September 27, 2016

It’s A Buyer’s Market, But Not Many Out There

A report from Bloomberg on Connecticut. “In Greenwich, the leafy Connecticut town famous for its cluster of hedge funds and the titans of Wall Street who occupy many a gated mansion, the rich are being maddeningly frugal. As Barry Sternlicht complained when he assailed his former hometown as possibly the country’s worst housing market. ‘You can’t give away a house in Greenwich,’ the head of Starwood Capital Group said, causing something of a ruckus. Many continue to try to sell their real estate holdings. As of Sept. 14, there were 46 homes at $10 million or more on the market, some that have been lingering since 2014, according to data from Miller Samuel and Douglas Elliman.”

“One problem is that risk levels have gone through the wringer. Members of the younger Wall Street crowd are quite conservative, says Robin Kencel, a broker with Douglas Elliman. ‘They used to say Oh, I’ll stretch.’ Now they’re more practical. They’ll ask ‘What are the utility bills? Oh, wait — I don’t want it.’”

The Casper Star Tribune in Wyoming. “Casper’s housing market was recently ranked as one of the least healthy in the country, largely due to the oil and gas bust. Realtors report that homes are retaining their value, and the current market offers opportunity. ‘Right now, the interests rates are screaming low, lower than they have ever been,’ said Gary Bryan, a real estate agent with Broker One Real Estate in Casper. ‘There are better houses on the market, better inventory than we’ve had before because we’ve had a little bit of an adjustment. It’s not a bad adjustment. It’s a good thing for buyers.’”

“Two years ago, Casper was a seller’s market, he said. But times have changed. ‘There is a little more negotiation going on,’ he said.”

The Williston Herald in North Dakota. “Despite the oil industry’s slowdown, Williams County’s population and housing needs continue to grow at one of the fastest rates in the nation, researchers say. Making predictions for Williston is challenging, though, in light of the dramatic swings that the city has seen in its housing needs, Nancy Hodur, assistant research professor and director for the North Dakota Center for Social Research, said.”

“‘Now all of a sudden you have vacant housing,’ she said, pointing out that although the market has opened up, what’s available needs to fit the needs of the majority of the population. ‘The tricky thing about saying you have a surplus of housing, is maybe you have too many $325,000 houses when what you need is houses for $125,000.’”

The Vindicator on Ohio. “Karen Humphries lives on Halls Heights Avenue on the Youngstown’s West Side, and she’s witnessed firsthand the damage out-of-state investors can do to a neighborhood. Out-of-state owners from various states own six of the 16 houses on the first block of Halls Heights and nine of 38 on the entire street. Humphries said those houses often sit empty for long periods of time. She sees children going in and out of them when they play.”

“Code enforcement scheduled two hearings for the property at 44 Halls Heights. Both times the property owner failed to appear in court. The Mahoning County Land Bank took control of the property on July 13 – nine years after it was purchased by a limited liability company in California. The land bank has since purchased three more properties on Halls Heights. ‘These out-of-town people have no idea what they’ve done to our neighborhood,’ Humphries said. ‘They’ve destroyed our neighborhood.’”

“The problem isn’t unique to the West Side’s Garden District. Out-of-state owners control 15 percent of properties citywide and 22 percent of the city’s 3,900 vacant properties. Out-of-state-owned properties are about 50 percent more likely to be vacant than locally owned properties. Nancy Martin, president of the Brownlee Woods Neighborhood Association, said investors from Taiwan and Australia own property in her neighborhood.”

“People from the Netherlands, England and Australia own property in the Garden District, said Jerry O’Hara, president of the Garden District Neighborhood Association. Out-of-state owners range from companies that specialize in flipping properties to ill-informed investors who get in over their heads purchasing homes over the internet. ‘Some of them have no idea what they’re doing,’ said Ian Beniston, executive director of the Youngstown Neighborhood Development Corp. ‘When you say, ‘Do you understand Youngstown has 4,000 vacant properties?’ You can feel their mouth drop over the phone.’”

“Houses will show up on the internet selling for just a few thousand dollars. ‘Then they buy it, and they’re stuck with it,’ O’Hara said. ‘That’s what happens a lot of times, and then they just sit because they can’t do anything with them.’”

WSIL TV in Illinois. “Dismal home sales numbers in Carbondale get worse as more folks hang out the ‘for sale’ sign. ‘Last year was the beginning of what’s going on this year, and this year it’s worse,’ explains realtor Terri Henry. Block by block, sign after sign, she says she hasn’t seen home sales this slow in the past two decades. ‘There were 11 homes on the market and up till now there’s only been one that has sold and closed, so it’s going to take us 66 months to get rid of these homes at that rate,’ says Henry.”

“Resident Ingrid Hansen noticed that same trend hit what she describes as a ‘well established’ neighborhood near the university. ‘The home next door has been vacant for four months but usually they sell within a year. I don’t know, maybe this year it will be different,’ she says.”

“Henry says it’s definitely a buyer’s market, but she doesn’t see many out there. ‘If you have 100 homes and you only have 25 people to buy, you’re going to be left over with 75 homes, so its going to be those homes that are in great condition, great area, ready to sell or the best deal,’ she explains.”

“Realtors say if a homeowner is having trouble selling the property they might choose to rent it out, but that creates another challenge since Carbondale already has a saturated rental market.”

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Comment by Ben Jones
2016-09-27 08:59:33

‘The tricky thing about saying you have a surplus of housing, is maybe you have too many $325,000 houses when what you need is houses for $125,000.’

Heck of a job Janet. Foreclosures are how assets get reset to fix a market.

Oh, is that “rooting” for a bubble to pop? Did I have anything to do with this situation in Williston because I point to it? What’s the alternative? Let the houses sit empty? Try and get some poor guy to send 110% of his income to a bank?

Comment by Lurker
2016-09-27 11:25:43

Can’t have people buying a $325k house for $125k. That would be wrong. Deflation is evil.

I remember reading about a famine in Niger in 2005, allegedly caused by the usual reasons: drought, pests = not enough food. Then I heard an interview with an aid worker on the ground reporting that the markets were actually full of food, rotting away because the farmers could not “afford” to sell for a lower price, while people starved. So the farmers ended up with nothing, and a lot of people died, but at least deflation was averted.

Plenty of food, but nothing to eat. Plenty of houses, but nowhere to live. Until the market is allowed to clear.

Comment by rms
2016-09-27 12:39:35

“Can’t have people buying a $325k house for $125k.”

The pension funds can’t afford that reality.

Comment by redmondjp
2016-09-27 13:26:57

“More foam needed on runway 2″

Comment by Apartment 401
2016-09-27 17:36:15

See also the scene in Steinbeck’s Grapes Of Wrath where the farmers poured gasoline over tons of harvested oranges and burned them.

Has there ever been any, any net benefit to the humanoid species from economists and financiers, ever?

Comment by Ben Jones
2016-09-27 09:03:12

‘Median sale prices rose in a number of areas in the Northern Virginia region, including Prince William County where it rose by 6 percent. In Fairfax and Loudoun counties, the median sale price increased by 2 percent and 1 percent, respectively. Arlington County experienced a decline of 1 percent, and in Alexandria City the median sale price fell by 14 percent.’

Comment by Ethan in Northern VA
2016-09-27 10:11:11

Ugh. Keep declining!

Comment by Ben Jones
2016-09-27 10:18:25

If that last stat is even half right, there are a bunch of 3% down loans underwater now.

Comment by Ethan in Northern VA
2016-09-27 10:42:54

I have a young friend that just bought in one of those cities (Springfield maybe, or Arlington can’t remember which.) His wife’s family (he’s white country boy, she’s Chinese) gave em half the money for the house downpayment straight up.

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Comment by Professor Bear
2016-09-27 12:46:33

If prices are already dropping in the current rock-bottom rate, loosy-goosy low-downpayment lending environment, imagine how fast they will drop when interest rates and lending standards revert to historic norms.

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Comment by Jingle Male
2016-09-28 04:23:32

Robert Shiller interview yesterday: “There is little to no correlation between home values dropping when interest rates rise. Rates rise because the economy is growing stronger… that tens to cancel out the effect on housing

Comment by taxpayers
2016-09-27 10:18:40 shows 0% yoy
And that’s w a big spender headed to the wh

Comment by Sean
2016-09-27 10:20:18

Loudoun County here. There is barely anything for sale, and what is for sale has been sitting for months and months. In my neighborhood I have two choices for houses:

1) A 4300 square foot home at $700K. Beautiful, move in ready. Too big and too much money.

2) A 2300 square foot home at $499K, reduced from $519K. These people were the original owners and have not updated anything since they moved in. Not even new paint. It is a complete dump. It’s being sold by an elderly couple who are moving across the state. So congratulations to whomever buys that house! Enjoy your half a million dollar home with a few hundred thousand more in updates! (Oh yeah, and $5700/year in taxes and $80/month in HOA fees)

Comment by rms
2016-09-27 12:42:53

“(Oh yeah, and $5700/year in taxes and $80/month in HOA fees)”


Comment by Puggs
2016-09-27 14:41:33

Yeah, prop. tax is the wild card in the supposed “fixed spending” once you’ve paid yer house off.

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Comment by Rental Watch
2016-09-27 16:23:34

Less of a wild card and more of a certainty in California with Prop 13.

I can pretty much set my watch to my property taxes going up 2% per year, pretty much forever.

Comment by aNYCdj
2016-09-27 09:07:22

the insanity of long island city mass high rises which before 9-11 was old single story mom and pop stores and taxi and hooker heaven at night….now everything is top of the line thousands of apartments

yet hotels in the area are turning into homeless shelters

Comment by Can_Bubble
2016-09-27 09:39:47

Adult children would undoubtedly be thrilled with a gift, but not all parents have nest eggs big enough. Still, lending money to help a child buy a home can look tempting. With low interest rates and volatility in equities, it’s a different kind of play on real estate: The child can break into the hot market, and the parents can collect interest on the loan or, like Ms. Henheffer, agree to a pro-rata stake.

Comment by ibbots
2016-09-27 10:31:04

Mom and Dad can liberate the equity in their 401k’s! Lol…what could go wrong?

Comment by Puggs
2016-09-27 11:24:26

I know parents who aren’t even blood related carrying notes for “snowflakes” who lost in the last bubble.

Comment by Puggs
2016-09-27 09:55:02

Maybe there is hope for our younger generation yet…

Members of the younger Wall Street crowd are quite conservative, says Robin Kencel, a broker with Douglas Elliman. ‘They used to say Oh, I’ll stretch.’ Now they’re more practical. They’ll ask ‘What are the utility bills? Oh, wait — I don’t want it.’”

Anytime I’ve heard the Tortoise and Hare story the Tortoise always wins.

Let’s git back to basics and save our economy.

Comment by jerzdebil
2016-09-27 09:58:52

Per bloomberg: 1 in 5 bidders (maybe buyers, wasnt listening too closely at first) last year did so sight unseen in the US. Housing as beanie babies - thanks Janet & Mel, you make such a lovely couple (of scumbags)!

Comment by Jingle Male
2016-09-28 03:55:31

“People from the Netherlands, England and Australia own property in the Garden District…….”

My first rule of owning income property is that it must be within a few miles of my normal driving pattern. Plane tickets, management fees, repair costs…..way too expensive and hard to control from a long distance.

Comment by Palm Beach County
2016-09-27 10:11:41

September 27, 2016 11:15AM

South Florida home prices grow in July as nation approaches 2006 peak….

So, when does this ‘bubble’ break in South Florida? Guesses? What will cause it to slow down?

Comment by Ben Jones
2016-09-27 10:15:02

Take a look at this past Friday’s post. I’d say Miami Beach already has. Naples too.

Comment by Ethan in Northern VA
2016-09-27 10:13:33

I’m sure you all caught the debate last night when Trump shouted at that we’re at the peak of another bubble (including the stock market) and the Federal Reserve shares the blame. Even though I don’t like either candidate I was pretty happy with that statement, although it probably won’t make the news like the other stuff.

Comment by taxpayers
2016-09-27 10:20:59

Today it’s all about calling a fat chick fat
Trumpf on wymin=milania

Comment by Don!
2016-09-27 13:11:10

Amy Carter’s still fugly.

Comment by junior_bastiat
2016-09-27 15:38:14

Aren’t most, if not all liberal women fugly, as well as women from liberal parents? Seems that way. Don’t think its a coincidence either, their hatred of others masks their self hatred - look at trigglypuff.

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Comment by Professor Bear
2016-09-27 21:46:38

Here comes the revisionist history:

Trump touts debate performance in Florida rally

By Jeremy Diamond, CNN
Updated 10:21 PM ET, Tue September 27, 2016

Comment by oxide
2016-09-27 10:22:17

Halls Heights Avenue on the Youngstown’s West Side

… where the most expensive SFH within a 10-block radius was sold for $100K. Most are for sale for under $30K. Were these foreign investors really looking for appreciation in a dying city like Youngstown? Would the Chinese bother to launder $22K on these shacks? It would cost more to fix these up than they are worth.

And it looks like different investors are buying these houses, not a single entity planning to buy up whole blocks to establish an oil-city type safe-house colony where there’s water.

Here’s what $100K buys in Youngstown:

Comment by Ben Jones
2016-09-27 10:34:33

Built in 1918.

Comment by oxide
2016-09-27 10:56:28

Yes, with a Craftsman interior. I would take that over Tool Brothers any day.

Comment by Ben Jones
2016-09-27 11:01:06

Either way it’s a perpetual rehab job.

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Comment by Apartment 401
2016-09-27 11:06:22

Nobody I went to college with who grew up in Youngstown moved back there.


It’s so bad that Bruce Springsteen wrote a song about it.

Comment by Ben Jones
2016-09-27 11:17:41

I heard yesterday Clinton has given up on Ohio. Anti-globalist lives matter.

Comment by Raymond K Hessel
2016-09-27 11:54:03

People in Ohio and the other 49 states have a long and hallowed tradition of voting against their own best interests, most recently in 2008 and 2012 when a snake oil salesman backed by Soros and Goldman Sachs and pitching “hope n’ change” to the rubes won against two even more odious globalist, neocon Wall Street toadies, McCain and Romney.

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Comment by rms
2016-09-27 12:47:10

“It’s so bad that Bruce Springsteen wrote a song about it.”

Oxycontin mentioned in the lyrics?

Comment by Carl Morris
2016-09-27 13:54:28

I don’t think so…but I think cannonballs were.

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Comment by oxide
2016-09-27 14:03:01

Which still raises the question: why on earth are out-of-staters or foreigners buying these places?? They aren’t going to get quick appreciation. They aren’t housing students, they aren’t Chinese setting up a safe-house homestead, they aren’t renting it out (why rent when you can buy for $30K)… and surely no one is going to launder $30K in frekking Youngstown… so, why?

Comment by Carl Morris
2016-09-27 16:56:16

As far as I know these are the type of people who buy houses without ever going there in person. So…we can probably deduce a few things from that.

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Comment by Don!
2016-09-27 10:25:42

Trump is the champion of labor.

Comment by Obama Goons
2016-09-27 10:32:45

Hillaryous is unelectable.

Comment by Raymond K Hessel
2016-09-27 11:55:04

Low-IQ mouth breathers, denizens of IDIOCRACY, can make it so.

Comment by Rental Watch
2016-09-27 10:53:39

I thought the strongest point that Trump had last night (over and over again) was that HRC has been in government for decades, and hasn’t been able to fix anything. What makes us think she’ll fix anything now?

I also thought that there was a softball to Trump that he completely missed. He should have called out HRC on cyber-security vis-a-vis her server. If she feels so strongly about cyber-security, then her actions with respect to her private server either show complete incompetence on the issue, or she was trying to hide something.

Anyway, the debate last night didn’t move me off my prior position, and I suspect many others are like me (unmoved). However, my guess is that more undecided’s went to Clinton’s camp than Trump’s camp.

Comment by Rental Watch
Comment by Professor Bear
2016-09-27 12:48:00

Now that Vancouver’s bubble is collapsing, they are at the top of the list of cities at risk of a housing bubble?

Interesting, indeed, how some MSM writers have their heads up their…

Comment by Bubble Boy
2016-09-27 12:21:37

Startup Offers Payment Insurance for Apartment Hunters

As the apartment market soars across the U.S., one financial-services startup sees opportunity in helping tenants get into units they can’t qualify for on their own.

TheGuarantors, launched in New York in 2014, sells payment insurance to tenants, providing landlords with a guarantee they will be made whole if the tenant becomes delinquent.

The offering is a symptom of a pricey market in which rents have risen faster than incomes and landlords can be picky about the qualifications they demand. Rents have climbed about 20% nationwide over the past five years while incomes have only recently started to rise.

Comment by Professor Bear
2016-09-27 12:36:21

Lotsa happy talk in the MSM about ongoing 5%+ growth rate in U.S. home prices.

Any thoughts on how long this can continue, or what will happen at the point when price appreciation reverts to a much lower historic norm?

Comment by Rental Watch
2016-09-27 13:22:08

The short answer is that no one knows. Here is an article that includes a chart of annual home price increases since 1988:

From 1998-2006, we had 8 straight years of home price increases of more than 5%…clearly this was not sustainable. But that unsustainable pace lasted for 8 years…with effective cost of debt going down (Option ARMs had higher rates than today, but didn’t require borrowers to actually pay much), and lots of development…peaking at over 2MM new homes per year.

I see the first burst over 10% home price growth per year clearly being a bounce off the bottom, and home price growth is way down from there.

So, if you believe that the high price increases in 2013-2014 was a “one time, post-crash” event (as I do), if what happened from 1998-2006 is any guide, there could be several years of home price growth above inflation.

Watch the housing start numbers…when we begin to exceed 1.5MM, I believe then we will be seeing the beginning of the end of greater-than-inflation price increases.

Comment by Professor Bear
2016-09-27 12:39:47

‘Right now, the interests rates are screaming low, lower than they have ever been,’

How long can interest rates that are at their lowest levels in the entire history of interest rates remain that low before they revert to historic norms?

Comment by Professor Bear
2016-09-27 12:43:04

‘When you say, ‘Do you understand Youngstown has 4,000 vacant properties?’ You can feel their mouth drop over the phone.’

It seems quite amazing that the shadow inventory still lurks all these years after the real estate bust supposedly ended.

Comment by Jingle Male
2016-09-28 04:15:33

I don’t think it is shadow inventory in the typical sense (bank owned zombies). It is more like abandoned housing, left to rot because there is zero demand.

Comment by Professor Bear
2016-09-27 12:51:47

Are you staying up nights worrying about the long-term Treasurys in your portfolio?

BlackRock sounds alarm about growing risk in Treasurys
Published: Sept 27, 2016 1:49 p.m. ET
Time to ‘rethink’ role for U.S. government bonds
Bond bulls have little room for error.
By William Watts
Deputy markets editor

The world’s largest asset manager joined the chorus of investors warning that expensive U.S. Treasurys could pose a danger to portfolios as the Federal Reserve moves closer to a rate increase and the Bank of Japan ramps up efforts to steepen the yield curve.

“It’s time to rethink the role of U.S. Treasurys in portfolios, and specifically to be cautious of long-duration Treasurys,” wrote Richard Turnill, global chief investment strategist at BlackRock, in a Monday note. “The risk-reward landscape for long-duration Treasurys is shifting.”

Duration measures the sensitivity of a bond’s price to changes in yield. As bond investors know, debt prices rise as yields fall and vice versa. Duration estimates just how much bond prices will change as the yield rises or falls. The longer the maturity, the longer the duration and the more sensitive a bond price is to changes in yield. That means that a small rise in yields can have an outsize impact on the value of long duration bonds in a portfolio.

With Treasury yields not far off all-time lows, there is little in the way of a safety cushion should yields begin to rebound. The yield on the benchmark U.S. 10-year Treasury (TMUBMUSD10Y, -1.36%) fell nearly 3 basis points to 1.56% on Tuesday, as bonds rallied in response to a fall in oil futures and continued worries over the health of European banks.

“Just a 0.2 percentage point increase in Treasury yields could wipe out a whole year’s worth of yield income,” Turnill wrote.

Comment by Professor Bear
2016-09-27 21:58:23

Markets Streetwise
Today’s Bond Market: Wrongly Priced for 30 Years of Wretched Existence
Government bonds have sold off aggressively in recent days, in what looks like a classic correction of overextended prices
By James Mackintosh
Sept. 14, 2016 4:38 p.m. ET

Is the bond bubble bursting? Supposedly safe government bonds have sold off aggressively in recent days, in what looks like a classic correction of overextended prices. While investors watch every twitch from central bankers—with even the timing of a speech moving the market this week—the bond market’s lack of interest in the economy is worrying.

Start with the popping sounds. The most pain has been felt at the long end, where the 50-year British gilt fell 11% in price in 10 days, as the yield rose. To put that in context, it’s the biggest loss in such a short period since the wild swings in the aftermath of the 2008 failure of Royal Bank of Scotland Group and Lehman Brothers. This time, though, there was no real trigger. Japan’s 30-year bond started falling first among the major markets, and has lost 12% since its early-July peak, the biggest 50-day loss since the country’s 2003 bond ructions. Again, there has been little real news.

The drops follow the sort of returns that usually denote something odd going on. Long-dated gilts leapt in price by 55% this year before they started falling, and Japan’s longest-dated bond had a similar rise. Germany’s 30-year bond gained 30% in the year to late July, before it started to drop. Odd things have been going on, of course: The Brexit vote raised concerns about a possible recession and about long-run growth, worries have arisen about the power of the Bank of Japan, and the European Central Bank’s €1 trillion ($1.12 trillion) of bond purchases are definitely odd, at least by pre-2008 standards.

The U.S. has been more conventional recently, but investors fleeing low yields in the rest of the world have dragged down Treasury yields.

However, to justify bond yields lower than central-bank inflation targets even over 30 or more years requires one of three things to be true: central banks will fail to rekindle inflation; the economy is permanently impaired, stuck in secular stagnation; or other investment options are even worse, so after-inflation losses on bonds look more attractive than the risk of even bigger losses elsewhere.

Comment by housingbobble
2016-09-28 03:41:26

The experts say Treasuries will crash each year. And each year they are incorrect. While Germany, esp Deutch Bank, collapse, global investors are racing into long term Us bonds. What is safer, German Bunds that have a negative yield or US bonds which pay 1.69%? It’s just how things are right now. When Italian and Spanish bonds are very risky but yielding as much as the US or slightly, there are big issues. But US yields will stay long for now.

Comment by Apartment 401
2016-09-27 17:47:13

Blue Collar (1978) starring Richard Pryor and Harvey Keitel:

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