February 1, 2016

Froth, Overpaying, Fear And More Price Reductions

The Kern Golden Empire reports on California. “The numbers are in for the 2015 Bakersfield housing market and Thursday the forecast for 2016 was released. Local appraiser Gary Crabtree says uncertainty over oil prices makes for a difficult forecast. Oil layoffs mean shattered budgets at home, putting mortgage payments in jeopardy, among other things. Without being able to tell how much longer the slump will last, Crabtree said 2016’s market changes are dependent the health of our local oil and Ag industries. Local real estate agent, Laurie McCarty, agrees. ‘We see a fear of those in the industry, a lot of sellers proactively putting their home on the market, trying to preserve whatever equity they have, even though they still have a job they think maybe at the end of the year they won’t,’ said McCarty.”

The Midland Reporter Telegram in Texas. “The recent oil boom led to a huge increase in rental prices. Ryan Dixon, 28, who moved to Midland last year, faced a situation of wanting a newer apartment since it would mean only a few hundred dollars difference. He visited about 10 complexes between May and the end of June. By the time of his move-in date, the rent of the apartment Dixon chose decreased $300. ‘It’s so amazing, the supply-and-demand difference, even back then,’ Dixon said.”

“He had picked the complex because of amenities, price, location and floor plan were the best of the 10, so the price drop came ‘as a plus,’ he said. Dixon signed a one-year lease but anticipates he could negotiate for lower rent. His reasoning is the decline in the oil and gas industry but also from a less-than-scientific measurement: available parking spots. ‘Just based on observational occupancy rates, it appears to be close to 50 to 60 percent occupancy now. Just based on how many parking spots are full every night and all that jazz,’ Dixon said. ‘It’s nowhere near as full as when I first moved in.’”

The Sierra Sun in Nevada. “The average sales price for an existing single family home in Washoe County was $292,000, according to recent statistics released by the Reno/Sparks Association of REALTORS. This is a decrease of 12 percent from November 2014 and a moderate 4 percent increase from October. Still, even with higher prices, it’s a buyers’ market, according to Sarah Carmona Zink, owner of Dreams Realty in Reno. She says homebuyers more and more are asking for concessions in contracts, such as asking sellers to cover home warranties or for any repairs before they take up residence. And they’re asking for these concessions up front.”

“‘We’re in a weird place, because we’re seeing a low inventory, but we’re seeing a lot more price reductions. Buyers are not apt to get into bidding wars and reluctant to buy until the price feels right,’ said Zink. ‘We’re starting to see price reductions and a lot more repair requests.’”

The Miami Herald in Florida. “Eddy Arriol’s Apollo Bank has been a big hit, recently earning a coveted five-star rating from Bauer Financial. Arriola answered these questions from the Miami Herald in an email. Q. Are Latin American investors and businesses facing liquidity issues because of struggling local economies? How will that affect crucial drivers of Miami’s economy such as real estate?”

“A. Yes, Latin America — and the rest of the world — is having liquidity issues, but that is not the only driver in figuring out what will happen to Miami’s economy…If you’re asking me if things are frothy in the luxury condo market and if foreign and out-of-town investors are overpaying for multifamily rental properties, then I’d say yes. We have a luxury real estate correction knocking on our front door.”

The Nikkei Asian Review. “According to the Institute of International Finance, the net capital outflow from China stood at $60 billion in April to June of 2015. The figure grew to $221 billion in July to September and to $239 billion in October to December. Where has the money gone? The answer can be found in Manhattan. Close to the intersection of 53rd St. and Lexington Avenue, a 61-story condominium is under construction. The residential tower, whose penthouse will be sold for $65 million, is slated for completion in 2017.”

“What is interesting is the list of developers involved in the property. It includes state-owned nonperforming asset disposal company China Cinda Asset Management and China Vanke, a real estate company. Chinese businesses invest in property projects in the U.S. and sell them to affluent Chinese. This condo may be one such ‘all-China’ property. ‘We are seeing less individual investors with the smaller numbers of $1 million to $3 million. Now the larger purchases on an institutional level with north of $10 million have significantly increased,’ said New York-based real estate lawyer Edward Mermelstein.”

The Worcester Telegram in Massachusetts. “When David J. Parent purchased a single-family two-bedroom house in Worcester in November 2006, he paid $195,000 for it. Now after a series of roof replacements, bath and kitchen remodels, new electrical wiring and the passage of nine years, his father’s real estate agency, Parent Prudential Associates, sold the house for $184,900 – $10,100 less than the purchase price of the house. ‘He won’t be even able to sell it for the original price. It’s worth less than it was 10 years ago,’ said his father, David G. Parent, before a purchase and sale agreement was reached.”

“The house at 27 Uncatena Ave., which was listed for sale for $194,900 on Oct. 29, underwent a series of price adjustments, dropping to $189,900 and then to $184,900, which is the price it sold for earlier this month. ‘This house is a typical situation of what is happening in Worcester right now,’ David G. Parent said, with a shrug of his shoulders.”

RSS feed


Comment by taxpayers
2016-02-01 06:13:28

Do oily area leases have deflator clauses now ?

Comment by rms
2016-02-01 06:15:49

From the Bakersfield, CA piece: “As for rising interest rates, Crabtree says no need to worry, at least for now. “The average family will have to make around 25-hundred dollars more a year to qualify for the same loan so it’s not that much,” said Crabtree.”

Trying to confuse the “How much a month?” California peeps with annual costs rather than just saying another $200 per month?

Comment by taxpayers
2016-02-01 06:57:03

the 10yr is under 2% so mort rates ain’t the problem

Comment by rms
2016-02-01 22:44:39

Oops… read that the wrong way. :(

Comment by Ben Jones
2016-02-01 07:49:24

‘Police arrested the maverick founder of China’s largest online finance business on suspicion of fleecing 900,000 investors of $7.6 billion, in what could be the biggest financial fraud in Chinese history. Ezubao was the most spectacular player in a booming online investment industry that Chinese authorities have been struggling to regulate. Firms ranging from established Internet companies such as Alibaba to virtually unknown upstarts have flooded into the business, promising higher returns than those at state-run banks, which often offer interest rates below inflation.’

‘Ezubao promised investors that borrowers would pay back loans at interest rates between 9 percent and 14.6 percent, but 95 percent of those borrowers were fictional entities created by Ezubao, a former company executive told investigators.’

‘Ezubao appeared to gain Beijing’s imprimatur when the gov.cn government website published an interview with Ding in July discussing his life as an entrepreneur. The interview has since been removed from the site.

State media took a far different tone on Sunday as CCTV aired Ding’s confession and footage of officials hauling away bags of cash from his home. The Xinhua news agency detailed Ding’s extravagant lifestyle and the gifts he lavished on a business partner Zhang Min, including a $20 million villa in Singapore and a $1.8 million pink diamond ring.’

“The truth is that it’s a fraud … it’s a typical Ponzi scheme,” Zhang, the associate, said in her aired confession.’

‘Despite the vast sums cited in the case, Ezubao, which also went by Ezubo on its website, represented just a sliver of China’s shadow banking industry estimated to be worth $1.5 trillion as of the end of June, according to Chinese banking regulators. Independent economists and party officials alike have warned about the danger of unchecked private lending and the political spillover of a large-scale collapse.’

‘After police shut down Ezubao in December, scores of protesters gathered outside a Beijing government building to demand their money back. Simmering anger on social media also spurred public security officials to phone Internet users to warn them against criticizing the Communist Party online.’

‘One investor from Northeast China who lost close to $80,000 told The Associated Press in December that police confiscated her computer and cell phone after she posted online that she might file a petition with the central government.’

‘Fu Weigang, a researcher at the Shanghai Institute for Finance and Law, said difficulty obtaining financing in a state-dominated banking system has for decades driven Chinese citizens into underground borrowing and lending, which also gave rise to countless Ponzi schemes.’

‘But Ezubao was able to take advantage of an influx of mom-and-pop investors in recent years using an Internet model, Fu said, effectively pushing small-scale scams to a countrywide level. “What they were doing was nothing new in China,” Fu said. “But how they were doing it online, and the scale, was unprecedented.”

Comment by Ben Jones
2016-02-01 07:55:10

‘Singapore has siezed a large number of bank accounts in recent months as part of an investigation into possible money-laundering linked to Malaysian state investment fund 1Malaysia Development Berhad (1MDB), authorities said on Monday.’

‘The statement comes a week after Switzerland’s chief prosecutor said a criminal investigation into 1MDB had revealed that about $4 billion appeared to have been misappropriated from Malaysian state companies.’

‘1MDB, whose advisory board is chaired by Malaysian Prime Minister Najib Razak, has been investigated by Malaysian authorities following accusations of financial mismanagement and graft. 1MDB has denied these allegations.’

‘Last week, Malaysia’s attorney general cleared Najib of any criminal offences or corruption, declaring that $681 million deposited into his personal bank account was a gift from Saudi Arabia’s royal family and no further action needed to be taken.’

‘The Wall Street Journal reported last year that investigators had traced nearly $700 million from an account at Falcon Private Bank in Singapore to accounts in Malaysia they believed belonged to the prime minister.’

‘Falcon Private Bank, a Swiss private bank owned by Abu Dhabi sovereign wealth fund International Petroleum Investment Company, has said it is in contact with Singapore’s central bank and will cooperate with authorities.’

Comment by taxpayers
2016-02-01 08:09:48

Singapore has caning and no unemployment insurance or 99′r BS
workie chop chop
unemployment rate 2.2% in tough times

Comment by In Colorado
2016-02-01 09:51:17

If you trust their numbers. I’ve encountered Singapore college grads who couldn’t find work even during the “good times”.

In theory the unemployment rate in Colorado is 3.5% (and we have unemployment bennies). But I don’t trust that number, just as I don’t trust the numbers in Singapore … or China, or anywhere else for that matter.

(Comments wont nest below this level)
Comment by Karen
2016-02-01 09:41:15

A $681 million dollar gift to the Prime Minister who is the chairman of the board of the state investment fund.

Seems kosher.

Comment by rms
2016-02-02 05:01:24

“Seems kosher.”

Yup, move along folks… nothing to see here.

(Comments wont nest below this level)
Comment by Jingle Male
2016-02-01 08:46:15

“….It’s worth less than it was 10 years ago,….”

Yet it is probably worth twice what it was 5 years ago!

Comment by Mafia Blocks
2016-02-01 08:53:08

And not a buyer in sight at 50 cents on the dollar Jingle_Fraud.

Comment by aqius
2016-02-01 21:48:10

here we go

Comment by Mafia Blocks
2016-02-02 05:22:05

Data my friend. Stick with the data.

(Comments wont nest below this level)
Comment by Ben Jones
2016-02-01 09:16:33

‘He had picked the complex because of amenities, price, location and floor plan were the best of the 10, so the price drop came ‘as a plus,’ he said. Dixon signed a one-year lease but anticipates he could negotiate for lower rent…‘Just based on observational occupancy rates, it appears to be close to 50 to 60 percent occupancy now. Just based on how many parking spots are full every night and all that jazz,’ Dixon said. ‘It’s nowhere near as full as when I first moved in.’

A newer, fancy apartment complex dropping rents and half full. How would you like to be the lender on that project?

Comment by Rental Watch
2016-02-01 13:51:27

Being a lender wouldn’t be so bad.

Being the equity whose underwriting included full occupancy and rents rising 4-5% per year into infinity would be rough.

Comment by Ben Jones
2016-02-01 09:23:25

From the Sierra Sun article:

‘Construction of new, single-family homes have been stagnant over the past few years, but homebuilders appear poised to begin anew. New subdivisions in South Reno or North Valleys, as well as in smaller communities like Dayton, Silver Springs and Fernley are under way or being planned.’

‘One homebuilder, Lennar Corp., has introduced Fronterra at Pioneer Meadows, an entire community dedicated to single-family home rentals in Spanish Springs. Lennar introduced the concept this past spring, and it proved so popular that the homebuilder already is in the process of building and additional 156 new homes. The company plans to build 10 single-family homes per month until finished.’

‘Dustin Barker, division president for Lennar, Northern Nevada, said it was attractive to young families and there were a surprising number of retirees who have moved into the community. “There were plenty of retired couples coming from say, California, who owned a home and built up equity in that home and can live off that equity,” Barker said.’

And escape the poverty back home. I see these Californians all over these parts. Usually when applying for rentals; bad credit and/or, recently foreclosed, asking for the first month free because they don’t have enough cash.

Comment by taxpayers
2016-02-01 12:45:20

did Reno ever recover?
sad place -gambling in the bathrooms

Comment by Ben Jones
2016-02-01 09:29:27

From the last link:

‘Geoffrey Carliner, an economics professor at Boston University, explained possible reasons for the change in Worcester’s house prices. “Usually, there are two reasons for house prices in a specific place to change,” he said. “One is the unemployment rate, and the other is the interest rate.”

Hmmm, so having interest rates artificially suppressed for over a decade (two, three?) might explain house prices way over historical averages? It’s a good thing the Central Committee will never allow unemployment to increase. Well, they can arrest anyone that reports it anyway.

Comment by IPFreely
2016-02-01 09:43:34

I looked it up on google, it’s a tiny old house. 100k would be too much for it.

“Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one.”

Comment by Raymond K Hessel
2016-02-01 10:22:21

While the lemmings rush from stocks to bonds, precious metals keep rising inexorably.

Comment by Double Flip Triple Gainer
2016-02-01 17:04:28

Those who have adhered to the Double Flip Corollary have done quite nicely thus far in 2016.

Comment by rj chicago
2016-02-01 11:41:47

Quote of the day….this…..

“A lot of people want to try and tie it to the Internet or ‘that’s not cool,’ or teens don’t like it,” Jesse Tron, a spokesman for industry trade group International Council of Shopping Centers, told CNBC last year. “It’s hard to support large-format retail in those suburban areas when people are trying to just pay their mortgage.”

Comment by Karen
2016-02-01 15:47:11

I am surprised by the look of many of the loanowners in the housing development behind my apartment complex. I understand some percentage may be renters, but this is a nice newish development and I don’t think a huge percentage are renters. But a lot of these folks just don’t look as well-off as you would expect. They definitely look like people who might be struggling with the mortgage. A lot of them drive older vehicles. At first I thought it must be just people coming into the neighborhood to houseclean or whatever, but then I walked the streets at night and saw all the cars parked there. Some of the people and their vehicles look like they belong in this neighborhood and these houses, but some just don’t. It’s very incongruous.

Comment by Mafia Blocks
2016-02-01 11:57:20

“‘He won’t be even able to sell it for the original price.”

Not to mention the $75k he dumped into after paying $195k for a $30k house.

Comment by Mafia Blocks
2016-02-01 12:03:40

“Oil Is Crashing After Hedge Fund Bulls Pile In At Fastest Pace Since 2010″


Comment by Senior Housing Analyst
2016-02-01 12:43:22

San Jose, CA Housing Market Craters; Prices Plummet 8% YoY


Comment by Senior Housing Analyst
2016-02-01 15:33:55

Land is an extremely risky proposition if it’s priced much more than $500-$1,000 an acre. Highly speculative and volatile.

Comment by Senior Housing Analyst
2016-02-01 15:52:24

Beaverton, OR Housing Market Craters; Prices Tailspin 19% YoY On Ballooning Mortgage Defaults


Comment by Double Flip Triple Gainer
2016-02-01 17:15:43

There is delusional, and then there is the Chicago Teachers Union. Making matters even more fun, Rahm is shopping around New York as we speak looking to raise $875 million and offering a 7.7% coupon. Shockingly nary a fish is biting. Something tells me even a 20% coupon wouldn’t suffice.


Comment by Mafia Blocks
2016-02-01 17:56:32

Housing my friend…. Housing.

Chicago, IL Housing Prices Crater 9% YoY


Name (required)
E-mail (required - never shown publicly)
Your Comment (smaller size | larger size)
You may use <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong> in your comment.

Trackback responses to this post