Many People Can’t Afford To Price Aggressively
It’s Friday desk clearing time for this blogger. “Almost half of single-family houses in the New York and Washington metropolitan areas are losing value, a sign that buyers’ tolerance for high prices in many large U.S. cities may be reaching a limit, according to a new index created by Allan Weiss, co-founder of the Case-Shiller home price indexes. More properties also were in decline in Los Angeles, Chicago, Phoenix and Miami. A steady rise in U.S. home prices since the bottom of the market combined with weak income growth has made housing less affordable, especially in big cities. ‘What happens in any bull asset bubble such as what we’ve seen is you run out of buyers,’ said Chris Whalen, senior managing director at Kroll Bond Rating Agency Inc. and an advisor to Weiss. ‘It’s hard to get deals done if the bottom third can’t get a mortgage.’”
“New home starts and sales in the Houston area are falling and the supply of new homes that have been completed but remain unsold is up dramatically, a new report from Metrostudy shows. The inventory of competed homes is the most concerning aspect of the market right now, said Scott Davis, Houston regional director for Metrostudy. ‘We’ve been in an extremely abnormal market from 2012 to 2014 when we had constrained lot supply and exceptional job growth,’ Davis said.”
“On the north side, there are too many houses being at the high-end of the market, Davis said. Many buyers can’t afford the higher prices. ‘For someone looking at a $600,000 to $800,000 home, there are over 300 locations in Houston where they can buy a new home in that price range,’ Davis said. ‘Buyers have a lot of options.’”
“Over the last three years, more than 3,800 rooms have been made available for U of A students who want to live off campus, doubling the number previously available, and more are on the way. There are concerns from private homeowners who lease their buildings to students. ‘It’s just the over saturation, fortunately for the students they have a lot to chose from but unfortunately for the properties there is so much competition which then trickles down to those individual homeowners,’ said Teresa Klinger, Senior Program Coordinator for Off-Campus Housing.”
“City officials say they aren’t able to physically keep count of Indianapolis’ climbing number of abandoned homes. ‘We recently had our quality of life team go out into the city and one of the biggest, single things we saw were vacant and abandoned homes,’ said Julie Fidler, housing and services specialist for the Indianapolis Department of Public Safety. ‘It’s not only a quality of life issue, it’s an attraction of nuisance because people who commit crimes may use those abandoned homes as the bases of their operation.’”
“Throughout the 10 months Mireille Blanchard’s Moncton home was for sale, only few potential buyers came to view the house. She’s noticed that there are a lot of For Sale signs in her downtown neighbourhood. Blanchard pulled her house off the market this earlier this week. ‘There’s one house that I noticed, they dropped their price by $40,000, and it’s still not sold. And we’re not prepared to lower our price so no, we’re not going to sell.’”
“Realtor Kari McBride, president of the New Brunswick Real Estate Association, says Blanchard’s plight is common. McBride says the reason behind the slow sales is ‘the housing market is in a state of oversupply.’ She finds many people, especially those who have only owned their home for three to five years, either aren’t able to sell their home, or are having to come down in price, sometimes losing money on their investment. ‘If you are in that bracket of home sellers, which many many people are, that they can’t afford to price aggressively or they don’t have the money to put in the updates the buyer’s looking for, then those are the houses that we’re seeing on the market for six, eight, 10, 12 months at a time,’ she said.”
“An estimated 362,000 homes in Baja California have been abandoned by their owners and another 60,000 are at risk of abandonment, according to the national director of El Barzón, a Mexico nonprofit founded to assist consumers in economic trouble. Thousands of abandoned homes dot sprawling, high-density developments in the eastern reaches of Tijuana and elsewhere in Baja, creating insecurity among the homeowners who have managed to hold on to their property. ‘A home that once put a roof over the heads of a family today provides shelter to kidnappers, drug dealers, and robbers,’ noted Martha Rueda, state coordinator for El Barzón in Baja California, in an El Sol interview.”
“The value of unsold apartments across the top seven cities of the country at the end of June has been estimated at a whopping Rs 4 lakh crore, with few signs the inventory will be cleared anytime in the next four years. At 7.5 lakh, the number of flats in the mid-priced range is virtually the same as it was at the end of March, this year, which means sales have come to a standstill. In addition, there are 50,000 luxury apartments, priced at an estimated Rs 1 lakh crore, lying unsold in Mumbai alone.”
“Despite the large number of flats going abegging, however, some 37,000 flats in the mid-priced segment were launched in the three months to June, roughly half the number opened up for buyers in the March quarter, data from PropEquity shows. Mudassir Zaidi, national director, Knight Frank, says builders have realised there is little point in launching new properties since that would only pressure prices further. ‘The pace of recovery in housing sales is far slower than earlier anticipated and the high inventory is not coming down in a hurry,’ Zaidi observed.”
“In a critique published in April, the global body that monitors the proceeds of crime, the Financial Action Task Force, said Australian real estate was an attractive destination for dirty money. In its April report, FATF said ‘large amounts are suspected to be laundered out of China into the Australian real estate market … Of great concern is that Australia has not brought real estate agents within the AML/CTF [counter-terrorism finance] regime.’”
“The Australian Federal Police restrained just $13 million in residential property in the 2013 financial year. But as concerns over some eye-popping property sales mount, more action may be looming. The AFP is investigating $80 million in property transactions from one group of Malaysians with links to a government investment body, including the sale of a student accommodation block in Melbourne for $22 million — almost $5 million more than its estimated market value.”
“Real estate agents are worried they will face an onerous compliance burden if they are brought within the anti-money laundering regime. But Malcolm Shackell, a partner in PwC’s forensic services division, said it might also cause headaches for the Australian money laundering regulator, Austrac, which already has 14,000 businesses to monitor. ‘You bring in the real estate industry and all of a sudden that doubles, triples,’ he said.”
“Spare a thought, if you will, for a Mr Qi, of China. He invested some £100,000 in shares in May, just before the stock-market bubble burst. He has lost £40,000, at least on paper. His dreams of making enough on the stock market are, for now, dashed, and he will have to postpone his plan to buy his own home. I do not know what the Mandarin for ‘negative equity’ is, but Mr Qi is feeling the effects of it, as are many more Chinese private investors. Reports tell us that the only way Mr Qi can find some relief from the stress is to have a good old-fashioned foot massage. There will be a good deal of foot-rubbing going on in China right now.”
Hold onto your hats, I’ve got a lot of desk clearing to do.
Here’s an in depth look at the Weiss data:
‘Stark New Warning on Home Prices’
“Common sense would indicate that house prices should bear some relationship to area incomes and the simplest measure is the ratio of the median house price in an area to the median household income such as these measures of Houston and San Francisco.”
Common sense, eh. Now they are trying to factor common sense into the affordability equation.
Bahahahahaha … it’s TOO LATEToo late!
(well that post got a bit screwed up. here’s another try)
Common sense was thrown out the window when prices were pushed up and now that prices are in located somewhere in the stratosphere common sense is beginning to make its ugly return.
Which means, if common sense returns, that prices will no longer be equal to value, which means the concept of OVERPRICED is making its return, its ugly return. An ugly return for buyers who are stuck and an ugly return for those people who were watching on the sidelines as their insane neighboring buyers and sellers were creating for him EQUITY, equity as represented by the price rise.
An now that prices are no longer rising but instead are falling the equity that was magically produced by the price rise IS VANISHING!
Vanishing! Vanishing right before your eyes! And vanishing equity translates to vanishing wealth!
The horror.
I’d not seen Conrad used to describe the housing bubble. Good work.
Yeah, so we’re seeing a popping of the bubblet that blew up in 2013. Not surprising.
There are so many variables for housing in the DC area homes that you really can’t trend it without a finer breakdown by house type. Even on my block, the house price can easily swing 0-15% depending on whether the house is renovated, has an addition, or has a rentable basement.
And how does one measure household income? Are they including the transient basement renters?
Prices can and typically do fall more than 15% Donk. Especially in the current environment where resale asking prices are 250% higher than long term trend and double construction costs(lot labor materials and profit).
“the bubblet”
Like it was an independent mania? Consider that it was an integral part of the anatomy of the biggest housing mania in history, a sucker’s rally where prices went back up to the lofty heights of 2004. Now there is a big air pocket, remodeled kitchens and basements not withstanding.
“Now there is a big air pocket, remodeled kitchens and basements not withstanding.”
An air pocket that was at one time filled with … with EQUITY!
Equity that could be cashed out and cashed out and cashed out - and this repeatedly cashed out equity went into …
SPENDING!
Lots of spending! Spending that was needed - IS needed - in a seventy-percent consumer-based economy. Spending that will be no of more because of that pesky air pocket.
Equity is a fallacy.
Mafia - Get over it. We have done well on the “property ladder”. What illusion, my dear? Buy, hold, and pay attention to cycles. We’ve always made $. Gotta pay to live somewhere.
Been into sweat equity lately. El Nino has become a cash grab for many exterior contractors. No thanks. Just saved $3K for 10 hours of work. I’ll break a nail for $3K.
Sorry MT Pockets. Had you not paid a 200% premium for depreciating asset and proceed to throw more money at it, your wallet wouldn’t be so light.
With 25 million excess, empty and defaulted houses and housing demand at 20 year lows, is it really all that surprising that housing prices are falling?
Remember…… Why buy a house at these grotesquely inflated prices when you can rent it for half the month cost? Buy later after prices crater for 65% less.
You mean RE agents Price Aggressively? There is a huge case for buying the listing in this country. M
If you want to sell a house in this market you probably should bury a realtor upside down in your back yard.
You are on fire today.
A real flamer.
combo
Amen. Breach it. We love the FSBO MLS websites. Sold our luxury home that way. Did pay the buyer agent commission, but saved a bundle. Listing Agents do not add any value. Buyer Agents should be a flat fee of $2,500. That’s all they are worth, in my humble opinion. Loan and Escrow folks, at least do some work.
What were your losses on that one?
The real estate cartel is a big problem folks. First of all everybody has to reduce prices after the agent told them they could get all the money at listing of their home. Of course no such offer is made with the 6 to 7% commission.
Why isn’t there a outcry for across the board commissions, nobody needs real estate offices anymore and the broker or office manager who sits there and does nothing but cheerlead needs to go.
3% across the board, 1% for buyers agent,1% sellers and 1% brokerage firm.
The MLS is who (?) and why are they the bible. All they do is make for lazy agents who hope somebody sells their listing (3% or 3.5%) they don’t want to hustle the sell anymore.
I’m in total agreement that RE commissions should be capped at the 3 percent level. The only thing I see RE’s doing today is errand boy on presenting the buy or sell offer.
There should be an antitrust investigation into residential real estate broker commissions.
While there may not be collusion currently, it is curious that ALL brokerages charge the same amount…it leaves the door wide open for a group like Redfin to disrupt the norm.
On the commercial side, commissions are whatever you can negotiate. For a tiny building (where there is a lot of work for a small sale), you might need to pay 6%. However, if you are selling a large asset that is easy to understand (and thus easy to sell), you can negotiate the fee down to 1 or 2%.
rental watch
I hear ya. The antitrust lawsuit didn’t have much of an effect. Psychology on the residential side is quite imposing. When we listed our luxury home on an online MLS listing website, we were boycotted by all the franchises, and even told off. Like we cared! A solo broker brought our buyer. IIRC. we paid under a few grand, to have an Attorney review the docs. Why are sellers so damn gullible?
doom
The DOJ lawsuit (2002-2003ish)against NAR did open some online opportunities, but people have been hoodwinked, you still an agent. I’m licensed for a commercial career, and the scare tactics on the residential side, infuriates me. Lawyers can facilitate the transaction, to protect both parties for a hell of a lot less $ (and they are truly professionals). In fact, in some states, NAR isn’t as much a cartel.
^^^ This. I agree. Agent/Brokers are nefarious folk. Even if your house never lost value, paying fees to sell is a loss.
Renting and happy after almost buying six months ago. Thanks to housing bubble blog, btw.
‘China’s slowing economy has taken its toll on the first-half earnings of major construction machinery makers. “There are too many machines out there in the market,” Zoomlion Chairman Zhan Chunxin told Reuters recently. “Companies tended to get orders ahead of major infrastructure projects previously, but now we hardly get any inquires even if several projects kick off at the same time.”
“It’s no exaggeration at all to say that the Chinese market is in the middle of a catastrophic long-term slump,” Zeng Guangan, chairman of Guangxi Liugong Machinery Co, told a recent industry forum.’
‘Global investors are bracing for data next week that could show a big drop in China’s foreign exchange reserves as the central bank steps up its intervention to stabilise the yuan currency after its shock devaluation last month.’
‘China’s foreign exchange reserves, the world’s largest, have been falling from a record $3.99 trillion in June 2014 due to a wave of capital outflows fuelled by jitters about its economic slowdown and an expected move by the U.S. Federal Reserve to raise interest rates. Foreign exchange reserves fell by $42.5 billion in July to $3.65 trillion, the sharpest monthly drop since March.’
‘The decline appeared to have quickened after China’s near 2 percent devaluation of the yuan on Aug. 11 stoked fresh concerns about its economy. The move sparked heavy selling of the yuan, and the central bank has intervened repeatedly since then via state banks to sell dollars to shore up the currency.’
“If the current pace of FX intervention continues, we estimate that the PBOC could lose up to around 14 percent of its FX reserves (ex valuation adjustments) between June and December,” Barclays said in a research note. “We estimate the PBOC would have to reduce the reserve requirement ratio by around 40 basis points a month just to offset the impact of its FX operations on domestic liquidity.”
‘Moreover, much of the money released into the economy by cutting banks’ reserve requirements may merely replace funds being moved offshore, rather than finding its way into new loans to companies which would support the real economy.’
“We do not believe the present policy is sustainable given the associated costs in terms of FX reserves depletion and liquidity imbalances,” Barclays said. “As such, we maintain our view that the yuan will need to depreciate further to stabilise capital outflows; we forecast a further 7 percent fall by year-end.”
‘Central banks will sell $1.5 trillion of forex reserves by the end of next year as they try to counter capital outflows stemming from China’s slowdown, low oil prices and a rise in U.S. interest rates, Deutsche Bank said on Tuesday.’
‘That would mark a major shift in global capital flows, ending two decades of reserve accumulation by emerging markets.’
“bracing for data next week that could show a big drop in China’s foreign exchange reserves as the central bank steps up its intervention to stabilise the yuan currency after its shock devaluation last month.”
Do any of you out there really think that this came as a shock to the BIS or IMF? R E A L Y?
You’re talking about the same guys who missed the 2007 housing bubble? It could be the ostrich syndrome! Head meet sand. Or perhaps, head meet ……well you get it.
And you missed the 2008-2015 bubble Jingle_Fraud.
Ouch
Negative feedback loop.
There’s that word “catastrophic” used again to describe the Chinese economic situation.
Come to think of it, that’s the first time I’ve seen the term used to describe the China slump.
‘Solano County’s housing market continued to grow at a solid pace this past year, as the county experienced an increase in home prices for the third straight year. The market featured a relatively low inventory, but high demand, according to Dave Franzoni, a Realtor with Coldwell Banker Kappel Gateway Realty.’
“There are multiple offers on almost every house, if they’re priced at the median price range,” he said.’
‘Realtors anticipate home prices will continue to increase at a similar rate during the next year, Franzoni said. The increase in home prices, meanwhile, has led to more inventory, he said. “We have at least 50 percent more inventory now,” he said.’
‘The perks of fame and showbiz success are undeniably many, but when it comes to selling their multimillion-dollar residences, famous folk and other industry bigwigs are, by and large, subject to the whims and forces of the marketplace just like regular people. The golden rule of real estate is almost universally touted as “location, location, location,” but most agents we spoke with told us that price is the real culprit when a property — celebrity-owned or otherwise — languishes on the market.’
‘Homes at the uppermost end of the market tend to take longer to sell; there are, quite simply, fewer buyers who can afford a $50 million-plus house who also want said house in that particular location. Just ask television syndication titan Richard King, who officially put his carefully and expensively rebuilt Holmby Hills mansion — a gigantic Georgian once home to silver-screen star Fanny Brice and later owned by Alan Ladd Jr. — up for sale in July 2011, at a nose-bleedy $65 million.’
‘Despite a slew of ballyhoo (the stately spread was fawned over in Architectural Digest and, over the years, has been yakked about by property gossips around the globe), the not-quite two-acre estate and its sumptuous, 17,000-square-foot residence remains unsold at its original asking price.’
‘Other property owners use a downward trajectory to try to lure buyers. Sitcom staple Kelsey Grammer’s third ex-wife, former “Real Housewives of Beverly Hills” cast member Camille Grammer, was granted in their 2011 divorce the erstwhile couple’s almost five-acre equestrian compound that’s tucked into the rustic-luxe rear of the guard-gated and celeb-favored Serra Retreat in Malibu. The lavish property, replete with swimming pool, tennis court and a lily pond, first popped up on the open market in August 2012 at $17.5 million. The property was later relisted at a scosh under $15 million, and now, more than three long years after its original list date, is still up for grabs at the significantly reduced asking price of not quite $14 million.’
Poor babies.
When the parasitic Realtor scum can’t sell your house because you won’t lower the price it becomes about prices. If the buyer still looks like he might pay the absurd price, “Location, Location, Location,” is cawed into his face.
‘The Bahamas Real Estate Association’s (BREA) president wants to “stop the haemorrhaging” represented by a 50 per cent first half sales decline on its Multiple Listing System (MLS), describing the trend as “worrisome”.
‘Carla Sweeting told Tribune Business she was determined to halt the pace of year-over-year sales declines, comparing the Bahamian economy to a “ship that needs to be turned around quickly”.
‘The BREA president told Tribune Business that VAT had made “everything more expensive”, with the 7.5 per cent levy now applied to “four to five cheques” relating to real estate transactions.’
‘Mr Dupuch said the Bahamas was effectively witnessing a ‘two-speed’ real estate market - a thriving foreign segment that was being offset by a weak Bahamian one. “We’re selling more high-end homes, as non-Bahamians go in behind the gates, and don’t care about crime and the economy. But the Bahamians are really worried. The banks are not lending. The market has shifted to where we are selling more high-end homes, and to non-Bahamians, than we were before.”
“The lending practices of the banks have been getting harder and harder over the years because of the foreclosures,” the BREA president added. “All that is due to the economy.”
‘Kuwait sales decline in July as market correction continues’
“Sales in the residential sector fell below the KWD 100 million mark for the first time in almost three years. Sales totalled KWD 98 million in July, down 28 per cent y/y. Reminiscent of 2010’s performances, the sector recorded only 251 transactions, dropping 41.5 per cent y/y. Vacant plots constituted 41 per cent of all transactions in the residential sector.”
‘Alan Maguire and Carol Anne Kennedy live, with two dogs, on a small housing estate just outside Waterford city. The estate, just over the Co Kilkenny border, contains 12 semi-detached houses that were completed in 2010 and 10 others with black hoarding over the windows and doors. In front of the houses there is wasteground overgrown with weeds. This complex is surrounded by a big metal fence with an ominous warning sign.’
‘When Alan and Carol Anne bought their house in 2010 it seemed like a bargain, though they were hurried along by “rumours” that the builder was in trouble. Three months later he went bankrupt. “We never heard from him again,” says Maguire. “The phone number wasn’t working.”
‘Alan and Carol Anne know they’re relatively lucky. “We’re probably still in negative equity,” says Maguire, though he hasn’t checked recently. “As ghost estates go, it’s not terrible,” he adds, and they both laugh.’
‘Down the road there are estates in much worse condition, where terraces of houses lie unloved in scrubby fields surrounded by railings, across from abandoned retail units. Ghost estates are the symbol of recessionary Ireland, strange monuments to our boomy hubris.’
“Ghost estates became the visible manifestation of the crash,” says Prof Rob Kitchin of the National Institute of Regional and Spatial Analysis at NUI Maynooth. “People don’t necessarily know the ins and outs of how the economy works but you can look out of the car window as you’re driving and you can see these things.”
‘The first bit of official action taken on the unfinished housing estate problem was a survey in 2010, which identified 2,846 unfinished estates. Within those, 78,195 units were complete and occupied, 23,250 were complete and vacant, 19,830 were being built, and there was planning for 58,025 more.’
“As ghost estates go, it’s not terrible,” he adds, and they both laugh.’
The world laughs with you.
Interesting that it took until 2010 to melt down in Ireland. Housing bubbles are such a sticky mess.
‘Bengaluru unsold homes cross Mumbai numbers; NCR at top.’
‘With 84,000 unsold housing units by the end of the June quarter, Bengaluru has crossed the inventory level of Mumbai for the first time/’
‘House prices in Dubai were some of the fastest falling in the world in the second quarter of 2015, performing worse than those of the hard hit economies of Greece, China, Cyprus and Ukraine, new research has shown.’
‘According to Knight Frank’s Global House Prices Index, mainstream residential prices fell by 12.2 per cent in the year to June and by 2.8 per cent quarter-on-quarter as volumes continued to slide.’
“Weaker demand, a strong US dollar and ongoing cooling measures have dampened sales volumes in the mainstream sector,” said Kate Everett-Allen, partner for international residential research at Knight Frank.’
‘War-torn Ukraine was the second worst performing housing market recorded by Knight Frank, with a 12.0 per cent annual decline, while in China prices fell 5.7 per cent over the same period.’
‘Drilling is down and hotel vacancies are up, but participants at a conference Wednesday said there are still reasons to be optimistic about Williston’s economy.’
‘Shawn Wenko, executive director for Williston Economic Development, which organized the conference, said 2015 has been a good year so far development, but it’s at a pace that’s a “new normal.” “Everybody got used to what happened between 2010 and 2015, and that was a tremendous amount of growth, numbers that were off the charts,” Wenko said. “And that’s a trajectory that’s not sustainable.”
‘One area that expanded rapidly in Williston was the addition of new hotels, with 16 hotels that opened in the city since 2010, said Amy Krueger, executive director of the Williston Convention Visitor’s Bureau.’
‘While hotel rooms were difficult to find in Williston a few years ago, hotels have been averaging about 55 percent full in 2015, Krueger said. The national average for hotel occupancy is about 70 percent, said Elzi, who said he paid $286 to stay at Williston’s Hampton Inn this week.’
‘Companies are now less likely to provide employee housing or pay for workers to travel home, Sanford said. Employers have dramatically cut back on overtime, which is the biggest reason workers have left North Dakota, Sanford said.’
“We have had people walk in and go ‘Can I file for unemployment because I’m only working 40 hours a week?’” she said.’
$70/day at a Hampton Inn……that may not be break even…but it’s better than vacant!
“Distressed saturation continues to be a challenge we face in today’s housing market,” says Alex Villacorta, Ph.D., vice president of research and analytics at Clear Capital®. “In fact, today’s ‘traditional’ housing market continues to be defined by distressed saturation levels. In Act One, at the start of the downturn, distressed properties were an albatross around housing’s neck. In Act Two, between 2011 and 2013, investors stepped in, buying, rehabbing and selling or renting distressed properties, which gave way to higher demand and rising prices.”
“While the overall effect of higher rates of distressed saturation in Act Three of the recovery is unknown, one thing is clear; when it comes to housing, REOs and short sales are not a passing fad. Last week’s crash leaves the economy and housing tenuous at best, especially as we move from the promise of the summer buying season. The last third of the year will reveal whether the housing recovery can withstand broader global volatility. If investors pull out, oversupply of distressed inventory could bring us back to Act One.”
Six more homes being foreclosed in our 400 unit subdivision….still left over from 2007. Act 4….
‘The craze for internet finance in China has seemingly subsided, as shown by the slowdown and even stagnation in fresh funds entering the sector, according to Shanghai’s China Business News.’
‘The paper said it has become rare for internet finance firms to successfully raise a third round of funds, unlike the previous situation when the market was awash with money.’
‘One major factor, the report said, is the recent stock market crash, which dealt a heavy blow to prospective investors. In addition, the bloated valuation of internet financial firms has driven away many investors.’
‘Some 4-5 trillion yuan (US$630 billion-$785 billion) in funds have exited the stock market following its crash, half of the total funds flowing into the market during the heyday of the bull market, said Xu Gao, chief economist at Everbright Securities.’
‘As a result, market players are anticipating a plunge in the valuation of internet financial firms, which was driven by an influx of massive funds to sky-high levels during its peak period. “Valuation of those firms will plummet, possibly to a half of existing levels, in the second half,” said one manager at a venture-capital firm, according to China Business News.’
What good is an Internet startup in a country with Internet censorship?
You can sell stock and get money…..pay attention PB!
‘Oil prices fell on Friday, pushing benchmark North Sea Brent crude down towards $50 a barrel, after a cut in European growth forecasts heightened worries over the outlook for demand at a time of huge oversupply.’
‘The European Central Bank (ECB) said on Thursday that economic troubles in China and emerging markets could drag the 19-member euro zone into deflation in the coming months.’
‘In a sign that banks increasingly expect oil prices to stay low for longer, BNP Paribas, Barclays and Commerzbank all cut their short-term price forecasts. “Oversupply will remain in the market for longer than expected,” Carsten Fritsch, Commerzbank senior oil and commodities analyst, told Reuters Global Oil Forum after announcing the price reduction.’
“There is still a supply-demand imbalance and on top of that is the overhang in the market,” said Abhishek Deshpande, oil analyst at Natixis in London. “The pressure will remain on oil prices.”
‘As warning signs begin to emerge about the health of the global real estate industry, experts in West Michigan believe there’s not much reason to worry about the fundamentals of the local market — at least not yet.’
‘In fact, the volatile global market with its escalating transaction volumes and skyrocketing property valuations may be creating opportunities in smaller markets like Grand Rapids as real estate investors make a flight to quality, according to local brokers.’
“We continue to see capital from elsewhere come into West Michigan. People can’t find deals in major markets — that trickles down into a market like Grand Rapids,” said Colin Kraay, a principal in the Grand Rapids office of Colliers International.’
‘For proof of rising valuations locally, one needn’t look beyond several recent transactions involving out-of-state investors. In July, principals at Rockford Development sold a student housing facility in downtown Grand Rapids to East Coast buyers for $12.5 million, or $192,000 per unit. A month earlier, New York City-based Berkadia Commercial Mortgage LLC announced that Atlanta-based investment firm Cocke Finkelstein Inc. had acquired Ramblewood Apartments in Wyoming for $100.4 million, or $58,713 per unit. The deal included 1,710 apartments as well as a tennis and health facility.’
‘But unlike in the years leading up to the previous recession, recent developments have clearly addressed existing demand, said Sam Cummings, managing partner at Grand Rapids-based CWD Real Estate Investment, a development and property management firm. He’s also hopeful that underwriting standards do indeed work as intended.’
“One thing is certain: That is that recessions happen,” Cummings said. “What goes up, goes down. It’s important in business and life to prepare and underwrite conservatively because business cycles are a reality.”
‘As a veteran of the commercial real estate sector, Cummings said he hopes some of the newer developers are aware of the inherent risks of doing business in a cyclical industry.’
“There’s always a problem when people treat real estate as an annuity — it’s not,” he said. “It’s a delicate, tender and rewarding beast and it needs to be handled by professionals. It’s a product, not a financial instrument, and that’s where we got into trouble before.”
‘Cheryl Darrell’s neighbors are a family of feral cats living in the vacant house next door. High grass and weeds surround the house in the 16900 block of Ziegler Street, off Pennsylvania Road, in Taylor. Pieces of the two-story house are falling off. It has been vacant for more than five years.’
‘One day, her dog barked so furiously that she looked in the backyard next door to see what was going on. Two teenagers were having sex in the grass. “Can you believe that?” she said.’
‘When the housing market crashed in 2007-08, some people lost their homes to foreclosure. Others simply walked away because they were “under water,” or owed more than the house was worth. Neighbors are left to look at the houses, which usually become eyesores.’
‘A house in the 700 block of Cleophus Parkway that has been vacant for several years will be torn down soon. There was a fire in it about a year ago. Neighbors say they see raccoons coming and going from a hole created by the fire.’
‘Across the street, another vacant house has knee-high grass and weeds, and the windows are covered with bright orange ordinance violation notices. But the city can only manage a couple of demolitions per year, Christian said.’
Well, unlike most of these zombie properties, at least a couple of these are getting some use (by the raccoons and cats)…
Not to mention the exhibitionist teenage couple!
‘As warning signs begin to emerge about the health of the global real estate industry, …’
I thought all real estate was local?
OMG, stick it to the students at $190,000/unit….they don’t know any better and can borrow to pay rent!
‘More than 772,000 senior adults, or more than 1 in 5, live in hidden poverty in the Golden State, many of them unable to afford basic needs but are ineligible for government help, according to a new UCLA study.’
‘The authors of the study found the population of 65 and older are quickly becoming part of the hidden poor, or those who live in the gap between the federal poverty line and what’s called an Elder Index poverty measure. The federal guideline says a single elderly adult should be able to live on $10,890 a year. But in California, the average should be $23,364, according to authors with the UCLA Center for Health Policy Research.’
“Many of our older adults are forced to choose between eating, taking their medications or paying rent,” said D. Imelda Padilla-Frausto, a UCLA graduate student researcher at the center and lead author of the study. “The state might be emerging from a recession, but for many of our elder households, the downturn seems permanent.”
‘Of the 1.2 million in California who are among the hidden poor, nearly 30 percent are in Los Angeles County compared with 21 percent who are below the federal poverty line. Those figures don’t include the city of Los Angeles, which has at least 28 percent of the state’s residents who are among the hidden poor.’
‘In San Bernardino County, 33 percent are just above the federal poverty line. At the Burbank Temporary Aid, which assists local residents with several services, the number of senior adult clients in need of help with groceries or paying bills has increased, from 1 percent to 10 percent, of all those who are served, said chief executive officer Barbara Howell. This trend began in 2008 and has continued.’
‘She said the increase is due to several factors, including health and housing. “It’s a cost-of-living issue,” Howell said. “After all of the foreclosures happened, everybody had to find apartments to rent. Now the rent is skyrocketing because there’s no inventory.”
‘San Joaquin County in August remained among the hottest housing markets in the country, although it slipped a few notches on the Top 20 list compiled by realtor.com, the website of the National Association of Realtors.’
‘Gauged by the number of views per listing on realtor.com in the first three weeks of August and the median age of inventory in each market, San Joaquin was the nation’s 16th hottest market, down from 13th in July.’
‘But overall, the hottest markets in the country are little changed from July, said Jonathan Smoke, chief economist for realtor.com. “Continuing the trend of California domination this year, 11 of the 20 hottest markets this month sit in the Golden State,” he observed Monday. “California’s tight supply and strong economic growth continues to propel its cities to the top of the realtor.com Hotness Index month after month.”
‘Both housing inventory and the length of time homes are on the market are on the rise, both positive trends for frustrated home shoppers. In addition, Smoke said recent stock market volatility may also benefit some buyers.’
“A temporary drop in demand by those negatively affected by stock market instability might be just what strained would-be buyers need to gain the advantage in a market that has given sellers the upper hand so far this year,” he said. And he noted that the market correction could prompt the Federal Reserve to hold off on increasing interest rates this fall, thus extending the availability of attractively low mortgage rates.’
“After all of the foreclosures happened, everybody had to find apartments to rent. Now the rent is skyrocketing because there’s no inventory.”
Sorry, renters, no HARP payment reduction plan for you. Only wealthy, deserving home owners qualify.
Harp homeowners are upside down. Hardly a sing of wealth.
So are you. A distinction without a difference.
So you are 65 years old and did no retirement planning. None! CA is a big state and you choose to live in the LA basin. And now I should want to shoulder your costs why? I have a choice to and I say no, it’s time you move to a place you can afford which might be Oklahoma.
Coworker retired last year from CA to OK. She had family ties back there, but money was definitely a factor.
it’s time you move to a place you can afford which might be Oklahoma.”
Many many older immigrants here in S. CA brought in by their kids who will not move away to Oklahoma. They can’t even speak English.
American Born elderly yea they bail, my neighbor just did to Spokane. They bail like crazy.
I’m not sure how anyone could live on $23,364/year in California. I’m sure there’s nowhere in this country anyone could live on $10,890/year.
$23,364 - if you just rent a room and take the bus.
Or you own your home, live debt free, are on medicare, and are healthy. $23K-$26K a year is doable in S Ca. Granted, not much of a lifestyle, but you could make ends meet. The trick is no rent or mortgage, a paid off vehicle, no debt, and luck. I see it happening with my neighbor. She mows her own lawn in her late 70’s.
Paying double triple or more for a depreciating asset isn’t a trick. It’s stupid.
My MIL lives comfortably on $24,000/year. $880/Mon 2 bd apartment rent (tax credit subsidized). Kaiser waives Medicare supplemental, and no co-pay or prescription cost because she is on SS. She actually has a little left over each month and she likes to donate it to the Indian community a nickle at a time!
BTW, her property taxes and Medicare co-pay in NJ were $800/mon before she got out of bed. Selling her house and moving from NJ to CA was a surprisingly sound financial move.
‘Crime has jumped across the city this year, but nowhere has the increase been as large as in L.A.’s hippest new domain: downtown. Here, the forces of rapid gentrification are crashing up against the chronic poverty, homelessness and crime that have long been a part of life in the city center. Police and residents say the influx of new lofts, luxury high-rise apartments, bars and eateries have made new downtown dwellers easy targets for street crime.’
‘Overall, violent crime in the Los Angeles Police Department’s Central Division, which covers parts of downtown, skid row and Chinatown, was up more than 57% through the end of August compared with the same period last year, and property offenses increased nearly 25%, according to police data.’
‘Certain crimes have captured extra police attention: “Creeper” burglars look for unlocked apartments or cars. Organized crews lift unattended purses or smartphones from tables at cafes. Others prowl around apartments, checking for open windows or doors to sneak inside.’
‘The Rev. Andy Bales, chief executive of the Union Rescue Mission, said he has been disappointed with the LAPD’s response so far. Officers, he said, appear to have largely taken “a hands-off approach” to policing skid row while the homeless population has ballooned and conditions have grown more dire.’
‘Bales said his car has been vandalized several times in the last year as he arrived or left the mission on South San Pedro Street. The problem reminds him of how bad things were more than a decade ago, when crime was rampant in the area.’
“You just don’t see the presence of the police as you would think you would in a place that is so desperate, so violent and with so many people at risk and drugs are used openly,” Bales said. “It’s just like Mardi Gras on crack again…. Nobody who doesn’t live it every day would even understand the level of anarchy that’s there.”
‘In more upscale parts of downtown such as Bunker Hill and Little Tokyo, the situation is not as grim. But authorities say crime patterns have a way of spreading from rough areas to the edges of more prosperous ones.’
‘The busy stretch of 5th Street between skid row and Pershing Square is a pipeline for drug dealers and people looking to score. Merchandise is frequently stolen from the shelves of markets and clothing stores. Fights break out on the sidewalk in the middle of the afternoon.’
‘So far, the crime increase appears to have done little to cool the red-hot popularity of downtown. Several new high-rise residential buildings are under construction or in the works. And the hip restaurant and bar scene continues to spread.’
‘Still, the threat of crime has given some pause. Roger Gendron, a real estate agent, recalled a young woman who moved out of a downtown unit after just three months because she had been harassed and felt unsafe walking to and from her building.’
“I could see why a single girl in her 20s would find that threatening,” he said, adding that he has noticed an “incredible change” in the level of violence there in the last year.’
“It’s going to be a deterrent to people who maybe don’t have the urban backbone to endure coming into a city downtown that’s not yet done and pretty and pristine,” he said.’
“It’s just like Mardi Gras on crack again…. Nobody who doesn’t live it every day would even understand the level of anarchy that’s there.”
Check.
“So far, the crime increase appears to have done little to cool the red-hot popularity of downtown.”
Yeah? Well maybe that’s because “Nobody who doesn’t live it every day would even understand the level of anarchy that’s there.”
Clueless people won’t be living there until they buy a place there, and it is then - THEN - that these clueless people will begin to understand.
“So far, the crime increase appears to have done little to cool the red-hot popularity of downtown.”
People buy things ranging from consumption on one end to investment on another. It’s a spectrum:
[Consumption]……………[Investment]
Investment means the product is obtained because it can produce profit, either via sale or cashflow or other.
Buying luxury housing in crime-ridden areas shows a very investment-driven mindset. Speculative even. As opposed to a desire to consume the product.
It seems to me that government and the central-bank encouraging speculation in basic necessities, be it food, energy or housing, does not increase social welfare.
“Buying luxury housing in crime-ridden areas shows a very investment-driven mindset. Speculative even. As opposed to a desire to consume the product.”
What people who are with means do when they buy - and live - in a crime-infested area is they add money to the economy of that area. They do this by offering to the criminals something that is worth stealing.
If everyone in a crime-infested area is poor, which is generally the case, then criminals have to venture beyond their neighborhoods to steal items of value. This is risky for them because they will venture out of their comfort zone and they will tend to stick out (and draw attention to themselves) when they enter into more prosperous zones.
But if items of value are brought into their comfort zones by outsiders who decide for whatever reason that they want to live in these crime-infested areas then the criminals don’t have to venture out at all: All they need to do is wait for the schmuck to go to work, or whatever, and then do their plundering.
It may seem be cheap to buy in a crime-infested area but there is a sort of “street tax” - a crime tax - one will end up having to pay.
If you think this article is exaggerating how bad it is down there, try this: Go to Google Earth or Google Maps, search for Union Rescue Mission in L.A., and go to the street view. Then “drive” around the area a bit and look at the mess.
‘Years later, many Washington condo owners still underwater’
‘Zillow says in reality, nearly 35 percent of Washington-area homeowners with a mortgage are effectively underwater, or unable to sell their homes for enough profit to comfortably meet expenses related to listing a home and purchasing a new one.’
‘In the Washington market, the least valuable third of homes are most likely to be in negative equity with 28.5 percent of homes in the bottom third in the second quarter, compared to 6.9 percent of properties in the top third.’
‘This is the next superpower? You’ve got to be kidding.’
‘Anybody expecting China to dominate the world must be wondering how the Keystone Kops managed to take over the Politburo in Beijing. China has embarked on a long odyssey to prove that capitalism can work within the confines of a communist government. There have been many impressive successes. But the failures—including those we’ve seen on display this summer—reveal that China is nowhere near the global powerhouse it imagines itself to be.’
‘Beginning in 2014, the central government began urging people to buy stocks, as a way to divert money from real estate and deflate a dangerous property bubble. People obeyed, and it seemed to work for a while. By June, the Shanghai stock market had soared by 150% since last summer.’
‘Then something happened that’s normal in capitalism: Investors began to think stocks were close to a peak, so they sold to lock in profits. Not what the government was expecting. The government tried to stem the selloff by enacting stimulus measures, instituting new rules and even preventing some institutional investors from selling. Authoritarianism displaced capitalism. Yet even then, stocks plunged.’
‘China’s government has now reverted to the ultimate absurdity: Blaming critics of the markets’ performance for the whole fiasco. Authorities have rounded up and punished nearly 200 people whose acts of sedition include suggesting Chinese stocks might go down. They include several bloggers and stock market officials plus at least one journalist. That’s like indicting a weatherman who accurately predicts a storm that’s coming. As if saying the sun will shine will make the sun shine.’
‘A month ago, the main problem in China seemed to be an overheated stock market that possibly reflected a weakening economy. Today, the main problem is much bigger: The nation’s leaders seem to have lost control. For a long time, they repeatedly surprised the western world with quarter after quarter of robust growth. Critics said the data was fishy and the boom was a mirage. Now, the critics seem right, while president Xi Jinping and his minions look like they have no idea what they’re doing. “Panicky and incompetent” is how Willem Buiter, global chief economist at Citi, described the Chinese leadership’s handling of the stock-market swoon. They ordered stock prices to rise and can’t believe that stocks disobeyed.’
‘The Potemkin mentality at the very top of China’s communist government suggests other parts of the Chinese state are a lot hollower than they seem.’
This is interesting:
‘Americans worry a lot about China, with more than half mistakenly believing it is the world’s top economic power. Only 32% say the U.S. economy is most powerful.’
Where did this come from? Our fawning media, that’s where. But why does our media want us to believe this crap? And this:
‘GDP per capita is still less than $8,000 in China, according to the World Bank. In the United States, it’s more than $54,000—7 times the level in China.’
These guys in charge are a bunch of greedy, corrupt buffoons. I’ve been saying this for a while, and now the reporters are aghast because they are rounding people up. It is what it looks like; a brutal, broken, terrible country.
‘That’s like indicting a weatherman who accurately predicts a storm that’s coming. As if saying the sun will shine will make the sun shine.’
Maybe it’s different in China, but silencing the messenger normally does not change the reality of the underlying message one iota.
“…a brutal, broken, terrible country.”
No way Jose! Have you ever been to Ordos? The afternoons at my apartment there are so quiet and peaceful. The perfect place to get away from it all. Brutal, HA!
I’ve heard the skateboarding opportunities around Ordos are awesome!
^^^TRUE. Journalists and China. Just twenty years ago we didn’t trust China. Now they have a jury rigged stock market, steal secrets, hang people with out trial, but people act surprised at the round up.
On the media, I feel like media has changed so much –makes me wonder if they are being paid by the government, like ad space, to tell stories. Some of the political reports are SO biased, they are clearly one-sided.
Of late, the coverage on the Pope has been massive. Also almost like a paid ad. I know the Catholic church is trying to rebrand, but the coverage of the Pope is 400x any other kind of religious coverage.
Just curious. My husband thinks it is not because of that ^ so much as it is a shift in television to meet the Hispanic viewing population, since that is the growing trend in television viewers. Either way, the news isn’t even tolerable anymore.
‘The Philippine stock index has declined every month since April, the longest string of losses in 13 years, as overseas investors pulled a record $1.24 billion amid concern that China’s economy is heading for a hard landing and the U.S. will soon raise interest rates.’
“Foreign investors have basically left the Philippines for this year,” Chua said. “For the index to really recover to a higher level we’d need a little bit of that flow coming back again to us.”
‘Volatility, which rose to a two-year high this week, also needs to ease before the exodus of foreign capital from equities ends, he said. While the nation’s economy is more sheltered from China’s slowdown than others in Asia, Philippine stocks can’t escape the regional contagion, Chua said.’
‘The MSCI Asia Pacific Index has tumbled 20 percent from its April high, with benchmark gauges in Taiwan, Hong Kong and Indonesia entering bear markets.’
Saturday will see 75 north shore properties go under the hammer as Sydney’s spring selling season begins. Robert Klaric from Auction Services says north shore listings increased over winter and clearance rates are likely to drop throughout spring.’
“It is not as buoyant now and we are likely to see that clearance rates in the first quarter of the year will be different than the last quarter,” Mr Klaric said. “Agents are pushing people to try to buy prior because they are not getting as much competition on auction day.”
‘Sydney’s new listings are up 16 per cent on the same period last year, which will make for an interesting spring, according to CoreLogic RP Data head of research Tim Lawless. “Spring will provide a timely litmus test for the market,” Mr Lawless said.’
‘New research has cast doubt on claims that foreign investment is pushing up Australian house prices, indicating offshore Chinese purchases totalled just 2 per cent of all transactions in 2014.’
”The research did not take into account the potential impact of illegal purchases by foreigners, which the Federal Government is presently investigating.’
‘Sha Liu from the University of Sydney, currently writing a PhD about Chinese buyers and global real estate markets, said the percentage of Chinese buyers in certain developments can be “up to 90 per cent”.
‘This extreme is usually seen when the developer themselves is Chinese and the project is within a Chinese ethnic community area, such as Chatswood or Chinatown.’
‘When a project is built by a Chinese developer, often up to 80 per cent of purchases can be from offshore buyers, she said. When it’s from a local developer this proportion was found to be much lower – up to 30 per cent.’
‘Yet even this purchasing activity could be set for a slow down as Chinese buyers’ ability to borrow from Australian banks is eroded. In April, Westpac tightened lending to foreign purchasers, telling mortgage brokers that applicants needed an Australian address.’
“In the near future more banks in Australia will impose similar restrictions on foreign loans,” Ms Liu said.’
Vienna, VA Housing Prices Fall 7% YoY As Prices Sink Nationally
http://www.zillow.com/vienna-va/home-values/
Prices are absurd in my neighborhood right now. (So Ca) Just closed, almost $600K for a 1967 two-story nothing house. Offer are low enough to trigger back up offer wishing until the coe. They are finding young families to overpay. The allure of two-story “I feel rich”.
yes neighbor just sold ~ 565K 2 story about 1800 square feet.
They Moved to Spokane buying a house with a barn for the daughter who has horses. They are retired federal employees.
Some young guy bought it drives a big low black BMW. Was there with a old guy maybe his dad? Maybe his dad bought it for him? Maybe hes a fireman ?
cactus
Our property taxes (like yours, I’m sure) hit the prop 2% increase cap. Just pisses us off.
Yes property taxes up limit. I bought under 400k a few years ago now appraised at ~500K
So I save about 1K a year because of prop 13. I’m sure they will find some other way to get the 1K. I think they want to raise a park tax and are going to spend 50K to study if residents are willing to pay more for a park tax. The residents who don’t pay property tax will say yes and the ones who pay will say no. Why not just charge parking at the park ?
Different property owners
Council members approved an amount not to exceed $40,000 for the consulting firm and voted to use general fund money for the study. The full amount will be paid back, however, from zone-change fees paid to the city by two local property owners who want the city to consider rezoning their properties from commercial to residential—one near the intersection of Los Angeles and Shasta avenues, the other on Spring Road just south of L.A. Avenue, according to Moe. KMA is scheduled to complete the study within eight weeks, according to the contract.
If you look at where state revenue comes from, a smaller and smaller percentage comes from property taxes.
How do they get you?
Increased income tax, and…a biggie…impact fees paid when trying to build new housing (that are sometimes paid through CFD Bonds).
cactus
Interesting info and updates. Thank you.
We paid under $400K Sept 2012 coe, and our home value is absurd as well. I recall you’ve been doing some pretties.
I found a great painter. Did a bunch of stucco repair and paint for 1/2 the quotes we were getting. Farmers Painting. Our home looks terrific.
My EE husband capitulated on carriage lights w/ no photocells, and used a timer and dimmer on higher end fixtures. Well worth it. Timer uses algorithms to set the on. Fabulous outcome. LEDs keep the operating cost down.
Moorpark has the BEST micro climate. Miss it. Simi is full of trash, and I’m not talking waste management.
Paying double for a rapidly depreciating asset and then throwing more money and it without a buyer in site at half that amount.
crushing.housing.losses
10,066 properties found Orange County, CA Real Estate and Homes for Sale
3,802 properties found Orange County, CA Price Reduced Homes for Sale
I laugh at some of the shanties in the sacramento area selling for 400k on tiny lots and about 1000 sq ft.
400k @ 4% = 1909.66 P&I
1909.66* 360 payments =about 687,000.00 or 287000.00 in interest over 30 years It is good to be a banker.
property taxes = 400k & .01 = 4000/12= 333.00 / month or 120k over 30 years
Insurance = 1000 bucks/ year or 30,000 over 30 years
Hoa fees too
The prices are so high that you have to get a bank involved.
Why buy it when you can rent it for half the monthly cost?
mafia
I don’t know your age, but many people want to own a home for retirement, and are willing to pay for lifestyle. Having a LL own your rights to living some place sucks. Did it between homes, and the insecurity and rent increases isn’t our flavor. Renting isn’t without risk. Cyber-hug, mafia.
I think he is sponsored by david lereah.
The rest of the world retires to a nursing home and then a pine box in the ground.
Reality my empty pocketed friend.
Baja used to be a fun place to drive down to (1980’s). Hit K55 in a van with a few boards, cheap beer, fish tacos, free camping on th bluffs, and uncrowded surf. One year all of our stuff was ripped off while we where in the water, another year the boards where stolen off the top of the van while we slept inside. We learned a few lessons.
Simi Valley, CA Housing Prices Crater 6% YoY
http://www.movoto.com/simi-valley-ca/market-trends/
I live in Northern Virginia which is part of the DC Metro area. In my county, you can buy a house with 75-125k household income. Townhouses going for 200-250 and SFH’s (starters) going from 250-350 depending on size, school district, and the other usual stuff.
Prices in my county crashed hard during the housing bust. Prices are up only 20% from the bottom. The prices over-corrected to the downside during the crash and there has been inflation between now and then. With those taken into consideration, prices really haven’t moved once they stabilized (ie: distressed housing was cleared from the market).
Even with the barely very modest price increases in my local area compared to the closer in areas, prices are still falling.
http://www.longandfoster.com/Market-Minute/VA/Prince-William-County.htm
Prices are falling because prices never reached bottom.
Bottom is a long way down my friend.