It’s A Buyer’s Market Because Prices Are High
A report from the New York Times. “One of the latest symbols of the overinflated luxury housing market is a pink mansion perched above the Mediterranean on the French Riviera. The home’s name befits its price. ‘Le Palais Bulles,’ or ‘the Bubble Palace,’ is being offered for sale at approximately $450 million. The listing is part of a global pileup of homes listed for $100 million or more. A record 27 properties with nine-figure prices are officially for sale, according to Christie’s International Real Estate. That is up from 19 last year and about a dozen in 2014. If you add in high-priced ‘whisper listings’ that are offered privately, brokers say the actual number of nine-figure listings worldwide could easily top 40 or 50.”
“The rise in nine-figure real estate listings comes just as sales of luxury real estate have cooled. Last year, only two homes in the world sold for over $100 million, according to Christie’s. Many say the sudden surge in hyperprice homes — often built and sold by speculative investors — is the ultimate bubble signal. The last time a sudden pop in $100 million-plus listings occurred was in 2007 and 2008, just before the housing crash. ‘When you have a record number of homes for sale at a price point of $100 million or more, that tells you these homes aren’t selling,’ said Jonathan Miller, president of Miller Samuel Inc., a real estate appraisal and research firm. ‘It’s not as deep a market as some might hope.’”
The Wilmington Biz in North Carolina. “The Wilmington area’s real estate industry has been booming in many ways in recent months and years, but when it comes to the area’s highest-priced homes, the numbers tell a different story, experts said. ‘In the luxury portfolio division, it’s a buyer’s market because prices are high, inventory is excessive,’ said Chris Livengood, vice president of sales at Wilmington-based Intracoastal Realty Corp. ‘We’re [at] about 20 months of inventory in New Hanover County in the million-dollar-plus category.’”
“Compiled from N.C. Regional MLS statistics, the report said New Hanover and Brunswick counties saw a decline in the combined number of closed sales on homes priced at $1 million or more, from 10 in April 2015 to six in 2016. Total volume in that category was down from $17.4 million to $7.15 million, according to the report. ‘April marks the second month in a row with total sales volume of high-end homes down more than $10 million compared to the same month last year,’ the report said.”
“‘I don’t anyone thinking, ‘What’s wrong with Wilmington?’ There’s nothing wrong with Wilmington. … This is happening across the entire country that in the upper end there’s too much inventory, and we have to get those prices right,’ said Steve Harney, founder of a New York-based company that tracks and analyzes real estate trends.”
The New Canaan Advertiser in Connecticut. “A national story about the value of various residential home renovations in the Saturday, May 28, edition of the New York Times (Renovations that add value… ) suddenly went hyper-local when discussing the housing market in general, and targeted New Canaan specifically as having a ‘glut’ of large homes listed for sale at present. Paul Sullivan, writing in a Wealth Matters story, quoted Amanda Briggs, brokerage manager at Houlihan Lawrence, saying that the town had a lot of listings for ‘large, four-story homes that are 10 to 15 years old.’”
“[Editor’s note: Typically New Canaan homes are not referred to as four-story, unless one counts finished basements and finished third floors. New Canaan homes are commonly referred to four-acre homes, if they are in such a zone.]”
WTOP on Virginia. “Arlington County remains Northern Virginia’s most expensive housing market, but prices fell last month. Long & Foster Real Estate Inc. said that based on 261 closed sales in April, the median price of homes in Arlington County was a hefty $587,470. Arlington’s median home value was more than $100,000 higher than the next-most expensive Northern Virginia jurisdiction: Alexandria. But Arlington County’s median price last month was down 6 percent from a year ago. And it was the only Northern Virginia community to see median prices fall.”
The Sun Sentinel in Florida. “Palm Beach County’s total taxable property value has increased for the fifth consecutive year, rising to a level not seen since the peak of the housing boom, according to preliminary estimates. But the most recent economic indicators show growth could be slowing, said Ken Johnson, a real estate economist at Florida Atlantic University. ‘We are seeing a rebound, but we are seeing a slowdown of the rebound,’ Johnson said. ‘We seem to have learned on the residential side that prices can get too high.’”
Southern California Public Radio. “In her campaign for Barbara Boxer’s U.S. Senate seat, California Attorney General Kamala Harris often mentions the record settlement her office negotiated with five of the largest mortgage lenders after the home foreclosure crisis. The deal that brought about $20 billion in relief to California won national media attention for Harris. But the mortgage meltdown continues affecting homeowners to this day.”
“In the home Rosario Frisse rents in a quiet neighborhood in Antioch — a city about 45 miles east of San Francisco — there aren’t many decorations on her walls. Even though she’s been living there for a few years, there are unpacked boxes on her patio outside and more in the garage. The home she once owned sits about a mile away. In 2009, Frisse lost the house after her adjustable mortgage was raised to an amount she couldn’t afford. Her husband was working with the bank to modify the loan. At one point working out a deal looked promising and they were waiting on an offer from the lender, she said. Instead, the lender foreclosed on Frisse’s house and it was sold at auction, she said.”
“For all the settlement relief that homeowners received to help them stay in their homes, the smallest number got a first mortgage reduction. The most widely distributed relief, which was given to about 200,000 homeowners, was the $1,500 in restitution that Rosario Frisse got. ‘That was like a slap in the face for a lot of us,’ she said.”
based on 261 closed sales in April, . But Arlington County’s median price last month was down 6 percent from a year ago.
hard to base anything on 261 sales
price oper sq ft?
‘hard to base anything on 261 sales’
After the super bowl it’ll pick up and you’ll know what prices are doing.
“hard to base anything on 261 sales”
An idea about how to do this is taking shape in the back of my mind. Hopefully I’ll eventually operationalize it.
Care to share the idea?
In due time.
Wow, a 60 month used car loan is 2.8 %
How about a tiny house mortgage ?
Why buy a tiny shanty when u can buy a full size shack for the same price?
* In flyover country only
“The home she once owned sits about a mile away.”
Wrong! The home she contracted to buy sits about a mile away.
“In 2009, Frisse lost the house after her adjustable mortgage was raised to an amount she couldn’t afford.”
I’ll bet losing the home had something to do with that pesky word “adjustable”.
“Her husband was working with the bank to modify the loan. At one point working out a deal looked promising and they were waiting on an offer from the lender, she said.”
And waiting and waiting and waiting …
“Instead, the lender foreclosed on Frisse’s house and it was sold at auction, she said.”
After tossing their stupid asses out into the street.
2009 rate hike?
Wtf
Maybe the teaser rate expired.
No. As anyone who read the fine print would have known, these subprime products were structured to enable the borrower to pay zero or even negative interest for the first few years, after which the lender fully amortized the remaining balance over a reduced time horizon compared to a conventional mortgage ( e.g. 25 years instead of the normal thirty). A doubling of the monthly payment at reset was typical. This was not only explained in the fine print, but also in numerous news articles that appeared in the Wall Street Journal and similar publications.
“…enable the borrower to pay zero or even negative interest for the first few years, …”
That describes a teaser rate.
“That describes a teaser rate.”
That doesn’t.
“Teaser rate” (Wikipedia):
“An introductory rate (also known as a teaser rate) is an interest rate charged to a customer during the initial stages of a loan. The rate, which can be as low as 0%, is not permanent and after it expires a normal or higher than normal rate will apply.
“The purpose of the introductory rate is to market the loan to customers and to seem attractive. They are commonly used for the application of balance transfers, and they may or may not apply to cash advances.
“In the United States, the Fair Credit and Charge Card Disclosure Act (FCCCDA) requires that the rate that will occur following the expiration of the introductory rate be clearly disclosed to the customer.”
“In the United States, the Fair Credit and Charge Card Disclosure Act (FCCCDA) requires that the rate that will occur following the expiration of the introductory rate be clearly disclosed to the customer.”
This is pretty much irrelevant information to a how-much-a-month loan owner in the case of an adjustable-rate mortgage which starts out as interest-only or neg-am.
What’s relevant, though still likely to be ignored, is information on how much the payment will jump when the loan resets to fully amortizing. It isn’t so much about the new interest rate, but rather the added effect of repaying principle over a compressed timeline that tends to double the monthly payment over night.
Of course, so long as home prices are steadily rising at rates far exceeding inflation, this can never pose a problem, as loan owners who cannot afford the monthly after reset can simply sell and book a large tax-free capital gain.
‘it was sold at auction, she said’
I’ve seen “owners” show up at a trustee sale and buy the house.She could have done the same, I’m sure.
Lots of Yellen bucks looking for a place to die on my travels over the last week.
The pain is going to be excruciating.
You’ve said lower prices are good for the economy.
It’s just terrible these luxury houses aren’t selling. I was talking with someone the other day about how “bad” it might get. Let’s take this FB above. Oh gosh, she had to move. She won’t unpack her crap or put a nail on the wall. Did she have to pay back the money that was lost on her default? No, she got a check! And it wasn’t big enough, a slap on the face!
In a country where obesity is a big problem, I don’t think we’ll be eating gruel. You know what bothers me? These pensions being wasted on luxury apartments when poor people are getting evicted to make way for it. And it only bothers me. I’m not a victim of it.
But boo hoo for the Frenchman who can’t sell his $450 million palace. We live in a really strange place and time.
I was reading this:
‘Fed’s Bullard says global markets seem well-prepared for summer rate hike’
A comment was obviously referring to the article I posted yesterday about the banks being loaned money by the central bank, so they can deposit it with the same central bank and get a guaranteed $12 billion a year:
‘Before raising interest rates, how about ending the corporate welfare of paying banks for their excess reserves? We never did that before going all the way back to the founding of the Fed.’
‘If they truly want an apples to apples comparison of our economic state, let the banks return the $4+ trillion that they’ve borrowed from the Fed to keep as excess reserves at the Fed for which the Fed then pays them a profit. How much would the average person borrow if he was guaranteed a 0.25% profit on a loan from the people from which he was borrowing?’
‘There’s an old adage about the first thing you do when you’re in a hole is to stop digging. So stop giving away money to banks. It’s been 7 years and if they aren’t healthy enough by now, they never will be. Let them fail.’
in 1921 they waited about 7 months= roaring 20’s
we are doing what Japan did in 1990= perma sck
“There’s an old adage about the first thing you do when you’re in a hole is to stop digging. So stop giving away money to banks. It’s been 7 years and if they aren’t healthy enough by now, they never will be. Let them fail.”
Pardon Jon Corzine.
‘In the latest repercussion of the tight Twin Cities rental market, low-income tenants at a Burnsville apartment complex stand to lose their homes as renovations lead to higher rents. Upgrades to apartments at the 339-unit Meridian Pointe mean rent increases of a few hundred dollars per month, threatening to price out more than three dozen tenants who use vouchers to help pay for housing.’
‘Resource Residential had planned to upgrade the property, raise rents and stop accepting Section 8 vouchers. Dozens of people moved out before the company decided to let remaining voucher recipients stay, but not accept any new Section 8 tenants.’
‘Building renovations started with vacant units. Now, 70 percent of the units have been renovated, and the remaining 30 percent — which includes tenants with and without vouchers — will all be completed at once.’
‘Tenants living in unrenovated units were notified this spring that their leases won’t be renewed, starting with those that expire at the end of June. Tenants who want to stay will have to pay for a more expensive renovated unit.’
‘In interviews with the Star Tribune, tenants living in renovated two-bedroom units said they pay less than $1,200 per month in rent. Meanwhile, tenants facing nonrenewal of their leases said they were told that the same type of unit would cost more than $1,400 per month.’
‘That increase is in response to the market, said Meridian Pointe asset manager Lucas Perl. “Our market rents have increased drastically at this property as occupancy has increased,” Perl said. “If someone were to rent an upgraded unit a year ago, their price that they paid for that unit is very different than the price that someone would pay today.”
‘It’s possible that tenants could see significant rent increases across the board as market rates rise, he said.’
‘For now, there’s a group of people unsure of where their home will ultimately be. At the county CDA’s request, Resource Residential is allowing tenants to move before their leases are up. It’s unclear whether the company will allow any flexibility for those who don’t find a new place in time.’
http://www.startribune.com/rent-hikes-threaten-to-displace-tenants-at-burnsville-s-meridian-pointe/381262081/
‘Richard Lee Abrams is a Los Angeles attorney. Abrams views are his own and do not necessarily reflect the views of CityWatch.’
‘Councilmember Huizar’s call to give $1 billion to real estate developers should surprise no one. As reported here and elsewhere, the City has manufactured a homeless crisis for one purpose: to justify giving those billions to their developer buddies.’
‘Each billion we borrow for developers to build apartments for the homeless uses up the City’s credit. When we borrow too much, Wall Street raises our interest rate. We still have to pay for the $1 billion lawsuit which is forcing us to fix out sidewalks. We have billions of dollars of unfunded liability for the pension funds. The DWP just raised everyone’s rates and they will raise those rates for the next four years.’
‘How did we get so many homeless? The city tore down their homes, throwing thousands of people onto the streets.
Why did the City tear down their homes? The apartments constructed during the last decade have a 12% vacancy rate. Five percent is equilibrium. Thus, developers are in a financial squeeze. They are “building into a glut.” Also, 2015 was the top year for millennials to move to urban areas. Twenty-five years ago the birth rate for millennials peaked and ever since then it has been downhill. The demand for new apartments is steadily dropping which means each new apartment the developers build will be vacant. With that type of future market, lenders do not want to loan money to the developers, but if they do, the interest rate is a very high to reflect the escalating risk.’
‘With the 12% vacancy rate, developers realized that the saturation point has been reached. But they are powerless to prevent people from moving away; they cannot prevent employers from relocating to other states. They do, however have one group of people for whom they can construct apartments: the homeless! ‘
‘The problem is that the homeless have no money. But, the taxpayers have an endless supply of cash. After all, we gave Wall Street over $3 trillion to rescue the bankers from the Crash of 2008.’
http://www.citywatchla.com/index.php/the-la-beat/11173-don-t-be-fooled-councilman-trying-to-score-billions-for-his-developer-buddies-and-you-are-paying-for-it
Affordable housing policy = COMPLETE FAIL
“…… boo hoo for the Frenchman who can’t sell his $450 million palace. We live in a really strange place and time.”
He should try marketing techniques: you know, listing it for, say $449,999,999. He would get better activity!!!
Jingle frrrrrrrrrraaaaaaaaaaud
Ben, fellow posters,
I’ve lost a lot of sleep lately worrying about the world as it is, and especially the state of the nation and the direction we seem to be headed in. I despair especially at how much more difficult and stressful life is likely to be for my kids than it was for me, as more and more people are going to be competing over finite, dwindling resources amidst a breakdown of private and public morality and simple decency. Posters in here tend to be much more awake and aware than the general population, and the HBB has been a notable “voice in the wilderness” warning of the unsustainability of the housing bubble and of fiscal and and monetary policies that enabled and encouraged speculative excesses and recklessness while creating serious systemic risks.
I’ve been a fairly prolific poster in here, as you know. I have quite often vented my frustrations at seeing how the 99% continue to lose ground every year, and how the game is rigged against the middle and working classes. But now I’m done with all that. Instead, the only thing left for me to do is to take full responsibility for myself, my wife, and my children, and do the best I can to provide for their needs and get them through what’s coming. I can do nothing about the breakdown of public and private morality, other than resolving to walk with integrity as a man answerable to God and to the people around me. Maybe most importantly, in my own small sphere of life, I want to treat others with kindness, respect, and compassion, which I haven’t always done.
So…I didn’t want to disappear without saying goodbye, and I wish each and every one of you the best. I will occasionally be lurking and might still post from time to time, but I am trying to get my priorities in order and focus on my family and responsibilities as we face turbulent times ahead.
Respectfully,
RKH
Good night and good luck.
“I wish each and every one of you the best.”
Same to you and your family Raymond K Hessel.
Brother RKH, these are the days of our region:
http://www.picpaste.com/20160530_080819.jpg
Region VIII
Before you make the final decision, I am old enough to remember the camouflage-wearing survivalists on TV talk shows such as Merv Griffin and Phil Donohue, giving up the urban life and white collar careers because the world was going to end. They pointed to financial irresponsibility, I.e. the Fed. Harry Browne’s book on the financial crisis was out a few years earlier. This was in the 1970s.
Then in the 80s it all changed. Those who gave up their jobs and headed for the hills either had to scramble back or they lost a lot of ground. Their was never any good way to make a living out in the boonies.
“Their was never any good way to make a living out in the boonies.”
I always have assumed that I could take up where my grandpas left off, providing local education services at a level that provided a path out of the boonies to those who wished to escape, and basic modern living skills to those who wish to stick around.
Same thing happened before Y2K.
I knew a guy who quit his very lucrative job at Microsoft in August 1998 and moved to Wisconsin to live on a farm with his mom to wait it out. Lost track of him after that so don’t know what he ended up doing (there were lots of cheap generators on Craigslist in the months afterwards, however).
But the thing is, timing is everything. At some point, these people will likely be proved correct.
Best wishes in the coming months. I basically dropped preaching to the idiots last year and have been looking for ways to protect family for what ever is headed our way. Kept one son out of the housing market in spite of wife’s family pushing, convinced the other (SIL)to sell and take a $200K profit and rent. All four kids and families have curbed purchasing of large ticket items. Might sound funny but am going to start storing and rotating a supply of dried beans, rice and putting up a green house in the garden area.
Learn that 95% happiness comes from within, and 95% of what’s left comes from other people. You have a people. Your relationships with them are something you control. The world circus is not in any way under your control. The circus will take care of itself, you can take care of your people, and they can take care of you.
Anyone else have a Laddie flashback while reading that?
Best wishes, RKH; it sounds to me as though you already have your priorities in order.
“A people” should be “the people”
I do like how the ‘a’ gives it a surreal turn.
“…, but I am trying to get my priorities in order and focus on my family and responsibilities as we face turbulent times ahead.”
Stay out of debt.
Have an exit plan if a palms-up revolution looks imminent.
“Have an exit plan if a palms-up revolution looks imminent.”
I decided not to. For several reasons. First, since you are all thinking of urban riots and famine, if that happens 90% of the American public will be suffering incredibly worse than what was seen in the GD. Most of us will die if we are lucky in that scenario. Second, I am armed. Third, what I wrote about above.
Paul Volcker was an economic Keynesian when he started tightening the Fed to stop inflation in its tracks. He put the brakes on while Jimma Cahtah was president. Even while doing so, lots of doomsayers were heading for the hills.
So if any major economic event happens, I will either die holding firearms in my hands but only after taking out those who initiate force against me, or I am going to prosper. In the first case it will be quick. In the second case I will be tsk tsking those doom and gloom ers.
I don’t expect famines and urban riots; I expect plenty of economic pain, but don’t expect to see the basic structure of society fall apart.
I expect to see some urban riots, but not enough to bring about the breakdown of society envisioned by the survivalist types.
I’d guess debts will be inflated away. Wages will rise, debts will become less of a burden.
“I expect to see some urban riots,”
I’ve already seen some urban riots, if they happen everywhere at the same time it’s Katie bar the door.
(stayed in U.S. and only went back to 1980)
From Wikipedia
Miami riots
8 May 1980, Miami, Florida, USA, black outrage at “a double standard of justice” [17]
1991 Washington, D.C. riot
5–7 May 1991, Washington, DC
1992 Los Angeles riots
29 April 1992, Los Angeles, California, USA[21]
2001 Cincinnati riots
10 April 2001, Cincinnati, Ohio, US, An Enquirer reporter, Kristina Goetz, reported that the lack of progress on perennial inner-city problems such as inadequate child and health care, failing schools, and low rates of minority home ownership was a contributing factor.[24]
Benton Harbor riots
16 June 2003, Benton Harbor, Michigan
2005 Toledo Riot
15 October 2005, Toledo, Ohio, USA, Residents at forum named poverty, above other causes, as the kindling for the riot.[26]
2014 Ferguson unrest
Precipitated by 9 August 2014 fatal shooting of 18-year-old Michael Brown by local police in Ferguson, Missouri, USA.
2015 Baltimore riots
Protests began after the death of Freddie Gray on 12 April 2015. Protests escalated to violence, looting, and arson on the day of Gray’s funeral Monday 27 April 2015.
I expect to see some urban riots, but not enough to bring about the breakdown of society envisioned by the survivalist types.
Yeah I expect not much different from what happened during the Rodney King riots. A friend of mine worked in a tall building in L.A. He and his colleagues would watch the goings on from their windows. Korean store owners had rifles to guard their shops and no friggin’ cops would bother them, which was good.
I would imagine the police would welcome people in my neighborhood taking out their illegal firearms and ammo and guarding themselves in such a scenario.
But nobody ran out of water or food. Neither did they during the quakes. In that scenario, 90% of the public will be greatly suffering, no matter where. And that includes most of us on this blog. So that is why I choose not to be a nattering nabob and anticipate investing in stocks and making great gains the next few years the Buffet way.
Well you probably do not remember the L.A. riots of ‘92 were in all the major metropolitan cities, not just L.A.
I survived them. You survived them.
“2014 Ferguson unrest
Precipitated by 9 August 2014 fatal shooting of 18-year-old Michael Brown by local police in Ferguson, Missouri, USA.”
I was there at Thanksgiving 2014, just a couple of days after the peak unrest. Others in my circle cancelled travel to the area the same week in order to avoid the risk. My sister and I couldn’t resist the temptation to check out the Ferguson riot zone. The property damage was bad, but due to the onset of cold weather and snow, no rioters were in evidence four days after the main event.
“Well you probably do not remember the L.A. riots of ‘92 were in all the major metropolitan cities, not just L.A.”
By everywhere I mean everywhere.
There were no riots in West Palm Beach Fl. in 92 but if you shut off the EBT cards, within 3 to 5 days there would be and everywhere else too.
I believe the worst U.S. riots since I have occupied the planet were the race riots which took place in the 1960s, during my childhood. I was completely oblivious to the events of the day, though I am sure my parents were paying attention. Many U.S. inner city areas sustained damage from which they never subsequently recovered.
How the 1960s’ Riots Hurt African-Americans
“The riots had economically significant negative effects on blacks’ income and employment. Further, those effects may have been larger in the long run - from 1960 to 1980 - than in the short run - from 1960 to 1970.”
“The riots significantly depressed the median value of black-owned property between 1960 and 1970, with little or no rebound in the 1970s.”
Any American of a certain age remembers the race-related riots that tore through U. S. numerous cities in the 1960s. Between 1964 and 1971, civil disturbances (as many as 700, by one count) resulted in large numbers of injuries, deaths, and arrests, as well as considerable property damage, concentrated in predominantly black areas.
Although the United States has experienced race-related civil disturbances throughout its history, the 1960s events were unprecedented in their frequency and scope. Law enforcement authorities took extraordinary measures to end the riots, sometimes including the mobilization of National Guard units. The most deadly riots were in Detroit (1967), Los Angeles (1965), and Newark (1967). Measuring riot severity by also including arrests, injuries, and arson adds Washington (1968) to that list. Particularly following the death of Martin Luther King in April 1968, the riots signaled the end of the carefully orchestrated, non-violent demonstrations of the early Civil Rights Movement.
…
The 2001 Cincinnati riots were instigated by an unarmed black male being killed by Cincinnati Police, he was the fifteenth unarmed black male killed in less than 2 years.
CNN reported on the riots as “demonstrations” which they were, initially, but the mayhem that followed were riots, not demonstrations.
A riot is an escalated demonstration.
Yeah I think a lot of people on this blog are too young to know of the turbulent 60s. I was 9 years old in 1968 and remember when journalists were permitted to cover wars, the nightly tolls of soldiers killed in action. Walter Cronkite was our focus. A couple years earlier the false flag “gulf of Tonkin” incident was set up by the U.S. to try to get the U.S. Into a quagmire, and it was successful.
In 1968 dozens of USN men were taken hostage by North Korea. Then in 1979 hundreds of Americans were taken hostage by Iranian students.
We’ve had crises come and go.
I am buying stocks.
“I decided not to.”
Many European Jews made that fateful decision likely trying to retain their hard earned assets hoping that they would be judged independently rather than blamed as a group. Greedy Swiss bankers colluded with German military who had an accounting of their victims… sharing the spoils. Humanity still has many centuries of evolutionary development ahead.
1) I don’t look like I have money
2) I have no religion
3) I am multi racial
4) the new reich will not be allowed to affect California
What’s a 9 figure house if your effective tax rate is not zero percent? French Riviera? High French taxes.
“‘Le Palais Bulles,’ or ‘the Bubble Palace,’ is being offered for sale at approximately $450 million.”
This aptly-named palais is certain to be chronicled in future accounts of the present-day mania.
“Many say the sudden surge in hyperprice homes — often built and sold by speculative investors — is the ultimate bubble signal. The last time a sudden pop in $100 million-plus listings occurred was in 2007 and 2008, just before the housing crash. ‘When you have a record number of homes for sale at a price point of $100 million or more, that tells you these homes aren’t selling,’ said Jonathan Miller, president of Miller Samuel Inc., a real estate appraisal and research firm. ‘It’s not as deep a market as some might hope.’”
The second pop in $100 million plus homes in under a decade signals a market slowdown which could create big problems for the sellers, as this price range is far beyond the reach of the affordable housing programs that provide federally-guaranteed mortgages to fuel the bubble in lower-tiered U.S. luxury housing.
Good luck to the sellers with the multi-year Dutch auctions!
”Stephen Jones, a member of the NFL’s first family and Dallas Cowboys CEO, is looking for a new revenue stream. The son of Cowboys owner Jerry Jones is selling his home in the coveted Highland Park area of Dallas. While located deep in the heart of Texas, his home resembles a Georgian estate. It’s listed for $11.5 million and features six bedrooms and 6.5 bathrooms spread out over more than 10,000 square feet.’
‘looking for a new revenue stream’
Yep, Texans have the fever. Houses should pay off like a jackpot. I remember during the oil boom, we would marvel that a house in Highland Park could cost (gulp) half a million dollars!! Why you could buy a ranch for that.
you could buy a ranch for that
We did, for much less than that. The neighbor was here partying with us last night and wants to sell the adjacent lot.
The Cowboys are finishing their new headquarters / practice facility way up north in Frisco. The old man has developed a ton of land up there. Stephen is likely moving to be closer to the hq.
“Here’s Why All Pension Funds Are Doomed, Doomed, Doomed.”
http://www.oftwominds.com/blogmay16/pension-doomed5-16.html
‘In the good old days before the economy (and pension funds) became dependent on debt-fueled asset bubbles for their survival, pension fund managers expected an average annual return of 3.8%–less than half the current expected returns.’
‘In the good old days, the needed returns could be generated by investing in safe income-producing assets–high-quality corporate bonds, Treasury bonds, etc. The risk of losing any of the fund’s capital was extremely low.’
‘Now that the expected returns have more than doubled while the yield on safe investments has plummeted, fund managers must take risks (i.e. chase yield) that can easily wipe out major chunks of the fund’s capital if the bubble du jour bursts.’
‘Here’s problem #3 in a nutshell: everyone who rode the great bubble of 1994 - 2000 (including pension funds) soon reckoned 10%+ annual returns on equities was The New Normal, so expecting 7.5% - 8% annual returns seemed downright prudent.’
‘When that bubble burst, decimating everyone still holding equities, the Federal Reserve promptly inflated two new bubbles: one in stocks and another in housing. Once again, everyone who rode these two bubbles up (including pension funds) minted hefty profits year after year.’
‘This seemed to confirm that The New Normal included the occasional spot of bother (a.k.a. a severe market crash), but the Federal Reserve would quickly ride to the rescue and inflate a new bubble.’
‘When the dual bubbles of stocks and housing both burst in 2008, once again the Fed rushed to inflate another set of bubbles, this time in stocks, bonds and rental housing. Lowering interest rates could no longer generate a new bubble. This time around, the Fed had to lower interest rates to zero indefinitely, and embark on the most massive monetary stimulus in history–quantitative easing (QE) 1, 2 and 3–to inflate a third bubble in stocks.’
‘This unprecedented expansion of free money for financiers and dropping interest rates to zero generated a bubble in bonds and an echo-bubble in real estate–specifically, commercial real estate and rental housing.’
From the weekend post:
‘The reemergence of equity and bond bubbles are being debated in the financial media. But what is less known to investors is the massive amount of forced hot air that has been blown into the commercial real estate market. For example, commercial real estate prices have increased by double digits for the past six years, according to The National Council of Real Estate Investment Fiduciaries. Also, according to the Real Estate research firm Green Street Advisors, commercial property prices now exceed the 2007 prior peak by 24% overall.”
“And in cities such as Manhattan, preferred office buildings and apartment complexes are 60% higher than what existed during the previous housing bubble. Of course, such lofty values have driven National Retail cap rates down to the subbasement of history, at just 6.5%.”
‘The cap rate is a very common and useful ratio in the commercial real estate industry and it can be helpful in several scenarios. For example, it can and often is used to quickly size up an acquisition relative to other potential investment properties. A 5% cap rate acquisition versus a 10% cap rate acquisition for a similar property in a similar location should immediately tell you that one property has a higher risk premium than the other.’
‘Another way cap rates can be helpful is when they form a trend. If you’re looking at cap rate trends over the past few years in a particular sub-market then the trend can give you an indication of where that market is headed. For instance, if cap rates are compressing that means values are being bid up and a market is heating up. Where are values likely to go next year? Looking at historical cap rate data can quickly give you insight into the direction of valuations.’
‘While cap rates are useful for quick back of the envelope calculations, it is important to note when cap rates should not be used. When properly applied to a stabilized Net Operating Income (NOI) projection, the simple cap rate can produce a valuation approximately equal to what could be generated using a more complex discounted cash flow (DCF) analysis. However, if the property’s net operating income stream is complex and irregular, with substantial variations in cash flow, only a full discounted cash flow analysis will yield a credible and reliable valuation.’
http://www.propertymetrics.com/blog/2013/06/03/cap-rate/
‘if the property’s net operating income stream is complex and irregular’ maybe it shouldn’t be used for retirement principle.
I posted this in the comments to the weekend topic:
‘West Virginia University opened University Park in August 2015. Half of the complex is a residence hall while the other half is operated as an apartment. The apartment was only 42 percent pre-leased for next year as of May 13, documents show. The four apartment complexes West Virginia University operates as an option for students to live on campus after leaving the dorms appear on track for a noticeably empty year.’
‘As of May 13, only one apartment of four has more than half of its available beds pre-leased for next year, documents show. College Park is 75 percent pre-leased, while the other three are still waiting more than half empty.’
‘Landlords in the area say students not signing leases for WVU apartments is just one glimpse into an over-saturated housing market they don’t think will get any better any time soon.’
“It’s kind of like high school soccer players,” said Frank Scafella, executive director of Campus Neighborhoods Revitalization Corporation, better known as Sunnyside Up. “They kick the ball and everybody runs to it to get into that market. And then it’s overdone, it’s over built and everybody suffers.”
‘Some of the options don’t come cheap. A two-bedroom “deluxe apartment” at University Place rents for $835 a month, a one-bedroom apartment at University Park goes for $1,250 a month and each person in a four-bedroom apartment at University park has to pay $781 a month.’
“It’s better than what was there, but here’s the thing,” Kelly said. “Yes, I think it looks better and it probably functions better and it’s probably higher quality. But who cares [about all of that], if the kids can’t afford it? It’s like a car shop. If you go out and only offer Cadillacs, what are the people who can only afford cheap cars going to do?”
http://www.wvgazettemail.com/news-education/20160528/wvu-having-trouble-filling-apartment-rooms
‘And then it’s overdone, it’s over built and everybody suffers’
Build your way out of a bubble.
One thing that seems to get lost in the discussions about cap rates is a discussion of the risk-free rate of Treasuries, specifically the 10-year Treasury.
I am yet to see an article that expresses cap rates in relative terms to the 10 year treasury (i.e., as a spread over the risk free rate on the 10 year treasury).
A substantial portion of the cap rate compression we have witnessed in recent years is the result of the falling rate on the 10 year treasury.
IMO if you make your living as a money manager then you are screwed.
- also -
If you depend on a money manager to make money for you then you are screwed.
The reason? Because the returns on invested capital are so low enormous risks need to be taken for those who dare to enter the market in order to earn a decent return. One return needs to be earned if you are investing your own money, two returns need to be earned if you are investing money that belongs to somebody else (one return for yourself, one return for somebody else).
But keep this in mind: If you are investing your own money then you are competing against other investors who are investing other people’s money, investing other people’s money not because the investment arena is all that wonderful but because THEY HAVE NO OTHER CHOICE.
And if they have no other choice then prices will reflect this fact.
The time is ripe for going to cash but these money-manager guys cannot do this, they cannot go to cash because they need to take a cut of what money they invest and going to cash will not allow them a cut without totally pissing off the owners of the money that is being managed.
IMHO. FWIW.
There was an article over the weekend about the hard times hedge funds are having. Pension funds are pulling out. Now why would pension funds be investing in high risk hedge funds? It mentioned 4 or 5 guys made a billion dollars each last year running these funds. There was a time when it took an empire and a lifetime to make a billion bucks.
“The Sun Sentinel in Florida. “Palm Beach County’s total taxable property value has increased for the fifth consecutive year, rising to a level not seen since the peak of the housing boom”
Saw this Palm Beach County Lake Park Fl. 2/2 side of a duplex on Realtor.com yesterday.
It would would have sold for about $60k in 2000 and I saw similar units in the same hood listed between $50k and $60k in 2009
Date Event Price Price/Sq Ft Source
05/05/2016 Listed $150,000 $131 JTHSMLS
01/04/2006 Sold $200,000 $156
So this little 1000 sq ft place has played out like this so far.
2000 $60,000
2006 $200,000
2009 $50k to $60k
2016 listed for $150,000
Did you decide to sign a death pledge for a lifetime of slavery in exchange for the pleasure of leasing a large sum of money that enables you to live in a bank-owned home?
I’m not a pledger, I make death bets.
Earlier today I was reading about Dred Scott, a Missouri slave in the antebellum era who encountered personal difficulties trying to buy his freedom.
A bit later, I found myself reflecting how although forced slavery is illegal in present-day America, the Real Estate Industrial Complex offers a program that makes it very easy for unwitting consumers to voluntarily sign up for thirty years of slavery in exchange for entry into the Ownership Society.
The Dred Scott Case
We’ll find a way around the 13th Amendment if it kills us. My theory is that indentured servitude will be re-branded as “freedom.” That is to say, if it hasn’t already happened.
“Hedge fund manager: A recession would ‘ironically’ help young people find jobs”
“London-based hedge fund manager Crispin Odey writes that we have a paradoxical situation where we need to raise rates and have a recession in order to get better.
“By Julia La Roche
May 27, 2016 10:00 AM
“London-based hedge fund manager Crispin Odey laid out a depressing scenario in his latest investor update.
“In order for things to get better, especially for young people looking for jobs, we need to have a recession. This recession would be the result of central banks tightening monetary policy by raising interest rates.
“’Nobody wants a recession but sometimes recessions can be better than the alternative policies which not only destroy incentive structures but also, create wrong price signaling, which in fact creates more mayhem as production reacts to misleading signaling, and ultimately leads to governments becoming even more involved in life of the economy. Having witnessed several years in which companies used cheap debt to buy back expensive equity, expect that in a few years’ time companies will be doing the reverse,’ Odey wrote in his fund’s April performance report seen by Yahoo Finance.
“He continued: ‘A world in which banks don’t lend, young people cannot find jobs, overcapacity is not the cause for prices to fall, is not a world which can long survive. Higher interest rates would not only create the recession, it would ironically create the inflation and the preconditions ultimately for young people to find jobs. Thus we have a paradox. Seven years ago it was necessary given a crisis, to lower interest rates from 5% to 0%. Today a crisis may give us the chance to raise interest rates back to these levels. Any other solution looks very unlikely to be successful.’”
“Odey joins a chorus of hedge fund managers who have raised concerns about the efficacy of central bank monetary policy after eight years quantitative easing and zero interest rates. In the letter, Odey wrote central banks’ actions ‘create dangerous bubbles or in the case of the banks, serve to weaken credit creation, which they so desperately want.’”
“He also pointed out that the debate has now moved to ‘just how long policies can support the current status quo?’”
“For Odey, it’s been a brutal 2016. Odey European, a now £676 million ($986.9 million) long/short equity fund, is among the bottom performers. According to data compiled by HSBC, the fund was last down 27.36% through May 13.
“The poor performance follows a challenging 2015 when the fund lost 12.82% for the year, the HSBC data shows. Since its inception, Odey European has produced annualized returns of 10.98%, the data shows.”
Link …
http://finance.yahoo.com/news/crispin-odey-investor-update-says-we-need-a-recession-125921827.html
‘not only destroy incentive structures but also, create wrong price signaling’
Like a historic boom in luxury apartments when not one single county has affordable housing for low income people? Like canyons of dark luxury condos all over the world?
‘which in fact creates more mayhem as production reacts to misleading signaling’
Like all these people stuck with $100 million houses they bought or built on spec and can’t sell? Like the Brazilians subsidizing renters in Miami, if they have renters at all?
‘and ultimately leads to governments becoming even more involved in life of the economy’
Like completely taking over the house finance industry and putting investment banks on indefinite life support?
‘central banks’ actions ‘create dangerous bubbles or in the case of the banks, serve to weaken credit creation’
Multiple bids over asking price, now occurring in hot markets like Wisconsin, Ohio, Michigan and Omaha Nebraska?
‘a chorus of hedge fund managers who have raised concerns about the efficacy of central bank monetary policy after eight years quantitative easing and zero interest rates’
Who’s up for 9 years? Or 15? I know, I know, the reason it didn’t work is there wasn’t more of it.
‘which in fact creates more mayhem as production reacts to misleading signaling’
Aka mal-investment: directly attributable to the central banks, for intentionally mis-pricing risk-reward across the entire spectrum.
Strange thought for the day:
Why are income taxes progressive, but property taxes are flat? Perhaps it should be the other way around?
Not at all strange.
Simple economic logic shows that when you tax something, you typically get less of it. (The exception would be a good with truly inelastic supply, which might be hard to find in the real world.)
If you tax work and subsidize idleness, you soon have millions of idle people relying on subsidies for their subsistence.
If you tax high-value work more heavily than low-value work, you end up with relatively more low-value work and less high-value work than if taxes were flatter.
These ideas are not rocket science. Anyone who grasps undergraduate micro economics can understand them.
Sure.
The subtext of my post is that having fewer $50M and $100M properties doesn’t strike me as a bad thing—it strikes me as an improvement.
“The subtext of my post is that having fewer $50M and $100M properties doesn’t strike me as a bad thing—it strikes me as an improvement.”
It strikes me as a first step on the path to affordable housing.
Harvard just awarded the Radcliffe Medal to Janet Yellen. The medal is presented to an individual who has had a “transformative impact” on society. Oh, there’s been a transformative impact, all right.
She was joined onstage by Ben Bernanke.
http://news.harvard.edu/gazette/story/2016/05/janet-yellen-honored-by-radcliffe-ponders-economy/
“Hedge fund manager: A recession would ‘ironically’ help young people find jobs”
It’s no surprise that a rich guy would promote a recession. He wouldn’t suffer from the rise in unemployment and he’d probably be well placed to profit from a crash in asset prices.
I’m not rooting for the recession, but I am rooting for rates to return to something more approximating normal. My reasoning: all of the mal-investment must stop; it is merely sewing the seeds of future economic pain.
What makes you believe rates can be normalized without sparking a recession.
If this were possible, wouldn’t the Fed have already done it?
I’m not arguing that normalization won’t spark a recession—it most likely will.
The point is one of motivation: I want to see the mal-investment stopped; it that requires a recession to accomplish, so be it. But I’m not _rooting_ for the recession—but an end to the madness.
So you, like the hedge fund guy, must assume that you won’t become unemployed during this recession.
“I want to see the mal-investment stopped; it that requires a recession to accomplish, so be it.”
Mal-investment eventually leads to a much worse and more protracted downturn than the occasional recession.
Exhibit A: Japan.
Exhibit B: China.
There’s probably no clear way to determine if an individual investment is what you call a mal-investment. If that’s the case, then it’s got to be impossible to determine when the total amount of such investment has reached a level at which a recession is warranted.
In addition to all of that, it’s still the case that the nobody who suggests that a recession is a good idea expects to lose his job as a result.
http://digital.vpr.net/post/utah-work-underway-building-blocks-newvistas-community-vermont#stream/0
‘The toilet that engineer Jared Reynolds demonstrates lights up around the rim, rainbow-style. It currently flushes only golf balls but a finished product will use foam instead of water, and it will monitor health by testing the waste it flushes away. A composting system for waste is still to be developed.’
‘Other engineers are working on the design of a small kitchen. “Imagine a kitchen that’s in a 4-by-4 area but it does everything a full size kitchen will do,” says its designer, Joseph Blanch, as he demonstrates a motorized vertical carousel where utensils and appliances can be stored.’
‘The size of the kitchen is important because each family’s living space in a NewVistas community will be only 200 square feet; 4-by-4 is a key dimension because cubes that size, stacked and connected, are the building blocks of the structures.’
‘In theory, the living space can be transformed from a dining room to a bedroom, or any other room in a house simply by moving soundproof vinyl walls and storing furniture inside the cubes.’
Do men dream of offering this to people when they could be offering them other things instead?
“Imagine a kitchen that’s in a 4-by-4 area
I would bet dollars to donuts that these guys’ jobs only exist due to Federal government grants…
http://nh.craigslist.org/reo/5610993958.html
‘Low condo fees include water, sewer, landscaping and plowing.’
Plowing.
It’s furnished, so leave your suitcase in the car, there’s no room for it. They might want to contact homeland security cuz I think there was an explosion in the kitchen.
For $84K, with a space that small, what are you striving for? Impress your friends? No. Take your family? No. Hide from the zombies? No. I guess being near the ocean means a lot to some people. Lord knows the weather is alright in NH for about 5.5 months a year. Sunken cost of $84K (plus probable somewhat high property taxes) for 6 months of living in a 168 square feet cabin? This is what people crave.
Don’t forget the HOA fees. Somebody has to pay for the snowplow even if no one is around.
The city plows our neighborhood streets, but only if it snows a foot or more. Otherwise we just drive over it.
When I came back to this country for school I witlessly tried to “drive over it” after a heavy snowfall. Thank God I was only a couple of blocks from my house when I got stuck, so I could run and fetch the snow shovel.
Evidently, $84K isn’t that far off from the going rate at the beach. Here’s a similar size condo conversion in an old motel, for $99K.
http://www.zillow.com/homes/for_sale/Town-of-Hampton-NH/113618987_zpid/398429_rid/any_days/pricea_sort/42.947564,-70.767317,42.91256,-70.832634_rect/13_zm/?3col=true
HOA includes plowing.
Thanks. The price is cocoa puffs. Buy a sweet travel van and hit up the Planet Fitness for showers. Nearest one is in Stratham, NH, about 10 miles away. This is the gig economy people, lol.
http://nh.craigslist.org/reo/5610809556.html
http://nh.craigslist.org/reo/5595290166.html
One thing I like about Trump: He often proves to be a realist in areas where delusional dreamers currently prevail.
ft dot com > World > US >
US Election 2016
Last updated: May 26, 2016 11:16 pm
Trump puts fossil fuels at US energy core
Barney Jopson and Demetri Sevastopulo in Washington
Republican U.S. presidential candidate Donald Trump gestures to supporters while speaking in Bismarck, North Dakota, U.S., May 26, 2016.
Donald Trump has vowed to unleash the full power of fossil fuels in US energy policy, warning that restrictions proposed by Democrats would leave the US “begging for oil” from the Middle East.
In his most extensive remarks on energy to date, the Republican candidate — who has turned his back on party orthodoxy in many other areas — adopted mainstream party positions favouring fossil fuels with less regulation and more production.
His remarks on Thursday were reassuring to oil executives who were unsure how Mr Trump would treat the sector, and bore the imprint of advice he said he had received from Harold Hamm, chief executive of Continental Resources, a shale pioneer.
Attacking his Democratic rivals Hillary Clinton and Bernie Sanders for wanting to impose stricter regulations on fracking, the real estate mogul said: “You do that and you’ll be back into the Middle East and we’re going to be begging for oil again. It’s not going to happen. Not with me.”
Mr Trump also said he wanted to “cancel” last year’s Paris climate change accord, roll back federal regulations, revive the moribund coal industry, and see the controversial Keystone XL oil pipeline built.
He sought to tie energy into his campaign narrative of US revival and attacked President Barack Obama and Mrs Clinton, the Democratic frontrunner, for putting foreign interests ahead of the US.
With the US now the world’s biggest producer of natural gas but still dependent on oil imports, Mr Trump said: “I want to be energy independent, yes, absolutely . . . and we also want to sell our energy to other places.”
He said he would approve the Keystone XL pipeline, a totemic oil project that Mr Obama rejected last year after more than seven years of evaluation. But the Republican said he would get a “better deal” from the project, proposed by a company called TransCanada.
“I want the Keystone pipeline, but the people of the United States should be given a significant piece of the profits,” he said.
As a result of the Paris climate deal, Mr Trump said “foreign bureaucrats are going to be controlling what we’re using and we’re doing on our land in our country. No way. No way”.
…
Attacking his Democratic rivals Hillary Clinton and Bernie Sanders for wanting to impose stricter regulations on fracking, the real estate mogul said: “You do that and you’ll be back into the Middle East and we’re going to be begging for oil again. It’s not going to happen. Not with me.”
I read somewhere that we buy very little oil from the Middle East at this point. We’re producing more at home and buying most of what we import from countries that are closer. We’re in the Middle East because we want to be.
“If a law is unjust, a man is not only right to disobey it, he is obligated to do so.” Thomas Jefferson
“hard to base anything on 261 sales”
In Florida there are qualified and unqualified sales. I just appraiser site and our sale is listed as unqualified, so it does not count toward comps.
Essentially comps excluded foreclosures, short sales, and anything the county thinks “isn’t high enough.”
I’m wondering what effect this designation, if any, will have on my taxes.
If the realwhores are systematically excluding low-value sales from official price stats, I would be more worried about the eventual resale value of the house.
http://www.iamwire.com/2016/05/tu-beer-hai-startup-bubble-bursting/136917
‘Disclaimer: This is an Influencer post.’
Influencer? Is that some new metric?
Gold - I am nearing the end of my strategy of buying a lot of gold twice a year. I think November 2015 was the bottom. The price will go so high in a year or two that I will be down to two ounces additional purchases per year.
http://www.zerohedge.com/news/2016-05-30/grant-williams-warns-looming-wealth-tax-says-own-physical-gold-not-et fs
If this story is true, I can see bitcoin going stratosphere along with gold. People can be goaded into bidding any price for something:
http://www.cbc.ca/news/canada/north/arctic-bay-nunavut-precious-pop-sell-online-1.3604269
No knock on bitcoin and gold. The push for money to exist solely as bits and bytes is chugging along fine with help from the masters. I just understand a little bit more now how the nominal price of something has no bearing.
15 of the 20 weather cities in the U.S. are in California. This aria LE is in the OC Register so it noted five of these cities are in Orange County:
http://www.ocregister.com/articles/median-716937-income-homes.html
Interesting that my own net income (and this even excludes my bond income and benefits) is higher than all the Orange County cities posted, including Newport Beach.
http://www.ocregister.com/articles/median-716937-income-homes.html
“Weather”/”wealthiest”
Image #5 - spec mansions… only in SoCal.
Did you ever notice how car commercials completely emphasize the monthly payment amount, with nary a mention of the sticker price? It’s almost like the auto makers assume the only possible way consumers will be able to buy is with a subprime auto loan, which is probably a reasonable assumption given how most American households are broke with no savings.
They use what works.
The flip side is that dealers tend to seem a bit taken aback when you make an all-cash offer. We got very attractive prices this way on the last two cars we purchased, both brand spanking new.
People who bought overpriced houses for prices they can’t afford are unable to do this.
Yep, back end loaded balloon payment loans. Junk status bonds are created from these fog-a-mirror loans, and the fed buys to worst tranches to keep the auto industry alive. Little wonder that these $60k four-door pickup trucks are as ubiquitous as dandelions.