February 26, 2016

A Real Sense Of The Opposite Of Optimism

It’s Friday desk clearing time for this blogger. “Generally speaking, home resales started falling from Sarasota to Naples in the last two to three months of 2015, said Denny Grimes, president of Denny Grimes & Co. in Fort Myers. ‘It’s kind of across the board,’ he said. ‘We saw sales down in Lee County 30 percent in January. We’re in the middle of a downshift in the marketplace. And it’s a good thing.’”

“He said the consumer confidence tank is ‘low on fuel.’ Part of the low confidence, he said, is ‘our fault,’ with home prices rising too quickly. ‘We have seen tremendous price increases in the last two or three years and we are pricing ourselves out of a lot of the market. You can ask for more, but buyers won’t pay it,’ Grimes said.”

“Some builders have already noticed a slowing demand for new homes, with several starting to offer incentives to entice buyers to purchase the inventory. One of the areas where that is happening is in the Immokalee Road corridor in North Naples, which has seen a surge in new construction over the past few years.”

“Developer of tall towers Extell has announced that they’re scaling back condo prices at their 80-story Lower East Side project One Manhattan Square. The pricing rollback comes alongside news of slowing sales in the city’s uber-luxury housing stock (which Extell has no small part in.) Condos in the city’s inaugural residential supertall, 432 Park Avenue, have been divided into smaller, less pricey units to spur sales. Extell relisted some One57 condos as rentals to cast a wider net. Vornado CEO Steven Roth declined to comment on the status of sales of 220 Central Park South during the company’s Q4 earnings call last week, noting that ‘[t]he market is slowing. It’s slowing for everybody. It’s slowing a little bit less for us, but of course it’s slowing for us as well.’”

“There are signs that the red-hot tech scene is slowing down in Silicon Valley. KRON Tech Trends reporter Gabe Slate learned tech stocks are down, layoffs are happening, and there will be more to come. Venture capitalists are starting to close their wallets and not invest in tech. Real estate analysts are warning the rate of growth for the housing costs in the Bay Area has surpassed where it was at right before the dot-com bust in 2001.”

“‘It sounds so dramatic to say a big bubble pop,’ said tech financial expert Erica Sandberg. ‘But it’s definitely a slowdown. And that is a fact. It is happening. People are losing their job and companies are not hiring as aggressive as they were before. There is definitely a real sense of fear that is out there, and when fear is there, the opposite of optimism, then certainly venture capitalists and any other sort of backers are going to put the brakes on.’”

“The slump in oil prices is making an impact on the Minot housing market. An average home is currently selling for around $200,000. That’s $50,000 less than it was during the peak of the oil boom. Driving through neighborhoods in Minot, you may notice multiple for sale signs. Hundreds of homes are on the market throughout the Magic City right now. ‘We’ve seen a major shift in the market,’ said Tracy Dachs, Century 21 Action Relators.”

“During the peak of the boom in 2012, Century 21 Action Realtors say they sold a total of 968 houses. At that time more than 200 rigs were in operation, the city was still recovering from the 2011 flood, and housing was extremely limited. ‘We would drive people by a dirt lot and hold up a picture saying, this is the house going on this lot, this is the house on that lot and you have two to choose from, which one do you want?’ Dachs said.”

“Moody’s said that property prices in Brazil had fallen by 5 to 20 percent in 2015 and that, according to projections, the industry will continue to be ‘under pressure’ until at least halfway through 2017. The Brazilian real estate industry has also been suffering from oversupply. Despite an ongoing reduction in the launch of new releases, the perception of a flooded market remains. Terminated contracts and poor sales have left large numbers of finished, sale-able properties on balance sheets and are only serving to prolong the downturn.”

“‘These price declines are primarily due to a sharp contraction in consumer confidence, which is based on economic uncertainty in Brazil, including the poor employment and high inflation,’ explained Cristiane Spercel, Moody’s vice president-senior analyst. Moody’s citied the liquidity of construction companies as the ‘most serious concern’ in their report. ‘We note signs of industry contraction since 2012, but the challenges for builders have been aggravated by a tighter funding availability and deterioration in real-estate prices,’ said Spercel.”

“The housing boom once fuelled loan growth in Singapore, but analysts warn that lenders in the city-state will have a tough time peddling mortgages this year as the home vacancy rate hits a record high. This chart from BMI Research shows that the vacancy rate of non-landed properties rose to 9.4% in the fourth quarter of 2015,, the highest level since at least the first quarter of 2006 when the series was first compiled.”

“‘Singapore’s real estate market is set for another year of price declines in 2016 as a middling macroeconomic outlook, subdued rental demand dynamics, the retention of market cooling measures by the government and central bank, and a gradually tighter credit environment continue to weigh,’ the report noted.”

“Rents at blue-chip housing estates are falling faster than home prices. Rents at Taikoo Shing – a housing estate targeting middle class families with household income of HK$80,000 to HK$100,000 a month – have fallen 16 per cent from their peak in October last year compared with an overall 11 per cent drop in home prices over the same period. ‘We have seen more leasing transactions record low rents on Hong Kong Island than in other districts. It reflects that middle class families are more careful in budgeting their expenses to prepare for tough times to come,’ said Wong Leung-sing, an associate director of research at Centaline Property Agency.”

“Landlords will need to react promptly by adjusting their asking rents downward if they want to find tenants before market sentiment turns worse, he said. Midland Realty chief analyst Buggle Lau Ka-fai said leasing for luxury apartments would also be affected as the stock market turbulence could dent financial institution profits, resulting in lay offs as a way of cost control. ‘Investment bankers will become less generous than before in terms of paying rents,’ he said.”

“I have been wondering about Beijing’s decision to intervene in the market since last year. What prompted policymakers to pour in trillions to prop up the bourse? Some people have argued that the incompetency of regulators and financial technocrats was a driving force. It is fair to say that some regulators are inexperienced. But are they so incompetent as to make such an elementary mistake? It wasn’t until I read Professor Zhu Ning’s book China’s Guaranteed Bubble that I was able to make sense of Beijing’s decision.”

“What do Chinese investors do when the stockmarket crashes? They cry, curse and occasionally jump out of buildings, but they’re also likely to stage protests at the gates of the Chinese securities regulator. There is a similar situation in the real estate sector. Chinese homeowners are likely to protest outside a developer’s office if it offers more discounts to new buyers or if prices drop. Some buyers even smash up the display centre and take sales staff hostage.”

“Instead of sending in the cops, local governments often act as meditator, asking property developers to compensate aggrieved buyers. Once again, social stability trumps all. The real danger of these actions is that it encourages the widespread assumption that the government will step in when things go wrong. Professor Zhu argues that unless Beijing reins in these implicit guarantees, a financial crisis is inevitable. It reminds me of the false sense of security created by the AAA ratings handed out willy-nilly to various mortgage-backed securities and collateralised debt obligations ahead of the great crash.”

“An economist and hedge-fund manager went undercover and found that Australia now has ‘one of the biggest housing bubbles in history’. Bronte Capital’s chief investment officer John Hempton and economist Jonathan Tepper toured suburbs across north-west and south-west Sydney to view housing developments and met with 20 mortgage brokers three weeks ago. They discovered that mortgage brokers were advising them to lie on loan application documents about the deposit for a house and about income, the Australian Financial Review (AFR) has reported.”

“When the pair asked banks to call their employer, ‘both reputable and disreputable brokers said banks rarely verified payslips,’ Mr Tepper wrote in a report. They also encountered developers lying about units and houses being sold in the west, the ‘epicentre’ of the housing bubble. To Mr Tepper’s surprise, some of Sydney’s poorest suburbs, such as Blacktown, Rooty Hill and Mount Druitt in Sydney’s west had properties selling from $500,000 to $700,000 - prices that are at least eight times the income of people from those areas.”

“There were more advertisements for deposit guarantees, where rather than putting a deposit down on a house you can take out an insurance contract that will pay the deposit if you default. Another shocking revelation was that the verification of documents was sometimes done by Indian call centres, according to Mr Hempton. ‘The further west I went, the more irrational it felt. Lots and lots of supply and prices that bore no resemblance to construction cost and income of people around there,’ Mr Hempton told AFR.”

“Tepper writes of getting a ride with an Uber driver who said he had his own house, had bought five investment properties in Queensland with no cash deposits, and went guarantor for his daughter who bought a $2.2 million home. His report noted that ‘over the past few years over 40 per cent of all new mortgages originated have been interest-only mortgages. This is truly Ponzi financing, where home buyers only make money if their houses keep rising in value. Paying interest only and revaluing property allows for a Ponzi dynamic. As prices rise in a Ponzi fashion, more equity allows for more deposits. This will reverse viciously when prices fall.’”

“Their research is an unrepresentative sample of all of Australia but Hempton challenges anyone to go out and start looking at the glut of property that exists in the west. ‘Go drive around western Sydney at the moment. It was pretty obvious to us there was a lot of unsold inventory.’”




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73 Comments »

Comment by Jingle Male
2016-02-26 04:05:33

‘Go drive around western Sydney…..’

I will be there shortly and was going to file an HBB report, but Hempton & Tepper already beat me to it. I’ll find an AU$1,000,000 house and make a YouTube video for you. It would cost U$700,000 today since the Australian dollar has dropped 30% since 2014.

Comment by Ben Jones
2016-02-26 04:51:14

These guys casually drove around and discovered massive fraud everywhere. Is anyone doing that in the US?

Comment by Jingle Male
2016-02-26 05:04:21

I did in 2006 and found massive quantities very similar to what they found in Australia.

Given the huge amount of paperwork and brain damage it took to refi some houses a few months ago here, I doubt a fraudster would get past the starting gate today in the US. And that was with 55% LTV and an 800 FICO.

Comment by Mafia Blocks
2016-02-26 05:26:58

Nonsense.

How many fraud driven mortgages were made in the last 6years? 10 million? 15 million?

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Comment by DumidolFanger
2016-02-26 06:01:15

3 pe cent down mortgages and FHA and VA loans. They’ve taken the fraud in house.

 
 
Comment by Ben Jones
2016-02-26 05:27:16

“Whether they are first-time buyers or hoping to get back into the red-hot housing market, David Setti with TurnKey Mortgage Solutions in Campbell, takes the opportunity to educate them. While lenders will allow 43 percent of gross income to be dedicated to debt, Setti asks his clients to think about the kind of life that debt will leave them with and whether they are comfortable with the bills they will be paying each month. ‘We think the industry is broken and it’s up to us to fix it,’ Setti said. ‘For example, I met with a couple who make $300,000 a year. First we talked about what they felt they could afford, figuring in their other expenses, and they settled on 1.2 million.’”

“Although they knew how much money they were comfortable spending, the couple was curious as to how much a lender would be willing to loan. They were surprised to hear that it was more than twice the amount they were planning to borrow. ‘He asked if the lender figured in their expensive eating habits, his kid’s private school education, or the money they spent caring for their horse. I told him, no, they don’t figure those expenses in and that we can only fix mortgages one at a time by educating clients.’”

http://thehousingbubbleblog.com/?p=9513

‘more than twice the amount they were planning to borrow’

Taking in 300k, gross, and they could borrow more than 2.4 million.

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Comment by Combotechie
2016-02-26 06:32:21

Here’s a repost from late yesterday. It’s a segment from the Australian version of 60 Minutes titled “Home
Groans” and it is well worth a watch (run time = 14 minutes)…

https://www.youtube.com/watch?v=j_ktN_h7-J4&feature=youtu.be&app=desktop

 
Comment by Ben Jones
2016-02-26 06:34:21

No answer? I have provided the name of the California loan dude. Can someone call him up and ask who is making loans at close to ten times gross earnings? And just what are the income taxes on 300k in California? I bet it’s high, 40%, more? (Note the pony isn’t deductible).

So these people are almost certainly bringing home less than 200k, but a lender is willing to drop over 2 million bucks on a shack. Hmmm, seems kinda significant. Is this an isolated case?

 
Comment by Mafia Blocks
2016-02-26 07:37:30

Stack on the shady appraisal times millions of sub-prime mortgages made in CA since 2008….. whattayaget?

 
Comment by Ben Jones
2016-02-26 08:18:54

‘a couple who make $300,000 a year’+'People are losing their job and companies are not hiring as aggressive as they were before’=foreclosure city.

“Pack the Tesla Ma, we’ll see if we can get to Ripon before the battery is dead and catch a bus from there.”

 
Comment by scdave
2016-02-26 09:43:52

“Pack the Tesla Ma, we’ll see if we can get to Ripon before the battery is dead and catch a bus from there.” ??

LOL…..

 
Comment by Rental Watch
2016-02-26 09:55:33

$300k of taxable income results in a tax rate of approximately 32.5%.

About 8% from CA, the rest from the Feds.

That’s a simple calc ($300k run through the Fed tax table, plus $300k run through the CA tax table).

In reality, the CA taxes would be deductible on the Federal return, so the number would be perhaps a couple of point lower (maybe to 30%).

 
Comment by cactus
2016-02-26 11:20:05

8 percent on taxable income between $40,251 and $50,869.
9.3 percent on taxable income between $50,870 and 259,844.

Read more: http://www.bankrate.com/finance/taxes/state-taxes-california.aspx#ixzz41IdCNhO6
Follow us: @Bankrate on Twitter | Bankrate on Facebook

 
Comment by Gary R
2016-02-26 19:49:03

Out of the 300K don’t for get 7.9% on the first $240K for SS and Medicaid

 
Comment by Gary R
2016-02-26 19:51:57

Don’t forget 7.9% on the fist 240K for SS and Medicaid. ( plus 1.45% on the remainder.

 
Comment by Gary R
2016-02-26 19:53:05

Sorry for the double post.

 
Comment by Jingle Male
2016-02-27 03:40:49

“No Answer?”

I got buried yesterday, as often happens these days at work. I will call David Setti today (Sat) and report back.

I do understand lending is getting a bit looser these days, but that does not make it fraud. 3% down is a loan program. Fraud is when you lie about your income or assets. I don’t think there is “phantom income” being used today like it was in 2006 or in Australia today.

 
Comment by Mafia Blocks
2016-02-27 04:42:10

Fraud is fraud. Meeting the number is fraud and it’s happening everywhere and has been all along.

 
Comment by rms
2016-02-27 07:01:12

“I do understand lending is getting a bit looser these days…”

It’s so loose that the government has to guarantee the lending because everyone knows the market would stall and drop into a nosedive because prices are too high. Ever wonder what the business schools are telling their students these days?

 
 
Comment by Karen
2016-02-26 08:58:59

“Given the huge amount of paperwork and brain damage it took to refi some houses a few months ago here, I doubt a fraudster would get past the starting gate today in the US. And that was with 55% LTV and an 800 FICO.”

There is simply no way Quicken loans and all those similar outfits are doing due diligence on the loans they are handing out. They’re all over Spanish language radio stations as well.

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Comment by salinasron
2016-02-26 10:34:45

“I doubt a fraudster would get past the starting gate today in the US. And that was with 55% LTV and an 800 FICO.”

I think you are totally wrong. I believe that the house listed below (a quick flip is totally fraud). Saw a hispanic family outside presumably moving in. Maybe it is for a low income strawberry picker family, I don’t know but surrounding area several blocks away is not going for $305/sq.ft. Check out the bath shower, they didn’t even clean the mold off the floor. Plastic yard fencing has fallen down in places and driveway has a lot of cracking that was increased in the remodel. The quote ‘30yr roof’ is flat composite shingles.

http://www.realtor.com/realestateandhomes-detail/740-Harrison-Rd_Salinas_CA_93907_M14708-21898

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Comment by cactus
2016-02-26 11:15:00

I did in 2006 and found massive quantities very similar to what they found in Australia. ”

Paladin , that was back in the day .

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Comment by snake charmer
2016-02-26 14:06:39

What surprises me is that they felt they needed to “go undercover” to do research, like this was a secret or something. Perhaps “going undercover” is how economists describe leaving their offices for source material.

 
 
 
Comment by Mugsy
2016-02-26 04:29:47

“The slump in oil prices is making an impact on the Minot housing market. An average home is currently selling for around $200,000. That’s $50,000 less than it was during the peak of the oil boom. Driving through neighborhoods in Minot, you may notice multiple for sale signs. Hundreds of homes are on the market throughout the Magic City right now. ‘We’ve seen a major shift in the market,’ said Tracy Dachs, Century 21 Action Relators.”

This is one of the worst places on the planet. The North Pole is more fun than Minot.

Why not Minot? (US Air Force Expression)

Comment by Ben Jones
2016-02-26 04:43:57

Yeah, but funny how money changes things:

‘During the peak of the boom in 2012…more than 200 rigs were in operation…‘We would drive people by a dirt lot and hold up a picture saying, this is the house going on this lot, this is the house on that lot and you have two to choose from, which one do you want?’

 
 
Comment by Mugsy
2016-02-26 04:32:37

“Tepper writes of getting a ride with an Uber driver who said he had his own house, had bought five investment properties in Queensland with no cash deposits, and went guarantor for his daughter who bought a $2.2 million home.”

At least he wasn’t an Ethiopian cab driver because then you know it’s a bubble!

Comment by In Colorado
2016-02-26 08:49:08

On the bright side, when it all comes crashing down he’ll still have his place in the “gig economy”

 
 
Comment by Ben Jones
2016-02-26 04:50:08

‘Even the CEO of Goldman Sachs sometimes misjudges the market. After seeing his Sagaponack mansion linger on the market for six months, Lloyd Blankfein has shaved $4 million off its asking price, bringing it to $13 million.’

‘Blankfein built the home in 2001, and has been trying to unload it ever since he and his wife Laura purchased a much bigger $32.5 million estate in Bridgehampton in 2012.’

‘The couple’s primary residence is a penthouse at 15 Central Park West, and they reportedly also own a home at Faena House, a new $1 billion condo project in Miami Beach.’

Comment by Sean
2016-02-26 08:16:50

“‘If the (mansion) has been sitting on the market for more than a couple years, there’s a problem,’ says CityRealty’s director of research Gabby Warshawer. ‘The market is responding. It’s saying, ‘No!’”

Sorry Ben, but that’s my favorite quote of the week.

 
 
Comment by Ben Jones
2016-02-26 04:54:42

‘The city of Frankfort is offering vacant lots in its new Chitty Subdivision free of charge. The offer is for a limited time — March 1 to 14.’

‘The new subdivision is one of six projects in progress or planned for the Frankfort area, including a city park improvement project, city housing rehab and demolition project, new duplex housing construction east of the Frankfort Community Care Home, the old Frankfort Grade School project, and construction of a grain loading facility by Farmers Cooperative of Dorchester, Neb.’

‘In the Chitty Subdivision project, nine lots are available and vary in size from about 1 1/2 acres to almost 3 acres. Lots are currently priced from $18,000 to $30,000.’

‘“The lots will be given away on a first-come, first-served basis,” City Clerk Melody Tommer said. “The new owner will be responsible for the costs to connect to all utility services.”

‘The new owner must pay the $6,000 fee for city water and sewer hookup at the time he or she makes the request for a lot, Tommer said.’

“The new owner will also be required to present a proposal of their new construction within 90 days of acceptance and must have completed construction of a home within 18 months of acceptance,” she said. “If this requirement is not met, then the $6,000 will be forfeited and the lot will revert to the city.”

Comment by Mr. Banker
2016-02-26 06:46:05

Bahahahahaha … the most expensive lot you will ever own just may be a free one in Frankfort.

 
Comment by Cracker Bob
2016-02-26 06:59:24

“*hitty Subdivision”

Comment by Ben Jones
2016-02-26 08:21:35

I wondered about their marketing department when I read that name.

‘its new Chitty Subdivision’

Do they have a Chitty library? Chitty park?

 
 
 
Comment by Ben Jones
2016-02-26 04:58:40

‘Tom Quigg of Windermere Real Estate Ocean Shores reports that January continued a buyers market locally as home sales continued climb.’

“Last year ended strong, and January seems to be holding up quite well. For the county as a whole, there were more sales in January than December. However, the housing market continues to shrink,” according to Quigg’s quarterly report. “The Months of Inventory graphs show the market as neutral in all areas except the North Beach, where added inventory has put the market back in the buyer’s category.”

‘With the exception of Westport/Grayland, homes sale prices for January 2016 are down a little from the prior month. The average sales prices are: Grays Harbor County - $133,000; Ocean Shores/North Beach - $144,000; Aberdeen/Hoquiam - $96,000; Montesano/Elma - $178,000; and Westport/Grayland - $194,000. But, winter months usually have fewer sales so average prices will be a little jumpy.’

A little jumpy. These small newspapers are funny.

 
Comment by Ben Jones
2016-02-26 05:02:59

‘Auto magnate Alan Potamkin is divvying up his dream home in Coral Gables. After listing the massive, 3.6-acre waterfront estate at 1 Casuarina Concourse in Gables Estates for $67 million last year, Potamkin has decided to list the home on its own with the option to buy the adjacent lot, currently part of the same parcel, for $49 million, The Real Deal has learned.’

‘Potamkin, who also has a residence in Aspen, lives in the Gables Estates mansion with Brigitt Rok, a psychologist who is Miami real estate investor Sergio Rok’s ex-wife. Hertzberg and Eber, who made headlines last year after a Miami Beach Realtor allegedly attempted to extort them after accusing them of manipulating the MLS, told TRD that Potamkin has purchased a preconstruction condo in Miami Beach, but would not disclose where.’

Comment by Professor Bear
2016-02-26 07:21:15

“purchased preconstruction”

Potamkin condos?

 
 
Comment by Ben Jones
2016-02-26 05:06:10

‘What do Chinese investors do when the stockmarket crashes? They cry, curse and occasionally jump out of buildings, but they’re also likely to stage protests at the gates of the Chinese securities regulator. There is a similar situation in the real estate sector. Chinese homeowners are likely to protest outside a developer’s office if it offers more discounts to new buyers or if prices drop. Some buyers even smash up the display centre and take sales staff hostage’

Yeah, we got some whiny little b*tches over here too. Remember how the Californian FB’s were? “Oh, I was frauded! They never should have lent me that much money!”

Comment by Professor Bear
2016-02-26 07:27:44

Sorry for the repost of this paragraph below, Ben. It struck us similarly. It’s almost like Chinese investors view ever-levitating asset prices as a basic entitlement.

Comment by In Colorado
2016-02-26 08:51:32

It’s almost like Chinese investors view ever-levitating asset prices as a basic entitlement.

They sure have come a long way from their Little Red Book days.

 
 
 
Comment by Ben Jones
2016-02-26 05:32:04

‘Some builders have already noticed a slowing demand for new homes, with several starting to offer incentives to entice buyers to purchase the inventory.’

As I noted yesterday, when builders start doing this they are minting fresh FB’s by the dozen.

Comment by Ben Jones
2016-02-26 05:35:24

‘Permits taken out by home builders for new houses were up more than 57 percent in January compared to a year ago, according to a bellwether research report. RL Brown’s Housing Report for January shows builder took out 1,257 permits for new construction in Maricopa and Pinal counties last month. That is up 57.3 percent from January 2015, according to the Scottsdale real estate research firm.’

‘New home permits were up 114 percent in Pinal County. New home sales were also up in January by 18.9 percent from a year ago.’

‘The median price for an existing home was $201,500 down 1.7 percent from a year ago. The median price for a new home was $294,850 down 1.1 percent. RL Brown said some year-end discounts helped bring down the latter.’

Comment by Mafia Blocks
2016-02-26 05:43:38

And here’s the money shot……. Contractors have all the room they need to slash prices given the fact that their asking prices are a minimum 300% higher than their cost to build. Not so if you’re a sucker who bought a house at retail(fraud driven) price.

Remember….. Reproduction costs of an SFR are $55/sqft(lot, labor, materials and profit).

Comment by Ben Jones
2016-02-26 06:15:03

‘permits were up 114 percent in Pinal County. New home sales were also up in January by 18.9 percent’

‘The median price for a new home was $294,850 down 1.1 percent’

And this doesn’t account for the extra garage they threw in or the flooring.

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Comment by Prime_Is_Contained
2016-02-26 12:39:45

Contractors have all the room they need to slash prices given the fact that their asking prices are a minimum 300% higher than their cost to build. Not so if you’re a sucker who bought a house at retail(fraud driven) price.

We discussed this dynamic extensively in the initial phases of the downturn—but ended up seeing much less of it than we anticipated.

Many properties went back to the bank rather than sell at reduced prices. To me, that suggested strongly that the builders had already pulled out all of their “earnings” via the construction loan, and that they would be underwater if they dropped the price below their construction loan balance. There’s no other way to view handing it back to the bank rather than selling it at a reduced price as rational behavior.

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Comment by Mafia Blocks
2016-02-26 13:47:44

Lol.

When there is nobody to sell it to even at 55 a square foot means you go bankrupt. It’s that simple. We are profitable at $55 a square foot all day long.

 
 
Comment by Mark in SF
2016-02-26 13:58:30

$55?! What year was that?

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Comment by Ben Jones
2016-02-26 14:08:35

In 2009 I saw ads for brand new Phoenix houses at $50/sf. And they had two car garages and a pool.

This is why we don’t see the 600-1500 new house roll-outs anymore. These guys got burnt.

‘The National Association of Realtors calculates that home construction lagged behind job creation last year in nearly two-thirds of the 146 U.S. metro areas it studied. The home-building industry’s largest trade association doesn’t directly dispute that.’

‘Rather, Realtors and builders are at odds on the fundamental question of whether it’s a supply problem or a demand problem.’

‘David Crowe, chief economist of the National Association of Home Builders, counters that builders would churn out more houses if there was sufficient demand to warrant it. “Supply is an issue; that is true,” he said. “But the dominant issue still is demand. That’s the reason builders aren’t building more homes.”

‘A builder needn’t sell as many move-up homes as it would starter homes to reach its targeted return on invested capital. Thus, the builders association and others say, there needs to be robust demand for starter homes in order for builders to justify developing starter-home communities. Many say that such demand hasn’t yet materialized.’

“If demand was there, there likely would be more supply,” said Mike Dahl, an analyst who tracks home builders for Credit Suisse AG.’

http://blogs.wsj.com/economics/2015/09/10/why-is-home-building-lagging-job-creation-realtors-builders-disagree/

 
Comment by Mafia Blocks
2016-02-26 16:46:33

Mark,

Multitudes have paid massively inflated prices, especially in places like San Francisco and Seattle. They’re borrowing just to eat because of it.

How much did you pay?

 
 
 
 
 
Comment by Ben Jones
2016-02-26 05:39:37

‘Just a few years ago, not having enough money for a new house or remodeling project or getting a new car meant for many people that those wants or needs would have to wait. As the country continued to suffer in the financial winter of the recession, institutions tightened up the lending process, making credit difficult to come by.’

‘But now, in what could be considered the spring awakening after a long winter, financial institutions in the Flathead Valley are largely back on track with lending, ranging from personal loans to real estate financing. “Credit’s getting a little easier,” said Patrick Barkey of the Bureau of Business and Economic Research at the University of Montana. “My sense is that things are not as tight as they were even a year ago.”

“We’ve had a major uptick in real estate loans, but I think a lot of that’s driven by the current rate environment,” Jim Kenyon, president and CEO at Whitefish Credit Union, said. “Anything consumer is doing really well.”

“Some of the people who had gotten hurt through the recession and got conservative in the recovery are now confident enough that they’re not going crazy,” Rosenberg said.’

Comment by Ben Jones
2016-02-26 05:45:38

‘An improving Colorado Springs economy, a hot real estate market and local businesses borrowing to expand combined to produce a banner year for Springs-area banks with surging profits, growing loan portfolios and the lowest level of delinquent loans in nine years, according to year-end data.’

‘The combined 2015 profits of the eight banks based in the Springs area jumped 31.1 percent from 2014 to $23.8 million, the highest annual total since 2006, according to the Federal Deposit Insurance Corp.’

‘The combined amount of delinquent loans the eight banks reported at the end of 2015 grew by more than a third to $11 million but fell as a percentage of the combined loan portfolios to 0.81 percent, the lowest since the end of 2006 and down from just above 1 percent at the end of 2014. That’s because the combined loan portfolios of the eight banks jumped 71.7 percent during the same period to $1.35 billion.’

‘Tatiana Bailey, director of the Southern Colorado Economic Forum, said bank lending is surging as a result of pent-up demand for loans that built up during the early years of the recovery from the 2008 financial crisis, when consumers lacked confidence to borrow amid tepid economic growth.’

“This speaks to the overall health of the economy. Job growth and the other economic indicators are positive, and people are now feeling confident enough about the economy to go out and buy homes and cars,” Bailey said.’

‘Lending fell sharply during the recession as loan delinquency levels soared to nearly 10 percent and several local banks faced orders from federal regulators restricting lending and other operations. The four Springs-area banks that had been under such orders have since been freed from those restrictions, and all but one of the eight local banks added to their loan portfolios in 2015 with most of the growth coming at Academy Bank, Peoples Bank and Integrity Bank.’

‘Zahl said the hot housing market generated most of the lending growth at Peoples Bank, with mortgage lending last year increasing about 40 percent from a year earlier to $1.05 billion. This, even though the bank sells off many of those loans to investors, and construction loans to homebuilding companies and commercial loans to businesses buying buildings to allow them to expand both grew last year. He said mortgage lending has remained strong into this year, with the local housing market showing no signs of slowing down.’

‘Lending to builders and businesses buying buildings for expansion also fueled growth for Integrity Bank, President and CEO Jim Wyss said. He said Integrity is benefiting from Denver-area workers buying houses in northern El Paso County at a significantly lower price than they would pay for the same home in the Denver area.’

Comment by In Colorado
2016-02-26 08:52:56

Take away the Air Force Academy and Springs would turn into Pueblo.

 
Comment by Lurker
2016-02-26 14:03:03

So the banks’ loan default rate SOARED by 33% in 2015, but this is masked by the flood of new loans, which soared even more by 71.7%.

How many new loans will it take to paper over the soaring default rate next year?

71%. In a year. Their loan book, which took how many years to build to its current level, almost doubles in a single year.

Sounds healthy.

(Coming out of lurker status just to comment on this absurdity)

 
 
 
Comment by Ben Jones
2016-02-26 05:51:01

‘The developer planning a supertall tower in the Sutton Place neighborhood of Manhattan lost a key decision in court Tuesday, paving the way for a foreclosure auction of his properties.’

‘Joseph Beninati was denied a temporary restraining order that he had sought to block lender Gamma Real Estate from seizing or auctioning off his properties at 428-432 E. 58th St., three contiguous five-story apartment buildings. In January, Beninati, founder of Bauhouse Group, defaulted on a $147.25 million loan from Gamma, a firm controlled by real estate investor N. Richard Kalikow, after trying unsuccessfully to sell the site or refinance it. The court’s refusal to grant the restraining order was a major blow to Beninati.’

“We have spent two years of time and millions of dollars,” said Beninati, who looked deflated outside the courtroom in lower Manhattan.’

‘Beninati’s problems come as both real estate lenders and buyers have begun to pull back on construction of high-end condo projects owing to increasing concerns that the condo market may be slowing as an oversupply of newly built multimillion-dollar apartments come up for sale. In court, representatives for Gamma acknowledged the project’s challenges. “The market is turning,” Greenberg, Gamma’s attorney, said.’

 
Comment by DumidolFanger
2016-02-26 06:04:31

Speaking of falling in Brazil, where’s Lola?

Comment by Mafia Blocks
2016-02-26 09:00:28

Struttin’ his stuff in the meat-packing district.

 
 
Comment by Ben Jones
2016-02-26 06:24:08

‘Global finance chiefs split over how best to revive the world economy, risking disappointment for investors seeking a coordinated campaign. Differences were laid bare on Friday as central bankers and finance ministers from the Group of 20 developed and emerging markets gathered for talks in Shanghai.’

‘Calls for increased government spending to lift demand, which have emanated from the U.S. and China, ran into opposition from German Finance Minister Wolfgang Schaeuble, who said using debt to fund growth just leads to “zombifying” economies. Bank of England Governor Mark Carney voiced skepticism over negative interest rates, which have now been adopted in continental Europe and Japan, and the head of the International Monetary Fund also warned about diminishing effectiveness of monetary policies.’

‘Lew also said that the G-20 should address “the need to avoid competitive devaluation. That’s competing in a beggar-thy-neighbor way to share a pie that’s either frozen or shrinking, and it doesn’t lead anywhere good.”

‘As for pro-growth measures, “the most likely outcome could be commitment by some governments to prop up faltering private capital spending, especially in commodity and manufacturing exporters,” strategists led by Valentin Marinov, head of Group-of-10 currency strategy at Credit Agricole SA’s corporate and investment-banking unit in London, wrote in a note.’

‘revive the world economy’

Ooo, I know, phony space alien invasion!

You know, you can’t borrow wealth into existence. You can’t print wealth. These knuckle heads have kicked the can and kicked the can. Now it’s a joke and they can’t bring themselves to acknowledge it.

Comment by Ben Jones
2016-02-26 07:59:32

‘the need to avoid competitive devaluation. That’s competing in a beggar-thy-neighbor way to share a pie that’s either frozen or shrinking’

A reformed Keynesian?

 
Comment by Neuromance
2016-02-26 17:48:25

Ben Jones:You know, you can’t borrow wealth into existence. You can’t print wealth. These knuckle heads have kicked the can and kicked the can. Now it’s a joke and they can’t bring themselves to acknowledge it.

You print some cash, buy some junk debt, and yadda yadda, the pump of the economy is primed and it takes off again.

Devil’s in the yadda yadda.

Comment by Ben Jones
2016-02-26 18:48:56

‘the pump of the economy is primed and it takes off again’

That was the theory before China happened. Some of these people are talking about zombie economies now. And the banks are getting killed by low interest rates. IMO, they blew it. QE was the biggest mistake they could have made, compounded by 7 plus years of ZIRP. If they want to have one more go at it, I’m not sure it will matter.

 
 
 
Comment by Professor Bear
2016-02-26 07:23:57

“What do Chinese investors do when the stockmarket crashes? They cry, curse and occasionally jump out of buildings, but they’re also likely to stage protests at the gates of the Chinese securities regulator. There is a similar situation in the real estate sector. Chinese homeowners are likely to protest outside a developer’s office if it offers more discounts to new buyers or if prices drop. Some buyers even smash up the display centre and take sales staff hostage.”

Does mass cursing and foot stamping help Chinese share and real estate prices return to normalcy?

 
Comment by ocsandrenter
2016-02-26 07:38:17

“Uber driver who said he had his own house, had bought five investment properties in Queensland with no cash deposits, and went guarantor for his daughter who bought a $2.2 million home.”
_
Australian version of 1929 shoeshine boy giving “stock tips”?
_
Neil, please pass the popcorn…

Comment by Ben Jones
2016-02-26 08:45:19

After ten years of bickering about a housing bubble and these guys simply pose as buyers and all this comes out. Remember how the government went on about laws restricting foreigners from buying existing houses, then somebody looked into it and no cases had been filed? Then they actually started enforcing it and whadda ya know, it was being broken all over the place. And again with the uber driving. How much income could this guy have?

Comment by In Colorado
2016-02-26 08:55:11
 
Comment by Ben Jones
2016-02-26 09:32:58

‘One of the mortgage industry’s most respected lawyers has spoken out about recent news articles reporting on mortgage fraud and a property bubble. Gadens partner Jon Denovan told Mortgage Business that recent reports in the Australian Financial Review about mortgage brokers and the housing market were “extraordinarily dangerous” and “sensationalist journalism at its worst”.

‘The leading financial services lawyer referred to a news article which appeared on the front page of Wednesday’s AFR, titled ‘Uncovering the big Aussie short’. The AFR reported that hedge fund manager John Hempton and economist Jonathan Tepper posed as a gay couple with a combined income of $125,000, viewing housing developments and meeting mortgage brokers in Sydney’s outer suburbs.’

‘However, according to Mr Denovan, the alleged fraud would have nothing to do with a bubble because the bank is still getting its valuation. “It’s just that some people, if there was broker fraud, are getting put into loans which they can’t afford, which is bad stuff, but that doesn’t cause a bubble,” he said.’

‘“There has always been fraud, but to suggest that fraud could be on a level to create a housing bubble, it’s not possible. What happened in America wasn’t to do with fraud,” Mr Denovan said, “it was about responsible lending requirements and no personal recourse. It’s completely different.”

http://www.mortgagebusiness.com.au/breaking-news/9494-lawyer-slams-dangerous-media-reports-of-mortgage-industry

A comment:

‘Every time these allegations of poor practices comes up it seems to be in either Western Sydney or the Gold Coast. Can we please get these grubs that are casting a shadow over our industry out. Can we call upon the Banks to report these guys if they suspect any dodgy practices. Removing these types from the industry is the only way we can hope to become known as the trusted advisors we should be.’

Another:

‘Just like the GFC subprime experience, we will all one day look back in hindsight and wonder how no one saw it coming. WA housing would have to be the most ridiculously priced when you consider there is nothing there, it’s unbelievably isolated and no job growth at all. Sydney is laughable, Melbourne next followed by Brisvegas.’

Brisbane-Brisvegas, I’m gonna use that one. San Vegas. Silicon Vegas. Palm Vegas. Vegas DC.

 
 
 
Comment by Senior Housing Analyst
2016-02-26 09:02:59

Seattle, WA Housing Market Craters; Prices Fall 5% YoY As Job Market Stumbles

http://www.zillow.com/seattle-wa-98199/home-values/

 
Comment by Ben Jones
2016-02-26 10:28:02

Dang, this might be the best internet rant ever:

http://allafrica.com/stories/201602261085.html

‘Whatever expensive imported soap you wash your greasy ass with will not wash away the stench of new money. Foolish fool!’

 
Comment by cactus
 
Comment by Ben Jones
2016-02-26 14:13:31

‘Donald Trump is poised to romp across the South on Super Tuesday, cementing a hold on the Republican presidential nomination. But it’s little-watched and deeply liberal Massachusetts that’s sending shivers down Democrats’ spines. Massachusetts, they fear, is where Trump could chart a course to the White House.’

‘The state — the largest non-Southern prize on the GOP calendar next week — is packed with the independent, blue-collar voters that will decide key general election states like Ohio, Pennsylvania and Michigan. And if Trump can trounce his Republicans rivals by pulling in those voters in Massachusetts on Tuesday, Democrats are afraid he could do the same to them nationwide in November.’

“It’d be like the canary in the coal mine,” said Doug Rubin, a Democratic strategist who helped steer Deval Patrick and Elizabeth Warren to statewide victories in Massachusetts. “If Trump is able to convince a lot of moderate-to-conservative independents to vote in the primary and he does really well here, that would be a warning sign for Democrats going forward.”

‘Recent polling suggests Trump is headed for a resounding victory in Massachusetts on Tuesday. A WBUR/MassInc poll out Friday morning puts Trump at 40 percent among likely GOP primary voters — far ahead of John Kasich and Marco Rubio’s 19 percent apiece. Among independents who are likely to vote in the GOP primary, Trump does even better, pulling in 42 percent. His favorability among likely voters with a high school diploma but no further education is a stratospheric 83 percent.’

‘Veteran Massachusetts Democratic strategist Mary Anne Marsh said all Democrats should watch Massachusetts because “it shows you that this is going to be a far tougher [general election] fight than most people thought.”

“I expect this race to be 2000-like close,” she said. “A lot of voters are split between Trump and [Democrat Bernie] Sanders. They agree on the problems. The only thing they’re debating is who has the better approach.”

http://www.politico.com/story/2016/02/donald-trump-massachusetts-219804#ixzz41JKSkCvf

‘A lot of voters are split between Trump and [Democrat Bernie] Sanders’

And not a Clinton or Bush? My how this has become an interesting election year.

Comment by Neuromance
2016-02-26 17:53:20

The unlikeliest candidate for president is currently finishing out his second term.

Comment by Ben Jones
2016-02-26 18:43:47

Considering he was in the bag for the neocons all along, the Empire was comfortable with him.

Comment by taxpayers
2016-02-27 06:33:25

An article on endless 2% gdp growth might be appropriate

(Comments wont nest below this level)
 
 
 
Comment by In Colorado
2016-02-27 06:57:06

During a fit of boredom yesterday I turned on the TV and attempted to channel surf off the antenna. Before I gave up on finding something to watch I came across a Hillary commercial.

In this advert a little Hispanic girl tells Hillary that she’s scared because her parents received a deportation letter. Just a letter, immigration hasn’t shown up yet to deport her parents. In fact, her parents are not only still in the US, they are at Clinton’s town hall meeting.

Clinton beckons the child to approach her and in halting Spanish (with subtitles in English) she tells her to be brave and makes vague promises (again, in bad Spanish) to put an end to deporting illegal immigrant families if she were to become President.

And people wonder why Trump, despite being an unlikable braggart, is popular. His promise to build a wall and make Mexico pay for it is purely bombastic, but the message he sends is clear: illegals will no longer be coddled. Even if he doesn’t make good on it, he is at least saying it.

 
 
Comment by Senior Housing Analyst
2016-02-26 16:55:49

Bend, OR Housing Market Craters; Prices Tailspin 16% YoY As Demand Collapses To 20 Year Low

http://www.zillow.com/bend-or-97701/home-values/

 
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