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They’re Getting A Little Scared

It’s Friday desk clearing time for this blogger. “Real estate experts say the Nashville housing market is cooling. Entry-level inventory is up a whopping 29.5 percent. Zillow economist Skylar Olsen said, ‘One of the other things that’s nice and why we know things are cooling off is we are seeing more of those listings having price cuts.'”

“A year-long cool down is taking its toll on Southern California home sellers, local agents and economists say. Homes sit longer. Asking prices are being reduced. And now, many sellers have to pay closing costs and pitch in for repairs to get their houses off the market. ‘They’re getting a little scared, the sellers are,’ said Riverside broker Maria Herrera. ‘Everybody’s talking, is (the market) going back down?'”

“Southern California’s median sale price also was down $24,500 from the all-time high of $537,000 reached last June. Chris Thornberg, a founding partner with Beacon Economics, predicted sales could be back in positive territory by this summer. ‘All these ridiculous claims of a housing downturn is just ridiculous’ Thornberg said. ‘The economy is humming along like nobody’s business. The fact that mortgage rates have dropped will not cause a rebound. It’s simply going to make the rebound stronger.'”

“Home values in metro Denver appear to have peaked last summer and are heading lower for the first time in seven years. That may provoke a sense of dread for those who struggled to stay afloat during the last housing downturn or lost everything in a foreclosure. After declining for years, the share of underwater mortgages started rising again in Colorado in the second half of 2018.”

“Areas in the state with the highest share of underwater properties include Pueblo, Trinidad, Walsenburg, Meeker, Wiggins, Yuma, Wray and Olathe. But there are a few surprises. Vail, Avon, Aspen and Snowmass Village also have some of the highest negative equity rates in Colorado. There are some first-time buyers who have only put down 3 percent. If they did so last year, and the current drop in home prices continues, they could be at risk if they are forced to sell, said Ralph McLaughlin, deputy chief economist with CoreLogic.”

“‘The homeowners who are most likely to be underwater are first-time buyers who put 3 percent to 5 percent down and bought during the peak season,’ said McLaughlin.”

“First-time and move-up homebuyers with heavy debt loads, low credit cores and small down payments face a daunting new mortgage hurdle: The Federal Housing Administration is toughening its underwriting standards. Mortgage company executives told me last week that they are bracing for reductions in their FHA business by anywhere from 10 percent to 30 percent.”

“For several years, the FHA has insured loans to buyers who previously would have been considered too risky or marginal at best. Borrowers are siphoning equity from their homes at an alarming rate. Joe Metzler, a loan officer at Mortgages Unlimited in St. Paul, Minnesota, welcomes the stricter standards. ‘FHA has become the dumping ground for crappy (loan) files with ridiculous DTI allowances and bad scores,’ he said. “A lot of it lately has been straight-up subprime. We should not be doing them.'”

“London was the weakest performing area in the first quarter of 2019, seeing prices drop 3.8 per cent year on year – the worst quarterly rate of decline since 2009. Lucy Pendleton, director of independent estate agents James Pendleton, said London has suffered ‘a bruising start to the year.'”

“Some painful memories are beginning to stir in the heart of Dublin’s affluent south side. When a five-bedroom, three-bathroom Edwardian home hit the market in September, the price was €2.5 million (RM11.48 million). Today, the red-brick abode is on offer for €1.95 million, down by more than a fifth. The cut reflects a wider slowdown in the Dublin housing market.”

“And one agent compared the becalming of the market to the period just before it crashed in 2008, one of the worst in Irish history and a bust that ultimately forced the country to seek an international bailout. The agent asked not to be named for fear of upsetting clients seeking to sell their homes, just as the latest boom runs out of steam. Since their 2012 low, prices have almost doubled.”

“After about 15 years of uninterrupted house price rises, the Swiss government’s efforts to cool Switzerland’s overheated property market have finally succeeded. House prices dropped 2.56% y-o-y in 2018, from an annual decline of 1.7% in 2017. A surplus of close to 9,000 rented residential properties is expected this year, according to Wüest and Partner.”

“Mainland developer Jiayuan International says it will relaunch its ‘micro home’ residential building in Tuen Mun around the middle of April, offering few details apart from a pledge to give homebuyers a ‘surprise’ in the project, which remains 99 per cent unsold. Analysts said prices at the 356-flat T Plus, which is slated for completion in September, might be slashed by up to 15 per cent.”

“‘The time of launch … will be as soon as possible. As soon as when we make the launch, you will have a surprise,’ said Alex Kwong, project general manager at Jiayuan. Kwong said T Plus suffered from an ill-timed release of new flats, adding that a chill descended over the city’s housing market such that ‘no project sold very well.'”

“If you felt a bit poorer at the end of last year, you’re not alone — Australian households dropped a lazy quarter of a trillion dollars in wealth in the three months leading up to New Year’s Day. The worrying news out of the figures is, while household wealth is falling, the household-debt-to-income ratio hit a new record just shy of 200 per cent.”

“UBS economist George Tharenou said even though, ‘Household liabilities fell over the quarter … income growth collapsed even more. Mr Tharenou said he was ‘calling the end’ of the household super leverage cycle,’ which saw household debt triple since 1994.”

“Along the well-manicured 1,425 green acres sit 3,500 luxurious homes. Most places inside Boca West Country Club are worth millions. But some are selling for as little as $1. Realtor and new homeowner Paul Green just moved into his ‘as is’ 1 bedroom and 1 ½ bath for the asking price of $1. Green said he bought his condo from an elderly man who is now living in a retirement home.”

“There are additional expenses that will cost the buyer. There’s a one-time membership fee of $70,000.00 and HOA fees range from $1,300 to $1,700. Renee Freidman, another Realtor and resident tells WPBF within the last two years, homes have been selling for little to nothing. Green said, this was a lifetime purchase that was worth every penny. ‘When you think about Manhattan, Miami, West Palm, you can’t live in a place like this for $2,000 a month,’ Green said.”

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This Post Has 69 Comments

  1. ‘FHA has become the dumping ground for crappy (loan) files with ridiculous DTI allowances and bad scores,’ he said. “A lot of it lately has been straight-up subprime. We should not be doing them.’

    Some posters here need to step up and eat yer crow!

  2. ‘another Realtor and resident tells WPBF within the last two years, homes have been selling for little to nothing’

    Where’s that poster who said 50% off was absurd?

  3. ‘Lucy Pendleton, director of independent estate agents James Pendleton, said London has suffered ‘a bruising start to the year’

    And London prices have been sinking like a turd in a well since 2014!

  4. ‘Home values in metro Denver appear to have peaked last summer and are heading lower for the first time in seven years. That may provoke a sense of dread for those who struggled to stay afloat during the last housing downturn or lost everything in a foreclosure. After declining for years, the share of underwater mortgages started rising again in Colorado in the second half of 2018’

    ‘Areas in the state with the highest share of underwater properties include Pueblo, Trinidad, Walsenburg, Meeker, Wiggins, Yuma, Wray and Olathe. But there are a few surprises. Vail, Avon, Aspen and Snowmass Village also have some of the highest negative equity rates in Colorado. There are some first-time buyers who have only put down 3 percent. If they did so last year, and the current drop in home prices continues, they could be at risk if they are forced to sell, said Ralph McLaughlin, deputy chief economist with CoreLogic’

    ‘The homeowners who are most likely to be underwater are first-time buyers who put 3 percent to 5 percent down and bought during the peak season’

    Well you know Ralph, mentioning that now doesn’t accomplish much. I said all along this was going to happen. And suurrrprise suurrprise, FHA cuts back on loans just when the party is ending! Isn’t that exactly how it works, every – single – time! Time for Corelogic to set up a REO website.

    1. I knew this was going to happen and have been waiting patiently for the downturn. I to am from Denver and most city people forget that business is cyclical and housing is no different. I’d say give it one to two years and then I’ll consider buying a home.

  5. ‘All these ridiculous claims of a housing downturn is just ridiculous’ Thornberg said.’

    Click!

    4. I would pay to watch Chris Thornburg being force-fed crow, at some point in the future.

    5. “Six inches of rain in January and another six to 11 inches in February could have accounted for part of February’s sales decline, added Herrera, broker for The Herrera Group in Riverside.”

      Okay, now it’s the precipitation? 🙂

    6. Since the economy is remarkably robust, as Dr. Thornberg states, this would be a good time to return interest rates to historically normal levels, ~6%. In fact, since the economy is SO STRONG let’s kick it up a notch and go to 7-8% so retirees and savers can earn a return on the reserves they’ve created from their labor. Then maybe I won’t be seeing as many sad looking old ladies sweeping up Burger King at night to support the Fed’s welfare program for speculators.

      1. Then maybe I won’t be seeing as many sad looking old ladies sweeping up Burger King at night to support the Fed’s welfare program for speculators.

        +1000

      2. Ten years of Fed “emergency measures” says all there is to say about our so-faux “recovery.”

  6. “For several years, the FHA has insured loans to buyers who previously would have been considered too risky or marginal at best.”

    Yep, a lender’s dream.

    “Borrowers are siphoning equity from their homes at an alarming rate.”

    Translation: Mass stupidity is being converted in to vast amounts of spendable money at the rate of one dotted line at a time.

    “‘FHA has become the dumping ground for crappy (loan) files with ridiculous DTI allowances and bad scores,’ he said. “A lot of it lately has been straight-up subprime. We should not be doing them.’”

    These words are from a loan officer from a place called “Mortgages Unlimited”. 😁

  7. “Six inches of rain in January and another six to 11 inches in February could have accounted for part of February’s sales decline, added Herrera, broker for The Herrera Group in Riverside.”

    DAMN YOU WEATHER!!!!!!!

    “‘The homeowners who are most likely to be underwater are first-time buyers who put 3 percent to 5 percent down and bought during the peak season,’ said McLaughlin.”

    What great insights! This is why McLaughlin-Boy gets paid the big YELLEN BUX. THOSE USC bribed college tuitions paid off right

  8. “If you felt a bit poorer at the end of last year, you’re not alone — Australian households dropped a lazy quarter of a trillion dollars in wealth in the three months leading up to New Year’s Day. The worrying news out of the figures is, while household wealth is falling, the household-debt-to-income ratio hit a new record just shy of 200 per cent.”

    A chart …

    https://www.google.com/imgres?imgurl=https%3A%2F%2Fedge.alluremedia.com.au%2Fuploads%2Fbusinessinsider%2F2019%2F03%2FAustralia-household-net-worth-Q4-2018.jpg&imgrefurl=https%3A%2F%2Fwww.businessinsider.com.au%2Faustralia-household-wealth-housing-stocks-budget-rba-2019-3&tbnid=eL5heAffIpE9iM&vet=1&docid=TYoj2sw26cxKqM&w=870&h=466&hl=en-US&source=sh%2Fx%2Fim

  10. 1 bedroom condo for $1M. That is el much stupido money.
    And $70K membership fee takes that to mucho stupido cubed.

  11. This is a no-brainer to the regulars here…

    The No. 1 thing people with fat savings accounts scrimp on that you likely don’t
    Published: Mar 29, 2019 8:31 a.m. ET
    People who save 20% or more of their incomes do things differently, new research shows
    There’s one big expense you may want to slash so you can save a lot more each month.
    By Catey Hill, Editor

    Go ahead, have that latte.

    That’s probably not the thing that’s breaking the bank for you.

    When Matt Kelly and his wife Cheri faced debts of roughly $65,000 in 2005, they decided something must be done. So they cut food costs from about $500 to $300 a month, and pared down entertainment and extras from their budget. But the big thing that tipped the scales in their financial favor: Slashing their housing costs, the Portland, Ore.-residents tell MarketWatch.

    The Kellys, who lived in Colorado at the time, moved from a three-story condo to an 850-sq.ft pad. That cut their monthly housing costs from $1,300 to $685, allowing them to save more than $7,300 a year. (Had they just cut a $4-a-day latte habit, their annual savings would have been less than $1,500.) By 2007, the Kellys were debt free, and to this day, they save roughly 25% of their income, Kelly says.

    “Cutting housing costs is a huge help in allowing us to live the life we want,” Kelly says.
    …

    3. Crazy times and the gov spending is out of control without much to show for it. Print, print, print….

      1. Progressives:

        Day 1: Waaahh waaahhh wahhh Trump is spending too much

        Day 2: Hey who’s up for spending $90 TRILLION on the Green New Deal?

        1. Progressives aren’t complaining about DJT spending money, they are complaining that they are not spending it how they would spend it. And, they are rightly pointing out that there is a bit of hypocrisy going on since he railed against Obama’s deficit spending and said that he would get rid of the deficit.

  13. ‘All these ridiculous claims of a housing downturn is just ridiculous’

    Whistling while strolling past the graveyard won’t stop global housing price declines already underway on multiple continents.

  15. “…Realtor and new homeowner Paul Green just moved into his ‘as is’ 1 bedroom and 1 ½ bath for the asking price of $1…”

    “…There are additional expenses that will cost the buyer….”

    “…There’s a one-time membership fee of $70,000.00 and HOA fees range from $1,300 to $1,700….”

    Just Wow. This one has scam written all over it.

    A big issue with Golf course R/E is that the acreage is *very* expensive to maintain and assessments *only* go up.

    (Disclaimer: Some family members discovered that fact in Palm Springs)

    Just wait until our REIC member Paul Green discovers that the HOA fees for all that “luxury” keep going up forever and ever.

    (Comment: HOA fees are *not* tax deductible in all 50 states, IIRC).

    Me thinks that in a few short years, this one will be dumped faster than a ice cream cone on a hot summers day.

    This investment will make buying a timeshare look like the deal of a lifetime.

    2. I lived on a golf course and I wouldn’t do it again. Sounds good in theory, but it kinda sucks. There is a never ending stream of people walking basically in your backyard. The occasional ball flying into the back yard. Although that can be alleviated by staying away from fairways. But the thing that I absolutely hated was the army of lawn mowers driving by every morning. Early morning. Like 5:30 early.

      1. Golf, as a sport, is in terminal decline. The younger generation isn’t picking it up. They’d rather play soccer or something like ultimate Frisbee. WSJ did an article a few weeks ago about how poorly houses on golf courses were doing price-wise. Demographics are destiny, and gen X, gen Y, and gen Z just don’t care about golf all that much. On the other hand, Top Golf seems to be doing a brisk business.

    3. Timeshare is what immediately came to mind on this with so many trying to dump them on Ebay for $1.

      I know because a younger, dumber version of myself bought one. Luckily it was a relatively small outlay.

      What worked for me was that, with the advent of places like Timeshare Exit Team, I think timeshare companies didn’t want the exposure and so have created easier ways to get out on their own websites, albeit still on the DL with the links buried a few pages deep. Instead of $3k and 9 month wait, I was out in a few weeks for $250. No more HOA fees, nothing but peace of mind.

    1. But back then he worked at UCLA. Now he works for whomever paid for his economics report. Meaning he is paid to tell the REIC industry what they paid him to say.

      1. REIC = Real Estate Industrial Complex. So saying REIC industry is saying Real Estate Industrial Complex Industry.

  17. Brokers expecting their FHA business to drop by up to 30%?!

    I thought the FHA said the other day that the tighter lending standard would only affect 5% of the loans they underwrite?

  18. Did you think ghost cities only existed in China? Think again.

    Economics
    Ghost Villages Are for Sale in Spain
    Some abandoned countryside hamlets are going for as little as $96,000.
    By Charlie Devereux
    March 28, 2019, 10:00 PM PDT Updated on March 29, 2019, 7:41 AM PDT
    Granda, an abandoned hamlet for sale in Lugo province.
    Photographer: Angel Navarrete/Bloomberg

    A demographic shift has left the Spanish countryside with hundreds of ghost villages, telling tales of people like Gustavo Iglesias.
    …

  20. Ha, China’$ found an American Wall $treet enabler to help bypa$$ the Tariff.in.Chief handshakin’ trade policie$, (boy, that was quick!)

    Exclusive: Goldman’$ China-backed fund buck$ trade tension$ to buy U.$. firm

    Reuters |BUSINESS NEWS|MARCH 28, 2019
    Harry Brumpton, Echo Wang, Liana B. Baker

    (Reuters) – Goldman Sachs Group Inc invested money from China’s sovereign wealth fund in a California-based industrial company and is looking for more U.S. deals, three sources familiar with the matter said, even after increased scrutiny from Washington all but stopped U.S.-China deals last year.

    In a confidential marketing document prepared for Goldman clients and seen by Reuters, the New York-based bank highlighted CIC’s “efficient sourcing of commercial partners and customers,” promising to “bring new pathways for growth via China.”

    “The Cooperation fund is a U.S. fund run by a U.S. manager, and is managed to be in compliance with all laws and regulations, including CFIUS,” a Goldman spokeswoman said.
    Even though Goldman received CFIUS clearance for the Boyd deal, it did not disclose publicly the Cooperation fund’s involvement in the acquisition and most of Boyd’s 4,200 employees were not told about the Chinese money, the sources said.

    A Moody’s Investors Service Inc credit rating note listed Boyd’s acquirer as Goldman’s flagship private equity fund West Street Capital Partners VII. After the deal, that fund transferred a minority stake in Boyd to the Cooperation fund, the sources said.

    A Goldman spokeswoman declined to comment on why Goldman’s Boyd-related announcements did not mention the Cooperation fund.

  21. The President today:

    “Had the Fed not mistakenly raised interest rates, especially since there is very little inflation, and had they not done the ridiculously timed quantitative tightening, the 3.0% GDP, & Stock Market, would have both been much higher & World Markets would be in a better place!”

    I voted for a guy who, when asked about the stock market, called it a “big, fat, ugly bubble.” Now he wants to continue those same tired old policies. I won’t vote for him again.

    1. I suppose I in effect voted for him by failing to vote for his opponent, which I could not bring myself to do…but think about what a vote for Trump meant. Whatever he may have said, HE IS A REAL ESTATE SALESMAN.
      As @Apartment401 says, “Realtors are Liars”. Bubble-loving liars.

    2. Drain the swamp was a mischaracterization. It’s not a swamp. It’s a septic tank. Anyone who goes into it is overcome by the toxic fumes.

    3. That is because you have principles. You know why you voted for someone and you believe in those principles. You don’t just join a team and vote for “our guy” and rail against “they other guy”. The thinking, independent voter is an almost extinct species these days.

    4. So you will vote for the other candidate (man, woman, xe) who will absolutely not lie to you. Har Har Har! You show ’em!

    5. I voted for a guy who, when asked about the stock market, called it a “big, fat, ugly bubble.” Now he wants to continue those same tired old policies. I won’t vote for him again.

      Never say never. Just imagine what kind of idiot the Dems could run against him. I don’t like him either, having voted for him, but he’s likely to be better than the alternative(s).

  23. Wolf Richter offers up a good read about today’s trading in Lyft …

    Lyft Shares Plunge 10% in 4 Hours from “Pop” to Close | Wolf Street

    https://wolfstreet.com/2019/03/29/lyft-shares-plunge-10-in-4-hours-from-pop-to-close/

    (a snip)

    “And these cash-burn business models are rewarded with ludicrously huge valuations that have been surgically removed from all reality. Each of these companies comes up with its own home-made metrics that it tells fawning analysts to watch, to distract from irrelevant details such as ‘net losses.’ And as long as these home-made metrics show an upward trend, regardless of how much money the company loses, it is a raging success in the eyes of those analysts. Historically, this works until it suddenly doesn’t.

    “The financial world has gone nuts.”

    2. “…cash-burn business models…”

      The same kind that went up in smoke in the early-2000s tech stock immolation?

  24. Here’s a good read …

    Lyft and Uber Are Making Traffic Worse – The Atlantic

    https://www.theatlantic.com/ideas/archive/2019/03/lyft-and-uber-are-making-traffic-worse/586054/

    (a snip)

    “A decade of record-low interest rates has made a fun-house mirror out of investment markets. In a normal world, with tighter credit, investors would not pour billions of dollars into companies that are likely to lose money indefinitely. In our world, though, interest rates have been low for years, and Lyft and its larger archrival, Uber, have the funds to lure drivers into already crowded downtowns.

    “Lyft and Uber have artificially reduced the price of a car ride in dense global cities such as New York—and so they have artificially increased the demand for such rides. Over the past decade, the number of registered for-hire cars in New York City, for example, has nearly tripled. Traffic speeds have fallen to record lows. In Midtown Manhattan, riding in a car is barely faster than walking. As they sit in worsening traffic, Lyft passengers have ample time to reflect on how financial markets are distorting real life on the streets.”

    1. Here’s another good read …

      The Irrational Exuberance Of Lyft’s IPO: Will The Bubble Burst?

      https://www.forbes.com/sites/lensherman/2019/03/26/the-irrational-exuberance-of-lyfts-ipo-will-the-bubble-burst/#1ed3f3f6535c

      (snip)

      “What explains this unprecedented tsunami of VC investment in money-losing ventures? Three factors seem to be driving investor exuberance.

      “First, these new ventures have compelling brand stories that intrigue and captivate consumers, VC’s and a fawning business press. It turns out that human beings are wired to respond emotionally to compelling stories. Lyft has been playing up its brand story in a video clip during its IPO roadshow in which co-founder Logan Green is shown riding a public bus in San Francisco and recalling a visit to Zimbabwe, where he drew inspiration from local carpools. At another point, Green touts Lyft as delivering “the largest shift to society since the invention of the car.” But nowhere in the promotional video is the company’s 2018 loss of nearly $1 billion mentioned, nor is any guidance given on when or if Lyft will ever be profitable.

      “A second reason driving profligate investments is the emergence of mega-VC’s that have dramatically ramped up the bets on hyper-growth, money-losing ventures. Softbank’s Vision Fund for instance has pumped nearly $20 billion into Uber and WeWork alone in just the last three years, not to mention $300 million for Wag, a US dog-walking service provider.

      “Third, investments at this scale enable — indeed require – mega-funded ventures to grow rapidly, often before their underlying business model has been validated, key operational processes have been built, customer behavior fully understood, or competitive resilience properly gauged.”

      I like this part: “It turns out that human beings are wired to respond emotionally to compelling stories.”

      If these “compelling stories” are flat out lies, then … so what?

      You use what works. And flat out lies work because people are stupid. Stupid people respond to compelling emotional stories rather than cold, unemotional logic. Hence Lyft.

      1. I still like what Matt Levine jokingly refers to as Lyft’s business model.

        “they are trying to forestall socialist revolution by giving people cheap stuff.”

  25. This article will make you feel much better about climate change, global warming, and every other flavor of doomsday scenario. Apparently life on earth is sufficiently resilient to be able to recover after being almost 100% wiped out!

    Annals of the Former World
    April 8, 2019 Issue
    The Day the Dinosaurs Died
    A young paleontologist may have discovered a record of the most significant event in the history of life on Earth.
    By Douglas Preston
    …

    1. (snip)

      “Some of the ejecta escaped Earth’s gravitational pull and went into irregular orbits around the sun. Over millions of years, bits of it found their way to other planets and moons in the solar system. Mars was eventually strewn with the debris—just as pieces of Mars, knocked aloft by ancient asteroid impacts, have been found on Earth. A 2013 study in the journal Astrobiology estimated that tens of thousands of pounds of impact rubble may have landed on Titan, a moon of Saturn, and on Europa and Callisto, which orbit Jupiter—three satellites that scientists believe may have promising habitats for life.”

      Okay so far, but then we get to this…

      “Mathematical models indicate that at least some of this vagabond debris still harbored living microbes. The asteroid may have sown life throughout the solar system, even as it ravaged life on Earth.”

      Now isn’t that a bit of a stretch?

  26. The Brexit clock is running out of time.

    European Union
    EU gives Britain 11 days to come up with new Brexit plan
    Brussels calls emergency summit for 10 April after MPs reject Theresa May’s deal for third time
    Daniel Boffey in Brussels
    Fri 29 Mar 2019 12.53 EDT
    First published on Fri 29 Mar 2019 11.27 EDT

    The EU has given the British government 11 days to come up with a fresh Brexit plan to avoid crashing out of the bloc at 11pm on 12 April.

    In the immediate aftermath of the crushing rejection of the prime minister’s deal, the European council president, Donald Tusk, called an emergency leaders’ summit.

    Should the UK seek a lengthy extension, leaders will debate any request at an extraordinary meeting on 10 April.

    EU capitals would require a clear justification at least two days earlier from Downing Street on the reason for a lengthy delay to allow officials to prepare. “We expect the UK to indicate a way forward before then, well in time for the European council to consider,” an official said.
    …

  28. Some of those articles seemed to have a more negative tone than we have been seeing. More “whoa is me.”

    Maybe we are reaching the media acceleration phase.

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