April 19, 2014

Bits Bucket for April 19, 2014

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April 18, 2014

History Repeats, First As Tragedy And Then As Farce

It’s Friday desk clearing time for this blogger. “Katrine and Stephen Campbell were up against stiff competition from 10 other bidders for the Reading home they wanted to buy. So, instead of making a specific offer, they promised to top whatever turned out to be the high bid by an additional $5,000. The increasingly popular tactic, known as an escalation clause, worked. The Campbells bought the four-bedroom house late last year for $597,000 — or $18,000 above the original list price, including the extra $5,000. ‘We must have looked at 50 places before making a bid on a house,’ said Katrine Campbell. ‘We made only one offer — and we got it.’”

“‘It sounds a little risky to me,’ said Peter Ruffini, president of the Massachusetts Association of Realtors. ‘It sounds sort of like issuing a blank check to sellers.’”

“A pattern of low inventory and rising prices has taken hold in the San Francisco Bay Area and Southern California real estate markets, DataQuick reported. A still-shaky economy and job uncertainty are preventing many homeowners from selling and moving up, said Stuart Gabriel, director of the Ziman Center for Real Estate at UCLA. Others are holding on to homes in the hope that prices will continue to appreciate as they did in last decade’s housing boom, the economist said. ‘Whether those bets will come through or not remains an open question,’ he said.”

“Ilkley MP Kris Hopkins has clashed with a fellow minister after welcoming the latest hike in house prices. The Housing Minister raised eyebrows after suggesting rising property prices were a ‘good thing,’ telling an interviewer: ‘I bought a house and I expect the value to rise.’”

“But Vince Cable, the Liberal Democrat Business Secretary, warned that home ownership was now ‘unaffordable’ to people on middle incomes. Mr Cable said: ‘A family on an average income is nowhere near able to afford a house at the average price.’ In the mid-1990s, the average house price was three times average earnings, Mr Cable added – but that ratio now stood at about 5.5.”

“Prime Minister John Key has agreed with Housing Minister Nick Smith that Auckland home owners should expect flatter house price inflation for some time as the house price to income multiple measure of affordability improves from a multiple of around seven now to the Government’s new target of around four. Key rejected the idea that the improvement in affordability could come through a fall in prices.”

“To get that multiple back to four would imply house prices remaining flat in Auckland for 19 years with average annual wages growth of 3%, as is currently the case. Or it would imply house prices dropping 43% for the multiple to be rectified, or a combination of both. ‘It’s unlikely there’ll be falling prices. In my view what you’re likely to see is a flattening out of those increases. The Government’s view is a modest increase in house prices makes sense. Rapidly escalating prices are not good for anyone,’ Key told his weekly post-cabinet news conference.”

“China’s latest message about the property market is simple and aimed at the man on the street: The home you’ve bought isn’t a one-way bet. Deal with it. That message has been pumped out through China’s state broadcaster as part of Beijing’s efforts to curb people’s enthusiasm for homes as an investment tool. One segment featured a woman in Shenmu county, who told CCTV that she earned more than 100,000 yuan from flipping two apartments in 2009 and 2010. Times are harder now, though, and she’s working as a taxi driver while struggling to pay her 3,463 yuan monthly mortgage for an apartment she bought 2011.”

“Originally she’d hoped to flip it at a higher price, but a credit crunch and oversupply of apartments has pinpricked her dream. CCTV said she hasn’t been able to pay for the past four months. ‘(The bank) sends me a text message every day,’ she said.”

“One resident in Changzhou who recently purchased her first apartment but has seen prices of neighboring units tumble nearly 20% told China Real Time. Ms. Wu was among those protesting outside of a showroom displaying models of property for sale in Changzhou last month. ‘There seems to be no way to get my money back. What can I do? I just blame it on my bad luck,’ she said.”

“For the second month in a row, the median single-family home sales price was down in February, according to Arizona State University’s W.P. Carey School of Business. However, according to the report’s author, Michael Orr, there is no reason to panic. ‘This is not a crash or anything like that,’ Orr said. ‘It’s a mild change, so people don’t need to panic. It’s more of a gentle easing off of the buying pressure that was unusually strong.’”

“Sales reports suggest that Loudoun County is coming out of a sluggish market that began with the government shutdown last year and chilled with cold weather throughout the first quarter of 2014. The conditions created an unusually high inventory. ‘We had a few really tough months, because of the weather. Inventory tripled in three weeks,’ said Beckwith Bolle, principal broker at Carter Braxton Preferred Properties in Leesburg.”

“RealtyTrac’s update on foreclosure numbers across the country show foreclosure auctions in Delaware rose 49 percent in the first few months of the year. Matthew Heckles, director of policy and planning at the Delaware State Housing Authority, says a spike is not exactly a surprise. He points out that authorities knew there was a backlog of foreclosures. ‘You know the water is in the sink, but if you’re under the drain none of it is getting through until you unplug the sink,’ said Heckles. ‘Because of the default rate staying constant and the foreclosure filings dropping in 2012, we knew there was a backlog. And eventually they would hit the streets and hit the courts.’”

“Orlando Regional Realtor Association Chairman Zola Szerences, said bank-owned home sales are expected to rise because of an uptick in foreclosure auctions during recent months. ‘In March, the number of foreclosures available for purchase was 125 percent more than in March 2013,’ he said. ‘For buyers who have struggled to find a suitable home within Orlando’s tight inventory and who have been worn down by competition and bidding wars, foreclosures represent a new avenue of opportunity.’”

“Janet Yellen, the new head of the Federal Reserve, gave her first big speech on monetary policy, and, in some ways, a fine address it was. But what was most striking to me was that she didn’t even discuss the financial markets and the overriding need to avoid another damaging speculative bubble. Indeed, Yellen didn’t use the B-word at all. Given that her immediate predecessors, Alan Greenspan and Ben Bernanke, will be remembered for, among other things, their roles in inflating the bubbles in the stock market and the housing market, that was a pretty remarkable omission.”

“Instead, she couched her remarks in terms of the old-fashioned inflation-unemployment trade-off, which is precisely the conceptual framework that encouraged Greenspan and Bernanke to shrug off what was happening in the financial and housing markets. The potential problem is that it sends a signal to participants in the financial markets that they don’t have to worry about interest-rate rises, so they can take advantage of cheap credit to leverage up and take more risks.”

“The issue is what’s going to happen over the next few years. The longer the Fed keeps interest rates at ultra-low levels and promises not to raise them rapidly, the greater the danger of history repeating itself. Two things that we know about bubbles are that, once they get going, they are self-reinforcing, and that they place central bankers in a bind. For as long as the bubble lasts, the economy looks great, and policy makers have an incentive to let it proceed. This is what happened to Greenspan and Bernanke.”

“If the U.S. economy were to experience a third bubble in twenty years, we would be confirming Marx’s famous statement, in ‘The Eighteenth Brumaire of Louis Napoleon,’ that history repeats itself, first as tragedy and then as farce. The Fed chair doesn’t want that written on her tombstone.”




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Bits Bucket for April 18, 2014

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April 17, 2014

Elvis Has Left The Building

The Press Enterprise reports from California. “Home sales across Southern California fell to a six-year low as median prices rose to its highest point since 2008, DataQuick said. ‘Southland home buying got off to a very slow start this year, with last month’s sales coming in at the second-lowest level for a March in nearly two decades,’ DataQuick analyst Andrew LePage said in a  statement. Freda England, of Century 21 Lois Lauer Realty, said prices are going up really high, really fast and that’s making buyers and sellers think twice. ‘There’s still a little hesitancy because of the economy,’ she said, pointing out that the market seems to be in somewhat of a watch-mode.”

“Rich Simonin, broker and co-owner of Wescoe Realtors, offered another view. ‘Elvis has left the building,’ he said. ‘The last rungs of investors are gone, and I think that’s taken unit sales down.’”

The Orange County Register. “Sales of new and luxury homes in March helped boost the Orange County median home price to $580,000, the highest point in seven years, according to DataQuick. The overall number of home sales continued to slide, however, down 5.8 percent, though sales of new homes nearly doubled from a year ago as more projects made a debut. Data also released this week by Steven Thomas show that Orange County’s housing supply is on the upswing, with 6,115 active listings, a 29 percent increase since January.”

“More buyers this year are looking for homes rather than investments, agents said, so the criteria is different from the frenzied bidding wars of last spring, when anything with four walls was a quick sell, often above the asking price. ‘An upgraded, well-maintained, priced-well home … is moving quickly with multiple offers,’ said Andrea Ballesteros of First Team Real Estate in Laguna Beach. But, she added, ‘we are seeing price reductions on homes that are not upgraded, not maintained well and do not show well.’”

The Los Angeles Times. “Southern California home prices are surging as the spring buying season heats up, with the median price in March hitting $400,000 for the first time in six years. But a deeper look at the market reveals a recovery divided between the rich and everyone else. The market for high-dollar homes is hopping, with sales on the rise and buyers launching bidding wars. But sales of low- to medium-priced homes have plummeted during the same period — with many potential buyers priced out.”

“‘Housing affordability is really taking a bite out of the market,’ said Leslie Appleton-Young, chief economist for the California Assn. of Realtors. ‘We haven’t seen this issue since 2007.’”

“Carey Chenoski, a real estate agent in Redlands, said she has seen less interest in homes for sale lately as first-time buyers struggle to afford the new higher prices. There are more homes on the market than last year — which is keeping further price growth in check — but they’re not selling. That is frustrating some sellers. Chenoski recently saw the price on a three-bedroom in Redlands reduced to $299,000 from $315,000 — and it still didn’t sell. So it was taken off the market. ‘Lately on Saturdays and Sundays, you see open house signs everywhere,’ she said. ‘The houses that last spring would be gone in the first day are sitting maybe 60 days.’”

“The number of homes listed for sale in March, while still historically low, was up 54% in the Inland Empire and 64% in Orange County compared with the same month last year, according to the website Realtor.com.”

The Mercury News. March marked more than 20 consecutive months of year-over-year price gains for single-family homes in the East Bay, South Bay and Peninsula, according to DataQuick. But the number of March sales in the Bay Area was the lowest in six years. In Contra Costa County, price gains have shrunk the supply of homes for sale for less than $300,000, according to Marilyn Cunningham, president of the Contra Costa Association of Realtors. That’s made it tough on first-time buyers, she said.”

“‘If I have client that’s a first-time buyer and they want to look under $300,000, that knocks out Concord,’ Cunningham said. ‘The house you could buy a year ago for $250,000 to $300,000 is now selling for $425,000. It’s the same in Martinez.’”

“The Contra Costa Association of Realtors said there’s hope — its latest figures show the inventory of homes has begun to grow.  ‘For the first time in recent memory, supply is poised to outstrip demand,’ the association reported.’

The Press Democrat. “In the last five years, sales of entry-level homes have never gotten off to a slower start in Sonoma County, while transactions for move-up and luxury properties have never been so strong at this time of year. The jump in higher-end sales helped push the county’s median sales price in March to $498,000, according to The Press Democrat’s monthly housing report compiled by Pacific Union International VP Rick Laws.”

“The median price has increased 56 percent in the last two years and now stands at its highest point for the month of March since 2007. Buyers last month purchased 353 single-family homes, a decline of 12 percent from March 2013. Real estate brokers said the pace of sales in the different price segments has been noticeable. ‘It seems like the bottom of the market has kind of gone stale,’ said Belinda Andrews, a broker associate for Century 21 in Santa Rosa. Meanwhile, she said, buyers were snapping up properties priced at or above $700,000.”

“One change in the market is that more buyers now are canceling transactions when issues arise, said Gerrett Snedaker, a senior VP in Sonoma for Wine Country Group by Better Homes and Gardens Real Estate . Those spending $900,000 on a home aren’t as willing to make thousands of dollars in unforeseen repairs without some concessions from the seller. ‘The buyers are fighting back,’ Snedaker said.”

From KCBS. “A new report by RealFacts, which provides an apartment database and tracks rental market rates has found that Bay Area apartment rents have reached record levels. Stephen Levy, Director of the Center for Continuing Study of the California Economy in Palo Alto, said the skyrocketing prices are having wide-ranging effects. ‘There are two challenges to a hot economy. One is traffic and high rents and housing prices are a second piece,’ Levy said. ‘Eventually, companies will be less likely to expand here [the Bay Area] because the people they are looking to hire will be looking at very long commutes or very expensive home prices and rents.’”

“And on whether the ‘coolness’ factor of living in the Bay Area or Los Angeles will wear off, Levy had some interesting thoughts. ‘I think people are struggling to deal with the fact that this is a hot area, we’re going to be more dense, and there’s going to be more traffic unless we handle it. It’s a challenge. If you want low housing prices and really good traffic, have a deep recession,’ he said.”




Bits Bucket for April 17, 2014

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April 16, 2014

Bits Bucket for April 16, 2014

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April 15, 2014

The End Of Crazy China Real Estate

Xinhua reports on Hong Kong. “The government curbs and the U. S. Fed’s tapering have cast a pall on Hong Kong’s housing market, dampening demand and dragging transactions to a 23-year low. Amid the waning demand, some developers started offering new flats at 10 to 20 percent below those in the secondary market. In one example, Sun Hung Kai Properties last month sold flats at its Riva development in Yuen Long at 7,600 to 12,400 HK dollars per square foot, up to 45 percent below list prices when the project was first launched in March last year and also 15 percent below second hand home prices in the area.”

“The secondary market didn’t fare well, neither. ‘In the secondary market, it was a much weaker picture, as falling new flat prices attracted customers to the primary market,’ said Wong Ching-yi, deputy chairwoman of the Midland Holdings. She said that six real estate brokers competed for one deal in 2012. Last year, more than 10 brokers scrambled for one deal. ‘The situation will become even worse this year,’ Wong added.”

CNTV on China. “Chinese mega cities housing turnover has shown a sharp fall in recent months. Some property developers are adopting a variety of new marketing strategies, including offering major discounts to attract home buyers. Some projects in Fangzhuang, Yizhuang and Tongzhou offer an online discount of as much as 50 percent, said Cai Hongyan, president of Real Estate Media Group.”

The Beijing Review. “Despite the housing supply mounting up, homebuyers seem to have gradually lost their enthusiasm and the market has begun to calm down. In Wenzhou of east China’s Zhejiang Province, housing prices have declined for 31 consecutive months, down 31 percent from the highest recorded level. ‘A sharp rise in housing prices always has something to do with speculation,’ noted Qiu Baoxing, Vice Minister of Housing and Urban-Rural Development, saying that what has happened to China now partly resembles the situation in Japan in the 1980s when market participants ranging from large enterprises to vegetable vendors jostled to have a finger in the property pie.”

“‘People tend to believe housing trade is the most lucrative business. As a result, capital and human power keep flocking to the real estate sector, which exerts a crowding-out effect on the real economy,’ said Qiu.”

From Forbes. “Developers in Hangzhou are now offering deep discounts, and investors and owners are noticing. And not just in that city. ‘It seems that the 30% price cut in Hangzhou really changed the way Chinese people think about real estate,’ writes Anne Stevenson-Yang of J Capital Research, ‘and I doubt there is any turning back from here.’”

“‘The banking system and the shadow banking system are becoming concerned about exposure,’ says David Cui of Bank of America. ‘Once people refuse to provide credit to developers, their balance sheets will be under pressure, forcing them to cut prices. Once enough of them cut prices, fewer people would buy because most people buy property only when they think the price is going up.’”

The Global Times. “Since March, 20 property developers in Guangzhou have been offering ‘zero down-­payments’ to attract buyers, in addition to large discounts and tax refund, the National Business Daily reported. New residential building sales volume in Guangzhou fell by 40 percent in the first quarter from a year ago, according to the report. So far this year, a total of six small to medium-sized banks have suspended mortgage loans to customers in Beijing partly due to fear of ­rising default risks, an online loan service provider, told the Global Times.”

Want China Times. “Many banks in cities across China have stopped offering home loans, with 25 out of 35 surveyed cities experiencing the trend, reports the Beijing-based Economic Information Daily. The banks have also adopted harsher scrutiny measures for screening home loan applications, while adjusting their interest rates higher for home loans. Observers have attributed the tightened loan measures to tense capital flows.”

“Meanwhile, figures showed that more than 70% of the cities across China have stopped extending home loans, the paper said. Some banks have replaced home loans with credit loans that demand higher interest rates, while other banks ask clients to purchase their financial products in exchange for an approval for a home loan application, according to finance-focused search platform Rong 360.”

From Reuters. “Suzhou, an ancient city in Jiangsu province 100 km (60 miles) west of Shanghai, became an industrial powerhouse, sitting at the heart of the Yangtze River Delta region that, along with the Pearl River Delta in Guangdong, drove China’s economic boom. Now it is ground zero for a painful corporate de-leveraging that has tacit government approval. One third of all loan delinquencies come from the region, and credit is getting harder to come by.”

“‘The more banks do this, the more they promote a vicious cycle, and companies are even less able or willing to repay their loans,’ said Zhou Dewen, vice chairman of the China Association of Small and Medium Enterprises.”

From NTD TV. “It is apparent that Li Ka-shing and his son are removing all their business from mainland China. In just one year, the Li family sold over 20 billion yuan of property in the mainland. Experts believe that, as Asia’s richest man, Li Ka-shing is very sensitive to China’s economic prospects. His ‘evacuation’ will influence the decisions of the rest of China’s rich. Yang Peichang, economist: ‘The Li family are the most sensitive people. They have low anticipation towards the Chinese economy first of all. Secondly, they are preparing early for possible chaos in China. This is because of the increasingly prominent social disorder in the country.’”

“Recently, real estate in first tier cities such as Beijing, Shanghai, Guangzhou’s have cut prices. The new tactics to draw customers have been displayed, such as beauty model show, hot dancing and free food. Ma Jiesen, economic commentator: ‘It is the end of the crazy China Real Estate. Low prospects are showing up everywhere. The CCP is still trying to pull up the economy by investment. However, it has become less and less efficient. This is because China’s economy is slowing down, and many drawbacks will emerge.’”




Bits Bucket for April 15, 2014

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April 14, 2014

Bits Bucket for April 14, 2014

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April 13, 2014

Gambling In A Legal Way

Readers suggested a topic on gambling. “Weekend topic suggestion: Get rich or die tryin’?”

A reply, “Do you have any big ideas which you could develop and sell to the masses?”

One said, “My idea is for a razor with 6 blades instead of 5. It’s extra better. Also I have an idea for a Kardashian with an even bigger booty.”

And finally, “I have nothing left with which I am willing to gamble, and for that reason….. I’m out.”

The Democrat & Chronicle. “The city’s tax foreclosure auction Friday at the Edgerton Community Center offered up about 530 properties from across the city and welcomed 350 bidders — both highs in recent years. These are not major developers but rather most are micro-investors, snatching up one or two properties at a time to renovate and rent. They choose houses having only an exterior or drive-by inspection to go on, making decisions based on the look, location and if it has a good roof.”

“‘Sometimes you are pleasantly surprised. And sometimes you are like, ‘Wow,’ said Joe Macko of Spencerport, who bid alongside his son and ended up with six properties — including a 2½-story on Agnes Street for $7,000. ‘I guess that is some of the fun of it; you are kind of gambling but in a legal way.’”

“Rocco Stebbins has been coming to these auctions for 12 years and owns about 40 properties; his father has been coming since before Stebbins was born. More than an hour later, he had yet to win a property. ‘They’re overbidding,’ Stebbins said after seeing houses go for more than $30,000. ‘I got houses next door I’ll sell them for half that. People get caught up.’”

“‘Anything that’s decent is going for money the houses aren’t worth,’ said Chris Cataldo of Irondequoit, who has been in the real estate investment business for three decades. ‘There’s more new faces. That’s because of all the TV shows (in which) you buy a house and get rich.’”

The Los Angeles Times. “Redfin recently asked 1,900 prospective home buyers nationwide what they planned to do with their old house when they bought a new one. As you’d expect, the majority said they would sell. But 39% said they’d rent it out. In Western markets like Los Angeles that have seen big price growth lately, the percentage was even higher. With the tenant covering the note, they can build equity — especially if home prices continue to rise. ‘It’s a market-based decision,’ said said Trevor Henson, managing partner at First Light Property Management in Manhattan Beach. ‘They know they can get really high rents right now. If I’m locked in on a 30-year fixed [mortgage] at 4%, and if home values are going up, it can make a lot of sense.’”

“Many of the new landlords are affluent and financially savvy, said Ellen Haberle, Redfin’s real estate economist. They’re not necessarily in it for the long haul, but they see a chance to profit right now. The wait-and-see approach is common, Haberle said. The conditions that make renting attractive could easily change. If rents fall or home prices rise enough, selling could be the smarter play. ‘These amateur landlords aren’t people who are doing this for a living,’ she said. ‘They just kind of happened into this opportunity.’”

Arizona Newzap. “The Phoenix housing market has been enjoying a renaissance of sorts since the 2011 recovery, but the latest real estate report from Arizona State University is showing a significant and sustained downturn to single-family-home sale prices. February 2014, which is the latest data available, marks the first time the median single-family-home sales price went down for a second month in a row since the 2011 housing rebound, the ASU report shows.”

“Phoenix-area home prices started rising quickly after hitting a recession low point in September 2011. Price increases began slowing down in July, with the market experiencing two monthly drops in the median single-family-home sales price this January and February — totaling about 5 percent. In February, the percentage of residential properties bought by investors was down to 20 percent from the peak of 39.7 percent in July 2012, the report states.”

“Walt Danley of Walt Danley Realty expects better numbers as the marketplace finds its new normal. ‘I think we are doing OK. I think at the end of 2013 we had a very strong January and February, but when we got into typically our selling season things have slowed down. I know that inventory is up year over year; in Paradise Valley we are about 21 percent above the number of active listings in inventory, but that inventory is not abnormal,’ Mr. Danley said. “What is abnormal is the lack of buyer demand.’”

“Mr. Danley says he has noticed a ‘lack of sense of urgency in the buyer pool. It has been a long time since I can remember buyer expectations and seller expectations so dramatically different,’ he said. ‘The reality is the market has shifted to a buyer’s market.’”

“‘We have changed from a seller’s market to a definite buyer’s market,’ said Robert Joffe of Prudential Arizona Properties. Mr. Joffe says the only thing investor buys did for the overall Phoenix housing market was make people feel better about the market itself. He says it had little to do with the overall health of the marketplace. ‘The only thing it does or the role it (investor activity) plays is in the amount of sales that happen,’ he pointed out. ‘They (investors) help the news, which makes everyone feel very good about things. It just helped everyone feel good, but I don’t think everyone believed that everyone was able to buy into it.’”




Bits Bucket for April 13, 2014

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