June 23, 2015

A Stress Test

A report from the National. “Last week, a group of economists, in a survey going by the rather ironic name of ‘The Lebanese Economic Outlook,’ acknowledged the elephant that many of us have noticed sitting in the room for the past two years: namely that the local housing market and construction sector have been adversely affected by the economic slowdown and are unlikely to register any growth in the immediate future. While hardly breaking news, their prognosis will be greeted with more than a dollop of Schadenfreude by first-time buyers who watched helplessly as house prices in some areas doubled between 2008 and 2012.”

“A buyer’s market? Maybe. You certainly get a lot of bang for your buck in Beirut. In the district of Ashrafieh, you can snap up a 350-sq metre apartment that would make Londoners and New Yorkers weep with envy for $1.5 million. The same property in the London Borough of Kensington, if you could find it, would cost $11.3m.”

From Bloomberg. “Singapore investors are buying fewer mansions in London after mortgage changes in the island nation limit their ability to borrow. The number of Singaporean’s buying prime homes in the capital fell 74 percent in the period from November to the end of May compared with the previous six months, according to broker Knight Frank LLP. They now make up 1.7 percent of all buyers in the city’s best districts, down from 3.8 percent in the prior period, the broker said.”

“Homebuying from ‘Singapore is very low at the moment and falling off,’ Rob Perrins, managing director of Berkeley Group Holdings, said in an interview June 17. Investors from the city state were the biggest overseas buyers of new homes constructed by Berkeley, London’s largest homebuilder, in 2013, Perrins said.”

The Business Times on Singapore. “Singapore’s housing glut will worsen in the near future as more public and private units come on stream and only start to ease from 2017, with the government potentially reviewing property cooling measures, a report by UOB Global Economics and Markets Research said. Private completions surged 52 per cent year-on-year to a 20-year high of 19,900 units in 2014, which was significantly higher than the Urban Redevelopment Authority’s (URA) projections at the start of the year, said the report.”

“Factoring in public housing supply, some 183,000 units will come on stream over the next four years, which will bring the overall housing stock from the existing 1.28 million to 1.47 million, representing a 14.5 per cent increase. ‘By location, the high-end oversupply is reflected in above average vacancy rates for the Central Region (8.6 per cent in Q1 2015). Vacancy rates in other areas have also picked up, such as in the North, up from 2.6 per cent in Q1 2013 to 11.5 per cent in Q1 2015. In the North East (Punggol, Sengkang), vacancy rates have doubled in two years and could continue to trend up amid record supply.’”

The Bangkok Post in Thailand. “The slowing economy coupled with a lack of liquidity in the system could be leading Bangkok to join some other major Asian cities that are facing a property glut as demand starts to show signs of cooling. Thailand’s property sector has been perceived to be on a never-ending up cycle for more than a decade by developers, investors and speculators alike.”

“The inventory figure for Bangkok is similar to those seen in major cities in China, where statistics show levels ranging between 12 and 33 months for residential property as of the end of last year — the highest since the property bubble emerged in China a few years ago. Major cities in India are also experiencing a property bubble.”

“At current rates, it would take two years for the market to absorb all the inventory. Sales could be slowed further by a growing belief among buyers that prices should be starting to fall after a sharp run-up over the past few years. The cost of land all across Bangkok has risen sharply, especially in areas near new or planned mass-transit lines, which has pushed up developers’ expenses and these are reflected in higher prices. Some estimate that speculative purchases of mid-range condominium projects now account for more than 30% of all units. That’s a figure that has not been seen since the frenzied period that led up to the economic meltdown of 1997.”

“James Pitchon, the executive director of CBRE Thailand, is especially concerned about the midtown area, where he estimates about 80,000 condominium units will reach the market in 2015. ‘I’m worried whether speculators can resell the units before the completion of the condos or whether end-user buyers can get mortgages successfully,’ he said. ‘It’s a stress test.’”

American Diplomacy on China. “In March David Shambaugh published an op-ed piece in The Wall Street Journal under the headline, ‘The Coming Chinese Crackup.’ Shambaugh cites five ‘telling’ indicators that point to a coming collapse. The first is the rising number of defections of those who have profited most from the present regime: Party officials and private entrepreneurs.”

“Shambaugh says, ‘First, China’s economic elites have one foot out the door, and they are ready to flee en masse if the system begins to crumble.’ Many have noted the startling outflow of capital from China and the increasing numbers of affluent Chinese students traveling abroad. Shambaugh cites a survey by the Hurun Research Institute in Shanghai which showed that 64 percent of China’s wealthiest individuals were either emigrating or planning to do so. ‘Wealthy Chinese are also buying property abroad at record levels and prices, and they are parking their financial assets overseas, often in well-shielded tax havens and shell companies.’”

“Then there is the major problem of ubiquitous corruption. ‘Fourth, the corruption that riddles the party-state and the military also pervades Chinese society as a whole.’ Everyone agrees that corruption extends into every corner of Chinese society, from army generals to party officials and business executives. ‘The trouble for China is that the public knows only too well that corruption is not simply a by-product of the system,’ says John Sudworth. ‘It is the system.’ A video briefly displayed on the internet showed local reporters questioning a group of children on their career ambitions. When asked what he wanted to be when he grew up, one six-year-old boy said, ‘I want to be an official.’ What kind of official? he was asked. ‘A corrupt official,’ he replied, ‘because they have lots of things.’”

The Property Observer on Australia. “LF Economics duo Lindsay David and Philip Soos have lobbed their submission, titled The Great Australian Household Debt Trap: Why Housing Prices Have Increased as the first presentation to the House of Representatives Standing Committee on Economics 2015 Inquiry into Home Ownership. But at the same time they claim this latest housing inquiry is a ‘transparent political ploy’ to avert implementing a raft of genuine policies that would impinge upon the government-supported ability of the FIRE sector to siphon record-breaking profits from the economy and labour through the extraction of economic rents, primarily usury and land rent.”

“‘Given that very few, if any, recommendations from previous inquiries have been implemented, there was little need to hold the recent inquiry into the housing sector,’ the submission says. ‘The Australian public would be far better served if an alternate inquiry were to be held that investigated ways to democratise the clearly malfunctioning political system which regressively only assists Australia’s army of private monopolists, usurers, speculators, rent seekers, free riders, financial robber barons, control frauds, inheritors and indolent rich.’”

“‘It is high time the nation’s politicians, political parties, public executives, top-level public economists, regulators and bureaucrats have their power over policymaking significantly restricted by and for the benefit of the public and common good. It is this self-interest that has helped to perpetuate the largest debt-financed real estate bubble in Australia’s history.’”




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50 Comments »

Comment by Senior Housing Analyst
2015-06-23 03:37:42

Las Vegas, NV Housing Prices Fall 22%

http://www.zillow.com/las-vegas-nv-89138/home-values/

Comment by taxpayers
2015-06-23 06:13:30

$200 per sq/ft in lost wages?

5% increase predicted

Comment by Senior Housing Analyst
2015-06-23 06:18:09

The forecast is falling housing prices.

Remember…. Falling prices are positively bullish, raise the standard of living and are good for your economy.

Henderson, NV Housing Prices Fall 10%

http://www.movoto.com/henderson-nv/market-trends/

 
Comment by Rental Watch
2015-06-23 09:57:49

Most expensive area in town (adjacent to Summerlin).

 
 
 
Comment by taxpers
2015-06-23 04:44:05

How to save a rabid home buyer
Ask “would you by a reit fund w a 7% load/fee?
Hel no

 
Comment by Senior Housing Analyst
2015-06-23 06:05:31

“Duke EnergyProgress To Cut Power Bills As Energy Prices Fall”

http://www.newsobserver.com/news/business/article25191286.html

Lower prices…. exactly what this moribund economy needs.

 
Comment by Senior Housing Analyst
2015-06-23 06:07:41

Bellevue, WA Housing Inventory Skyrockets 121%; Prices Fall

http://www.movoto.com/bellevue-wa/market-trends/

 
Comment by Senior Housing Analyst
2015-06-23 06:09:24

Oil Prices Fall After Chinese Factory Data Disappoint

http://www.marketwatch.com/story/oil-prices-fall-after-chinese-factory-data-disappoint-2015-06-23

Falling oil and energy prices are a bullish sign and good for your economy.

Comment by Albuquerquedan
2015-06-23 09:14:13

Oil has moved from being down almost one dollar to being up around 70 cents, it suggests that someone received a peek at either the API or EIA report.

http://futures.tradingcharts.com/marketquotes/index.php3?market=CL

Comment by Senior Housing Analyst
2015-06-23 09:26:51

“Metal Prices Continue Falling”

https://agmetalminer.com/2015/06/22/metal-prices-continue-falling-this-month-as-consumer-price-index-rises-less/

Falling prices simply makes your dollars more valuable. King Dollar.

 
Comment by Blue Skye
2015-06-23 09:31:46

Have mercy daytrader. We know oil is off 50% in the big picture. We do not need hourly updates on the wiggles.

Comment by Albuquerquedan
2015-06-23 10:18:58

I am responding to Ha’s comment which was given us the movement for the day. The big turn about was big news. BTW, don’t think that Chinese moving from China is all bad news for China, lots of money flowing into China:

http://www.china.org.cn/business/2015-06/22/content_35878101.htm

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Comment by Albuquerquedan
2015-06-23 10:24:18

BTW, it is a pretty amazing chart considering that there has not been any public news to explain it.

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Comment by AmazingRuss
2015-06-23 14:00:36

Almost as if…it were made up.

 
 
 
 
 
Comment by Professor Bear
2015-06-23 06:25:23

“Some estimate that speculative purchases of mid-range condominium projects now account for more than 30% of all units. That’s a figure that has not been seen since the frenzied period that led up to the economic meltdown of 1997.”

That’s the first time I have seen property speculation mentioned as a factor leading up to the Asian currency crisis. Please share if you have other information on this element.

Comment by Senior Housing Analyst
2015-06-23 06:39:03

All these collapses were caused by massively inflated real estate prices… including the Asian Currency ‘Crisis’.

http://www.essentialaction.org/imf/asia.htm

“There were other underlying causes for the financial crisis, including overinvestment in real estate and other speculative and unnecessary ventures,

Sound familiar? Difference is this time it’s global.

 
 
Comment by Professor Bear
2015-06-23 06:27:16

“A buyer’s market? Maybe. You certainly get a lot of bang for your buck in Beirut.”

No need to qualify.

Comment by In Colorado
2015-06-23 07:23:02

$1.5 M for a large flat in Beirut. And I thought Palo Alto was expensive.

Comment by Senior Housing Analyst
2015-06-23 07:24:15

Is there a buyer?

Comment by ocsandrenter
2015-06-23 07:32:37

Is there a buyer?

More importantly is there a lender?

Even more importantly, a foolish lender?

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Comment by snake charmer
2015-06-23 07:30:16

Is there any city more synonymous with religious and ethnic strife? And it was shelled and bombed only nine years ago. Prices not only are detached from economic reality, but from political reality as well. I mean, come on:

http://tinyurl.com/ofmjwjr

Comment by Albuquerquedan
2015-06-23 12:25:54

Compared to most of the Middle East it is an oasis.

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Comment by AmazingRuss
2015-06-23 14:03:28

Everybody’s fleecing the Chinese out of their Walmart money.

 
 
 
Comment by Professor Bear
2015-06-23 06:35:15

“It is this self-interest that has helped to perpetuate the largest debt-financed real estate bubble in Australia’s history.”

Luckily this could never happen here in America.

Comment by In Colorado
2015-06-23 07:24:26

Wake me when ordinary houses in Topeka, KS fetch $1M.

Comment by Senior Housing Analyst
2015-06-23 08:05:16

Here’s a very positive chart of falling housing prices in Topeka, KS.

http://www.zillow.com/topeka-ks/home-values/

Comment by taxpers
2015-06-23 09:26:30

Predicting +5% ¿

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Comment by Senior Housing Analyst
2015-06-23 09:31:07

Newport Beach, CA Housing Prices Fall 19%

http://www.zillow.com/newport-beach-ca/home-values/

 
 
 
 
 
Comment by Senior Housing Analyst
2015-06-23 06:45:36

“Where House Prices Are Falling Fastest”

http://gulfnews.com/business/property/where-house-prices-are-falling-fastest-1.1534648

Falling housing prices…. it’s the latest rage.

 
Comment by Senior Housing Analyst
2015-06-23 06:58:33

“Brazil’s Housing Market Falling As Interest Rates Rise And The Economy Slows”

http://en.mercopress.com/2015/06/16/brazil-s-housing-market-falling-as-interest-rates-rise-and-the-economy-slows

 
Comment by snake charmer
2015-06-23 07:46:31

“Then there is the major problem of ubiquitous corruption. ‘Fourth, the corruption that riddles the party-state and the military also pervades Chinese society as a whole.’ Everyone agrees that corruption extends into every corner of Chinese society, from army generals to party officials and business executives. ‘The trouble for China is that the public knows only too well that corruption is not simply a by-product of the system,’ says John Sudworth. ‘It is the system.’”
_________________________________/

My opinion is that this, rather than malinvestment or ecocide, will cause China to collapse. Corrupt leadership can be replaced through various means, but a corrupt society is irredeemable.

Comment by Blue Skye
2015-06-23 08:59:57

Corrupt leadership is tolerated as long as there is general prosperity. A depression in China would remove the government’s legitimacy. Depression is the natural thing to expect after a massive credit expansion.

 
 
 
Comment by Senior Housing Analyst
2015-06-23 09:20:10

“King Dollar Reigns Supreme In Planet Forex”

http://www.khaleejtimes.com/biz/inside.asp?section=opinionanalysis&xfile=/data/opinionanalysis/2015/June/opinionanalysis_June10.xml

King Dollar my friends…. King Dollar. He reigns supreme. Not equities, not commodities….. King Dollar.

 
Comment by Colorado Renter
2015-06-23 10:18:40

It was just announced on the local news radio in Denver (850 KOA), that housing prices for the metro area are up another 13%. That makes Denver the hottest housing market in the U.S., according to Zillow.

When will the madness end??

Comment by Albuquerquedan
2015-06-23 10:20:21

When will the madness end??

When will fiat money end and before it ends I expect a lot more inflation not less.

Comment by Senior Housing Analyst
2015-06-23 10:47:10

That’s not inflation Dan.

*Learn* the difference.

 
 
Comment by Senior Housing Analyst
2015-06-23 10:20:39

Are you sure?

Denver, CO Housing Prices Fall 10%

http://www.movoto.com/denver-co/market-trends/

 
Comment by snake charmer
2015-06-23 12:05:40

I saw on the financial news the other day that prices in certain markets are nearing their bubble peaks. The anchor and the reporter both were smiling idiotically, calling to mind The Eagles’ “Dirty Laundry.”

Outside of cities like New York and San Francisco that are attractive to foreign buyers, it looks like places that are desirable to young people are bearing the brunt of the echo. Rents in those places are going crazy too.

Madness is a good word for it, because we seem determined to harm ourselves, mentally ill on a societal scale. And harm ourselves we will. There’s big trouble on the way.

Comment by Senior Housing Analyst
2015-06-23 12:18:41

That’s the problem with “financial news”. There is very little truth to it.

 
Comment by Albuquerquedan
2015-06-23 12:29:00

Saw the same story. As I have been saying for some time declining housing prices in real terms is very possible, declining housing prices in nominal terms when the Fed is creating “money” by the ton out of thin air is very hard to see.

 
 
Comment by rj chicago
2015-06-23 12:11:48

Hey there CR - totally get what your sentiment is. It is utterly insane right now - esp out by you there in big D. See if what I note to RW below makes any sense to you.

Rental Watch
This one is for you as I noticed CR’s post.
Just spoke with a site rep in an area between Castle Rock and Parker - new development with maybe 35 homes in it - being done by a local outfit there in CR.
I went on the web yesterday in my desire to continue to look at new builds and found a home - single level jobber in said development - near Sapphire Pointe - has views down through the valley there in CR - nice looking geography and I remember it as I had visited it last summer before said builder started developing the lots.
Anyway - the builder site is quoting a price of 480k for new build of about 2300 s.f. I call rep - rep says to me oh - that price DOES NOT INCLUDE the purchase of the lot. What is the price of said lot I ask - response - 250k!! This for less than a quarter of an acre of land - other remaining lots in the development are in the 160 to 240 range for lots up to and maybe a bit above 1/4 of an acre.
I note this because home builders are out there with misleading information if they don’t include the price of the land in their advertised price.
As noted here on HBB many times - Realtors are liars and I am now want to include in the that pool home builders!!!
HA - get where you are coming from - have for some time but I reiterate…..cost is cost regarding home building right now - these guys have to make a profit to stay in business, pay their subs etc. The issue I am now seeing is they don’t include the price of the lot - THAT is where a good chunk of the lie resides.
Comments are welcome.

Comment by Housing Analyst
2015-06-23 12:46:35

And we’re all profitable at $55/sq ft my friend.

 
Comment by Colorado Renter
2015-06-23 14:55:20

Wow!! That is crazy. How can people afford that?

Comment by Senior Housing Analyst
2015-06-23 14:57:41

They can’t.

Remember…. If you have to borrow for 15 or 30 years, you can’t afford it nor is it affordable.

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Comment by trader jack
2015-06-23 12:25:37

it is the American way! To be considered successful in life you must have a million dollar home, with all amenities, drive a mercedes or BMW, and all is well with the world.

The fact that is all built on debt is of no consequences, as having all of those things mean you are among the elite of the country!

And the government wants you to feel this way as it collects more and more money from fees and taxes as those are based on the market price of the taxable items.

I AM A MILLIONAIRE , LOOK AT ME AS I OUTSHINE THE LOWER CLASSES.

Will end badly!

Comment by Senior Housing Analyst
2015-06-23 14:05:38

“To be considered successful in life you must have a million dollar home, with all amenities, drive a mercedes or BMW,”

Since when does a lifetime of crushing debt represent success?

Comment by redmondjp
2015-06-23 14:59:09

When you come here from China and buy a house with cash and have no debt, and no longer live in a Communist country, that is by definition success . . .

All-cash offers on houses are now the norm, rather than the exception, for homes $1M+ in my area. This from boots-on-ground local realtors, not phony data from some website.

Comment by Senior Housing Analyst
2015-06-23 15:05:02

It’s all borrowed money my friend.

Data… stick with the data.

Redmond, WA Housing Inventory Skyrockets 91%; Prices Fall 7%

http://www.movoto.com/redmond-wa/market-trends/

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Comment by Patrick
2015-06-23 18:09:07

I spoke with a builder’s site rep today who is selling houses in a Toronto subdivision. They personally had just sold over 50 houses in this one site for over 1.5 million each. Most went for cash.

100% of the homes were sold to Chinese.

Some bought only one and some purchased multiples !

A small group is single handedly inflating the market.

Get this - the builder is paying the rep less than $4,000 for each sale that closes. Non refundable deposits are almost $200,000 !

The rep had sold all of them in less than two weeks.

 
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