September 20, 2014

Investors Engulfed By The Tidal Wave Of New Supply

It’s Friday desk clearing time for this blogger. “The vacancy rate for single-family homes was 10.7 percent in 2013, up from 10.6 percent in 2012 and near its 2011 peak of 11 percent. That’s far above the vacancy rate during the bubble (8.6 percent in 2005) and before (7.4 percent in 2000). In 2013, household formation was just 321,000, much lower than the 1.2 million baseline implied by current population growth. The number of owner-occupied single-family homes actually fell by 184,000. ”We’re still building single family homes faster than we can fill them,’ argues Trulia’s chief economist Jed Kolko.”

“DR Horton announced it would have to use incentives to sell its homes. It last reported it had 10,000 unsold homes, 3,100 of those already finished. ‘Other builders are sitting on more than that,’ noted Buck Horne, an equities analyst at Raymond James. ‘That’s a lot to be speculating with, especially after the spring selling season.’ As of last quarter, Pulte had less than 1,000 spec homes in all of its combined communities. ‘That’s one the industry’s lowest ratios of spec homes,’ Horne said.”

“There are plenty of vacant homes, no new owner households are being formed, and there’s not enough demand to necessitate building more new homes. Why then do real estate agents claim there is not enough supply to meet demand, and why are home prices continuing to rise?”

“Media reports about rising home prices, strangely enough, are starting to have a dampening effect on the local housing market, said Royal Hartwig, at Keller-Williams Realty’s Palatine office. ‘After hearing these optimistic reports, sellers who have been holding back are deciding that it is time to list their homes. But many times they are expecting to get more money for their homes than the market will currently bear, so the homes are starting to just sit on the market again and inventory is rising,’ Hartwig said.”

“For the second month in a row, the Austin housing market has seen sales on the decline compared to the year-earlier period. Also in August, price dropped for single family houses compared to a year ago. ‘A majority of Austin area homes are now priced out of an affordable range for first-time and first-time, move-up homebuyers where a significant portion of home sales volume occurs,’ said Austin Board of Realtors president Bill Evans.”

“Metro Phoenix’s median home-sales price is poised to dip by $5,000 during September. The dip doesn’t surprise market watchers, who expected it because of steadily falling sales in the Phoenix area. ‘Limbo perfectly describes our current housing market,’ said real estate analyst Tom Ruff of The Information Market, owned by Arizona Regional MLS. ‘Low demand and a lack of new housing inventory have balanced the market into a standstill.’”

“Eileen Rivera, an agent with Keller Williams Realty Los Alamitos, and other experts believe what’s going on now is that banks are starting to release some of the tremendous numbers of foreclosed properties they were so reluctant to release while the market was still down. ‘There’s no question that the big banks held on to inventory and they held back, and they’re releasing some of them now,’ she said. ‘I was dealing with one home the other day that had been foreclosed on 19 months ago.’”

“A home at 2749 San Francisco Ave. in Long Beach can be considered a typical foreclosed home on the market. The 1,176-square-foot home has three bedrooms, two bathrooms and is selling for $369,900. The home, which was built in 1946, was originally priced at $429,000. Rivera said banks only look at the bottom line in the transaction, whereas a homeowner may have trouble letting go of a property for a lower price. ‘It’s the least emotional transaction there is,’ she said.”

“The slide in China’s property market has lasted well into the third quarter and appears to be dragging the broader economy with it. For a Beijing-based trader with a leading global commodities trader, the housing market sell-off means overdue payments from one of her clients, a private chemicals producer which expanded into real estate in 2008. ‘It owes us $600,000 in contract payments but says it can’t pay because of failed property investments by its parent,’ she said. ‘It’s not just us — other suppliers are affected.’”

“The current slide in house prices follows a multi-year boom which lured in companies such as Zhejiang Galico. Around the country, companies which built massive real estate portfolios as part of non-core businesses are now trying to offload them. Li Yonglin, a sales manager with a real estate agency in Wenzhou, said Galico’s case is not unusual as boom turns to bust. ‘Payments collection in property projects has been very slow and that has affected funding flows for the whole group. These are very common cases among small businesses and we’ve even seen some business owners running away,’ he said.”

“The Financial Times writes that the Chinese Communist party is turning to western governments – including Canada – to help in its quest to track down individuals who have moved themselves, and more importantly, their wealth, overseas. A housing analyst based in Vancouver told us that any capital flight might be brought back to China due to capital fright – the fear of losing one’s head for running afoul of the ruling party’s policies. ‘The corruption crackdown could accelerate outflows à la Argentina, or it could cause a repatriation of funds if officials attempt to repay bad debts so as to avoid jail time,’ he said.”

“Investors should sell their residential investments in Singapore. The property market, which has been gradually declining, does not need any new action to tip it over. Just the sheer number of new homes being supplied both in Singapore and Iskandar will drive prices lower. New private home sales in Singapore have plunged in the past three months to about 40 per cent of the monthly average of the past five years or so.”

“In the past six months, there has been an increase in the number of mortgagee home sales. During the luxury property boom from 2006 to 2008, about 60 per cent of top-end apartments were purchased by foreigners. Some have held on to their investments, but they are now feeling stifled. I recommend that investors sell their residential investments before they are engulfed by the tidal wave of new supply.”

“Lower Manhattan’s Trump Soho hotel-condominium tower, which has struggled to find buyers since sales started in 2007, is facing foreclosure. The 391-unit Trump Soho has recorded about 122 completed deals, according to appraiser Miller Samuel Inc. Fifty-eight units are currently listed for sale, with prices ranging between $915,000 for a studio to $50 million for a 10,000-square-foot presidential suite. ‘The challenge of this building is a very high price per square foot paired with extremely high carrying charges related to the hotel services they were trying to market,’ said Jonathan Miller, president of Miller Samuel.”

“Economics columnist Martin Wolf doesn’t want to predict when the world economy will face another financial crisis. But he tells Yahoo Finance editor in chief Aaron Task, more turmoil is ‘more or less inevitable’ because ‘nothing profoundly changed,’ since 2008. ‘Banks have such a powerful interest in finding ways around regulation,’ Wolf says, and they always succeed at it. Wolf fears this is putting us ‘back where we were’ before the crisis happened.”

“So how can the broken system be fixed? Wolf says the first step is to make world economies less dependent on debt. ‘Wolf says radical reform of the financial system is necessary to put the world economy on steady ground. Right now, he says, there is still ‘incentive for the people inside’ to play ‘the leverage game,’ and it’s just too dangerous.”




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September 19, 2014

Bits Bucket for September 19, 2014

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September 18, 2014

A New Breed Of Investor Moving Into A New Paradigm

The National Post reports on Florida. “Lured mostly by cheap prices, Canadians spent $2.2-billion on Florida real estate last year, easily making them the Sunshine State’s No. 1 international buyer of real estate. ‘We went down there on a holiday and prices were so damn low, I said to my wife ‘let’s buy,’ said Jerry Jarson, a 74-year-old retiree from Shanty Bay, Ont. The former air force officer and lawyer bought a condo two years ago in Cape Coral for US$79,900. He estimates its value has risen US$39,000 in two years. Mr. Jarson said he was able to use the equity in his Canadian home to buy his condo. ‘We never had any money but the bank has lots,’ he said about the line of credit on his Canadian home he was able to use to finance the purchase.”

The Washington Post. “Forget mortgages. In areas like Miami, the rise in foreclosures and other distressed properties attracted moneyed investors and foreign buyers who used their cash to buy homes at firesale prices. Miami’s share of cash sales hit 70 percent in 2011 and 2012, according to CoreLogic. As we reported last year, real estate executives said institutional investors — who in some cases are bidding on hundreds of homes a day — accounted for as much as 70 percent of sales in some Florida markets.”

The Miami Times. “Industry experts agree that with markets moving as rapidly as they are in South Florida, it’s only natural for people to ask if we’re in the midst of a land price bubble. ‘Miami is moving into a new dynamic, and historical perspectives will be non-relevant moving into a new paradigm,’ said CBRE Managing Director Ken Krasnow. ‘We have a new breed of investor who looks at the demand drivers,’ he said. ‘There’s a deep demand pool out there.’”

“Not everyone is sanguine about the rising cost of land, however. Demand will remain high for at least a few years, mainly because of population growth, but the trend will not last forever, said Jack McCabe, real estate analyst and CEO of McCabe Research & Consulting. In fact, he is concerned about a global recession in 2017 if not before and worries that people have short memories of what Miami – along with the rest of the country – went through not that long ago.”

“Mr. McCabe said flight capital from Latin America is inflating land and residential prices. ‘It doesn’t matter to many people fleeing distressed counties how much they pay because they just need to get their capital out of some of these countries,’ he said. ‘Will this flight capital continue to come to Miami? We don’t know.’ Mr. McCabe said Miami has the highest foreclosure rate among the nation’s largest metropolitan areas. ‘This is a very abnormal market,’ he said, ‘propped up by flight capital.’”

The Orlando Sentinel. “Home prices in the core Orlando market took a seasonal dip in August, dropping from a midpoint of $170,950 in July to $165,000 last month, according to the Orlando Regional Realtor Association. Prices typically soften after the peak of the summer buying season, but association officials said the decline was also the result of a large number of distress properties selling last month. ‘Closings on foreclosures jumped 30 percent in August,’ said association Chairman Zola Szerencses. ‘Foreclosures tend to carry discounted price tags — great opportunities for buyers — so the cumulative effect of all these sales is a restraint on the median price.’”

“The volume of sales was down, with 2,449 houses selling in August — a decline from both a month earlier and a year earlier. One concern for prices in the future is the prospect of inventory levels increasing to the point that the Orlando market becomes more of a buyers’ market than it has been during the recovery of recent years. The core Orlando market had a 5.4-month supply of homes on the market — the highest level since January 2012.”

The Sun Sentinel. “Lenders filed 238 foreclosures last month in Palm Beach County, up 10 percent from a year earlier, according to RealtyTrac. Broward filings jumped 26 percent. Scheduled auctions — when a judge sets a date for a home to be repossessed — also increased in both counties. After years of foreclosure backlogs, existing cases are moving swiftly through the courts, observers say. Jerry Tepps, a foreclosure defense lawyer in Palm Beach and Broward counties, said courts are hiring retired judges and administrators to ‘make things happen.’”

“Tepps has a few cases that will be resolved this year, only months after they were filed. ‘It used to be three or four years before they were over with,’ he said. ‘The court system has become much more aggressive in applying resources than it ever has before.’”

The Saint Peters Blog. “In the last year, foreclosure judges in Florida have been working under explicit guidelines from both the state Legislature and Supreme Court to clear court dockets by tying up old cases, mainly by giving banks tens of thousands of homes statewide. The objective of the Florida Supreme Court was to dispose of 256,000 cases every year for three years of the program, writes Alison Fitzgerald of the Center for Public Integrity. ‘They just slam the defendants,’ said attorney Margery Golant, who practices in Palm Beach and Broward Counties. ‘They deny them their rights; have hearings in absentia and just flush them down the garbage disposal.’”

“Undeniably, most unresolved cases involve homeowners who are unable to pay and are not fighting foreclosure. Many have already left their homes.”

The Tampa Bay Times. “Ricardo Lopez could barely contain his fury as he walked from the St. Petersburg courtroom in late July after Judge Karl Grube for the second time in five months set a date to sell his family home. ‘How can this happen? He didn’t even listen to you. This is a total fraud!’ the 12-year St. Petersburg police officer fumed as he paced around Matt Weidner, his lawyer, in the courthouse hallway while his wife sat rigidly behind sunglasses on a nearby bench and his two small kids’ wide eyes took in the scene. ‘I could go in and arrest that lawyer. I can call the economic crimes unit right now,’ he offered, brandishing his cell phone.’

“Lopez got to this point because he was injured in 2009, missed two months of work and got behind on his payments to JPMorgan Chase. As he recovered and began paying, he says, the bank allocated the money to his past due debt, late fees and other charges. He tried to send something extra each month, but no matter what, he remained more than 90 days late. ‘It was never an issue of can we afford the house,’ he said. ‘They wouldn’t make anything current. It was constantly past due.’”

“Finally, he stopped paying, and asked for a loan modification. At the trial in March, Weidner argued that JPMorgan couldn’t foreclose because it didn’t have an original promissory note, the only original document required in a foreclosure trial. Grube disregarded the discrepancies and allowed the document into evidence. ‘So we’re making a factual determination that this is, in fact, the original?’ Weidner asked. ‘Overruled, sir,’ Grube responded. Lopez is racing the calendar while negotiating with Bayview mortgage in hopes of keeping his home. There’s still an order in the St. Petersburg courthouse to sell his home on Sept. 29.”




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September 17, 2014

We’ve Forgotten What Normal Is

The Daily Bulletin reports from California. “California home sales slipped in August after two months of increases as the median home price rose, the California Association of Realtors reported. August marked the 10th straight month that sales were below the 400,000 level and the 13th straight month that sales have declined on a year-over-year basis. Sales in August decreased 1.2 percent from 398,940 in July and were down 9.3 percent from 434,910 in August 2013, according to CAR. ‘With more homeowners in a position to list their homes for sale following rising home prices, housing supply is improving across all price ranges as would-be sellers may be seeing this as an opportunity to list their homes for sale,’ said CAR President Kevin Brown.”

The Central Valley Business Times. “What happened to the housing recovery? Perhaps it went on vacation last month. In August, 34,269 California single-family homes and condominiums were sold, down 4.2 percent from July’s total of 35,787 and a decline of 13.5 percent from 39,614 sales in August 2013, according to figures compiled by PropertyRadar Inc. August 2014 sales were the lowest August sales since 2010, it says. On a regional basis, over the past 12 months sales are down 18.8 percent in the Central Valley, down 15.7 percent in the Bay Area, and down 16.7 percent in Southern California.”

“‘The bloom is definitely off the California real estate rose,’ says Madeline Schnapp, director of economic research for PropertyRadar. ‘The rapid rise in prices over the past two years has outstripped the ability of many would-be California homeowners to purchase.’”

The Press Democrat. “Sonoma County home sales slowed in August to the lowest level in four years, according to The Press Democrat’s monthly housing report compiled by Pacific Union International VP Rick Laws. Sales declined 15.1 percent from a year earlier and were the smallest number for the month since 400 homes were sold in August 2010. The county’s median sales price declined to $475,000 in August from $510,000 in July. The median remained 8.7 percent higher than a year ago.”

“Sales may have dropped because buyers face tougher standards to obtain home loans and because there are fewer foreclosures and shorts sales on the market than in the last four years, said Gerrett Snedaker, a senior VP in Sonoma for Wine Country Group by Better Homes and Gardens Real Estate. ‘I think we’re still working some normalization into the market after seven years of disruption,’ Snedaker said. ‘It’s been so long, we’ve forgotten what normal is.’”

The Orange County Register. “What are house hunters in San Bernardino trying to tell us? August’s Southern California housing market fit all-too-familiar 2014 themes, according to trends within CoreLogic DataQuick’s monthly report. First, the buying pace stayed cool, with 20,369 homes sold in the six counties – the slowest August in four years and down 18.5 percent from August 2013. It was the 11th consecutive month of year-over-year homebuying declines. Second, selling prices stayed high, but appreciation slowed.”

“My trusty spreadsheet tells me that such an extended streak of San Bernardino over-performance is a bit of a rarity in the past quarter-century of CoreLogic DataQuick record keeping. The two previous noteworthy lengthy streaks were: 14 straight months (and 16 out of 18 months) in 1990-91 as the late 1980s boom was ending, and 19 straight months (and 24 out of 25) in the 2004-06 boom years. This year’s house shopper is clearly balking at various conditions that significantly pushed up Southern California selling prices. The regional median price is up 70 percent since its 2009 bottom.”

“It’s also a good bet that this same pricing phobia gave an edge to the often sensitive San Bernardino market. And comparatively, San Bernardino home sales are only down 9.8 percent in a year. Only Orange County – down 9.3 percent – has fared better. That leaves us to fret whether this cycle of anxiety over affordability ends badly for everyone in Southern California – as it did twice before in the past quarter-century.”

The Sacramento Bee. “Two dozen protesters wearing yellow T-shirts marched through a downtown Sacramento conference room and chanted slogans Tuesday during a meeting of the California Housing Finance Agency’s board of directors. The members of the Alliance of Californians for Community Empowerment demanded that the agency’s Keep Your Home California program move faster in distributing $2 billion in federal aid for struggling homeowners.”

“Keep Your Home California still has about $1 billion of the money it received from the U.S. Treasury Department’s Hardest Hit Fund several years ago. It must spend that remaining amount by 2017. Critics say the program has been dragging its feet as more homes are lost to foreclosure. ‘What do we want? Principal reduction! When do we want it? Now!’ the protesters chanted as they marched in circles around the room.”

The Record Bee. “Nearly two-and-a-half decades after his father purchased property and began building a house in Cobb, Rob Somerton is unsure how much longer he will be its owner. Somerton claims that Bank of America has been trying to foreclose on the house since 2011, using the Mortgage Electronic Recording System,or MERS. ‘They could foreclose in a month, or they can drag it out longer,’ Somerton said. ‘I really don’t know.’”

“‘Something has to be done about this,’ Somerton said. ‘It ruins lives. You can’t imagine the anguish and stress something like this does to a person.’”




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September 16, 2014

Markets Will Not Be Liquid When Liquidity Is Needed Most

Reuters reports on Canada. “Jeff Lowry and his family left a sedate housing market in Tennessee last year and moved to Canada in the midst of a housing boom, where bidding wars and soaring prices were an unpleasant reminder of his American roots. Trading in his suburban home outside Nashville for a smaller $600,000 house in Waterdown, Ontario, the 39-year-old regional manager wonders if he’s just bought into another bubble. ‘Obviously it is risky, and we’re concerned,’ said Lowry. ‘The housing market is skyrocketing and we wonder, are we paying the top price?’”

“Lowry is already counting his gains as the Canadian housing market marches ever higher. ‘We’ve only lived here eight months and the values have even gone up since then,’ said Lowry, marveling at how much money his neighbors are getting as they sell. ‘I think I will make money here. I purchased it at C$600,000 and they are now going for C$680, C$690. If that trend continues I’ll be sitting pretty in two or three years.’”

From Bloomberg. “The Australian Prudential Regulation Authority in May warned of growing evidence of ‘lending with higher risk characteristics.’ Interest-only mortgages jumped to 43 percent of all new home lending in the three months through June 30, and credit to buy rental properties climbed to 38 percent, both record highs. Cheap money is driving prices higher. Property agent Darren Dowd last month sold a three-bedroom house in the northwestern Sydney suburb of Baulkham Hills for A$895,000, almost A$100,000 more than he expected. Two years ago, he sold the same house, about 30 kilometers (19 miles) from Sydney’s central business district, for A$605,000.”

“‘Prices in our area have increased about a quarter of a million dollars just in the past couple of years,’ said Dowd of broker Ray White Baulkham Hills, adding that the number of people choosing to sell their homes at auction is at a 15-year high. ‘We’ve seen a sharp increase in auctions in just the past three months because people are seeing the exceptional results others are getting and saying, ‘I want what he has.’”

The Star Online on Malaysia. “According to the first half 2014 Property Industry Survey by the Real Estate and Housing Developers’ Association Malaysia (Rehda), properties in the affordable housing price range below RM1mil have been facing a tough sell largely because of homebuyers’ difficulty in getting financing and a glut of unreleased bumiputra lots. Also, some 31% of properties in the RM500,001 to RM1mil range were still left unsold after completion in the past three years. These were largely in hot property markets like Selangor and Johor.”

“Rehda president Datuk Seri Fateh Iskandar Mohamed Mansor said demand for property was intact but with the Government’s cooling measures introduced a year ago, developers were finding it difficult to successfully sell in the affordable housing segment. ‘A property is a person’s biggest wealth creation asset, yet they can’t seem to own one,’ he noted.”

The South China Morning Post. “Mainland regulators have gone pretty easy on money launderers over the past few decades. That is set to change, however, as the People’s Bank of China begins to assign more responsibility to banks in flagging suspicious transactions, Michael Thomas, North Asia director at Wolters Kluwer Financial Services, told the South China Morning Post. President Xi Jinping’s anti-corruption drive is also aimed at stopping officials from moving large amounts of money - along with their families - abroad.”

“Mainland media have dubbed these cadres ‘naked officials’ and regional governments have come down particularly hard this year on those caught with major assets abroad. In July, the provincial government of Guangdong said it identified more than 2,000 ‘naked officials’ and removed more than 800 of them.”

The Financial Express in India. “Protests over delays in completion of real estate projects today reached doorstep of government minister, when some aggrieved buyers used an industry conference to air their grievances. About two dozen flat owners of Unitech’s two under-construction housing projects in Noida reached NAREDCO’s annual convention to petition Urban Development Minister M Venkaiah Naidu and I&B Minister Javadekar. Unitech Golf and Country Club Apartment Buyer’s Association, Noida VP Sanjeev Sood said: ‘The project was launched in 2007 but still we have not got the possession. We have paid 95 per cent of the total cost of the flat. The construction work has stopped on the site.’”

The Business Times on Singapore. “A larger percentage of high-end luxury condo homes on the resale market are selling at a loss and a smaller percentage at a profit, as the tide of the once-rosy property market recedes and reveals those who have been ’swimming naked’ - that is, those without adequate holding power for their extravagant purchases. The low-rental environment is leaving more owners struggling to repay their mortgages. In some cases, the monthly rental cannot cover the mortgage.”

“‘It’s quite common that rents cannot cover monthly instalments, especially for bigger units. But those who don’t have holding power would have to let go of their units. Others may be forced to do mortgagee sales,’ said Christine Li, head of research and consultancy at OrangeTee.”

“Losses made in resale transactions from January to August 2014 range from S$9,300 for a unit in Bukit Timah, to S$2.06 million for a unit in Tanglin. The latter was purchased at S$6.8 million in 2007, and sold for S$4.7 million in April this year. Four units at The Promont (at Cairnhill), St Thomas Suites (near River Valley), Tanglin View and Waterscape At Cavenagh also resold at considerable losses of S$800,000 to S$1.2 million each.”

From the AFP. “Loose monetary policies have created an ‘illusion of permanent liquidity’ that is spurring investors to make risky bets and push up asset prices, the Bank for International Settlements said Sunday. ‘The longer the music plays and the louder it gets, the more deafening is the silence that follows,’ Claudio Borio, who heads the BIS’ monetary and economic unit, told reporters. ‘Markets will not be liquid when that liquidity is needed most,’ he warned, urging ’sound prudential policies (and) extra prudence on the part of market participants themselves.’”

“The BIS, the so-called central bank of central banks, has long warned such moves are whetting investors’ appetite for short-term, high-risk investments and froth in property markets, potentially creating the bubble conditions for a new market crash. Borio said that markets have shown ‘exceptionally subdued volatility’ at levels similar to before the financial crisis in recent months, which could be ‘a sign of high risk-taking.’”

“Borio stressed that ‘a common mistake is to take unusually low volatility and risk spreads as a sign of low risk when, in fact, they are a sign of high risk-taking.’ ‘The illusion of permanent liquidity is just a prevalent now as in the past,’ Borio said, pointing out that years of ‘unusually accommodative’ monetary policy has left investors feeling secure low interest rates would continue or only be gradually tightened.”




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September 15, 2014

The Misconception Is That People Can Afford It

The Press Enterprise reports from California. “Banks are still in the throes of taking back housing-crisis remnants in Inland Southern California, a new report from RealtyTrac shows. The 2,447 foreclosure filings across the two-county region in August were 11.6 percent less than the year earlier, but nearly half of the filings – 1,057 – involved notices of default. Industry analysts say the spike in initial mailings and bank repossessions are revealing ’shadow inventory’ that’s been in the background since the height of the foreclosure crisis.”

“To avoid a glut of foreclosure action, home-price devastation and possible market implosion, the filings were parceled out. Home take-backs also took somewhat of a hiatus when the California Homeowner’s Bill of Rights took effect in 2013. Foreclosure activity began to intensify in March. Bank-repossession notices then showed year-over-year increases every month through July. Total foreclosure filings in July rose for the first time after 31 consecutive months of declines.”

“‘If the 15 percent average decline had continued in January through August, we would have seen 52,056 total foreclosure starts in the Inland Empire during that time period,’ said RealtyTrac Vice President Daren Blomquist said. ‘Instead, we have seen 24,509 NODs (notices of default) during that time. That leaves 27,547 that we would have expected to happen, but did not happen.’ If only half of the 27,547 anticipated filings lead to a foreclosure, Blomquist said, it could take at least 11 months at the current rate for the Inland region to work through the backlog.”

The Pensacola News Journal on Florida. “For the 11th straight month, Florida led the nation in foreclosure rates. Florida had a total of 6,468 foreclosures in August, a 74 percent jump from July and a 25 percent increase from August of last year. In Pensacola, 307 housing units faced some sort of foreclosure activity in August, up 274 percent from July and 60 percent from August 2013. Pensacola Realtor Anthony Sessa said many of the foreclosed homes are ones realtors have known about for some time.”

“‘In the last 30 days, our inventory of properties which will eventually be on the market has increased greatly,’ he said. ‘It’s what we call shadow inventory, that we’ve all known about and were just wondering when we were going to get it. Our inventory in general has been average to low, so it’s the best time to feed this stuff out.’”

CBS Philly on New Jersey. “The shrinking casino industry is one reason experts say Atlantic County is top on the list of counties in New Jersey for home foreclosures. This week RealtyTrac released a report showing New Jersey foreclosure starts in August increased about 115 percent from the same period last year. ‘When these casino workers came in and bought these $300,00 to $500,000 houses they could afford them, but when they lost their jobs or went from full time to part time, they couldn’t make the payments,’ says Atlantic County Sheriff Frank Balles.”

The Denver Post in Colorado. “The number of foreclosures filed in Colorado last month showed the largest year-to-year increase since 2007, when the state was embroiled in the mortgage meltdown, according to a new report. The increase, a 57-percent surge when compared with a year ago according to RealtyTrac, is likely the result of state investigations into the practices of Colorado’s two largest foreclosure law firms. ‘The surge in foreclosure activity is not the result of a faltering economy but, instead, problems in the foreclosure industry that have delayed some (filings),’ said Chad Ochsner of Re/Max Alliance.”

Arizona Public Media. “After being on a downward trend for several months, foreclosure filings are rising in Tucson and statewide. A new report from RealtyTrac showed the number of homes that progressed a step in the foreclosure process went up by 16 percent from July to August. The number more than doubled from June to July, and is up by nearly half since this time last year. RealtyTrac Vice President Daren Blomquist said the recent jump in filings is due to more homes entering the foreclosure process. ‘Primarily, the increases in Tucson are coming from the foreclosure starts, properties just starting the process. Actual bank repossession of properties, the final stage of foreclosure, those are still going down,’ he said.”

The Fairfax Times in Virginia. “Fairfax County’s budget staff expressed some nervousness last week about declining sales in the local housing market. The number of active listings in the county in August was at a five-year high, as compared to the same month in prior years, and the number of homes sold was down about 12 percent from last year. David Versel, senior research associate at the George Mason University Center for Regional Analysis, said the local housing market is actually doing quite well, given the slow recovery of the job market. ‘Our job growth has been really weak this year,’ he said. ‘The fact that the housing market is even flat is positive.’”

“While soaring inventories can be a sign of trouble in the housing market, Versel said that the numbers had been abnormally low. ‘If it keeps going up over the next six to 12 months, then it is probably a cause for concern,’ he said. While still not back to where they were at the peak of the market, the median sales price for Fairfax County is now $478,000, compared to a low of $308,000 in 2009. ‘In that relatively short amount of time, prices have increased 55 percent,’ said Corey Hart, senior product manager with RealEstate Business Intelligence. ‘To think that houses would continue to appreciate at double digit increases year over year, it’s really not sustainable.’”

Seattle Weekly in Washington. “Everyone around here has been flooded with unsolicited offers. Walking around the neighborhood, we run into Stanley Perkins, who has lived in his house since 1973, when he bought it for $17,500. Asked to bring out some of the offers that regularly arrive in the mail, he heads into the house and comes back with carton after carton. ‘Dear Stanley,’ begins one letter from a repeated land suitor. ‘As I have stated in my letters to you recently, the land market may be in a bubble and 2014 could be the top of the market.’ The letter’s author goes on to say that he represents buyers who ‘are so eager to purchase your property’ that they have agreed to pay all of the usual commissions.”

From Bloomberg. “Canada’s ratio of household debt to disposable income approached a record high between April and June, underscoring the central bank’s concern about imbalances in consumer finances. Home sales and prices have shown unexpected strength as the lowest mortgage rates in decades spur demand. Forecasts for housing starts were raised yesterday to the highest this year in monthly Bloomberg News surveys.”

“With mortgage debt rising, the economy will be exposed when interest rates rise, said Andy Nasr, senior portfolio manager at Calgary-based Middlefield Capital Corp. which manages about C$4 billion ($3.6 billion), including real estate stocks. ‘The misconception is that ‘Well it’s ok because people can somehow afford it,’ he said at Bloomberg’s Toronto office. ‘They can’t.’”




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September 14, 2014

A Decade Of Boom, Bust And Boom Again

A report from MarketWatch. “Jim Reid and his strategy crew at Deutsche Bank spent over 100 pages this week examining the ‘near two-decade rolling series of inter-related bubbles’ that have characterized our financial lives. We’ve sure been on a hot streak, between the Russia and Asia in the 90s, those crazy dotcom kids in 2000, the speculative housing bust in 2007, and more recently signs of a Chinese credit bubble. Their conclusion: this trudge from one bubble to the next may be making its way to the final frontier. That frontier is the bond market.”

“Here’s the Deutsche treatment: ‘The worry is that there is nowhere left for this bubble to go given that it is now in the hands of the lenders of last resort (governments and central banks with regulators ensuring other large captive buyers). Although we think this bubble needs to be maintained to ensure the solvency of the current financial system, the best case scenario is that it slowly pops over time via negative real returns for bondholders. The worst case scenario being future restructuring.’”

The Sydney Morning Herald. “One of Australia’s most senior bankers believes global financial markets may face a “meaningful” correction similar to the 1994 bond crash, because aggressive monetary stimulus is inflating asset bubbles. Rob Whitfield, the chief executive of Westpac’s institutional bank, warned that bubbles were forming as global investors took on more risk in search of higher returns. Mr Whitfield said central bank moves to stimulate growth had created ‘a wall of liquidity,’ which had in turn triggered a global hunt for yield reminiscent of conditions before the 1994 bond crash.”

“Historically, he said asset bubbles had ‘largely arisen during periods of ultra-accommodative monetary policy, combined with sustained periods of low interest rates and an ever-increasing supply of money - sound familiar?’”

The Mercury News. “After a red-hot start to the year, the Bay Area’s housing market is heading toward a fall and winter hibernation that should be easier for buyers battered by frenzied competition for a scant supply of homes for sale. Some real estate agents in the East Bay said they were beginning to see price reductions as sellers realize they have missed the big buying season. Laura Wucher with Better Homes and Gardens Real Estate, said she’s seeing more homes being listed just as the market is slowing. ‘A lot of people have listed their houses too late, and it’s taking a lot longer to get offers,’ she said.”

“Jennifer Branchini, president of the Bay East Association of Realtors, said she’s seeing more houses with ‘price reduced’ on them. ‘When I see seven to 10 price reductions in a day, I think it’s a sign the market’s calming down’ in the East Bay’s Tri-Valley area, Branchini said.”

The Los Angeles Times. “The latest sign that buyers are gaining leverage in Southern California’s housing market: Price cuts are back. The number of homes with reduced asking prices has risen sharply in recent months, a reversal from last year’s sellers’ market, when list prices seemed more like a floor than a ceiling. These trends have been building all year. But home sellers — often the last to see market shifts — are finally getting the message, said Paul Reid, a Redfin agent in Temecula.”

“‘A lot of what we’ve seen over the last six or eight weeks is people lowering their prices to get buyers in the door,’ Reid said.”

“David Silva, a veteran agent with Ricci Realty in Orange, has watched as the number of homes for sale in that Orange County town ballooned from about 100 in early 2013 to about 270 today. With more competition on the market, some of his clients have had to cut prices to drive up interest. He’s heard stories from colleagues about would-be buyers walking away from contracts when they found a better house for less money.”

“Some sellers — those with less motivation to move now — are pulling their homes off the market, said Steve Shrager, an agent with Coldwell Banker in Studio City. Sellers who can’t get the price they want are choosing to rent their home, or try to sell again in another year. ‘They feel the price can’t go anywhere but up,’ Shrager said.”

“After two years of bidding wars and big price run-ups, some sellers have yet to come to terms with reality, said Steven Thomas, chief economist at Reports on Housing, which tracks the Southern California market. After a decade of boom, bust and boom again, many aren’t sure how to react to a normal market. ‘People are not used to this,’ he said. ‘That’s why you get some panic. Eventually these houses will sell. You just have to be patient.’”