The Swift Change From Bidding Wars To Surplus
It’s Friday desk clearing time for this blogger. “The 114 homes sold in Delaware County in June is a 23.9% increase from the same month last year according to the Monthly Indiana Real Estate Markets Report. The median sales price increased 17.1% to $105,000. The average sales price increased 21% to $124,424. ‘It’s been years since we have seen activity and pricing at these levels,’ said Bruce Bright, 2015 President of the Indiana Association of Realtors. ‘Despite a continued lack of inventory and increasing prices, consumers across the state see the opportunities that low interest rates present and are confident about housing as an investment.’”
“Brooklyn’s real-estate bubble is inflating to astronomical new heights with the listing of a shoebox-sized Windsor Terrace bungalow for an astounding $1.25 million. Neighbors were stunned by the sky-high price. ‘I’m shocked. It’s pretty crazy,’ said one longtime resident who said she attended the bungalow’s open house last week. ‘The floors are slanted. It’s going to need some repairs. If you have somebody who’s thinking small with vision, maybe that would work.’”
“Homebuyers ramped up their activity in South Florida this summer as both sales volume and prices grew in June, according to the Florida Realtors. ‘With the continued growth in both sales and prices in Florida, it raises the question of whether the market is starting to overheat,’ said Florida Realtors Chief Economist John Tuccillo. ‘The decline in inventories to seller-market levels, and the decline in days on market, tend to suggest that possibility as well. But there are mitigating factors here.’”
“The Miami Association of Realtors is troubled that only 29 of the 8,523 condominium buildings are approved for FHA loans. Nationwide, 30 percent of condo buildings can quality for FHA loans with low down payments.”
“Imagine buying a home in Fitzroy for a fraction of its market price; or gaining priority access to a semi in Bondi because you worked in the area. It seems ludicrous amid Australia’s overheated property market but it’s the reality for ordinary people in the UK priced out of exclusive suburbs, who are able to buy property in prime spots through the notion of shared ownership. ‘Right now my lowest value one bedroom, full value is £160,000 (A$337,550). So you could buy the minimum shared value at 40 per cent and raise a mortgage on £64,000, (A$135,020)’ said Notting Hill Housing’s sales manager for shared ownership, Wendy Gordon.”
“Ray White Drummoyne director Chris Wilkins said he can’t see it happening here anytime soon. Instead of a change in policy, he said people need to adjust their expectations about what buying a first home might mean. ‘I see us following down the path of a New York or a London where we’re more aligned to a rental city or culture than we are of an ownership city or culture. People forget history really quickly. It’s a little bit like at the moment people are saying ‘we’re going to wait, it’s going to crash’ but without being disrespectful to those people, what planet do they live on? It can’t be planet Earth because when has that ever happened?’”
“Auckland house prices could hit $1 million within 18 months if interest rates continue falling, experts predict. Hugh Paveltich, the co-author of the annual Demographia international housing affordability survey, predicted the million mark would be hit by March 2017. ‘It is sitting at about the $750,000 mark now and [rising] at about $3000 a week, or $150,000 a year, so it should be at about $900,000 12 months down the track. So you are looking at about a year and a half from now,’ he said. ‘The whole thing is a complete circus and I curse the politicians for failing to articulate these serious issues with clarity.’”
“Regina’s housing market has benefited enormously from soaring prices for oil, potash and other commodities, sailing through the global financial crisis comparatively unscathed. Prices leapt more than 50 per cent between October, 2006, and June, 2008, alone. Real-estate speculators moved in, snapping up derelict buildings in the city’s impoverished North Central neighbourhood by the dozen, often leaving them vacant while waiting for prices to keep on soaring. That fuelled a spike in new construction, particularly among condos aimed at first-time buyers, many of which were originally planned during the boom years but came onto the market just as prices began slowing.”
“For rental landlord Boardwalk Real Estate Investment Trust, first-quarter results in Regina ‘weren’t pretty,’ said president Rob Geremia. ‘We’re now seeing pretty major corrections in Regina.’”
“Realtor James Wruth figures buyers have been scared off by the swift change in the market from bidding wars to a surplus of unsold listings. ‘The fact that buyers have plenty of homes to choose from, lower interest rates and lower prices, but still aren’t making an offer, makes me scratch my head sometimes,’ he says.”
“Agreeing with the view that property prices are slated to come down, Orbit Corporation MD Pujit Aggarwal said that though there was little room to cut prices due to high costs, builders were now willing to reduce prices and sell units even at a loss. ‘They will sell in order to meet cash flow requirements such as interest payments, overhead costs or further construction,’ he told CNBC-TV18. According to Aggarwal, prices in some pockets of Mumbai could fall about 20-25 percent. ‘Till now, builders had been reducing prices through indirect means such as the 80:20 schemes and interest free EMIs, but a direct price reduction is absolutely on the table now,’ he said.”
“Several institutional investors said the recent plunge in Chinese shares has had the biggest impact on China’s middle class, the 21st Century Business Herald reported. ‘The stock market has a greater impact on the middle class. It has millions of yuan in equities, and some of them suffered heavy losses because of margin trading,’ a general manager of a private equity fund in Shenzhen said.”
“A broker in Guangzhou said some investors have turned their attention to commodities since late June, while a private equity fund manager said he moved his money into gold, silver and private equity funds. A real estate broker in Guangzhou said, however, that investors do not have enough money to put into the housing market because of the losses they sustained in the stock market.”
“So far, the impact of dramatically lower oil revenues has been limited to the oil patch, but the potential for contagion is still present. Back in the 1980s oil bust, the drop in gasoline prices helped consumer spending and the mass entry of Baby Boomers into the housing market provided a source of broad-based economic stimulus. But what’s different this time is the $550 billion that has been loaned to energy producers.”
“What’s also different is a looming global recession, a $900 billion subprime auto-loan bubble that’s about to burst and an echo-bubble in housing that’s threatening to follow the first housing bubble’s trajectory of crash and burn. The row of dominoes swaying unsteadily in these stiff winds won’t take much to topple.”
“So after the housing bubble burst seven years ago, what now? The BIS warns low interest rates could spell ‘entrenched instability’ published by GMA news online, June 28, 2015. The BIS is the Bank of International Settlements. It is the Central Bank of the world comprised of 58 central banks. It has a core of 31 chiefs of central banks of the most economically powerful countries of course. The BIS is not controlled by any government, pays no taxes, and has its own police force.”
“What did the BIS warn about in the article? It warned about the persistently low interest rates. In fact, some countries such as Switzerland, Sweden and Denmark have negative interest rates. Japan, in recent years, also approximated negative interest rates. In fact, interest rates are even lower now than at the height of the 2007-2008 financial crisis. This monetary policy of lowering interest rates is, the BIS warned, ‘overburdened in an attempt to reinvigorate growth.’ This, the BIS said, resulted in ‘too much debt, too little growth and too low interest rates.’”
“And yet, governments still rely on the same monetary and fiscal policies that have so far been ineffective while retaining the same neoliberal framework and policies that caused the economic crisis in the first place.”
‘It is different this time. At least that’s the contention of the writers of this month’s Economic and Housing Outlook regarding new low downpayment mortgages. Freddie Mac’s Office of the Chief Economist, which publishes the report says that the company’s Home Possible Advantage mortgage, introduced in March, is a very different product than similar loans that were common before the housing crisis.’
‘The mortgage, which permits a reduced downpayment of as little as 3 percent and allows the funds to be a gift from family or employers or a grant from a government agency, has raised concerns that mortgage lending may be returning to some of the risky lending practices that led to the housing crisis.’
It’s almost every day we get a wonderful new lending product.
They are doing shat like this but there is no bubble and they are also going to raise interest rates? Jingle Fraud has a bridge he wants to sell us.
Regardless of what other indicators there are, 3 years of double digit appreciation definitely indicates you are in a bubble in that area.
A strange notion indeed considering the fact that historically, rarely do housing prices “go up”.
Historically, rarely do central banks keep the interest rate pedal to the metal for this long.
P.S. The scary thing is that some major asset classes (e.g. precious and industrial commodities, Chinese stocks and housing) have already seen their prices reach a tipping point before any interest rate tightening has occurred.
‘China Has Entered the Bust Phase: Whelan ‘
http://www.bloomberg.com/news/videos/2015-07-24/china-has-entered-the-bust-phase-whelan?cmpid=yhoo
‘(Reuters) - Caterpillar Inc rode the boom markets in China, Brazil and piggybacked the oil industry to rich profits, but the world’s biggest construction and mining equipment company effectively declared the good times over on Thursday, warning of an extended period of retrenchment.’
‘Facing slowdowns in developing markets, a static oil industry and a strong U.S. dollar suppressing overseas earnings, Caterpillar said it was pruning operations and cutting costs to adapt.’
‘Caterpillar executives blamed the expected decline in construction revenue on reduced residential building activity in China and Brazil, soft sales related to oil and gas construction in the United States and the strong U.S. dollar undercutting the value of sales in Europe.’
‘Chief Executive Doug Oberhelman told analysts Thursday that in mining, a key sector for Caterpillar, it had seen no expansion, “and won’t for the foreseeable future.”
‘If Caterpillar’s forecast of lower sales for the second half of 2015 prove accurate, it will be the first time since the 1930s that Caterpillar has suffered three straight years of decline, Halverson said.’
“Their competitors are facing the same issues - China is very weak, any kind of capital goods-orientated business in Brazil is facing massive headwinds,” said Kwame Webb, analyst at Morningstar.’
http://www.thefiscaltimes.com/latestnews/2015/07/23/Caterpillar-sees-end-good-times-moves-cost-cutting-mode
‘If Caterpillar’s forecast of lower sales for the second half of 2015 prove accurate, it will be the first time since the 1930s that Caterpillar has suffered three straight years of decline, Halverson said.’ ??
Let that paragraph sink in for a moment…
We’re now seeing the fugly downside of globalism - when the world economy sneezes, we all get a cold.
CC says “Jingle Fraud has a bridge he wants to sell us.”
I prefer not to sell anything. If you would like to rent a bridge, I would be happy to buy one in the next downturn and rent it to you.
it’s a credit bubble until u no longer see adds on tv
“what’s your credit score?”
who would care
Ben Jones: It’s almost every day we get a wonderful new lending product.
I thought the country had already reached, and exceeded Peak Debt. And the system imploded and was bailed out by the taxpayer.
I guess they feel as if they’ve fallen slightly behind Peak Debt (maximum serviceable debt) with the low interest rates and the Fed’s DSR/FOR (purportedly) being at historic lows despite debt levels being at historic highs. So they’re trying to nudge back up towards it.
You can appreciate the bind this puts the central bank with regards to raising interest rates.
This is effectively a zero down program because the entire 3% down payment can consist of gifts and government grants.
It was just a year and a half ago maybe two that loan caps and other aspects were tightened. It’s interesting that these later loosening moves started right around the time the market stalled late last year.
And here we go again
with HBB thinking that 0% down is going to crater the economy. IT IS NOT. What cratered housing was the variable payment schemes. Teaser rates, interest only, neg am, are what brought down housing. These no-down loans are still fixed-rate fully amortized. The article itself points this out in no uncertain terms.
And it’s obvious who these loans are targeted at: Millenials with student loans. Money they normally would have gone to saving the down payment is going toward student loans. With this, they can buy a house earlier and make nearly the same payments as rent.
What cratered housing was…paying too much for the house.
Yes, prices are too high. But we’ve seen prices stay too high for 15+ years now. So I think it’s a good point that just knowing lending is looser than it really should be, knowing that interest rates are lower than they should be, knowing that prices are higher than they should be… That still doesn’t necessarily help in the decision on housing. I’ve followed this blog since, I would guess, early 2007 or so, and I’ve found it very useful. But I’m also glad that I decided at some point that even know housing is overpriced, it was still rational to buy. Prices will go up and down, but now at least I’m almost 5 years into a 15 year mortgage, closer to having no rent and no mortgage. I wish I’d even done it a couple years sooner. I see a lot of the same names here that I saw 7-8 years ago, and I hope that for those of you who are here because buying a house is something you want at some point in your life (which is why I was initially here way back when), you don’t put it off forever, so long as the rent/carrying cost comparison makes sense. Better to get the house paid for well before you retire. We’ve already seen that the powers that be will not allow rational housing prices to stand. They will do everything possible, even to the point of illegal bailouts, etc, to keep things inflated. You shouldn’t waste your life wishing that things were different from what they are or trying to convince people to agree with a viewpoint they just don’t want to see. To the point about lending, subprime has not returned. Paulson and Ackman and others who were smart enough to short the housing bubble in 2006-2007 are not placing such bets now. The same pressures that built up then with SIVs and Ambac and MBIA and highly-levered structured credit hedge funds– they just don’t exist nearly to the same extent today. Biggest risks today are tech bubble bursting (will happen at some point) and global recession with asset price deflation a la the late 90s Asian flu in lots of developing countries. These things will happen, and they will affect house prices in the U.S. But you’re probably never going to get a house that’s reasonably priced in your lifetime. The lowest prices in 2009 or so were still not reasonable, IMO. Still, you have to decide to buy or not to buy based on rational factors other than blind rage against the machine because of the unfairness of it all. Anyway, long post, but that is my 2 cents. I do hope prices will drop and return to a pattern of barely keeping up with inflation over the long term.
‘That still doesn’t necessarily help in the decision on housing. I’ve followed this blog since, I would guess, early 2007 or so, and I’ve found it very useful. But I’m also glad that I decided at some point that even know housing is overpriced, it was still rational to buy..you have to decide to buy or not to buy based on rational factors other than blind rage against the machine because of the unfairness of it all’
I’ve bought more houses in the past few years than you will in your life. I’m really sick of this “oh you guys are permabears, you hate houses” crap.
I rent the house I live in and manage the rest. You know what land-lording is? It’s work. And if you paid too much, it’s low paying work.
“but now at least I’m almost 5 years into a 15 year mortgage, closer to having no rent and no mortgage.”
That’s your funeral my friend.
And subprime is back with a vengeance.
“But you’re probably never going to get a house that’s reasonably priced in your lifetime.”
Likely true in the coastal metro areas. But realize that the working household can only service a limited amount of debt, e.g., mortgage, student loans, compulsory Obama Care insurance, $60k pickup trucks, $700 smart phones, etc., before the tipping point is reached. A crashing family isn’t a pretty sight. I’m seeing more of this at work.
A high school friend of my daughter said that her father told her there is no money for college, and they’re not signing any loan paperwork either. This is a blue collar family that couldn’t say no to a luxury sedan or a pickup truck, but didn’t care to look toward the future. Getting married will be her only meal ticket.
‘Move aside, Ordos. China has a new ground zero for overbuilding.’
‘The northeastern Chinese city of Shenyang recently ranked last on a list of 36 major cities in terms of investment and development prospects, weighed down by sluggish economic growth and oversupply of buildings. The list was drawn from an annual survey of more than 100 property developers, consultants and investors conducted by the nonprofit real estate group Urban Land Institute.’
“The lowest ranking for Shenyang is tied to the stagnant economy, partly caused by the recent drop in oil price,” the nonprofit said in its report, titled “Chinese Mainland Real Estate Markets 2015: ULI Analysis of City Investment Prospects.”
‘Housing prices in Shenyang fell 7.6% in June from a year earlier, outpacing the average 2.7% decline recorded in 100 Chinese cities, according to private data provider China Real Estate Index System.’
‘Shenyang, the capital of frigid Liaoning province bordering North Korea, is a transport hub and a commodity distribution center with a population of 6.2 million people. But that has not made it immune to irrational construction. The city’s housing inventory reached the equivalent of 31.7 months of sales in June, the highest among 28 major cities tracked by another firm, China Real Estate Information Corp.’
‘The city’s shopping mall and office markets suffer a similar fate. Between 2008 and 2013, Shenyang saw more retail development investment than any other Chinese city, edging out Beijing and Shanghai, ULI said. Unsurprisingly, Tier 1 cities such as Shanghai, Shenzhen, Beijing and Guangzhou are currently at the top of the list, nearly unchanged from last year.’
*shakes head* I told my cousin “Ordos you fool, not Shenyang!”
Did he he listen? Nope, his family savings invested now in an apartment.
When my Ordos property goes up I don’t think I’ll be able to bail him and my stock market junky BIL both out.
‘First quarter growth slumped -0.6% Q/Q, and weak economic data in April sets up the distinct possibility of a technical recession. Why is that a problem? Over the last 50 years, Canada has not had two consecutive quarters of negative GDP growth without a recession in the US.’
‘The downward revision clearly reflects weakness in the commodity sector. Plummeting business investment in energy, as well as weaker than expected exports of non-energy commodities have jolted the Canadian economy.’
‘It’s fair to ask whether two rate cuts in 2015 are a waste of valuable ammo if and when home prices do start to decline.’
‘Property investors in Alberta are starting to wonder if the downturn is already underway. Calgary’s luxury home market looks to be the epicenter. In June, there were more than 800 Calgary homes for sale worth more than $1 million, and for every 10 new home listings only 2 were sold. Home sales have fallen for six straights months and home prices have been down for five consecutive months. It’s a similar story in Edmonton.’
if and when
“if and when”
One of the few times a Canadian article admits that prices will fall. I don’t think most Canadians have any idea how bad things are going to get, they’re still in the “it’s different up here” phase of thinking.
From where I sit, prices in Canada have already fallen 25% in the past two years.
From above:
‘A broker in Guangzhou said some investors have turned their attention to commodities since late June, while a private equity fund manager said he moved his money into gold, silver and private equity funds’
Well that was perfect timing. Let’s follow up:
‘Chinese Dama, or middle-aged women, seemed to have lost a lot after they bet big on gold as the price of the yellow metal sank to its lowest level in more than five years.’
‘Many Dama investors recently turned away from the Chinese stock market, which has been on a roller-coaster ride in the past few weeks, and invested on the gold.’
‘But bullion for immediate delivery tumbled as much as 4.2 percent to $1,086.18 an ounce, the lowest price since March 2010.’
‘It was estimated that the Dama investors bought 300 tons of gold in 10 days. But the exhilarating scenes of Chinese Dama buying out all the gold in every jewelry store has gone sour with the gold price continuing to fall since then.’
‘Chen Sijin, a senior consultant at Royal Bank of Canada’s Risk Management Department, wrote in an article in Beijing News that price of the gold jewelries purchased by the Dama investors were generally higher 20 percent than the international gold price.’
‘Different from bullion, they are not investment commodities in the real sense as the jewelries can’t be kept to fend off inflation, he said.’
‘The Dama investors who bought gold today won’t be able to recoup their costs until the gold price surges to $1,360 an ounce, Chen said.’
The prospect of Chinese Dama fuming over their gold jewelry investment losses is quite ugly.
Jewelry is marked up 100’s maybe a thousand percent over spot prices.
Oh I got that point. Only in an extreme period of gold price appreciation would one rationally expect to gain by purchasing gold jewelry and later selling it for scrap (or even again as jewelry).
This sort of thing happened in the U.S. during the rampant inflation of the late 1970s, as documented in William Greider’s book, Secrets of the Temple.
Greider’s 1987 critique of the Fed remains just as valid today as when this interview was conducted.
And yet, nobody has been able to do anything about The Fed either then or now.
It really does go to show that the Banksters are the ones in charge.
Now, when do those NFL preseason games start?
redmondjp: It really does go to show that the Banksters are the ones in charge.
Now, when do those NFL preseason games start?
This brings up a good point - if the majority of people have their bread and circuses - relatively comfortable lives - and a certain segment - a very limited segment - is able to grow wealthy beyond the dreams of avarice, without disturbing the lifestyle of the majority of people - what then?
It’s an interesting thought experiment.
With the government retaining a high incumbency rate with the current system, which is also beholden to large donors, there’s no impetus on the politicians’ part to change anything.
The result is - you get an actual plutocracy. The Citi memo was spot on.
I’m trying to visualize hordes of Chinese Dama converging on a jewelry store and clearing it out of gold jewelry, and then breaking into a square dance afterwards. How do you live in modern China and not be insane?
‘The unsold stock of residential units is showing no signs of tapering in the Delhi-NCR market. Data from PropEquity shows inventory overhang is at a five-year high in NCR with 2.10 lakh units remaining unsold in the five months of January-May 2015.’
‘Property markets in key Indian cities continue to remain stressed, as sales are falling sharply. The study showed that in NCR, absorptions levels have dropped 63% in January-May 2015 to just about 17,300 units getting sold, compared to the first five months of 2010, when over 47,000 units were sold.’
‘Meanwhile, in Noida, the situation is abysmal. The housing market continues to remain difficult, with absorption rate lower than 2009 levels, the report said. While new supply or launches have halved compared to calendar years 2008-2013 and there is pressure on pricing, the sales have not picked up. In the three months of April-June 2015, BoFA report says the Noida market witnessed new sales of about 3,800 units, which is lowest in the last eight years. “Absorption rate at 3.7% is lowest in eight years as investors who held the housing market seemed to have deserted the market given poor visibility on timely delivery, price appreciation and exits,” the report said.’
‘Samantak Das, chief economist and director of research, Knight Frank India, said, “NCR now has the highest stock of unsold units among the top seven cities in India. There is high pressure on velocity of sales and we do not expect much traction in sales in 2015 as well”.
‘Seattle-based brokerage Redfin says its demand index, released Thursday, is “the industry’s first and only measure of housing activity before purchase.” The index is based on millions of visits to Redfin’s website, thousands of requests for home tours and offers written on homes in 15 major metros, the privately held firm said.’
‘U.S. homebuyer demand in June was up 13 percent over the year, according to Redfin, a smaller 12-month gain than in previous months. Redfin forecasts that home prices will be up 4.3 percent over the year in July and 2.2 percent in August, amid a sharp slowdown in sales.’
“We think prices are topping out,” said Nela Richardson, Redfin’s chief economist. “The answer for many buyers is just wait, don’t push it.”
A slowdown this time of year is typical, as buyers with kids want to be in their new (to them) homes by the time that the school year starts.
‘Silicon Valley prides itself on having a meta-status that defies easy categorization, but this cannot save it from the impending bubble. According to investors like Mark Cuban, Chris Sacca, Bill Gurley, Manish Goyal and Bharat Ramnani, there’s no longer doubt about the existence of a bubble — it’s just a matter of when it will burst and how bad the carnage will be.’
‘So far, the tech bubble discussion has been as self-referential as Silicon Valley. It revolves around the 117 ‘Unicorns’ on which investors have staked billions. Whether all the folly is driven by “FOMO” (fear of missing out), as Gurley puts it, or “hubris or bad decision making or naiveté about consequences,” according to Sacca, the bubble goes way beyond 117 companies, one valley and the anxiety of its investors.’
‘Should it burst, the tech bubble will have ramifications that ripple around the tech world like the shockwave from an apocalyptic asteroid. Most tech hubs are not self-sufficient at all; the fact that they are always referred to as the “Silicon Valley of [insert country]” should be a tipoff that they are merely branches off the trunk that is Silicon Valley. Even prolific hubs like Israel, China and India depend on Silicon Valley to pump capital through their arteries.’
Mark Zuckerberg is the 9th richest person in the world.
And yet he is not even the richest Californian!
I’ve got a question. How many of the unicorn companies are profitable, or will be in the foreseeable future? Without the benefit of crony capitalism, are too-big-to-fail banks even profitable? Maybe the better question is whether making a profit even matters right now.
30 Apr 2015
‘When George Scangos took the helm at biotech giant Biogen in 2010, he took a look around the company’s headquarters in the Weston, Massachusetts, suburb of Boston and thought, “What are we doing out here?”
‘Last year, the company celebrated the return of its headquarters to Cambridge’s Kendall Square, one of the capital cities of the biotechnology industry. The neighborhood’s 2.5 square miles are home to 130 life sciences companies, according to industry group Massachusetts Biotechnology Council, the densest concentration on the planet.’
“There’s so much happening here in Kendall Square,” Scangos said in an interview outside Biogen’s new headquarters on Binney Street. “MIT is a two-minute walk from where we’re standing now, Harvard is down the road, Mass General is a five-minute walk in the other direction. You can’t go out to lunch or dinner without seeing people you know from those institutions. The level of excitement and interaction and vibrancy is quite amazing.”
‘Read MoreWhy biotech IPOs are suddenly hot’
‘And as biotech has boomed over the last few years—the Nasdaq biotech index has more than tripled in the last three—so has real estate in Kendall Square.’
http://www.cnbc.com/2015/04/30/biotechs-real-estate-boom.html?__source=yahoo|finance|headline|headline|story&par=yahoo&doc=102636461
Hmmm.
http://finance.yahoo.com/echarts?s=^NBI+Interactive#{%22range%22:%225d%22,%22allowChartStacking%22:true}
‘Almost no one was expecting good news from Biogen’s (BIIB) earnings today but what they got was even worse than expected. Evercore ISI’s Mark Schoenebaum explains. Shares of Biogen have plunged 17% to $320.65 at 10:46 a.m.’
http://blogs.barrons.com/stockstowatchtoday/2015/07/24/biogen-we-knew-it-would-be-bad-but-this-is-bad/?mod=yahoobarrons&ru=yahoo
Down 20% now.
http://finance.yahoo.com/q?s=BIIB&ql=1
The level of excitement and interaction and vibrancy is quite amazing
Let me know when they discover a cure for cancer, as opposed to another ED pill.
Maybe the better question is whether making a profit even matters right now ??
Amazon was founded in 1994….It has lost money up until this mornings quarterly report…Thats 20+ “years” of loses…It made a few pennies a share in its latest report…Did you see what its stock did today ??
Amazon may have finally crossed the “scale” ravine…If Bezos is right, they will be a world juggernaut for many decades to come…
Not really. Amazon’s model is a failed one. When every item in your inventory is a loss leader, you’re destined to fail. Undercutting your competitors just to get some work isn’t profitable. Ever.
I’ve been a controller for a company when it was losing money. It’s not hard to do, but I’m sure it takes effort to lose money for 20 years.
IMO this company makes money selling stock.
Amazon isn’t a good example. They’ve been pretty open about reinvesting all profits into expansion. They don’t intend to show a big profit every quarter.
They’ve been pretty open about reinvesting all profits into expansion ??
Exactly which must be hard if you a investor in the company…Hanging in there all this time betting that Bezos is right…If he is right, he will have created a huge world juggernaut that nobody will be able to compete with…
It’s hard to compete with a company that’s willing to lose money.
“It’s hard to compete with a company that’s willing to lose money.”
Indeed. Hasn’t this been China’s business plan?
‘Las Vegas’ resale housing market hit the brakes last year as investors pulled out and sellers overpriced their homes. But now, things are picking up again amid cheaper borrowing costs and, says an industry advocate, an influx of buyers who had been blocked from new purchases due to past financial woes and investor competition.’
‘Already-low borrowing costs have dropped further, and bankers are loosening their purse strings. GLVAR President Keith Lynam didn’t say that easier lending is helping boost the market, but he didn’t rule it out. “It certainly hasn’t hurt to get cheaper money out there,” he said.’
‘Despite the upswing this year, Las Vegas is by no means problem free. Some 25 percent of local homeowners with mortgages remain underwater, meaning their mortgage debt outweighs their home value.’
‘And Nevada, with the bulk of its population in Clark County, had the fourth-highest foreclosure rate in the nation for the first half of 2015, according to RealtyTrac. One in every 126 homes statewide received a foreclosure-related filing in that time, up almost 10 percent from the same period last year.’
“There are some dark clouds on the horizon,” Lynam said.’
Always always always, as things slow down into recession, companies loosen credit standards to suck up other potential customers. Now it is institutional SOP with government also. When you see this coming … Better step aside… A lotta men didn’t …. And a lotta men died.
‘Landlords of industrial real estate in Calgary will be focused on their tenants, aggressively pursuing renewals to limit or reduce exposure to potential vacancy in their portfolio during what could be a prolonged economic downturn, according to a report by Cushman & Wakefield.’
‘Brent Johannesen, vice-president of industrial sales and leasing for Cushman & Wakefield in Calgary, said the vacancy rate in the city has increased slightly to five per cent with the completion of a significant amount of new construction in the second quarter of this year.’
“The year-to-date leasing activity sits at over two million square feet and is down from a very active 2014 which experienced over four million square feet of activity in the second quarter,” he said.’
‘Leasing activity is also down from 4.1 million square feet to 2.3 million square feet year-to-date. There is 2.3 million square feet under construction, with 1.4 million square feet completed in the second quarter.’
“While many tenants are waiting to see the impact of the softening economy resulting in a slowdown of overall leasing activity, renewal activity is still brisk. At this time, landlords are becoming more aggressive with incentives . . . which is correlating into lower net effective rates,” said the report. It is anticipated reductions in net rental rates will accelerate as we move into the second half of the year.”
‘Susan Thompson, research manager at Calgary Economic Development, said the city’s industrial real estate market is just starting to see some impact from the slowdown in the energy sector.’
“(Landlords) are going to do what they can to keep their tenants happy and in place,” she said, adding that much of the construction taking place in the market is built-to-suit which have commitments in place for space.”
“Although there are many industrial buildings still under construction, we have seen the development community delay and postpone planned developments as they wait for the market to absorb the vacancy that already exists,” it said. “C&W anticipates that for the balance of the year we will see some companies that are unable to maintain positive cash flow and likely see some distress sales as the economy works toward recovery.”
‘The report said Ohio’s foreclosure levels are the lowest they’ve been since the end of 2009. Despite the drop, Ohio still has one of the nation’s highest foreclosure rates.’
‘The foreclosure numbers should be put in perspective, said Kal Mughrabi, of Coldwell Banker Heritage Realtors in Springboro. He said Ohio was once the nation’s leader in foreclosure activity during the peak of the housing crisis.’
“There’s no doubt there has been a decrease in the number of foreclosures taking place,” Mughrabi said. “But a lot of those decreases are from all-time highs. The local market was once flooded with foreclosures — as high as 25 to 27 percent of all transactions. That number has been cut in half.”
‘He said there’s still more work to be done, particularly regarding so-called zombie foreclosures, or homes in the foreclosure process not yet owned by the bank. These homes have been vacated by their owners.’
“If you go to some neighborhoods you will see houses that have been vacant for more than a year,” Mughrabi said. “That’s a concern because when a property sits vacant and the bank does not finish the foreclosure process it hurts the overall market, and I still think there’s a healthy amount of those properties sitting around.”
‘A new report by the Metropolitan Council says more residents are living in poverty in metro-area suburbs than in the inner cities of Minneapolis and St. Paul, putting a strain on communities that are now struggling to maintain housing, build transportation infrastructure and provide social services that poor residents need.’
‘More than 385,000 people live in poverty in the suburbs and rural areas across the seven-county metro, compared with 259,000 in Minneapolis and St. Paul combined. The report defines poverty as 185 percent of the federal poverty line, which is about $44,000 a year for a family of four.’
‘Maplewood Mayor Nora Slawik said the increased poverty can be seen on her city’s north side, and that the community is trying to keep property values up by creating a pool of money that residents can access for home repairs.’
“Our housing stock is getting older, and people are having trouble keeping up with payments, which cause some of the foreclosure issues,” Slawik said. “We also have some issues with rehabbing.”
““Our housing stock is getting older, and people are having trouble keeping up with payments, which cause some of the foreclosure issues,” Slawik said. “We also have some issues with rehabbing.”
That’s a going to be a problem for more and more cities in the Northeast and Midwest - houses built in the 1920’s are getting to the point where maintenance and rehab costs become a significant expense, and there were a lot of houses built in the 1920’s. It would be interesting to know how the bubble cities of today will deal with their current housing stock when it’s a hundred years old.
Depreciation can never be hidden. It can be delayed but the losses grow even larger.
Robert Shiller: “Houses Depreciate”
http://www.pragcap.com/robert-shiller-dont-invest-in-housing
This is not my area of expertise, but in my opinion a lot of what has been built lately won’t have anywhere near the longevity of older houses. My neighborhood has seen a plague of McMansions, and I’ve noticed that the largest one is being very slowly and deliberately built, without the particleboard and other cheap-looking materials that characterize its peers, which are erected in a few weeks. When I asked a neighbor about the difference, he told me “that’s the builder’s house.”
Would you rather live in a balloon framed fire trap on a undersized foundation near the end of its useful life or a newer house?
“A new report by the Metropolitan Council says more residents are living in poverty in metro-area suburbs than in the inner cities of Minneapolis and St. Paul…”
This is happening around a lot of regions of the U.S.A.
Criminals know LE is stretched very thin out in the boonies. A lot of
“progressive” anti-gun tree hugger types move out to those places and become easy victims or move back to the city or former “progressives” who decide to like guns for their own protection.
My “progressive” sister moved to Texas and now owns a handgun.
I’ve been saying all along, whether LE is crooked or helpful, LE is more common in the city. You either better own a gun for yourself so that LE would not have to only bring chalk and write up a report of your dead body, or hope LE shows up at your place before the criminal (without a badge) kills you or a member of your family.
Or you live in the lowest crime areas.
‘Luxury Honolulu condo Waiea foregoes … trash chutes?’
‘The Howard Hughes Corp.’s Waiea luxury condominium, currently under construction in the Texas-based developer’s 60-acre Ward Village in Kakaako, was designed and is being built without trash chutes, the developer confirmed to PBN.’
‘The 36-story, 171-unit condo is one of the first high-rises in Honolulu to skip this common feature. The developer’s other luxury condo, Anaha, being built diagonally across from Waiea on a former Pier 1 Imports site, has trash chutes.’
‘Race Randle, vice president of development for The Howard Hughes Corp., told PBN in an email that Waiea has been designed with trash and recycling rooms on each floor, in lieu of trash chutes.’
“This is based on common practice in luxury high-rise developments in cities such as Vancouver and London where trash and recyclables are conveniently collected by staff,” he said. “This proven method, which is being applied to Waiea, offers an added level of service to residents, ensuring effective service and encouraging recycling as part of our LEED Platinum neighborhood.”
So now the undocumented minimum wage slaves will have to collect all of that from every floor, load it onto the janitor’s cart, and take it down the elevator. For every floor in the building. Every. Single. Day.
Why that’s FAR more efficient!
The building I work in is Leed _____ (some precious metal, can’t remember which). Which leads to stupid auto-sensing faucets that won’t see your hands if you have poor circulation in them (sensor looks for heat, not motion), not to mention the battery-powered soap and towel dispensers - let’s simply ignore how many batteries we are throwing away every year (not part of the LEED calculations so we just ignore that).
Saw a similar thing when I moved my friend in to an apartment in Riverside, CA.
Residents were to leave their trash and recyclables by the door for pickup by staff, but they only did it four days a week. So it pretty much sits out there all weekend looking bad and stinking up the place.
Klassy.
When I was being “Bill in Baltimore” a few years back, my apartment complex was like this. Staff would collect trash during a certain hour each night. And if you were out that evening, you of course would have to take your own trash out.
There were perhaps one or two people on the floor who were too late a few times and you just would not want to walk past their stinky trash “can.”
It was nice for someone to collect your trash on humid summer evenings when you just wanted to stay indoors in AC or cold winter evenings and it was windy outside.
‘China Construction Bank has been ordered to tighten money-laundering controls at its New York branch to resolve an enforcement action brought by the US Federal Reserve and the New York Department of Financial Services.’
‘The world’s second-largest bank by assets is working to address “deficiencies relating to the branch’s risk management and compliance” with the Bank Secrecy Act, the regulators said on Tuesday. The order calls for better oversight of account holders and the creation of a new internal audit program.’
‘The bank should submit plans for compliance and customer due diligence programs to help curb money laundering and suspicious transactions within 60 days, the Fed said.’
‘Mildred Harper, chief compliance officer at CCB’s New York branch, confirmed the enforcement action but declined to comment.’
‘It is the first time that the Fed, the United States’ central bank, has taken an enforcement action against CCB, according to a Fed database. The records show that no similar actions have been taken against any of the three other large Chinese banks－Bank of China, Industrial and Commercial Bank of China and Agricultural Bank of China.’
‘The Fed did not impose a fine or other immediate sanctions on the bank, and it did not detail what specific problems CCB was facing. But a source familiar with the matter said the Fed action was driven by issues in the correspondent banking business, in which banks transact in dollars on behalf of foreign banks that have no presence in the United States.’
‘There have been problems with how CCB monitored transactions, said the source, who asked not to be named.’
‘The issue of banks failing to properly vet foreign correspondents is a major concern for regulators in the U.S.. Some banks are acting as a gateway to the U.S. financial system without doing enough to keep criminals out, regulators say.’
‘The underlying picture in China is going from bad to worse. Robin Brooks at Goldman Sachs estimates that capital outflows topped $224bn in the second quarter, a level “beyond anything seen historically”.
‘The Chinese central bank (PBOC) is being forced to run down the country’s foreign reserves to defend the yuan. This intervention is becoming chronic. The volume is rising. Mr Brooks calculates that the authorities sold $48bn of bonds between March and June.’
‘Charles Dumas at Lombard Street Research says capital outflows - when will we start calling it capital flight? - have reached $800bn over the past year.’
‘Looking back, we may conclude that the world economy came within a whisker of stalling in the first half of 2015. The epicentre of this crunch has clearly been in China, with cascade effects through Russia, Brazil and the commodity nexus.’
‘Chinese industry ground to a halt earlier this year. Electricity use fell. Rail freight dropped at near double-digit rates. What had begun as a deliberate policy by Beijing to rein in excess credit escaped control, escalating into a vicious balance-sheet purge.’
‘The Chinese authorities have tried to counter the slowdown by talking up an irresponsible stock market boom in the state-controlled media. This has been a fiasco of the first order.’
‘The equity surge had no discernable effect on GDP growth, and probably diverted spending away from the real economy.’
‘Two leading Chinese power companies reported lower electricity generation as the economy slows. Huadian Power International Corporation Limited reported on Tuesday that the total amount of power generated in H1 decreased 7.29 percent from the same period a year earlier. The corporation’s total amount of on-grid electricity tumbled 7.33 percent in the first half of last year.’
‘Last week, Datang International Power Generation Co., Ltd. reported that its power generation had dipped 4.32 percent. Total on-grid power decreased 4.10 percent.’
‘ONE News can reveal that the Trans-Pacific Partnership Trade deal will stop the right to restrict sales of homes and farm land to non-resident foreigners in fellow TPP countries.’
“We will not support an agreement that takes away basic rights for New Zealanders” - Labour leader Andrew Little.’
‘John Key says Labour is putting politics over prosperity by imposing such bottom lines around things like foreign land sales as the deal opens up trade access to the biggest and four biggest economies in the world.’
‘Earlier this month Labour drew flak for the use of data which it claimed showed that a large number of Chinese foreign buyers were buying up Auckland housing.’
A corrupt elite selling a country out from under everyone else is a prominent characteristic of the Third World. I’m still very surprised that Western political leaders cannot grasp the implications of this, but at least some of them likely have a large personal financial stake in the outcome.
‘The double-whammy of the lowest interest rates since the 1960s and an investor frenzy has seen Sydney’s median house price smash through the magic $1 million mark for the first time.’
‘Domain’s senior economist, Dr Andrew Wilson, says house prices leapt an extraordinary 8.4 per cent over the June quarter to $1,000,616. “It’s the highest rate of growth since the late 1980s,” Dr Wilson said. “And it’s because of low interest rates and they’re going lower, lower and lower.”
‘The median house price has increased by almost $200,000 in a year or 22.9 per cent, which is one of the highest annual growth rates ever recorded by the city. Dr Wilson said it exceeded the boom time results of 2001 and 2002.’
‘Leading inner west agent Peter Gordon of Cobden & Hayson says $1 million is now the starting price rather than the median in his area. “We recently sold a little tiny house in Balmain – basically one bedroom and a study – for $1.05 million,” he said.’
‘Mr Gordon said there had been a spike in market appraisals recently. “A lot of sellers … are starting to think we are at the end of a cycle and thinking they should be selling to take advantage of the current strength just in case there is any sort of downturn,” he said.’
‘In any boom there are going to be winners and losers; those who have cashed in their chips and those who never got a seat at the table. New figures from the Domain Group show that median house prices in Sydney have grown 8.4 per cent over the June quarter to eclipse $1 million for the first time.’
‘Sydney’s annual growth rate is now sitting at 22.9 per cent - the highest since the late 1980s.’
‘Danny Crecca puts his windfall down to good luck. “We were just lucky with timing,” he said referring to the quick $1.12 million gain he made on the sale of his weatherboard cottage in North Ryde.’
‘Mr Crecca, 43, bought an unrenovated three-bedroom house on busy Cressy Road for $880,000 in May 2013. Last month he sold the home for $2 million. “I’m a plumber – I’ll never earn that much again,” said Mr Crecca.’
‘Initially he and wife Rosetta had planned to rebuild on the 696-square-metre block and incorporate a granny flat. Their architect suggested a duplex instead – plans were drawn and a DA approved.’
“We started getting quotes to build and were a bit surprised at the costs ahead. We were already in a fair bit of debt,” said Mr Crecca. “At the same time we were watching the property market increase with prices going through the roof.”
‘McGrath Ryde agent Stefon Bertram was aware the Creccas had gained council approval to build a duplex. He’d recently sold a potential duplex site around the corner on Coxs Road for a then record of $1.8 million. Mr Bertram called on the Creccas with an enticing idea.’
“We had some leftover buyers from Coxs Road and I rang the underbidder,” said Mr Bertram. “He was very keen and said, ‘What will it take to get it off the market before the first open home?’”
‘The buyer, a developer, bought it sight unseen, dropping a $2 million cheque to Mr Bertram straight away. “It was an incredible result,” said Mr Bertram. “He didn’t mind paying a premium – he just wanted to get his Saturdays back. Buyers are in fear of missing out at the moment.”
‘The Crecca family first bought in North Ryde in 1999, paying $365,000 for another unrenovated house. Then the suburb median was $349,750. Now it stands at $1,311,000. The Creccas are leaving North Ryde for Beaumont Hills where they now have a brand new two-storey home with a pool, “and a lot less debt”. The suburb median at Beaumont Hills near Kellyville is $953,000.’
‘Faced with a $1 million median house price, Christopher O’Neill, 31, says he has no hope of buying, particularly without a partner. “I saved and saved and eventually stopped looking, then, in the last 18 months, it has all gone crazy,” Mr O’Neill said. “At a million dollars, everyone my age or younger is priced out of the Sydney market.”
‘At the heart of the problem, he said, were cashed-up investors – both foreign purchasers and those looking for tax concessions. Those tax concessions, such as negative gearing, “need to be slowly rolled back within a decade, so it doesn’t financially ruin people who have bought”, he said.’
‘He also thinks the rules around international buyers need to be better enforced. “Something needs to be done about it.”
Scorching Dallas-area home prices mean tough summer market for buyers
http://www.dallasnews.com/business/residential-real-estate/20150723-scorching-dallas-area-home-prices-mean-tough-summer-market-for-buyers.ece
‘Was the China Stock Market Crash Engineered?’
‘On July 1, when over 200 million shares of Sinopec Oilfield Service Corp. were dumped on the market and caused the share price to plummet by the maximum 10 percent in a day, Mr. Zhu, an investor in Toronto, smelled something fishy.’
‘The pattern repeated the next day: massive selling of a state-affiliated firm (Sinopec itself is one of the largest state-owned enterprises in China), maxing out the 10 percent drop that is allowed by Chinese securities regulators. And this pattern was reversed in the week leading up to the plummet: huge volumes, driving the price way up, before a sharp peak, and the harsh crash.’
‘The same thing happened with thousands of stocks—both small and large—in the Chinese markets beginning in late June, wiping out an unprecedented $3.5 trillion in market capitalization in weeks.’
‘In all this, Mr. Zhu, who has been in the markets for 25 years, perceived the shadow of a conspiracy. “This dramatic collapse, in both speed and scale, when there were no major sudden external shocks—for it to be this fast and big—shows that it wasn’t the normal fluctuations of the market,” he wrote in an email. “It’s easy to see that the stocks were controlled and manipulated, and they slid down a thousand miles with complete disregard to the numerous efforts made by the government to stop the slide.”
‘He added: “Just who was manipulating those stocks, how it was financed, it’s all hard to say clearly. … It was evidently not for making money, nor did they even care to preserve their principal. So just what was it for?”
‘Looking at the same companies, Jon Carnes, a noted short seller of Chinese companies that he publicly accuses of being frauds, also believes that politics was behind their movements, albeit not the kind Zhu said.’
“Where Mr. Zhu sees conspiracy and manipulation, I see failed regulation,” Carnes said, pointing to trading halts that kicked in after a 10 percent intraday price drop. “The limit, by definition, removes all liquidity and sets the stage for a panic. In a downward market, who knows what will happen tomorrow?”
“Where Mr. Zhu sees conspiracy and manipulation, I see failed regulation,”
I see greed and stupidity. It is much easier than conspiracy.
“I see greed and stupidity”
That is what my Chinese relatives were telling me when I was visiting.
No conspriracy.
Dallas/Fort Worth Area Housing Prices Turn Negative On Year
http://www.movoto.com/dallas-tx/market-trends/
‘People forget history really quickly. It’s a little bit like at the moment people are saying ‘we’re going to wait, it’s going to crash’ but without being disrespectful to those people, what planet do they live on? It can’t be planet Earth because when has that ever happened?’
This reminds me of rental watch yesterday; ‘you think prices are going to crash.’
They already crashed. And you have forgotten. That’s just one reason I think it’s the same bubble. People didn’t get burnt enough. Look at how easily we’ve dropped into this loan stupidity, bidding wars, writing letters.
‘Eddie would like to to sell his home, but like millions of Americans, the widely touted housing recovery hasn’t fully reached his North Akron, Ohio, neighborhood. He owes about $60,000 on his mortgage and the two experienced real estate agents he consulted put the value of his home at somewhere around $58,000 to $59,000. Even if he were to find a buyer who would pay the full $60,000 he owes, by the time he paid a real estate commission and closing costs, he would have to bring a few grand to the table.’
“Being underwater on the mortgage has me trapped here,” he writes in an email. “As I sit here right now, I cannot even sell my home without taking a loss, and that will prevent me from buying the next house.”
‘Eddie’s not alone. According to CoreLogic, at the end of 2014, 10 million (20%) of the 49.9 million residential properties with a mortgage have less than 20% equity (referred to as “under-equitied”) and 1.4 million of those have less than 5% equity (referred to as near-negative equity). According to the Zillow Negative Equity Report, “the rate of underwater homeowners was much higher among the homes with the least value.”
http://finance.yahoo.com/news/help-im-trapped-house-cant-090021806.html
Just don’t take the dishwasher when you leave Eddie.
‘The number of sales and price of Hamptons’ homes dropped in the second quarter of 2015, according to new a report released Thursday.’
‘Some 590 transactions took place totalng $931 million in the quarter, representing a 16% decline in number of sales and a 14% drop in total dollars spent in the same period last year, according to the report by Douglas Elliman Real Estate and appraisal firm Miller Samuel Inc. Median price for all homes also fell by 7% to $849,000 in the quarter.’
‘The Hamptons residential market had been booming. The second quarter of 2014 marked the first time since 2005 that the number of sales hit 700. In 2005, the peak of the market, 786 homes sold. Additionally, all-cash buyers drove the activity in 2014 and 2013, similar to what occurred in Manhattan, where almost half, 45%, of all buyers paid without taking a mortgage, according to Mr. Miller.’
http://www.crainsnewyork.com/article/20150723/REAL_ESTATE/150729925/the-high-times-are-over-hamptons-home-sales-take-a-dip
Eddie is in the same predicament my Midwest-located parents faced in selling their home earlier this year with respect to market value. Luckily my parents paid off their mortgage many years ago, so the underwater issue was not a problem for them.
Eddie Slithers is alive(barely) and not well.
An elderly relative in a small Rust Belt city recently passed away, and his children are putting his paid-off house on the market. This is going to be interesting. They were looking at realtors, one of whom promised to bring by a potential buyer that very afternoon. I said I thought that was being dangled just to win the listing, and that the “potential buyer” was a confederate of the realtor.
This happened to us when my dad passed away in 2000 in Fresno. At that time I was lucky to get us $75,000 for the house. The Zestimate is currently $140,000. It’s in an industrial area. My parents each died of cancer. We were eager to sell. My oldest sister needed her share of the money but she was willing to take the house. The rest of us said no because we knew she and her kids would trash it.
how many were “underwater” before big gov got in the mort game?
“I cannot even sell my home without taking a loss, and that will prevent me from buying the next house.”
Eddie, might be time to buy a mobile home.
I suspect the last wave of boom and bust is far more quickly forgotten by those who are making bank surfing the new wave.
“People didn’t get burnt enough.”
Based on what?
Shiller’s data shows prices reached a trough within a few percent of pre-bubble troughs..the rest of the difference can be explained by how the Boskin commission changed how CPI was calculated. Shiller didn’t adjust for that…I know, because I asked him (and he responded).
The bottom in prices was formed with cash buyers, not zero-down speculators. The rocket ride up has been fueled by cheap debt, but the bottom was formed with cash.
‘The bottom in prices was formed with cash buyers’
Yeah, none of that came from $4 trillion in Bernanke bucks.
When the oil states bubble popped, the feds ran around shutting banks and S&L’s down, throwing people in prison. Compare that to the moral hazard run rampant today. We even see the exact same subprime guys getting back in the business.
The Fed increased their balance sheet by about $3.5 Trillion since the crash.
$2.5 Trillion took a round trip and ended up as excess reserves.
Could the $1 Trillion that whizzed around the economy landed in housing? Sure.
At the same time though, corporate balance sheets ballooned with cash as well. Did the $1 Trillion end up on corporate balance sheets?
Who knows where that $3.5 Trillion landed? We know that $2.5 Trillion landed as excess reserves.
The fact of the matter is that Shiller’s data…the best data for someone looking at long-term cycles shows the following inflation adjusted readings for prior troughs:
1971: 101
1982: 107
1995: 113
2012: 126
The Boskin Commission came out in 1995, and concluded that prior measures of CPI overstated inflation by about 1% per year. As such, they started to change CPI at that point to reduce that bias.
In other words, the CPI measurement after 1995 was different than that before 1995.
Shiller used the same CPI measure, even though the methodology had changed (he told me that they had discussed using other potential inflation measures, but decided to stay with the BLS measure).
However, the entire bias was not eliminated right away, it has taken time. There was a look at how much of the bias was eliminated in I believe 2006, and they noted that about half the bias was eliminated.
In other words, if the Boskin commission never happened (and we had a consistent measure of inflation before and after 1995), inflation would have been reported at about 0.5% higher per year over the prior 20 years…or about 10 points.
MoreThat’s not “inflation” Rental_Fraud.
*Learn* the difference.
Instead of the blather, ducking and weaving, how about addressing the fact that current asking prices of resale housing are double construction cost.
Yep, and meanwhile Eric Holder who declined to prosecute the Wall Street crooks behind the 2008 crash has very recently returned to his old private sector job defending white collar criminals…
http://www.salon.com/2015/07/07/why_eric_holders_new_job_is_an_insult_to_the_american_public/
How about these additional ongoing gems:
Suspension of mark to market accounting
Toxic loan accumulation by the federal government
Foreclosure moratoriums by federal and state governments
“Loan modifications” and other kick the can down the road measures
ZIRP to force investors into riskier investments
That last Fed measure allowed hedge funds to take out low-interest loans and assemble their RE portfolios through “all cash” transactions.
A debt-induced crash alleviated by even more debt. Nope, no natural bottom.
There was no bottom my friend.
Case Shiller? Here you go. Does there appear to be a bottom there?
http://img802.imageshack.us/img802/7812/caseshiller.jpg
There is if you look at the actual data from Shiller’s website and not some BS non-inflation adjusted chart.
http://www.econ.yale.edu/~shiller/data.htm
Mania’s are inside peoples minds. A bubble will no longer exist when it has been purged from the minds of most participants. That never happened, for various reasons.
‘President of the Indiana Association of Realtors. ‘Despite a continued lack of inventory and increasing prices, consumers across the state see the opportunities that low interest rates present and are confident about housing as an investment.’
Two days ago we learned that most people in the US think real estate is the best investment. I’m pretty sure they mean houses. The bubble is alive and well, growing on loans that are getting shakier every day. When consumers buy more of a thing when price are going up, it’s a sign of speculation.
The bottom will be in when most people consider a house to be the worst investment in history and the anguished memory of their losses will be retold for a generation.
So, being “burnt enough” has more to do with changing people’s perception of housing than home prices reaching their natural bottom?
If the crash of 2008-2010 wasn’t enough to get people away from wanting to own housing, you may be waiting a long time for that perception change.
What about the articles that have been whizzing around about there being more people content renting, which is why rents are rising, and apartment construction is booming with a lower home ownership rate…isn’t that evidence that there was at least some change in perception?
Sure, but the poll this week about investing and the widespread dive back into speculation shows we have a long way to go. The “crash” was interrupted by the government and the central bank. Changing accounting rules so REO’s can sit for years, hosing down the mortgage industry with $ 4 trillion, that kinda thing. The GSE’s should be sitting in boxes in storage somewhere, but instead they are back to their fun and games. I don’t know what’s going to happen, but I do think this move to reflate the bubble will be seen as one of the biggest mistakes ever. Heck, we’d be getting back to normal by now.
Correct me if I am wrong on this, but CS does not capture fundamental changes like the average price or size of new houses because they look at “same sales”. If the size of houses doubles over a decade or two, CS wouldn’t budge.
CS could watch the 1,000 ft2 ranch I lived in 40 years ago, with its quaint white formica (gold speckles) countertops and harvest gold appliances just meander along at the same CPI adjusted price, while 3,500 ft2 mansions with arched windows, stainless and granite sprang up like mushrooms all around. RW would say there is no bubble here.
The Dingbat doesn’t like that reality either.
Reno, NV Housing Demand Plummets 17% YoY
http://files.zillowstatic.com/research/public/City/City_Turnover_AllHomes.csv
Evergreen/San Jose, CA Housing Prices Fall 11%
http://www.zillow.com/evergreen-san-jose-ca/home-values/
California Realtor Charged With 12 Counts Of Fraud
http://www.marinij.com/general-news/20150721/danville-man-to-be-sentenced-on-conspiracy-charges/1
R repugnant
E evasive
A appalling
L lazy
T treacherous
O obnoxious
R repulsive
Does anyone else find it odd that the Bank of International Settlements (”Central Bank of the world comprised of 58 central banks…”) maintains that persistently ultra-low interest rates are a no-no, yet all of its member banks are playing this strategy?
“Auckland house prices could hit $1 million within 18 months if interest rates continue falling …”
Interest rates falling = lower monthly payments = rising house prices.
Rising house prices = rising equity = rising wealth.
Rising wealth = rising prosperity.
Thus …
If you lower interest rates then you will magically create wealth and prosperity.
Central Banking 101.
It’s even more magical when one remembers that New Zealand is basically an agrarian economy.
House price moves around the world
That was interesting…Nice post Mike…
It’s good to see falling housing prices in China and Japan. At least the truth is being told about it.
even HA can afford that
The median sales price increased 17.1% to $105,000.
Have another my friend. Drink up.
https://goo.gl/yRCqOC
Opinion: What real estate in the Hamptons says about the economy
Published: July 24, 2015 7:56 a.m. ET
Prices are falling, and everyone is starting to freak out
Bloomberg
This home in Southampton, N.Y., rented for $380,000 a summer in the past 10 years.
By Marek Fuchs, Columnist
“The high times are over.” — Crain’s New York Business
If you think Elvis met an undignified end by dying on a toilet, wait until you see what happens to the Hamptons. Housing prices are finally falling, which signals doom for the entire economy, at least according to a chunk of the media, who are flapping their alarmist gums as we speak.
We could waste 100 years here speaking about how often the media jump to dramatic conclusions. But before dispelling the notion that as Further Lane goes, so goes America — let’s hold the thought in our palms for a moment.
…
In the second quarter of 2015, the total number of sales in the Hamptons — and median sale price — dropped. As in: off the lip of a cliff. Nearly 600 transactions were recorded, a 16% decline; moreover, median sales prices fell to $849,000 in the quarter, a 7% tumble, all according to Douglas Elliman Real Estate and Miller Samuel Inc., an appraisal firm.
As this was happening to the rich and beautiful (or, at least, surgically enhanced), the rest of us were laced with uncertainty too. July’s Consumer Confidence figure did curdle, dropping steeply to 86.9 from June’s 96.1 and, more problematically, expectations of 95.
Maintaining a decent level of consumer confidence always involves a bit of devil’s magic. Besides holding interest rates below ground and heedlessly printing money, the government can’t do much to help. Consumer confidence is, to some degree, psychological.
So is Further Lane a leading indicator?
No. At least not right now. Disappointment in the Hamptons and the real world did seem to pace each other a bit.
But here’s the factor to watch: In a country obsessed by celebrity and real estate pornography, the Hamptons may, going forward, hold outsized influence over psychic notions of our collective economic health. Traders and media bigwigs love the place. In fact, many work from there over the summer, adding to its overwrought influence. Never forget: Once notions of an economic decline take hold, the story will largely be told from Amagansett.
We are not, to be certain, there yet. One lame quarter (and it’s only been one) does not a recession make. That’ll take two. You have to, also, beware of a certain media bias. The media is not biased toward the positive or negative. In large measure, they are only biased toward having a new story line to write. Considering that the housing at the higher end and, indeed, economy at large, have been bouncing along nicely, recession (aka “The High Times Are Over”) is a fresh, new story line.
Nothing is better, at least to a journalist, than having a new story to tell. As a result, they are often too quick to tell it.
Considering, though, the dicey underpinnings of the economy (see: those underground interest rates and that heedlessly printed money), I might keep a particular eye on those bloated bodies and egos along Long Island’s depreciating South Shore.
Considering current asking prices of resale housing are inflated 250% higher than long term trend irrespective of location, housing prices have a long way to fall yet.
Elvis did not die on the toilet…he died besides the toilet!
“So after the housing bubble burst seven years ago, what now? The BIS warns low interest rates could spell ‘entrenched instability’…”
Entrenched instability! Bastards! Who is doing this?
“The BIS is the Bank of International Settlements. It is the Central Bank of the world comprised of 58 central banks. It has a core of 31 chiefs of central banks of the most economically powerful countries of course. The BIS is not controlled by any government, pays no taxes, and has its own police force.”
Oh, so these are the guys!
“What did the BIS warn about in the article? It warned about the persistently low interest rates.”
But … but … but these BIS guys are the guys who set the rates.
“This monetary policy of lowering interest rates is, the BIS warned, ‘overburdened in an attempt to reinvigorate growth.’ This, the BIS said, resulted in ‘too much debt, too little growth and too low interest rates.’”
But … but … but all of this is your doing!
art off 5.8%
artsy fartsy art
no one here called it
dealt it
“art off 5.8%
Sounds like we’ve hit the peak of this economic cycle.
That’d be great if this were a cycle but the business cycle was suspended.
inventory is up here in 22151
July slump that won’t go away this year