A Slowdown In Sales And A Potential Supply Glut
A report from the Wall Street Journal. “Quicken Loans’s Super Bowl ad has sparked rumblings over whether we should worry about a new housing bubble. ‘What if we did for mortgages what the Internet did for buying music and plane tickets and shoes?’ a narrator says. The 60-second spot then opines about how Quicken’s new product, called the ‘Rocket Mortgage,’ might do that. It would unleash ‘demand for necessary household goods as our tidal wave of ownership floods the country with new homeowners who now must own other things.’ CNET says the ad ‘might send a shiver down your spine.’ Bloomberg Business says it falls into the realm of having ‘forgotten that the financial meltdown ever happened.’”
The Real Deal on New York. “Wary of a slowdown in high-end apartment sales and a potential supply glut, lenders are beginning to retreat from Manhattan’s luxury condominium market. Many banks are either cutting down their luxury condo construction lending or stepping away from the market altogether, according to brokers and lenders interviewed by The Real Deal. Developers, however, remain bullish that their product will sell, and are trying new avenues to obtain the financing.”
“‘Everyone’s a little worried,’ said Michael Stoler, a managing director at investment firm Madison Realty Capital. ‘With anything at $2,500 (per square foot) or more, lenders are very cautious,’ he added.”
The Miami Herald in Florida. “When Latin America sneezes, Miami catches a cold. So what happens when South Florida’s vital economic partner comes down with something really nasty? Real estate brokers aren’t shy about admitting that 2016 will be rough. ‘We’re going to see a slowdown [for condos] in 2016 across the board,’ said Philip Spiegelman of condo marketing and brokerage firm ISG. ‘We used to be able to close a deal with a foreign buyer in two visits,’ Spiegelman said. ‘But a lot of times now it takes four or five visits. It’s taking a lot longer to get to that ‘yes’.”
The Jamestown Press in Rhode Island. “Following a glowing statewide report, the island’s realty firms confirmed the bullish news that housing sales in 2015 were the highest in more than a decade. On the minus side, some of the prices — especially for luxury properties — sank ’significantly,’ according to Bob Bailey of Lila Delman Real Estate. Also with supply and demand, he described a mismatch between property conditions and the expectations of today’s luxury buyer. However, many of those listings were scooped up in the fourth quarter after anxious sellers lowered their asking prices, he said, leading to 30 percent of the year’s sales closing in the last quarter.”
The Tyler Morning Telegraph in Texas. “Home sales in Tyler in 2015 were great and sales in the East Texas region were good. Yet, while 2016 seems off to a solid start, there could be trouble brewing if oil and gas prices remain low. John Jarvis is a real estate agent in Emory, whose specialty is rural properties. ‘We’re starting to see oil prices affect sales in our five major cities, but not the degree it did the last time, in the 1980s,’ Jarvis said. ‘A friend of mine has just gotten laid off from his oilfield job, and he thinks oil might drop to the low $20s (per barrel of West Texas Intermediate crude). If that happens, and we start losing even more oil and gas jobs, that would trickle down to the home market.’”
“Claudia Carroll, chairwoman of the Greater Tyler Association of Realtors agreed. ‘For our area, the big question is oil and gas prices and whether that will negatively impact the market,’ she said. ‘I’m beginning to hear anecdotal indication that it might. I’ve had a couple of my own clients call and tell me they’re being affected. One is having to put his home on the market, and the other is pulling back from plans to move up.’”
The Dickenson Press in North Dakota. “Though contractors are still constructing speculative homes for market, Dickinson’s housing boom has largely tapered off. City Administrator Shawn Kessel said the city expects the number of permits issued this year to be ’significantly down’ compared to previous years, but that the trend does not come as a surprise. ‘It’s not unanticipated based on quantity that has been built in the last three or four years,’ he said. ‘Thousands and thousands, literally, of housing units — whether they be single-family or multi-family — have been constructed.’”
“While he said it’s too early to judge 2016, Tracey Hoff, owner of The Real Estate Co. in Dickinson, said housing remains active and the increase in availability is good for buyers. ‘In the past, if you went back to ’12, ’13 and ’14, (buyers) didn’t have a lot to look at — there was no inventory,’ he said. ‘I think the buyers are benefitting from this, and I think it’s a great opportunity because there’s a little more selection and they’re probably getting more house for the money.’”
The Dickenson Press that is posted above also carries this article:
“Crossing’ into new territory: Oilfield entrepreneur enters restaurant business with new steakhouse
“Seth Murphy knows next to nothing about running a restaurant.
“But he knows what he likes: great food, a place he can both bring his family and conduct business, and a venue that can be used to give back to the community.”
This should end well.
“The boom’s gone, and some southwest North Dakotans are OK with that.
(snip)
“The Dickinson oilfield entrepreneur said he isn’t letting the western North Dakota energy industry downturn keep him from diversifying his business ventures.
“’Everyone says it’s a hard industry, and I’m sure it is,’ Murphy said of the restaurant business. ‘But hard is a relative term. Not everybody deals with what we deal with by 5 a.m. every morning either.’
“Murphy, the president of oilfield service company SM Fencing, said he wanted to start a business separate from the energy industry that would be able to provide an amenity to southwest North Dakota community.
“He and his company believe they’ve found that opportunity with The Crossing, an 11,000 square foot steakhouse and bar under construction on north State Avenue near the Sierra Ridge apartment complex.
(snip)
“’What is our vision and how are we going to get there?’ she said. ‘There is no blueprint. This is us sketching it out on a kitchen table, and trying to figure out what this is going to look like and how this is going to go. One of our biggest advantages is our team is deep in common sense.’
“When complete, The Crossing will have two levels and ability to seat around 270 people.
Beyond that, Gartner said, The Crossing will have two private conference rooms able to provide space for everything from parties to board meetings, and another area she said can be called a “multi-use space.”
“We want The Crossing to be where people celebrate their life’s biggest moments,” Gartner said.
“While the group’s main focus is to bring another dining opportunity to the area, it also hopes to use The Crossing as a philanthropic entity.
“Gartner, who like Murphy is from the Killdeer area, was brought on board a little over a year ago and she was sold on The Crossing, in part, because of Murphy’s wish to conduct more philanthropic efforts.
“When I started on, what was appealing was he’s looking for a legacy impact,” she said. “… That’s part of the Crossing’s DNA is there will be social good woven into it.”
Gartner said The Crossing wants to be known as a gathering hotspot and the restaurant of choice for locals, both old and new, and be able to cater to changing social demographics.
“’It isn’t a goal to build this to service the oilfield if and when it comes back,’ Murphy said. ‘We’re building this to serve the locals that have been here that input good into the community. The agricultural segment is going to be a big part of what we play to.’
“I really see it as becoming almost a cornerstone of the community,” she said. “I think it’s going to be a big place where people can gather.”
(snip)
“’None of us have restaurant experience,’ Murphy said. ‘We know what we like. We purposefully didn’t bring anyone into the team that had restaurant experience because the way you’ve always done it is not always the right way. Just because it’s been done one way for 30 years doesn’t mean it can’t be done better.’
Here’s a good article from last year that features Dickenson N.D., from The Atlantic magazine …
The North Dakota Oil Boom Bust
http://www.theatlantic.com/business/archive/2015/06/north-dakota-oil-boom-bust/396620/
’None of us have restaurant experience,’
He could take it to silicon valley and raise billions. BTW, I read that Amazon is gong to start selling books. In stores.
Two hundred seventy seats is a very large restaurant, even for a big city. And this is Dickinson, N.D., population 22,300. Is anyone involved with the oil business capable of thinking small when thinking small is the right move? What’s the matter with a restaurant that seats 75? That place will be an empty cavern at least five days a week and possibly six or seven. As soon as it opens.
“Our team is deep in common sense.”
Is Quicken Loans the reincarnation of Countrywide?
Reading some of the Facebook reviews of the “Rocket Mortgage” it looks like it also links you to multiple Realtors who call you nonstop. One guy was denied a loan and had folks calling him for weeks.
I saw the Quicken ad while watching the game and couldn’t believe it was for real. “You can get a mortgage with your phone!” Almost like this was Angry Birds or Farmville or summoning a Uber.
Back around 2003-04, I remember another Super Bowl ad for a mortgage firm, the theme of which was “we won’t look too closely” into the prospective borrower’s background or creditworthiness. My first thought was, if someone wants a loan for two or three times annual income, aren’t you supposed to look closely? At that time I had no idea that the loans were securitized and sold off.
‘We’re starting to see oil prices affect sales in our five major cities, but not the degree it did the last time, in the 1980s’
A little early yet Jarvis, we’ll check on you in three years of that “surplus of lots” nobody will lend on.
‘I’ve had a couple of my own clients call and tell me they’re being affected. One is having to put his home on the market, and the other is pulling back’
Does anyone remember that UHS chairman or something, in southern California. At one point she was saying, ‘there ain’t no bubble’ adamantly, then 6 months later she was a foreclosure specialist.
She was promoted to Foreclosure Moratorium Specialist in 2009.
I found it. For some reason her name stuck in my memory:
April 13, 2008
It’s A Happy Day In California
“David Day’s house-flipping strategy flopped and now he’s fighting for his financial life. Like so many others, he’ll likely lose.”
“Day and his family are on foreclosure’s doorstep, struggling to make mortgage payments totaling $6,240 a month. ‘I haven’t slept in five months. I wake up every morning in a cold sweat. I’m getting ready to go into bankruptcy,’ he said. ‘There is no money for food, basically.’”
“Day, a record producer who lives in Granada Hills, is upset that his lenders won’t modify the mortgages on either his residence or investment property. So far, all the assistance plans exclude speculators.”
“Howard Hack, owner of Howardsappraisal.com, sees it happening every day. ‘In many (of these) neighborhoods, half of the comps are foreclosures,’ he said.”
“The misery continues to build. As of April 4, across Los Angeles County in the past 120 days there were 119,663 pre- foreclosure proceedings initiated, 55,482 property auctions and 30,368 properties repossessed, according to Foreclosures.com. In the San Fernando Valley alone, there were almost as many foreclosures in the first two months of this year as sales.”
“Mary Funk, president of the Southland Regional Association of Realtors, specializes in foreclosures. Some of her clients have adopted a ‘cash for keys’ policy to minimize any damage left behind by a frustrated former owner.”
“‘If they deliver the keys to me and have the house vacant and broom clean, I hand them a check and they give me the keys and they are gone,’ Funk said.”
“That might become the best- case scenario - if you want to call it that - for Day, the investor. He said he’ll probably let the investment property slide into foreclosure and keep making the mortgage payment on the house he and his family have lived in for two decades.”
“‘We had no idea that this was the beginning of the end,’ he said of his attempt to cash in on a hot market that had chilled. ‘We got blindsided.’”
http://thehousingbubbleblog.com/?p=4389
“Howard Hack, owner of Howardsappraisal.com”
LMAO.
Fitting for anyone involved in pimping used houses at a grossly inflated price.
I wonder why he didn’t call it Hackappraisal.com.
“Mary Funk, president of the Southland Regional Association of Realtors, specializes in foreclosures. Some of her clients have adopted a ‘cash for keys’ policy to minimize any damage left behind by a frustrated former owner.”
And she’s sure to put your finances in a funk for a lifetime.
reminds me of this guy from SDCIA. Is it starting to happen again ??
Jeff begins to crack up…
“I have been ill…
I can’t sleep, I can’t eat, when I do eat it comes up. This morning I started the day with a shower and threw up in the shower…
I am barely functioning, I try to read everyone’s posts…
To those of you that insist that these houses were a mistake, you were right.
To those of you offering constructive advice and support, thank you.
I try to read everything but the words are just swimming, I’ll try again later…”
‘I haven’t slept in five months. I wake up every morning in a cold sweat. I’m getting ready to go into bankruptcy,’ he said. ‘There is no money for food, basically.’
It’s interesting to see this 2008 time-capsule. Completely wiped out. Yet here we are just 8 years later and at another exhausted phase of a mania. I can guarantee you that in Texas in the 80’s, there were no short memories. I understand the myth that the government just had to help house prices back up, or we’d all be eating gruel. But I wonder what people will think of Bernanke and friends if this guy and millions like him, find themselves stuck - again?
Crude Oil Mar 16 (CLH16.NYM) -NY Mercantile
29.93 Down 0.96(3.11%) 10:40AM EST
http://finance.yahoo.com/q?s=clh16.nym
Saw $1.46 gas this morning on the way in to the office.
In 3Q or 4Q 2014 I read where Goldman said (and I am paraphasing from memory)that it takes a little over 2 years from when oil takes a big drop before housing takes a big hit. My calculation at the time was that the big drop in housing would occur in 4Q 2016 in Oil rich areas. 3 quarters to go in the Oil patch of TX and ND.
Housing will continue crater irrespective of what oil does.
‘it takes a little over 2 years’
Don’t miss my post tomorrow.
Paying grossly inflated prices for housing or energy results in massive losses. Oil companies are profitable at $10/barrel and contractors are profitable at $55/sq ft of new housing. Why roll the dice at a higher price?
“Chesapeake (Energy) Plummets Over 20% On Report It Has Hired Bankruptcy Attorneys”
http://www.zerohedge.com/news/2016-02-08/chesapeake-plummets-over-20-report-it-has-hired-bankruptcy-attorneys
This makes no sense. Only falling prices to dramatically lower and more affordable levels can make a market and accelerate the economy.
http://finance.yahoo.com/news/holding-back-chinas-capital-flight-160001965.html
‘The decline in China’s foreign-currency reserves to a four-year low, even without evidence of widespread domestic capital flight, adds pressure on policy makers to strengthen the economy through fiscal easing and structural reforms.’
‘China’s reserves, once a continuously rising hoard, fell $99.5 billion in January, continuing a slump from 2015 as the People’s Bank of China sought to shore up the yuan. While estimates of the sources of the hard-currency outflows differ, much of the total is thought to be pay-downs of foreign debt. A much bigger threat — “the dam that the PBOC must make sure doesn’t break,” according to Frederic Neumann at HSBC Holdings Plc — would be an exodus of funds from domestic investors.’
“The worst fears of cascading capital flight have not come to pass,” Tom Orlik, a Bloomberg Intelligence economist, wrote after the reserves report on Sunday, noting that the drop was less than some had anticipated. “Households are not maxing out their $50,000 annual quota for FX purchases.”
Yeah Tom, these Chinese were taking 50k out a year and buying million dollar condos left and right.
‘once a continuously rising hoard’
Its interesting how this money-laundering that was once a source of joy in real estate circles, has now taken on the gloom of financial collapse. What happened to the global savings glut?
“What happened to the global savings glut?”
It and national treasure were burned up building tens of millions of excess empty houses around the globe.
“pressure on policy makers to strengthen the economy through fiscal easing and structural reforms.”
This is what they have been doing for the last five years and it has only made their problems more gargantuan.
Happy Chinese New Year. Welcome to the Red Fire Monkey.
Tech stock collapse sure looks like bubble popping
http://finance.yahoo.com/news/we-wuz-wrong—tech-stock-collapse-sure-looks-like-bubble-popping-151711386.html
I found this article Friday:
‘Tableau’s results came in tandem with poor performance from business network LinkedIn, which shocked Wall Street with a revenue forecast that fell far short of expectations. Its shares plunged 44 percent on Friday, exacerbating the rout in business-services companies.’
“They’re a proxy for enterprise spend,” said Daniel Ives, an analyst at FBR, about LinkedIn.’
‘Investors wondered whether enterprise customers will be willing to splurge on trends like big-data analytics and cloud computing. Those trends, hyped heavily over the years by analysts and the companies themselves, had previously driven big share-price gains.’
“If you’re uncertain how much is something worth, you’re going to give the lowest bargain-basement price,” said analyst Katherine Egbert at Piper Jaffray.’
http://finance.yahoo.com/news/business-services-firms-shares-bleed-173956040.html
How low can they go? “I think that what we see is a crisis in valuation for the highest multiple stocks, where valuations … had been driven too far for thematic reasons, what investors perceived as the hottest growth areas,” Avondale Partners analyst Randle Reece said.
http://news.yahoo.com/cloud-data-analytics-stocks-extend-losses-bloodbath-163655481–finance.html;_ylt=AwrC1C6337hW8ggAQ5nQtDMD;_ylu=X3oDMTByNXQ0NThjBGNvbG8DYmYxBHBvcwM1BHZ0aWQDBHNlYwNzcg–
How low can they go?
Z-Row
The unicorn ranchers are done.
Update: Dow Craters 350 Points; Blows Hole Through 16K Floor
http://www.marketwatch.com/investing/index/DJIA
The S&P 500 bounced off of 1808 intraday not that long ago.
S&P 500 (^GSPC) -SNP
1,831.40 Down 48.65(2.59%) 2:41PM EST
http://finance.yahoo.com/q?s=^gspc
Winter Garden, FL Housing Market Craters; Prices Plunge 9% YoY On Ballooning Housing Inventory
http://www.zillow.com/winter-garden-fl/home-values/
‘Monday’s drop in U.S. bank stocks follows concern over stress in the financial sector in Europe, where the cost of insuring the European financial sector’s senior debt against default climbed to its highest level since late 2013.’
‘Credit default swaps on several U.S. banks have followed suit. The cost for a five-year CDS contract on Morgan Stanley debt, for instance, has rocketed by more than 27 percent since last Thursday and now stands at its highest since October 2013, data from Markit shows. Citigroup’s CDS, likewise, is at the highest since June 2013.’
http://finance.yahoo.com/news/u-bank-stocks-bonds-clobbered-221107187.html
‘Asian share markets were scorched on Tuesday as stability concerns put a torch to European bank stocks and sent investors stampeding to only the safest of safe haven assets. The rout began in Europe where the FTSEurofirst 300 index shed 3.4 percent to its lowest since late 2013, led by a near 6 percent dive in the banking sector. Deutsche Bank alone sank 9.5 percent as concerns mounted about its ability to maintain bond payments.’
‘The cost of insuring bank debt against default also climbed to its highest since late 2013. Borrowing costs in Spain, Portugal and Italy jumped as investors demanded a fatter risk premium over safer German paper, where two-year yields hit record lows at minus 52 basis points.’
“The ‘fear factor’ in markets has morphed from being about an emerging market hard-landing and collapsing oil prices to being about the extent of the slowdown in the developed world and the ability of central banks to reflate asset values yet again,” said analysts at Citi in a note.’
‘The Bank of Japan’s recent shift to negative rates has fueled concerns that ever-more exotic monetary policy is rapidly reaching the point of diminishing returns.’
http://finance.yahoo.com/news/stocks-dumped-safe-havens-bank-002035428.html
‘Global stocks were gripped by a fresh bout of panic selling on Monday, raising fears over the health of the world’s banking system for the first time since the financial crisis. European markets slumped to their lowest level in more than two years amid an unremittingly bleak outlook for the global economy and concerns over the resilience of the world’s biggest lenders.’
‘Deutsche Bank was world’s biggest bank faller, with its shares down as much as 11.8pc. Germany’s largest lender, which posted a record loss in 2015, closed down 9.5pc on the day, and has seen 40pc of its market capitalisation wiped off since the start of the year. Its shares are now down to their lowest ever level at €13.82 per share.’
‘Banks bore the brunt of the sell-off as the “ugly spectre” of negative interests rates in two of the world’s three largest central banks - Europe and Japan - was spooking investors, said Jasper Lawler at CMC Markets.’
‘The cost of insuring against default for investment grade bank debt rose to its highest level since 2013 to 119 basis points. “Putting on a trade at the moment would feel like standing in front of an oncoming freight train,” said Juan Esteban Valencia at Societe Generale. “There are too many issues to worry about, whether it’s oil, China’s slowdown, emerging markets or bank exposures to emerging markets and commodities.”
http://www.telegraph.co.uk/finance/markets/12146915/Fears-over-new-financial-crisis-come-back-to-haunt-global-markets-in-day-of-trading-turmoil.html
I just got this in an email:
‘$2M Reduction on the Best Lot in Bel Air’
‘Bel Air’s premier building site. 8.8 acres located just 1.3 miles from the Bel Air Hotel off scenic Stone Canyon Rd. Turn left on Levico and drive a few hundred feet to a 24 hour guarded gate that secures four homesites. Three homes currently exist and are occupied by some of the most prominent residents of Los Angeles. This is the only undeveloped lot of the four and has a flat pad of two expansive acres.’
10701 LEVICO WAY, BEL AIR, CA | $17,950,000
02/08/16 Price change $17,950,000-10.0% – Westside Estat…
01/11/16 Listed for sale $19,950,000
http://www.zillow.com/homedetails/10701-Levico-Way-Los-Angeles-CA-90077/2103175043_zpid/
Zestimate
$6,355,098
That’s humorous. A year ago it was 2.8 million.
Supply shortage in the downtrodden urban neighborhood on the rise (I hope)where I just bought. Only one rehabbed house on the market; at least several dozen buyers who want to live there.
Some houses have even sold in the $130,000s - a never-before seen sight!