We Began To Think Of Our Homes As Investments
It’s Friday desk clearing time for this blogger. “International buyers are accounting for the smallest share of California home sales in at least eight years as prices climb and investors from China, the biggest source of foreign purchases, slow buying, according to the state’s Realtors group. The share of international buyers fell this year to less than 4 percent, compared with a peak of 8 percent in 2013, the California Association of Realtors said in a report. Chinese purchasers may be decelerating because it’s difficult to move money abroad, according to Leslie Appleton-Young, chief economist for the real estate association. The country limits individuals from spending more than $50,000 overseas and the central government has stepped up anti-corruption campaigns as the economy slows.
“‘It’s harder for Chinese to get money out,’ Appleton-Young said in a telephone interview. ‘One of my agents said on the last transaction, a Chinese buyer wrote that a check was for tuition when it was really for a home.’”
“In another sign that Miami’s luxury condo boom has reached its peak, South Florida’s dominant developer, Related Group, has dropped the required deposits on one of its Brickell area projects from 50 percent to 30 percent, The Real Deal has learned. Related, which is developing about 20 percent of all new condo projects proposed or under construction in coastal South Florida, has sent out fliers offering preconstruction units at its Brickell Heights 02, at the reduced deposit rate — at least temporarily. It is the first time the giant Miami-based developer has marketed a lower deposit structure during this cycle.”
“The lowered deposits come amid a flurry of new condo developments announced for South Florida, including more than 70 new condo towers with nearly 20,200 units in Greater Downtown Miami, including the Brickell area, according to Peter Zalewski. Related is not the first to lower the deposit structure on a preconstruction condo project in recent months, as developers battle to offset the strengthening U.S. dollar against many foreign currencies.”
“Technology job growth in Seattle is leading to a booming housing market, but the backlash against the rising cost of home ownership may finally be taking its toll. Two percent of renters in Seattle said they plan to buy in the next year, compared to 7 percent at the beginning of the year, the Zillow Housing Confidence Index said. However, confidence didn’t slip in Seattle quite as badly as other tech hubs – such as San Francisco, Denver and San Jose – and Seattle now has the highest homeownership confidence among these cities.”
“The drop in confidence over the first half of the year was significant among 18 to 34 year olds in tech hubs. In San Francisco, the percentage of them planning to buy a home within a year has plunged from 18 percent last to just 5 percent, and a similar pattern was seen in Seattle, Zillow PR specialist Jordyn Lee said in a blog post.”
“The luxury London property market finally appears to be in pause mode, and it could stay stuck for a while, as extra costs are piled on to the cost of buying a top-notch home according to high-end estate agent Knight Frank. The hike in the cost of buying homes at the top end of the market has ‘just stalled the market’ in Hong Kong and Singapore, Alistair Elliott, chairman of Knight Frank, told CNBC. In Asia-Pacific, Knight Frank’s offices have seen some cooling-off as countries outside China were affected by its slowing economic growth.”
“Thousands of homes under construction in Dubai are being put on hold as property prices in the emirate continue to fall and rents start to sink. Property broker JLL said average apartment prices in the city fell 11 per cent over the past year because of the strong dirham, higher sales transaction fees and mortgage caps. The broker predicted that average housing rents in the city would continue to fall by as much as 10 per cent over the coming 12 months.”
“‘We expected rents to fall sooner than they did, and actually we are surprised that they held up for so long,’ said Craig Plumb, the head of research at JLL’s Dubai office. ‘We expect it has a lot to do with a slowdown in the overall economy, meaning that employment growth has not been as strong as it was. With oil prices staying lower for longer than was at first anticipated, the Government has been cutting back spending, which has led companies to be a bit more cautious with their hiring.’”
“More Aucklanders are looking outside the city for work as new figures show a record number of houses selling for more than $1 million. Head of Trade Me Jobs Peter Osborne says over the past year there has been a noticeable lift in the number of Aucklanders looking outside the region for a new job. ‘Thirteen per cent of applications sent by Auckland candidates were for roles located outside the Auckland region. That’s up an impressive 47 per cent on the previous year.’”
“Mr Osborne says the employment market had been hinting at a slowdown for several months. ‘A number of economic indicators suggested the Kiwi job market was cooling off this year with employers not hiring as often, but new job listings remained strong on Trade Me Jobs in the face of a pessimistic outlook,’ he says.”
“Whether September’s prices have set a trend for the remainder of the year has yet to be seen. In the last week of the month there was a fall in auction sales and there was less pressure on buyers to make immediate decisions. New regulations for international buyers are due to come into force in November and these have coincided with a tightening of requirements around the export of money out of China.”
“Data has revealed almost one in three houses sold throughout the Wide Bay in the June quarter this year sold at a gross loss. The RP Data Pain and Gain report placed the Wide Bay as the fifth highest gross loss region in the country with 31.9%. Just Mackay at 47.6%, Fitzroy with 35.6%, Townsville at 34.0% and the WA Outback with 32.6% saw a greater percentage of sales with a gross loss. RealWay Bundaberg sales manager Brent Illingworth said there were people who studied the market and were still prepared to sell in this climate.”
“‘They will sell in this market and possibly lose, but it might free up some cash to buy another good investment or maybe upgrade their own home,’ he said. ‘So it’s not stopping people selling, but unfortunately there are always going to be people that have to sell.’”
“Beware: Tampa Bay still has plenty of zombies. Just in time for Halloween, RealtyTrac reports that the bay area ranks fourth among major metro areas in the number of ‘zombie houses’ — vacant homes in some stage of foreclosure. Marilyn Bevan lives across Summit Lane from the zombie, a once attractive 1,800-square-foot ranch house now abandoned and largely neglected. Records show that a couple paid $205,000 for the house in 2003 and divorced in early 2011, just as the bank was starting to foreclose. Both already had moved out by then.”
“The ex-husband, now living in a condo that also is in foreclosure, declared bankruptcy in August in a move that will leave the Safety Harbor house in limbo for some time. ‘He rented it for some time and then he came back and said he was going to live there and blah blah blah, and the next thing we know, he had carted off everything he could,’ Bevan said. ‘It’s getting uglier all the time.’”
“Last month, in response to the news that Detroit’s white population is now growing for the first time in decades, with the number of residents surging in particular downtown, a local radio station paused to ask: ‘Is Detroit big enough for everyone?’ It was an odd question, given that the city’s population is less than half the size it was in 1950, with tens of thousands of empty lots and hollow homes attesting to the ample elbow room.”
“But a neighborhood, no less a continent, defies the knowable volume of boxes or bottles or stadiums. We know when a bathtub is full, because the water runs over. But a city? A city block? How would you even define such a thing? ‘When people say a place is ‘full,’ to me it’s shorthand for they’re not willing to even entertain the challenges of what it would mean to redevelop the space,’ says George McCarthy, the president of the Lincoln Institute of Land Policy.”
“Remarkably, researchers Peter Ganong and Daniel Shoag suggest that nearly a third of the decrease in economic inequality in the U.S. last century up to 1970 can be explained by workers moving from poor states to rich ones. But since then something has changed. Home prices in California used to be about the same as home prices in Michigan or Connecticut. Today, there is a vast difference in housing costs across the country.”
“William Fischel, who has long studied land use at Dartmouth, has some fascinating theories of what changed in the 1970s. For one, the national Environmental Protection Act empowered local residents worried about the environmental cost of new development. But the 1970s were also a time when we began to think of our homes not just as places to live, but as financial investments for the future.”
“And people who believe their homes will put their children through college, or fund their retirement, are bound to be more protective of them. ‘That’s when people began to look around and say ‘well what might threaten the value of this home?’ Fischel says of the 1970s. Residents were no longer worried about the old-school zoning concerns of keeping factories and housing apart. ‘They worried about ‘well, if there’s another housing development down there, it’s going to crowd the schools, and create more traffic.’ They became hyper-sensitive to community effects. And they started showing up in zoning hearings.’”
‘It’s getting uglier all the time.’”
That all depends on how you look at things. Remember… Falling prices to dramatically lower and more affordable levels is positively bullish and good for the economy.
‘One of my agents said on the last transaction, a Chinese buyer wrote that a check was for tuition when it was really for a home.’”
You know there’s problems when the leader of your organization admits to complicity in fraud and misrepresentation.
Don’t worry, everyone’s going to get schooled on that transaction! Ha!
“Austin Realtor Caught On Camera Stealing From Home”
http://kxan.com/2015/09/10/austin-real-estate-agent-burgles-condo/
Sorry, I wrote my post below to call out obvious fraud in plain view before reading yours.
“‘It’s harder for Chinese to get money out,’ Appleton-Young said in a telephone interview. ‘One of my agents said on the last transaction, a Chinese buyer wrote that a check was for tuition when it was really for a home.’”
Would the agent be considered an accomplice to fraud in this situation?
‘ fraud is the intentional deception of a person or entity by another made for monetary or personal gain’
Here, the misrepresentation is made by the buyer to the Chinese government in order to move their funds out of China. While less than an ideal situation ultimately it is their money to begin with. It isn’t as though they made fraudulent misrepresentations in order to cheat someone else out of money.
Money launderers are always just nice guys trying to be free. Especially the ones from communist, all F-d up China.
Is our country really any different?
We’ve even gotten to most of the Swiss banks who now rat on American’s account balances to the IRS . . .
not most Swiss banks, all Swiss banks, make that all banks and countries that matter:
‘FATCA requires foreign banks to reveal Americans with accounts over $50,000. More than 80 nations—including virtually all that matter—have agreed to the law (FATCA). So far, over 77,000 foreign financial institutions (FFIs) have signed on too. Countries must throw their agreement behind the law or face dire repercussions. Even tax havens have joined up. The IRS has a searchable list of financial institutions.
If you think money anywhere can escape the IRS, think again. Even notoriously difficult China and Russia are on board. Which is more amazing? Probably Russia. The U.S. and Russia were negotiating a FATCA deal until March 2014, but Russia’s annexation of Crimea caused the U.S. to suspend talks. That meant Russian financial institutions faced being frozen out of U.S. markets. Russia took last minute action to allow Russian banks to send American taxpayer data to the U.S. when President Vladimir Putin signed a law in the 11th hour to satisfy the U.S. treasury.
http://www.forbes.com/sites/robertwood/2015/05/14/facts-about-fatca-americas-global-disclosure-law/
San Francisco, CA Housing Prices Fall 12% YoY
http://www.zillow.com/noe-valley-san-francisco-ca/home-values/
‘But the 1970s were also a time when we began to think of our homes not just as places to live, but as financial investments for the future. And people who believe their homes will put their children through college, or fund their retirement, are bound to be more protective of them. ‘That’s when people began to look around and say ‘well what might threaten the value of this home?’
This bubble has been going on for longer than most realize, and the NIMBYism some here use as an excuse for high prices turns out to be another aspect of the mania.
when gov gets in prices distort
re
hc
edu
cash for clunkers
etc………..
cash for clunkers
If you think that program contributed to a shortage of beaters, you should see what they do in Europe. Cars are subject to onerous government inspections. By the time they are ten years old the inspectors come up with a laundry list of things to fix or replace that can easily cost $6000. My BIL sent his perfectly fine, ran like clock, never had a problem, 10 year old Nissan to the junkyard to be scrapped after the inspector came up with an absurd list of things to “fix”.
Now I know why a beater was a rare sight in the UK. It seemed like everyone had a late model car.
Something else to keep in mind. Cash for clunkers was a one time event that only removed about 770K cars.
Imagine if 10% of the US fleet was forcibly retired every year.
I’m still mad about the clunkers program - I was waiting for an SUV demo derby and it took a big bite out of available vehicles for one.
low end used car prices exploded
tax the poor !
Same idea in Japan. Back when my friends and I were in to souping up our Nissan 240SXs in the late 90s, it was common knowledge you could get perfectly good low mileage engines from Japan.
Maybe because it was a nissan? I saw some old fiats and other locally made putt-putts around Italy a few years ago. Gotta keep those union car builders busy!
San Diego, CA Housing Prices Crater 11% YoY
http://www.zillow.com/san-diego-ca-92130/home-values/
‘A New York-based developer and Miami-based Fortune International Group have launched preconstruction sales for a branded luxury condo-hotel in Orlando. Prices for the 436-unit, 21-story building range from $290,000 for a studio to $1.8 million for a four-bedroom penthouse.’
‘The ph Premiere Hotel & Spa would be the first branded development of its kind in Orlando, which trails Miami in luxury condo-hotel development, even though Orlando annually hosts 45 million more visitors than Miami.’
‘According to Smith Travel Research, 2,695 hotel rooms built around condominiums in Miami are expected to open in 2016, and 5,000 more are under development.’
Remember….. paying multiples over construction costs($55/sq ft for lot labor materials and profit) for a used item like a house is a grave financial error you’ll never recover from.
Where did you get that cost figure?
From 30 years of building and contracting my friend.
Sacramento, CA Foreclosures Balloon 49%
http://www.capradio.org/57264
From your link:
Starts - or notices of default that people get when they first enter the foreclosure process - were down in August, by 30 percent from a year ago. Blomquist says that’s because people are getting better home loans, not the type of no-down payment loans that helped trigger the housing crisis.
HA, please try to read the info before you spout off with your diatribe!
It says foreclosures are up 49% in Sacramento.
Are you sure you reading the right article?
Same article. You’re talking about reposessions of 2007-8 loans, not new activity. Here is another tidbit for our fellow readers:
“So far this year, California has been averaging just under 3,000 bank repossessions a month. That’s well below the peak of 17,000 in 2009″.
You just cherry pick and mislead. Nothing to see on your posts when you look past your prognostications!
Up 49% is up 49% my friend.
‘As a rout in Chinese stocks this year erased $5 trillion of value, investors fled for safety in the nation’s red-hot corporate bond market. They may have just moved from one bubble to another.’
‘So says Commerzbank AG, which puts the chance of a crash by year-end at 20 percent, up from almost zero in June. Industrial Securities Co. and Huachuang Securities Co. are warning of an unsustainable rally after bond prices climbed to six-year highs and issuance jumped to a record. The boom contrasts with caution elsewhere. A selloff in global corporate notes has pushed yields to a 21-month high, and credit-derivatives traders are demanding near the most in two years to insure against losses on Chinese government securities.’
“The Chinese government is caught between a rock and hard place,” said Zhou Hao, a senior economist in Singapore at Commerzbank, Germany’s second-largest lender. “If it doesn’t intervene, the bond market will actually become a bubble. And if it does, the market could crash the way the equity market did due to fast de-leveraging.”
‘The slide in stocks is one reason why corporate bonds have done so well, prompting a 91 percent jump in issuance last quarter. Many investors who sold shares during the Shanghai Composite Index’s 38.4 percent drop from its June high have plowed the proceeds into debt, viewing the market as a haven given its history of almost negligible defaults. Five interest-rate cuts since November have also fueled gains as the People’s Bank of China seeks to revive growth with lower borrowing costs.’
‘A reversal in the bond market would do more damage to China’s economy than the drop in shares and exacerbate capital flight from the biggest emerging market, according to a worst-case scenario projected by Banco Bilbao Vizcaya Argentaria SA. The Spanish lender more than doubled its first-quarter profit by selling holdings in a Chinese bank.’
“The equity rout merely reflects worries about China’s economy, while a bond market crash would mean the worries have become a reality as corporate debts go unpaid,” said Xia Le, the chief economist for Asia at Banco Bilbao. “A Chinese credit collapse would also likely spark a more significant selloff in emerging-market assets.”
‘The risk of a downward spiral in debt prices has increased after investors took on leverage to amplify their returns, according to Ping An Securities Co. The monthly volume of bond repurchase agreements — a form of borrowing used by investors to increase their buying power — has jumped 83 percent from January to 39 trillion yuan in September, according to data from the Chinamoney website.’
‘About 16 percent of companies on the Shanghai stock exchange lost money in the past 12 months, double the proportion last year, and the number of firms with debt levels twice their equity has doubled to 347 since 2007. Profits at Chinese industrial companies sank 8.8 percent in August from a year earlier, the biggest decline since the government began releasing monthly data in 2011.’
‘Baoding Tianwei Yingli New Energy Resources Co., a maker of solar components, could become the latest Chinese company to default on local-currency notes after its parent said it’s unlikely to meet a deadline next week on a 1 billion yuan bond.’
“Global investors are looking for signs of a collapse in China, which itself could increase the chances of a crash,” Commerzbank’s Zhou said. “This game can’t go on forever.”
“I’m calling it a soft landing — a return to what is considered to be more normal market conditions,”
Leslie Appleton-Young, Chief Economist, California Association of Realtors
“Maybe we need something new. That’s all I’m prepared to say”
“I’m sorry I ever made that comment.”
“When I get my new term, I’ll let you know.”
Leslie Appleton-Young, Chief Economist, Cal. Assoc. Realtors
When asked about her “Soft Landing” prediction
lying.through.her.teeth.the.whole.time.
I thought Leslie Simpleton Young said the market in 2005 was going be like a souffle. It was going to level out.
I just heard her on KNX biz report in LA predicting what 2016 was going to bring.
Souffle
Of all the analogies to use…
‘They will sell in this market and possibly lose, but it might free up some cash to buy another good investment’
I’ll just let that one hang out there.
Gambling addiction!
compared to a 3.6% increase for Springfield as a whole.
was 0 before
sis Nat realwhore assoc get to Zillow?
pump up predictions or lose $$$
I wish your posts were a bit more lucid. What are you saying?
Fraud is easy to understand. Especially for you Jingle_Fraud.
Miami Beach, FL Housing Prices Plunge 14% YoY
http://www.zillow.com/miami-beach-fl/home-values/
I always take predictions of trees growing to the sky with a large grain of salt.
Don’t miss that the data used to support the writer’s main point is
1 1/2 years stale!
The danger of foreign buyers gobbling up American homes
Published: Oct 9, 2015 2:31 p.m. ET
An influx of foreign buyers is driving up home prices in cities such as San Francisco.
By Dan Barnabic
In the wake of market recovery from the last real estate crash of 2007/08, developers have been once again trying to lure low-earning Americans into buying homes and condos facilitated by very small (in some cases 3%) down payments, with the idea to increase domestic demand.
But this scheme seems not to be working so well anymore. Domestic wherewithal and therefore demand for purchasing real estate seems to be waning. Realty company Zillow Group reported recently that 30% of homes lost value over the last year. This is in concert with another recent report about a falling bear market in lumber and the latest Google Consumer Survey showing approximately 62% of Americans having less than $1,000 in their savings accounts.
However, in stark contrast, demand for homes in select urban areas such as San Francisco, Denver, Portland, Seattle, Los Angeles, Las Vegas and Miami — where prices appreciated from 6.1% to 10.4% within the year — is an oddity that needs explaining. Unusual high appreciation of the aforementioned urban centers is due to the ever growing influx of foreign buyers — mostly wealthy Chinese — who view American residential real estate as the safest investment commodity.
According to a National Realtors Association survey, the Chinese spent $22 billion on U.S. housing in 12 months through March 2014 — 72% more than they spent the year before! They buy mostly high-end, expensive homes with a median price of over half a million dollars. Chinese foreign buyers account for almost half of all the sales to other foreign buyers such as Canadians, British, Indians and Mexicans.
At first glance, foreign investment may seem to be a welcome boost to the economy. But a very disturbing second thought comes to mind — rapid depletion of affordable housing for middle-class Americans. Notwithstanding its present economic woes, China produces legions of multi-millionaires who, almost as a rule, prefer to invest their money in residential properties outside of their country — mostly in the U.S., Canada and Australia.
Even at their economy’s reduced annual growth rate of 5% or 6 percent, given their enormous population of 1.4 billion, a large number of wealthy individuals will continue to emerge from China and continue to buy into American residential properties for years to come. The same can be said for emerging wealthy buyers from India, whose population is close to 1.3 billion.
By allowing foreign buyers to buy American homes in large numbers, affordability of housing for American middle-class citizens is only going to further erode, eventually to the point of them not being able to afford homes in their own country.
…
‘to the point of them not being able to afford homes in their own country’
I saw this article the other day. I remember that the Japanese were going to own everything too. The writer must not have seen the WSJ article that quoted the shack-builders themselves saying houses aren’t getting built much because there isn’t enough demand. A mania, IMO, usually contains a bit of truth. The weather is nice in Florida, but it was nice 30 years ago and houses didn’t cost hundreds of thousands. There are Chinese money-launders buying houses but the vast majority of purchases are being made by USA-ans. Same in Canada and Australia. Here’s where the psychology fits in; it’s OK for someone in Vancouver to pay a huge amount, because they can always sell to one of those rich Chinese guys. It’s OK for a loan to be made for the same reason.
The headline for the last link above says there is no shortage. Anywhere. If Tokyo can be over-built and crash any place can.
Now it is true, housing we can afford isn’t being built. If I’m a shack builder and I can sell $500,000 houses instead of $100,000 houses, what am I going to do? The reason those lots in Queen Creek are empty is because the FHA lowered the loan cap. The builders had already paid too much for the land, so it sits.
‘Builders in Phoenix and areas from Sacramento, California, to Orlando, Florida, are sweetening offers as sales slow in some of the country’s most volatile housing markets. Buyers, suffering from sticker shock after large price gains in 2013, are pulling back after the U.S. government cut the maximum size for mortgages with low down payments. In Phoenix, the Federal Housing Administration’s loan limits dropped well below the median price for a new home.’
“Phoenix is very slow, Sacramento is spotty,” said John Burns, a housing consultant based in Irvine, California. “The investors came in and pushed prices a little too high. And then FHA rocked the new-home market really hard.”
“Phoenix is a cautionary tale about raising prices too aggressively and opening up communities too aggressively,” said Alex Barron, senior research analyst at Housing Research Center LLC in El Paso, Texas. “It’s a bad combination where affordability got out of control and the FHA limit went down. Homes are unaffordable now, and all of a sudden there’s a ton of supply.”
http://www.bloomberg.com/news/articles/2014-10-07/homebuilders-offer-freebies-as-booming-u-s-markets-cool
Just lower the loan limits and prices will go down. Better yet, get rid of the FHA entirely. Oh no, the UHS scream, that would crash prices! Uh, then why the angst about living under a bridge watching the Chinese BBQ? If Mel and Janet hadn’t done their thing late last year, we’d already be on our way to getting out of this mess. But they goosed it one more time. And as we see in Denver (hottest market in the country a few months ago) there isn’t any shortage. Actually it’s a glut. Same in Manhattan and Miami Beach. Coming to a Manteca near you.
“And as we see in Denver (hottest market in the country a few months ago) there isn’t any shortage. Actually it’s a glut. Same in Manhattan and Miami Beach. Coming to a Manteca near you.”
This will become much more apparent once we reach the stage where panicked investors begin to rush out the exit door of the burning theater.
In due time…
Did I miss something? When did the GSEs lower their loan limits? I thought it was still $417,000.
“By allowing foreign buyers to buy American homes in large numbers, affordability of housing for American middle-class citizens is only going to further erode, eventually to the point of them not being able to afford homes in their own country.”
During the two-year build-up prior to the D-Day invasion the well-paid U.S. soldiers has the rapt attention of the ladies. The average Brit was a broke-azz loser and not happy about it. Fast forward, and here we are getting served a nice helping of crow.
Chinese all-cash buyers of U.S. homes have tripled since 2005
Published: Oct 9, 2015 2:12 p.m. ET
Mandarin-speaking Chinese are buying mostly high-end homes with a median price of over $500,000
By Daniel Goldstein
Personal finance reporter
Xiāoshòu. That’s how you say “For Sale” in Chinese. And if you’re selling to an all-cash buyer in a U.S. real estate deal, you may need to find a real-estate agent who speaks Mandarin.
A joint analysis by Irvine, Calif.-based realty research firm RealtyTrac, and New Jersey-based multicultural marketing company Ethnic Technologies, found that 46% of Mandarin Chinese-speaking buyers who purchased U.S. homes in the 17 months ending in May 2015 paid all cash, more than triple the number paying all cash in 2005. Overall, Mandarin speakers are the second largest non-English speaking cash-paying group, totaling nearly 18% of all cash deals, second behind those buyers speaking Spanish at 43%.
Among all non-English speaking groups, the share of all-cash buyers of U.S. homes increased from a 20% share in 2005 to a 33% share in the 17 months ending in May 2015.
…
It appears they buy about 50,000 homes/year. We build 500,000/year (1,000,000 in good years). HA says we have 25,000,000 vacant, foreclosed houses in our shadow inventory…….some one needs to buy them! HA!
degenerate.gambler.
Interesting report and comments. Though, real estate continues to be very local. What is happening in some of the glitzy markets really doesn’t have much effect for some smaller areas.
http://stuartfloridarealestatenews.com/category/real-estate-information/market-reports/
So are those 800k up houses glitzy? Days on market seems kinda high.
Stuart, FL Housing Prices Crater 9% YoY
http://www.movoto.com/stuart-fl/market-trends/