People Were In Shock, Then Denial, Now They’re Angry
It’s Friday desk clearing time for this blogger. “The amount of recent job layoffs around southern West Virginia has the market for selling houses down thousands of dollars. The Beckley Board of Realtors reports there are currently 425 houses up for sale in Raleigh County, alone. At this time last year, the average home sold for $118,000. That price has dropped by $7,000 in 2016. ‘They feel like they know the price of the home and they know what it’s worth, but in all honesty, in most cases they’re not going to get that price,’ says Cathy Smith, Beckley Board of Realtors president. ‘Prices are low and it’s a buyers market right now.’”
“The low price of oil is bringing on more uncertainty for a big chunk of Houston’s economy. Leon Green sees it every day in his property management business, Green Residential. Green deals mostly with home rentals, and he’s telling his clients to move a property quickly, they’ve got to drop their prices. ‘This house that we’re in right now, it rented for $5,000 about 18 months ago,’ Green said. ‘It’s being advertised for lease for $3,800 a month right now.’”
“Byron Calais lost his job two weeks ago working for an oil and gas maintenance company. Adding to the stress, the family just bought their home five months ago, and now they’re not sure how they’ll keep it. ‘I’m nervous,’ Calais said. ‘I’m willing to drive Uber if I have to — anything to just keep some momentum going.’”
“The nation is seeing some of the lowest gas prices in decades. But while drivers are celebrating filling up for under $30, Vernal, located about three hours northeast of Salt Lake City is in tears over it — and these are not tears of joy. From businesses, to hotels, to housing, to jobs, everyone is feeling the pain. Troy Allred and Angela Walker, who have been working in the real estate business for years, said it’s a sad sight to see so many homes up for sale. They say right now residential sales are down 30 percent. ‘There is probably four to five listings right here on this street,’ said Allred.”
“‘When you see these foreclosures — that’s families without a job and a home,’ said real estate agent Angela Walker as she points out all the homes for sale on one block.”
“In the early days of the downturn, most Albertans believed this would be just another V-shaped dip, over in a matter of months, and made virtually no lifestyle changes, figuring they’d be rehired within six months. Instead, a year later, oil is trading even lower, more layoffs are being announced, wages are falling and the housing market is stalled. ‘A year ago, people were in shock, then they were in denial, now they’re angry,’ says Todd Hirsch, chief economist at ATB Financial, an Alberta crown corporation. ‘They’ve lost their job. Their neighbour has lost their job. They’re watching this thing we built come collapsing in on itself.’”
“‘I don’t think we’ll see the tsunami of houses coming on the market that we saw in the late ’80s,’ Hirsch says. However, house sales are falling, and he believes prices could decline in 2016 by as much as 10 per cent. On the other hand, the fall from $100 a barrel was inevitable, and the adjustment, though painful, is necessary, Hirsch says. As oil prices rose, so did the cost of production, particularly labour rates, pushing the break-even point for new production to $80 or $90 a barrel. ‘Everyone knew someone whose son was driving a truck for $80,000 a year,’ Hirsch recalls. ‘It’s not sustainable.’”
“‘If housing prices fall, it will very much deepen the downturn we have now,’ Hilde C Bjørnland, professor of economics at the Norwegian Business School BI in Oslo, told newspaper Dagens Næringsliv (DN). ‘High housing prices and a high degree of household debt makes us vulnerable if unemployment rises rapidly,’ Bjørnland told DN, adding that the economic fallout will no longer be confined to the areas of Western Norway where there’s the biggest concentration of oil and offshore firms that have been cutting back and laying off workers.”
“Some upmarket Abu Dhabi landlords are starting to offer tenants small rent reductions as the low price of oil prompts the capital’s housing market to soften. ‘In response to the tempered market outlook, some landlords are now starting to offer tenants more flexibility, while also becoming more receptive to minor rental discounts, as they strive to maintain and build tenant loyalty to uphold occupancy rates,’ said Matthew Green, the head of research and consulting in CBRE’s Dubai office.”
“Imagine being an award-winning investor at just 24, only to end up owing banks $3 million by the age of 27. What a roller-coaster ride that would be. But that’s exactly what ‘Property Investor of the Year 2012,’ Kate Moloney, claims has happened to her. Moloney has recently written a book, explaining how the tumbling value of her property portfolio has left her ‘living with financial cancer.’ On her website she explains that the portfolio was worth $8.5 million when she won the award, but just three years later, ‘if we were to sell our properties, we would still owe the banks about three million dollars (not including arrears interest and selling costs).’”
“Moloney and her partner Matt Moloney have been hammered by the end of the mining boom. Thirteen of the 16 properties that helped them win the award were in Moranbah or Mackay, and heavily exposed to the end of the mining boom. Curiously, the award judges were well aware of that fact.”
“It’s hard not to feel a tiny bit of sympathy for the Moloneys – as much as this kind of property investing is driven by avarice, young investors are nonetheless surrounded by an army of spruikers, financial spivs, and cheerleading journalists all hollering that the paper profits will just keep coming. The magazine that ran the awards, Your Investment Property, is simply taking the same view as our politicians and regulators – a view which fails to distinguish between investment in productive assets, and speculation on proverbial ‘tulips‘. As with the flowers of 17th-century Holland, house prices surged way above anything that could relate to the utility they offer their owner.”
“When I spoke to the magazine’s editor Nila Sweeney this week, she confirmed that house prices in Moranbah had fallen ‘30 or 40 per cent’ which would make Moloney’s story ring true ‘if you’re highly geared.’ She added: ‘At the time of the awards, the market was performing differently. The judges can’t be blamed for what happened later.’”
“As unsold homes mount up, Chinese developers have lost their appetite for land and have become focused on getting rid of inventory. The sales center of a new development in Nanning is offering discounts of 80,000 yuan (12,100 U.S. dollars) for each home bought. The average price per square meter is about 8,000 yuan. The heady days of housing consumption are gone. New home buyers are more savvy now, with little expectation of buying low and selling high.”
“A lack of shops and restaurants, coupled with poor transportation has scared buyers off. ‘The nearest wet market is too far from here, and buses are too few,’ said one potential buyer, prioritizing convenience over price. ‘More supportive policies are expected to be unveiled for the property sector,’ marketing director of a real estate company Lin Qu predicted. ‘House prices remain high in many cities, which means developers still have huge room for future promotion.’”
“Say you have $10 and lose 50%, leaving you with $5. How much must you gain to have $10 again? Many people understandably answer ‘50%,’ but the answer is actually ‘100%.’ Quite a difference. The smaller the loss, the lower the hurdle. But the deeper the loss, the more it takes the Jolly Green Giant to clear the hurdle.”
“Not too bad at smaller losses. Stock markets present these at regular intervals and so far, they recover. But individual stocks can do far worse and lose money permanently. Losses such as 70%, 80% and 90% require high hurdle gains of 233%, 400% and 900%. Hard to find. Consider newer companies offering more promise than performance. Ouch. This flashes the danger of paying too much for a stock. By ‘too much’ I mean value, not price. Many people who snapped up Las Vegas homes willy-nilly in the housing boom forked over way beyond any real values – the rents people would pay to live there. It was a mania followed by a crash.”
“Often, in it’s the same with stocks. Hey, everyone will tweet, listen to Pandora, wear a Fitbit, use Groupons, drive a Tesla or make soda at home! It’s a sure thing. Maybe not. Yes, investors could probably not do any work, buy big familiar companies, and not lose too much, but no one in the 1970s believed that Bethlehem Steel, Eastman Kodak, Woolworth’s or General Motors would someday be bankrupt, either.”
“If we don’t know the value of what we’re buying, we don’t know if we’re paying too much, and we certainly don’t know whether to sell or hold on. We become fools, gambling that a greater fool will throw more money at us. That may work, until it doesn’t. Then it’s a robbery where accomplices scram while shoving the money at the hapless slowpoke. The police nab the unlucky one holding the bag. That’s the result of any loss with too high a hurdle.”
Typically, the seven stages of grief are described as:
- Shock or Disbelief
- Denial
- Anger
- Bargaining
- Guilt
- Depression
- Acceptance and Hope
Sometimes, people speak of five stages of grieving, putting together:
- Shock/Disbelief and Denial
- Bargaining and Guilt
http://activepause.com/stress/grief-stages.htm
The circle. Hard to believe we are back to square one again!
You’re stuck in the denial phase Jingle_Fraud.
You calling anyone stuck is like a pot calling the kettle black.
Falling prices my friend. Falling prices.
Winter Garden, FL Housing Prices Crater 9% YoY
http://www.zillow.com/winter-garden-fl/home-values/
Hope guarantees nothing.
‘Chinese New Year Not So Happy For China’s Growing Number Of Unpaid Workers’
‘Activists have warned that this tough line on labor NGOs could make it harder to resolve such disputes peacefully in the future, leading to further problems as the economy slows. And a lack of protection of workers’ rights, possibly leading to more unpaid wages, could also undermine the Chinese government’s plans to boost the economy by selling off part of the nation’s vast inventory of unsold housing to rural migrants.’
‘Wage arrears has long been endemic in China’s construction industry, Crothall told International Business Times. A slowdown in growth in new construction projects over the past year has added to the problem, which is compounded, he said, by the fact that many construction workers are paid “once at end of year or at the end of the project,” receiving only “pocket money” in between. Between Jan. 29 and Feb. 1 of this year, CLB logged protests by construction workers over unpaid wages in more than half of China’s 31 provinces and regions. Some marched in the streets, blocking them off, only to be arrested, according to CLB data. In other cases, workers did not take to the streets but rather occupied their bosses’ offices in the hope of being paid.’
‘The problem is not only wage arrears but manufacturing more generally, with a growing number of factory closures in the Pearl River Delta, Guangdong’s manufacturing hub — closures which are often made more painful for workers by the way they are handled by the companies’ management.’
“The standard procedure for many factories before they close down is to stop paying workers for a month or two months, sell off the assets and machinery, and then the boss [will] disappear,” Crothall said. In one recent case in Chaozhou in eastern Guangdong, workers from a shoe factory staged a protest over unpaid wage arrears after their boss fled. Other workers, meanwhile, are reported to have been told to go home early for the New Year to help their employers save money at a time of flagging orders.’
‘And “it’s not just manufacturing and construction,” Crothall added, noting that China’s mining sector and steel sectors have been particularly hard-hit, with a fall in demand for such commodities as a result of the general economic slowdown.’
“The basic system is not changing — employers can basically do whatever they want,” Crothall said. Local government bureaucrats are unlikely to push employers to obey the law because of the system of cronyism whereby factory owners are good friends with mayors and their deputies.’
‘There is also evidence that some companies in sectors hailed as saviors of China’s economy, such as e-commerce, are increasingly laying off workers. “If you look at some of the companies that are having problems, a lot of them are start-ups, in areas like e-commerce or robotics, all these bubble industries that everyone rushes into without any real planning or forethought,” Crothall said, adding that such companies often hire workers on short-term contracts, giving them little protection.’
‘Observers say the crackdown is a further sign of the Beijing government’s growing intolerance of civil society activism, amid worries about a more vocal population, and tensions over the economy and the widening wealth gap between China’s rich and poor. Crothall says it is also designed as a warning to other activists, many of whom are already keeping a lower profile.’
‘According to one Guangdong factory worker, without such NGOs to advise them, “Workers will either silently swallow insult and humiliation or alternatively they will do much more extreme things, such as blocking roads in order to get back their money, since there will be no one to tell them what they should and should not do and how to fight for their rights legally.”
Wow, this really sounds like an economic juggernaut of a country about to dominate the world.
+1……billion…..
Indeed.
China never was the juggernaut that most believed. I’ve been saying this for years to anyone who would listen.
I am highly suspect that today’s stories of Chinese workers not being paid are not new. It’s worse now, granted, but not new.
The building of ghost cities proves there was not much of an economy in the first place. Not now, not 5 years ago, not 20 years ago.
Easy credit and mal-investment indicate the absence of financial foundation or erode the hell out of what was.
None of it is rocket science.
“The basic system is not changing — employers can basically do whatever they want,” Crothall said. Local government bureaucrats are unlikely to push employers to obey the law because of the system of cronyism whereby factory owners are good friends with mayors and their deputies.
___________________________/
Wait. You mean, like, there’s corruption there?
“There is also evidence that some companies in sectors hailed as saviors of China’s economy, such as e-commerce, are increasingly laying off workers.”
http://images.en.yibada.com/data/images/full/25415/jack-ma.jpg?w=685
Kate Moloney adds her own thoughts in the comments section about her predicament. This is classic:
“We have made a lot of mistakes and accept full responsibility for it all. Our biggest mistake was listening exclusively to the property seminars without any original thought of our own. ”
Translation: We accept full responsibility, but it’s not our fault because we didn’t think for ourselves.
…..more from the article:
“…young investors are nonetheless surrounded by an army of spruikers, financial spivs, and cheerleading journalists all hollering that the paper profits will just keep coming.”
It sounds like they could have used a link to the Housing Bubble Blog.
Oh yes, Ben can make it clear: Don’t buy 15 houses in a small outback mining town of 8,900 people at the top of cycle. You might end up owing $200,000/house more than the houses are worth.
They were cash flow positive.
Hysterical comment😀😀😀😀
‘It’s hard not to feel a tiny bit of sympathy for the Moloneys – as much as this kind of property investing is driven by avarice, young investors are nonetheless surrounded by an army of spruikers, financial spivs, and cheerleading journalists all hollering that the paper profits will just keep coming. The magazine that ran the awards, Your Investment Property, is simply taking the same view as our politicians and regulators – a view which fails to distinguish between investment in productive assets, and speculation on proverbial ‘tulips‘.’
av·a·rice
ˈavərəs/
noun
noun: avarice
extreme greed for wealth or material gain.
Some people always want more, more, more….right up to their bankruptcy filing.
MOAR!!!
Yet another example among millions of not understanding the value of a dollar and what your buying.
It’s no mystery. There are input costs(lot, labor, materials and profit) and depreciation. If you’re paying more than construction costs(plus profit) of $55/sq foot, you’re getting ripped.
Why would anyone even pay new price for a 10 year old(or more) house?
A new Casey Serin/Poster child for Bubble 2.0 and looks like the timing in the bubble cycle is about the same too as well as the blind acceptance of the “education” received at flipper/speculator seminars…
“We have made a lot of mistakes and accept full responsibility for it all. Our biggest mistake was listening exclusively to the property seminars without any original thought of our own. ”
Critical thought is lost on 75% of Amurica.
‘Stralia
‘Why Washington Is Making It Easier For Rich Foreigners To Buy U.S. Real Estate’
Keep in mind the US government is only looking into money laundering in NYC and Miami and only for 6 months.
‘Last November, down a stretch of road heading into downtown London just across from the Thames I see this grayish-white building that looks like Frank Lloyd Wright’s Fallingwater in Pennsylvania. There’s a good half dozen of them lined up along the river, looking completely out of place among the cranes that are busy constructing the next luxury high-rise. My Addison Lee driver tells me that the developer didn’t even bother advertising the homes to Londoners. It was sold entirely to the Chinese, he tells me. It’s their London ghost city.’
‘You don’t need to go to London to see how the world’s globe trotting elite, some quite unsavory characters, have been behind the boom in super luxury real estate. Drive down 11th Avenue in New York along the Hudson and you will see them: new towers with their own architectural sex appeal, catering to multi-millionaires willing to fork over more for a property than any American would ever dream today.’
‘It’s happening in New York. It’s happening in Boston with its new Millenium Towers, and it’s happening in Los Angeles, the go-to hot spot for hot Chinese money.’
‘I asked Millenium Towers who is buying up their million dollar studio apartments. It can’t be Bostonians, I believed. For a million, they rather have a place in the Back Bay or Beacon Hill. No one responded. Changes in the Foreign Investment in Real Property Tax Act of 1980 will make it easier for the government to know who owns what. Until then, it was quite easy to bring dirty money into American real estate. A large chunk of Miami has dependent on it for years, some in the business there tell me off-record.’
‘But the real motivation behind the change in the Act back in December is a tax exemption that makes it easier (and cheaper) for foreign stock funds and REITs to buy American real estate. This also opens the door for institutional investors, particularly those in Europe, who are dealing with zero yield and negative interest rates and don’t have attractive options for capital preservation long term. Now they have a tax-friendly haven for moving money off shore in a tangible asset, like a high rise mixed-use dwelling in Manhattan, instead of putting it in low yielding debt, domestic equity or foreign currency bonds. With the outlook looking relatively dismal for stocks this year, foreign pension funds and investment firms managing real estate investment trust portfolios, will find a friendly market right here.’
‘Note that this change comes at a time when New York is redrawing its skyline. There are at least four new commercial towers in the works downtown. And while I have not done the homework yet to see if any of those have foreign capital invested, projects like that can now more easily be rolled up into REIT portfolios with a larger number of foreign domiciled majority shareholders.’
“During 2015, our firm transacted hundreds of millions of dollars in real estate transactions and many of our Chinese clients indicated that they were concerned that the window of opportunity to source Chinese funds in order to transact U.S. real estate investments was closing. It is noteworthy that in 2015, Chinese investors accounted for approximately $25 billion of U.S. real estate purchases – and it now appears that the Chinese government is seeking to curtail the flow of funds out of China” said Terrence A. Oved, Esq., head of the Real Estate Department at Oved & Oved LLP in New York.’
‘One never knows and it may have happened already. A number of European sovereign wealth funds from Finland, Norway and Sweden, are active in Baltic real estate. They’ve made Lithuania one of the hottest real estate markets in Europe. They are fleeing negative rates and putting money next door in Moscow and St. Petersburg investment funds.’
‘By comparison, the U.S. sounds a heck of a lot safer. It has a stable government. It has a clear rule of law. The new rules may kick out some corrupt money looking to launder capital undetected during the sale. But for the most part, American real estate’s open door policy is one big, colorful welcome mat to rich buyers who are willing to do what most Americans no longer can do: overpay for housing.’
‘Call it the rich man’s sub prime. South Beach Miami’s Faena House is an 18-story hyper-luxurious penthouse going for a cool $60 million. Guess who built it? The Faena family of Argentina and Ukrainian-born billionaire Len Blavatnik. Unless a young Hollywood celebrity or Rihanna buys it, the smart money is on a rich foreigner. Realizing a profit on this thing is moot. These are mostly money losing operations, and the independent buyer doesn’t care.’
‘In other words, developers are building hard asset savings accounts…not housing and office towers.’
‘They have built luxury real estate from Midtown to Downtown NY. Some people in the business estimate that as much as 75% of the homes inside are foreign-owned. Most are being marketed by foreign real estate agents with connections to people overseas looking to buy in the U.S. Even if they have no plans on living there, they all see it as a safe haven. It is unlikely that they can sell it at a profit in dollars, but based on where their money is coming from, its a profit in their local currency if one assumes dollar weakness over time instead of prolonged dollar strength.’
‘The big risk is overkill. Developers may be getting ahead of themselves and institutional investors need to take note. Eventually, the markets where this money is coming from will improve. It may be five years from now. But it will happen. And when it does, developers will be sitting on empty buildings instead of half empty ones currently full owned — in the majority — by international buyers. An empty building won’t be returning rent and lease payments to REIT owners in that case. In the mean time, new construction from Boston to LA is keeping blue collar work available in major cities. It consumes steel copper and iron ore, of which the world is overflowing.’
“It is noteworthy that in 2015, Chinese investors accounted for approximately $25 billion of U.S. real estate purchases”
Good friggin lord!
It is a $15 trillion market. $25 billion is not really a substantial part….. 0.0016. = 2/10ths of 1%.
‘not really a substantial part’
- Bargaining
LMAO
“It is a $15 trillion market. $25 billion is not really a substantial part….. 0.0016. = 2/10ths of 1%.”
The $25 billion doesn’t go into lifting the prices of all the houses, it only lifts the price of the houses that are sold.
But this lifting of houses that are sold also lifts the VALUES of the houses that are not sold - it lifts the values of the comps.
There is a multiplier effect at work here; The reality of a price rise for a few produces an illusion of a rise in wealth for many.
The article was about commercial real estate, not residential. I was providing Sean a perspective on $25 billion, relative to the size of the commercial real estate market…..because he thought $25 billion was huge and relatively speaking, it is very small.
By now we know full well what your “perspective” is Jingle_Fraud.
A dollar is alot of money in a collapsing market.
It is a $15 trillion market. $25 billion is not really a substantial part….. 0.0016. = 2/10ths of 1%.
But what percentage is it of the ultra-luxury market?
Come on, this one law firm is washing hundreds of millions. How many Chinese construction company towers are there in LA and NYC?
In the reports of money laundering out of Canada, straw men are common. Same with Miami. We don’t have any idea how much is being bought or by whom. As I understand it, one of the favored ways to move cash out of China is fake invoicing. How could one pin that on a nationality? As the New York Times discovered, it was very time consuming to figure out who owned these LLC’s that own other LLC’s. One of the governments new plans is to force somebody in the process to be liable when dirty money turns up. But it’s a joke because all the Canadian and US government are encouraging this.
And it’s happening all over the Seattle area as well, and the eastside suburb of Bellevue is ground zero for Chinese investors (hence my term “Bellevue, ROC”).
Recently I came across one female Chinese real estate agent selling a home (asking twice what it is worth, which is what caused me to dig deeper on this particular listing) - did some googling and searching county records, and she is listed as the property owner for the house, as well as for 8-10 other houses all over the Seattle area. I strongly suspect that she also is a straw buyer.
But our governments love this - it raises the assessed values, and keeps the mother’s milk tax revenue flowing in.
We don’t have any idea how much is being bought or by whom.
Agreed
One of the governments new plans is to force somebody in the process to be liable when dirty money turns up. But it’s a joke because all the Canadian and US government are encouraging this.
And they aren’t the only ones.
If you read the article, you will understand the $25 billion was for all Chinese investment in US commercial real estate in the last one year period.
The reference is not one law firms account, not residential investment, just what the Chinese invested in commercial real estate. The Japanese did the same thing in the 1980s and when their economy crashed, they sold all their US assets, many at substantial losses. Pebble Beach golf course, where the Cosby Pro Am is being played this weekend is a great example. Paid like $500 million and sold it back for $325 million. The Chinese buying commercial real estate isn’t going to hurt the US.
Falling prices to dramatically lower and more affordable levels isn’t going to hurt anything either Jingle_Fraud.
Shouldn’t the figure be compared to the $250B in total 2015 commercial transaction volume?
Precisely.
Now ask yourself how much of that $205B was fraud driven? 50%? More? Now where’ down to $75B in real transactions.
I’ll wager $75B in commercial real estate for 2015 is at 30 year lows.
Lets just call it Fraud Adjusted Dollar Volume In Commercial Real Estate.
” It is unlikely that they can sell it at a profit in dollars, but based on where their money is coming from, its a profit in their local currency if one assumes dollar weakness over time instead of prolonged dollar strength.”
Logic fail.
The big risk is not overkill. The big risk is social instability. And I respectfully disagree that the U.S. “has a clear rule of law.” The rule of law is suspended when it comes to large financial institutions. And if we had the rule of law, we’d keep dirty money from coming here in the first place.
And I respectfully disagree that the U.S. “has a clear rule of law.”
It’s relative. You’d have to live in a third world country to see the difference. I still remember the “tip jars” at most Mexican government offices. Unless you wanted to wait all day for your paperwork to be processed, you’d better put a tip in that jar. And pretty much ANY problem could be solved with a bribe.
Actually, I have lived in a Third World country. There is a difference, but it’s narrowing all the time.
‘The B.C. NDP’s housing critic is calling for an inquiry into Metro Vancouver’s real estate market over a technique known as shadow flipping, under which sales contracts are reassigned, in some instances multiple times, before the sale of a home is closed.’
‘Vancouver member of the legislative assembly David Eby outlined his concerns on Monday at a news conference, where he said some realtors are using the technique to avoid paying taxes and, in some cases, to avoid controls established to prevent money laundering.’
“The provincial government has been asleep at the switch on this issue, and it’s time for them to step up and begin a formal arm’s-length investigation into what’s happening in our real estate market in British Columbia,” said Eby.’
‘A Globe and Mail investigation revealed that those involved in the shadow flipping can avoid paying the property transfer tax by reassigning the sales contract before the final sale. Eby said several people came to him in January with specific instances where forms were fudged, with implications for money laundering as well as tax avoidance.’
‘Eby said the real estate council is not living up to its responsibility of protecting the public from Realtors who don’t follow the rules. He said a few corrupt agents are hurting the reputation of the whole profession.’
“Clearly, something needs to happen to address the fact that people are told that they cannot trust real estate agents,” said Eby. It is up to the B.C. government to ensure watchdogs are doing their job, he said.’
‘Shadow flipping is helping to push housing prices upward, sometimes by millions of dollars, in an already overheated market, Eby said.’
It’s like buying and selling cars without ever registering them.
‘Millions of dollars worth of development is in limbo following a change to the Foreign Investment Review Board’s rules for international purchases of Australian property. Developers’ plans have been thrown into chaos by changes quietly introduced late last year to what constitutes a new dwelling under Australia’s foreign investment framework.’
‘The new guideline states a single home built to replace a demolished established home would “generally not be considered a new dwelling” by the FIRB.’
‘Foreign nonresidents are only allowed to buy new or off the plan properties, and vacant land, in Australia, meaning cashed up overseas investors could be shut-out of the booming market for new luxury homes in Melbourne’s east and elsewhere under the new rules.’
‘Several Melbourne developers are understood to be unsure what to do with millions of dollars worth of property they bought with the intention of rebuilding luxury homes on the blocks in Monash hot spot Glen Waverley, with their key Chinese market possibly out of the equation.’
‘Others have already begun work on luxury homes that were aimed at Chinese investors and are worried they will not get the prices they expected when building started.’
‘One agent, who did not want to be named, said local Chinese buyers would be expecting prices of luxury homes in Monash to drop if their overseas competition was removed, and would be waiting to secure a “bargain.”
‘William Chen, of Jellis Craig Hawthorn, said he had only learned of the rule change recently and the higher end of the market in areas such as Balwyn and Canterbury would be affected. Temporary Australian residents can generally buy as many new properties as they want, but can only purchase one established dwelling, meaning Australian-based investors would also be restricted.’
“Before they could just buy new homes (in these areas),” Mr Chen said. “Now they can only buy one, no matter what. Of course, (it’s) bad (for the market). But how bad, I don’t know. We’ll have to wait and see.”
‘Construction is everywhere in China. Between 2011 and 2013, China consumed around 6.4 gigatons of cement, according to The Washington Post—more than what the United States used during the course of the 20th century. If Japan taught the world just-in-time production, where inventory should be minimized, China has mastered just-in-case construction—build now and figure out what to do with it later. In its ferocious race to modernity, with three decades of double-digit growth, China has built enough floor space to cover Hong Kong twice over every year. And now, cracks are beginning to show.’
‘There are 13 million vacant homes in China, according to Reuters. Known as “China’s ghost cities,” there is an abundance of newly built urban areas complete with shopping malls, central squares, stadiums, avant-garde administrative buildings, luxurious condos, and villas—everything except people. In the city of Xi’an last year, a never-used 27-floor high-rise that covered 37,000 square meters was blown up and cleared away because it had been left vacant for too long and deteriorated beyond repair.’
‘This is all the more disturbing, given that one-fifth of China’s economic activities are related to the property market. The consequences are many. Zoomlion, the country’s leading construction machinery and sanitation equipment maker, announced a 90% net profit drop in 2015. Fifteen Chinese real estate companies projected a loss for 2015 due to the recent market slowdown. Wanda Commercial Properties, whose founder was until recently China’s richest man, was downgraded last week by Standard and Poor’s to junk bond status, and by Fitch Ratings to “BBB,” hovering two notches above junk bond status, according to The Wall Street Journal.’
‘Chinese authorities have long manipulated interest rates and down payment requirements, played with tax rates, and imposed purchase restrictions to either curb or spur the property market. From the second half of 2014 onward, there’s been no hampering of the real estate sector—all moves have been stimulus-oriented, including a six-fold reduction of interest rates.’
‘As early as the second half of the 2000s, municipal governments have routinely handed over land to developers. Developers would then receive loans from banks to develop the land. Individual investors bought housing units at inflated prices. In the process, local government pocketed much-needed revenue, local GDP grew, politicians got patted on the back, jobs were created, and everyone made money so the wheels kept turning. But the system has proved to be extremely inefficient at building what is actually needed and yielding return on investment.’
‘For China’s middle class, a weakening economy is a mere inconvenience. For the 70 million people who live in abject poverty, a small contraction in living standards could be an utter disaster—enough to trigger social unrest. With overall GDP growth grinding to a record low of 6.9%, the Chinese government has had no choice but to inject more stimulus.This temporary tweak to avoid deeper shocks is needed without a doubt. But the urgency for broader economic reforms is needed even more.’
Ah yes, the never ending call for “reform.”
‘Market Slowdown Hits UAE Realty Projects: Construction Of 18,200 Units Faces Delays’
‘Real estate investment and advisory firm JLL estimated that the delivery of some 18,200 residential units in Dubai won’t come as originally anticipated due to a number of issues. The figure represents 70 per cent of the 26,000 units earlier planned for completion in 2016.’
“[The] information received from developers is that 26,000 [residential] units are expected to be delivered in 2016 within 136 projects. Of these figures, based on previous years, we expect around 30 per cent of these to be completed as scheduled,” Craig Plumb, JLL head of research for Middle East and North Africa, told Gulf News.’
“These figures relate to Dubai rather than Abu Dhabi, but we would expect the two markets to be relatively similar,” he added.’
‘Haider Tuaima, research manager at ValuStrat, said delivery of some properties has been stalled due to “over-optimistic completion dates” and “poor project management.”
‘“[Besides], some off-plan projects have seen a slowdown in investor appetite, resulting in shortage in the project’s cash flow. That’s why many developers are introducing attractive payment plans that go beyond handover dates. Some developers are invariably slowing up as sales demand slows, as they are in no rush to complete a project that has a lot of unsold units.”
‘However, project delays can be taken as a “blessing in disguise”, JLL said, as they can “help stabilise the market and avoid excessive oversupply.”
‘Rents have dropped. What happens when my contract expires? How do I approach my landlord?’
‘Rents have certainly come down over the past months.
The lowering of rents started last year as One Oasis launched, and suddenly an over-supply of housing had an effect on the rental market.
Later in the year, as positions were cut and projects delayed, enough people started leaving Macau to tip the balance in the tenants favour once again.’
‘A question we are asked frequently is ‘what happens when my rental contract ends and I want to drop my rent’? Can a new contract be negotiated? Yes, of course.’
‘Comparing ‘apples with apples’, you can find a property that closely resembles your current home and take note of the asking price. Bear in mind that the final rental price is likely to be 5 percent – 10 percent lower than the asking price.’
‘Once you have established the market price range, you can inform the owner of the current prices and ask them what they would like to suggest for the new rental agreement. If the landlord replies with a price, you can then start to evaluate accordingly, remembering that one element is price and another is ‘terms’.’
‘If the landlord asks for your offer, then you can offer the current market price. As you come to the end of the negotiation, it does pay to remember that a two year term is normal but not mandatory. You can change the length of the lease if you believe that will drop further, or if they will rise.’
‘You may be in a position of uncertainty, as many people are, with your current job. Its worth noting that the current environment and extra flexibility of landlords has led to the inclusion of a ‘professional clause’ in some contracts. Namely, this means that should you lose your job and have to leave Macau, you will be allowed to give one months notice without penalty.’
Does anyone know about Fountain Hills AZ? A friend of mine who sold his house in MA just bought a lot there(approx. 2 ac.) for 145K. He has already spent 60K on groundwork. The original owner bought it for 75K some 20 yrs. ago. Looks to me like a bubbly price.
It appears the previous owner got the shaft as well.
Fountain Hills, AZ Real Estate and Homes for Sale 508 properties found
http://www.realtor.com/realestateandhomes-search/Fountain-Hills_AZ/type-single-family-home,condo-townhome-row-home-co-op,mfd-mobile-home,multi-family-home
Price reduced 233 properties found
http://www.realtor.com/realestateandhomes-search/Fountain-Hills_AZ/type-single-family-home,condo-townhome-row-home-co-op,mfd-mobile-home,multi-family-home/shw-pr
There is no shortage of inventory. Even though this guy has an MBA from Babson, I think he is about to get hosed. It’s too late to tell him anything, and probably wouldn’t listen. Real estate always goes up!
Dude, I went Hanson
Before u were born
“About to?” It’s over, he paid it.
Seems to be dominated by White retiree’s…22,000 people….90% White…Median age 56….
What’s not to like
‘As oil prices have collapsed, it’s become clear that Norway has caught what used to be called the Dutch disease - an overreliance on one industry, in this case the oil and gas sector. With its upmarket waterfront restaurants and the Barcode office blocks, the Sorenga dockside development serves as a poignant reminder of how prosperous Norway had become while the going was still good.’
“Where once there was a container port, there is now housing,” says Vibecke Lyse Augdal, managing director of property rentals company Utleiemegleren, as she takes in the view from a luxury flat.’
‘Buoyed by its all-important oil and gas sector, Norway seemed invincible during the boom years, as Brent crude oil prices surged from less than $40 a barrel in late 2008 to a peak of more than $120 in early 2011. Then, as oil prices started to fall in 2013, it became apparent that beyond the glitz, the Norwegian economy had become incredibly unbalanced.’
‘The pain has spread. Economic growth has slowed dramatically, and this “has led to an increase in the rate of unemployment, which went above 4% of the labour force in early 2015″, according to a recent OECD report.’
‘Investment levels throughout the economy have fallen too, by about a third since oil prices collapsed. “This will be a long-term situation”, laments Mrs Solberg. “We will not go back to the high investment level that we had three to four years ago.”
‘Both consumer spending and lending exploded during the boom years. House prices rose by about a third during the last six years. Household debts have reached more than 200% of annual disposable income, making the Norwegians one of the most indebted people in Europe.’
‘Much of this was fuelled by favourable tax rules for mortgages and historically low interest rates. But with most mortgages being floating rate, that could have a “significant macroeconomic” impact once interest rates start rising, the OECD has warned.’
‘The recent reversal in the Norwegian people’s fortunes has already resulted in consumer sentiment weakening. House prices have all but stalled.’
Yes, this is my third oil bust. The first one in 1963 blew my parents fragile marriage apart. I’m not sure how long their union would have lasted, but that oil bust killed it sooner than later. In 1985 it cause me to leave oil sooner rather than later. I went back to school and became a scientists. I was a field engineer before. In the mid-80s bust, the spot oil market topped at $42/barrel and the contract price was around $36. These numbers dropped to $28 for the contract and $32 for the spot. This lower level held and then the bottom dropped out. Finally, the price arrived at $11.50/barrel for Louisiana Sweet. Brent was $6.60/barrel. Real estate got murdered, oil production and exploration got murdered, computers, cars, yo-yos, etc., etc. all took a dive in Louisiana, Texas, Oklahoma, and so forth. In today’s prices, Louisiana Sweet spot price would be about $25. Not there yet, but it looks like it will be soon.
Real estate in New Orleans, Baton Rouge, Lake Charles, Lafayette, Beaumont, Tx. will be a real mess, but in Houston,Texas… I’d hate to think.
Regards,
Roidy
BTW, La. Sweet closed at $27.42 in the spot market today. Oil is there after all.
Regards,
Roidy
“With a weaker energy sector, Norway is now aiming to diversify its economy”
Diversification when everybody already does it for less?
‘The FipeZap index, which records data of property prices in twenty Brazilian cities, showed that Brazil’s real estate market grew by 1.32 percent in 2015, but also saw a reduction in Rio de Janeiro property prices by 1.36 percent. When inflation is taken into account, the real estate market in Rio suffered a fall in real terms of 10.58 percent.’
‘Charlie Crocker, a British expatriate and owner of Van West Property in Rio advises, “If you are a foreign buyer-investing in Rio right now, the exchange rate is great. The week BRL [Brazilian Real] is throwing up a lot of opportunities. As with any investment or purchase, go as close to prime as you can afford. A little bit of outside space or a sea view always goes a long way.”
‘Crocker believes “if you are looking to sell a property right now, it is not a good time to repatriate funds.” He adds “I happen to be selling my apartment which some might consider poor timing but I will not be pulling the money out of Brazil. I intent to capitalize on the week BRL and invest a small amount more in order to get something larger, closer to prime and with some outside space!”
“The week BRL [Brazilian Real] is throwing up…”
Of course you’re throwing up. Market collapse along with currency collapse. Doubling down…priceless.
Charlie Crocker, a British expatriate and owner of Van West Property in Rio advises, “If you are a foreign buyer-investing in Rio right now, the exchange rate is great.
And they’ll throw in some free Zika mosquitoes.
I’ll bet muggings and other crime is on the rise as the economy continues to sputter without a safety net in place.
‘A Chinese capital control crackdown is likely to have contributed to the cooling of Auckland’s housing market, Quotable Value says. QV spokeswoman Andrea Rush said the slowdown was likely a result of new measures introduced by the Government and Reserve Bank aimed at curbing investor activity in the country’s biggest city, as well as restrictions on money leaving China.’
‘The capital control crackdown is Beijing’s response to a huge surge in capital outflows, which are estimated to have reached US$1 trillion last year, a more than seven-fold jump on 2014. Chinese nationals are officially restricted to the equivalent of US$50,000 a year in foreign exchange, although many loopholes have been used to get around the restriction.’
‘Last month China’s central bank pledged to take a hard line on illegal currency transactions - including those facilitated by underground banks - used to sidestep that country’s foreign exchange quotas. “It would seem that it has had some kind of an impact [on Auckland's housing market],” Rush said of the crack down.’
‘She said some of the biggest value declines had been seen in investment housing stock, “There has been a large increase in Chinese new migrants coming in under the Investor and Investor Plus categories. So it’s going to be harder for those new migrants to bring cash out of China under those categories with the new restrictions.”
‘There have also been reports of the Chinese crackdown affecting Sydney’s hot property market. Lu Lu Pallier, of Sotheby’s International Realty, told the Australian Financial Review last month that Chinese clients had been facing difficulties moving money offshore. “It is getting harder for them to send money out … I’ve been told since the start of the year it has tightened up,” she said.’
The problem with a 30 Trillion game of hot potato…eventually someone runs away with the potato.
‘Construction and renovation projects remain popular plays for senior living providers in the year ahead, but their interest in such forays has slightly decreased, according to recently released findings from investment banking and financial advisory firm Lancaster Pollard.’
‘To fund projects, internal equity and private domestic sources remained the most popular forms of equity among respondents. Interest in different types of debt financings were fairly even for participants, but 27% of those surveyed indicated they aren’t considering debt financing in 2016, a marked 58% decrease from responses in 2014.
“When you’ve had rates as low as they have been, a lot of the low-hanging fruit has already been recapitalized,” Lancaster Pollard Senior Managing Director Steve Kennedy tells Senior Housing News.’
‘Construction costs saw a slight increase in January, and some projects aren’t coming to fruition as the result of higher labor costs, according to a different report recently released by construction firm The Weitz Company and the American Seniors Housing Association (ASHA). The pullback in construction is happening amid oversupply fears, especially with regard to assisted living.’
‘And 65% said they’ll probably attempt to sell a facility in the next 12 months, an action more likely among for-profit providers.’
Gig Harbor, WA Housing Market Craters; Prices Plunge 9% YoY
http://www.zillow.com/gig-harbor-wa-98332/home-values/
‘Six and a half years removed from the Great Recession, we’re now in the midst of the “Great Repricing.” That’s what David Rosenberg, chief economist and strategist for Gluskin Sheff + Associates, dubbed the current market selloff, one that’s seen the Standard & Poor’s 500-stock index drop more than 11 percent since the new year began. Continued carnage in crude and flows to the yen, commonly considered a safe-haven currency, are signs of a market in which risk appetite is nowhere to be found.’
“If [Janet Yellen] is so confused, why shouldn’t the rest of us be?” wrote Rosenberg, commenting on the Fed Chair’s testimony before the House Financial Services Committee. “And the blowout in credit spreads and sharp compression in the market multiple attests to an investor base that indeed is very confused at the moment.”
‘Since the financial crisis (or going back to the early 1980s, depending on whom you ask), selloffs of this severity typically have forced monetary policymakers to refill the punch bowl, creating the appearance of a central bank “put.”
“This is no longer 2009-14 when central banks could bolster markets … the laws of diminishing returns have clearly set in,” he wrote. “The latest experiment on negative rates is falling flat on its face, but in a classic case of following Albert Einstein’s definition of insanity, the academics who run the world’s central banks show no sign of backing away from a policy that is undermining the banking system.”
“We need an entirely new strategy which would involve true debt monetization,” he said, suggesting the sort of “helicopter drop” of money previously bandied about by the likes of Ben Bernanke and Milton Friedman.’
On this:
‘more than 11 percent since the new year began’
I’ve noticed this frequent reference to the drop this calendar year. What about the drop from last summer?
‘a classic case of following Albert Einstein’s definition of insanity…Since the financial crisis (or going back to the early 1980s, depending on whom you ask), selloffs of this severity typically have forced monetary policymakers to refill the punch bowl…We need an entirely new strategy which would involve true debt monetization…suggesting the sort of “helicopter drop” of money’
Squeal like a pig.
That’s amazing that there are flows to the yen, given Japan’s quarter-century of stagnation, negative interest rates, and increasingly desperate attempts to create inflation. If Japan looks good, other places must look horrid.
It is odd. I’ve been trying to figure out what’s going on with the Yen flight. Best I can tell, it is in anticipation of something that doesn’t exist yet or hasn’t happened yet.
“what’s going on”
The explanation may not be so complex. You just don’t think about things like a speculator. Even our friends here on your blog who are speculators “back up the truck” to buy things that are in freefall.
japan has loads of regs, Keynesian policies, and tax the rich schemes.
The left says it’s because they’re old=BS
They have the most aggressive QE in the world. Why would I value their currency more than the US peso? So I can buy Japanese government bonds and pay them interest for the privilege?
I don’t know much about the situation, but it seems like the markets think Yellen is going to go seriously negative rates or they think the US economy is going to really tank. Or both.
The strength of the YEN is very odd given their Neg. bond rates and all the QE…
I don’t know much about the situation, but it seems like the markets think Yellen is going to go seriously negative rates or they think the US economy is going to really tank. Or both.
It seems like a mixed bag. I took a quick look at trends. Other than when compared to the yen and the Euro, Uncle Buck is doing quite well.
Robert Shiller: “Houses Depreciate”
http://www.pragcap.com/robert-shiller-dont-invest-in-housing/
25 MILLION excess, empty and defaulted houses CHECK
Housing demand at 20 year lows and falling CHECK
Housing prices inflated by 250% CHECK
Household formation at multi decade lows CHECK
Rampant housing fraud CHECK
A media corrupted by the housing industry CHECK
Population growth the lowest in US history CHECK
Immigration flat to slightly negative CHECK
What were you saying about housing?
‘At the heart of the concerns is an alarming conundrum: While hobbled banks may not be able to tolerate rates this low, limping economies may not be able to tolerate them any higher.’
‘The “doom loop” that sent eurozone banks and countries into a spiral of mutual deterioration four years ago could now be encircling central banks and lenders.’
http://finance.yahoo.com/news/doom-loop-fears-cast-pall-002900150.html
What’s fun is being a money manager who is trying to extract hefty fees from managed accounts that earn next to nuthin’. Or earn less than nuthin’
Caw!
‘The thousands of attendees seeking reasons for optimism didn’t find them at the annual International Petroleum Week. Instead they were greeted by a cacophony of voices from some of the largest oil producers, refiners and traders delivering the same message: There are few reasons for optimism. The world is awash with oil. The market is overwhelmingly bearish.’
“The oil industry is facing a crisis,” said Patrick Pouyanne, CEO of Total SA, Europe’s biggest refiner. BP Plc boss Bob Dudley described himself as “very bearish” and joked that the surplus is so extreme that people will soon be filling swimming pools with crude.’
‘As the world runs out of places to store oil, “I wouldn’t be surprised if this market goes into the teens,” said Jeff Currie, head of commodities research at Goldman Sachs Group Inc.’
‘Crude prices surged briefly last month on speculation the Organization of Petroleum Exporting Countries would team up with Russia to cut production. The head of the nation’s biggest oil company had other ideas.’
“Tell me who is supposed to cut?” said Igor Sechin, CEO of Rosneft. “Will Saudi Arabia cut production? Will Iran cut production? Will Mexico cut production? Will Brazil cut production? Who is going to cut?”
http://www.bloomberg.com/news/articles/2016-02-12/the-oil-industry-got-together-and-agreed-things-may-never-get-better?cmpid=yhoo.headline
‘I wouldn’t be surprised if this market goes into the teens’
Now be careful there Jeff, Dan might wheel out some drill rig statistics.
Price yer life at $30 oil and you wouldn’t have these problems….that’s what happens when you order your life around speculation and greed.
rented for $5,000 about 18 months ago,’ Green said. ‘It’s being advertised for lease for $3,800 a month right now
so renters should make an offer at the end of the month
max 90 day contract period
‘Byron Calais lost his job two weeks ago working for an oil and gas maintenance company. Adding to the stress, the family just bought their home five months ago, and now they’re not sure how they’ll keep it.’
Get this Bryan, a few months ago a UHS in Houston admitted it “hit” in February of 2015. And I pointed out there was nothing but relentless cheer-leading in the time since. I’d bet they told you all sorts of nice things while you were busy dashing from open house to open house. “Oh, you can’t put in contingencies, you might miss out of the house!”
You got schlonged Bryan.
‘I’m nervous,’ Calais said. ‘I’m willing to drive Uber if I have to…’
Again, this uber thing comes up as a last resort to foreclosure. Why not deliver pizza? You’ll make more money.
Progress was made at the lunch table in the cafeteria this week
One of our young pups was asked if he had bought something yet. He said no, because he thought prices were too high.
I chimed in and told him to sit tight, as another crash was coming. And guess what? No one tried to contradict me and no one rolled their eyes. In fact a few heads were nodding their agreement.
Again, this uber thing comes up as a last resort to foreclosure. Why not deliver pizza? You’ll make more money.
Plus you aren’t taking strangers in your car.
Of course he isn’t gonna be able to make the monthly nut on the McMansion driving an illegal taxi (which now pays less than before) or delivering pizzas.
This is just like the guy who goes out and buys a $70k new truck because he “survived” the layoffs at his oil patch job.
“Byron Calais lost his job two weeks ago…”
Looks to me like Byron lives large… must be in debt up to his eyes.
Central planning always results in failure. Central Planning is foundational to socialism and communism.
“637 Rate Cuts And $12.3 Trillion In Global QE Later, World Shocked To Find Quantitative Failure”
http://www.zerohedge.com/news/2016-02-12/637-rate-cuts-and-123-trillion-global-qe-later-world-shocked-find-quantitative-failu