February 4, 2016

From High Cotton, Coming Back To Reality

The Union Tribune reports from California. “San Diego County home prices were up 0.7 percent in November, below the national average, said the S&P/Case-Shiller Home Price Index. In the last 12 months, San Diego County home prices increased 6 percent, passing the national average of 5.3 percent. But the last three months have shown a comparatively slow market for San Diego. From August to November, home prices increased an average of 0.4 percent. ‘Prices, and rents too, are bumping up against peoples’ ability to pay,’ said Dana Kuhn, real estate lecturer at San Diego State University. He said San Diego was, in part, losing ground to other cities because the local population is moving away for financial reasons. ‘It’s now becoming more and more common for people to leave for more affordable locations,’ Kuhn said.”

The News & Observer in North Carolina. “A New York developer has acquired SkyHouse, the 23-story luxury apartment tower that opened in downtown last year, for a record $103 million, according to Wake County property records. World Wide Group acquired the property from the development group behind the project. The price shatters the previous record for the most ever paid for a Triangle apartment complex on a per-unit basis. WWG paid nearly $322,000 per unit for the 320-unit SkyHouse tower.”

“The price is all the more impressive when you consider SkyHouse, which opened in April, is still leasing up. More than 80 percent of its units are now rented, according to the Downtown Raleigh Alliance. ‘World Wide Group takes a long-term view to all of our real estate investments and we see a tremendous growth opportunity in Raleigh’s luxury marketplace,’ David Lowenfeld, WWG’s chief operating officer, said in a statement.”

Crain’s Chicago Business in Illinois. “With only a few days left before the post-Super Bowl home selling season, homeowners in some Chicago suburbs might consider waiting on the sidelines a little longer. In Burr Ridge and Lake Forest, 2016 dawned with enough homes on the market to feed at least 10 months of sales, according to a report from Midwest Real Estate Data. When the inventory is so high, ‘if you need to list your house, it has to be in the top 10 percent of the prettiest and the bottom 50 percent on price,’ said Tracy Wurster, a Berkshire Hathaway HomeServices KoenigRubloff agent in Lake Forest. Otherwise, ‘it won’t get noticed.’”

“While an oversupply of homes bugs sellers, it gives buyers a strong advantage. They have many options and likely can take their pick at a nice price. Yesterday buyers closed their $1.55 million purchase of a house on Ashton Drive in Burr Ridge whose sellers first put it on the market in early 2014 at just below $2 million.”

“At the moment, all the suburbs with the tightest inventory are generally lower-priced than all those where it’s loosest. One reason for loose inventory is that more affluent homeowners may be more financially able to wait for their price, Nugent said. ‘A famous line with sellers is, ‘I don’t need to sell,’ she said. ‘My question is, ‘Then why are we sitting here at this listing meeting?’”

The Tampa Bay Times in Florida. “Florida might have a short supply of homes for sale, but there’s no shortage of people hoping to sell them. Last year, 28,507 people passed the Florida real estate exam and became licensed sales associates. That’s the most in nine years and a whopping 142 percent jump from the low point in 2010. The dramatic increase gives Florida a total of 221,000 real estate agents, right at the time when many are bemoaning the dearth of homes on the market.”

“Bob Hogue in St. Petersburg, whose school is one of the state’s largest, has been in business since 1978. He said it could take years for inventories to return to normal because so many borrowers — more than 100,000 in the bay area — are still underwater on their mortgages and don’t want to put their homes up for sale if they can’t at least break even. ‘There are still so many people stuck in that spot, it casts a negative pall over the market,’ Hogue said. ‘I don’t think we’re going to see a real strengthening until almost everybody is out of that spot.’”

The Odessa Amercian in Texas. “Odessa home sales fell more than 25 percent in the last three months of 2015, while median home prices dropped just 3.5 percent, according to a new report from the Texas Association of Realtors. Meanwhile, rent prices in Odessa and Midland have fallen quickly. A one-bedroom in Odessa now averages $830 per month, less than the state average and more than 25 percent less than at this time in 2015, according to a February 2016 report about Texas rents released by Apartment List on Monday. A two-bedroom in Odessa averages $1,090. Rates in the Tall City saw a similar change but remain higher, with a one-bedroom averaging $950 per month, or about 22.5 percent less than at this time last year.”

“Ivey said he would not expect home prices to drop by such a percentage, reasoning that home values did not soar to the same degree that apartment rates did during the boom. Still, he said some relief in the housing market is long overdue. ‘Everything’s down — the median sales price is down, the number of active lists is up — and so you think Man, we are falling off the face of the Earth,’ said Warren Ivey, owner of Century 21 in Odessa. ‘But we are not. A year ago we were in high cotton. Now our consumers, our buyers, are starting to get a little breathing room and it’s coming back to reality.’”

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Comment by Blue Skye
2016-02-04 04:34:47

“WWG paid nearly $322,000 per unit for the 320-unit SkyHouse tower.”

Impressive. You can rent a 2/2 for $2300. Get this, there is actually a dog-wash on the roof!

skyhouseuptown dot com

Comment by Ben Jones
2016-02-04 06:33:57

‘The price is all the more impressive when you consider SkyHouse, which opened in April, is still leasing up’

Well that does make it a more impressive price. These New Yorker’s know a partially vacant bargain when they see it. Now, why is it 20% vacant, they’ll figure out later. That’s a snazzy website too:

*$99.00 move-in special!

Huh, now why would they be offering that?

Comment by taxpayers
2016-02-04 08:54:05

downtown Raleigh ? =wtf
rent falling 25%in one yr =wtf

also or Ethan and other used car seekers “where do you work?” is a question a seller answers w/o thinking. If they slog in traffic buy something else.

Comment by Ben Jones
2016-02-04 09:56:11

‘Last year was tumultuous in a lot of ways, but multifamily deals wasn’t one of them. The outlook for 2016 is roughly the same: lenders want to lend, borrowers want to borrow, and barring a meltdown in the U.S. economy, a lot of deals still pencil out for both parties.’

“U.S. multifamily fundamentals remain very favorable,” said Jeffrey W. Adler, vice president of Yardi Matrix. “With rents forecasted to grow more than 4.5 percent in 2016, forecasted solid job formation of more than 200,000 per month, and new forecasted completions of approximately 335,000 units, multifamily should remain a favored asset class.” Adler added, “While new development deals should face greater scrutiny as new supply impacts high-end rents and absorption, there is significant upside in value added redevelopment acquisitions that should continue to attract both debt and equity capital in most Southern and Western markets.”

‘According to Marcus & Millichap Capital Corp. Senior Vice President William E. Hughes, “Multifamily is still the darling among lenders, with maybe a little less luster going forward in some markets, as more inventory comes on line. Even so, not much less luster. The demand for multifamily isn’t going away.” Hughes added that while there will be plenty of available capital, underwriters aren’t throwing caution to the wind. “This cycle hasn’t been frothy. Standards have been maintained and that’s sustaining the market.”

‘Indications by the GSEs suggest that mul- tifamily debt levels this year will match 2015 levels, said Higgins. Overall, the Mortgage Bankers Association forecasts $225 billion in originations in 2016, roughly the same as in 2015. Also, the conduit market, while experiencing pricing volatility, isn’t expected to see any retraction in the new year.’

“Given the amount of debt capital available in the market, we don’t expect any major changes for lenders,” said Bressler. He expects continuing interest in the sort of deals that Mesa West completed late last year, which included providing the joint-venture of the Bascom Group and Oaktree Capital Management with $46.8 million in first mortgage debt for the acquisition, renovation and stabilization of Axis at Nine Mile Station, a 336-unit multifamily property in Denver.’

‘A portion of the three-year, non-recourse financing will be used to help Bascom implement its value-add investment strategy, which involves repositioning the asset, according to Mesa West principal Steve Fried, who headed the origination along with associate Seth Hall. “Bascom has the experience to unlock the underperforming property’s upside potential and narrow the current rent gap with competing properties,” said Fried.’

‘None of this is to say that the capital mar- kets will be precisely the same this year as in 2015. “Credit tightening isn’t likely in gateway cities and urban markets,” explained Higgins, “Still, with the new supply that has come on line over the past few years, older properties in secondary and tertiary markets will be subject to closer scrutiny. These properties will take the brunt of any downward value pressure as cap rates rise in response to interest rates.” Higgins added, “Rising interest rates will potentially have the greatest negative impact on debt service coverage and valuations.”


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Comment by Falling Housing Prices
2016-02-04 05:26:29

Falling Housing Prices

Comment by Mafia Blocks
2016-02-04 05:41:38

“While an oversupply of homes bugs sellers, it gives buyers a strong advantage.”

25 million excess empty and defaulted houses has the tendency to do that.

Comment by Mafia Blocks
2016-02-04 05:44:33

“A one-bedroom in Odessa now averages $830 per month, less than the state average and more than 25 percent less than at this time in 2015″

It’s about time they actually started reporting falling rental rates.

Do you think it might have something to do with the fact that renting is half the cost of buying?

Comment by Mafia Blocks
2016-02-04 05:48:44

“Another Leg Lower In Oil Coming After Many Producers Found To Have Far Lower Breakevens”


And this is the reality. Remember…… production costs are under $10/barrel

Comment by Ben Jones
2016-02-04 06:26:25

Financial turmoil half a world away is melting Minnesota’s iron country– The railroad tracks that connect the 50-year-old iron mine here to the rest of America are hidden by a blanket of snow. On a normal day, a train would be plowing through the snow every three hours, carrying thousands of tons of iron ore destined to be melted into the steel frame of a car or the beams of a skyscraper. But nothing has been normal in this region for nearly a year, when the mines began shutting down, victims of a global plunge in the price of natural resources that is upending the world economic order. Brazil is in recession. Australia is struggling to pay its debts. South Africa’s currency is plummeting. And here in America’s Iron Range, the snow on the railroad tracks lies smooth and undisturbed. By Ylan Q. Mui


Comment by Mr. Banker
2016-02-04 07:12:19

“On a normal day …”

A “normal day” (snort)

“… a train would be plowing through the snow every three hours, carrying thousands of tons of iron ore destined to be melted into the steel frame of a car or the beams of a skyscraper …”

… in some other land far across the Pacific Ocean where a centrally planned economy would for reasons of its own decide that building ghost cities and trains that go to nowhere would save its used-to-be-prosperous-exporting economy.

Comment by Ben Jones
2016-02-04 07:29:53

‘On a normal day, a train would be plowing through the snow every three hours, carrying thousands of tons of iron ore’

”a centrally planned economy would for reasons of its own decide that building ghost cities and trains that go to nowhere’

This is where Bernanke the Courageous can step in and remind us how helicopters and printing presses are a substitute for a sustainable economy.

It was all a bad investment people. That’s what causes recessions and depressions. They aren’t an El Nino of finances. The business cycle (a result of central banking, look it up) always generates excess which must be burned off in a recession or worse.

OK, this was always a given. We accept the up and down of the business cycle for the stability of central banks, we were always told. “They prevent panics, don’t you remember the 1870s’!” But somewhere along the way, central banks got pretty big for their britches. Now they are seen responsible for a never ending global “wealth effect”. They fund wars and ghost cities and stock booms out of thin air. No longer can they be concerned with a little stimulus here and there.

I’ll repeat what I heard the other day; if low interest rates were the economic ambulance, QE was economic triage. And it is ongoing.

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Comment by tresho
2016-02-04 10:52:51
Comment by redmondjp
2016-02-04 15:45:41

They know this would happen. Global economic collapse is being engineered in order to set up the global bank and its impending universal currency.

If you want to increase your control, you have to first have a problem so large that only your proposed solution (global bank/government) is big enough to fix it.

Comment by Ben Jones
2016-02-04 07:13:38

I was reading about this area the other day. 7 out of 11 plants are closed and it ain’t coming back. I remember back in the 80’s little oil towns went from having 24 hour restaurants to not even having a convenience store.

‘A year ago we were in high cotton. Now our consumers, our buyers, are starting to get a little breathing room and it’s coming back to reality’

I found this statement interesting. (I couldn’t resist using the high cotton comment in the title). It means doing really well, like when the crops are bountiful. But coming back to reality? The high cotton was reality. Is it that feeling that over the top, money everywhere,it will never end was not reality? It seems like every boom is looked back upon as a fantasy world.

Comment by Blue Skye
2016-02-04 09:07:33

“it will never end was not reality?”

If you make $1 in a boom and save it then after the boom it is still real for you. If you borrow $100 thinking you can always make the $1 payments, after the boom you are screwed and it (will never end) was not real.

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Comment by redmondjp
2016-02-04 15:48:07

But being in “high cotton” was a seasonal snapshot, with no guarantee that the same would be true a year later. Farmers, of course, knew this.

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Comment by Mafia Blocks
2016-02-04 11:12:57

It’s a shame these bubble jobs existed in the first place.

Comment by Combotechie
2016-02-04 12:40:40

The longer bubble jobs exist the greater is the number of people that get sucked into them - especially when the bobble jobs are lucrative jobs.

Bubble, bubble, bubble = Distortion, distortion, distortion.

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Comment by Combotechie
2016-02-04 13:00:03

Check this out:


In 1957 there was no such thing as NASA. Beginning in 1958 there was, and 1958 was the beginning of some very massive funding for NASA, massive funding that peaked out in 1967. So, was this massive NASA funding a bubble?

In one sense it was in that it sucked in and committed a lot of students into making careers in aerospace (lucrative careers, for a while) and then … something happened, and that something that happened ended up with a lot of career changes for a lot of people.

Look at the chart and do some counting up of the years and you will discover that the good years of NASA, the lucrative years, weren’t very many.

Comment by Combotechie
2016-02-04 13:18:36

“… massive funding that peaked out in 1967″ should read “massive funding that peaked out in 1966″.

Eight years.

Comment by redmondjp
2016-02-04 15:49:23

Similar to the Reagan-era defense contractor boom in Southern CA.

Comment by taxpayers
2016-02-04 06:11:18

Super low inventory in 22151
Prices flat,but soon Hilary will be hiring more feds.
0 has created 20+ new gov agencies of clock watching slobs

Comment by Mafia Blocks
2016-02-04 06:32:14

Doubtful my friend.

Comment by Mafia Blocks
2016-02-04 06:47:16

“Credit Suisse Plunges To 25 Year Lows After Posting Enormous $5.8 Billion Q4 Loss”


Comment by Ben Jones
2016-02-04 06:54:25

‘The shares are down 32% this year alone.’

‘Investment banking was a nightmare as revenues fell 17% in 2015 due to “lower debt and equity underwriting” attributable to “volatility in capital markets.” “They’re the ones we control the least,” Thiam said of the Global Markets and Investment Banking & Capital Markets units.’

Comment by Ben Jones
2016-02-04 07:03:10

‘Dear Moneyologist,’

‘My mother-in-law passed away several months ago. She made my husband’s brother’s ex-girlfriend the executor of the will, which was changed to give the two of them everything. My husband got an old car and his sister got her jewelry. My brother-in-law and his ex-girlfriend changed the will so they received everything else: The house, any money, her IRA and everything else in the house.’

‘My question is: Since the executor of the will was appointed to settle all of my mother-in-law’s debts, hospital bills, mortgage, etc., would she have to also pay a debt that my mother-in-law had with me? The reason I ask: She co-signed for my mortgage. It originally was $168,000, but I owe about $118,000. Would she be responsible for half of it, since she was half-owner, so to speak?’

‘Christine in Denver’

‘Dear Christine,’

‘Your brother-in-law and his ex-girlfriend don’t have the legal authority to change the will. Only your mother-in-law had the power to do that. As for any debt owed to you from your mother-in-law. I give you top marks for creative thinking. And the same for chutzpah.’

‘Debt repayments don’t die with the creditor, but your mother-in-law was not in your debt. On the contrary, she was actually doing you a favor by co-signing. It’s your house, your mortgage — and your problem.’

‘So you need to consult the original mortgage loan agreement. “If this agreement has a provision that would shift responsibility, in whole or in part, to your mother-in-law’s estate, then further steps would be highly beneficial,” Harris says. I’m guessing (a) it would be highly unusual for a co-signer to do that and (b) your mother-in-law’s estate would have to be worth enough to cover the mortgage. If it does not have such a clause, it’s likely that the lender will still hold you responsible for this debt as the primary signer. The most likely scenario: You need to pay the rest of the mortgage.’

‘Take your mother-in-law’s jalopy for a drive in the country. That would probably have made her happy to know her car is being put to good use. Make sure you join American Automobile Association first, however, in case you have engine trouble on the way.’

Comment by cactus
2016-02-04 10:18:37

My brother-in-law and his ex-girlfriend changed the will so they received everything else: The house, any money, her IRA and everything else in the house.’

That’s against the law. Maybe they compelled the mother to change he will ?

Comment by Karen
2016-02-04 15:17:38

‘My question is: Since the executor of the will was appointed to settle all of my mother-in-law’s debts, hospital bills, mortgage, etc., would she have to also pay a debt that my mother-in-law had with me?’

FB’s are now looking to the dead for assistance and to share the blame.

They twist and contort everything in their attempts to escape responsibility. It really is terrible that this monster was ever created to begin with. But this really is the mentality of your average person these days. They have become completely corrupted.

Comment by Professor Bear
2016-02-04 07:24:30

‘It’s now becoming more and more common for people to leave for more affordable locations,’

BS. It has been happening ever since we moved here, over a decade ago. We have seen plenty of families leave due to affordability issues. The only folks who are financially secure either bought before 2000 or struck it rich by other means (trust fund babyhood, corporate officership, etc).

Comment by cactus
2016-02-04 10:24:15

Poway so many old people and they sold the city up the river with the bonds they sold.

I guess they figure they will be dead and so what if they can’t pay the balloon payment ? A new Detroit in the making ?

My landlord their thought his junk house off Community was such a great property ?? People shooting each other over parking.

Comment by In Colorado
2016-02-04 11:19:53

I still remember how stuck up people in Poway were when I worked in Rancho Bernardo in the 90’s. You’d think they lived in La Jolla.

Comment by rj chicago
Comment by aNYCdj
2016-02-04 09:16:46

and i really thought rahm would kick azzz with black criminals, and fix the failing school unions, be a healer in chi town so he could run for pres in 2016……boy was i way off the mark

Comment by The Central Scrutinizer
2016-02-04 11:10:18

Seems he was pretty good at the first thing… maybe a little to eager.

Comment by taxpayers
2016-02-04 16:05:10

The 17 % raise for teachers will no the city,then the state

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Comment by SD_LI
2016-02-04 09:50:52

Ben, thanks for posting the SD Union Tribune article. Home prices in San Diego are clearly headed lower. The market has long been stalled and even rents are starting to fall. I can’t wait for the crater!

Comment by tresho
2016-02-04 10:44:53

NYT: Many Flint Residents Are Desperate to Leave, but See No Escape
FLINT, Mich. — Charles White, a carpenter, sat on the couch in the living room of his small bungalow, his gaze fixed on his 5-month-old, Vaughn, nestled in a bouncy chair at his feet.

Mr. White, who has lived in Flint most of his life, said that he was at his job the day before when his girlfriend, Tia, called in a panic after coming from the pediatrician. Both of their children have lead poisoning.

“She spent all day crying, trying to figure out how we’re going to get out of here,” he said softly. “I’m prepared to sell everything I own to get out and save my children.”…Homeowners have little hope that they will be able to sell. Renters, like Mr. White, who pays $450 a month for a three-bedroom house, worry about [extravagance housing costs anywhere outside of a poisoned, unliveable, soon-to-be ghost town. By the way, Mr. White doesn't have to worry about selling his house.]

Comment by tresho
2016-02-04 10:57:50


“It costs money to move,” said Sandra Ballard, a 62-year-old retiree who lives on the impoverished north side of Flint. She said she struggled to pay her $350 a month rent for a three-bedroom apartment with a patched ceiling.

The “patched ceiling” is that apartment’s best part!

Comment by tresho
2016-02-04 11:02:23

A comment to the above article:

I’d move people and animals to safety first, then figure out what to do about the water. Bulldozing the city is probably the cheapest alternative.

Comment by In Colorado
2016-02-04 11:26:29

When you have no money, no job waiting for you somewhere else and have no relative’s couch to crash on when you arrive, “packing up and leaving” basically means becoming homeless.

Comment by In Colorado
2016-02-04 11:28:10

Renters, like Mr. White, who pays $450 a month for a three-bedroom house

He’d have to cough up more than twice that much to rent a dump in my little burg.

Comment by Mafia Blocks
2016-02-04 13:25:46

And quadruple that amount to buy one of those rotting shanties.

Remember….. rental rates are half the cost of buying housing at these grossly inflated asking prices.

Comment by Senior Housing Analyst
2016-02-04 11:07:58

San Diego, CA Housing Market Craters; Prices Plummet 6% YoY As Housing Inventory Looms


Comment by Mafia Blocks
2016-02-04 11:41:53

“Toxic Loans Around the World Weigh on Global Growth”


How many millions of toxic mortgages were written in the last 5 years…. 10 million? 20 million?

Comment by Karen
2016-02-04 15:49:37

“Toxic Loans Around the World Weigh on Global Growth” - this is quite an article.

“If you have a boom and then a bust, you create economic losses,” said Alberto Gallo, head of global macro credit research at the Royal Bank of Scotland in London. “You can hope the losses one day turn into profits, but if they don’t, they are a drag on the economy.”

Bankers of the world: hoping the losses one day turn into profits.

On China: ““The world has never seen credit growth of this magnitude over a such short time,” she said in an email. “We believe it has directly or indirectly impacted nearly every asset price in the world…

“Headline figures for bad loans in China most likely do not capture the size of the problem, analysts say. In her analysis, Ms. Chu estimates that at the end of 2016, as much as 22 percent of the Chinese financial system’s loans and assets will be “nonperforming…”

“My sense is that the Chinese policy makers seem like a deer in the headlights,” Mr. Balding said. “They really don’t know what to do.”

You don’t say.

Comment by Combotechie
2016-02-04 16:44:44

A reminder: Asset prices are destroyed by Mr. Market and this destruction is immediate. The destruction of the debt that powered the asset prices and is backed by asset prices is generally done by accountants (as well as by Mr. Market) and this is not done until much later, after all hope of a recovery has finally been exhausted.

Meaning … the destruction of debt (debt that is somebody’s money, money that somebody is owed, money that somebody thinks will someday be paid to him) somewhere down the line will cause a lot of money to go poof which means a lot of people will discover that they aren’t as well off as they thought they were.

Oh, and as for promises, promises of money; those, too, are forms of debt. The most fun sort of these types of promises are the ones that are unfunded.

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