Cries For Help From Investors
A report from Crain’s New York. “Toll Brothers Inc. plans to use competitive pricing and offer buyers incentives to speed up sales at some of its New York City condominium projects. ‘There are certain units in certain locations within a building that are hot, and then there are other units that may be in a dark, cold corner that you have to incentivize a bit more,’ Chief Executive Officer Douglas Yearley said on the company’s earnings conference call. While Toll ‘will not fire-sale it to move’ units, ‘we will price to the market.’”
“Toll shares fell 7.3% to $34.78 at 1:54 p.m. in New York, the biggest drop since late August. The Standard & Poor’s Supercomposite Homebuilding Index was down 3.1%. Investors are probably reacting to Toll’s comments about the New York ‘market becoming more competitive and the fact that they will start incentivizing more in that market,’ Megan McGrath, an analyst with MKM Holdings LLC in Stamford, Connecticut, said in an e-mail.”
The Middletown Press in Connecticut. “October was another good news, bad news month for Connecticut’s single-family home sales, according to The Warren Group. The bad news for the Connecticut housing market is that median home prices continued to drop. The median price of homes sold in October was $235,000, a 2.1 percent decrease compared to the same period in 2014. The median sale price for October of this year represents a 14.4 percent drop from where it was nine years ago. The year-to-date median sale price is $249,000, 1.9 percent less than it was through the first 10 months of 2014.”
“Donald Klepper-Smith, chief economist and director of research for New Haven-based DataCore Partners said the decline in median housing prices ‘goes hand in hand with under performing labor markets.’ ‘It doesn’t help that you have excess housing inventory on the market,’ Klepper-Smith said.”
KGAB in Wyoming. “The President and CEO of the Greater Cheyenne Chamber of Commerce says a housing shortage for both rentals and homes for sale seems to have eased in recent months. Dale Steenbergen says that while he considers the increased availability to be a good thing as things stand right now, if current trends continue to the point where there is an oversupply of housing sitting vacant, that could be ‘problematic.’ He says a major factor in the decreased demand has been low oil prices and the resulting decrease in oilfield jobs in Laramie County. He says the current situation isn’t yet one of panic for property owners, but adds ‘we’ll be watching this situation carefully.’”
“Cheyenne Mayor Rick Kaysen said in August that around 1,500 new housing units were either being built or planned for the city over the next few years.”
The Advertiser in Louisiana. “Home sales for Lafayette Parish are struggling — and failing, of late — to keep the torrid sales pace set here in 2014. Blame it on the energy industry’s price plunge and the impact felt across this oil-soaked region. Bill Bacque, chair of the MLS this year, suggested that the housing market has been affected by oil and gas price declines. A Bureau of Labor Statistics report released this week showed jobs lost in the Lafayette Metropolitan Statistical Area were the highest in the country from October 2014 to October 2015. The area lost 4,300 jobs, the federal report said. ‘With no relief on the near-term horizon, it would appear that the ripples emanating from the oil patch will continue to play a mitigating role in our housing market during 2016,’ Bacque said in an issued statement.”
“Bacque said the market shows a 3.7-month supply of homes in the $150,000 to $299,999 range, the most popular price range in Lafayette. But there was a surfeit of housing in the pricier, $300,000 and up price range, about 9.9 months’ worth, homes that may prove more difficult to sell if jobs decline or if interest rates rise this month, which is widely anticipated.”
The Houston Chronicle in Texas. “Houston-area home sales fell 10.5 percent in November, the second straight double-digit decline, the Houston Association of Realtors said. The local housing market has been affected by low oil prices, which have led to thousands of layoffs throughout Houston’s energy industry. More job cuts are expected next year. Energy companies and manufacturers could shed another 18,000 jobs next year, in addition to the at least 29,000 lost this year, according to a report released this week by the Greater Houston Partnership.”
“‘Houston won’t sink into recession, but growth will be much, much slower, and to some that might feel like a recession,’ the partnership report warned.”
Reuters on Michigan. “Buying a property in Detroit a few years ago seemed like a steal for overseas investors – as little as a few thousand dollars would get them a house in a city that had hit rock bottom and could only see better times. Yet the promise turned into a nightmare for many and stories of properties vandalized, ransacked, left untended and un-rentable have sapped the interest from overseas buyers, real estate brokers say. ‘The bottom has fallen out of the speculative market,’ said Darin McLeskey, co-founder of Denovo Real Estate, who said he had received a lot of ‘cries for help’ from investors.”
“Brokers say overseas investors got burned by their own inexperience or were misled by companies misrepresenting the state of the properties and over-promising rental income. Foreigners also had trouble finding contractors or property management companies they could trust. Amsterdam-based investor Edwin Schouten said he was shocked to find his locally-managed houses empty and vandalized. ‘The first red flag was when I found houses empty and I could see the grass growing half a meter high,’ said Schouten, who now organizes his own property management.”
“Many investors have never visited Detroit and were unaware of problems such as buying the lone intact house on an otherwise abandoned block, brokers say. Michael Jordan, founder of StrategyProperties.com, estimates overseas demand has fallen by a third since 2013 and says foreigners who come to him to sell are often taken aback by losses they would need to take. ‘The problem I run into is that investors are so deep in the hole.’”
“‘Houston won’t sink into recession, but growth will be much, much slower, and to some that might feel like a recession,’ the partnership report warned.”
Here’s the chronological Houston quote stream for the next year or two:
“Oil isn’t the only business in town anymore.”
“The slowdown in oil won’t affect real estate.”
“We may have more homes on the market but that makes for better choices for buyers.”
“One month of lower sales doesn’t make a trend.”
“Two months of lower sales isn’t too much of a big deal. We’ll pick up after Christmas.”
“Yes, the RE market has slowed down but as soon as the foreign buyers get back in the market to fill in for the unemployed oil workers we’ll be fine.”
“Homes above $500,000 are slow but everything else is moving along.”
“Homes at most prices are sitting a lot longer now but it’s only temporary.”
“The market here can’t handle much more of this unless some serious price cuts start to occur.”
“He’s offering a Mercedes with the sale of the house.”
“I didn’t think Houston would have so many REO’s.”
“‘Houston won’t sink into recession, but growth will be much, much slower, and to some that might feel like a recession,’ the partnership report warned.”
Is Houston going the way of China?
“He’s offering a Mercedes with the sale of the house.”
This is when you know that the panic is beginning in earnest.
you know it’s really bad when the phrase
“Like everyone else, ” precedes a statement
as an excuse for bad financial news.
I got so sick of seeing/hearing that trite, overused set of
words during the last downturn! Rich people especially
loved saying that to garner sympathy . . . like they were just
so gosh-darned unlucky like reg’lr folk.
except maybe for “snapping-up”.
and ” a little bit”.
No way could a UHS spook the heard & say
out loud “The prices are falling a lot. GET OUT NOW!”
they’d be persona non-grata at the next “Run For The (insert charity)” event.
the horror.
heard = herd
(tiny mobile screen + ottokorrect)
Paraphrasing HA: I can ask $10 for my 1950 house in Detroit, but who is going to pay that price?
Same with your underwater shanties Jingle_Fraud.
Great analytical work HA! You know, without having any information. Idjut.
You freely disclose everything we need to know Jingle_Fraud.
“Toll shares fell 7.3% to $34.78 at 1:54 p.m. in New York, the biggest drop since late August. The Standard & Poor’s Supercomposite Homebuilding Index was down 3.1%. Investors are probably reacting to Toll’s comments about the New York ‘market becoming more competitive and the fact that they will start incentivizing more in that market,’ Megan McGrath, an analyst with MKM Holdings LLC in Stamford, Connecticut, said in an e-mail.”
Big drops in Wall Street darling, monopolistic, nationally syndicated homebuilder share prices, circa 2007, were a harbinger of the first wave of Housing Bubble collapse.
so they won’t be raising prices next week
In the Las Vegas area not two months ago I heard at a new Toll Bros community how they were raising prices 5k every five sales and it was only going up and that I should put a deposit down that day to lock in my lower pricing. The sales person did not like when I laughed at that and said no thank you I will buy it in a year or two for less. You would think I had grown another head and a tail for the look I got.
Curious to see when and how quickly the incentives spread to the rest of the market.
If NY is soft, it’s likely flyover is already softer!
“The bad news for the Connecticut housing market is that median home prices continued to drop. The median price of homes sold in October was $235,000, a 2.1 percent decrease compared to the same period in 2014. The median sale price for October of this year represents a 14.4 percent drop from where it was nine years ago. The year-to-date median sale price is $249,000, 1.9 percent less than it was through the first 10 months of 2014.”
Connecticut is reporting affordability improvements at all time scales mentioned in the article. Given the longstanding federal policy objective to provide U.S. citizens with affordable housing, how could the news about Connecticut housing prices possibly be any better?
“…if current trends continue to the point where there is an oversupply of housing sitting vacant, that could be ‘problematic.’”
A large oversupply of homes sitting vacant is step one on the pathway to affordability.
“Many investors have never visited Detroit and were unaware of problems such as buying the lone intact house on an otherwise abandoned block, brokers say. Michael Jordan, founder of StrategyProperties.com, estimates overseas demand has fallen by a third since 2013 and says foreigners who come to him to sell are often taken aback by losses they would need to take. ‘The problem I run into is that investors are so deep in the hole.’”
Any moronic overseas investors who invested in Detroit residential real estate because it seemed cheap thoroughly deserve to have their asses handed to them on a platter.
‘The problem I run into is that investors are so deep in the hole.’
The great thing about all-cash investors is that their equity remains positive down to the last drop. No matter how large their losses grow, their equity will always be positive and hence they can never get in a hole and find themselves underwater.
Of course this assumes no physical depreciation, vandalism, real estate taxes or other ownership costs will diminish their equity.
It also assumes that they didn’t get the cash by borrowing it from somewhere else.
It would be great to know how many of the supposedly all-cash investors are really f-d borrowers in fine clothing. I expect many of these guys to find themselves naked on the beach when the current liquidity tsunami tide recedes.
“all-cash investors are really f-d borrowers in fine clothing.”
Nailed it.
“Any moronic overseas investors who invested in Detroit residential real estate because it seemed cheap thoroughly deserve to have their asses handed to them on a platter.”
Perhaps they read articles such as this (from last year):
“Want to make money as a landlord? Try Detroit”
(snip)
“Investors who buy homes in the metro area can expect a 30% gross annual return from rents. That’s triple the national average of 10%.”
(snip)
“Yet, there are trade-offs. While many of the older homes in Detroit are well-crafted, brick buildings with hardwood floors and leaded glass windows, many lack some of the essentials — like plumbing and heating.”
Bahahahahahahaha … nevertheless …
“Still, the properties requiring major renovations can sell for just a few thousand dollars and be fixed up rather affordably: area contractors work for much less in Detroit than in hotter markets like San Francisco or New York.”
Oh, BTW, there’s this rather minor, trivial consideration …
“Finding reliable tenants, especially in a city like Detroit, can be yet another issue. Due to the high rate of unemployment, many tenants have bad credit and lack assets, unable sometimes, to even pay the normal security deposit.”
This too …
“And neighborhood stability is always a consideration. ‘Until crime is under control, rentals won’t go up in value much,’ said Saltmarshall.”
Discounting these two minor incidentals a thirty percent return on your money is a lock.
http://money.cnn.com/2014/04/16/real_estate/detroit-landlord/
And there’s this (from 2009):
“Detroit’s Nightmare Is Investors’ Dream”
(snip)
“In extreme cases, homes are on sale for $1 or less, which has enticed investors to Detroit from as far away as the United Kingdom and Australia.”
What the locals know …
“None of these houses are selling. None of them,” she said. “If you go down to the next block you’ll see a lot of foreclosures all around here.”
What people from overseas think they know …
“Do the math, you can buy and rehab a home for $20,000, then rent for $900 a month,” he said. “Three to four months of the year, rent is going to pay the taxes.”
http://www.cbsnews.com/news/detroits-nightmare-is-investors-dream/2/
About 7-8 years ago, I actually met a guy in the Seattle area who watched a late-night informercial about becoming a Detroit slumlord. He had a wife and young children, and owned a nice house.
He had already sold his house when I met him, and was getting rid of excess possessions in preparation for the move.
I didn’t have the heart to tell him what he was in for. The worst neighborhoods in the Seattle area are still nicer (and far safer) than most parts of Detroit.
‘McLaughlin said that the federal government’s effort to boost home ownership during the housing downturn was disorganized and scattershot, but it might have found a winner with the reduction in mortgage insurance premiums for FHA loans by an average of $900 a year. “We saw a small but noticeable increase in FHA borrowers after mortgage insurance premiums were reduced,” he said.’
‘As mortgage interest rates rise, the need for more loan products that don’t require large down payments or years of mortgage insurance premiums is going to rise in 2016 as well, says Anthony Hsieh, chief executive of loanDepot.com, the second-largest nonbank lender in the U.S. “We have a real lack of programs out there for consumers to extract equity,” he said.’
‘RealtyTrac’s Blomquist said that in 2016 he expects to see more loan products such as Fannie Mae’s loan that allows for multigenerational families to spread the cost of homeownership by counting income of boarders or renters and other family members whose income is counted even though they are not on the loan itself. Blomquist said this type of program should be expanded to “crowdfunding” for multiple families who might want to share on a loan or a home.’
‘Earlier this year, Freddie Mac CEO Donald Layton told mortgage bankers that more low down payment products were needed to “fill in some nooks and crannies left in the mortgage market” that left some borrowers, especially those who were self-employed, unable to get home loans.’
“We’ve definitely reached the tipping point where the stakeholders in the markets are less worried about risk,” Blomquist said. “The driving force is growing the market, rather than containing the risk.”
Damning admission from Gov.
Clearly their charter is to create a nation of debt-slaves.
“The Global Economic Reset Has Begun”
http://www.zerohedge.com/news/2015-12-09/global-economic-reset-has-begun
As previously mentioned, if you’re carrying any amount of debt, you’re screwed.
‘It doesn’t help that you have excess housing inventory on the market,’
Tens of millions of them. Yet prices are still massively inflated 3x over long term trend. 6x over long term trend price in some states like CA, WA, OR, TX, FL, NY.
Denver, CO Housing Craters; Prices Plunge 17% YoY
http://www.movoto.com/denver-co/market-trends/
Boulder will never go down
I think Cartman live there now
Most areas of Boulder are falling MoM and QoQ.
It’s a long way down for housing prices there.
On the other side of the real estate investing equation:
Housing’s new crisis: Half your income for rent
Diana Olick
Wednesday, 9 Dec 2015 | 12:50 PM ETCNBC.com
There are now 9 million more renters than there were just a decade ago, the biggest jump in renters on record, and they are paying more for rent than ever before.
Of the nation’s now 43 million families and individuals who rent, 1 in 5 are considered “cost-burdened,” or paying more than 30 percent of their incomes on rent, according to a new study by the Harvard Joint Center for Housing Studies. Others pay half their incomes.
“The crisis in the number of renters paying excessive amounts of their income for housing continues, because the market has been unable to meet the need for housing that is within the financial reach of many families and individuals with lower incomes. These affordability challenges also are increasingly afflicting moderate-income households,” said Chris Herbert, managing director of the center.
Adding to the crisis, the number of “severely” cost-burdened renters, those paying more than half their incomes on rent, went from 7.5 million to 11.4 million in the last decade. This, as renter incomes have declined 9 percent since 2001. Add it up, and 49 percent of renters are cost-burdened, 26 percent severely so.
Demand has clearly outstripped supply, despite a recent boom in apartment construction and a 35 percent jump in the number of single-family rental homes since the housing crash. Multifamily apartment starts are up.
“Record-setting demand for rental housing due to demographic trends, the residual consequences of the foreclosure crisis and an increased appreciation of the benefits of being a renter has led to strong growth in the supply of rental housing over the past decade both through new construction and the conversion of formerly owner-occupied homes to rentals,” said Herbert.
…
I’m curious PB, don’t you think all the evidence points to there being too little housing development?
The evidence points to a mismatch of housing production to housing needs. There’s way to much luxury product going to speculators only buying to capture central bank engineered price gains, and little building to meet the needs of people who just need a roof over their heads.
As we learned here and from other sources. There is no ’shortage of housing’. Not in the US, Japan, UK, Asia. A globe full of excess, empty and defaulted houses, oil, cars, raw stockpiles.
“New Report Reveals Melbourne Housing Shortage is Bogus”
http://www.moneymorning.com.au/20151210/new-report-reveals-melbourne-housing-shortage-is-bogus.html
Seattle, WA Housing Demand Craters; Prices Plunge 6% YoY
http://www.zillow.com/market-report/12-15/99624/seattle-wa-98199.xls?rt=14
“Houston-area home sales fell 10.5 percent in November, the second straight double-digit decline, the Houston Association of Realtors said. The local housing market has been affected by low oil prices, which have led to thousands of layoffs throughout Houston’s energy industry. More job cuts are expected next year. Energy companies and manufacturers could shed another 18,000 jobs next year, in addition to the at least 29,000 lost this year, according to a report released this week by the Greater Houston Partnership.”
Think of all the pain they could have saved if only they had kept their lifestyle priced at the historical norm for oil. *sigh*