Aggrieved Investors Realise There Is A Problem
The Globe and Mail reports from Canada. “After riding the oil boom for more than a decade, Newfoundland and Labrador is facing a dire economy and a return to the days when it was the archetypal ‘have-not’ province. To accommodate the hundreds of additional labourers, engineers and executives moving to St. John’s to work on these projects, new offices, housing and restaurants popped up, including upscale restaurants and luxury condos with a view of the harbour. The average house price increased to $284,000 from $104,000 over the oil bull market, according to Canadian Real Estate Association data. ‘There would be bidding wars. Here. I mean I had never heard of that,’ said Elizabeth Lawrence, director of strategy with the City of St. John’s.”
“Condos used to get snapped up as soon as they went up for sale, but many have been sitting on the market for months. Throughout the city there are indications that construction has slowed: An empty hole that was destined to be a condo; a person taking down a sign for a gleaming building that was never built. ‘People are holding off right now because of potential layoffs with the government,’ said Larry Hann, a real estate agent with Hann Group, which specializes in condos and houses. Mr. Hann is optimistic for the future because of the huge offshore oil finds, but said: ‘In a couple of years time, unless we get another major oil project, there is going to be a lot of inventory sitting around empty.’”
The Rio Times on Brazil. “As Brazil is rocked by political uncertainty and alarmed by a shrinking economy, canny investors are turning to the country’s real-estate market in search of a bargain. Companies are keen to identify ’stranded’ properties from a surplus of stock and secure large discounts on them. Exxpon, a Brazilian real-estate growth company that specializes in high-risk investments, is looking at discounts on houses of up to sixty percent.”
“‘The greatest opportunities today are in the residential segment, with the high number of cancellations (returns),’ says founder Jonathan Franklin. According to the Fitch credit-rating agency, dissolutions in construction between January and September 2015 were 41 percent.”
From Emirates 247 on the UAE. “Sixty investors from the UAE have paid money for dream homes that are yet to be delivered by Indian builder. A group of non-resident Indian investors in the UAE and other Gulf countries said they have lost hope in a residential apartment project in their home country bearing the name Esperanza (Spanish word for Hope) because even six years after making the payment, they are yet to get possession of their dream homes.”
“Now the Dubai office of the company is non functional and the aggrieved investors said there is no response from the builders office in Kerala too. When Emirates 24|7 contacted the Dubai office phone number provided in the Mather project official website, the respondent said the office is currently used by an ambulance company. According to them about 60 investors from the UAE alone have paid 90 per cent of the price already, taking bank loans and savings. In many cases, banks have already handed over the loan amount to the builder, but no one got possession of the residential units.”
“‘About four years ago, the Chairman of the company himself came to Dubai promising to speed up the project delivery. He had told us to give some more time and we were counting on his promise,’ the aggrieved investors said.”
Domain News on Australia. “An industry report recently predicted Victoria would be the most oversupplied market in the country by 2017, led by high-density apartment development in the inner and middle ring. Buyers’ advocate Cate Bakos had to gradually drop the rent of her ’60s St Kilda apartment with each tenant term over the past three years – from $290 a week to $240. When her last tenant vacated, and the property manager recommended lowering the rent even further, Ms Bakos realised there was a problem. ‘It’s been very difficult with the oversupply that we’ve got, and in particular the new glossy apartments with reasonably low rental yields because you’ve got landlords competing with each other,’ she said.”
“With a large volume of new apartments being built in Prahran, Biggin and Scott’s Suzie Farrell said a purchaser might make a loss if they sold the property within the first year. One of her clients paid $389,000 for an off-the-plan apartment in Prahran about a year ago and tried to sell it at that price six months later with another agency. The property sat on the market for six months before it was relisted with Ms Farrell, who has the lowered the asking price to $369,000. The last sale in the block was $365,000.”
From Bloomberg on the UK. “Lenders are charging higher interest rates for development loans for London luxury homes as slumping commodity prices and increased taxes deter overseas buyers, fueling concern the market is oversupplied. Developers are constructing or plan to build about 54,000 homes in central London, according to data compiled by researcher Lonres last year, just as demand and values fall. Home prices in the U.K. capital’s best districts fell the most since June 2009 in the six months through February, according to broker Knight Frank LLP.”
“‘Everyone is freaking out,’ Randeesh Sandhu, whose firm has loaned close to 1 billion pounds ($1.4 billion) to developers, said in an interview. ‘There has been nervousness for a while in the super prime market and there is also now nervousness in prime.’”
Robert Shiller reported on the U.S. housing market yesterday. Prices have increased 30% in some markets since 2012. He says people are gaining confidence about home buying. He also says there is a shortage of available homes and that is part of what is driving the demand and price increases. He stated there is no bubble today and doubts we will have one, given the recent bubble, but there is always a danger of a bubble.
The Senior Housing Analyst (aka “HA”, Jake, Mafia, etc.) says markets are plummeting, demand is falling and at 20-year lows, and there are 25,000,000 (about 27% of all houses in the U.S.) vacant, defaulted, foreclosed homes just sitting around.
Hmm, with whom should I place my faith? An experienced Nobel Prize winning Yale University professor or a cryptic internet poster? HA!
I do wonder about the rest of the world and their housing markets. Shiller does point out it is a small world very interconnected and that is is a danger to our market.
Hmm, with whom should I place my faith? An experienced Nobel Prize winning Yale University professor or a cryptic internet poster? HA!
Let’s take a trip down memory lane, shall we? To 2006, when an exalted prognosticator at an ivy league college issued a bullish housing report, while a scrappy band of naysayers at an obscure housing bubble blog run by one each Ben Jones called BS. History records who was right and who was dead wrong. So I’d mind that hubris if I were you, Jingle Male.
http://www.salon.com/2006/06/13/thehousingbubbleblog/
Raymond, I think you are mixing up your forecasts and forecasters. Shiller warned of the housing bubble in 2005. He was right there with the HBB.
http://www.npr.org/templates/story/story.php?storyId=4679264
June 30, 2005
Yale Professor Predicts Housing ‘Bubble’ Will Burst
My point still stands. Almost all of the “experts” called it wrong, because their paychecks depended on maintaining a sanguine view of the economy and housing markets. The motley crew at the HBB, on the other hand, saw through the smoke and mirrors and called BS. Now history is getting ready to repeat itself.
I think your point doesn’t stand. Shiller stands above it.
Well… not really Jingle_Fraud. Not at all.
It was long since obvious something was wrong back then. The current conditions duplicate those so Shiller is gyrating, as usual.
Jinglola hubris
Yellen gives Greenspan a run for him money in the BS department. On bloomberg radio today I heard one of their retarded hosts babble about yellen’s “brilliant” performance yesterday and he used all this pseudo scientific/math terms that were completely meaningless in describing what she said. Being a math guy, it really made me wonder if that’s the point - get peoples (including congress) eyes to glaze over when they talk so as to get them to focus on something else. They know most people either have an aversion to math or were taught to hate it and instead obsess over the kardassians. Hell, even in an earlier part of my career where I was semi regularly publishing papers for peer reviewed journals my boss shared with me his tactic of including a lot of math to intimidate the reviewers - this was in the area of climate research btw, where I figured out that global warming was a joke well before it became such a thing. Scientists backed it because selling crisis brings in the grant money.
Let me fix that for you:
Jake “the cryptic internet poser”
Yes. That guy that’s living in your MT skull…. rent free.
gaining confidence
Debt is slavery.
Comment by Bill, just South of Irvine
“Houses are money pits”
Houses are not only money pits, they are a religion. Especially in California. They rob the owners of their freedom.
However, if you can afford the upkeep of a house while losing your income or half your assets in a divorce and if you are 100 percent certain your neighborhood will never become ghetto, then go ahead and put yourself in the shackles by placing yourself under the shingles.
I think I’m just going to post this every day:
‘A recent report by the Office of the Comptroller of the Currency, a federal agency that regulates the nation’s banks, warns that declines in mortgage underwriting standards are mirroring pre-crisis trends.
‘Underwriting standards eased at a significant number of banks for the three-year period from 2013 through 2015,’ the report said. ‘This trend reflects broad trends similar to those experienced from 2005 through 2007, before the most recent financial crisis.’ Not since 2006, it noted, have lenders taken on so much credit risk, and it says the hazard will continue to grow this year: ‘Examiners expect the level of credit risk to increase over the next 12 months.’
‘A large chunk of the risk is coming from first-time home buyers with shaky credit and so-called ‘rebound’ buyers who previously defaulted on home loans. The demand from otherwise uncreditworthy home buyers ‘is driving home prices up faster than incomes and inflation,’ noted Edward Pinto, co-director of AEI’s International Center on Housing Risk in Washington.’
‘This is especially true in hot spots like California, where subprime-mortgage lenders offering interest-only loans with no FICO-score requirements are cropping up from the ashes of Countrywide Financial, the bankrupt subprime giant.’
‘In another sign housing is overheating, home ‘flipping’ is red hot again and hitting levels not seen since just prior to the mortgage meltdown. Nationwide, almost 180,000 homes were sold and then resold last year — the highest level since 2007. In fact, according to RealtyTrac, flipping in a dozen metro areas — including New York, Los Angeles, San Diego, Miami and Jacksonville, Fla. — exceeded peaks set in 2005.’
‘Like the last bubble, this one is fueled by artificial demand from government-induced lax lending standards and accommodative interest rates set by the Federal Reserve. Today’s relaxation in mortgage-underwriting standards is largely a function of government housing-policy changes at FHA, Fannie Mae and Freddie Mac, which dominate the nation’s mortgage activity. As in the last easy-credit cycle, we are seeing ‘the promotion of policy to push firms to seek riskier products to promote growth,’ Wells Fargo Chief Economist John Silvia said.’
‘All three agencies have slashed down-payment and other requirements under pressure from Obama regulators, who include, most significantly, former Congressional Black Caucus leader and Obama appointee Mel Watt, head of the new Federal Housing Finance Agency, which now controls Fannie Mae and Freddie Mac.’
‘Last year, Fannie Mae launched a new subprime-mortgage product called HomeReady that caters to recent immigrants with weak credit and limited income. The new loan program, which offers ‘income flexibility,’ allows borrowers for the first time to bundle income from roommates and relatives to meet qualifications for income. They only have to put 3% down, and can use gifts from nonprofit groups to subsidize their down payments.’
‘There is no limit on the number of non-borrower household members who can be present on a single transaction,’ Fannie advises originators. And even then there is ’documentation flexibility,’ a frightening echo of last decade’s ‘no-doc loans.’
‘You don’t have to show personal financial independence. You can be maxed out on credit cards and even live in government-subsidized housing. Just as long as you round up enough income-earners and pool finances to help meet a debt-to-income ratio of up to 50%. And you don’t need good credit. ‘If the borrower’s credit score is less than the minimum credit score required,’ Fannie tells loan underwriters, ‘the lender may develop an acceptable nontraditional credit profile’ that takes into consideration timely payments on electricity bills and car insurance — and even gym dues — in lieu of payments on credit cards and loans.’
‘Under HomeReady, you can even qualify for a ‘cash-out refinance’ of your mortgage, a type of loan that led to over-leveraging and a wave of defaults during the mortgage crisis.’
‘Why would Fannie offer the same kinds of poorly underwritten loans that forced it into bankruptcy? Because HomeReady aligns ‘with our housing goals’ set by Watt, it says in its HomeReady literature. It’s all part of a government campaign to ease access to home loans for recent Hispanic immigrants — including those living here illegally. In fact, HomeReady caters to illegal immigrants by allowing borrowers to waive Social Security documentation.’
‘Watt, who as a congressman once demanded Freddie Mac back loans for welfare recipients in his North Carolina district, has instructed Fannie and Freddie to come up with ‘alternative credit-scoring models’ to FICO and approve more home buyers. ‘We have the pedal to the metal’ on adopting a new model, Watt said.’
http://thehousingbubbleblog.com/?p=9573
smells like smelly Mel Watts
CRA point man
+1
+365……everyday!
“A large chunk of the risk is coming from first-time home buyers with shaky credit”
They don’t even have to have shaky credit. 3.5% down does enough damage.
East of Seattle where I live, there are a lot more all-cash or mostly-cash foreign buyers than there were during the last bubble. These people will not walk away from their homes if prices correct.
Yeah, it seems like it’s all or nothing. All cash or little down. I’m curious to know what percentage of overall sales are taken up by each category.
Are you sure about that? Seattle and SF have the highest number of mortgages per 1000 housing units in the US. Worse yet, the highest default rate too.
At least welfare recipients have steady income…
Heard on the radio yesterday that only 25% of those eligible for Section 8 get vouchers. The other 75% are on waiting lists that can be years long.
In Denver, there is lottery just to get on the waiting list.
Section 8 Mortages are coming to a gated community near you!
Section 8, proudly destroying neighborhoods for over four decades.
“Remember… Resale housing prices are currently 300% higher than long term trend and double construction costs.”
Good point.
It appears housing prices have a long way to fall to get back to long term trend. A very long way to fall.
http://picpaste.com/de61c27614df214bc8a6a963a39031b9.jpg
‘we are seeing ‘the promotion of policy to push firms to seek riskier products to promote growth,’ Wells Fargo Chief Economist John Silvia said’
It’s not a conspiracy, it’s policy. Remember this?
“foam the runway” for the banks - Washington Examiner
http://www.washingtonexaminer.com/…foam-the-runway…banks/…/2502982
Jul 24, 2012 - HAMP borrowers would “foam the runway” for the distressed banks looking for a safe landing. It is nice to know what Geithner really thinks of …
Tim Geithner’s principal hypocrisy - Reuters
blogs.reuters.com/great-debate/…/tim-geithner’s-principal-hypocrisy/
Aug 6, 2012 - That program incongruously left it to the largely bank-owned … that the program would “foam the runway” for the banks by extending out the …
Why Neil Barofsky’s Book “Bailout” Matters | naked capitalism
http://www.nakedcapitalism.com/…/in-bailout-neil-barofsky-r...
Naked Capitalism
Aug 28, 2012 - The programs were meant, Geithner says, to “foam the runway” for banks, spread out foreclosures since banks couldn’t take a hit all at once.
How Treasury Secretary Geithner Foamed the Runways …
wallstreetonparade.com/…/how-treasury-secretary-geithner-foamed-the-r…
Aug 29, 2012 - It’s real goal, according to U.S. Treasury Secretary Tim Geithner, was to “foam the runway” for the banks. Here’s an excerpt from the book:.
This man made millions suffer: Tim Geithner’s sorry legacy …
http://www.salon.com/…/this_man_made_millions_suffer_tim_geithners_...
Salon
May 14, 2014 - Keep in mind that this was the guy who handed hundreds of billions of dollars over to banks with basically no strings attached, suddenly …
Urban Dictionary: foam the runway
http://www.urbandictionary.com/define.php?…foam…runwa...
Urban Dictionary
Aug 16, 2012 - fifty billion dollars was supposedly intended to help homeowners, but was primarily used to foam the runway for the banks (videosearch: …
Timothy Geithner’s Treasury Department Ignored Warnings …
http://www.huffingtonpost.com/…/timothy-geithner-neil-b...
The Huffington Post
Jul 20, 2012 - … banks. ‘This program will help foam the runway for them. … “HAMP was not separate from the bank bailouts; it was an essential part of them.” …
Foaming The Runway For The Banks - YouTube
Video for foam the runway for banks
▶ 0:46
https://www.youtube.com/watch?v=g5uMtZgL1As
Jul 24, 2012 - Uploaded by GOP War Room
Neil Barofksy says on “Morning Joe” that Geithner said that the Treasury Department’s housing policies were …
Barofsky Book: Geithner Confirmed in 2009 That HAMP Was …
https://shadowproof.com/…/barofsky-book-geithner-confirmed-in-2009-...
Jul 20, 2012 - After several evasions, Geithner said about the banks, “We estimate that they … over time… this program will help foam the runway for them.”.
Krugman on Geithner: He was “…all for bailing out banks …
http://www.dailykos.com/…/-Krugman-on-Geithner-He-was-all-for-b...
Daily Kos
May 18, 2014 - So HAMP would ‘foam the runway’ by stretching out the foreclosures, giving the banks more time to absorb losses while the other parts of the …
“Prices have increased 30% in some markets since 2012.”
Econ 101 says this price rise should squelch demand.
“He says people are gaining confidence about home buying.”
But instead of squelching demand this price rise seems to be powering it.
So just how weird is this? Raise prices and you raise demand? Macy’s would love to operate in a world such as this.
Consider: As prices rise they get closer to the top. The closer to the top they get the greater grows the risk of a fall and the greater grows the distance of the fall. The only way this would not be true is if there was no top to fall from.
Also consider: The higher the price rise the greater grows the number of potential buyers that get shut out of being able to buy. Demand should fall off because of this because Econ 101 says it should. If something else is happening then either Econ 101 is wrong or the market is not and Econ 101-type market. If the market is not an Econ 101-type market then just what sort of market is it?
Combo, I agree with your points. The market is goofy.
The point I am trying to make is market is under supplied. There is more demand than there are houses to buy (or even rent). We need to build more houses (or actually, make it easier to build more houses…..lower permit costs, fast track lot development, etc.)
I agree with Ben too, making financing less stringent, facilitating sub prime loans is stupid.
I track inventory in the Sacramento sub market where I invest. I use Craigslist and sort each one for the product I own. In three foothill cities, available rental inventory is down almost 90% from a year ago. There were 6 houses (4 bd, 2 ba or larger) for rent yesterday in a town of 45,000 people.
People are so desperate for rental housing, the scammers are now posting fake ads and getting people to complete credit apps before they can get the address or see the house. Here is one example:
http://sacramento.craigslist.org/apa/5514173049.html
Note there is no address and if you click the “Reply” button the e-mail is gobbeldy gook. I answered such a fraud post recently just for fun and here is what I received…
“Thank you for your interest in the property listed for rent. You were the second to e-mail from the ad. The first prospective tenant no longer had to move because of his work situation. I know you want the precise address of the property but we do want not to divulge the address before you are qualified.
When you want to come look at the place, then please visit the link below and grab your credit report. All of our tenants use this site because it is widely trusted. Just fill out the form and indicate that you want the report. We aren’t interested in specifics of your report, it’s more of a formality to ensure you have rental history. You can get your report by CLICKING HERE …..”
The scam would not work so well if there were more legitimate houses available. Click on the link yourself and take a look at the reply e-mail address. SCAM. SCAM. SCAM.
Are you sure about that?
US Housing Demand Plummets To 20 Year Low
http://2.bp.blogspot.com/-yX5B5Hn95bQ/VYC3Wr6ihBI/AAAAAAAAj7I/alOslZa-cK8/s1600/MBAJune172015.PNG
Here is another SCAM listing….
http://sacramento.craigslist.org/apa/5511117540.html
Note the reply email and no property address. Go ahead and reply to the lister and see the response…..
The rental market in the Sacramento foothills is ripe for scamming because people cannot find enough houses to rent.
Roseville is a city of 130,000 people. There are 42 homes (4 bd, 2 ba or larger) listed for rent on CL. There used to be 300 or more.
We need more inventory.
‘We need more inventory’
It’s coming:
‘Bakos had to gradually drop the rent of her ’60s St Kilda apartment with each tenant term over the past three years – from $290 a week to $240. When her last tenant vacated, and the property manager recommended lowering the rent even further, Ms Bakos realised there was a problem. ‘It’s been very difficult with the oversupply that we’ve got, and in particular the new glossy apartments with reasonably low rental yields because you’ve got landlords competing with each other,’ she said.’
Exactly, this is the solution to some of the problems with housing.
Saw a lot of these scams when I first moved to SF. I got screwed indirectly because I used the scam rental rate as a basis for salary negotiation.
lol@rusty T
“The point I am trying to make is market is under supplied. There is more demand than there are houses to buy (or even rent).”
Demand driven by what? Take a look at what it is it that is driving demand. Two things immediately come to mind:
1. Rising prices.
2. Affordability.
Rising prices are driving demand. Is this statement true or is it not? If it is true then the market is screwy and a screwy market should chase people off but instead it is drawing them in.
Affordability is at term that used to be related to the price that needed to be paid but it has now been morphed into a term that relates to a price that is promised to be paid.
Paying a price and promising to pay a price are two different things. In one market, the paying-the-price-market, prices could never get out of hand because the price would reach a point - a ceiling - whereby it would price itself out of the market. But in a promise-to-pay-market prices will be allowed to go as high as the promises would be allowed to drive them and if these promises are cheap to make then then prices will only reach a ceiling - a top - if the promises reach a point whereby they will no longer be honored, a point that most probably exists but is also a point that, for now, is not possible to locate.
The housing demand is being driven by multiple factors. Population growth and lack of supply are the main ones.
Your point is valid that rising prices pull people toward the idea of owning. There are many people who should not buy for many reasons. Look at Selfish Hoarder, he has a good handle on why he is a renter: portability of his job and no desire for maintenance issues. Others don’t think independently like he does. They just get on the bandwagon like the others.
“Population growth and lack of supply are the main ones.”
You forgot the big one: Loosening lending standards, which is a one-way ticket to the next housing bust.
Perhaps you are too busy to read Ben’s post above on this topic. No worries…he indicated that he is going to post it every day from now on out.
The problem is housing has become a speculative asset, as such, I think the behavior of housing prices is more akin to markets than consumption driven product price demand curve we traditionally think of.
‘a speculative asset’
There isn’t any question about that. It’s even being built to suit the situation; 10 or 100 million dollar condos no one lives in. There are several problems. This means periodic crashes. Mortgages were always what they were because prices didn’t fluctuate much. Are we going to have a major bust every 8 years, bail out the banks or Quicken and reconstitute the GSE’s? Go ask a stock broker if you can buy $300,000 of twitter stock with 3% down.
Are we going to have a major bust every 8 years, bail out the banks or Quicken and reconstitute the GSE’s?
YES.
Well… maybe but heres the thing. How far down will housing demand go before it ends? 30 years? 50 years?
Who knows?
I don’t and you don’t either.
However, what we all know is how to run a simple spreadsheet and the numbers don’t pan out for buying.
I’m probably a baby around here and I bet they don’t pan out in my life either. Sad but you play the cards you’re dealt not the ones you want.
Here’s what we do know. Housing demand is at record lows and falling.
Raise prices and you raise demand? Macy’s would love to operate in a world such as this.
They do. It’s their designer section.
Goofy? It’s buy now and get free money forever, or be priced out forever. It’s unassailable lemming logic.
I think Shiller joined the party a while back.
Ho Chi Shiller:
June 25, 2012
‘One of the nation’s most prominent economists has advocated the use of mortgage write-downs as a strategy to revive the housing market.
In an op-ed column published in The New York Times, Yale University economics professor Robert J. Shiller framed the resurrection of the housing market as a ‘collective action problem’ that continues to defy resolution by a unified industry.
‘At the moment, the trouble in our real estate markets and the drag these markets are placing on our entire economy may be understood as a collective action problem,’ Shiller wrote. ‘In a nutshell, mortgage lenders need to write down the amounts owed by individual homeowners – that is, let everyone sit down and relax – but the different stakeholders have been unable to reach an agreement, even if it is in their common interest.’
‘Shiller argued that write-downs would benefit lenders that would otherwise ‘lose so much on the legal costs and depressed market values of the homes that it would be in their interest to lower mortgage balances so the homeowners stay in place and don’t default.’ He also stressed that write-downs would create a positive effect on the broader national picture.’
‘If such mortgage principal reductions could be applied on a large scale, there could be large neighborhood effects, raising a sense of optimism among homeowners and bolstering the value of all homes and, ultimately, the whole economy,’ he wrote. ‘But mortgage lenders in all their different forms lack a group strategy.’
‘Furthermore, Shiller advocated a theory proposed by Cornell University law professor Robert C. Hockett on using eminent domain seizures on underwater mortgages as a means of stabilizing the housing market.’
‘Eminent domain law needn’t be restricted to real estate,’ he stated. ‘It could be applied to mortgages as well. Governments could seize underwater mortgages, paying investors fair-market value for them. This is common sense too. The true fair-market value for these mortgages is arguably far below their face value, given the likelihood of default, with its attendant costs.’
‘a collective action problem’
And from Chairman Mao Gross:
‘Bond manager Bill Gross said central banks are “running out of time” to reflate global economies as their aggressive policies including quantitative easing and low, even negative, interest rates are losing their effectiveness. Gross wrote that markets and the capitalistic business models based upon them and priced for them “will begin to go south” if global economies do not produce growth.’
‘”Capital gains and the expectations for future gains will become Giant Pandas – very rare and sort of inefficient at reproduction,” Gross said. “I’m saying that developed and emerging economies are flying at stall speed and they’ve got to bump up nominal GDP growth rates or else. Cross your fingers.”
‘Gross warned against investing in negative-yielding securities. “The real market and the real economy await a different conclusion as losses from negative rates result in capital losses, not capital gains,” he said. “Investors cannot make money when money yields nothing. Unless… nominal GDP can be raised to levels that allow central banks to normalize short-term interest rates, then south instead of north is the logical direction for markets.”
Can you believe he gets paid million a year for this?
‘Gross warned against investing in negative-yielding securities’
Well Bill, that is profound.
‘central banks are “running out of time” to reflate global economies’
In other words, cut rates so you can raise them. The problem with Gross and Shiller is they don’t believe in markets. They want the Wizard of Oz. But “supporting” this or “resurrecting” that means you have to keep on doing it.
“…Shiller joined the party….”
Maybe he just sees the reality and you don’t.
The reality is current housing prices are 300% higher than long term historical trend and double construction costs. That reality is demonstrated by collapsing housing demand at 20 year lows.
‘There would be bidding wars. Here. I mean I had never heard of that,’
Electronic printing press money needs to find itself toe-tag houses to die in.
Your comment is spot on for the reverse mortgage arena. My parents have a reverse mortgage that accrues 10k of interest every year. They were given a lump sum at the signing which is long gone and now the bank is already above the zestimate. They are stuck there with no equity and no options if things dont go well for them.
…. damn..
We knew reverse mortgages were deadly evil but that is just horrific.
Thankfully reverse mortgages are a (literally) dying business. Those scam products prey on stupid elderly women who get twitchy at the thought of moving out of the family home that they can’t take care of anymore.
Younger women got some benefit from the feminist movement. At least they have the mental strength to sell the home for the cash and move into assisted living when the time comes. They won’t need a reverse mortgage.
With housing demand at 20 year lows and falling fast they won’t have anyone to sell to either.
Get to slashin’. And be quick about it.
Spare me. Reverse mortgages are a boom business.
They’re being guaranteed by the GSE’s now. Search for “HECM”.
Does anyone do any homework here or just spout their mouth off?
I call them, “heck-em, feck-em and flee” but then I’m weird.
So fraud is booming.
The point?
I’m making a prediction that reverse mortgages WILL die, eventually, when the current generation dies. The younger generation doesn’t have the same emotional need to stay in the same house for 50 years, so they will be less likely to get a reverse mortgage. They’ll take the equity and buy a condo in an active adult community.
I suspect that reverse mortgages will die a more practical death anyway. You can only get a reverse mortgage if you own the house outright, and folks in the younger generations aren’t even getting mortgages, much less paying them off.
The younger generation doesn’t have the same emotional need to stay in the same house for 50 years, so they will be less likely to get a reverse mortgage.
That could be because the younger generation is younger. Their attitudes may change when they get older. It could be similar to thinking that companies that sell hearing aids will go bankrupt because the younger generation doesn’t purchase them.
“He says people are gaining confidence about home buying. He also says there is a shortage of available homes and that is part of what is driving the demand and price increases. He stated there is no bubble today and doubts we will have one, given the recent bubble, but there is always a danger of a bubble.”
When the facts change, he’ll change his mind, and his situation summary.
I was wondering this am if these housing problems, high rents, etc had anything to do with earths population passing the number of sustainability ?
On NPR this am I hear about rent control in DC and a lady complaining about all the repairs needed , Do we have so many people who want cheap rent and someone to fix everything all below a market cost?
7 B and exponentially growing with a large number of them unable to do the simplest things but complain ?
And governments promising to get one group of people to take care of another group.
I was wondering this am if these housing problems, high rents, etc had anything to do with earths population passing the number of sustainability ?
That thought has crossed my mind as well. Have the PTB decided to make family formation so onerous via high housing costs, dismal employment options, social changes, etc. as a way to curb population growth?
It does seem a bit tinfoil hat, yet at times I wonder if global population reduction, at least in the First World which hogs most of the globe’s resources, could be the goal. It would go hand in hand with the decimation of the first world’s middle class.
Drive across the USA, you’ll change your view on overpopulation. Hours… and hours… and hours… of nothing. We clump together.
There might be a lot of empty space, but in the southwestern part of the country what there isn’t a lot of is fresh water.
Don’t move to ILLANNOY - specifically the utopian paradise of Chicago - you won’t like it here, I mean you really won’t like it.
https://confoundedinterest23.wordpress.com/2016/03/29/case-shiller-home-price-index-rises-5-75-yoy-in-february-worst-in-show-chicago-cleveland-dc/
Shiller or a housing analyst on the HBB. My moneys on the HBB.
You never know what angle a guy like Shiller might be playing. Maybe he is interested in a future position on the FOMC.
So if prices are back at the peak; and that peak constituted a bubble, how is it that houses are not in a bubble now? Unless, of course, the dollar has devalued that much
$15/hr minimum wage finally starting to come through.
And you thought CA was an impoverished hellhole before? Watch the disaster unfold with this economy crushing bad idea.
“So if prices are back at the peak; and that peak constituted a bubble, how is it that houses are not in a bubble now?”
Because Jingles owes money on houses.
Wait a second are you really thinking that 30% increase in price when wages are flat and interest rates are not much lower then in 2012 is normal? That a house gaining in many areas more “value” in a single year than most people make working 40 hours a week for a year is a sign of a healthy and sustainable market? Basic math tells you it has to end or you have to come up with more creative ways to get someone to sign the line that is dotted.
Shillers gonna shill
I was wondering what is behind the runup again in house prices. I concluded:
1) Low interest rates. 500K at 3.8% mortgage rate yields 2,329.79 monthly payment. At 7%, 350K yields the same monthly payment.
2) De facto zero down government backed mortgages. Technically, they’re 3%, but the entire 3% can be gifted.
3) Foreign money coming into the country.
4) What about supply and demand? Baltimore City revealed the truth back in the early-mid 2000s. The city had been losing population for decades, yet prices were skyrocketing. This past year, population actually almost held steady. If you google “baltimore city population”, Google displays a handy graph of the population immediately.
What about Baltimore City house prices? Yep, steadily increasing.
Google “cleveland population” and you can see the chart. They’ve been consistently losing population. Case Shiller shows their prices increasing too, slightly.
Now, with the federal government and the central bank “all in” on supporting house prices, what’s going to happen going forward? The mortgage market is still totally nationalized. The GSEs buy nearly every new mortgage, have been for the past 8 years. Is there any reason for that to change? Maybe political pressure. The current system is working just fine for Wall Street, so no real pressure to change.
Millenials who want to buy? Maybe some political pressure, if they understood how the mortgage finance system works. Which is unlikely. 70% of people don’t know who Janet Yellen is, apparently. One of the most powerful people in the country.
To win in speculative markets, the trick is to get in, get out, and get paid. The big Wall Street companies are able to do this reliably, and when they all fail, they get bailed out. For the average citizen however, without all that infrastructure and inside information, sometimes, as they said in War Games (1983), “The only winning move is not to play.”
Info on p.9 of the Freddie PDF. Also, it’s a PDF.
All of these things are a factor:
House_Price = f(a, b, c, d, e … n)
In some markets, lack of supply is exacerbating (or improving, based on your perspective) the issue. But just two cities off the top of my head that are losing population are also seeing price gains. So, there seem to be other, national, factors at play as well.
Shiller’s mantra, “Irrational Exuberance”, implies that markets led by psychology are by nature volatile. He is selling a couple of books right now, including a revised version of I.E. that are promoting regulatory intervention to prevent bubbles. I wonder if he feels that, lacking more stringent oversight, bubbles are not preventable or even remarkable but are just a way of life and that, perhaps, we are all too stupid to listen to sound advice anyway so why bother hyping Housingbubble II. No one cares… I read one article that quoted him as saying that buying a house was good because it forced savings, even though he, himself rents. I personally think he’s stopped caring about housing.
We need to expand the safe spaces where our special snowflakes can scamper off to when some random micro-aggression occurs without a trigger warning.
http://www.independent.co.uk/student/news/black-san-francisco-student-filmed-harassing-white-student-because-of-his-dreadlocks-in-cultural-a6959181.html
Wigga, please.
Robert Shiller: “Housing Depreciates”
http://www.businessinsider.com/robert-shiller-home-investment-a-fad-2013-2
mine did, and they all do ,but the land tripled in price
It’s the land! Nope
It’s the labor! Nope
It’s the materials! Nope
Remember….. Land is highly speculative resulting in massive price swings entirely unfounded on fundamentals. If you’re paying more than $500-$1000/acre, you’re paying too much. That’s why land is referred to as worthless dirt. Besides, there is a globe full of land and roughly 95% of it goes undeveloped.
That’s fine out in Timbuktu, but not true for urban areas.
Stop with the repeated lies, Housing Analyst.
Stop with the repeated lies, Housing Analyst.
Just Joshua Tree him.
Ever notice how almost no one replies to his posts. I’ll bet most readers of this blog have his posts blocked and never even look at them. And for good reason, he’s a troll.
Yet you respond to my posts. Just like the rest of them.
It’s reality my friends.
And you’ve got your characters mixed up again.
That’s fine out in Timbuktu, but not true for urban areas.
Are you sure? Detroit, Cleveland, etc.
Hilary will hire more fed workers and give Oxide a raise
Shiller makes a great point about investing in housing. It is not for everyone and can be a big loser. That being said, it also ads credibility to his point that U.S. housing is not in a bubble…..yet.
Whatever you call it, bubble, credit expansion, misallocation of resources, it is not healthy. It’s pumped up by credit and speculation and scams and government intervention. Do you never read or see all the stories about all the funny money loans being pushed? 3 percent down has been going on for years and it’s all fraud, just like you.
There’ll always be lots and lots of demand if you throw out all credit and qualification standards. Lend people who can’t pay back money and increase demand.
I have watched the lending process with a couple of people recently and I will tell you it is much different from 2004-2007. I understand there are a few loosy-goosey lenders out there, but on whole it is very difficult to get a loan processed and funded these days. You cannot fog a mirror today and get a NINJA loan. ISTR the subprime loans in 2006 were 50% of the market. Not so today.
Fraud in the housing market has never been more egregious than it is right now.
Remember….. 3% down payment mortgages is subprime by definition.
Novato, CA Housing Market Craters; Prices Plummet 13% YoY As Land Prices Plunge
http://www.zillow.com/novato-ca/home-values/
25 MILLION excess, empty and defaulted houses CHECK
Housing demand at 20 year lows and falling CHECK
Housing prices inflated by 250% CHECK
Household formation at multi decade lows CHECK
Rampant housing fraud CHECK
A media corrupted by the housing industry CHECK
Population growth the lowest in US history CHECK
Immigration flat to slightly negative CHECK
What were you saying about housing?
Immigration flat? Get real, HA.
Refute it my friend.
Indeed, almost 1 million Green Cards are granted every year. Plus H1-B’s, and other visas, plus refugees, and heaven knows how many illegals.
This is double counting.
The green card’s are obviously given to people who have “other” visas (including H1-B) so obviously they must’ve occupied housing before that. You can only include one or the other. Visas predate green cards so that’s the correct way to count. The number of visas can easily be looked up on the official website. (Hint: it’s not 1 million.)
There are a tiny amount of asylum green card’s granted but they are a rounding error in terms of population growth.
Clearly, you are not an engineer or one with any understanding of numbers.
“This is double counting.”
Uh-huh. How do you know who green cards are “obviously” given to, how many and where they “oviously” lived before they got said green cards.
Nobody knows, and unless you, personally, have been present at the granting of visas and green cards to each and every individual who has one, and seen it with your own beady eyes, you don’t either. Oh, wait, look it up on an “official” website? Bwahahahaha! It’s whatever they want to say it is.
Quick, how many illegal immigrants are there in the US? 11 million! Yep, that’s the “official” number. And I’ve been hearing and reading that number since 2006. The same danged number. But here’s a little secret: Nobody really knows.
Anyway it’s all BS. We don’t get accurate numbers for anything anymore. It’s all lies. Pick ‘em out of thin air, who cares?
You can just go to the USCIS website and check for yourself.
This is not rocket surgery. There is a procedure.
Spare me the “they all lie” - by that logic, you can believe anything you want and clearly you do.
Evidence? Who needs it? We’ll just make up whatever we want.
Evidence? Who needs it?!!?
Exactly.
My life is awesome and I don’t have to gloat about it on F-book B’eechiz.
So why is everyone gloating on Facebook?
It’s mostly inferior feeling folks or Alpha males that boast regularly on the Book… After a while I’d just block ‘em, but now I’ve just e-liminated my account.
This is double counting.
Perhaps there is some overlap. But not everyone who gets a temporary work visa eventually trades up to a green card. And many green card holders get them right off the bat.
This may have been posted yesterday, if so, forgive the re-post. Here’s a newly built Chinese apartment with walls crumbling into sand:
http://www.zerohedge.com/news/2016-03-29/made-out-sand-dramatic-look-inside-newly-built-chinese-apartment
“Amid yet another government-fueled housing bubble, it seems in their haste to fulfill a rapacious demand for property in which to gamble their hard-grafted assets, Chinese construction companies have cut a few corners.”
Hard grafted assets. Good one.
‘In 2010, officials revealed that many homes had a lifespan of just 20 years.’
Remember the photos of the Chinese houses where people found out the sills were made of foam and they started tearing it apart? Since then we have discovered it’s the same in the US.
Your Arizona subdivision video showing the styrofoam was tragic and hilarious at the same time.
A person commented on youtube that this is how construction is done now. Fine, but don’t tell us how expensive it is to build when you are using the cheapest materials that can be found. Those people in China were pissed because they are paying a couple thousand bucks a square foot. You would at least think you could get real molding for that price. This is quickie mart construction.
A person commented on youtube that this is how construction is done now.
Particle board walls and Styrofoam trim. I wonder what they’ll come up with next. Replace the particle board with corrugated cardboard?
What about shipping containers!!!
Oh, wait…. LOL!
“‘The greatest opportunities today are in the residential segment, with the high number of cancellations (returns),’ says founder Jonathan Franklin.”
Yes, I would like to return this house; do I need a receipt?
‘is looking at discounts on houses of up to sixty percent’
Where oh where is rio, telling us of his massive gains with his shanty? No bananas offered for your shack now rio.
lol. Lola and her non-stop antics were hilarious. The best one is when she teamed up with Jingle_Fraud in some whacked out scheme to donate $500 to the HBB to avoid posting of picture of herself.
I thought Rio posted a picture. I did send the $500 to Ben, but I missed reading the blog the day the photo was posted.
uh huh
I figured Lola was banned, but it looks like he either slunk off to more depraved pastures or dropped dead.
Here lies Lola
Here LIES Lola
Lola is a walking case study in OCD.
Where oh where is rio ??
I wish he would post to get some local perspective on whats going on there not just with housing but the social unrest….
Yes, it would be great to get an on site report. It does sound rough in Brazil today.
Lola was hiding behind a proxy server. He never was in brazil.
” … looking at discounts on houses of up to sixty percent.”
And that is in terms of a currency that has lost 60%.
They are really getting banana’d.
In a few months all that Olympics mania will vaporize as well.
‘Welcome to Japan — Where homes are thrown away after one generation’
“We have no expectation of gaining any value from our home,” said Brasor. “But, of course, most used homes outside of Tokyo will not have any value in forty years. And I think Japanese people have come to understand that, even if they don’t admit it out loud.”
“We have no expectation of gaining any value from our home.”
Hey, this is how I feel about my car.
Maybe this is how I should feel about my car and maybe this is how I should feel about my house. But I don’t because nobody else does.
If I look up the value of my car in Kelly’s Blue Book then I will see that its value (aka its price) approaches zero as time passes by, but if I Zillow up my house then I will discover that its value (aka its price) goes up as time goes by.
Both values (both prices) are decided by strangers and both values (prices) should go in the same direction as time goes by but they don’t; The value of one goes one way and the value of the other goes the other way.
And the reason for this just may lie in psychology, mass psychology. If large masses of people are conditioned to behave in one manner then the expectation should be that this conditioned manner is the manner I which they will behave. In Japan the masses are conditioned to behave in one manner, in the U.S. they are conditioned to behave in a different manner.
My 2 cents.
The difference with the Japanese market is demand. The Japanese population is declining, so the demand for housing is dropping. The population in the U.S. is growing, so demand for housing is growing.
Again, if you want to keep housing prices affordable, build more of them.
Incorrect.
Population growth is the lowest in US history. Just like Japan. Besides…. record amounts of housing units are getting built in the US while demand continues to plummet.
Japan is weird.
There’s a premium for new construction (alternately stated, a discount for “old” housing.)
Also, they won’t buy if there was a murder or suicide in the apartment. That will trade at a serious discount.
事故物件 (jiko bukken - accident property)
Needless to say, the realtors lie about this and there are equally weird laws about what constitutes “disclosure”.
This is what happened to the rural South. My old family home is in a town in Georgia that had 10x the population in 1920 that it has now. Old cracker houses are essentially free.
I agree, my grandmother’s 1,200 SF home sold for $2,600 in 1993 in a small South Dakota forming community of 300 people. It was 600 people when they built the house in the 1940’s. Many houses in the town have been sitting vacant years after being abandoned.
U.S Population growth was .75% last year. 321,000,000 people and growing by 2,407,000 per year. If 60% own houses and there are 2.4 residents/house, we need 1,000,000 new houses each year for purchase. We only completed 647,000 last year (2015). So new construction is running 35% below demand needed for the demand.
Population growth is at all time record lows per 2010 Census. And with 25 million excess empty and defaulted houses and another 35 million just beginning to empty as boomer die off, there is no need to build more empty houses.
There Are Plenty of New Apartments Being Built—Just Not Affordable Ones
‘A surplus of swanky residences means wealthier renters aren’t seeing the huge price increases that poorer ones are.’
http://www.theatlantic.com/business/archive/2015/11/the-inequality-of-rent-hikes/415359/
Not just apartments, Ben:
http://www.aol.com/article/2015/08/11/death-of-starter-homes/21220790/
Donk,
“Starter home” is a distinction that never existed in the first place. It’s a NAR creation that came and went. A house is a house is a house.
At least BuilderOnline (linked in the AOL article) confirms your $50/sq ft.
—————
Making a $200,000 home work as a homebuilder is junior-high-level arithmetic. Solving for profit — say, 20 percent — land and building direct costs can not exceed $160,000. Problem is, a 20 percent margin on a sub-$200,000 house has become frighteningly elusive in the past decade.
The lowest build cost is around a $50 a foot, says David Goldberg, a homebuilding and building products manufacturers analyst for UBS, New York. “If you do a 2,000-square-foot house, which is what you’d have to do to compete with existing stock, that leaves you with $100,000 of sticks-and-bricks cost. The maximum cost on the land would be $60,000.”
—————
The article goes on to say that a $200K starter home would have to be built boxy and cheap, which is likely to turn off the special snowflake Millenials accustomed to shiny pergraniteel apartments.
We’re quite profitable at $50 a square regardless of what someone says who just happens not to be in the construction biz.
Again, if you want to keep housing prices affordable, build more of them.”
Don’t we have a water shortage in CA ? After all we need to ship Alfalfa to Saudi Arabia and China.
see the problem? limited resources in a global world.
Yeah, I heard that on the radio this morning.
——-
http://wtop.com/business/2016/03/saudi-land-purchases-fuel-debate-over-us-water-rights/
“Almarai Co. bought land in January that roughly doubled its holdings in California’s Palo Verde Valley, an area that enjoys first dibs on water from the Colorado River. The company also acquired a large tract near Vicksburg, Arizona…”
“The purchases totaling about 14,000 acres enable the Saudis to take advantage of farm-friendly U.S. water laws. The acquisitions have also rekindled debate over whether a patchwork of regulations and court rulings in the West favors farmers too heavily, especially those who grow thirsty, low-profit crops such as alfalfa ”
——————
But I guess no one is kindling a debate about whether SAUDI ARABIA, of all countries, should be buying thousands of acres of US land???
And why isn’t anyone buying up land in the lush East and Midwest?
The globe is awash in resources. There is no shortage of anything except cash so hold onto every dollar you’ve got. You’ll thank us later.
Almarai Co. bought land in January that roughly doubled its holdings in California’s Palo Verde Valley, an area that enjoys first dibs on water from the Colorado River
In some circles fresh water is known as “blue gold”
And why isn’t anyone buying up land in the lush East and Midwest?
My guess is that they are buying it for the water rights, so that they can resell the water to an ever thirsty metro LA. That of course means that the valley will be left to whither.
Yeah keep your dollaz, which will depreciate about 5% or more every year under your mattress. Its just paper…
Increasingly valuable dollars and prices continue to fall is nothing but good new for the economy.
Hey rental watch, this is going on all across the country. I could dedicate a full blog to it:
‘Hundreds of people are looking for new places to live after new owners of an Iowa City apartment complex announced plans for major renovations last week. The owners of the Rose Oak Apartments, formerly called the Dolphin Lake Point Enclave, plan to begin a major reconstruction project on the property next month. The move has left many residents with deep fears about whether they’ll be able to find housing at the same price elsewhere in the Iowa City area.’
‘Tenants were told via a personalized letter that the complex would not be renewing their leases. For those with leases lasting into the fall and winter months, owners recommended they consider moving out early to avoid construction noise and parking issues. “We just got comfortable, and they come in and just take it all down,” said Barbara Pruitt who works full-time and lives in a two-bedroom condo with her daughter.’
‘Pruitt said she hasn’t been able to find any other housing in the area of the same size and privacy at the $750 rate she currently pays. “I’m going to have to leave Iowa City, period, because I’m not getting nowhere,” she said.’
‘The complex is offering to fully return deposits as well as offering money for moving expenses to those who move out early, said Reggie Reed, director of operations for College Fund Properties II LLC, a partner that recently bought the property.’
‘recently bought the property’
How many examples of this do I have to find? The tax code encourages apartment flipping. Renovate, jack up rents, repeat. This is why rents are going up. And despite a 30 year high in apartment construction, all that’s being built is “luxury”. Isn’t that interesting?
Infestors in search of “yield”.
A similar story local to me, an investor bought the building in December and raised rents from about $1100 to $1800, then in February issued eviction notices to all the tenants. Locally rents are up something like 40% in the last 4 years so these people are in a tough spot. The median house price in the county is up to about $550K and nearly back to 2006 levels so buying is not an option for most people.
http://www.pressdemocrat.com/news/5394684-181/eviction-of-8-petaluma-families?artslide=0
I’d rather rent it for $1800 than $6000/month for PITI and depreciation.
“I didn’t move out, I was kicked out. I don’t know why. I’m a good tenant,” said Jesus Torres, 69, who lived with his wife in their apartment at 200 Walnut St. for nearly 42 years until this month. “I thought I was going to die in that apartment.”
42 years of renting… go get some boxes, Jesus.
Same for “new” housing. All that’s being built is 2 story behemoths that many people don’t want to buy. But, that’s all they’re building! More sqft, more profit!
Supply and demand laws have gone out the window!
Coral Gables, FL Housing Market Implodes; Prices Crater 16% YoY
http://www.zillow.com/coral-gables-fl/home-values/
A look at the price chart shows that current prices exceed those of 2006, the bubble peak
Bubble peak in Coral Gable was Jan 2008. It was reached again in Feb 2015. Todays price is 16% lower than peak…. and falling fast.
“The median home value in Coral Gables is $752,900. Coral Gables home values have gone up 8.1% over the past year”
Are you sure that’s the correct link?
We’re sure FL_Donk. We’re sure.
This is Hong Kong:
‘Painful days for mall-unit buyers’
‘Small investors lured into speculating on tiny subdivided units in nondescript neighborhood shopping malls back when the retail market was hot now find themselves losing their shirts, as they are unable to find tenants to lease the space, ultimately leading to the units often winding up in foreclosure.’
‘For example, back in 2013 - when the local property market was sizzling - a 400-square-foot unit at the Cathay 88 mall in Wan Chai was sold for a gain of HK$8.5 million, representing an appreciation of more than 50 percent after a one-year holding period.’
‘But in contrast, at the same mall last month, a 60-sq-ft unit fetched only HK$280,000 - about half of what the vendor paid 10 years ago.’
‘This is happening even in prime locations such as Tsim Sha Tsui, where, for instance, nearly all retail spaces at the three-story Capital mall - the former DNA Galleria - at the junction of Chatham Road and Cameron Road are vacant. And with the poor occupancy rate, landlords find it nearly impossible to attract potential tenants.’
‘Initially, developers and big-time investors sold subdivided mall units to small investors, ballyhooing guaranteed rental returns of up to 5 percent for the first two years.’
‘However, after the guaranteed period expired, the small-time landlords found it impossible to terminate the management contract, or lease out the property. In one publicized case, a big- time investor marketed units at a renovated mall as a “prosperous investment” opportunity, using the slogan that one could buy a mall unit for “the price of a parking space.”
‘Such a boom started several years ago after the government imposed new stamp duties on the sale of residential properties, but not on commercial premises. This prompted savvy big- time investors to shift to commercial and industrial properties, and subdividing them into hundreds of small shops the size of walk-in closets.’
They were getting loans for these things?
‘often winding up in foreclosure’
‘The average house price increased to $284,000 from $104,000 over the oil bull market, according to Canadian Real Estate Association data. ‘There would be bidding wars. Here.’
Here! If you read the article, these people are seriously done. I wouldn’t give them 50 Canadian pesos for a condo up there.
Wouldn’t a real speculator would be buying places cheap? The price of oil will come back. I guess it depends on property taxes and carrying costs.
Donk,
The price of oil is currently 4x production costs. If by ‘back’ you mean back down to production +profit and overhead, you might be right.
You have fantasy-land cost numbers for everything HA - are you stick in the 1960s, maybe living in a nuclear fallout shelter somewhere?
It’s reality my friend. Get over it and get on with your life.
Well, if you call a basement with a cardboard sign at the top of the stairs that says “Comand Center” a fallout shelter…
My favorite quarters are directly between your ears.
We are beginning to find out what is fantasy and what is sustainable demand for everything. Not understanding that we are coming off the biggest credit expansion and building bubble and bubble in all things that go into houses in history is fantasy that will bite you.
Until it all went “poof”. I’ll bet the local auto dealerships are a bunch of sad sacks these days, with their lots choking with new and used cars and trucks they can’t sell.
What a great article - thank you, Ben!
It really conveyed the feeling of Newfoundland and Labrador. Reminded me of the grey winter weekend I once spent sitting in front of a window, watching it sleet onto the frozen snow outside, reading Annie Proulx’s The Shipping News with the heat turned up.
Couldn’t put it down. I was still in the Northeast at the time. I did not have to get up except to make more coffee. Anyway, the article you linked to strongly evoked the sense of place in Ms. Proulx’s book, where everybody loses.
The vise of dwindling prospects, wherever you are - it’s a great equalizer, IMHO. It’s not hard to imagine that a Trump, thrown to his knees, would experience the same choking feeling as the people described in the article. Assuming he had no fallback positions. Or loving family. Or other human capital, such as acquaintances who could help him into his “recovery” deal. Ummm…you know what I mean. OK, it’s prolly not the same thing. Unemployed, impoverished, aging Newfies prolly don’t have a lot in common with a Mr. Trump.
Whatever.
What IS beyond dispute: whoever you are, a “no debt” lifestyle provides a fair start to recovering from prostration.
Here I am in Metro DC, a more-or-less successful economic refugee, and still a renter. I’m pretty happy about that, all in all. I was able to get away. If I need to, I’ll be able to get away from here easier.
‘Everyone is freaking out,’ Randeesh Sandhu, whose firm has loaned close to 1 billion pounds ($1.4 billion) to developers, said in an interview. ‘There has been nervousness for a while in the super prime market and there is also now nervousness in prime.’
I feel your pain Randeesh, but I’m not freaking out. See, I didn’t lend any money to London developers. I never understood this safe deposit box thing with the luxury air shantys. And wasn’t it just a few months ago that the “super prime” market got tight and now it’s spreading? Take solace. They are screwed in Manhattan and Miami Beach too.
Ben, if I’m ever an FB, remind me not to seek solace and comfort from you.
Let’s not forget that this stuff in London is largely a bunch of money laundering scum bags from every mafia in the world. Screw em.
+1 million. It’s sad to see how low the UK has fallen, and how its citizenry has had to pay the price for this corruption.
As expected, Yellen the Felon juiced the markets with her uber-dovish speech (as if raising interest rates and crashing the Fed’s Ponzi markets was ever a remote possibility). Will be interesting to see how long this latest speculative binge lasts before the financial crack cocaine wears off.
Oh. THAT’s why my portfolio recovered somewhat. Jeez, and I thought it was attributable to the thriving economy.
‘According to them about 60 investors from the UAE alone have paid 90 per cent of the price already, taking bank loans and savings. In many cases, banks have already handed over the loan amount to the builder, but no one got possession of the residential units’
‘House purchasers lose their homes because of defaulting developer.’
‘WHY does this keep happening to house buyers in Malaysia?’
‘This incident happened two years ago in Taiping where a laid-back community of mainly retirees found the roof over their heads nearly, and in some cases, actually, blown away. The purchasers had paid the developer and had moved into their houses and lived there for 10 years. Problem was that the purchasers paid the developers in cash remittance without taking out end-financing loans.’
‘Unknown to the purchasers, the developer did not pay the developer’s bank to settle the developer’s loan vide bridging loans. The developer’s charge remained and grew into bigger indebtedness to the bank.’
‘Apparently, the developer’s bank had not been collecting payment of the loan from the developer, even as the developer was collecting the instalments of the purchase price from the purchasers, as provided in the sale & purchase agreement (S&P) schedule.’
‘Having waited for 10 years for the developer to settle his loan, the bank realised that the developer was not going to pay; that foreclosure was unavoidable.’
‘The bank had a problem. Apart from the developer’s loan having ballooned over the years because of the bank’s laxity in not insisting on the developer paying promptly, there was also political repercussion. There are a few issues here, namely, the destruction of a settled community in a pleasant location, the injustice of the S&P; the solicitousness for developers in preference to purchasers on the part of the powers that be; and the embarrassment resulting from the bank’s philanthropic ramifications.’
Encino, CA Housing Market Craters; Prices Plummet 16% YoY
http://www.zillow.com/encino-los-angeles-ca/home-values/
‘Small financial institutions are running into trouble in China as loans turn sour due to a housing glut in regional cities, even forcing a state-run investment firm in Hunan Province to bail out debt-ridden local credit unions.’
‘Shenzhen-listed Xiandai Investment had revealed plans by Monday to provide assistance to Xiang Tan Xian Credit Cooperatives Union and Lixian Rural Credit Cooperative, both located in Hunan Province. These rural credit co-ops are similar to Japan’s agricultural co-ops, and can collect deposits, make loans and perform settlement functions.’
‘Xiang Tan Xian has liabilities of some 12.8 billion yuan ($1.96 billion), exceeding its assets by about 400 million yuan, according to Xiandai. Its capital ratio is negative 13.75%, and the ratio of nonperforming loans to total lending is said to reach 20%. Lixian Rural’s liabilities outstripped its assets by roughly 200 million yuan.’
Bothell, WA Housing Market Caves; Prices Plunge 6% YoY
http://www.zillow.com/bothell-wa-98011/home-values/
Nice to see that China is doing itself in by copying US/Western “mainstream financial practices”
I guess we can see where this is going right?
http://money.cnn.com/2016/03/30/news/economy/obamacare-patients-blue-cross-blue-shield/index.html?iid=hp-toplead-dom
“It’s no surprise that people who newly gained access to coverage under the Affordable Care Act needed health care; that’s why they were locked out of coverage before,” said Ben Wakana, national press secretary, Health Department.
yes we can see where this is going.
All those damn sick people drove my premiums through the roof. Such is life when you apply free market principles to people who have to pay or die.
Even when you eat right, exercise and don’t smoke you still pay up the wazooo!
wow, MSFT pushing up against the all-time high NAV:
http://finance.yahoo.com/echarts?s=MSFT+Interactive#symbol=MSFT;range=my
Is this a bell ringing?
Bad sh#t coming.
And Reality is coming with it.
Denver, CO Housing Market Sinks; Prices Crater 6% YoY As Housing Inventory Balloons
http://www.zillow.com/denver-co-80203/home-values/
Remember….. nothing accelerates the economy and creates jobs like falling prices of all items to dramatically lower and more affordable levels. Nothing.
https://finance.yahoo.com/news/rapid-destruction-of-homes-in-japan-124412426.html#
HA lives in Japan
Anybody who knows anything about Japan could’ve told you this fifty years ago. It’s always been thus.
Read above. Posted a detailed comment about Japan.
That only exemplifies Ben’s point. If there was a crash after such stringent attitudes, what happens when the attitudes towards “old” houses is FAR less stringent?
Va_Donk…. It really comes down to what is least costly. Either put the house back in the ground right where it came from and build a new one or throw good money after bad maintaining an old one.
The Fed conundrum in one chart…
Report from Anchorage:
Mom’s sleeping in front of a real estate flipper infomercial, with backslapping testimonials from people who say things like:
“now we don’t have to worry about our dead end jobs anymore”
“theres been no better time in history”
“wealth and long term security”
It is so brazen it actually makes me queasy. How does any moral society tolerate this? It’s straight up animal cruelty to human beings. To bleed the last of their life force, attach drains to them for any they have in the future, and not finish it. To send them staggering, stunned, impoverished back into their community, to drag down the others because they have been swindled out of what they could have contributed.
Interestingly the 1800 number is shown much much more prominently than the URL. Must CALL NOW! They keep saying. Makes me think it might be designed like a free to play game, searching out those boomer whales with cash just as they’re entering dementia.
I would imagine the more desperate people get, the better it works.
Operator are standing by! Call now! MUST CALL NOW!
They guy is named Armando Montelongo.
I feel like I’m in a Simpsons episode.
Some Wiki trivia …
Montelongo moved back to his hometown of San Antonio, Texas, from California in 2001 and launched a career as a real estate investor. He began offering real estate seminars in 2005 and started Armando Montelongo Seminars in 2008. It is part of the Armando Montelongo Companies.[13][14] The free seminars are offered nationwide on multiple days in multiple cities, primarily by representatives of the company. The free seminars include information on the company’s $1,500 three-day workshop as well as for a $25,000 in-person training workshop with Armando Montelongo.[15][16]
In 2011 the seminars company was investigated by Texas’ state attorney general’s office. Montelongo settled the case with no admittance of wrongdoing and signed an “Assurance of Voluntary Compliance” outlining 20 conditions that must be met to continue marketing the seminars, including refraining from any false claims and that the seminars are primarily a vehicle to sells goods and services.[17][15][16][18]
It ain’t easy bein’ greasy.
“I would imagine the more desperate people get, the better it works.”
Yep, I know a guy who is into MLM. They basically sell videos that encourage people to join them selling people videos, under the guise of the freedom that comes from being an “entrepreneur” working from…wherever. From what I understand, the video programs are $10-15k, so often people spend the last of their savings or borrow to get in on the action.
We need to start following this Armondo Montelongo guy. He seems to be doing well in real estate:
http://armandomontelongo.com/?gclid=CIWK9eKL6csCFQFsfgodJuwOug
Armondo Montelongo… rich corinthian leather…
it’s an excellent potential model for future California homes, because all new houses there will have to be net zero beginning in 2020.
NET ZERO ? WTF
Read more: http://www.digitaltrends.com/home/honda-smart-home-inside/#ixzz44Pzwleqj
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NET ZERO ? WTF
https://en.wikipedia.org/wiki/Zero-energy_building
I guess if you want an old school McMansion in Cali, you’d best buy it now.
The Property Brothers are having an open house at 3 PM in our neighborhood two streets down from us. Maybe I’ll run in and have a look.
Look around a bit, gasp, shriek, and run out like you are beset by evil spirits.
Didn’t go, too lazy. This is it, 3752 Forestcrest LV, NV 89121
http://www.zillow.com/homedetails/3752-Forestcrest-Dr-Las-Vegas-NV-89121/7060337_zpid
Neighbors on nextdoor.com say it was owned by an Elvis impersonator.
Posting from cell phone, aggravating. Kitten chewed my laptop charger wire again.
Newton, MA Housing Market Caves; Prices Implode 12% YoY As Housing Demand Craters
http://www.movoto.com/newton-ma/market-trends/
You mention Australian housing in Victoria. Slums in Sydney now have higher pricing medians than New York, Tokyo, Singapore and Paris.
http://www.luckyoz.com/new-york-tokyo-homes-cheaper-sydney-slum-mount-druitt/