March 18, 2016

A Little Bit More Desperation In The Air

It’s Friday desk clearing time for this blogger. “In an event touted as the first of its kind in the Bay Area, six luxury homes said to be worth more than $85 million total, four of which are in Marin, are up for auction. The Belvedere property has been on the market for a total of 223 days. The property in Tiburon has been on the market 91 days, and the property in San Rafael has been on the market 179 days total. ‘For a property to be on the market a year, either there are issues with the property or it’s grossly overpriced,’ said Marcus Robinson, an agent with Coldwell Banker. ‘The only reason luxury properties go up for auction is they have a problem selling on the Multiple Listing Service because, generally, they are overpriced. I feel that sophisticated buyers will only purchase a luxury property at an auction if they can get a screaming deal.’”

“The buyer who set a Downtown Manhattan record when he paid $50.9 million for the penthouse condominium unit at Walker Tower is lowering his resale expectations after unsuccessfully trying to flip the apartment for $70 million. Neil Moffitt, CEO of Hakkasan Group, a London-based hospitality firm, has now slashed $15 million, or 21.4 percent, off of the asking price, bringing it to $55 million. The unit had been on the market with its $70 million price tag for close to a year. Moffitt has reportedly never lived there.”

“The price cut comes amid a wave of discounts in the ultra luxury Manhattan market. More than 60 homes or the 550 or so of the Manhattan homes with asking prices of at least $10 million had their prices cut by at least 5 percent in the past 60 days, according to StreetEasy. This rise in price cuts can be largely attributed to an uptick in the levels of high-end inventory on the market.”

“It took four hours for Chinese developer Greenland’s three-bedroom plus study penthouse to sell for $11 million when its Potts Point luxury apartment development, Omnia, was launched in November last year. So it is somewhat surprising that Frasers Property Australia has taken eight years to sell its last tri-level penthouse at its 56-level Lumiere apartment tower in the Sydney CBD. The 54th-floor apartment was sold to a Chinese buyer, who already owned a apartment in the building, for about the same as its initial listing price in 2008, $5.5 million.”

“In 2008, the penthouse was only a ‘warm shell’ or a mostly empty space. When it was sold in February, it was fully fitted out. Sydney housing prices started to fall in November 2015 after three boom years. While it was not a big loss, the penthouse apartment sold at little profit as it was empty with no rental income for the last eight years, said selling agent Greencliff chairman Stanley Quek.”

“With the steadily rising number of competitors in the residential property market, apartment rental and occupancy rates look to be on the decline with an increasingly saturated market, according to real estate experts. Knight Frank Cambodia’s most recent analysis of the apartment sector stated that there is no imminent threat of oversupply while ‘occupancy and rental prices are sure to be impacted by the sudden rise in condominium units. A sudden increase in the volume of units that will become available for rent starting from 2016 could potentially see occupancies drop’ in the high-end and mid-range segments, the report stated.”

“Dit Channa, CEO of Lucky Real Estate, explained the current market dynamics. ‘Since the market is still small but the number [of competitors] is escalating, more investors are investing in higher quality and offering better services to their apartments by having a pool, proper parking spaces, gym, etc,’ he said, noting that several older apartments have already lost about 30 to 40 per cent of their tenants.”

“The tale of two Canadian cities seems to have been turned on its head, with the unemployment rate in Calgary surpassing that of Windsor, Ont. In Alberta, licensed insolvency trustee Freida Richer has been getting busier and busier as laid-off workers exhaust severance packages and employment insurance. ‘Last year, we started to see that uptick in the number of filings and certainly in the number of phone calls we’ve been getting,’ said Richer. ‘The tone of my discussions with people now certainly, year-to-date, is that there’s a little bit more desperation in the air and frustration because they’re running out of money and they’re ending up having to default on payments.’”

“Home prices in Beijing, Shanghai and Shenzhen have surged by 20-30% since the Lunar New Year in February, according to state-controlled media. In Shenzhen, prices have increased by more than 70% over the past 12 months. ‘The makings of this rally started more than a year ago and have reached a tipping point,’ says Steven McCord, head of research for JLL North China. ‘Policies are looser than at any time in history in the last ten years, including the major policy rollbacks of 2009.’”

“Previous upswings were not driven by leverage, McCord explains. The norm was that people did not finance the maximum allowable level. They financed, on average, half of the cost – even if 70% or 80% was allowed. Therefore, mortgages did not play a role in driving up demand or prices. ‘Now, we believe there are more buyers using the maximum available leverage,’ he says. ‘For homebuyers, it is easier than ever to get mortgages.’”

“But more important, McCord adds, the downpayment itself is today often being financed through peer-to-peer lending channels. ‘This is not the norm yet, but it’s appearing and it makes us uncomfortable,’ he says. ‘This means some buyers are buying with zero down.’ In his view, peer-to-peer lenders are basically another form of high-interest ‘loan shark.’ Hong Kong Economic Journals recently reported that some 900 peer-to-peer lending platforms went belly up last year, three times the number in 2014. While some bankruptcies were due to poor management, many companies folded after the owner or operator took the money and disappeared.”

“Over the past few months, China has seen another boom in the real estate market—housing prices in Beijing, Shanghai and Shenzhen spiked again, on top of an already-dangerous housing bubble. This circumstance, as well as the natural political comedy of the Communist Party’s ‘Two Meetings’ in Beijing, caught attention of joke writers and commentators on the Internet this week.”

“Jokes of the Week: China’s silver-tongued realtors. Yesterday I received a call from a real estate agent. He asked: ‘Do you want to buy a new apartment? The price keeps surging. If you don’t buy now, you won’t be able to ever get it at the same price!’ I replied: ‘Sorry, but I already bought one.’”

“After several seconds of silence, he responded: ‘Well then, do you want to sell your apartment? We are seeing super high housing prices right now. If you don’t sell now, you may not ever be able to get these prices.’ As the agent seemed to be such a diligent professional, I felt obliged to tell him the truth: ‘To be honest, I am just a poor man, having neither money to buy an apartment nor an apartment to sell.’”

“Another several more seconds of silence passed, and he spoke again: ‘Tomorrow there will be a kickstart sales event for some newly-built apartments. I can pay you 200 yuan if you queue overnight outside the sales building, pretending to be a buyer. Interested?’”

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Comment by Jingle Male
2016-03-18 02:34:23

Chinese UHSP: It is always a good time to buy….I mean sell…..I mean get paid to be a pretend buyer. Pretty soon, you can be a pretend inmate…..I mean get free housing and three meals a day!

There is always an upside to every situation!

Comment by Combotechie
2016-03-18 03:24:44

The word is Imputed!

Imputed buyers, imputed sellers, imputed inmates!

Comment by Combotechie
2016-03-18 03:39:00

Speaking of imputed, here’s a chart of Venezuela’s GDP.

Comment by Professor Bear
2016-03-18 08:17:33

Interesting how the vertical scale starts at 4.

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Comment by Combotechie
2016-03-18 03:42:48

In lots of math courses you get to play with imaginary numbers.

In the world of economics you get to do the same thing.

Comment by Combotechie
2016-03-18 03:52:58

In case anyone here is slow to get my point, the world’s all-important GDP measurements appear to me to be a function of price more than it is anything else; Raise prices and - presto!- your GDP goes up.

If the prices are a bit imputed then … so what?

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Comment by Combotechie
2016-03-18 04:08:18

Here’s a chart that shows consumer expenditures in the LA area and in the US. Note the hefty chunk of expenditures that housing takes up and then think of how much of these expenditures are possibly not in fact actual expenditures but instead are imputed expenditures, and then think about how changes in the prices of housing - which includes rent, actual rent and imputed rent - will affect these expenditures.

Comment by Blue Skye
2016-03-18 04:43:07

If that is the case, then why does GDP keep going up when prices are crashing?

Comment by Professor Bear
2016-03-18 08:18:57

Except that in the case of maths, “imaginary” is a misnomer.

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Comment by Combotechie
2016-03-18 03:46:28

Here’s a chart that shows the GDP of Zimbabwe:

Comment by Ben Jones
2016-03-18 06:11:55

‘ZIMBABWE this week marks a full year with its economy in negative inflation as latest statistics show the country’s annual inflation closed the month of February 2016 at -2,22 percent.’

‘According to the Zimbabwe National Statistics Agency (Zimstat), the annual inflation was down 0,03 percent from -2,19 percent in January, pushed by a decline in health prices as well as electricity, gas and other fuels. This marks 12 full months with inflation in negative territory after having slid into deflation in February 2015.’

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Comment by steadykat
2016-03-18 09:43:05

Rhodesia in 1960:

Interesting that people are now starving in an area that was once had bragging rights as “the breadbasket of the Continent” of Africa.

Comment by Professor Bear
2016-03-18 04:25:51

‘Policies are looser than at any time in history in the last ten years, including the major policy rollbacks of 2009.’

As the night follows the day, this will end in tears, anger and blame on others.

Comment by Puggs
2016-03-18 12:57:23

Everyone wanted to behave in 2009 for like 6 months. Bad behavior is back en vogue.

Comment by Professor Bear
2016-03-18 22:48:52

And openly encouraged…

Comment by Senior Housing Analyst
2016-03-18 04:26:38

Davis, CA Housing Market Implodes; Prices Crater 8% YoY As Housing Demand Caves Nationally

Comment by Ben Jones
2016-03-18 06:15:51

‘More than 60 homes or the 550 or so of the Manhattan homes with asking prices of at least $10 million had their prices cut by at least 5 percent in the past 60 days’

This is a safe deposit box? I guess if you think about it, it’s not like a safe deposit box at all. I wonder how that claim even came to be?

Comment by Jake
2016-03-18 06:32:58

Even safe deposit boxes depreciate rapidly.

Robert Shiller: “A House Is A Depreciating Asset”

Comment by Professor Bear
2016-03-18 22:50:43

What is the annualized rate of decline for a 60-day drop of 5%?

((1-0.05)^(365/60)-1)*100% = -26.8%.

That’s gonna leave a mark.

Comment by Ben Jones
2016-03-18 06:20:07

‘Negative interest rates may be gaining popularity in central bank circles, but one of the countries to first use the unconventional policy is at risk of an unsustainable asset bubble as a result, Moody’s Investors Service has warned.’

‘Sweden was among the first countries in the world to adopt negative interest rates, cutting its key deposit rate to minus-0.1 percent in February 2015 in the hope of boosting persistently low inflation. The Swedish Riksbank has continued cutting the rate since then, slashing it by 0.15 percentage points to minus-0.5 percent last month.’

‘Nonetheless, inflation has remained very low, averaging 0.7 percent in 2015, up from 0.2 percent in 2014, according to the European Commission. Meanwhile, economic growth has continued to be among the strongest among the advanced economies, coming in at 3.6 percent last year.’

‘This, coupled with ultra-low rates, has stoked a boom in house prices and mortgage lending that could prove problematic, according to Moody’s.’

“These trends will likely continue as interest rates will remain low, raising the risk of a house price bubble, with potentially adverse effects on financial stability, as and when house prices reverse trends,” Kathrin Muehlbronner, senior vice president at Moody’s, said in a report.’

‘The possibility of other major central banks adopting negative rates continues to be touted, with Norway’s central bank governor reiterating that the bank might yet do so. “We have experience from other countries that it’s possible to go beyond the zero-lower bound … if necessary, we have extended room for maneuver,” Oystein Olsen told CNBC.’

Comment by Combotechie
2016-03-18 06:45:51

“Meanwhile, economic growth has continued to be among the strongest among the advanced economies, coming in at 3.6 percent last year.’

“This, coupled with ultra-low rates, has stoked a boom in house prices and mortgage lending that could prove problematic, according to Moody’s.”

Economic growth coming in at 3.6 percent last year. Check.

A boom in housing prices and mortgage lending. Check.

So, a boom in housing prices translates to 3.6 percent growth? Yes?

If yes then so-called growth is but a measure of price increases.

Comment by Ben Jones
2016-03-18 06:46:47

‘All Canadians are paying the price for ‘conceal’ estate in Toronto and Vancouver’

‘The latest attraction in London is the Kleptocracy Tour, organized by anti-corruption groups. They drive customers through neighborhoods that have become the world’s most expensive square footage, thanks to the flood of dirty money bidding up real estate values.’

‘The tour is interesting, I’m told, because the Brits more or less know who owns what because their press is vigilant – and because the expats are often flamboyant. But many, notably those who continue to loot their countries or are serial crooks, try to stay under the radar. But everyone feels their presence.’

‘Americans have escaped this phenomenon thanks to the Patriot Act, and banking laws that frighten away the most egregious money laundering activities. But a real estate loophole exists, the size of the Panama Canal, and the money is gushing in, along with heightened concerns. New York City and Miami luxury condo prices are going through the roof as their skylines become stacks of safety deposit boxes for persons unknown.’

‘This month, Washington cracked down, as Ottawa should have starting in 2012 when the ruination of Toronto and Vancouver housing costs began. (Last year alone, prices jumped 14 per cent and 30 per cent, respectively.)’

‘The real estate loophole is simply that while banks must follow know-your-client rules, developers and lawyers or accountants need not. So stashing cash through these intermediaries in a condo using a shell company owned by a trust in a secrecy haven that, in turn is owned by another shell company offshore is a nifty laundering technique. No one’s the wiser, especially governments, ex-wives, cranky partners, regulators, tax officials, courts or cops.

‘Canada has become a secrecy haven, unlike the U.S. where a more diligent press exists. For instance, a credible website published that shell companies paying cash bought half of the US$8 billion worth of luxury apartments acquired in New York City in five years.’

‘By comparison, in Vancouver or in Toronto’s condo cluster the percentage of cash deals by anonymous offshore entities and/or “see throughs” or empty laundering vehicles, is unknown. And nobody’s gone to the trouble to ferret out this information.’

‘Using the New York metric, a good guess would be that offshore shells bought half of all the high-priced condos in Vancouver and Toronto. But nobody knows — and that’s the problem.’

Comment by Jake
2016-03-18 06:48:07

Inflated housing prices are synonymous with fraud.

Comment by Ben Jones
2016-03-18 06:51:27

‘Tom Quigg of Windermere Real Estate Ocean Shores reports that 2016 continues to be a buyers market locally for home sales.’

“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.”

Comment by Ben Jones
2016-03-18 06:55:31

Another Foreclosure Suicide in Washington State

‘Reports the Wenatchee World: A major police operation Sunday to get a 66-year-old Wenatchee man to vacate his home that had been foreclosed upon and sold ended in the man’s death by apparent self-inflicted gunshot wound.’

‘Police responded to the Marilyn Street home at 1 p.m. after the home’s new owners reported they were at the home and heard two gunshots inside while they were outside trying to make contact with the man.’

Comment by redmondjp
2016-03-18 11:01:16

I can already hear the whispering at the housewarming party: “So which room did the guy kill himself in?”

But wait, what? Two shots? Did the guy miss the first time?

Comment by BottomFisher
2016-03-18 18:05:15

Practice makes perfect

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Comment by Professor Bear
2016-03-18 22:52:48

“…after the home’s new owners reported they were at the home…”

Scumbag vultures

Comment by Ben Jones
2016-03-18 07:01:46

Mounds: A city of abandoned buildings

Comment by Jake
2016-03-18 07:08:08

The fortunes of towns and cities turn rather quickly.

Comment by Professor Bear
2016-03-18 22:59:14

This is a town which never recovered from the Great Depression.

Historical population
Census Pop. %±
1900 854 —
1910 1,686 97.4%
1920 2,661 57.8%
1930 2,129 −20.0%
1940 2,144 0.7%
1950 2,001 −6.7%
1960 1,835 −8.3%
1970 1,718 −6.4%
1980 1,669 −2.9%
1990 1,407 −15.7%
2000 1,117 −20.6%
2010 810 −27.5%
Est. 2014 763 [3] −5.8%

Comment by Senior Housing Analyst
2016-03-18 07:15:37

Fernandina Beach, FL Housing Market Craters; Prices Implode 9% YoY As Foreign Nationals Dump Houses On Market

Comment by taxpayers
2016-03-18 07:26:36

VIX 14.02 -2.91%

here we go loop d loop

Comment by Ben Jones
2016-03-18 07:27:56

‘A photo of Facebook founder Mark Zuckerberg jogging Friday morning in downtown Beijing’s notorious smog has prompted a torrent of amusing comments and some mockery on Chinese social media. Zuckerberg is a favorite personality among the Chinese public, despite Facebook being banned in the country alongside other overseas social media platforms. He’s also become somewhat notorious for persistent yet so far futile efforts to woo leaders enforcing China’s strict online censorship.’

‘Zuckerberg posted the photo to his Facebook page of him and five others running through Tiananmen Square with the famous gate to the Forbidden City imperial palace in the background. None wore the air-filtering face masks that are ubiquitous in Beijing and other Chinese cities.’

‘At the time the photo was taken, Beijing’s air pollution index was well into the hazardous zone at about 15 times of the level considered safe by the World Health Organization.’

‘Chinese residents wondered aloud whether Zuckerberg’s jog was yet another gesture aimed at pleasing the Chinese authorities who claim they are gradually winning the battle against air pollution. “Kissing up?” commented Tom Wang, a Chinese environmentalist, who reposted Zuckerberg’s running photo and added a graphic of Beijing’s air quality readings from Friday morning.’

‘Journalist and avid runner Peng Yuanwen joked that Zuckerberg’s lungs had single-handedly filtered Beijing’s smog after the city’s air quality noticeably improved by early afternoon. “The human-flesh smog vacuum is better when it’s American-made,” teased Peng, playing on a joke among Beijing residents that they filter the city’s air with their lungs by inhaling harmful particles.’

‘Others noted that Zuckerberg’s run took him through the square where hundreds of thousands of Chinese students gathered in the spring of 1989 to demand democracy. The movement ended in the early hours of June 4 after troops and tanks crushed all resistance, killing hundreds, possibly thousands of protesters.’

Comment by junior_bastiat
2016-03-18 13:54:45

Just got back from Australia this week, checked real estate prices wherever I went in New South Wales. Prices are due for at least a 20% correction, and at the bottom people might be able to pick something up for 50% off if they have the cash, but Australia is in a good position - lots of commodities, small population and even with the decline in China’s growth there is still a floor to their sale of coal and gas which they have in abundance.

The break in the market will be psychological - people will just stop buying. Building is going on everywhere, with retirees selling their places in/near the big cities and going out to new developments near pristine beaches or in the mountains. Both jobs and wages are a joke, so the young without inheritances don’t stand a chance against the Chinese money and they know something is out of whack. Remodeling everywhere too, blue collar guys very busy when the surf isn’t good. Everybody doing deals in the restaurants, either for new property or with a contractor to remodel. Sydney choked with traffic and many high end sports cars/super cars. Feels a lot like San Diego circa 2003-4.

Comment by Ben Jones
2016-03-18 14:11:45

Good input, thank you!

Comment by Jake
2016-03-18 18:45:07

Is that you Jingle_Fraud?

Comment by junior_bastiat
2016-03-18 19:51:18

Nah, I’m not him/her, just decided to take advantage of the weak aussie dollar to go back, first time in 16 years for me.

I was trying to figure out how far out of Sydney is considered a bedroom community because prices are pretty nuts. Nice areas, but very few high paying jobs as far as I can tell. Talked with a friend who lives there now, he agreed - its not like San Diego where we used to live where there were/are lots of 6 figure jobs for tech, biotech, etc. Prices don’t compute - there are retirees, and then all the people catering to them in lower wage service jobs. Dining out isn’t cheap either, fortunately I was getting at least 25% off thanks to the strong dollar. When I was there in 2000 the dollar was so strong I lived like a king, crazy hotel in Sydney, going out to the great barrier reef, driving a rental car that was nicer than 90% of the other cars on the road (and a hyundai at that). Now lots of Aussies have “flash” cars, whereas back in the day they liked a kind of ugly muscle car (holden) that they took pride in being able to work on themselves - from blue collar types to PhD’s in meteorology. Tons more tattoos now too, legs, sleeves, even women behind the ear.

Comment by GinGary
2016-03-18 14:26:48

“I can pay you 200 yuan if you queue overnight outside the sales building, pretending to be a buyer. Interested?’”

That’s 6 jumbo shrimp! Who doesn’t love jumbo shrimp?

I can’t help but think this is what real estate and IPO sales events looked like in those parts not so long ago.

Comment by Sacks of Dong
2016-03-18 14:45:20

“Some of the most valuable things, such as fine art, rare antiques, precious jewelry and collectible vintage cars are sold in auctions,” said Olivia Hsu Decker
I heard this Realtor slime pimping the San Rafael auction on the radio today.
“The six homeowners participating in this auction are not distressed sellers,” Decker said. “They simply want to have a deadline to sell their home instead of showing their homes over a prolonged period.”
Olivia restates after the Realtor Bvllshit Gizzard is surgically removed: “They want to be rid of them regardless of price.”

Comment by phony scandals
2016-03-23 17:08:55 - 99k -

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