The Housing Bubble

Its Friday desk clearing time for this blogger. “Austin homeowners have enjoyed steadily rising property values for several years. ‘I’ll show them a house that’s dilapidated, tear down, almost and they’re still going for $300,000, and it’s ridiculous, but the thing is the comps around are supporting it,’ said real estate appraiser and broker Stan Laird. ‘People are paying it.’”

“Activity at the first of the new downtown-Brickell condo towers to be completed leads many to anticipate that a majority of units in condos under construction or announced will, like their immediate predecessors, add to the area’s rental base. Units at My Brickell started at less than $500,000. ‘It was built with no parking,’ said Peter Zalewski, principal of CraneSpotters.”

“Buyers of housing all across the city hit the pause button in the third quarter, in the face of stiff headwinds on the pricing front. While the median sale price for an apartment in the city hit $575,000, up 2% from a year earlier, both the dollar volume and the number of sales declined, according to the Real Estate Board of New York. n the Bronx and Staten Island, on the other hand, median sale prices dropped 7% and 2%, respectively. ‘Pricing has tempered activity,’ said Michael Slattery, senior VP for research at REBNY. ‘As prices start to go up, it’s pushing people out of the market.’”

“The median sales price of a home in Kitsap County was $249,950 in September, $7,000 more than in August, according to the Northwest MLS. Frank Wilson, managing broker of John L. Scott Real Estate, said about one-third of homes in Kitsap sell in the first 30 days after being listed, but about 30 percent of homes don’t sell after six months. ‘Even though the market has picked up, it is still important to price your home at or close to market value, otherwise buyers move on to purchase another home,’ Wilson suggested. ‘We are seeing a trend of buyers who are much more discriminating about what they are buying. Despite not having a lot of choices, buyers are willing to step aside from a transaction after an inspection if the home is not perfect.’”

“A large homebuilder active north and south of Kern County has moved into the Bakersfield market with its purchase of nearly 400 unfinished lots it plans to turn into homes for first-time and “move-up” buyers starting next year. Although Realtor Ronda Newport said she thinks Woodside will do well in Bakersfield, she expressed concern that 400 new homes could ‘flood the market’ and depress prices. ‘It would be nice to have new options and new builders come to town,’ she said. ‘I just don’t know, with high inventory, how that’s going to affect sales.’”

“Local homebuilder Matt Towery said he was less concerned about Woodside flooding the market than he was about the company’s price points. Noting local wages have not risen much lately, he pointed out some developers recently dropped prices on their home inventories in Bakersfield.”

“Although it hasn’t been reflected in prices, the number of homes being sold in Israel dropped sharply over the past year. As of June 30, there were 94,450 homes and apartments under construction in Israel; by August 31, 26,920 were still unsold, a very unusual situation in a country where, in recent years, apartments have been snapped up before the first foundation had been dug. That constitutes 28.5% of all apartments being built, a record high, beating the previous 25% record. Some experts believe that the slowdown in sales is likely to boomerang – that even though prices will be ‘discounted’ by 18%, prices will rise by an even greater amount, because contractors will slow down their construction efforts as the homes they are currently building remain unsold.”

“Asking rents have stalled in the cap­ital cities after a spike in investment property purchases pushed up ­supply in the housing rental market. The rental market has become more affordable for tenants in ­Canberra and Perth as landlord returns fall. Sydney agents have reported ongoing demand from investors for new stock. Greencliff Realty, which is marketing properties in Chip­pendale’s Central Park development, said investors made up about 50 per cent of all buyers to date in the $2 billion project. ‘Although, we’ve seen a pause in rental growth over the September quarter, demand will continue to put upward pressure on rents in ­Sydney,’ Domain Group senior economist Andrew Wilson said.”

“A backlog of more than 400 unsold new housing units is acting as a drag on Regina’s housing market, according to Canada Mortgage and Housing Corp. ‘What we are seeing for sure is that, for Regina, the unsold inventory - those units that have been completed, but remain unsold - the level has risen quite a bit,’ said Goodson Mwale, CMHC’s senior market analyst for Saskatchewan. Saskatoon home builders, who took their foot off the gas last year, seem to be putting the pedal to the metal this year. While total starts were down in September to 285 from 614 in September 2013, year-to-date starts were 2,671 versus 2,367 during the first three quarters of last year.”

“The public housing resale market continued to soften for the eighth consecutive month, with prices hitting a 20-month low as property curbs and a healthy stream of Build-to-Order flats continue to crimp activity, showed a flash report by the Singapore Real Estate Exchange. Century 21 CEO Ku Swee Yong expects the downward trend to stretch for three more years, given the ‘avalanche of supply’ in BTO flats, as well as the number of Executive and Private Condominium projects nearing completion.”

“Manager of research and consultancy at OrangeTee Wong Xian Yang said demand for rental flats have fallen in the wake of tightened foreign worker policies. Mr Ku added that falling rents for private property have led to some ‘cannibalisation’ on HDB units.”

“House prices in London have fallen for the first time in nearly four years, and will continue to do so, according to the Royal Institution of Chartered Surveyors. Charles Puxley, estate agent from the Chelsea branch, Jackson-Stops & Staff, said: ‘Traditionally September is a busy month for instructions in central London. This has not happened this year and there is notably very little activity at just over the £2m mark. Mansion tax it seems to be a real worry. It will decimate London prices.’”

“Further out in Enfield, Essex, Keith Barnfield of estate agents, FRICS, said: ‘Activity is yet to pick up after the holidays. More properties are staying on the market for longer and offers are being made below asking price.’”

“As the US Federal Reserve attempts to exit from its unconventional monetary policy, it is grappling with the disparity between the policy’s success in preventing economic disaster and its failure to foster a robust recovery. To the extent that this disconnect has led to mounting financial-market excesses, the exit will be all the more problematic for markets — and for America’s market-fixated monetary authority.”

“The operative view in central-banking circles has been that the so-called ‘wealth effect’ — when asset appreciation spurs real economic activity — would square the circle for a lagging post-crisis recovery. The persistently anemic recovery and its attendant headwinds in the US labor market belie this assumption.”

“Nonetheless, the Fed remains fixated on financial-market feedback — and thus ensnared in a potentially deadly trap. Fearful of market disruptions, the Fed has embraced a slow-motion exit from QE. By splitting hairs over the meaning of the words ‘considerable time’ in describing the expected timeline for policy normalization, Fed Chair Janet Yellen is falling into the same trap. Such a fruitless debate borrows a page from the Bernanke-Greenspan incremental normalization script of 2004-2006. Sadly, we know all too well how that story ended.”