October 25, 2014

For Every Reckless Borrower There Is A Greedy Investor

It’s Friday desk clearing time for this blogger. “Markets that were hottest during the recovery saw the largest slowdown in home-value growth in the third quarter, Zillow said. The Bay Area definitely makes that list. The news gets even worse for Bay Area homeowners. Zillow expects year-ahead home-value appreciation in the Bay Area to grow just 2.9 percent, not even meeting the company’s national projection of 3 percent. Third-quarter inventory of Bay Area homes on the market jumped 20.2 percent from a year ago. Homeowners are likely to feel the chill as more people decide to sell before the slowdown turns into price cuts. It’s too late, Zillow says, noting that 37 percent of listings on its site nationally had at least one price cut in the past month.”

“In good news for housing, Fannie Mae and Freddie Mac reached an agreement with mortgage lenders to make it harder for the mortgage giants to force the banks to buy back loans that go bad. San Francisco’s top banker touted the importance of home loans. ‘Every home that gets sold — that satisfies a customer’s need — not only fulfills a dream, but a dollar spent on a home multiplies through the economy like no other thing we do,’ said Wells Fargo CEO John Stumpf . ‘A loan to a homeowner is magical in that respect.’”

“Home prices softened in September across Palm Beach and Broward counties. Douglas Rill, broker at Century 21 America’s Choice in West Palm Beach, said some sellers still think the market is surging and price their homes accordingly. ‘You have a certain percentage of sellers pushing the envelope to above market numbers,’ Rill said. ‘Those homes are taking longer to sell.’ Marisa DiLenge, a Broward agent for Better Homes & Gardens, said she has a three-bedroom Plantation listing that shows well because it’s professionally staged, but a buyer has yet to step forward. On Monday, the seller cut the price a second time, to $282,499. ‘When I put my listings on the MLS, I usually have them under contract within a week or so,’ DiLenge said. ‘I’m not seeing that the last four or five weeks.’”

“While prices have slowed this year after a stellar 2013, industry observers insist this isn’t the start of a new meltdown. ‘I have no fear that there will be another bubble,’ said Ken Johnson, a real estate economist at Florida Atlantic University. ‘I don’t see any irritational exuberance in the housing market right now. We might go flat, we might go down a little bit, then back up. But we’re not going to lose 50 percent of value. That’s just not going to happen.’”

“The NAR’s chief economist, Lawrence Yun, said sentiment among real estate agents was at its lowest level of the year, suggesting that sales may be weaker going forward. ‘It’s turned into what I think is really a classic buyers’ market,’ said Sherry Spinelli, a real estate agent with Long and Foster in Northern Virginia. ‘More days on market, prices are coming down, the offers are even lower and there are just a lot of houses out there, so it’s a challenge for sellers. I think you have to lower the price in order to sell it.’”

“‘Buyers don’t have the same sense of urgency as they did before. They can be a little bit more discerning,’ said Greg Bender, a Los Angeles-area Realtor with Berkshire Hathaway HomeServices. Bender is seeing homes sit on the market far longer than they did just six months ago. It is no longer a seller’s market. In Phoenix the price deflation is even more dramatic. Last year, prices were up 18 percent annually at this time. Today they are up barely 1 percent. ‘Most of the median-price increase over the last 12 months is because a greater percentage of the homes being sold are in the luxury market, not because home values overall are increasing,’ Arizona State University’s Mike Orr wrote in a recent report.”

“Prices soared again between 2011 and 2013 due to the Federal Reserve’s intervention. Some argue that as that demand goes away, housing will pay a price again. ‘If stimulus ‘hangovers’ are proportional to the amount of stimulus that preceded them, then this one could be a doozy,’ wrote Mark Hanson, a housing analyst in California.”

“There are more homes for sale in Moose Jaw than there are buyers which has led to a three per cent decrease in housing prices. Moose Jaw isn’t the only city experiencing a growing home inventory during this year. According to the Royal LePage housing price survey, in Regina, the average prices for single family homes have dropped seven to eight per cent during the past year. ‘There’s a lot more product on the market now than normal,’ said Jim Millar, executive officer with the Moose Jaw Real Estate Board, who says this is why housing prices have dropped.”

“Dubai house prices and rents weakened in the third quarter, according to a report from Asteco. According to rival broker Care, 19,000 more new homes were expected to be handed over in Dubai next year, hampering landlords’ efforts to further raise rents and prices. ‘For the first time since 2012 we have seen both residential rental rates and sales prices decline as a result of a natural adjustment to continuing new supply entering the market,’ said John Stevens, the Asteco managing director. ‘We believe that sales prices may soften further with more new supply on the way.’”

“It’s more bust than boom for the Gladstone property market, with a property analyst saying it is the same old story for the central Queensland region. The figures represent a 13.1% and 24.9% decrease in house and unit prices, respectively, compared with the corresponding period last year. Senior economist Dr Andrew Wilson said the economic influences would continue to affect the Gladstone market for years to come. ‘Same old, same old for Gladstone … when is it going to end?’ he said. ‘There was a lot of investment money pumped into the market three years ago with the mining boom. But unfortunately mining is no longer booming.’”

“The effects of the slowdown are evident throughout China. Factories are churning out steel, concrete and other commodities well beyond local demand and are kept alive by local governments arranging emergency loans. Debt levels are rising at a clip that rivals the US, Japan and South Korea before they tumbled into recession. About 20 per cent of apartments are vacant, according to a Goldman Sachs report, and Chinese cities are chockablock with empty apartment towers. Much of Chinese consumer wealth is tied up in housing.”

“Zhang Shuangyang, who runs a cake shop and two online sock stores, said she has delayed major purchases and is increasingly worried about the future. ‘We can feel that the economy is getting worse.’”

“Unfortunately for China, Ernest Hemingway might see his words about bankruptcy ring true again. In ‘The Sun Also Rises,’ someone asks: ‘How did you go bankrupt?’ To which the other person replies: ‘Two ways. Gradually, then suddenly.’”

“For a decade, until mid-2012, Josef Ackermann was the CEO at Deutsche Bank. It was a position that earned him the nickname ’shadow chancellor’ of Germany and allowed him to play a decisive role during the European banking crisis and then in the eurozone’s debt crisis. Q: ‘The Greek state had been borrowing recklessly in the 30 years before the crisis broke, and especially after 2000. But wherever there is a reckless borrower there must be also an equally reckless creditor. Shouldn’t both sides in a loan agreement – the creditor and the borrower – share responsibility for it? Shouldn’t banks pay the price for reckless lending?’”

“A: ‘You’re right: for every reckless borrower there is a stupid or greedy investor. To this day I keep wondering how investors came to collectively bid down Greek bond prices to a few basis-points over German Bunds to end up owning 350 billion euros of Greek debt? The search for yield and wrong regulatory incentives, such as the zero risk weighting, can explain only part of it.’”

“The Federal Housing Finance Agency this week polished off a new set of guidelines that will allow government backing of loans that it had shunned since the mortgage crisis. And in a surprise move, the guidelines include a provision to consider some mortgages without down payments. There are instances where loans should be available to borrowers without the means to place a down payment. It’s just that I can’t think of any.”

“It’s important to recognize that borrowers can no longer depend on banks and regulators to measure creditworthiness. A series of government programs, low interest rates and tax breaks along with loosening standards at banks eroded this institutional test. So today it’s incumbent on the borrower to ask himself if he can afford the American Dream.”

“For many, the answer is probably ‘no.’ The U.S. median household income is $51,900. The median home price is $188,000. So, yes, it’s possible. But the current home-buying market is full of cash buyers and speculators, many of them hedge funds. That means in many markets, there’s competition for properties from buyers who will outgun regular folks.”

“The FHFA will, in the end, encourage more lending. And this will translate into more credit for people who have been denied. But that policy isn’t the one that matters. It’s my policy, your policy, based on what we truly can afford that does.”

Bits Bucket for October 25, 2014

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October 24, 2014

Bits Bucket for October 24, 2014

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October 23, 2014

The Essence Of The Housing Industrial Complex

Some housing bubble news from Wall Street and Washington. The Washington Post. “The agency that oversees Fannie Mae and Freddie Mac said this week that it might soon lower the downpayment requirements from five percent to three percent for loans backed by the two firms. The Federal Housing Administration, a popular source of low downpayment loans, may soon consider lowering the fees it charges borrowers on the loans it insures. The nation’s top housing official, Housing and Urban Development Secretary Julian Castro, recently said it’s time to ‘remove the stigma’ tied to promoting homeownership. Castro said boosting the homeownership rate is at the top of his agenda.”

“The nation’s home ownership rate jumped, from 43.6 percent in 1940 to 64 percent in 1980, where it stayed for many years. The norm for downpayments settled at about 20 percent around that time, but the low-downpayment loans continued to be available for borrowers who met relatively strict criteria. That went by the wayside as home prices soared at the start of the past decade.”

The Associated Press. “Experts say it’s hard to predict whether the regulators’ move will actually boost mortgage lending and the housing market. Anthony Sanders, a real estate finance professor at George Mason University, also suggested that it could re-open the door to risky lending. ‘The problem facing the housing and mortgage markets is too few borrowers with sufficient income to pass debt-to-income rules,’ Sanders said. ‘Lowering the down payment requirement misses the point. So now we are putting poorer households in low-down payment loans - again?’”

“The decision of the regulators to drop the 20 percent down payment requirement for banks to escape ’skin in the game’ for mortgage securities was a big win for finance industry lobbyists and advocates for affordable housing, noted Cornelius Hurley, a former counsel to the Federal Reserve who heads Boston University’s Center for Finance, Law and Policy. The regulators’ work on the rules ‘attracted the essence of the housing industrial complex,’ Hurley said. ‘They all came out of the woodwork.’”

The Atlantic. “‘What I’m paying for my mortgage is less than what I was paying in rent,’ says Yasmine Parrish, a 28-year-old marketing professional who recently purchased a home in Los Angeles. Parrish’s mortgage broker helped her find a program for first-time buyers that allowed her to put down 5 percent instead of the standard 20 percent.”

“Why aren’t all young would-be homebuyers just taking advantage of the low down-payment options offered by these plans to get into the market before prices rise further? Not everyone has access to the programs that can shrink a down payment, and even for those who do, such help may not be enough. ‘Typically the down payment is the biggest hurdle for a homebuyer’ says Ken Fears, director of regional economics and housing finance at the National Association of Realtors. Some programs, like Fannie Mae’s Community Home Buyer’s, require a 5 percent down payment, a sum that still makes saving a difficult proposition for many young people, particularly those in areas with quickly climbing home prices, such as San Francisco and San Diego. States like North Carolina and New Hampshire, have particularly well-regarded programs that allow for down payments of about 3 percent.”

“In competitive areas, where homes are scarce and multiple bids are common, an affordably low down payment can be limiting. ‘You’re not very competitive. If you’re going into a house with multiple offers and they see 3 percent down versus 10 or 20 percent down, they’re not going to go with your offer,’ says Anne Simpson, a 27-year-old teacher and prospective homebuyer in Washington D.C.”

Mortgage News Daily. “The latest Fannie Mae Lender Sentiment Survey discusses compliance costs and how much it costs. Most lenders (72%) reported that recent regulations have had a ’significant’ effect on their business. Critics ask what the Agencies are doing about that. Mid-sized lenders reported a 50% increase in compliance spending. Note that most lenders are worried more about compliance risk than volume decrease risk.”

“Let me know when all of this starts reminding folks of 2004, or even 2001 when Cuomo encouraged increasing home ownership. Of course it will take a while for aggregators to go along for the ride, although many depository banks have been at 97% for portfolio products for quite some time. And the big guys have already removed dozens of credit overlays. And why not - Fannie and Freddie have gained immense market share with small and mid-size lenders already, and the Wells and Chases of the world have to compete. LOs, when thinking about making a move, will tend toward the companies that will close these loans. So good mortgage companies lose originators - a wonderful spiral. On the other side of the fence are lenders grappling with buybacks from the Agencies - they will be much less inclined to increase LTVs or accept lower credit scores based on a ‘flawed GSE academic theory of increasing home ownership rates’ (as one CEO who wrote to me observed). And lenders just want buyback criteria better spelled out!”

“Congress, of course, has been unable to do anything by itself in terms of GSE reform. So the MBA, FHFA, and others are taking matters into their own hands. Eliminating F&F without an effective replacement would devastate the market, so let’s change them to suit the marketplace.”

“Turning to lenders…On Q Financial, Inc., is introducing non-QM loan programs. ‘On Q’s new non-QM loan products include solutions for self-employed or recently retired borrowers, individuals with a short credit history or flawed credit from a past short sale or foreclosure. On Q will also be offering debt-to-income ratios up to 50% on certain products and introducing a 40 year amortization Jumbo loan with an interest-only option in the weeks to come. In addition, On Q, a FNMA, FHMC and GNMA approved seller/servicer is also relaxing its underwriting credit overlays.’”

“Impac Mortgage Corp. Correspondent has an innovative bank statement program product which serves the self-employed. Unique features for borrowers include: Up to 50% DTI, down to 680 FICO, 5/1, 7/1, 10/1 ARMs, LTVs up to 80%, Cash out up to $350,000 on primary home, Loan amounts up to $2M. LDWholesale announced a New Jumbo Product. Loan amounts up to $3,000,000, 2-4 unit loans available, cash out refi’s on second homes and investment property permitted to $1,000,000 for purchase and rate term refi’s.”

From Highlands Today. “More than 60 percent of the 5,403 homes in the past three years have sold for cash, said Steve Fruit, a broker associate with RE/MAX Realty Plus II in Lake Placid. A good deal of the cash comes from Northern retirees, and Highlands County prices are more affordable than the homes they buyers sold in coastal Florida cities or large metro areas, Fruit said.”

“‘I think what we’re seeing is a return to a healthy market,’ said Chip Boring, RE/MAX broker in Sebring. However, he’s seeing a few unhealthy signs. ‘And it’s scaring the hell out of me. Online, they’re starting to offer no-verification loans,’ Boring said. Not requiring borrowers to prove their income was one of the causes of the real estate bust.”

Bits Bucket for October 23, 2014

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October 22, 2014

Bits Bucket for October 22, 2014

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October 21, 2014

Until Buyers Like The Price, It’s Going To Sit

The Palm Beach Daily News reports from Florida. “The number of demolition permits and new-home building permits issued by the town has soared over the past couple of years — and most of those are for projects on the North End. The frenzy has left many would-be home buyers and spec developers struggling to find suitable properties. ‘I note that (tear-down houses in) the current spec inventory — few that there are — are priced at or above $1,200 per square foot. Some of the new ones already announced by other brokers are well above $ 1,300 per square foot,’ said the Corcoran Group’s Bill Yahn. ‘To reward the developer for his effort and risk, a finished home on a $3 million site would likely be priced approaching $7 million. New homes priced in the $6 millions may become a thing of the past after 2015.’”

The Pioneer Press in Minnesota. “Home builders, consider yourself warned. A report commissioned by the Metropolitan Council says there are enough single-family homes in the metro area right now to last until 2040. The report says that aging baby boomers, fewer households with children, and changing tastes will flip the housing market around: More people will live in apartments and townhomes in transit-friendly developments. ‘I am giving communities the heads-up,’ said the author of the report, Arthur C. Nelson, professor of urban planning and real estate development at the University of Arizona. ‘I am telling them not to plan for any more of these.’”

“But they certainly are. Developers in Dakota, Washington and suburban Ramsey counties are building — or planning — thousands of the homes that Nelson says will become obsolete. The report is controversial because, if true, it means a glut of these homes will force down their value. John Lockner sells homes in Woodbury for RE/MAX Results — and sales are booming. ‘As long as there is market demand, the single-family home is what builders will be wedded to,’ said Lockner, a former president of the St. Paul Area Association of Realtors.”

The Arizona Republic. “Metro Phoenix’s housing market continues to slow. Sales and prices dipped slightly in September, according to the Arizona Regional Multiple Listing Service’s latest Stat report. What’s particularly interesting is the median price of houses listed for sale during September was $224,800 compared with a median price of $215,000 in August. Could it be that prices will tick up a bit in November?”

“‘There were no surprises in September,’ said real-estate analyst Tom Ruff of the Information Market, a division of ARMLS. ‘Home prices are stable, and anticipated declines in October can be attributed to modest downward pricing pressure as well as seasonal patterns.’”

The Deseret News in Utah. “While the overall Utah economy has bounced back admirably since the depths of the Great Recession, the local housing market has yet to rebound to prerecession levels, a new study published by the University of Utah’s Bureau of Economic and Business Research showed. The report found that the Beehive State experienced the slowest housing recovery of any post-World War II cycle, with residential construction having only recovered 55 percent.”

“‘This was unlike any other cycle,’ said Jim Wood, executive director of the bureau. ‘In no other housing cycle have we had housing prices decline. ‘We’ve had one or two years separated with years of growth, but we haven’t had a declining year since the 1960s. In terms of new residential construction, the prerecession peak was clearly too high, but the subdued demand and slow recovery is worrisome. Thirty-three of 50 states are down in single-family home (construction) this year.’”

Steamboat Pilot in Colorado. “A year ago, the Steamboat Pilot & Today’s classifieds section listed a one-bedroom apartment available for $700 per month, a two-bedroom for $1,150 and a three-bedroom, two-bath home for $1,550. The prices weren’t rare finds but representative of 40 other listings, including those at Mountain Village and large complexes across town. The rental landscape today is far bleaker for the prospective tenant, and last Sunday only six properties were listed for rent in Steamboat — including one-bedrooms for $800 and $1,200 apiece, two-bedrooms for $1,400 and $1,600 and high-end three- and four-bedrooms for $3,000 and $2,150 each.”

“Steamboat Springs City Council member and economist Scott Ford said while he didn’t disagree with the idea that the rental market is tight, the survey results may only represent a small sample of rentals. ‘This could be the tyranny of small numbers,’ Ford said.”

The Centreville Independent in Virginia. “Last month I ended my article stating that inventory is up and it is a great time to buy. I’m going to continue with that theme for October. The number of homes on the market in Centreville, Clifton and west Fairfax (22033) has increased across the board since April of this year. I have a chart on my website that illustrates these data for the number of Active Listings quite well. It is dramatic with the uptick in inventory that began with the entry of the Spring market and continued increase as more people placed their properties for sell and the demand for these properties decreased.”

“With more homes on the market and Sellers waiting longer to have their properties sell, right now is a fantastic time for a Buyer to get into the market. Anecdotally, I had the honor of taking one of my military relocation clients out in the Springfield/Kingstowne area this weekend and we had over 60 properties to choose from in their price range. It is a nice change to not be in a multiple offer situation with a buyer.”

The Greenwich Time in Connecticut. “After a strong showing in 2013, the real estate market in Greenwich’s backcountry has hit a slump this year, as houses linger on the selling block for longer periods of time and the number of sales declines. Backcountry homes on the market at the end of the third quarter were active for an average of 295 days, up 40.5 percent from 2013, when the average time was 210 days, according to a third-quarter report released by Houlihan Lawrence’s Greenwich office.”

“The glut of homes is likely due to the strength of the backcountry market in 2013, said David Haffenreffer, manager of Houlihan Lawrence’s Greenwich brokerage. ‘Any time you have a strong year in sales — and you saw that with the number of units that sold last year — you’ll see new inventory come to market, because sellers think it’s a good market for their home,’ Haffenreffer said.”

“Julianne Ward, a real estate agent with Berkshire Hathaway HomeServices, said she thinks buyers are willing to take their time, waiting for price cuts before diving in. ‘If you really want to sell your house, you can in any market and at any time. You just have to be flexible with your buyers, because the buyers are the ones who are making the market, and if they don’t like it at a particular price, they’re not going to buy it. And until they like it, it’s going to sit there,’ Ward said. ‘It used to be there was an overabundance of buyers and not enough houses, and now it’s the opposite,’ she said.”

Bits Bucket for October 21, 2014

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October 20, 2014

Confidence In The Property Market Is Collapsing

The Globe and Mail reports from Canada. “An analysis of local incomes released last week by and urban planner Andrew Yan, showed that 25- to 55-year-olds with BAs in Vancouver make about $41,000 a year, $10,000 a year less than the median for Canada and $20,000 less than in top-paying Ottawa. The spread was even worse for people with master’s degrees– as though employers realize people are so desperate to be in Vancouver that they can pay them less. ‘The relationship between incomes and prices of homes has totally broken down here,’ said Andrew Ramlo, a director at Urban Futures.”

“Eesmyal Santos-Brault, a green-building consultant, bought his first condo 10 years ago when he was 28 and working at a non-profit for near minimum wage. He didn’t think he’d even qualify for a mortgage, but his mother, a real estate agent, offered to lend him the $7,000 he needed for the minimum down payment. To his surprise, he found the bank would indeed lend him money. ‘I keep telling all my artsy, environmental friends that they should do this,’ says Mr. Santos-Brault, who has since bought a townhouse in Strathcona while renting out the condo. And he worries that people are handicapped by the attitudes they’ve inherited from their families or social circle.”

“‘They don’t know anyone who owns, they don’t understand money, they just don’t think it’s possible. I keep telling them: ‘It’s a conspiracy to keep you as renters. Then you can pay someone else’s mortgage,’ he said.”

Dow Jones Business News. “Hong Kong has one of the world’s biggest wealth gaps and its highest real-estate prices. Years of stagnant wage growth have created deep frustration among students and the middle class. One target of their frustration is the city’s tycoons, a handful of families and colonial era conglomerates that control most of the real estate. Even as thousands of protesters took to the streets, the property arm of Li Ka-shing, who Forbes says is worth about $31.4 billion, was unveiling apartments that totaled 165 square-feet. The apartments, about the size of a one-car garage, haven’t been priced yet, but slightly larger units have recently sold in the city for between HK$1.77 million and HK$3.6 million ($228,000 and $464,000 U.S.).”

“Ka-shing said in a statement that he understood the ‘passion’ of Hong Kong students but urged them to go home. The tycoons’ words don’t resonate with young protesters such as Arnold Chung, 19, who expects to live with his parents for years. Average starting salaries for university graduates have risen 1% annually over the past 17 years, to 198,000 Hong Kong dollars (U.S. $25,522) a year, lagging behind inflation and lagging far behind the rise in housing prices. ‘The young generation doesn’t listen to Li Ka-shing,’ said Mr. Chung, a student. ‘We expect rich people to say this (protest) will disturb the economy.’”

The South China. “The crisis facing Hong Kong-listed Agile Property Holdings after its chairman was put under house arrest has aroused investor concerns about how widespread President Xi Jinping’s anti-graft campaign will be in the struggling property industry. Qi Jingmei, a senior researcher at the State Information Centre, a government think tank in Beijing, told the South China Morning Post that corrupt government officials should be worried, but not competitive developers. ‘It will not harm the development of the whole real estate industry,’ she said. ‘But it’s not bad to wash out some weak developers through such a campaign.’”

“A housing glut continued to plague the industry and developers needed to strengthen their corporate management during the downturn, Qi added.”

“Li Junheng, the head of research at JL Warren Capital, a New York-based independent equity research firm with a China focus, said: ‘Widespread corruption in itself is not new news, but fraud investigations and consequential funding cutoffs are material headwinds for developers.’”

The West Australian. “Confidence in the Perth property market is collapsing, a new national survey has found. It is even worse for landlords, with rents expected to fall over the next two years. Confidence in the Perth property market is now at its lowest level on record with most of the fall taking place over the past six months. NAB chief economist Alan Oster said the survey had found strong activity by foreign buyers in all States. In Victoria they accounted for almost one in every four new property sales.”

“Another issue uncovered by the survey was housing affordability concerns linked to growing concern among homeowners about the state of the jobs market. ‘This was not surprising given recent strong house price growth and rising trend unemployment,’ Mr Oster said.”

The Advisor in Australia. “In recent weeks debate has raged on the best way to cool the market; one school of thought being meddling with lending rules, the other – espoused by building and real estate associations – to simply increase the supply of homes. Aussie Cranbourne franchisee Michael Spalding has warned that new homebuilding may not be music to brokers’ ears. ‘I operate in an area which is rife with new home construction, and I haven’t noticed a boost in business,’ he said. ‘There seems to be a lot of building going on, but I have no idea where people are getting the money from to buy.’”

The Irish Independent. “Three weeks ago, The Sunday Independent conducted a ‘blind shopper’ exercise which revealed that some banks were offering up to five times people’s salaries and asking for deposits of less than 10pc, desperate to start lending again. The Central Bank reacted. In fact it seems to have overreacted, bringing in strict new rules that are more restrictive than almost anywhere else in the world. ‘For someone on an average salary to save 20pc of the cost of the average starter home, especially if in the meantime they are renting, will take three years, five years, longer,’ says Keith Lowe, CEO of one of the country’s biggest estate agents. ‘These proposals mean a deposit of €50,000 on a property that costs just €250,000, which in Dublin will barely buy you a two-bed apartment. That takes years and years to save.’”

“A rake of international private equity houses and investors poured into the Irish residential property market in the wake of the recession. Major investment firms such as Lone Star and Kennedy Wilson own thousands of Irish homes. They now face a vastly-changed market - and they are spooked, according to Lowe. ‘I had one of the biggest on the phone to me yesterday, asking me should he be concerned,’ said Lowe. ‘These guys are worried, particularly by the pace at which this is all happening.’”

Bits Bucket for October 20, 2014

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October 19, 2014

A Point We Haven’t Started From Before

It’s Friday desk clearing time for this blogger. “Sure, home prices are rising across Greater Boston, but when it comes to really big gains, some suburbs and city neighborhoods are in a league of their own. To the north of Boston, Middleton is hard to beat, with prices up nearly 50 percent, hovering around $637,000, the Warren Group finds. Still, what goes up will come down at some point. There are signs sellers may be starting to overprice their homes, notes Matt Hanson, a Redfin agent who works with buyers in Woburn and other north of Boston areas. ‘The listing agents are pricing the properties higher,’ Hanson said. ‘It has gotten to the point where it is all the market can bear.’”

“A new forecast predicts that Southwest Florida’s single-family home prices will continue to inflate over the next three years into bubble territory. Local Market Monito’s president Ingo Winzer called the Naples-Marco Island metro area’s sizzling price increases justified because prices had fallen so far from their 2006 peaks, he now characterizes them as ‘worrisome.’ ‘It’s starting to look like a new bubble is building,’ he said. ‘The market is no longer underpriced.’”

“Seeing a growing disconnect between what they want and what they can afford, many buyers are starting to sit on the sidelines, said Naples real estate agent Dona Schrim. ‘I think the market is coming to a point where prices may not be able to be sustained,’ she said.”

“Homeowners across Southern California are getting hit with a fresh wave of foreclosures. KNX 1070’s Ed Mertz reports industry analysts say there’s been a 30 percent jump in foreclosures from August to September in Los Angeles, Orange, Riverside, San Bernardino and Ventura counties. Tens of thousands of properties across the Southland that were purchased before 2008 were delayed being foreclosed on due to the California Homeowners Bill of Rights, which was enacted in Jan. 2013, said RealtyTrac VP Darren Bloomquist.

“‘We’re looking at three to four thousand a month,’ he said. ‘That could take close to a year to clear that backlog.’”

“Colorado was one of several states where homes scheduled for foreclosure auction spiked in the third quarter of 2014, with the 2,919 homes set for auction, up 50 percent from 1,941 in the second quarter, and up 48 percent from 1,968 in the third quarter of 2013, RealtyTrac said. Scheduled foreclosure auctions also spiked year-over-year in North Carolina and Oregon, both up 85 percent; New Jersey, up 66 percent; Oklahoma, up 58 percent; New York, up 57 percent; and Connecticut up 51 percent.”

“Blomquist said the increased foreclosure activity ‘is not the result of underlying economic or housing market problems. The bad news is that Colorado’s housing market may have looked better than it actually was over the past 12 months because of these artificially held back foreclosure actions.’”

“One out of every 292 Atlantic County homes was in the foreclosure process in August, making the area’s foreclosure rate second-worst in the nation, according to RealtyTrac. ‘Our data shows the average foreclosure process in New Jersey is over 1,000 days, so I would say it’s probably too early (to reflect casino closings),’ said Daren Blomquist.”

“With a glut of foreclosed properties hitting the market, the trend could have dire ramifications for local real estate values, said Carlo Losco, president of Balsley Losco Real Estate in Northfield. ‘I think people need to pay attention and make some realistic choices,’ Losco said. ‘If they wait, all the figures could line up against them and decrease value. Or are they going to do the best they can now before all these issues come into play?’”

“Iskandar Malaysia (IM) has come under heavy fire in recent weeks from analysts, valuers and the media for the apparent free fall of the property market here. They claim developers who were eager to make their presence felt in IM early this year are now beating a retreat because prices have slumped to an untenable level. This scary prognosis is naturally turning away prospective investors.”

“Even giant China players with enormous capital at their disposal have not been spared, with reports suggesting that they may also be in trouble as they had been ‘over confident’ about prospects in IM and are now reeling with disbelief as they had become ‘over exposed.’”

“China does not have large independent labor unions, yet the world’s second-largest economy has witnessed an increasing number of worker strikes over the past year. According to an Oct. 14 report from the Hong Kong-based watchdog group China Labour Bulletin (CLB), the number of strikes and worker protests in the third quarter of 2014 was double the number of labor actions recorded in the same period last year.”

“Notable is the uptick in strikes led by construction workers, from just four demonstrations last summer to 55 this summer. Amid a slumping housing market, new home prices in August tumbled in 68 of 70 Chinese cities monitored by the government. As the CLB report explains, ‘Developers are saddled with declining sales, weaker credit availability, and continued pressure from local governments to buy land. In these situations, it is the construction workers who are always the last to be paid.’”

“Taiwan’s Ministry of Finance has asked eight state-owned banks to provide details on outstanding loans to Chinese companies as fears grow of defaults involving privately owned firms on the mainland. Taiwan’s banks are among Asia’s largest lenders of syndicated loans and have lent heavily to private and state-owned Chinese companies in recent years. The MoF move comes on the heels of similar action of the Hong Kong Monetary Authority, which stepped up its scrutiny of banks under its jurisdiction this year after their exposure to Chinese onshore companies soared in 2013.”

“The ministry also sought information on the terms and conditions of security and repayments on the loans, bankers said. ‘We are afraid there will be a ripple effect of loan defaults for Chinese companies. We are even cautious of lending to Chinese state-owned companies,’ said a banker at a state-owned Taiwanese bank.”

“Stakeholders in the housing sector opine that it is not wise for estate developers to construct houses and lock them up until buyers offer them the exorbitant amount of money they require for rents or sales of such houses. They argue that if the owners of such houses were a bit flexible with their terms, the high cost of rent would have been reduced in Abuja. Unarguably, many of the private housing estates in the FCT have remained unoccupied years after they have been completed by their owners.”

“‘What private estate developers are doing is to create a class problem in the FCT where only the wealthy can own and live in descent homes. I foresee a crash in the estate market, especially in the FCT, because the income of most Nigerians is not enough to enable them to purchase these houses,’ said Mr Emma Akeem, a resident of the FCT.”

“The global financial markets are dangerously stretched and may unwind with shock force as liquidity dries up, the Bank of International Settlements has warned. Guy Debelle, head of the BIS’s market committee, said investors have become far too complacent, wrongly believing that central banks can protect them, many staking bets that are bound to ‘blow up’ as the first sign of stress.”

“In a speech in Sydney, Mr Debelle said: ‘The sell-off, particularly in fixed income, could be relatively violent when it comes. There are a number of investors buying assets on the presumption of a level of liquidity which is not there. This is not evident when positions are being put on, but will become readily apparent when investors attempt to exit their positions. The exits tend to get jammed unexpectedly and rapidly.’”

“Mr Debelle, who is also chief of financial markets at Australia’s Reserve Bank, said any sell-off could be amplified because nominal interest rates are already zero across most of the industrial world. ‘That is a point we haven’t started from before. There are undoubtedly positions out there which are dependent on (close to) zero funding costs. When funding costs are no longer close to zero, these positions will blow up,’ he said.”

Bits Bucket for October 19, 2014

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