apartment she bought 2011.”
“Originally she’d hoped to flip it at a higher price, but a credit crunch and oversupply of apartments has pinpricked her dream. CCTV said she hasn’t been able to pay for the past four months. ‘(The bank) sends me a text message every day,’ she said.”
“One resident in Changzhou who recently purchased her first apartment but has seen prices of neighboring units tumble nearly 20% told China Real Time. Ms. Wu was among those protesting outside of a showroom displaying models of property for sale in Changzhou last month. ‘There seems to be no way to get my money back. What can I do? I just blame it on my bad luck,’ she said.”
“For the second month in a row, the median single-family home sales price was down in February, according to Arizona State University’s W.P. Carey School of Business. However, according to the report’s author, Michael Orr, there is no reason to panic. ‘This is not a crash or anything like that,’ Orr said. ‘It’s a mild change, so people don’t need to panic. It’s more of a gentle easing off of the buying pressure that was unusually strong.’”
“Sales reports suggest that Loudoun County is coming out of a sluggish market that began with the government shutdown last year and chilled with cold weather throughout the first quarter of 2014. The conditions created an unusually high inventory. ‘We had a few really tough months, because of the weather. Inventory tripled in three weeks,’ said Beckwith Bolle, principal broker at Carter Braxton Preferred Properties in Leesburg.”
“RealtyTrac’s update on foreclosure numbers across the country show foreclosure auctions in Delaware rose 49 percent in the first few months of the year. Matthew Heckles, director of policy and planning at the Delaware State Housing Authority, says a spike is not exactly a surprise. He points out that authorities knew there was a backlog of foreclosures. ‘You know the water is in the sink, but if you’re under the drain none of it is getting through until you unplug the sink,’ said Heckles. ‘Because of the default rate staying constant and the foreclosure filings dropping in 2012, we knew there was a backlog. And eventually they would hit the streets and hit the courts.’”
“Orlando Regional Realtor Association Chairman Zola Szerences, said bank-owned home sales are expected to rise because of an uptick in foreclosure auctions during recent months. ‘In March, the number of foreclosures available for purchase was 125 percent more than in March 2013,’ he said. ‘For buyers who have struggled to find a suitable home within Orlando’s tight inventory and who have been worn down by competition and bidding wars, foreclosures represent a new avenue of opportunity.’”
“Janet Yellen, the new head of the Federal Reserve, gave her first big speech on monetary policy, and, in some ways, a fine address it was. But what was most striking to me was that she didn’t even discuss the financial markets and the overriding need to avoid another damaging speculative bubble. Indeed, Yellen didn’t use the B-word at all. Given that her immediate predecessors, Alan Greenspan and Ben Bernanke, will be remembered for, among other things, their roles in inflating the bubbles in the stock market and the housing market, that was a pretty remarkable omission.”
“Instead, she couched her remarks in terms of the old-fashioned inflation-unemployment trade-off, which is precisely the conceptual framework that encouraged Greenspan and Bernanke to shrug off what was happening in the financial and housing markets. The potential problem is that it sends a signal to participants in the financial markets that they don’t have to worry about interest-rate rises, so they can take advantage of cheap credit to leverage up and take more risks.”
“The issue is what’s going to happen over the next few years. The longer the Fed keeps interest rates at ultra-low levels and promises not to raise them rapidly, the greater the danger of history repeating itself. Two things that we know about bubbles are that, once they get going, they are self-reinforcing, and that they place central bankers in a bind. For as long as the bubble lasts, the economy looks great, and policy makers have an incentive to let it proceed. This is what happened to Greenspan and Bernanke.”
“If the U.S. economy were to experience a third bubble in twenty years, we would be confirming Marx’s famous statement, in ‘The Eighteenth Brumaire of Louis Napoleon,’ that history repeats itself, first as tragedy and then as farce. The Fed chair doesn’t want that written on her tombstone.”
how many soviets are there in housing ?
director of policy and planning at the Delaware State Housing Authority,
“Katrine and Stephen Campbell were up against stiff competition from 10 other bidders for the Reading home they wanted to buy. So, instead of making a specific offer, they promised to top whatever turned out to be the high bid by an additional $5,000. … ‘We must have looked at 50 places before making a bid on a house,’ said Katrine Campbell. ‘We made only one offer — and we got it.’”
The people with buckets of money and boxes of stupid are back.
“‘It sounds a little risky to me,’ said Peter Ruffini, president of the Massachusetts Association of Realtors. ‘It sounds sort of like issuing a blank check to sellers.’”
Well d’oh…
You mean the sellers?
These suckers paid OVER retail. That’s just idiotic.
Love reading about bidding wars :}
The increasingly popular tactic, known as an escalation clause, worked. The Campbells bought the four-bedroom house late last year for $597,000 — or $18,000 above the original list price, including the extra $5,000.
That purchase strategy is patently insane.
Further it is not sustainable and a shoeshine-boy indicator of a bubble about to pop.
But the house hunters employed a slightly different strategy once they set their sights on a three-bedroom home in Melrose, which was listed for $449,000.
Barbuto and Marciniec thought the asking price was too high because the home needed repairs.
So they bid $25,000 below the list price, the same amount offered by another potential buyer. Then the seller asked the two bidders for their “best and final offer.”
Instead, Barbuto and Marciniec provided a written escalation clause. They promised to beat the other bidder by $5,000, if given an hour to decide whether the price was right. The tactic worked, and they bought the home for $443,000.
THIS IS A FEEL GOOD STORY:}
Vero Beach, FL Housing Prices Collapse 31% YoY; Inventory Doubles
http://www.movoto.com/vero-beach-fl/market-trends/
“Times are harder now, though, and she’s working as a taxi driver while struggling to pay her 3,463 yuan monthly mortgage for an apartment she bought 2011.”
I’m guessing that is 2 or 3 times what she earns in a month driving taxi. There is no such thing as personal bankruptcy in China as far as I can tell.
Debt slave for life.
You have to hand it to the Chinese bankers for knowing how to seal a labor contract with a home debtor.
As of today the yuan is about 16 cents.
Flipping two houses in two years: $16K
Apartment mortgage: $554/month
If she began to bleed her flip profit starting in 2011 when she bought, she could pay 29 months worth of rent before running dry. So it makes sense that she is beginning to struggle right about now in mid-2014. Methinks she was counting on more flip income, or appreciation, to maintain that apartment.
That’s why she now unfortunately has to work. Says so in the article.
The house will make you rich seems an elusive model.
“The house will make you rich seems an elusive model.”
Not for me is isn’t. “The house will make you rich” mantra is the best thing I have going for me.
If it is not cash flow positive, no point.
“Others are holding on to homes in the hope that prices will continue to appreciate as they did in last decade’s housing boom, the economist said. ‘Whether those bets will come through or not remains an open question,’ he said.”
Those bets will continue to come through until they turn south, at which point will be heard a whole lot of homemoaners wailing and clamoring for more government assistance to prop up the value of their most valuable asset.
Unless you own in the Bay Area and bought before it got crazy, then you’d be wise to just ignore anything coming from the Bay Area.
Before it got crazy? You mean the 70’s or thereabouts?
In retrospect, 1996 proved to be a good time to buy.
“For the second month in a row, the median single-family home sales price was down in February, according to Arizona State University’s W.P. Carey School of Business. However, according to the report’s author, Michael Orr, there is no reason to panic. ‘This is not a crash or anything like that,’ Orr said. ‘It’s a mild change, so people don’t need to panic. It’s more of a gentle easing off of the buying pressure that was unusually strong.’”
A real estate pimp utters his famous last words…
Regarding PHX, this is what I saw last night, a desirable house in one of the most desirable areas near me that I watch. Put on the market April 1 for 325K, price dropped 10 days later to 300K. A 25 grand cut. Undercutting everything in the neighborhood and the only one below the current “zestimates.” We’ll see what happens. If that sells where it is at it sets the comps heading down bigtime.
Somebody wants out quick.
PS It is still too high. Last sale was Feb 2010 for 226K, just a hair over $100 sq/ft.
Reminds me of this guy.
(Should be safe for work)
Thank you — awesome Kevin Bacon role. I had to watch that one twice!
“Matthew Heckles, director of policy and planning at the Delaware State Housing Authority, says a spike is not exactly a surprise. He points out that authorities knew there was a backlog of foreclosures. ‘You know the water is in the sink, but if you’re under the drain none of it is getting through until you unplug the sink,’ said Heckles. ‘Because of the default rate staying constant and the foreclosure filings dropping in 2012, we knew there was a backlog. And eventually they would hit the streets and hit the courts.’”
I’ve noticed similar results when clearing clogged toilets.
Hall & Oates….”Ooh, ooh here she comes, the man eater…” Inflation! “…..Watch out boys, she’ll chew you up.”
Chipotle Mexican Grill just announced that its first-quarter sales beat expectations, but food inflation is pressuring profit margins.
“Food costs were 34.5% of revenue, an increase of 150 basis points driven by higher commodity costs,” Chipotle management said. “Higher commodity costs were primarily driven by inflationary pressures in beef, avocados, and cheese prices.”
Earnings per share climbed 7.8% to $2.64, below expectations of $2.87.
While inflation has generally remained low in the U.S., food prices have been notably hotter.
“Prices for foods, feeds, and beverages rose 3.7% in March, the largest monthly gain for the index since a 4.3% increase in March 2011,” said the U.S. Bureau of Labor Statistics earlier this month. ” The March 2014 advance was driven by a 14.0% rise in fruit prices, the largest one-month increase for that index since the index was first published monthly in December 1993.”
______________________________
A Chipotle meal has gone from $4.50 to $6.25 in the last few years. $1.75 increase on $4.50 is a 38% increase. Quite significant that they are now feeling more pressure from rising food costs.
I can ask $50k for my 14 year old truck but where are the buyers?
I though I read the price of a chipotle burrito was going up .75.
So it will go to $7.00? That’s why I pack my own lunch. Cost’s me about $1.50. 200 lunches Xs $5.50 = $1,100. I can retire a year earlier with the savings.
“Cost’s me about $1.50.”
How long do you spend on packing the lunch? 10 minutes? That’s an implicit price tag for the opportunity cost of your free time of 6 X $1.50 = $9.00/hour — less than the proposed new minimum wage.
(Observed by a confessed hypocrite who packs his own lunch five days a week and makes it for himself the other two!)
Yeah, Whac, I just sacrifice an extra 10 minutes a day of HBB postings……it seems to work out OK. HA doesn’t miss my extra posts anyway!
You’re our best confirmation J._Fraud. Stick around.
Inflation will not save you pimp. Another quote from the Az article above is for you:
“Most sellers don’t realize that and they still think the market is in their favor,” Orr said. “Sellers tend to be optimistic of what they can sell the house for, until they actually try. It’s usually a pretty good idea if they get realistic from the start. Then they can sell their house more efficiently and quickly.”
I see to give it away to a investor who makes all the money on your equity?
That is why if you can afford to stay hold out folks, the guy with the exotic car who just passed you, he preys on people who listen to the nonsense that the sky is falling?
What? I don’t understand what you are trying to say.
Hold on to your property because when underwater people are gone and the interest rates start to rise their is going to be a boom in real estate this fall.
Many will want to buy before the return of 6% or more, which under the Republican control house and senate will certainly happen.
Yeah…. hold onto that underwater depreciating house.
Just think about how much money investment bankers will make once the world’s food and water supplies are fully financialized. Don’t expect democratic governments to stop that process. Regulators and elected officials will be falling over themselves to hasten it so that they can become rich off other people’s desperation too.
The Czar didn’t get it either.
He certainly did get it in the end!
Sacramento Housing Demand Collapses To 10 Year Lows; Inventory Skyrockets 63%
http://www.zillow.com/local-info/CA-Sacramento-home-value/r_20288/#metric=mt%3D30%26dt%3D1%26tp%3D6%26rt%3D8%26r%3D20288%26el%3D0
http://www.movoto.com/sacramento-ca/market-trends/
HA, how does the Zillow sales volume at 6% above last year equal a collapsing market? Oh, because the volume the year before was 7% above 2011? You are such a rube.
Have you noticed Zillow says Sacramento home sales prices increased 22% last year?
Same with Movoto: Look at the 5-year inventory. 1300 units this year vs. 3200 units listed five years ago. Look at 5-year prices: $218,000 today vs $161,000 five years ago.
Post something truthful and meaningful please.
‘Post something truthful and meaningful please’
Yeah, more burrito statistics!
You’re struggling with the data again. Demand fell 11% this year and fell every year in the past 5 years.
Nice duck and weave J._Fraud.
Falling demand would create falling prices. Prices rose 22%. You cannot reconcile your claim of “collapsing demand” with that fact.
You cannot reconcile your mind with the reality that there are 25 million excess empty houses in an environment of collapsing demand.
What are your losses so far J._fraud?
And with demand at 20 year lows, what do you think is going to happen to prices? Fall up?
“Sales reports suggest that Loudoun County is coming out of a sluggish market that began with the government shutdown last year and chilled with cold weather throughout the first quarter of 2014. The conditions created an unusually high inventory. ‘We had a few really tough months, because of the weather. Inventory tripled in three weeks,’ said Beckwith Bolle, principal broker at Carter Braxton Preferred Properties in Leesburg.”
The weather clearly is the source of all problems in the U.S. economy. Add global warming to the picture, and it is clear that we are all doomed.
Alexandria, VA Housing Prices Crater 12% YoY; Inventory Explodes 46%
http://www.movoto.com/alexandria-va/market-trends/
Oakton, VA(DC metro) Rental Rates Plunge 17% YoY
http://www.zillow.com/local-info/VA-Oakton-home-value/r_6274/#metric=mt%3D46%26dt%3D1%26tp%3D6%26rt%3D8%26r%3D6274%26el%3D0
“Janet Yellen, the new head of the Federal Reserve, gave her first big speech on monetary policy, and, in some ways, a fine address it was. But what was most striking to me was that she didn’t even discuss the financial markets and the overriding need to avoid another damaging speculative bubble. Indeed, Yellen didn’t use the B-word at all. Given that her immediate predecessors, Alan Greenspan and Ben Bernanke, will be remembered for, among other things, their roles in inflating the bubbles in the stock market and the housing market, that was a pretty remarkable omission.”
Given that her immediate predecessors avoided using the B-word like the plague, that omission was pretty unremarkable.
Bernanke avoided it, and this year he’s on track to make $800,000 for three speeches.
Why was it so critical for him, Greeney and Yellen to studiously avoid the B-word? Does it boil down to academic conceit? Since Eugene Fama and other orthodox academic economists deny the possible existence of bubbles, is it simply sacrilegious to suggest otherwise, no matter the overwhelming strength of empirical evidence?
I find this persistent bubble denial highly puzzling. Whom does it serve?
“China’s latest message about the property market is simple and aimed at the man on the street: The home you’ve bought isn’t a one-way bet. Deal with it. That message has been pumped out through China’s state broadcaster as part of Beijing’s efforts to curb people’s enthusiasm for homes as an investment tool. One segment featured a woman in Shenmu county, who told CCTV that she earned more than 100,000 yuan from flipping two apartments in 2009 and 2010. Times are harder now, though, and she’s working as a taxi driver while struggling to pay her 3,463 yuan monthly mortgage for an apartment she bought 2011.”
It’s awesome.
By contrast, can you imagine the U.S. Ministry of Propaganda warning its citizens that housing prices may, indeed, some times decline, and when and if it happens, it is the homemoaner’s problem?
When your economy is based on supply side economics instead of demand side economics, you can make that kind of rational decision and that is why I have not shared the worry that many people have about China. Housing is a consumptive item not an investment, if properly understood.
Check out what this $400k house looks like:
‘When the bank grabs the house you’ve called home for nearly 18 years and tells you to pack up and leave, it’s tough to let go. But when your credit is decimated, finding a new place can get even tougher. Betty Gunn and her husband, David Gunn, must vacate their home, house 443 in Iqaluit, around April 20.’
‘But they don’t own house 443 anymore. The CIBC does, following a nightmarish trip the couple took through the banking and legal systems that in 2012 led to foreclosure proceedings and the transfer of their home’s legal title to the bank.’
“Flying into Iqaluit”
http://1.bp.blogspot.com/-LL7OoP2qnFc/TaD3O1nyuFI/AAAAAAAAD0U/JrST7KEdmmQ/s1600/07-iqaluit.jpg
From the comments:
‘That is a huge mortgage to still have on a house they have owned for almost 20 years, even in Iqaluit. This couple must have been borrowing against equity as house prices rose. They both make good incomes, they should not have been living so much on debt. The bank was probably allowed to apply the payments towards the line of credit, that’s how they write the contracts for those things, otherwise they wouldn’t give you the money at all.’
‘And of course legal aid should not be supporting them in this case … the couple have real, well-paying jobs, they need to budget, save money, and pay for things like that themselves, like everyone else in their situation has to. If you can afford a house in Iqaluit, you can afford to hire a lawyer to deal with your real estate issues as needed (and it should be rarely needed). ‘
‘But they don’t own house 443 anymore. The CIBC does, following a nightmarish trip the couple took through the banking and legal systems that in 2012 led to foreclosure proceedings and the transfer of their home’s legal title to the bank.’
“But they don’t own house 443 anymore”
Actually, they never owned it in the first place. They may have been in the process of BUYING the home (via the monthly-payment-plan) but buying is not the same as owning.
A slight distinction skipped over by the MSM and others, much to my delight.
People are smart.
“a pleasant section of Happy Valley…”
Nunuvut is the end of the earth.
At first I thought the couple had HELOC’d out the wazoo, but they hadn’t. There is more to this story. From the article:
“What’s worse is this: they insist to this day that they kept their mortgage payments up to date and that the bank messed up their financial situation for months by applying mortgage payments to a separate [$36K] personal loan. ”
That’s not “worse,” that’s the key. What was the fine print on this $36,000 loan? Was there some provision that payments went to the personal loan first? Was the house collateral for the personal loan?
They had $186K left on the mortgage, so they weren’t even underwater. Their big mistake was not knowing that they needed a lawyer right away. They also need to re-read the fine print on that loan.
I keep thinking back to a comment on an article months ago: if you have no equity, there’s no money in it for them, and the bank will basically ignore you and let you squat. But if you have equity, then they go after you like gangbusters. It’s not really “stealing,” but it’s plain that the bank wants to use the fine print to sieze the equity and sell the house for a quick profit.
The politician keeps talking about “communication.” My ass. Banks make their money by NOT communicating. If the bank had communicated that their mortgage payments were not going to the mortgage, the bank wouldn’t have made a 40% profit.
If there was any equity, they would sell and pay the loan off. The very act of walking away proves that. Read the comments; these people refi’d and sold the house to the bank.
More importantly, the idea that a wood shack like this is worth 400k shows everybody involved is a freaking idiot.
That is the crux of the biscuit; There is no “equity” when the transaction price is multiples of construction costs(roughly $55/sq ft).
Maybe $57 if you have to bring everything in by boat or sled, but 20 years ago? Couldn’t have been worth more than $30K and now they owe $180K on top of a personal loan of $36K! The victim doesn’t claim to have been making his payments on the personal loan.
A small unattractive house in my neighborhood went on the market a couple of years ago after the original owner died. It is located on a tiny odd shaped lot and the interior hadn’t been touched in decades.
The house was over forty years old. The heirs put this thing on the market for the princely sum of $525,000.00. After a year of zero interest from potential buyers the price started dropping. It ended up at $360,000.00 with continued non-interest until the family decided to give it back to the Bank.
I’m on the Board of the local water Company. One of the family members called our office and requested that the water meter be removed because no more water payment bills were going to be paid because “if we sell the house for 360K there isn’t going to be anything left for us to split up after we pay back all the loans”.
A 20K house bought over 40 years ago and all that is left of the original owner’s legacy is a 360K hole in the ground.
Is this Country great, or what?
lol…. Great story!
if one can’t be bothered to understand the agreement (contract) made, then you can always fall back on making the agreed upon payments. I know that’s just crazy talk! these people are victims.
This is the second time now that I’ve read something about Canadians treating a house in the middle of nowhere on the tundra as an ATM or a retirement fund. That town is on Baffin Island, which I didn’t even know was inhabited.
I couldn’t resist looking up “Iqaluit” in Wikipedia, and here is some of what I found:
“Iqaluit has a typically Arctic climate (Köppen: ET), although it is well outside the Arctic Circle. The city has cold winters and short summers that are too cool to permit the growth of trees. Although it is north of the tree line there are still shrubs that are classed, locally, as trees. These include the Arctic Willow (Salix arctica) which is hard to recognize as a tree because of its low height. The permafrost does not allow the taproot to get deeper than 6 in (150 mm) so this does not allow vertical growth. The Arctic Willow may be up to around 25 ft (7.6 m) horizontally, but only 6 in (150 mm) tall. Average monthly temperatures are below freezing for eight months of the year.[11] Iqaluit averages just over 400 mm (16 in) of precipitation annually, much wetter than many other localities in the Canadian Arctic Archipelago, with the summer being the wettest season.”
Everybody wants to live in Iqaluit!!!
Yes, and they have to pay for the “Freeze Tax”.
Forbes Asia 4/15/2014 @ 4:58PM 535 views
From Asia To California
Ed Fuller Contributor
Several months ago, Global Hotel Network invited me to share my views of the impact on Orange County, California—and the entire US—that the coming avalanche of tourists from mainland China will have on all of us in the hospitality industry and beyond. The column received a lot of positive response from my peers, colleagues and others in the industry, encouraging me to share these ideas with a broader audience. So, with permission, I am reprinting it here. Global Hotel Network is an influential e-newsletter that reports on news and trends in the industry and is read globally by the industry’s thought leaders. Please copy into your browser to read the article as it appeared in Global Hotel Network.
There’s no way around it: if you live and work in Orange County today, or do business here, one way or another, your life will be touched in some way by the more than 1 million visitors from China expected to come to the U.S. by 2015.
China is poised to become the Number One tourist market for those of us who make our living in California’s tourism and hospitality industry. Today, California is now the primary US tourist destination for Chinese visitors. More than 46% of all Chinese tourists to the US take advantage of the more than 60 weekly direct flights between the Chinese mainland and California to stop here first before venturing on to other US destinations. Should we care? You bet! Last year, Chinese visitors to California spent $2bn here. China’s middle class is larger than the entire population of the US. Their pent up demand to explore the world, unleashed by the simplification of our visa application policy, knows virtually no bounds. Even now, Chinese visitors are the world’s largest spenders to the tune of about $6,000 per person per trip to the US and, when they get here, they tend to stay longer than visitors from other countries.
At or near the top of their list of what attracts them to California , other than our climate and natural beauty, are Orange County’s (OC) premier tourist destinations such as Disneyland. But, it’s not only The OC’s tourist attractions that are appealing: every day we read accounts of major commercial and personal real estate deals being made in Orange County by visitors from China. They’re buying office buildings and other investment properties, vacation and retirement homes for themselves and housing for sons and daughters who are studying at one of our local colleges and universities. In fact, the California Association of Realtors recently pegged foreign sales at 5.8% of the State’s total real estate transactions and 39% of these buyers come from China, followed by Canada at 13% and India and Mexico at 8.7% each.
…
” In fact, the California Association of Realtors recently pegged foreign sales at 5.8%”
Here’s a chart of California Housing Demand…. 5.8% of this is meaninful in what way?
http://www.zillow.com/local-info/CA-home-value/r_9/#metric=mt%3D30%26dt%3D1%26tp%3D6%26rt%3D14%26r%3D9%26el%3D0
I’d guess a dwindling supply of foreign buyers is driving CA housing demand into the ground, but that’s just a hunch…
So if my math is correct, for every 10,000 real estate sales, 226 are buyers from China.
Talk about burying the lead. Which in this cases undoes the argument from the bulk of the advertisement.
Realtors would like to make people think that just because a few Chinese people have a fortune, that all Chinese do. Somehow, I don’t see how that’s possible when most of them make a few dollars a day working in factories or scrape out a marginal living on a subsistence farm.
This talk of the coming Chinese hordes reminds me of the article last year from Canada where it was found that realtors hired Chinese people to pose as buyers to gin up the market.
That’s an interesting angle to a mania. There are Chinese buyers. So why fake the Chinese interest? (The company that got caught apologized, BTW).
In a bubble, a kernel of truth is magnified in the public’s eye. It is self-reinforcing.
If there are 1.3 billion chinese then they have 13 million 1 percenters. If only 10 percent of their rich one percenters desire a house in SoCal then that is 1.3 million sales. What if their 2 perecenters and 3 percenters also fancy a spot near baywatch? I’m sure this won’t cause any social unrest due to the fact that the status quo doesn’t want to build anything but luxury homes. Everything will be fine
Yes they are just drive up jamboree rd. off the 405 and try and find someplace to eat
Actually I am surprised they speak English there many do not.
“Realtor’s License Revoked After Fraud Allegations”
http://www.wthr.com/story/25268316/2014/04/16/realtors-license-revoked-after-fraud-allegations
With charlatans like these running things, it’s no surprise the housing market is rife with fraud and losses.
California Foreclosure Starts Skyrocket 57%
http://www.realtytrac.com/images/reportimages/california_foreclosure_starts.jpg
As if 4.4 million excess empty and defaulted houses in California isn’t enough.
“Game Over for Real Estate: Time to Short US Housing Market”
http://www.nomadiccapitalpartners.com/short-us-housing-market/
If you haven’t bailed out yet, it’s too late.
‘The top graph of the National Association of Homebuilders Market Index on the chart shows that the next slump is probably already underway. In February, the index lurched lower with a record 10-point decline…Mortgage originations just dropped to a new 18-year low, their lowest level since August 1995.’
That’s a beautiful graph title!
“The Housing Crater: Phase II Underway”
Thank you.
Record 10 point decline….
Let’s start keeping track of Phase II’s records!
90% of All Foreclosures Held Off Market ……..…. And There Are MILLIONS of Them
http://realestate.aol.com/blog/2012/07/13/shadow-reo-as-much-as-90-percent-of-foreclosed-properties-are-h/
How about this one. It was interesting that after Reuters ran this, it disappeared from the media. It’s almost like they don’t want you to know:
‘May 31, 2013 - Well over a million U.S. homeowners are months behind on payments on government-backed mortgages, raising the risk federal housing agencies will end up facing the cost of managing a fresh flood of foreclosed homes, two government watchdogs said on Thursday.’
‘Some 1.7 million borrowers have missed several payments on mortgages backed by the U.S. government, the inspectors general of the Federal Housing Finance Agency and Department of Housing and Urban Development said in a joint report. These loan delinquencies represent a “shadow inventory” of homes that could hit the market if foreclosed on.’
‘The report said the shadow inventory, which is made up of loans that have been delinquent for at least 90 days, is more than seven times the inventory of REOs that Fannie Mae, Freddie Mac and HUD currently own. “Even a fraction of the shadow inventory falling into foreclosure could considerably swell … inventories of REO properties,” the report warned.’
Read this again Rental watch:
‘the shadow inventory…is more than seven times the inventory of REOs that Fannie Mae, Freddie Mac and HUD currently own. “Even a fraction of the shadow inventory falling into foreclosure could considerably swell … inventories of REO properties”
“It’s almost like they don’t want you to know:”
Too late.
Let’s put two and two together:
‘90% of All Foreclosures Held Off Market…the shadow inventory…is more than seven times the inventory of REOs that Fannie Mae, Freddie Mac and HUD currently own’
So 10% of what could be 700% larger is listed. Hmmm, that means the number you see on the market is miniscule.
While purely anecdotal, I’ve been watching my neighborhood using the WTD method (walking the dog). Most of the neighborhood is made up of approx. 20 yo 3/2 1100sq ft. homes and its very popular with families and people who don’t need a lot of space. I’ve walked about 25% of the area and foreclosures/bank owned homes easily outnumber houses for sale - this does not even include pre-foreclosures.
Maybe it received no more press because the sky is not falling.
“The delinquency rate, at 6.39 percent, is more than 3 percentage points lower than its peak of over 10 percent in 2010 and is edging closer to the historical average of around 5 percent. The percentage of loans in foreclosure has fallen for the seventh consecutive quarter, decreasing to 2.86 percent, the lowest level in six years. The percentage of new foreclosures started, at 0.54 percent, is the lowest in eight years and is back within its typical historical range.”
‘the percentage of new foreclosures started, at 0.54 percent, is the lowest in eight years and is back within its typical historical range’
Uhh, I think your history is a little off. Look back at the 90’s:
http://www.richmondfed.org/banking/markets_trends_and_statistics/trends/pdf/delinquency_and_foreclosure_rates.pdf
‘Maybe it received no more press because the sky is not falling’
That’s not the issue. Why hold one single house off the market, much less millions? People are putting in multiple bids within minutes, right? There’s a shortage of houses in Omaha, dang it! Don’t tell me we are being told a load of horse-crap?
By the Fed? These are the people that give us the CPI with Faustian substitution (or something). Their statistics must be reliable.
Ben, your stats reconcile with mine. Most loans are prime fixed rate. So the high percentage of subprime defaults has less effect on the overall default rate because there are fewer of them. So a 5% delinquency rate is the historical average.
I understand what you are saying about holding inventory off the market, for what ever reasons that occurs. I find it ludicrous.
However, I also find it curious you are so invested in another housing bust, when the majority of circumstances which lead to the 2006 bust are not present today.
Will there be a correction? Sure. Housing always goes up and down. Is it going to crater? No, why would it. The economy is recovering, jobs are being created.
In 2004 & 2005, completely unqualified people were buying homes they could not afford. Fraud was rampant. In the last 4 years, I have yet to see anyone buy a home for which they were not qualified…even over qualified.
No one is going to be walking away from their homes like they did in 2008-2012. There will be very little downward pressure as the tail end of the 2006 bust washes through of the market.
Guess again my friend.
And full employment won’t prevent. Remember; <b.Current asking prices of resale housing are 250% higher than construction costs.
Price collapse will be most spectacular in craptacular So.Cal.
Yeah. Between CA and Denver, CO it’s going to be a doozy.
BY PUGGS” Price collapse will be most spectacular in craptacular So.Cal.”
Southern California homes increased $17,000 in one month. Keep dreaming!
Great parody account! Love it!
Merced, CA Housing Prices Crater 9% YoY; Inventory Explodes 181%
http://www.movoto.com/merced-ca/market-trends/
Moreno Valley, CA Housing Demand Collapses 21% YoY; Craters to 10-Year Lows
http://www.zillow.com/local-info/CA-Moreno-Valley-home-value/r_25981/#metric=mt%3D30%26dt%3D1%26tp%3D6%26rt%3D8%26r%3D25981%26el%3D0
The market is booming?
But Where are the buyers?
Inventory is looming,
>________________.
Yes, this is what I am wondering about also. I think everypimp is equating no crash with there being far fewer falling into foreclosure this time and thinking that without the foreclosures there can’t be the crash.
I think it’s more like the market is going to get the pneumonia that kills many people with chronic illnesses because we are already starting with that backlog that has been outta sight, outta mind.
That must be why prices rose 30.9% last year. No one wants a home. HA, Ha, ha, more meaningless data cherry picked by HA.
‘meaningless data cherry picked’
You mean like 5 year comparisons? More burrito statistics please!
Exactly. JingleBail sees one article about a fast food chain raising prices and jumps on the inflation train. But show him 5 years of evidence of something and he cries foul. What a tool…
to answer the obvious. more Mexicans = more demand for Mexican food, hence higher prices. that was easy. but I can’t explain what’s going on with peanut butter (I don’t have all the answers).
Cherry picked data?
Like the price when demand is collapsing?
You’re flailing J._Fraud.
“Vital Signs: Housing Inventory Remains Spacious”
http://blogs.wsj.com/economics/2013/11/06/vital-signs-housing-inventory-remains-spacious/
Massive and growing excess empty housing inventory, collapsing housing demand at 20 year lows, asking prices of resale housing 300% higher than construction costs(with profit);
What do you think was going to happen?
Objective observation:
HBB posts are more closely resembling those of 2006 by the day, when the gap between housing bulls and bears (Professor Bear included) reached a fever pitch before financial panic struck in August 2007 (remember when Ben Bernanke assured the world that “Subprime will be contained to $200 bn”?).
On the basis of the above objective observation, I suspect we are once again approaching “go” time, as regards the next leg of housing price collapse.
just checked a MLS site ( last 3 months) 750k to over 1m yellow highlight means sold, must be a lot of fools out their never seen so much yellow in all my life?