August 22, 2014

The Market Feels A Bit Surreal Again

It’s Friday desk clearing time for this blogger. “Only 95 African-American couples or families applied for home-purchase mortgages in all of Multnomah County in 2012, a paltry 1.5 percent of the total, according to federal data. Six years earlier, before the housing bubble popped, 575 black families or individuals applied for home-purchase loans in the county. African-American families are losing a time-tested way to stabilize their finances while building assets for retirement or economic and social advancement, says Tom Cusack, a retired federal housing official. ‘What are you going to do to accumulate wealth?’ Cusack wonders. ‘You’re not going to get rich or pass along money by putting money into a 1 percent CD.’”

“As Inland home prices move closer to unaffordable levels for many working Janes and Joes, homeowners and shoppers are clamoring for a timeout moment, like the one you get just before a roller coaster car crests the hill. Dennis Kolbeck, an Inland-area home shopper, called last week to say something’s got to give because the market feels a bit surreal again. ‘I was ready to pounce on a house, but the prices got the best of me,’ he said.”

“In the Phoenix-Scottsdale, Arizona market, the summer market is drowsy. ‘We seem to have sluggish demand,’ said Floyd Scott, owner of Century 21 Arizona Foothills. In the luxury market of $1 million and above, supply is more like 18 to 24 months, he said. Scott noted the number of transactions has been ‘trending down’ for three years. Buyers are taking longer to decide on their purchases, shopping around more. ‘We’re not seeing multiple offers on any of our properties,’ he said.”

“‘Sales are lower this year than they were last summer,’ said Bonnie Roberts-Burke, president of the District of Columbia Association of Realtors. ‘Buyers are worried that they’re over-paying. They’re pickier than I’ve seen in the last few years,’ she said. ‘More deals seem to be falling apart than in the past.’”

“The foreclosures in Frederick County, according to RealtyTrac, jumped from 109 in June to 199 in July. Hugh Gordon, a mortgage loan officer with Fitzgerald Financial, said there are mortgagors barely hanging on. Some of those walking away from the house, even though a foreclosure means a loss of credit standing, are doing so because of the condition of the house, Gordon said. ‘What do you do with a town home in a group of town homes that no one wants because of its condition?’ Gordon said. ‘I also continue to see far too many buyers entering the market thinking prices are as negotiable as they were during the recession.’”

“The Austin housing market is overvalued, according to the latest Trulia Bubble Watch report. At the end of an alley off East 11th Street is a one bedroom, one bath, 780 square foot home. It’s described by realtors as a likely ‘tear down.’ The asking price is $310,000. Cathy Conley and her husband bought their first home in the 80s. Then Austin’s biggest bubble, burst. ‘We watched the investment in our home dwindle before our eyes,’ said Conley. They were able to wait it out until the 1980s housing market recovered. But, many weren’t so lucky. ‘Austin was booming at the time and everyone was investing in new homes and life was great and then the rug was pulled out from under most people in Austin.’”

“What makes Countrywide special isn’t just that they gave out a lot of bad loans, it’s that they sold those bad loans to others while keeping the good ones for themselves. In a 2005 email, the Countrywide Financial Corporation’s chairman—not named in the statement, but it was Angelo Mozilo—wrote that he was ‘increasingly concerned’ about a certain adjustable rate loan. He feared that the average borrower was not ’sufficiently sophisticated to truly understand the consequences’ of their mortgage, making them increasingly likely to default. He wrote: ‘…the bank will be dealing with foreclosure in potentially a deflated real estate market. This would be both a financial and reputational catastrophe.’”

“According to the CMHC survey, ‘about half’ of condo investors in Toronto and Vancouver currently rent out their last purchased unit. However, one glaring omission from the survey are foreign investors, as it only included condo owners who reside inside their CMAs. And, as several brokers have pointed out, the survey assumes all participants truthfully filled out their paperwork at time of funding.”

“‘I believe that this report is based on a survey or condo owners and is also based on what was reported at the time of funding; So in reality we have no idea how accurate these numbers are,’ commenter M. Robertson said. ‘From experience as a lender I can tell you that a lot of brokers will put owner occupied on an application so that they can get it approved. A lot of lender underwriters also turn a blind eye.’”

“Weekly ­advertised rents have fallen 3.6 per cent in Docklands and 6.4 per cent in ­Southbank over the past 12 months while they have stayed still in the central business district, RP Data figures show. Over the past five years, rents in Docklands have fallen 8.6 per cent. In Sydney, Hugh Eriksson tells a similar story. The marketing executive, who owns a townhouse in Neutral Bay, says he has bent over backwards to keep rents near to stable and has even allowed pets. ‘There might be low vacancy in the inner city but renters are still in a position where they can choose,’ he says.”

“Jason Plevras paid $600,000 for a two-bedroom apartment in Melbourne’s Southbank last May. The real estate agent assured him he would have no trouble finding a tenant, Plevras says. ‘I remember when I was signing the contract to buy, I made clear that I was worried we won’t be able to rent it,’ the 33 year old says. ‘They said ‘renting will never be a problem. You’ll always have tenants,’ His starting price was $600 a week, but that went down to $525 before it rented. It’s been a ‘yo-yo’ of tenants coming and going ever since, Plevras says. ‘Because it’s so competitive, we’re almost putting anyone we can in.’”

“More wealthy Chinese are moving their money out of China to invest in Australia’s property market as a corruption crackdown in the world’s second-largest economy gathers momentum, according to property consultants and lawyers. Chinese citizens received approvals to invest nearly $5.58 billion into the sector, up 41 percent from a year ago. ‘They are worried, so they are looking for a safe place,’ said a Sydney-based immigration lawyer, who is advising on setting up a new fund exclusively for Chinese investors and regularly travels to Beijing and Shanghai. ‘They don’t want returns, not necessarily. They want a safe place to park their funds.’”

“At a new luxury apartment project called International City Park, a salesperson said sales have slowed sharply since the start of the anticorruption drive. Kaili is the capital of Qiandongman prefecture and the home of many government officials, who used to be big customers. ‘Government officials here have two or three apartments,’ according to the salesperson. They aren’t looking to buy more. ‘They are secretly trying to sell them,’ she said.”

“A group of students from a Communist Party school in Kaili, for instance, recently toured the prison and received a ‘vivid warning’ of the dangers of succumbing to corruption. The climax of the show: songs and dances performed by the prisoners about their crimes and their feelings of remorse. The performers were dressed in prison gray-and-white striped uniforms. ‘We are all party officials,’ said one of the attendees. ‘We all have had similar experiences. Now they have to spend their lives in jail.’”

Bits Bucket for August 22, 2014

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August 21, 2014

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August 20, 2014

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August 19, 2014

Bits Bucket for August 19, 2014

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August 18, 2014

Buyers Aren’t Seeing What Looked Like A Bargain

The Mercury News reports from California. “The turbocharged Bay Area housing market ran out of gas in July as the region turned out the lowest annual price gain in almost two years, according to Corelogic DataQuick. It’s most likely the inevitable winding down of a long run of astonishing price gains. Single family home prices are up about 50 percent in two years in Alameda and Contra Costa counties and about 25 percent in Santa Clara and San Mateo counties, and are up about 40 percent in the nine-county Bay Area. ‘Inventory has crept up, and more inventory is coming on all the time now,’ said Barbara Lymberis, with Perfect Harmony Properties in San Jose’s Willow Glen.”

“Alameda County, which along with San Francisco saw the sharpest year-over-year price gains in July, is cooling off in August, according to Glen Bell of Better Homes and Gardens Real Estate in Berkeley. ‘Prices are leveling off and we’re seeing some downward pressures,’ said Bell, who tracks the East Bay housing market. He said that about 13 percent of homes for sale in Berkeley have seen reductions in asking prices, and even more are slow to sell. ‘It’s an eye-opener for a lot of agents,’ Bell said.”

The San Gabriel Valley Tribune. “Southern California home sales hit a three-year low for the month of July and the region’s median home price dipped to $413,000, industry tracker CoreLogic DataQuick reported. ‘Prices came a long way in a couple of years, and now a lot of would-be buyers just can’t stretch their finances enough to buy in today’s more conservative lending environment,’ said CoreLogic DataQuick analyst Andrew LePage. ‘The more spectacular annual price gains of a year ago — over 20 percent — seem far back in the rear view mirror now.’”

“‘It’s really being driven by sellers, in my opinion. They are listing their properties way too high. I don’t want to say they are greedy …. but they always add another 10 to 15 percent on top of what the fair market value is. But buyers are not fooled by it. And as soon as we reduce the price the home sells within a couple weeks,’ said Robert Smith, a Realtor with Centennial Realty in Valencia.”

The Glendale News Press. “Anne McDonald, a Realtor with Hall & Chambers Real Estate in Glendale, said properties that are ‘listed at the right price’ are still seeing multiple offers, while prices are being reduced more often on homes that may be overpriced for the market and have not sold for several months. Prices are also being reduced more often on ‘unique’ homes, which may not have a yard or have small bedrooms, McDonald said. And as more homes go up for sale, it’s having a calming effect on the market. ‘As inventory rises, prices are stabilizing,’ McDonald said.”

The Union Tribune. “From June to July, the median home price in San Diego County declined by $5,000. At the same time, activity in the county’s real-estate market declined both over the month and annually. In July, there were 3,474 transactions closing in San Diego County, down from 3,736 in June, and an 18.5 percent drop from the 4,260 transactions in July 2013. In July, there were 8,122 active listings in the county, up from 5,443 a year earlier, the San Diego Association of Realtors reports.”

“Gary Kent, a La Jolla-based agent with Keller-Williams, said he considers the current housing market to be the first balanced market since 2000, meaning it’s not a strong buyer’s or seller’s market. ‘I think that’s partly because prices have reached the point that we have some people selling because they like the price they can get for the house,’ he said. ‘The flip side is that buyers aren’t seeing what looked like bargain prices anymore. Some buyers are dropping out of the market saying, ‘Well, it’s not a bargain.’”

From CNBC. “‘Homes that are in good condition and priced well are still selling quickly,’ said Geoffrey Schiering, a San Diego Realtor. ‘The inventory of homes for sale has risen slightly, but remains at a relatively tight 3-month supply. However, the number of closed sales has dropped substantially…this suggests that as some sellers have begun pushing their list prices higher, more homes are failing to sell.’”

The LA Times. “As the Stinson Beach County Water District board prepares to vote Saturday on a rationing regimen, the talk here is of the town’s split: full-timers whose numbers are dwindling versus an ever-increasing number of out-of-towners with multimillion-dollar second homes, many used as seasonal rentals. Vacation rentals are ‘a political hot button,’ and some longtime residents are calling for a ban said Sarah Butler, a broker with Oceanic Realty. But Butler called that notion ‘ridiculous. It’s what our economy is based on now. It would literally pull the rug out from under Stinson Beach.’”

The Press Enterprise. “When the California Homeowner’s Bill of Rights took effect in 2013, monitors of foreclosure activity across the nation predicted banks would take a collective pause on repossessions. RealtyTrac VP Daren Blomquist said he believes today that numbers are coming in to show the timeout is truly over. RealtyTrac reported that 575 homes were taken back by lenders in Riverside and San Bernardino counties in July, up 27 percent from July 2013. ‘What’s driving the increase continues to be the REOs,’ Blomquist said. ‘We have now seen five consecutive months where the bank repossessions have increased annually.’”

“Bank repossessions have rebounded in many other Southern California metro markets. San Diego’s overall foreclosure activity increased 12 percent in July from a year ago due to a 40 percent jump in REOs; Los Angeles’ overall foreclosure activity increased 10 percent as the result of a 58 percent jump in bank repossessions.”

“Blomquist said that banks that kept houses with mortgages in default out of the REO pipeline are coming out of limbo. ‘It demonstrates that the market is definitely improving, but there is a bit of a soft underbelly in California – still, with the lingering foreclosures that have been held back, in part, because of the Homeowner’s Bill of Rights,’ he said.”

Speculators Who Became Pessimistic

The Property Report from Thailand. “There’s a new language of tourist in Chiang Mai and it’s not Russian. Ubiquitous signs in Mandarin have appeared all over. From spas to property agents, everyone seems ready to cash in on the tourist yuan. A noticeable aspect of this development is the change to the city skyline as condo buildings have been popping up in outlying neighbourhoods, and prices have been spiking at THB80,000 (USD24,700) per sam, double what it was four years ago. Targeting the new arrivals is Kingsfield, a Singaporean-managed company with a strong architectural background. They have been conceptualising several modern developments, including The Consulate Residence, across the city and hoping to market them to Asian expats. ‘They’re not buying one or two, they’re buying six,’ says Matthew Lim. This is likely as a safety mechanism to externalise money, he explains.”

“Bernard Yeo from Century 21 group and manages one of the few international property brands in the city. ‘The Chinese buyers are mostly businessmen who have accumulated some funds and see the potential of Chiang Mai growing further,’ he says. ‘They’re quite fast in making decisions. So long as they feel the price is right, they will execute it without giving it any second thoughts.’ He points out that they like the clean air and freedom, though most are buying as investments rather than residences.”

“But is a bubble developing? In spite of the growth, the number of empty new shophouses constructed along the three ring roads that girdle the city is very obvious. The emerging middle class can create demand among the slew of new housing developments, yet the number of new condos seems optimistic. In spite of politics and a strong baht, the market demand is being sustained by Chinese money. Major alterations to the Chinese economy could be a blow for the city.”

From Xinhua. “China’s property sector showed new signs of cooling in July, with more cities reporting month-on-month price drops, official data showed on Monday. Out of 70 major Chinese cities, 64 saw month-on-month price declines for new homes in July, compared with 55 in June, the National Bureau of Statistics (NBS) said. ‘Within four months, new home price drops spread from individual cities, with only four in March and eight in April, to the record high of 64 cities in July. The pace of cooling in this round of property adjustments is faster than market expectations,’ said Zhang Dawei, chief analyst at real estate agent Centaline Property.”

“Zhang said the latest data suggested that the cooling trend was still evident. Growth of property investment decelerated for six months straight starting in February. In July, monthly property sales stood at 81.15 million square meters, representing a year-on-year decrease of 16.3 percent and a month-on-month dive of 34 percent. Zhang said rising inventory suggested that a housing oversupply has begun to show in some cities.”

From Dow Jones/Beijing. “A whiff of desperation lingers over China’s property markets. Investors betting on a quick real-estate recovery would be wise to consider the consequences. Last week the housing bureau in the southeastern province of Fujian announced a province-wide programme to insert itself in the market, directing local authorities, property developers, banks and construction firms to team up to rescue financially struggling projects.”

“Prices are sliding, and inventories of unsold properties are high across China. A recent study by data tracker China Real Estate Index System showed that 17 Chinese cities have housing inventories that could take more than five years to digest. There’s also an oversupply of property developers in need of financial help. Investors have taken local government easing moves as the beginning of the end of the property market’s woes. They might be better off taking it as a sign of how bad things really are.”

From IFR Asia. “Default rates in China’s trust loan sector are set to rise in the next 18 months as regulators rein in credit growth and loans to underperforming companies come due. The default rate in the country’s roughly Rmb11trn (US$1.79trn) trust industry could hit 5% this year and next year, according to analysts and economists. Trusts backed by loans to lacklustre industries, such as coal and real estate development, are expected to have trouble meeting repayment schedules, sources said.”

“‘With the industry’s current capacity, we estimate that it can handle a default rate of maybe 2.3%,’ said Yifan Hu, head of research at Haitong International. ‘According to the most conservative estimate, the default rate will be 5%, which is a huge distance from 2.3%.’”

“There are some signs that initial efforts to control bank off-balance sheet financing and non-bank lending, including trusts, has paid off. Total social financing, a measure of liquidity in the economy, fell 86% in July to Rmb273bn from Rmb1.97trn in June, the People’s Bank of China reported last week. It is the lowest level since 2008. In addition, new renminbi loans last month totalled Rmb385bn, down from Rmb1.08trn.”

Want China Times. “An increasing number of Chinese real estate investors have become unable to pay their mortgages and are facing legal action from banks, writes our sister paper Want Daily. The situation has emerged in China’s first-tier cities, with fears that it might develop into a full-blown version of the US subprime mortgage crisis that sparked the global financial status in 2008. Several real estate projects in second-tier cities which were very popular when launched have run into dificulties and developers have been forced to shift their inventory at lower prices.”

“The situation has been brought about in part by speculators from Hong Kong, Macau and Taiwan who became pessimistic about the future of real estate in China, Want Daily said. A document from a Jiangsu court reveals that the number of mortgage disputes this year has doubled from last year. Among 367 legal cases involving real estate disputes, there were 98 cases in which investors were unable to pay their loan back.”

“The document also suggested that over half of the defendants were from Fujian province. Several other cases involved groups of friends and family members who banded together to buy up real estate but when their banks called in their loans simply allowed the banks to repossess the properties without showing up in court.”

The People’s Daily. “An international manhunt is underway for a Chinese businessman who fled the country following allegations of fraud, authorities said. The International Criminal Police Organization (Interpol) has issued a red notice for Liao Rongna of the Zhengling Group, a private conglomerate based in Liuzhou City, south China’s Guangxi Zhuang Autonomous Region. Liao is said to have cheated his way into several billion yuan of loans by promising investors high returns, then failed to repay the debt. Being found guilty of this kind of crime in China can result in a death sentence.”

“According to Li, another local entrepreneur, people all over Guangxi mortgaged their houses and companies to local banks to raise funds for Liao, only to find the billionaire suddenly incommunicado. Police found more than 1,500 loan contracts worth 3.2 billion yuan in Zhengling files during their investigation. ‘I lent him 20 million yuan (3.25 million U.S. dollars) only this March, because he assured me that I could get a rate of 0.3 percent per day,’ said Li, who had previously splashed out 37 million yuan on a deal he thought was too good to be true. He was right. Liao has not paid back the money.”

“In recent years, any number of millionaire businessmen like Liao, accused of fraud or simply out of their financial depth, have fled the country. Life abroad with large with large sums of other people’s money is far preferable to dealing with bankruptcy or feeling the wrath of the domestic law. In a national teleconference in July, officials with the Ministry of Public Security called on police authorities to urge suspects to give themselves up and to offer rewards for information from the public that leads to arrests.”

“‘Even if they are in the farthest corners of the world, we will find them, seize them and bring them to justice,’ said Liu.”

From MarketWatch. “China’s corruption crackdown is now starting to make waves in another corner of the economy, as officials afraid of government scrutiny are dumping apartments. In one case late last year, an Inner Mongolia political leader named Wu Zhizhong was convicted of corruption, accepting bribes and embezzling public funds. Investigators said Mr. Wu owned 33 properties in China and one house in Canada. Xinhua, China’s official news agency, said the keys to all of his homes could fill up an entire handbag.”

“According to roughly a dozen property agents interviewed by The Wall Street Journal, officials are now afraid to buy luxury pads, and several are trying to offload properties that might raise red flags. According to real-estate agents, government officials make up as much as 20% of owners in the luxury housing market, and the agents say they simply aren’t buying much anymore. ‘A major way to corrupt an official is to give him a house as a gift,’ says Yan Jirong, a professor at the Peking University School of Government. ‘The anticorruption campaign is sending a signal’ that such tactics should be stopped, he said.”

“In June, one government official offered a two million yuan ($325,000) discount on his apartment in Beijing’s downtown Chaoyang district, originally priced at 22.5 million yuan, according to the real-estate agent selling the home. An advertisement for the four-bedroom home was titled ‘Distressed sale!!!’”

“Many officials mask their homeownership by using the IDs of their chauffeurs, relatives or surrogate buyers, according to real-estate agents. One agent in Beijing said a client was in the process of unloading a home when the client was arrested last year. ‘I didn’t realize he was an official until I saw his picture online when he was arrested,’ the agent said.”

The Slowdown In The Market Is Evident

The News Press reports from Florida. “The rebound in building permit activity is a positive indicator of stabilization. Single-family and multi-family permit activity in Lee, Collier and Charlotte counties — which we expect to end up at around 8,500 permits pulled by year-end — hasn’t reached year 2000 levels when around 10,000 permits were issued. This suggests the current level of permit activity is sustainable. However, sustainability of our current momentum will be affected by home price increases, interest rate increases, and the cost of land, materials and labor, along with initial signs of a potential oversupply in some market areas.”

“New home sales remain steady, but the large annual percentage increases may have come to an end. For example, a potential oversupply may spur on builder competition for buyers in the form of discounts and other incentives. New home prices have escalated so rapidly that the industry could be shutting out the primary middle-America homebuyers.”

The Orlando Sentinel. “Home prices in the core Orlando market continued a 37-month upward trend in July, but the number of sales dropped sharply from a year earlier and the previous month, a new report shows. Tom O’Brien, broker associate for Watson Realty in Lake Mary, said the slowdown in the market is evident. ‘I have four houses listed, and I’m struggling to get anyone to look at them,’ O’Brien said. ‘This time last year I would have had people clamoring to see them.’”

The Sun Sentinel. “Mom-and-pop landlords are making robust returns in South Florida, a new report says. Zillow ranks the region as the country’s second-best market for residential landlords who aren’t professional investors. But some landlords who bought at the pricing peak are still struggling. Mike Ablack, who rents the Coral Springs townhome he bought in 2005, falls just short of breaking even each month, in part because he doesn’t want to raise the rent and risk losing a good tenant. ‘I’m sure there are people out there making a killing,’ Ablack said. ‘But to me, it doesn’t make sense to raise the rent $50 and create animosity.’”

From WFLA. “Perry Garcia was thrilled to be able to buy his first house at the age of 21. He saved and started his home search for his growing family of four, including an 18-month old baby. He found a listing for a townhouse in Summerfield in Riverview. He purchased the foreclosed home from Fannie Mae and began renovations. But one day into remodeling his kitchen, he found toxic Chinese-made drywall, known to off-gas sulphuric gas that destroys appliances and could make people sick. The drywall in the kitchen is stamped, ‘Made in China.’ Then he removed electrical outlet covers, exposing corroded wires.”

“Fannie Mae spokeswoman Keosha Burns said Fannie Mae would never knowingly sell a home with toxic drywall. She said every home taken back in foreclosure is inspected. If an inspection showed this problem, the home would not have been sold, she said. Fannie Mae’s inspection missed the bad drywall, and so did Garcia’s. So what now? ‘We can’t disclose something we don’t know,’ Burns said. ‘It’s not our property anymore.’”

The Ocala Star Banner. “The Ocala metropolitan area had the dubious distinction during July of registering the highest foreclosure rate in the country — four times the national average. In recent months, 20 percent to 25 percent of all single-family home sales handled by Realtors have been foreclosures. Before the housing market collapse in mid-2008, such foreclosure sales were rare in Marion County.”

“Randy Alvord, president of the Ocala/Marion County Association of Realtors, said many of the foreclosures are a result of the struggling local job market, too many people not qualifying for government foreclosure help, and some people just walking away from their homes to find something cheaper to buy. Alvord worries that much of the local unemployment improvement is really because of low-paying jobs or part-time work.”

“Wayne Archer, executive director of the Kelley A. Bergstrom Center for Real Estate Studies at the University of Florida, said it is difficult to say why Ocala stands out. One reason is almost certainly the legal system, he said. In Florida, it takes an average of 1,000 days for a home to pass through the foreclosure process. That means it takes longer for foreclosures in Florida to be off the books — and off RealtyTrac’s lists. ‘So the sins of 2011 are still with us,’ Archer said. ‘It’s going to take several years.’”

The Destin Log. “Some reports show single family home sales were down nearly 17 percent in May. Condominium sales have been up one month and down the next. In contrast, luxury homes are seeing increased activity, while it appears that short sales and foreclosures are decreasing. The key word is ‘appears.’ Everything is not as it seems. In Florida it is estimated that there are still nearly 160,000 foreclosed properties. These are properties that are not on the market and not obtainable for purchase. Lenders have become strategic in the release of REO properties to the public.”

“Many of the largest lenders have created ’servicing companies’ to facilitate in removing the negative performing assets off their books. These companies are often actually owned by the lenders. This allows the banks to ‘appear,’ there’s that word again, to have stronger balance sheets than actually exist. This method gives the ‘appearance’ that the lenders quarterly performance is stronger than they really are.”

“To me, it is just a façade, a huge shell game. This deluge of foreclosed property is called ’shadow inventory.’ Because these large number of properties are not actively marketed for sale or a part of the multiple listing system which is used to calculate the number of months of inventory available in a specific market. The results published may not really be accurate.”

“A new term is Zombie foreclosure or Zombie Houses. According to RealtyTrac, ‘a zombie foreclosure exists when a homeowner abandons a house that is facing a pending foreclosure action. There are approximately 55,000 of these Zombie properties right here in Florida, more than triple the nearest state of Illinois, according to RealtyTrac.”

“When combined with bank-owned homes, the number is estimated to exceed 200,000 in Florida in either zombie or REO mode. Zombie homes in Florida have been in foreclosure process an average of 1,095 days, according to RealtyTrac. That is three years.”

Bits Bucket for August 18, 2014

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August 17, 2014

The Super Piggy Bank That Couldn’t Go Wrong

It’s Friday desk clearing time for this blogger. “Southern California home sales plunged in July and show little signs of rebounding. The pain is especially acute for brokers, who depend on a commissions. ‘There are a lot of hurting agents right now,’ said South Bay agent Leo Nordine, who said his volumes have been roughly flat this year. ‘There are too many agents and not enough sales.’”

“‘Dick Beeson, principal managing broker of Re/Max Professionals in Tacoma, said the market is healthy. And more inventory would come online and help further balance the market if lenders would bring their bank-owned and distressed properties to market faster, Beeson said. Lenders are well aware that home values are improving, so they are waiting to ‘maximize every property,’ he said.”

“Foreclosure filings in Meriden, Wallingford and Southington have increased since the peak of the financial crisis. If foreclosures are increasing this long after the start of the financial crisis, homeowners may have continued to make mortgage payments through the recession but ‘finally ran out of steam or a means to do so,’ said Robert Porter, chairman of Quinnipiac University’s finance department. Larry Madow, a Wallingford real estate agent, said he is having a harder time selling foreclosed properties because they’re often ’sitting vacant for a few years,’ causing deterioration.”

“In New Jersey, state court records show 31,500 new foreclosures cases have been filed as of Aug. 1, on track to be at least the third-highest annual total in state history. Sheriff’s sales have hit a four-year peak, and bank repossessions almost doubled in May. There have been shocks to the housing market before, said James Hughes, dean of the Edward J. Bloustein School of Policy and Public Planning at Rutgers. But this downturn has dovetailed with a change in attitudes as well as fortunes. ‘Up until the Great Recession, housing was the super piggy bank, the investment that couldn’t go wrong,’ Hughes said. ‘Now people know it can.’”

“At a glitzy show stall for a new residential development in Hong Kong, property agents re promoting the latest trend in the overcrowded city — high-end ‘micro-flats’ which still come with an eye-watering price tag. some of the newly built studio flats measure as little as 16 square meters (177 square feet) and are on sale for HK$1.5 million — almost US$200,000. ‘I’m 33 years old and I really need my own place,’ says Single entrepreneur Mike Ko. ‘The market is too expensive, so buying a studio flat is a good first step to home ownership,’ he said.”

“Agents are selling the pint-sized flats on the basis that the market boom will only continue. ‘You want to buy now because prices will just go up,’ said one agent at the new Mont Vert development in the suburban neighborhood of Tai Po. ‘You are saving, in a sense.’”

“The rental market has returned to pre-boom prices, with the downturn finally taking effect. ‘Many investors were given high rental appraisal prices and can no longer find tenants,’ said Angie Wallwork, the office manager of 360 Property Management Mackay. ‘Not all landlords are rich investors, the majority are ordinary people trying to get ahead,’ she said. Many owners of vacant property weren’t local and there were some who ‘haven’t even seen their houses,’ Mrs Wallwork said.”

“The glut of vacant homes across China owned by small investors has fueled a cottage industry: companies that help owners rent their homes for short-term stays. Wang Xiyuan said he has no plans to buy more property, preferring instead to focus on managing what he already owns: three apartments in Beijing and two in Changzhou. ‘Buying investment homes in hopes of flipping them for profit? That era is over,’ he said. ‘The villa has been empty till now, but I’m considering putting it up for short-term rentals if there is demand,’ said Mr. Wang.”

“More than one in five homes in Chinese cities is vacant, according to a survey. If China’s property market sees a sharp price decline, panicked investors of these empty units could rush to sell, said Li Gan, the professor who oversaw the survey, ‘and this could potentially trigger a housing-market collapse.’”

“A report recently disclosed that in May and June of this year, Hangzhou City of Zhejiang Province, Wuxi City of Jiangsu Province, Ningde City of Fujian Province, Xinyi City of Jiangsu Province and others are all experiencing defaults on personal mortgage loans. Xie Zuoshi, a Professor of Economics and International Trade School of Zhejiang University of Finance says, ‘Why did this happen? This must be due to prices falling more than the down payment. Or the value of the house now is lower than the returned loan payment to the bank in the future.’”

“Mr. Yang, Heye Real Estate Brokers Company, Zunyi City of Guizhou Province: ‘House prices fell too much now. It is impossible for the government not to save. Government is certainly able to produce some liberal policies to promote house transactions. If no one buys, then the economy is of course paralyzed.’”

“Xie Zuoshi: ‘Relaxing the restriction order or abandoning the restriction order cannot stop the falling housing prices. So what’s the aim for me to buy a property? I buy a house in the hopes that the value increases in the future. If the house prices are expected to fall, then I do not buy. If I do not buy, what sort of use is there in relaxing the purchase order, I would have had no intention to buy.’”

“In an interview with London-based Central Banking Journal last week, Reserve Bank governor Raghuram Rajan had warned of a global crisis arising from an asset price crash due to the cheap money policy followed by most countries in the developed world. ‘We are taking a greater chance of having another crash at a time when the world is less capable of bearing the cost,’ Rajan warned. ‘Instead of the political system taking action, reforming the economy, etc, as industrial countries also need reforms, they are relying on the monetary authorities to provide whatever boost that was required. I thought this was dangerous because monetary authorities across the world are boosting asset prices rather than real activity.’”

“Janet Yellen and other central bankers ignore the intricate mechanisms that balance supply and demand; they want to force people to demand more. They have no interest in discovering prices; they want to impose their own prices and they could care less what Mr. Market has to say. They believe they can improve the markets, control them, whip them into shape and force them to do their bidding.”

“‘No need to lift rates to curb risk, says Yellen’ is how the Financial Times reported her position last week. Someone must have told her that prices of houses, art, bonds, stocks and other assets are all getting closer to bubbledom.”

“Some lose their money because they are stupid. Some run into a ditch because they aren’t paying attention… or because they are paying too much attention. Some are too cautious. Others are too reckless. Some are arrogant. Some are ruined by timidity. Others by pride. Whatever your weakness, Mr. Market will find it. He will encourage you to dig yourself in deeper and deeper… Then he will fill the hole!”

Bits Bucket for August 17, 2014

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August 16, 2014

Bits Bucket for August 16, 2014

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