December 19, 2014

For Real Estate, The Winter Is Coming

It’s Friday desk clearing time for this blogger. “Orlando is primed to see an exodus of investors who bought thousands of houses in the area during the downturn, according to RealtyTrac. Winter Park real-estate agent David Welch has helped cash investors purchase Orlando-area houses in recent years. He said that so far, few have started to sell off their assets, but that prospect looms large. ‘It was great having them come in and grab these things, but at some point they’re going to want to divest themselves,’ Welch said. The investors aren’t likely to collaborate on how they sell off their properties, so it’s uncertain how the market will be affected, Welch added.”

“Wielding the biggest clout among the investor-owners are four institutional hedge funds: Colony American Homes, Blackstone, American Homes 4 Rent and Progress Residential. Holding more than 700 houses in the metro area, those companies have a strong stake in Orlando’s continued housing recovery. ‘I think it’s going to have a chilling effect on any housing market,’ said Daren Blomquist, vice president of RealtyTrac. ‘They are purchasing fewer properties. Demand is weakening, and supply will increase. In the best case, it will be more of a balanced market, but it could turn quickly to a buyers’ market.’”

“A Scottsdale investor has bought 106 metro Phoenix rental houses for $16.8 million, or about $158,255 a home. Scottsdale-based Pacific Rim Properties purchased the houses from a Denver group called Wymont. The deal is one of the biggest sales of a rental-home portfolio since the investor home-buying spree of 2010-12. Of the 106 houses sold, 101 currently are leased. Most of the homes were built in 2004 and have four bedrooms. The purchase price-per-house is about $50,000 less than metro Phoenix’s current median home price.”

“Investing in Valley houses and other markets hit hardest by the housing crash was a big Wall Street play during the downturn. Real estate market watchers are tracking what investors do with their many Valley rentals houses because if too many try to sell at the same time, it could push down home prices again.”

“Kevin Maloney has been a prominent real estate developer in New York for decades. Maloney himself is surprisingly pessimistic about the luxury condo market — at least for someone who is investing millions in it. ‘Citywide, when you get into apartments above $25 million, the air gets very thin very quickly,’ he said. ‘At any one time there are maybe a half dozen people in the city looking for a $50 million plus apartment, and there’s now probably 60-70 of those apartments on the market. There’s going to be some downward pressure at the very high end.’”

“Extell’s tower One57 has only sold one unit in the third quarter — a pace at which it would take the building six years to sell out. Sales at Harry Macklowe’s 432 Park Avenue have reportedly also slowed. With several more condo towers set to hit the market in the coming years, some observers already predict a crisis. ‘If real estate was a publicly traded company and I could short its stock, I would very happily short 57th Street,’ Stonehenge Partners’ CEO Ofer Yardeni said recently. ‘The market there has stopped. It hasn’t just declined five percent or 10 percent. It’s just stopped.’”

“Local and national economists have given upbeat projections about the economy for next year, but with housing activity down, ‘it is hard to feel warm and fuzzy about the 2015 housing market in Las Vegas,’ Home Builders Research President Dennis Smith said in the report. Sales have plunged this year as would-be buyers, saddled with credit woes, flat wages and sticker shock, can’t pay developers’ high listing prices. Moreover, despite ‘what some press releases suggest,’ the resale market has also been slumping, Smith wrote.”

“Real estate agents are describing Las Vegas as a buyer’s market, and listings of previously owned homes no longer get multiple offers or bidding wars, according to Smith. Sales incentives are common, as buyers’ agents get follow-up calls from sellers’ agents asking what the sellers can do to help get acceptable offers. The resale business is slowing as investors, faced with fewer bargains, pull back from Las Vegas.”

“Saskatchewan will see a slight decline in home sales in 2015, thanks to a large supply of listings on the resale market and slowing demand, according to the latest forecast from the Canadian Real Estate Association (CREA). Consumer confidence and job growth in the Prairies may come under downward pressure depending on how far oil and non-energy commodity prices decline and on how long they remain low. ‘The effect of lower oil prices on Canada’s housing markets is something of a wild card at the moment,’ said Gregory Klump, CREA’s chief economist.”

“Some UAE developers are taking a closer look at their off-plan sales to see the level of their exposures to overseas buyers, and especially to those from Russia or one of the CIS states. For instance, with their currency in a free fall against the dollar, Russian buyers with exposure in Dubai’s real estate will have to use up more of their roubles to stick to their dollar/dirham commitments. In summer, just when the Russia-Ukraine strife was heating up, there was reportedly a Ukranian buyer who decided to forego the down payment he had made on a premium off-plan purchase made in Dubai.”

“‘The currency volatility will mean less reliance on overseas buyers, especially from those markets where they are at a disadvantage because of a strong dollar,’ said Anand Lakhiani, Director at Indigo Properties.”

“Wealthy Russian homebuyers are vanishing from London after driving a wave of foreign investment that lifted property prices to records. Only the oligarchs persist. The number of Russians registered through Christie’s International Real Estate to buy homes in the city dropped by 70 percent in a year, said Giles Hannah, the broker’s senior VP. Russian buyers have been ‘eliminated virtually overnight,’ said Andrew Langton, chairman of luxury-property broker Aylesford International Estate Agents. ‘The sanctions are really beginning to bite on expensive property in London, on top of all of the tax which the government introduced in the autumn budget. It’s killed the golden goose.’”

“Slumping prices of the nation’s key exports of coal and iron ore have hit government revenues, with Australian Treasurer Joe Hockey announcing that the federal budget would not be in surplus until the end of the decade. ‘In the last six months unforeseen events have hit the Australian economy. In particular, we are now witnessing the largest fall in the terms of trade since records began in 1959,’ Hockey said in a statement.”

“The message for policymakers was clear: the party is over. ‘Broadly speaking, the balance of risks facing the Australian economy contains more substantial downside than upside uncertainties. External risks, chiefly from commodity markets, combined with speculative activity in the housing sector and uncertainties in the responsiveness of non-resource sectors, could conspire to generate a period of weak macroeconomic activity,’ the OECD said.”

“In Dongguan, a sprawling factory city, one real estate developer has cut prices by 15 percent, offered $1,600 worth of free appliances to move apartments. In Hangzhou, families that paid in advance for new apartments have occupied a stalled, half-finished complex. And in Changsha, a bustling river town where developers built a forest of fancy towers, a third of the modern office space is empty and families are mulling whether to buy in a weakening housing market or wait. For real estate, ‘the winter has not come yet, but it is coming,’ said Hu Yifan, the chief economist for Haitong Securities international division.”

“About $34 million in retail spending are lost annually due to a lack of economic development within a half mile radius of Danville Regional Medical Center. Danville City Council members learned this hard fact and more from a presentation on Danville’s housing market by Virginia-based CZB consultants. ‘It worked for 60 years that unless you screw it up they will come. That is true on the coasts and a handful of markets,’ said Charles Buki, of CBZ. That is no longer true for about 70 percent of the housing market, he added, including Danville. The main issue is that the housing market has excess supply. ‘Every place in America is struggling with this,’ he said.”

“Falling gas prices are a good thing, but falling home prices are not. Here in Houston it is real concern. Realtor Lauren Taylor says as oil prices fall, home sellers are worried about their investment. ‘I think that when the amount of people moving goes down a lot more than it is now, that’s when I have a concern,’ Taylor said.”

“Ted C. Jones is the Chief Economist Stuart Title. He says Houston added more than 120,000 jobs in 2014 and those people fueled the housing boom. The forecast for 2015’s job growth is not as strong. ‘The good news is for prospective buyers out there, you may look at a home and decide three hours later to offer a contract on it and it may not have multiple offers like they have in the past,’ Jones said.”

Bits Bucket for December 19, 2014

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December 18, 2014

It Is Turning Out To Be A Disaster

The Manteca Bulletin reports from California. “Folks who can only afford $500,000 homes are riffraff. Sounds crazy? It doesn’t if you are in Pleasanton and are among those speaking out against plans to build more affordable housing in the community of 70,000 where the medium income household income is $113,345 and the median home value is $813,000. An argument advanced by one Pleasanton resident speaking out against more affordable housing was that $500,000 homes attracted Central Valley riffraff. Whoa. Middle income families in Manteca would have a struggle paying the median Pleasanton rent of $2,500 let alone the mortgage payment on an $813,000 home.”

The Mercury News. “While price increases took a bit of a breather during the late fall and early winter, there’s little sign the hot market that’s causing such pain for buyers will end any time soon. Prices reached all-time highs in San Mateo County in October and Santa Clara County in June, according to CoreLogic DataQuick. Sales last month were at their lowest level for a November since 2007-08 in the East Bay and South Bay, according to the report. ‘Around here, there’s a bazillion buyers, and there’s nothing to buy,’ said Colleen Larkin of Thornwall Properties in Berkeley. ‘I don’t think it’s going to end.’”

The Press Democrat. “The Sonoma County housing market is ending 2014 much as it began the year, with slightly lower sales, higher prices and a marked drop in the number of economically distressed properties. But while selection remains tight, buyers this fall have shown a reluctance to pay more for a home than the recent sales price of comparable properties. ‘Last year no one was dropping their price,’ said Tom Kemper, manager of the Coldwell Banker office in Santa Rosa. But this fall many sellers have done so after first trying to get more money than a neighbor did for a comparable home.”

“Buyers, said Kemper, seem to be telling sellers ‘we’re not going to pay 20 grand more than the last guy just because you want it.’”

The Sacramento Bee. “Sacramento County’s housing market continued its traditional seasonal slowdown in November, with the number of sales falling significantly compared with October, CoreLogic DataQuick reported. Sales of all homes – new, resale and condos – in Sacramento County totaled 1,459, down 22 percent from 1,871 in October. That was the worst November since 2007, when 1,341 sold.”

“The story was the same throughout the Sacramento region and statewide. There were 527 closings in Placer County in November, down 27.4 percent from 726 in October. El Dorado County saw a 38.6 percent decline, from 311 in October to 191 last month. The monthly drop was nearly 19 percent in Yolo County, with 144 closings in November vs. 177 in October. CoreLogic DataQuick analyst Andrew LePage noted that year-over-year home sales in Sacramento County were down in 10 of the 11 months reported so far this year; the only exception was a tiny 0.2 percent rise in September.”

The Daily Bulletin. “Home sales across Southern California sank to their lowest level for a November in seven years and prices showed more signs of flattening as the market’s slump dragged on, according to CoreLogic DataQuick. Sales of new and previously owned houses and condominiums fell 9.5 percent from a year ago in the six-county region with Los Angeles, San Bernardino and Riverside counties posting the biggest declines at 10 percent. ‘It is turning out to be, I guess you could say, a disaster,’ Robert Kleinhenz, chief economist at the Los Angeles County Economic Development Corp., said of the region’s market.”

The Union Tribune. “The pace of home-price appreciation in San Diego County fell last month to its lowest rate since June 2012, the period just before real-estate investors pushed annual gains into the double digits for a nearly 18 month stretch. From October to November, home prices fell $10,000, and activity dropped by 19 percent to 2,675 transactions. ‘Interest rates, price appreciation, household income, inflation, all of these things are fairly stable right now so there’s no particular motivating factor to move somebody up or down in price or in or out of the market,’ said Mark Goldman, a loan officer and real-estate lecturer at San Diego State University. ‘Now owner occupants look more to the purchase price of a home as an alternative for purchasing shelter, as opposed to a speculative investment of purchasing a home that will go up in value.’”

Bits Bucket for December 18, 2014

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December 17, 2014

Rapid Growth And Uncertain Collateral

A housing bubble report from Wall Street to Washington. Bloomberg, “The largest U.S. banks have lowered their standards for some of the riskiest lending in a sign that weak underwriting is returning to levels seen before the 2008 financial crisis, according to a regulator’s report. The banks have continued to erode standards, especially in large corporate loans, consumer loans and in leveraged lending, according to an annual Office of the Comptroller of the Currency survey of examiners. ‘As banks continue to reach for volume and yield to improve margins and compete for limited loan demand, supervisors will focus on banks’ efforts to maintain prudent underwriting standards,’ said Jennifer Kelly, the OCC’s chief national bank examiner. She said the trends are ‘very similar’ to those from 2004 through 2006.”

“Tuesday’s report said such lending showed the most loosening among commercial products, with 48% of banks that engage in the lending easing their standards. A particular area of concern is commercial real estate, as examiners cited rapid growth and uncertain collateral.”

The Daily Caller. “The government is offering cheaper mortgages to first-time homebuyers, a risky move that could pave the way for another financial crisis, a mortgage foreclosure lawyer told The Daily Caller News Foundation. The new rules, announced by Fannie Mae and Freddie Mac last week, allow lenders to offer mortgages with a minimum downpayment of 3 percent — down from 5 percent.”

“‘I think it’s setting up the ability for another crisis to come,’ Adam Deutsch, senior associate at New Jersey firm Denbeaux & Denbeaux Law told TheDCNF. ‘If a homebuyer does not have the savings to deposit 5 percent of their home purchase, it is a safe assumption they will not have a savings contingency to cover unexpected costs of homeownership, such as a leaky roof or replacement water heater.’”

From Al Jazeera. “Aisha McKnight-Baron couldn’t believe her ears. Turned down by Bank of America for a home mortgage, McKnight-Baron was stunned to learn from her real-estate agent that she could still qualify for a loan. The lender was Angel Oak Home Loans. The company offered a loan program that targeted the millions of people like her with credit problems who, since the 2008 financial crisis, have been unable to secure a traditional mortgage.”

“For McKnight-Baron, a plastic surgeon in Atlanta, the subprime loan was a lifesaver. ‘The rate is a bit higher, but [Angel Oak] considered my circumstances, and I’ll be able to refinance,’ said McKnight-Baron.”

The Associated Press. “Six years after the collapse of Lehman Brothers, the lessons of the financial crisis may already be fading from collective memory. Just last week: Congress acted to loosen the regulation of the high-risk investments that ignited the 2008 crisis. Housing regulators cut minimum down payments on home loans. The Institute of International Finance declared it ‘worrisome’ that global indebtedness, as a share of world economic output, has reached record levels. All this comes as subprime auto loans for financially stretched buyers are surging.”

“And the so-called too-big-to-fail banks that needed a taxpayer bailout in 2008 now loom even larger than before the crisis: America’s five biggest banks account for 44 percent of bank assets, up from 38 percent in 2007, according to SNL Financial. Despite its overall finding that threats are moderate, Treasury’s research office warned of ‘excessive risk-taking during an extended period of low interest rates.’”

“The Treasury Department announced on Dec. 4 that homeowners in their sixth year of payments on a modified mortgage will get a $5,000 principal reduction to help them build equity and handle possible financial trouble. The assistance, which could total $5 billion, is part of the Home Affordable Modification Program, or HAMP, which began in 2009 to stem the flood of foreclosures after the housing crash.”

“As the interest rate on many of these loans rises to 3 percent in the sixth year and 4 percent in the seventh year from 2 percent in the first five years, officials say the $5,000 reduction will help curb additional defaults. The program made about 1.4 million modifications by the end of September and 961,648 of the loans are still active. Thirty percent of the loans, or 419,401, defaulted after the modification.”

“In making the $5,000 payouts, HAMP isn’t distinguishing between borrowers who might need the support and those who don’t. A homeowner who got a modification five years ago because of a job loss could be financially stable today and still get the payoff.”

“‘If people still need this kind of help, five years down the road, then they are simply not in a home they can afford,’ said Mark Calabria, director of financial regulation studies at the Cato Institute research group in Washington and a former senior staffer on the Senate Banking Committee. ‘The Republican leadership in Congress wants to end the program, and we’re way beyond the point where people could argue there’s a housing crisis.’”

National Mortgage Professional. “November was an unhappy month in the 2014 housing calendar, according to a pair of new data reports. ‘Following strong new home sales in October, our data shows November sales volume dropped significantly,’ said Mike Fratantoni, chief economist at the MBA. ‘Average loan size increased to almost $307,000 in November from roughly $300,000 in October, indicating that builders are having greater success with higher priced homes and difficulty at the entry level, as first-time buyers continued to face tight credit conditions.’”

“Separately, RealtyTrac’s U.S. Foreclosure Market Report for November found a total of 55,906 U.S. properties started the foreclosure process in November, a decrease of one percent from the previous month but a six percent increase from a year ago, the first year-over-year increase following 27 consecutive months of year-over-year decreases.”

From Builder Magazine. “It was four years ago that I wrote my last By George! Column in October of 2010. As we know, cheese gets moved when you look away or don’t pay attention. One of the first things I did was go back to the last piece I wrote to see how we have progressed from those dark days of 2010. Sadly, much of the piece read like I wrote it last week. I have included the piece at the end of this one.”

“A release from Freddie Mac on December 8, 2014, about attitudes among renters about renting and homeownership. The essence is that although 91% of renters view homeownership as something to take pride in, only 39% expect to purchase a home in the next three years. However, 45% of renters say they live paycheck to paycheck and will probably never be able to buy.”

“Whether we like it or not, our housing situation is looking more and more like the 1920’s than the 1990’s. Then, only 40% of the population owned a home and 60% rented. Many of those who rented paid a significant portion of their income toward rent and never could save enough to purchase. Sounds more like where we are going, based on the trend lines of the past couple of years.”

“But, what I think should be considered currently is the thought that we may have had way more of a structural shift in the underlying factors that drove homeownership and the home building and residential development industries in the period from 1945-2007 than many have realized or chosen to accept. The implications of such a shift for company business models, product, land values, and who participates in the industry are significant and not always to the good. However, with every disruptive change comes both the opportunity to thrive in the new environment and the risk of sudden extinction.”

What Would Have Been Unthinkable

Bloomberg reports on the UK. “Bank of England Governor Mark Carney said the selloff in emerging markets may worsen, posing the risk of higher borrowing costs and weaker growth in core markets. Even as U.K. banks’ exposure to Russia is ‘very modest,’ and ties between the two countries ‘relatively limited,’ Carney said the central bank was ‘not complacent at all about the dynamics in the global economy.’ ‘There is a risk that, in economies where core inflation is already weak, particularly some parts of the euro area, low headline readings further depress expectations of future inflation,’ the BOE said in the report. This ‘could result in slower rates of growth of nominal incomes, increasing the burden of existing debts.’”

“Tighter lending standards may still be contributing to a slowdown in mortgage approvals and might be deterring borrowers and banks from high-risk loans, officials said. ‘High household indebtedness continues to pose risks to financial stability,’ so recommendations in June against risky mortgages “continue to act as insurance against a significant deterioration in lending terms,’ the BOE said.”

RTE News reports on Ireland. “In a review of risks to the Irish economy, the Central Bank noted that house price growth in Dublin is now higher than that recorded at the peak of the property bubble in 2006. House price growth in Dublin has been above 23% since June. The Central Bank said Irish households remain highly indebted, leaving them vulnerable to economic shocks, falls in income and rises in interest rates. There has also been a rise in the number and value of mortgages in very long term arrears - classed as more than two years overdue.”

“It warned that in the current low interest rate, low inflation environment increasing numbers of investors are searching for yield - a return on their money - and that this is increasing the risk of volatility in the financial system. The Dublin office market and Government bonds - which have benefited from the inflow of foreign funds - are vulnerable to a change in investor sentiment if higher yield opportunities present elsewhere.”

Reuters on Canada. “Fort McMurray has long drawn thousands with jobs that paid six-figure salaries to a region that produces more crude than anywhere else in the Western Hemisphere. But a slide in oil prices since June has fueled a sense of unease in the community of nearly 73,000 which for over a decade has rarely known anything but the good times. Some signs of a looming slowdown can already be seen in the local property market. New housing starts in the municipality of Wood Buffalo comprising Fort McMurray and nine surrounding hamlets are forecast to fall 62 per cent this year, according to the Canada Mortgage and Housing Corporation.”

“Two-story-high ‘now leasing’ signs that adorn some downtown apartment blocks, would have been unthinkable at the height of the recent decade-long boom when, as mayor Melissa Blake put it, the city had ‘more people than places to put them.’ ‘There seems to be a lot of layoffs up here so people are just kind of holding on to their money,’ said Sandy Mastel, a manager at Raven Truck Accessories and Motor Sports.”

The National on Dubai. “The property broker CBRE is predicting that if the price of Brent crude continues to drop for a sustained period then the huge government-owned funds tasked with spending surplus cash on assets abroad may cut back on their ambitious plans to buy European trophy assets. ‘The biggest impact is potentially on the international property markets than the local markets,’ said Nick Maclean, the managing director of CBRE’s Dubai office. ‘And the sovereigns in the GCC are such an important component of new cash for the international markets that if that is withdrawn a little then it has an impact.’”

“CBRE said housing rents in Dubai rose 1 per cent during the final three months of the year, cancelling out a 1 per cent fall recorded during the third quarter. At the same time sales prices increased 18 per cent over the year – down from 30 per cent in 2013. The company added that more than 20,000 new homes are expected to enter the market during the course of the next 12 months, which ‘could have a deflationary impact on sales and rental rates.’ It said there were 65,000 new units potentially going to be delivered over the next three years.”

ABC News in Australia. “The rural town of Katherine has gone from a well-publicised housing shortage to an ‘unusual’ lack of rental demand, according to a real estate agent. Territory Rural’s Alison Ross told 105.7 ABC Darwin that Katherine housing demand had anecdotally dwindled to its lowest level in almost a decade. ‘There hasn’t been this certain number [of houses] available for quite some time,’ she said. She put the trend down to several factors, including economic downturn, the development of additional defence housing, and the scaling back of mining operations at Roper River and Pine Creek.”

“The mayor of Katherine, Fay Miller, said the housing market had noticeably dropped, but this was partly due to cyclical factors. She said mining redundancies and new housing developments were contributing to the rental glut, but things were not set in stone. ‘I’m sure that we will see things start to pick up again [and] that those rates will certainly improve.’”

Smart Property in Australia. “With almost double the number of listings on the market in Western Australia compared to last year, one real estate commentator has warned against overpricing properties for sale. ‘The days of coming up with a dream price, then adding on another 10 per cent, are well and truly over. Today’s buyer is much more informed and simply does not have the time to be deciphering over-priced properties,’ said RE/MAX WA managing director, Geoff Baldwin.”

Quartz on China. “Between 2003 and 2012, $1.3 trillion slipped out of mainland China—more than any other developing country—says a report by Global Financial Integrity, a financial transparency group. $725 billion—more than half of the outflows from the last decade—has left since 2009, just after the Chinese government launched its 4 trillion yuan ($586 billion) stimulus package. The government’s June 2013 crackdown on fake trade invoicing caused a seize-up in liquidity, pushing banks close to a meltdown. This precarious relationship with liquidity might partially explain ‘Operation Fox Hunt,’ the crackdown on Chinese government officials who have fled China or transferred assets to family members abroad.”

“With China’s real estate market in the doldrums, its economy slowing, and its leader cracking down, the ‘foxes’ have more reason than ever to sneak their spoils overseas. Making sure they don’t isn’t just a matter of legality, but of protecting China’s financial system from freezing up once again.”

Want China Times. “Luo Fei, mistress of China’s former railways minister and transportation bureau chief Zhang Shuguang, has been sentenced to five years in prison for taking bribes. The court ruled that the monetary support she received from Chang constitutes a bribe, reports our Chinese-language sister newspaper China Times. Zhang is 25 years older than Luo and is married. He has been known for being a ‘naked official’ since his wife and children emigrated to the US, where they bought houses and opened companies.”

“His expenses increased dramatically when he was courting Luo. Zhang called Ge Jianming, president of railway equipment maker KTK Group and asked for money. Ge handed Zhang a black briefcase containing two million yuan (US$325,000) in cash. Zhang set aside 700,000 yuan (US$113,000) of the savings to pay for his and Luo’s daily expenses and used the remaining and his own savings to buy a house as a gift to her.”

Bits Bucket for December 17, 2014

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December 16, 2014

Where Did All The Investors Go?

The Orlando Sentinel reports from Florida. “Orlando-area home sales have slowed, the inventory of house listings is up, houses are taking longer to sell and sellers have less negotiating power than they did a year ago, according to a report. Orlando Regional Realtor Association Chairman Zola Szerencses, said the market conditions should appeal to buyers. ‘With the average interest rate at its lowest point in 18 months — 4.01 percent — plus an inventory plumped up with new foreclosures, our winter housing market has many gifts to offer buyers,’ he said.”

From Boston Curbed in Massachusetts. “Everyone knows that the Luxury Glutpocalypse has hit Greater Boston: too many new higher-end apartments, too few tenants for them, and a lot of gobsmacking incentives to try and right the market ship. You can see that the decreases have been steepest in areas that have seen some of the briskest development of luxury apartments (Back Bay, downtown Boston, Chinatown). Let’s not kid ourselves, however: The rent decreases in these areas throughout the year have been relatively slight (no greater than 5 percent in downtown, for instance) and rents overall were up a little more than 2 percent. But it’s interesting to note that some of the biggest drops—and the slightest increases, for that matter—came in areas where big luxury complexes have recently opened.”

The Northwest Herald in Illinois. “Sure, it’s December and that often brings a slowdown in the real estate market. Regardless of the holiday season, it seems that even November was down a little, too. In fact, all of 2014 has been a tad off from what we saw in 2013. So what’s going on? Where did all the investors go? Agents tell me that many of their investors have pulled out of the market, thereby, cooling the market after the 2013 rally in McHenry County.”

“But why aren’t people buying? Interest rates remain incredible at historic lows. Shouldn’t that drive the market to buy? Maybe it will take a significant rise in rates to get people buying. The old timers tell me that in the 1980s – when interest rates were 16 percent to 18 percent – people were in fear of rates going higher so they frantically applied for loans. Yet, here we are on the other end and banks can’t give money away.”

The Los Angeles Times in California. “As the year draws to a close, Southern California’s housing market remains stuck in low gear. The number of homes sold in the six-county Southland dipped 9.5% in November, compared with the same month last year. The median price climbed to $412,000, up 7% from November 2013 but basically unchanged from recent months, according to CoreLogic DataQuick. ‘Southern California home sales are closing on a low note in 2014,’ said Andrew LePage, a data analyst for CoreLogic DataQuick. ‘Inventory still lags demand in many markets and traditional buyers haven’t filled the void left by the investors who’ve pulled out.’”

The Pacific Business News on Hawaii. “Foreclosures rose 40 percent statewide in Hawaii last month and more than doubled on the Big Island in , according to RealtyTrac. The newest numbers reflect the fact that mediation didn’t work for some homeowners, said Darin Blomquist, vice president of RealtyTrac. Anders Hostelley, president of Honolulu HomeLoans, pointed to a Hawaii law that requires attorneys to file documents affirming that lenders have the legal right to foreclose before they can start foreclosure proceedings, something that they were previously allowed to do later.”

“‘Attorneys needed to change their procedure and timing in filing foreclosure actions, which they have most likely been able to catch up on,’ Hostelley said. ‘This could be part of the reason for the recent spike in foreclosures.’”

The New York Post. “Real estate brokers Carol E. Levy and Chris Lipman have the kind of apartment most New Yorkers can only dream of. But now, the custom-made winding entrance steps serves as a border between hostile camps. The duo divorced in 2012, and though the split was far from amicable, Lipman lives on the 17th floor in the guest bedroom, surrounded by a media room and the sole kitchen, while Levy lives upstairs in the 18th-floor master suite with her new husband. Levy and Lipman’s two teenage daughters also share the upper floor. The exes intend to stay in this unorthodox situation until the sale of their marital home, which came onto the market for $24 million, and has been reduced to $18 million to speed the sale.”

“Levy and Lipman are just one of many couples in the city who are living together after their romantic relationships expire, mostly due to financial situations and the high cost of New York housing. ‘The current scarcity of real estate options in New York City for people going through a litigated divorce often makes co-habitating the only viable option,’ says Todd Spodek, divorce attorney and partner at Spodek Law Group in Tribeca. ‘Plus, if you voluntarily move out and can support yourself, your claim for [spousal] support is diminished.’”

Bits Bucket for December 16, 2014

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December 15, 2014

Selling An Obsolete Version Of The American Dream

The Sun Sentinel reports from Florida. “Real estate agent Susan Gauthier isn’t getting paid any more than her standard 3 percent commission to camp out in the cold. It’s just part of the job this week. Gauthier, representing a New York couple, has stood in line since Thursday morning to reserve a unit at Minto Communities’ Villas By The Sea condominium, planned in Lauderdale-by-the-Sea. By midday Friday, four other buyers were parked outside Minto’s sales office on Commercial Boulevard. Prices for the 51 units range from the $500,000s to more than $1 million. During the housing boom of 2000 to 2005, buyers routinely camped out overnight for homes. The practice is slowly returning as the market strengthens.”

“‘I’m a native Floridian, and this is not my kind of weather,’ Gauthier said. ‘We’re not even on the sunny side of the street.’”

The Orange County Register in California. “Many sellers take their homes off the market or stop looking between Thanksgiving and Jan. 1. But some real estate agents say that’s a mistake. Some economic and global factors suggest there could be especially good reasons to accelerate plans to purchase or sell homes this winter instead of waiting until the traditionally busier spring and summer homebuying seasons. With little price appreciation these days from month to month, waiting to sell until this spring is ‘fruitless,’ said Steven Thomas, who analyzes the Orange County housing market. ‘It may be the busiest time of the year where demand peaks, but it is also a time where the potential of too many homeowners opting to place their homes on the market and at unrealistic prices could lead to a major buildup in the inventory,’ he said in his most recent report.”

The Reporter Herald in Colorado. “Colorado State University’s Everitt Real Estate Center director Eric Holsapple told the real estate professionals to expect continued ‘good, steady growth in home prices’ in Loveland. ‘Loveland’s home prices are rivaling Fort Collins’, which wasn’t the case a few years ago,’ Holsapple said. In the Fort Collins-Timnath market, the median price this year was $287,500, he said, and next year it could reach $300,000.”

“Loveland had 597 housing starts this year but 409 closings on new homes. ‘It could be that home prices have gone up on the new-home side pretty drastically over the last 24 months,’ said John Covert, regional director of Metrostudy. ‘Maybe we’re hitting this price ceiling,’ and people who want to buy a new home are waiting to see if a new housing development will offer more affordable prices. Covert said partly as a result of national homebuilders’ move back into Northern Colorado, the market now has a number of ’spec homes’ that were built without buyers on the hook. He said he expects to see incentives and discounts spiking at the end of the year as those publicly traded homebuilders work to clear out some of their inventory.”

The Idaho Statesman. “Seven years after crews working for the Knife River Corp. paved roads for a housing development in western Canyon County, the company still has not been paid. The developer, Eagle-based Union Land Co., had run out of money. Its failure was one among many in the downturn that popped the housing sector’s bubble in 2007 in the Treasure Valley and elsewhere. Five years after the recession ended, good times are returning, but new-home construction has yet to recover. The Intermountain MLS says 36 newly built homes sold in Canyon County in October, compared with 131 in the same month in 2006, when the local market’s descent had just begun.”

“Union Land, owned by Kerry Randall Angelos, was developing projects in several Western states during the early 2000s. Bankruptcy court records listed more than 14 developments that Union Land was involved with before going under. Union Land’s failure was not the first for Angelos, whose website says he moved to Boise from Portland in the late 1990s. According to court records, Angelos had filed for bankruptcy in Oregon in 1989. Angelos and his wife, Jacqueline Lee Angelos, filed for bankruptcy in April 2011. They listed zero income and $176.6 million in debts. The couple said they were ‘completely wiped out by the national collapse in the real estate market beginning in 2007.’”

From NBC 40 in New Jersey. “It would take 29 months to sell all the homes that are currently on the market, and that’s just in Atlantic City, according to Cindy Marsh-Tichy, president of New Jersey Realtors. ‘So that’s a lot of inventory to be sitting there that’s not moving and they’re not moving because there’s a lot of short sales and foreclosures unfortunately,’ said Marsh-Tichy. ‘Atlantic County is number one in the state for foreclosures,’ said Sheriff Frank Balles. ‘With so many layoffs we’ve seen here in Atlantic County, we’re projecting that this time next year our foreclosure, our foreclosures here in Atlantic County are extremely high.’”

From CNBC. “In an effort to accelerate lending to lower- and middle-income borrowers, mortgage giants Fannie Mae and Freddie Mac are launching programs that will guarantee loans with down payments of as little as 3 percent. Economist Robert Shiller cast doubt on whether that would be the best course of action. ‘Because it’s only a 3 percent margin, if somebody defaults and they have to sell the house, they might not get all the money back.’ ‘In a sense, it’s a good investment because it’s only one a lot of people make. So somehow they’re motivated to do it.’”

“However, there’s a caveat. ‘Historically, houses have not done well as investments. They haven’t really gone up much in value in the last 100 years. And on top of that, they’re a nuisance,’ he said. ‘You have to take care of them.’”

The Chicago Tribune. “Fannie Mae and Freddie Mac insist that they will limit the mortgages to creditworthy borrowers who can be expected to make their payments. But the new rules ensure the proliferation of loans that will not be repaid. Arnold Kling, a former Freddie Mac economist now at the Mercatus Center at George Mason University, says that under this new policy, the mortgage giants ‘are setting people up to fail.’”

“What we should have learned from the vast trauma we endured is that the federal government should stop trying so hard to enable Americans to buy homes. By luring many of them back to betting their savings on the housing market, the mortgage firms are selling them an obsolete version of the American dream that puts us all at risk of another debacle. After the last mortgage binge, we woke up in the gutter. Isn’t once enough?”

Bits Bucket for December 15, 2014

Post off-topic ideas, links, and Craigslist finds here.

December 14, 2014

A Lot Of Profit Which Resulted In Unsold Stock

An international desk clearing post for the weekend, starting in California. “On a reality TV show about Bay Area real estate, he was Mr. Flip It. But now Todd Hill, of Los Gatos, stands accused in a lawsuit of defrauding his top investor of $6 million. The concerns stem from a civil lawsuit by Woodside developer Max Keech, who claims Hill defrauded him by siphoning off money meant to rehab old houses. Keech said they bought between 160 and 170 homes, many of which were foreclosed properties sold at sheriff’s sales. Hill, who still identifies himself on his Facebook page as an ‘actor and director,’ was one of the show’s stars. In its trailer, he’s seen on courthouse steps reaching out with a wad of bills. In another scene, he saunters up to a competing team looking at a house up for auction and says, ‘What are you doing here? You can’t afford this.’”

“In one shot, he seems to summarize the risks of house flipping in just a few words: ‘I don’t want to go broke.’”

“When George Brown went to sell his ninth floor condo in May, he expected to have a deal within 30 to 60 days. He finally sold it earlier this month. ‘I guess I’ve been in the business long enough to know sometimes things go and sometimes they don’t,’ he said. There was also an unusually high number of condos on the market, he said.”

“His case is an extreme example of the glut of homes on the market slowing sales, according to the ReMax Housing Market Outlook report. Larry Stewart, who is Brown’s agent and owner of the Saskatoon branch of ReMax, said the city ‘has serviced an amazing amount of land — almost too much, I think. There’s been a lot of profit in construction in the past five years.’ So much profit, in fact, that the roughly 200 small builders in the city have been putting up houses on spec, which has resulted in unsold stock.”

“Slashed prices on a large-scale apartment building project in Shenzhen by East Pacific Group, a leading developer in the city, are part of a growing trend to spur demand in China’s flagging realty market, according to Guangzhou’s Time Weekly. Prices for the project, one of the largest housing projects in the city in recent years, have dropped to 40,000 yuan/square meter (US$6,500)from the original 70,000 yuan/square meter (US$11,300). The reduced price is comparable to houses built 10 years ago in the neighborhood.”

“That a leading property developer and its chairman Huang Chubiao, long dubbed by Hong Kong media as the ‘Li Ka-shing of Shenzhen,’ would take such a step is a reflection of the market trend, said the report. Huang is again being picked apart by the news, under such names as the ‘realty king of Shenzhen’ for the huge amount of idle land the group owns in the city.”

“The construction industry has expressed fears over the Central Bank’s new loan-to-value and loan-to-income requirements. Strict new mortgage lending measures will play havoc with building at both ends - first by eliminating a huge tranche of buyers and second, by causing banks and private financiers to withdraw promised capital and finance for big schemes. First time buyers in Dublin will now have to save an average of €70,000 to buy a €350,000 home and most builders and their financiers believe this is too big an ask for young couples.”

“One source added: ‘In most cases, those schemes which have gone ahead have only just got funding by the skin of their teeth.’ The source said that if the measures went ahead ‘almost all’ multi-unit schemes currently being planned would be postponed or curtailed altogether.”

“As oil prices suffered more sickening blows this week, and iron ore and coal languish, only one force stands between Australia and a serious recession — Chinese investment in our residential property market. I’ve already looked at some of the local and global side effects of the oil slump, so today it’s appropriate to note that the Chinese boost to investment in real estate is a global phenomenon. Whether it be London, New York, Melbourne or Sydney, housing markets have never seen anything like the current rash of Chinese and Asian buying.”

“An enormous portion of the Chinese investment comes via new developments and the Chinese developers behind the big Sydney and Melbourne apartment projects appear to be working on an expected return of about half that required by their Australian counterparts. Accordingly, many Australian developers sell the land and approvals to the Chinese and let them go to the next stage. That’s why Chinese are dominating new developments, particularly in Melbourne where there is a high likelihood of major oversupply of one or and two bedroom apartments.”

“At the moment, some of the Chinese investors are planning a slowdown for the early months of 2015 but this will be temporary and they will be back with force. To put it simply, during the middle of the mining investment boom we did not need Chinese investment, but now we do.”

“Presented in snappy 12-to 15-minute segments, Ultra Rich Asian Girls puts a lens on Chelsea Jiang and three female contemporaries, as they swan about their adopted city. A recent episode saw them leave Vancouver for a sumptuous island cottage owned by one of the women’s family. The four women feasted on B.C. crab and argued over what to look for in a potential husband. Forget handsome but poor, declared Ms. Jiang. ‘Ugly rich guys can use their wealth to get plastic surgery and become handsome,’ she said. ‘Hot and rich.’”

“Politicians understand there’s an affordability crisis in Vancouver but most are loath to discuss the role of foreign capital, particularly from China. Ian Young, a reporter who is ethnically Chinese, moved to Vancouver five years ago, and writes frequently about the local housing market and the impact that mainland Chinese money has on the city. ‘It’s accepted, widely understood that mainland Chinese money is a driving force behind the Vancouver property market,’ says Mr. Young. ‘There’s a reluctance to discuss it’ outside of Chinese communities, he says, because people are afraid that if they do, they’ll be branded as ‘racist.’”

“The first time Chun Yang saw Tacoma, it reminded him of his hometown of Shanghai. Yang already has built a twin-tower hotel in his hometown. He wants Tacoma to be next. Congress approved the EB-5 program in 1990 to create jobs in America by encouraging foreign capital investment. Immigrants whose investment of $1 million leads to the creation of 10 direct full-time jobs can receive a permanent visa. At 10 jobs per investor, about 90 investors at the $500,000 level would be allowed. That would raise almost $45 million – about $11 million more than they’re required to have for the equity component, so it gives them a cushion. The calculations are about the same for the second phase of the project – the apartment/condo building – if Yang decides to build it after the hotel is done and financially stable.”

“The attractiveness of college outside China cannot be underestimated, said Michael Fowler of the World Trade Center Tacoma, and that’s where Tacoma shines. The hotel developer Yang’s son, Yiwen, will start attending UWT Tacoma in January. ‘There’s a very strong tie between academic pursuits and their children’ for foreign investors, Fowler said. College entrance exams in China are, in a word, hellish. ‘Rich kids are not necessarily the best test takers,’ he said. ‘Usually it’s the countryside folks who score highest on the tests because it’s their out. So coming to the U.S. is a good alternative for wealthy children and has good career opportunities as well. EB-5 is a way to get there.’”