There Seems To Be A Big Bubble Blowing
A report from Radio New Zealand. “Auckland home-owners are already wanting to renegotiate loans or borrow more following the release of Auckland Council’s new property values, mortgage broker Bruce Patten says. Patton told Morning Report many homeowners called yesterday, wanting to use their new valuation to raise more capital for renovations, and new cars and boats, and he thinks there will be more inquiries to come. On average the site gets around 90,000 daily page views, but yesterday there were nearly 1 million, the council says. Mr Patten warned the valuations were generally ’sight unseen’ and an indication only of value. ‘The price is what someone’s prepared to pay for it today,’ he said.”
The Australian. “Auction clearance rates have slowed across the country as listing numbers grow and housing supply threatens to overtake demand. Sydney experienced a clearance rate of 75.5 per cent — its lowest since the first week of July — while Melbourne recorded 71.6 per cent at the weekend, Australian Property Monitors said. RP Data recorded a clearance rate of 45 per cent in Brisbane, 61.3 per cent in Adelaide, 50.6 per cent in Canberra and 56.3 per cent in Perth.”
“It wasn’t the prestige suburbs keeping the market afloat. Sydney’s inner-city and eastern suburbs produced ‘underwhelming’ clearance rates of less than 70 per cent at the weekend despite their price growth and popularity, APM chief economist Andrew Wilson said. Sydney can expect a record November, with more than 5000 auctions expected to be held this month — the highest number ever recorded, according to APM.”
Reuters on Sweden. “Having slashed rates to zero to fight the risk of deflation, top Swedish officials are now in a quandary over how to rein in borrowing and house price rises without sending the real estate market into a downward spiral. In Stockholm’s frenzied housing market, buyers make multi-million crown offers to snap up flats they may only have seen in photographs. And cranes and scaffolding are common sights. ‘We don’t think it will crash badly,’ said Peter, a 47 year-old investment advisor, who with his wife has just bought a house in Stockholm for around 12 million Swedish crowns ($1.62 million). ‘It might stop going up for a while, but over the longer term we expect it to go up.’”
Business World in the Philippines. “The majority of Metro Manila condos are in Makati — about 80%. From what started as P40,000 per square meter for initial sales of Makati condos in 2001, the price per square meter of new condos in Makati now range from P150,000 to about P220,000. But is there a vibrant enough market for reselling? Or even for rentals? Owners of older condos have a difficult time trying to sell units, or even rent them out, in the face of declining prices, and little demand for old units. Is there a glut?”
“Near the Makati Fire Station is a new condo complex 59 storeys high, dense with 74 units per floor, composed of one- and two-bedroom units from 20 sqm to 36 sqm each unit. Further down is a four-tower condo complex, 41 storeys high sitting on top of a five-floor commercial podium, 50 units per floor of one- and two-bedroom units, 22.25 sqm to 39.7 sqm each unit. There seems to be a big condo bubble blowing in Makati.”
The Hindustan Times in India. “There is good news in store for Mumbaiites who plan to rent homes in the near future — there has been a marked reduction in rentals of residential properties across the city. While the rents for smaller homes have dipped by 10%, those of premium properties have fallen by 35%, experts from the housing sector said. Real estate investors, who are saddled with vacant flats because of low demand from buyers, have made these apartments available for tenants. ‘The older rates were inflated. What we are seeing now is a correction in prices,’ said Prakash Rohera, CEO, Kkarma Realtors.”
The Strait Times on Singapore. “Landed homes are taking more of a hit than apartments in the lacklustre property market, with prices falling and demand drying up. The price index for landed property has fallen 5.1 per cent over the past four quarters, well in excess of the 3.3 per cent slide in the non-landed index, according to the Urban Redevelopment Authority. ‘Our agents are also suffering. We have taken steps to offer some discounts and, hopefully, buyers will see the value. Where (else) can you get a new landed house with a park or sea view?’ said Mr Sam Chong, senior manager at Sunway, which developed Avant Parc in Sembawang.”
From China Daily. “Real estate companies listed on the mainland bourses saw a surge in inventories during the third quarter of the year, a report said. During the first three quarters of this year, about 60 percent of China’s top 50 realty developers by sales revenue reported declining average prices of sold properties. As many as 26 developers said the average price of sold properties dropped less than 10 percent year-on-year, and six developers said their property price dropped more than 10 percent, according to CRIC. ‘Developers will further cut prices and give better offers to attract buyers to meet the revenue goals for 2014,’ said Wu Huimin, director of residential property at real estate company DTZ East China.”
The Gananoque Reporter in Canada. “The Chinese industrialists who purchased the Eagle Point Winery and its luxurious modern castle on the river less than three years ago have defaulted on their loan and the ownership of the properties have reverted to the former owner. When Chinese industrialist Du Zhongyi of Wuhai, China, purchased the mansion and winery in March, 2012, the transaction was heralded as the start of Chinese cash flowing into the Thousand Islands.”
“Du announced plans for a 80-home subdivision on the winery property, which would be marketed to Chinese millionaries who wanted a place in Canada. Du, a Chinese coal producer, was rumoured to have paid $20 million for the Eagle Point properties. If accurate, that means that Du left about $6 million on the table when he walked away from the deal.”
“Auckland home-owners are already wanting to renegotiate loans or borrow more following the release of Auckland Council’s new property values, mortgage broker Bruce Patten says. Patton told Morning Report many homeowners called yesterday, wanting to use their new valuation to raise more capital for renovations, and new cars and boats, and he thinks there will be more inquiries to come.”
The people who live in New Zealand appear to be just as stupid as the people who live in the United States. Apparently both groups of people just cannot stand prosperity in that whatever monetary gains they may make regarding so-called increases in equity are immediately cashed out and replaced by - (and this should be startling but apparently it isn’t) - replaced by DEBT!
And what is equity? Is it not associated with the term PRICE? Yes? No?
And what determines price? Is the determination of price (regarding real estate at least) not the cumulative opinions of strangers? Strangers who may or may be of sound minds?
Strangers vote the price up, this voted-up price immediately translates to a sudden boost in equity, and this boosted equity is seen as something that should be immediately - IMMEDIATELY! - “cashed out” - which is just a fancy term that means it should be exchanged for debt.
Then opinions change and the price rise eventually peaks out and (the horror) goes into reverse and when the price goes into reverse then so does the equity go into reverse, and if the equity was cashed out while it was available then all that will be left of this cashed out equity-that-went-into-reverse will be debt.
But unfortunately, unlike price and unlike equity, the debt doesn’t go into reverse; The debt, it gets to stick around for a while, maybe for years.
“The Chinese industrialists who purchased the Eagle Point Winery and its luxurious modern castle on the river less than three years ago have defaulted on their loan”
We’re going to see this trend increase tremendously over the next 36 to 72 months. And the outcome is going to shock many, devastate many more. Watch this closely as it relates to the US east and west coast in particular.
“Du, a Chinese coal producer, was rumoured to have paid $20 million for the Eagle Point properties…”
Probably a lot more than that. The castle alone was listed at $18 mil. The whole deal was supposed to be more like $100 mil. He won’t be able to come back. Even though he’s lost the title he’s liable for the balance owed.
Peak Chinese Miracle Ponzi is over.
“….If accurate, that means that Du left about $6 million on the table when he walked away from the deal.”
Du is in deep doo-doo. Ruht roh.
The world is collapsing on him just as he needs to bring his money home to save his investments in China.
This is unprecedented…..well, since the Japanese pulled the same stunt in 1990 and got their hats handed back to them.
I believe much the same happened to California investors in other states’ real estate markets in the wake of the 2007-08 financial collapse. Those other states’ real estate markets took quite a hammering when the flood of California investment dried up.
This go ’round, China is playing the former role of California, and California the former role of the other states.
I did witness some flush CA investors start buying in TX in 2006 & 2007. “The cash flow is so much better”. Today they can’t unload the properties for what they paid. The cash flow gets eaten up in management, maintenance and plane tickets to TX.
That’s true of anyone who bought a house since 1999 anywhere J._Fraud.
I’m looking forward to reading similar stories about the Chinese equity locusts who snapped up thousands of California investment properties.
California!?! Who WOULDN’T want to grossly overpay for RE in CA?!? What with the oppressive taxes, liberal-fascist government, dwindling natural resources, overcrowding and radiation! What? Radiation? Oh, yeah.
http://www.whoi.edu/news-release/Fukushima-detection
Yawn…
Yeah, I guess your right. I mean, its not like radiation is bad for you or anything. And radiation exposure isn’t cumulative or anything. And it will disappear quickly, because radiation doesn’t have a long half-life or anything. And I’m sure that levels can’t possibly get any higher- because no other isotopes will be carried over. And I’m sure that this will stop really soon because the Fukushima reactors are all contained, the fuel rods have all been weighed and accounted for and radioactive cooling water is no longer being intentionally pumped into the sea by TEPCO. Its not like this is a canary in a coal mine- they were probably actively testing for radioactivity all along the coast just by coincidence. Yeah, being in the path of this will probably end up being a huge win for California. Yawn.
California, NY, Singapore, Canada, Brazil, Australia, Africa, London, Spain, Japan….
A world of hurt. China is the biggest credit expansion in history and their deleveraging is going to leave a ring around the tub.
Why wouldn’t governments anticipate this and do all they can to offset market forces that might otherwise harm investors?
Las Vegas Mortgage Defaults Balloon 78%
http://www.8newsnow.com/story/26796471/home-mortgage-defaults-rise-repossessions-sink
HA, you are such a sensationalist. I wish you were an analyst.
Foreclosure rates dropped by 80% in late 2013 with new foreclosure requirements due to court cases and legislative actions. A spike upward in late 2014 is normal.
There is nothing different about Las Vegas this year. It has been trying to dig it’s way out of 2007 bubble bust for the last 7 years. Slowly it’s getting there. Try not to get confused by the press.
Get a calculator and do some math before you post BS.
That’s the headline J._Fraud. Whine to the publisher about it.
And for your benefit, foreclosure and default rates are still 700% higher than long term trend.
blah, blah blah, blah blah, blah blah…..
How do they compare to 2010?
Blah blah blah.
Foreclosure rates are elevated 700% higher than long term trend.
Las Vegas has only seen some price increase in the last two years. Housing starts reflect the massive overbuild from 1993 to 2006, to the tune of at least 200,000 SFRs. So what gave Vegas a little price bump in the past two years? Investors, we’re told, and that game is closing.
Buckle up!
http://research.stlouisfed.org/fred2/graph/?id=LASV832BP1FHSA
A reader sent this in. Check out the cartoon:
‘The Reserve Bank has warned that Australians face unprecedented mortgage pressure over the next decade as lagging wages growth fails to keep up with record household debt, making it harder to pay down mortgages as interest rates inevitably rise.’
‘The Reserve Bank said on Friday that in New South Wales and Victoria – where house prices have risen much faster over the last year than the rest of the country – the share of income required to service an average home loan over the next 10 years “is close to historical highs.”
‘The reality check comes after ANZ chief Phil Chronican warned that Australians have an “irrational obsession” with property investment, calling for a frank debate about tax distortions that pump up house prices.’
“Check out the cartoon.”
I resemble that!
Yes, you look just like an idiot.
‘ANZ’s CEO Phil Chronican has pointed to negative gearing as the key driver behind Australia’s “irrational obsession” with property. Mr Chronican told Fairfax Media that he was worried some investors viewed buying property as a “one-way bet”.
A key reason for the popularity of housing investment was the tax distortion created by allowing investors to deduct interest payments against other forms of income, he said, adding that Australia would benefit from a debate about negative gearing and a better understanding of the risks involved.’
“I do worry that some people behave as if housing is always a one-way bet,” he said. “I think there is a bit of an irrational obsession with housing as an investment class. “For many investors, they would be better off in assets other than housing.”
‘The Bank of America Merrill Lynch chief economist said his biggest concern over APRA’s use of macroprudential tools is that they either don’t work or unintentionally hurt those who are not the source of the problem. He added that the rise in house prices is “not doing anyone any good”.
‘Executive Condominiums (ECs), the hybrid private-public housing type targeted at the sandwiched class, are registering a high rate of vacancy across the island, pointing to continued selling pressure in the Housing and Development Board (HDB) resale market.’
‘While I have been harping on the massive oversupply of housing in Singapore, the truth is that most investors do not acknowledge the pain until they are swept away by the tsunami. The signs are everywhere and have been around for some time.’
‘As of the third quarter this year, there were 21,569 vacant private homes, excluding ECs. This represents 7.1 per cent of the total stock of 302,510 apartments, condominiums and landed properties and the seventh consecutive quarter of increase from the 5.2 per cent vacancy rate in the first quarter of last year.’
‘Four years ago, when these ECs were launched, a typical plan for the upgraders was to buy the EC — many on deferred payment schemes — in the expectation that HDB resale prices will rise during the time that the new home was being built. By the time they receive the keys to their ECs, these upgraders could sell their HDB flats in the resale market for a sizeable profit, which could be used to reduce the loan on their new homes.’
‘However, the tide has turned against them. HDB resale prices have dropped for the past five quarters and recent changes to valuation rules and to purchases by Permanent Residents have made it even tougher to sell the current units at market prices. Most serious sellers, such as the upgraders, are pressed to accept prices below market value. However, some are still holding out for better prices while postponing their key collections.’
‘By law, each family is allowed to own only one subsidised housing unit at any one time, and I am guessing that these families are under pressure to sell their HDB flats as soon as possible. The pressure to sell may worsen, with EC completions expected to total 2,854 next year, 6,371 in 2016 and 2,505 in 2017.’
‘Two other segments will add to the supply of resale HDB units. Second-timers who have purchased HDB BTO (Built-to-Order) flats and DBSS (Design, Build and Sell Scheme) units will, by law, need to sell off their current HDB flats when the new BTO/DBSS flats are completed.’
In the Sacramento foothills, around 2006 & 2007, the “subsidized condominium housing” was not selling well, even though the city provide grants and zero interest money for buyers. $250,000 for a 1,000 SF condo.
Fast forward to 2010: market rate condos were selling for less than the subsidized housing. When there is mass market insanity, even the “do-gooders” get fooled.
The project melted down and the public/private partnership failed. Prices are $170,000 now. No need for a municipally sponsored second mortgage.
http://vicarahoa.com/vicara/property4sale_detail.asp?id=1
And overpriced by $120k but don’t fear…. prices are falling and you’ll be able to pick up one of those CA shanties for $50k before too long.
“Housing is a money pit.”
You better believe it. Especially considering current resale housing prices are 3x higher than construction costs(lot, materials, labor, profit).
Renting is half the cost of buying so you know what to do. Buy later for 70% less.
‘More Liquidity, Greater Risks?’
‘In hopes of bolstering a gloomy real estate market, China’s central bank at the end of September announced its decision to encourage banks and financial institutions to free up home loans by issuing mortgage-based securities (MBS).’
‘”MBS can liberate an untapped resource for home mortgages and boost the funding liquidity of the property market by diversifying the sources of home loans,” said Chen Qing, deputy head of the Financial Research Center of Chongqing University.’
‘According to statistics from the People’s Bank of China, the central bank, by the end of September, the real estate loan balance in the nation had amounted to 16.74 trillion yuan ($2.74 trillion), with individual housing loans totaling 11.12 trillion yuan ($1.82 trillion).’
“The huge volume of deposited assets has severely restrained commercial banks’ capacity to issue home loans, aggravated the risk of defaults, and jacked up the cost of home loans,” said Chen.’
‘Lian Ping, chief economist with Bank of Communications, noted that though the Chinese Government has unveiled a series of real estate regulatory policies such as property-purchasing limitations and loan restrictions, housing prices had been climbing year on year. “Housing prices will level out in the second half of next year, and a further decline is not likely,” said Lian.’
Fang nu is contained.
‘It has been a stellar couple of years for Perth’s housing market – but it looks as though the good times might be tapering off. According to REIWA president David Airey, the prognosis for the market is not promising, with a downturn in 2015 likely.’
‘While the latest REIWA data shows the median price has lifted slightly, sales turnover is at its lowest level in two years, sale listings are trending upwards and rents are falling. In fact, the number of listings are likely to smash through the 12,000 barrier shortly, Airey said.’
‘Airey offered the following figures as further evidence for his warning of a downturn:
Sales turnover is 12% below average.
Average days on market have gone up to 59.
The number of vendors dropping their asking prices have gone from 48% to 51%.
There is 50% more rental properties available for lease than there was at this same time last year.
Rents have softened to 4% below the median price from the same time last year.
Perth’s rental market is struggling because it currently has 2,000 properties more than is needed to balance supply and demand.’
‘Canada’s housing starts were cooled by an unexpected sharp slowdown in construction of new condominiums in October, sending them to their slowest pace in seven months. “Given the healthy building permit applications in September, we may see a rebound for the multi category, although the longer-term outlook isn’t all that rosy given the accumulating inventories of unsold condos in some parts of the country. We continue to expect a moderation in residential investment next year,” said National Bank of Canada senior economist Krishen Rangasamy.’
‘Economists also noted what is probably a healthy cooling of a couple of major red-hot urban markets – Vancouver and Calgary. Housing starts slowed by 5,000 or 25.7 per cent in Vancouver, to 14,400, their slowest pace in 20 months. Vancouver’s starts have now declined 46 per cent in the past two months, since hitting a peak of 26,600 in August. Starts in Calgary edged down 4 per cent, to 17,600.’
‘By contrast, Toronto’s starts jumped by 10,500, or 70 per cent, to 25,600, reflecting a rebound from a sharp decline in September.’
“While recent home prices trends are starting to raise some eyebrows, there’s little concern about overbuilding in Canada with housing starts trending near fundamental requirements. This is true in the ‘hot 3’ cities (Vancouver, Calgary and Toronto) as well, where resale price growth is heated, but new construction is largely following population trends,” said Bank of Montreal senior economist Robert Kavcic.’
‘“The priciest Canadian markets became even less affordable in October.” That was the response Thursday from BMO senior economist Sal Guatieri. Guatieri and other housing market watchers suggest good job markets, an influx of immigrants and millennials and other “fundamentals” are supporting the heated conditions and booming prices in Vancouver, Calgary and Toronto.’
‘So are record low interest rates. “Strong support from immigrants and millennials are definitely a factor, but it’s doubtful prices would climb this fast without a big push from low, low interest rates,” the economist said.’
but it’s doubtful prices would climb this fast without a big push from low, low interest rates,” the economist said.’ ??
Yep…..
“Borrowing to pay for a rapidly depreciating asset at a massively inflated price puts you in a hole that you’ll never escape from.”
Ever.
Chain it to a pool and hot tub and yer really skewr’d.
“With 25 million excess, empty and defaulted houses in the US, 4 million of which are in California, there is plenty of “housing supply”.
‘The gap between borrowing costs for China’s most highly-rated borrowers and riskier ones with low or no credit rating has jumped in recent weeks. And property prices are now falling across China, confounding optimists who predicted pent-up demand would prop them up despite massive over-building and a glut of supply. Potential buyers aren’t stupid: once prices started falling, they stood by to watch the bargains land.’
‘China’s leaders, like politicians anywhere, must ultimately be populists. They are reluctant to inflict too much pain on the public — or on vested interests. Each time the economy stumbles, therefore, they have stepped in with short-term palliatives like measures in late September to ease restrictions on property investment. Indeed, economists now expect Beijing to unleash interest rate cuts and other measures to defend growth along the lines of the mini-stimulus earlier this year that accelerated infrastructure spending and encouraged bank lending to small- and medium-sized enterprises.’
‘The result, however, is a schizophrenic policy mix that lurches from reform to revival, but achieves neither. China’s producer prices have already been in deflation now for two-and-a-half years. Yet credit, while slowing, is still growing faster than the economy. China isn’t growing out of its debt bubble, and cannot. In a recent report, Gavekal China economist Joyce Poon illustrated how China appears to be marching in Japan’s path toward a deflationary trap, with anemic growth, falling prices and an increasing proportion of new loans being used to pay off old ones.’
“new loans being used to pay off old ones…”
And the collateral long, long gone.
‘It might stop going up for a while, but over the longer term we expect it to go up.’
Bubble investor’s famous last words…
“The majority of Metro Manila condos are in Makati — about 80%. From what started as P40,000 per square meter for initial sales of Makati condos in 2001, the price per square meter of new condos in Makati now range from P150,000 to about P220,000. But is there a vibrant enough market for reselling? Or even for rentals? Owners of older condos have a difficult time trying to sell units, or even rent them out, in the face of declining prices, and little demand for old units. Is there a glut?”
It’s gonna crash.
the price per square meter of new condos in Makati now range from P150,000 to about P220,000
That’s $500 USD per square foot. For a condo in a third world country where college grads earn less than $1000 a month. Who the heck is supposed to buy those condos? That would be like having condos costing $2000-$3000 sq/ft in Silicon Valley.
And who wants to live in a high rise in a place known for frequent and sometimes violent earthquakes?
Foreclosure Rates Reverse Course, Rising Again
http://finance.yahoo.com/news/foreclosure-activity-reverses-course-rising-125711550.html
More inventory to choose from coming your way. Sit tight.
Who wants to live in a smelly, dilapidated foreclosure home?
Jingle_Fraud has your answer.
Why not sign up to pay an extra half million over 30 years to avoid living with poors?
Where are our half million dollar men today?
Where are they? Posting lie after lie elsewhere on the internet. It’s lucrative work if you can get it.
And people thought they were so savvy buying the supposed bottom of 2012. What they don’t realize is the bottom was just a closed trap door.
Exactly. And the work real hard at convincing themselves the bottom was 2011.
Bzzzzzzzzzzzzzzt. WRONG!
Florida’s Huge Foreclose Rate Grows as National Rate Jumps 7%
http://247wallst.com/housing/2014/09/11/floridas-huge-foreclose-rate-grows-as-national-rate-jumps-7/
BTW guess what vintage these delinquent mortgages are?
2010.
‘We don’t think it will crash badly,’ said Peter, a 47 year-old investment advisor, who with his wife has just bought a house in Stockholm for around 12 million Swedish crowns ($1.62 million). ‘It might stop going up for a while, ******but over the longer term we expect it to go up********.’”
Fools being separated from their money.
It’s 2006 again!!!!
Investment Advisor - LOL!!!