Overcapacity Has Led To A Vicious Cycle
It’s Friday desk clearing time for this blogger. “The latest foreclosure numbers contain some troubling news for the St. Louis area. RealtyTrac shows that foreclosure activity was up 128 percent over last year in Missouri, and 140 percent in the St. Louis area. RealtyTrac VP Daren Blomquist tells KMOX that while much of that is due to banks finishing the foreclosure process on properties, the number of properties entering the process is also up, 77 percent statewide. Another concern, according to Blomquist, is that 43 percent of the loans entering foreclosure, were written after 2008, ‘That is again, another red flag that this isn’t all just tied to the last housing bubble 10-years ago, but there are more problems with more recent loans.’”
“Connecticut’s home foreclosure picture brightened again in August, but troubled home loans still might be holding back the recovery in the state’s housing market. ‘The percentage of loans in foreclosure tied to the housing bubble years is still disproportinately high, with 56 percent of loans in the foreclosure process originated between 2004 and 2008,’ said Daren Blomquist, VP at RealtyTrac. Blomquist said he would consider 30 percent of loans in foreclosure tied to those years to be closer to normal. ‘That is some cause for concern that a shadow inventory of bad loans continues to linger over the Connecticut housing market, and the uncertainty of when and how that shadow inventory will be released could be hobbling the housing recovery to some extent,’ he said.”
“‘We did see a 49 percent increase in bank repossessions in Sacramento in August,’ says Blomquist ‘and that was the fifth consecutive month with an increase from a year ago.’ Meanwhile, Nevada posted the country’s highest home foreclosure rate in August. ‘That was the first time Nevada had been ranked number one since September 2014,’ Blomquist says. He says the state’s four percent annual increase was driven by a jump in bank repossessions, which more than doubled in August. ‘The majority of the problem in Nevada, in fact 70 percent of the loans in foreclosure, are linked to loans that were originated back between 2004 and 2008,’ says Blomquist.”
“A report by Zillow indicated 18 percent of Phoenix homeowners had underwater mortgages, when homeowners owe more than their house is worth, in the second quarter of 2015. Sue Klima, president of the Phoenix Association of Realtors, said the Zillow data is close to what she’s seeing in the Phoenix market. Klima was underwater on her mortgage and recently put her home on the market. She said she paid $435,000 for a 2,400-square-foot home in 2006, which is now worth $355,000. However, she was fortunate enough to put down a large down payment, reducing negative equity.”
“She advises homeowners with underwater mortgages between $10,000 to $15,000 to wait it out. ‘I really think the whole area is going up in value, and we have a shortage of inventory,’ Klima said.”
“A city sitting on the border of Alberta and Saskatchewan is starting to feel the effects of the down-turning oil market. ‘Our local market from last year is down ten per cent – (sometimes) fifteen per cent right here in the city. So, when you’re talking a $350,000 house, that’s a $40,000 to $50,000 hit on the house. You know, it can be significant,’ said Michael Dewing. a real estate agent in Lloydminster. ‘We’re not quite double but almost double the inventory we usually see and we just don’t have the buyers to support that.’”
“The Executive Director of Lakeside Estate, Mr Salah Kweku Kalmoni, has advised prospective homebuyers to take advantage of the current grim economic outlook to acquire properties rather than waiting for things to normalize before they do that. Using Lakeside as an example, Mr Kalmoni said the company had been forced by the challenges to reduce its prices in order to sell. ‘In actual sense, now is the right time to own properties. The challenges present a buyers’ market to consumers and I think people who want to own properties are better off buying them now,’ he told the GRAPHIC BUSINESS in Accra.”
“Realtors hate to admit it, but there is a bloodbath in residential real estate, especially in smaller tier-II and-III cities. The prices are down between 10-25 per cent across markets like Chandigarh, Surat, Dehradun, and Delhi’s Dwarka Expressway, and Gurgaon’s Golf Course Extension. In bigger markets like Delhi NCR, Mumbai, and Bangalore, builders are struggling to find home buyers. Most real estate experts say that around 80 per cent of the unsold inventory today is held by re-sellers. According to Acquisory Consulting founder Sumchit Anand, ‘If during festive season, October-December, there is no improvement in sales in the residential segment, the developers may be forced to reduce prices and sell out unsold inventories,’ feels Sumchit.”
“Mackay has returned to a local buyers’ market as investors shy away. That’s the message from Real Estate Institute of Queensland zone chairman Peter McFarlane after seeing the results of the June quarter. He said he was taken aback by the figures in front of him. Mackay’s housing market dropped 20% in house sales activity, in comparison to the previous quarter. The number of houses sold totalled 165 for the year throughout the region, with an average median sale of $355,000. About 3000 properties are for sale throughout the area and 1200 are available for rent.”
“‘The investment market has declined to almost to a halt. Our market has transitioned from an investment market to a home buyer market,’ he said.”
“A $5 billion business and financial district for the coal city of Luliang was scheduled to open next year. But today, the area, which was to house at least 300,000 people, remains mostly grass and cornfields. A few workers are trying to finish what would have been the district’s main boulevard — which is now a road to nowhere. ‘The economic situation now is very bleak,’ says a low-level manager named Gao. ‘The construction industry, the entire real estate market is bankrupt. Our company can’t survive, so the workers were laid off.’”
“One residential development, China Culture Garden, has just been completed — but there is no sign of tenants, furniture or potential buyers. Wu, a real estate agent, says overcapacity has led to job and salary cuts and nobody seems to have much spending power these days. Luliang is trapped in a vicious cycle. ‘There are many people in the city just sitting around. They have nothing to do,’ says Wu. ‘People have no place to work. There are more homes under construction than the number of buyers. How can they sell? They can’t.’”
‘Homes listed for $100 million or more are piling up fast, but sales have ground to a halt, leading some to call a top in the very top of the real estate market. Real estate brokers and analysts said there are roughly 20 homes for sale (either officially or unofficially) for $100 million or more in the U.S. That’s up from about a dozen or 15 last year.’
‘At the same time, sales of nine-figure homes have stalled. By the summer of 2014, three homes sold for $100 million or more. But so far this year, there hasn’t been a single recorded sale at those prices, brokers and analysts said.’
‘And as the inventory of super mansions rises, so have the price cuts—with some getting slashed by tens of millions of dollars.’
‘While some sellers may slap a blockbuster price on their homes to get marketing attention, the mega-prices have so far failed to generate sales. “A $100 million price is just testing the market. But I don’t know how much more testing they need to do,” said Jonathan Miller, CEO of the Miller Samuel appraisal firm. “It’s not working, this stuff isn’t selling. Sellers are being extremely more aggressive and unrealistic than ever before.”
The prevalence or dearth of super mansion listings and sales is a canary in the coal mine for Echo Bubble implosion.
I fully expect the current episode in U.S. residential real estate to closely resemble the recent experience in the Chinese stock market when viewed through history’s rear-view mirror, though with lagged timing and protracted denouement. At this point we aren’t even past the denial of the Echo Bubble’s very existence, so there is a long ride down ahead.
I’m looking forward to all the real estate experts who are currently pimping the market eventually claiming in the aftermath that they called the Echo Bubble collapse. Maybe AlbqDan will make an encore appearance for this very reason.
NYC “luxury” condo glut
them sub million then Winchester then,then,then
I always enjoy the Friday wrap. $10 mill here, 10 mill there…..they have some room!
Don’t miss my comments below about your fair city (Arden Square Mall vicinity).
I’ll find them now. Arden has turned into a gang banger heaven!
They have not shown up yet. I’ll check back tonight.
With a crime rate of 48 per one thousand residents, Sacramento has one of the highest crime rates in America compared to all communities of all sizes - from the smallest towns to the very largest cities. One’s chance of becoming a victim of either violent or property crime here is one in 21. Within California, more than 92% of the communities have a lower crime rate than Sacramento.
…
http://www.neighborhoodscout.com/ca/sacramento/crime/#description
“With a crime rate of 48 per one thousand residents, Sacramento has one of the highest crime rates in America…”
This doesn’t surprise me. Several friends that I grew up with now reside just east of Sacramento in over-priced spec house neighborhoods after being priced-out of San Jose. They don’t live with crime, but they commute into it and live with it on a daily basis. I looked at a good paying job in Sacramento, but was disappointed to see bars in windows everywhere, super thick glass at several outlets and street Negros everywhere prowling for anything that wasn’t bolted to the ground. Phuc that job offer… and the long commute that came with it.
Ben - your youtube about Surprise yesterday got me on google maps to see where this place is -
I went out that way - to Sun City West a couple years back to visit a former work collegue who had retired - North of Bell Rd in the 55+ and then some environs - I thought - this place is worse than a FEMA camp - who the hell would choose to live there. Then I saw your video and wow - no takers on a lot of empty homes in the middle of the desert. May the folks are waking up?
It may be in Surprise technically, but it’s way past what most people would think of it. Greer Ranch South and North are two big blocks of houses. The empty part at the end of the video is on the north side (Northerner GR?). And to the south is another enormous development that apparently sold a few houses and stopped because now it’s walls and 3 foot high weeds. I’d bet they are getting $100k plus for these lots in GR.
There’s a lot of water out there; must be from wells. I drove past miles of irrigated crops, mostly flowers. They were doing flood irrigation and sprinklers. And there were miles of nothing, too. The commuters must be using Loop 303 just to the west because the little 2 lane deal straight into town couldn’t handle much traffic.
The long-term question is: how long before those wells go dry?
Lost Wages is now installing their THIRD water intake, at the bottom of Lake Mead, so they can suck it dry. The water level is getting low enough that Hoover Dam is going to have to retrofit their generators with low-head (lower water pressure) turbine blades ($$$$$$$).
Lack of water is going to do in these places in the long run. Just ask anybody in inland CA where their wells have already gone dry.
But the land developers don’t care a whit about that.
I agree. And why not grow flowers where it rains more? I don’t know if I’ve ever seen that much irrigation in Arizona before.
I agree. And why not grow flowers where it rains more? I don’t know if I’ve ever seen that much irrigation in Arizona before.
This is precisely why the “eat local” movement is so misguided. You are better off growing things where the environment is conducive to growing, and then using a relatively small amount of resources to transport the finished product to the demand.
If it weren’t for the regulations that may be in place to control where weed comes from/goes (for tax and other reasons), I can see warehouse space in Denver falling off a cliff if Marijuana is ever legalized for recreational purposes nationally. Why grow it in a warehouse in Denver when you can grow it in Humboldt County much cheaper?
Ben - your observations now make sense to me -
On a flight from PHX to ORD that I took last March we departed west bound and flew approx 8 to 10 miles west before starting the right northerly bank to head toward Chicago -
I looked down and like you said all this irrigated land and then the friggin houses all over the place. Again I kept thinking - who would live this far out - and then when I look at the ‘pretty’ names of the developments out that way to Greer Ranch and points beyond - it is all for the elder set me thinks. Again I think back on my former collegue who lives in Sun City West - she loves it - I could not figure out why.
I personally cannot imagine wanting to live in Phoenix in the summer, period.
I prefer the weather in this area more than Flagstaff. Up there you had three maybe two and a half months that you weren’t having to build a fire. The wind is ferocious, I’ve read it’s one of the windiest in the US. Try that with zero degrees and three feet of snow. Going to get the mail was like visiting Siberia. Lots of people up there love the winters, but I got sick of it.
Here there are basically two hot months (June and September) and two really hot months (July and August). The rest of the year it’s really nice. And what I was told is true, when it’s 90 it doesn’t feel like cuz of the low humidity. But the people here drive like crazy drunk teenagers. Phoenix has the second highest red-light running fatality rate in the US.
We drove through the Phoenix area on the way home from our spring Grand Canyon / Sedona vacation. I was very taken in by the beautiful saguaro cactus stands to the north of Phoenix.
Avon, CT Housing Prices Crater 18% YoY
http://www.zillow.com/avon-ct/home-values/
Sue Klima, president of the Phoenix Association of Realtors, said the Zillow data is close to what she’s seeing in the Phoenix market. Klima was underwater on her mortgage and recently put her home on the market. She said she paid $435,000 for a 2,400-square-foot home in 2006, which is now worth $355,000. However, she was fortunate enough to put down a large down payment, reducing negative equity.”
“She advises homeowners with underwater mortgages between $10,000 to $15,000 to wait it out. ‘I really think the whole area is going up in value, and we have a shortage of inventory,’ Klima said.”
That’s right folks. Hold onto that melting ice cube while us realtors exit as the price declines accelerate.
Realtors are such honest people.
“She said she paid $435,000 for a 2,400-square-foot home in 2006, which is now worth $355,000. However, she was fortunate enough to put down a large down payment, reducing negative equity.”
It sounds like they lost at least $80,000 in net worth on that deal.
What part of the outcome was fortunate?
Not to mention losses of $2-$3 per square foot every year to depreciation.
I’ll wager her total losses are in the $140k-$160k range.
What part was fortunate? Perhaps that it was all funny money from climbing the property ladder?
Have a friend a Phoenix who has paid off his house. Bought at the last peak with inherited money, refi’ed to take money out, couldn’t sell this last year, paid off loan, redoing the whole inside and out because the RE said that would help it sell early next year when prices are better. For three years the RE tells him it will get better but while stats don’t list it because it’s paid off he is $100K under purchase price, but hey, who could have seen it coming.
100K of real money he lost. Not loaned out write off money.
If you are still significantly under water in Phoenix at this point, after the runup and pump and dump since the last trough then you are really screwed and were really an idiot in what you paid.
What is the historical percentage of underwater homeowners? It’s much lower than 20 percent right?
yes- how many of our parents were “underwater”
or had a mortgage when over age 55?
it’s a fairly new concept
The number I’ve heard is 5-10% in “normal” times. In 2006, the number was 1MM (out of about 50 million borrowers), but clearly that 2% was skewed downward due to the property bubble.
Making stuff up as you go along rental fraud?
‘The last time the Federal Reserve raised interest rates, it was summer of 2006…In fact, the Fed has been depressing interest rates for so long that, in their adult lifetimes, millennials have never seen anything other than cheap loans for homes and cars.’
“Keeping interest rates low for prolonged periods of time imposes distortions on the economy,” said Peter Morici, an economist at the University of Maryland.’
‘We’re already seeing problems with distortions caused by too-cheap loans. For example, companies borrowed lots of money to expand more quickly. They were hoping that by planting, drilling and mining more, they would reap big profits. But then China’s economy cooled, and now many commodity companies are crashing because the world is awash in oil, coal, wheat and so on.’
Here’s an idea; how about we consider what the Federal Reserve has done, instead of what they haven’t? From the last link (which is worth reading in full if you have time):
‘Government leaders here doubled down on the country’s old industrial model that emphasized investment in things like coal mining, infrastructure and mile after mile of apartment buildings. Eventually, overcapacity so outstripped demand that it crashed the local economy, which is now among China’s worst.
The failed new district has had ripple effects across the city, beginning with thousands of farmers like Liu Yihu, whose house was demolished by the government to make way for the now-failed project.’
“There used to be irrigation ditches, but those were blown up for the construction of the new city,” says Liu, 63, who wears a worn suit coat as he sells tomatoes and peppers by the side of a road. “Without water, ordinary people can’t grow crops. The yield isn’t even half of what it was in previous years.”
‘When coal prices were high and the government could still afford to pour money into infrastructure, Luliang’s economy boomed. As recently as 2010, GDP growth was a staggering 21 percent, more than twice the national rate, and Gao’s factory was pumping out 700,000 tons of cement annually.’
‘Last year, though, GDP here shrank by 2 percent. And this year, Gao’s cement plant only produced 30,000 tons. The company’s employment fell from a high of 1,000 workers to just 100. Gao says no one seemed to see the crash coming.’
“We didn’t worry,” says Gao, whose wages have been decimated and had to borrow money to pay his son’s college tuition, room and board. “We felt in our hearts that things would always be good and there would be no problem. Now we have a sense of crisis.”
‘Gao blames government officials for ignoring the basic law of supply and demand. Instead of managing supply, Gao says, officials pushed to open more coal mines and build more housing developments to boost GDP numbers on which their promotions were based. Those projects also generated lots of bribes.’
“When applying for a business license, a company needs to go through layers of bureaucracy for approval,” Gao explains. “Officials took kickbacks. So this is why there are so many coal companies.”
‘Wang Wenliang, a manager at the city’s Big Earth River Coal Company, says about one-third of the nation’s coal operations need to close. But he doubts the government will allow anything so dramatic.’
“The government will prop you up, not let you go bankrupt,” says Wang. “It won’t dare to let so many workers go. If people have no place to feed themselves, the society will have problems.”
But it’s all Grandma and muffins isn’t it Janet? No owning up to this catastrophe.
It seems like many of the worst economic distortions of recent low rate era in central banking landed in China. It doesn’t seem quite fair to narrowly blame the Fed, as other developed nation central banks have followed the same low rate policy.
‘Recession. Recession. Recession. In Canada, Belgium, Czech Republic, Italy, Japan, Portugal, Taiwan, Slovenia, the Netherlands, Brazil and Russia. They’ve all either had recent recessions, are in deep danger, or have one now. Who’s next?’
‘Not us. We hope. Australia has dodged the recession bullet for 24 years. But economic pessimists abound, predicting bust anytime soon.’
‘The BRICS aren’t looking too flash. Brazil and Russia are in recession. China’s stock market has wobbled disconcertingly. Even the US$24 billion the panicked Chinese central bank threw at the markets wasn’t enough to stop Beijing’s brokers from running for their financial lives.’
‘Speaking of BRICS, South Africa is also in deep, deep trouble.’
‘Commodity-driven economies are not the only victims of this global downturn. Japan, which emerged from recession in the first quarter of 2015, is teetering on the brink once again. Prime Minister Shinzo Abe’s “Abenomics”, once praised for its debt-driven mass infusions of capital, has produced a sake-driven hangover. But all eyes are on China right now: will it be a soft landing? Or bust?’
‘Beijing is burning its foreign exchange reserves. A record US$94 billion sell-off in the last month has reduced its reserves from a peak of US$4 trillion in June 2014 to around US$3.5 trillion in September 2015, a consequence of the Bank of China’s inept 2% devaluation of the renminbi (RMB) in early August.’
‘A lot of Chinese money flows into the Vancouver property market, but the Canadian federal government is mopping up the mess with an anti-corruption probe. Result: Vancouver property is no longer the flavour of the month, and the dosh is now thoroughly embedded in the Melbourne and Sydney real estate markets.’
‘If you’re a cynic like me, you might think Canberra’s masterly inactivity over money laundering is a direct reaction to our persistent current account deficits. Rather than undertake politically difficult structural reforms, why not let China send us bags of money to buy real estate, while simultaneously stimulating a construction boom? Win-win. Frankly, both sides of politics have long been guilty of this telescope-to-the-blind-eye form of regulatory laxity. And it’s fuelled a property bubble. Even the Reserve Bank has noticed.’
‘In my view, US shale oil and gas production is the game changer. Once the oil industry convinces the Capitol and the White House to rid America of the Nixon-era ban on oil exports, the global balance of oil power will change. Irreversibly.’
‘The biggest factor that has driven the recessionary trend is not the Chinese market, austerity budgets, or even the threat of higher US interest rates this year. Arguably, the end of the quantitative easing program (QE3) by the US Federal Reserve in October 2014 has been the chief culprit behind the global economic slowdown.’
‘Why? Because for six years, the Fed’s QE programs not only poured liquidity into the US economy, but stimulated demand worldwide. Not printing money? That’s America’s own version of austerity.’
‘Why? Because for six years, the Fed’s QE programs not only poured liquidity into the US economy, but stimulated demand worldwide. Not printing money? That’s America’s own version of austerity.’
Luckily China is stepping in with stimulus to fill the void.
The real game changer will be when people like this realize that no, we’re not going to be exporting shale oil and gas anytime soon. Or ever.
The “game-changer” is going on right now, as oil/gas companies are sitting idle, burning cash at an alarming rate while crude stumbles around at $45 per barrel with absolutely zero hope of ever skyrocketing again.
“Gao says no one seemed to see the crash coming.”
Perhaps they were all reading and believing A-Dan’s posts (and not the other contributors and posts here)?
“We felt in our hearts that things would always be good and there would be no problem. Now we have a sense of crisis.”
Two decades of the Greenspan fed have destroyed the American middle-class who now need dual stem degrees to match the standard of living that their parents enjoyed; not electronic toys, but college for their children, paid-off mortgages and secure retirements.
‘An Auckland mortgage expert warns that speculators are driving up house prices, making it harder for first home buyers who are getting regularly outbid. “The speculators are buying and selling quickly without adding any value in a lot of cases, so that falsely drives the prices up,” Loan Market mortgage adviser Bruce Patten said.’
‘New figures released by QV yesterday show more than 2000 Auckland homes were bought and sold more than once over the past 12 months.’
‘Labour’s housing spokesman Phil Twyford said the house price jump could not be blamed solely on the market. “People are responding to the National Government’s policy which is that if you want to get rich in New Zealand become a property speculator.”
‘What was needed was a government-backed building programme to flood the market with affordable houses and a crackdown on speculators, including a ban on non-resident foreign buyers buying existing homes. Mr Twyford said new figures released by the Reserve Bank showed an “explosion” in mortgage lending with most of the growth going to property investors.’
‘A West Auckland house has sold twice in four months with its price jumping by more than $500,000 during that time. The three-bedroom, two-bathroom home in Alwyn Ave, Te Atatu South, was bought for $950,000 in March. It was sold in July for $1,465,000, according to QV data.’
‘The Herald revealed last week that a modest three-bedroom Henderson house on Bruce McLaren Rd had been sold four times within three months, with its price rocketing by $153,000 in 13 weeks. Neighbours said the property had sat empty since July with no improvements except for professional staging.’
‘QV home value northern operations manager Jan O’Donoghue said speculator trading patterns showed signs they thought the market could soon turn. “Often, nothing has been done to improve these properties at all and speculators are just on-selling it and taking the capital gain. Rapid on-selling can be a sign that some speculators may believe we are close to reaching the top of the market and decide they have made enough profit.”
‘Planning to buy a home? You may well strike a lottery this festive season. Tata Housing is offering a complementary free room in their flats. A developer in Noida is giving discounts on his property, with a minimum money-back guarantee of Rs 25,000 – but going all the way up to a 50% discount for 25 flats.’
‘With residential real estate stuck on the flypaper in 2015, developers and property owners are taking recourse to such schemes to attract buyers. And the schemes have already started, a month before the festive season officially kicks off.’
“The Indian real estate sector is going through a slowdown as there is a major demand and supply mismatch across the country, especially in the NCR. The market is at its lowest levels currently. Developers may resort to offering more freebies such as cars with bookings, foreign trips, complimentary modular kitchens, free club memberships, free car parking etc,” said Samir Jasuja, CEO at PropEquity.’
‘Jasuja said: “Markets have been slow to absorb new projects… We can expect aggressive marketing spends by developers to sell existing inventories; already developers are offering projects at almost zero booking amount.”
‘Dubai’s hotel sector appears to be caught in a trend of declining room rates and occupancy levels this year as more properties open.’
‘Last month, the average occupancy rate declined 1.7 per cent year on year to touch 74.2 per cent, while the average room rate declined 12.5 per cent to Dh587.50, according to the research company STR Global. The dips came as hotel room supply increased by 6 per cent, outstripping demand, which increased 4.3 per cent.’
‘As a result, a measure of hotel profitability – revenue per available room – decreased by 13.9 per cent to Dh435.66.’
‘Another 30,000 rooms are expected to come on stream in the next two years, according to the consultancy JLL.’
‘Coupled with a slowdown in tourist numbers from Russia and the euro zone, room rates are also expected to drop in the short to medium term, it said in its second quarter report.’
‘The boom in hotels has led some business heads to warn against adding more rooms without proper feasibility studies and due diligence.’
Let me guess. The conclusion of the feasibility study will be that the market can absorb more rooms. No one ever forecasts contraction. And due diligence? In Dubai? This is a country that has an indoor ski resort.
“Another concern, according to Blomquist, is that 43 percent of the loans entering foreclosure, were written after 2008, ‘That is again, another red flag that this isn’t all just tied to the last housing bubble 10-years ago, but there are more problems with more recent loans.’”
I wonder if RealtyTrac or other source has information on what percentage of the post-2008 loans now entering foreclosure are federally guaranteed, meaning the lender gets made whole at taxpayer expense.
I’m guessing the number is close to 100%; if anyone has or locates the actual statistic, please post.
Eventually, won’t 100% of loans entering foreclosure be those written after 2008? The important question isn’t what percentage of new foreclosures were written after 2008.
The important question is “what percentage of loans written after 2008 are entering foreclosure?”
RealtyTrac has an incentive to keep people worried–you are more likely to buy their data if you are worried–and so they say things like the quote you note above.
Here is another quote from their press release on Wednesday:
“Foreclosure starts in August continued to search for a new floor below even pre-recession levels, indicating the housing recovery of the past three years is built on a solid financing foundation,” said Daren Blomquist, vice president at RealtyTrac.
‘RealtyTrac has an incentive to keep people worried’
Yet:
‘the housing recovery of the past three years is built on a solid financing foundation’
RT is as much of a cheerleader as Corelogic or Thornberg.
Yes, but they always sprinkle enough of the doubt to make people ask questions.
Like the 43% number, which as I’ve noted a few places is an inevitability, and as such, is about the stupidest piece of data on the blog today.
‘the stupidest piece of data on the blog’
Testy. Could it be the aroma of roasted crow is wafting through your office today? You know, next week I’ve got free tickets to the Great American Beer festival, and I was even asked to judge a side-contest. May I recommend a hearty porter? No, make it a stout, to complement the bird.
lol
Not testy, just shocked that people don’t think through the data that is presented.
The stout does indeed sound good though…no need to eat any food with it…a good stout is a meal on its own.
I’m surprised no one commented on this guys name:
‘the developers may be forced to reduce prices and sell out unsold inventories,’ feels Sumchit.
I can hear them now. “Sumchit down at the brokerage is going around saying may have to cut prices!”
‘When Brazil’s leftist President Dilma Rousseff loses the support of someone like longtime backer Edson Silva, perhaps she had better start worrying. Fuming against Rousseff’s latest economic austerity plan. It entails cutting nearly a billion dollars from public housing, long the jewel in the Workers’ Party policy crown.’
“Who is paying for the economic crisis The worker,” an angry Silva said at a hotel taken over by some 450 homeless families in the capital, Brasilia.’
‘Surrounded by police, who want them out, the squatters are a vivid example of the inequalities in Brazil and the government’s unfinished campaign to end extreme poverty during the Workers’ Party 12-year rule. Some 22 million people, about 10 percent of the population, remain homeless.’
‘Silva said the austerity package convinces people like him that they have been forgotten by Rousseff. “The government wants to sweep all the social problems under the rug,” he said.’
‘So they are taking matters into their own hands, ignoring police warnings and insisting they will stay in their new lodgings. The three-star hotel, complete with a chandelier in the lobby and made-up beds, was shut down because of an unrelated legal dispute.’
“We’ll only leave here when we’re dead,” Silva said.’
‘Rousseff has already faced repeated street protests from the centrist and right wing opposition in Brazil, which blame her and the Workers’ Party for the economic slump and a huge corruption scandal at state-owned oil company Petrobras.’
‘Now, leftist protesters could be an increasingly frequent sight out on the streets of Brazil. In Sao Paulo on Wednesday, about 500 members of the Homeless Workers’ Movement marched in the city center, calling for housing.’
‘There was another demonstration in Sao Goncalo, in the Rio de Janeiro outskirts, and on Friday some 20,000 people from leftist groups are expected to gather in Sao Paulo. “We’re all angry. How can they go and cut ‘My house, my life’” asked activist Fabiana Lopes in Sao Paulo, referring to the Workers’ Party program of giving the poor housing — and helping to lift 40 million people out of poverty in the last decade.’
“Everything is hard: jobs, housing. What are they going to cut next” she asked. “This is why we are fighting. I supported the Workers’ Party in the past, but not any more.”
I’ve got an idea Fabiana. Get your pitchfork and take all the money from the rich people and gringos living off the fat of your country, pronto!
I know of one who regularly advocates confiscation. Take his stuff and sell his house.
‘While most Vancouverites will barely notice the current global market slump, the northern half of the province is facing headwinds apparent in nearly every community. Northern B.C.’s continued reliance on export-driven industries means it’s feeling the ramifications of global market volatility more so than diverse centres such as Metro Vancouver, Greater Victoria and the Central Okanagan.’
‘Three years ago we were booming – mines, mills, energy, natural gas, rail and transportation projects.’
‘Today, the story is different. Our coal mines are closed. The Endako molybdenum mine, which has operated since 1965, is shut with no plans to reopen any time soon. Natural gas activity in the Peace country – the fuel to support a nascent liquefied natural gas (LNG) industry – has been curtailed significantly, with first-quarter water withdrawals to support fracturing activity at their lowest levels in five years.’
‘The TSX Venture Exchange has lost nearly half its value in the last year, signalling a lack of investor interest in the junior exploration sector, which will hurt small companies trying to advance mining and mineral projects in the north.’
‘The downturn in China’s housing industry has hit lumber exports.’
‘And then there’s household debt. At a time when money is cheap, Canadian families are saddled with debt. More than one-third of families had a debt-to-income ratio above 2 in 2012, which means their overall debt level was at least 200% the level of their after-tax income, according to recent Statistics Canada data.’
But Chinese money-launderers are snapping up your sky boxes, what could go wrong?
“‘We did see a 49 percent increase in bank repossessions in Sacramento in August,’ says Blomquist ‘and that was the fifth consecutive month with an increase from a year ago.’”
I was on recent travel to an area of Sacramento I have periodically visited over the years. The changes to the area were quite strikiing. For one, there were sketchy looking characters out and about who were not present on previous visits, leading me to adjust plans to avoid walking alone after dark. Secondly it appears high-density low-income housing has been recently situated right across the street from the hotel where I stayed, which might help explain the shady characters I occasionally encountered in the hallways of my otherwise nice hotel. Finally the streets in the area have been altered to increase auto speed and traffic volume at expense of less safe pedestrian corridors.
Why anyone would want to invest in real estate in such a ghettofied area mystifies me.
White Flight and rising crime. California has had a net population loss over the last 10 years.
35 million 2005 to 38.5 million 2015. That’s 3.5 million in 10 years. Source: CA Dept of Finance.
Nope.
5 million Californians left between 2004 and 2013. 3.9 million people came To CA from other states during that period, for a net population loss of more than 1 million people. Source: US Internal Revenue Servce
If you are writing about the area around Arden Fair Mall, you are correct, it has become a war zone.
Real estate is not a static investment like many people think. You have to be aware of trends, commodities, demographics, financing…..and you ALWAYS must read the HBB.
“If you are writing about the area around Arden Fair Mall, you are correct, it has become a war zone.”
What explains this change? Only a few years back the area seemed perfectly safe for middle-aged Caucasians to venture out on foot at night.
At any rate, it’s good to know that my mental crime risk detector is still functional.
There are many contributing factors to the deterioration of the Arden area. There are lots of older apartments that became cheap flop houses. The state fair brought lots of people and gangs to the area. The mall became a gang scene. It all adds up to a tough neighborhood.
I noticed the same thing on my last business trip down there - sketchy characters also modified my evening walking route near my hotel near Cal Expo. I don’t really get the appeal of that area myself, and I grew up in a semi-arid desert area of eastern WA.
To each his/her own, I guess. Everybody’s got to live somewhere. But I think what we are both seeing is evidence of the inexorable slide of our country towards a third-world country. I see it locally by looking at the low wages and dismal advancement opportunities for the working class. Plus, when people are too poor to even shop at Walmart, and are buying expired cans of food at the dollar store instead, that is really not a good sign IMO.
‘Q: Is biotech a bubble?’
‘A: Investors are watching the Federal closely this week - not just because there’s a chance of a hike in short-term rates. Investors are also curious if the fed will talk about stocks - including biotech.’
‘Back in July 2014, Federal Reserve Chair Janet Yellen first warned investors of what she saw as a biotech stock bubble. She said she was seeing a bubble in “smaller firms in the social media and biotechnology industries” in a testimony.’
‘The Nasdaq Biotechnology Index is up more than 400% from the time its powerful rally began back in March 2009, says Bespoke Investment Group. While biotechs have pulled back about 10% along with the broad market the last few weeks, the Nasdaq biotech index is still up nearly 30% over the past 12 months.’
‘She said she was seeing a bubble in “smaller firms in the social media and biotechnology industries”
Doom and gloomer.
Here’s some charts that cover the year. The fifth one down covers the healthcare sector, of which biotech is a part.
Do a stare-and-compare and you’ll see that healthcare is the sector that is doing the best overall; The others are mostly in the toilet.
http://finviz.com/groups.ashx?g=sector&v=410&o=name
‘For a publication that historically has held up free markets as the real Jesus, the Orange County Register’s news section has recently has treated Airbnb as if it were the housing equivalent of Mexicans, a public menace deserving of scare tactics.’
‘Similar attitudes are also evident in articles published earlier this year. California assemblymember Ling Ling Chang wrote an opinion piece called “Supporting the Blossoming ‘Sharing Market,’” where she calls Airbnb and Uber good examples of the free market. “Here in California,” she wrote, “there is just one thing that could derail this great movement: government.” In an article published this past August, the Register’s editorial board wrote, “Laguna’s desire to ban a resident from deriving economic benefit from their own property is a violation of rights.”
‘Historically, quality-of-life stories have been the Reg’s bread-and-butter, a way to rile up their Barcalounge-lounging core Mission Viejo readership into writing letters to the editor. But don’t discount an editor’s personal obsession over an issue spilling into the Register’s pages–witness the nearly daily Disney coverage this year, all no doubt coming from editor-in-chief Rob Curley. Wearing at least one Mickey Mouse item a day? Far bigger a threat to OC than AirBnB–THINK ABOUT IT.’
‘A San Francisco couple got an unpleasant surprise on their way to Burning Man this year. As they were on their way to the annual arts festival in the Nevada desert, they received an email from one of their friends, thanking the couple for renting their apartment on Airbnb, The Guardian reports.’
‘But the couple hadn’t put their apartment on the home-sharing site. Instead, they had hired a professional house sitter they’d found on the site TrustedHousesitters.com, who had then listed the apartment on Airbnb himself — for a price of $2,000 for five days.’
“I feel violated, and pretty upset that somebody I thought I could trust has done this to me,” one of the apartment owners told The Guardian’s Jemima Kiss. “He told our friends that there was a ‘misunderstanding’ between us, but there’s no way I told him he could go ahead and make $2,000 for himself.”
http://finance.yahoo.com/news/hired-housesitter-went-burning-man-223308340.html?soc_src=mail&soc_trk=ma
I see a new reality show in the works.
“Another concern, according to Blomquist, is that 43 percent of the loans entering foreclosure, were written after 2008″
Click
‘Everyone said it was a close call, and that any move would make little real difference. So why all the confusion and overheated talk after the Fed declined to raise rates yesterday? Maybe because it leaves the market stuck.’
‘But everyone is splitting hairs here: No one who has been paying attention should have been too surprised with the decision, no matter which way it went.’
‘It’s worth looking back a couple of years to a similar instance when such assumptions turned out wrong. Two years ago almost to the day, the Fed opted not to start tapering the pace of its QE bond purchase program, confounding many expectations. Then Fed chief Bernanke cited recent “tightening of financial conditions” and stubbornly soft inflation. Those concerns echo today.’
‘Quickly the Street pushed out its predictions for the taper into the next year, believing the Fed was loath to make a big policy shift in December due to concerns about market liquidity. The very same concerns are flaring now.’
‘Yet in December 2013, Bernanke did indeed initiate the taper, a process that ended with the sunsetting of QE last October. Interestingly, in 2013 – with the market already up big into September – stocks initially rallied on the “no taper” announcement, then pulled back about four percent over the next four weeks, then kicked off a strong fourth-quarter rally.’
‘This might be the big takeaway from the interplay of the Fed, the economy and markets: Most of the benefit to financial assets of easy money policies has been felt. The real economy has been catching up to the markets, at a time when global concerns are dragging more on asset values than on U.S. growth.’
You cannot run in place forever.
Most of the benefit to financial assets of easy money policies has been felt ??
Yep…The central banks have exhausted their options…More of the same has less effect (that string thing)…The only alternative option now is fiscal policy…Greece along with others are finding out thats quite disruptive…As far as us, not going to happen anytime soon…
The only alternative for Federal Reserve Banks is the obvious. Falling prices as a result of collapsing demand.
‘Business is brisk for Alberta mortgage broker Adil Mawji. However, it’s not because Albertans are busy buying homes — sales are actually declining in Canada’s one-time boom province. Rather, it’s because Albertans are fearful for their jobs as the oil and gas market gets routed. They are looking to take risk off the table and lock in mortgage rates at historically low levels.’
“People are trying to get their mortgage secured right now and take advantage of the lower rates,” says Mawji, a senior mortgage broker at Invis Inc. and president of the Alberta Mortgage Brokers Association. “A lot of people in the oil and gas sector are not sure if their jobs are going to be around or if they are going to be making as much money.”
‘More than just the resale market is being impacted by oil’s slide. Brian Johnston, chief operating officer of Mattamy Homes, Canada’s largest new homebuilder, said his firm, which has communities in both Ontario and Alberta, quickly reacted to oil’s decline and “made some market price adjustments and dabbled with incentives. We don’t believe this is a short-term phenomenon.”
‘BMO economist Robert Kavcic says Alberta’s GDP is down about one per cent this year, and by mid-year, the province had shed between 20,000 and 30,000 jobs. “Alberta confidence is shaken for sure.” The losses are clearly showing up in Alberta home sales numbers. As of July, residential home resales were down 14.7 per cent from last year, according to the Canadian Real Estate Association, but still trending above the 10-year average. Prices were also holding, with the average home selling for $394,977, about the same as last year, while prices in other major markets continue to rise. How much longer prices hold is anyone¹s guess, but CREA expects a 2.8 per cent decline in Alberta prices this year. “We’re starting to see a trend toward values dropping,” Mawji says.’
‘Worries about Canada’s housing market typically come in a few popular shapes. Overinflated prices may crack due to a recession or higher interest rates will send mortgage costs past the limits of stretched household budgets.’
‘The Bank of Canada, safe to say, is determined to fend off the rates scenario until either the economy is humming or consumer debt levels become more manageable. As for a recession, Calgary’s once-sizzling housing market is now offering something of a blueprint for what might happen to prices in other cities with seemingly indomitable markets, like Vancouver and Toronto, when an eventual turn finally arrives.’
‘High-profile layoff announcements from some of Calgary’s biggest employers are weighing on the mood of the city, as well as expectations for its real estate market.’
“If a downturn is not expected to be particularly prolonged, then people may be prepared to sit tight and wait it out and not list their house,” said Robin Wiebe, a senior economist at the Conference Board of Canada. “Like anything else, people don’t want to take less than what they paid for their house and they’re going to resist selling it for a loss.”
‘Property investors on the lookout for bargains are eyeing the sunshine state, with a national buyer’s agency reporting a boom in Queensland inquiries, especially those from interstate residents who can’t afford to buy in their own cities.’
‘Cohen Handler buyer’s agent Jordan Navybox says there are big profits to be made in Brisbane, especially in established suburbs close to the CBD. “You throw a dart at Brisbane in the next three years and you’ll make money,” he claimed.’
‘He recommended investing in established properties in high-demand suburbs such as New Farm, Paddington and Hamilton, where two bedroom units. “We’re steering clear of infill developments on the outskirts of town,” he said. “You can get a house only 10km away for $500,000; however, we’d prefer to buy a good unit over a poor house.”
‘He claimed that searching for bargains within suburbs where new developments were limited could deliver capital gains of 30 to 50 per cent within three years.’
‘But other commentators warn to proceed with caution, as the state’s rebound after floods, economic turmoil and the mining downturn is far from guaranteed. Property analyst Louis Christopher of SQM Research said the state’s comparatively sluggish economy meant “buying activity hasn’t been strong”.
“If Brisbane is so good, why aren’t we seeing capital gains now?” he challenged.’
‘The first time I met Malcolm Turnbull, all he could talk about was Japan. It was June 2002 and the Goldman Sachs banker-turned-politician couldn’t comprehend how a smart, democratic government could simply stand by as an enervating malaise strangled the economy.’
‘When I asked him whether something similar could happen in Australia, Turnbull stared out his Sydney office window. “There are real risks for Australia in globalisation and we could be a loser in the future just as we have been a winner to date,” he said.’
‘Those risks are more than obvious now. Unlike Japan, Australia isn’t suffering from deflation and demographic blight. But its leaders, too, are guilty of not moving fast enough to adjust to a changing economic reality.’
‘Rather than invest in education, training and infrastructure and tweak taxes to empower small businesses, Abbott’s team protected mining billionaires (by scrapping carbon-tax policies). His government championed fiscal austerity even as the economy experienced its weakest run of growth since the 1991 recession. Business leaders complained, rightly, about a lack of resolve to overhaul an outdated labour market. As a historic property bubble from Sydney to Perth massively outpaced wage growth, Hockey told voters they were imagining the problem.’
‘In fact, it’s the government that’s appeared blind to the competitive pressures of globalisation. For years, China’s voracious appetite for iron ore, coal, copper and other commodities fuelled growth and filled Canberra’s coffers. That dampened the urgency for Abbott or his predecessors to diversify growth engines away from the mining industry, leading to a two-speed economy and widening inequality.’
‘There’s plenty of blame to go around, but Abbott’s Liberals deserve much of it thanks to Prime Minister John Howard’s failure to diversify the economy during his 1997 to 2007 term. Howard’s stint followed those of reformists Bob Hawke and Paul Keating. Governments during the Hawke-Keating era lowered trade tariffs, opened the financial industry, floated the Aussie dollar and built a compulsory, national pension system. And then Howard coasted, riding China’s coat tails and leaving economic management to the central bank.’
How is the f********* world is a PM (or President) supposed to diversify the economy? Are they omnipotent dictators???
(Yes, of course, they can have an impact - but only so much).
Are they omnipotent dictators???
They want people to think that they are–so they can use economic blame to promote themselves and knock down the other guy.
‘Housing market ‘downshifts’ in August: Median price for Orange County home is $610,000′
‘The median price of an Orange County home – or price at the midpoint of all sales – was $610,000 in August, Irvine-based real estate data firm CoreLogic reported. That’s the highest price for an August in eight years and falls just 5 percent below the all-time high reached at the peak of the housing bubble in June 2007.’
‘But prices have retreated 3 percent over the past two months from June’s median of $629,500. And chances of reaching that pre-recession peak of $645,000 this year remain slim as the end-of-the-year slowdown takes place.’
‘Sales, meanwhile, totaled 3,174 in August, up 3.4 percent year-over-year but down 14 percent from July. Orange County’s housing numbers were similar to those for Southern California and for the state as a whole.’
“Southern California home sales downshifted” in August, said CoreLogic Research Analyst Andrew LePage.’
“…downshifted…”
Just wait until after rates normalize. This is just the beginning.
‘In Palo Alto, Sereno Group agent James Yang said he continues to see multiple offers on homes, though not to the same degree as in the spring: “In Los Altos and Palo Alto, places where you get the higher price points, we’re seeing maybe five or eight offers instead of 15 to 20. So, still multiples, just not as crazy.”
‘Pacific Union agent Adam Touni, also based in Palo Alto, agreed: “Back in the spring, I sold a house in Menlo Park for $800,000 over the listing price and received six offers — for a townhouse.”
‘Lately, he has noticed that multiple-offer action has shifted toward Sunnyvale, Redwood City and San Carlos, where there’s still healthy competition for homes priced in the $900,000 range. One San Mateo-based client bought a “stay-cation” weekend place in Berkeley’s Tilden Park area: “It listed for $750,000 and sold for $900,000; six offers.” It has three bedrooms and two baths, and its new owner “can be at Chez Panisse in 10 minutes.”
‘LePage suggested that the July-to-August sales slip could be attributed to the region’s ever-tight inventory and the lack of affordable housing stock. After all, the median prices of $700,000 in Alameda County and $1,055,000 in San Mateo County present formidable challenges to many potential buyers, even if those prices are down a tick or two from July.’
‘He summed up the sales drop like this: “Is it a big deal? Probably not. Is it noteworthy? Yes. If we continue to see the same drop-off for the next couple of months,” he added, “then we’d have something to talk about.”
I wonder how long paying hundreds of thousands of dollars to be close to Chez Panisse is going to seem like a good deal?
If we continue to see the same drop-off for the next couple of months ??
Well Mr. Touni, if you have been in business around here for awhile you know that the residential real estate market starts its slow down in September and accelerates all the way through January….Happens EVERY year…Many reasons but seeing inventory increase and sales slow in the winter its par for the course around here…
The real answer on if the market has market (prices) have headed south will be in the spring…March-May particularly in the face of higher rates…
No one ever forecasts falling housing prices(except for Senior Housing Analyst). But theyre falling nonetheless.
A-ha. So you have multiple personality disorder. That explains a lot.
Falling housing prices. Collapsing housing demand my friend.
Simi Valley, CA Housing Prices Plummet 7% YoY
http://www.movoto.com/simi-valley-ca/market-trends/
“One San Mateo-based client bought a “stay-cation” weekend place in Berkeley’s Tilden Park area: “It listed for $750,000 and sold for $900,000; six offers.” It has three bedrooms and two baths, and its new owner “can be at Chez Panisse in 10 minutes.””
You can drive to Chez Panisse from San Mateo in about 35 minutes (non-commute hours).
Or you can piss away 900k to shave 25 minutes off. Luckily he had a Realtor to advise him on the right course of action.
‘Sacramento’s housing market tailed off slightly in August, although prices remain higher compared with the same time last year.’
‘CoreLogic reported that the median sale price fell to $275,000 last month for an existing single-family home in Sacramento County. That was down from $279,000 in July, but up 5.8 percent from the $260,000 recorded a year earlier.’
‘The numbers suggest Sacramento’s market held up slightly better than other major areas of California, where the drop-off in sales activity was more pronounced. CoreLogic said the volume of homes sold fell 12 percent between July and August in both the Bay Area and Southern California.’
So much for the red-hot summer sales season.
harp-harm- smelly Mel Watts
WOW !
“43 percent of the loans entering foreclosure, were written after 2008,”
gov programs ALL fail
always
100% of loans entering foreclosure were written after 1984.
Next year, the 43% number will be even higher. Should we panic even more then?
What is there to panic about? All these defaults are a direct result of grossly inflated prices. Now prices are falling again. Pick yourself up off the floor and cheer up my friend and remember… Nothing accelerates the economy like falling prices. Nothing.
The irony is that this bubble was just getting a head of steam back in ‘84.
What about $8 billion a year to Israel?
Denver, CO Housing Prices Fall 9% YoY
http://www.movoto.com/denver-co/market-trends/
Looky, looky, looky, another article that indicates people who take on debt still taking on even more debt for the time being:
http://finance.yahoo.com/news/student-loans-don-t-restrain-003300754.html
Atlantic City Metro Housing Prices Crater 7% YoY; Prices Declines Spread Nationally
http://www.zillow.com/nj/home-values/
LIVE ! on bloomberg (oy’) luxury NYC condo glut
Did the all-cash Chinese investors dissappear overnight?
“…a road to nowhere.”
Here’s to wishing some enterprising author all the best on his ground breaking book about the 2015 Chinese financial panic, A Road to Nowhere.
crater