Investors Have Had Their Fingers Burnt
It’s Friday desk clearing time for this blogger. “Houston’s booming housing market is losing some of its momentum due to the steep decline in oil prices in recent months. A further slowdown appears to be on the horizon. The Houston Realtors group said sales of houses priced at $500,000 or more slowed significantly in January. Amy McGee, an agent with Coldwell Banker United Realtors in Houston, said the market has gone from being white hot to a mixed bag. One of her clients, 24 year old Robert Nolt, says he has permanently shelved his home search in Houston. He had put a contract on a three-bedroom home in Houston for $340,000 in December, but cancelled it that same month due to his concerns about job stability.”
“Mr. Nolt said his company has idled some boat crews and enacted pay cuts. His pay was cut 25%, he said. Rather than buy a home in Houston now, he’ll continue to stay with his parents in Pennsylvania. ‘I’m out of the hunt indefinitely,’ he said.”
“East Boston is definitely changing. But then along comes a sale like this one for Unit 447 in the perennially popular Porter 156 lofts to make us doubt the entire trend. The 3-BR, 2-BA, 1,389-square-foot condo with private terrace (and the rights to build a private roof deck) dropped on the sales market in September for a cool $699,000. The tag then declined steadily from there, until the spread traded late last week. After chopping its price to $599,000 in mid-December, Unit 447 closed on Feb. 6 for $575,000. Not everything in the Hub is going for way over asking.”
“In New Jersey, bank repossessions were up 116 percent in January, marking a 51-month high. ‘It’s getting worse rather than better, although for the most part, there are some exceptions in some of the New Jersey markets that are struggling economically,’ said Daren Blomquist, VP of RealtyTrac. ‘It was the highest level we’ve seen since back in October of 2010. What this also tells me is that there is more of this coming. There is also a big jump in New Jersey in these scheduled auctions, the foreclosure auctions and sheriff’s sales. That tells me that we are not through this, this is going to continue.’”
“Foreclosure activity in San Joaquin County rebounded sharply in January and is partly a reflection of a nationwide trend of a ’spring cleaning’ by lenders moving to clear problem mortgages from their books, RealtyTrac Inc. reported. Also, the bounce in home and condominium repossessions might be related to California’s Homeowners Bill of Rights. That legislation took effect at the start of 2014 and created additional delays in the foreclosure process, even as it gave mortgage holders more opportunities to keep their homes. The January rise was the first year-over-year increase in San Joaquin County repossessions following 37 consecutive months of decreases.”
“Canadian home prices have started to trend downwards in several major Canadian cities, including Montreal, Winnipeg, Calgary and Hamilton, Ont. Hamilton, which has been one of the country’s hottest markets for two years, saw prices rise 7.2 per cent since last year, but fall by 0.3 per cent in January. Other markets are well into a downswing in prices. Teranet National Bank analysts said the price behaviour in Ottawa, Montreal, Quebec City and Halifax was ‘consistent with buyer’s-market conditions.’”
“London house prices declined for the fifth month in a row in January and are forecast to keep on falling by surveyors and estate agents. One London agent, John J. King, of Andrew Scott Robertson, in Merton said: ‘A testing period between now and Easter. Vendors undecided, purchasers testing the market with offers well below asking prices. If upsizing, a good time to buy.’ His comments were echoed in the report by Christopher Green, of Curzon Land, who said: ‘I have found some sellers who will take substantial (20%) discount from advertised price.’”
“It’s not just billionaires who have seen their wealth crimped by the falling iron ore price. More modest investors who were advised to sink their money into property in booming mining towns have also had their fingers burnt. Prices in the mining regions of Western Australia are already falling and the fall in commodity prices and mining slowdown is significantly impacting on Perth and Darwin prices too. SQM Research data shows that the asking price for three-bedroom houses in Port Hedland is just over $800,000 compared with $1.3 million in 2012.”
“In Karratha, another Pilbara town, the story is similar. Asking prices for three-bedroom houses have plunged 40 per cent over the past three years, to $457,000. Some property experts recommended city investors buy houses in mining towns. Investors who bought at the top of the market have been burnt. ‘The reason for the oversupply is that you have sellers coming onto the market who are not absorbed by the buyers – so the listings increase as new listings come on,’ says Louis Christopher, of specialist property researcher SQM Research.”
“A Manhattan replica in China, complete with knock-offs of Rockefeller Center and the Hudson River, is missing that one key element that makes New York, New York: the people. The business district of Tianjin, China was billed as the world’s largest financial sector in the making when construction began on the 10-year project more than five years ago. Now, construction has all but stopped and builders have left town, leaving behind empty buildings and streets. The $50-billion project is heavily in debt and will likely remain half-completed and abandoned in a sign of China’s economic slowdown.”
“And the slowing Chinese economy will be felt the world over, including Canada, as demand for oil and other commodities drops. ‘If China’s economy continues to slow down, I think it will have a very big impact for Canada, for many African countries, and for many countries in Latin America,’ Rao Tan of Beijing’s Renmin University told CTV.”
“A leading member of the country’s economic watchdog has told how he agonises over his own personal failure to foresee the economic collapse. Prof FitzGerald said if he had properly scrutinised the balance sheets he would have determined that the banks were in trouble. ‘Not seeing the unsound nature of the banking sector was a bad mistake,’ he said, adding that he will feel regrets ‘until the day I die.’”
“He had written to the regulator twice in the first quarter of 2006 expressing his concerns about the economy’s potential exposure. His worry stemmed from knowledge about a number of Irish investors who wanted to invest large amounts of money in Poland. He described how he became suspicious as one Irish bank had a branch in Poland where investors had ‘leveraged’ large amounts of money for their investment. The banking crash, he felt, could have been prevented by prudent fiscal policy and prudent policy by the central bank.”
“The property bubble got out of control between 2003 and 2007 and became ‘a tumour which grew and grew and squeezed the rest of the economy,’ he stressed. The number of houses being built was running ahead of the population and people expected house prices to rise in the future, which made buying better than renting. This all led to the bubble. Prof FitzGerald said it was impossible to identify when the bubble became irreversible and when a collapse became inevitable. At the time, however, ‘the people of Ireland did not want to change.’ ‘The information was out there. You couldn’t miss what we were saying,’ he claimed.”
“Over the past 40 years Auckland has become a world-class city. But what will happen in the future? No one knows, today, but after two months living in Auckland, talking to people everywhere and following the local media, I have an overwhelming impression that you are living in a ‘bubble’ of inflated housing prices and affluent lifestyles. This bubble is based largely on credit and confidence that the good times will continue. It supports a new affluent lifestyle: fancy homes, flash cars, fine dining and having fun. Nearly everyone is involved, directly or indirectly.”
“In many respects, housing is special: the basis of a middle-class society. It is a major sector of the economy providing jobs and represents the main asset of most families. Today things are very different. Housing has become a financial investment and personal statement of social status and lifestyle. Everyone talks about real estate: the media pump it with news about record prices and advertising with alluring stories and pictures. Owners don’t buy houses just to live in but to appreciate in value. And banks now invest most of their money in mortgages rather than more productive small businesses loans. They all hope for (and require) the bubble to keep growing.”
“Some people say this is just the free market acting naturally and that it will adjust itself in the future. But others doubt this and worry about the human consequences. History is full of stories about bubbles that ended unhappily. If you agree Auckland’s property values and affluent lifestyle are inflated, housing is important and your natural attractions and suburban lifestyle are unique, then focus on deflating your property values/lifestyle and making Auckland a more affordable, liveable, cosmopolitan ’suburban centre in the sun’ for everyone.”
Be sure to check out the photos at the Chinese Manhattan replica article.
Amazing. In the comments section an empty Paris replica is mentioned. Where economic growth is measured by ever increasing pace of construction, and $50 billion projects like this are stopped half way and abandoned, “slowing growth” isn’t an appropriate term.
I was wondering: has there ever been such an astounding waste of resources in history? I realize wars and such might count, but this was purposeful and to no end. It makes the Egyptian pyramids look tiny.
That’s what bothers me the most. These are non-renewable resources, and they’re being squandered, and the land and water are being defiled, and for nothing. These will go down as some of history’s greatest monuments to folly. Indeed, future generations, to the extent they exist, likely will believe the leaders of this era were insane.
There’s also an abandoned, unfinished amusement park, called “Wonderland.”
http://www.theatlantic.com/photo/2011/12/chinas-abandoned-wonderland/100207/
Wasted resources count as GDP. A point I’ve made before is that if China was really “growing” as fast as we’ve been told, there wouldn’t be a brick to spare on unneeded projects. Heck there’s something like 50 of these cities. My conclusion is that China is an economic basket-case temporarily propped up by a off-shoring fueled bubble. IMO, this is a singular event; there won’t be another China flame-out.
It’s not just a waste of natural resources either. Converting your gold as it were, into rotting, depreciating, deteriorating structures is no different than converting it into casino chips. It’s a guaranteed loss.
India hasn’t apparently fully loaded up on debt. I don’t think they are possibly stupid enough now to take the baton, but I’ve been amazed this whole time.
I’ve heard two contrary, well thought out opinions on the Chinese ghost cities:
1. Urbanization is occurring at such a large and rapid scale, that even if they have overdeveloped cities, the excess will be absorbed faster than people think; and
2. Regardless of whether #1 occurs, the Chinese government is dramatically underestimating the cost of maintaining all of this new infrastructure–ultimately that will be the major problem.
Ultimately, I don’t know what will specifically cause China to crash, but I firmly believe that centrally planning an economy of 1.3 billion people is a bad idea on its face and will ultimately result in malinvestment of capital and resources. How that malinvestment manifests itself (buying of commodities at unsustainably high prices, building of ghost cities, etc.), or impacts the economy is largely unknown.
While we all dislike government manipulation in the US, it is a far more free economy than China. And ultimately, many more capital allocation decisions are made very close to the need (or lack thereof)–there far less waste if decisions are being made locally.
China’s excess housing capacity is no different than the excess capacity here in the US Rental_Fraud. Massive, growing, depreciating and a loss.
Does anyone out there have the building height to future real estate crash index / visual out there? - I lost my link to it.
Hard to imagine the mega urbanization of China continues with the construction of surplus capacity in everything stopped. Kind of like housing in Phoenix.
My goodness…Nice find Ben…That was incredible and disturbing at the same time…Who the hell are they building that for ?? Its a friken make-work project…
My take away is that it stopped. Oil price collapsed, iron, coal, copper. No mystery, it was all fake.
Why does a culture that’s thousands of years old want to replicate some noob?
‘Irish Economy Boom & Bust: We wonder if conventional wisdom could be fooled again following this week’s dramatic acknowledgement by an economist of unimpeachable professional integrity, that both he and Ireland’s leading economics think-tank were “totally wrong” in May 2008 when an assessment was made that the “Irish economy is resilient in the face of adverse circumstances” and “the fundamentals of the Irish economy are sound.”
‘Prof FitzGerald in his opening statement [pdf] did cite economic warnings made by the ESRI during the bubble years but what was shocking about the testimony was that the economist had found himself as a ’soft landing’ hopeful along with the commercial economists and some academics who had made handy earners [apparently €5,000 a pop] writing ‘economic assessments’ to accompany developers’ planning applications and puff pieces for mortgage lenders.’
‘John FitzGerald acknowledged at the Banking Inquiry that he had not given sufficient attention to the banking situation even though he was aware that the Central Bank and financial regulator were effectively incompetent.’
‘In an impressive display of candour, a leading Irish economist has admitted his lasting regret that he gave an upbeat forecast on the Republic’s economy in the early stages of the credit crunch.’
‘Professor John FitzGerald, who was an ex-chief at the Economic and Social Research Institute (ESRI), said no one else was to blame for his blundering assessment.’
‘It is refreshing to hear such rare and public self-criticism. There has not been much of it during or in the aftermath of the credit crunch here or elsewhere in Europe or in America.’
‘In Northern Ireland, for example, our housing crash was every bit as bad as the Republic (property prices collapsed by 50 to 60 per cent on both sides of the border). But there are not many signs of Stormont examining that disastrous housing bubble and trying to draw lessons from it.’
‘The property boom was talked up by estate agents and by bankers. And a further tier of people who ought to have been disinterested observers, such as politicians and the media, failed to see what was happening and to denounce it.’
‘Many hundreds of thousands of people in Northern Ireland were happy to grow rich in their homes due to soaring house prices, funded by a younger generation of home buyers paying multiple their incomes to get on the housing ladder, having been told by their elders that “you can’t go wrong with property”.
‘If anything was rich for denunciation by clergymen, it was this frenzy, but there wasn’t much sense or concern in 2006 that the bubble would burst.’
‘It did, and when it did, few people admitted any blame.’
This is interesting in its affect on the Chicago Lakefront - Irish developer named Gallagher pulled out when he went bankrupt several years back and left a gigantic hole - the very apt symbol of everything that went wrong in the RE run up……
“He had written to the regulator twice in the first quarter of 2006 expressing his concerns about the economy’s potential exposure. His worry stemmed from knowledge about a number of Irish investors who wanted to invest large amounts of money in Poland. He described how he became suspicious as one Irish bank had a branch in Poland where investors had ‘leveraged’ large amounts of money for their investment. The banking crash, he felt, could have been prevented by prudent fiscal policy and prudent policy by the central bank.”
As a result…. A gigantic 100 ft. deep hole off the Chicago River at the lake front here in Chicago for what was to be the second tallest building in the United States - designed by S. Calatrava blew up when the Irish developer went bankrupt and abruptly pulled out during the RE crash.
One proposal is this…..
http://www.chicagonow.com/dennis-byrnes-barbershop/2014/11/for-information-on-my-award-winning-historical-novel-madness-the-war-of-1812-visit-httpwww-madness1812-com-like-the-barbershop-you-can-subscribe-to-it-by-typing-in-your-email-address-in-t/
Another set is here…..
http://www.designboom.com/architecture/6-proposals-to-replace-the-worlds-second-largest-tower-that-never-was-1-31-2015/
I like the one with the birds swirling around - that seems to be a very apt conclusion to this whole mess - it has all gone to the birds!!!
Wasn’t this supposed to be 200 stories? I have a friend in Chicago who was sending me photos.
While I’ve lived in a high-rise that was a fraction of that height, I don’t see the appeal of living that far off the ground. A long time ago, I had a January interview high up in the Sears Tower. So high up, in fact, that inclement weather was below me. I looked out a window and it was like being in an airplane, sunny skies over solid clouds. Down in the street it was snowing.
yep - over 200 floors actually - it was scheduled to be one of the tallest structures in the world. Looked like a twisted pickle or a uterine vibrating device aka a dildo - this project had the markings of dildo all over it!!!
so at 200 + floors at 12ft floor to floor min for structure, mechanicals etc. structure would have been just at 2400 ft. tall. Yikes. and the with wind on the lake - the sway factor would have been worrisome if living there on the top floors.
‘When Liu Chuang landed in Vancouver in 2013, he noticed that most of the Chinese immigrants he met were heavily invested in residential real estate and hungry to diversify. Flipping houses didn’t appeal to the 39-year-old entrepreneur, who is launching a Vancouver-based tech incubator to help his Chinese-born friends invest in local start-ups.’
“The Chinese I know … they’ve already bought quite a few houses, they really don’t want to buy any more,” said Liu, who was also born in China and co-founded venture capital firm Nextplay Ventures. “Now they want to invest in technology or other industries that can give a good return on investment.”
‘Liu represents what real estate agents, lawyers and immigration consultants say is a transformative shift in where wealthy Asian individuals and families, primarily from mainland China, place their money in British Columbia, the West Coast province.’
‘With the Vancouver market looking pricey, many of these investors are seeking other opportunities. “The days of parking capital in five houses in Vancouver have passed,” said Richard Kurland, a local immigration lawyer.’
“Immigration consultant Alex Liao said he has clients looking to spend at least $20 million to buy a well and set up a bottling plant to export mountain water to China, where the economic boom has also meant higher pollution.
“One of my clients is exporting – I cannot believe it – 200 container loads of mineral water from B.C. to China every single month,” said Liao. “Lots of people, right now, are buying wells.”
So the days of investing in poorly-thought through, perpetually-unprofitable companies have arrived? Here comes the dumb money!
‘Foreign property buyers are set to be hit with stiff application fees to help the government monitor illegal purchasing and prevent distortions in prices. The federal government is also on the cusp of announcing fresh measures on investigations, penalties and enforcement, due to be released in coming days.’
‘The controversial crackdown comes as Treasury confirmed on Monday that it had conducted 33 investigations into suspected illegal purchasing of property – and found most were compliant. In other cases, they were in fact legal under current laws because the homes in question were bought by an Australian citizen or permanent resident.’
‘Concern emerged last year that cashed-up offshore buyers, including from China, have been driving up prices in an already overheated property market, particularly in parts of Sydney, triggering fresh calls for a crackdown on illegal activity.’
‘In some circles, the lack of prosecutions in recent years is seen as a sign that the current laws and compliance systems are too weak. The focus on foreign buyers has been heavily criticised by Labor’s Ed Husic, who has accused the government of undertaking a tax grab at a time when foreign investment in new dwellings is helping keep the economy afloat.’
‘The committee also said off-the-plan schemes marketed overseas should be advertised in Australia, and that criminal penalties should be applied to real estate or other advisers who knowingly help foreigners breach local rules.’
‘According to the report, Treasury has not made any successful prosecutions of FIRB residential real estate since 2006. There were 17 divestment orders between 2003 and 2007.’
‘One of the final defendants in the mortgage scheme that played a role in Bakersfield’s housing collapse learned his fate today. Jerald Teixeira was sentenced to three years probation and approximately $1,078,000 in restitution.’
‘Teixeira was a former loan officer for Crisp and Cole’s lending company, Tower Lending.’
I wonder if the houses they played with have been foreclosed and resold yet.
Last week in the Sacramento area, one of the houses Cynthia Lorica and Edwinna Firmeza financed in 2007 finally sold at auction. Cynthia & Edwinna became tenants of the feds for a while and owe huge restitution.
Here is a bit of irony: the loan servicer turned down direct offers of nearly $600,000, forcing the sale to go through their own auction house. Price? $500,000…..plus another 5% or $25,000 to the auction house!
You’re the proxy Jingle_Fraud. Let us know what they pitch your $hit out the front door.
Here is a bit of irony: the loan servicer turned down direct offers of nearly $600,000, forcing the sale to go through their own auction house. Price? $500,000…..plus another 5% or $25,000 to the auction house!’
125K that’s real money. well maybe not to bankers
The ladies collected $30,000 a year in rent for 7 years and never made the first mortgage payment, due May 1, 2007. They walked with $200,000….until they went to the Dublin California federal prison for women. Lorica will likely be deported to the Philippines. Firmeza became a citizen, so she can stay and pay $1,000,000 in restitution…..
unless a defendant has hard assets to execute against, many times these restitution claims go unpaid. a lot depends on who holds the judgment, the feds, or a state.
I have two clients with multimillion-dollar restitution judgments against them from the feds. once the feds establish that there is nothing to execute against They close the file and send it to the IRS to treat as a discharge of debt income item which may or may not be taxable.
states are generally more aggressive in pursuing restitution where the defendant holds no hard assets.
“Crisp and Cole.”
Now that’s a throwback to the early days of this blog.
‘When it comes to buying property in the UK, London has always been the exception rather than the rule. Just as estate agencies are generally able to predict which way the market is going, there’s always something extra to think about when it comes to the capital.’
‘Recent research from property experts has shown a drop in demand for property in most if not all central boroughs. Data shows the greatest decline in demand in the UK was in the central London borough of Westminster, which experienced a drop of 42%.’
‘Other poorly-performing London boroughs were Hackney, Tower Hamlets and Newham. These neighbouring suburbs experienced something of a boom in the lead up to the 2012 Olympics, but demand has slumped in recent months.’
‘Russia is teetering on the edge of a recession thanks to a plummeting oil price, western sanctions and a crashing rouble. Suddenly London’s property market is not as attractive to many of Russia’s super-rich, who have been selling up in droves. Without foreign investors to inflate the London property bubble, prices were bound to drop.’
‘Robert Shiller has a new source of concern. In the new edition, due out later this month, Shiller adds a fresh chapter called “The Bond Market in Historical Perspective,” in which he worries that bond prices might be irrationally high. Noting that interest rates (which move inversely to prices) are extremely low given historical norms, Shiller writes: “The U.S. bond market, showing such low yields, looks as it if may have gone through something of a bubble, and may collapse further, eventually.”
‘Shiller said that if bonds are in a bubble, it’s not sort of a gleeful frenzy that the word tends to conjure images of. For Shiller, a bubble is “a social epidemic of enthusiasm and excitement spread by word of mouth, attracting more and more investors in a market. But I don’t know that the bond market is really driven by excitement. Excitement of sorts-but it isn’t so optimistic. I think it’s mixed with a tinge of regret about ‘Why am I getting such low yields?’ ” So what’s driving yields so low? Central banks have served a role by buying fixed-income securities, but he says there’s more to it than that. “The story is longer and deeper than that; it’s not just central banks,” Shiller said on Thursday. “It’s something about our investment opportunities and our fears and our culture, so it’s a very deep phenomenon. And the question in my mind is: Will it last?”
‘Not likely, says Shiller, given that many long-term bond yields around the world are fast approaching zero on an expected inflation-adjusted and even nominal basis. “We can’t go below zero, not far below zero,” he said. “it seems to me this ‘new normal’ culture could last, but then it could crash.” “I think it’s a risky time to be investing in long-term fixed income,” the economist said.’
‘Still, that doesn’t mean that a crash in bond prices is around the corner. “Yields have been trending down since 1981, over 30 years now,” Shiller added in an email to CNBC on Thursday. “There could be a major turning point again in coming years, but I see no reason to think that such is imminent.”
“Yields have been trending down since 1981, over 30 years now,” Shiller added in an email to CNBC on Thursday. “There could be a major turning point again in coming years, but I see no reason to think that such is imminent.”
In other words, imminent. Shiller’s @ss-covering is way too easy to identify.
Fort Lee, NJ(Manhattan Metro) List Prices Plunge 20% As Traders Bail Out Of Housing
http://www.zillow.com/fort-lee-nj/home-values/
Imagine how it would feel to you to be an investment guru who charges large fees to his clients - fees that can only be justified by a hefty return on the client’s investment capital - but there is no way to get a hefty return on this capital without taking enormous risks.
What is one to do?
1. Prudence says you should act to protect your client’s capital by avoiding enormous risks (but you will still need to eat and if the client yanks away his money from your clutches because he is not getting a good return then you will starve), or …
2. You will subject your client’s money to enormous risks.
Money managers who opt for number 1 will eventually end up leaving the business, which means eventually the only money managers that will be left will be those who opt for number 2.
And if all the money managers opt for number 2 then you will end up with a market that has embedded in it some enormous risks.
The problem with number 1 is that the enormous risks are still there, just not recognized.
I’m starting to feel like the bond market is the equivalent of the late 2005 housing market.
I’m hearing more and more supposedly smart people talking about global overcapacity, lack of demand, etc. leading to longer-term low rates for the “foreseeable future”. These comments are the same as “permanently high plateau, paradigm shift, etc.” comments about the housing market in 2005.
In other words, people are trying to rationalize why this time around is non-cyclical, and there won’t be forces pushing toward a reversion to the mean.
The only thing that I’ve seen that might make this LESS-cyclical (not non-cyclical) is demographics. Pension funds are looking for current cash flow, so are retirees–in greater and greater amounts/numbers. This might make the next 20-years have generally lower rates than the 20-years leading up to 2005, but it doesn’t have any bearing on mean-reverting forces that will eventually push yields up.
They’re late to the party Rental_Fraud. And so are you.
‘The country’s largest private mortgage insurer says it expects rising losses on its portfolio of Alberta mortgages this year and is more heavily scrutinizing new applications from oil-sensitive regions of the province as low crude prices weigh on Western Canada’s housing market.’
‘Genworth MI Canada Inc. is raising its target loss ratio, a measure of claims paid compared to premiums earned, from 20 per cent to 30 per cent on expectations of rising unemployment and a 3-5 percent drop in Alberta home prices.’
“Clearly, the current environment, specifically the low oil prices, will put some pressure on losses and potentially the size of the housing market in Alberta,” Stuart Levings, Genworth’s president and CEO, prices, told analysts during a conference call to report its fourth-quarter earnings Wednesday Alberta represents a fifth of the company’s mortgage insurance business, although the province accounted for 27 percent of new insurance premiums written last year. The bulk of Genworth’s Alberta portfolio consists of insured mortgages dating back to 2012 and now average 20 percent equity, offing a buffer against “a moderate downturn in house prices,” chief risk officer Craig Sweeney said.’
‘It is also watching the Ontario housing market, where it sees “a modest degree of overvaluation” in prices of single-family homes.’
‘Genworth Canada’s stock has plummeted 25 percent since November, when ratings agencies began downgrading the company’s major shareholder, U.S.-based Genworth Financial, to junk status.’
“the Ontario housing market, where it sees “a modest degree of overvaluation”…
You have to have thick Canadian glasses on to say such a thing.
Here’s a town in the heart of Ontario’s Upper Canada region. Post railroad hub, post Hersey’s Canadian HQ, now simply dreary middle of nowhere. And here is the cheapest 60 year old “bungalow” for sale in the whole region. It’s on par with cabins I rent on remote fishing trips, but it’s only close to a drug deal. Overpriced by at least 400%.
http://www.century21.ca/yourchoicerealty/Property/ON/K7A_4S4/Smiths_Falls/110_CASSELLVILLE_Lane
They must have spent a fortune on the staging furniture.
BTW, what kind of fishing do you do up there?
My cruising buddy lives in the vicinity of Smiths Falls. When I’m really going fishing I head up along the Ontario/Quebec border to Temagami for Pike, walleye (pickerel) and bass. Where my dad and went in Southern Ontario years ago isn’t undeveloped anymore.
The photos online look like good fishing!
http://www.temagami.ca/
Says -22 C right now.
Paradise for a few weeks of the year! (if you pick the right weeks)
http://canusavacations.ca/
How are the mosquito’s? I’ve seen old footage of pike fishing. Man, I could do that all summer.
I love to fish for Pike. I caught one 42 in when I was 12 and have been addicted since. Mosquitoes are worst in the early part of the season. Black flies will make you drop your gear and run for your life if you are onshore and not properly covered up. The trick there is to go after the dragon fly hatch. They eat the little buggers. I like the end of August for that reason, plus the water is warmer. I’ve also been up there when it was snowing in early July.
Oh, and on the mosquitos, they are not a problem in the sunshine or nighttime really. If you return to the dock just at sunset you will not be comfortable, and you won’t want to stand outside at the grill. An hour earlier or an hour later is OK.
Sounds like a blast. If you ever need someone to fill out a boat up there I’ll buy the beer.
You guys head east a few hours and get on the Sacandaga. An old frenchman lumberjack holds the North American pike record out of that lake. It’s a big assed lake so if you’re looking for daily pounds you might be out of luck but you stand a chance to hit a monster. My 90+ year old father always told me there were man eating pike in there and I chased them while spending summer weekends on lake waterskiing and drinking beer. FWIW, legend has it that divers observed a 6+ footer in there back decades ago.
If you like catching pike after pike all day long, head a little an our north of the Sacandaga and hit Pyramid and Paradox lakes. 3 to 4 pounders one after another.
You’d be welcome. Your own bunk but not your own room. We mustn’t talk economics. You’d be offline for a week. Shure you could handle the withdrawal?
Absolutely. My fishing skills are a bit rusty living in Arizona, but I used to be pretty good at it. There was a time when I’d fish every extra day I had, dawn to dusk. It looks like there’s a variety of fish to go after:
https://www.youtube.com/results?search_query=temagami+fishing
“staging furniture”
Ya got me Ben.
Thought it was gonna look like HGTV. $85K, no way. At $60K it would make a nice Oil City house in southern Appalachians, but up there… is that unusable in winter?
‘In the last several years, the presence of foreign buyers has helped the housing market in its resurgence. There are signs, however, that point to this trend slowing dramatically. The stronger dollar makes U.S. housing more expensive to foreign investors, especially for those in Europe where many economies are struggling. Russian buyers are especially having a hard time as they face plummeting oil prices, a weakening ruble, as well as international sanctions. According to the California Association of Realtors, the number of sales to international clients has dropped about 25%.’
‘Along with foreign buyers, institutional investors also played a large role in the housing market’s recent recovery. They bought up thousands of properties and turned them into rentals. But because home price increases have slowed, the timing is looking right for these investors to cash out and see significant returns on their investments. According to RealtyTrac, for those institutional investors who purchased a home in 2012, they could see a 38%-43% return if they sold now. This also means that far fewer institutional investors will be buying this year.’
‘While many experts are predicting the mortgage rates to stay fairly mild this year, hovering around 5%, there are no guarantees. The Federal Reserve, which sets the bar in this regard, could very well come out with something much higher than people are expecting. Stan Humphries, chief economist from Zillow, says that if rates climb to 6%, it would mean that home buyers in high-priced markets would be spending more than half of their income on housing. This could stall the market if home prices don’t then drop to something more affordable.’
‘Even though most people are applauding the strengthening job market, income levels are still not increasing at the same pace as housing prices. This disparity in growth, coupled with rising mortgage rates and tight lenders, could make it extremely difficult for home buyers to be able to afford a home in the city they want to buy in.’
‘The housing market is not all doom and gloom, but it is important to educate yourself on the state of the market and what factors are at play in determining where it is headed. If you are thinking of selling or buying a home this year, a great place to start is by finding an experienced real estate professional who works around the clock to match up the perfect home with the perfect buyer.’
“……If you are thinking of selling or buying a home this year, a great place to start is by finding an experienced real estate professional ….”
Here is a much better suggestion:
READ THE HOUSING BUBBLE BLOG!
http://www.limeminds.com/wp-content/uploads/2014/08/When-to-sell.png
Get to it Jingle_Fraud.
‘The Phoenix housing market for year 2014 will go down as flat with single-digit appreciation, and for some areas no increase at all. The demand for homes to buy is weak while the demand for homes to rent is strong. Reasons for weakening demand are: Investor buys dropped by 41 percent in 2014 from 2013. Owner occupier buyer up only 0.3 percent. One in four former owners still unable to purchase due to short sales or foreclosures. Over 365,0000 lost homes to short sales/foreclosures.’
‘Lending still very tight with lenders very risk averse. Average FICO score for closed loans at 754. Income and wealth disparity increasing with very slow income growth in Phoenix, 0.9 percent for Phoenix 2011-2013.’
‘According to Michael Orr, director of the Center for Real Estate Theory and Practice at Arizona State University’s W.P. Carey School of Business, as quoted from his “Greater Phoenix Market Report” dated Jan. 21, 2015; a big factor in weak demand for purchasing is millennials are not buying homes like their parents did.’
The reason for weakening demand is simple: price. There was an unsustainable multi-year double digit increase runup since 2011-12 and people know it. They now see prices dropping as the speculator fools are shaken out and at least 1/3 of the demand side is gone because of this. They know that price drops are increasing and accelerating.
‘In just about any metro area in the U.S., investors, developers, and builders are scrambling to keep pace with the surging demand for multifamily housing, especially rental apartments.’
‘An estimated 351,000 multifamily units were started in 2014, up nearly 14% over 2013 and more than double the 6.6% growth rate for total housing starts last year, according to the National Association of Home Builders. In Nashville, multifamily completions jumped about 70%, according to commercial real estate brokerage Marcus & Millichap. Completions in Seattle were at their highest level since 2000. Dallas’s 19,000 completions led the nation, with Austin, Texas, and New York City, each with 14,000, hot on Big D’s heels. Phoenix’s 4,900 units might finally make a dent in a vacancy rate that in 2014 was as low as it had been in seven years.’
‘As of mid-September, multifamily comprised 3.5% of outstanding bank loans, its highest share since 1992, according to American Banker magazine. About 90% of recent multifamily construction has been rental apartments.’
‘Capital is rushing into this sector in search of rich returns on investment. Through the first 11 months of 2014, Atlanta-based Carroll Organization purchased a dozen multifamily properties valued at more than $500 million. Michael Massie, Executive Vice President of The Picerne Group, a private REIT, says valuations “are taking off” in Southern California, “and that gives us confidence to invest in those markets.” Between March and September, Picerne broke ground on three mid-rise communities with a total of 676 apartments, including the first new multifamily project to be approved in Cerritos, Calif., in four decades.
Tom Brink, AIA, LEED AP, a Vice President with RTKL, points out that developers are demanding much higher densities from apartment buildings. “Apartments as skyscrapers [are] proving to be serious architecture,” says Brink. He also says there has been a surge in mid-rise districts and neighborhoods requesting new height limits, and far greater use of steel versus wood, to increase heights and densities, as well as to save time and labor.’
“If someone tells you that the desirability of urban life is waning, don’t believe them,” adds Arden Hearing, Managing Director of Trumark Homes’ Trumark Urban division, which has seven condominium projects in the works in San Francisco.’
‘It’s a similar story in Houston, which Scott Ziegler, AIA, Principal with local design firm Ziegler Cooper, says is experiencing something of an urban renaissance. (Sperry Van Ness reports that half of Houston’s 11,000 multifamily deliveries in 2014 were in urban submarkets.) Ziegler Cooper’s recent work in that metro includes seven apartment towers, including the 28-story, 361-unit Catalyst in Houston’s central business district, which broke ground last summer, and will feature high- and low-rise apartments (the latter forming a streetscape). Ditto for Dallas, where the firm designed the 507-unit Preston Hollow Village, a 42-acre complex that offers three apartment types—850 sf for Millennials, 1,150 sf for young professionals, and 1,600 sf for empty nesters.’
‘Many renters may aspire to live in or close to downtown, but that lifestyle doesn’t come cheap. A significant percentage of prospective renters are in a financially fragile state, and their housing options are narrowing as more and more developers and investors slavishly pursue deep-pocket customers.’
“Most high-rises being built today are luxury,” says Robert Hidey, President, Robert Hidey Architects, Irvine, Calif., which has worked with most of the big multifamily builders in California. Gilbane’s Cava calls the luxury segment “definitely one of our focal points.” To attract these customers, he says, high-end properties must offer such amenities as infinity pools and upgraded design features in common areas, such as $25-30/sf flooring.’
‘Bruce Percelay, Chair of The Mount Vernon Company, a Boston-based developer and property manager, acknowledges that “there’s a ton” of luxury apartments being built, but he would like to see more rental that’s directed at the middle class. “Right now, we’re in a crisis because construction and land prices [militate against] building for the middle class,” he says.’
Ben - A related article as to why it is that the apt ‘boom’ is going on….cheap, cheap money is what is going on - this is a chase for yield - supply / demand means NOTHING to any of these shills considering that 80+ percent of the debt is held by Freddie……
Take a moment and read on….
https://confoundedinterest.wordpress.com/2015/02/12/rentership-society-alert-freddie-mac-catching-fannie-mae-in-apartment-boom-fed-helping-drive-up-home-and-apartment-prices/
such as $25-30/sf flooring ??
I think someone here suggest you could almost build a entire house for that…Which tells you how asinine it is…
^ I think someone got ripped off by a general contractor.
‘The appeal of so-called shoebox condos — no larger than the size of two average living rooms — will face its first real test in Canada this year, with an influx of the compact homes set to hit the country’s largest real estate market.’
‘Investors are betting on big returns from young renters who can’t afford to buy in the red-hot real estate market and don’t mind living in a unit, about 500 square feet, where their dining table might have to fold down into a bed.’
‘Although developers are pitching micro condos as an affordable entry point into the market, brokers say it’s mostly investors — catering to a demographic of young professionals increasingly flocking to the downtown core — that’s driving demand.’
‘There are nearly 3,000 micro condo units under construction in Toronto that are slated to be completed this year, Hildebrand says. If investors snatch them up, that could spur developers to build more of the micro units to satisfy demand from investors. “This is something that the market and developers are going to be paying very close attention to in 2015,” Hildebrand said. “Sometimes we don’t know how strong demand is until we’re shown the supply.”
‘The challenge comes in securing a mortgage for the micro units. Brokers say Canada’s five biggest banks are hesitant to provide financing for units below a certain minimum square footage, concerned that investors will sell off the properties if the housing market starts to slide.’
“If there’s a downturn in the housing market, is the lender going to be able to sell and recover the mortgage financing they provided?” said Christopher Molder of Axess Mortgage. “Because these units under 500 square feet are relatively new, no one’s tested the market to see how desirable they are.”
‘Ziel Feldman’s HFZ Capital Group is planning on turning The Shore Club in South Beach, Florida, into a five star hotel and condominium The Real Deal Miami reported. Meanwhile a $46.5 million triplex penthouse at his firm’s The Marquand at 11 East 68th Street in Manhattan has been sitting on the market for months.’
‘The Shore Club currently has 309 rooms. Feldman plans to turn it into a 100 room hotel with 75 condominiums. The condominiums will start at $2 million and Feldman says that 20% of them are already sold.’
The epicenter of the crash is Ft. McMurray Alberta. Job losses are piling up because of the oil price crash. 2000 just yesterday. Out of a population of around 80000 there are just under 1100 houses for sale and climbing. Calgary and Edmonton are equally screwed. Check out the asking prices to live in this barren sub-arctic wasteland. I know, I lived there for 2 years a long time ago.
http://www.kijiji.ca/b-house-for-sale/fort-mcmurray/c35l1700232
http://www.kijiji.ca/v-house-for-sale/fort-mcmurray/60k-below-appraised-value-one-of-a-kind-home-in-eagle-ridge/1051130186?enableSearchNavigationFlag=true
Seller is a licensed Realtor in the Prov. of AB.
Date Listed 12-Feb-15
Price $999,900.00
Houses are kinda close together.
These stupid prices reflect a government that used the agency of the Canada Mortgage and Housing Commission (CMHC) to insure houses up to 1 million cdn. The banks didn’t care, they are covered by the taxpayer if people default. Ft. McMurray is a cold smelly boom town with zero redeeming qualities save very high paying jobs. At least until recently. This story is starting to play out in a number of other centers across Canada from Newfoundland, the Maritimes, Quebec, most of Ontario, outside Toronto (GTA) Manitoba, Saskatchewan and central B.C. The media is not looking, the Governments are not talking and the people are as stupid as ever.
I saw this yesterday:
‘You have to feel for the national media who swarmed here when the price of oil started to tumble, praying they’d be able to catch a glimpse of Fort McMurray’s downward spiral into total economic ruin.’
‘After all, our fair town had been the object of so much derision and attack over our supposed horrid living conditions, made all the more puzzling by the continued emigration of Canadians from all across the world for the purpose of making a living in our northern paradise, that it seemed the ingredients were right for swaths of workers to return to their old homes, and leave local business without a customer in sight.’
‘Almost gleefully did the Globe and Mail proclaim that “the place has gone dead,” claiming to quote a local restaurant owner’s impression of the state of our fair municipality.’
http://www.fortmcmurraytoday.com/2015/02/05/the-price-of-oil-has-fallen-the-sky-hasnt
From the comments:
‘To some degree, you’re right, Tyler. The news about our demise as a city that other media outlets so gleefully announce is just a tad bit overstated - wishful thinking on their part. Dramatic headlines they are, created only to sell newspapers and tacky current affairs magazines.
Where I beg to differ, though, is that bit about this latest slowdown and the opportunity it now presents our region. That was the same line tossed out seven years ago during the last downturn in the latter part of 2008. Just like the news stories about the demise of Fort McMurray, we were assured then about all the contractors and an abundant labour pool, ready to dive into all those construction projects our city so desperately needed developed.’
‘As is heard today, our Mayor’s “reasonable and rational commentary” back then was presented in a reassuring tone (as it should have been), only to be followed by a less than desirable path we saw City Hall marching down, precipitated by the hiring of what another commenter (wbauditarchive) so eloquently describes as the Mayor’s “Confidence Men.” The results were overly ambitious dreams and magnificent projects clouding the minds of the political class downtown, perhaps blinded by the potential titles of legacy bestowed upon them.’
Another:
‘Excellent column Tyler. Yes Globe and Mail and CBC news have had an Archie Bunker look at Fort McMurray. The CBC one I like the best…we should frame it.
CBC Edmonton Reporter who only like to interview drunks and escort ladies as representing Fort McMurray last week said that you can tell when Fort McMurray is suffering when patrons to Fort McMurray bars no longer drink PREMIUM VODKA but now drink cheaper vodka…sure signal of downturn.
Well bless me dog and pony, Martha, aint that quaint?? Pass the MOONSHINE Martha!
And calling it Fort McMoney?? Never heard that.
And The Oil Patch? Never heard that either..if it is its the biggest patch in North America.
Some folks from CBC actually think they are journalists. They trash Fort McMurray all the time. Suzuki called all of us..” idiots who live in a hole in the ground..” Nice guy.
I think they escaped from the Winnipeg Comedy Festival.’
That’s all a reflection of the, “it’s different here”, mentality. I lived up there in 1981-83. I was looking at some street shots in the paper today and the downtown looked the same. They still use a 2 lane highway to get to Edmonton, 300km. south. They pulled billions a year out of that stinking moonscape and put nothing back. Now the locals will lose their shirts. The Alberta government is cutting 9% across the board in spending. It’s broke as well. All that money, all that pollution.
A “northern paradise”? Would it still be paradise without high-paying jobs? It just as easily could become a cold version of hell.
‘Well bless me dog and pony, Martha, aint that quaint?? Pass the MOONSHINE Martha!’
Canadians are funny when they get mad.
Rosie
Agreed. Our problem is not just western oil “patch” (although that “patch” is probably bigger than most countries), but the Alberta first policy (understandable) for jobs. Nfld, NB, NS, PEI all already are being affected and it will snowball if oil stays around $50. I hope everyone paid cash for those fwd.
The real problem for them is they have a developed O&G industry in their own yards but most of that work is going to the US as well as almost all of the product.
Oh well, if Keystone doesn’t get signed maybe the East Coast will insist on all those tankers putting into their ports first ! And instead of shutting down the Imperial refinery, process it there and send it by rail to the US.
Or, have all that fish caught in Canadian waters processed in Lunenberg once again - instead of China ! to be sent back here !
Check out the asking prices to live in this barren sub-arctic wasteland.
That always confounded me. It’s not like there was a shortage of land. And the weather … compared to these places, Denver is Miami.
If CMHC had limited insurance on mortgages up to $500,000 that house would be $499,900. The Conservative government did all of this. The buyers, stupid sheeple that they are, thought these prices are normal.
Rosie
You should have driven that road before it was paved - huge improvement today.
No more broken windshields.
No frost heaves? When I drove the AlCan Hwy in 2001, those frost heaves were a terror. Hard to see before it’s too late. But I understand about the rocks. If it was gravel and a big truck coming the other way passed me and I was on the outside of a curve, it would spray me with rocks. I had a cracked windshield AND cracked sunglasses, before I learned to roll up the window in those situations.
The worst though was the washboard road effect. The only way I made it was to go fast enough that my tires bounced along the top of each rib.
LOL.
I know the washboard effect from BC logging and power station access trails - always keep good power on, or you start to spin on steep grades. The fun part was on returning the rental car !
BRAND NEW 2014 FOUR bedroom, 2 bathroom Moduline Silverwood Orlando manufactured home with land. Corner GAS FIREPLACE with mantle in living room.
Only $417, 900 and it has a MANTLE! Oh Canada!
Nice post…Thanks Rosie…
“then focus on deflating your property values”
Sale Prices Plummet 41% In Exclusive Dallas, TX Suburb
http://www.zillow.com/southlake-tx/home-values/
“Mr. Nolt said his company has idled some boat crews and enacted pay cuts. His pay was cut 25%, he said.”
“His pay was cut 25%”
Ouch. There’s a big chunk of spending that suddenly went poof.
Except maybe it’s worse than that; Maybe some anticipated earnings was spent - anticipated as in borrowed, borrowed from tomorrow - and this anticipated earnings, this borrowed money, acted to support the economy (an economy that grew to depend on borrowed money as well as earned money) and now that large chunks of both earned money and borrowed money may be going poof at the same time the economy that depended on all this money flowing into it is sort of … is sort of hosed.
The joy of spending today what money you earn today and also spending today what money you anticipate you will earn tomorrow turns to despair when what money you earn today gets yanked away.
And this despair strengthens when you not only can’t spend what money you thought you were going earn today and earn tomorrow but it also strengthens when you have to pay back to the lender the money you borrowed from tomorrow.
Which means you will have two bills to pay: You will have today’s bills you will need to pay today and also you have the bills borrowed from tomorrow that you will need to pay today.
‘Also, the bounce in home and condominium repossessions might be related to California’s Homeowners Bill of Rights.’
Moratoriums nor other price fixing measures will prevent housing prices from cratering. Not in CA. Not anywhere.
Monterey County, CA List Prices Plummet 20% In 2014 As Defaulted Properties Hit Market
http://www.zillow.com/monterey-county-ca/home-values/
‘East Boston is definitely changing.’
meanwhile down the road…
Sellers Slash List Prices 33% In Concord, MA As Sale Prices Fall Statewide
http://www.zillow.com/concord-ma/home-values/
‘R.I.P., inflation. You had a good run, but it’s over now that prices are rising less than 1 percent in the United States, United Kingdom, Europe, China, and Japan.’
‘Now this isn’t the first time that inflation has died. The Black Death killed it, along with a third of Europe’s population, for most of the 1400s. Then it came back, but disappeared again every time there was a big financial crisis: in the 1830s, the 1870s to 1890s, the 1930s, and 2009. This last time, though, was different—well, at least at first. Prices only fell for a very little while before inflation rebounded back into positive territory. No, it never got that high, but the U.S. and U.K. were able it to keep it from falling too far below their 2 percent inflation targets by buying bonds with newly-printed money. Even Japan, which had been stuck in deflation for decades, was able to get its price rising again when it started doing the same.’
‘But then oil prices started falling, and inflation did too. You can see that in the chart above: outside of Europe, inflation was between 1.5 and 2.5 percent before crude collapsed, and it fell below 1 percent everywhere. Now this is good and bad news. The good part is that lower oil prices put more money in people’s pockets for them to spend. But the bad part is why oil prices are so low. Sure, a lot of it’s about the new supply that’s come online from fracking. But economist Jim Hamilton estimates that 44 percent of it is because of decreased demand. The global economy, in other words, is slowing down again.’
‘The problem is credit bubbles. Just when the world gets over one of them, another one bursts and drags everyone down again. Japan’s popped first in the early 1990s, and it’s never fully recovered from it—though it’s trying harder now. Then there’s Europe, which, with its debt, deflation, and 11.4 percent unemployment, is well on its way towards becoming the next Japan, or worse. The U.K. is just beginning to bounce back from its own burst bubble—its premature austerity didn’t help—but the foundations of its recovery are still shaky. The U.S. has, believe it or not, done better than almost every other post-bubble economy (which doesn’t mean it couldn’t be doing even better with better policy), but now its relative strength has become a weakness as the dollar has gone up too much. And finally, China is starting to look a little wobbly itself now it’s substituted its export-led growth model for a credit-led one. It has its own housing bubble, and shadow-bank-fueled debt explosion, up 75 percent of GDP, that sure looks unsustainable.’
‘Put it all together, and you get falling demand that’s turning into falling inflation.’
“Some property experts recommended city investors buy houses in mining towns. Investors who bought at the top of the market have been burnt. Prices in the mining regions of Western Australia are already falling and the fall in commodity prices and mining slowdown is significantly impacting on Perth and Darwin prices too.”
____________________________/
What the hell kind of expertise is that? Western Australia is very remote as it is. Even Perth feels like the end of the world. The Kimberley area is known for blistering heat, not million-dollar houses.
And let me guess. The city investors’ mining town real estate purchases were made using borrowed money. The world economy has built the most ornate debt-driven house of cards ever, a veritable Alhambra. Oh how pretty. It will fall down just the same.
‘And let me guess. The city investors’ mining town real estate purchases were made using borrowed money’
Not just that, but the really savvy ones are cash flow negative:
“The fall in the price of iron ore has ended an era of astonishing rents in the Pilbara, according to local MP Brendon Grylls. In one of the starkest signs yet that the resources boom is over, a house in the Pilbara mining town of Port Hedland was passed in at auction for $360,000 at the weekend after it was bought for $1.3 million just four years ago.”
“Mr Grylls says small business operators left the town of Karratha in droves at the height of the construction phase of the resources boom because they realised it was more profitable to rent their homes than try to make money from a business. Mr Grylls said he paid $1350 a week rent for a Karratha house that fetched $2400 a week in 2012. ‘This normalising is not good for the Sydney investor who bought a place in the Pilbara sight unseen because their adviser told them it would be good for their negative-gearing portfolio,’ he said.”
http://thehousingbubbleblog.com/?p=8852
Sounds like ______ .(fill in the blank with NYC, Dallas, San Francisco, LA, Denver or any other large city.)
Not really, as those places you mentioned are not one-trick-pony cities like the mining towns are.
Hint: It’s not different in ________. That includes RainCity/Seattle.
Zillow predicts 33782 home values will increase 6.3% next year, compared to a 6.3% increase for Pinellas Park FL as a whole. Among…
que’?
I think that Mr. Banker would see this - dial em up and then discard - next…..
http://www.ritholtz.com/blog/2015/02/selling-a-nyc-apartment/#more-137992