A Bit Of A Herd Mentality
A report from the New York Times. “For the past several years, wealthy buyers from China have been purchasing investment properties and pieds-à-terre in luxurious Manhattan high-rises. Lately, though, some have moved their portfolios east to the exclusive enclaves of Long Island. Last year, Jennifer Lo, an associate broker with Douglas Elliman in Great Neck, N.Y, sold a five-bedroom house on Long Island to a family from China. As soon as the deal closed, the new owners handed Ms. Lo the key and asked her to keep an eye on the place. ‘They told me they were returning to China and would not be back for two years,’ said Ms. Lo, incredulously. ‘I said, ‘But what about the house and upkeep on the garden?’ The wife suggested I pour cement over the grass, maybe turn it into a basketball court. I tried to explain this isn’t how things are done on Long Island.’”
“Theresa Wang has decided her home is too big for a family of two. It is listed for $3.68 million. The price tag is purposeful — the numbers 3, 6 and 8 are all considered lucky for the Chinese. ‘We actually have another property in Sands Point, and we also listed it at $3.68 million,’ said Andrew Wu, who is marketing the house. ‘We might soon list my mom’s house, and I’m thinking we will ask the same price.’”
The Calgary Herald on Arizona. “A sagging loonie and a gradually improving Arizona resale housing market have taken a bite of Canadian snowbirds’ appetite for buying homes in the Sonoran Valley resale sector, say industry experts. During a five-year run, ending in 2013, there was a time during that span when Canadians were the largest segment of out-of-state buyers laying down cash for Arizona real estate. Nowadays, not so much. Diane Olson, a former Winnipeg police officer who now does much of her real estate business in the Phoenix area, sees as a possible silver lining to this whole scenario is Canadians who bought low beginning to sell high.”
“‘With so many Canadian buyers who purchased their homes while the dollar was at par or better they now have a nice foreign exchange gain. That exchange gain, coupled with property appreciation, is providing food for thought for some investors who are trying to decide whether to hold or sell,’ she says.”
The Charlotte Observer in North Carolina. “The title of a slide at last month’s Charlotte Commercial Real Estate Forum asked the question that’s been on a lot of people’s minds: ‘Too many apartments?’ It’s hard to ignore the high-end apartment complexes seemingly sprouting on every corner in town. David Ravin, CEO of Northwood Ravin, said he’s optimistic. His company is building a 384-unit development in Plaza Midwood, and 400-unit Holly Crest in Huntersville, both set to be completed this year. But he does think the market will change in coming years. ‘We do have a bit of a herd mentality,’ he said of developers. ‘One person announces a project on one corner and everyone wants to put projects on the other three corners. This last wave, it’s relatively the same product.’”
The Washington Post on Maryland. “Angry homeowners packed a community meeting in Bowie on Saturday, demanding officials probe the foreclosure and housing crisis that has decimated wealth in Prince George’s County and find more ways to help residents still reeling from financial losses. Nick Charles said appraisers are part of the problem. His home is valued at a fourth of the price at which it was purchased. ‘When you have people outside coming into a community to appraise homes where they don’t live, it’s like having someone criticize your parenting without having any knowledge of what goes on inside the home,’ he said. ‘The fact is our homes are being valued by people who need to be held accountable,’ he said.”
Aljazerra on Florida. “Under a Florida law, companies that own more than 80 percent of condo units in one building can terminate a condo complex under certain conditions and turn it into apartments for rent. The companies have to pay the owners they’re evicting the ‘current market value’ for their units, which may not even cover their mortgage. Some owners, who have diligently paid their bills and fees, are left without a home and drowning in debt.”
“In 2005, Joe Cunningham, a retired Philadelphia cop, and his wife Linda Cunningham, a retired school teacher, were hoping to split their retirement years between Florida and Cape May. So, they bought a $240,000 condominium in a Lansbrook Village near Tampa, paying $160,000 upfront. In 2008, the original developer faced a foreclosure on the property. Then, the bank that backed the project was declared insolvent, so the Federal Deposit Insurance Corporation oversaw the auctioning off of its assets for just pennies on the dollar.”
“That consortium now owns more than 80 percent of the units in the complex. The Cunninghams and their neighborhoods have been told a termination is coming. If the complex is terminated at the current market value of $80,000, they said they’d lose their entire investment. The Cunninghams say their $160,000 investment would simply evaporate, as would their dream of spending the winter months of their golden years in Florida. ‘We’d have nothing. We would get nothing back,’ Linda Cunningham said.”
“Theresa Wang has decided her home is too big for a family of two. It is listed for $3.68 million. The price tag is purposeful — the numbers 3, 6 and 8 are all considered lucky for the Chinese. ‘We actually have another property in Sands Point, and we also listed it at $3.68 million,’ said Andrew Wu, who is marketing the house. ‘We might soon list my mom’s house, and I’m thinking we will ask the same price.’”
I’m guessing some newfangled Chinese real estate investors who are counting on luck to make them rich are in for a memorable lesson in life’s dear school for fools.
We get so caught up in the excitement and riches of selling high to corrupt Chinese money that we forget just how different that culture is. This is the equivalent of Americans buying property in China and then burying one of those Catholic statuettes when they wanted to sell, or requiring that a buyer feed the squirrels.
Agreed. These Chinese investors need to bury statues of St. Joseph in the yard to have any chance of finding a buyer at $3.68 million.
A large subset of the Chinese buyers who are moving to Long Island are drawn by the public schools, and plan to stay put while their children grow up. “Many Chinese want a U.S. education,” Ms. Lo said. “In China, there is so much competition, even to get into elementary school, and it doesn’t matter if you are rich or poor.”
well that makes all the difference here
I’m calling b___s__t on wealth not mattering in Chinese school admissions.
“Nick Charles said appraisers are part of the problem.”
And he’s damned right!
“His home is valued at a fourth of the price at which it was purchased.”
Those damned appraisers!
“‘The fact is our homes are being valued by people who need to be held accountable,’ he said.”
String ‘em up!
Why is it so difficult to understand that widespread fraud was and still is a factor in determining the value of a used house?
What I don’t understand is why he’s whining to a journalist instead of “snapping up” as many as he can at the supposed incredible discount then flipping at what he knows is the “real” market price. Why leave a 300% profit sitting on the table?
Oh wait, maybe the problem is the appraiser is correct, and he’s wrong. Nah, couldn’t be it… could it? Ability to fog a mirror always indicates financial skills far beyond what any professional in their field has, right? I mean don’t all professions work that way, hey mr electrician I know you’ve done this 500 times but I fogged a mirror once which everyone knows makes me an expert on wiring multi-horsepower VFD drives?
For a real treat, try programming one.
And I bet that when Nick Charles was buying his house, he was praying for that appraiser to hit-the-number so that the bank would grant the loan.
This is the same county where that African family borrowed over $1 million in student, home, personal, and business loans.
It’s a bit like the lottery - the people who are least able to afford it are the ones most amenable to the sales pitch.
Another big NYT story is, gosh! There’s money laundering going on.
‘Behind the dark glass towers of the Time Warner Center looming over Central Park, a majority of owners have taken steps to keep their identities hidden, registering condos in trusts, limited liability companies or other entities that shield their names. By piercing the secrecy of more than 200 shell companies, The New York Times documented a decade of ownership in this iconic Manhattan way station for global money transforming the city’s real estate market. Many of the owners represent a cross-section of US wealth: chief executives and celebrities, doctors and lawyers, technology entrepreneurs and Wall Street traders.’
‘But The Times also found a growing proportion of wealthy foreigners, at least 16 of whom have been the subject of government inquiries around the world, either personally or as heads of firms. The cases range from housing and environmental violations to financial fraud. Four owners have been arrested, and another four have been the subject of fines or penalties for illegal activities. The foreign owners have included government officials and close associates of officials from Russia, Colombia, Malaysia, China, Kazakhstan and Mexico. They have been able to make these multimillion-dollar purchases with few questions asked because of US laws that foster the movement of largely untraceable money through shell companies.’
‘Vast sums are flowing unchecked around the world as never before, whether motivated by corruption, tax avoidance or investment strategy, and enabled by an ever-more-borderless economy and a proliferation of ways to move and hide assets. Alighting in places like London, Singapore and other financial centres, this flood of capital has created colonies of the foreign super-rich.’
‘Where it made landfall in New York was the Time Warner Center. ..About $8 billion is spent each year for New York City residences that cost over $5 million each, more than triple the amount of a decade ago. Just over half of those sales last year were to shell firms. The Times examination reveals the workings of an opaque economy for this global wealth. Lacking incentive or legal obligation to identify the sources of money, an entire chain of people involved in high-end real estate sales—lawyers, accountants, title brokers, escrow agents, real estate agents, condo boards and building workers—often operate with blinders on.’
‘As Rudy Tauscher, a former manager of the condos at Time Warner, said: “The building doesn’t know where the money is coming from. We’re not interested.”
The unchecked movement of capital also has been enabled by weak, complicit, and intellectually bankrupt Western governments who decided that high asset prices would excuse the criminal acts which begot them. It’s all good!
Look at the international rogues’ gallery of people who bought there (excepting Jimmy Buffett, and Tom Brady, who sold his unit). Oh, it’s a “global neighborhood” all right. If you have sufficient assets, Manhattan is money laundering and political asylum blended together.
‘Investment bank JP Morgan is being investigated by US authorities for hiring the son of China’s commerce minister despite him being one of the worst candidates its recruiters had seen, the Wall Street Journal reported.’
‘Gao Jue, son of minister Gao Hucheng, was hired by JP Morgan and kept on during major job cuts despite an extremely poor performance, and after he inadvertently sent a sexually explicit e-mail to human resources, the paper said.’
‘The elder Gao said he was willing to “go extra miles” for the bank if his son was spared from company-wide job cuts in 2008, it said.’
‘Meanwhile, a senior banker described Gao Jue as “immature, irresponsible and unreliable”, according to the report, and one recruiter said in an internal email that she was concerned about his qualifications. “Jue did very very poorly in interviews—some MDs said he was the worst BA candidate they had ever (seen)—and we obviously had to extend him an offer,” she said of his appointment as a business analyst.’
‘Gao joined JP Morgan in 2007 and left less than two years later. After working for several other leading firms he is now with Goldman Sachs, the report said. Gao Hucheng was vice commerce minister at the time his son was hired and was previously China’s chief trade representative.’
‘The move to hire Gao was “widely understood” to be supported by William Daley, a senior executive at the bank and former US commerce secretary, the report said. Daley reported directly to chief executive James Dimon and worked at the bank from 2004 to 2010.’
‘US authorities are already investigating hiring practices at JP Morgan under the Foreign Corrupt Practices Act, a law that forbids US companies exchanging anything of value for a business advantage.’
When will quarter of a million speaking fees for our central bank head emeritus come under this spotlight?
He can do whatever he wants now that he has left his post. It’s a free country, you know!
He may have stopped working, but he is still on the payroll.
He’s worked for JP Morgan, Goldman Sachs, and “several other leading firms,” probably making hundreds of thousands of dollars and doing essentially nothing. This new class of princelings rivals the Spanish monarchy that Goya ridiculed. But don’t worry, U.S. authorities are investigating JP Morgan! Sic that golden retriever on them, then they’ll learn.
“Nick Charles said appraisers are part of the problem. His home is valued at a fourth of the price at which it was purchased.”
Strange how the mind of a fool with empty pockets works. His mind refuses to allow him to conclude that he got rippped off.
MD List Prices Turn Negative YoY; Sale Price Gain Evaporates As Defaults Build
http://www.zillow.com/md/home-values/
Stages of grief. When the lightbulb goes on, he will default.
“sees as a possible silver lining to this whole scenario is Canadians who bought low beginning to sell high.”
Better check sold or pending houses Ms. Olson, what buyers?
‘The corruption scandal battering Petrobras has already cost bondholders $4 billion. With the oil producer facing billions of dollars in writedowns, investors are bracing for even more pain.’
‘Petroleo Brasileiro SA’s $41 billion of dollar-denominated debt has lost 10 percent of its value since Nov. 13, the day before the federal police said they found “strong evidence” that at least seven builders formed a cartel to win public contracts, including 59 billion reais ($21 billion) in orders from the state-controlled oil company.’
‘The bond losses could be poised to swell. That’s because Petrobras may write down as much as $32 billion stemming from Brazil’s largest-ever graft probe and lose its investment grade, said Wilbur Matthews, the chief executive officer of Vaquero Global Investment LP.’
“This is a deeply troubled company, and we should see more losses coming when the final numbers for writedowns are finally out,” Matthews, who oversees more than $100 million in emerging-markets debt, said from San Antonio. “It would be a disaster seeing the company as a fallen angel and going to the junk category. And that seems not to be far from happening.”
This is a deeply troubled country.
Yes sirreeee.
While focusing on the obvious oil debacle, the wheels and fenders have completely vibrated off the Brazil
MiracleFraud Machine.Stayed tuned to the HBB.
This is a deeply troubled country.
Is there any country these days that isn’t “deeply troubled” with unrepayable debt, asset bubbles, corruption, etc.?
Iceland?
The one country that told the globaliist banksters to go F themselves looks relatively good.
said ‘Matthews, who at one time oversaw more than $100 million in emerging-markets debt’
CA Housing Demand Falls Every Year Since 2009
http://files.zillowstatic.com/research/public/State/State_Turnover_AllHomes.csv
It’s worth mentioning that current demand has fallen to 1990’s levels.
And yet prices continue to go up, at least by MSM accounts.
Go figure!
Did you stop to think about the “vacation home” saga is more than just one more inventory bomb ticking away?
It’s the MOAB.
I hope so! My wife and I would love to purchase a small retirement condo in Va Beach or Somewhere in the mid-Atlantic region. Obviously not at these prices.
“February 8, 2015: Is a strategic default on a mortgage ethical?”
http://www.indystar.com/story/money/2015/02/08/pete-planner-strategic-default-mortgage-ethical/22824991/
The housing debacle today is far more severe than in 2008.
Big expensive wedding for the wifey or fix the house…….whew! what a very, very hard choice for a man
It’s no mystery that strategic default is resurfacing.
Another aspect to think about is WRT divorce rates, it isn’t about spending $20K on his house or their house, its probably going to end up as spending $20K on the future ex-wife’s house. In the 50/50 odds of divorce is he more likely to lose his $20K in the form of liquid cash or house?
Weird as it sounds to recommend this, on this blog of all places, its probably harder for her to “take the money and run” in the form of house rather than cash. So the wifey / future x-wifey benefits if he defaults double, she gets to blow cash on the wedding and keep the guys house fund. From his point of view he should want to keep the house so he could cash it in after the divorce.
The cost of shielding money in a house is pretty spectacular due to carrying costs, so a pre-nup is probably cheaper.
Here’s what is certain; If you paid stupid amounts of money like $100+/sq ft for a house, you’ve got nothing but pain ahead of you.
Maybe he should keep it in an offshore bank account that she doesn’t know about?
That might have worked 20 years ago . . .
The IRS is onto that these days.
If you live near the border you could slowly and steadily take cash and deposit it in a Mexican or Canadian Bank. I doubt the IRS would ever know. Or if you’re really paranoid you could keep the case in a safe deposit box in one of those foreign banks.
That couple buying near Tampa may not have intended to spend much time in that condo, which is an unremarkable property in an unremarkable sprawl area. I know snowbirds who do that (I usually leave thinking that winters must be really long and bad, for this house or condo to seem good), but it just as easily was speculation.
to spend much time in that condo ??
Son & I have had many conversations about this…How much will you use this 2nd home ??
There is a new dynamic involved also…Its called VIRBO, HomeAway, B&B and FlipKey…Why be a prisoner of one place when you can pick and choose…Get some different flavors…Son and 11 other guys each year do a 1 week Palm Desert get together…Its a palace…Its got everything and incredibly beautiful…Costing $400. each for the week…
I asked my son, if you had the money would you or your peers buy a 2nd home…He said; Absolutely Not….
I have come to believe that the 2nd home market due to demographics and better options is in for continued downward pressure on prices unless it in some special area…Carmel would be an example but even there…Why buy it…Just rent it…
Exactly. Why buy it when you can rent it for half the monthly cost?
You’re catching on Dave.
“… The Cunninghams say their $160,000 investment would simply evaporate, as would their dream of spending the winter months of their golden years in Florida. ‘We’d have nothing. We would get nothing back,’ Linda Cunningham said.”
Yes. Yes, we know. Just like millions of other lemmings who believed in something that was obviously too good to be true, your investment will evaporate, your dreams will be crushed and you will get nothing back. No go track down the Realtor who sold you that shitbox and give them a great big hug.
they have pensions and you dont
Municipal workers in Detroit also had pensions… as do public employees in several soon to be bankrupt California cities… and elsewhere…
http://www.bloomberg.com/news/articles/2015-02-05/detroit-pension-cuts-from-bankruptcy-prompt-cries-of-betrayal
“Detroit’s record $18 billion municipal bankruptcy has resulted in a bitter outcome for David Espie, 58, who will repay the city $75,000 in a lump sum while his $3,226 monthly pension is cut by $216.”
Returning $75,000 he fraudulently received
Making $3,000/month for life for driving a bus for a whole 21 years. Plus a COLA. Plus free medical for life.
Yeah - he took it on the chin for a city he helped BANKRUPT.
And a nice cut and paste to you to obscure the facts.
$75,000 in a lump sum while his $3,226 monthly pension is cut by $216.”
Zillow has a glitch- they show minn,mn a -2% on one site and possitve forecast here ?
http://www.zillow.com/minneapolis-mn/home-values/
Take a look at the multiple Minneapolis zip codes going negative QoQ and MoM eating away at YoY gains.
What is the first thing a public union x00n does when he/she retires?
Moves to a right to work and low tax state…
————————–
In 2005, Joe Cunningham, a retired Philadelphia cop, and his wife Linda Cunningham, a retired school teacher, were hoping to split their retirement years between Florida and Cape May. So, they bought a $240,000 condominium in a Lansbrook Village near Tampa, paying $160,000 upfront.
“Theresa Wang has decided her home is too big for a family of two. It is listed for $3.68 million. The price tag is purposeful — the numbers 3, 6 and 8 are all considered lucky for the Chinese. ‘We actually have another property in Sands Point, and we also listed it at $3.68 million,’ said Andrew Wu, who is marketing the house. ‘We might soon list my mom’s house, and I’m thinking we will ask the same price.’”
How does somebody with Down’s Syndrome end up with so much money?