A Bubble Means Price Increases For Nothing
It’s Friday desk clearing time for this blogger. “Last week, Lawrence Yun, chief economist for the National Association of Realtors, made an appearance before real estate professionals gathered for a meeting of the Greater Tampa Association of Realtors. He offered plenty of food for thought about the housing market’s condition. ‘The bottom line is that we have encountered some degree of recovery. I think we will continue the recovery over the next two to three years, and then subsequently, the recovery may well change into expansion,’ said Yun. ‘Now, you are just trying to get back to the prior principal in terms of prices. It may take an additional two to three years to get to where it had been in 2005-2006.’”
“Are you in the market to buy a new home? That’s a question many people would have laughed at just a few years ago. But more people are emerging from the housing purgatory created by the Great Recession. A recent report released by the University of Central Florida shows the median home price for a house in Florida peaked in 2006 at around $258,000. The current median home price in the state is $177,000. ‘You don’t need perfect credit,’ said Matthew Wilson, president of the Flagler County Association of Realtors. ‘If there’s a little bit of a hiccup in your credit, the lenders are looking over, you know, looking past some of that.’”
“Lake County’s housing markets ended the year with mixed results as the volume of home sales continue to slow, according to the Lake County Multiple Listing Service. The median price of a Lake County home decreased 18.72 percent from November’s median price of $187,000 to $152,000 in December and was up 0.33 percent from $151,500 recorded in December 2013. Closed escrow sales of homes in Lake County totaled a 53 units in December, according to the MLS. Sales in December were down 3.64 percent from 55 in November and down 31.17 percent from 77 in December 2013. This is the slowest December in more than four years.”
“According to California Association of Realtor’s newest housing market indicator measuring sales-to-list price ratio, multiple bid offers for properties has waned, and properties are again generally selling below the list price. ‘2014 saw a return to a near normal housing market, with sales moving at a moderate pace and home price appreciation growing at more sustainable levels,’ said C.A.R. Chief Economist Leslie Appleton-Young. ‘Home prices have stabilized over the past year, which is positive news for buyers who have been putting off their home search until prices leveled off.’”
“Sharply declining oil prices in the past few months are taking a toll on home building in West Texas, the chairman of the nation’s largest home builder said. Donald R. Horton, who founded D.R. Horton in 1991, said banks in Midland-Odessa have ‘backed off’ the small home-building companies there. But in other Texas cities where the economy also relies heavily on the oil industry, he said, the impact hasn’t been as great. Horton said his company and one other firm are now the only ones building homes in Midland-Odessa. ‘Has the number of buyers slowed down there? Yes. But the builders have slowed way down,’ he said. ‘I can tell you, so far in Houston, we haven’t seen any issues.’”
“Low oil prices are having an effect on the economy in the province and the drop below 50 bucks a barrel could also be having an effect on Calgary’s condo market. Compared to the same time last year, sales are down by a third, the number of units listed has nearly doubled and the average price is down almost nine percent. Anna Husted, says for her it’s the right time to buy. ‘I’m feeling really excited about being a first time home buyer and getting my first condo so it’s just kind of coincidence that I’ve been buying at this time with the falling oil prices and the rise in listings, I guess, so it’s a good thing for me, because there’s lots of places on the market and prices are down,’ said Husted.”
“Gilson Porto began his career as a real estate agent seven years ago when Brazil’s property market was booming due to increasing wages and easier credit. But starting in 2013, business began to slow along with the country’s economy. ‘A few years ago people would come into this office and ready to buy. Now they just come to ask prices, to look around. Those willing to lower their prices are getting to sell their property, but those who are not flexible are really not doing business,’ Porto said.”
“When real estate prices were rising steeply, there were fears of a bubble in the making. But analysts said this recent gradual devaluation suggested that is not the case. The market was heated because for the first time many Brazilians had the means to buy property, experts said. ‘We don’t have a bubble. A bubble means a lot of increases in prices for nothing. You had real reasons for the expansion of the prices in Brazil. After this, we have to reduce, to put the prices in their correct level as a matter of fact,’ finance professor Fabio Gallo said.”
“Precisely the same factors that plunged Ireland into its housing crisis last decade are now in play in New Zealand and could spark a big correction, says a leading Auckland fund manager. Milford Asset Management executive director Brian Gaynor said house prices might come down ‘10, 15, 20 or even 25 per cent’ and he cited the former Celtic Tiger as a warning. ‘The first thing is the role of the media,’ he said. ‘House prices are one of the sensations. The media played a huge role in Ireland in record prices - the best suburbs to buy, highlighting people who had bought and three months later made huge gains of 20 or 25 per cent or more. It’s a mirror image of the same thing here. It has a huge influence because we do have this massive herd instinct.’”
“The head of Europe’s bailout fund, Klaus Regling, said cheap money and the country’s lust for property allowed a ‘blind spot’ to develop into a financial meltdown. Mr Regling said these factors were ‘ominous’ for a country that never experienced a property crash. The German economist, who carried out an investigation into the Irish financial crisis, said it was ’striking’ how many people had invested in property. ‘Unfortunately, it’s hard not to overstate the impact of this cultural attitude,’ he said. ‘Property acquisition, as a topic, was almost a national obsession, though not something we could easily quantify in hard data.’”
“He added: ‘The buyers all presumed the price of property could only go up … People bought apartments for their children who were still in school because they thought once they got out of school, university and start a job they would not be able to afford a house.’”
“Trinity College Professor Philip Lane told the inquiry the construction boom ‘obscured the underlying deterioration in fundamentals’ needed to properly run a banking system. Prof Lane said recessions in other countries prior to the worldwide credit crunch had been relatively brief. He said this led to a situation where bankers misperceived the collective risk. Prof Lane said that when bankers are making the same decisions ‘you get a systemic problem.’”
“William White, former chief economist to the Bank for International Settlements - the bank of central banks - and currently an advisor to German Chancellor Angela Merkel, said the global elastic has been stretched even further than it was in 2008 on the eve of the Great Recession. The excesses have reached almost every corner of the globe. ‘We are holding a tiger by the tail,’ he said. ‘Sovereign bond yields haven’t been so low since the ‘Black Plague’: how much more bang can you get for your buck?’ he told The Telegraph before the World Economic Forum in Davos. ‘QE is not going to help at all.’”
“Under his guidance, the BIS annual reports over the three years before the Lehman crisis were a rising crescendo of alarm calls at a time when other global watchdogs were asleep. His legendary report in June 2008 openly discussed whether the world was on the cusp of events that might prove as dangerous and intractable as the Great Depression, as it indeed it was. The authorities kept having to push rates lower with the trough of each cycle, building up ever greater imbalances, in an ineluctable descent to the ‘zero bound,’ where monetary levers stop working properly.”
“He deplores the rush to QE as an ‘unthinking fashion.’ Those who argue that the US and the UK are growing faster than Europe because they carried out QE early are confusing ‘correlation with causality.’ ‘The Anglo-Saxon pioneers have yet to pay the price. There are serious side-effects building up and we don’t know what will happen when they try to reverse what they have done.’ The painful irony is that central banks may have brought about exactly what they most feared by trying to keep growth buoyant at all costs, he argues, and not allowing productivity gains to drive down prices gently as occurred in episodes of the 19th century. ‘They have created so much debt that they may have turned a good deflation into a bad deflation after all.’”
“Home prices have stabilized over the past year, which is positive news for buyers who have been putting off their home search until prices leveled off.”
Q: Should I buy a house now?
A: No, prices are still going up. Wait until they peak and then buy.
The neighbor 4 doors down who bought 4 months ago can now zillow their house and see it is valued at $30000 less than they paid (10 percent less).
That must be a nice feeling, ugh! I said it at the time that this would be their fate. And I don’t want to hear bashing of zillow numbers because however they calculate it, it is down 30K form then.
Zillow is marginally useful…
They give a current direction of prices based on transaction prices.
Prices are falling.
By all means buy at the top, in order to qualify for a bailout next time prices crash.
“They have created so much debt that they may have turned a good deflation into a bad deflation after all”
He seems to omit that “they” created a huge overhang of inflation with all their debt pushing, which must (not may) come crashing down.
The avalanche may be a bad result, but creating the overhang was the cause.
This “debt pushing” of theirs is what they see as “growth”.
This is the year that the Canadians give it away. Oh, it’s going to be priceless seeing all that is exposed in the wake of that collapse.
‘Calgary MLS listings soar while sales plunge’
‘As of Thursday, according to the Calgary Real Estate Board website, January MLS sales of 549 are down 34.8 per cent from the same period a year ago while new listings have risen by 42.8 per cent to 2,262 and active listings are up by 75.2 per cent to 4,311.’
‘Phil Soper, president and chief executive of Royal LePage, said when you see a sharp change in a very short period of time in the number of house sales and new listings it’s because the buyer or the seller is expecting further change in the market.’
“So in Calgary right now, we’ve got buyers who are expecting that there might be an opportunity to purchase a home for a discount over recent value. So they’re delaying transactions in the hope that they see some movement in prices,” said Soper. “In the meantime, when those transactions aren’t going through that normally would have, people who in normal course would have been listing their home, they start to get piled up and you start to see inventory grow.”
You’re screwed Phil and you know it. If you hadn’t been such an arrogant hick all these years I might feel sorry for ya.
Sounds like the dreaded deflationary psychology is taking hold. That market must be in need of stimulus.
It’s sad, because of all the large and small pains to come. In 2007 I did an interview with a Calgary paper. The reporter asked me, “won’t the commodity boom make a difference?” I replied that it didn’t save Texas, it made it worse.
Some would say, “oh Ben, you have missed all these years of up, up, UP!” I didn’t miss anything because I don’t want anything to do with Alberta. And what do you have to show for it now? A bunch of butt-hurt FB’s getting ready to live out of their car.
Here’s a tip for the rest of the greedy fools; it’s coming. I don’t know when, but it’s coming:
‘In the heart of Silicon Valley, there’s been a big jump in the price of small houses. In fact, demand is so strong in Palo Alto, and inventory so lean, that homes that look more like bungalows are now selling for millions.’
‘For example, a home at 151 Kellogg in Palo Alto with two bedrooms and one bathroom, and only about 990 square feet of living space, recently sold for $3 million.’
‘That’s not unusual.’
No. It is unusual you morons!
‘In 2014, the median price of a home in Palo Alto with less than 1,000-square-feet of living space surged 40 percent to $1.7 million, according to DeLeon Realty’
‘Realtors say a lot of that surge can be explained by the flow of new tech money in the area, which is driving prices higher, as well as an influx of international investors looking to capitalize on a red hot real estate market.’
“About 40 percent of these buyers are investors from overseas,” said Ken DeLeon, the founder of DeLeon Realty.’
‘Specifically, he says there are many Chinese buyers, who intend to tear down the homes and build new ones.’
It’s the same old crap. You are swimming in a bunch of Yellen bucks thinking you live where gold can be picked up off the ground. Calgary was the end all, be all until they hit the wall too.
‘It’s the same old crap. You are swimming in a bunch of Yellen bucks thinking you live where gold can be picked up off the ground. Calgary was the end all, be all until they hit the wall too.’
Which reminds me of the truth about gold rushes. The gatekeepers set up the gates and fools rush in. The only difference is todays gatekeepers run DC too.
I just looked at that Palo Alto house on Google Maps, and you have to be kidding me. You’d think the house, and the land it sits on, were the equivalent of Sutter’s Mill. To these speculators, they are.
This is unhealthy, stupid, and wrong. And deep down, we know that. But we’re not good enough to put a stop to it.
No. It is unusual you morons! ??
Sure its unusual Ben…Really its more like their own world…I have lived here my whole life…Seen a lot…Can I explain Palo Alto and why people are willing to pay what they do ?? I can only offer these thoughts;
US crime rate mean = 301….Palo Alto is 116…Last murder was 6 years ago and there was only 1 in that year….
Estimated median household income in 2012: $117,251
For population 25 years and over in Palo Alto:
High school or higher: 97.6%
Bachelor’s degree or higher: 77.5%
Graduate or professional degree: 49.3%
Unemployed: 4.8%
Mean travel time to work (commute): 20.6 minutes
Stanford University & Hospital
Weather, terrain and amenities…
People with various degrees of wealth want to live there…Now, we have the added demand from wealthy foreigners…Its the only explanation I can offer for the rational for house prices there…
It’s stopping all on it’s own. That’s the beauty of it all.
People with various degrees of wealth want to live there…Now, we have the added demand from wealthy foreigners…Its the only explanation I can offer for the rational for house prices there…”
Lots of over paid upper management up there that can pay way high for what they want. Meanwhile their worker force in China make very little.
Meanwhile their worker force in China make very little ??
You mean like the Google, Facebook & Twitter employees ??
Has Apple announced their first round of layoffs yet?
Wealth? If you have a net worth in the 7 figures and all you can afford is a 900 sq ft bungalow, I don’t think I’d call that wealth. Sounds more like hyperinflation. Everyone’s house is worth millions in Zimbabwe too.
Wealth? If you have a net worth in the 7 figures and all you can afford is a 900 sq ft bungalow, I don’t think I’d call that wealth ?
Well, just like HA you want to read what you want to read and conveniently ignore the whole story…You ignored this part Dude…
‘Specifically, he says there are many Chinese buyers, who intend to tear down the homes and build new ones.’
That would make an interesting follow up. If they didn’t build something new.
“you want to read what you want”
Like this?
San Leandro, CA Sale Prices Plunge 12% YoY
http://www.zillow.com/san-leandro-ca-94577/home-values/
SCDave,
Your blather about crime rate don’t mean much. Gilbert, AZ also has a low crime rate in the same range but you can buy a house in the $100s still. And it’s in the east valley High Tech corridor.
I’m plunging deep into commercial software in Irvine and hope to be the software God of the East Valley in Phoenix at some point so that I can stay in AZ.
You compare Gilbert, AZ to Menlo Park, CA. You’ve got to be joking with us……
BTW, they each are great places to live and I’m sure they offer much to their residents, but they are not comparable.
We know Jingle_Fraud. It’s different there. The frauds are larger.
‘Menlo Park, CA’
Never heard of it.
Here, read this blog…..
http://thehousingbubbleblog.com/?p=8669
“Trinity College Professor Philip Lane told the inquiry the construction boom ‘obscured the underlying deterioration in fundamentals’ needed to properly run a banking system. Prof Lane said recessions in other countries prior to the worldwide credit crunch had been relatively brief. He said this led to a situation where bankers misperceived the collective risk. Prof Lane said that when bankers are making the same decisions ‘you get a systemic problem.’”
Even as central bankers and leading economists who number among their colleagues slap each other high fives for successfully saving the world economy with an electronic printing press run amok, the problem of excess capacity left over from the boom lurks in the shadows, growing the seeds of the next crisis.
Exhibit A: China.
However, at least the theory that massive wealth redistribution towards the world’s richest is the way to quickly end a crisis has been conclusively proven.
“…the global elastic has been stretched even further than it was in 2008 on the eve of the Great Recession. The excesses have reached almost every corner of the globe. ‘We are holding a tiger by the tail,’ he said. ‘Sovereign bond yields haven’t been so low since the ‘Black Plague’: how much more bang can you get for your buck?’ he told The Telegraph before the World Economic Forum in Davos. ‘QE is not going to help at all.’”
In theory, won’t the EU QE drive down bond yields? (Never mind if they were already negative insome corners of Europe.)
What happens to elastic when it is stretched too tightly?
Busuness Insider
Bond Yields Hit Record Lows Across Europe
Myles Udland
Jan. 23, 2015, 7:57 AM
Markets are still digesting the European Central Bank’s QE announcement on Thursday.
In response, stocks have traded higher, the euro has continued to fall, hitting an 11-year low against the US dollar, and now bond yields across europe are hitting record lows.
Via ZeroHedge, here’s a quick grab of headlines showing the number of record lows in bond yields across Europe:
…
Bonds have yields? Who knew that? I thought it was all about the price appreciation as people needed a “safe haven”.
not lately
the 40% of your retirement portfolio yields 0% after inflation
only Oxide and gov workers get to retire
Can things get any better for those who kept the faith that long-term Treasurys would keep going up?
Bond
yields fallprices rise when theirprices riseyields fall.Credit Markets
U.S. Government Bond Yields Drop, Europe’s Are at Record Lows
ECB’s Stimulus Likely to Boost Prices at a Time When Demand Is Already Strong
By Min Zeng
Updated Jan. 23, 2015 3:40 p.m. ET
Government bond yields on both sides of the Atlantic tumbled to historic lows on Friday, the latest ripple from Thursday’s decision by the European Central Bank to support economic growth with a monetary stimulus plan.
The 10-year yields in Germany, France, Belgium, Finland, Austria, the Netherlands, Spain, Italy, Ireland and Portugal all fell to record lows, extending the declines of the past months.
In the U.S., the yield on the benchmark 10-year note fell toward a 20-month low. The yield on the 30-year Treasury bond settled at a record low. Bond yields fall when their prices rise.
Investors have been piling into both stocks and government bonds following ECB President Mario Draghi ’s announcement on Thursday that the central bank will buy a total of EUR60 billion ($67 billion) a month in assets, including government bonds. The ECB said the buying will start in March and run through September 2016.
Bond buyers believe the buying binge by the ECB will boost asset prices at a time when demand for bonds, especially high-grade government bonds, remains strong due to the uncertain global growth outlook.
“In today’s $100 trillion global supermarket of bonds, the shelves will be further emptied by the ECB’s bond-buying program, supporting bond prices,” said Tony Crescenzi, senior market strategist at Pacific Investment Management Co. in Newport Beach, Calif., which had $1.68 trillion in assets under management at the end of 2014.
Lower yields on government bonds could be a boon for the housing market as they push down mortgage rates. Companies also benefit by locking in favorable borrowing costs when selling new debt.
But lower yields mean investors have to make do with lower income, pushing many to dial in to riskier bonds for higher yields. Investors also caution that bond buyers may be vulnerable if sentiment sours on bonds, as slim yields offer a thin layer of protection against the risk of capital losses.
In late afternoon trading, the yield on the benchmark 10-year Treasury note was 1.814%, compared with 1.898% on Thursday. The yield had closed at 1.777% on Jan. 15, the lowest level since May 2013. The yield was 2.173% at the end of 2014.
The yield on the 30-year Treasury bond closed at 2.391%, breaking below the previous record of 2.399% on Tuesday.
The ECB joins the ranks of the Federal Reserve and other major central banks in tapping the unconventional monetary-policy tool, known as quantitative easing, following the 2008 financial crisis.
The yield on the 10-year German government bond fell Friday to 0.316%, according to Tradeweb. The yield on France’s 10-year bond fell to 0.533%. The yield on Spain’s 10-year bond declined to 1.378% and the yield on Italy’s 10-year bond dropped to 1.538%.
Jim Caron, global fixed-income portfolio manager at Morgan Stanley Investment Management, with $398 billion in assets under management, said he expects the ECB to gobble up all the net issuance of eurozone government bonds over the next 12 months.
“This should prove to be supportive for euro bonds ultimately,” said Mr. Caron. “As for Treasury bonds, they will follow price action in Europe.”
Lower bond yields in Europe and Japan have turned U.S. Treasury bonds into an attractive bargain, dragging down U.S. bond yields even as the U.S. economy has strengthened and the Fed is prepared to raise interest rates in the middle of this year for the first time since 2006. The Fed’s next policy meeting is due on Jan 27-28.
A stronger dollar has enabled foreign investors to pick up extra returns on U.S. bonds and stocks. The dollar rallied Friday to the strongest level against the euro in more than a decade.
Some investors are seeking higher yields in riskier markets.
Mark Dowding, senior fixed-income manager at BlueBay Asset Management in London, which oversees $67 billion, said he has allocated more cash into government bonds sold by relatively small economies in Europe, such as Latvia, Lithuania, Slovakia and Slovenia.
Mr. Dowding has also been buying euro-denominated government bonds sold by such countries as Mexico, Brazil, Turkey and Indonesia.
“At some point we believe everyone is too pessimistic on growth and yields will start to rise, but this is more likely later in 2015,” said Mr. Dowding.
…
30-year T-bond yields sliding down a slippery slope
Does anyone know the capital gain that would result from a 1-year decrease from 4.0% to 2.5% yield on a thirty-year Treasury bond?
If you purchased a 4% bond at par for $1.00 and yields dropped to 2.5% a year later, you could sell the bond for $1.60. The gain of 60% would be subject to long term capital gains tax.
60%
‘2014 saw a return to a near normal housing market, with sales moving at a moderate pace and home price appreciation growing at more sustainable levels,’ said C.A.R. Chief Economist Leslie Appleton-Young.’
You just can’t bring yourself to say it can you Lester…. I’ll help.
South San Francisco, CA Sale Price Turn Negative On Year; Down 4% As Price Declines Spread Statewide
http://www.zillow.com/south-san-francisco-ca/home-values/
San Jose, CA Sale Prices Plunge 9% YoY As Housing Correction Resume
http://www.zillow.com/san-jose-ca-95123/home-values/
“He deplores the rush to QE as an ‘unthinking fashion.’ Those who argue that the US and the UK are growing faster than Europe because they carried out QE early are confusing ‘correlation with causality.’ ‘The Anglo-Saxon pioneers have yet to pay the price. There are serious side-effects building up and we don’t know what will happen when they try to reverse what they have done.’”
With an echo chamber full of economists in mutual agreement on the unqualified success of QE to save the planet from economic crisis, why would they ever try to reverse what they have done?
They are trying to reflate different parts of a deflating hot air balloon.
‘Washington took extraordinary steps to try to revive the economy. The $700 billion Troubled Asset Relief Program (TARP), approved by Congress in the waning days of the George W. Bush administration, is the best known, but Washington’s truly radical post-2008 actions came not from Congress but from the Federal Reserve. “Many of the Fed’s actions were previously unimaginable,” writes Alan Blinder in his 2013 book on the financial crisis, After the Music Stopped. The Princeton economist, who served as the Fed’s vice chairman during the Clinton years, was most startled by the Fed’s role in the rescue of insurance giant AIG. While everyone else was worrying about TARP, he writes, “AIG was, in effect,nationalized by a government agency (the Fed) that had never regulated it and that had not sought congressional approval to do so. Very strange.” AIG outraged the public when it continued to pay employees big bonuses after getting bailed out, but, according to Blinder, “the most serious economic issue” of the bailout was the message it sent investors.’
‘Sophisticated lenders to AIG, including Goldman Sachs and other large financial institutions, now know that such borrowers are too big to fail. As Blinder also notes, the Dodd-Frank financial-reform law of 2010 did nothing to stop the Fed from making similar bailouts in the future.’
‘Of more immediate consequence for American workers was the Fed’s December 2008 action on interest rates. The Fed slashed rates to zero—lower than they’d ever been in the central bank’s century-long history. “To call such a low interest rate abnormal is an understatement,” Blinder observes.’
‘The Fed wanted to get people and businesses to keep borrowing (if they could afford to), in the hope that they could create jobs with their purchases and expansions. The central bank also wanted to deter people from defaulting on their existing debt by making it cheaper to pay back. Reducing mortgage defaults mitigated banks’ losses. Finally, the Fed wanted to encourage investors to borrow inexpensively, making it easier for them to buy fixed assets such as office buildings, apartments, stocks, and bonds. Such purchases push asset prices up, make people feel richer, and spur them to spend more—just as happened during the housing boom.’
‘When interest-rate policy failed to do the trick, the Fed started directly purchasing long-term Treasury bonds and home mortgages. In effect, the Fed became an artificially generous lender to replace the financial firms that had stopped lending.’
‘Over time, this effort has “worked,” at least on the Fed’s terms. Mortgage rates have never been so low. Home prices stopped falling in 2012 and have gained 25 percent since then, rising seven times as fast as inflation. The stock market has hit record highs. And as house values bounced back, people began spending on cars and other big-ticket goods again, along with services, such as haircuts and babysitting. All the new spending, of course, is creating jobs.’
‘But did the Fed’s approach spare Americans a harsh reckoning, or only delay it? Even after more than $1 trillion in defaults and repayments, Americans still hold twice as much housing debt as they did in 2000. If mortgage debt had merely stayed in line with the growth in other prices instead of outpacing inflation, we’d owe a collective $6.6 trillion today on our houses, not $9.4 trillion. And what happens when mortgage rates rise, or when house prices stagnate or even fall again?’
‘We would do well to heed the warning of William Pesek, a Tokyo-based Bloomberg columnist. In his book Japanization, Pesek notes that Japan never came to terms with its own private-sector debt after its markets crashed 20 years ago. Instead, he writes, “Japan manage[d] to delay painful and destabilizing change by cutting interest rates to zero to stimulate borrowing.”
‘Pesek calls this a “bubble fix”—inflating a new bubble to replace the one that just burst. “By creating the illusion of vibrancy in stocks and real estate, and in turn, entire economies, all this free money does more harm than good,” he contends.’
…. like buying one counterfeit dollar with two counterfeit dollars.
Solution: Get out of debt quickly and do not borrow.
Too-big-to-fail is alive and well, aided and abetted by macroeconomic policy makers’ hasty conclusion that QE is a magic bullet to rescue economies from the aftermath of a credit-fueled bender.
There was a post several years back on Ritholz’s site The Big Picture that indexed ALL and I mean ALL the financial bailouts due to the bubble in RE and other bubbles at the time - I will see if I can find it - it listed as I recall hundreds of programs - many that just went un-announced and others that were simply with-held from scrutiny - the problem is far worse than just TARP!!!
Seattle, WA Sale Prices Dive 5% YoY; Down A Crushing 18% QoQ
http://www.zillow.com/seattle-wa-98199/home-values/
http://youtu.be/kK62tfoCmuQ
Dallas Tx area is looking quite positive… unless you’re a speculating fool.
Frisco, TX(Dallas) Sale Prices Fall 6% YoY As Oil Bust Widens
http://www.zillow.com/frisco-tx/home-values/
‘Australian real estate investor Maureen Pound said losing money on three rental apartments she owns in Melbourne and Brisbane doesn’t concern her. She’s putting her faith in future profits from rising property values.’
“I might lose A$30,000 ($24,285) on a property over 10 years, but the property has gone up A$200,000,” said Pound, a 46-year-old business management consultant who lives in Melbourne.’
‘Pound is one of more than a million Australian landlords who must cover the difference between their mortgage payments and rental income. Their bet on the continued ascent of housing prices is fueling record levels of debt and leaving investors more vulnerable to an increase in interest rates or a downturn in property values.’
Pound is one of more than a million Australian landlords who must cover the difference between their mortgage payments and rental income. Pound is one of more than a million Australian landlords who must cover the difference between their mortgage payments and rental income.
Oh, the looks on their faces in 10 years when their prediction falls flat on its ponzi face and their excrement flowing out of their behinds while their pants are still up…Priceless! Neil, please pass the popcorn.
We won’t have to wait 10 years. It’s already falling apart.
It’s not likely to be a gentle enema either. It is truly amazing that speculators can get in on a boom right after it starts to collapse and think they are getting in at the beginning.
At 46, the 10 year get rich on housing scheme is her retirement plan. She’s going to need a new plan.
A gentle enema! I may have to change my screen name.
The “buy to let” crowd is soooooo smart. Nobody ever loses money that way.
‘As demand for new homes intensifies, a California-based builder says it will launch sales at three communities in Broward County next month. Standard Pacific Homes will accept contracts beginning Feb. 14 for about 200 homes and townhomes at the old Raintree Golf & Country Club near Pembroke and Hiatus roads in Pembroke Pines, said Dan Grosswald, South Florida president.’
‘Prices for the Raintree townhomes will start in the low $300,000s, while the single-family homes will be priced from the low $400,000s. Standard Pacific also is opening a 107-home neighborhood at Watercrest at Parkland, the upscale Parkland development where homes range from the $400,000s to more than $1.5 million.’
‘The market for new homes is on the rise across South Florida, with builders struggling to find enough land to satisfy demand. In moves reminisicent of the housing boom of 2000 to 2005, builders are holding lotteries, while some buyers are waiting in line overnight to get their pick of lots.’
‘Grosswald said he expects the three new communities to be well-received, and he’s not ruling out the possibility of buyers camping out before the official launch.’
‘Now what, Ms. Yellen you jackass?’
Ben:
Just to the west of downtown Denver a Canadian home builder called Cardel is doing this too - lottery - this just behind the hogbacks up I-70. This last fall they started to have a lottery for home sites - land that was under development on which to build. I went up there last fall - looked around and thought “who the hell would want to live 5 feet from your neighbor with a 20 ft retaining wall in your back yard?” The whole thing is a joke.
Land developer there took what is a beautiful chunk of land and just butchered it to put in production builds. Sickening - and yet they are holdlng a lottery for this sh*t!!!
“Luxury”, i.e., high priced, apartments and condos built right next to railroad tracks and major street crossings. Why would you live there if you don’t want to hear trains?
http://www.chron.com/neighborhood/heights/news/article/First-Ward-frets-about-proposed-high-speed-rail-5901900.php
I’m gobsmacked.
‘Nothing Is Going to Save the Housing Market’
‘Fed Chair Janet Yellen worries about the negative effects of tight credit standards on housing. While she admits that lenders should have raised their standards earlier, “any borrower without a pretty positive credit rating finds it awfully hard to get a mortgage,” she said in July.’
‘Nothing Is Going to Save the Housing Market’
That’s clear considering all the external stimuli yet housing demand still plummets.
Housing Demand Plummets To 20 Year Lows
http://2.bp.blogspot.com/-fqSztKilps8/VFlPKlr52JI/AAAAAAAAhKU/v5oS41S-y0s/s1600/MBANov52014.PNG
Articles like this rarely mention the core reason many people are hesitant to buy a house: a lack of job security. Just because you have a good job today and qualify for a mortgage today, will that job still be there 5 years from now when you still have 25 years left on your mortgage?
The reason: Grossly inflated prices
The public understand this…. If you have to borrow for 15 or 30 years, you can’t afford it nor is it affordable.
Words to live by.
Ben, what a great headline! Thanks for the reference! I’ll find some realTwhore into whose face to rub it.
‘Following the announcement on Tuesday from oil giant Baker Hughes that it was laying off thousands of employees, many are wondering if the impact of falling oil prices will start to be felt in other economic sectors outside of oil and gas.’
‘One of the concerns is whether or not we’ll see the housing market suffer. Patrick Jankowski of the Greater Houston Partnership told KTRH says we will. “We’ll probably see some cooling down of the housing market,” Jankowski said. “Maybe the prices won’t go up quite as fast, and maybe they will even flatten.”
‘One of the concerns is whether or not we’ll see the housing market suffer. Patrick Jankowski of the Greater Houston Partnership told KTRH says we will. “We’ll probably see some cooling down of the housing market,” Jankowski said. “Maybe the prices won’t go up quite as fast, and maybe they will even flatten.”
Peppermint Patty just can’t develop enough honesty to say prices are falling or will fall.
Why is that?
Baker Hughes was going to layoff anyway due to the acquisition by Halliburton.
William White and William Pesek. I so much agree with you both.
Counterfeiting your own currency leads to all sorts of future troubles. We should not be fooled by temporary “illusionary” improvements for a small group.
Key to personal wealth will be current knowledge that assists you to make rapid changes. Very, very, rapid.
PB, those multitudes of experts saying QE was good - hog wash !
“Low oil prices are having an effect on the economy in the province and the drop below 50 bucks a barrel could also be having an effect on Calgary’s condo market.”
You mean I can get that awesome C$ 1,000,000 Calgary condo for only
US $800,000? Where’s my banker?!?
1,000,000 Calgary condo for only
US $800,000?
Isn’t that loonie? However, from the other side of it, just a few years ago, the Canadian dollar was worth U.S.$1.05. Many Canadians were buying property in Arizona. The permabears on this board were laughing at them. However, if they sell now, they would make a good return on their money just based on the exchange rate and would have the appreciation of their Arizona properties to add to that. And yes they did appreciate despite some of this board trying to claim they did not.
With demand at 20 year lows, who they going to sell to?
Remember….I can ask $50k for my 10 year old Chevy pickup but where is the buyer at that price?
‘if they sell now, they would make a good return on their money’
If being the operative word. Counting chickens before they hatch is folly.
‘they did appreciate despite some of this board’
I’m sick of the mis-characterizations. Who was it that was at the courthouse steps in Phoenix in 2010, blogging live on the insanity? Me. You think I don’t know that prices in Phoenix went up 70% (at least) in two years after Blackstone and the others showed up? It’s a bubble, and that’s why I stepped back. I refused to take part in driving prices up. Oh, but they’ll sell you houses 4 at a time now. I can give you a phone number if you want in on a 3% yield in a falling market. Of course, the builders will undercut you down the road without even blinking.
These Canadians with their HELOC money are going to get what’s coming to them.
Ben, the comment was not directed at you.
Damn Ben… You didn’t have to hurt him like that
I’ve had it with this permabear stuff. I’m in the process of starting the 4th RE related venture in the past 8 years. I’m not a bull or a bear; I’m a vulture.
It doesn’t matter Dipstick. You got schooled and rightly so.
“a good return on their money just based on the exchange rate…”
They just lost 25% in real terms on their house equity in Canada, if they owned the house in Canada. The exchange rate part of it is a wash, less their travel expenses, interest payments, depreciation, taxes, and if they were to cash in, the exit costs.
The big danger for the Canadian HELOC locust is a drop in Canadian house prices. Their loans are for 3 or 5 years and if you are maxed out at renewal time you won’t get the renewal. Oops! The only win on the exchange rate is if they were leveraged to the eyeballs and paid off their HELOC with sale proceeds. They’ll have to panic before everyone else though.
Downdraft on Phoenix.
CraterRage® Photo Of The Day
http://goo.gl/wMuVNd
I recall William White’s paper in 2008.
The link below is a good summary of what this guy is about - A true voice in the wilderness!!!
http://www.spiegel.de/international/business/the-man-nobody-wanted-to-hear-global-banking-economist-warned-of-coming-crisis-a-635051.html
It’s interesting that the media will refer to the BIS and IMF warnings years ago, largely ignoring that they have been trying to tell Yellen and the others to stop what they are doing. When the history of this is written, it will probably be one of the wonderment’s that it fell on deaf ears.
I found the article I was searching for from Ritholz’s site from a few years back - describes the financial time line following the bubble burst and finance crisis as W. White’s warnined from prior years - be forwarned this pdf is 42 pages long going date by date and event by event..
As D. Byrne said back in the day - Same as it ever was!!
https://www.stlouisfed.org/financial-crisis/full-timeline
Midday Update: Oil Down, Dow Down, S&P Down, Gold Down
http://www.marketwatch.com/
Did I mention housing prices are down and falling?
Starter home at 739,000.00…..Really? And this is not their ‘forever home’. The NAR shills are really dialing up the heat!!!
Reuters 1/23/2015 8:00 AM ET
Print Article
By Beth Pinsker
NEW YORK, Jan 23 (Reuters) - Joe and Debbie Valerio, a couple in their 60s, put their Westport, Connecticut, home of more than 20 years on the market because it was getting too big for them.
When they found a nearby condo they loved, they pounced. That set off a chain reaction allowing Peter and Leah Baiocco, a couple in their 30s, the ability to trade up.
The Baioccos lived a few miles away, contemplating a future move to a bigger home once kids came along. With favorable economic conditions, they jumped at the chance to buy the Valerios’ $2.7 million house last April. After renting it out for nearly a year, the Baioccos’ starter house in Fairfield, Connecticut is on the market for $739,000.
This seemingly simple sequence of events is still relatively rare in the U.S. housing recovery. Despite an improving economy and rock-bottom rates, inventory of available homes is inconsistent. Anything more than a trickle of listings sends prices down, causing sellers to pull their homes off the market.
Then prices go up again because competition gets fierce, and sellers re-emerge. As a result, a bustle of trade-up activity is expected for this spring’s selling season, before conditions change again.
“I think a lot of people have made a lot of money in the stock market the last few years. People who want to enjoy a luxury home, now is the time. Everyone has more cash available to them,” says Ken Barber, a real estate agent in Wellesley, Massachusetts.
Other positive signs: new single-family housing starts are at a high since 2008, according to the Commerce Department’s latest report.
Also, fewer homeowners are renting out their homes to delay selling them, down to 35 percent in 2014 from 39 percent in 2013, according to Redfin, a real-estate brokerage.
And more consumers have positive equity. Last spring, 19 percent of homeowners in Redfin markets (such as Atlanta and Philadelphia) had low or negative equity. That was down to 11 percent in November. Nela Richardson, Redfin’s chief economist, expects it to hit 8 percent by March 2015.
Even better for buyers, interest rates are near-historic lows below 4 percent. “The question of staying versus leaving is shifting. For people who were afraid to leave their mortgage because they thought it was the best they’re ever going to get, now there is another good mortgage around the corner,” Richardson says.
Those trading up in 2015 should hit a sweet spot of selling near the top but not buying at the top, says Margaret Wilcox, an agent from agent in Glastonbury, Connecticut, for William Raveis.
Wilcox says a client couple recently traded up from a $500,000 house to a $1 million home. They did not get quite the price they wanted for the sale of their old home, but they got a discount of nearly $300,000 on their new purchase, Wilcox says.
There are a few red flags for buyers and sellers. Seller confidence is still low, with just 35 percent of sellers thinking now was a good time to sell, versus 48 percent the previous year, according to Redfin.
Keith Jurow, a housing market analyst who writes the Capital Preservation Real Estate Report, is something of a doomsayer and thinks talk of a housing recovery “is phony and only an illusion,” he says.
Given the number of mortgages originated between 2004 and 2010, he feels that too many of the people who would like to trade up still have little or no equity in their homes and are not prepared to do a sale below their purchase price.
“Unless you bring more cash to the table, you can’t trade up,” Jurow says. Also, foreboding makes some people want to act now. They do not want to be the family that missed their chance, adds Bob Walters, chief economist for Quicken Loans. “People won’t delay forever,” he says.
The Valerios and the Baioccos have only happy thoughts about their real estate choices. They love their new homes.
“In our mind, it’s the house we’re going to be in forever,” says Peter Baiocco. (Editing by Lisa Shumaker)
They set off a default chain reaction scenario. Just like 2006.
“Unless you bring more cash to the table, you can’t trade up,”
Uh, isn’t that always how it’s supposed to work? More cash, or a higher salary to support the higher trade-up mortgage? Only in the world of magical thinking does the act of merely occupying a starter home for a few years entitle someone to move up to a bigger house without having any extra money to pay for it.
It’s amazing how people totally ignore the fact that if their starter house has doubled in value, so has the house they want to move up to.
Recently in Maryland, there was a fire at a 16,000 sq foot mansion that killed six people. A few years ago in Maryland, there was another mass casualty mansion fire.
What’s going on with these things? How does an entire mansion burn down and no one gets out? And how does it burn so completely so fast? I’m thinking of both incidents. I can’t find a link to the previous waterfront mansion fire as the current incident is saturating Google, but it was very similar to this incident. Is the cause building materials? Something else? Are these modern mansions firetraps somehow?
mmm…complacency? That their $millions in purchase price covered everything including the assumed smoke/fire alarms tied into the alarm company. Oh, no ADT? That’s too middle class. These huge echo chambers come with lifetime smoke/fire alarm tied to the internet of things don’t you know?
Damn. Char-broiled to a crisp for being naive.
Never assume, because you make an ass out of u …but NOT me.
‘Government-backed mortgage company Freddie Mac is selling $410 million of deeply delinquent U.S. home loans in its second sale of the debt. “The loans involved in this transaction are deeply delinquent, including a large share that are more than two years delinquent,” Tom Fitzgerald, a spokesman said in a telephone interview. “This transaction is consistent with Freddie Mac’s continued goal of reducing illiquid assets from its investment portfolio.”
‘Freddie Mac, which owns or backs $1.9 trillion of housing debt, held $161 billion of loans on Nov. 30, according to monthly disclosures. It’s also started repackaging re-performing and modified mortgages into new bonds that it guarantees. The company sold $659 million of non-performing loans in its first transaction in July.’
http://www.bloomberg.com/news/2015-01-23/freddie-mac-selling-410-million-of-delinquent-home-loans.html?cmpid=yhoo
….or about 3,000 houses. Yawn. Wake me up when you find 24,997,000 more houses, so HA can prove up his claim. Hint: it will never happen
We’ve already accomplished that task Jingle_Fraud. You just don’t like the fact that 4 million of them are right in your backyard.
How’s your losses stacking up $250 A Month Man?