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We’ve Lost So Much Money

A report from Domain News in Australia. “Perth house prices have continued to tumble, falling 2 per cent to $528,200 in the June quarter, new figures show. The city’s median house price is now 14 per cent below its 2014 peak, according to the latest Domain House Price Report . Perth unit prices are now 19 per cent below the 2014 peak.”

“Property analyst and valuer Gavin Hegney said Perth property prices were still suffering from an oversupply of new apartments and house-and-land packages in many areas, particularly in the outer metro suburbs. Xceed Real Estate sales general manager Jonathan Marlow said he was yet to see signs of a market recovery given very soft transaction volumes, in addition to areas where a recovery was necessary in order to stimulate the rest of the market continuing to record falls in value.”

“‘Essentially the bottom of the market, whether it is in established apartments or established houses in less desirable areas both geographically or socially, still appear to have not found the bottom,’ Mr Marlow said. ‘All of the people who are in these areas that may normally be aspirational are unable to move due to reverse equity positions in almost all cases.'”

The Urban Developer. “The property market downturn has driven housing returns into the red, with the total returns for residential property slumping 3.3 per cent over the last year. The combination of falling value growth and low rental yields has pushed total returns into negative territory for the first time since the global financial crisis.”

“Total returns over the fiscal year were lower in both Sydney and Melbourne, which recorded declines of -6.7 per cent and -6.0 per cent respectively. ‘For Melbourne it was the first financial year in which returns were negative since 2011-12 and it was the largest fall in total returns on record,’ said Corelogic’s Cameron Kusher.”

The Australian Financial Review. “Residential lot sales across Australia sank to a record low in the first three months of the year, dragged down by falling demand for new homes. Only 7236 lots were sold in the March quarter – almost 50 per cent below the average of the past decade according to the latest HIA-CoreLogic Residential Land Report.”

“HIA chief economist Tim Reardon blamed the property downturn in the major cities as well as the credit squeeze that has plagued the market since towards the end of last year for the poor results. ‘Falling house prices tend to cause people to become reluctant to sell their house in the hopes that they will get a better price if they hold off. Buyers are also disinclined to purchase a dwelling in case they have misjudged the bottom of the market and house prices fall further,’ Mr Reardon said.”

From Nine News. “They’re the booming Sydney suburbs where new homes are being fast-tracked to feed the city’s population rise. But accelerated development in the NSW Government’s chosen hotspots – many in the form of apartment tower blocks – has spawned a silent tsunami of building defects.”

“A 9News investigation reveals homeowners in the postcodes of earmarked ‘priority precincts’, growth and urban renewal areas have a more than double rate of defects compared to those where regular planning rules apply. The revelation comes after it has emerged residents have been forced to evacuate at least four Sydney apartment blocks because of defects in Parramatta, Zetland, Mascot and Olympic Park.”

“Nevertheless, the State Government appears to be attempting to wash its hands of accountability from the sanctioned building frenzy, which saw development applications assessed in as little as 24 hours. Publicly reported defects are just the tip of the iceberg, as thousands of home owners are understood to be suffering quietly for fear of devaluing their homes or are gagged by developers’ non-disclosure agreements.”

“‘It is a significant threat to public confidence for us to simply turn the deck chairs on the Titanic for a better view of the iceberg,’ added Stephen Goddard, of the Owners Corporation Network. ‘Clearly there is every possibility that the absence of oversight that has existed here at Mascot Towers has repeated itself in other places.'”

“Many owners were attracted to buy in planned precincts by the prospect of affordable housing and capital growth – but on the flipside, are ill-placed to fund legal action or sell at a loss. Mr Goddard warns that buyers who purchase off the plan now have an 80 per cent chance of buying into a building with defects. ‘It is unfortunate that you have more consumer protection buying a refrigerator than a million-dollar apartment,’ he said.”

“Opal Tower apartment owner, Monica Zhang said: ‘We’ve lost so much money.’

This Post Has 91 Comments
  1. ‘Essentially the bottom of the market, whether it is in established apartments or established houses in less desirable areas both geographically or socially, still appear to have not found the bottom,’

    ‘All of the people who are in these areas that may normally be aspirational are unable to move due to reverse equity positions [i.e. underwater] in almost all cases.

    – Australia is ahead of the curve with-respect-to U.S. markets.

    – From the Scooby-Doo gang…
    “Looks like we’ve got another mystery on our hands”:
    “Jeepers!”
    “Jinkies!”
    “Zoinks!!”
    “Ruh-roh–RAGGY!!!”
    “And I’d have gotten away with it, too, if it weren’t for those meddling kids [HBB Bloggers]!”

    https://confoundedinterest.net/2019/07/24/winter-is-coming-for-housing-new-home-sales-rise-only-7-mom-with-falling-mortgage-rates/
    Winter Is Coming … For Housing! New Home Sales Rise Only 7% MoM With Falling Mortgage Rates
    confoundedinterest17
    July 24, 2019

    “The Census Bureau reports New Home Sales in June were at a seasonally adjusted annual rate (SAAR) of 646 thousand. That is up 7% over May NHS.

    That is the good news.

    Now for the less good news.

    First, new home sales are up … to pre-1995 levels. That is, pre-house price bubble (orange line).

    Second, despite hopes that declining mortgage rates would stimulate a larger rise in new home sales, their hopes were shattered.

    Even worse, there is clear pattern to YoY [year-over-year, which is less volatile and shows trendline) new home sales. Winter is coming! (see chart)”

    – Great Jay Powell photo too! 🙂

  2. “‘It is a significant threat to public confidence for us to simply turn the deck chairs on the Titanic for a better view of the iceberg,’ added Stephen Goddard, of the Owners Corporation Network.”

    – Classic quote, or soon to become one.

  3. “Opal Tower apartment owner, Monica Zhang said: ‘We’ve lost so much money.’

    True, Monica, but look at the wisdom you’ve gained.

  4. A corrupt business from top to bottom.

    “Publicly reported defects are just the tip of the iceberg, as thousands of home owners are understood to be suffering quietly for fear of devaluing their homes or are gagged by developers’ non-disclosure agreements.”

  5. I envy those Aussie bubble watchers. Last bubble, San Diego was the lead horse in the race to the tar pit. But here I am still having to endure daily radio infomercials on becoming independently wealthy flipping houses with other people’s money. It’s getting exhausting waiting for this to end.

    1. Don’t worry John, savvy buyers are ready to BTFD in 2020 and take us to new all time highs! The parabolic v-shaped recovery will be talked about for years.

  6. Just saw this…

    https://www.zerohedge.com/news/2019-07-24/subprime-20-mortgages-now-available-borrowers-without-credit-scores
    Subprime 2.0: Mortgages Now Available For Borrowers Without Credit Scores

    by Tyler Durden
    Thu, 07/25/2019 – 21:55

    “The new program is available with conventional, FHA, USDA, or VA loan options, with the goal of helping those with no credit history into homes.”

    – Two comments:
    1) As Ben previously mentioned, they’re “scraping the bottom of the barrel” again, just like last time, since they’re running out of greater fools and the market’s slowing down. Keep kicking the can as long as possible, then when it finally breaks, stick the taxpayer with the bill. Rinse and repeat until U.S. of Zimbabwe. I think he also mentioned that there IS Subprime 2.0, despite denials to the contrary (because it’s different this time). This is just one (more) example.
    2) Taxpayer guarantees enables this and results in maximum moral hazard scenario, but don’t worry though, ’cause CFPB’s “got your back.” Uh-huh.

    1. I knew this back in 2009/2010. Your FHA, USDA, VA,etc loans were nothing but subprime. Gobmint guaranteed all sub-prime since the bailout.

    2. i suspect the real target demographic for this program is undocumented immigrants. Don’t like paying for their healthcare? How about bailing our their mortgages?

      1. When it comes to paying the mortgage illegals say: mi casa es su casa. When it comes to HELOC, it is just mi casa. When the HELOC cannot be paid, it is run for the border. The only deportations approved of by Democrats is self deportation to avoid consequences for criminal behavior or to avoid fiscal responsibilities.

  7. It’s blatantly obvious what the Fed is doing. They know a massive housing price collapse is coming so they’re trying to get out front of it and paper over it with more cheap money. They think they found some magic elixir that never loses its potency. They’re wrong.

    The one thing they have in their arsenal, however, is the ability to tailor their policies to favor the wealthy and hang the majority of people out to dry. Until we see violent uprisings in major cities, with the hatred and vitriol directed not only at politicians but at bankers, nothing will ever change, it it even would then.

    1. That was awesome. The entire investigation was guided by the goal of getting Trump, to the exclusion of evidence of a real conspiracy by Dems with Russians. Was Mueller on board with the plan or was he completely checked out, letting all the Trump haters completely run the show?

  8. I was just browsing rentals and having a good laugh. I came across a house that’s 900 square feet and asking $1,950 per month. They want the first month’s rent, the last month’s rent, and $1,950 for a deposit, for a total of $5,850. How on earth, at a time when most Americans can’t even come up with $400 for an emergency, are they going to come up with that much cash to move in? This is a dumpy 2 bedroom house at the average rental price, not something nice.

    1. The last tenants were meth addicts or they dragged off to jail and the landlord had to wait to months to legally recoup the house so no more mr. nice guy

    2. If I Was in that situation, I would just buy something… sign the docs and get some cash back at closing maybe 5K at closing with a 100% LTV. Granted that I live in a non-recourse state.

      Then, when Sheeat hits the fan, I can stay in the house for one year to 3 years free while I fight eviction. (Can’t do that as a renter) Plus with all the money I am stuffing the mattress with, since I am not paying rent or mortgage, I can drive my RV/Van to Mexico for next 3 years and chill at Baja .

      Then I come back and repeat the cycle, while I collect food stamps, and WIC for my kids, and apply for grants for everything, because we’re a family of disadvantaged people.

      People just gotta Game it, NO choice to survive. If you have no Assets, No savings, No Career job, or Cushy Gig working for .gov.

      How many people will do what I just describe?

      1. How many people will do what I just describe?

        There will be more and more who see no other choice as we continue on the path we are on. American Roma, with an occasional temporary house purchase thrown in whenever the Fed makes that the easiest way to get through a couple more years.

        1. BTW… check out this beauty in Sacramento. A flipper is looking for 700K for a 1965 house with a home depot remodel. It’s madness 700K in Sac tow… Lunacy

          https://bit.ly/2GwsVYG

          the dropped the price 2K… Lolz for a 700K house. I could get a discount of 2K on a 10K car… the GREED on these nasties

      2. Why would you want to write the rules to enable this kind of scam artistry? Does it all get down to increasing the number of Democratic voters?

  9. Who knew that artificially ginning asset prices with an unprecedented electronic money printing binge could ultimately be deflationary?

    It is quite the shocker to learn this.

    1. Is the U.S. 10-year Treasury yield currently under actively management to keep it above the 2 percent Maginot Line?

      The Financial Times
      Opinion Markets Insight
      Why US bond yields could be going the way of Germany and Japan
      Without a dose of ‘shock and awe’ from the Fed, long-term rates could drop below zero
      Bob Michele yesterday

      Ten-year US Treasury yields could be headed to zero. This is not a forecast. This is not a bold prediction. This is not something that we hope happens.

      This is an observation of what is unfolding in the markets right in front of us. The 10-year yield peaked at 3.25 per cent in November last year and has fallen relentlessly, to as low as 1.93 per cent earlier this month. Today, about one-third of the global government bond market and one quarter of the global aggregate bond market have negative yields. We should consider it a warning: that this is the path the US market is on unless there is an adequate policy response.

      What is surprising is that the dramatic decline in yields has happened against a backdrop which would have suggested otherwise. The last move by the Federal Reserve was to raise interest rates in December. The central bank is also in the process of running down its balance sheet by up to $35bn per month. Assets in US money market funds have increased steadily over the last nine months to about $3.3tn, the highest level since the financial crisis, when the Fed provided an unlimited guarantee to these funds. Equities, gold and cryptocurrencies have all risen strongly. Further, the US economy could be characterized as “OK”.

    2. It is a head scratcher…

      The last 20 years has seen substantial increase in productive capacity (AI, robotics, general automation) without a corresponding increase in effective demand (wages stagnated due to the weakening of labor’s relative power as a result of globalization & automation).
      This paradox of being able to produce more while being able to sell less can be mediated when there are new markets to sell into. But markets are saturated, there are no “new worlds to conquer.”

      This might be the undisclosed rationale of the money printing. The printed money simulates a new “market,” creating demand where there was none.
      This appears to be part of a larger, longer term end game. The fundamental shift of resources to those who own assets from those who do not, whose net effect is to further diminish the already deteriorating effective demand.
      If this paradox cannot be solved, those who are shut out and the disenfranchised are going to be hopping mad.

      This was foretold in the statement that, at some point, “the means of production will outstrip the mode of production.” In English, we will be able to produce far more than we can distribute. I believe this is exactly what we are moving towards.

      1. “If this paradox cannot be solved, those who are shut out and the disenfranchised are going to be hopping mad.”

        Many of the economically disenfranchised will also find themselves homeless.

        1. “If this paradox cannot be solved, those who are shut out and the disenfranchised are going to be hopping mad.”

          I move that information be managed in such a way so as to cause these hopping mad disenfranchised people to be willingly pitted against each other.

          1. This is why we need a mass immersion n the Englsih language for all people, so they are not left behind. The staggering amount of functional illiteracy is the root cause of the wealth gap. Not many can survive today with an 8th grade reading and math level

      2. a bit I forgot, inadequate demand is usually followed by trade wars and competitive currency devaluations. This is evidence of national entities fighting over limited markets to sell into

        1. “…competitive currency devaluations…”

          Beggar Thy Neighbor

          German Yields Fall to a Record as Markets Set the Tone for ECB
          By John Ainger
          July 25, 2019, 1:21 AM PDT
          ECB Set to Signal September Action, Pimco Says

          German yields are once again plumbing fresh depths ahead of a crucial European Central Bank meeting that will set the course for global easing.

          Yields on 30-year bonds fell to a record low as money markets priced in a 40% chance of a rate cut at today’s decision. Analysts expect President Mario Draghi to set the stage for lower borrowing costs and more quantitative easing in September to combat an economic slowdown and sagging inflation.

      3. wages stagnated due to the weakening of labor’s relative power as a result of globalization & automation).

        Excellent summation. I would add also to the list of globalization and automation the decline of unions. I’ve never been a pro-union guy necessarily, but I recognize that they have played a counterbalancing role at critical points in our country’s history to prevent against monopsony.

        Another phenomenon I think we are witnessing is a redefining of the market for whom goods are produced. Increasingly the end consumer of housing and autos is the wealthy. Just owning a home is becoming a luxury good. The same could be said about a new vehicle. It used to be that there were such things as starter homes or even starter vehicles. But the US doesn’t seem to be interested in producing those anymore. There has been a deliberate shift away from those markets, possibly because they don’t really exist anymore with the hollowing out of the middle class, but also because there is little profit there.

        1. Very good post OneAgainstMany .

          That’s why I think one of the tricks is to create a strong middle class again by jobs and manufacturing base here. That which was taken away by Globalism/bad trade deals can be undone.

  10. Definitely being downplayed by the press but GDP up 2.1 percent second quarter. Due to the floods, Boeing, and the oil and housing slowdowns, I thought the Atlanta fed’s estimate would be correct but not even close. To put in prospective Obama average 1.9 percent per quarter. Thus a bad Trump quarter is a good Obama quarter.

    1. I don’t believe GDP is a very good barometer of how our nation’s economic prospects are doing. Instead, take a look at the bottom 20% and see how their wages are doing.

      1. “Instead, take a look at the bottom 20% and see how their wages are doing.”

        The bottom 20% are washing down hostess cupcakes with root beer while watching the love connection. Otherwise they’re out in the section 8 apartment parking lot pulling each other’s hair.

      2. Growth in GDP is an excellent measure on how fast the pie is growing. Now, how you divide up the pie is a separate political not economic question. The US has historically believed that creating a larger pie usually is better because even if someone gets a smaller slice, that slice will be bigger than an equal slice in a smaller pie. Like anything you can go to far in one direction. However, the people pouring into this country are often fleeing countries where equality was favored over growth. There are some people and even cultures that would rather have less than see a neighbor have more. This is contrary to the ten commandments which created the foundation of our constitution. Jealousy is a sin not something which should create public policy.

        1. It’s not about jealousy, its about whether GDP growth should be the benchmark by which we measure the success of economic policy.

          If our imaginary economy of 3 people, one person gets growth of 50%, and the other see reduction of income of 10%, that is still an net gain. Yet it is not a healthy trend. GDP can still grow as we outsource manufacturing jobs and the middle and lower class has its head dunked repeatedly in the toilet.

          The rising tide…lifts all yachts?

          1. Also, GDP growth can be juiced by debt, which is a completely separate point and which should also be discussed because GDP fueled growth backed by massive debt is not sustainable.

          2. As socialist Europe is discovering you have to create wealth to redistribute it. Greece was just exhibit A. Moreover, look at the debt to GDP ratios for European countries, even after Obama almost doubled our debt we look good.

          3. Moreover, look at the debt to GDP ratios for European countries, even after Obama almost doubled our debt we look good.

            Yes, let’s do look at the debt to GDP ratio of European countries. Here are all the “socialist” EU countries who are better than the US on debt to GDP measure:

            Austria, Belgium, Latvia, Bulgaria, Lithuania, Croatia, Luxembourg, Cyprus, Malta, Czechia, Netherlands, Denmark, Poland, Estonia, Finland, Romania, France, Slovaki, Germany, Slovenia, Spain, Hungary, Sweden, Ireland, United Kingdom.

            Particularly low debt loads are in the northern Hanseatic League Countries and the Nordic countries (our family is Danish). Almost of these countries have a much lower wealth inequality as measured by the GINI coefficient or by looking at deciles. GDP per capita is strong too.

            It’s good to look at what we are doing well and continue it. And we should also look at what we are not doing well and look for ways to rectify it. US has a problem with income inequality. As Ray Dalio put it recently, “Capitalism isn’t working for most people.” I believe this is the US version of capitalism that is broken, not markets in general.

            Source:
            https://en.wikipedia.org/wiki/List_of_countries_by_public_debt

            (View Gross Government Debt as % of GDP)

          4. “Also, GDP growth can be juiced by debt…”

            A barrio/ghetto gang-banger getting shot and ending-up in the ER and surgery also adds to the GDP despite the lack of real investment.

      1. Yes and both the bond and stock market will expect more or less easing depending on the strength of the economy going forward. Nothing has been fully factored in, thus lower growth can mean lower mortgage rates.

        1. I have far different numbers from a credible source, Ireland for example has massive debt it assumed due to its housing collapse that it assumed. I will post numbers Saturday.

          1. To really understand just how messed up the European socialist countries are you must look at external debt. But even government debt for countries like Ireland are distorted by special factors. Of course, artificially lowering interest rates keeps debt down when people are paying you to borrow money

  11. Gold is up right now by $8 an ounce, it would have been a lot more had the GDP come in at 1.3 percent. On yesterday’s thread PB asked how many times can a rate cut be factored in. The question is really factored in by whom. Until something happens 100 percent of the investors will not believe it will happen. Thus, if a report means that 90 percent believe a rate cut will happen at the next Fed meeting and before the report only 80 percent thought so, it still moves the markets, yes including mortgage rates. It may not make them drop much but they will probably drop a little.

    1. Now, you can get 100 per cent in a smaller group such as leading investment bankers etc but it is not the entire universe of people who may place an order for a bond.

    1. The two are very different so are you asking for two different ways to invest? Carter was president to give us stagflation and I do not see it imminently coming back. Gold is the best for that type economy. Japanification is a bond play.

    2. In the vein of following japans footsteps, I’d say sexbots will be a massive industry going forward in this country if it isn’t already. Have you seen the hordes of fat, tattooed and pierced witches with hair a color crayola has yet to develop? It’s like a memo went out instructing them to make themselves as ugly as possible. Plus all the health care related to being 10 kinds of f-d up, that’s a money maker too.

      1. “Have you seen the hordes of fat, tattooed and pierced witches with hair a color crayola has yet to develop?”

        I see that “Rapinoe Purple” is in style these days.

  12. For folks using the JoshuaTree, I published a new version with some…tweaks…last night. Coding and wine don’t always mix, so let me know if you see any incorrect behavior 🙂

    1. “Coding and wine don’t always mix…”

      Wine may not be enough to deal with linguistic nuances in the Damerau-Levenshtein distance. I (we?) really appreciate your JT development efforts.

    1. Probably not unrealistic to think realtor.com, NAR, Zillow, and Redfin will try to get this blog shutdown when the RE downturn spreads nationwide. In a few years time, the only thing left on the Internet will be google ads, Amazon, and porn.

    1. True. But I cannot disagree since those our my words almost verbatim after he testified.

      1. “Are” of course my words. The coup failed, now the perpetrators of the coup must be punished to prevent it in the future

  13. I’m convinced this was a fake investigation based on testimony like you posted Ben.

    I think they all thought Clinton was going to win, but they wanted something to attack Trump with in case Trump objected to them letting Hilary off the hook for her computer crimes.

    If I remember correctly, the Russian disinformation was leaked prior to the election against Trump and it was in mainstream news.

    Really, they were between a rock and a hard place that they had discovered crimes by Hilary so close to the election. These computer crimes under normal Justice would of disqualified Clinton as electable. They would of had to put up Bernie Sanders as a replacement.

    I don’t think they ever had something like this happen so close to a election that they found crimes by a candidate, being Clinton.

    So, Hilary gets let off the hook for crimes that would of disqualified her to run, and the smear against Trump begins to distract from Hilary. Being a Russian operative is just so much more interesting than computer crimes. Hillary even destroy the computer, and if that isn’t obstruction I don’t know what is.

    So, basically I think it was a frame job against Trump to distract from Hilary crimes.Than when Trump won against the odds, than it became how to take him out, based on the frame job.

    So, for 21/2 years Trump was slandered on a daily basis for crimes he didn’t commit involving Russians.

    The whole investigation was to try to find something. So, the best they could do was some weak obstruction language. Basically , Trump expressed distain over being the victim of this and being slandered daily by the press.

    Of course the Dems have to keep the impeachment talk alive because they want to take back their power.

    The fact that higher ups in the FBI and DOJ were able to pull this off with the help from Dems and the left winged press is bizarre.

    Seriously, do you really think the FBI would let a Russian operative act as President, as they drag out a investigation for 21/2 years.
    This would be a national emergency that would require quick action.

    Look at how they tried to frame a Supreme Court Justice on unproven rape charges. That Ford lady was a joke in terms of her acting job.

    I’m just saying that this has to be cleaned up because i don’t like fraud and dirty tricks and false frame jobs so a side can get power they lost.

    Trump let the investigation proceed , but no doubt it cost him in the mid term election.

    I don’t like any of the Politicans, but what I hate worse is what occured here.

      1. Thank you for that tape. It’s really interesting. I just wish that people who do things like this could be busted.

  14. I think Mueller was checked out mentally and that’s why he was hired as a figure head Mueller either faked that performance, or the a guy really wasn’t up for the job. This makes for great cover for the real culprits that were conducting a fake investigation.

  15. Please do not attack the base of the Democrats. Next you will be arguing that your tax money should not be spent on gender realignment .

      1. Recommended TDS check:

        Are you doing your own independent analysis, or just rechanneling Hannity?

        1. Good question.

          I’m one of these guys who tries to get the basic facts by going to all sites. Facts are what I’m interested in, not spin. Than I start forming a opinion based no doubt on what I find valuable.

          1. “Everyone is entitled to their own opinions, but they are not entitled to their own facts.” —Daniel Patrick Moynihan, edited

          2. Unfortunately, people tend to report only those facts favorable to their opinions. Hence, “alternative facts.”

  16. ‘Falling house prices tend to cause people to become reluctant to sell their house in the hopes that they will get a better price if they hold off.

    Yes, just wait for a recovery. It may take 15 years to see peak prices again. I see houses in my neighborhood that people bought in 2004 that are still not selling for the prices they paid 15 years ago.

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