Buyers Are Starting To Get A Bit Spooked
The Los Angeles Times reports from California. “Alisha Chen is part of a growing cottage industry of real estate agents, bankers and attorneys who specialize in helping wealthy foreigners buy a little patch of Southern California. She started asking her local clients — many Chinese American immigrants themselves — if they knew anyone back home who might be interested in buying a house here. ‘At first, they were a little leery,’ she recalled. ‘They’d say, ‘OK. I’ll buy one property as an investment.’ Six months later they were amazed at how much they were getting back. They call and say, ‘I want to buy more.’”
“But even she’s starting to wonder how much longer this influx of cash from across the Pacific will last. The Chinese government keeps making noise about clamping down on currency leaving the country. The U.S. government is talking about taxes on foreign investors, which could make buying here a little less attractive. Buyers are starting to get a bit spooked. ‘I think I’m not going to be putting as much energy into this,’ she said. ‘I think the next few years are going to be a good time for first-time buyers.’”
The Salt Lake Tribune in Utah. “Home sales in Salt Lake County slipped 3 percent lower for the third quarter, according to data released by the Salt Lake Board of Realtors. That represents a decline of almost 9 percent within county boundaries for the nine months ending in September compared with the same period in 2013, a trend market watchers say is linked to higher prices and, possibly, a lack of new homes. ‘We’re just coming off the peak,’ said Angie Domichel Nelden, president of the Salt Lake Board of Realtors, who noted that 2013 marked Utah’s strongest housing market in seven years. ‘This is a little bit of a correction.’”
The Oregonian. “Oregon had the nation’s highest percentage of vacant homes going through the foreclosure process, according to RealtyTrac. About 18 percent of all properties in the foreclosure process nationally had been vacated, the firm says. Within that subset, Oregon had relatively more of these so-called ‘zombie’ foreclosures than any other state. This may herald a new wave of foreclosure proceedings in Oregon.”
“John Helmich, chief executive of Eugene’s Gorilla Capital, which tracks foreclosure filings in most of Oregon, said this month ‘we see zombies in nearly every neighborhood and all have been empty for months or years. We expect more zombies to pass through foreclosure and back into the market over the next few months.’ RealtyTrac said 1,091 — or 36 percent of Oregon’s properties in foreclosure in the third quarter — had been vacated.”
The Times Dispatch in Virginia. “‘Zombie foreclosures are still a problem in some areas and a rising problem in some areas, such as Washington, particularly the Maryland part of D.C., and in New York and New Jersey,’ said Daren Blomquist, VP of RealtyTrac. The report shows that zombie foreclosures rose 40 percent in the Washington area in the third quarter from a year ago and 30 percent and 75 percent, respectively, in New York and New Jersey.”
“‘Virginia has a relatively fast and efficient foreclosure process that doesn’t allow for zombie foreclosures to develop,’ Blomquist said. ‘When you have a foreclosure process that takes three to four years, it opens the door to more vacated and abandoned properties.’ The average amount of time to foreclosure on a house in Virginia was 232 days in the third quarter, he said. The national average was 615 days.”
The Leader Post in Canada. “With more than 400 unsold new housing units on the market, Regina’s housing construction activity is expected to slow by 25 per cent in 2014, followed by an 8.5 per cent reduction in 2015 and a 2.3 per cent decline in 2016, according to the Canada Mortgage and Housing Corp. fall housing market forecast. Stu Niebergall, CEO of the Regina Region Home Builders’ Association, said the CMHC forecast seems reasonable and agreed that the unsold inventory of new housing units is holding the Regina market back somewhat. He added that Regina still has a ‘reasonably healthy market.’ ‘We’re at very low risk of seeing a big housing price correction. But I don’t think we’ll see price escalation for quite a period of time.’”
From News 10 in New York. “Foreclosures have become a major problem in areas all over the country, including the Capital Region. According to Realtytrac, 2,416 Capital Region homes fell into some form of foreclosure in 2008 - a 152% jump over 2007. There’s a common misconception that foreclosures are only happening in lower-income neighborhoods such as Schenectady’s Hamilton Hill, but that’s just not the case. ‘Because they were first-time home buyers and they were buying in a specific neighborhood and they were lower income potential buyers,’ explained counselor Patricia Hall-Murray.”
“She told NEWS10 that there are communities in Rotterdam or Bellevue that have as many as eight or nine houses for sale within a block or two. ‘There’s just so many people that are in trouble, and it’s just not one segment of people or not one income level of people, it’s really across the board,’ she said. ‘You have people that are overwhelmed, frustrated, angry.’”
From the California article;
‘I think the next few years are going to be a good time for first-time buyers.’”
This is an under statement considering there are millions of excess empty and defaulted houses in CA and demand is cratering while prices have resumed their downward trajectory as housing demand is collapsing.
‘Six months later they were amazed at how much they were getting back. They call and say, ‘I want to buy more.’
By traditional standards, this seems like a pretty crazy reason to buy residential housing. Has this sort of logic ever motivated multiple individual investor home purchases before the current episode?
Because RE has become the modern equivalent of ‘Beanie Babies’. And we all know how that infatuation endured.
No mention below that first-time buyers are priced out, given current home prices relative to household incomes, despite the lowest interest rates on record.
Bulletin First-time buyers’ share of U.S. home sales hits a 27-year low
Market Pulse
First-time buyers’ share of home sales hits 27-year low
Published: Nov 3, 2014 10:00 a.m. ET
By Ruth Mantell
Economics reporter
WASHINGTON (MarketWatch) - The share of homes sold to first-time buyers dropped to 33% in 2014 — the slimmest portion in 27 years — down five percentage points from 2013, the National Association of Realtors reported Monday. First-time buyers have been playing a weak role in the housing market’s rebound, making it tougher for other families to move into a new place. Historically, first-time buyers’ share of home sales is closer to 40%. Rising housing costs and strict mortgage standards are making it tough for young families and other first-time buyers to jump into the market, analysts say. “Less stringent credit standards and mortgage insurance premiums commensurate with current buyer risk profiles are needed to boost first-time buyer participation, especially with interest rates likely rising in upcoming years,” said Lawrence Yun, NAR’s chief economist.
…
first-time buyers are priced out
That was my thought. You bid up the market with your foreign investors. Now you’re going to turn around and sell more expensive housing to first-timers? Good luck with that strategy.
Pretty amazing how far out of touch with economic reality the ‘experts’ can be!
They’re not out of touch, they’re benefiting financially.
By the way, my personal prediction is that- not unlike ‘granite and stainless throughout’- the upcoming ‘must-have’ trend for west-coast housing will be integrated geiger counters. As the prevailing winds from Fukushima continue to dust that area intermittently with radioactive pixie-dust for the next 500 years, it will be interesting to see what health hazards manifest themselves.
“‘There’s just so many people that are in trouble, and it’s just not one segment of people or not one income level of people, it’s really across the board,’ she said. ‘You have people that are overwhelmed, frustrated, angry.’”
But are they enlightened? Did any of them learn anything - anything at all - from any of this?
They paid the tuition but did they get the lesson? Probably not.
People are smart (snort).
I wonder if this is still the hangover from 2007 lending. It continues to amaze me how long the housing bubble bust effects take to work through the system.
Imagine the coming carnage from the 2007-2013 housing disaster J._Fraud.
Paid for tuition, not paid the tuition. Tuition means knowledge. Can’t pay the knowledge. Common mistake.
from google:
NORTH AMERICAN
a sum of money charged for teaching or instruction by a school, college, or university.
“I’m not paying next year’s tuition”
synonyms: fees, charges, bill
“students go broke paying the increased tuition”
also:
teaching or instruction, especially of individual pupils or small groups.
“private tuition in French”
Can’t pay for the knowledge. Tuition is teaching or paying for the teaching. It’s like plumbing.
Knowledge is acquired with the time and effort it takes to acquire it. Once you obtain it, you can charge others tuition for sharing it with them.
“But even she’s starting to wonder how much longer this influx of cash from across the Pacific will last. The Chinese government keeps making noise about clamping down on currency leaving the country. The U.S. government is talking about taxes on foreign investors, which could make buying here a little less attractive. Buyers are starting to get a bit spooked. ‘I think I’m not going to be putting as much energy into this,’ she said. ‘I think the next few years are going to be a good time for first-time buyers.’”
Translation: the money has already dried up. No one is going to stop making money hand over fist unless they are forced to. If they are not putting as much energy in, it is because Someone has already pulled away the punchbowl.
Translation: the money has already dried up.
+1.
Heh. “Making noise” about clamping down on currency leaving the country. “Talking about” taxes on foreign investors. How many times have we heard the Chinese say that something, anything, will be done? The fact is that neither government is going to do a #&@(*#! thing.
This jawboning act is nearing its sell-by date. Our leaders and institutions have monetized their credibility, which is the ideological equivalent of eating your seed corn.
There will come a day when the Fed Chair, for example, makes an announcement and it will have no effect.
In the short term overseas buyers may still rush to buy, overall curtailing of these buyers will occur. What does it mean, luxury property will have to look to North America buyer, good luck with that.
The 0.1% of North American buyers who are able to afford luxury homes are currently out swimming in the pools behind one of the several they already own. When the overseas cash dries up, so does luxury home demand.
‘I felt this way before—and it was during Bear Stearns. Everybody cheered that Bear Stearns got a bailout from the Fed. And within three days, they were out of business. So, this is Japan bailing themselves out. they had no choice. They have to raise taxes. They are now monetizing their debt—100 percent monetizing their debt, and buying stocks. They’re buying REITs. They’re buying ETFs. It’s insane.’
‘Japan is in a lot of trouble. It has a stagnant economy, an enormous debt load, and must raise taxes. A tax increase earlier this year has placed the Japanese economy on the path to recession. Similar to Bear Stearns, the country is essentially insolvent and levered to the gills. Without the bailout orchestrated by the BoJ, the markets would have lost confidence in Japan and the country would eventually default on its debt. So they had no choice, they had to bail themselves out.’
‘But the other side of the story is that Japan does not operate in a silo - it is a player in the increasingly globalized economy. Japan’s move will force other countries to act - specifically South Korea and China. In laymen’s terms, Japan has become the WalMart of the global economy. It has effectively announced “roll backs” and discounted prices on exports and the only way for competitors to survive is to match the price cuts.’
‘What is known is that currency wars have no winners. Competitive devaluations send deflationary shocks throughout the global economy like a hot potato.’
http://finance.yahoo.com/tumblr/blog-japan-stimulus-reminds-me-of-bear-stearns-171444266.html
‘What is known is that currency wars have no winners. Competitive devaluations send deflationary shocks throughout the global economy like a hot potato.’
Speaking of deflationary shocks, how do you like oil at $79/barrel? Now that it has crashed below $80/barrel on short order, I’m wondering how far down the bottom is?
Whatever you do, don’t fill up your tank, because it will be cheaper next year!
Fixt for u J._Fraud.
Whatever you do, don’t fill up your tank, because it will be cheaper
next year!tomorrow.I hope you are joking about that.
For clarification, deflationary psychology can lead to housing demand evaporating for a year or longer, if people believe they will be able to buy houses for much cheaper in the future than currently, it may be economically rational to rent and wait for years.
By contrast, I did put only three gallons of expensive Shell gasoline in my tank on Saturday morning, then went back to Costco in the evening for the $2.959/gallon regular (with no lines).
The bottom line is that the time scale at which deflationary psychology operates is heavily dependent on whether the item in question is an investment (like housing) or consumption (like gasoline).
heavily dependent on whether the item in question is an investment (like housing) or consumption (like gasoline).
Wait, I thought housing was a consumption item!!
It depends whether you rent or own.
I would argue that even when you own, a portion (equivalent to rent) is a direct consumption expense. It is the expense of providing you and yours with shelter.
The house you own to rent out to someone else is an investment; the house you own to live in yourself, you are consuming.
That’s great if it’s cash flow positive but anything priced in the last 15 years is cash flow negative.
“housing demand evaporating”
What it will lead to is opening the curtain on millions of excess and overpriced houses. The price of food doubled with the price of oil, which doubled with the frenzy of building. When the energy bubbles deflates so will the price of food. Along with that the price of plywood, wire and shingles will collapse. What will that do to the price of housing?
It only takes one new house at half price to collapse the valuation of an entire city. That’s an alligator in black swan clothing.
“I would argue that even when you own, a portion (equivalent to rent) is a direct consumption expense. It is the expense of providing you and yours with shelter.”
Yes.
However, the home equity wealth effects part of a home purchase is clearly an investment which is not a one-way bet, which folks who truly believe that ‘real estate always goes up’ tend to neglect.
One could arguably subtract off the monthly rent on comparables to figure out the purchase price of this highly leveraged gamble on price appreciation.
One could arguably subtract off the monthly rent on comparables to figure out the purchase price of this highly leveraged gamble on price appreciation.
+1; I almost said the same thing in my previous reply!
We’ll call that the speculative option component—for those in no-recourse states, at least!
Gas prices are dropping so fast, smart folks might want to consider investing in underground storage!
They finally tore down the old GM dealership in my village, one of those closed in the mysterious doings after the government bailout. Beneath the floor of the service shop was a railroad tanker filled with gasoline. Apparently the dealer’s private supply during the years of rationing. Talk about “I’ve got mine”.
Gasoline does not store well at all; one of the benefits of diesel.
I remember back in 2008 when various sovereign wealth funds were buying huge stakes in struggling investment banks. Since that time, I’ve not seen sovereign wealth funds in the news.
I kind of predicted this some time back ,it is so obvious, growing up with inflation, I never imagined a time when deflation would ever be a real possibility. I do know that all forms of speculators will get their collective asses handed to them.
I notice the MSM shows a growing schism between articles that start off on the theme that “foreclosures are at their lowest level since the end of the housing crisis, six years ago” and others on the theme of “a growing number of zombie foreclosures threatens to drive down home prices.”
Wherein lies the truth?
The two are not contradictory. Recorded and completed foreclosures — where bank assumes title — are at the lowest level. Zombie foreclosures occur when the homeowner gets a foreclosure notice, moves out but the bank doesn’t follow through with foreclosure proceedings. The property sits vacant with title still in the homeowner’s name. This leaves the homeowner still liable for property taxes, code violations, HOA dues, etc., etc.
Growing zombies tells me banks are using zombies as a way of avoiding responsibility and liability. They probably figure losses due to no mortgage payments is less than losses due to the property being REO.
What does difference does it make when they are 25 million of them? It’s a distinction without a difference.
Sounds like a great way to hide losses “off balance sheet.” Is it legal!?
“Is it legal?”
You win the prize for irrelevant question of the day.
No doubt
Not in Bay Area.
Just one of many reports for Fall selling season (all saying same thing):
http://m.bizjournals.com/sanjose/news/2014/10/21/the-new-normal-for-silicon-valley-homebuying-36.html?page=all&r=full
Hoping it will change soon equivalent to hoping Dems will pull off greatest upset ever tomorrow.😬
Interesting considering demand is negative in 55 of 58 counties in CA.
You do understand that biz journals is a real estate roundtable publication right?
4 charts that says it all for housing. This via Ritholz. Multi family - to the moon - SFR not so much.
http://www.ritholtz.com/blog/wp-content/uploads/2014/11/4×1.png
Wowzer — SFR construction is in the sh!tter. Maybe refangled subprime lending could reflate the SFR construction bubble?