An Artificial Price Pressure
A report from the Wall Street Journal. “It has always taken some financial wherewithal to purchase a newly built home. But never like now. The Commerce Department reported that the pace of new home sales in April reached an annualized 517,000, adjusting for seasonal swings. Still, while April counted as one of the strongest new-home sales reports since 2008, taking a longer view it was still very weak. Price has a lot to do that. Over the past year, the median price for a new home has averaged $289,750. That is 37% more than the $211,300 price tag an existing home has carried. While the two measures aren’t completely comparable, in 1999 the difference was half that.”
“What’s more, the median price for a new home in 2013 reached 4.2 times the median family’s income, equaling where it was during the peak of the bubble. Given that new home prices have risen more than income since then, that mark has probably been eclipsed.”
From Bloomberg. “Merion Homes bought two dozen rambler-style houses in Northern Virginia’s Pimmit Hills community for about $450,000 each, just to knock them down. Now it’s selling customized residences three times larger at prices topping $1 million. Knockdowns across the country are increasing, said Robert Dietz, an economist with the National Association of Home Builders. The trade group estimates that builders tore down and reconstructed about 32,000 homes last year, representing 5 percent of all single-family housing starts. Beyond the nation’s capital, the trend can be found in suburbs of cities from Boston to Minneapolis and Los Angeles.”
“Ning Yim, an accountant who lives in Pimmit Hills, said new construction is changing the dynamics of the neighborhood, established in the early 1950s for returning veterans of World War II. ‘We like it when we see more new houses,’ said Quy Phung, Yim’s husband. ‘It brings up the property values.’”
The Dallas Morning News in Texas. “Dallas-area home prices are at a record high and about 15 percent ahead of where they were at the peak of the market before the recession, Case-Shiller says. Home prices are expected to rise at close to a 10 percent annual rate through the rest of this year and into 2016 in the Dallas-Fort Worth area. ‘The industry is concerned that incomes aren’t rising as fast as home prices,’ said David Brown of housing analyst Metrostudy Inc. ‘Right now, builders are more about getting houses started and completed,’ Brown said. ‘But everybody is wondering what happens when interest rates go to 6 percent.’”
“Unlike in some markets where speculation drove home prices higher than many consumers can afford, the rise in values in North Texas is driven by economic growth. ‘Demand simply exceeds supply,’ said Randall S. Guttery, real estate programs director at University of Texas at Dallas. ‘To me, a bubble is an artificial price pressure on housing,’ he said. ‘I see nothing artificial about our market locally.’”
The Sun Sentinel in Florida. “Last week, Realtor boards in Palm Beach and Broward counties released April figures showing steady price increases amid a busy spring selling season. The median price for existing homes in Palm Beach County was $300,000, 10 percent higher than a year ago. Broward’s median was $287,500, up 5 percent.”
‘Sellers are seeing good returns, but there is a limit, said Cathy Prenner, a real estate agent for Campbell & Rosemurgy in Broward and Palm Beach counties. ‘Right now, family houses are selling well,’ she said. ‘Homes will sell very quickly if there’s good value. But if sellers keep going up and up on the price, it doesn’t work.’”
CNN on Colorado. “The living quarters are also getting tight for Brandon Hess, his wife and 9-month old son in their studio loft in downtown Denver. The first-time buyers started searching for a bigger home before Christmas last year. The couple originally wanted to stay near downtown, but quickly realized that wasn’t in the budget and expanded their search. They toured more than 30 houses, but found list prices can be deceiving and bidding wars are common. ‘It’s sort of a demoralizing process, you would see a house you think is in your range, but the new tactic is to list at $270,000, but they really want $380,000.’”
“Rapidly rising home prices have made it hard for the family to save. ‘We aren’t putting any money away. We are breaking even right now.’ They’ve tabled their plans to become homeowners for now, and at this point, Hess is worried they may get priced out of the rental market. ‘We are starting to feel like we can’t afford Denver anymore.’”
CBS San Francisco in California. “After years of techies and start ups flocking to Silicon Valley, now they are flocking away, for better pay and more affordable places to live. According to a study at Redfin, the exodus from Silicon Valley is real. The real estate brokerage analyzed searches on its database and found a dramatic increase in the number of Bay Area people searching for homes in Seattle, Portland, Boston, Austin, and Chicago.”
“Doug Wilson works in tech. He said he loves the Bay Area and is sticking around, but has colleagues who have taken the leap. ‘They realized they’re being priced out of the housing market. Other places such as Texas provide opportunities to make six figures and the money goes a lot further.’ Wilson confirms companies are leaving, too. He knows of two that are in the process of moving, right now. ‘They’ve just had it with California,’ he said.”
NBC News on New York. “A sum of $21.5 million might seem like a lot of money but, in the outrageous world of New York real estate, you might be surprised by how little it will actually buy. This 12,000-square-foot townhouse is now back on the market reduced from its original $27 million 2011 listing. Ukrainian-born billionaire Alexander Rovt bought the townhouse in 2008 for $6.96 million and began a five-year gut renovation that cost a whopping $18 million. Shockingly though, he has never spent a night there. In fact, no one has. The townhouse has not been lived in since Rovt purchased it. There is a full-time housekeeper who cleans the massive space daily, but she doesn’t reside there.”
“Of all the shocking features this residence has, perhaps the most startling is that the property’s broker calls it a bargain at $21.5 million. Warburg Realty’s Jason Haber insists: ‘This is the best townhouse on the market right now. Asking less than $1,800 a square foot quite frankly makes this house a steal.’”
“It has always taken some financial wherewithal to purchase a newly built home. But never like now. The Commerce Department reported that the pace of new home sales in April reached an annualized 517,000, adjusting for seasonal swings. Still, while April counted as one of the strongest new-home sales reports since 2008, taking a longer view it was still very weak. Price has a lot to do that. Over the past year, the median price for a new home has averaged $289,750. That is 37% more than the $211,300 price tag an existing home has carried. While the two measures aren’t completely comparable, in 1999 the difference was half that.”
Given the much lower rate of new home sales now versus in 2006, might relatively higher new home prices compared to incomes reflect sales concentration to a more upscale demographic now compared to in 2006?
The builders last year were saying they were building ever bigger houses.
Ironically, the more income you have the more foolish you are allowed to be.
Lots of people have desperate need to show trophies to the world.
Much insecurity out there. Much need for approval.
It’ll likely get worse as everyone under 30 now seems to have a trophy just for participating, not for accomplishment.
You’re a special snowflake just for showing up.
Oh - and what’s all this burgeoning nonsense of having “graduation” ceremonies for preschoolers, kindergarten, fifth grade, sixth grade, etc.?
It’s all the rage.
More examples of praising the act of simply “showing up” as a meaningful accomplishment.
Millennials seem to park in two camps. Once they realize they aren’t treated for being special as a snowflake they go into introspective mode, sulk and moan about how hard life is and either blog about it or write a whining song. There’s this 30 something singer/songwriter who actually crafted lyrics that gets airplay about how hard life is after having his first son. Waaaaaa.
There’s this 30 something singer/songwriter who actually crafted lyrics that gets airplay about how hard life is after having his first son
He must be paying a ton of child support after his ex hit the eject button.
But why are the builders building the more expensive houses?
Because they can make more profit from them? Of course!
But here is another reason: in areas where land is very expensive, they have to. I just walked the four-lot developed behind my house last night. The homes are stating at $1M.
The cost of the land, plus the exhorbitant cost of developing the land (thanks to crazy stormwater rules among other things), means that just the developed lots w/o homes cost in the $300K - 400K range each.
The underground stormwater storage vault they were required to put in (which is 50′ long by 20′ wide by 10′ deep) cost $240K (to the developer), so that alone adds $60K per lot.
And not a buyer in sight at a fraction of that price.
Never build on spec.
Wrong, HA. There will be multiple potential buyers for each and every house. These houses are 1.5 miles from Microsoft HQ.
Remember…. there is no housing demand.
US Housing Demand Plunges To 20 Year Low
http://2.bp.blogspot.com/-fqSztKilps8/VFlPKlr52JI/AAAAAAAAhKU/v5oS41S-y0s/s1600/MBANov52014.PNG
But your data is again wrong. In the area where I live, demand is extremely high and will continue to be until the tech company jobs bubble pops.
And it’s down in Seattle 10%. See for yourself.
http://files.zillowstatic.com/research/public/City/City_Turnover_AllHomes.csv
Data my friend.
‘in areas where land is very expensive, they have to’
Like Bozeman.
There is something insidious going on of late. This government mandated crap is happening all over the country - land costs are an issue and suburban ’sprawl’ is the enemy to be dealt with (at least in the eyes of progressives).
When I was thinking about building a new home last year (and didn’t) I looked at land south of Denver and north of the Springs and in my searches since have seen increases on parcels I was considering accelerate in some cases by 10 to 50k over that time span. What was a 90k parcel is now 120 to 150k. This in areas where utilities are in the street but nothing else. Cost is just for the dirt for the privlege to build. Eroding dollar value has something to do with this due to Fed policy as has been noted on HBB for some time.
Needless to say the lots remain on the market as builders are concerned that their costs may not be recouped due to buyer demand dropping in further out burgs.
On the flip of this though is that infills are getting built on. But that land already has a high cost due to location and access to jobs, schools, amenities, shopping and what I like to call the hipster factor.
Again I use an area north of Castle Rock south of DTC as an example when I was looking about. The area is very desireable but mostly built out. I now find that builders in this area continue to build high end homes on more marginally appealing lots at a smaller and smaller margin. This while inventory of high end 700k + homes are starting to stack up like cord wood going unsold especially in Douglas County CO.
Example of the insanity…. There is a development by a fairly decent builder north of Castle Rock where homes start at 675k and back right up to I-25. Now who in their right mind would find value in that proposition much less desireable? Back yard is right next to the freeway at 675K!!! Sheeesh!!!
I am finding more and more of this as I travel the country. Was down south in March in Nashville looking about and similar story - Friends are looking build there and they are finding that land is increasing the cost of builds. PHX - we have beat that cow enough already. Seems the areas that boomers and their millenial counterparts find appealing are now becomming the very thing they are trying to get away from - high costs, poor services and the like.
On a final note….There is a gubmit policy movement that I don’t know if the dots connect as I have not done enough research on it but this may provide insight…
http://www.wsj.com/articles/SB10001424052702304281004579222442197428538
Here in the Chicago area Mayor Rummy has decided in order to make the city look fiscally healthier than it really is he is gradually poaching firms from the surrounding burbs with nice incentives to relocate to the city. Daley did this with impunity. Motorola is an example and now with Google are in the Merchandise Mart just off the Loop. United Airlines, Miller Coors - the list goes on and on.
and this…..
http://www.forbes.com/sites/realspin/2012/08/13/how-obama-is-robbing-the-suburbs-to-pay-for-the-cities/
“Obama has lent the full weight of his White House to Kruglik’s efforts. A federal program called the Sustainable Communities Initiative, for example, has salted planning commissions across the country with “regional equity” and “smart growth” as goals. These are, of course, code words. “Regional equity” means that, by their mere existence, suburbs cheat the people who live in cities. It means, “Let’s spread the suburbs’ wealth around” – i.e., take from the suburbanites to give to the urban poor. “Smart growth” means, “Quit building sub-divisions and malls, and move back to where mass transit can shuttle you between your 800 square foot apartment in an urban tower and your downtown job.” In all likelihood, these planning commissions will issue “recommendations” which Obama would quickly turn into requirements for further federal aid.”
Again I have not researched this stuff enough to know if there is a causal affect but land has just increased in value to the point of making it difficult for builders to find margin in reasonably priced homes. This does not bode well for the first time buyer me thinks.
Comments welcome and any additional info on the links above would be appreciated.
There is a globe full of land and 95% of it goes undeveloped.
Paying more than a few hundred dollars an acre is strictly a bubble phenomenon.
RJ-
I’m most familiar with So Cal markets (although we did just decline to invest in a subdivision in Castle Rock–pricing just felt too high).
For a long-term perspective, most population growth has occurred in CA in the inland markets (Central Valley, Inland Empire), and that is where the bulk of the growth is expected over the coming decades…that’s where there is available land.
Right now, housing development in these historically higher growth markets is running at less than 50% of normal (some are closer to 1/3 of normal). And sales are sluggish. Despite coastal home prices at or near all-time highs.
Why?
For the most part, developing new homes in the inland markets simply doesn’t make economic sense. Pricing pressures from the coast haven’t made their way far enough inland.
When builders determine what they can pay for residential land, they do a “residual land” calculation. The starting point is the expected sale price of the homes they intend to build, and then they deduct a profit margin and all costs (hard, soft, fees, land development, interest cost on borrowings, etc.). The resultant number is the most they will pay for the dirt.
When times are better, they might assume a lower profit margin (because they are underwriting a rapid sales pace), or home sale price growth, which will both tend to drive up the cost of the land.
A big part of the land development cost component are entitlement costs (and risk), which are made more expensive due to CEQA (California Environmental Quality Act) and Prop 13 (which has forced more and more local revenue generation onto city fees instead of property taxes). To go from raw land to a finished lot (which includes impact fees), even for a “cookie cutter” subdivision is often $100k…if the land were $0.
In many (not all) inland So Cal markets today, if you do the residual calculation, you get to a number either less than $0, or less than the value of the land as agricultural land. This has been driving homebuilders to only build expensive homes in nicer communities (often closer to the coast). What this means is that even if the land were handed to you for free, you couldn’t put in all the infrastructure (including new government requirements, permits, etc.), build a house, and sell it for a profit.
So, in general over the prior few years, you see very few markets where they are grading large numbers of new lots.
That said, I think we are getting close to a point where that will change. In talking to some land brokers recently, land residual values are starting to get back above $0 in some markets that we have been tracking.
Yes, home prices are at a level that indicates a cyclical high. However, IMHO, we will need to see national housing starts get above 1.6MM for a period of time (at least 1 year) before we see a significant price correction. And we have a little way to go before we get there.
And perversely, the high fees and infrastructure costs are going to keep demand for new homes generally weak due to the necessary higher price points of new homes, so the runway back up to normal levels of housing development could be longer than would otherwise be expected.
‘very few markets where they are grading large numbers of new lots’
I found one:
https://www.youtube.com/watch?v=cFoaLS4D6Fw
This video doesn’t cover 10% of what’s going in up there.
Good stuff Ben. Were these stalled subdivisions that they are now restarting? Or did they recently build all the roads/infrastructure?
My whole comment references what I’ve been seeing in Inland Southern CA markets. While the residual calculations I note are universal, when talking about residuals being below $0, I’m talking about those markets.
I’m sure the fees are generally lower in Phoenix (which makes the math easier), but at $400k+ per home (noted on 2 signs that I saw), I can see how the math works.
Do you know what the current housing construction run rate is in Phoenix in general? At peak they were building ~40k-50k+ homes per year…I seem to recall more “normal” times would be more like 30k homes per year.
RW -
Re Castle Rock subdivs -
I recently took a look at a new community near Plum Creek Golf course - community of some 50 homes being built by an outfit based in Boulder - nice layouts etc for folks like me who see living on one level as I age a good thing.
Went there in March when I was out there in CO. Had a very brief meet and greet with the rep who I had been emailing back and forth with over a year - and ya know - just that week - builder sold all the land - all remaining 40+ lots to another outfit and is pulling out - “refocusing” was the reason.
I found my self very disappointed and now back in the hunt and really frustrated.
The thought I had and still wonder about is - why the sale of the lots?
Your explanation said it all - their numbers were just not working out for the price they were trying to build the houses at.
thanks.
Yeah, 400k works for the builder just fine. For local incomes? This is all new as far as I know. I think greater Phoenix is building about 12k SF units a year right now. I read there are 13k apartments under construction and another 16k planned.
You’re talking about developments Rental_Fraud, not houses.
‘But everybody is wondering what happens when interest rates go to 6 percent.’
That’s easily answered: Interest rates don’t go back to 6% for a very long time.
Interest rate increases are not the only thing that can trigger a downturn. Anything that incites fear will do.
A downturn can trigger lower interest rates.
Then wouldn’t mortgage rates go back up to ten percent ? I think with ZIRP we are at 4 percent now.
So payments double, at least? Hahahhahaha. That’s why it would never happen.
We have a poster here that’s good at predicting things that have already happened. I noticed that the long-standing 0% Toyota loans have turned into 1.9%. And a person I know who has made great use of the 0% credit card balance transfers, for years, recently informed me those have gone away.
And crash the economy? Your good points regarding the Toyota loans and CCs notwithstanding, who will pay the interest on the national debt? All this Fed talk talk talk and it’s always six months away.
‘who will pay the interest on the national debt?’
Janet Yellen?
Anyone paying 750K for a 900sf shack in the bay area deserves what it going to happen.
Yes and those shacks are in the earth filled mud flats along the bay. One thing that is going to happen is they will become house boats with the rising ocean levels. Got pontoons?
Next big quake will nail them before the ocean does.
And it’s overdue.
I’m VERY surprised with all the quakes over the past many years along the Ring O Fire that the U.S. coast hasn’t been hit yet. Is 2015 the year of the biggie??
“rising ocean levels.”
Rising ocean levels from an ocean of acid that will not only flood your house but will dissolve it.
Rising and warming oceans of acid, relentlessly rising, relentlessly warming, relentlessly dissolving.
There will be no escape!
There will be no escape!
Don’t even think of moving out here.
“Merion Homes bought two dozen rambler-style houses in Northern Virginia’s Pimmit Hills community for about $450,000 each, just to knock them down. Now it’s selling customized residences three times larger at prices topping $1 million. Knockdowns across the country are increasing, said Robert Dietz, an economist with the National Association of Home Builders.”
I think this is outstanding as it worked out so well right up until 2006 or so. Bubble? What bubble?!?
‘This is the best townhouse on the market right now. Asking less than $1,800 a square foot quite frankly makes this house a steal.’”
Oh there’s some stealing going on alright…
It’s all dumb money playing these days.
“I see nothing artificial about our market locally.”
Don’t look now, but the Dallas Fed says you are already in the “collapse” phase.
“Falling Steel Prices Weigh on Construction Costs in May”
http://www.forconstructionpros.com/press_release/12077834/falling-steel-prices-weigh-on-construction-costs-in-may
Take note bidders. Escalator clauses are gone and they’re not coming back.
“Farmers Discuss Falling Milk Prices”
http://www.bbc.com/news/uk-england-32904415
Falling prices are good for the economy.
why are you lurking over in this thread?
Stick with the data Poet….
Vienna, VA Housing Prices Crater 21% YoY
http://www.movoto.com/vienna-va/market-trends/
your rubbish belongs in the bits and buckets.
Housing Poet… Housing.
Davis, CA Housing Prices Fall 4%; Housing Demand Craters
http://www.movoto.com/davis-ca/market-trends/
boys, boys, boys - man o man the heat in your dialogue (not discussion) has been escalating recently - calm yo self down man!!! Depressing to see you guys at one another’s throats.
Housing my friend housing.
Novato, CA Housing Prices Fall 7%
http://www.movoto.com/novato-ca/market-trends/
When you keep using garbage data to try to prove something, it does cause frustration. You remind me of my 6-year-old kid, always trying to blame somebody else for your problems.
Your beef is with the data my friend. I can’t help you with that.
Bellevue, WA Housing Prices Fall 11%
http://www.movoto.com/bellevue-wa/market-trends/
You are using data to lie.
So yes, actually you can help me with that.
You can stop lying. You are no better than the housing shills.
Refute the data my friend.
Redmond, WA Housing Prices Fall 13%; Excesss Housing Inventory Balloons 103%
http://www.movoto.com/redmond-wa/market-trends/
Dude, just quit. I live here. I’m looking for a bigger house.
Your data is wrong. There is no excess inventory here. In fact, there is hardly any inventory at all.
Give it a rest.
Go to redfin, type in Redmond, WA and see how many houses you see for sale. Go ahead, try actually going to a website outside of zilloto.
And my realtor feeds me REAL data on house sales in my area almost daily as she has several clients looking in my area as well. Everything is selling for over asking. It’s only a matter of how much over, and often that is not known until the sale is recorded with the county.
So I have good data from a local realtor who has been buying and selling houses in my area for the past 25 years.
That, my friend, is good data from somebody who actually has boots on the ground.
Stick with the data my friend.
Redmond, WA Housing Prices Fall 13%
http://www.movoto.com/redmond-wa/market-trends/
Alexandria, VA Housing Prices Fall 10% YoY
http://www.movoto.com/alexandria-va/market-trends/
Remember…. falling prices to dramatically lower and more affordable levels is the best medicine for a moribund economy.
“What’s more, the median price for a new home in 2013 reached 4.2 times the median family’s income, equaling where it was during the peak of the bubble.”
So? Who cares? Why not focus your attention on what really matters to most buyers which is …
How much are the monthly payments?
In this People Are Smart world we now live in the criteria that once determined whether or not something was considered “affordable” has morphed from “What is the price?” to “What are the monthly payments?”
That’s the term “affordable”. Another term that needs to be considered is the term “desirable”; This term IS related to price in that the higher the rise in price in this People Are Smart world the more desirable the property becomes.
Raise the price and you raise the desirability. Lower the monthly payments and you raise the affordability. Couple the two together - the desirability and the affordability - and - presto! - you will have before you a “recovery”, perhaps even a boom.
Is this related to a depreciating ‘asset’?
So much for allowing interest rates to normalize, eh?
Increasing interest rates not only will cause federal debt to explode, they’ll also torpedo the housing market and thus funding of local and state governments.
The Federal Reserve now is in a trap.
Time for smart people to reconsider what wealth really is. What we have long considered to be “wealth” ….is it still true? Conceptually speaking.
Increasing interest rates not only will cause federal debt to explode, they’ll also torpedo the housing market and thus funding of local and state governments.
The Federal Reserve now is in a trap.
Not only the Fed, central banks around the world are playing the ZIRP game. And no one wants to be the first one to raise interest rates.
Have the balance sheets of their member banks been repaired yet?
“starting to feel like we can’t afford Denver anymore”
And thus begins the two-tiered society, see also California for an example
Colorado = The Next California.
Who has been saying that for quite a while now?
Oh yeah….MacBeth!
A shame, really. At one time, Colorado was a wonderful place. No longer. It is being destroyed.
A shame, really. At one time, Colorado was a wonderful place. No longer. It is being destroyed.
It’s horrible here. Whatever you do, don’t move here. Move to someplace nice, like Hotlanta or Houston.
We know what your depreciating house is worth. How much do you owe?
what are your losses to opportunity costs? I think you have left a lot of cash on the table stressing about depreciation.
What are your losses Poet?
Vacaville, CA Housing Prices Sink 5%
http://www.movoto.com/vacaville-ca/market-trends/
‘China’s stock markets plunged on Thursday, with indexes dropping over 6 percent in record high turnover as investors rushed to sell after more brokers tightened margin trading requirements for clients and the central bank drained money market liquidity.’
‘The CSI300 index and the Shanghai Composite Index both slumped in late afternoon trade, ending down 6.7 percent and 6.5 percent, respectively, their worst day since January 19 when markets fell over 7 percent on an earlier crackdown on margin trading. In terms of points shed, the two indexes suffered their heaviest single day loss since 2008.’
‘China’s stock market has surged over 140 percent over the past 12 months despite a flagging economy, as retail investors, including university students, barbers and janitors piled into the world’s best performing market, though economists have warned that, based on economic fundamentals, the rally was unjustified.’
‘Official data shows the surge has been accelerated by cheap credit, with the outstanding value of margin finance hitting a record 2 trillion yuan on Tuesday.’
‘Tian Weidong, analyst at Kaiyuan Securities in Xi’an, said that the sharp drop in financials was partly due to news that Central Huijin Holdings, an asset management company controlled by Beijing, had reduced its holdings in major state-owned banks China Construction Bank and ICBC, both of which are index heavyweights.’
‘But he added that many investors were already looking for a reason to sell, and the changes to margin financing sparked the stampede. “Many investors have become very cautious and are looking for a reason to take the profits they have already earned,” he said.’
‘Analysts warned of the risk of volatility intensifying. “If the stock market suddenly reverses and investors default on their margin debts, the contagion effect will be much greater than in previous cycles, since the banking system is now more exposed to the brokerage industry,” wrote Chen Long of Gavekal Dragonomics.’
http://finance.yahoo.com/news/china-stocks-post-biggest-slump-074056668.html
‘has surged over 140 percent over the past 12 months despite a flagging economy, as retail investors, including university students, barbers and janitors piled in’
The square dancers have left the building.
Yet there will be untold billions worth of IPOs to take advantage of this deep pool of dumb borrowed money.
“boomerang dumb money”.
Just two days ago, I saw the first advertisement for a China Stock Market Investment Fund. I thought, oh, oh, the downturn is right around the corner.
Ruh roh…
Interesting that these janitors are trading on margin. I was told the Chinese have bushels of cash savings.
Yeah, aren’t they supposed to be hoarding money?
Maybe they are trading on margin to avoid dipping into their hoarded money?
“…..looking for a reason to take profits they have already earned.”
Earned? Or “won”, by shooting craps?
‘Stocks also fell before a flood of new share sales. Subscriptions for 23 initial public offerings including China National Nuclear Power Co. may lock up 4.9 trillion yuan ($790 billion) of liquidity starting early June, according to the median estimate of six analysts surveyed by Bloomberg.’
“We are seeing another wave of profit taking today, with investors locking in gains in banks and insurance companies, as placement overhang and new IPOs weigh on sentiment,” said David Welch, head of equity sales trading at Reorient Group in Hong Kong.’
‘Shanghai Golden Bridge InfoTech Co. jumped 44 percent in its debut, matching a similar jump by more than 100 companies that listed in the past year.’
‘China’s central bank drained tens of billions of yuan from the financial system by selling repurchase agreements to targeted financial institutions, according to two people familiar with the matter. The People’s Bank of China has halted open-market operations for the last six weeks.’
‘Record growth in margin debt helped fuel a 127 percent gain in the Shanghai gauge over the past year, the most among global indexes tracked by Bloomberg. Margin lending by brokerages exceeded 2 trillion yuan ($322 billion) as of May 27, five times the level of a year earlier, stock exchange data showed.’
“The whole nature of the China market, it’s all on leverage, all on margin trading, so margin calls will further push the market as retail investors are forced” to put up more funds, said Michael-Douglas Lee, a Hong Kong-based trader at SG Securities Ltd.’
http://www.bloomberg.com/news/articles/2015-05-28/chinese-stock-index-futures-drop-on-margin-curbs-ipo-concern
Asking less than $1,800 a square foot quite frankly makes this house a steal.’”
Yah, but whose doing the “stealing”? I say the ding dong from Ukraine is trying to rip off a greater fool; hopefully this ding dong loses his ass and his creditors force him into bankruptcy and this ukrainian “developer” trying to get money for doing nothing loses everything and gets tossed onto the street with the dogs where he belongs.
He paid $7 M and put $18 M into the property. He is “asking” $21 M. The loss is already there….$4 M minimum….
That’s hardly a safe deposit box. And don’t forget the UHS cut.
Yes, and the carrying costs must be tremendous. What is the property tax rate in NYC? If 2% a year, that is another $625,000/year on his combined purchase/construction cost.
“Ukrainian-born billionaire Alexander Rovt bought the townhouse in 2008 for $6.96 million and began a five-year gut renovation that cost a whopping $18 million. Shockingly though, he has never spent a night there.”
_____________________________/
News flash to NBC: that’s not shocking at all.
According to Wikipedia, he’s a naturalized U.S. citizen who has lived in New York City with his family since 1985, so this isn’t a case of a corrupt foreign oligarch trying to launder money.
This 12,000-square-foot townhouse is now back on the market reduced from its original $27 million 2011 listing.
That is one big azz townhouse. That’s like 3 McMansions.
Worthless housing…. worthless worthless housing. Housing is worth less and less with each passing day.
Aurora, CO Housing Prices Plummet 21%
http://www.movoto.com/aurora-co/market-trends/
$per sq ft up 11%
try again
And transaction price down 21%.
Nice try.
Aurora, CO Condo Prices SURGE 15%
http://www.movoto.com/aurora-co/market-trends/
same data, same link HA.
Condo prices have a long way to fall.
Thanks for that tip.
Total Inventory Today 1,710
1 Month Ago 1,549 10%
1 Year Ago 558 206%
So:
Inventory is going up, banks are getting serious about foreclosing, maybe to sell at what may be the peak before rates rise and the bottom drops out and the suckers who are the last ones to buy go underwater and into foreclosure.
It’s a vicious cycle alright.
“a vicious cycle”
Gravity awaits.
Context matters:
Aurora has a population of about 350k people and approximately 130,000 housing units.
Per Zillow, in the last 12 months approximately 8,500 housing units sold (a rate of about 700 per month).
So, 1,700 listings represents less than 3 months of sales.
As I read the data, assuming Zillow’s sale data is accurate, there are two possible conclusions to draw:
1. The number of listings went from an ultra-low level to just a level that is low; or
2. The “year ago” data from Movoto is bad data and the change in inventory was far less pronounced (it’s hard to sell 8,500 homes in a year if for at least part of that year you only had 600 homes on the market).
The increase in inventory on it’s own isn’t much of a warning sign to me given the context.
What matters is falling prices and massive and growing excess housing inventory.
H.Analyst,
Do you own or rent?
I sold my last house two years ago, had to bring cash to the table to leave, had to leave b/c job change made it difficult to afford. Didn’t short sell, just lost a lot of savings.
I’m renting, was hoping for a bottom before buying.
I think prices will keep dropping, part of me wonders if I should buy at all again. Or wondering if I should wait a few years.
Just curious what your thoughts are on buying when or if at all.
Anyone is welcome to chime in as well. I read this blog almost daily, have for over a year, never comment but am really on the fence.
Thx
Sara,
I’m wonderin’ about all the same things, too.
Repost your comment in the Bits Bucket for June 1. Even better, wait until the morning and repost in the June 2 Bits, since it’s late on the east coast.
Tarara B.
Wonderin’ - Neil Young and the Shocking Pinks
NPR is interviewing academic eggheads who are puzzling over why the housing market remains stuck in a half-century low level of activity. Nobody mentioned the Fed’s artificial bubble price reflation as a possible factor.
Economists Examine Why The Housing Industry Continues To Lag
May 28, 2015 5:01 AM ET
Chris Arnold
Morning Edition
Home prices are on the rise again. Overall though, with sales and new construction still at ho-hum levels, the recovering remains choppy at the national level and inconsistent from market to market.
DAVID GREENE, HOST:
Here is a reminder that in an economy, numbers only tell us so much. Right now in the United States, home prices are rising but still relatively affordable, and interest rates are low. So economists are trying to figure out why home sales and home construction are not picking up faster. Here’s NPR’s Chris Arnold.
CHRIS ARNOLD, BYLINE: When you’ve owned a few houses, you know there are certain things that you just must have. And for Karen Diamond, that includes a place right outside the door to the kitchen to put the grill for cooking barbecue.
KAREN DIAMOND: We grill 12 months out of the year, so - and after a snowstorm, the first thing we shovel out is the grill.
ARNOLD: Diamond and her husband, Ruben Fernandez, are looking at a new condo in Boston. They’ve stopped by here with their realtor, Thomas O’Connor.
O’CONNOR: A full bath here…
DIAMOND: Right.
O’CONNOR: And then two smaller bedrooms here.
DIAMOND: With a closet.
O’CONNOR: Yup.
ARNOLD: They like this place ’cause it’s all on one level. They’re both retired, and the house where they live now, it’s tall and narrow and full of stairways, which are clearly getting a little harder to navigate.
DIAMOND: I already fell down the steps, carrying a chair down the steps. That’s how I did it. But it’s - you have to think about these things before you’re too old.
ARNOLD: So parts of the housing market right now seem pretty normal. Empty nesters are downsizing, families with kids looking for bigger houses. But there is something missing, something really important.
LINDSAY PIEGZA: The first-time homebuyers.
ARNOLD: Lindsay Piegza is the chief economist with the financial firm, Sterne Agee.
PIEGZA: First-time homebuyers account for about 50 percent of the market share, typically. They now fall into less than 30 percent, a multi-decade low.
ARNOLD: Piegza says that drop in demand is a big reason that home construction is still down around a 50-year low point. That’s actually an astounding number if you think about it. Builders are putting up fewer homes today than they were back in 1960, and the U.S. population has about doubled since then. So when will the housing market really get back to normal?
WILLIAM WHEATON: I think there’s pretty much agreement that the housing market has not recovered as fast as everybody thought it would.
…
“…found a dramatic increase in the number of Bay Area people searching for homes in Seattle, Portland, Boston, Austin, and Chicago.
Doug Wilson works in tech. He said he loves the Bay Area and is sticking around, but has colleagues who have taken the leap. ‘They realized they’re being priced out of the housing market.’”
You can feel it here in Portland. Both in more congestion and in reciprocal increase in our housing prices that then prices others out. Thanks Alan, Ben, Janet!
Ashburn, VA Housing Prices Fall 6%
http://www.zillow.com/ashburn-va/home-values/
http://finance.yahoo.com/news/pending-us-home-sales-jump-140037081.html
‘Americans signed contracts to buy homes in April at the fastest pace in nearly nine years, evidence that steady job growth is strengthening the real estate market. The index now stands at its highest level since May 2006.’
“The confidence has returned to housing, not only as shelter but as a good long-term investment,” said Ron Peltier, CEO of Berkshire Hathaway’s real estate affiliate, HomeServices of America.’
‘Employers have hired 3.1 million new workers over the past 12 months. But wages are rising at a 2.1 percent annual clip, about four times slower than prices of existing homes. Nationwide, the median price of an existing home surged 8.9 percent over the past 12 months to $219,400.’
Why all of a sudden are we concerned with incomes and house prices? Nobody said boo about it for 2 years of rocketing prices. These price increases ARE income. Ask the Califori-whatever poster.
And get this:
‘Unless home values level off because more supply comes onto the market, economists warn that buyers will be priced out of the market and sales will suffer.’
Unless because. What’s the warning about again?
We have to reach the point where an organic plateau of historically high prices with historically low interest rates will last long enough for our historically slowly rising income to catch up to our historically high housing prices.
CraterRage Photo Of The Day
http://goo.gl/h3TdJ8
how are your investments performing?
Falling housing prices Poet…. falling housing prices.
Huntington Beach, CA Housing Prices Fall 9%
http://www.zillow.com/huntington-beach-ca-92646/home-values/
you have been wrong for how many years now?
Stick with the data Poet.
Los Angeles, CA Housing Prices Plunge 16%
http://www.zillow.com/los-angeles-ca-90046/home-values/
your losses are mounting everyday. Can I extend an olive branch to you?
Cheer up Poet and remember…. falling prices to dramatically lower and more affordable levels is positively bullish and good for the economy.
Coppell, TX Housing Prices Fall 10%
http://www.movoto.com/coppell-tx/market-trends/
Total Inventory
Today 172
1 Month Ago 147 17%
1 Year Ago 82 110%
Invest now in real estate in Orange County, Florida!!! Don’t be left out!!
http://www.bizjournals.com/orlando/blog/2015/05/3-good-reasons-to-invest-now-in-orange-county-real.html
“A sum of $21.5 million might seem like a lot of money but, in the outrageous world of New York real estate, you might be surprised by how little it will actually buy. This 12,000-square-foot townhouse is now back on the market reduced from its original $27 million 2011 listing. Ukrainian-born billionaire Alexander Rovt bought the townhouse in 2008 for $6.96 million and began a five-year gut renovation that cost a whopping $18 million. Shockingly though, he has never spent a night there. In fact, no one has. The townhouse has not been lived in since Rovt purchased it. There is a full-time housekeeper who cleans the massive space daily, but she doesn’t reside there.”
Good thing this guy is a billionaire, as he will hardly miss the millions he is set to lose on this failed flip.