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The Current Downturn Is Unprecedented In Terms Of The Magnitude And Length Of Declines

A report from CBC News in Canada. “When the market was hot, people lined up overnight to get their hands on pre-sale condominiums. Now that the housing market in B.C.’s Lower Mainland has cooled, some buyers are trying to back out of their contracts — unable to obtain the financing they need. A Vancouver lawyer says clients are coming to him several times a week hoping he can help find loopholes to get out of buying units they signed onto several years ago.”

“Kenneth Pazder says most people are having trouble obtaining mortgages high enough to pay off the developers for units they purchased when the value of the homes were higher. With pre-sale condos, a buyer puts down a deposit on a unit that has not yet been constructed. Once it’s complete, the buyer must pay the developer the entire balance.”

“The trouble occurs when the buyer goes to a bank to apply for a mortgage. A bank will only provide a mortgage based on the home’s current value. Now that housing prices in the Lower Mainland are lower than in recent years, the buyer must now make up the balance to pay off the developer.”

“Most clients, he says have watched their unit values drop since they agreed to purchase their units, as opposed to appreciate, which has been the case with pre-sale condominiums for the last decade. For a buyer closing on a home priced at $1 million, it could mean coming up with an additional $150,000 to pay the developer, he says.”

“When it’s compounded with the mortgage stress test, buyers need to come up with even more cash. ‘That’s quite a bit,’ Pazder said.”

The South China Morning Post. “A Hong Kong customer has backed out of buying a HK$251.23 million (US$32.11 million) luxury home in the Deep Water Bay neighbourhood, marking the second property default in nine days. The buyer, who is unidentified, failed to conclude the sales contract, forfeiting a HK$12.56 million initial payment made to the developer Nan Fung Development.”

“‘Buyers will be taking a critical look at their investments, especially for these super deluxe homes that used to set one price record after another,’ said Vincent Cheung, managing director of Vincorn Consulting and Appraisal Agency.”

“Vanke Property, the Hong Kong unit of China’s most valuable developer, paid the price last weekend, when it launched a 251-flat Grand Le Pont project in Tuen Mun, in defiance of the downbeat mood in the market. Only 30 of the flats were sold, according to sales agents.”

“Tycoon Lee Shau-kee’s Henderson Land fared far worse. All 33 flats at Novum East in Quarry Bay went unsold as of 6pm, while only one of 13 was sold at Novum West in Sai Wan.”

The Daily Telegraph in Australia. “Sydney’s current housing downturn has pulled the city property market into ‘uncharted territory,’, becoming longer and deeper than any other slump over the past 30 years. CoreLogic revealed median property values across the Harbour City have fallen 14.9 per cent since peaking in July 2017, which eclipsed falls recorded over other periods of market weakness.”

“CoreLogic analyst Cameron Kusher said prior downturns in Australia’s big cities were generally shorter and not particularly deep. ‘When downturns have occurred they are often small and values return to previous peaks fairly quickly,’ Mr Kusher said. ‘The current downturn for a number of regions is unprecedented in terms of the magnitude and length of declines.”

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This Post Has 39 Comments

  1. ‘The buyer, who is unidentified, failed to conclude the sales contract, forfeiting a HK$12.56 million initial payment’

    Well that was an expensive couple of days.

    ‘Buyers will be taking a critical look at their investments, especially for these super deluxe homes that used to set one price record after another’

    And we’re told it’s impossible to spot bubbles. BTW, this is another example of the most expensive areas falling first, fastest and further.

    2. Why on earth would spend that kind of money on a place in China??? They can take it from you whenever the hell they want.

  2. ‘For a buyer closing on a home priced at $1 million, it could mean coming up with an additional $150,000 to pay the developer…When it’s compounded with the mortgage stress test, buyers need to come up with even more cash’

    I would say it was cheaper than renting but these airboxes aren’t even finished.

  3. Now that the housing market in B.C.’s Lower Mainland has cooled, some buyers are trying to back out of their contracts — unable to obtain the financing they need.

    Die, speculator scum.

    1. Inventory increase winners
      Seattle 100%+
      Nashville, las Vegas neck n neck 90%+
      I still think chighetto will catch up

      1. Sydney was the hottest market in the world two years ago. I wonder what happened to the shortage?

  5. When flips flop:

    https://www.zillow.com/homes/for_sale/Birmingham-MI-48009/24532968_zpid/78902_rid/globalrelevanceex_sort/42.550037,-83.181385,42.531113,-83.212155_rect/15_zm/

    https://www.zillow.com/homes/for_sale/Birmingham-MI-48009/24498311_zpid/78902_rid/globalrelevanceex_sort/42.567447,-83.186181,42.529603,-83.247721_rect/14_zm/

    https://www.zillow.com/homes/for_sale/Birmingham-MI-48009/125757978_zpid/78902_rid/globalrelevanceex_sort/42.567447,-83.186181,42.529603,-83.247721_rect/14_zm/

    https://www.zillow.com/homes/for_sale/Birmingham-MI-48009/24531969_zpid/78902_rid/globalrelevanceex_sort/42.55441,-83.192588,42.54968,-83.200281_rect/17_zm/

    https://www.zillow.com/homes/for_sale/Birmingham-MI-48009/24531310_zpid/78902_rid/globalrelevanceex_sort/42.569738,-83.18425,42.531895,-83.245791_rect/14_zm/

    https://www.zillow.com/homes/for_sale/Birmingham-MI-48009/2091153459_zpid/78902_rid/36m_days/globalrelevanceex_sort/42.560287,-83.192275,42.522439,-83.253816_rect/14_zm/

    https://www.zillow.com/homes/for_sale/Birmingham-MI-48009/24533143_zpid/78902_rid/36m_days/globalrelevanceex_sort/42.543453,-83.193217,42.538722,-83.200909_rect/17_zm/

    https://www.zillow.com/homes/for_sale/Birmingham-MI-48009/24506639_zpid/78902_rid/globalrelevanceex_sort/42.559956,-83.190343,42.522107,-83.251884_rect/14_zm/

    https://www.zillow.com/homes/for_sale/Birmingham-MI-48009/24507486_zpid/78902_rid/globalrelevanceex_sort/42.538639,-83.209565,42.529175,-83.22495_rect/16_zm/

    https://www.zillow.com/homes/for_sale/Birmingham-MI-48009/24507465_zpid/78902_rid/globalrelevanceex_sort/42.538639,-83.209565,42.529175,-83.22495_rect/16_zm/

    1. LMAO, i lived in Birmingham for 20yrs, sad that its not the nice little town it was in the 90’s anymore, those homes wont sell at those prices, crazy. The restaurant/bar scene was fun back in the days, now it’s all restaurants and bars and not many small business’s which made that town. Townsend Hotel was the start, money follows money, enjoy the taxes.

      1. The more affordable housing stock there is being decimated to build these ugly speculative monstrosities that no one wants or can even afford, which is really sad.

        Occasionally, it’s a poorly maintained home that probably needed to at least be renovated down to the studs, if not completely torn down, but most been really nice ones that were destroyed simply because they’re deemed to be too small now, 900-1,100 square feet or so. But they would still make great starter, empty nest or single owner properties.

      2. boots
        I have often mentioned the Pimmit Hills neighborhood in Northern Virginia. So, a couple weeks ago I went for a 5- mile walk to case the joint. Housing-wise, Pimmit Hills seems similar to Birmingham: lots of small houses on larger lots are being sold as tear-down for the land value alone. It’s a nice shady suburb, about 25% tear-down-new builds. Original well-kept homes run $650K. New builds are fugly and run $1.2 mil.

        But Pimmit Hills is a 10 minute drive (or a long walk) from 4 major highways, a major high-end mall (Tysons Corner), and some very high-end defense contractors and banking office towers. There’s at least some justification for turning Pimmit Hills into a high-end nabe. But I don’t know about Birmingham. What kind of jobs are there to merit million-dollar houses?

        1. Automotive and other industry executives, doctors, lawyers, professional athletes, entrepreneurs, mostly, I would imagine.

          1. No it can’t be! Only around DC, you will see those jobs. The rest of country basically eats dirt.

  6. Now Hong Kong’s properties condition is different from before.
    Previous many China tycoon think Hong Kong is safe for them and buy Hong Kong properties. Now the pandora’s box is opened ( China extradition ) and we see China’s ambitions. Laundry money or clean money from China or elsewhere will not stay in Hong Kong. A wave of emigration has started.

    1. One country, two systems my a**. China is intent on gobbling up Hong Kong and Taiwan.

    2. Isn’t Chinese laundry money being poured into BitCoin? Much less traceable than condos in London or Miami.

  7. The Canadians and their banks were responsible in the 2000s, which is why TD Bank is spreading all over the U.S.

    I guess a decade of interest rates close to zero was enough to change their values and beliefs as well.

    It’s enough to make one wonder if homo sapiens have free will at all. This is debt. This is your brain on debt.

    1. Speaking of interest rates close to zero…

      Markets
      Treasury 10-Year Yield Slides Below 2% to Lead Global Decline
      By Ruth Carson
      and Masaki Kondo
      June 19, 2019, 5:12 PM PDT
      Updated on June 20, 2019, 3:22 AM PDT
      – Fed is about to embark on rate-cut cycle, JPMorgan Asset says
      – Japan’s benchmark bond yield approaches bottom of BOJ range
      – U.S. Treasury Yields Could Go Lower, Says Pictet’s Gaud

      Treasuries led a global bond rally, with 10-year yields dropping below 2% for the first time since November 2016 as expectations grow that major central banks will ease policy.

      The U.S. 10-year yield slid as much as five basis points to 1.9719% after the Federal Reserve signaled it was ready to cut interest rates. Japan’s benchmark yield dropped to minus 0.185%, near the bottom of the central bank’s targeted range after Governor Haruhiko Kuroda suggested policy makers won’t step in to prevent further declines. Similar rates in Germany fell deeper into the negative, approaching a record low reached earlier this week.
      …

  9. https://www.google.com/amp/s/www.wsj.com/amp/articles/investors-are-buying-more-of-the-u-s-housing-market-than-ever-before-11561023120

    Bidding wars? Perhaps multiple people low balling the same property?Is the WSJ attempting to revive the RE market with talk of mania and FOMO based on speculator demand from 2018 and prior? I believe in the equity locust theory buying up lower cost parts of the country, but New York / CA I don’t think so… The IPO millionaires never arrived with briefcases full of cash, Chinese money launderers disappeared due to gov restrictions, the ones that live and work here are paying every last penny on rent, avocado toast and Starbucks and majority done have more than $400 in savings. Nice try WSJ, not fooling me!

    “Michael Pickens, 31, who works in tech sales in the Bay Area, and his wife kept losing out in bidding wars to all-cash offers. “It was all cash, no contingency, seven-day close,” he said.

    He and his wife decided instead to rent a small apartment in Santa Clara County and buy investment homes on Roofstock in less expensive locales.

    They now own homes in Georgia and Tennessee despite never having visited either state.”

    1. Are we headed for a world in which the basic human requirement of shelter is hoarded by the oligarchs?

      At what point do we get the guns out and start lining them up?

      2. When the experts are finished the treasury will be empty, the houses will be empty, and the plebs will be homeless.

      3. Are we headed for a world in which the basic human requirement of shelter is hoarded by the oligarchs?

        Already there, except a lot are still in the hands of wannabe oligarchs. But they’ll find their way to their rightful owners soon enough. As long as they are being hoarded it doesn’t matter so much by who, the effect is the same regardless.

        1. Agree. The greatest lament is for all the Grade B plane-jane older stock that got upgraded to BS luxury.

        2. I guess there might be some solace in knowing they more than likely bought at or near the market peak, because they can’t possibly expect to push sale or rental prices any higher than they are now if they are looking for positive cash flow. We’ll just end up with more homeless on the streets.

  10. Is the Wall Street drinking binge on the Fed’s respiking of the punchbowl already over?

    1. Come join in the Dog Party Professor Bear, plenty’$ of liquidity juice in the Fed’$ tran$parent a$$et bowl!

      Hurry, hurry, hurry! … Buy, Buy, Buy! … Go dog, GO!

      Opinion: The U.$. $tock market is like a drunken party — stay for a while but know when to leave

      Nigam Arora | MarketWatch |Published: June 20, 2019

      “There is a type of in$anity among central bank$ and politician$. It starts with the bond market$ and follows through to the $tock market$. Let’s bring some common sense to the forefront. Is there a free lunch here? The answer from politicians, central bankers, stock market permabulls and mom-and-pop investors is a re$ounding “yes.”

      What to do now depends on your thoughts about this free lunch. I, for one, do not believe in free lunche$. The debt bubble is getting bigger and will eventually bur$t. Many investor$ will get badly hurt. Think of it, instead of a lunch, as a party where almost everybody is drunk and all the drunken people claim that nobody is drunk. I would suggest to investors that they enjoy the party but be aware of the risk$ ahead.”

  11. These one-sided contracts builders write are not fair. If your shelter contract is based on lending into the future your going to lose your deposit.

    The deal should be subject to loan approval at the time the house is finished. If you want to be a dumb buyer and take a deposit risk in a ever-changing market go ahead.

    I knew of a bunch of people who lost their deposit when the market changed in the last bubble pop. But, people line up to take dumb risks with frenzy buying.

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