Many Are Looking To Exit Their Investment
It’s Friday desk clearing time for this blogger. “If you’re interested in buying a newly constructed house in the Washington region, you’ll find plenty of options in a variety of price ranges. Just be prepared for a long wait — there may be few move-in-ready options this spring. ‘There’s definitely a lot of building going on, but builders are being a little more cautious and avoiding getting ahead of buyers,’ says Ben Sage, director of the Mid-Atlantic region of Metrostudy. ‘Builders were optimistic in 2014, but they found that the demand wasn’t what they thought it would be.’”
“Towns and neighborhoods across the Boston area posted big gains in both sales and prices in February. Boston was more of a mixed bag; some neighborhoods posted strong numbers, but others all but fell off the map. The dire cold may have made buyers stingier, as selling prices were down in a number of towns. Somerville home sales plunged 36 percent, with just seven properties changing hands so far this year, while condo sales were down 14 percent. The median price of a condo dropped 6 percent, to $422,000. Downtown Boston saw condo sales drop by a quarter through the end of February, while the median price edged down 14 percent to $757,500.”
“Believe it or not, Manhattan residential sales prices are flat. That’s the takeaway from Douglas Elliman’s latest quarterly report, which found that the median sales price in Manhattan was $970,000 during the first quarter of 2015, compared with $980,000 last quarter. The luxury segment saw its median sales price drop 10.6 percent to $5.1 million. There were also nearly 20 percent fewer luxury sales compared to last year, with 266 closed sales in the first quarter.”
“In a separate analysis published on Tuesday, the Wall Street Journal found that resale prices are rising. The median price of a resale condo in the first quarter was $1.4 million, up 9.8 percent. New condo prices dropped 22.8 percent to $1.4 million. ‘I contend that surplus demand has largely been satiated or absorbed,’ said Jonathan Miller, president of real estate appraisal firm Miller Samuel. ‘The prior level was not sustainable…. So even though sales fell sharply, they are still high.’”
“After financing oil-related hotel and apartment boom in parts of the country, CMBS lenders and investors are now worried low oil prices will leave them facing foreclosures and heavy losses. Many are declining to funnel more cash into once-hot areas in North Dakota and Texas, and are keeping a nervous eye on the properties underpinning the investments they already hold.”
“Some of those loans are already struggling. A Strata Estate Suites CMBS loan of US$23.7m on a pair of apartment buildings in the North Dakota towns of Williston and Watford City went into foreclosure just a year after the ink dried on a new mortgage underwritten in May 2013. By July 2014, a foreclosure was started. Kroll Bond Rating Agency estimated a US$3.8m loss on the loan to the CMBS trust. A nearly US$4m loss on just one loan for less than US$24m underscores the size of the risk now facing CMBS investors with exposure to oil-drilling areas.”
“The numbers look better for Sonoma County, but the U.S. still has a large quantity of homeowners who are underwater on their mortgages, and the picture didn’t improve in the final months of 2014. Zillow called the flattening ‘a major turning point’ for the housing market. ‘The days in which rapid and fairly uniform home value appreciation contributed to steep drops in negative equity are behind us, and a new normal has arrived,’ the report stated. The report concluded that ’some homeowners trapped very deeply underwater may essentially be in negative equity forever.’”
“Seven percent of Sonoma County mortgage holders owed more than their homes were worth in the fourth quarter, according to Zillow. For Mendocino County, 14 percent were underwater in the fourth quarter, while in Lake County the rate was 23 percent. In Napa County, the negative equity rate was 8 percent and in Marin County, 3 percent. For the nation, 27 percent of mortgage holders in the bottom tier were underwater. In Atlanta, Chicago, Detroit, Kansas City, Las Vegas and St. Louis, more than four in 10 such homeowners had negative equity.”
“Public and private home prices across Singapore kept falling in the first quarter of this year, with further declines expected. The market is now so moribund it could start hurting jobs in the real estate industry, they said. Savills Singapore research head Alan Cheong noted overall private market transactions nearly halved last year. In the first quarter of this year, new sales slid 42.3 per cent year on year, and secondary market sales fell 8.2 per cent. ‘Given transaction volumes have declined significantly since June 2013, the multiplier effects on those directly and indirectly employed in the residential property market (is a concern),’ he said.”
“For those of you looking to hop onto the property bandwagon in Dubai, waste no time; it’s currently a buyer’s market. Brigitte Tenbergen, a luxury sales specialist at LuxHabitat, a luxury real estate brokerage in Dubai, said: ‘It’s definitely a buyer’s market emerging in Dubai as prices have been dropping by almost 15 to 20 per cent since the peak of prices on luxury properties last year between February and June.’”
“‘We are definitely more within a buyer’s market as they appear to be calling the shots, not just in their lethargic activity but also in their approach to viewings and offers,’ says Mario Volpi, managing director of Ocean View Real Estate. ‘Anyone who is re-selling any recently bought off-plan properties are likely to see a negative premium on their asking price. Many are looking to exit their investment before the next payment is due to the developer by selling at a loss to buyers.’”
“Chinese bankers are gritting their teeth over the risks they face in further relaxing lending rules to home buyers. China’s biggest banks recently reported lower profits and a spike in bad loans to multi-year highs at the economy slows, adding to their concerns about increasing their exposure to weaker areas of the economy such as the property market. A massive glut of unsold homes could also offset higher sales, keeping prices and fresh investment under pressure.”
“‘The difficulty for us now is that the deposit has gone down, which increases the risks for us,’ said a loan officer at one of China’s four biggest banks. ‘We’re already losing money at a 70 percent downpayment level,’ said a banker at a mid-sized Chinese bank. ‘We’re unlikely to reduce the lending rate.’”
“In early 2012, a few months after she left China for a new life as an immigrant investor in the United States, Shi Lan Zhao flew to Metro Vancouver, bought a numbered B.C. company and began searching for properties in which to invest. Flush with money that she and her ex-husband, Jianjun Qiao, had moved from China through banks in China, Hong Kong and Canada, Zhao first bought a Richmond condo, paying for it outright. A few months later, on a return trip, she bought a five-bedroom White Rock home, also paying for it outright.”
“Zhao, 51, moved easily between B.C. and her home outside Bellevue in Washington state, making at least 20 trips since 2011. She became familiar to real estate agents and people at the Vancouver company that managed her properties and the banks where she and Qiao kept accounts. But U.S. and Chinese investigators now suspect the money for the Metro homes purchases came from an embezzlement scheme that was just one part of a massive corruption and bribery operation that nearly crippled the China Grain Reserves Corporation, also known as Sinograin.”
“Zhao was arrested at her home in Newcastle, just outside of Bellevue. Qiao has not been found, and investigators believe he has fled to the Caribbean. A search of property and title records conducted by The Vancouver Sun show that Zhao’s numbered company bought the properties outright. However, a few months later, it took out mortgages on both, totalling $1.1 million, that represented almost their entire market value. According to the U.S. indictment, a few weeks later Zhao and Qiao took money from their Canadian RBC account to pay for a Bellevue home. Zhao recently put the White Rock property up for sale for $689,000.”
“Although the Federal Reserve and others cheer on the rise in housing (and stock market) prices as good for homeowners and the economy, there is a dark side to rising home prices. The current surge in home prices is not driven by strong economic fundamentals such as higher productivity, wages and labor participation rates, but rather by artificially low interest rates orchestrated by the Federal Reserve’s zero interest rate policy and quantitative easing programs.”
“Former Federal Reserve Chairman Ben Bernanke admitted as such when he testified to Congress in July 2013 during his tenure: ‘I don’t think the Fed can get interest rates up very much, because the economy is weak, inflation rates are low; if we were to tighten policy, the economy would tank.’”
“The Fed’s manipulation of the economy by driving rates down to get people to move in and out of houses is as foolish as paying people to dig ditches and then paying others to fill them up. Nothing of lasting structural value is produced in either example. This artificially manipulated game of real estate musical chairs works until the music stops. And it will as the low inventory/strong demand dynamic reverses and inventory increases and demand drops.”
‘The days in which rapid and fairly uniform home value appreciation contributed to steep drops in negative equity are behind us, and a new normal has arrived,’ the report stated. The report concluded that ’some homeowners trapped very deeply underwater may essentially be in negative equity forever.’
Underwater forever sounds downright unpleasant.
Fuck ‘em. They bought while their heads were firmly embedded in their asses. I need a house. I don’t give a damn if someone loses his shirt selling me said house.
If they are deeply underwater they are fools not to walk away. There are no consequences as the last couple of years have shown.
Buy the same house 3 years later for the much cheaper market price.
If they are deeply underwater they are fools not to walk away.
I’ve come to believe that they are fools TO walk away–the smarter ones stay for free for years. Stay-no-pay.
The piper will be paid regardless if you occupy the house or not.
These are people who are paying.
“Buy the same house 3 years later for the much cheaper market price.”
If they walk away, they’ll need to wait 7 years. A foreclosure without showing hardship stays with you for that long on your credit report.
And the difference between a house priced 300% higher than long term trend and a house priced at long term trend?
The latter can be paid for with cash.
“If they walk away, they’ll need to wait 7 years. A foreclosure without showing hardship stays with you for that long on your credit report.”
Have you been asleep or smoking crack for the last 5 years? There have been hundreds of stories showing that to be BS.
Can you borrow money with a foreclosure on your record?
Yes.
Can you do so with the best rates and lowest down payments?
No.
Back peddling supreme?
Yes.
Successful rebuttal?
No.
“Can you do so with the best rates and lowest down payments?
No.”
In other words, the banksters have cause to ensure that foreclosure victims can soon requalify to buy, as their loans pay higher interest rates than loans to buyers with good credit ratings pay.
I lent a friend money to buy a house 4 years ago, after she walked away from a $400,000 millstone neck house and loan.
She should refi into these attractive low rates, but the lenders keep telling to wait for 4 years after her BK clears.
Richard Warm Onger: If they are deeply underwater they are fools not to walk away.
Depends on if it’s a recourse or non-recourse state.
“Fannie is also pursuing defaulting homeowners as a “deterrent” for people who might be thinking about defaulting in the future, Van Order said. Fannie Mae has hired debt collectors to pursue people in 38 states and the District, while Freddie Mac has taken homeowners to court in 17 states and the District.”
But suppose they are underwater and have stopped making payments, but have never been foreclosed. Wouldn’t it make sense for those in this group to continue living forevermore rent free?
Home ownership is different then renting, as any renter who tried this tactic would be out on the street within thirty days by police order.
Living in a home being foreclosed is no way to live. My wife and I were renting a house that was in foreclosure and the unknowing outcome wore us down daily. We moved.
Just like the one you’re living in now Jingle_Fraud.
“Underwater forever sounds downright unpleasant.”
It’s brutal honesty. It as painful as the $50,000 ten year old Chevy truck.
“‘The difficulty for us now is that the deposit has gone down, which increases the risks for us,’ said a loan officer at one of China’s four biggest banks. ‘We’re already losing money at a 70 percent downpayment level,’ said a banker at a mid-sized Chinese bank. ‘We’re unlikely to reduce the lending rate.’”
Something is very, very wrong with China’s housing situation if bankers are losing money on 70 percent downpayment loans. How is that technically even possible?
One possible explanation is that the banks are losing money in general and are reluctant to increase risk anywhere in their overall book. Possibly their loans to property developers are going sour quickly.
“As growth in the world’s second-largest economy grinds to an expected 25-year low of around 7 percent this year, banks are contending with thinning profit margins and bad debt levels that have hit multi-year highs.”
“…home prices fell at a record annual rate of 5.7 percent last month.”
http://www.reuters.com/article/2015/03/31/china-economy-property-idUSL3N0WX2QG20150331
The banks have record profits, try again.
In the end yes, but they have only declined by around 5%, the loss is the fact that the loans are non-performing as soon as the payments stop. The 70% down payments are part of the reason why so few loans in China end up being written off at a lost.
The banks are already losing money and the government is trying to get them to lend more. It’s not going to go well.
Interesting. Evidently 70% down payment is (or was) typical.
http://www.wsj.com/articles/china-lowers-down-payments-for-buyers-of-second-homes-1427712176
CHINA LOWERS DOWN PAYMENTS FOR BUYERS OF SECOND HOMES….March 30th….
Buyers of second homes would be required to make a minimum down payment of 40%, down from the previous 60%, as part of efforts to encourage upgraders to take the plunge……
http://www.marketwatch.com/story/bank-of-china-posts-slower-profit-growth-2015-03-25-2248510
Excerpt from link OMG, the rate that their profits have increased has slowed down, still at record levels but they have slowed down:
By MarketWatch
Published: Mar 25, 2015 10:01 p.m. ET
BEIJING– Bank of China Ltd. became the second major Chinese state lender this week to post its slowest annual profit growth as a publicly traded company, as the industry grapples with a slowing economy and growing bad loans.
The bank, China’s fourth-largest lender by assets, said it stepped up provisions against possible losses from rapidly growing bad loans.
“Chinese economic growth has entered a ‘new normal,’” said Bank of China Chairman Tian Guoli in the bank’s earnings report, invoking a phrase used by Chinese officials to describe slowing economic growth. “The operating environment for banks is undergoing immense and profound changes.”
On Tuesday, China’s No. 3 lender, Agricultural Bank of China Ltd., reported its slowest annual profit growth since it went public in 2010. Bank of China listed its shares in 2006.
Bank of China said Wednesday its 2014 net profit rose 8% from a year earlier to 169.6 billion yuan ($27.35 billion), thanks to higher interest and fee income. The result beat the median 167.88 billion yuan net-profit forecast of 27 analysts polled by Thomson One Analytics.
The bank said its nonperforming loans stood at 842.6 billion yuan at the end of 2014, up 250.5 billion yuan from the end of 2013. Its ratio of bad loans to total lending rose to 1.18% from 0.96% a year earlier. It also said it had disposed of 19.9 billion worth of nonperforming loans in 2014 to cap increasing bad debt.
But still, wouldn’t a home’s price have to fall by over 70 percent for a bank to lose money on a 70 percent downpayment loan?
Not that there’s anything wrong with that.
Excerpt:
The China-led Asia Infrastructure Investment Bank has 47 countries that have joined or applied to be part of it, as US allies reject Washington’s concerns, Zhao Yinan reports from Beijing.
Washington has appeared to soften its stance on the new Asian Infrastructure Investment Bank, which some view as a challenger to the US-dominated World Bank, after seeing many key allies flock to join the China-led project.
US Treasury Secretary Jacob Lew said on Monday that the US is looking forward to cooperating with the financial institution, which was first proposed by Beijing in 2013 and aims to boost funding for infrastructure construction in Asia’s developing nations.
Previous reports quoting White House insiders suggested the US had been angered by allies such as Britain rushing to sign up with the AIIB.
Yet, analysts say the tone of Lew’s comments, which came during his visit to Beijing as the special envoy of US President Barack Obama and just a day before the deadline for applications for founding members of the bank, leaves the door open for the US to adopt an observer status in the coming months when details of the bank are settled.
The change in the US stance may have to do with Japan, its strongest ally in Asia, announcing it is likely to join the AIIB in a few months, according to a Financial Times report that quoted Masato Kitera, the Japanese ambassador to Beijing.
In a meeting with Chinese Premier Li Keqiang on Monday, Lew said the US welcomes and supports proposals that are helpful to infrastructure construction, and cooperation on that regard can be carried out through any mechanisms accepted by the two countries, including the annual China-US Strategic and Economic Dialogue, the World Bank and the AIIB
“Three separate surveys showed Chinese companies shed jobs last month as they struggled with soft demand and deflationary pressures, suggesting that economic growth may have slipped below 7 percent in the first quarter of 2015, which would be the weakest in six years.”
“may have slipped”
“Weighed down by a property downturn, factory overcapacity and high levels of local debt, China’s economic growth is expected to slow to a quarter-century low of around 7 percent this year from 7.4 percent in 2014.”
http://www.reuters.com/article/2015/04/01/us-china-economy-pmi-official-idUSKBN0MS31320150401
Their light vehicle sales are up to almost 25 million per year, they are just collapsing over there:
http://www.chinadaily.com.cn/business/motoring/2015-03/30/content_19947253.htm
That’s a lot of Party officials and middle managers!
This is why you are reading garbage stories like this, but they do admit to the 7% growth:
http://usa.chinadaily.com.cn/epaper/2015-04/03/content_19991474.htm
“garbage” = information that conflicts with Communist Party Pimping.
Garbage= “information” on its face has no basis in reality. Vague stories that cause people to jump to conclusions that are far from reality. Clearly, the story should not have had that quote without an explanation on what he meant. But the whole purpose was to get people like you to assume that prices had fallen 70% and it apparently worked.
No. I said prices must fall by at least 70%, not that they had. They have fallen 5%. The banks are losing money on something else. Can you guess what it is?
China created about one million net jobs per month last year and all signs point to the same this year, yes some industries are restructuring such as coal, textile, iron ore and steel but high tech, trains, auto and service industries continue to hire rapidly.
They are shedding jobs now.
Service industry means construction. Good luck with that during an economic contraction. A “profound” correction.
Service is far more than construction although construction is included in service. It includes banking, it includes servicing all those new autos, it includes new gas stations and yes all those blue collar jobs for women, I posted a few days ago, also increased healthcare jobs for an aging population and even the increased number of stock brokers for its bull market, even if it is overdone.
Three separate surveys showed Chinese companies shed jobs last month
If there is still 7% growth, why would there be layoffs?
If there is still 7% growth, why would there be layoffs?
Isn’t that obvious? The economy is restructuring like I said in the other posts. China is becoming the leading nation in the use of robots. BTW, this shows that wage levels have hit at least the 5-6 dollar an hour level since robots do not make sense to replace people working for less than that. However, higher productivity can and does lead to some layoffs even though it is good for the economy as a whole. Layoffs are normal even in a booming economy. The key is the net jobs created and they are still about one million per month.
Quit simple. The current 7% GDP rate is down 50% from 14% GDP growth rate.
Deflation and falling prices. It’s your wallets best friend.
Factory wages are around $300/mo, and the workday is 12 hours. It’s not robots that are causing layoffs.
It’s certainly possible for a bank to lose on a 70 % downpayment if the purchase price / (market value + debtor payments) ratio becomes sufficiently large.
Suppose ‘debtor payments’ drop off to 0. The bank still has 70% of the purchase price in hand. So to lose money requires that
(market value) < 30% * (purchase price), or
(market value) / (purchase price) < 30%.
Is a 70% drop in market value even plausible?
Let’s wait and see! I bet that it is probable once the train approaches the end of the tracks. . .
“a pair of apartment buildings in the North Dakota towns of Williston and Watford City went into foreclosure just a year after the ink dried on a new mortgage underwritten in May 2013.”
That one failed before the oil price fell.
‘We’re already losing money at a 70 percent downpayment level,’ said a banker at a mid-sized Chinese bank. ‘We’re unlikely to reduce the lending rate.’
Is there even one person who thinks Chinese banks are immune to the housing bubble after reading this? Even one?
Yes.
Hint: Remove the’m’ from your blog name…
Right on cue!
They lose money when the payments are not made, that does not mean they will not recover their losses when they take possession of the home.
With 150 million excess empty homes, why would they want to foreclose? House prices need to come down by more than 70% to become affordable for the working people. Down 5% already and gaining momentum.
If someone walks away from a home that they put a 70% down payment on, it means that the Chinese housing market is much worse than anyone realizes, except for the Chinese bankers who know what’s really going on. All the happy news is just realtor talk.
Who says they walked away, the probably do not even live in the house since a 70% down payment means it is an “investment” house that no one lives in. A few percent of these loans are delinquent because they do not have sufficient cash flow, they probably are the Chinese version of flippers. It hardly endangers the banking system of China.
‘A 16 February report by investment analysts, Motley Fool Australia, said that as of 2013, 49m apartments in China were sitting empty – 22% of the total. That is enough vacant real estate to absorb six years’ worth of further urbanisation in China, added the same report.’
‘In other words, all this vacant real estate could add up to six years of “lost demand”, during which the chemicals and polymers that would have gone into building new homes might not be needed.’
‘With this oversupply has come a fall in prices and a rise in unpaid debts. China’s total debt quadrupled from $7trillion in 2007 to $28tr by the middle of last year with half of these loans linked to the property sector, said a February 2014 McKinsey study.’
‘In the case of polyvinyl chloride (PVC), capacity has grown well in excess of local demand over the last seven years – on the assumption, of course, that China’s construction boom would eventually absorb this oversupply. PVC is used to make water pipes, window frames and other end-use products that go into the real estate sector.’
‘In 2007, PVC capacity totalled 12.4m tonne/year against real consumption of 10.4m tonnes, according to ICIS Consulting. But by 2014, capacity stood at 30m tonnes/year versus real consumption of just 15.9m tonnes (real consumption is consumption adjusted for inventories).’
‘The same applies to phenol, one of the main applications of which are phenolic resins that go into construction. In 2007, China’s capacity was 574,000 tonnes/year compared with real consumption of 10.2m tonnes. Last year, though, capacity had surged to 24m tonnes/year over real consumption of 18.5m tonnes.’
‘And just in case you are not already sufficiently worried, here is something else: The size of China’s main property buying population, those aged between 25 and 49, will peak this year, according to a December 2014 study by Ai Jingwei – a China real estate expert. This is the result of China’s one-child policy, which has left the country with a rapidly ageing population.’
‘The difficulties for China are further compounded by the big role that real estate has played in driving its GDP growth. No less than 23% of the country’s GDP in 2013 was down to the building, sales and fitting-out of homes, said Moody’s Investors’ Service.’
‘“On the real estate sector in China, one of the big questions you need to ask is, ‘Who owns the land?’,” said a senior executive with a global polyolefins producer. “The answer is the government – there are no freeholds, only leaseholds – and so they can take the land back any time they like.”
‘His solution is that empty apartments, which have been bought for investment purposes are acquired by Beijing and then converted into low-cost social housing. The boost to consumer spending, thanks to low-income earners being given access to cheap accommodation would be huge, he added.’
“China has no bankruptcy laws. So all that would happen would be that Beijing would take over the land and the property owners and real estate developers would walk away, free from all their obligations,” the source added.’
‘Surely, though, even the absence of bankruptcy laws would not be enough to prevent huge resistance from investors. Why would any of them be prepared to accept seeing the value of their assets wiped out overnight?’
“I don’t think this would be a big problem as you have people in their mid-30s who have already made and lost tens of millions of dollars,” he added. “As a result, they think that because they made and lost their fortunes so quickly, they can do so again,” said this source.’
‘China not only has no bankruptcy, but also no social stigma attached to losing all your money, he continued. “Ex-millionaires have, as a result, very quickly found directorships with new businesses. What matters to these new businesses is not the fact that these people have lost a lot of money, but instead that they have lots of experience,” he added.’
I can just see it; ‘So Mr Li, what experience do you have?’
‘Well, I lost $5 million last year, $10 million this year and I am confident I can double that next year.’
‘Excellent, as we have many millions to lose in the years to come and it would seem you are just the man for the job!’
Is what you are describing any different than silicon valley where having multiple failed start-ups is considered something to be considered desirable when you are seeking funding for a new start up?
He’s describing the end of a boom. You’d best be wearing your seatbelt.
I do not own any Chinese stocks so I have no worries. You are six months too late to buy Chinese stocks.
I profit from the end of their boom every time I stop at the gas station.
Don’t be a degenerate gambler and buy stocks. Hold onto your money and keep it safe from asset deflation.
So what they are describing is the state acquiring the housing and leasing/selling it to low wage workers? Kind of like having serfs quarters? I guess that is what our banks and corporations are doing here. Except that the Chinese serfs can afford the housing.
Hey HA - I must admit: I’m being an degenerate gambler by shorting stocks. . .
Options is probably the worst form of Wall St gambling but at least the cost is low if it goes against you.
‘Chinese property developers are finding themselves forced to sacrifice profits to boost sales, as the downturn in the housing market saddles them with bulging inventories and limited access to new funding.’
“With the downward pressure on the economy, the real estate industry will continue to undergo a period of profound correction,” said Cao He, chairman of Hong Kong-listed builder Franshion, in the company’s annual report. “Property developers will face challenges including shrinking profit margins and intensifying competition.”
‘The sector has borrowed heavily in recent years from offshore bond markets, banks, and local investors. With cash needed for debt repayments and to finance existing projects, developers have been unable to wait for prices to recover.’
‘Total debt in the sector has jumped 280 per cent over the past five years, according to RGE research, with an increasingly large portion of it short-term borrowing. Top-rated developers raised $29 billion in new offshore funding last year alone, according to Moody’s.’
‘Last week the US, UK and Germany all saw their main stock market indexes hit their highest levels ever. Most European markets, including Ireland’s ISEQ as well as France, Belgium and the Netherlands, have returned to pre-2008 heights. Japan’s main market is at its highest since 2000.’
‘Companies from Ryanair to CRH have seen their valuations soar. CRH’s market capitalisation, at €21bn, is on par with the annual economic output of Cyprus. Ryanair’s, at €15bn, now exceeds the GDP of Iceland.’
‘Sovereign debt shows a similar pattern. The price of buying 10-year government bonds in Ireland and many other countries is at record lows. Investors are more confident in these countries’ ability to pay back their loans than at any other time in history.’
“In September Ethiopia became the lowest-income country to ever issue a 10-year bond, and it did so at a yield of 6.6pc,” said Hensman. “I remember when the US was issuing 10-year bonds at that price. And that Ethiopian bond was two time oversubscribed - demand was twice the amount available - because people are so desperate to get a return for their buck.”
“Irish debt is the same. The payout for holding Irish debt which matures in five years is now 0.25 of a percent annually. It never fell that low all through the last decade, through the peak of the Celtic Tiger. “It doesn’t make sense. While Ireland has clearly achieved a lot more than many other countries there is still risk, given its debt burden.”
‘Ireland is not the only country where stock and bond markets share little in common with economic data.’
‘London Super-Luxe Is Cooling. BOE Will Be Watching ‘
‘Whatever the immediate cause, the fact that London house prices are at unprecedented valuations means that however low mortgage rates might be, people can’t afford them. House prices have soared while wages stagnated. Valuations across London and its commuter belt are broadly ten times average earnings. On price-to-rental and price-to-earnings metrics, U.K. property overall is between a third and a half overvalued. For London the ratio is much higher than that–prices are a third above their peak in 2007 when there was widespread concern the London market was in the midst of a bubble.’
‘The question now is whether those high prices represent a fundamental risk to the U.K. economy–as opposed to young people trying to get onto a housing ladder that’s far out of reach.’
‘The BOE’s economists routinely shrug off worries that the U.K. is in the midst of a housing bubble. London might be pricey, they say, but property prices haven’t inflated nearly as much elsewhere in the U.K. Besides, with interest rates as low as they are, affordability measures are pretty good. What’s more, the BOE’s top brass are convinced they have the macroprudential tools to restrain prices should a bubble start to appear.’
‘China is importing less from Australia. Its global imports have declined by 20 per cent over the first two months of the year. The value of Australian exports to China plunged 29 per cent over the first two months of the year, partly because of falling prices for coal and iron ore.’
‘China’s Customs Bureau said on Sunday the volume of imported coal from Australia was down 45 per cent in January and February compared to the same time last year.’
‘The value of these shipments fell by more than half. Iron ore held up better, with volume flat but the value was down 45 per cent. “Weak commodity imports are the major factor in the sluggish import growth, as Chinese commercial banks have significantly tightened the trade financing facilities for commodity traders,” said ANZ’s chief China economist Li-gang Liu.’
‘China’s Premier Li Keqiang indicated on Thursday credit would be tightened this year, after five years of record loan growth. Despite interest rates being cut twice over the past four months the government is actually withdrawing credit from the economy via the loan quotas it issues to banks.’
I predict that Ben will be posting many interesting articles about Canadian and Australian real estate in the near future.
“Mumbai: Cotton exports from India, the world’s biggest producer and seller, are expected to fall 41 per cent to a five-year low of 7 million bales this crop year ending September as top buyer China curbs purchases, a government official said.”
http://profit.ndtv.com/news/industries/article-cotton-exports-seen-falling-41-as-china-buys-less-751235
China’s imports are falling off a cliff, while their exports have not. That’s going to make their GDP numbers surprise to the upside until all the speculative excess hoards of raw materials are cleared out at ever lower prices.
China is stealing resources from the rest of the world, its growth rate caused numerous countries and companies to over expand their capacity to produce raw materials and when it lower its growth targets they are caught competing with each other for market share. Yes, its trade surplus is soaring but it will not end for a few years until the world supply/demand balance is restored. Whether this was due to a brilliant move by China or accidently I do not know. However, resources will not continue to be produced at a lost.
loss
“China is stealing resources from the rest of the world…”
China paid top dollar for resources right before prices for those resources started to collapse. Them is some right smart people what you got there.
“a brilliant move by China”
There you go.
They are losing their butts on the speculative stockpiles of raw materials. Kind of like the Starbucks business model inside out. It’s a “profound” correction.
“brilliant move by China”
http://tinyurl.com/k7od486
Even AlbuquerqueDan will have to admit that you totally nailed it!
‘David Blitzer, chairman of the index committee at S&P Dow Jones Indices, affirmed that the housing market has witnessed a rise, but then also it faces difficulty. “Home prices [nationwide] are rising roughly twice as fast as wages, putting pressure on potential home buyers and heightening the risk that any uptick in interest rates could be a major setback”, said Blitzer.’
‘Blitzer also shared that the current home sector is weak and residential construction is also not taking at right pace. In Bergen County, the price of a single-family home declined 8.6% in January from a year earlier.’
‘In Passaic County, the median dropped 1.8%, to $275,000. New Jersey’s housing market is facing many challenges, like the state’s employment market. The place is also not been able to offer desired number of jobs.’
‘Also, the state is considered as one of the nation’s highest rates of properties in the foreclosure pipeline.’
‘Las Vegas’ housing market is one of the most overvalued in the country, as investors pushed up prices amid limited supply and a sluggish economy, a new report says. Fitch Ratings said today that housing demand in Las Vegas, along with other boom-and-bust areas including Miami and Phoenix, has been “bolstered” by outside investors.’
‘The cities also have high rates of underwater homeowners, restricting the number of properties for sale. In these areas, small changes in demand have had “an outsized impact on price,” and growth is “expected to be more fragile than true demand-based expansion,” Fitch analysts wrote.’
‘The research and bond-ratings company ranked Las Vegas the seventh most overvalued market in the nation, after Austin, Texas; Houston; Phoenix; Riverside, Calif.; Miami; and San Antonio.’
‘Home prices in Las Vegas, Phoenix, Riverside and Miami — case studies for last decade’s bubble and burst — have all climbed more than 45 percent since mid-2011, “despite comparatively modest economic growth,” Fitch said.’
‘Investors swooped in for low-priced homes after the economy collapsed, often turning them into rentals. They helped battered housing markets recover, pushing up prices at eye-popping rates and raising fears of another bubble.’
‘But the investors left markets “dependent on external demand sources,” according to Fitch. These days, investors have been backing out from Las Vegas and other cities, and price-growth has cooled substantially.’
‘Some analysts say that, with investors backing out, Las Vegas will have to depend more on traditional buyers. But that could turn the slowdown into a slump, as Nevadans have some of the worst personal finances in the country, and many locals can’t get a mortgage because of tighter lending requirements.’
“We’re not in a healthy situation,” John Restrepo, principal of RCG Economics, said last fall.’
This little matter has been getting some attention lately:
‘have all climbed more than 45 percent since mid-2011, “despite comparatively modest economic growth”
Wait a minute. Somebody ask Mr. Bernanke how come these house price increases haven’t resulted in better economic growth? Because if this isn’t working out, all the Fed has done is burden the population with higher housing costs. Not to mention the time and moneys lost actually working toward a sustainable economy.
‘Home prices in Las Vegas, Phoenix, Riverside and Miami — case studies for last decade’s bubble and burst — have all climbed more than 45 percent since mid-2011, “despite comparatively modest economic growth,” Fitch said.’
Last decade’s bubble? 45 percent in that time period is the definition of a bubble. Where’s Rental Fool to say it’s all in line with historical norms?
This report also says that despite all this they don’t expect any significant declines.
I read that critical posts were being deleted from Bernanke’s blog. Anything regarding a second housing bubble to how low interest rates affect the savings of seniors ist verboten. But if you want to proclaim his brilliance, that’s fine.
“I read that critical posts were being deleted from Bernanke’s blog.”
I can’t imagine someone that full of himself tolerating open criticism.
‘The research and bond-ratings company ranked Las Vegas the seventh most overvalued market in the nation, after Austin, Texas; Houston; Phoenix; Riverside, Calif.; Miami; and San Antonio.’
Denver didn’t make the list? WTH?
http://www.numbeo.com/property-investment/region_rankings.jsp?title=2015®ion=021
Price to Income for Denver is still not near the top.
That’s an index Rental_Fraud. Indices aren’t prices.
‘Municipalities have to shoulder the responsibility for maintaining zombie homes. They have little choice. Communities can’t afford to have neighborhoods overwhelmed by homes abandoned by their owners and left empty for the three years it can take to complete foreclosure. But municipalities need help with the upfront cost, and a way to eventually recoup that expense from the owners or mortgage lenders.’
‘Zombie homes are a blight. They lure thieves, rats and other vermin, are often choked with weeds, are an invitation to squatters and generally become eyesores that ruin the quality of life for neighbors, undermine public safety and send property values through the floor.’
‘Communities suffer when that happens. And Suffolk, with 2,080 zombie homes as of Jan. 31, and Nassau with 1,960, are an epicenter of the epidemic — according to a recent Newsday and News 12 series.’
‘Zombie homes are a blight. They lure thieves, rats and other vermin…’
How many different ways are there to describe a deadbeat owner?
‘Two oil towns that have defined Alberta’s resource – and real estate – boom now show how fast the bloom can fade.’
‘In Fort McMurray, the city of 76,000 at the centre of Canada’s biggest oil fields, housing sales plunged 66% in February and are down 30% through the first two months of this year, the local real estate board reports. Only 48 houses sold last month and the rental vacancy rate has spiked to 12%, the highest in Alberta.’
‘Further south in Cold Lake, the centre of in-situ oil production, total building permits plunged to $1.7 million, down from $8.9 million in the first two months of 2014. New housing starts have collapsed. Only two new single-family permits were issued since January, compared to 20 in the same period a year earlier.’
“Stores are less busy and streets have quite a bit less traffic,” said commercial realtor Ken Shebib who has lived and worked in Fort McMurray for 38 years “A number of my [retail] clients report that sales are down considerably as compared to last year.”
‘The average composite home price in Fort McMurray remains near $597,600 – the highest in Alberta – but may not hold. “This may change if sales continue to slow,” said Canada Mortgage and Housing Corp. analyst Braden Batch.’
‘The bubble popped in 2007. Lots of people were hurt, and politicians took more of your tax money to bail out Fannie Mae and Freddie Mac along with reckless banks. They also gave the Federal Housing Administration a $2 billion bailout.’
‘Then the politicians said, “We’ll fix this so it doesn’t happen again.” Congress passed Dodd-Frank and a thousand new regulations. The complex rules slowed lending, all right. It’s one reason this post-recession recovery has been abnormally slow.’
‘But — April Fools’! — the new rules didn’t solve the problem of reckless lending, and it’s happening again.’
‘Because our government subsidizes home purchases, recklessness is invited. Somehow, Americans buy cars, clothing, computers, etc. without government guarantees, but politicians think housing is different. Both parties support the subsidies.’
‘After the bubble popped, I assumed the political class would learn a lesson, but they haven’t. Today, even more American mortgages are guaranteed by government. More than 90 percent of new loans are backed by taxpayers. After the crash, Fannie and Freddie did raise their minimum down payment — to a measly 5 percent — but a few months ago, they lowered it again to 3 percent!’
‘Are they crazy? A sensible congressman, Rep. Jeb Hensarling, R-Texas, tried to get an answer from the administration’s new mortgage regulator, asking in a hearing, “All things being equal, is a 3 percent down riskier to the taxpayer than a 10 percent down loan?”
‘A pretty basic question — but one that director Mel Watt still dodged, responding, “Mr. Chairman, that is generally true. But when you pair the down payment with compensating factors … look at other considerations … you can ensure that a 3 percent loan is just as safe.”
‘What? That’s nonsense. This is what happens when pandering politicians get to dispense your money. Watt is among the worst. When he was a congressman, he pushed for mortgage subsidies for welfare recipients who made down payments as low as $1,000.’
‘Edward Pinto, who studies housing risk for the American Enterprise Institute, says policies like this put us on the way to another bubble: “The government is once again … saying, let’s loosen credit, give loans to people that potentially can’t afford them, and everything will be fine because house prices will go up.”
3% down vs. 10% down: Personally, I don’t see 3% down as riskier to the taxpayer than 10%. The stability of the income stream (job security) needed to make the monthly payments is the primary factor driving defaults. The size of the down payment doesn’t predict whether or not you get laid off two years from now.
‘In Bergen County, the price of a single-family home declined 8.6% in January from a year earlier’
Have you heard of a strategic default? Jingle mail, just walk away Rene?
+infinity.
PLENTY of folks walked away in 2009/10 who did not lose their jobs.
true…a couple of my sleazy coworkers did just that several post 2008, they had bought their houses at very affordable prices but sucked all the equity out through serial refi’s…they later bought second homes then pulled a strategic default on the first, all the while employed and making good money.
If there’s objective data that proves this is a sizable problem, then I’m open to changing my mind about it. Sure I’ve heard anecdotal stories about strategic defaults but I’m not aware of real data that shows it to be a real problem, especially among the employed who could still make the payments. The pain of bankruptcy and lost credit is a pretty good deterrent.
And how many millions of suckers stopped making payments still living in the house right now? 5 million, 10 million, 20 million?
Frankly, your mind is your problem.
per the 2012 article below over 1/3 of defaults were strategic…that is sizable indeed.
http://www.newsday.com/classifieds/real-estate/7-things-consider-before-a-strategic-mortgage-default-1.3613506
more on the percentage of defaults deemed strategic, who tends to do it, etc…it is a big problem
http://www.minyanville.com/businessmarkets/articles/housing-market-housing-report-strategic-defaults/4/25/2011/id/34151
Amazing, isn’t it, how China’s housing market can’t even sustain 70% down loans, when the U.S. market can get by on 3% down which, in many cases, leads to a buyer starting out his life as an owner in an underwater position.
‘To attract the potential home buyers during the festival of Navratra and contain their unsold inventory which is around 55-60 percent in entire Delhi-NCR, the realtors have put freebies on offer. These freebees are in the form of payment schemes giving no EMI till possession, assured return, buy back policy etc.’
‘Pawn Jasuja, director, Finlace Consulting said, “Announce freebies for the buyers has become a practice these days. However, the reality is, that the freebies are mainly aimed at containing the unsold inventory.”
‘Asked about the Navratra scheme announced by Unnati fortune Group; Anil Mithas, CMD, Unnati Fortune Group said, “True to its name, Unnati fortune will be offering fabulous fortunes like gold coins to 51 early birds booking homes at the carnival, and the most fortunate here will get a chance to get a luxury car. The group is also offering easy payment scheme.”
‘On whether Supertech is also offering any such freebie; RK Arora, chairman, Supertech said, “Supertech Limited is offering a scheme during Navratras on its project Eco Village -1, 2, 3 and 4 located at Greater Noida West. We have ‘Buy Two Get Three’ on the offer wherein the customer will have to pay an amount for a 2BHK unit and will get a 3BHK unit, at the same price.”
Oh dear…
‘A condominium project under construction in Miami has broken the 50 percent-down threshold that’s served as the benchmark of South Florida’s latest development boom, putting pressure on others to offer pre-construction units with higher leverage.’
‘Swire Properties Inc., the developer of Miami’s sprawling Brickell City Centre project, said it is reducing the amount it charges would-be unit owners.’
‘Instead of having to pony up half in advance, buyers will owe only 20 percent of the sale price when signing a purchase contract. An additional 15 percent would be due 120 days after signing, Swire said in a statement. The remaining 65 percent would be due at closing, meaning it could be financed.’
‘Because of the advanced stage of construction on both towers, it appears buyers would be able to secure a unit for 20 percent down late this year and flip the contract at closing.’
‘Swire’s two towers, Rise and Reach, topped off in the first quarter. Delivery of the combined 780 units is scheduled for late 2015 or early 2016. Swire’s latest financial filings said the company sold 47 percent of the units by mid-March.’
‘The filings indicate 304 units have sold at Reach, and 65 units have been picked up at Rise, which began sales last November. In the same filing, Swire disclosed, “While demand remains strong [for Miami residential properties], there has been a marked increase in competitive supply since early 2015.” That suggests Swire has modified its deposit structure to stand out and boost sales numbers.’
‘Peter Zalewski, a real estate consultant who advises condo developers, told the Daily Business Review the lower deposit structure is a telltale sign of market oversupply.’
“This is a great indication that developers are starting to run into a roadblock,” he said.’
‘The only other project to buck this trend, McKafka Development’s 90-unit Crimson in Miami’s Edgewater neighborhood, is offering its remaining condos with 15 percent to 35 percent down. The Crimson is also one of the few South Florida condo projects to secure backing from Fannie Mae, the federal government’s loan securitization giant, opening the door to easier financing at closing.’
‘In general, projects have touted the 50 percent requirement for high liquidity as a source of financial strength and noted the reluctance of banks to lend with lower down payments.’
‘Chicago-area home prices declined in January for the fifth consecutive month but they remained 2.5 percent ahead of where they were a year earlier, according a barometer of the housing market’s health.’
‘Meanwhile, Chicago’s 2.5 percent year-over-year gain in January topped the gains posted by Cleveland, Minneapolis, New York and Washington, D.C.’
“Regional patterns in recent months continue — strength in the West and Southwest paced by Denver and Dallas with results ahead of the national index in the California cities, the Pacific Northwest and Las Vegas,” said David Blitzer, chairman of S&P Dow Jones Indices’ index committee. “The Northeast and Midwest are mostly weaker than the national index.”
‘Average sales prices of condos and co-ops dropped 21 percent in New York last month as a result of a decline in very high sales, according to CityRealty. The fall in high-end closings was most clearly seen in the average sales price of the top five sales dropping $17 million.’
‘The average price of a condominium dropped to $1.9 million, a 35 percent decrease from the previous four weeks. The highest sold apartments averaged a selling price of $13 million this period, down from $31 million the four weeks before. In fact, the highest sell was only $17 million.’
‘The number of properties selling for a profit has increased, although unit owners, particularly in lifestyle markets, have borne the brunt of loss making sales in the past quarter. The latest CoreLogic RP Data Pain and Gain report reveals during the December quarter only 8.6 per cent of property sales were for less than their original purchase price.’
‘Mr Kusher said some of this could be because of the large number of investors who buy into the unit market. “I think the unit markets have been more susceptible to downturn,’’ he said. “If people need to exit a property quickly and if they have got a house and an investment unit they are more likely to exit that unit at a loss than exit that house. Housing finance figures suggest that investor activity is really strong but I think part of it can be people buying off the plan properties and those properties not valuing up when it comes time to settle. There could be a bit of that going on in those statistics, that could be why you are seeing quite a level of loss in units.’’
“Across the individual capital cities, the proportion of loss-making resales is trending lower in Sydney, Melbourne, Brisbane and Adelaide,’’ he said. But Mr Kusher said he wouldn’t be surprised to see the number of loss making sales start to increase in Perth, Darwin and the ACT.’
“(Values in) those markets are still growing but the rate of growth has really slowed in those three capital cities and regional markets. You might see some subtle improvement but I think you will continue to see a higher proportion of loss making sales in those regional markets.’’
‘Sydney was the best performer during the quarter with only 2.4 per cent of sales at a loss, followed by Perth at 5.5 per cent and Melbourne with 5.6 per cent.’
‘Adelaide had 8.9 per cent of sales at a loss, while Darwin had 10.3 per cent. Brisbane still had a relatively high 10.5 per cent of sales at a loss but Mr Kusher said that market had been dragged down by the outer council areas in the greater Brisbane region.’
‘In the ACT 10.8 per cent of sales were at a loss. Hobart was the worst performer during the quarter with 15.5 per cent of sales at a loss.’
Tacoma, WA List Prices Crater 43% As Housing Bust Spreads; Banks At Risk
http://www.zillow.com/ruston-wa-98402/home-values/
From the Washington Metro article: “In areas like southeastern Vienna and Pimmit Hills in Falls Church where you can find 1950s homes on large square lots,”
I’ve been through that nabe. Yes, cute 900 sq ft 3/1 ranches on 1/4 acre lots, $400K mostly for the land. That’ll turn into McMansionville one house at a time.
There are a LOT of places like that in DC, much of it built up in the 1950’s to take advantage of the Beltway which was built at the same time. I don’t think the Beltway can handle the traffic, and Metro can’t either.
We’re back to “it’s the land” eh?
Wrong again Donk.
And remember….There is a globe full of land and a full 95% of it goes undeveloped.
And none of that land is inside the Beltway.
Until we all have Teleport, yes, it’s going to be the land.
It’s called substitution Donk. Learn it.
And absent borrowed money and fraud, the land is near worthless. Had you been fortunate enough to write the check from your own source of cash, you wouldn’t write it for even 10% of what you paid. You know it, we know it.
Just was in DC last weekend - daughter who lives in Arlington VA tells me that I-66 closed to single driver vehicles during rush hour during the week INSIDE the beltway - if caught fines are big - and they have many cameras on that road - just was on it on Sunday. So…..roads just can’t handle the traffic as you note.
‘Zhao was arrested at her home in Newcastle, just outside of Bellevue. Qiao has not been found, and investigators believe he has fled to the Caribbean. A search of property and title records conducted by The Vancouver Sun show that Zhao’s numbered company bought the properties outright. However, a few months later, it took out mortgages on both, totalling $1.1 million, that represented almost their entire market value. According to the U.S. indictment, a few weeks later Zhao and Qiao took money from their Canadian RBC account to pay for a Bellevue home. Zhao recently put the White Rock property up for sale for $689,000.’
But these people running up house prices won’t hurt the comps, and I’m sure the guy on the run will service those mortgages.
‘represented almost their entire market value’
They did a 100% cash out? And used it to buy more houses?
The entire housing market is founded on fraud. If the buyers are frauding, the leeches and bloodsuckers attached to transaction are frauding.
It’s all a mirage.
Double-down!! To infinity, and beyond!!!
San Francisco Metro YoY Gains Evaporate To 1%; Plunge 9% QoQ And 3%QoQ
http://www.zillow.com/san-francisco-metro-ca_r395057/home-values/
Corrected: San Francisco Metro YoY Gains Evaporate To 1%; Plunge 9% QoQ And 3%MoM
Labor Force Participation Rate Plummets To New 38 Year Low
http://data.bls.gov/timeseries/LNS11300000
Global debt - China’s has quadrupled recently substantiating what Ben has been saying for some time - and housing glut there me thinks is a result of debt growth by the Chi Comms.
http://www.theguardian.com/news/datablog/2015/feb/05/global-debt-has-grown-by-57-trillion-in-seven-years-following-the-financial-crisis
Foreclosure Can Haunt Borrowers for Decades: What to Do if It Happens to You
by Virginia C. McGuire on April 1, 2015 | posted in Banking, Banking Feature, Mortgages
When Guillermo Galindo lost his two-family suburban Boston home to foreclosure in 2009, his 4-year-old daughter had to say goodbye to her beloved dog. It was too difficult to take the pup with them into a rented home.
The Galindo family had struggled financially for months. His employers cut his hours due to the recession. Then rental income declined from a tenant who had lost her job. After an unsuccessful attempt to get the lender to modify the mortgage, the Galindos succumbed to foreclosure.
“I thought it was all over,” he said of his disastrous homeownership experience. He was wrong. Six months later, collection letters started arriving again — not from the lender this time but from the insurer who backed the mortgage on his old property. The insurer claimed he still owed more than $136,000 on the loan he used to buy the house in Revere for $410,000 in 2005, even after the bank seized and sold the property. By this point, Galindo was cobbling together a living teaching first aid to child-care workers. He could barely feed his family, much less pay off a six-figure debt.
Galindo is one of thousands in the U.S. struggling with what is known as a deficiency judgment, where borrowers face demands for the difference between what they owed on a foreclosed home and what the lender got from selling the property. Such claims are legal in many states, although sometimes subject to a statute of limitations. In some cases, debt collectors can hound borrowers for decades after a foreclosure.
“There are certain states where it’s free range, and they can sow whatever havoc they want in terms of collecting,” says Geoffry Walsh, a lawyer with the National Consumer Law Center in Boston. His organization maintains a list of state laws related to foreclosure. The resource can help consumers see if they’re protected by state law from being pursued for a deficiency judgment resulting from a foreclosure. For instance, a time limit may prevent legal action after a certain number of years have elapsed. Walsh says a few states have increased consumer protections since the financial crisis and recession ended in 2009.
Sometimes, debt collectors represent mortgage lenders. In other cases, a collection agency that bought a defaulted loan for pennies on the dollar is looking to get whatever it can from the borrower. Galindo was pursued by the company that insured his lender against a default on the mortgage. The Colombian immigrant, who still struggles with English after 30 years in the U.S., didn’t understand that the insurance he paid for protected the lender — not him.
“It’s like paying insurance for a car, and then you have an accident and you have to pay for the accident,” Galindo says. He knows better now, but it won’t help him resolve the debt.
…