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The Market Crashed And Many Buyers Are Saddled With A Property They Can’t Sell

It’s Friday desk clearing time for this blogger. “I was not surprised to hear housing prices have fallen for the first time in something like a decade. I could have hazarded a guess that was the case based on nothing more than the aggressive selling and house flipping I have watched in my neighborhood in the recent past. A couple of years ago, houses would go up for sale and they would sell the very same day. Then, all of a sudden, houses started taking a few more days to sell; then a week; then a little longer, and a little longer; then, next thing you know, the news announces a dip in housing prices for the first time since seemingly ever. Nothing lasts forever, after all.”

“The challenge is that a lot of homes on the market, especially in Flower Mound and Highland Village, are priced out of buyers’ reach. Audra Smolinski, a broker and Realtor with Loves Residential Realty, agreed that affordability is a primary factor for today’s buyers. ‘They want it all, and they can’t afford it,’ she said. ‘It’s difficult to find anything move-in ready under $200,000.'”

“Real Housewife of New York Bethenny Frankel is giving her apartment a little summer price cut. The Skinnygirl entrepreneur has been trying to sell her Soho loft since 2017, and she’s lowered her expectations to just about breaking even. Frankel is now listing the Mercer Street abode for $4.25 million, and while it’s not pocket change by any means, it’s just $500,000 more than the $4.2 million she paid for the place back in 2014, and that’s not including the renovations costs and the transaction and brokerage fees.”

“22 homes sold in all of Boca Isles in the first half of 2019. Every home in Boca Isles took more than a month from listing to close. Most did sell in less than 3 months, but four of them took six months or longer. It should also be noted that 13 listings expired or canceled in the first half of the year. There are 18 homes listed for sale at this writing. It remains a buyers market in Saturnia, where 8 homes sold in the first half of the year while 11 listings expired or canceled. There are 20 homes listed for sale.”

“Greater Vancouver housing sales fell in June to a 19-year low for the month while the benchmark price for a typical home dropped below $1-million for the first time in two years. The price of detached homes sold in Greater Vancouver averaged $1,486,620 last month, a 15.3-per-cent drop compared with June, 2018. On Vancouver’s expensive west side, the price of detached properties sold in the first six months of this year averaged $3,119,811, down 17.5 per cent from the first half of 2018, according to Macdonald Realty.”

“Board president Ashley Smith said in a statement that the ‘expectation gap’ between buyers and sellers lingers, with sellers ‘often trying to get yesterday’s values for their homes while buyers are taking a cautious, wait-and-see approach.'”

“The construction of homes in London has fallen to its lowest level in a decade amid a slowdown across the country. Lawrence Bowles, at Savills, said: ‘For London, in part the key driver is the weakness in pricing in recent months. Annual price growth has been negative for the last ten months.'”

“The Co Wicklow home of high profile solicitor Gerald Kean is back on the market more than two years after it was first launched for sale seeking €3.75million. This time around it comes with a substantial price drop and a new selling agent. Drayton Mano is back on, and this time it is seeking €2.25million. The sizeable 40 per cent drop in price reflects the heady original asking price but also the sluggish market for country properties in this price bracket.”

“Pity the poor owners of homes in Israel worth 20 million shekels ($5.6 million). Those grandiose properties, once in demand mainly by foreign investors, no longer have a market. It’s not just property owners. The industry that once served the top end of the Israeli real estate market – builders, architects, relators and interior designers – has seen business evaporate.”

“‘Neighborhoods and communities that were built for foreign residents have turned into ghost towns in the best case. In the worst case, properties have been converted into Airbnb offerings,’ said Lior Shklarsh, who heads the real estate agency de-Botton in Savyon, an affluent municipality outside of Tel Aviv known for its villas.”

“Siva Shanker, former president of Malaysian Institute of Estate Agents, believes that there is a bad side to the Airbnb trend. ‘When the property market started to make a turn for the worse, many of these speculators found it difficult to sell or rent out their units but at the same time they needed income to service their loans. Many of the people, who claimed to be experts, gave false assurances that the properties could be sold at a premium of up to 40 percent within a couple of years, or that they would be able to get high rental yields. This is essentially a get rich quick scheme and many people believed in them. But then the market crashed and many of the buyers are saddled with a property that they can’t sell or rent out,’ he said.”

“Suburbanite director Anna Porter told The New Daily that a lack of mortgagee-in-possession sales suggested the market hadn’t yet reached its bottom. ‘What I have seen in cycles gone by is a number of mortgagee-in-possession sales hit the market prior to reaching the bottom – and we just haven’t seen that in any real volume yet,’ she said. ‘A lot of people are struggling to settle on off-the-plan properties is another indicator that there is more financial distress sitting in the mortgage sector.'”

“CoreLogic senior research analyst Cameron Kusher said price falls still had a way to go in cities outside Sydney and Melbourne – as their downturns started later – and lower demand for housing in these cities meant longer recovery times. ‘The big test will be when we get to spring, when more new listings come on to the market,’ he said.”

“The developer of a micro flat project in Hong Kong has cut the price of flats that are smaller than a car parking space by 38 per cent. Market observers said the company had to resort to steep discounts after agents managed to sell only two of the 27 units on offer at the T-Plus on December 8 last year, prompting the developer to later suspend sales.”

“In China’s hi-tech hub of Shenzhen, a confluence of factors, from over-exuberant commercial property developers, to the US-China trade and tech war, to an exodus of foreign investors, are weighing heavily on what was until recently a booming economy. Developers – who have continued to build despite the macroeconomic problems – are facing huge overcapacity. The vacancy rate is now near 10-year high. The vacancy situation is most pronounced in the city’s Qianhai area near the border with Hong Kong, which has a vacancy rate of 65.7 per cent.”

“The downturn is not just being felt in the property sector. A yacht broker in Shenzhen said his team of five sales people once sold 26 imported yachts in a single year, some costing millions of US dollars, to wealthy Chinese buyers earlier in the decade. Last year, they sold fewer than 10. ‘The upper-middle class only buy yachts when the economy is seeing stable growth and people are making a good living – not like now. Many rich Chinese people in Shenzhen, either in the tech or finance sectors, are worried that the economic crisis is worsening, as the trade war has sharply escalated in recent months. I think our sales will be even worse than last year,’ he said.”

“The trend continued until 2015, said Lan Liu, operations manager of a serviced office firm in the Futian district. After that, the influx slowed, she said, and the number of Chinese firms entering the market increased. ‘But to be honest, they were not as stable as the foreign clients,’ said Liu, adding that many of the clients now were new Chinese financing companies, who took short-term leases and then disappear.”

This Post Has 169 Comments
  1. ‘But to be honest, they were not as stable as the foreign clients,’ said Liu, adding that many of the clients now were new Chinese financing companies, who took short-term leases and then disappear’

    Some real winners.

  2. ‘A couple of years ago, houses would go up for sale and they would sell the very same day. Then, all of a sudden, houses started taking a few more days to sell; then a week; then a little longer, and a little longer; then, next thing you know, the news announces a dip in housing prices for the first time since seemingly ever. Nothing lasts forever, after all’

    Eat yer crowz Thornberg!

  3. ‘The developer of a micro flat project in Hong Kong has cut the price of flats that are smaller than a car parking space by 38 per cent. Market observers said the company had to resort to steep discounts after agents managed to sell only two of the 27 units’

    But the HK media (including this same paper) tells us day after day the market is to the moon Alice! Is 38% a lot?

      1. They are an entertaining couple who know one of life’s great secrets: with the proper attitude and sense of humor, even a sucky experience can be quite enjoyable.

      1. So how does this arrangment work out if you pick up that hot chick at a bar? I sure she would be impressed with your trendy digs.

        1. Her place, a bro’s or hotel, I guess. Can you book Airbnb on such short notice?

        2. From the article:

          “And there are some ground rules: Lights out at 10 pm, and no guests allowed. “You can’t invite any friends over,” she says. “Sorry. Just make new ones here.””

  4. Why is it that the Real Housewives of Who Gives a F**k are always chasing the market down?

  5. “Greater Vancouver housing sales fell in June to a 19-year low for the month while the benchmark price for a typical home dropped below $1-million for the first time in two years.

    Oh dear. The cratering shows no signs of bottoming out anytime soon. That’s going to make it increasingly hard for UHSs to ensnare the dwindling pool of Greater Fools and Knife Catchers. And with what’s happening in China, there won’t be any embezzlers or money launderers riding to the rescue of Vancouver real estate, either.

    I repeat: oh dear….

  6. Wall St. is beating the rate cut drum as hard as they can. Mortgage rates are absolutely pitifully paltry right now, and likely set to go lower at some point. The PTB are going to squeeze every last drop out of this bubble. We are in uncharted waters.

      1. It’s 2000-2001 and 2006-2007 all over again. There’s nothing left to inflate the system….without rate cuts.

  7. Something that’s been on my mind the past few weeks as the Fed did an about face and appears set to cut rates: Why can’t US housing hyperinflate to the obscene levels we’ve seen in Canada and elsewhere on the globe? We saw Canada stall years back, then take right off like a rocket. As all of the countries debase their currencies, and we join in, we’re still the prettiest ugly duckling in the brood. All this phony money could wash up on our shores as it runs to hard assets.

    1. It is true Chinbabwe compared to the bubbles in the rest of the world we have a minor bubble. I posted a chart within the last month and the bubbles outside the US make our home prices reasonable. Even San Francisco is a lagger. It speaks to a world recession, it would be smart for the US to minimize its dependency on world demand since these housing bubbles are going to end very badly

    2. If you look at HK houses are 49.42 times income compared to 3.58 times for the US as a whole. For European socialistic countries we do not talk about much on this blog, Sweden 10.26, France 12.85 and Germany 9.02. This can be found at a site called Numbeo. This leads to two questions: why can’t the US bubble continue for a while and perhaps get worse and second isn’t it logical that bubble collapse will really occur overseas first?

      1. As a country we may in fact be one of the “cleanest dirty shirts” economically, with enough raw materials, diversity and – compared to others – mild speculation. It may not seem that way to us inside the bubble but if you were living in SE Asia making $200/mo trying to buy one of those houses going for 100K must seem like you’re about to climb Everest without sherpas.

        Also, those nano homes in HK – too bad things are so dense they cant go van life and get a nice RV for a fraction of the price. Just saw an article today about how LA and SF have tons of people doing it. Would also be a way for the US to boost exports because I’m guessing aside from Mercedes we dominate that market.

      2. Sweden = they can afford to pay more for housing if health insurance and college are not a drain on the pocketbook.
        I pay $900 a mo for Blue Cross junk and never use it.

        1. I was going to point this out too. It’s not to say that the housing markets of over Northern European markets aren’t inflated (they likely are), but it is apples vs. oranges in some respects. The Economist does the Big Mac Index on occasion and they like to talk about purchasing power parity, but it is difficult to compare a single Big Mac from country to country because of vastly different social safety nets and tax schemes.

      3. wow – that seems high. Seattle’s SLU and Belltown area seem reasonable by comparison 🙂

        ——————-
        the vacancy situation is most pronounced in the city’s Qianhai area near the border with Hong Kong, which has a vacancy rate of 65.7 per cent.”

  8. To put air back in the bubble, mortgage rates need to get cut in half from the peak of ~5%,, if 2006-2011 is a guide. That would mean the 10 year has to get below 1%. If the Fed doesn’t start cutting rates this year, the system runs out of air.

    1. Mortgage rates are at historical lows, and yet home sales are falling. It’s almost like we’re in a bubble mania and psychology has turned or something. With prices now in the stratosphere, speculators exiting, and buyers priced out, what’s happening now is perfectly logical.

      Also recall that during the bursting of the last two asset bubbles, the Fed was cutting rates like mad, but to no avail. This was again because market psychology had turned from greed to fear. We’re starting to see this in housing now. Stocks haven’t quite got there yet, but when the Fed start cutting, look out below, IMHO.

        1. The Fed hasn’t started cutting, yet. Right now the Fed and DJT are just jawboning the markets higher. That works for a while, until it doesn’t anymore. Just look at S&P 500 vs. 10 Yr. Treas. Does this make sense (no). Yield curve has inverted everywhere. There’s no rational or economic justification for current stock prices right now, IMHO. We’re running on hopium.

          1. The Fed hasn’t started cutting, yet.

            The fed funds rate was 20% in 1980. The choice in 2006-2007 was another bubble or systemic collapse. Much to my surprise, the central planners succeeded in inflating another asset bubble. We revisit the same choice. I’d like to see the engineered bubbles stop but one has to be realistic as to where that may lead.
            Municipalities: bankrupt
            Pension funds: wiped out
            Police departments: closed
            Schools: closed
            Fire departments: closed
            Roads and bridges: no money for repairs
            :Major insurance companies: bankrupt
            Banking system: wiped out
            ATMs: not working
            Credit system: frozen
            Trucking system and food transportation: shutdown
            Grocery stores: empty
            Etc…
            Ok I am hogging too much space on this thread. later.

          2. “There’s no rational or economic justification for current stock prices right now, IMHO”

            I respectfully disagree. I think there’s *some* economic justification: Lots of job creation and some half-way decent US economic growth in a low inflation environment I think would see a rally in the SP500. We also have the highest central bank interest rates in the G7, which I think explains the low bond yields.

          3. Well, at least there are options…

            https://morningporridge.com/the-morning-porridge/f/blains-morning-porrdige—july-5th-2019

            What’s really happened over the past 10-years is central banks printed lots of lots of money and pumped it into the financial system through QE. What happened to that money? Well, most of it stayed in the system, and has been invested in financial assets – NOT the real economy. And that is where the money continues to reside – QE has inflated the value of all financial assets by boosting bond prices via dangerously low rates and converting equity into debt (thus pushing up equity prices through buybacks). And, of course, markets have spotted and coat-tailed the effect… meaning the banks and hedge funds and owners have received lots of dividends and bonuses while workers have seen wages fall and rights reduced in the new gig economy.

            Long-term its unsustainable. But why would the party ever end? Because no one is going to get paid a pension from negative yields to infinity. And politicians and voters notice the rich getting richer while western economies flatline as the financial party goes on and on and on. Resentment is a terrible thing to behold – parliaments and corporate princes’ palaces will burn fiercely.

            So, there you are, the stark binary choice. Either:

            Central Banks take the medicine now and steer the global economy back to normalisation, which means a sharply corrective stock market crash followed by recovery, rising rates (and a bond market wobble). 5 more years of pain! Then everything back to normal.

            Or

            They keep fuelling the bubble, till its negative infinity rates and financial inflation means a single Tesla share is worth more than California… And the resentment is such the real world explodes and it all ends very badly.. Loads more pain for longer..

          4. “5 more years of pain! Then everything back to normal.”

            I’m thinking more like a generation of pain before things got back to normal. If they ever did.

            BTW, what would normal look like in a world of globalization and free trade? Would we be rolling that back, and re-establishing Manufacturing in this country?

            ( sorry about the empty post above)

          5. “I think there’s *some* economic justification: Lots of job creation and some half-way decent US economic growth in a low inflation environment I think would see a rally in the SP500.”

            It doesn’t work that way. Everything you’ve mentioned is already reflected in current prices.

          6. This.

            Wsj.com
            U.S. Markets
            Stocks Tick Lower After Jobs Report Clouds Expectations of a Rate Cut
            Report eases fears of a hiring slowdown
            By Lauren Almeida and
            Michael Wursthorn
            Updated July 5, 2019 12:26 pm ET

            U.S. stocks stumbled after a better-than-expected June jobs report clouded expectations of an imminent interest-rate cut by the Federal Reserve.

            All three major indexes fell from their records after new data showed U.S. employers hired at a robust pace in June. somewhat dashing investors’ expectations of an interest-rate cut at the Fed’s policy meeting later this month. A sustained slowdown in job growth could potentially nudge the central bank into taking steps that would have stoked further economic growth.

            To Read the Full Story
            Subscribe

          7. + 1 John…I agree…We faced the Abyss in 2008…

            And;

            “Etc”…=…World War because if we go down everybody does…

          8. $o to get to “realistic” $helter.$hack hou$ing price$ the following has to $ucceed:

            Municipalities: bankrupt
            Pension funds: wiped out
            Police departments: closed
            Schools: closed
            Fire departments: closed
            Roads and bridges: no money for repairs
            :Major insurance companies: bankrupt
            Banking system: wiped out
            ATMs: not working
            Credit system: frozen
            Trucking system and food transportation: shutdown
            Grocery stores: empty
            Etc…

            $ounds like a pathway for ” $ocial $ecurity $ociali$m ll”

          9. scdave:
            “Etc”…=…World War because if we go down everybody does…

            No problem$, the U$A gets to repleni$h its YEARLY $786 Billion$ of taxpayer dollar$ of Mega.Military.Industrial.Complex expenditure$, = good paying job$ for everyone!

  9. C’mon Ben, don’t be such a Debbie Downer. Every one of these articles has something negative to say about the global housing market. Don’t you know housing always goes up and it’s always a good time to buy? /s

    1. This time next year, housing will be up another 10% so you will wish you had bought right now. Home equity is the greatest wealth building tool you have available even if your net worth is currently $0. Realtor commissions are the best money you will ever spend. /s

    2. We did not face the abyss in 2008, the investment bankers faced the abyss. We faced the end of a housing bubble and the chance for real price discovery in housing. And a come to Jesus moment that to consume you need to really produce

      1. Your a lion…Lehman was the fuse…AIG would have been the Bomb…It would have went systemic and taken the whole thing (country & world economies) down but you go ahead and believe what you want…

        The collapse and near-failure of insurance giant American International Group (AIG) was a major moment in the recent financial crisis. AIG, a global company with about $1 trillion in assets prior to the crisis, lost $99.2 billion in 2008.

        1. For pennies on the dollar Warren Buffet or someone like him would have bought it . We have bankruptcy laws for a reason. The rich and powerful speculators should have been allowed to lose everything they owned. The company should have been refinanced by a new shareholder group
          I am not saying there would not have been pain but in the end we would have a deeper recession but a sharper recovery if instead of trying to save the bad loans we would have concentrated on rebuilding our industrial base. Helping the bankers prop up housing prices only prolonged the pain.

      2. Transportation companies were closing up overnight and leaving rigs stranded. We were only a week or two away from food not being delivered into the cities.

        1. That’s exactly what Mr. Banker would like you to believe. Obama and Tim Geithner presided over the biggest banker bonus pool in history in 2010. So much for free market capitalism.

          1. In 2008, over 3000 trucking companies closed. If you don’t believe me and think this is banker propaganda, go find some truckers who were running long hauls at the peak of the financial crisis and ask them. The fact the bankers used the crisis as an opportunity to enrich themselves, as they are won’t to do, does not change the facts.

          2. Yes, but the housing bubble created demand for China’s industrialization. Smaller regional banks could not be allowed to buy up the assets of Northeast banks for pennies on the dollar since those banks had just facilitated globalization.

        2. We did not need to prop up housing prices to save the economy. Providing liquidity to the system did not require saving the bankers who caused the problem. We would have had a deeper but shorter recession had we allowed the market to engage in price discovery. As long as people saw that housing was still overpriced they were reluctant to buy I was one of them. Business Tax cuts and much more infrastructure could have boosted the economy without the need to keep houses at artificial highs

          1. Of course spending money to make ourselves more competitive would have been counter productive to globalism and moving production overseas.

          2. +1000

            The Fed could have opened the discount window more broadly without bailing out bad actors. Providing liquidity was important during the financial crisis, but bailing out the banksters was not.

          3. Morgan Stanley, Citibank, Wells Fargo, Goldman Sachs would have all gone bankrupt. The credit system and international payment system would have frozen. I don’t agree with the bail out, but the idea that for the rest of us our lives would have continued with some semblance of normalcy under such circumstances…buying groceries, putting gas in the car, going to our jobs…it’s a fantasy.

          4. for the rest of us our lives would have continued with some semblance of normalcy

            I seriously doubt that we would have had an extinction event. Making the bankers even richer doesn’t look like a “saving life as we know it” requirement. I’m not one of those three days to starvation kinda guys so maybe I’m just silly.

          5. Bankers love to bamboozle the masses with stories like, “if these too-big-to-fail firms aren’t bailed out, the entire world as we know it will end.”

            So long as bailouts are standard operating policy, as they apparently still are, based on the global central banking cartel’s current efforts to tee up QE-to-infinity-AND-BEYOND, we’ll never know whether what they tell us is true or not.

          1. Realize too that Iceland couldn’t bail-out their banks even if they had wanted to, i.e., the crisis was just too big.

        3. Do you think that part of the reason for the failing truck companies was the fact that the trading desks of the big banks had driven oil to $ 147 per barrel during the Summer. Then we reward their greed by bailing them out.

        4. Can you provide some links to prove what you’re saying?

          LOL, it reminds me of the Y2K hysteria.

      3. ” … And a come to Jesus moment”

        Fed Fund$ rate @11.25% does sound like a $helter.$hack Bapti$mal

  10. “The upper-middle class only buy yachts when the economy is seeing stable growth and people are making a good living – not like now.”

    Jesus… and I thought I was upper middle class 🙁

    1. “The upper-middle class only buy yachts when the economy is seeing stable growth and people are making a good living – not like now.”

      Jesus… and I thought I was upper middle class

      Hahah. We laugh at the working class schmucks who think they are middle class. And now we have brand new yacht purchasers who also think they are middle class. What a country, everybody is middle class except that guy in the gutter and Bezos.

      1. Lake Wobegon: “where all the women are strong, all the men are good-looking, and all the children are above average.”

        1. Wyoming where the men are men, the women are men and the sheep are scared. Just joking, there are actually very beautiful women in Wyoming.

          1. I’ve definitely heard the sheep one before :-). Regarding women in Wyoming, they have the same point of view as the women in Alaska: “The odds are good but the goods are odd”. So most of the good looking ones head for greener pastures to compete with all the other corn fed girls straight off the bus for the attention of a city boy with a rich dad. Who boinks them all but then ends up marrying some high stress blue blood chick that fits in better at the country club. Most of those girls don’t come back to Wyoming so I assume they find a 2nd tier guy eventually and drive a soccer van in the burbs.

          2. Growing up in California the sought after birds were usually stacked. Up here in corn-fed fly-over country the skinny ones are quickly swept-up while the skinny stacked ones can easily marry into wealth.

    1. Don’t forget the $60,000 pretty-boy luxo-truck (w/ leather seats) to pull the boat.

    2. Reminds me of the old joke about boats the two best days for a boat owner are the day he or she buys the boat and the day he or she sells the boat.

      1. I actually love boats. The boat show is always a nice way to spend an afternoon. My dad had boats when I was a kid and it was great, but expensive, fun.

        1. hey I bought a boat this year, its 20 years old but had a new engine, 15k and a slip so I don’t need a truck. Sure beats throwing money down on a house at this time. I only plan to keep it a year because I’ve always wanted to spend time on the water in Dana Point, CA and this is the cheap way to do it. We’ve figured the boat paid for itself just by not buying a house this year. I’ll sell it for what I paid and move along with just gas and slip fees as the price of admission.

          1. “I’ll sell it for what I paid and move along with just gas and slip fees as the price of admission.”

            LMFAO. This must be your first boat.

            BOAT = break out another thousand.

          2. We’ve figured the boat paid for itself just by not buying a house this year.

            Quite the illogical rationalization.

          3. Is there a single person in the US that doesn’t know there’s an explosion of student debt? Yet the media is not curious about this luxury living development?

          4. the boat paid for itself

            Well he didn’t sell it yet!

            Living on a boat was very savings friendly for me, but it was modest.

    3. There is no better barometer of a bubble than a peak in boat sales…

      I also think the sky scrapper index is pretty reliable.

      Buffet says that underwear sales is a good barometer of a good economy because, according to him, people don’t buy underwear when economic conditions are tight.

      1. Good point, Uncle Warren…underwear are the perhaps the ultimate consumer durables. I remember my mom explaining the concept of “flour sack drawers” — homemade underwear fashioned out of empty flour sacks during the Great Depression.

          1. Definitely left a lasting tactile impression on my mom. Lots of household decisions during her childhood in the 1930s were based on substitution of readily available local resources for cash purchases. Mom also didn’t much enjoy the squirrel dinners my grandmother served up, and I am sure the local squirrel population greatly feared my grandpa’s shotgun.

    4. The yacht bubble was a great leading indicator of the crash last time.

      Flip That Yacht
      Rich Buyers Sell Unfinished Boats, Reaping Millions in Profits
      By Robert Frank
      Updated May 25, 2007 12:01 am ET

      Terry Taylor, a Florida car dealer, has purchased five yachts since 2001. But don’t expect to see him anchoring off the coast of Cannes this week. Mr. Taylor is boatless, having sold all of his yachts to other buyers for huge profits.

      “I wouldn’t feel too bad for Terry,” jokes Felix Sabates, a partner in Trinity Yachts of Gulfport, Miss., which built Mr. Taylor’s boats. “He’s probably made more money off those boats than we did.”

      To Read the Full Story
      Subscribe
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  11. “Developers – who have continued to build despite the macroeconomic problems – are facing huge overcapacity.”

    “KEEP BUILDING, BOYZ!” 🙂

  12. Personal note here my friend Joe who was the first live camera man on scene as the planes hit the towers he was on assignment for CNN fn looked up as the planes hit…… well CNN lost so much money covering this because of union contracts in NYC and Washington, the outsourced to work to a 3rd party and slashed wages benefits….. but 15 years later it seems cnn has to pay back wages… CNN to Pay $70 Million to Settle Long-Running Labor Dispute Camera operators say they were laid off so CNN could avoid union

    https://news.bloomberglaw.com/daily-labor-report/cnn-to-pay-70-million-to-settle-long-running-labor-dispute

  13. Not in developments down here. Builders may have a small proportion of inventory homes, but typically build after the sales agreement is signed. Only exception is near close out of a development. Some of the inventory homes are due to buyer default during the course of construction. Carrying inventory homes is VERY expensive, but some buyers do want houses that are move in ready, but not the norm

  14. Does it seem like the Housing Bubble is simultaneously imploding on multiple continents? It’s almost like an Ebola pandemic!

    1. “Does it seem like the Hou$ing Bubble is $imultaneously imploding on multiple continent$?”

      Geez Professor, Global “$ynchronized $lowing” is knot a unknowingly known illu$ion is it?

  15. “In the worst case, properties have been converted into Airbnb offerings,…”

    That is a very horrible prospect!

  16. BTW, has anyone seen Lawrence Yun lately? Sales reduction at same time as interest rate drops? It’s just got to be that stubborn inventory shortage! No other explanation. I guess he is taking his time preparing a carefully worded statement. Vacation maybe? Perhaps summer doldrums?

    1. “…Vacation maybe?….”

      Lawrence is conspicuous by his absence.

      Used to be (when R/E could only go up) we would get several pontificating missives a week.

      Hard to know whats really going down at the NAR, but if it like many other large organizations, be careful about what you ask for, [vacation] as you might actually get it.. (AKA permanent, as in “I want to spend more time with my family”)

    1. “This time could be different,” Lawrence Yun said after delivering a mid-year economic forecast that was devoid of the economic gloom economists were seeing a year ago.

      He actually went there. That is so awesome. How many boxes are left to check at this point?

    1. It is interesting that despite the price decline the price for square foot is going up.

      1. Also the approximately 2.2 million open house house is a joke. If you cannot see that bubble, you are legally blind.

  17. We got that about the joke. The communist party of China went be coming after you. No guarantee however when it comes to hood wearing realtors!

  18. Sure enough, Yun said that lack of builder activity is a big factor. The “shortage” narrative is still alive and well! Of course the venue was a realtor’s conference. Anyone surprised?

    1. A “black swan event” is something which happens that nobody saw coming. A Deutsche Bank failure would surprise almost nobody.

  19. dtRump, Kudlow, Ha$$ett, Mnuchin, $heldon, Navarro, Moore & Ro$$ LLC. : Great

    “Trade War$ are ea$y, … but, … “Complicated!”

    How do you say “Thank.you!” in German & Japane$e?

    BUSINESS NEWS| JULY 4, 2019 | Reuters

    GM, Ford quarterly China $ales $lide again amid economy woe$

    Yilei Sun, Norihiko Shirouzu |BUSINESS NEWS| JULY 4, 2019 | Reuters

    U.S. car companies’ share of total China passenger vehicles sales fell to 9.6% in the first five months of this year from 10.9% in the year-ago period, according to CAAM. Over the same period, German car maker$’ $hare has ri$en to 23.3% from 20.9% and Japane$e auto maker$’ to 21.3% from 17.3%.

        1. “are” for our. But I hope the CEO for GM is showed the door, the billions spent in China should have been invested in the US or at least North America

          1. Agree. If Mary Barra doesn’t go full-bore EV and autonomy in Michigan it will be a betrayal.

        1. So it is possible for a large earthquake to be followed close in time and proximity by an even larger one…yikes!

      1. Not all that surprised there were stories about swarms of quakes after the last big one

    1. I thought they were trying to figure out how to tax mother nature. I think they will impose ten times the tax for a 7.0 than a 6.0 but that might be too much science for them. BTW, earthquakes are racists because they do more damage to older less earthquake resistant structures more often inhabited by POC.

  20. They said they felt it in Las Vegas also, the earthquakes that is. This one reminds me of the one about 50 years ago with the rolling feel of it.

    Do people put off buying real estate after a earthquake ?

    1. Probably only non-native Californians buying in California. It could contribute to the outflow. I remember a family leaving after the 5.9 Whittier earthquake in 1987.

      1. I’ve also heard firsthand from former Californians who left following their first big earthquake. It’s a little ironic, as the really big ones seem to only occur at very low frequencies (less than one per decade?). By contrast, it seems like Oklahoma experiences an EF5 tornado once every 2-3 years.

        1. Almost every region has a natural disaster. It’s just a matter of frequency and forewarning.

        2. The last couple decades have been quiet. I vividly remember the 5.9 Whittier earthquake in 1987 and the 6.7 Northridge earthquake in 1994. My college roommate freaked out during the Northridge earthquake because she remembered the 6.9 Loma Prieta earthquake in 1989.

          1. “…the 6.7 Northridge earthquake in 1994.”

            That was the expensive one. The CalTrans cut back on projects around the state for a least ten years redirecting the money to seismic retrofitting of the elevated freeway network around the Los Angeles metro area.

    1. Published May 16, 2019 at 08:30PM / Updated May 16, 2019 at 09:52PM
      Portland home prices begin to fall
      Dip in prices not even across the market
      Portland and Mount Hood panorama.
      Elliot Njus
      The Oregonian

      It’s no longer just a slowdown: Portland-area home prices have begun to slide after a long post-recession boom, according to one industry measure.

      An index from the real estate website Zillow says the area’s median home value reached a peak $399,300 in February. It’s since fallen ever so slightly to $397,400 in April.

      The decline is small, but the index uses a rolling average and seasonal adjustment to iron out volatility. Prices remain 3% higher than they were a year earlier, but the company’s seasonally adjusted index has shown declines for two months in a row.

      Before March, the last time Zillow reported a decline in metro home prices was February 2012.

    1. Technology
      Why Housing Policy Feels Like Generational Warfare
      To Millennials, at least
      Alexis C. Madrigal
      Jun 13, 2019
      Firefighters spray water on a burning, partially completed apartment building in the San Francisco Bay Area.
      Reuters / Noah Berger

      In his magisterial 2005 history, A Nation of Realtors, Jeffrey Hornstein laid out the country-shaping effect of 20th-century housing policy. In the decades following the Great Depression, the federal government—as well as states and cities—subsidized the creation and consumption of single-family homes. The American dream’s most important archetype became buying a home. “Americans,” Hornstein wrote, “particularly white Americans, came to think of themselves as inhabiting a classless society, composed of one big ‘middle class,’ its membership defined to a large degree by actual or expectant homeownership.”

      Recently, however, we’ve lost the plot on the classic life arc of yesteryear. Places where real estate is cheap don’t have many good jobs. Places with lots of jobs, primarily coastal cities, have seen their real-estate markets go absolutely haywire. The most recent evidence of this remarkable change comes in a new report by the real-estate firm Unison. The company, which provides financing to homebuyers by “co-investing” with them, calculated how long it would take to save up a 20 percent down payment on the median home in a given city by squirreling away 5 percent of the city’s gross median income per year.

      Nationally, the gap between income and home value has been rising. Using Unison’s methodology, it took nine years to save up a down payment in 1975. Now it takes 14.

      GONG!

        1. Patience, my friend. If those negative yields on $13 trillion of sovereign bonds against economic strength mean what I think they do, then the buying opportunity of a lifetime awaits those who are willing to wait out the crash within the next five years and purchase when everyone else is out of the market. I was similarly in a position to buy in 1987, but waited until 1992, when there were many attractive choices in the aftermath of a recession. Unless you have a lot more family wealth than I do, this approach is what I recommend.

          1. Agreed. It’s not that I’m not patient. We could afford to buy cash right now, even at inflated prices. It’s more along the lines that I want an economy where it actually makes sense to work for the average joe to work for living and actually get ahead. Instead, we have a “get rich quick” economy full of speculators, flippers, and where everyone is chasing capital gains and appreciation. Taxing capital gains at the same rate as wage income would solve a lot of our problems if you ask me.

  21. Doug Noland, an analyst I’ve followed for many years, highlights the extremes of today’s markets

    Weekly Commentary: Abject Monetary Disorder

    excerpt:
    As spectacular as it’s been at Europe’s “core,” the yield collapse at the “periphery” has been nothing short of astonishing. Italian 10-year yields traded as low as 1.55% Thursday, down a stunning 112 bps from the end of May. At Thursday’s 2.01% low, Greek yields were down 150 bps since May 15th. Portuguese 10-year yields were as low as 0.27% in early Thursday trading, after trading at 2.0% in November and 1.16% in May. After beginning the year at 1.41%, Spanish yields traded Thursday at 0.20%. At Friday’s close, Denmark’s 10-year yields were at negative 0.30%, Austria’s negative 0.13%, Netherlands’ negative 0.22%, Finland’s negative 0.10%, Belgium’s negative 0.02%, Sweden’s negative 0.02%, Slovakia’s 0.05%, Ireland’s 0.07%, Slovenia’s 0.11%, Cyprus 0.45% and Croatia 1.09%.

    I’ve witnessed a lot of “crazy” in my three decades of closely following various Bubble markets (i.e. Japan’s Nikkei ending 1989 at 38,916 (closed Friday at 21,746); manic early-nineties buying of Mexican tesobonos; late-1993 collapsing U.S. yields and Bubble excess that portended the 1994 rout; speculative Bubbles in SE Asian securities and Russian bonds; LTCM with $2 TN notional derivatives exposures; Internet and tech stocks in 1999; and $1 TN of new subprime CDOs in 2006; etc.). Yet nothing compares to the ongoing global yield collapse.

    The global bond market speculative melt-up has brought new meaning to phrase “indiscriminate buying.” I know it’s heresy to suggest as much, but we’re witnessing history’s greatest speculative Bubble go to absolutely “crazy” extremes (it will all have been obvious in hindsight).

    1. Mike,

      This is a “crazy” speculative global bubble. The values aren’t justified.

      Even the big housing boom post World War 2 ,in the 50’s, was justified because of the huge demand buildup. Good plentiful jobs ,but the prices were in sink with wages. The houses were smaller on average also.

      The car became a big thing at that time also. People would finance car and house but not credit card debt. You had to qualify and the crazy lending just wasn’t operative. Banks in those days felt obligated to protect depositor savings.

      1. Here is how I remember it:

        I was well into my second term of enlistment of my Air Force career before I was able to get my first credit card. This would have been at the beginning of the 90s. And it probably only had a $500 or maybe $1,000 credit limit.

        But then flash-forward just a few years, I was attending college classes. I recall occasionally banks had tables set up in the student union and were handing out credit card apps to the students.

        Two or three more years later (end of the 90’s), credit card offers were arriving in my mailbox seemingly daily.

  22. At least 10-year Treasury yields underwent a magnitude 7.1 earthquake yesterday to jolt them back up to over 2 percent.

    1. Bond traders are suddenly highly skeptical about the case for multiple near term Fed rate reductions.

      In the interest of maintaining their political independence, the Fed may choose to take near term actions which confirm such skepticism. You can expect more weakness in both stocks and bonds until this uncertainty is resolved.

      10-year Treasury yield sees biggest daily jump in seven months after June payrolls data
      By Sunny Oh
      Published: July 5, 2019 3:47 p.m. ET
      The U.S. economy created 224,000 jobs in June

  23. Why should governments pay for money when they can create it out of thin air for free? Where are the super rich going to stash their money, in their mansions, better pay for lots of security or loan it to the government and pay a small fee. Crazy but it makes sense once governments start monetizing debt.

    1. For that matter, why should we pay income taxes when the government can print all the money it needs? I begin to suspect that the tax system is more about keeping the people who already have a lot of money in the top position by preventing those seeking to build wealth from amassing savings, rather than actually raising necessary funds.

      1. Professor Bear,

        Interesting thought about the income tax thing. Federal income tax was basically created in 1913.

        It really amazing when you think about what a tool the income tax became ,especially considering the rich favored right off.

      2. Do you remember my bear story from the other day?

        “I don’t have to outrun the bear, I only have to outrun you.”

        We have a form of internecine economic warfare.

  24. Funny , but some how I predict they are going to tie this earthquake to climate change.

  25. Very hard for even AOC to tie it to AGW. However, if this earthquake activity manifests itself in other places as volcanic activity we could see rapid global cooling. We have had relatively very little volcanic activity in the last one hundred plus years. Previously within one hundred years we had a couple of massive eruptions massively cooling the planet.

    1. Agreed. And to my limited knowledge, climate scientists fail to consider predictable future volcanism in their global warming forecasts.

        1. Not big enough to matter.

          Volcanoes such as Krakatoa, Mt. Pinatubo, and Mt. Tambora had modern eruptions with global cooling effects.

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