November 25, 2015

Some Figure Prices May Be Nearing Their Peak

A report from Bisnow. “The other real estate sectors may have picked up this year in North Texas, but, make no mistake, multifamily was still the darling of commercial real estate for 2015. Many deals are seeing several types of buyers competing for the same assets, and private investors and midsized companies are stepping up into bigger deals with the money they’ve made over the last few years. They’re taking that equity, buying bigger deals, upgrading their portfolios and taking advantage of the economies of scale, says Marcus & Millichap national multi-housing group senior director Al Silva. NOI growth has contributed more to appreciation in this market (especially Class-B and C space) than low rates have. Al’s marketing Villa Bonita, a Class-C apartment complex in Dallas. Between 2012 and 2015, that property went from an NOI of $530k/year to $900k/year, a 67% increase.”

“Al tells us there are still real value-add opportunities out there, they’re just harder to find. The market is not overpriced across the board, he says; just don’t expect the same frenzied growth forever. No one is building any new B and C apartments, and the rent growth is sustained across DFW, Al says. Just a couple of years ago, not everyone was convinced that major rent growth was sustainable here; now, everyone knows it and that has helped drive down cap rates. As a result, DFW is beginning to look more like gateway and coastal markets with investors expecting appreciation and rent growth.”

The Dallas Morning News in Texas. “The number of homes for sale in North Texas has inched up for the first time in more than two years. Agents sold 8,138 single-family homes in October in the more than two dozen counties included in the North Texas numbers. In October, 20,254 preowned single-family homes were listed for sale with real estate agents, according to data from the Real Estate Center at Texas A&M University and the North Texas Real Estate Information Systems.”

“Dr. James Gaines, chief economist with the Real Estate Center, said homeowners who are having houses built might also be putting their current homes on the market. ‘Some figure that prices may be nearing their peak and want to cash out,’ he said.”

The Daily Journal of Commerce in Washington. “Seattle’s rental market seems to be softening a bit as all those new units under construction start to have an impact. Billy Pettit, senior VP at Pillar Properties, said he’s seeing signs that demand is slowing down. Market analysts are still reporting 95 to 97 percent occupancy rates for Seattle properties, he said, ‘but when we call (the properties) they’re more like 92 to 94 percent on the high end.’

“Pettit was part of a panel discussing multifamily trends in the Puget Sound area. ‘The next 12 months will be really telling,’ said fellow panelist Chris Rossman, VP at Wolff Co. ‘We’ll see how deep demand really is.’”

“Panelists said there’s one product we won’t see much of anytime soon from local developers: condos. Claudio Guincher, president of Continental Properties, said he’s sold 88 of the 117 condos in Vik, a complex in Ballard that will be done in January. Guincher said he chose to do condos because Ballard was ‘awash with apartments.’ The units have been selling for $550 a foot, he said, and demand has been shallow. ‘Young workers don’t want to get bogged down with a condo if they switch jobs,’ Guincher said.”

Vegas Inc. in Nevada. “Las Vegas builders sold the fewest homes and pulled the fewest permits in months in October, a new report shows. And while business this year remains above 2014 levels, one analyst doesn’t expect ‘any notable improvement’ in demand next year. Builders also pulled 556 new-home permits last month, a ‘disappointing’ sum and the lowest monthly tally since January, Home Builders Research founder Dennis Smith wrote.”

“Smith noted that Las Vegas’ housing market faces a number of roadblocks, including stagnant incomes and high rates of underwater homeowners. These and other issues ’seem to be hanging around like an unwanted house guest,’ Smith wrote.”

The Wall Street Journal. “The prolonged slump in crude prices is rippling beyond the oil industry into areas of the North American economy that, until recently, had managed to avoid the worst of the downturn. Signs of that distress are spreading throughout once-booming oil-producing regions across North America. Sales of single-family homes in Houston fell 10% on the year in October, the first double-digit decline this year, according to the local association of real-estate agents. Restaurants in Texas and the Southwest have experienced a drop in revenue and customer traffic, industry tracker Black Box Intelligence said in a recent report.”

“The slowdown is being felt acutely by towns in western North Dakota, the heart of the Bakken formation. Newly built apartment complexes and hotels in the regional hub of Williston stand half-empty, victims of disappearing oil field work crews. Williston rents have fallen by half from their peak in 2013, according to a survey by a local apartment management association.”

“John Sessions, who co-owns a real-estate developer called Bakken Housing Co., said his Eagle Crest multifamily apartment complex in Williston opened in February, but is still at 65% capacity. ‘Two years ago, it’d have been full up in two months,’ he said. ‘Back then, you could write a business plan with premium rents more akin to Seattle or parts of New York City due to the dearth of housing and seemingly endless flow of inbound potential employees in the oil patch.’”

KGW Portland in Oregon. “The stars of an HGTV show are coming to Oregon next week, but they’re not coming to film. They will be here for a seminar to teach people how to flip houses for a big profit. Tarek and Christina El Moussa, of the show Flip or Flop, remodel run-down homes in California, and sell them for big profits. Their traveling seminar has been advertising on Facebook and Instagram saying you can ‘…learn how to flip houses in the Portland area for a profit without using your own funds.’”

“Scrolling through the hundreds of comments on a sponsored Instagram post, most go like this: ‘Stay out of Portland!! You’re preying on low income families and marketing to out of state buyers that are pushing locals out. You are not welcome!!’”

“There are six stops for this seminar from November 30 through December 5. It will make stops in Eugene, Salem, Portland, Vancouver and Longview. Some people on social media promise to picket the locations.”

Bits Bucket for November 25, 2015

Post off-topic ideas, links, and Craigslist finds here. Please visit my Youtube channel which you can also find here:

November 24, 2015

Entering The Ponzi Stage

A report from Business Insider. “Quietly, over the last three months, Sotheby’s auction house has seen its stock lose one-quarter of its value. This is, in large part, due to its high-end clients. Something is about to happen to them. The polite way to say it is that — as Sotheby’s CEO Tad Smith put it earlier this month — they are about to get more ‘discerning.’ The frank way to say it is that they’re about to get walloped by this year’s choppy markets.Yes, we’re seeing record-breaking sales for some items, but if you look below that tier the picture isn’t so great. ‘The Modigliani sold last week for $170 million, but we’re seeing second-tier artists and second-tier works by the best artists starting to slide down in price,’ billionaire hedge fund manager and art collector Ken Griffin said in a CNBC interview.”

“For years, some have said that we are in the midst of an asset bubble spurred on by the Federal Reserve’s low-interest-rate policy. ‘When you keep the price of money at zero, all sorts of silly things start to happen,’ said Ruchir Sharma, head of emerging markets and global macro at Morgan Stanley Investment Management at a Bloomberg conference.”

The Press and Journal in Scotland. “The number of homes sold in the Aberdeen area has fallen in the last six months due to the effects of the oil price crash, new figures have show. A report by property firm Savills shows that the number of house sales in the Aberdeen area fell by 23%, while homes selling above the £400,000 mark dropped 44% between May to September 2015, based on the prior year. In the third quarter of the year compared to the same period the year before, homes over £400,000 saw their values drop 9%.”

“Faisal Choudhry, Savills’ head of residential research Scotland, said this had to be taken in context of the stellar rise in residential values in recent years. ‘Looking at the ten year average for the overall residential market, values are 24% higher in Aberdeen and 19% higher in Aberdeenshire, compared to 11% for Scotland as a whole,’ he said. The property group said it expects ‘further adjustment’ next year as the oil price is expected to remain subdued.”

The National Post in Canada. “The slumping oilpatch in Alberta continues to take its toll on the Fort McMurray housing market, as the average MLS sale price of a home in that northern community plunged by more than $117,000 in October. Data obtained from the Canadian Real Estate Association indicates that the average sale price for the month of $468,199 was down 20 per cent from $585,438 in October 2014. Sales also plunged by 41 per cent to 85 from 144 a year ago.”

“Doug Porter, chief economist with BMO Capital Markets, said there are many — mostly oil-driven — cities that have softened markedly. ‘The renewed sag in oil in recent months looks to have triggered a renewed weakening in housing markets across much of Alberta and Saskatchewan. Six of the 25 major markets reported double-digit declines in sales last month, and four of those were in these two provinces,’ he said.”

AFP on Brazil. “Brazilian Monica de Oliveira thought she’d forever left behind those days of worrying about getting her daughter new clothes. Biting recession in the world’s seventh biggest economy is starting to undermine the country’s widely lauded progress in dragging some 40 million people out of poverty, starting in 2003. De Oliveira knows what it’s like to be one of them and now she’s afraid her family is sliding back. She and her husband had a combined monthly salary of about $500 working as security guards in Caieiras, near Sao Paulo, and both have been laid off.”

“One by one their little luxuries have disappeared. Family outings on the weekend are over, the dream of a new car and bigger house is on hold. Even interest payments on debts are no longer feasible. She’s far from alone. ‘Soon there will be no new clothes for my daughters. We won’t go to the circus, we won’t go out to McDonalds,’ de Oliveira, 36, said. ‘I wanted to pay for them to study, to give them a better life.’”

From Perth Now in Australia. “Perth rental vacancies have risen 64 per cent in 12 months, according to a report. Property analysts SQM Research said the figure was based on a total of 7507 vacancies in October this year compared to 4567 vacancies at the same time last year. Asking rents were also down 6.4 per cent for houses and 8.4 per cent for units in the past 12 months, the company found. Perth is second behind Darwin for a challenged rental market, with their vacancy rate rising 75 per cent in the 12 months and their asking rents falling 20.5 per cent.”

“‘Clearly, vacancies have been soaring in Perth and Darwin, while our east coast capital cities have generally been stable,’ the SQM report found. ‘This is just one indicator on how the mining downturn has effected the economy. Clearly, not everywhere has been effected, but those cities and townships that do have exposure have been hit hard.’”

The South China Morning Post on Hong Kong. “Hong Kong’s home rents fell 1.8 per cent month on month in October, the biggest monthly decline in four years, a private study shows. The worst performer was City One Sha Tin, where average rents fell of 4.5 per cent month on month to HK$36.20 per square foot. ‘It is the biggest monthly decline in four years,’ said Wong Leung-sing, head of research at Centaline Property Agency, citing an increase in supply as a reason.”

“Rents have also been softening in popular housing estates such as Taikoo Shing. ‘The average rent once hit more than HK$42 per square foot when the market peaked in the second quarter, now it’s down to the HK$39.60 level,’ said Kenneth Chiu, sales manager at Centaline’s Taikoo Shing branch. ‘The average rent a few months ago was HK$26,000 a month. Now you can rent one at between HK$23,000 and HK$24,000.’”

From Bloomberg on China. “Chinese borrowers are taking on record amounts of debt to repay interest on their existing obligations. The amount of loans, bonds and shadow finance arranged to cover interest payments will probably rise 5 percent this year to a record 7.6 trillion yuan ($1.2 trillion), according to Beijing-based Hua Chuang Securities Co. Dubbed ‘Ponzi finance’ by Hyman Minsky, the use of borrowed funds to repay interest was seen by the late U.S. economist as an unsustainable form of credit growth that could precipitate financial crises.”

“‘Some Chinese firms have entered the Ponzi stage because return on investment has come down very fast,’ said Shi Lei, the Beijing-based head of fixed-income research at Ping An Securities Co., a unit of the nation’s second biggest insurance company. ‘As a result, leverage will be rising and zombie companies increasing.’”

“China Shanshui Cement Group Ltd. became the latest company to default on yuan-denominated domestic notes last week as overcapacity in the industry hurt profits and a shareholder dispute stymied financing. State-owned steelmaker Sinosteel Co., which pushed back an interest payment on a bond last month, postponed it again this week.”

“The amount of bad debt among Chinese banks rose 10 percent in the third quarter from the previous three months to 1.2 trillion yuan, about the size of New Zealand’s economy. Total debt at listed companies has climbed to 141 percent of common equity, based on a market-capitalization weighted average, the highest level in three years. Defaults will probably keep rising as profits fail to keep up with interest expenses at some Chinese borrowers, according to Zhou Hao, a senior economist at Commerzbank AG in Singapore. ‘We will see more defaults and rising bad loans in the financial system,’ Zhou said.”

Bits Bucket for November 24, 2015

Post off-topic ideas, links, and Craigslist finds here. Please visit my Youtube channel which you can also find here:

November 23, 2015

Once The Market Starts To Soften: ‘Get Out Of Dodge”

The Real Deal reports on New York. “Forget about aspirational pricing. Sellers serious about offloading their luxury apartments will need to slash prices to find buyers who have plenty of new development alternatives to choose from, top brokers said. After a slow start to the typically busy fall, agents said they’re just beginning to move product – and only when their sellers get real about asking prices. ‘Most sellers are absolutely not realistic,’ said Dolly Lenz, speaking at a conference hosted by the magazine Haute Living. ‘They’re buying into the hype and they’re bringing it to the brokers and saying, ‘Oh no, my apartment will sell for $15 million.’ Well, the last sale in your building was for $8 million.’”

“Some sellers appear to have gotten the message. Approximately 650 New York City listings lowered their ask by at least 5 percent over the last 30 days, compared to 419 listings in the previous 30-day period, according to StreetEasy. A total of 29 of those homes were priced at $10 million and up. ‘Everyone expected there to be an uptick in activity coming back from Labor Day but there wasn’t,’ said Compass’ Leonard Steinberg. ‘In November, all of a sudden the email inboxes are cluttered with price reductions.’”

The Miami Herald in Florida. “Pop star Pharrell Williams is giving the sale of his downtown Miami penthouse another try — and he’s willing to take a $1.6 million hit to get rid of it. The 42-year-old singer relisted the 40th-floor penthouse at Bristol Tower after more than a year off the market. According to MLS listings, Williams now wants $10.9 million for the three-floor, 10,000-square-foot crib. One drawback: Property taxes currently are about $60,000 a year.”

“Williams bought the place at the height of the real estate boom for $12.9 million. He has been trying to unload the digs for more than two years. The singer first listed it in November 2012 for a whopping $16.8 million, but the sale price melted steadily until Williams pulled it off the market a year ago.”

The Mercury News in California. “Home sales slowed in October across the Bay Area, dropping by just under 2 percent from the year before even as prices kept going up. Median sale prices rose, though not by the double-digit margins that had become routine for some parts of the region during the frenzy of the past several years. In Santa Clara County, a typical home sold for $869,000, up 6 percent from $820,000 in October 2014 — though down from $910,000 in September 2015.”

“Pleasanton-based agent Steve Mohseni, described ‘a general softening of the market. We may be heading into a period when appreciation will slow down compared to what we have been seeing over the past five years. Buyers are rethinking, pausing.’ After years of record prices, he said, ‘their willingness to pay more into new highs will be somewhat limited.’ The situation is pushing some potential sellers off the fence: ‘Once the market starts to soften, then people start thinking, ‘Well, let me get out of Dodge.’”

The Press of Atlantic City in New Jersey. “Atlantic County may be at ground zero for people losing their homes, with the nation’s highest foreclosure activity, but it is not alone in facing scores of abandoned properties. The was clear this week at the New Jersey State League of Municipalities meeting in Atlantic City, when a workshop called ‘Creative Solutions for Vacant Properties’ attracted more than 500 local government officials from all over the state. The huge crowd forced organizers to move the session from a regular room to a cavernous conference room.”

“‘In all my years of coming here I have never seen anything like this,’ said Michael L. Zumpino, CEO of the consulting firm Triad Associates, of Vineland, a member of the panel. ‘This large crowd shows it’s not just an urban city problem, it’s a problem for all of us,’ said Walter Denson of Trenton’s Housing and Economic Development office.”

The Herald Business Journal. “The symmetry of housing price history is disturbing to some investors and economists. In 2006 home prices reached their apex and began to decline. Five years later, the decline reached its nadir and prices began to recover. Next year, five years into the housing price growth, housing prices will probably have returned to their 2006 level. What bothers some analysts is the five-year down phase approximately matched by the five-year up phase. The question they are asking themselves is whether this is some sort of market cycle that will soon bring another housing bust?”

“There is general agreement that the housing price situation was a bubble. And when that housing bubble burst, it took Wall Street and the rest of us with it. Which is it, then? Is it a bubble now? Is the five-year pattern a fearful symmetry or just a coincidence?”

“There certainly is an eerie resemblance between where we are now and those pre-crash days. A report published by the New York Federal Reserve Bank in 2004 was entitled, ‘Are Home Prices The Next Bubble?’ and addressed the concerns of investors and economists at that time. What their research indicated was that, ‘A close analysis of the U. S. housing market in recent years, however, finds little basis for such concerns. The marked upturn in home prices is mostly attributable to market fundamentals. Home prices have essentially moved in line with increases in family income and declines in nominal mortgage interest rates.’”

“Researchers at the Federal Reserve Bank of San Francisco analyzed the current housing market and found that both the loan and the household financial data are encouraging. In a report entitled, ‘What’s Different About The Latest Housing Boom,’ they write that, ‘…conditions in the latest boom appear far less precarious than those in the previous episode. The current run-up exhibits a less-pronounced increase in the house price-to-rent ratio and an outright decline in the household mortgage debt-to-income ratio, a pattern that is not suggestive of a credit-fueled bubble.’”

“The Federal Reserve efforts to find a bubble definition sturdy enough to support monetary policy, though, have produced disappointing results. It is still not clear how to distinguish a bubble from a rising price environment caused by shifts in supply, demand, or both. And, worse, it is not clear what kind of Federal Reserve intervention would deflate a bubble efficiently enough to avoid widespread collateral damage throughout the economy.”

“In the end, it may be about symmetry after all. The current housing market is different from the bubble of last decade, but home prices still might stall or even decline. And because the Federal Reserve cannot really lower interest rates that are already near zero, our economy will have to respond on its own as best it can. That would be different from last time, too.”

“What haven’t changed are the imbalances in the overall economy, and in the housing market, due to wage stagnation and artificially low interest rates. Those factors provide enough symmetry with the pre-crash markets to make the prospect of a faltering housing market worrisome.”

Bits Bucket for November 23, 2015

Post off-topic ideas, links, and Craigslist finds here. Please visit my Youtube channel which you can also find here:

November 21, 2015

Luxury Apartments … Going Up In The Hood

A weekend topic on rents, affordability and the housing bubble. WWLTV in Louisiana. “Uptown remains one of the most expensive places to live in New Orleans. Realtor Greg Jeanfreau said the current growth and demand for housing in New Orleans is unprecedented. It has its plus and minuses. ‘You have people moving here from other parts of the country. To them, $500,000 is like $50,000 to us, and it doesn’t seem like that much. It’s a pretty wild time. There’s a lot of excitement, but there’s a lot of things happening and there’s people that aren’t happy about it.’”

“According to a report by HousingNOLA, rent in New Orleans have jumped 50 percent from 2000 to 2013. Home values have soared 54 percent in that same time frame. Harold Brooks said he’s feeling that pressure. For almost 20 years, Brooks has lived at a house on St. Claude Avenue near Poland Avenue in the Upper 9th Ward. It’s an area that Brooks says is increasingly gentrifying, driving up the costs of homes and rent around him. ‘You’re going to do one of two things: If you own a house, you’re going to sell it, if you’re renting, well, you’re just going to move.’ Brooks said.”

The Star Tribune in Minnesota. “Ralph Gilbertsen, 74, lives on about $900 a month from Social Security and pays around $250 for his one-bedroom apartment. The balance of his $750 rent is covered by Section 8, a federal government program that provides housing subsidies to low-income people. But Gilbertsen, along with hundreds of other residents, will have to find a new home. The Crossroads has been sold to a developer who’s spending millions of dollars to bring it upmarket.”

“It’s a scenario being played out across the Twin Cities, housing advocates say. With apartment vacancy rates in the metro area hovering around 2 percent, landlords have the market clout to raise rents and refuse vouchers, both steps that tend to force out low-income residents. ‘Crossroads is a huge example of this happening, and I think we’re going to continue to see it across the metro area,’ said Eric Hauge, an organizer with Home Line, a nonprofit tenant advocacy group. ‘It’s not illegal to discriminate against poor people.’”

The Yale Daily News on Connecticut. “I hadn’t come to the New Haven mayoral debate expecting fireworks. Everyone knew incumbent Mayor Toni Harp was going to win re-election in a landslide. But the forum had a tense moment when her opponent Ron Smith, former city clerk and Newhallville alder, criticized the new wave of ‘luxury apartments … going up in the hood.’ He cited Winchester Lofts in Newhallville as one example, whose units are unaffordable to many residents of the Elm City. ‘You know good and well,’ he said, his voice rising, ‘we can’t afford $1,900 a month.’”

The News Press in Florida. “The good news from a Zillow market report Friday was more apartments are opening across the county, slowing the rate of rising rents. The operative word is slowing. Rents continue to rise much faster than the historical norm, and faster than incomes, the Zillow October Real Estate Market Report says. ‘The owners I deal with, who read the national reports of rising rental trends, push me to raise their rents even higher. What they don’t realize is we’ve already increased them by a couple hundred dollars,’ says Larry Simons of Home Hunters USA, a leader in the local apartment market.”

Vegas Inc. in Nevada. “Las Vegas’ rental market has heated up in recent years, with investors buying cheap homes in bulk to lease out and landlords buying and building apartment complexes. The growth in rental prices, however, is far from robust, a new report shows. The median home-rental price in Southern Nevada was $1,214 a month in October, up 2.6 percent from a year earlier, according to Zillow.”

“Investors flooded Las Vegas and other hard-hit cities after the housing bubble burst to scoop up cheap rental homes. The buying binge pushed up local home values at one of the fastest rates nationally, raising fears of another bubble. Apartment investors also flocked to Southern Nevada to buy and build properties. In Southern Nevada, by comparison, investors are paying an average of $80,401 per unit for rental complexes this year, according to brokerage firm Colliers International.”

“Most of the construction today is in the southwest valley and Henderson, and some real estate pros have said developers might be overbuilding.”

Nevada Public Radio. “Keith Lynam, president of the Greater Las Vegas Association of Realtors, told KNPR’s State of Nevada that stability has returned to the Valley’s housing market. He said home appreciation is getting closer to where it should be and there are no ‘hot pockets’ of neighborhoods that are outpacing the rest of the valley. ‘It’s a great time to buy and a great time to sell,’ Lynam said.”

“However, Lynam said there are still 40,000 vacant homes in Southern Nevada that need to be dealt with. ‘We’ve got a tremendous amount of vacant homes out there that we need to address,’ Lynam said, ‘And unfortunately none of us can do anything about. It’s those people in the financial institutions that need to take an action on that.’”

The Union Tribune in California. “A new report from the federally backed National Resource Network published a long list of economically challenged cities, with a focus on California. The report spotlights our state because of its size and urbanization – and its high concentration of distressed places. The ‘Hidden In Plain Sight’ report lists 77 distressed California cities – defined as those with at least one of the following: unemployment rates above 9 percent as of 2013, where 20 percent or more adults are in poverty or where the population had declined by at least 5 percent over the last decade.”

“The report echoes data from the U.S. Census Bureau. Using the bureau’s newer supplemental poverty measure, California’s poverty rate over 2011 to 2013 was 23.4 percent, representing about 9 million people. This is the highest poverty rate of any state ‘largely due to California’s high housing costs relative to the rest of the country.’ The data is a bit old, but there’s little question that distress levels remain high in these places.”

“Urban writer Joel Kotkin, a fellow at Chapman University in Orange, fears California is becoming a ‘feudal society’ – an economic system with rich and poor and where people lack the opportunities to move into a different economic class. In his view, the state’s tax and regulatory policies are driving good blue-collar jobs to other states, while California’s land-use policies drive up the cost of housing, making it harder than ever to climb those economic rungs.”

The Kingman Daily Miner in Arizona. “David Sexton recently moved to Golden Valley from ‘Commie-fornia’ to escape government overreach, and that’s what he sees in a Mohave County zoning ordinance that would restrict the sale and relocation of manufactured homes older than seven years. ‘They’ve regulated themselves into Third-World status,’ Sexton said of California’s failing economy. ‘Old mobile homes have a following like old cars. People love them for what they are, and unfortunately, they’re both being regulated into oblivion.’”

“Sexton was among more than a dozen people who spoke Monday at the Board of Supervisors regular meeting in opposition to the ordinance that was scheduled to take effect Dec. 2. Supervisor Jean Bishop, whose district covers Golden Valley, Dolan Springs and Chloride, made a motion to postpone enforcement of the ordinance and send it back to the Planning and Zoning Commission for reconsideration or repeal. The board voted 5-0 to approve her motion.”

“The purpose of the ordinance, which was recently adopted by the board, is to make sure manufactured homes meet federal construction standards and that they’re consistent with surrounding development. Bullhead City enacted a similar ordinance a few years ago to clean up blighted neighborhoods. ‘We already have a tool called code enforcement,’ Elise Herron told the board.”

“Golden Valley resident Carmen Johnson asked for a complete repeal of the ordinance, saying it creates a hardship for low-income families wanting to move to the valley and for anyone who wants to buy a mobile home over seven years old. ‘Effectively, this eliminates growth and the creation of jobs and business,’ Johnson said. ‘It’s condemnation,’ added Margaret Wene. ‘You destroyed the values of our property, but you want to put a value on it and tax us. You’re going to destroy the valley and all the other areas.’”

“Supervisor Hildy Angius agreed with citizens’ comments about code enforcement issues and overregulation. ‘I think this is a really misguided ordinance and if it was up to me, I’d take it off now and don’t even waste any more time,’ she said.”

Bits Bucket for November 21, 2015

Post off-topic ideas, links, and Craigslist finds here. Please visit my Youtube channel which you can also find here:

November 20, 2015

It’s Investors Who Are In The Headlights

It’s Friday desk clearing time for this blogger. “Is Fed chair Janet Yellen a sorceress who needs to conjure up a new spell? One online retail executive seems to think so. Patrick Byrne, the CEO of Overstock, said in the company’s earnings release Monday that the United States economy has been lifted by ‘Janet Yellen’s Magic Money Machine.’ Presumably, the ‘machine’ is the Fed’s poiicy of low interest rates. Byrne said this machine ‘has kept sales of homes and home-related products robust.’ But he warned of a discouraging shift in the economy in the third quarter.”

“He noted that there were ’sharp traffic swings for competitors with sites catering to disposable income’ — particularly fashion and jewelery retailers. During a conference call with analysts, Byrne elaborated on these comments, saying that ‘there’s a real secular, fundamental question mark about the economy’ and that he is ‘quite bearish’ about consumer spending outside of housing. Yes, Home Depot and Lowe’s are still doing well. But the lousy results from Macy’s and Gap this week are not a good sign. Walmart is the worst-performing stock in the Dow this year. And shares of higher-end retailers like Nordstrom and Tiffany have plunged too. So there’s a case to be made that Yellen’s magic is starting to wear off.”

“People buying homes in Waco generally find bargains, according to a report by real estate giant Coldwell Banker. Trammell Kelly, a residential real estate specialist with Kelly Realtors, said would-be home buyers from California or the Northeast typically sell upscale homes before considering a move to Texas, or Waco. ‘They are simply amazed at how much more house they can acquire here for the price,’ Kelly said, adding he is seeing an increasing number of investors from California and even the Dallas-Fort Worth area who are buying homes locally not to live in but to resell.”

“Coldwell Banker reports that 50 of the top 100 most expensive markets in the United States are in California, with Newport Beach topping the list. The average listing price of a four-bedroom, two-bath home there is $2.29 million.”

“Orange County home sales and prices ‘lost steam’ in October, dipping more than usual from September amid the elevated cost and restricted supply of homes, CoreLogic reported. ‘The luxury market got hit in September because of the stock market dip,’ said Steve Thomas, author of ReportsOnHousing. ‘For example, demand in Newport Coast dropped down to 5 pending sales (as of) … Sept. 24, and there were 121 homes on the market at the time.’”

“The fictional home of Al Pacino’s character (Tony Montana) in the 1983 film Scarface has sold after a price drop of almost US $23 million. The ridiculously opulent Montecito, California mansion spent a whopping 17 months on the market. Russian-born financier Sergey Grishin bought the estate for a reported $20 million in 2008, when U.S. housing prices went through a major crash. Thinking he could make a pretty penny, he waited until 2014 to put the Montecito home on the market at $35 million, but no buyers bit. Months later, he dropped the price by nearly half, to $17.9 million. It finally sold at $12.26 million, leaving Grishin over $7.7 million in the hole.”

“RealtyTrac released their October Foreclosure Market Report and it’s a mixed bag. Despite a fairly steady flow of repossessions and auctions over the last few years Chicago’s shadow inventory has really flattened out. Gone are the days when it would decline by 800 or more units in one month. In fact, October’s level was actually up over September. That was the second time in less than a year where we saw an actual increase in the level of shadow inventory.”

“I don’t understand why this is happening since you would expect the auctions and repossessions to be steadily driving this number down. Could we really have reached a steady state where we are perpetually dealing with the most intractable properties that you can’t even give away?”

“Not so long ago, houses in Alberta suburbs couldn’t be built quickly enough to keep up with demand — but a report says the number of new houses that aren’t sold or rented has jumped by nearly one-third in Edmonton and by a smaller degree in Calgary. An ATB Financial report says Edmonton has seen the number of so-called ‘unabsorbed’ new houses skyrocket by more than 30 per cent in the past year. Currently there are 403 unabsorbed houses in Calgary, a number that’s falling, compared to Edmonton’s growing number of 949, according to ATB Financial. Some ATB economists believe the current economic conditions in the province will cause the number of completed but so-called ‘unabsorbed’ homes to grow.”

“Housing investors have suddenly become a bunch of nervous Nellies. A survey by Digital Financial Analytics, shows only 58 per cent of one-property investors expect higher prices in the coming 12 months, down from 83 per cent in the September survey. The change of heart has been no less dramatic for portfolio investors owning more than one property, with only 63 per cent now expecting price rises, compared with 89 per cent in September. The balance of supply and demand in the housing market is continuing to shift, with a divergence between the number of homes newly listed for sale and the total still on the market waiting for a buyer. Sydney and Perth share most of the blame.”

“‘House price expectations are on the turn, with investors, those eternal optimists, now more uncertain about future capital appreciation,’ DFA’s principal Martin North said. All market segments, including home owners and first home buyers, are less inclined to expect rising prices but it’s investors who are ‘in the headlights.’ ‘Such large changes over just a couple of months are unusual,’ Mr North said. The survey’s construction may even understate the extent of the turnaround. It is based on responses gathered over the latest 12 months.”

“Westpac economist reckon the Auckland housing market is suffering a hangover from what it calls ‘recent excesses.’ ‘The weakness was especially concentrated in Auckland, with sales down 15 per cent and prices down almost 5 per cent in just one month,’ say the report’s authors. ‘This confirms the idea that some of the recent froth in the Auckland market was driven by investors getting in ahead of the new regulations.’”

“The report says investors have done their dash for now, and the ‘Auckland housing market is likely to suffer the resulting hangover, for at least a few more months.’ Peter Thompson, managing director of real estate firm Barfoot & Thompson, says: ‘What is clear is that the rate of price rise that occurred in September, at the start of the spring season, has not been sustained. Clearance at auctions has definitely slowed,’ he says. ‘However, buyers are no longer under the same pressure to meet vendor price expectations, and the properties that are selling are those with realistic reserves.’”

“With the real-estate boom entering its fourth year banks and developers are eager to expand credit to the sector, though regulators say they are monitoring lending for real estate for signs of a bubble. The National Bank of Cambodia could increase the risk weights associated with real-estate lending. ‘The real-estate and construction sector has grown very fast. It seems to me that supply is in excess of demand. It is a bubble, but I don’t know when it will bust,’ said Economist Srey Chanthy. ‘If you have time, spend a day hanging around in Phnom Penh and the suburban areas. You will find that there are a lot of real-estate projects going on, many buildings, apartments/condos and they have low occupancy rates, some are even empty. Most project owners, apartment and condo investors, buyers and customers borrow from banks. If they cannot pay, the bust will occur and prices will drop.’”

“Stephen Higgins, managing partner at research firm Mekong Strategic, agreed. ‘It’s a bubble, particularly in the apartment market, with many buildings having very high vacancy rates, yet there’s a lot more supply coming online,’ he said.”

“Home sales Belgravia, the London district favored by Russian oligarchs for its large Regency-style houses, are slumping after the collapse of the ruble against the pound. Transactions dropped 25 percent in the neighborhood in the 10 months through October from a year earlier, compared with a decline of almost 20 percent in the rest of central London’s best districts, according to researcher Lonres. Sales of luxury homes in the capital have also been damped by an increase in the stamp duty sales tax and falling commodity values. That’s prompted broker W.A. Ellis LLP to warn that ‘the bubble may already have burst’ for the most expensive properties.”

“‘The share of Russian buyers in the prime central London market is down due largely to the currency weakness and difficulty in getting money out of the country,’ said Charles McDowell, who advises wealthy clients on buying luxury homes in London. ‘This has affected Belgravia and Knightsbridge in particular, which is very much the Russian heartland.’”

“During his career apogee in the early 2000s, Oscar-winning actor Nicolas Cage was one of the highest-paid celebrities on the planet and was making as much as $40 million a year. In 2009, the once high-flying Cage filed for bankruptcy. At the age of 51, he’s only now climbing back to financial solvency. How could a multi-millionaire movie star fall so far, so fast? Simply put, Cage made colossally stupid real estate investments — and dug a deeper hole for himself through poor management of his property-related debts and obligations.”

“His vast real estate empire included two apartments on a ritzy stretch of New York’s Fifth Avenue; three castles (one an ancient Bavarian castle in Germany); Dean Martin’s former home in Beverly Hills, Calif.; a townhouse in Bath, England; and two islands in the Bahamas. His magnificent homes, apartments and land either went into foreclosure or were sold for huge losses. What’s more, the IRS came after him for $6.3 million in back property taxes.”

Bits Bucket for November 20, 2015

Post off-topic ideas, links, and Craigslist finds here. Please visit my Youtube channel which you can also find here:

November 19, 2015

There Is A Chance It Could Get Cheaper

Reuters reports on Sweden. “Sweden’s housing market and high levels of household debt are a growing risk to the country’s financial system and authorities need to take action, the head of the country’s central bank said in a newspaper interview. The Riksbank has slashed its benchmark rate and launched a 200 billion crown ($23 billion) bond-buying program to head off the threat of deflation, fuelling borrowing and leading to worries of a housing bubble. ‘It is more dangerous every day that passes,’ Riksbank Governor Stefan Ingves said in an interview in the daily Svenska Dagbladet. “But you cannot calculate if something is going to happen.’”

“He said that with the Riksbank focused on inflation, it was up to other authorities to tackle the housing market, and called for action from politicians. ‘In the previous Stability Report in spring we could see the risk level for Sweden was higher,’ he said. ‘There is no shortage of analysis, but a lack of decision-making.’”

The Nikkei Asian Review on China. “China’s economy remains beset by heavy downward pressure, official data released Wednesday shows, as falling prices discourage production and investment and fuel a vicious cycle. Electricity generation, an indicator of production activity, fell 3.2%, a sharper decline than in September. A manager at a state-owned coal mining company in Henan Province saw his pay drop after the Chinese New Year from more than 300,000 yuan ($47,120) a year to his basic salary of less than 2,000 yuan a month.”

“‘I’m planning to quit the company and open a Sichuan restaurant,’ he said, adding that he has canceled plans to buy a home.”

3 News on New Zealand. “The Auckland housing market slowed last month following the introduction of new restrictions, according to the latest industry figures. The city’s median price slipped 3 percent to $748,250 in October from September, and the volume of sales dropped 19 percent to 2,546, the Real Estate Institute of New Zealand said. The central bank introduced Auckland-specific lending restrictions this month, while the government’s more stringent enforcement of taxing speculators’ capital gains began last month. ‘The drop in the number of sales in Auckland in October is the result of a softening of demand over the past few months and the new IRD and bank account rules introduced at the start of October,’ institute chief executive Colleen Milne said in the report.”

The Daily Telegraph in Australia. “‘You only find out who is swimming naked when the tide goes out.’ Billionaire Warren Buffett’s famous warning of what happens in changing markets is ringing true for Sydney real estate as the winding down of the city’s recent price boom reveals the suburbs where homebuyers paid too much money. Core Logic RP Data figures show home prices have begun falling in 36 of the Harbour City’s 700-odd suburbs and most are areas that had the hottest home auction markets earlier this year. These include Edgecliff, Rushcutters Bay and Balgowlah, near Manly, where median unit prices fell between 4 and 7 per cent over the last three months. Double Bay units recorded an even bigger price fall of 15 per cent over the same period, the largest decrease of any Sydney suburb.”

“Prices in these four areas had climbed by up to $200,000 in the three years prior to July. SQM Research analyst Louis Christopher said that in the heated market some excitable buyers paid too much for their homes, especially at auction. ‘Property values in the Sydney market as a whole are not overvalued and will not fall significantly anytime soon, but a lot of people who purchased property in May and June, when the market was peaking, probably paid more than their homes are worth now,’ Mr Christopher said.”

“Laing and Simmons-Potts Point selling agent Nuri Shik said vendors need to adjust their expectations to the slowing market, but added that well-presented apartments are still getting good results. One of his clients, the Keys family, is taking this mantra to heart by renovating their Darlinghurst apartment at 4 Clampton Place prior to selling it. ‘It needs an update and it will be fun to fix it up,’ Colleen Keys said. ‘It does concern me that there is a lot of talk about prices coming down, but for now I think the market is still good for both buyers and sellers.’”

The Kyiv Post in Ukraine. “Property prices in Ukraine fell along with the hryvnia at the beginning of the year. ‘Prices have dropped by around 40 percent,’ said Katrina Bankova, an estate agent at the largest real estate agency in Kyiv. ‘Rents for elite properties have dropped by 20 to 25 percent. Properties which went for up to $3,000 a month have dropped by 50 percent,’ said Tim Louzonis, co-founder of AIM Realty Kiev, which specializes in properties for expats.”

“Buyers now have unprecedented bargaining power compared to the previous 15 years, making it an attractive proposition for investors. ‘There is no market price. Before you used to be able to say a square meter here cost X but now it’s a market of bargaining…The last apartment I sold was going for $120,000, but they sold it for $100,000. Sometimes people go down by $40-50,000,’ said Bankova.”

“And there is a chance it could get cheaper. Property professionals in Kyiv are still divided on whether the market has reached its lowest point. ‘The clients have changed. They’ve become more picky,’ said Alexandr Laznenko, an agent at one of Kyiv’s largest real estate firms. ‘People don’t want what’s on the market. They want to find a bargain every time.’”

The Rio Times in Brazil. “Host countries can expect a fall in demand in the property market after they have put on big sporting competition, but usually after the event has taken place. Rio de Janeiro is struggling already, according to reports. In Barra da Tijuca, a wealthy neighborhood in the city which will host much of the Olympic Games, the new high-rise accommodation built for athletes has failed to sell well. Only 230 of over 3,600 units have been sold. Many of them have now been taken off the market.”

“Real-estate companies are slashing prices and offering incentives and freebies to entice buyers to the market. Online sales portal VivaReal, in partnership with a number of construction companies, has expanded Black Friday (November 27th) to include the whole of November marking down properties throughout the month. Elsewhere in the city, projects are failing to materialize.”

“The port area in the centre of the city, which has been undergoing extensive regeneration, has a number of new offices that stand empty. Buildings, a property research firm, says almost a quarter of office space in the area is tenantless. ‘We imagined this crisis would occur only after the Olympics in 2016, but it’s happening now, calling into question the aggressive bets made on projects in the lead-up to the Games,’ Leonardo Schneider vice president of Secovi, a housing syndicate, explained.”

From Mexico News Daily. “Social housing projects in Baja California abandoned for financial reasons and the lack of amenities such as schools and hospitals have become breeding grounds for disease and petty crime. About 100,000 homes are believed to have been abandoned across the state and are now being occupied by wild animals, gangs and drug users.”

“Alejandro Arregui, Baja California representative of the national mortgage fund Infonavit, said the problem had been partly caused by purchasers being in arrears on payments on 13,000 apartments, of which at least 5,000 had been abandoned as a result. ‘The problem of abandoned housing stems from poor planning whereby no development centers were created,’ said Lauro Arestegui of the federal Secretariat of Agrarian and Urban Development, adding that residents’ problems with making payments were thought to be primarily caused by poor access to basic services such as schools and hospitals and work places.”

“The problem has persisted unchecked for several years despite legal efforts by local authorities to reclaim the apartment blocks. They have become perceived as gang strongholds and therefore lawless no-go areas. Local authorities have identified half a dozen such ‘hotspots’ in Tijuana. In one of them, Villas del Campo, half of the 35,000 homes are estimated to have been abandoned.”

Bits Bucket for November 19, 2015

Post off-topic ideas, links, and Craigslist finds here. Please visit my Youtube channel which you can also find here: