Money Laundering, Speculation And Low Interest Rates
It’s Friday desk clearing time for this blogger. “More Americans who recently went through foreclosure or bankruptcy are getting home loans. A new wave of nonbank lenders is bringing these risky buyers back into the housing market some seven years after the mortgage meltdown. The lenders are targeting borrowers who have recently gone through a foreclosure, short sale or bankruptcy—but who they say are safer than their credit profiles suggest. They are sometimes approving borrowers in as little as a few months or even weeks after a foreclosure.”
“‘Lenders are trying to carve out niches that play upon the fact that underwriting remains, by historic standards, very tight,’ said Guy Cecala, publisher of Inside Mortgage Finance. ‘That’s always the way it starts out and then you keep loosening and loosening—we’re right at the beginning of that.’”
“Earlier this year, the Federal Housing Administration, which insures mortgages for borrowers with relatively low down payments and less-than-pristine credit scores, cut its annual premium costs by half a percentage point. With that move, officials said they aimed to save borrowers an average of $900 annually and support 250,000 home sales for first-time buyers over three years. However, Edward Pinto, a housing expert with the American Enterprise Institute, said in research expected to be released Thursday that borrowers have used premium-cut savings to buy pricier properties. Further, Pinto said FHA has picked up borrowers who mostly would otherwise have taken loans backed by other federally controlled mortgage programs.”
“‘FHA’s action did little to expand access to middle-and lower-wealth borrowers,’ Pinto wrote. ‘Instead the benefits were largely captured by the National Association of Realtors and other housing-interest groups, as the premium cut was largely capitalized into the purchase of higher priced homes. The [FHA premium] reduction provided a textbook case of how the additional buying power created by liberalized credit during a seller’s market, primarily gets absorbed in price, without much increase in accessibility.’”
“Residential foreclosure rates in Wilmington have improved, but activity remains higher than the national average. Real estate agent Dave Sordelet said some of the houses may be difficult to maintain because the owners overpaid for properties to begin with. ‘If you look at the houses that sold in 2006 and 2007 that were commanding $150,000, it was questionable back then,’ he said. ‘Things got overvalued and today you can’t sell them for $100,000.’”
“Since 2005, more than 1-in-3 Detroit properties — 139,699 of 384,672 — have been foreclosed because of mortgage defaults or unpaid taxes, property records show. The vast majority are houses. When Talise Banks bought in 2002, all homes on the block were occupied. All but seven of 24 homes on the block have been foreclosed in the past 10 years. Her mortgage payment is $900 per month for a home appraised at $5,000. She owes $82,000 on the mortgage for the 900-square-foot home.”
“‘People come around and see no neighbors, so they steal, rob and strip,’ said Banks, 30, a single mother of two young boys. ‘They come by, take out windows, hot water heaters and whatever else from homes. There’re just a lot of problems.’”
“Marc Cohodes, once called Wall Street’s highest-profile short-seller by the New York Times, has come out of partial retirement to make targeted bets against ’subprime’ Canadian lenders. Cohodes — who is familiar with Vancouver — says Vancouver real estate has reached peak insanity, and any number of factors could trigger a collapse. ‘The cross-currents are beyond crazy in Vancouver — it’s a mix of money laundering, speculation, low interest rates,’ he said. ‘A house is something you live in, but in Vancouver you guys are trading them like the penny stocks on Howe Street. It’s as clear as day that the market is a Chinese money laundering mecca.’”
“Surging Chinese demand for Australian homes is dwarfing efforts to root out illegal buyers as the government struggles to avert a backlash against unaffordable housing. Chinese already buy almost a quarter of new homes in Sydney and their outlay will more than double to A$60 billion ($46 billion) in the six years to 2020, according to Credit Suisse Group AG. ‘Forget the anti-corruption,’ said Ray Chan, managing director of Sydney-based Henson Properties, which sells homes almost exclusively to Chinese. ‘A lot of money is coming through.’”
“Macau’s six-year lucky streak has come to an end. That’s become evident not just at the baccarat tables but at real estate agencies, too. After more than quintupling over six years, residential prices are heading for their first year of declines since 2008, tracking a gambling revenue slump in the world’s largest casino hub. China President Xi Jinping’s drive to eradicate corruption and a slowing economy has kept high rollers away, dragging down the city’s economic output 24.5 percent in the first quarter.”
“Prices fell as much as 26 percent at One Central Residences, high-end serviced apartments located next to casinos, according to Franco Liu, Macau head of Savills Plc. ‘Those in the casino industry are concentrated in the luxury home segment,’ Liu said. ‘They’ve made lots of money in the past and spent it on properties or cars. These past few months, the drop is more significant because they’re offloading some of their investments.’”
“A year after lensmen from The Business Times put together a photo essay on ‘dark condos’ to highlight the rising vacancies in the private housing market, they returned to the same 10 completed condo projects to capture these developments, as far as possible, from the same angles. They even went at around the same time - between 8 pm and 9.30 pm on a weekday, before the school holidays, when people could reasonably be expected to be home. Their findings: Only one of the 10 developments was visibly more lit up than a year ago.”
“Roving expats and rich foreigners occupying condos only part of the time could be seen as contributing to the sub-optimal use of Singapore’s real estate, said DTZ South-east Asia’s chief executive Ong Choon Fah, but then again, this is ‘the price you pay for being a global city.”
“The idea was logical enough: The government should step in to restore the housing market, which the financial crisis had crippled. While low interest rates may have given housing prices a boost, they have not increased home ownership. As Lance Roberts noted on his blog, ‘trillions of dollars have been directly focused at the housing markets including HARP and HAMP, mortgage write-downs, delayed foreclosures, government backed settlements of ‘fraud-closure’ issues, debt forgiveness and direct buying of mortgage bonds by the Fed to drive refinancing and purchase rates lower.’”
“‘Speculators have flooded the market with a majority of the properties being paid for in cash and then turned into rentals,’ Roberts wrote. ‘This activity drives the prices of homes higher, reduces inventory and increases rental rates which prices first-time homebuyers out of the market.’ In other words, government policies designed to turn renters into homebuyers have instead created more renters. But at least institutional investors made money.”
“It took some nine years for the wheels of justice to catch up with one of this city’s most notorious real estate con men. But, justice finally prevailed last week in the case of Michael David Scott, a now 51-year-old from Mansfield who ravaged the Dorchester real estate market with a rash of bogus mortgage and bank loan schemes.”
“Amazingly, Scott kept up his bold dealings after he was indicted in 2010. It was only after the Globe and the Reporter exposed his continued practices that he lost his realtor’s license in 2012. It’s no secret that state and federal authorities were too slow to act on the rampant real estate shenanigans that helped plunge the country into deep recession in the mid-to-late 2000s.”
“Michael David Scott is a poster boy for that reckless, unchecked period that wreaked havoc on the streets where he operated— places with names like Parkman Street, Adams Street and Navillus Terrace. We hope the punishment he will receive fits the crime.”
Green chili’s. They would go well with crow I bet.
‘China’s GDP growth does not have to reach 7 percent this year, financial news portal wallstreetcn.com reported Wednesday citing Finance Minister Lou Jiwei, who also said that the current growth is “within a reasonable range.”
‘Lu Ting, chief economist at Huatai Securities, noted that Lou’s remarks should not be considered as a sign that the central government will stop rolling out more easing and supportive measures, given the persistent downward pressure on the economy.’
“Without further easing, it will be hard for GDP growth to even reach the target of ‘around 7 percent,’” Lu told the Global Times.’
‘Experts noted that it will be a challenging task for China to reach GDP growth of 7 percent this year. The PBC has already cut interest rates three times and lowered banks’ reserve requirement ratio (RRR) twice since November 2014. “I think that more monetary easing is expected in the second half, especially more RRR cuts, to counter the negative effects brought about by capital outflows,” said Lu of Huatai Securities.’
Crow is a delicacy when properly prepared and served on a platter.
That’s right China, just keep handing out those bad loans like Halloween candy. It’s not like they’re ever going to be paid back anyway.
Marketwatch dot com
Asia Markets
China stocks plunge 7%, slide toward bear territory
By Chao Deng
Published: June 26, 2015 6:06 a.m. ET
The Shanghai Composite falls almost 20% from its recent peak
Reuters
Chinese stocks plunge Friday, with other major Asian markets also weaker.
China’s stock markets plunged toward bear territory Friday, a sharp turnaround after a year of strong gains.
The Shanghai market, China’s largest, closed down almost 20% from its recent peak, while the second-largest Shenzhen market fell 20%, entering bear-market territory. The country’s startup stocks have lost a quarter of their value since hitting a record high earlier in the month.
…
So, is it still “soaring”?
I can’t help but wonder what effect this development might be having on people who went into debt to buy Chinese stocks?
ft dot com
June 26, 2015 9:04 am
China rout bolsters view bull run is over
Josh Noble in Hong Kong
Chinese stocks suffered one of their biggest one-day declines on Friday, fuelling worries that the year-long bull run is drawing to a painful conclusion.
The Shanghai Composite sank 7.4 per cent, wiping hundreds of billions of dollars off the total market capitalisation of the index. The market has reversed 18.8 per cent from its June 12 high, although it is still up almost 30 per cent in the year to date.
More than two-thirds of the companies listed in Shanghai hit their daily downward limit of 10 per cent, while just two stocks registered gains. Some of China’s biggest stocks saw billions of dollars knocked off their value, with China Life Insurance shedding 7.5 per cent, and China Merchants Bank losing 8.3 per cent.
The tech-heavy Shenzhen market dropped 7.9 per cent while the small-cap board, ChiNext, tumbled 8.9 per cent.
The Hang Seng China Enterprises index, comprising large Chinese companies listed in Hong Kong, lost 2.8 per cent.
“This is the correction that a lot of investors — especially long-term strategic investors — have been waiting for,” said Chi Lo, China economist at BNP Paribas Investment Partners. “I don’t think Beijing will panic . . . Beijing is uncomfortable with the rapid rise in the market. It’s too fast.”
Analysts have been warning that a range of factors have put China’s stock market rally under increasing strain.
Companies have been rushing to raise equity — either through initial public offerings or through secondary share sales. The increased supply has sucked liquidity from the market as investors look to profit from the typical first-day jump in new listings.
Shares in Guotai Junan, a broker, rose 44 per cent on Friday on their trading debut in Shanghai. The company raised $4.9bn, the largest listing in China since 2010.
Margin finance, which has helped fuel the rally, has drawn increasing scrutiny from the financial market regulators. Margin loans stood at Rmb2.2tn as of Wednesday, according to official data, up from Rmb403bn a year ago. The true extent of margin trading is hard to measure, however, due to the growth of “grey market” lending.
…
Markets
China Stocks Plunge to the Brink of a Bear Market
Shanghai Composite Index on the verge of bear territory, down 19% from its June 12 high
By Lingling Wei, Chao Deng and Shen Hong
Updated June 26, 2015 1:40 p.m. ET
SHANGHAI—A Chinese stock market slump that began two weeks ago deepened, with the main index tumbling on concerns the government is seeking to cool a yearlong debt-fueled rally.
The Shanghai Composite Index fell 7.4% Friday to 4192.87. The index is off 19% since a June 12 high, a decline that has wiped off $1.25 trillion in market capitalization, an amount roughly equal to the size of Mexico’s economy.
Two smaller indexes entered bear-market territory, defined as a 20% fall from a recent high. The Shenzhen Composite Index fell 7.9% to 2502.96, down 20% from June 12. The ChiNext Price Index was 8.9% lower at 2920.70, tumbling 27% from a record close on June 3.
“It’s a bloodbath today,” said Li Yu, a 49-year-old business executive in Shanghai. Mr. Li said he invested more than one million yuan ($161,000) in the stock market this year. “The losses I suffered today were enough to buy a luxury car.”
Investors appeared to lose their nerve amid signs that Chinese authorities have grown uncomfortable about the pace of gains and the massive amount of debt that investors have taken on this year to buy stocks.
A decision earlier this month by index provider MSCI Inc. not to include China’s mainland-listed shares in its global benchmarks, citing market-access issues, also has hurt sentiment. An inclusion this year would have paved the way for U.S. and European index funds to invest more in China, which is trying to lure greater foreign participation in its market.
The Shanghai market gained 60% from the start of the year to its recent peak, in large part because investors bet Beijing would support the rally to help counter slowing economic growth, which has fallen to around 7% from double-digit rates a few years ago.
Authorities have allowed investors to borrow hundreds of billions of yuan from brokers to fund stock purchases in the past year, a practice known as margin lending. The central bank has cut interest rates three times since November, igniting the rally.
But last week, the People’s Bank of China withdrew some 300 billion yuan ($48.3 billion) in short-term funds from the banking system, according to Chinese bank executives, a move that many investors took as a sign that policy makers were concerned about overheating. The Shanghai index began to lose ground June 15 and Friday was the year’s second-biggest daily drop.
“There’s widespread panic today and some of my friends got margin calls and were forced to sell their stocks at deep losses. There was too much leverage in this market and it’s crazy,” said Yunfeng Wu, an investor in Shanghai.
…
Why does that article bring Mexico into this? That is nonsensical and invalidates the data.
It’s just a way of explaining a large number, comparing it to something we have an idea of.
China might have been late to the party, but it looks like they may be leaving early.
‘Home sales and prices increased in Worcester County during May over the same period last year, new data show. Condominium sales in Worcester County surged 22 percent, to 168 units sold, The Warren Group said; however, the median price plunged 14 percent to $176,250.’
‘The results came as home sales statewide dropped nearly 3 percent, and the statewide median price remained unchanged at $340,000 during May. The Warren Group, publisher of the trade journal Banker & Tradesman, tracks all sales transactions.’
‘The Massachusetts Association of Realtors, a professional group that uses a different method to track home purchases, similarly reported that single-family home sales dropped in May over the same month last year. The Realtors reported a small decline of nearly 2 percent in the median home price of $341,000.’
condos are hot just before condo hotels and floating condo hotels
then you know it’s the peak
‘Black Americans won’t stop being poorer unless banks stop discriminating’
‘Blacks have always been at greater risk for losing wealth during housing market declines, because home equity comprises a much larger percentage of their overall wealth. The ACLU report notes that housing equity makes up 51% of white household wealth, but 71% of wealth for black households.’
‘And individually, black households can help close the racial wealth gap by diversifying their assets and investing in stocks and amassing other non-housing assets.’
‘Even if blacks diversify their assets, though, the racial wealth gap will not close as long as homes in black neighborhoods continue to be valued less than comparable homes in white neighborhoods.’
‘Home values in black, Latino and low-income neighborhoods have not recovered from the recession, but home prices in wealthier, white areas are now on the rise. One reason home values in black neighborhoods remain low is because of the disparate ways banks manage and maintain real estate owned (REO) homes they acquire in foreclosure sales.’
‘A 2014 report found that REO homes in black neighborhoods are more than twice as likely to have overgrown yards littered with trash or to have broken or boarded windows compared to REO homes in white neighborhoods. White homes are marketed more heavily than homes in black neighborhoods, likely because they are better maintained.’
I hope it’s not racist to point out how few reasons cited for the racial wealth gap can be attributed to ‘bank discrimination.’
‘Her mortgage payment is $900 per month for a home appraised at $5,000. She owes $82,000 on the mortgage for the 900-square-foot home’
What this lady needs is a refi.
“Hey lady…. You need a HELOC!
‘Her mortgage payment is $900 per month for a home appraised at $5,000. She owes $82,000 on the mortgage for the 900-square-foot home’
What this lady needs is a refi.
That is the universally prescribed solution.
What she really needs is to send the bank some jingle mail. If she saves her monthly payments until she gets kicked out, she can buy another house for cash.
They didn’t say in the article, but I’d bet that’s what she is doing. Who in their right mind would make $900 a month payments on a $5,000 house?
Bingo. Owes $82K, worth $5K? Walk away. It’s the American Way!
How in the world does someone owe over $80k on a house worth $5k?
A neighborhood in Detroit can go from middle class to abandoned in a matter of years. It only takes one or two bad neighbors to bring a whole street down.
It happens anywhere.
White homes are marketed more heavily than homes in black neighborhoods, likely because they are better maintained.’
oh do you ditint”
CRA =race based lending
worked out great
‘The city apartment glut has seen almost one in four central Melbourne property sales make a loss, alarming new figures show. The CoreLogic RP Data Pain and Gain report shows loss-making home sales in the City of Melbourne hit 24 per cent in the first three months of the year.’
‘This was up on 17 per cent of sales that made a loss in the December quarter.’
‘CoreLogic RP Data senior research analyst Cameron Kusher said the apartment flood was taking a toll on sales prices in the city centre. “Obviously most of that stock is units and I think it is reflective … because there is so much new supply coming on line some people are taking a hit when they sell those properties,” he said.’
‘The average loss was $34,301, with total losses worn by home sellers in the municipality totalling $5.81 million.’
‘Recent Australian Bureau of Statistics figures suggest the pain is likely to continue with 12,516 more units approved for inner Melbourne in the year to April, the highest level of approvals in the country.’
‘When Federal Reserve head Janet Yellen was asked about housing issues last week, she gave an economist’s classic “on-the-one-hand, on-the-other-hand” answer. But because she neatly summed up the disparate economic realities confronting millions of owners, sellers, renters and would-be buyers around the country, it’s worth taking a closer look.’
‘On the one hand, she said, rising home prices have been terrific news for many owners. “The increase in house prices is restoring the wealth of many households who have [home equity] as their major asset,” she said.’
‘On the other hand, there are millions of renters who are being squeezed by the housing gains of owners and landlords. Many of them are prospective first-time buyers frustrated by higher asking prices; others are what are known as “rebounders” — people who encountered difficulties during the financial crisis but have now rebuilt their credit and want to buy.’
‘Both groups face not only rising rent demands from landlords — in some large metropolitan areas, rents have jumped by double-digit percentages during the past year — but also what Yellen described as “credit availability” conditions that are “quite constrained.”
‘But an upbeat trend that the Federal Reserve and Yellen haven’t kept tabs on yet may be taking shape: In recent weeks, rising numbers of first-time buyers have been finding ways to get past the hurdles.’
‘According to a June 19 Campbell/Inside Mortgage Finance tracking survey, which polls 2,000 real estate agents nationwide, first-time buyers accounted for nearly 39 percent of home purchases in May; that’s the highest level since August 2010. The National Association of Realtors reported Monday that first-time purchases in May rose to 32 percent of all buying activity — the largest share since September 2012.’
‘What might be going on? Tom Popik, research director for Campbell Surveys, told me that one key change he sees in the data has been in financing. The Federal Housing Administration cut its annual mortgage insurance premium rate drastically in late January. That has made 3.5 percent down payment loans affordable to first-time buyers with FICO scores and debt-to-income ratios that would trigger rejections elsewhere in the market.’
Jim Rogers on this moment in monetary policy history:
http://www.marketwatch.com/story/why-jim-rogers-is-buying-what-everyone-else-is-selling-2015-06-26
While the people who bought four or five houses with zero down may be beneficiaries of the policy, the banks themselves are the intended target. It is all about making the pigmen whole on their reckless bets.
It’s amazing to me that we cannot seem to make the right decision to save our lives.
The right decision IS being made… for the banks.
‘Romania’s residential real-estate sector continues to hit a home run this year, after 2014 registered record sales volumes and new stock entered the market. More than 3,300 units are expected to be delivered by the end of the year and part of them are already sold even before the construction authorizations are released.’
‘After many years of sluggish progress, the new residential market proved to be the star of 2014 and continues to be the centre of attention in 2015. Many investors resumed their developments or started new projects on lands they had in stock. Demand is ascending, banks switched position and are more and more interested in financing such projects.’
‘However, experts hope that the enthusiasm in the market will not lead to a ‘mini-crisis’ and will keep the same path in the next period as well.’
‘Residential stock reached over 26,000 units at the end of 2014, marking an 18 per cent y-o-y increase, according to a report by Colliers that concentrated only on projects that have more than 100 units. This has been the largest addition to the inventory since the financial crisis, reads the report.’
‘Complementary to the stock delivered in large scale projects, smaller developments proliferated in 2014, reads the Colliers report. Developers, usually local players, chose to build 30 - 60 unit projects throughout the city.’
‘Mihai Dumitrescu, the managing partner of Crosspoint Investment Banking & Real Estate, notices a decrease in terms of prices in the North of Bucharest, but expects to remain stable in the following period. “In the Northern part of Bucharest, prices have decreased by ten per cent in the context of an increased competition in the area,” Dumitrescu tells The Diplomat - Bucharest. “Taking into account the amount of projects that will be delivered this year, our opinion is that prices will keep the same level in the following period.”
‘Analysing the real estate market, Csiki goes on to add that what the pre-crisis period left behind is the bubble level the market touched at that moment and an extreme cautiousness of all involved parties. Although there still are industry representatives evoking those years, looking retrospectively, the current context is healthier and more sustainable, he says.’
‘Villa Ticino West — a 760-home neighborhood approved in 2004 — is gearing up to move forward. A small, neighborhood-style commercial area has been approved on a map for another subdivision on the northeast corner of the intersection. The Manteca Unified School District’s bus parking is on the northwest corner.’
‘Toinette Rossi of SA. Rossi Inc. is bringing the project back for a general plan amendment, rezone and tentative subdivision map at tonight’s 7 o’clock Manteca Planning Commission. The developer noted the housing slowdown and recession that followed made proceeding with the project earlier futile. She now believes the housing market favors moving the project to construction.’
The Manteca/Lathrop junction has been long discussed as the area that is going to grow the fastest in the central valley…What I have heard is many thousands of acres have been long ago tied up by the big dogs..
Midland, TX:
‘Four years after Fasken Oil and Ranch unveiled The Vineyard, its master planned community, the company’s plans continue coming to fruition. Crude prices have declined sharply and oilfield activity declined significantly since Fasken unveiled its 1,000-acre community on two sections of its C Ranch, but that has not affected plans for the office park, Skeen said.’
“So far, based on the prospects we’re talking to, there’s been no change,” he said. It has, however, altered Fasken’s plans for single-family housing development, he said. “We’ve pushed off the single-family component for a year. We’re waiting to see what impact (the slowdown) will have on the real estate market,” Skeen said.’
‘Fasken plans to celebrate on Aug. 20 the completion of its 170-unit Sandstone Ridge luxury apartment community. The complex features one-, two- and three-bedroom units.
There is also a second set of apartments planned for the northern end of The Vineyard. The complex, approved last year, will be comprised of nine two-story buildings holding up to six units for a total of 39 two- and three-bedroom apartments with a gated entrance, attached garages and 128 parking spaces.
The Vineyard is also home to the new Barbara Fasken Elementary School, which is under construction and expected to open for the 2015-16 school year. The 40-classroom building will house up to 600 students; the design includes three playgrounds. Skeen said road infrastructure to the new school has been completed.’
‘Work is also proceeding on a monument-style entry sign welcoming visitors to the community.’
‘The Whitehorse housing market appears to be satiated, as not a single builder applied for one of the 50 properties available in this week’s Whistle Bend land lottery. “I’d say we are well looked after,” said Val Smith, a spokesperson for the Whitehorse Realtors Association.’
‘Smith says it signals the land shortage around Whitehorse has ended, and points to the growing number of country residential lots outside the city which have been subdivided for sale recently.’
“So I’d say we are in a nice position now,” she said. “There is land available both within city limits and outside.”‘
‘Land officials with the Yukon Government say that they, too, are not surprised by the lack of sales. They say the unsold properties will help fill the land inventory they’ve promised Yukon builders. “There’s a large inventory available now,” says Johanna Smith, who manages land client services for the government, “and as Monday, at 8:30 a.m., we’ll add another 52 or 54 lots to that inventory.”
‘The rental apartment vacancy rate across Saskatchewan was 5.6 per cent in April, up 3.3 per cent from one year earlier, Canada Mortgage and Housing Corp. reported.’
‘Despite that, rents keep going up.’
‘CMHC attributed the rising vacancy rate to problems in the oilpatch and its impacts, noting that the vacancy rate in Estevan, in the heart of the oilpatch, was 20 per cent in April, far higher than the 5.5 per cent in April 2014.’
‘Two other oil centres, Lloydminster and Weyburn, had apartment vacancy rates of 11.6 and 8.0 per cent, up from1.8 and 3.8 per cent, respectively, a year ago.’
‘So will rising vacancy rates lead to lower rents across the province? Well, that’s hard to say, though the CMHC report says landlords in Estevan, with its high vacancy rate, “have begun to adjust rates downward”.
‘Mwale added in an interview that a much more detailed picture of rental accommodation in the province should emerge in this autumn’s CMHC market survey, which should depict not only rents and vacancies as the oilfield economic slowdown continues, but also the impact of a summer’s worth of new construction, plus the impact of post-secondary students returning to rent apartments.’
‘To that end, the University of Regina plans to open its two new residences for autumn classes, with 606 beds available in the two towers.’
‘This autumn’s survey should also take into account the slowing rate of immigration into Saskatchewan, which is significant because most immigrants tend to rent before they buy. And buying is on the mind of Mwale and other analysts because continued low interest rates and a large stock of unsold homes take tenants out of apartments and into detached homes or condos.’
‘Nearly $23 million in foreign investment authorized under a U.S. visa program is helping fund several large projects heading for the Old Sawmill District in Missoula, the first of which broke ground Tuesday.’
‘The EB-5 program, run by the U.S. Citizenship and Immigration Services, was established by Congress in 1990 to stimulate the economy by allowing foreign individuals to invest in projects that create American jobs.’
‘The minimum qualifying investment is $1 million, or $500,000 in rural areas. In return for their investment, the individual and his or her family receive residential status for two years. If their investment creates at least 10 jobs, the investor receives U.S. citizenship.’
“We now have 46 foreign investors who have each made a $500,000 commitment to the Missoula community,” Sherman told members of the Missoula Economic Partnership.’
‘Aside from the $23 million invested by foreign individuals through the visa program, the city of Missoula also spent $12 million to reclaim the site and install critical infrastructure, clearing the way for development. A 20-unit condominium project dubbed Polleys Square is the district’s first project. It also marks the first real estate development in Montana funded in part by the EB-5 program.’
‘Wetherbee said two other district projects ready to break ground within the next six months – including a 200-bed student housing complex and an executive-style apartment building – will also receive EB-5 funding. The Northern Rockies Regional Center website said its first 15 foreign investors for the Sawmill District were cleared by Citizenship and Immigration Services on March 15.’
“The reason this project fits so well under EB-5 is because there was a big problem,” Wetherbee said. “There was a problem with the site being abandoned.”
‘Wetherbee said his project’s “village” theme interested foreign investors. “You’re building something out of nothing,” he said. “We’ve got $23 million through NRRC, leveraged up by $40 million in debt. Some has been identified and secured, and some has not. These projects will be coming out of the ground within the next six months.”
‘The EB-5 program has led to the creation of other prominent projects elsewhere in the U.S., including the Barclays Center – home to the Brooklyn Nets – and the FBI Field Office in San Diego.’
‘Roughly 92 percent of the foreign capital has come from China. Sherman said the Missoula center has placed former Max Baucus staffer Todd Jackson in China to facilitate outreach with potential investors. Baucus now serves as the U.S. ambassador to China.’
‘The Northern Rockies Regional Center is also working to raise $15 million for the Elkhorn gold project, which has plans to expand portions of its mine. While the mine is looking to raise $100 million overall, Sherman said, the $15 million sought in EB-5 funding would serve as a catalyst for further investment.’
‘Sherman added that NRRC is also sponsoring the Yellowstone Club as it embarks on a $280 million expansion. Of that, he said, $140 million would come through EB-5 investments. That project would create an estimated 4,500 jobs, he said.’
“They’re in the market right now and they’re making great progress,” Sherman said. “They’ve already put up $140 million of their own money and they’ve begun this expansion. The second phase will be EB-5 funded.”
‘Sherman said the center takes a “cautious and conservative” approach to the projects it takes on. He said the approach has paid off, with the Savannah (Georgia) Economic Development Authority signing on with NRRC as it looks to complete a $250 million marina expansion.’
‘Northern Rockies Regional Center is also working on behalf of the Tacoma (Washington) World Trade Center to drum up investors there. “We’ll have a three-legged stool, Montana of course being the closest to our hearts,” Sherman said. “We’ll also be able to develop projects in Georgia and Tacoma. There are a lot of strategic reasons why that makes sense for us. It keeps our visibility high in the foreign investment climate, and it gives us a steady stream of projects that we can keep investors focused on.”
Glad to see that the U.S. government is enabling foreign money-laundering under the guise of “investment.” Yes, the village theme wildly interested the investors.
I wonder how many of these EB-5 projects will still be operating 5-10 years from now…
‘Sold in Belmont: The Good, the Mind Boggling and How Much Ugly for $1.2M’
‘We’ve lost our collective minds. Or at least homebuyers have. It’s right there on Dean Street. A nice 80-year-old Garrison Colonial of ground-level brick over a second-floor frame. Nothing extraordinary, on a small lot, and better than average space at 2,300 square feet. Just your vanilla Belmont house …’
‘… that just sold for more than a million bucks! Not located on “the Hill” or along “Gol(d)en” Street, this structure was in the heart of Belmont’s most “average” of its neighborhoods.’
‘If this Winn Brook sale doesn’t sounds a clarion call to Belmont homeowners to sell and reap the rewards of buying a Colonial back in the 1990s, they will have only themselves to blame if this purchase signals a housing bubble that is ready to burst.’
‘Exactly 10 years ago this month, then-Federal Reserve Chairman Alan Greenspan was asked if he had any concerns regarding the housing market. At that time, he emphasized that he saw no sign of a nationwide housing bubble, but he did have concerns over “froth” in the market and pointed to a big increase in the purchase of investment properties — particularly in second homes.’
‘As a result, he said, there are “a lot of local bubbles” around the country, but not at a national level. As we are all very much aware, Greenspan — along with many other esteemed economists — was incorrect in his prediction that there was no national housing bubble in sight.’
‘So here we are, a decade later, and some are starting to suggest that we are on the verge of another “bubble” bursting due to an overheated housing market. I’m often asked if there is any truth to this, and my response is, “No, I don’t believe there is a national bubble on the horizon.” And here are the reasons why.’
Bubble denial recipe:
1. Acknowledge that Alan Greenspan and other experts were wrong a decade ago.
2. Recite a long list of reasons why “this time is different.”
In my local and regional area, however, things are different than last time:
1) Less liar-loans and much more all-cash sales
2) Much higher percentage of purchases (both residential and commercial) being all-cash foreign investers
I’m not saying that it’s not a bubble, but I have come to see that there are some differences between now and last time - will that effect the outcome? Don’t know.
My personal hunch is that even if the RE bubble pops again, foreign investment will continue because it has to - the Chinese have to do something with all of their excess currency, and investing in desirable (to them) areas on this continent still makes sense to them. Look at that article from today’s news about the $21T in savings that they have - that’s a lot of moola!
It’s all dumb. borrowed.money. my friend.
Can you even come up with something original? This is another one of your bot-provided responses.
So let’s say that it is (dumb, borrowed, money). So what?
Refute it my friend.
Davis, CA Housing Prices Fall 5%
http://www.movoto.com/davis-ca/market-trends/
‘Two real-estate economists said that many home builders aren’t doing a good job of determining what home buyers want.’
‘Nela Richardson, chief economist for brokerage Redfin Corp., and Selma Hepp, chief economist for Zillow Group’s Trulia real-estate website, both said builders aren’t constructing enough entry-level housing to meet demand. They’re focusing more of their resources instead, the economists said, on building pricey homes for buyers with ample credit.’
“If there is any speculation in building, it’s going to be toward the higher end,” Ms. Richardson said.’
‘By speculation, she meant building homes without buyers already signed up. Building entry-level homes on a “spec” basis was a common practice before and during last decade’s real estate boom, when there was ample demand for those homes.’
“More Americans who recently went through foreclosure or bankruptcy are getting home loans.”
Loans that are floated due to being driven by the incentive of numerous and lucrative fee extractions.
“A new wave of nonbank lenders is bringing these risky buyers back into the housing market some seven years after the mortgage meltdown. The lenders are targeting borrowers who have recently gone through a foreclosure, short sale or bankruptcy—but who they say are safer than their credit profiles suggest. They are sometimes approving borrowers in as little as a few months or even weeks after a foreclosure.”
And that’s when the lucrative fee-extraction process begins.
“‘Lenders are trying to carve out niches that play upon the fact that underwriting remains, by historic standards, very tight,’ said Guy Cecala, publisher of Inside Mortgage Finance. ‘That’s always the way it starts out and then you keep loosening and loosening—we’re right at the beginning of that.’”
And at the same time the lucrative fee extraction process will accelerate right along with the accelerated loosening because that’s where the incentives are.
It would be different if the incentives were with keeping the loans instead of extracting fees from making the loans but that not where we are at.
Maybe once upon a time, but not anymore.
We’re right at the beginning of that…
This is my worry. There appears to be no constituency for not loosening standards more and more and more over the next few years to keep the party going. The only thing that can cool off the market is rising prices and rising interest rates. In many places the prices have already risen in the last 3 years far past the point of any organic demand being able to support them. To keep it going they will do everything and anything.
Is there a single person on this blog who does not believe they will do everything to keep the party going?
They’ve already done it. Despite the refrains of “there’s no subprime now”, I’ve posted many examples of a lull months back and an unleashing of credit which appears to have pumped the bubble back up. This isn’t anything new. Subprime lending exploded in 2003 just as prime lending dropped like a rock. All the “innovations” in loans last century came as the buyer pool drained. This was repeated several times.
It’s a sad situation. The government is driving this sh*t-cart and there won’t be any wall street boogeyman to blame it on this go-round.
But really, what could we have expected? No one of consequence went to jail. The former Countrywide CEO is enjoying a fine breakfast this morning I’m sure. As is Greenspan and Bernanke. Someone mentioned the other day about how all these virtuous people in powerful places just pretend that money laundering and rampant fraud aren’t business as usual. But I agree that it is. Look at HSBC’s laundering of drug money; barely a slap on the wrist.
Way back, some used to post here that the housing bubble was engineered by the central bank. I was doubtful. But what is going on now has been openly planned and pulled off by the Federal Reserve and the US government.
What matters is demand and price.
Demand wouldn’t be at 20 year lows if the price was market. That is the crux of the biscuit.
Have you observed the type of flunky that signed up for a mortgage in the past 15 years?
“The [FHA premium] reduction provided a textbook case of how the additional buying power created by liberalized credit during a seller’s market, primarily gets absorbed in price, without much increase in accessibility.’”
“Absorbed in price” = a rise in price.
And this - the rise in price - is what creates the demand.
Note: It is not the price itself that creates the demand, it’s the RISE in price that creates the demand.
In a normal market price by itself would tend to dampen demand if the price was seemed to be too high because Econ 101 says so.
But in a nutso market that’s not how it is.
underwater mort holders are like Greeeeece- u o me
the imf /ecb is t like the Bama - harp-harm- fha 3% down
keep in mind 20% of IMF is us taxpayer funded
NYC- I see fall foliage on their “million dollar listing” show
wonder what’s happening on the high end now?
Good catch! I actually had time to watch but did not pay attention to when the episodes where filmed.
most recent is feb -me thinks
but they are saying the high end is slow- even on this pimp show
“‘FHA’s action did little to expand access to middle-and lower-wealth borrowers,’ Pinto wrote. ‘Instead the benefits were largely captured by the National Association of Realtors and other housing-interest groups, as the premium cut was largely capitalized into the purchase of higher priced homes. The [FHA premium] reduction provided a textbook case of how the additional buying power created by liberalized credit during a seller’s market, primarily gets absorbed in price, without much increase in accessibility.’”
____________________________/
I typically do not agree with the AEI, but this guy is right on here. I remember the $7,500 homebuyers’ tax credit from 2008-09. All that did was raise home prices by $7,500. It was sellers and realtors who benefitted, rather than buyers.
https://www.google.com/search?q=Edward+Pinto&ie=utf-8&oe=utf-8
‘An executive vice president and chief credit officer for Fannie Mae until the late 1980s, Edward Pinto has done groundbreaking research on the role of government housing policies in the lead-up to the financial crisis. In particular, his data have revealed striking facts about the contributions of housing policy to the mortgage crisis. Two of his major research papers have been submitted to the Financial Crisis Inquiry Commission: “Government Housing Policies in the Lead-up to the Financial Crisis: A Forensic Study” and “Triggers of the Financial Crisis.” Currently a housing-finance-industry consultant, at AEI Mr. Pinto is continuing his work on the role of housing policies in the financial crisis and researching policy considerations and options for rebuilding our housing-finance sector.’
http://www.nationalmortgagenews.com/authors/edward-pinto-113.html?csite=lossmit
I have a problem with all this quick reset of credit access on a foreclosure. short sale or bk event,on so many levels. Maybe a good business decision, but morally incomprehensible. I’m not made that way.
I do believe the housing “racket” (and it is) will not get real anytime soon. My neighborhood(of modest homes) is now going out in the high 500Ks. Where are they finding these idiots? Here we go again. (Simi/So Ca)
They’re not.
Housing demand in CA is at near 30 year lows.
Maybe in the Inland Empire. Not anywhere true near SFO.
Across the entire state my friend.
Not true, not my friend . . .
Demand is extremely high in some places (SFO - I travel there for work), and very low in other places, like Salton City or Bombay Beach on the Salton Sea. Not many people want to live in those places; on that we can agree:
http://www.vice.com/read/i-went-to-californias-post-apocalyptic-beach-town-salton-sea
The Salton Sink should be drained and then become the home of a huge solar plant. Rather than covering pristine desert areas with solar panels. JMHO!
May sales in SF had the biggest YOY decline except for Siskiyou County.
http://www.car.org/marketdata/data/countysalesactivity/
The REIC wants the public to hear about skyrocketing prices and bidding wars. But CA sales have been kinda crappy for years. The ownership rate has been dropping for something like 5 or 6 years straight.
It’s reality. In fact demand today is at it’s lowest level since 1998 per MRIS records.
Data my friend data.
San Francisco Metro Housing Demand Falls To 1998 Lows
http://files.zillowstatic.com/research/public/Metro/Metro_Turnover_AllHomes.csv
I just read something about “easier” financing yesterday, mortgage.
At the same time I just had two cc cards lower my credit limit, AHHH
I guess no McMansion for me.
Several weeks ago I had a friend whose newly married son and new DIL wanted to buy a house for $405K. They had an income of $77K with some manipulation by the mortgage company and were applying for a VA loan (no down). They had $28K in the bank and $14K CC debt. No problem, the mortgage company was going to close everything within a 17 day time frame. I was invited to a meeting with the mortgage agent and got my two cents into the discussion. At the end the agent told me that she’d been in the business for 30 yrs and that I sounded like her father. When I informed her that I was not going to let these kids sign such a loan, her answer was “at least they will have a house”. The son was under financial conservatorship and the parents finally saw their way to tell the agent that the issue was going to be put before the court for a judge’s approval (this would take 2 months for a decision), and the process came to a quick halt.
Ron-
14K in CC debt for this young couple? I hate it when my liability hits $600, and I pay my debts in full every month. WTH can be so important to buy on a CC? (Maybe I’m just getting o l d.)
ibi, they ran up CC debt in 8 months. Interest rates to 29%. Spent at Target, eating out every day, Chase bank card, etc.
Majority of income is disability income. When qualifying for the loan the mortgage company (Chase) took the disability income(tax free) and added in the tax that would generate that after tax income. The new number is now the gross income that is applied to the loan application.
One thing that stands out very, very clear in the RE and banking industry of this country is a lack of ethics when the welfare of their fellow Americans comes into play. Our banking system and government is impotent to solve and maybe that’s been the objective all along. The only party able to step in and solve the problem will be the IMF, another step toward one world government in the minds of the elitists.
This perfectly illustrates why the rules need to get changed back to where the banks have to keep (be held financially responsible for) a certain percentage of loans in their portfolio.
Otherwise, they make quick bank off of the fees, and pawn off the loan to somebody else. Zero incentive for them to do their due diligence.
It further illustrates that paying in excess of production cost($55/square foot in lot labor materials and profit) for a used depreciating asset is financial suicide.
WTH can be so important to buy on a CC?
iToys are not cheap! All my coworkers have the latest iPad, iPhone and MacBook.
Colorado
$14K of CC debt is just stupid, and you can’t fix stupid.
My EE hubby is on a lithium battery kick. New lawnmower, new drill, new this, new that (replacing old chit) but it’s paid off at the EOM. He’s good with tech toys for now.
The lawnmower makes the job less messy (oil and gasoline) and it’s pretty quiet.
Strappy sandals for $25 and I’m happy. Men’s toys aren’t cheap, granted. (not being sexist)
All junk.
La Mesa, CA Housing Prices Fall 5%
http://www.movoto.com/la-mesa-ca/market-trends/
‘On the one hand, she said, rising home prices have been terrific news for many owners. “The increase in house prices is restoring the wealth of many households who have [home equity] as their major asset,” she said.’
“IS RESTORING THE WEALTH OF MANY HOUSEHOLDS” WFT, this woman is clueless. These people just keep us going down the road to total financial ruin.
Let’s see, we’ll artificially inflate house prices so that people will borrow on their imaginary wealth and spend and viola the economy will automatically turn itself around. Yeah, what are you smoking!
Starts with a C and ends with ‘ack’.
Ron
Like my neighbors who a lactating over our local housing bubble, thinking of selling in the selling season. Then I ask “where are you going to go?” “how much will moving up cost?” “when do you plan on retiring?” Then they give me that look. Yeah, all greed, no strategy. Idiots.
who “are”
Yup, party like it’s 2005 again! This morning I just heard a radio ad for Cash Call mortgage: stated income (high FICO, but no income verification), up to $3 million, cash out up to $500K!
Where’s pick your payment coming back?
Those commercials are annoying. I am sure that is going to end well for those who tap that “illusionary equity.”
I heard it was the greatest no-brainer in the morning of mankind.