It Appears That The Prices Weren’t Able To Hold
It’s Friday desk clearing time for this blogger. “If you’re interested, even concerned, about the economic outlook for 2015, relax, recommends Sanjay Varshney, El Dorado Hills resident and heavily credentialed economist, academic and financial adviser. With the real estate market cooling off, construction has slowed, too. The Latrobe Road area in El Dorado Hills ‘is on fire right now, with so many new homes going up.’ Folsom is ‘landlocked.’ The city-annexed 3,500 acres south of Highway 50, he said, ‘I’m sure one day will be a reality, but currently we have a lot of planned housing projects already on the books.’”
“‘Right now, I don’t think you can buy land in many parts of Manhattan and Brooklyn at levels that would make economic sense for housing,’ said Jeremy Shell, TF Cornerstone’s head of finance and acquisitions. Mr. Shell said the firm’s goals for 2015 will be ‘disciplined.’ ‘We‘re taking a pass on the high-end condo market right now,’ he said. ‘Some of these super-luxury, over-financed condo projects are the poster child for a boom and bust.’”
“A big jump in listings brought more potential buyers out to northern Virginia’s housing market this summer and fall. The traffic, however, did not translate into a similar jump in sales, and homes are now sitting on the market far longer than they did just one year ago. The problem, ironically, was too few listings at the beginning of the year. ‘We only had a 1.64 month supply of homes in January 2014. This led to a lot of multiple contract situations which drove up prices, and by the time many spring sellers put their homes on the market it appears that the prices weren’t able to hold, which led to higher days on market and increased inventory,’ said Edward Berenbaum, a Realtor in Alexandria, Virginia.”
“The traditional seasonal slowdown in Toronto’s real estate market appears to have arrived a little early this year. Ricky Chadha, with Royal LePage Estate Realty, noticed that listings suddenly dropped off in mid-November. He thinks sellers are trying to time the market more than they did in the past. Some have decided it’s time to cash in and they want to make the most of it. ‘I just feel like people are being too strategic. Everyone’s an expert,’ he says. ‘More often than not, everyone’s second hobby is real estate.’”
“But Mr. Chadha says some of those sellers would be better off listing when no one else does. ‘If everyone’s flooding the market during those peak times, there’s the potential to backfire.’”
“China’s property developers, among the country’s most heavily leveraged companies, will get a negligible lift from the central bank’s first benchmark interest rate cut in two years. ‘From the demand side — the rate cut will not stimulate demand sufficiently for cities that face oversupply,’ said Fitch Ratings analyst Lim Su Aik. He added that lower interest costs would be of only slim benefit to even the most indebted builders. ‘From the borrowers’ perspective, interest expense accounts for only 5 percent of home selling price; the impact from a 40 bps cut will only cut interest expenses by about 6-7 percent, or around 0.3 percent of selling price.”
“It’s a point not lost on apartment hunters like Li, a 37-year-old finance professional who would like a second home in Beijing. ‘Compared with the huge amount for a housing downpayment, what’s the use of the moderate rate cut?’ she said.”
“The glut that characterised high-end property in the nation’s capital, Abuja has continued without any sign of abating. In the midst of this, prices of homes are falling and investors are cashing in on the low prices to purchase homes. Prospective home owners are now prowling housing estates and other sales points, closing deals at prices below market rates. Another reason why property prices are low now is because of the coming general elections. Many politicians are selling off their homes and lands to raise money for their campaigns, so a lot of properties from politicians have come into the market at below market rates, driving prices down. With a seeming glut in properties, even developers have been forced to reduce home prices.”
“There’s an increasing number of forced sales of rural properties on the market in Queensland. Property valuer Herron Todd White spokesman Tim Lane says the market peaked in 2008 and has been on the slide ever since. But Mr Lane says the banks have taken a responsible attitude to the situation. ‘Certainly, there is receivership, mortgage and possession type activity, but in my view the banks have actually managed this position very well. They know if they throw everything out to the market, that doesn’t do anybody any good. They are prepared to work with grazier to effect strategies to exit appropriately. But some are just not in that position, so there are a number of that type of sale.’”
“The Government is eyeing Australian moves against foreign property speculators amid fresh claims they are forcing Kiwi first-home buyers to the sidelines of Auckland’s overheated property market. Labour leader Andrew Little said Barfoot & Thompson’s data showed ‘a major problem’ in the Auckland housing market. Juwai.com, a Chinese real estate website which claims to be the biggest one-stop shop for Chinese seeking overseas properties, has 8500 New Zealand listings.”
“Mr Little said first-home buyers, especially in Auckland, were being outbid and out-priced by overseas buyers, ‘people who aren’t even living here but want property here.’ ‘The Government has to do something about it. The Australians have had a look at their programme of putting restrictions on overseas buyers, we should be doing the same thing.’”
“Property investors who leave homes empty just to make money from property price rises could be fined or even jailed under proposals made by a London council. The drastic action has been proposed as the north London borough revealed that 30% of 2,000 homes built in the last six years have nobody on the electoral register and, even when students and foreign tenants are discounted, close to a quarter of homes in five of the newest residential developments appear to be empty. Research consultancy Molior has found that in developments of more than 20 units in London, over 70% of new-build sales in the £1,000-£1,500 per square foot range were to investors, and over 50% in the £700 to £1,000 per square foot range. It said some are ‘held as permanently available hotel suites’ by the owners.”
“‘To people used to property as a speculative asset, this might seem harsh, but if you look at housing as something for people to live in there is no reason not to treat buy-to-leave punitively,’ said Seb Klier, Generation Rent’s policy and campaigns manager. ‘If we are really serious about helping first-time buyers we have to take punitive action against those who see housing as an investment asset only.’”
“A fall in the value of high end housing, particularly in hotspot areas such as Geneva and Zurich, combined with a slowdown of overall price increases across Switzerland could signal the end to a troubling property bubble in the country. The tip of the iceberg began to melt between August and September this year. The cost of buying the most expensive houses Swiss-wide declined nearly 5%, according to property monitoring firm Farhländer Partner. And even modestly priced houses fell in value in Geneva and Zurich. ‘This development is long overdue,’ Fahrländer’s Dominik Matter told swissinfo.ch. ‘Prices have reached such high levels in certain geographic areas and market segments that households simply could no longer afford afford them.’”
“A combination of rock bottom interest rates, rising immigration and the declining performance of other investment classes, such as bonds, saw average property prices escalate by more than a third across Switzerland over the last five years. In Geneva and Zurich the cost of buying a home shot up by as much as 70% in the same period. Whilst property prices are more sustainable in most parts of the country, observers fear a ripple effect across the board if a localised bubble were to burst.”
“Nearly all money is created by commercial banks in the act of lending. They also decide whom to lend it to, and for what purposes. Is this good for the economy? A growing movement is arguing for an alternative. According to Positive Money’s research, in the ten years leading up to the financial crisis, around half of the money created by commercial banks was going directly into mortgage lending - loans to enable people to buy houses or commercial property - and around a third into the financial market, in order to buy existing financial assets, not to make new investments in things like factories.”
“‘All that mortgage lending had the effect of pushing up house prices, and created a lot of instability in the market,’ says Ben Dyson, founder of the UK’s Positive Money, part of a growing international movement pushing for reform to the current monetary system. Mervyn King, who headed the Bank of England for ten years until 2013, has also called for reform of the monetary system, saying that ‘of all the many ways of organizing banking, the worst is the one we have today.’”
“‘What we’re saying is that commercial banks shouldn’t have the ability to create electronic money, the deposits in your account, because they have incentives to lend recklessly. The more they lend, the more interest they can charge. So they over-lend, especially in housing, and create bubbles - debt bubbles and housing price bubbles. We don’t need banks nearly as much as we think we do,’ added Dyson. ‘And if we take the power to create money away from them, we’ll need them even less, because we’ll have a source of money created by public central banks which will come into the economy without debt - without anybody having to borrow it.’”
‘Central banks are trying to solve a debt crisis by piling on more debt, creating a “point of low return” for investors, bond guru Bill Gross said in a letter to clients. The portfolio manager takes the Federal Reserve , Bank of Japan and European Central Bank to task for using monetary policy to make it easier for governments to run up debt, all in the hopes of stimulating anemic global growth.’
“In the U.S., as elsewhere, there has been little focus on public investment and infrastructure spending. It’s been all monetary policy, all of the time, with most of the positives flowing over to markets as opposed to the real economy. The debt currently being created is not promoting real growth and solving a debt crisis-it is being used by corporations to repurchase shares and accentuate the growing inequality between the very rich and the middle class.”
“How could they? How could policymakers have allowed so much debt to be created in the first place, and then failed to regulate their own system accordingly? How could they have thought that money printing and debt creation could create wealth instead of just more and more debt? How could fiscal authorities have stood by and attempted to balance budgets as opposed to borrowing cheaply and investing the proceeds in infrastructure and innovation? It has been a nursery rhyme experience for sure, but more than likely without a fairy tale ending.”
Yep - and when all this blows up it will make these little brush fires in Ferguson and other locales look like child’s play.
It doesn’t have to. It increasingly looks like a dead end for the money pumpers. In a way, you could cut the Gordian knot and do away with debt, or at least government debt. But the way the system is set up, somebody has to lose.
This debt based money arrangement is fighting unstoppable trends. I was reading about Tesla batteries this morning. How combined with solar power, it could make off-grid living much more do-able. There will be a day when we can 3-D print houses. No electric grid, cheap printable houses; how are you going to sustain ever higher house prices then?
I like what these guys in the last article are proposing. Wealth based money. Technology can do what it should - make the cost of living fall our entire lives. Houses get cheaper every year, not more expensive. Our earnings buy more every year, not less. But, you’ll say, how can we earn that money? That’s the challenge we should embrace and conquer, not resist with outdated central banks and their money-helicopters.
“No electric grid, cheap printable houses; how are you going to sustain ever higher house prices then?”
1. Govt-sponsored limits on buildable land.
2. Govt-guaranteed financing of mortgages for the limited amount of land made available.
There will be a day when we can 3-D print houses.
You mean components, right? Someone still has to put it all together. It would be cool to have houses that snap together like Lego blocks.
‘Good news for potential home buyers: You really don’t need much money to purchase a home.’
‘Most loan programs require little or no down payment. The seller can pay some or all of the closing costs. Plus, the inspection fees may be able to be billed at closing.’
‘VA home loans and USDA 100 percent Guaranteed Rural Housing Loans require no down payment. FHA requires 3.5 percent of the purchase price but those funds can be gifted. Also, 5 percent is the minimum down payment on conventional loans, and those funds can be gifted as well.’
‘The sellers of the home can provide closing cost help for the borrower. USDA and FHA allow 6 percent of the purchase price. VA is unlimited, and conventional is limited to 3 percent in most cases. The lender can also provide some lender credit toward closing costs.’
‘If you have been thinking you can’t buy a home because you don’t have a hefty down payment, the wait is over. It is definitely possible to purchase a home without much money in the bank.’
‘Check with a qualified licensed mortgage professional to find out how you can get started on your home-buying adventure.’
The VA loan program has much lower default rates than other programs. They understand how to qualify borrowers! I think the VA program is unsubsidized and fully self supporting since its inception.
Jingle_Fraud,
Give the fact that overall default rates are elevated 700% above long term trend, a 500% VA loan default rate is nothing to brag about.
And just a note. Until these massively inflated asking prices of resale housing fall back to long term trend, the default rate will continue to create additional excess empty housing inventory.
“…So, where would you get this ’saved money’?!?”
http://vimeo.com/50044167
No down payment loans by definition are fully subsidized. No lending institution that wasn’t 100% backstopped by the taxpayer would ever offer them. Of course you know that.
3% down has been the standard since 2008. That’s subprime by any definition.
To suggest “this isn’t going to end well” is looking in the rearview mirror. It’s already not ending well.
Dead wrong, the maximum guarantee limit is 25%, NOT 100% on VA guaranteed loans.
http://www.benefits.va.gov/HOMELOANS/documents/docs/2014_county_loan_limits.pdf
I used one to buy a house in a normal market in 1997 and it worked out OK, though I did have one offer rejected specifically because I was using a GI Bill/VA loan. When I tried to buy again in 2011 I didn’t even consider going VA since there was so much competition and as it happened I was unable to get an offer accepted (or even countered) with 20% down and a preapproved conventional loan since I was up against legions of 100% cash flippers and speculators.
Wait, what? I thought lending was supposed to be tight?
“Wait, what? I thought lending was supposed to be tight?”
Lending is not tight for housing, prole, because high housing prices are good for the economy, good for the children, good for America itself and good for spreading democracy and the American way far across the globe.
‘A condominium hotel unit at the Trump International Hotel Waikiki Beach Walk, where all 462 units sold out in one day eight years ago to the tune of $700 million, is going up for auction next month with a suggested opening bid of $2.5 million.’
‘The opening bid is $2 million less than the former asking price of $4.5 million for the 1,027-square-foot, one-bedroom unit on the 36th floor of the 38-story building. Bids are due on Dec. 17.’
‘The hotel-condominium tower, which was completed in 2009, was developed as a venture of The Trump Organization of New York, Los Angeles-based Irongate, Vancouver-based S& P Destination Properties and Tokyo-based Seven Signatures Corp., sold out in one day in November 2006 simultaneously in Honolulu and Tokyo over an eight-hour period. More than half of the buyers were from Japan, while others were from Hawaii, the U.S. Mainland, Canada, Mexico, Britain and China, the developers said at the time.’
‘New house price data released on Friday seemed to suggest that sanity was returning to the market – but there was little sign of that at one London development, where a studio flat in Battersea power station that sold for close to £1m in the spring is about to go back on the market with a price tag of up to £1.5m. And it has not even been built yet.’
‘Chris Innes-Ker, associate at John D Wood & Co, one of the largest estate agents in Battersea, said the new price was credible. “It’s an entirely separate market from what’s going on in the real world,” he said. “It seems to be defying all logic. It’s creating a market of its own.”
‘Tulip bulbs! Get your tulip bulbs here!! Its a can’t-miss, once-in-a-lifetime investment opportunity! Guaranteed to make you rich overnight! Get ‘em before they’re all gone! Its not like these things grow in the dirt or reproduce themselves or anything! Also running a special on magic beans! Grows all the way up to the sky where you’ll find a pot of gold!’
‘Coyotes prowl the fairways of what used to be the Lake Orlando Golf Club in Rosemont. At Rolling Hills in Longwood, weeds choke the once-manicured greens. And in Palm Beach County, residents are trying to keep homes from being built on the long-closed Mizner Trail Golf Course.’
‘From the Panhandle to the Keys, golf-course communities have hit a rough patch across Florida. Many homeowners find the courses that they paid a premium to live on are shutting down, leaving them to worry about what comes next.’
‘The tailspin is a stark contrast from a decade ago, when the number of courses was on the rise, the economy was strong and new players were coming to the game.’
“A lot of the golf courses across the country, but especially in the Orlando market, that were developed over the last 10 to 15 years were done so as amenities for a housing development,” Stine said. “They didn’t have any regard for whether there were enough players to support that golf course or to support another golf course in the Greater Orlando area. They’re just in the business of selling houses.”
If I recall correctly a golf course is considered an impermanent, interim use in most zoning districts. Sadly most home buyers in these areas don’t understand this.
Ahhhhh… The luxurious lifestyle of Golf Course Living- especially here in sunny Florida where we play year-round! You too could own a grossly overpriced, hastily and shoddily built Garage Mahal on the 13th fairway. Where roving gangs of half-inebriated strangers prowl your backyard looking for lost balls or a convenient place to pee. You also get the benefit of constantly inspecting for and repairing your damaged windows, walls and screened pool enclosures. If you are REALLY lucky, then some duffer will periodically shank a ball into your exterior AC unit- which is always a cheap fix. All of these things add to the ambiance of Golf Course Living as well as lower your insurance rates. No, really.
I always thought golf course living was bait for Midwestern retirees who were sick of winter. And we can be glutted with them just like we can be glutted with anything else. At one point during the bubble I asked “how many golf courses does this state need?”
Sometimes developments here are named after the plant or animal whose habitat was destroyed to build them, like the subdivisions in Lee or Collier County with “panther” in the name. That’s hilarious about the coyotes; these courses have altered the ecosystem.
FWIW, the golf courses in my little burg are open year round. Sure, they’re closed on snow days, but the snow usually melts after a few days. I’m sure Orlando is far balmier than here, but you can play 12 months a year here.
“‘Right now, I don’t think you can buy land in many parts of Manhattan and Brooklyn at levels that would make economic sense for housing,’ said Jeremy Shell, TF Cornerstone’s head of finance and acquisitions. Mr. Shell said the firm’s goals for 2015 will be ‘disciplined.’ ‘We‘re taking a pass on the high-end condo market right now,’ he said. ‘Some of these super-luxury, over-financed condo projects are the poster child for a boom and bust.’”
With prices falling in all 5 boroughs and in all 4 directions, the entire northeast is busting in a boom/bust cycle
Manhattan Sale Prices Plunge 24% YoY
http://www.zillow.com/new-york-ny-10019/home-values/
“The problem, ironically, was too few listings at the beginning of the year. ‘We only had a 1.64 month supply of homes in January 2014. This led to a lot of multiple contract situations which drove up prices, and by the time many spring sellers put their homes on the market it appears that the prices weren’t able to hold, which led to higher days on market and increased inventory,’ said Edward Berenbaum, a Realtor in Alexandria, Virginia.”
….. and …. drum roll please….. Falling prices.
Alexandria, VA Sale Prices Crater 14% YoY
http://www.zillow.com/alexandria-va-22304/home-values/
This would also explain the high number of For Sale signs that I saw in the countryside estate areas last week. I guess January 2014 was the tail end of the run-up phase in the 2013 investor-fueled bubblet. And realtors stupidly think that this year will be like last year.
I wonder if there isn’t a demographic element to this. These high-maintenance estates are probably occupied by successful Boomers with horsey kids. I expect serious downsizing after the kids graduate college.
Apparently they see falling housing prices to dramatically lower levels like we do.
‘This led to a lot of multiple contract situations which drove up prices, and by the time many spring sellers put their homes on the market it appears that the prices weren’t able to hold’
Gosh, I hope they didn’t pay too much.
There never was a shortage. And in a few months they’ll be crying about a glut, and “why did you loan me so much money?”
Notice that all these global bubbles are collapsing at roughly the same time.
‘More Americans are falling behind on their car loan payments. But they’re still doing a much better job of keeping up with their car loans than with their mortgages or credit card payments.’
‘The rise in late payments is partly due to the fact that car sales are up alot this year. Car prices are up too, so the average size of a car loan is at a record high according to Experian.’
‘Another factor is that more used-car buyers need to borrow money to make their purchase, according to Experian. And those buyers are more likely to fall behind on their payments. Lenders are also more willing to make loans to buyers with poor credit. About 36% of new-car loans are now made to subprime borrowers, according to TransUnion, up from 31% in 2009.’
‘But even though more car buyers are in default, only about 1% of all auto loans are 60 days or more past due. Meanwhile, about 3.2% of home loans were 60 days past due in the third quarter, according to the Mortgage Bankers Association, excluding foreclosures.’
Wow, no attempt to argue with the obvious black and white data. We are now past denial, moving in to what, Anger?
I was never in denial that the bubblet prices would fall. I have been saying that they would.
In fact, when I bought, my prediction was that there wouldn’t be a bubblet. I predicted that prices would bounce along the bottom for about 5 years. I wasn’t anticipating that investors would drive prices into a bubblet. I still anticipate that prices will fall to 2011-level adjusted for inflation. I think I will still be slightly ahead of renting.
“I still anticipate that prices will fall to 2011-level adjusted for inflation.”
Why 2011? Because magic 2011 is when you became a loan owner? Seriously?
Done your paying 2 rent as it is. Falling prices back to long term trend is just shellac on your coffin.
Or is this more of your non- math math again?
I wonder if there isn’t a demographic element to this ??
I believe there is and it does not just relate to some country-side estate either….Just had lunch with a friend a few days ago…He has a home in Palo Alto & another that the wife inherited in Hawaii…The Hawaii house is on the water but out of the nearest town by about 30 minute drive…Woke up with a swollen leg…Drove himself into town to hospital and diagnosed with a blood clot…
He is now questioning if being that far from medical assistance and care makes sense…Same thing happened to another friend with a cabin in the Sierra’s…Heart attack…Had to have helicopter medi-vac to hospital in Modesto…And then to San Jose…Doc told him he lost 1/3 of heart mussel due to delay getting to hospital…He sold the house in the Sierra’s…
I guess, the long winded point I am trying to make is there is a very large demographic that has no interest in buying or living, even part time, in rural or mountain area’s…
That’s a small snapshot of the larger demographic picture.
With 70 million boomers expiring leaving 35 million excess empty houses and population growth at all time historic lows per the 2010 census, the demographics are key in understanding what’s going on right now and into 2030, give or take a few years.
But the prices in those “exclusive” areas can only be afforded by older, affluent people. Awww, shucks, looks like those $750k cabins in the Sierras might have to come down in price.
I agree with you and HA.
Large hospital/specialist medical complexes are located in the outer burbs because such complexes need lots of cheap land. I guess the nearby outer burbs burbs will probably survive. I can envision retirees living on the nicer blocks, insterspersed with older small condos/apt and rowhomes for the medical grunt staff.
And I agree that high-maintenance semi-rural estates, vacay cabins, and rural areas in general are shot to hell.
They’ve got one foot in the grave and the other on a banana peel Donk.
‘Hotel investments have showed a remarkable resilience in China this year, notwithstanding the sluggishness in the commercial property market and the ongoing government crackdown on corruption, a report said. Hotel investments in China during the first six months of the year surged to about $1 billion, an 83 percent growth over the corresponding period in 2013.’
‘At the same time, many of the property owners are looking to exit from their old assets in China as the market has more or less reached a low point in the investment cycle, after some difficult years, the report said.’
‘About 200 hotels are scouting for new owners and some of them are also offering some offline properties for sale, said data from Hotel Property, a Shanghai-based online hotel property agency. The total volume of the assets on sale stood at about 80 billion yuan ($13.01 billion), said a senior director of the website’s big investor department surnamed Feng.’
‘China’s hotel industry, especially high-end hotels, have been facing tough times due to the ongoing government crackdown on corruption and several owners are believed to be scrambling to exit from the industry altogether, sources said. “High-end hotels which are largely dependent on government business have been the worst hit,” Feng said, adding that in some cases the owners had to sell the hotels as business is virtually non-existent.’
“Some of the developers are trying to cope with the difficult situation by placing their hotel property on the market,” said Li Meng, senior vice-president of Jones Lang LaSalle’s hotels and hospitality group.’
‘China’s commercial realty sector had developed rapidly in the past few years, leading to a proliferation of high-end hotels, Li said. “There is a bubble in the market and it is normal for some property owners to seek exit options,” she said.’
‘Black Knight found that there were approximately 1.3 million underwater Fannie Mae- and Freddie Mac-backed mortgages represented an aggregate $39 billion in negative equity as of October, with 365,000 of these loans in delinquency. Black Knight acknowledged the rekindled political debate on principal reduction, especially in regard to the government-sponsored enterprises, and warned that the cost of such an endeavor will be more than a little expensive.’
“With an aggregate 40 percent delinquency rate among borrowers with current combined loan-to-value ratios above 100 percent—a number that rises to over three out of every four for severely underwater borrowers (those with CLTVs of 150 percent or higher)—the scope and cost of such write-downs would be immense,” said Barnes. “Some $89 billion in principal reductions would be required to right-side these borrowers. For the 365,000 delinquent underwater loans backed by Fannie Mae and Freddie Mac alone, nearly $18 billion in write-downs would be called for.”
Here is the link to the report on which the article was based, if people care to peruse:
http://www.bkfs.com/CorporateInformation/NewsRoom/MortgageMonitor/201410/MortgageMonitorOctober2014-Report.pdf
The applicable underwater data is on page 12.
‘Sunny With A Chance of Catastrophe!’
‘That eye-catching title was the subject of a presentation by highly regarded business leader and motivational speaker Stefan Swanepoelat our recent National Association of Realtors® conference in New Orleans. While Stefan’s message dealt more with technology trends that will soon shape our lives, the title could just as easily have been applied to several of the presentations we had, including that of our Chief Economist, Dr. Lawrence Yun, political prognostications by Mark Halperin and John Heileman and many of our other legislative discussion.’
‘Of course the recent election was much on everybody’s minds and what that means to the nation and to the housing market. Once again the National Association of Realtors® was the largest direct contributing PAC in the country with over $20 million disbursed, and we preserved our bi-partisan status by investing 51% of that with Republican candidates and 49% with Democrats. At the federal level we enjoyed an 87% success rate with our candidates while our local association scored in 17 of 18 races we participated in.’
‘Now let’s talk housing. On the October charts, sales continue at an unspectacular pace while prices have softened even more. Both sales and median price dropped from the previous month for the region as well as the state. Our median price is just 1% ahead of 2013 - Temecula actually dropped 6% from last October. Depending on who you believe, there’s more bleh news ahead. There’s nothing to indicate a surge before year-end and catapult us out of these megrims. If there’s an upside to this it’s that there’s no longer any discussion of another housing bubble.’
Look at the grift being dispensed. In a bipartisan manner, not that I’m surprised.
Excerpts from Stefan’s speech: ” . . . and if you don’t update your websites so those techie millenials can bid up a house from their smartphone, then you’ll end up living IN A VAN DOWN BY THE RIVER!!!”
If you’re reading this and just bought and financed this year or last you gotta be going…”crap!”
‘Building permit values plummeted to $43.8 million in November, down nearly 60 per cent from $103.8 million during the same period last year, due to steep declines in residential, hotel and institutional construction activity, according to the City of Regina’s monthly building permit report.’
‘The biggest decline was in single-family dwellings, which fell by nearly two-thirds to $7.2 million last month from $21.7 million in November last year. Similarly, no permits were issued for apartments last month. Non-residential construction saw a 56 per cent drop.’
‘SINGAPORE — The Government has scaled back sharply the supply of land for the development of private homes and executive condominiums (ECs) in a move that property analysts say is timely following the slowdown in the housing market.’
‘The cut comes after successive rounds of property cooling measures and loan curbs led to private home prices falling for the fourth straight quarter in the three months ended September, with sales remaining in the doldrums. And even while the measures have curbed buying, more homes are being completed to add to a rising wave of supply.’
‘Analyst Wong Xian Yang from OrangeTee said: “The tapering of land sales signals the Government’s awareness of the huge supply in the pipeline. This should be positive for property prices and will help mitigate the current decline.”
‘American families are grappling with stagnant wage growth, as the costs of health care, education, and housing continue to climb. But for many of America’s younger workers, “stagnant” wages shouldn’t sound so bad. In fact, they might sound like a massive raise.
Since the Great Recession struck in 2007, the median wage for people between the ages of 25 and 34, adjusted for inflation, has fallen in every major industry except for health care.’
‘In retail, wholesale, leisure, and hospitality—which together employ more than one quarter of this age group—real wages have fallen more than 10 percent since 2007.’
‘The picture isn’t much better for the youngest group of workers between 18 and 24. Besides health care, the industries employing the vast majority of part-time students and recent graduates are also watching wages fall behind inflation. (40 percent of this group is enrolled in college.)’
‘The familiar bash brothers of globalization and technology (particularly information technology) have conspired to gut middle-class jobs by sending work abroad or replacing it with automation and software.’
‘Once you account for falling wages among young workers—if you must: “the Millennials”—many mysteries of the economic behavior of young people cease to be mysterious, such as this generation’s aversion to home-buying, auto loans, and savings. Indeed, the savings rate for Americans under 35, having briefly breached after the Great Recession, dove back underwater and now swims at negative-1.8 percent.’
‘It’s easier to see why young Americans aren’t saving any more than we used to: Their wages are falling behind the cost of basic goods and many are going into debt to pay for a college degree.’
‘The evaporation of real wages for young Americans is a real mystery because it’s coinciding with what is otherwise a real recovery. The economy has been growing steadily since 2009. We’re adding 200,000 jobs a month in 2014. That’s what a recovery looks like. And yet, overall U.S. wages are barely growing, and wages for young people are growing 60 percent more slowly than overall U.S. wages. How is a generation supposed to build a future on that?’
And backstopping wages with cheap credit works to fill the gap between wages and grossly inflated prices…… temporarily.
I’ve seen the quesion asked here from time to time but it’s worth asking again.
“Do you really believe wages are going to triple to meet grossly inflated prices?
The answer of course is a resounding NO. Grossly inflated prices will continue to fall to meet wages. And remember…. Falling prices of all items is your wallets best friend and positively bullish and good for the economy.
And now, CraterRage.
How is a generation supposed to build a future on that ??
They can’t so they don’t…Cause & effect….Plummeting household formation and birth-rates…
Talk about putting lipstick on a pig.
None of this is a mystery unless common sense has been completely supplanted by ideology.
The future belongs to Lucky Ducky
And the future is NOW
‘As economies grow, so should wealth and the tax base. Not in some countries. According to Transparency International’s annual Corruption Perceptions Index, Turkey has suffered the year’s biggest fall in rank, and low rankings for the major emerging economies known collectively as the BRICs – Brazil, Russia, India and China. Turkey, which dropped five points to a CPI score of 45, was the biggest loser, while China was down four points to 36, the same decline as Rwanda, Malawi and Angola.
So what is the logic behind it? In emerging economies, the middle class that cherishes growth does not see a problem with bribery, irregularities, kickbacks and overall corruption. As most novelists of European literature wrote about in the early years of the 20th century, the poverty-stricken masses would probably turn a blind eye to bigger crimes if they were given just enough social aid so as to hope that “things will be better.”
‘But according to Transparency International’s description, corruption by governments, police, court systems, political parties and bureaucracies undermine development and deepen poverty.’
‘Transparency International referred to the crackdown on free speech and the press as a means to cover up corruption issues. The sad issue is there is really no demand for it. Turkish society has chosen to be numb and dumb about corruption issues, fearing that otherwise it may somehow hit his/her business. Erich Fromm wrote that Nazism resurrected the lower middle class psychologically while participating in the destruction of its old socioeconomic position. In some countries, corruption has become the engine of growth for the lower middle classes.’
‘According to a recent survey by the Turkish Business and Industry Association (TÜSİAD), corruption increases the cost of doing business 10 percent worldwide. TÜSİAD Chairman Haluk Dinçer also stressed last week the trend of increasing in corruption in Turkey. However, his concerns about damaging confidence and justice are unfortunately limited to a handful of business pioneers, because there seems to be little payback in worrying about the issue. Previously in the 1990s, if a government or business was labeled corrupt inside or outside of Turkey, there was a price to pay - be it in the form of interest rates or low ratings in financial circles. Now, there is no accountability, no cost and no penalty for being corrupt. So all big business leaders say, “Hell, am I the only stupid guy in the room not filling his bucket while it’s raining?”
‘The point they are missing is that this will not and cannot last forever.’
‘So when TOKİ, the government’s Housing and Construction Administration, prefers to hide the cost of the new presidential palace of Recep Tayyip Erdoğan, on the grounds that it may hurt the economy, one should be afraid. Indeed, be very afraid.’
‘Turkey President Recep Tayyip Erdogan has of late been ridiculed in the international press for arguing that Muslims discovered America and that women and men should never be seen as equal. But his claims may have been less a declaration of his beliefs than an attempt to divert attention from the criticism over his new residence: a lavish, 1,000-room presidential palace four times the size of Versailles.’
‘Perhaps Ankara should run with this position and announce that Ak Saray is part of a government initiative to create jobs, spur economic growth and burnish the country’s tarnished image through massively oversized construction projects. Turkey, after all, already has more than half a trillion dollars’ worth of planned, ongoing or recently completed building projects across the country.’
‘The two dozen luxury towers of Maslak 1453, an $8.4 billion residential project along the edge of an Istanbul forest, will make Ak Saray look like a gecekondu (shanty). A few miles away, the $2.5 billion Zorlu Center offers pricey residences, a five-star hotel, a high-end mall and a massive performing arts center.’
‘A rail tunnel under the Bosporus, opened last year, cost about $5 billion. A second, for vehicular traffic, will cost another $2 billion. Istanbul’s third airport, its third bridge across the Bosporus and its new financial center, all under construction, are expected to cost $14 billion, $3.5 billion and $2.6 billion, respectively.’
‘A proposed canal cutting from the Marmara Sea to the Black Sea on Istanbul’s European side could cost as much as $30 billion. Two planned nuclear plants will total $42 billion, and a $3 billion dam and hydroelectric plant and a $3.5 billion irrigation project are under construction in the country’s southeast.’
‘The list goes on, including a hilltop mosque fit for a sultan on Istanbul’s Asian side that may rival Suleimaniye, Turkey’s largest mosque, on completion in 2016. Neo-Ottomans go big, officials from Erdogan’s Justice and Development Party (AKP) could argue, or they go home. “The new Turkey needs to manifest itself in certain ways,” Erdogan said in October.’
‘Erdogan could remind Turks that he has to live somewhere and that he is the country’s leader. And yes, he also needs the $135-million upgrade of his two Ottoman-era mansions in Istanbul and his Mediterranean getaway, as well as the $185 million retrofit of an Airbus for personal use.’
‘Yet Turkish voters have shown time and again that abuses of power bother them only when they coincide with economic malaise. The country’s recent economic boom was in part fueled by construction. With growth slowed, the government could say it needs to invest more heavily in the sector, especially if it hopes to achieve its dream of becoming one the world’s top economies by the centennial of the republic in 2023.’
‘Sure, a recent International Monetary Fund paper found that when construction represents 9 percent or more of GDP, as is nearly the case in today’s Turkey, it can lead to economic trouble. And OK, in early 2014 housing sales in Turkey dropped 10 percent from the year before, even as building permits were issued for nearly 90 percent more construction, prompting many analysts to warn of a housing bubble.’
This guy needs a beheading in the worst possible way.
‘If you thought the global financial crisis had killed off Australians’ penchant for taking out big mortgages, think again. Household indebtedness is back near record highs, after only a brief slowdown between 2008 and 2012.’
‘The ratio of household debt to income is 151 per cent, the highest since March 2008 and just below its all-time peak of 153 per cent, latest figures from the Reserve Bank show. As the graph shows, this measure has tripled since the early 1990s.’
‘So it’s hardly surprising that investors overseas often worry about this high debt load, and how borrowers would cope if they were hit by an economic shock or a sharp rise in interest rates. The Reserve Bank has also been giving borrowers some not-so-subtle hints that it does not want to see borrowers take on too much more debt, most of which is used for buying houses.’
‘In NSW and Victoria, it said the share of household income needed to pay the interest on an average loan over the next 10 years was already near “historical highs”. In other words, average households in the two biggest states are already directing plenty of their budgets towards paying interest on their loans. As a result, many economists reckon average household debt compared with income is probably close to its limit.’
‘The eagerly awaited report on foreign investment in residential real estate was finally released last week. The Chair’s forward starts with a predictable warm and fuzzy moment: “Buying into the Australian Dream doesn’t come cheap.”
‘Only to proceed to the most amazing faux pas: “There is no simple explanation for the decline in housing affordability – although lack of land supply (a government responsibility), underdevelopment (a government responsibility), state planning laws and regulations (a government responsibility), local council red tape (a government responsibility) and stamp duty and tax arrangements (a government responsibility) likely all play a part.”
‘What a fascinating admission that surely warrants another inquiry into these frank admissions.’
“According to Foreign Investment Review Board (FIRB) statistics, in the first nine months of this financial year, FIRB approved foreign investment into residential property of around $24.8 billion, 44% higher than the $17.2 billion approved during all of 2012/13.”
‘Then the clanger: “First, there is no accurate or timely data that tracks foreign investment in residential real estate. No-one really knows how much foreign investment there is in residential real estate, nor where the investment comes from.”
‘That being the case then how can the House Economics Committee find that foreign investment is not causing distortions in the Australian housing sector – when by their own admission they concede they have no idea how much real estate has been sold to foreign buyers?’
‘Then of course: “During the course of the inquiry, it came to light that no court action has been taken by FIRB since 2006. During the entire Rudd-Gillard-Rudd government, not one divestment order was issued, which means that not one government sale of illegally acquired property was made. This compares with 17 divestment orders between 2003 to 2007 when foreign investment in residential real estate was at much lower levels.”
‘They quite conveniently failed to mention that for some strange reason the Rudd government abolished FIRB approvals to foreign investment during the course of the global financial crisis. At the time it was most unclear as to what was exactly happening as decisions based on FIRB appeared at best chaotic. How can you then prosecute when the Rudd government made this totally legal?’
‘Of course the bull in the china shop (no pun intended) is those many loopholes that exist to overseas buyers in that it is very easy for a family member who resides overseas to simply transfer monies into an Australian bank account. The family member here goes out and buys a property in their name and when the overseas family member gains Australian residency they simply pay the stamp duty to transfer the property into their own name.’
‘Of course it is just a mere coincidence that the Chinese government requested a bipartisan arrangement with the Australian government to process the identities of all Chinese buyers who purchase Australian real estate.’
‘Then of course the recently announced Free Trade Agreement with China allows any Chinese national full access to acquire any commercial or agricultural property up to $1 billion.’
Any if you guys go here? This is a great short video explanation for lay people to understand what is wrong with our economy right now. There is also a petition to sign. I shared it on FB for my clueless friends.
http://www.positivemoney.org
“… to understand what is wrong with our economy right now.”
Hmmmmm … banks loan money that is not theirs to lots and lots of people and collect from these people lots and lots of interest for doing so.
So … what’s the problem?
“In the ten years leading up to the financial crisis, around half of the money created by commercial banks was going directly into mortgage lending - loans to enable people to buy houses or commercial property - and around a third into the financial market, in order to buy existing financial assets, not to make new investments in things like factories.”
The point is that where once people borrowed for real investments that created a stream of income to pay back the debt, now people are borrowing for consumption. Repayment is backed by no more than a promise to be poorer tomorrow in exchange for being richer now.
And why? To cover up inequality, so businesses can pay workers less and then turn around and sell them more. Otherwise, the inequality we’ve seen — and the trade deficits we’ve seen — would not be possible.
http://larrylittlefield.wordpress.com/2014/03/09/debt-and-inequality-go-together-rising-debt-is-the-cause-of-rising-inequality/
If total debt in the economy doesn’t rise, you get stagnation. And the only solution the economic elite has to this express train to catastrophe is hair of the dog.
‘There is no such thing as a scarce demand. Most individuals have unlimited desires for goods and services. For instance, most individuals would prefer to live in nice houses rather than in small apartments.’
‘Most people would like to have luxury cars and be able to dine in good quality restaurants. What prevents them in achieving these various desires is the scarcity of means.’
‘In fact, as things stand, most individuals have plenty of desires, i.e., goals, but not enough means. Unfortunately means cannot be generated by boosting demand. This will only increase goals but not means.’
‘Contrary to the popular way of thinking we can conclude that demand doesn’t create supply but the other way around. The current economic difficulties are the outcome of past and present reckless monetary and fiscal policies of central banks and governments.’
‘It must be realized that neither central banks nor governments are wealth generating entities. All that they can set in motion is a process of real wealth redistribution by diverting real wealth from wealth generators toward non-wealth generating activities.’
‘As long as the pool of real wealth is expanding the central bank and the government can get away with the myth that their policies can grow the economy. Once however, the pool of wealth becomes stagnant or starts shrinking the illusion of the central bank and government policies are shattered.’
“Most people would like to have luxury cars and be able to dine in good quality restaurants. What prevents them in achieving these various desires is the scarcity of means.”
“… scarcity of means.”
You rang?
I know a way of making this ugly “scarcity of means” thingy go away - or at least get POSTPONED a bit (but now is not the time to discuss such an unpleasant thought that just might be related to such an ugly word such as “postpone”).
Visit your local bank branch and ask for the Dotted Line Special and all of your current - CURRENT - scarcity of means problems will immediately vanish just as quickly as you can say the word “poof”.
And when you can’t service the debt load anymore, call Mr. Banker’s cousin, Mr. Lawyer. He has a portfolio of bankruptcy filing options to suit your needs.
Nice post…Thanks for the link…
It’s just a matter of putting things together I learned on the Housing Bubble Blog. But seldom see written about elsewhere.
“relax, recommends Sanjay Varshney, El Dorado Hills resident and heavily credentialed economist, academic and financial adviser.”
Well, there you have it, from a ‘heavily credentialed’ economist. What, me worry?
“financial advisor”
LOL
Connecticut Sale Prices Plunge 4% YoY Statewide; Down 5% MoM and 10% QoQ
http://www.zillow.com/ct/home-values/
Next Up; State of California
http://finance.yahoo.com/news/why-elon-musks-batteries-scare-050001220.html
Got Sun ?
Aren’t plunging oil prices grand? Too bad housing can’t seem to be able to follow suit.
Futures Movers
Oil falls to 5-year low, hit by dollar, Saudi price cut
Published: Dec 5, 2014 3:24 p.m. ET
Analyst sees U.S. benchmark around $55 a barrel in January
Shutterstock/anekoho
Saudi Arabia kicks off oil-price cuts. Others to follow?
By Victor Reklaitis & Eric Yep
NEW YORK (MarketWatch) — Crude-oil prices fell hard again Friday, with the U.S. benchmark settling at its lowest level in more than five years.
Oil briefly erased some losses after a stronger-than-expected U.S. jobs report, but then it slumped to trade at its lowest level since mid-2009, weighed down in part by a rallying dollar (DXY, +0.80%). A stronger buck often hurts commodities that trade in dollars, since that makes them more expensive for holders of other currencies.
“The jobs report was great, but along with that came a further strengthening of the dollar, and the oil market has generally been prioritizing the dollar strength over economic strength,” said Jim Ritterbusch, president of oil-trading advisory firm Ritterbusch & Associates.
…
“Analyst sees”
There is an oxymoron. They don’t see that demand stopped its relentless climb and production hasn’t. They cannot couple global building mania with energy demand. They cannot couple debt exhaustion with cracks in the credit pyramid. If they could, they would ask where has the building stopped and where is the credit Ponzi collapsing.
Spot on reality right there.