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We’re Selling Below Cost, We Can’t Hold On To The Inventory

A report from the Daily Telegraph in Australia. “Sydney’s supply of properties for sale has hit a decade high this summer as weakening buyer demand creates a growing backlog of unsold housing. Buyer’s agent Peter Kelaher said a long listing period tended to ‘turn off’ buyers. ‘It may have been priced too high in the beginning, but by the time the owners (cut the price) it’s too late,’ he said.”

“The drop pushed the median price of a Harbour City home down to about $789,000, well below the more than $900,000 it was in mid-2017 when the market was peaking. A five-bedroom house in North Kellyville has been up for sale since November 2017, while a house on nearby Foxall Rd has been for sale since May 2016. In that time, the prices for these homes have dropped by up to $250,000.”

The Australian Financial Review. “More than a third of all Melbourne housing lots advertised online are re-sales by buyers who can’t get financing or speculators trying to flip sites prior to settlement, according to research by RPM Real Estate Group.”

“The group, which sells lots across dozens of estates in Melbourne and Geelong, said the secondary land market had ‘peaked’ and prices could fall as settlement looms and buyers try to sell to avoid losing their deposits. Separate to these figures nearly 1000 lots are being resold on classifieds website Gumtree, suggesting well over 3000 lots are being resold in a market where total annual lot sales have fallen to about 10,000 from a peak of 24,000 about 18 months ago.”

“RPM’s head of communities Luke Kelly said just over half (53 per cent) of resale lots identified in December had since settled which could indicate they were bought by genuine investors or even owner-occupiers who could no longer get finance to complete construction or whose circumstances have changed forcing them to sell.”

“‘We could assume the other 1200 resales – which are yet to settle – are buyers in a similar position along with speculators who sought to cash in on the significant price growth over the last few years,’ Mr Kelly said.”

The Nikkei Asian Review. “Australia’s gross domestic product grew just 0.2% in the October-December quarter of 2018 from the preceding period, weighed down by declining exports and a housing slump, raising concerns about the health of its China-reliant economy.”

“A slowdown in housing starts also took a toll as real estate prices headed south. Economic conditions in China, which purchases roughly 30% of Australia’s exports in value terms, figure largely in the Australian economy.”

“More than 80% of the country’s iron ore exports, a key product along with coal, head to China. Australian iron ore, which emits fewer air pollutants than rival products, is thought to enjoy steady demand. ‘But if Chinese demand falls, some fallout will be inevitable,’ says a source at a Japanese company.”

From Eleven Media Group. “The National People’s Congress of China began Tuesday in Beijing. This year is a milestone, marking the 70th anniversary of the founding of the People’s Republic of China, and the economy is the main focus of attention at the NPC, China’s national legislature”

“The myth of growth in which auto and housing sales continue to support the economy has collapsed. This article will explore the actual situation in the country. ‘We only sold 500 vehicles last year, and so incurred a loss of 800,000 yuan (about ¥13.2 million.) It’s the worst figure since we started operations,’ said Zhu Dawei, a general manager of a sales outlet of U.S.-based automaker General Motors in Shenyang, Liaoning Province. The outlet was empty without any customers.”

“In 2018, five years after Xi took office, the auto market was shaken significantly. The country’s new car sales declined by 2.8 percent year on year to 28.08 million units, falling below the previous year’s level for the first time in 28 years.”

“The effects of the economic slowdown have extended to the real estate market. Last autumn, high-rise condominiums built along a coast were put on sale in Xiamen, Fujian Province. The price per square meter for a unit with two bedrooms and a living-dining room is 26,000 yuan (about ¥430,000). That is a reasonable price in Xiamen, where housing prices have remained high, but only a few people have visited there for the purpose of buying them.”

“‘Actually, we’re selling the condominiums below cost,’ a man in charge of the sales said. Explaining the reason for the low prices, he said, ‘Considering the construction costs, we want to sell units for 40,000 yuan (about ¥660,000) per square meter, but we can’t hold on to the inventory.'”

“In Xiamen, unsold homes have piled up to a value equivalent to total transactions for 18 months. The housing market is deteriorating nationwide. According to Chinese media, the floor space of homes sold fell 9 percent year on year in Beijing in 2018, and 4 percent year on year in Shanghai in the same year.”  

This Post Has 42 Comments
  1. ‘The group, which sells lots across dozens of estates in Melbourne and Geelong, said the secondary land market had ‘peaked’ and prices could fall as settlement looms and buyers try to sell to avoid losing their deposits’

    The photo looks a lot like the Arizona pipe farms I’ve shot video of.

    1. There’s that, “Oh yeah, everyone knows the market peaked last year, duh,” posturing again from the same newspapers that claimed during the peak there was no bubble.

  2. “‘Actually, we’re selling the condominiums below cost,’ a man in charge of the sales said. Explaining the reason for the low prices, he said, ‘Considering the construction costs, we want to sell units for 40,000 yuan (about ¥660,000) per square meter, but we can’t hold on to the inventory.’”

    Well, there’s always bankruptcy.

    1. That or pad some government officials wallet and get a good ole fashioned bail out. It’s not there fault the Chinese buyers disappeared.

      1. The Chinese Communist Party (CCP) is going to face a huge backlash, since they encouraged this speculation and malinvestment all along (much like our own policymakers). The millions of Chinese who suddenly find themselves insolvent due to their failed real estate “investments” are going to be enraged, and rightfully so. Of course the CCP will do what corrupt scoundrels always do in these situations: take the country to war to rally the lumpen around the flag and get rid of some of those surplus womanless dudes who otherwise might cause instability, and grab some “living space” while they’re at it.

        1. find themselves insolvent

          That wouldn’t be good for your social credit score. Neither would joining protests.

  3. https://m.youtube.com/watch?v=QJf5GEKqVJI
    Videos by Realtors and Mortgage Brokers like this one are proliferating on YouTube parroting the same three talking points.
    1. No price depreciation.
    Decided to check Bend Oregon where this guy is from. List prices down 15% with with an increase in sq ft of 24% year over year. So that’s about a 20% decline on a $/sq ft basis. So I guess this is “Bend over”, Oregon for anyone who bought at the peak last year.
    https://www.movoto.com/bend-or/market-trends/
    2. Tight lending standards.
    60% FHA and 50% VA loans exceeded qualifying mortgage debt to income limits in November 2018. The % of Fannie loans in the category have approximately tripled in the last 5 years and doubled since the spring of 2017.
    3. Low foreclosure sales.
    Notices of default hit a low around the same time prices peak and then up tick as prices fall. The process from notice of default to foreclosure takes a minimum of about four months depending on the state. Foreclosure sales are the “laggiest” of lagging indicators. This guy must be aware this fact.

  4. “The drop pushed the median price of a Harbour City home down to about $789,000, well below the more than $900,000 it was in mid-2017 when the market was peaking. A five-bedroom house in North Kellyville has been up for sale since November 2017, while a house on nearby Foxall Rd has been for sale since May 2016. In that time, the prices for these homes have dropped by up to $250,000.”

    This is called riding the market down…or as greed head said NoT Gonna it away

    Btw, Australia housing bubble peaked in mid 2017. The US west coast peak in 2018. SF, San Jose, Seattle, LA, OC, San Diego, etc….look to Australia for your future….its coming

    1. “Ghastly” – now there’s an apt description. I like it better than the “shifting market” euphemism invariably used by REIC shills.

  5. Commentators who ignore the Plunge Protection Team’s role in the recent stock market rally have a tendency to make nonsensical statements about bulls and bears.

    1. It’s important to bear in mind the role of government intervention in kickstarting the current “bull market”.

      Dec 27, 2018, 6:33 am
      Mnuchin Calls Plunge Protection Team; Stocks Soar One Day Later
      Adam Sarhan, Contributor
      Markets

      One important lesson investors can learn from the market action over the past decade is that the government plays a very important role. Investors were reminded about this important lesson over the past two trading days.

      The Government Matters:

      As a quick recap, on Monday (Christmas Eve), stocks officially fell into bear market territory as the major indices fell 20% below their record high. On Monday, news broke that Treasury Secretary Steve Mnuchin, called the CEOs of the major banks to help restore confidence. The market was closed on Tuesday for Christmas but stocks soared 1,000 points (the largest gain since the last bear market during the financial crisis) on Wednesday. Literally, the first day after that call was made. I can’t make this up.

      Plunge Protection Team:

      In the “old” days, traders used to refer to a secret club that would step in and save the day. That secret club was known as the plunge protection team. In the old days, no one could prove that they existed but the world has greatly changed (in so many ways) since the “old” days. So, I guess the next time the government steps in and decides to fire a bazooka, it is worthy for investors to pay attention. At least in the short-term.

      Will The Rally Last?

    2. Shiller Says Recession Risk Elevated Amid Longest Bull Market
      February 13, 2019 • Carolina Wilson, Sarah Ponczek

      Recession risk is real, according to Nobel laureate Robert Shiller, and one might come as soon as this year.

      Whether the U.S. will experience a contraction has become one of the hottest debated topics among investors amid uncertainty surrounding U.S.-China trade talks, deteriorating earnings forecasts and slowing growth around the globe. The ambiguity caused the almost decade long rally in U.S. stocks to come within a whisker of its end in December.

      “It seems like there has to be an elevated probability of a recession this year or next year,” the Yale University economics professor said during a panel discussion at the Inside ETFs conference in Hollywood, Florida. “There are these signs that show people are worried. It’s also the longest bull market in the stock market,” he said. “There’s a spirit of thinking –- it aught to come to an end soon.”

  6. ‘We only sold 500 vehicles last year, and so incurred a loss of 800,000 yuan (about ¥13.2 million.) It’s the worst figure since we started operations,’

    ¥13.2 million is only $118,087.20. ‘Tis a mere flesh wound.

    1. Speaking of flagging auto sales…

      U.S. auto sales tumbled 2.8 percent in February
      The Detroit News Updated 4:23 p.m. PST Mar. 1, 2019

      New-vehicle sales for February failed to meet forecasts, with sales of hot sport-utilities even starting to cool.

      Overall sales for the month tumbled 2.8 percent from the same month a year ago, according to released Friday estimates from the online retail site Edmunds.com. Sales came in at 1.26 million for an annualized industry sales rate slowed to 16.6 million, according to Edmunds, for the worst reading in 18 months.

      1. Went to a NBA game the other night. One of the sales managers for a top 4 dealership in the state said that their net profit last year as $600k in February. This year it was $60k, a 10-fold decrease. Sales are slowing dramatically.

  7. For years, Amazon has grown rapidly in its hometown of Seattle, providing thousands of high-paying jobs that attract top talent from around the globe.

    I keep hearing this day after day but there is never an actual breakdown of the type of jobs created and the pay scale… I wonder why?

    1. I suspect that Amazon, like so many scam “New Economy” companies, has overextended itself and is now starting to retrench since the bust of Tech Bubble 2.0 is slouching closer despite the central bankers’ efforts to forestall the inevitable. I’m guessing that negative internal financial results, rather than a bunch of obnoxious SJWs, were the real reason Amazon axed the establishment of a second HQ in NYC.

      https://www.cnbc.com/2019/03/06/amazon-to-close-all-of-its-pop-up-stores-in-the-us.html

    2. Loss prevention manager found guilty of stealing $230K
      Seattle Times-29 minutes ago
      PORTLAND, Ore. (AP) — A jury has found a Fred Meyer loss prevention manager guilty of stealing nearly $230,000 from self-checkout machines at a Portland …

      1. So the loss prevention guy turns out to be the biggest thief of all. Kind of like entrusting your country’s money issuance to a criminal private banking cartel masquerading as a central bank. Who would do such a thing?

        Oh, wait….

        1. Well, he thought it was to prevent his own loss, so he thought he was doing gangbusters work. Now he’ll just be doing chain-gang rock busting.

  8. “The drop pushed the median price of a Harbour City home down to about $789,000, well below the more than $900,000 it was in mid-2017 when the market was peaking.

    I fear that in this scenario, someone might very well have overpaid.

    Such a tragedy…okay, I’m all cried out now. Just need someone to hold me and tell me everything is going to be okay.

  9. Isn’t it a wee bit early for central bank stimulus to ratchet up? What kind of monetary tidal wave will they have to unleash when the S really HTF?

    1. Euro, bond yields tumble as ECB pushes out rate hike, unveils fresh stimulus for banks
      By Abhinav Ramnarayan and Virginia Furness

      LONDON, March 7 (Reuters) – The euro and euro zone government bond yields tumbled on Thursday after the European Central Bank changed its rates guidance and announced a new package of cheap loans to boost the economy.

      The European Central Bank pushed out the timing of its first post-crisis rate hike to next year at the earliest and offered banks new rounds of multi-year cash.

      The ECB had said previously that rates would be on hold through the summer of 2019, although in recent months weak economic data had prompted investors to already push out their rate hike expectations well into 2020.

    2. Keynesian wreckage will be left in the wake of this interminable hair-of-the-dog hangover cure.

      Markets
      China Has a Dirty $1 Trillion Stimulus Secret
      Another economy-boosting infrastructure binge is afoot, but you won’t find it reflected in the fiscal deficit target.
      By Shuli Ren
      March 4, 2019, 4:44 PM PST

    3. When these guys announce their thinking to the press, it most likely is already in the works.

      Business News
      March 6, 2019 / 10:17 AM / Updated 17 hours ago
      Fed thinking about growing balance sheet again: K.C. Fed paper
      Trevor Hunnicutt, Richard Leong

      NEW YORK (Reuters) – The U.S. Federal Reserve is considering when to stop reducing bank reserves and start building up its balance sheet again, according to a paper from the Kansas City Fed released on Wednesday.

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