It’s Not A Shortage, It’s A Pricing Challenge
It’s Friday desk clearing time for this blogger. “While the nation is experiencing a housing shortage, local Realtors have a different take on the subject, especially when it comes to South Florida’s real estate. WPBF 25 News 9 a.m. anchor Stephanie Berzinski spoke to Realtor, Elizabeth Hoadley of Hoadley Donohue Real Estate to find out if that same housing shortage is happening in South Florida. ‘Personally I have not experienced a housing shortage,’ Hoadley said. ‘(Instead) it’s a pricing challenge. We have a lot of people who are desiring to cash out after the great fall,’ Hoadley said. ‘So they will put their house on the market but instead of truly wanting to sell it they want to list it and see what they can get out of it.’”
“The median price of a home in Massachusetts fell nearly 5 percent in February, pushing it to just below the $300,000 mark from $312,500 last year. Condo sales and prices followed the same pattern. While condo sales rose 26 percent during the year’s first two months, the median price fell 3.2 percent in the same period to $285,000. The biggest drop in home prices came on the Cape, with Barnstable County recording a 10 percent decline in its median price, to $315,000. On the South Shore, the median price in Plymouth County fell 3 percent, to $285,000. Condo prices fell 9 percent, to $225,000, according to The Warren Group.”
“‘With a mild winter behind us and the spring market beginning to heat up, the year is off to a very strong start,’ said Timothy M. Warren Jr., CEO of The Warren Group. ‘Though fairly moderate, the drops in median sale prices for both single-family homes and condos bring welcome relief as the state struggles with high housing costs.’”
“Despite significant declines in job creation, apartment developers have an estimated 30,000 units under construction in the Greater Houston area—including more than 1,300 in Conroe and Montgomery. There are not enough new jobs to sustain the apartment construction boom throughout the region, said Patrick Jankowski, senior VP of research for the Greater Houston Partnership. ‘We have—what looks like—a three-year supply [of apartments] without the job growth to sustain the [Greater Houston area] market,’ Jankowski said. ‘There are going to be too many units coming online.’”
“Gary Barnett, the developer who touched off a luxury-condo boom in Manhattan, will play host next month to a group of Israeli bond investors who are worried about dimming global interest in New York City’s costliest homes. Barnett’s Extell Development Co., which sold debt in Tel Aviv tied to the performance of some of its priciest condo developments in New York, saw his company’s bonds sink as low as 86 agorot on the shekel last week, with yields surging as high as 9.9 percent. It was the first sign of alarm by Israeli investors who since 2008 have financed a $2.4 billion borrowing spree by U.S. property builders.”
“‘Current Extell yields at 9 or 10 percent reflect a lot of fear and panic, but I think they better reflect the risk-return,’ said Lior Grinhouse, who manages 30 billion shekels at Psagot Investment House Ltd. in Tel Aviv. ‘It’s too early to tell if there is real damage.’”
“Apartments in more than 140 suburbs are on a confidential black list because of growing concerns about oversupply, off-the-plan sales, and, in some areas, falling prices, according to leaked documents. AMP Bank, the banking division of the largest financial services group that compiled the list, claims it is a ‘prudent’ response to managing risks of ‘over-supply,’ which could push down prices, rents and lead to defaults. Suburbs more than 10-kilometres from Sydney’s central business district, such as Homebush and Arncliffe, where there is a lot of apartment building underway, have recently been added to the list.”
“AMP is one of several big lenders circulating ‘black lists’ of suburbs where apartment buyers will face tougher terms and conditions, including increased scrutiny of their ability to pay. A recent survey by WBP Property revealed nearly half off-the-plan sales in the eight months to last August were in negative equity, which means worth less than the purchase price. Average losses were about $40,000, or about 10 per cent, between agreement to buy and pre-settlement valuation. Buyers have to bridge the gap between the purchase price and final valuation, which can result in contract breach, deposit loss and, potentially, legal action by vendors.”
“The skyrocketing Shenzhen housing market cooled off in March as transaction volumes saw a marked slowdown, signalling an abrupt turn in market sentiment. Total transactions by area in the nation’s most expensive city decreased 24 per cent to 89,400 square metres last week over the prior week, and fell 10 per cent year on year, according to China Index Academy. Over the weekend, mainland publication The Paper reported that second hand home prices were falling, citing the example of a flat that recently sold for a 2 million yuan (HK$2.4 million) discount, representing a 12 per cent cut in price, as the investor who bought the property wanted to cash out as soon as possible.”
“The Paper reported that a new project in Shenzhen’sLonghua district has set an initial selling price nearly 20 per cent cheaper than similar projects in the area. Carol Wu, China property analyst at DBS Vickers, said she expects price growth will ease in Shenzhen after pent-up demand was released over the past few months due to ‘panic buying.’ ‘Now prices have gone far beyond the level an average person can afford,’ said Wu.”
“Calgary homebuilders are reporting a slowdown - but definitely not a full-stop - in the wake of the downturn. Danelle Kaspers of Treehouse Developments – a housing contractor – is thankful the work has been continuing on. She thinks some of the work they’ve seen is speculative, but they also get people who want to take advantage of the slower market to build. ‘It was such a boom market before and prices were higher,’ she said. ‘There’s definitely been a price reduction – there definitely had been up to a 10 per cent drop in price on some of the inner city developments.’”
“Imagine your dreams of home ownership finally coming true. The bank qualifies you for a loan to buy a modest but perfect two bedroom craftsman on Beacon Hill. Then the economy tanks. You discover you owe much more in loans than your home is worth. The payments would eat up almost all of your now-reduced monthly income. You realize you’re on the verge of losing your home to foreclosure, with the thousands of dollars you’ve already made in payments vanishing into thin air. That’s what Pina Orsillo Belgrano says happened to her.”
“After eight years of struggling to keep her home, last week she received letter from the bank telling her she’d exhausted all other options, and that her home was being foreclosed. Belgrano said her experience as a homeowner was not the idea of the ‘American Dream’ she had in mind when she emigrated to the U.S. at age 16. ‘My thing was, ‘well, maybe I should explore the American Dream,’ she said, ‘which has now become a total American Nightmare.’”
“A longtime Nebraska lawyer who later served as the CEO of TierOne Bank when it became insolvent was sentenced Wednesday to an 11-year federal prison term. He was also ordered to pay a $1.2 million fine and undetermined restitution. Gilbert Lundstrom, 74, was accused by the government of causing more than $50 million in losses by concealing the dicey state of the bank’s assets as the housing bubble burst and TierOne became the biggest bank to fail in state history. He was found guilty by a jury last year of 12 of 13 counts in a bank-fraud case.”
“During his three-week trial, subordinates of Lundstrom said he created fake accounts to conceal bad loans made to real estate developers as the housing boom was about to become a housing bust. ‘Do not see me as an evil man. I never intended to hurt anyone,’ Lundstrom told the judge, explaining that he never expected the bank to become insolvent and put employees out of work. ‘I truly believed that the market would turn around and we’d get out of this together.’”
Recall how the REIC came out with a study saying mainland Chinese only owned 1 or 2% of the houses in Vancouver:
‘The http://www.news1130.com/2016/03/24/vancouver-real-estate-china-economist/ Bank of Canada estimates one in three buyers of Vancouver real estate come from China. But an economist points out it’s a problem that we even have to guess, with governments at all levels dragging their feet on collecting data that’s often available in other jurisdictions.’
“It’s as good an approximation as you have when you don’t have perfect data,” says Davidoff. “I think to the extent that the property around this area is being bought from outside Canada. Now, if they’re coming to immigrate, that’s one thing. If they’re purchasing housing purely to store cash, that’s something entirely different.”
With that level of fraud going on, they’ll say anything to understate the problem.
Didn’t take long for News 1130 to fold and pull the story.
Housing High Crimes
Everything they’ve said has been a lie. And the lies knowingly and cheerfully were endorsed by embarrassing, feckless political leadership. Canada will have its own Trump, and soon.
“Canada will have its own Trump, and soon.”
And that might be Canadas last and only chance.
“If they’re purchasing housing purely to store cash, that’s something entirely different.”
So if wealthy non-Chinese buy three homes and one of them is only used in December to shop in Manhattan and to attend an art auction, that’s okay?
If religious denominations have tax exemptions, that’s okay?
‘Sweden cuts maximum mortgage term to 105 years (the average is 140)’
‘A number of banks and analysts have warned that Sweden’s housing market is overheating, with HSBC in January saying: “The pace of acceleration in the housing market points to a bubble.”
‘Now Sweden is dealing with its overheated housing market by reining in mortgage availability. Regulators introduced restrictions which will mean mortgage terms - the time homebuyers have to clear the debt - will be drastically reduced to just… 105 years.’
‘The move comes because historically there has been no time limit on mortgage duration.’
‘So as prices rose and affordability became tougher, Swedish banks’ response was to extend terms, as had been the case in other high-cost property markets including Japan in the Eighties.’
‘The average term is reported to be 140 years. This meant many people who inherited property but who could not afford to take on the mortgage debt had to sell up.’
Just so you don’t miss it:
‘as prices rose and affordability became tougher, Swedish banks’ response was to extend terms, as had been the case in other high-cost property markets’
And prices went up even more. Click!
“And prices went up even more.”
And this price rise is what fueled demand.
One way to address the affordability issue is to lower prices, but if you lower prices then the “buy now or be priced out forever crowd” would choose to sit on the sidelines instead of stepping up to buy as they have long been conditioned to do.
This means the term “affordable” must not be defined in terms of the entire price but must instead be defined in terms of small chunks of the entire price - chunks of the entire price that are so small that they stretch out over a century.
A century?
‘historically there has been no time limit on mortgage duration’
And Sweden has NIRP too. I’ve seen it reported that one consequence of negative interest rates could be a mortgage where the bank pays you to borrow.
‘Sweden cuts maximum mortgage term to 105 years (the average is 140)’
Lemme see.
If I make an extra payment every month……. will this reduce my mortgage to 52.5 years?
+52.5
‘The skyrocketing Shenzhen housing market cooled off in March as transaction volumes saw a marked slowdown, signalling an abrupt turn in market sentiment. Total transactions by area in the nation’s most expensive city decreased 24 per cent to 89,400 square metres last week over the prior week, and fell 10 per cent year on year, according to China Index Academy. Over the weekend, mainland publication The Paper reported that second hand home prices were falling, citing the example of a flat that recently sold for a 2 million yuan (HK$2.4 million) discount, representing a 12 per cent cut in price, as the investor who bought the property wanted to cash out as soon as possible.’
‘The Paper reported that a new project in Shenzhen’s Longhua district has set an initial selling price nearly 20 per cent cheaper than similar projects in the area.’
This is the city that’s up 50-70% in the last 12 months (I can’t keep all these Chinese dumps in my head). Oh well…
‘Everyone is worried that a third China bubble is about to pop’
‘First, China’s property bubble popped. Then, China’s stock market bubble burst over the summer, and investors lost a ton of money before the government took control of the system. Now the concern floating around the world of markets is that the third in China’s “triple bubble” is about to burst.’
‘That bubble is credit, especially corporate bonds, which have absolutely exploded over the past year as refugees from the other bubble bursts searched for yield. This one is going to be for a very straightforward reason, too — supply. Simply put, there are about to be too many bonds in China.’
Oooh, and then another bubble was re-started in Shenzhen and other polluted dumps. What’s next from these crazy tricksters?
Next? Succumbing to the law of gravity….financial gravity!
‘Argentina’s shale capital suffers from slowdown’
‘The dizzying growth of Añelo, driven by the production of shale oil and gas in the Vaca Muerta geological reserve, has slowed down due to the plunge in global oil prices, which has put a curb on local development and is threatening investment and employment.’
“We had an interesting growth boom thanks to the strategic development plan that we were promoting, to get all of the oil services companies to set up shop in Añelo. That really boosted our growth, and helped our town to develop,” Añelo Mayor Darío Díaz said.’
‘The population of this town located 100 kilometres from the provincial capital, Neuquén, rose twofold from 3,000 to 6,000. And that is not counting the large number of machinists, technicians, engineers and executives of the oil companies who rotate in and out of the area, along with the truckers who haul supplies to the Loma Campana oilfield eight km from Añelo.’
‘The mayor pointed out, for example, that rent for a two-bedroom housing unit has climbed from 33 dollars to 100 dollars a month, and that a plot of land that previously was worth 1,700 dollars cannot be purchased now for less than 130,000 dollars.’
“The situation is very complicated,” said Díaz, who estimated that there will be 1,000 more unemployed people in the province, added to those who have already lost their jobs.’
‘Oil worker unions in Vaca Muerta say 1,000 people have been laid off so far in the industry, as well as 1,000 in other areas. Eduardo Toledo, an agricultural technician who decided to move to Añelo and invest in a restaurant, is worried about the slowdown in oil industry activity in Vaca Muerta. “When we started, we had just one stove with three burners and an oven,” said Toledo.’
‘Like Toledo, many people invested in hotels, rental housing, shops and small-scale service businesses. “Everyone wanted to come to what was going to be the shale gas and oil capital,” he said.’
Vaca Muerta???
I think this translates to “dead cow.”
It sounds like a Patagonian version of western North Dakota. I’ve written this before, but this mentality spreads like a sickness.
‘a plot of land that previously was worth 1,700 dollars cannot be purchased now for less than 130,000 dollars’
Now that’s equity!
Coral Gables, FL Housing Market Implodes; Prices Tailspin 16% YoY As Declines Appear Statewide
http://www.zillow.com/coral-gables-fl/home-values/
Which Coral Gables? The North one or the South one? That’s the problem with a sweeping Zillow generalization.
“The median price of a home in Massachusetts fell nearly 5 percent”
Yep yep. Prices are falling. This we’ve known.
The biggest drop in home prices came on the Cape, with Barnstable County recording a 10 percent decline in its median price, to $315,000. On the South Shore, the median price in Plymouth County fell 3 percent, to $285,000. Condo prices fell 9 percent,
And the largest declines are found near the coast all over the country. FL, CA, MA, WA, OR.
The Problem?
Housing prices are massively inflated 250% than long term trend. Housing prices have a long way to fall.
You have to wonder whether falling prices along the coasts will be accompanied by large-scale migration from the coasts to the heartland, as occurred in the early-90s.
Combined with a reversal of the suburb to urban trend?
It’s gonna get ugly.
“You realize you’re on the verge of losing your home to foreclosure, with the thousands of dollars you’ve already made in payments vanishing into thin air. That’s what Pina Orsillo Belgrano says happened to her.”
The number of housing market victims with absolutely no role in their personal financial demise is truly staggering.
‘Having your house foreclosed on can be a nightmarish ordeal, yet one woman is sharing her plight with the public. Deborah Chrzanowski spoke today at a press conference Friday in downtown Buffalo, recounting the issues she faced after losing her home.’
“In the course of seven years, my home went back and forth through the foreclosure process. Harassing phone calls from various lending institutions became frequent and so confusing that I no longer knew who owned the property and what my responsibilities were,” said Chrzanowski.’
‘I no longer knew who owned the property’
Not you.
‘and what my responsibilities were’
Get some boxes.
“My thing was, ‘well, maybe I should explore the American Dream,’”
Pina, a deep thinker who considered every angle before signing up for 30 years of debt.
‘No money down‘
‘A growing corner of China’s $2 trillion mortgage market looks a lot like the US subprime bubble’
‘”The magnificent apartments,” with zero down payment.’
‘China’s top leadership is worried. Chongqing mayor Huang Qifan, who is rumored to be premier Li Keqiang’s new top economic adviser, pointed out parallels between China’s situation and the US subprime crisis during the Communist Party’s annual planning meetings earlier this month. “If China allows high leverage in the housing market, it could lead to a financial disaster,” Huang said.’
‘AMP is one of several big lenders circulating ‘black lists’ of suburbs where apartment buyers will face tougher terms and conditions, including increased scrutiny of their ability to pay. WBP Property revealed nearly half off-the-plan sales in the eight months to last August were in negative equity…Average losses were about $40,000, or about 10 per cent, between agreement to buy and pre-settlement valuation. Buyers have to bridge the gap’
But interest rates are low! Helicopter money, Yellen!
‘The commodity price crash that has already decimated Australian mining profits now looks set to hit the earnings of the nation’s major banks. Key points:
‘Bank shares slump between 3-6 per cent
ANZ flags extra $100m-plus write-down on resources loans
Westpac warns of “pockets of stress” in WA and Queensland, bad corporate debts
Analysts have long-warned of rising bad debts’
‘ANZ has flagged a $100 million-plus increase in its bad debt provisions over the past month due to resources sector exposures. Westpac’s head of consumer banking George Frazis said the current risk environment looks fairly good for the bank, with 74 per cent of customers ahead on repayments, low interest rates and improving unemployment.’
‘Mr Frazis said the bank is confident the Australian housing market will remain strong overall, but some areas are already feeling pain. “At a micro level, there are pockets of stress, and we’re primarily seeing this in Western Australia and Queensland,” he observed.’
‘Responding to a question from the ABC, Mr Frazis said the rising stress in these pockets was likely to translate to a 10 per cent increase on the previous corresponding period in bad debt provisions. “It’s around about a $25 million impact in terms of an increase in provisions … obviously we’re ramping up our collections, so this is something we’ll make sure we keep under control.”
‘Westpac’s CFO Peter King also added that the bank may need to increase bad debt provisions for five large corporate clients. The ABC understands that this list likely includes Slater & Gordon, where Westpac is the joint leader of a banking syndicate with NAB that is owed hundreds of millions of dollars by the financially troubled law firm.’
Keep us updated George:
‘At a micro level, there are pockets of stress…we’re ramping up our collections’
‘Sydney property prices fall for first time in three years: ABS’
‘The ABS analysis noted falls in almost all segments of the market, but most notably among established houses with prices between $700,000 and $1.4 million, and for attached dwellings in the $420,000 to $850,000 bracket. “The frantic activity we saw last year is well behind us,” AMP Capital chief economist Shane Oliver said. “My feeling is the latter part of last year was a kneejerk reaction to [Australian Prudential Regulation Authority led] restrictions on lending,” Dr Oliver said.’
‘For 2016, he said it would most likely be a case of relatively modest price growth with little chance of a “return to the bubble-like conditions of last year”.
‘Domain Group data recorded a downturn in the December quarter, with the largest quarterly drop on record for houses of 3.1 per cent. This was the first house price decline since June 2012. Apartments declined 2.8 per cent over the same period, the first drop since March 2013.’
The chart shows Sydney median price at $1,013,258. No word on how many cents.
The DNC and the repulsive Debbie Wasserman Schultz are blatantly trying to rig the primaries for Hillary.
http://libertyblitzkrieg.com/2016/03/23/american-democracy-allegations-of-voter-suppression-emerge-from-the-arizona-primary/
Miami Beach, FL Housing Market Craters; Prices Plummet 13% YoY
http://www.zillow.com/miami-beach-fl/home-values/
‘Do not see me as an evil man. I never intended to hurt anyone,’ Lundstrom told the judge, explaining that he never expected the bank to become insolvent and put employees out of work. ‘I truly believed that the market would turn around and we’d get out of this together’
That’s why you committed fraud, because you truly believed.
I wonder though, how this guy fell through the cracks. Where was Eric Holder, doesn’t he know this crook going to jail is a risk to the financial system?
Too funny. We had, and still have, a Department of Justice that intentionally rendered itself impotent, by subordinating justice to a particular economic theory. And Eric Holder returned to Covington & Burling, where in intends (his words) to be a “player.” Check out his practice specialties:
http://tinyurl.com/gup27aj
At least my tax dollars are no longer paying this guy’s salary. Not directly, anyway. Can’t wait for his memoirs.
In retrospect, in the area of domestic policy, the Obama Administration saw its primary function as restoring the financial oligarchy. It has succeeded.
Eric Holder >> Inaction Jackson
“We’d get out of this together.”
I love how it turns from “I truly believed” to “We” when the S starts HTF.
Typical US management philosophy.
“All of you peons need to execute my plan without question, and when the thing blows up in our face, WE will pull together and fix it.”
Very true and well spotted.
The linked article, and the one from which it in turn gets its summary of the case, go really easy on the guy, too, and not just in faithfully reporting his argument for mercy. I doubt very much whether a peon gets that kind of deference in the media.
Did they all get bonuses together too?
Hey Donk…..
This Gilbert is truly delusional!!
Edmond, OK Housing Prices Crater 16% YoY
http://www.zillow.com/edmond-ok/home-values/
‘After eight years of struggling to keep her home…her home was being foreclosed’
Eight years and she’s complaining?
Eight years of squatting!? Did she keep making payments!? Probably not!
“eventually left her $50,000 deeper in debt than she was when she started.”
Making payments or not she was negotiating like a champ.
Eight years is three years more than our neighbor. They refrained from making payments on their former residence, socking away all their money.They had 5 years free (CA) living and then leveraged when their credit improved, financed the place next door FHA, and then used their money to make their new residence nice. No one bother to check their savings, or they used title games on accounts.
If you have no integrity it can be quite profitable. I’ll pass.
Coming from MT Pockets that’s priceless
Ben….
This….
http://wwwtheworldandeverythinginit.blogspot.com/2016/03/the-incredible-vanishing-starter-homes.html
‘Trulia defines a starter as a home that is in the lower third of a market’s valuation and affordable to those making the median income in that market’
Yeah, a starter is something like 700k in San Jose, CA.
Boy aren’t they in a tizzy about these starter homes! What happened? See, no starters, no move up or down. System brokie.
OK, lets summarize; land prices double or triple in the past 3 years. Lower priced housing doesn’t “pencil out”. even for apartments. Voila - the only thing that gets built is expensive. There’s your bubble, right under every ones nose.
Oh but their hands are tied. Can’t go back on the prices now. Well just like the North Dakota article said recently, the path to lower prices is foreclosure. “Heaven forbid Ben, are you mean and stuff?”
Foreclosure or otherwise distressed sales are how prices are rolled back when sellers can’t or won’t lower their price. Our system doesn’t allow borrowers to just sell and walk away from a loss. They have to go through a forced sale or they can hand in the keys, but the consequence is they get dinged with the foreclosure or deed in lieu of same. Down payment or collateral - gone. These developers screwed up. They have to default and let the next guy build cheaper. And let it be a lesson to them: the buyers dictate the market. If you build stuff the end users can’t afford, you will fail.
Now there is another way; you can build at a loss, and just eat it for the good of society. What’s that? Oh, I didn’t think you would, just thought I’d mention it..
Saw “99 Homes”. Good show. Surprising how many people thought going into debt for thirty years to live in a house was a good idea. If Realtors had consciences they’d be blowing their own brains out left and right.