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We Had A Little Blip In 2008 And There’s A Similar Tightening

It’s Friday desk clearing time for this blogger. “After years of dramatic price increases in the country’s largest cities, major metro real estate markets are seeing the beginnings of what some are calling a correction — a shift that should bring overvalued properties back down from lofty heights. Sales are down in places like Manhattan, San Francisco, and Los Angeles, key regions where prices have soared since the recession.”

“But as coastal cities reel from the unbridled rebound, what’s the outlook in Chicago? ‘Sellers need to act now but be a little more realistic about their pricing,’ says veteran broker Rafael Murillo. ‘In areas like Wicker Park, the West Loop, River North, and Lincoln Park, sellers shouldn’t be so ambitious about prices. Buyers are just not able or willing to pay high prices anymore.'”

“Jack Osbourne is renting out his former family home in Los Angeles. The five bedroom, six-and-a-half bathroom property, located in upscale Studio City, has been made available for $16,500 a month. Jack had originally listed the home for $3.45 million in 2017, but slashed the price to $3.2 million within a month before finally taking it off the market.”

“September is usually the month that we’d expect to see real estate activity start to pick up after a summer break – but there’s no sign of that this year, new statistics from the Real Estate Board of Greater Vancouver reveal. There were just 1,595 home sales in Metro Vancouver in September 2018, which is a dramatic 43.5 per cent decrease from the 2,821 sales in September 2017, and an even more surprising 17.3 per cent month-over-month drop since August this year.”

“The numbers certainly place a question mark over the B.C. Real Estate Association’s recent assertion that the slowdown in sales across the province so far this year is ‘largely behind us’ and that activity is likely to pick up this fall. The worst-hit areas for value declines in the detached sector were West Vancouver, where benchmark prices are down 11.4 per cent year over year, and Vancouver West, down 10.9 per cent.”

“The 1850-built Enniskerry house and holding owned by the late parents of Minister for Transport, Tourism and Sport Shane Ross has failed to raise any offers at auction, despite being guided at €1.6m, less than half of original asking price of €3.75m. Darren Chambers of Lisney said the agency was ‘flabbergasted,’ but he added that the lack of bidding was symptomatic of a ‘general unresponsiveness’ from buyers now being felt at the prestige end of the market in general.”

“New figures suggest some resorts on the Swiss alpine slopes are undergoing a property slump. In the high Alpine resort town of St Moritz, house prices have plunged more than 11 per cent in the last 12 months. On slopes such as Davos and Klotsers, property values have sunk by nine per cent and 10.7 per cent respectively.”

“Residential price declines in Abu Dhabi and Dubai are among the most pronounced in the world over the past year, according to Knight Frank. Values had fallen by 6.9 percent in the UAE capital in the year to the end of June. This made Abu Dhabi the second worst performing city in the index with only Turin, Italy showing a biggest price drop of 7.1 percent in the same period.”

“A reliable leading indicator for the world’s least affordable housing market is sending a sell signal for the first time in three years. Losses in the Hang Seng Properties Index on Thursday left the gauge of Hong Kong real estate stocks trading as much as 20 percent below its peak in January. Declines of that magnitude from major highs have preceded the last four downturns in Hong Kong home prices, data compiled by Bloomberg show.”

“The former British colony has led a global surge in property prices in recent years that shows increasing signs of reversing in major cities from London to New York. ‘Stocks pretty much always peak and bottom before physical properties’ in part because the equity market is more liquid, said Peter Churchouse, chairman at Portwood Capital. ‘History is telling us something here.'”

“While sellers have been the victors for the past 12 months, Patrick Tynan of LJ Hooker Nowra said buyers were making a comeback in the Shoalhaven property market. ‘In our area numbers are down about 21 per cent on last year. Twelve months ago we were in a sellers market, and now we’re in more of a buyers market,’ he said.”

“Mr Tynan attributed the decline in sales to the ongoing banking royal commission, and tightening of lenders criteria. ‘We are finding the financiers are being a bit more critical of lending, particularly for investment properties,’ he said. ‘We had a little blip in 2008 with the Global Financial Crisis, and we are finding there’s a similar tightening of the banks due to the royal commission where the market has tapered.'”

“In the last 48 hours four Turkish construction giants with decades – in one case a half-century – of history have filed for bankruptcy protection. These were Palet Construction, a firm founded 52 years ago, Ceylan and Nuhoğlu, each more than 30 years in the business, and Nafia.”

“Ali Babacan, the ruling Justice and Development Party (AKP)’s longest-serving deputy prime minister for economic and financial affairs, gave the plainest description of the problematic period faced by the construction sector in a searing piece of self-criticism in 2014, before leaving the party.”

“‘Without producing anything ourselves, without earning it, we are using credit secured from abroad for luxury construction projects, shopping malls, luxury accommodation … before long this is going to land Turkey in trouble,’ said Babacan.”

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This Post Has 30 Comments

  1. ‘The numbers certainly place a question mark over the B.C. Real Estate Association’s recent assertion that the slowdown in sales across the province so far this year is ‘largely behind us’ and that activity is likely to pick up this fall’

    Ahem…

  2. “Jack Osbourne is renting out his former family home in Los Angeles. The five bedroom, six-and-a-half bathroom property, located in upscale Studio City, has been made available for $16,500 a month.

    Jack, you must be a bigger druggie than yo’ daddy Ozzy if you think some renter is going to pay your mortgage.

    1. “is renting” implies that it is rented. 16k should about cover his mortgage taxes and. Of course of the property is declining in value by 30k a month he would be better off selling.

  3. Anyone that has official data on months of supply? I like to see how close we are to a buyer’s market.

    2. The NAR loves to say 6-months supply is a balanced market. I think it’s much lower than that. I see price cuts after a few weeks. Sellers wants to unload much sooner than 6-months.

      Also, I think the NAR does actively manage metrics including ‘days on market’ and ‘months supply’ to ensure they have a ‘buy now’ story.

      1. That data is for the whole USA and based on August numbers. I love to see this per region and with updated numbers. If inventory is growing at this pace and sales catering, I expect us to pass 6.1 month of supply quickly. Especially in San Jose and Seattle area.

        1. On the other hand that $6k plus monthly payment for a San Jose 3br/2ba, those 30-days roll by too fast.

  4. ‘We had a little blip in 2008 with the Global Financial Crisis, and we are finding there’s a similar tightening of the banks due to the royal commission where the market has tapered.’”

    Oh dear. Did this REIC shill just compare the current downturn to the deterioration before the 2008 financial crisis? That was no “little blip” – it almost took down the global financial system. And this time around, after ten years of QE, the Fed and central banks have no ammunition left to avert a full-blown crisis.

    Be afraid, FBs and REIC toads. Be very afraid.

    1. the Fed and central banks have no ammunition left to avert a full-blown crisis.

      Did we run out of ink?

  6. Barely solvent (if that) Spanish banks lent Turkish developers $82 billion to go on a speculative building spree and fund grandiose infrastructure projects for Turkey’s megalomaniac President Erdogan. So what’s going to happen to the Eurozone financial sector when Turkish firms start defaulting on all those loans?

    I’m beginning to think our all-wise, all-knowing Keynesian central planners and central bankers erred very badly in believing in debt-fueled “growth” and lending staggering sums to deadbeat countries like the PIIGS, Argentina, and Turkey.

    https://www.theguardian.com/cities/2018/aug/23/how-turkeys-lira-crisis-was-written-in-istanbuls-skyline

    From a distance, Esenyurt, a newly built up neighbourhood on the edges of Istanbul, looks a bit like Hong Kong or Dubai, with a bustling downtown of shiny skyscrapers. Upon closer examination, however, you notice that tower after tower stands incomplete, lacking windows or furnishings; others are only half-occupied, their windows dark after nightfall.

    “In the residential areas, 100% of the construction has stopped,” says Mohamed Karman, a local estate agent, from his small office in the central square of Esenyurt. “Do you know why? The materials. Everything is in dollars, you pay in dollars.”

  7. He is “flabbergasted ” and there is “unresponiveness from buyers” imagine what he will be saying a year from now!

  8. September is usually the month that we’d expect to see real estate activity start to pick up after a summer break

    Huh?

    1. He meant to say ‘pick up the for sale signs that have been knocked over and cluttering up the yard.

    3. Ya don’t you remember the realtors told us all the buyers went on vacation this summer. The Chinese investors took the bus back to China town and and and… oh yeah interest rates went up, yeah that’s why the normal peak season sales fell through the floor.

    1. Earlier this summer, DMAR Market Trends Committee saw indications the housing market was cooling but was shocked when it completely froze in September:

      I wasn’t shocked. Don’t think any HBB regulars were.

      Spoiler alert for the clueless DMAR “experts”: It only gets uglier from here.

    2. Article confirms there is no “pent-up demand” for $500,000 starter homes in Denver.

      Go on Zillow and look up asking prices for used houses in random ZIP codes around Denver. Prospective buyers are collectively realizing that it just isn’t worth it. And those who want to raise a family are realizing they’d be better off moving back to the Midwest.

      Denver: it’s just not worth it.

  11. “In 2008 And There’s A Similar Tightening”

    Soon to be followed by financial panic and bailouts…

  12. 10-year yield, 30-year yield hit fresh multiyear highs in brutal week for bond bulls
    Published: Oct 5, 2018 3:58 p.m. ET
    The 30-year bond yield logged its largest weekly climb since President Donald Trump’s election
    By Sunny Oh

    Treasury yields hit fresh multiyear peaks on Friday, extending their weeklong ascent, after a key jobs report showed tightening labor markets were leading to wage gains—a bearish development for bond bulls.

    The Bureau of Labor Statistics reported the U.S. had added 134,000 jobs in September, below the 168,000 jobs expected from economists polled by MarketWatch. July’s and August’s numbers were increased. The unemployment rate fell to 3.7%, its lowest level since 1969. While, the average hourly earnings rose 0.3%, after a stellar 0.4% gain the previous month.

    The 10-year Treasury note yield rose 3 basis points to a seven-year high of 3.227%, contributing to a weeklong climb of 17.1 basis points, its largest such rise since February. The 30-year bond yield rose 4.2 basis points to 3.396%, extending its weeklong rise to 20 basis points, its biggest such climb since the week of President Donald Trump’s election.
    …
    https://www.marketwatch.com/story/yields-extend-march-higher-ahead-of-jobs-report-amid-brutal-week-for-bond-bulls-2018-10-05

  13. Article about Illinois governor’s race confirms Illinois is bankrupt:

    “The crux of Illinois’ budget problem is simple: State lawmakers guaranteed Illinois teachers, school administrators, bureaucrats and other state workers generous pension benefits, and then failed year after year to sock away enough money to pay for them. The state constitution, meanwhile, makes it almost impossible for lawmakers to take those benefits away. “You can’t promise what you don’t have money to do,” says James Spiotto, a Chicago consultant who’s an expert on state pension issues. “That’s what we did.”

    https://www.politico.com/magazine/story/2018/10/05/pritzker-rauner-illinois-governor-2018-221079

    Why would anyone want to buy a house in Illinois? LOLZ

  14. I guess Ford is having trouble showing a profit selling their $60k+ four door pickup trucks, so the labor force will take a hit.

    “Ford to Cut Jobs as It Reorganizes Salaried Workforce”

    “Ford Motor Co. informed employees this week of a planned reorganization that will cut salaried jobs, part of Chief Executive Jim Hackett’s broader plan to slash costs as the auto maker seeks to improve profits and revive its stock price.”

    1. It would be nice if Ford and other US automakers changed their focus from “shareholder value” (creating obscene stock option windfalls for senior executives using borrowed money) to producing vehicles people wanted to buy and own.

  15. “Buyers are just not able or willing to pay high prices anymore.’”

    Where did all of the government-sponsored, federally-guaranteed subprime loans go?

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