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Another Round Of FONGO Takes Over And Homeowners Say, ‘Oh I Better Get Out’

A report from Bloomberg on Canada. “Household debt in Canada has reached levels that could be qualified as excessive. Canadians owe C$2.16 trillion—which, as a share of gross domestic product, is the highest debt load in the Group of Seven economies. With the housing market cooling, a reckoning may be fast approaching. People are ‘freaking out,’ even though, with interest rates not far above historical lows, ‘money still costs nothing,’ says Scott Terrio, a Toronto-based manager at Hoyes, Michalos & Associates Inc., a company that specializes in insolvency.”

“Much depends on what happens to housing prices, particularly in Canada’s largest city. John Pasalis, president of Toronto property brokerage Realosophy Realty, says one potential trouble spot is the city’s condo sector, where many buyers who snapped up pre-construction units paid well above current resale prices. If the job market wobbles and prices for condos start to fall, people could start walking away from their contracts, Pasalis says. ‘Then we have problems.'”

“Another pocket of vulnerability is Helocs, short for home equity lines of credit. In Canada, borrowing through Helocs has grown faster than residential mortgages since 2017 and stood at C$243 billion in October, or 11.3 percent of total household debt, according to DBRS Ltd. The credit rating agency warned in February that if real estate prices fall, homeowners may find themselves with debt loads that exceed the value of their homes.”

From Teesside Live in the UK. “Teesside Live readers have had their say after Bellway Homes applied to alter their Roseberry Manor estate to include smaller and more affordable three-bedrooom houses due to sluggish sales. And while people say they ‘feel sorry’ for home-owners who could potentially find themselves in negative equity as house values drop, others say they have less sympathy and it’s ‘economics, simple supply and demand.'”

“Another added: ‘Lost all sympathy as soon as they said they were mortgaged to the hilt.’ Another added: ‘An area that needed that bypass overlooked for greedy developers and yet another one of many poor council decisions, sorry but Karma’s a bitch.’ While another Nunthorpe resident added: ‘I hope this sends a message to the councils eager to approve such developments in Nunthorpe – with often overpriced housing – and think about what’s actually needed across the area rather than just council tax in the coffers.'”

The South China Morning Post. “Home sales at Hong Kong property developer Chinachem Group’s Sol City development in Yuen Long got off to a slow start on Tuesday, and only a fifth of the 148 units on offer were sold. The lacklustre sales, which started at 6pm local time, added to evidence that a correction in Hong Kong’s property market is far from over.”

“‘Quite a big number of people showed up, but many of them were interested only in small units,’ said Sammy Po Siu-ming, the chief executive of Midland Realty’s residential division, the project’s sales agent. ‘The number of sales was not big, but it was not a surprise either.'”

“Hong Kong developers have been reducing prices to woo homebuyers amid an acceleration in launches of new flats on the market. Four projects with 607 units were offered for sale in Lohas Park, To Kwa Wan, Yau Tong and West Kowloon last weekend, the biggest weekend launch in a year.”

“Home prices in Hong Kong, the world’s most expensive housing market, plunged by 9.2 per cent between a peak in July last year and December, according to the city’s Rating and Valuation Department.”

From the West Australian. “Conditions in Perth’s property market already favour first-homebuyers, and they could become more favourable if home owners are gripped by another bout of fear of not getting out (FONGO). Perth’s property values have had the longest and deepest declines since the 1980s, with prices falling 17.8 per cent since peaking in June 2014, and experts are unsure if the market has reached its bottom.”

“‘The rental vacancy rate in Perth is now declining, which is putting upward pressure on rents, whereas in Sydney it’s still going the other way,’ said AMP Capital chief economist Shane Oliver. ‘But Perth has had a few periods of false hope where it looks like the market’s bottoming out several times, and then it starts coming down again, so another round of FONGO takes over and homeowners say, ‘Oh I better get out.'”

“Luke Whelan and fiancee Rachel Mackin Brown wanted to upgrade their first home, but after six months, FONGO lingers. They paid in the low to mid $600,000 range for the two-bedroom townhouse in 2015 and are seeking the same price. ‘For now, we’re not willing to drop (the price),’ Mr Whelan said. “We’ll look at it again in six to 12 to 18 months.'”

From News.com.au in Australia. “Just a couple of years ago Australia couldn’t get enough tradies and builders and house prices were soaring. Now the story has turned around and it’s bad news for everyone. BIS Economics housing expert Angie Zigomanis said builders were already cuttings costs and laying off people.”

“Nerida Conisbee, Chief Economist at REA said the worst will come in the next six months, in what could prove to be the deepest construction employment downturn since the GFC. ‘It wasn’t just hitting people on the ground building stuff it also hits town planners, real estate agents, listed property companies, there’s a wide range of flow on impacts.'”

“A good sign of how bad it’s all getting is an index of secondary sales of houses, land, or options to buy on resales site Gumtree. Recent figures show prices across the majority of areas have fallen, with many owners dialling down their prices as their lots fail to sell, according to managing director of housing developers PEET, Brendan Gore.”

“He said sales on sites like Gumtree were signs land speculators were attempted to avoid costs that come with real estate agents while exiting the market. ‘People are adjusting their prices downward regularly because they’re struggling to move them.'”

This Post Has 45 Comments
  1. ‘They paid in the low to mid $600,000 range for the two-bedroom townhouse in 2015 and are seeking the same price. ‘For now, we’re not willing to drop (the price),’ Mr Whelan said. “We’ll look at it again in six to 12 to 18 months.’

    ‘People are adjusting their prices downward regularly because they’re struggling to move them.’

    Chase that market down.

  2. ‘John Pasalis…says one potential trouble spot is the city’s condo sector, where many buyers who snapped up pre-construction units paid well above current resale prices. If the job market wobbles and prices for condos start to fall, people could start walking away from their contracts, Pasalis says. ‘Then we have problems’

    Toronto prices are sinking like a turd in a well John.

    1. i am in downtown Toronto this week and next – working in the financial district. Condo prices have dropped in many Toronto neighbourhoods – but dont seem to impact the condos right downtown – YET!

      But there seem to be at least 6 new buildings under construction …. so

  3. ‘Perth has had a few periods of false hope where it looks like the market’s bottoming out several times, and then it starts coming down again, so another round of FONGO takes over and homeowners say, ‘Oh I better get out.’

    Huh, I wonder where this false hope comes from? Oh, right the freaking REIC media! The same day this Hong Kong article came out, in the same paper, it was “we’re going back to the moon Alice!”

    Sure, that’s how it works. Ten years or more, double digit increases year after unsustainable year, a few months down and to the sky baby! They’ve only lied a hundred million times.

    1. Compiled sales for last week from 15 San Diego zip codes shows an 18% drop from sales per week in the previous month. Sales momentum from the previous upswing in activity may be dissipating We may see softening sales trend return as pool of buyers lured by lower interest rates runs dry.

    2. “Sure, that’s how it works. Ten years or more, double digit increases year after unsustainable year, a few months down and to the sky baby! They’ve only lied a hundred million times.”

      You use what works. These lies work because the vast multitudes of ignorant pukes who inhabit the planet have been so successfully dumbed-down.

      Easy money for bankers everywhere.

      (I like it, I love it, I want some more of it.)

  4. If the job market wobbles and prices for condos start to fall, people could start walking away from their contracts, Pasalis says. ‘Then we have problems.’”

    Gosh, it’s a good thing the Fed and central banks haven’t spent the last ten years creating moral hazard so ordinary people will honor their financial obligations out of a sense of personal integrity.

    I slay me….

  5. The borrowing and spending binge by Canadian households, businesses and governments (all levels) continues unabated. Growing the debt in the economy significantly faster than the economy itself grows seems to have developed into a way of life in Canada.

    At the end of December, 2018 the total debt outstanding in Canada (bottom line of the Statistics Canada credit market summary data table) was $8.089 trillion. At the end of December, 2017 the total debt outstanding was $7.645 trillion. In the 1 year period from the end of December, 2017 to the end of December, 2018 it increased by $443 billion. This is an increase of 5.8%.

    https://owecanada.blogspot.com/2019/03/canadian-total-household-business-and_14.html

    1. i grew up in the Toronto area. People (including rich bankers in the western suburbs) did not show off their wealth. It has completely changed in 20 years

      Everyone is living large, expensive cars and clothes. So of it with real money, the rest from borrowing,

      Many of us cannot figure it out

      1. “Many of us cannot figure it out.”

        Drop into my bank and I’ll let you in on just how this miracle is performed. Be sure to bring along with you the proper ID, a list of all – ALL – of your assets including a current list of marketable body parts.

    2. “The borrowing and spending binge by Canadian households, businesses and governments (all levels) continues unabated. Growing the debt in the economy significantly faster than the economy itself grows seems to have developed into a way of life in Canada.”

      What a beautiful passage this is! Pure poetry! A Bankers dream come true!

      “At the end of December, 2018 the total debt outstanding in Canada (bottom line of the Statistics Canada credit market summary data table) was $8.089 trillion.”

      The total debt outstanding was $8.089 trillion. TRILLION! What an orgasmic figure! Makes me want to ask: “Was it good for you too?”

      Makes me want to sing in as loud a voice as possible: “Oh Canada”.

      Bahahahahahahahahahahahahaha.

      1. There’s the federal charges from mailing in the whatever. He’s going to jail.

        If you or I sent an envelop with white powder and a fake “hate” note through the mail, we would go to a federal prison for a very long time, and rightfully so. Jussie, who as a black gay Democrat meets at least two criteria for “protected class,” will almost certainly not darken the inside of a prison cell given the bifurcated application of “justice” by our DoJ. This despite wasting substantial law enforcement resources, falsely implicating Trump supporters in a fake hate crime, and further fueling the dangerous racial polarization in this country.

        One law for me, and one for thee.

        There, fixed it for you.

      1. Rahm Emmanuel, to his credit, understands the implications of having such a blatantly compromised and corrupted judicial system that will hasten white flight, especially of taxpayers and the productive, from Chicago. I think he was genuinely shocked and dismayed at the extent to which Chicago has become a Banana Republic, and he had every right to be.

  6. FONGO problems? Just write a love letter to the potential buyers. Show them pictures of your kids. Talk about how much getting out of this house means to you. It’s the new normal!

    1. “The San Francisco-based companies Uber, Lyft, AirBnb, Pinterest, Postmates and Slack are all expected to sell stock for the first time in the coming weeks …”

      … to a bunch of dummies …

      “… allowing tens of thousands of employees currently holding shares to grow their personal wealth exponentially, instantaneously.”

      I find all this to be quite amusing.

    1. Fear of Getting Schlonged (FOGS) has set in, as each new month’s housing data is going to cause FBs and realtors to experience panic attacks, followed by involuntary bowel movements.

  7. What are bond traders trying to tell Mr Market?

    Bonds
    US 10-year Treasury yield touches new 14-month low as yield curve continues to flatten
    Published 6 hours ago Updated 37 min ago
    Thomas Franck

    The yield on the 3-month Treasury note, which remains 6 basis points above that of the 10-year, declined as more investors grew confident that the Federal Reserve will be forced to cut interest rates in 2019. Data showing the trade deficit narrowed lifted yields off their lows.

    At around 8:49 a.m. ET, the yield on the benchmark 10-year Treasury note, which moves inversely to price, was lower at around 2.398 percent, while the yield on the 30-year Treasury bond was also lower at 2.862 percent. The yield on the 3-month Treasury bill dipped to 2.463 percent.

    1. The Street
      What’s Behind Collapsing Bond Yields
      Lower rate expectations from the Federal Reserve are playing a role, but so are investors’ fears of getting hit
      Why Investors Are Obsessed With the Inverted Yield Curve
      Amid a shaky marketplace, investors are eyeing the yield curve for signs of economic stability. History shows that when the yield curve inverts, a recession may soon follow. Photo Composite: Stephanie Swart for The Wall Street Journal.
      By Justin Lahart
      March 25, 2019 2:28 p.m. ET

      The Treasury market is in a different place than it was last fall.

      Through much of November, the yield on the 10-year note was above 3%. Now, with the economy looking softer and the Federal Reserve making a dovish pivot, it is around 2.4%, below the three-month Treasury bill’s yield of 2.45%. This is a discomfiting development since such yield-curve inversions have preceded past recessions.

      To Read the Full Story
      Subscribe

  8. Turkish developers, including corrupt state-owned enterprizes with links to Erdogan the would-be Caliph, took out huge loans denominated in euros and dollars to go on a multiyear building spree. Now with the near-collapse of the Turkish lira, they can’t afford to import most building materials and half-built grandiose construction projects fill the skyline in Ankara and other major Turkish cities. Meanwhile, CDSs – a financial scam in their own right, which buy fictitious insurance for bad debt – are soaring, indicating the market is pricing in cascading defaults. Could Turkey be the catalyst that finally overwhelms the ECB’s extend and pretend?

    https://www.zerohedge.com/news/2019-03-27/turkey-verge-collapse-overnight-swaps-hit-700-cds-soar

  9. Lennar and KB both reported yesterday and both had much better than expected numbers. Housing stocks are up 1-2% today on the news.

  10. Mortgage applications rose by 9% for the week ending March 22. Purchase rose 6%, refinance rose 12%.

    1. Picking up nickels in front of steamrollers can be detrimental to your financial future.

    2. Mortgage “applications” rose… I gather you like your analogies (mainly to automobiles) so here’s one: 100 people apply for a job at Walmart but only 5 get hired. Put that into perspective for these applicants.

      Fewer first-time home buyers likely to qualify for mortgages under tougher FHA standards

      http://www.usatoday.com/amp/3271050002

      1. Spin it however you want. Q1 19 has been pretty good for housing. I realize on a blog like this, positive news will never be acknowledged and the reply will always be “yeah but”. It’s cool. It’s why I like reading all different sides and perspectives.

      2. Take a look at MBA mortgages application chart going back 30 years. Right now applications are at 1997 low and falling.

        Ooooph.

        1. Q1 19 has been pretty good for housing… positive news

          Positive for the predators or the prey?

  11. White House: Trump to sign memorandum on federal housing finance
    By Steve Goldstein
    Published: Mar 27, 2019 9:44 a.m. ET

    President Donald Trump is expected on Wednesday to sign a memorandum on federal housing finance, a White House official said. The memorandum, coming on the second day of a Senate Banking hearing on housing finance reform, will direct the Treasury Department and the Department of Housing and Urban Development to draft reports on the reform of Fannie Mae (FNMA, -0.19%) and Freddie Mac (FMCC, -0.81%) Politico reported.

  12. Applications up 9%
    Refis up 12%
    If these are cash out refis….that is not necessarily a positive sign

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