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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April 12, 2014

Bits Bucket for April 12, 2014

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April 11, 2014

A Con Only Works When The Mark Is Greedy

It’s Friday desk clearing time for this blogger. “Bidding wars. All-cash deals. Foreign buyers. Manhattan? No, Queens! Jim Pappas, the owner of Jackson Heights-based real estate brokerage Rock Realty, told the Daily News many are from China, but buyers from Greece, Brazil, India, Tibet and Nepal are also hitting the market. Some buyers are coming in with all-cash offers and are bidding on properties without seeing them. Pappas is currently handling the sale of a house on 84th St. in the historic section of Jackson Heights. ‘Five offers were submitted sight unseen in less than one week,’ he said. ‘It’s crazy. There’s a frenzy.’”

“The first quarter figures for 2014, supplied by Strafford County Registry of Deeds Dennis Vachon, show that real estate activity in the county, from January through March, has taken a plunge. In neighboring Farmington, Craig Lancey of R-W Real Estate had this comment to make on some prospective home purchasers: ‘Too many buyers spend months chasing the ‘pot at the end of the rainbow’ looking at distressed properties and making low ball offers, only to find their best opportunities have passed them by. The 2013 fourth quarter interest rates climbed as high as 5.5 percent. They are now in the low 4 percents. Free money doesn’t last forever!’”

“Is the Sun setting on Atlanta home prices again? Yes, it probably is. In fact, it’s fair to say that the Atlanta metro housing market is a few months past any supportable market peak, and there is some good data to support this conclusion. The big hedge fund buyers are slowing their home purchases, while ramping up to sell off rental properties to other investors. Turn-key investing is becoming a ‘hot’ item once again as the big investment companies who bought up billions worth of foreclosures now seek to quietly sell them off.”

“The media will be reporting months-old data, saying that home prices in Atlanta are up quite a bit over 2012 and are ‘recovering.’ But I think the recovery part of this is already behind us at the moment. 2012 and 2013 were the recovery, such as it was. At present, in April of 2014, my sense is that supply-demand problems are still wide-spread, and we’ve gained back 50% of the losses from the crash. The only question now is what generated those gains – growing end-user demand or large scale hedge funds buying up foreclosures.”

“One big reason that many sellers have held off because of the unusually harsh winter weather. But other homeowners — especially those who bought during the housing boom — still can’t sell without taking a loss, and those properties are likely to stay off the market. ‘There are still sellers waiting for the market to improve in order for them to get out,’ said Jeff Adler, a Keller Williams agent in Ridgewood.”

“‘A lot of sellers have been taken aback by the amount of decline from the peak to where the market is now,’ agreed Jorge Ledesma, a Re/Max agent in Teaneck. ‘It’s a bitter pill to swallow when you see so much equity in your home, and through no fault of your own, you see it go away.’”

“Nobody lives in the home next to Kimberly Merida. The three-story Bellevue house, which is in foreclosure, was abandoned last summer. If someone doesn’t claim the vacant property soon, it may become a problem for Merida. She has been thinking about putting her house on the market in a year or two, and abandoned properties tend to bring down a neighborhood’s real estate values. Nearly 36,500 homes in Pennsylvania were in foreclosure in February, according to RealtyTrac. ‘It might be (a concern) because foreclosures sell for less,’ she said.”

“There were 584 foreclosure starts in El Paso County in the first quarter of 2014 from January 1 to March 31. That’s 35 more than the same period in 2013, but more importantly, says Thomas Mowle, El Paso County Public Trustee, it could lead to the first year-over-year increase in foreclosures in El Paso County since 2008-’09 at the height of the housing bust. If the first quarter trend continues, Mowle says El Paso County will see a 26 percent surge in foreclosures this year. ‘There’s not an obvious cause for why it’s going up,’ Mowle said, ’so we hope that it’s going to go down, but it is a little troubling that it’s been continuing for a few months now.’”

“The other shoe has dropped. A foreclosure inferno that raged across the Inland region and other hot spots in the U.S. is considered by industry experts be effectively contained, but new data shows banks have begun to turn their attention back to properties that have been in limbo. Foreclosure starts rose 10 percent in California in the first quarter from the same period in 2013, according to RealtyTrac. It was the first double-digit percentage increase for filings involving notices of default — the first step in the foreclosure process — in California since 2009.”

“In the Inland region, the 3,911 notice of default filings jumped even more, 21 percent, for the first three months of the year from the 3,236 filings over the same span of time in 2013. Banks, now adjusted to the 2013 California Homeowner’s Bill of Rights, are now taking steps to clear out the standing stock of homes that have long been in default. ‘I would suspect it will take a year for lenders to catch up with the foreclosure deficit created in 2013,’ said Daren Blomquist, VP of Irvine-based RealtyTrac. ‘We estimate that only 10 percent of these bank-owned properties are listed for sale and more than half are still occupied by the former homeowner or tenant.”

“Businessman Allen Zhao has been waiting since the middle of last year for prices in the scenic southern city of Hangzhou to rise high enough this year to sell his two-bedroom apartment for about 2 million yuan. Last Monday, he was horrified to hear that his neighbour let her place go for just 1.7 million yuan. ‘That is not much more than the price I paid in 2012,’ said a rueful Mr Zhao, 45. ‘Now I’m regretting not selling earlier - more bad news about the property market keeps coming in every day.’”

“Please allow me to take you back to 1991 and a Japanese middle manager looking at a sleepy suburb, an hour and 20 minutes from his job in the city. The Tokyo city government employee, who was then 36, took out a loan for almost the entire $400,000 (about £1 million at today’s value) and bought a cramped four-bedroom apartment. With property values then rising at double-digit rates, he would easily earn back the loan and more when he decided to sell.”

“Ten years later he tried to sell his property for $200,000, half what he originally paid. I’m afraid he still lives in it today. Of course the assets bubble bursting in Tokyo sent a tsunami of property devaluation right across the country, and a recession that still continues in Japan.”

“Now if a one small-bedroom flat in Knightsbridge cost more than £1 million, what do you think Buckingham Palace would fetch if the for sale sign went up? I leave you to guess where this will all end. So to all those first-time buyers, especially in Somerset, please hold on before you buy, and don’t be fooled by this property boom or for that matter low interests rates. Remember being trapped in negative equity will rob you of your freedom to choose where you can live. For these are not my words, but those of a Japanese gentleman by the name of Mr Nakashima.”

“It’s been said that a con only works when the mark himself is greedy. It’s a paraphrased adage from the glory days of caricatured grifters and confidence men, but it still rings true today. David Crisp and Carl Cole, the now-forlorn faces of a notorious Bakersfield mortgage scam that skimmed tens of millions of dollars from fraudulent home purchases, have been sentenced for their crimes.”

“It’s still too early to tell, but by some accounts, California’s real estate world may be showing signs of rebirth. In some locales, home prices are inching upward and banks are once again dolling out lines of equity for home improvements and debt consolidation. Who’s to say that a thriving market wouldn’t once again entice others to take the path of Crisp & Cole? And, if they do, how long will we wait to make note of the fact that the emperor has no clothes?”

“As of now, we’ve got some finality. The scheme is dead and buried. Going forward, though, it’s a different story. If we don’t learn from this homespun cautionary tale, how can we really say we’re all that much better than the con men?”




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Bits Bucket for April 11, 2014

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April 10, 2014

Bits Bucket for April 10, 2014

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April 9, 2014

The Risks Surrounding A Decade-Long Run-Up

The National Post reports from Canada. “Areas to the west are seeing the same listing crunch that has characterized Toronto proper, which means that a growing pool of buyers is competing for an inventory that can’t keep up with demand. ‘We’re setting records left, right and centre. I’ve never seen anything like it,’ says Rob Kelly of Royal LePage Meadowtowne Realty in Mississauga. ‘Right now the buyer pool is so large with such a lagging inventory that it’s creating these crescendos. When there is a listing, it’s gone within days and attracting six, seven, eight, 10 offers. The houses are selling for well over what is considered market value.’”

“Another of his recent sales involved a three-storey townhouse in Oakville that was priced $50,000 higher than what the last comparable unit sold for. On the day the sign went up, there were three offers and a deal was done for a bit over asking at $517,000. ‘Sellers love it, but it’s a little scary for agents like me,’ he says. ‘We don’t want it to be too exaggerated. We don’t want a correction.’”

From News 1130. “If you’ve been hoping to buy a single-detached family home, you may not be able to do it here in Metro Vancouver. Tsur Somerville with the UBC Centre for Urban Economics and Real Estate says he doesn’t see prices for detached homes going down anytime soon, since the inventory is shrinking to make way for more condos. ‘It’s sort of two choices. One is live in something other than a single family house, and that’s a function of what else is available. Or, go live somewhere else.’”

The Richmond Review. “Compared to a year ago, houses were selling like hotcakes last month, according to the latest figures from the Real Estate Board of Greater Vancouver. But look at another set of numbers, and the picture wasn’t as rosy for March. Fewer houses sold in March than February, continuing a trend since nearer the peak of the market in 2011. Sales of condominiums and townhouses remained about the same last month compared to February, with 75 townhomes sold for a median price of $518,000, down slightly from the 79 homes that sold for a median price of $525,000 a month earlier.”

“Condo sales eked up, to 119 sales at a median price of $338,993, up from 116 for a slightly lower median price of $341,415. Regionally, March’s sales were 17.2 per cent below the 10-year sales average for March. ‘You cannot have a record year every year,’ said local realtor Tony Ling.”

The Canadian Press. “Signs of a cooling in the Canadian housing market piled up on Tuesday as both the pace of housing starts and building permits slowed. On a seasonally adjusted annual basis, urban starts were down 18.8 per cent in March. On the same basis, multiple urban starts decreased by 25.5 per cent while single-detached urban starts segment slipped by 5.4 per cent. Meanwhile, the drop in building permits was due in large part to a 31.5 per cent drop in the value of building permits for multi-family homes — such as condos and apartment buildings — to $1.5 billion for February. Plans for single-family homes fell 12 per cent to $2.2 billion.”

“‘While the extent of the decline was indeed surprising, major month-to-month swings of this nature are not unprecedented, for multiple unit dwellings,’ TD Bank economist Connor McDonald said. ‘This report highlights the downside risks surrounding homebuilding after a decade-long run-up. Weaker construction activity, along with general fatigue in domestic spending, will inevitably put more pressure on net exports to drive the next stage of Canada’s economic recovery.’”

From News Talk 1010. “Royal LePage says that after a ‘remarkably drab winter’ for real estate activity, the final month of the first quarter saw inventory increase noticeably. ‘It appears that it took only the slightest hint of spring to bring home sellers out of hibernation,’ said Phil Soper, chief executive of Royal LePage.’

The Herald Business. “There is little question that harsh weather has helped to dampen enthusiasm for home buying in the Halifax area this spring. Some real estate agents have been telling me it has been one of the worst markets in some time. The number of homes sold this year though the Multiple Listing Service in Halifax by the end of February was down 20 per cent from the same period last year. There is a large inventory of homes on the market. As a result, it is not unusual for sellers to lower their asking price in an effort to attract attention from would-be buyers.”

“Guillaume Neault, senior market analyst with Canada Mortgage and Housing Corp.’s Atlantic Business Centre in Halifax, attributes the slowing pace of residential construction in March in Halifax to the slight growth in the municipality’s employment and population levels. ‘The numbers that we have so far regarding the resale market are tracking very much along the same pace as last year. We may be a few percentage points — between five and eight percentage points — below last year.’”

The Ottawa Business Journal. “The price of detached houses in Ottawa edged up as condo prices fell during the first three months of 2014, according to Royal LePage Real Estate Services. ‘It is common to see a slowdown over the winter months, but 2014 has been one of the most extreme that I have witnessed,’ John Rogan, broker of Ottawa brokerage Royal LePage Performance Realty, said in a press release.”

“Despite slow sales, the market for detached houses in Ottawa is still balanced, according to Royal LePage. It’s a different story for condos, however, where excess supply is pushing prices down. Condo prices declined 1.4 per cent to an average of $258,500 during the three-month period. ‘Our condo market supply has continued to see some overflow but we remain confident that these excess units will work their way through the system in the year ahead,’ said Mr. Rogan in the statement.”

The Western Star. “All across the country headlines are reassuring Canadians: Don’t worry, they say — the housing price bubble isn’t bursting yet. The Conference Board of Canada is reporting that the seemingly over-inflated prices charged for homes from St. John’s to Victoria almost reflect their actual values, so if they do start to decline, they’ll only drop a little bit. There’ll be no crash. The Conference Board is responding to various claims to the contrary.”

“Those other banks and agencies, the Board says, are making faulty calculations. Instead of comparing incomes and apartment rents to house prices, which produces a high ratio that suggests overvaluation, the Board’s release says they should compare them to mortgage payments. That shows a more modest ratio and, consequently, suggests that home-buyers are almost getting their money’s worth. However, according to one of the board’s senior economists, “The housing market may be undergoing a correction in some regions and market segments, but it is more likely to be a soft landing than a bubble bursting.”

“The housing market in Labrador’s Upper Lake Melville area could be described as one such segment, except that it is not included in the board’s study area. Nevertheless, residents will soon discover if they’re in for a soft or a crash landing, since the central Labrador bubble has already burst. All it takes now is to watch how much and how fast it deflates.”

“The fact that it has been pricked is hard to miss. After many months of trying to unload their investments onto a flattened market, several cash-strapped entrepreneurs have had to drop their asking prices, or even take their houses off the market altogether and offer them for rent. So now people are wondering just how far prices will drop. A local real estate agent recently told the local CBC that he, in essence, expects the ’soft landing’ promised by the Conference Board for the rest of the country, not the ‘collapse to a ridiculously low level’ feared (or perhaps welcomed) by many of his neighbours and clients.”