It Was A Free-For-All And Speculation Was Rife
It’s Friday desk clearing time for this blogger. “Thousands of foreign buyers are snapping up U.S. properties across the country. Florida is the number one region for sales, holding twenty-two percent of the foreign market. The National Association of Realtors estimates total international sales from Chinese buyers were $22 billion in the twelve months that just ended in March, 2015. They report the Chinese are buying luxury homes in Naples and Southwest Florida because they are a bargain compared to the $1.5 million they might pay for a small condominium in Hong Kong. They report that some are paying cash and buying sight unseen.”
“‘Foreign buyers purchased $92.2 billion for houses in 2014. Thirty percent of U.S. real estate agents now say they are working with offshore clients,’ said an NAR spokesperson.”
“If you can afford the $8 million penthouse on the 41st floor of downtown’s Harbor Club, you can probably buy your own Tesla. But the person who snags the top-floor unit at one of San Diego’s iconic skyscrapers will get a custom ordered Tesla Model S P85D for free. Property owner Mark Weinzierl said he hopes the offer helps set the penthouse apart as he competes for buyers around the world. ‘There’s a lot of interest in other cities, New York, Vancouver, Miami, L.A. and we don’t necessarily think that San Diego has a lot of buyers coming in to look at the property,’ he said.”
“While San Diego’s real estate market is currently a sellers’ market, that doesn’t apply for ultra high-end units, said Greg Neuman, the property’s listing agent with Berkshire Hathaway. There aren’t enough local buyers and the ones that can afford those units look around the world, he said. It may take an international buyer,’ he said. ‘We don’t have a lot of high end sales in condominiums.’”
“Incentives for buyers also popped up just before the Great Recession, after home prices peaked. A spokeswoman for Tesla said Wednesday that its cars have been used more recently as deal sweeteners. Weinzierl said he’s selling at a price that is essentially a loss because he currently has other interests in mind. Neuman said if a buyer didn’t want the Tesla that he would be willing to negotiate different terms.”
“At the height of the housing bubble a decade ago, a home equity line of credit seemed like an answer to a prayer. La Mirada mother Liberty Gutierrez built two businesses, renovated her home and bought three more properties: ‘For the first 10 years, anything I borrowed and used was interest-only when I paid it back.’ But this year her $175,000 home equity line of credit (HELOC) resets. It’s not just the interest she now has to pay but the principal. Her payments will jump from around $400 to $1,700 a month.”
“‘I’m not behind, I’m not unemployed, I’m not underwater. But that still doesn’t mean I can afford such a jump in a mortgage payment every month,’ Gutierrez said. ‘I have no idea what I’m supposed to do with this property.’”
“She isn’t alone. According to RealtyTrac, 3.3 million homeowners nationwide have a HELOC that’s scheduled to reset in the next four years, and 250,000 of those are in Los Anglees and Orange counties. That’s the largest number of HELOCS of any metro area in the country. The biggest surprise for RealtyTrac VP Daren Blomquist was that found 56 percent of homes with a HELOC nationwide are underwater. In Southern California, 60 percent are underwater. He says the timing couldn’t be worse: ‘This is coming at a time when home price appreciation is slowing down.’”
“April brought some positive real estate news for the Fredericksburg region. April’s median sale price increased slightly, by 0.6 percent, to $251,500 year-over-year. However, the median price fell just over 3 percent from March 2015’s $260,000. There were 998 new listings in April, up about 11 percent from last year’s 894 listings in the same month. ‘We are in the full spring market and are experiencing an increase in sales,’ said Fredericksburg Area Association of Realtors board of directors member Erin Newbill. ‘There is still some shadow inventory out there, but overall, it is a strong market.’”
“With a faltering economy and a government in crisis, these are not happy days for Brazilians. Certain ocean-area condos are selling at cut rates – some of them by as much as 20 per cent less than this time last year. As the real-estate market cools as a result, however, now could be a prime time for Canadians seeking a vacation home or an investment property. ‘Brazil right now is in a bit of a real-estate recession,’ says Dale Ripplinger, a Regina-based real-estate agent. ‘It’s interesting because so much of this almost mirrors what’s happening in Saskatchewan. Prices doubled in Regina and Saskatoon from mid-2007 to the end of 2008 and then tripled between 2007 and 2011. We’ve overbuilt, and the oil slowdown is hurting us. It’s very similar.’”
“Rents in Moscow’s most coveted neighborhoods are plunging as demand withers with the exodus of U.S. and European executives. As foreign employees exit the expensive neighborhoods they favor, rents have fallen by about 40 percent on average in dollar terms over the last year, according to David Gilmartin, owner of Troika Relocations. ‘The rental market is being hit by two things,’ Gilmartin said. ‘It was overpriced to begin with, and the number of people looking has fallen dramatically.’”
“A Chinese property developer has claimed ‘Australia would not survive’ without Chinese migrants. During an interview with Hong Kong television station TVB on May 10, Chen Guo Jing, a commercial and residential property developer based in Melbourne, spoke out in a report titled ‘Mainland Invasion’ about the growing amount of Chinese investment in Australia. Mr Chen, who has been living in Australia for 27 years, reportedly said: ‘Australian treat Chinese with contradicting attitude. However, Australia can’t survive without us. Therefore, Australian keep the anti-Chinese resentment to themselves.’”
“‘Why? Luxury housing and expensive cars are all bought up by us Chinese. Mineral and energy resources are all bought up by us Chinese. If there were no Chinese, Australia couldn’t survive,’ he said. Reporter Melissa Gecolea’s report for TVB aimed to show how ‘the Chinese diaspora is impacting life in Australia where mainlanders now top the list of foreign investors in real estate, driving prices up.’ One Facebook comment on the video from a Canadian Aaron Lee said: ‘This is also happening in Vancouver as well. I don’t think I can ever afford to buy my own house.’”
“Speculators have dominated Johor’s Iskandar housing market in the last few years but a slowdown since the middle of last year amid a surging supply is putting the squeeze on them, consultants said. ‘In 2012 and 2013, it was a free-for-all and speculation was rife. Even Singaporeans were coming in, buying blindly, and that encouraged developers to launch bigger numbers of units,’ said Mr V. Sivadas, executive director of PA International Property Consultants.”
“There was an air of hesitancy at this week’s City Sales auction of Auckland apartments, which was held just a couple of hours after The Reserve bank announced proposed new mortgage lending restrictions on Auckland residential investment properties. There were only three apartments on offer but even so, the turnout was smaller than usual. Although all of the properties on offer received bids, the auctioneer struggled at times to extract them from potential purchasers and in the end none of the bids met its reserve and all three properties were passed in for sale by negotiation.”
“Only time will tell whether the Reserve Bank Governor gets his wish to cool the Auckland housing market.”
“The Reserve Bank has finally got off the fence and signalled it’s getting its giant pin out and trying to deflate Auckland’s housing bubble a bit. It’s more of a controlled deflation than a grand splat of course, but it’s interesting, considering we don’t actually have a property bubble in Auckland at all, according to the Prime Minister and his friends in the business elite.”
“This week we learned David Hisco, who makes $2000 an hour heading up ANZ, is in total agreement with BNZ chief executive Anthony Healy, who is in total agreement with John Key, about the fact that that there is ‘no bubble.’ The Government’s inaction has been given the blessing of the financially blessed. One might have suspicions that it’s in the bank’s interests to keep property prices ratcheted up, and people borrowing, and profits flowing. The top four banks made almost $2.3 billion in profits in the first half of this year, or $12 million a day; a third of that was reaped from property investors.”
“Add that to the fact that the top property-owning politicians are all from the National Party, and an unmistakable pattern begins to emerge. Or, as they like to say, a ‘conspiracy theory.’ According to detractors, people like myself are just glass half-empty types, because where we see crony capitalism and the buying of influence, they see the natural order of things. A natural order where ordinary people are locked out of owning a house, and poor people live week to week at the mercy of an unmediated rental market, in the service of ensuring legislation never unduly discomforts those who can most afford it.”
Suck ‘em in …
“La Mirada mother Liberty Gutierrez built two businesses, renovated her home and bought three more properties: ‘For the first 10 years, anything I borrowed and used was interest-only when I paid it back.’”
Shake ‘em out …
“But this year her $175,000 home equity line of credit (HELOC) resets. It’s not just the interest she now has to pay but the principal. Her payments will jump from around $400 to $1,700 a month.”
“‘I’m not behind, I’m not unemployed, I’m not underwater. But that still doesn’t mean I can afford such a jump in a mortgage payment every month,’ Gutierrez said.”
And then there’s the punch line …
“‘I have no idea what I’m supposed to do with this property.’”
I’m signing up for a class to learn how to play the world’s tiniest violin after reading this article.
“‘I have no idea what I’m supposed to do with this property.’”
That wasn’t covered in Armando’s get rich quick seminar.
Comment of the day!
At least HELOCS are recourse loans in California (unlike 1st mortgages, which are non recourse), so hopefully the lender will go after this deadbeat…these resets should also help pop Bubble 2.0 in Calif.
Inventory is up 120% from a year ago and at a 3 year high locally so I’m expecting the pop soon.
They’re already a’fallin’.
“Recourse” No debt relief, courtesy of dear taxpayers, for you!!!!!
“But this year her $175,000 home equity line of credit (HELOC) resets. It’s not just the interest she now has to pay but the principal. Her payments will jump from around $400 to $1,700 a month.”
$48,000 in interest payments over 10 years?!?!??!?! Oh, the humanity!!!
That might be most the bank will ever collect off that note. I smell default.
“‘I’m not behind, I’m not unemployed, I’m not underwater. But that still doesn’t mean I can afford such a jump in a mortgage payment every month,’ Gutierrez said.”
Ahhhhhhhhh, the fine print shuffle.
‘Incentives for buyers also popped up just before the Great Recession, after home prices peaked.’
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‘As experienced new home agents, we may even be able to negotiate a reduction in the sales price for you with some of our preferred builders. Our team is committed to finding our clients every discount possible on their new Las Vegas home purchases.’
And all your new neighbors are instant FB’s.
Danville, CA List Prices Turn Negative; Down 4% YoY As Inventory Balloons 145%
http://www.movoto.com/danville-ca/market-trends/
“The biggest surprise for RealtyTrac VP Daren Blomquist was that found 56 percent of homes with a HELOC nationwide are underwater.”
Wow, that is a surprise. I wonder if there is perhaps a connection that ties the sucking out of equity to being underwater?
Wonders never cease.
“Wonders never cease.”
Let’s see:
1. Strangers vote up the price.
2. This rise in price translates into a rise in equity.
3. This equity is then traded for debt.
4. Strangers then vote down the price.
5. The equity vanishes however the debt remains.
6. The losses mount as depreciation accelerates.
Sammamish, WA Sale Prices Crater 13% YoY; Price Declines Spread Statewide
http://www.zillow.com/sammamish-wa-98074/home-values/
Ain’t happening. Try again. No Shillow or Movonouttahere allowed.
Care to wager on that?
Bellevue, WA List Prices Plunge 12%
http://www.movoto.com/bellevue-wa/market-trends/
MA Sale Prices Plunge 15% YoY Statewide
http://www.zillow.com/ma/home-values/
‘Banks have had long enough to “revise their ambitions” and the Australian Prudential Regulation Authority will “be watching carefully to see a moderation in growth in investor lending in the second half of the year,” Chairman Wayne Byres said in a speech.’
‘Landlords have fueled a surge in house prices with Sydney homes now costing 40 percent more than they did three years ago. The central bank has warned speculative investor demand may amplify prices and increase the potential for a fall later, while APRA urged lenders in December to limit investor mortgage growth to 10 percent a year.’
“Given the importance of housing-related lending, it should not be surprising that APRA supervisors are increasingly vigilant on the risks this lending presents,” Byres said, according to the text of his speech. “Put simply, if all our eggs are increasingly being placed in one basket, we need to make sure the basket isn’t dropped.”
‘Moody’s warns that Australia’s banks face challenges from a future house price fall, while previously secret Reserve Bank documents show it wants a bigger slowdown in investor loans.’
‘A recent survey of banks and credit unions by the Australian Prudential Regulation Authority (APRA) shows Moody’s is right to be concerned. Earlier this year, APRA presented banks with four hypothetical borrowers - two property investors and two owner-occupiers - and asked them to assess how much they would lend to them.’
‘In a speech to credit unions and other customer-owned banks yesterday, APRA’s chairman Wayne Byres described the results as, “quite enlightening for us - and, to be frank, a little disconcerting in places.”
‘Mr Byres said it was “not uncommon” to find that the most generous bank or credit union was willing to lend 50 per cent more than the most conservative. The difference was largely driven by banks applying different benchmarks for living expenses, and the lack of a discount with some banks for uncertain sources of income such as bonuses, investments and rents.’
‘A particularly worrying finding is that only around half the institutions surveyed applied a rate rise buffer to all the prospective borrower’s existing loans, rather than just the one they were applying for. “I confess to struggling to see the logic of such an approach – after all, any rise in interest rates will at some point in time affect the borrower’s other debts just as they will for the new loan being sought,” Mr Byres observed.’
‘The APRA boss is also worried about most banks’ assessment of interest only loans, with only a minority testing such loans as they would actually apply. “The majority assumed P&I [principal and interest] repayments over the full 30-year term, and hence were able to inflate the hypothetical borrower’s apparent surplus income by, in our particular example, around 5 per cent,” Mr Byres noted. “Our overall conclusion from this hypothetical borrower exercise was that there were clearly examples of practice that were less than prudent.”
‘While downtown Chicago is witnessing a flood of new apartments, construction is expected to begin this summer on Strata, a new condo development in River North at 847 N. Larrabee Crain’s reports. Property owner Domus Group has just begun sales for the site’s 27 units at prices ranging from $799,000 for a three-bedroom unit to $2.1 million’
‘The high-end downtown condominium market has rebounded from the crash, but the Ritz-Carlton Residences on Michigan Avenue still seem stuck in 2008. With high-end services that include a butler, a private dining club and curbside valets, the 89-unit tower is among the most luxurious recently built condo projects in the city. Yet it’s also the slowest-selling luxury building downtown, with about 70 percent of its units still unsold nine years after they came on the market.’
‘Many buyers who signed contracts before construction began walked away after the market crashed.’
‘In 2012 and 2013, the dispute with Terra stalled the first buyers’ move-in dates. At the time, Prism was asking $1,200 per square foot, the highest in the city, for its condos, according to Appraisal Research Counselors. Prices have come down since then. The most recent sale, a 33rd-floor two-bedroom, closed May 8 at about $2.15 million, or $747 a foot. Two other sales this year have dipped below $700 a foot.’
‘Even after the price cuts, “the perception is still out there” that prices haven’t come down, Shawkey said.’
‘San Francisco is once again debating how best to regulate short-term rental websites like Airbnb, after a law legalizing the practice went into effect less than four months ago. City planners have since said the law is unenforceable and needs to change, a position supported by Mayor Ed Lee and the Board of Supervisors.’
‘But just how to strengthen the law remains a point of contention, as does the question of what impact short-term rentals are having on San Francisco’s housing stock.’
‘Today, a report will be released by Budget Analyst Harvey Rose that provides new analysis of the impact of short-term rentals on The City, drawing comparisons between longer-term hosts and evictions and estimating that in some neighborhoods Airbnb units could comprise as much as 40 percent of potential rentals.’
‘In the Haight, for example, nearly 32 percent of the vacant rental housing units were listed on Airbnb, some 122 total. In the Mission, 29 percent of potential rentals, or 199, were listed on the website. Another estimate says the Mission percentage could be as high as 40 percent and as high as 43 percent in the Haight.’
“Airbnb has made a lot of claims that they are not impacting our housing stock. This demonstrates that they clearly are,” Campos said during an interview with The San Francisco Examiner. “And that in some neighborhoods like the Mission the impact is so significant that it’s definitely pushing people out.”
They actually refer to the place as “The City”?
Just Californicators deluded into believing their own Hollywood bull$hit.
They actually refer to the place as “The City” ??
If you have lived here long enough its universal throughout northern California at least…When someone says “The City” in conversation, all know they are talking about SF…Probably similar to someone saying BeanTown…
Yes, that’s common here.
And it goes back at least 50 years. My parents grew up south of SF, and have always referred to SF as “The City”.
Old Warriors Jersey’s from the 60’s have “The City” on the front.
Nomenclature is a funny thing. I had a roommate from TX. He referred to SF as “Frisco”. You’ll never hear someone native to Northern CA call it that.
True, I’m a native and “The City” was a common term when I was growing up there in the ’60’s. A very different place back then, affordable to rent or buy, and it was a LOT of fun as a kid. Moved north to the wine country 20 years ago, at that time rent was still affordable in S.F. but buying was not for most.
Ben said: They actually refer to the place as “The City”?
New Yorkers do that, too. Drives people from upstate NY crazy.
“a law legalizing the practice…is unenforceable”
I’m going to guess the law makes the practice illegal.
I don’t understand how renting out vacant houses via this AirBNB makes people leave the neighborhood.
‘A South Bay landlord who wanted to make some extra cash by renting out a room through Airbnb is in need of a place to stay herself since the tenants refuse to leave.’
‘Poonam Sandhu said a couple she rented her back master bedroom to on Airbnb also stopped paying weeks ago.’
“It’s essentially like watching burglars in your house, constantly waiting for them to pick up the next item,” Sandhu said.’
‘The eviction is a lengthy process, and in the meantime the couple has been holed up in the room, living rent-free.’
‘Attorney Leo Siegel said the couple has three previous eviction judgments against them in Santa Cruz County, and may be choosing this as a lifestyle. “They get to game the system by pro-rating their living expenses over however many months they get to live in someone’s property without paying,” Siegel said.’
‘To make matters worse, the home mysteriously developed a sewage problem during their stay that was so bad it forced plumbers to shut off the water. Sandhu had to move in with friends, and offered to pay the couple for a motel, which they refused.’
‘Sandhu said her biggest mistakes were not getting a background check, and allowing the couple to pay cash off the Airbnb platform after the first payments.’
‘Sandhu says Airbnb has not been able to help, and says this should be a warning to others. “Whenever an Airbnb transaction ends, it doesn’t mean that people are actually going to leave, and in this state, it doesn’t mean that they have to leave. They have rights as a tenant,” Sandhu said.’
‘not getting a background check’
Down and down the profits go. Accidental motel owners. This isn’t new, BTW. Recall the woman in Palm Desert (IIRC) who rented out her condo, in violation of HOA rules, and the guy wouldn’t leave.
As I found recently in a post, these people are mostly speculators, using these websites to game the local laws. As soon as prices stop going up, their attitudes toward cleaning toilets and making up soiled beds for pennies will change.
‘Sandhu said her biggest mistakes were not getting a background check, and allowing the couple to pay cash off the Airbnb platform after the first payments.’
Allowing strangers access to your home seems reckless at best.
‘The eviction is a lengthy process, and in the meantime the couple has been holed up in the room, living rent-free.’
Here’s a thought: shut off the water and power. I suspect that they would promptly leave, though they might trash the place before they self evict. Bringing strangers into your home just to make a few lousy dollars, just goes to show how desperate people are.
I’d bet because it’s a residential unit, they have established residency and in Arizona for example, it’s illegal to cut off utilities or deny access.
in Arizona for example, it’s illegal to cut off utilities or deny access.
So what happens if you don’t pay the water and power bills? I ask because a few years ago I forgot to pay it one month. Within 15 days of it being past due I received a nastygram threatening to cut me off within a couple of week if I didn’t pay up immediately.
If you don’t pay your own bills you can be cut off. If the landlord is paying, he/she can’t cut them off in Arizona. I also can’t have them transferred into my name and then cut them off. You have to go through the courts to evict.
It’s a BnB, Bed and Breakfast. Go over at 6AM and make them breakfast. Served in bed if they like, real friendly and all. Knock, knock!
If you don’t pay your own bills you can be cut off. If the landlord is paying, he/she can’t cut them off in Arizona. I also can’t have them transferred into my name and then cut them off. You have to go through the courts to evict.
I understand, but if I’m the AirBnB “host” I presume that the utility bill is in my name. So if I don’t pay it (in Arizona) does that mean that the squatters could sue me to get me to pay up and get the service reinstated?
Let’s say that they do, and the court appearance is scheduled for, I don’t know, say 2-3 months down the road. I guess that means they’ll be in the dark and cold, without water during that time. Of course, they’ll probably steal everything in the house before pouring concrete down the toilets and destroy the the drywall and break all the windows before they leave.
But I get your point, the law is not on your side. Moral of the story, don’t turn your house into a motel to make a pittance.
I am curious, how do these squatters prove residency? It’s not like they have a rental agreement or can show a utility bill. Perhaps all they need is a letter delivered to the address that they can mail to themselves.
‘how do these squatters prove residency’
I’m sure it varies state by state. I’ve even seen individual judges view things differently. One would be to establish mail service, or have utilities turned on in your name. That’s how they do it in Florida. Move into a vacant zombie, turn on the lights and water and you’re home! I seem to recall the guy who squatted in the Palm Desert condo rented it for a week or two and that was enough. You have to figure it takes a bit of time for the “landlord” to realize what’s going on. A little phone tag, more time goes by. Ah, the “grey areas.”
http://homeguides.sfgate.com/squatters-rights-law-california-45887.html
I live in SF, we refer to it as the city because it’s an enormous sprawl from north of the bay bridge all the way to San Jose and over to the east bay of oakland and a dozen other cities. It makes sense. I will say tho, it’s overloaded with arrogant douche bags and I’m working on an escape from not only the “City” but the whole crappy state!
‘The housing market is bouncing back, according to figures provided by the Pueblo Association of Realtors. Local realtors closed 178 home sales in March, compared to 161 in March 2014. The median price for home sales this March was $144,896, up from $130,990 in the same month last year.’
“In the last 2 1/2 months, the door opened and the buyers started coming out and all of a sudden we’re seeing homes sell very quickly,” said RE/MAX agent David Anderson, who’s been a realtor for 30 years.’
‘Anderson said in recent months, homes have been on the market for between seven to 30 days. “Last week I had two of them that sold within two days,” he said.’
‘The low inventory is driving up demand for developers like Roger Fonda, who owns Eagleridge Homes. Fonda owns several properties on the northside of Pueblo near Eagleridge Boulevard. He said it’s not only the locals who are buying.’
“Of the five houses we built in the last year, four of [the buyers] are from out of town or out of state,” Fonda said.’
Pueblo - Colorado’s armpit. No jobs, lots of minority poverty, no touristy stuff and the place is ugly. Even the local Colorado State U campus has a hard time attracting students from the rest of the state. They kept sending letters to my son, extolling the virtues of CSU Pueblo. Not a single one of his HS graduating class chose that school.
+1 - Last time I was down that way was driving through from a long weekend in Taos many moons ago - this just after the CSI (Steel) plant there closed - man you could roll a bowling ball down the main street and not hit a soul - cause there were none there to hit.
It is one butt ugly town in a very dry part of CO.
“Of the five houses we built in the last year, four of [the buyers] are from out of town or out of state,” Fonda said.’
Must be “investors” because I can’t imagine anyone buying a vacation house in Pueblo.
‘Apartment prices in Copenhagen are closing in on the pre-global financial crisis record highs in 2006 as they shot up by 5.7 percent between March and April, according to figures from estate agents Home.’
‘The past year has seen price hikes of about 16 percent, partially due to increased sales of newly-built apartment buildings, which account for 30 percent of the total apartment sales in the capital. The development has economists concerned.’
“The situation is beginning to be a concern,” Steen Bocian, the head economist at Danske Bank, told TV2 Finans. “We can’t conclude this is a housing bubble yet because there is so much going on and many people are moving to the cities. But having said that, this hasty growth should be worrying if you are a buyer scouring the market now.”
Oh no, we can’t conclude this is a housing bubble yet. “People are moving to the cities”? So Denmark is like China now?
You know it’s a bubble when politicians and professional economists sound like realtors.
‘China’s housing sales in the first four months fell 2.2% to 1.49 trillion yuan ($240.3 billion) from the same period a year earlier, marking an improvement from the 9.2% decline in the first quarter, according to the National Bureau of Statistics.’
‘Down payment requirements have already been eased for second home purchases and local governments have been rolling back some of their restrictions on home purchases.’
‘Alex Huang, a production engineer in Shanghai, is one such potential buyer who just might be convinced to take the plunge. “I’m looking for an apartment near my office in Minhang district, and I’m more confident in buying a place in Shanghai rather than in my hometown, where prices are still falling,” said the 28-year-old Mr. Huang. He believes housing prices are more likely to appreciate in Shanghai than in Changsha–where he was born.’
‘At first glance, Sunday’s interest cut announced by China’s central bank had broad implications for an economy facing significant downward pressure. The cut is seen by many as adding fresh fuel to China’s record-setting stock rally.’
‘Feng Yu, a retail investor in his twenties, told Xinhua he welcomes the rate cut as a strong boost to the stock market. In his view, China’s stock market will be flooded by more liquidity”from everywhere.”
‘According to Feng, there will be more cuts in interest rate and banks’ reserve requirement ratios in the coming months, more people will open stock accounts, and social security funds will be allowed to enter the stock market.’
“All these suggest that we’ll see more money going into the stock market to sustain the rally,” Feng said, adding that he will also seek to increase his gain in the stock market with increased leverage.’
“I’m really grateful for this rate cut. I took an 800,000 yuan (US$129,000) mortgage and this rate cut allows me to pay 6,000 (US$970) less a year. That’s three months’ rent for me,” said Yan Dingfu, who works in Shanghai.’
‘Yan couldn’t afford the down payment required for homes sold in the Chinese financial hub. Instead, he bought a home in Shanghai’s neighboring city Jiashan, hoping that the rate cut, combined with other property easing measures released since March this year, will allow him to sell his home at a higher price in the future.’
“The rate cut will not make buying an apartment cheaper for us. But it prompts us to make decisions fast because if we don’t buy home now, it will become more expensive in the future,” said another Shanghai home buyer.’
“I took an 800,000 yuan (US$129,000) mortgage and this rate cut allows me to pay 6,000 (US$970) less a year. That’s three months’ rent for me”
Mortgage and rent? Brilliant.
On this topic…I breathed a big sigh of relief last week when my friend FINALLY dumped their Shanghai show-condo after over a year on the market. Luckily I don’t have to convince them not to put it back into real estate because as divorced person they are no longer allowed to own as many houses as they were allowed to as a married person.
‘Sold signs hang next to new, single-family homes as open fields along Sugar Road continue to disappear. Several of the otherwise sunflower-studded fields have been cleared for new housing developments near Alberta Road in the past few years.’
‘Called “Summerset Estates,” the property has more than 100 lots where custom luxury homes feature vaulted ceilings, stone floors, and castle-like turrets. The asking price for one of the 4 bedroom and 3 bath 3,241-square-foot homes is $259,000.’
‘Those lots are a small fraction of the 57,818 homes sold in Texas during the first quarter of 2015 — about a 4 percent increase during the same quarter of 2014, according the Texas Quarterly Housing Report compiled by the Real Estate Center at Texas A&M University.’
“Our biggest challenge is that this is a subprime market, meaning that people’s credit scores are not high enough traditionally to get a loan,” said Steve Ahlenius, president of the McAllen Chamber of Commerce.’
‘In 2008, the Urban Institute found that 27 percent of home mortgage loans in Hidalgo County were subprime loans. The Rio Grande Valley comprises 6 out of 10 highest jurisdictions with the highest percentage of subprime loans in Texas, according to the research group.’
“There are people in this market that know how to structure those types of deals to get them into a home,” Ahlenius said.’
‘Another key is interest rates and the loosening of federal lending standards, he said. “Then you won’t have to have a perfect credit score in order to have a house,” he said.’
$259K for a 4BR 3BA 3200sf home??? Cheeze and crackers, in Seattle that is $500K in the far-flung exurbs (20-30+ miles out), and easily $750K+ closer in.
This subprime thing has me really worried. It’s 2005 all over again (if not 2006 or early 2007, time will tell on that).
This is in the poorest county in north America.
But it does show the real cost of building a home that size and how much profit the builders are making in the pricier areas, even with expensive land.
‘Cathy Weil, president of the Elmira-Corning Association of Realtors, said local Realtors are seeing multiple offers and quick sales on available properties. “The pace of sales right now is fast and furious,” she said.’
‘Weil said while the market appears strong, the county’s numbers may have more to do with a weak 2014 than a strong 2015. “The first quarter of 2014 was a bad start to the year for almost the whole Northeast,” she said.’
‘Many in the industry believe credit is still too hard to come by for homebuyers — possibly an over correction from the pre-recession times when credit was too easy to get. “The ‘credit crisis’ was supposed to be softening this year, and we haven’t seen it at all,” Weil said.’
“The typical credit score for borrowers obtaining conventional financing backed by Fannie Mae and Freddie Mac remains about 750,” she said.’
‘For Federal Housing Administration loans, usually for lower-income and/or first-time buyers, the typical credit score was 690, even though the program allows lending to those with scores of 650.’
“I think we have people stuck in their houses,” Weil said. “They need a higher credit rating now to get a new mortgage than what they when they bought, and they’re stuck. I think that’s one of the reasons we don’t have a big inventory,” she added.’
‘Weil noted that those numbers are national, and she couldn’t confirm whether they reflect local buyers.’
“The pace of sales right now is fast and furious,” she said.’
I think she’s lying.
I don’t see many for sale signs, but the ones there are just sit and sit and sit.
Two years ago we were in a commercial conversion to luxury rental mode here. Now we are in a teardown to build hotels mode. Exactly like 2006.
There are no new jobs. We can’t use 300% more hotel rooms.
Update: Crude Oil Prices Fall
http://www.marketwatch.com/investing/future/crude%20oil%20-%20electronic
‘How bad is the market for shipping commodities across the world’s oceans? Consider that more than 100 vessels will probably be scrapped this year — a record — and daily earnings for the industry will still tumble.’
‘Having predicted as recently as February that shipping rates this year would jump, forecasters are turning increasingly bearish as China’s coal imports plunge and its iron ore buying expands at the slowest pace on record. The Asian country’s economy, which is the second-largest after the U.S., will expand the least in a generation in 2015, estimates compiled by Bloomberg show.’
‘Against that backdrop, owners will demolish the equivalent of about 6 percent of all Capesize vessels this year, according to GMS Inc., a Cumberland, Maryland-based company that purchases obsolete carriers. Even so, earnings per vessel will still slump by about 20 percent this year based on a Bloomberg survey of 10 shipping analysts.’
“You can’t make the market good just by scrapping, that’s only going to protect the downside,” Eirik Haavaldsen, a shipping equities analyst at Pareto Securities AS in Oslo, said by phone May 13. “Coal is collapsing and iron ore is just not growing.”
‘A slump in China’s property sector that has hit steel consumption may be a warning signal for industrial metal copper, which reacts with a time lag to the construction cycle.’
‘Steel is mainly used in the early stages of construction while copper is largely consumed towards the end of the building process in electrical cabling and plumbing. Additional copper is also needed for consumer appliances once housing is sold.’
“Recent sharp weakening in steel demand … may be the ‘canary in the copper market’, Goldman Sachs analyst Max Layton said. “To the extent steel demand weakness reflects weak new (housing) starts, this may be a prelude to declining copper-intensive construction completions.”
‘China is the largest global consumer of both steel and copper, accounting for nearly half of the total for each metal. China’s apparent crude steel consumption fell for the first time in three decades in 2014 and continued the decline this year, sliding 6.2 percent in the first quarter, the China Iron & Steel Association said.’
‘Both steel and copper prices have fallen in the past 12 months — the steel rebar contract on the Shanghai Futures Exchange is down 26 percent, while benchmark copper on the London Metal Exchange has shed 7 percent.’
‘Hynes said that China’s demand growth would still be in “the low single digits”, about 4 to 5 percent. “Over the past couple of years the full effect on copper demand from construction has been delayed because property has been sitting empty.”
‘Layton said there is a lag of about 18-24 months between the start of new Chinese construction projects and completion. For the past two years, late-cycle construction completions have grown as developers attempted to maintain cash flows, but completions are due to be weak for the next two years, said Layton.’
Seeking Alpha
Baltic Dry Index Casts Pessimism Over Drybulk And The Broader Market
May. 11, 2015 6:11 AM
Summary
- It’s been an ugly year for drybulk carriers, the Baltic Dry Index is at all time lows.
- We think this signals that the broader market may continue to grind to a slowdown and then reverse course.
- Iron ore companies like VALE will be the beneficiaries from lower shipping rates.
By Parke Shall
It’s been an ugly year for drybulk carriers, and we think that tells us to avoid the sector as a whole and also not to put too much stock in the broader markets continuing to rally. The Baltic Dry Index is the gauge most commonly associated with drybulk carriers, and it’s been at, or near, all time lows for the better part of 2015. Right now, its at 573, near an all time low.
…
The trouble with cargo ships is that by the time they are delivered, the boom is over.
The scrap should make some quality rebar for more Chinese ghost cities.
Paging Dan
Positive economic news….
“Prices On US Imports Have Been Falling For 10 Straight Months”
http://www.businessinsider.com/r-import-prices-fall-for-10th-straight-month-2015-5
Remember…. falling prices to dramatically lower and more affordable levels is positively bullish and good for the economy.
“Another Chinese Firm Defaults on Its Dollar Bond”
http://www.bloomberg.com/news/articles/2015-05-08/china-defaults-mount-as-coal-company-winsway-misses-bond-coupon
Collapsing energy demand
“Greek Import Prices Fall For Twenty-Eighth Month In March”
http://www.hellenicshippingnews.com/greek-import-prices-fall-for-twenty-eighth-month-in-march/
Great news for everyone in Greece.
“Majority Of US Metro Areas Experiencing Falling Home Ownership Rates”
http://www.propertywire.com/news/north-america/us-home-ownership-rates-2015051110492.html
The Wallet Speaks; Why buy a house when I can rent if for half the monthly cost?
‘Metro Orlando’s homeownership rate dropped by more than that of all but three markets in the U.S. from 2010 to 2013, according to a study released by the National Association of Realtors.’
‘Homeownership has been in a state of decline nationally, with a 1.8 percent drop during the three-year period. But Orlando’s decline of 4.27 percent more than doubled the U.S. average.’
‘A review of homestead-exemption records showed that only 59 percent of the houses built from 2004 through 2014 were owner-occupied. Historically, 77 percent of new houses were owned as primary residences.’
‘More evidence of the Orlando region’s shift toward rentals can be seen in what’s being built. About a third of Orange County’s new residential construction during 2014 was apartments — more than double the rate from the housing-boom years of 2003 through 2006, property records show.’
‘The peak of the foreclosure crisis has passed in Central Florida, but its effects are still being felt by plenty of homeowners. Among those still ensnared is Orange County Commissioner Victoria Siplin, whose Holden Heights condominium will go on the auction block next week.’
‘The three-bedroom, two-bath unit was foreclosed upon because Siplin hadn’t paid the mortgage on it since 2008, or property taxes on it ever, according to court records and the Orange County Tax Collector’s Office.’
‘Records show that the condo association also placed a lien on the unit in March, citing unpaid assessments going back more than a year in the amount of $4,442.20.’
‘According to the site, the 1,465-square-foot unit has an assessed value of $83,253.00. It was built in 2006. Siplin and her husband, former state Sen. Gary Siplin, bought the unit in August of that year for $202,700. The same day, Gary Siplin deeded the unit to his wife for $100, records show. She became the sole owner of record under her maiden name, Victoria Pierre. The property currently has a homestead exemption.’
‘In a written statement she said the amount of the mortgage outstripped the unit’s value after the housing bubble burst. “Hundreds of thousands of people faced the same unfortunate circumstances as I did with respect to an upside down mortgage,” she wrote.’
‘Her statement did not address the nonpayment of property taxes.’
‘Victoria Siplin works as a paralegal in her husband’s law practice. She was elected to the County Commission representing District 6 in 2014. Orange commissioners earn an annual salary of $78,471.12.’
‘Siplin’s condo is one of eight properties that will be auctioned on the clerk’s site that day.’
Gotta love Floriduh, where even the elected officials are deadbeats and don’t pay their mortgage for 8 years.
She and her husband represent the “Urban” district of Orlando. No condo or home in that zip code was ever worth $200K.
……the 1,465-square-foot unit has an assessed value of $83,253.00.
There is HA’s $55/SF value including everything (except back taxes, HOA dues and accrued interest!)
$55/sq is for new construction Jingle_Fraud. A run down 30 year old depreciating shack is worth far less.
It is just sad to see how many people are gaming the system, without even a shred of shame about it.
And this also seems to be the norm for many of the third-worlders who have been coming here. Get what you can, and screw everybody else.
With those kinds of values, how is our country going to survive? At what point are those of us in the minority who are being good serfs, working hard and paying are taxes, going to be fed up enough about it to do something? And then what do we do? The FSA will be rioting in the streets.
This all does not end well.
Pot meet kettle.
‘More evidence of the Orlando region’s shift toward rentals can be seen in what’s being built. About a third of Orange County’s new residential construction during 2014 was apartments — more than double the rate from the housing-boom years of 2003 through 2006, property records show.’
$10/hr Disneyworld “cast members” can’t afford $300K starter homes.
“Incentives for buyers also popped up just before the Great Recession, after home prices peaked. A spokeswoman for Tesla said Wednesday that its cars have been used more recently as deal sweeteners. Weinzierl said he’s selling at a price that is essentially a loss because he currently has other interests in mind. Neuman said if a buyer didn’t want the Tesla that he would be willing to negotiate different terms.”
In particular, the incentives of ‘free’ car giveaways became popular just before the last crash. I question whether this is merely a ploy to finance a car on a mortgage loan in order to get a lower rate than on a csr loan, plus deductible interest. Is it even legal to pretend a car is part of a home structure, just because you park it in the garage?
“House and contents”.
“With a faltering economy and a government in crisis, these are not happy days for Brazilians. Certain ocean-area condos are selling at cut rates – some of them by as much as 20 per cent less than this time last year. As the real-estate market cools as a result, however, now could be a prime time for Canadians seeking a vacation home or an investment property. ‘Brazil right now is in a bit of a real-estate recession,’ says Dale Ripplinger, a Regina-based real-estate agent.”
______________________________/
So for Canadians, now could be a prime time to buy vacation or investment property in … Brazil? Did I read that correctly? Note to Canadians: Latin America is not Phoenix. Although I do find it amusing that Canadians are being urged to buy a vacation home in a country other than their own. Maybe the Chinese bought up everything in Canada.
A thought that crossed my mind: a vacation house in the US is just a short (and relatively cheap) flight from most of Canada, and if yo want to do so, you could drive their in your car. A house in South America is a long and expensive flight away and there’s now way you’re getting there in the SUV.
Anywhere in the southern part of South America is an overnight flight. I’ve seen pictures of Brazilian resort areas, like around Florianopolis, and they look very enticing, but all the same I don’t know why anyone would buy property in a Third World country where he or she didn’t speak the language, didn’t have connections or relatives there, and didn’t have at least a basic understanding of local law governing the purchase. Talk about caveat emptor.
“Thousands of foreign buyers are snapping up U.S. properties across the country. Florida is the number one region for sales, holding twenty-two percent of the foreign market. The National Association of Realtors estimates total international sales from Chinese buyers were $22 billion in the twelve months that just ended in March, 2015. They report the Chinese are buying luxury homes in Naples and Southwest Florida because they are a bargain compared to the $1.5 million they might pay for a small condominium in Hong Kong. They report that some are paying cash and buying sight unseen.”
____________________________/
In my own Tampa neighborhood, over the last 18 months, I have seen middle-aged Asians driving slowly down the streets checking out houses. Just last month, I saw what looked like a Chinese man emerge from a luxury sedan with two blonde realtor types, looking at a house that a homebuilder recently purchased with the intention of tearing it down and building a McMansion. These individuals might be U.S. citizens who work here and are looking for a place to live. If so, good, I’m totally OK with that. But they also might be Chinese criminals looking to launder looted money. I don’t think our leaders want to find out the answer. It’s all good!
‘Homes are selling at a faster clip this spring, but something still isn’t quite right in housing. Lower rates, however, did not translate into more mortgages to purchase a home. In fact, purchase loan originations were down 25 percent in the first quarter from the previous quarter and up only 1 percent from a year ago, according to new numbers from RealtyTrac.’
‘Blomquist admitted that FHA insured loans, a favorite among first-time buyers due to their low minimum down payments, saw weak volume. Granted the first quarter was still winter, but the comparison to a year ago points to weakness, especially given that the economy has supposedly improved in the past year.’
‘RealtyTrac also recorded the highest volume of nonowner occupant buyers (largely investors) in the first quarter since 2011. Investors are still in the game, and some are now starting to use mortgages again for their purchases, though that share is still small.’
“Investor activity continues to represent a disproportionately high share of all home sales activity in this housing recovery, but unlike the past three years the large institutional investors are backing out while the smaller, midtier and mom-and-pop investors are remaining active,” said Blomquist.’
http://finance.yahoo.com/news/housing-numbers-something-weird-143437438.html
‘The home ownership rate now stands at the lowest level in 25 years, and it continues to drop each quarter it is measured.’
US ten year treasury note yields have gone from 2.35 to 2.15 in little more than a blink.
My favorite part of all these last couple of weeks has been reading all of these folks suggest the slide in bond prices being the result of inflation being upon us.
People mistaking inflation for an increase in risk premiums for illiquid markets….as Mr. Banker would say, BAHAHAHAHAHAHAHAHA.