Hearing The Word Oversupply Just About Everywhere
The Los Angeles Times reports from California. “By most measures, the housing market these days is a bit sluggish. But the high end is hopping. Luxury home sales in Southern California are hitting levels not seen in decades. Sales worth $10 million or more are on pace this year to double their number from the heights of the housing bubble. The number of homes bought for $2 million or more in recent months is the highest on record. Sales have been brisk, said Joan Marcus Colvin, New Home’s senior VP of sales, marketing and design, especially at that Newport condo building, the Meridian, where 34 units have sold since February, at an average price of nearly $3 million.”
“That’s without even having a model home to show customers — the site is still under heavy construction. ‘It’s quite a testament to the strength of the high end of the market,’ Colvin said. ‘These were bought sight unseen. We couldn’t even stand people there and show them it.’”
CNN on New York. “Sales of multimillion dollar residential properties are up 120% so far this year, according to CityRealty. Many of this year’s sales have taken place at the new, super-luxury buildings that are popping up in neighborhoods just south of Central Park, the Upper East Side and in Chelsea, said Pam Liebman, CEO of Corcoran Group. The cost of acquiring land to build on in Manhattan is so sky-high that builders are aiming for the very high end and charging many millions for the apartments. ‘That’s the only way the math works,’ said Liebman.”
National Mortgage Professional. “The number of homes for sale continued to increase across the U.S. in October, a good sign for buyers—but with a catch. In many parts of the country, supply increased more among the most expensive homes than low- and mid-priced homes, according to Zillow. In Denver, there were almost four times as many homes available for sale in the upper price tier (priced at $357,900 or more) than there were homes priced in the lowest price tier (less than$219,000). The same was true in many other markets. Dallas, Atlanta, Phoenix and Nashville had at least two times more homes for sale in the top tier than the bottom tier.”
“As the market has cooled, buyers looking for less expensive homes did find some relief in the hottest metro areas, including San Diego, Los Angeles and the Bay Area. In San Francisco, the number of low-priced homes on the market rose by 39 percent, but there were fewer high-priced homes on the market.”
The Arizona Republic. “More owners of metro Phoenix’s high-end houses are trying to sell, but there fewer buyers in the market for a house costing between $500,000 and $3 million. The Valley’s luxury housing market had been bucking the overall slowing trend until recently. In September, 213 houses priced above $500,000 sold in east Phoenix and the northeast Valley. That’s down 10 percent from August and down 7 percent from September 2013, according to housing analyst Mike Orr’s Cromford Report.”
“The report tracks luxury home sales in Scottsdale, Paradise Valley, Fountain Hills, Rio Verde, Arcadia, Biltmore, Cave Creek and Carefree, where most of metro Phoenix’s more expensive neighborhoods are located. Listings of houses priced above $500,000 in these areas climbed to 2,295 in September, up 3.6 percent from August and 19 percent from September 2013. Demand from high-end buyers has enticed more owners of the Valley’s most expensive houses to try to sell.”
The Sun Sentinel in Florida. “Home listings are on the rise across South Florida — especially in the picked-over lower price ranges, a new report shows. In Palm Beach, Broward and Miami-Dade counties, 10,001 for-sale properties were priced below $149,950 in October, a 49 percent increase from a year ago, according to Zillow. Mid-tier and high-end listings also increased, but not by nearly as much as the low-priced properties.”
“Amanda Wilson, an agent for EWM Realty in Broward and Palm Beach counties, said many low-end homes are foreclosures that haven’t been maintained. Some have missing appliances or structural and roofing issues — costs that easily stretch into the tens of thousands of dollars. ‘Finding something that they’re proud to live in is hard,’ Wilson said. ‘Most buyers in that price range don’t have $30,000 or $40,000 that they can put into the house. They’re middle class America. Every penny counts.’”
The Philadelphia Inquirer in Pennsylvania. “I spent the first six months of the year hearing real estate agents complain there just wasn’t enough for sale to satisfy prospective buyers. The supply shortage - that is, a shortage of houses that buyers wanted, houses that were up to date and properly priced - lasted well past the spring selling season ending June 30. And it was widespread. For ‘Town by Town’ in the Sunday Business section, I visited 26 municipalities and neighborhoods in eight counties, and of the 75 real estate agents and builders I interviewed, all but two started the conversations lamenting a shortage of listings.”
“But after the usual summer sales lull ended at Labor Day, Veteran agent Gary Segal, who sells in eastern Montgomery County, and other agents said, folks began listing their houses at a pace Realtors had been hoping for back in the spring. Unfortunately, there were fewer prospective buyers in the fall market than there had been four months earlier, so ‘almost overnight,’ Segal said, ‘the seller’s market became a buyer’s market again.’”
“The dynamic has changed just about everywhere, said Martin Millner, an agent with Coldwell Banker Hearthside in Yardley. ‘There isn’t tremendous buyer demand, and yet more houses are going on the market,’ he said. The high-end market dynamic is changing as well, Millner said. He repeated an observation by a friend of his who sells more expensive houses that ‘it is the worst he’s seen in 35 years.’”
“As I like to emphasize, real estate is local down to the neighborhood and even the block. But I’m hearing the word oversupply just about everywhere in the region now. Where have all the buyers gone?”
‘In Palm Beach, Broward and Miami-Dade counties, 10,001 for-sale properties were priced below $149,950 in October, a 49 percent increase from a year ago, according to Zillow…Amanda Wilson, an agent for EWM Realty in Broward and Palm Beach counties, said many low-end homes are foreclosures that haven’t been maintained.’
Huh, I wonder where these thousands of foreclosures came from?
10,000 houses just magically appeared in 3 counties. And that’s what they’re willing to admit to.
How many counties are there in the US?
Sure, because 3,333 homes in 3 counties in Florida directly correlates to 3,333 in every county across the nation. More outstanding analisys from the Housing Analyst. HA, Ha, ha, hahahaha….
You’re probably right Jingle_Fraud. With 4.4 million excess empty houses in CA, the number is far higher.
‘Even in the $100 trillion market for bonds worldwide, one of the most persistent dilemmas facing potential buyers is a dearth of supply.’
‘Demand for debt securities has surpassed issuance five times in the past seven years, according to data compiled by JPMorgan Chase & Co. The shortfall is set to continue into 2015, with the New York-based firm predicting demand globally will outstrip supply by $400 billion as central banks in Japan and Europe step up their own debt purchases.’
‘The mismatch helps to explain why bond yields worldwide have fallen by more than half since the financial crisis in 2008 to a record-low 1.51 percent in October, even as borrowing by governments, businesses and consumers added $30 trillion to the market for debt securities.’
‘The Bank for International Settlements estimates the amount of bonds outstanding has surged more than 40 percent since 2007 as countries such as the U.S. increased deficits to pull their economies out of recession and companies locked in low-cost financing as central banks dropped interest rates.’
‘Even so, a shortfall emerged. At a time when investors scarred by the worst economic crisis since the Great Depression were seeking out the safest assets, central banks in the U.S., U.K. and Japan sapped new supply by purchasing trillions of dollars of bonds in unprecedented stimulus programs.’
‘The BOJ, the largest holder of Japan’s government bonds with 20 percent, may end up owning half that market by as early as 2018 as it tries to spur an economy that’s contracted at least five times in the past decade, according to Takuji Okubo, a chief economist at Japan Macro Advisors in Tokyo.’
‘Central banks in the U.S., Europe, Japan and the U.K., along with the major lenders and reserve managers in those regions, are on pace to amass $26 trillion of debt securities by the end of next year, according to JPMorgan.’
‘Weaker global expansion and a lack of inflation threatens to make those forecasts all too optimistic yet again. Last month, the International Monetary Fund lowered its 2015 growth forecast to 3.8 percent from 4 percent in July.’
‘That’s translating into diminished expectations for inflation. For Japan, bond yields indicate consumer prices will rise an average of just over 1 percent per year over the next decade. In Germany, Europe’s largest economy, those expectations dipped below 1 percent last month.’
”Even in the U.S., a bright spot among global economies, the weakening long-term inflation is drawing greater scrutiny. Minutes of the Fed’s meeting released Nov. 19 said “participants observed the committee should remain attentive to evidence of a possible downward shift in longer-term inflation expectations.” That day, the bond market’s inflation outlook for the next decade closed at a three-year low of 1.84 percent.’
These are some pretty big numbers. I sure hope Janet knows what she’s doing.
‘Some commodity fund managers believe oil prices could slide to $60 per barrel if OPEC does not agree a significant output cut when it meets in Vienna this week. Tom Nelson, of Investec Global Energy Fund, said he believed Saudi Arabia had allowed the price to fall to incentivise smaller OPEC producers, which often rely on the biggest producer to intervene, to join Riyadh in cutting output.’
“They (the Saudis) want to cut but they don’t want to cut alone,” Nelson said, adding that a cut of between one million and 1.5 million bpd should be sufficient to balance the market. “The market really wants to see that OPEC is still functioning …”
Yeah, please OPEC billionaires, show us you are functioning by artificially withholding supply that you didn’t pay one nickle for. I can remember when “the markets” didn’t sit around cheering for this gang of thugs to rob us.
Check out the several articles I posted on Megabank, Inc’s commodities speculation activities in today’s Bits Bucket. The usual suspects are up to their neck in it again as another bubble collapses.
‘Marriner Eccles was the Governor of the Federal Reserve System in 1941. On September 30 of that year, Eccles was asked to give testimony before the House Committee on Banking and Currency. The purpose of the hearing was to obtain information regarding the role of the Federal Reserve in creating conditions that led to the depression of the 1930s. Congressman Wright Patman, who was Chairman of that committee, asked how the Fed got the money to purchase two billion dollars worth of government bonds in 1933. This is the exchange that followed.’
ECCLES: We created it.
PATMAN: Out of what?
ECCLES: Out of the right to issue credit money.
PATMAN: And there is nothing behind it, is there, except our government’s credit?
ECCLES: That is what our money system is. If there were no debts in our money system, there wouldn’t be any money.’
‘Robert Hemphill, Credit Manager of the Federal Reserve Bank in Atlanta, wrote in 1936:
‘If all the bank loans were paid, no one could have a bank deposit, and there would not be a dollar of coin or currency in circulation. This is a staggering thought. We are completely dependent on the commercial banks. Someone has to borrow every dollar we have in circulation, cash, or credit. If the banks create ample synthetic money we are prosperous; if not, we starve. We are absolutely without a permanent money system. When one gets a complete grasp of the picture, the tragic absurdity of our hopeless situation is almost incredible — but there it is.’
“the tragic absurdity of our hopeless situation is almost incredible…”
Interest must be paid on this money until everything is consumed by the banks. The Fed broke the rules of their own game by outright buying assets. Makes one wonder what the endgame looks like.
The Fed broke the rules of their own game by outright buying assets.
Whose rules?
The Fed’s rules, of lending the currency into being. It doesn’t have to be paid back and no interest is due. Just my opinion, a sign the wheels are falling off.
“The Fed broke the rules of their own game by outright buying assets. Makes one wonder what the endgame looks like.”
There is some comfort knowing that the practice goes back until at least 1933. And moreover, a Mormon was involved.
Ben:
Re: your comment on Eccles - have you read “Lords of Finance” from 2009 that outlines the history of four central bankers at the turn of the 20th C and set the stage from the dregs of WW1 for WW2?
Just started it and very interesting read.
I say this because the seeds of destruction tend to be sown earlier than the history books generally outline.
If Tesla can solve the battery problem, we could some day see every house in a sunny location off the grid with solar and storage.
Germany is headed in the right “alternative” energy direction with less sun and less wind than USA.
“Rob us?” That’s a bit narcissistic, don’t you think? Just top buying oil.
‘These were bought sight unseen. We couldn’t even stand people there and show them it.’
Multi-million dollar luxury homes are selling sight unseen, suggesting the prospective owner(s) doesn’t plan to live there, but is simply using these units as a physical asset to temporarily park vast amounts of liquidity.
No bubble here, folks…
but is simply using these units as a physical asset to temporarily park vast amounts of liquidity ??
The only word I would change in that sentence PB is the word “temporarily”….We possibly could see that money parked there for a very,very long time….
And why is that Dave?
I think not. As HA will corroborate, unoccupied structures undergo rapid physical depreciation, resulting in massive financial loss over the long term.
unoccupied structures undergo rapid physical depreciation ??
Really ??
First, why do they need to be “unoccupied” particularly if there is some threat of
Second, why would they physically deteriorate ?? This was built in 1929…
https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=0CCAQFjAA&url=http%3A%2F%2Fen.wikipedia.org%2Fwiki%2FEmpire_State_Building&ei=LllzVPzWGYLfPaXYgMAP&usg=AFQjCNGSBfB1EMpoVtXMhpHGBeYOZAn2JA&sig2=AsrAFrj1E3gYIKLcKJ3S4A&bvm=bv.80185997,d.ZWU
All man made items depreciate Dave. ALL of them.
Is that as true of “boxes of air” in the sky—e.g. large condo towers, where someone is keeping the utilities on and the roof repaired?
I agree, most is foreign $$ in CA. Chinese and Persian.
I.e. places people want out of…
So much oversupply, yet such high prices relative to incomes and rents of comparable housing…something’s gotta give!
“Where are the buyers?”
I’m right here. I’d love to purchase a house but just don’t see it as a viable purchase now, plus the ones in my range are just junked out houses.
When will Realtors realize that the smart money is sitting on the sidelines?
After the flood of dumb borrowed money has dried up.
After the flood of dumb borrowed money has dried up.
And when will this be? That’s the real question. If a sucker is born every minute and we have an enabling government it might be a long time…
It’s already a long time and it is increasingly fragile. This has been the biggest credit expansion in history and it will end like they all do, only bigger.
‘And when will this be?’
I’m not sure that matters as much as knowing something big is going to happen. Years ago, we had a good laugh here when it was reported some geniuses had bought Laguna Beach houses and left them empty so no renters would mess them up. And the dark condos in Florida. Now we have really expensive towers all over the world quietly whistling in the wind.
The report here today that in spite of massive bond issuance by public and private sectors, there isn’t enough supply of debt. And the Japanese are doubling down with more QE. 20 trillion here, 30 trillion there. I think we’ve become numb to the insanity of it all. Have we lost our ability to be shocked with the stupidity and enormity of these policies and markets? Buying sight unseen was recognized as foolish in 2005. Now we hear of the Chinese “cultural” proclivity to having big percentages of housing permanently vacant! And not $250k condos. $1-3 million. The most astounding thing IMO; all this money, and deflation is mounting.
‘I think we’ve become numb to the insanity of it all. Have we lost our ability to be shocked with the stupidity and enormity of these policies and markets?’
I’ve been at a loss for any better explanation, for quite some time now.
You know we are in a serious period of deflation when billionaires buy sky boxes for tens of millions and they sit. There must not be any way to make money on the money. Think of how inefficient this all is. Jeebus, this isn’t even real estate! They don’t own one square inch of dirt. They’ve bought an expensive HOA, complete with a door-man with nothing to do. But watch the media ohh and ahh at this ridiculous spectacle.
‘When Prime Minister Shinzo Abe responded to Japan’s surprise recession by delaying a sales-tax increase, it was a cause for worry, not celebration, for many young Japanese. This generation, barely aware of their country’s economic heyday, frets that putting off tough decisions now could make the future even worse.’
‘Despite Abe’s unprecedented stimulus efforts — almost everything short of dropping money from helicopters — Japan has slipped into recession less than two years after the last one. With the country’s debt rising, population aging and job security fading, young people in particular wonder when, and if, Japan will bounce back.’
“This is our children’s future,” said Mai Yamaguchi, a 29-year-old trading company employee heading into the gaudy Shibuya shopping area for an outing with her 4-month-old son and two other young moms and babies. “Child care, elder care, social welfare are all going to be even bigger burdens for us.”
‘Under pressure to reduce the developed world’s heaviest per-capita debt burden, at over a quadrillion yen ($8.5 trillion), Abe raised the sales tax from 5 percent to 8 percent in April, and was supposed to increase it to 10 percent next year. But after the economy, already fragile after two decades of malaise, shrank for two quarters in a row, he put off the second increase until 2017.’
‘Yamaguchi was unimpressed by that decision. “I’m grateful to Mr. Abe for his policies to improve child care, but putting off the tax increase, well, they say the pension system is on the verge of bankruptcy. I think it would have been better to go ahead and raise the tax as planned,” she said.’
‘The generation born as Japan’s economic bubble burst in the early 1990s will be supporting a vast cohort of retirees. Though their nation is rich, with ultra-modern public transport, low crime rates and excellent public health services, most are making do without the security of lifetime employment enjoyed by their parents and grandparents.’
‘Over the past two decades, Japanese manufacturers struggling to compete with rivals in China have grown increasingly reliant on temporary or contract workers. Budget cuts have extended such practices into other fields such as teaching and nursing. Today, about four in 10 Japanese work in part-time or contract jobs with little job security and scant benefits. For young Japanese, permanent, career-track jobs are the exception, rather than the rule.’
‘College student Yuto Tanaka, 19, said he knows that there’s millions of yen (tens of thousands of dollars) in debt for every person in Japan. But fretting won’t resolve that problem, and neither would an immediate tax hike, he said.’
“If they raise the sales tax now, it will hurt the economy and tax revenues will fall anyway,” said Tanaka. “We have to hope,” he said. “If Japan falls to pieces, our society will be finished. We have to muddle through.”
http://news.yahoo.com/japans-young-fret-unexpected-recession-hits-145846969–finance.html
I’m not sure that matters as much as knowing something big is going to happen.
It matters somewhat. If it doesn’t happen for 20 years that means sitting for a long time on the sidelines. It also means missing out on opportunity, I think.
It’s already been over 20 years.
This week end I did a trash-out in a northern Arizona town, (not Flagstaff). I had a dumpster brought in because it was so much stuff. Every 10 minutes I had to chase people out of that dumpster, who were trying to grab soiled blankets, mismatched shoes, torn up garden hose, you name it. This was men and women. I thought to myself at one point, this is like a post-apocalyptic movie.
A lot of people have gotten rich in the last 20 years and it hasn’t been me. I’ve spent the last 15 on the sidelines because it all looks fake and contrived. Looks like I might spend the next 15 on the sidelines, too.
Your experience with the dumpster is insane. It is like a post-apocalyptic movie. Scary.
Patience my friend. Prices are falling once again and this thing is just getting legs under it.
Ben’s dumpster experience reminds me of these immortal lines:
“You’ve got to remember that these are just simple farmers. These are people of the land. The common clay of the new West. You know… morons. “
“The most astounding thing IMO; all this money, and deflation is mounting.”
If much of the money is locked up in ‘all cash’ real estate investments that sit empty until future price gains happen, then I am missing the surprise over mounting deflation.
Dead money has no velocity.
“They’ve bought an expensive HOA, complete with a door-man with nothing to do. But watch the media ohh and ahh at this ridiculous spectacle.”
It’s the emperor’s new skybox.
If there is an upside to this episode, it’s the hope that some of the more destructive aspects of Keynesian theory may finally be laid to rest once society takes stock of the massive waste of resources and manpower that this new era of monetary madness precipitated.
“Every 10 minutes I had to chase people out of that dumpster, who were trying to grab soiled blankets, mismatched shoes, torn up garden hose, you name it. This was men and women. I thought to myself at one point, this is like a post-apocalyptic movie.”
Dumpster diving is just one step down below attending your neighbor’s garage sale and paying good money for worn out junk.
‘You know… morons’
They were morons. I’d say, as they stood there in the dumpster holding their prize, ‘I think those are dog bedding’s.” And the guy would say, “oh, it probably has dog sh&t and pee all over it huh,” even as you could plainly see the stuff on what he was holding up.
“And when will this be? That’s the real question. If a sucker is born every minute and we have an enabling government it might be a long time…”
you’re missing the point. There is no demand.
High end houses are bonds now. Even in my world they’re looked at as relatively equivalent. I’m living in Spain for the time being and moderate homes are still, sort of, moderately priced but the high end here is like anywhere else - silly expensive. But appreciation is nothing like in HKG or London so there’s a sense it is a bit safer.
I am tempted to park cash in RE here. But there’s so much risk - so illiquid, so complicated. I would live in the property so there’s that but rent here is so inexpensive - I need to run the numbers - just to convince myself it’s not worth it.
Bonds. So much easier but they’re no bargain either.
Bah.
Careful, lest you get sucked into the mania.
Dumb question of the day: What is the alternative?
My wife and I are just baffled by this market… We live in Denver, have a household income well over $100k and quite simply cannot afford anything in the Denver metro area. We have no debt aside from her small car payment, no kids, and pay about $1350 in rent for a house. We’ve resigned ourselves to be renters for the foreseeable future.
Meanwhile, we see so many people continue to pay $350k+ for houses that were $200k ten years ago (we live in the Denver “Highlands” area), have a single household earner (i.e. stay at home mom), two brand new SUVs, 2+ kids, etc. I just can’t make any sense of it!
“Meanwhile, we see so many people continue to pay $350k+ for houses that were $200k ten years ago.”
They are morons and you are prudent - I don’t see anything to feel bad about there.
I just can’t make any sense of it!
The only sense in it is….
Mo Credik!!!
Save yer cash and be a 100% down buyer when things tank.
Re: Crash. If savings rates are at 8%, will you want to put $300k cash into a home or earn $24k a yr in interest and live on the beach in Brazil?
I’ll take the interest any day over the upkeep costs of a depreciating liability called a “house”.
“on the beach in Brazil…”
Just don’t swim in the bay.
Once rates head up to 8%, a vanishingly small percent of households will have the assets available to capitalize on it, and only a fraction of those will be brave enough to do so.
Very similar situation in SLC as Denver, both areas doing relatively well as far as the overall economy is concerned, but prices have lost all touch with incomes. Denver is probably running 1.2-1.3x SLC prices, but even at our level we’re looking to relocate and settle some place we can afford.
Sad thing is, the lenders and UHS people would likely be in strong disagreement with you, with regard to your assertion that you can’t “afford” anything in the area. The lenders are the ones who are supposed to keep the lid on people’s proclivity to bite off more than they can chew, but not any more.
That’s a very good point! We’ve been approved to buy into the madness, and told it was affordable for us (like you said). But both my wife and I absolutely REFUSE to be house poor. With our jobs we have a decent amount of time off each month, and spend it doing stuff we enjoy rather than being worried about living week to week each paycheck. There’s no way I could live my life in such a financially stressful manner.
“I just can’t make any sense of it!”
Join the club!
ha, same situation only double your starter home price here in San Diego, this is ruining generations
‘Sales worth $10 million or more are on pace this year to double their number from the heights of the housing bubble. The number of homes bought for $2 million or more in recent months is the highest on record’
Central Bank liquidity. I hope with all my heart that it all goes to sh_t for them someday and that the masses rise up and simply take their properties away from them or better yet destroy them. The rich do not deserve their ill gotten gains - not by a long shot. Sorry to be so grim but I am quite fed up.