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All The Fictitious Value Must Be A Loss To Some Persons Or The Other

A report from Bow Valley Crag and Canyon in Canada. “The list of headwinds is many for the city’s new homes market. Veteran housing analyst Dave LaRose notes he surveys new builders’ salespeople and is hearing anecdotally about prospective buyers making low-ball offers, some even asking an impossible $100,000 or more off a $500,000 listing price. ‘There are people who have been absolutely ridiculous with their offers,’ he said.”

The Wall Street Journal on the UK. “The uniquely British financial strategy, contract reassignment, has helped real-estate speculators in the U.K. reap fantastic and fast profits over the past decade. But in today’s floundering market, attempting to unload sale contracts at a profit has become a risky strategy.”

“According to research by LonRes, which monitors new build prices in the British capital, prices in Nine Elms, home of both Battersea Power Station and the new American Embassy, where 20,000 apartments are being built, have fallen 15.4% between 2014 and 2019, or $240 a square foot. In Earl’s Court, a west London neighborhood on the fringes of prime central London long-tipped for price growth, prices fell 9.3%. In Canary Wharf, London’s modern financial district, prices are down 8.3%.”

The Tirana Times on Albania. “According to the Albanian Construction Portal there are 245 construction projects currently underway in Tirana, from 227 at the beginning of the year. Compared to the same quarter a year ago, the area of new permits granted has nearly fivefold.”

“The biggest concern of the main operators in the market is that construction in the Tirana area is being done without empirical studies and without relying on an analysis of how the demand performance will continue in Tirana. Market operators say the new arrivals in the city supply both the rental and sales market at the same time, but they belong to a category seeking economic prices, which does not match the boom of luxury and high-rise construction.”

From News.com.au on Australia. “Government, builders and the banks have mucked it up and Australian homeowners and homebuyers are on the hook for big financial pain, experts have told news.com.au in the wake of Sydney’s Mascot Towers drama. REA chief economist Nerida Conisbee said the apartment quality crisis had come at the worst time, as values were already slipping thanks to the large number of properties coming onto the market.”

“Financing is also problematic for people who already own apartments in new buildings, with banks valuing units in buildings that have had problems significantly lower than their purchase price, pushing owners into negative equity that may follow them around for life. ‘It affects the value of your property, you’ll get mortgage prisoners stuck in these flats unable to move,’ said Steve Jovcevski, housing expert at Mozo.”

“It’s a story all too familiar for Andy White, who owns an apartment in a building in Melbourne constructed with non-compliant cladding. ‘You’ve got more consumer protection with a toaster than an apartment,’ Mr White said. ‘You can’t sell, you can’t put it up as surety for a loan to buy somewhere else. Be wary and do extra homework if you’re going to buy — I would not buy an apartment again.'”

From Newshub New Zealand. “Some of Auckland’s popular inner-city suburbs experienced a dip in property prices in May, with Parnell prices falling 14.8 percent, Ponsonby dipping 4.1 percent and Remuera dropping 7.8 percent. ‘Property prices in the region have been flat for a number of months but now it seems the Auckland property bubble is losing air and prices are on the decline,’ says Head of Trade Me Property Nigel Jeffries.”

From MarketWatch. “According to Ritholtz Wealth Management’s Nick Maggiulli, the greatest bubble of all time burst in 1989, and investors still haven’t bounced back. ‘Japan in the late 1980s was the grandaddy of them all,’ he wrote. ‘More importantly, in the 30 years since the peak, both Japanese stocks and residential real estate have yet to recover.'”

“As for how to prepare for the next bubble, Maggiulli left us with a quote from an anonymous pamphlet from the South Sea bubble of 1720 that was cited in ‘arguably the greatest financial history book‘ ever written: The additional rise of this stock above the true capital will be only imaginary; one added to one, by any rules of vulgar arithmetic, will never make three and a half; consequently, all the fictitious value must be a loss to some persons or the other, first or last. The only way to prevent it to oneself must be to sell out betimes, and so let the Devil take the hindmost.'”

This Post Has 38 Comments
  1. ‘You’ve got more consumer protection with a toaster than an apartment’

    Yeah Andy, and for the past couple of weeks virtually every media down there was gushing about “the boom is back on!” With absolutely no proof. Buncha bogans.

    1. As a young lad growing up in Oz, we referred to them not as bush turkeys, but scrub turkeys – and they were a bit ornery, but then again I was a lot smaller and more things scared me then. Magpies inspired even more fear, as there were weekly stories on the news of people getting attacked by them. I believe the cartoon Heckle and Jeckle was based on magpies.

      Oz has a lot of interesting birds. Glad to see the Aussies building a lot of substandard housing which will end up providing shelter for the avian world.

  2. I think this is the first Albanian article I’ve posted in 15 years. This thing is everywhere.

  3. some even asking an impossible $100,000 or more off a $500,000 listing price

    The gall. Unpossible.

  4. Holy crap. Gold just shot up to $1374. Blew right past the $1350 “Maginot Line” resistance.

    Looks like the smart-money flight to safe haven, and out of the Fed’s doomed Ponzi markets and asset bubbles, has begun in earnest.

    https://www.kitco.com/market/

    1. Apparently someone’s figured out that maybe, just maybe, MMT isn’t really a good thing after all, and in fact in many cases leads to hyperinflation.

      Fiat money only works when market participants have “faith” in the currency. Fiat in the U.S. is “Federal Reserve Notes”. FRNs are essentially monopoly $, since not backed by precious metals. When the “full faith and credit” of the gov’t. comes into question, people begin to realize this. Continuous, exponential $ printing and unbridled gov’t. spending tends to do this. MMT is neither modern, nor a theory; it’s merely propaganda cover for the huge, growing, steaming pile of global debt. “Whistling past the graveyard” if you will. Jay Powell, the Fed, and other central banks are doing a great job of destroying the “full faith and credit” thing lately. Uber-doves, all. Fortunately, you can’t print gold.

      “All the money and all the banks in Christendom cannot control credit…Gold is money and nothing else.” – JP Morgan’s 1912 Congressional testimony on “the justification of Wall Street”

      “Fiat money eventually always goes back to its intrinsic value – zero” – Voltaire

      ‘We will not have any more crashes in our time.’ – John Maynard Keynes, 1927

      ‘I don’t believe there will be another financial crisis in our lifetimes.’ -J anet Yellen, 2017

      And one more zinger…

      “There is no housing bubble” – Ben Bernanke 2006

      1. Just curious. Has there ever been a time when printing money to meet any and every political desire, regardless of the resulting debt load, in other words MMT, has not resulted in hyperinflation?

        They say that under MMT they will control inflation by increasing taxes. On whom? It will have to be on the bottom 80%, or — maybe even more poisonously, on the top 20%. And after 35 years of being trained to expect lower taxes, what politician will survive raising taxes? So there will be no taxes that significantly reduce inflation.

        1. Has there ever been a time when printing money to meet any and every political desire, regardless of the resulting debt load, in other words MMT, has not resulted in hyperinflation?

          I suppose the answer is, “it depends.” How much quantitative easing are we talking about. Japan has been doing this for decades trying to cure their deflation, but it didn’t create much inflation.

  5. Veteran housing analyst Dave LaRose notes he surveys new builders’ salespeople and is hearing anecdotally about prospective buyers making low-ball offers, some even asking an impossible $100,000 or more off a $500,000 listing price. ‘There are people who have been absolutely ridiculous with their offers,’ he said.”

    Try to keep up, Dave. Those “low ball offers” from today’s knife catchers are as good as it’s going to get. Your “impossible” $100K off the greedhead wish price pales in comparison to what those shacks are going to go for once they go under the auctioneer’s hammer.

    1. My wife really liked a shack we recently looked at but it was 350k over what I would even consider spending in this peak of the bubble. Told her I would go ahead and make the offer 350k below what they are asking. This was Monday and not even a response saying “no” from realtor. There is a sense of pleasure I get low balling realtors and greedbag sellers. I’m sure I’ll be looking back at this laughing and remind my wife how over priced the market was and tell her she should be thankful that the greedbag, commission whore realtor ignored us. Winning!

      1. Curious, is your wife pulling on an “economic oar,” rearing children or just along for the middle-class ride?

        1. Raising our two children for last 8 years while finishing her medical degree. Our youngest will be entering full time schooling this year and momma will be back in the working class. We plan to catch a falling knife by end of next year and are financially setup to do so but I have a bit of stubbornness and principle behind waiting it out as long as possible but not so long that my kids are off to college. I get what most on here are saying about the timeframe of this bubble and for me I will likely be Buying at a peak, I am hoping it’s not the top of the peak tho!

          1. “Raising our two children for last 8 years…”

            We executed a similar plan, which was economically painful, but our two both graduated with honors from high school, and they are progressing through college, which is, again, economically painful. I’ll probably roll-over and die like an exhausted salmon when it’s all over.

    2. “absolutely ridiculous”

      REALTOR, a 20% lowball is just the opening act. When this sh*tshow really starts rolling you’ll feel like you’re blessed to receive any offer at 50% off

      “This sucker could go down” — George W. Bush, 2008

  6. From MarketWatch. “According to Ritholtz Wealth Management’s Nick Maggiulli, the greatest bubble of all time burst in 1989, and investors still haven’t bounced back. ‘Japan in the late 1980s was the grandaddy of them all,’ he wrote. ‘More importantly, in the 30 years since the peak, both Japanese stocks and residential real estate have yet to recover.’”

    Japan’s just ahead of the curve…

    http://worldpopulationreview.com/countries/countries-by-national-debt/
    Debt to GDP Ratio by Country 2019
    Name National Debt to GDP Ratio
    Japan 234.18%
    United States 109.45%

    https://www.nasdaq.com/article/boj-is-a-top-10-shareholder-of-90-of-japans-stock-market-cm610733
    BOJ is a top-10 shareholder of 90% of Japan’s stock market
    April 24, 2016, 01:23:29 PM EDT By Adam Button, ForexLive

    https://www.zerohedge.com/news/2018-06-27/boj-now-top-10-shareholder-40-companies-owns-42-all-government-bonds
    BOJ Is Now A Top-10 Shareholder In 40% Of All Japanese Companies; Owns 42% Of All Government Bonds
    by Tyler Durden
    Wed, 06/27/2018 – 20:10

    https://www.oftwominds.com/blogapr19/Japanification4-19.html?fullweb=1
    Charles Hugh Smith – Of Two Minds
    The Japanification of the World

    April 5, 2019
    Zombification / Japanification is not success; it is only the last desperate defense of a failing, brittle status quo by doing more of what’s failed.

    ” Here’s the core dynamic of zombification / Japanification: the top 25% are doing whatever is necessary to maintain the status quo because it works well for them, but the system is failing the bottom 75%, who must be politically, socially and economically neutered so they can’t upset the apple cart.

    Depending on the economy/society in question, one could argue that it’s the top 40% defending the status quo and disenfranchising the bottom 60%, or it’s the top 20% disenfranchising the bottom 80%. The exact ratio doesn’t matter; what matters is the status quo no longer works for the majority, but they are powerless to change the system because it’s controlled by the minority who benefit so greatly from it being locked in its present setting.”

    The path forward for the U.S., because it’s working so well in Japan…

    https://www.reuters.com/article/us-usa-fed-yellen-purchases-idUSKCN11Z2WI
    Business News
    September 29, 2016 / 2:44 PM / 3 years ago
    Yellen says Fed purchases of stocks, corporate bonds could help in a downturn
    WASHINGTON (Reuters) – The Federal Reserve might be able to help the U.S. economy in a future downturn if it could buy stocks and corporate bonds, Fed Chair Janet Yellen said on Thursday.

    “The road to perdition is paved with good intentions by central bankers.”

    1. BOJ is a top-10 shareholder of 90% of Japan’s stock market
      April 24, 2016, 01:23:29 PM EDT By Adam Button, ForexLive

      Had to look that one up. It looks like even though it is a top 10 shareholder, the BOJ still “only” holds about 4% of the value of the Japanese stock market. Still too much, but the numbers above make it appear that it is vastly more.

      “Ninety percent of the game is half mental.” – Yogi Berra

    2. I am fairly certain they are already propping up the stock market through their partner central banks which are not restricted from buying stock. But it’s more of the same mantra….give us more power so we can fix the problems we created in our last power grab. Central planners never change. Always another excuse close at hand to extend their reach. Never ends.

  7. This is one of the worst real estate articles I have ever read:

    “If you can afford rent, you can afford to buy,” said Lori Abbey with Compass Realty.

    With the help of Abbey and mortgage broker Brent Schneider, we’re sharing seven keys to scoring your first set of keys.

    “Home ownership is really a lot easier than people might think,” Schneider said.

    “Figure in that you save money on taxes,” Abbey said. “So, you get to write all of the interest off on your taxes. That’s like a mini-savings or vacation plan for many people. Truly.”

    You’re also building equity.

    “It doesn’t take much time at all to build that equity,” Abbey said. “All of a sudden, they have $100,000 in equity, which is an asset, which is, effectively, a savings plan.”

    Experts say there’s truly never been a better time to buy than now.

    “Because Denver has become a big city, with industry and people — which makes it less susceptible to recessions,” Abbey said. “Denver is less likely than many places to take a big downturn.”

    https://www.thedenverchannel.com/lifestyle/real-estate/shopping-for-a-home-here-are-7-keys-to-scoring-your-first-set-of-keys

    That last paragraph is emblematic of the horsesh*t language of emotional economics spoken by REALTOR.

    1. “So, you get to write all of the interest off on your taxes”

      But only if you are married and have over 14K in interest per year and have capped the 10K tax deduction limit. The standard deduction for Married is 24K

      14K/year in interest at 4% is about a 400K loan.

      1. Yep, the 2017 tax reform was sort of programmed to destroy the housing market.

        Of course, most of the politicians voting on it probably didn’t understand the math… Or didn’t care, they knew their payoff from the donors would be handsome.

        1. The decline would have been more precipitous if the mortgage interest deduction was capped at a lower level. Right now it is basically decimating the 2nd housing market for the pretend wealthy. In 10-20 years, things will be really different as inflation and prices rise such that the MID will mean almost nothing in the rent vs. buy equation.

  8. Just a few weeks ago the MSM was predicting that the stock market was predicting an imminent recession. Now what is it saying? The Fed has a bazooka and a recession is far in the future?

    1. Zillow loses money on flipping houses, but they make it up on volume.

      Revenue, baby! Profits are old-school. Otherwise, since real US corporate profits are still down from 2012 (according to the BEA and Federal Reserve), the stock market would be half what it is today.

  9. The day that shelter got turned into a short term investment or ATM machine ,instead of it being a historic long term investment plus a shelter need was evil.

    The day they turned health care into a price fixing medical cartel Monopoly was a bad day

    Shelter and health care are basic needs and people are being held hostage to lack of choices in these rigged markets.

    1. “Shelter and health care are basic needs and people are being held hostage to lack of choices in these rigged markets.”

      Your pension is needed too, but remain confident that your sacrifice will be acknowledged at the Pearly Gates. Now go back to work and wait for that 2,000-yr/old tall blonde white guy’s feet to appear on the Mount of Olives. Expensive arid real estate!

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