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Investors Are Getting Increasingly Anxious As The Bleak Situation Persists

It’s Friday desk clearing time for this blogger. “An Upper East Side mansion finally sold after more than a year on the market and a hefty price reduction. The elegant limestone structure was acquired by an anonymous buyer for $30.1 million. The Kagans bought the late-1890s house in 2009 for $24.5 million, then undertook a top-to-bottom renovation. When they put the 22-room home back on the market in 2017, they initially sought $44 million. This wasn’t the only spruced-up townhouse to sell at a big discount last month.”

“Homes in San Francisco stayed on the market longer this year compared to the same time last year, and overall sales dropped by 13 percent. ‘The first half of 2018 was probably the hottest market since the height of the dot.com boom,’ said Patrick Carlisle, chief marketing analyst at Compass. ‘That’s a massive swing – to go from one of the hottest markets we’ve ever had to a market where price has been kicked down a little.'”

“The market has especially cooled off on the high-end front, where there was a 30-percent reduction in luxury condo sales of $2 million and over and a reduction in overbidding of asking prices. Carlisle said this was because many developers in recent years have shifted to building extremely high-end condo projects — $3 million — leading to an oversupply and a softening of the market. ‘This dynamic is playing out in New York as well,’ Carlisle said. ‘Buyers are going to play the sellers off each other.’ He said the first quarter is usually slower than the second quarter, where the glut of home sales are typically come on the market.”

“Two down, two to go! After price cuts and desperate publicity stunts, Sister Wives star Kody Brown has finally sold another one of his Las Vegas homes. Christine sold her home on Tuesday, April 2 for $599,900. The house was listed for sale in July 2018 for $675,000. It was cut to $649,000 in September 2018, $639,000 in November 2018 and $614,900 in January 2019.”

“Following the news of the Federal Housing Administration subjecting mortgage underwriting to a more intensive manual underwriting process, banks have started to pull back and will continue if yields continue to drop, according to a new study.”

“‘The reason for the change now is I suspect someone was looking at the FHA portfolio and had an Oh sh** moment when they realized the outsized portion of the portfolio that is at much greater risk of default due to very low down payments and higher debt to income ratios,’ wrote Glen Weinberg, chief operating officer of Fairview Commercial Lending. ‘This led to the abrupt change in underwriting to try to mitigate future risk as the economy enters a new cycle. Unfortunately, the changes now might be too late as the real estate market is already starting to cool.'”

“Cities around the world, from New York to London to Stockholm to Sydney, are struggling to solve growing affordable housing crises. Acute shortages are persisting despite millions of dollars invested and hundreds of thousands of units built. These trends, coupled with a glut of luxury supply, have damped prices in some of the frothiest markets. In Sydney, the median house price at the end of last year was about $1.1 million Australian dollars ($780,000 U.S.), down about 11.3% from the peak hit in 2017, according to CBRE Group.”

“There have been ‘rapid declines in approvals and building starts’ recently, Laurence Troy, from the City Futures Research Centre at the University of New South Wales, said. ‘As we are now seeing, when the price a property can fetch drops, so too does the desire to build it. It was rampant price growth that underpinned developers’ (activity) to add supply, not a desire to make housing more affordable.'”

“Singapore’s private residential prices fell the most in two-and-a-half years in the first quarter, with values of high-end homes have the biggest decline in a decade. To counter what they said was ‘excessive exuberance’ in the city-state’s property market after a spike in prices last year, authorities in July slapped higher stamp duties on property purchases for individual home buyers and tightened housing loan limits.”

“According to Colliers International, the gap between a large supply and soft demand was the major cause of stagnant growth for apartment prices in Jakarta in the first quarter of 2019. ‘We project that until the end of 2019, the outlook for apartment (prices) would be somewhat stagnant because many investors are taking the wait-and-see stance,’ Colliers International Indonesia senior associate director Ferry Salanto said.”

“The uptake for social housing in Hà Nội has been disappointingly low due to indifference from the intended target customers. The backlog of vacant rental apartments continues to grow. Investors in the city are getting increasingly anxious as the bleak situation persists despite numerous open biddings, while they still had to pay bank interests and the apartments deteriorate from sitting empty.”

“New data show the Auckland price plunge is continuing. In the first quarter of this year, 7.2 percent of sales resulted in a capital loss for sellers – that’s compared to just 3.1 percent at the same time last year. ‘We’ve had tax change which is affecting property investors, and we’ve had a general loss of interest from foreign buyers in a number of international cities – Sydney, Melbourne, Vancouver, Auckland,’ said Westpac’s Dominik Stephens. ‘Actually prices in all those cities are dropping away.'”

“That’s bad news if you are looking to sell. Newshub has spoken to one seller whose home failed to sell at auction on Wednesday. They’re gutted.”

“The call of the muezzin from nearby Umm al-Qutuf echoes through Harish, wafting through half-occupied buildings, around for-sale signs for new and existing apartments and past scores of construction sites. Billed as Israel’s city of the future, Harish already boasts blanket WiFi coverage and fiber optic connections to every home. Many areas have been zoned to permit Airbnb rentals. But Harish hasn’t yet come up to expectations, with many housing units standing empty and many more on sale at lowish prices.”

“Many buyers had hoped to rent the units they bought but because of the oversupply of new homes, it’s hard to find tenants willing to pay enough to justify the investment. Meanwhile, the Finance Ministry has toughened tax rules for property investors. As a result, many are trying to sell their apartments, increasing the supply even more.”

“Crucial changes will be made to a major housing development after a committee heard that current sales rates meant the estate would take 18 years to complete. The new plans angered existing residents who had bought homes for close to £400,000.”

“Speaking after the plans were approved, one Roseberry Manor resident, who asked not to be identified, said: ‘We were sold an executive estate of four and five bedroom detached houses by Bellway which they are now failing to deliver. Bellway clearly overpriced the houses we have bought in the first place and this is evident in the massive discounts they have applied since original residents have moved.'”

This Post Has 39 Comments
  1. ‘Bellway clearly overpriced the houses we have bought in the first place and this is evident in the massive discounts they have applied since original residents have moved’

    Well, it was cheaper than renting…

  2. ‘The reason for the change now is I suspect someone was looking at the FHA portfolio and had an Oh sh** moment when they realized the outsized portion of the portfolio that is at much greater risk of default due to very low down payments and higher debt to income ratios…This led to the abrupt change in underwriting to try to mitigate future risk as the economy enters a new cycle. Unfortunately, the changes now might be too late as the real estate market is already starting to cool’

    All the REIC wants to talk about is lower interest rates. But this FHA thing is going to kick their butts.

    1. But this FHA thing is going to kick their butts.

      And if Fannie and Freddie tighten too, it could get real interesting real fast.

      Most of the FHA loans are made by non-banks that don’t have a balance sheet/Portfolio to put these loans in, so they won’t be making them.

  3. ‘The first half of 2018 was probably the hottest market since the height of the dot.com boom,’ said Patrick Carlisle, chief marketing analyst at Compass. ‘That’s a massive swing – to go from one of the hottest markets we’ve ever had to a market where price has been kicked down a little.’

    ‘The market has especially cooled off on the high-end front, where there was a 30-percent reduction in luxury condo sales of $2 million and over and a reduction in overbidding of asking prices. Carlisle said this was because many developers in recent years have shifted to building extremely high-end condo projects — $3 million — leading to an oversupply’

    Wa happened to my shortage bay aryans?

    1. “…The market has especially cooled off on the high-end front, where there was a 30-percent reduction in luxury condo sales of $2 million and over and a reduction in overbidding of asking prices…”

      Perhaps the “ultra-wealthy” weren’t as “ultra-wealthy” as they thought they were.

    1. While down from 3.25%, it’s still higher than 1.5% in 2016. While there has been talks about rate cute and QE, keep in mind that these are such talks. The FED has stop increasing the rate but the rate has not been cut.

  4. “The elegant limestone structure was acquired by an anonymous buyer for $30.1 million. The Kagans bought the late-1890s house in 2009 for $24.5 million, then undertook a top-to-bottom renovation.”

    Unless they paid over $5.6 million for the renovations and other HODLing costs, it appears they still made money.

    1. Is this the neocon power-couple Kagans? Serving as unregistered agents for a foreign power looks like a pretty lucrative racket, if that’s the case.

  5. what big city is farthest off peak besides NYC ?

    eventually it will be chighetto due to taxes and out migration

  6. “The Kagans bought the late-1890s house in 2009 for $24.5 million, then undertook a top-to-bottom renovation. When they put the 22-room home back on the market in 2017, they initially sought $44 million. This wasn’t the only spruced-up townhouse to sell at a big discount last month.”

    Better sell quick before the NYC mansion tax hit.

  7. Article at USA Today (yeah I know) about the arbitrage opportunities for low end homeowners. Lower end prices have risen faster than higher end, on a percentage basis, allowing faster move up.

    “When Todd and Marisa Bluth bought a $188,000 starter house in Commerce City, Colorado in 2012, they figured it would take at least a decade to build enough equity and savings to trade up to their dream home. Yet just four years later, they sold the 1,600-square foot unit for $284,000, allowing them to take their nearly $100,000 profit and buy a five-bedroom nearly three times the size for what seemed like a steal — $375,000 — in a more upscale neighborhood.”

    https://www.usatoday.com/story/money/2019/04/05/u-s-housing-market-less-expensive-homes-rose-more-sharply-price/3356733002/

    1. Literally the definition of bubble behavior. Meanwhile, the ladder for new entrants is getting pulled up, and eventually, demand will evaporate.

    2. I saw that and may use it in a weekend topic. Here’s the thing: some sucker had to borrow that 100k, with interest. These REIC stories never mention that. Nor do they mention it may be too much to repay, especially now that FHA is pulling up the subprime lending.

      1. Bad boy Ben. It’s not called subprime lending. It’s called “nonprime” lending! This time will be a slap on the wrist. Don’t make this mistake again.

        1. May 25, 2018

          “In his corner of American finance, where hard selling meets hard luck, Angelo Christian is a star. Each time Christian sells a home loan, the company he works for, American Financial Network Inc., takes as much as 5 percent. Many of Christian’s customers have no savings, poor credit, or low income—sometimes all three. Some are like Joseph Taylor, a corrections officer who saw Christian’s roadside billboard touting zero-down mortgages. Taylor had recently filed for bankruptcy because of his $25,000 in credit card debt. But he just bought his first home for $120,000 with a zero-down loan from Christian’s company. Monthly debt payments now eat up half his take-home pay. ‘If he can help me, he can help anyone,’ Taylor says. ‘My credit history was just horrible.’”

          “Christian can do this kind of deal because he is, in effect, making the loan on behalf of the federal government through its most important affordable housing program. It’s a sweet deal: He gets his nearly risk-free commission. Taylor puts no money down. If things go south, the government ultimately bears the risk. Many borrowers ‘are living paycheck to paycheck and, if they lose their jobs, they go into default immediately,’ says John Burns, a housing consultant.”

          http://thehousingbubbleblog.com/?p=10443

        1. That’s an extra 100k, for 30 years. So that’s about double, 200k. You really are just a troll. I don’t see you adding anything here but horse hockey.

          1. He’s just angry because he’s levered to the teeth on his own shack, and he knows what’s coming down the pike.

          2. $100K at 30 years is about $60K of interest.
            Now let’s do the math on renting for 360 months.

        2. “Borrow $100K at 3.5%. The horror!!”

          An additional $450/mo for 30-yrs [is] a lot of money for those wage slaves who actually repay their debts.

    3. & The beat$ goes on … & The beat$ goes on …

      What tangible item on a National / Global $cale can you di$tort by “variou$ scheme$” that in a short amount of time & a $imple $ignature.of.credit$ … increa$es its value by: $10,000 | $50,000 | $100,000 | $250,000 | $500,000| $750,000 | $1,000,000’$ ????

  8. Wanker Banker$ Mega.Bank$ are $trong! … Non.bank$ are $acrifical lamb$ HB.B ll … Lone Ranger $ilver Bullet$ Fed Fund$ rate$ @ 2.5%

    1. While the “repetitive task” plebs have automation and off-shoring nipping at their heels, they continue to pile-on the debt.

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