Creating A Frenzy
It’s Friday desk clearing time for this blogger. “Local real estate agents are classifying the housing market in the Tomball and Magnolia area as a seller’s market. ‘There’s a real low inventory [in Tomball and Magnolia] that’s creating almost a frenzy of people [looking for homes] certainly in the $200,000–$250,000 pricing [range], and above that they still sell quickly,’ said Pamela Sitterly, a real estate agent with RE/MAX in Tomball and Magnolia. ‘People are trying to put offers in without even seeing the house.’”
“Developers across the U.S. are reviving a concept that collapsed with the real estate crash in 2008: combining condominiums and hotels. The $150 million Beachwalk hotel-residential project in Hallandale Beach, Florida, which Related Group CEO Jorge Perez expects to be completed in 2015, has 300 residential units. The units sold out in two months, with an average price of $500,000, according to Perez. ‘The money that is coming in from buyers from Latin America and Europe is unprecedented today,’ he said. ‘When we talked to some of these potential buyers, a lot of them said they were investors. But they also wanted to be able to enjoy their condos and at the same time maximize their income. That’s why we are creating a hybrid product.”
“Jumbo-mortgage borrowers feasted on interest-only loans during the housing boom, enticed by low down payments and monthly outlays. But a monthly sticker shock could be ahead for these borrowers. Mark Livingstone, president of Cornerstone First Financial, a mortgage broker in Washington, D.C., purchased an investment property in Odenton, Md., with the help of a 10-year interest-only, nonjumbo loan with a fixed rate. The monthly payment recently shot up to $2,424 from $1,463 with the start of principal payments. He plans to list the property this month because the rental price won’t cover the cost of the new payment.”
“More than 300 investors from Delhi and NCR, who had booked flats in a Gurgaon housing project and deposited 25% of the cost upfront, are demanding investigation into what they call a multi-crore fraud because the developer had allegedly sold off the project land. According to one of the investors, B P Gautam, after the investors paid 25% of the amount, company gave them receipts and allotment letters. ‘But since 2011, there has been no movement on the project. We visited the company’s office several times but they are not willing to share any information with us.’”
“It was a month that every stockbroker would like to forget. As screens turned red and losses mounted, some investors were left wiped out. The entire Dubai market came to be viewed through the prism of a single publicly traded construction company. Shares of Arabtec have lost 65 per cent of their value in less than two months amid uncertainty over the company’s strategy, hundreds of layoffs, and the future of announced projects. ‘I can safely say that 95 per cent of my customers that bought into Arabtec lost money. No one came out with a profit. I had clients that were crying. Can you imagine? They were crying,’ said Khaldoun Jaradat, the head of Brokerage House Securities in Abu Dhabi.”
“For the second time in five months, the executive chairman of Hong Leong Group Singapore and City Development Limited, Kwek Leng Beng, has called on the government to review property restriction measures here.He told the press that ‘foreigners were choosing to plough their investment dollars into countries like Britain, Australia and the US over Singapore, while Singaporeans have been investing abroad.’”
“In a reaction to the report of Kwek’s remarks, a young concerned Singaporean posted the following comments online: ‘First, the government has no business helping private real estate companies like Kwek Leng Beng’s to attract international business. Second, it is of no loss to Singapore if we miss out on Kwek Leng Beng’s so-called [foreign] ‘investments.’ In fact, what we have observed is the extreme negative externalities wrought by the free flow of such ‘investments’ (read: cash) due to excess liquidity which has its roots in the liberal cash-printing US, EU and Chinese central bank policies. Third, by Cheryl Ong’s calculation, private home prices have spiked 60% since 2009. Assuming a generous sustainable rate of 6% compound increase for home prices since 2009, home prices should only have increased by 33.8%. We are about 25% over-valued. Quarterly decreases of 1.5% is nothing.”
“Forth and finally, the government’s role should be to develop a sustainable, moderate, gradual increase in home prices (just like overall inflation!) so that homes remain affordable for the masses in land-scarce Singapore – and not to indulge folks like Kwek Leng Beng who are too happy to make a quick buck from policy errors and mistakes.”
“The Federal Reserve should not raise interest rates in order to battle financial bubbles, according to the central bank’s chairwoman Janet Yellen Wednesday. Her remarks suggest that the Fed is ‘more interested in having a resilient financial system that can cope when asset bubbles burst than it is in popping them through rate rises,’ the Financial Times reports. Yellen argued that higher interest rates in the run-up to the housing crisis would not have averted it, nor would higher rates have addressed the problem of overleveraged big banks.”
“Starting with Alan Greenspan as chairman of the Federal Reserve Bank to his successors Ben Bernanke and now Janet Yellen, policy has essentially meant granting unlimited interest-free or nearly interest-free money to major banks and other Wall Street players. Although not discussed publicly, monetary policy makers of Wall Street at the head of the Federal Reserve Bank and the Treasury Department have come to view the bestowing of cheap money upon Wall Street as a monetary stimulus measure that would work through asset-price inflation and the subsequent trickle-down mechanism.”
“The official rationale for the injection of cheap money into the financial system is still justified, publicly, on the same grounds as the traditional Keynesian monetary stimulus: that such infusions of money into the financial sector would prompt enhanced lending to the real sector, thereby encouraging productive investment, employment and growth. Portraying asset-price inflation as a monetary tool of economic stimulation, policymakers in the United States and other core capitalist countries are no longer averse to creating financial bubbles; as such bubbles are viewed and depicted as fueling the economy through demand enhancement effects of asset-price appreciation.”
“Instead of regulating or containing the disruptive speculative activities of the financial sector, economic policy makers, spearheaded by the Federal Reserve Bank since the days of Alan Greenspan, have been actively promoting asset-price or financial bubbles.”
“Professor Peter Gowan of London Metropolitan University describes this rather perverse strategy in the following words: ‘Both the Washington regulators and Wall Street evidently believed that together they could manage bursts. This meant that there was no need to prevent such bubbles from occurring: on the contrary, it is patently obvious that both regulators and operators actively generated them, no doubt believing that one of the ways of managing bursts was to blow another dynamic bubble in another sector.’”
“The following dialogue has circulated widely on China’s Internet, posted by an anonymous netizen. It helps explain the psychology that keeps China’s housing bubble afloat. At a karaoke bar, a middle-aged man sat with his nephew in a private compartment. ‘Uncle,” the nephew said, ‘No one is buying the houses we build. You must think of a solution fast.’”
“The middle-aged man said to his nephew: ‘You don’t need to worry. All you need to do is construct the houses. I’m not building houses to sell. Most people couldn’t afford them, anyhow. The construction is just a vanity project.’ Surprised, the nephew asked, ‘Where will the money come from if you do not sell the houses?’ ‘We will get a loan from the bank,’ the uncle replied.”
“‘Wouldn’t we need to pay it back?’ the nephew asked. The uncle explained: ‘Say I borrow 500 million from the bank and use only 200 million for investment and development. 300 million will be mine to keep. So it doesn’t matter whether I sell the houses or not. After the houses are built, we will engage in speculation until the houses are worth a billion yuan each. We will gift some of the best houses to public servants. ‘Once these public servants have many houses on their hands, they will do all they can to keep the value of the houses from dropping because if the value drops, it means the money they’ve got is disappearing. That’s how they will begin providing services for us,’ the uncle said.”
“‘But why wouldn’t we need to pay the bank back?’ the nephew asked. ‘Pay what?” scoffed the uncle. ‘We’ll use this billion-yuan house as collateral, and take out a loan for a new housing development. Just watch me get rich.’ ‘What if the bank runs out of money?’ the nephew asked. ‘No worries. The government will print more,’ the uncle replied.”
“‘Suppose it doesn’t?’ the nephew asked. ‘We’ll just announce bankruptcy and leave the houses for the government to deal with,’ the uncle replied. ‘All my money is in foreign banks, anyhow.’”
“The construction is just a vanity project…”
Nice explanation of the Chinese “miracle”.
Closer to home, Monsanto executives create a moonshot in their stock options by borrowing on the cheap and buying back $10 billion in their own shares. Another “miracle” thanks to the Fed. The seed sales are just for vanity.
http://online.barrons.com/news/articles/SB50001424053111904544004579646303280157052
“Vanity projects.” We’re left with clear-cut forests and raped land strip mines thanks to greedheads and their “vanity projects.” I hate people. This whole world is rotten to the core.
China will redefine crater.
Instead of crater all you will need to say is “CHINA!”
“Yellen argued that higher interest rates in the run-up to the housing crisis would not have averted it, nor would higher rates have addressed the problem of overleveraged big banks.”
Once upon a time we had a Fed Chairman who said his job was to remove the punch bowl once the party got started.
Now we have this.
It’s simply revealing the ad hoc nature of financial regulation in this country.
Look at this quote from Geithner: “First of all, I’ve never been a regulator…I’m not a regulator.” According to the New York fed bank’s Web site, that was your job!!
Quoting from the Fed’s website: “As part of our core mission, we supervise and regulate financial institutions in the Second District.” That district of course is the epicenter for bailed out banks and billion dollar bonuses.” — Dylan Ratigan, NBC
It seems as though they’re being told what they need to do to keep Wall Street profitable, and they do it. Holder and Breuer showed their hand when they talked about why Wall Street was not being criminally investigated after the debt crisis.
More on the ad hoc nature of financial regulation:
“There really is no reason other than political pressure for the Fed to take us from bubble to bubble by cutting interest rates to near zero and flooding the market with liquidity. Ironically, the lesson friom the Great Depression - that letting the banks go under is not a good idea - has been so well absorbed by the Fed that it is played for a patsy by the banks.
A rock-bottom nominal short-term interest rate prompts risk-taking and makes price bubbles more likely; it is unclear, however, that it is much more helpful in prompting corporate capital investment and job growth than a somewhat higher but still low nominal short-term interest rate.” — Raghuram Rajan, former University of Chicago professor and current head of the Indian central bank, in his book, “Fault Lines”.
And as far the financial “regulators” being told what to do, imagine the power that big financial companies have. These are companies bristling with lawyers and lobbyists, surrounding a core of salespeople and traders. Recently Goldman Sachs sent an email in error, and then decided to simply order Google to remove the email. That’s an interesting thought process that leads to that conclusion.
I’ve said it before and I’ll say it again - the financial sector needs to be kept on a short leash, or else they’ll put society on a short leash. And peddling logical constructs in return for currency and peddling betting is very, very lucrative for a small group of people, but it’s not a good way to improve the standard of living of the society at large.
The “small group” is what you say needs to be regulated, yet their regulator is actually owned by them, not by the society at large.
It is like handing a junkie the keys to a never-ending heroin stash with the expectation they get sober. Foolish beyond words.
Why wouldn’t you want to let banks that make foolish gambles go under when they lose buckets of money?
Wouldn’t letting banks get their comeuppance for making foolish investments (e.g. in subprime real estate lending) encourage better financial decision making by the survivors?
Keynesian policy involves boying demand in the short term by tossing life vests to the peons when a large firm goes under.
The operative points here are:
1 - The large players are allowed to die off.
2 - the PEONS, not the execs, not the shareholders, receive the life vests.
Since Reagan’s introduction of “trickle down”, Keynes has been verboten in the western world.
Since 1981 they’ve been intervening in the natural process of death for large incumbent entities and handing massive amounts of cash to executives hoping it will “trickle down”.
Not only has this not happened, the incumbents have become incredibly invasive to our basic human rights. Big players now spy on us and manipulate the law to artificially restrict our ownership rights over anything containing electronics.
The concept of “trickle down” needs to be slain or our civilization is headed for collapse.
“Mark Livingstone, president of Cornerstone First Financial, a mortgage broker in Washington, D.C., purchased an investment property in Odenton, Md., with the help of a 10-year interest-only, nonjumbo loan with a fixed rate. The monthly payment recently shot up to $2,424 from $1,463 with the start of principal payments. He plans to list the property this month because the rental price won’t cover the cost of the new payment.”
From out of the blue …
The president of a mortgage brokerage firm apparently could not have seen this coming even though he had ten years to look for it.
I love this blog.
Indeed. Circumstances like these show you the depth of what is going on. It proves beyond a shadow of a doubt that in large part, people who are in the filthy, corrupt business of housing truly don’t understand the business they’re in. None whatsoever. They think a house priced 300% higher than long term trend(or double construction costs) is perfectly normal. Once again, when you don’t have to pay for what you buy(and borrow instead), you’ll never understand the value of a dollar.
On the contrary, I think they DO understand.
I just think they are that corrupt and that hedonistic.
This is the result of a country that lives off credit. Credit enables people to live now, pay later. Maybe these people are correct, and that shafting the next guy while you screw off is the just and noble thing to do.
Our country - led by our federal government - has long stopped being interesting in generating wealth. The focus for quite some time has been on how to preserve wealth, and where that’s not possible, how to transfer it.
And that’s it.
This quote is often repeated here, mainly because it is the underlying principle that best explains the situation at hand.
He plans to list the property this month because the rental price won’t cover the cost of the new payment.”
So there’s still some pent-up supply out there, eh?
Sacramento, CA Housing Demand Collapses 15% YoY; Now At 10-Year Low
http://www.zillow.com/local-info/CA-Sacramento-Metro-home-value/r_395045/#metric=mt%3D30%26dt%3D1%26tp%3D6%26rt%3D6%26r%3D395045%26el%3D0
‘A few cracks are starting to appear in New Zealand’s economic story, says ANZ chief economist Cameron Bagrie. ANZ calculates a financial conditions index which reflects not only interest and exchange rates, but also asset prices (including housing), commodity prices and credit growth.’
‘ANZ has revised down its estimate for this season’s dairy payout to a level that would imply a $3 billion drop in dairy farmers’ incomes. And Bagrie describes the state of the forestry sector as “carnage”. “I don’t use that sort of term lightly,” he said.’
‘The pummelling log prices took about eight weeks ago was now flowing into activity - or, rather, the lack of it. “In the housing market I think prices at the moment are actually falling. Annual per cent changes still look okay but when I look at the market I think house prices are starting to nudge back a little bit.”
‘As the mortgage rate curve flattens it provides fewer places for borrowers to hide from rising interest rates. “The household sector as a whole is still injecting more funds into the residential property stock than it is withdrawing from it, suggesting that households are not front-running the expansion,” Bagrie said.’
‘The pummelling log prices took about eight weeks ago was now flowing into activity - or, rather, the lack of it.’
Let me guess: Fewer log exports from NZ to China?
‘Sales of new homes slumped 45% in May from the same time a year earlier, part of an overall slowdown in the Israeli housing market that appears to be intensifying. Real estate experts said the slowdown comes in response to a number of plans from the government to lower housing costs.’
‘Housing and Construction Minister Uri Ariel said he was pleased with the drop in sales. He is proud Israelis are waiting to buy, he said, adding that it expressed confidence the government would succeed in lowering home prices.’
‘The new government programs will exempt sales of new homes costing up to 1.6 million shekels ($470,000) from the 18% value-added tax for first-time home buyers and a create a “target price,” in which developers will be able to buy land at a discount if they commit to offering at least 80% of the new units built on it at about 80% of the market price.’
‘Both plans are now in the process of being legislated, prompting prospective home buyers to wait and see how prices are affected.’
‘Bahamian realtors yesterday called upon the Government to pass laws regulating appraisal management companies, with the push by the Canadian-owned banks to foist such a system on the industry branded “a huge game changer”.
‘David Morley, Morley Realty’s principal, told Tribune Business that unlike Florida and the US, the Bahamas had no statutory laws in place to govern the operations of entities such as NAS Valuations.’
‘BREA, Mr Morley added,, had taken its own initiative to improve appraisal standards by reaching out to the Royal Institute of Chartered Surveyors (RICS) - an organisation whose standards were accepted throughout the Caribbean.’
“We completely understand some of the banks are overlent, or have lent too much on properties,” Mr Morley told Tribune Business, “but it’s not the appraiser’s fault.”
“At some point, someone in the banks had to sit down and say: ‘How could you have a $500,000 house in Elizabeth Estates?’ The banks, at some time, have to take responsibility for not vetting some of the appraisals that came in.”
‘Buyers’ market conditions continue to drive High Country real estate sales, and they could extend well into the summer as the number of properties listed surges. In May there were 568 homes added or renewed within the High County Multiple Listing Service, which tracks properties in Ashe, Avery and Watauga counties. That’s the largest one-month addition in at least eight years.’
‘Since February the number of properties listed within the MLS has increased 28 percent, with 3,003 listed as of June 8. “The High Country is a buzz of activity during the upcoming months. Many visitors enjoying the cooler weather and various festivities would love to own mountain property,” said Laurie Phillips, executive officer of High Country Association of Realtors. “With extensive inventory and attractive prices, this is a great time to buy.”
‘The Florida Keys has a housing crisis on its hands. It is alarming how little rental property there is, and how high-priced rents are. Landlords are becoming unreliable and a large number of houses are going into foreclosure. My landlord defaulted on 10 houses in the last two months. Now the banks own a ton of properties and when they sell, those people often turn them into vacation rentals.’
‘People can barely live down here unless they have roommates, but I’m a mother, so I really can’t have roommates.’
‘Key West needs people to work, not move out because they can’t afford to pay the first and last months’ rent, plus a security deposit, totaling $6,000 to $10,000. Without workers, you have no tourist destination.’
‘The business of buying and selling houses for quick profit is in decline nationally, but a second wave of foreclosures in New Jersey has bumped it up locally. Foreclosures in Atlantic County rose 116 percent between the first quarter of 2013 and the first quarter of this year. They were up 90 percent in Cape May County, 127 percent in Cumberland County, and 71 percent in Ocean County during that time.’
‘Anthony D’Alicandro, a real estate agent with Coldwell Banker Casa Bella in Linwood, said the foreclosure trend is far from over. He knows of about 100 properties that have gone through foreclosure and are not even on the market yet.’
‘More than 1 in 10 houses sold in the Dallas-Fort Worth area in the first quarter went to investors — big-money buyers snapping up thousands of properties around the country.’
‘While increases in home prices have slowed investor housing acquisitions, there’s no sign that these buyers, ranging from hedge funds to wealthy foreigners, are stepping out of the market.’
“They are making money hand over fist,” said Stan Humphries, economist at online real estate marketing firm Zillow. “They went into it for cash flow. And now they’ve gotten all this appreciation on their assets,” he said. “I don’t think there is going to be a rush to the exits by these guys.”
‘But in some cities they are still dominating the housing market and have the potential to cause prices to be artificially increased, said Jack McCabe of Florida-based McCabe Research and Consulting. “We have hedge funds driving prices in some markets,” McCabe said. In some Florida cities, investors are buying more than 50 percent of the houses that come up for sale. They are from all over, including Canada and Europe,” he said. “There are a lot of high-net-worth investors. “As long as they have investment funds in their war chest, they are going to continue to buy.”
‘McCabe said that in the last six months, his firm has tracked thousands of investor home purchases that were made above the asking price for the houses, creating another bubble. “This is going to be the driver of the next recession in the U.S.,” McCabe said.’
“As long as they have investment funds in their war chest, they are going to continue to buy.” ??
And its astounding to see the massive “War Chest” of money at work around here…Redevelopment on a scale that I have never seen in my lifetime…The big dogs are here in a big way…Its a Heavy Weight battle for assets…Incredible…
Yeah, I cracked up at the term “War Chest” normally that’s safe cash not margin loans and borrowed money. When the Dow normalizes you’ll see all that “war chest” money evaporate.
Ben
I guess I missed it. Where did you move to, if you don’t mind me asking?
‘Foreign investors are likely key drivers of the Sydney and Melbourne housing booms, according to new UBS data, potentially buying up to 40 per cent of all newly constructed homes, and accounting for up to one in eight Australian sales overall.’
‘Unprecedented levels of foreign buyer activity, combined with the ability of the $559 billion, self-managed super fund sector to leverage its cash five times when making property purchases, could be two reasons this Australian housing cycle is different from anything seen before.’
‘The most powerful first-order influence is undeniably the cheapest mortgage rates in 40 years, with competitive variable loans being promoted for as little as 4.6 per cent.’
‘China’s rising middle class is likely a significant source of offshore demand. Alongside New Zealand, China and India are now two of the three top sources for immigrants into Australia. Many companies facilitating the government’s “significant investor visa” program, which for a $5 million investment entitles a foreign investor to permanent residency within four years, have been targeting wealthy Chinese.’
‘Canadians are overly invested in domestic markets that are already fully valued, while facing a future of insufficient guaranteed retirement income and the likelihood of outliving their investments, warn executives of Sun Life Global Investments.’
“In 2008 and 2009 when markets had a tough time, Canada did well because consumers continued to spend, our finances were strong and the housing markets went higher up. Unfortunately, we never had a chance to pull back a little bit; housing is overinflated, consumers have significant amounts of debt and we’re starting see the economy slow down so unemployment is going up,’ said Sadiq Adatia, chief executive, after addressing Edmonton-area financial advisers.’
“The next few years we see interest rates going up, bond yields going up, and there will be very little left over for the consumer to spend on the economy.”
‘Rick Headrick, president of Sun Life Global, stressed the need for investments to be diversified geographically and by asset type — within both stocks and bonds — as the need for retirement income increases. There are now more than 700,000 Canadians living past age 85, more people than there are registered minor hockey players, at a time when the disappearance of defined benefit pension plans means very little retirement income is guaranteed.’
“Up until a couple of years ago, everybody was asking ‘what happens if I die?’ Now they’re taking, ‘what happens if I live?’ ” says Headrick.’
‘It’s now been nearly six years since the Great Recession initially took hold of most of the U.S. economy, including Arizona and Flagstaff. Very few economists at the time said the impacts would linger past several years. The recession — defined as two consecutive quarters of negative GDP — indeed let up officially late in 2009.’
‘But even today, most economic indicators in the Flagstaff region, including sales tax receipts and jobless rates, have not returned to pre-recession levels, although the trends are upward.’
‘In Arizona, meanwhile, the construction industry and related building and retail sectors, which provided nearly a quarter of the economic activity in the Valley, have not rebounded. Median housing prices in the Valley boomed temporarily last year on the strength of outside speculation, but they have retreated as the market for rental homes has become saturated.’
‘And government spending, especially at the county and city levels and in school districts, has not grown proportionally to the population and enrollment — in other words, it has not returned to levels where it otherwise would be before the cuts.’
‘This is most apparent in education, where K-12 schools are still short about $700 million a year in state appropriations they were set to receive before the recession, and NAU is short about $60 million.’
‘Where has that previous spending gone? In Arizona and Flagstaff, some of it was generated by home equity loans tied to inflated home prices. When the bubble burst, so did the discretionary spending on home projects, recreational vehicles and big vacations, among others.’
but they have retreated as the market for rental homes has become saturated ??
I was wondering when we were going to finally see this comment…All that investor (speculator) activity eventually has consequences….
On the other hand, we have this opinion;
AMERICA’S LOOMING RENTAL CRISIS
Source: The Atlantic
http://www2.realtoractioncenter.com/site/R?i=VSQulSwUqX4em7iQKp1GXg
it’s hard to get left of the atlantic
they’re calling for reparation x
‘Finding a new home or apartment in the Coastal Bend won’t be easy right now. Supply is down and demand is up. That means housing prices are on the rise. Many in the housing industry are watching closely, wondering when the Corpus Christi housing bubble might burst, sending prices back down.’
‘With a shortage of land in town, realtor Gene Guernsey says nothing stays on the market long. Rent right now is at an all time high, its about $1,300 for a 2 bedroom, even so, what goes up must come back down. Guernsey says its only a matter of time until the rental prices drop as well.’
“After they build enough apartments and they build enough houses, it will level off and then eventually it will falter off, because they’ll overbuild,” Guernsey said. “Is that 6 months or 9 months or is that 3 years from now,” Guernsey asked. “We just don’t know,” he added.’
‘There are about eight apartment complexes under construction across the city. New home sites are going up quickly, too. Guersney’s selling a home on the Island right now that he’s sold twice before, first in 2000 for about $185,000, then it sold for about $290,000 in 2004. Today, it’s listed for $365,000.’
‘listed for $365,000′
So 15 years ago this Corpus Christie house had a loan of 200k, and it might be 365k now? My oh my, Janet, you’ve really screwed up this time.
She is just getting started, too!
Offer on a home without seeing it ??? I know of millions of sellers who would love that secnairo, but of millions of sellers also know this is a total RE agents lies that only furthers them as irevelant in the sale and buying of houses in 2104. There is a better way to save 6% on their ( so called must have) commission’s that benefits both parties in the final sale.
“irevelant”
?
“There is a better way to save 6% on their ( so called must have) commission’s that benefits both parties in the final sale.”
Of course there is my friend. And there is a way to save yourself and your offspring from a lifetime of financial losses: Simply do not pay a grossly inflated price for a rapidly depreciating house. And right now, housing prices are grossly inflated 300% over long term trend and double construction costs (lot, labor, materials and profit).
The best way to avoid a 6% Realtor™ commission is to simply never, ever buy a house — especially at grossly inflated prices!
‘Property developers in two of China’s weakest housing markets are offering to buy back homes above the purchase price to boost sales as demand slows.’
‘In Hangzhou, where home prices fell the most in May, Shanheng Real Estate Group is giving homebuyers an option to sell back their apartments in five years for 40 percent above the purchase price. In Wenzhou, DoThink Group is offering to repurchase homes at three of its projects for 120 percent of the purchase price after three years.’
‘The offers are the latest strategy by developers across China, including reducing prices, delaying project launches and offering incentives to potential buyers, as they seek to maintain sales targets. “Obviously they’re relatively cash-thirsty,” said Dai Fang, a Shanghai-based analyst at Zheshang Securities Co. “If it works, there surely will be other developers following suit.”
‘Transaction of commercial housing in Shanghai fell 36.5 percent year-on-year to 713,700 sq meters in June, according to the 21st Century Business Herald.’
‘In the first half, transaction declined 32.63 percent year-on-year to about 4 million sq meters, the report said. Data from Shanghai Deovolente Realty shows that Shanghai’s newly-built commercial housing came to a total of 5.26 million sq meters in the first half, up 6.7 percent year-on-year, which led to a glut of 1.1 million sq meters in terms of newly-built commercial housing as of the end of June.’
‘As a sign of a flagging market, land sales in the Shanghai market dropped to 65.57 billion yuan, a decline of 11.9 percent year-on-year, or 55.5 percent month-on-month.’
‘It’s shaping up to be quite a busy summer for the Flathead Valley’s construction industry, with residential projects scattered throughout the county. “We’re building everywhere — Bigfork, Columbia Falls, Whitefish, Kalispell, all directions,” said Tom Bowen of Bighorn Development and Homebuilder. “We even have a couple [houses] going into Somers.”
‘Flathead County Planning Director BJ Grieve said his office also is fielding calls from people “kicking the tires.” “Generally I can tell you our phone is ringing off the hook with development-related inquiries and folks calling to run ideas by us and ask how those ideas fall into the various regulations we administer,” Grieve said. “Most stop short of actually pulling the trigger and making an application, and all the subdivision preliminary plats currently entitled still aren’t banging down the door to go to final plat.”
‘As of Jan. 1, there were 1,228 preliminarily approved lots available in Flathead County. He also has observed builders absorbing the inventory of existing lots, “but there is a ton of inventory to get absorbed still,” he said.’
‘Before the big crash of 2008, Gilmore Erickson seemed to control two of the more promising condo tower sites in downtown San Jose. When the Los Gatos man pitched investors, success seemed inevitable. The mantra of the era was “get in or lose.” In fact, Erickson’s two condo projects were, in the words of prosecutors, “an unmitigated disaster.” No ground was ever broken.’
‘You might dismiss it as another failure but for this: Gil Erickson had done a year in prison after a grand theft conviction a decade before in a Monterey County property scheme, a fact he didn’t share with investors. And he lacked the massive wealth he claimed.’
‘There was one tipoff that should have alerted investors: Stymied in its attempt to get traditional financing, Grandpoint was promising investors a 50 percent return on their money after a year.’
‘The story of one investor, whom I’ll call by his first name, Jack, shows how it worked. Jack had heard about Grandpoint through a real estate investment club. After watching a webinar featuring Erickson’s son, Alexander, he met with Erickson at the company’s downtown offices.’
‘Jack was cautious: He sent in a set of email questions that Grandpoint deftly answered. (Example: “What percentage completion is the Fifth Street property as of today?” Answer: “If the question refers to the commencement of construction, it is 75 to 80 percent ready.”) He invested $100,000, money he never saw again.’
‘For the vast swath of renters in Los Angeles — whose median household income, according to the Census, is $40,000, less than half what homeowners earn — there’s only so much money to spend on housing.’
‘Already, 33% of Southland renters spend at least half their income on monthly rent, according to a report by Harvard University’s Joint Center for Housing Studies. And if wages are flat, every little bit that rent goes up means something else has to go, said Larry Gross, executive director of the tenants advocacy group Coalition for Economic Survival.’
“Where do you cut back?” Gross said. “They’re running out of ways.”
‘It’s a sign, experts say, that without stronger job and income growth, the pricey Southland rental market may be topping out. “It becomes a sustainability issue,” said Reis senior economist Ryan Severino. “Can tenants keep pace with rent increases? For most workers, income growth isn’t sufficient.”
‘For the vast swath of renters in Los Angeles — whose median household income, according to the Census, is $40,000, less than half what homeowners earn — there’s only so much money to spend on housing.’
If Affordable Housing programs are supposed to help low-income families, then why do they discriminate against low-income renters in favor of wealthy homeowners?
That’s why so many are leaving for Texas.
‘When Rafael Mangual bought his condo at the Cambria at Polo South in Osceola County, he thought it was going to be a nice community — a place he could call home for years to come. Mangual paid $176,000 for his condo in 2007. Over the years the community made updates and upgrades. But condo owners said they have watched the property itself deteriorate. Many condos were foreclosed on or rented out.’
“Now it’s a dump, a real dump,” Mangual said.’
‘In February Mangual got a letter saying their condos were turning into apartments with Section 8 housing. They would be forced to sell their condo to the new owner. Instead of the $176,000 Mangual paid for, the owners appraised his condo at $66,000. That was a best and final offer. “I’m out $110,000,” Mangual said.’
‘Mangual said the new owners told him he could remain there, but that he would have to pay $1,000 a month in rent. That’s on top of the mortgage payment he still pays.’
“Developers across the U.S. are reviving a concept that collapsed with the real estate crash in 2008: combining condominiums and hotels. The $150 million Beachwalk hotel-residential project in Hallandale Beach, Florida, which Related Group CEO Jorge Perez expects to be completed in 2015, has 300 residential units. The units sold out in two months, with an average price of $500,000, according to Perez.”
What’s next up in the Echo Bubble progression?
- Dumpy apartments converted to condos?
- Floating condos on the Mississippi River or on cruise ships permanently at sea?
finally ,time to go all in
combining condominiums and hotels
It’s good to come back to reading this blog after being away for about five years. I learned so much from when I first started reading it in - I guess about 2003. Something about the stock market going over 17000 and seeing way too much bubbly development in NW Bexar County (outside San Antonio city limits) over the last year or so gave me the disheartening realization that we learned nothing from the last crash.
When I told family members about an upcoming burst in the housing bubble during the 2000s, they were patronilizingly indifferent. Until it happened.
To read these realtors comments about it being a good time to buy…..NOOOOOOO!
Thanks, Ben, for keeping this blog alive.
It’s unbelievable that we’re all still here. I’m a lurker and once-in-a-while poster since 2005 and I just keep wondering when will it end?
I’m currently in Dallas trying to find rental housing and it’s horrifying.
I went the other day to look at what purported to be a luxury apartment complex, but never actually got inside to see the apartment.
It’s a gated community and all of the parking slots in front of the office were full, so I idled for 10 minutes waiting for someone to leave. Some of the people I saw going in and out I couldn’t believe. Women with do-rags on their heads, heavily tatooed white folks with a look about them that just screamed “Aryan Nation”, lots of junker cars going in and out.
I wondered if maybe the gate was to keep the people in? And this place was not cheap and their requirements for getting approved seemed pretty stringent. I couldn’t reconcile that with what I was seeing with my own eyes.
There are many odd things afoot.
And this place was not cheap and their requirements for getting approved seemed pretty stringent.
Maybe their “stringent requirements” is just a check on whether the rent will be paid on time? Section 8 always pays on time…
On quick count, there are 4,000 rentals available in Dallas.
Spare us.
No, they do not take Section 8
4,000 rentals in a city of how many million?
Trying to find a decent rental for a reasonable price is not easy and I don’t appreciate Housing Analyst’s sarcasm. I’m a real person, not involved in real estate, telling my experiences.
You spare me.