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A Tough Situation If Liquidity Dries Up

A report from WCMH in Ohio. “The Columbus real estate market is booming. Just as fast as a homeowner can put a for sale sign in their front yard, it is now quickly replaced with a sign that reads sold. ‘We got 8 offers all over list price,’ homeowner, Kelly Gunther said. ‘It’s definitely crazy in this market.'”

From Loudoun Now in Virginia. “One section of the real estate community that is doing quite well is homebuilders. The low inventory on the market is also causing many buyers to flock to new construction, said Allison Metzger of Green Lawn Realty.”

“‘I think it’s forcing people to purchase new construction whether they want to or not. The prices of new construction in some cases are astronomical to me, but people are willing to make it work because there’s nothing else out there they like. So they’re stretching themselves,’ Metzger said.”

“Heather Wilhelm Gosman, a Realtor with RE/MAX Gateway admits that she is seeing some sale prices on homes now that don’t make much sense to her. But Gosman doesn’t believe the housing market is headed for another crash like 2008. Lending practices have significantly improved since then, she noted. ‘I think we have fail-safes in place that will prevent [a crash] from happening,’ she said.”

From Market Watch. “It’s been difficult for lenders in the mortgage business whose firms provide the financing for the millions of Americans wanting to buy their own residence. With loan origination and volume decreasing, and after executives reduce their company’s costs, they are faced with the decision of whether to lower margins or credit standards.”

“Such a ‘race to the bottom,’ which partly caused the 2008 U.S. economic meltdown, isn’t the only thing that could precipitate the next housing crisis. I’m referring to what’s known in the financial industry as ‘liquidity risk.’ In basic terms, this is the ability for a firm to meet short-term financial obligations such as compensating employees. Liquidity risk is particularly acute within the housing sector because non-bank lenders originate more than 50% of home loans, up from just 9% in 2009.”

“Some 40% of non-banks didn’t turn a profit in 2018, according to Richey May & Co, and these institutions are likely to be in a tough situation if liquidity dries up.”

The Spokesman-Review in Washington. “While home prices in Spokane County were on the upswing in March, sales dropped dramatically compared to last year. Home sales declined more than 24% compared to March 2018, marking the largest year-over-year decrease in five years, according to data from the Spokane Association of Realtors.”

“Association Executive Director Rob Higgins said low inventory and high demand for housing is continuing to drive up home prices. ‘The market is very strong and that’s exemplified by fact that if you put a house on the market right now, you’ll probably have multiple offers on the property,’ he said.”

The Arizona Republic. “The price on a luxurious estate sprawling 22,000 square feet in metro Phoenix’s Gold Canyon community has been cut from $12.5 million to $6.9 million. The owner Burkes Global Properties spent almost $14 million to develop the mansion on the tallest point in the Superstition Mountain Golf and Country Club.”

“Only one house in metro Phoenix’s Southeast Valley is listed for sale for more than the Gold Canyon mansion. A 15,000 square-foot home on Kyrene Road in Chandler on Kyrene Road is on the market for $8.75 million. It was listed for $12 million in 2007.”

From Mansion Global on California. “Oil heiress and philanthropist Aileen Getty has relisted her Malibu, California, home Friday—nearly a year after it was taken off the market—at a reduced price of $11.995 million. The modern farmhouse-style home was first listed in May 2017 for $14.1 million, Mansion Global previously reported. It was removed from the market the following May.”

“Ms. Getty purchased the dark grey stucco mansion in August 2016 for $12.5 million.”

From Realtor.com on California. “An amazing Beverly Hills, CA, estate once owned by Cher is back on the market—with a major price cut to $48 million. In 2018, the sprawling compound hit the market as our most expensive listing of the week, with a $68 million price tag. This was also a discount from the $85 million it was listed for in 2016.”

“Now down 43.5% in price in three years, the home represents an intriguing opportunity. ‘This is the ultimate equestrian environment,’ says listing agent Joshua Altman. ‘No changes have been made to the property. The price reflects the current state of the high-end market, which is primed for buyers.'”

This Post Has 50 Comments
  1. ‘cut from $12.5 million to $6.9 million. The owner Burkes Global Properties spent almost $14 million to develop the mansion’

    Philanthropist.

    1. I’m bored here in the Columbia Basin, so I am heading out again tonight to do more hang gliding down in the San Francisco bay area.
      Keep up the pressure on the REIC!

  2. ‘The prices of new construction in some cases are astronomical to me, but people are willing to make it work because there’s nothing else out there they like. So they’re stretching themselves’

    ‘she is seeing some sale prices on homes now that don’t make much sense to her. But Gosman doesn’t believe the housing market is headed for another crash like 2008. Lending practices have significantly improved since then, she noted. ‘I think we have fail-safes in place that will prevent [a crash] from happening’

    Click!

    1. ‘I think we have fail-safes in place that will prevent [a cra$h] from happening’

      $tay low Fed Rate$ + $trong Wanker Banker$ + Non-Bank lender$ of “ill repute$” = Fail $afe!

    1. Sorry no sympathy for Trump on this one. He seems to be only complaining because it happened to him. He has done nothing to stop this from happening to the rest of us who would be powerless against the state. Has he done anything to dismantle, or said anything about dismantling, the surveillance state? Very disappointed with Trump on this account.

      1. https://9to5mac.com/2019/03/05/nsa-spying-program/

        ‘NSA no longer spying on phone records of US citizens, legislation may not be renewed’

        Mar. 5th 2019

        The New York Times reports that this latter program ended some six months ago. The claim was made by a senior Republican congressional aide.

        ‘The agency has not used the system in months, and the Trump administration might not ask Congress to renew its legal authority, which is set to expire at the end of the year, according to the aide, Luke Murry, the House minority leader’s national security adviser […]’

        ‘Security and privacy advocates have been gearing up for a legislative battle over whether to extend or revise the program — and with what changes, if any.’

        ‘Mr. Murry, who is an adviser for Representative Kevin McCarthy of California, raised doubts over the weekend about whether that debate will be necessary. His remarks came during a podcast for the national security website Lawfare.’

        ‘Mr. Murry brought up the pending expiration of the Freedom Act, but then disclosed that the Trump administration “hasn’t actually been using it for the past six months.” “I’m actually not certain that the administration will want to start that back up,” Mr. Murry said.’

          1. Once I stopped paying attention to what the news was blathering about and started researching for myself, I turned into a grudging Trump supporter with a whole new perspective on the state of our country. I think the next several months are likely to bring a landslide of new information and a national paradigm shift. I am overwhelmingly curious about how this will impact the housing market.

      2. They were spying on the Russians just so happened all the Russians were at the Trump Tower. If they were spying on porn stars they would have found the same.

    2. Wasn’t that like Watergate? Where are you Carl Bernstein and Bob Woodward? /sarc
      MSM=Democratic operatives with bylines. No news allowed that would reflect badly on Dems. Remember the Virginia (Northam) scandal? Me either… ‘It Just Went Poof’!

      1. ‘It Just Went Poof’

        Maybe it was out on the feathery edge of what is sensational (profitable) and what’s not. The MSM only makes money on things that can keep you tuned in.

    3. On a related subject, I hope that Julian Assange (arrested in London today to face extradition to the U.S.) will testify that Seth Rich gave Wikileaks the DNC emails in 2016. Seth Rich was murdered in Washington D.C. in 2016 in a “robbery” in 2016 in which nothing was stolen.

      Computer forensics have proven that the speed of download of the DNC emails was unpossible via a trans-Atlantic hack, it was done by someone on site with an external hard drive (detailed in The Nation magazine, not exactly a Trump friendly publication).

      Seth Rich was murdered by the DNC and the Clinton Machine. And if you try to post that last sentence on corporate social media, you will likely be censored, or banned.

      Donna Brazile wrote in her book “Hacks” that she was afraid for her life in the immediate aftermath of Rich’s murder. Why is that? And why will you be censored or banned for asking these questions?

      Hillary Clinton is a murderer. Thanks Ben Jones for providing one of the last online outlets where the truth can be discussed without censorship.

      1. On a related subject, I hope that Julian Assange (arrested in London today to face extradition to the U.S.) will testify that Seth Rich gave Wikileaks the DNC emails in 2016.

        I’ve been kinda bummed about his arrest. Thanks for pointing out one possible bright spot in it.

        1. Apartment 401 is on target. Assange’s arrest was strategic. I predict that he’ll help to bring down the whole house of cards and go down in history as a hero.

    1. Bugs: “Eh, what$ up Doc?”

      $hadow banking is now a $52 trillion$ industry, posing a big ri$k to the financial $ystem

      CNBC | PUBLISHED 4/11/2019 | Jeff Cox

      “The exposure of the global financial system to risk from shadow banking is growing,” DBRS said. “Weaknesses in these shadow banks arising from these activities could result in runs that could instigate or exacerbate financial market stress.”

      The companies face less regulation than traditional banks and thus have been associated with higher levels of risk.

      In the years since the crisis, global shadow banks have seen their assets grow to $52 trillion, a 75% jump from the level in 2010, the year after the crisis ended. The asset level is through 2017, according to bond ratings agency DBRS, citing data from the Financial Stability Board.

      The U.S. still makes up the biggest part of the sector with 29% or $15 trillion in assets, though its share of the global pie has fallen. China has seen particularly strong growth, with its $8 trillion in assets good for 16% of the total share.

      Within shadow banking, the biggest growth area has been “collective investment vehicles,” a term that encompasses many bond funds, hedge funds, money markets and mixed funds. The group has seen its assets explode by 130% to $36.7 trillion. It poses particular danger because of its volatility and susceptibility to “runs” and is part of the “significant risks”

      Nonbank financials, which also include insurance companies, pension funds and the like, have grown 61% to $185 trillion. Traditional bank assets have increased 35% to $148 trillion during the same period

      “A sharp rise in rates would impose sizable mark-to-market losses and diminish fund returns,” DBRS said. “In some circumstances, this deterioration in performance might result in large investor outflows and greater potential for forced asset sales. Such outflows might spill over into other funds and the markets more broadly.”

  3. I just got this in an email from Edward Pinto:

    ‘While it has been difficult to gauge the impact FHA’s March 15, 2019 Total Scorecard changes will have on its purchase volume, an early indication may be gleaned from the MBA’s Weekly Application Survey. FHA and VA purchase shares usually track fairly closely, especially over short time periods. Since FHA made a policy change and VA did not, this provides the opportunity for a natural experiment.’

    ‘We start by comparing FHA and VA’s respective shares in the couple of weeks prior to the announcement (with VA indexed to 100). We can then track changes in the ratio of FHA purchase apps to VA apps. As indicated in the chart below, for the two weeks prior to the effective date, the ratio was 1.00. However, in the first week the changes took effect, this ratio dropped to 0.91. In the second and third weeks that the changes were in effect, the average ratio was 0.87 or a 13% drop relative to the VA.’

    ‘We will continue tracking this relationship, but definitive results will not be available until June/July when loan level origination volumes for April/May are released.’

  4. Thanks, Mansion Global. I REALLY didn’t need that picture of Aileen Getty. For all her billions you’d think she could afford a better hair stylist.

      1. $230k

        $CAD

        Might be affordable if you have a better than average job in Hamilton, and there was not a recession on top of a crater baked in the cake. Buy on the US side for half of that.

  5. https://www.marketwatch.com/story/the-us-housing-recovery-is-built-on-quicksand-2018-10-17

    “It’s important to understand that the so-called recovery in U.S. housing starting in 2012 did not occur because of an improving economy and a growing demand for homes. Instead, specific actions were taken by mortgage lenders, their servicers, and the government to prop up markets because millions of homeowners were still delinquent on their mortgages and faced the threat of foreclosure. These homes owned by deadbeat borrowers, which have been intentionally kept out of foreclosure, will put tremendous downward pressure on home prices when lenders can no longer kick the can down the road.”

    1. “Home price gains since 2013 have been much less impressive than you think”

      Well…. I dont know about that fake news story. Sillycon Valley up 116% since 2012 is pretty impressive! As my fellow troll poster QT keeps reminding us, real estate only goes up! The gov is handing out free mortgage forgiveness passes like a volunteer hands out needles to the homeless in SF. Think of it like this. you can qualify for any size mortgage as long as its not over 10-15x your income, which in median income terms would put you around 1m worth of FREE “investing” money you can purchase a home with. 3-5% down payment and issue? no problem, credit cards offer cash advances! plop that money down on your new equity volcano and boom your rich like all the other super duper smart people. now when it comes time to pay that all back and you dont have the funds you can simply tell the bank you forgot and ask for some of that good ole 2012 style forgiveness. when the credit card bills start overflowing your mailbox just say F it and file a chapter 11 (which you can do every 7 years!). Living the dream! FREE FREE FREE!

    1. $4.29 for a gallon of gas in LaLaLand today! All the SoCal steam crackers took a dump and Magic Clean-Aire Corn Squeezins is costing more (but beer is the same price!) so expect to see a good bump in the consumer credit balance this quarter.

      1. in LaLaLand today

        It’s under $250 along the east coast. Your government must be jacking you up.

    2. Holy ****. I stopped changing my own oil about six years ago; had no idea it had gone up that much since. I used to pay half that for synthetic or semi-synthetic.

      The skid plates they started installing on vehicles successfully put me out of business, after about 35 years of DIY. I just take it in now.

  6. Good news on pipelines!! Much safer than trucks and trains to move oil and nat gas. It all about education.

  7. The former Cher house is a “buyer opportunity”? Really?. These folks just cannot help themselves with their BS.

    Next time it will be an ” exceptional buyer opportunity” when price is reduced another 30%. After that, a new dictionary will be needed.

  8. Trump is going to nominate Angelo Mozilo for the FED he knows a lot about banking and likes easy money.

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