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The Model Of ‘If You Build It, They Will Come’ Is Over, People Aren’t Believers Now

A report from the Miami Herald. “About two years ago, Janet LeGrand — also known by her maiden name, Janet Garcia — used what Homestead police called a fake engineering firm and a falsified résumé to try to dupe the city into awarding her firm a $33.3 million construction contract. LeGrand was arrested on a charge of scheming to defraud, and then again for wage theft after failing to pay dozens of employees a total of hundreds of thousands of dollars. She eventually posted bail and relocated.”

“The Miami-Dade charges — set for trial next month — didn’t stop LeGrand from setting up shop again, this time in greater Las Vegas. LeGrand is spearheading a project that’s vastly larger than Homestead’s.
The company says the mixed-use development — including workforce housing, offices, retail space, luxury residential units, a hotel and entertainment space — will be like a ‘mini city.'”

“Law enforcement records allege that LeGrand lied by claiming she had access to billions of dollars in investment capital. Cops also said she pretended to be a financial partner in a $942 million Port of Miami Tunnel project as well as a $483 million development project in Ohio. Lisa Hauger, a Realtor based in Nevada, told the Herald Monday she remembers when Janet LeGrand contacted her in 2018. She was looking to lease office space in Las Vegas. Hauger didn’t like the looks of it. ‘That’s when I Googled her. I called police down in Florida and they told me to run, so I did,’ Hauger said.”

The Palm Beach Daily News in Florida. “A federal court has ruled against former Palm Beach developer and convicted felon Robert V. Matthews in a civil case brought by the Securities and Exchange Commission, which claimed he had defrauded foreign investors who put money into his never-completed Palm House hotel-redevelopment project in Palm Beach.”

“Prosecutors in Connecticut say Matthews and others took part in a criminal scheme to defraud foreigners who put money into the Palm House project under the federal EB-5 program, which offered investors the opportunity to get expedited immigration papers, commonly known as green cards. Most of the investors were Chinese and were told the Palm House would be developed and opened as an ultra-luxury hotel-condominium, according to court filings.”

The Houston Chronicle in Texas. “International homebuyers are pumping the brakes on purchases in Texas and across the nation, according to Texas Realtors. Foreign spending on Texas homes fell 28 percent to $7.8 billion in the 12 months ended March 30, down from $10.9 billion in the same period a year ago. In the 12 months ended March 2018, international buyers spent $18.7 billion on 34,135 Texas homes.”

“Spending by buyers from China, Canada, India, the United Kingdom and Mexico, the five countries that spend the most on U.S. homes, fell across the nation. Chinese buyers cut their spending by more than half, purchasing $13.4 billion worth of homes, compared to $30.4 billion in the year-ago period. Lawrence Yun, chief economist for the National Association of Realtors, called the magnitude of the decline ‘quite striking, implying less confidence in owning a property in the U.S.'”

The Star Tribune in Minnesota. “A nearly $190 million financing package will pave the way for construction to begin early next month on the tallest — and most expensive — condominium building in the state, but it will scuttle plans for a competing condo tower just a few blocks away. Bob Lux of Twin Cities-based Alatus said that after three years of planning, he is now considering other options for a site where he planned to develop Alia. The proposed 40-story tower would have had 214 units, including nearly 50 that would have been priced at more than $1 million.”

“‘We’ve been waiting to make sure that the Eleven was going to close, but now that it has we will transition our project,’ Lux said. ‘It would not be a smart decision for ourselves or our buyers or the marketplace to flood the market.'”

The Real Deal on New York. “First, it offered up to 10 years of free common charges. Now, Extell Development is launching a ‘rent-to-buy’ program to spur deals at One Manhattan Square. In an email announcing the incentive, the developer said renters will be able to apply a ‘full year’s rent’ to their purchase of a unit. But the developer’s perk is also clearly the latest sign of Manhattan’s slow condo market. After initially marketing OMS to Asian buyers, Extell has offered several perks to entice buyers.”

But foreign investment has dried up, and sources said renters are more likely to move to tertiary neighborhoods than buyers. ‘The model of ‘If you build it, they will come’ is over,’ said Bold New York’s Jordan Sachs, citing low buyer sentiment overall. ‘People aren’t believers now,’ he said. ‘There’s a lot of talk about a recession on its way.'”

From Mansion Global on New York. “A custom-built, 32-acre estate in Durango, Colorado, will go to auction without reserve on Oct. 12 with Platinum Luxury Auctions. The records show that it was previously listed twice. The first in 2015 for $11.75 million and again earlier this year for $10.75 million.”

From Mansion Global on California. “A Los Angeles megamansion in the gated community of Wallingford Estates that claims to have the largest zero-edge pool in Beverly Hills got a $25 million cut from its price last week. Now asking $110 million, the estate has 12 bedrooms, 24 bathrooms and an indoor sports complex complete with a basketball court, a gym, a boxing ring and a sports lounge and bar. In Los Angeles, a city home to a glut of high-priced megamansions, big-ticket discounts have become de rigueur.”

“A Bel Air estate dubbed Chartwell—the most expensive home on the market in the U.S.—also got far less expensive in June after cutting $50 million from its price tag, taking its asking price down to $195 million from $245 million. And a 12-bedroom Bel Air mansion with its own helipad and a candy wall is currently asking $150 million, far below the $250 million it was first being shopped for in 2017.”

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This Post Has 77 Comments

  1. ‘Prosecutors in Connecticut say Matthews and others took part in a criminal scheme to defraud foreigners who put money into the Palm House project under the federal EB-5 program, which offered investors the opportunity to get expedited immigration papers, commonly known as green cards. Most of the investors were Chinese and were told the Palm House would be developed and opened as an ultra-luxury hotel-condominium’

    Yep.

  2. Sitting in a coffee shop listening to a yuppy couple gloat to another yuppy about the great deal they got on their shack. The single yuppy is asking them for advice on how to flip a house. They think $425,000 is a reasonable amount to spend on the property. When they talk about dollar amounts they use faux hushed tones.

    I hope they all lose their fieking shirts.

    This is in Philly btw.

    1. The plot thickens… the property needs two variances in order to make the investments needed to make it profitable. Turns out the couple are REALTORS. They are gonna help the single apply for the variances. The single had no idea that it could take 2 months to get the variances. LOL, it’s gonna be more like 8.

      Uh-oh, now the building needs sprinklers. “No big deal, just another $30,000.”

      “It’s so great we are talking about this, I had NO IDEA. I gotta write this stuff down!”

      Stick a fork in this chick, she is done.

      2. “It’s so great we are talking about this, I had NO IDEA. I gotta write this stuff down!”

        Bahahahahahahaha. Send her to me.

      3. Nobody has “flipped” a house since early 2008. All the flips since then have been renovations of trashed houses, basically a full-time job. And buyers seem to know it. There are at least 4 renos in my neighborhood ~30 days and aren’t selling.

        1. “Nobody has “flipped” a house since early 2008. All the flips since then have been renovations of trashed houses”

          This one was one of the most “trashed” houses i have seen in awhile. Took about a year to sell and a 50k+ price reduction to 675k

          https://www.zillow.com/homedetails/10111-Soquel-Dr-Aptos-CA-95003/16138103_zpid/

          Pre “flip” photos which dont at all show the true terrible shape it was in. I went to see it back in feb and it smelled of urine and mold, dry rot everywhere, illegal split into multiple dwellings, likely was a college party or squatter house. graffiti all around the house not shown. I wouldnt be supprised if the “flipper” left dry rot and mold behind all the lipstick they put into this.

          http://www.valleyview-properties.com/10111-Soquel-DR-Aptos-CA~i45$81740402$RES

        2. younger admin. I work with is so excited, shes pregnant and her Husband wants to get into Home flipping.

          I’m done giving advice, so congratulations !

          3. I might add that while flipping houses in a market with skyrocketing prices makes even the most foolish whole on their bets, flipping in a declining market is almost always financial suicide for all involved. Every day you own the house it is declining in value, and the profits are being wiped out vs. the opposite where the house is rising in value so the longer it is held, the better the returns (not taking into account interest paid, etc.). It’s made even more difficult by the fact that it is nearly impossible to find a house that will be available at a price where a profit will be available 6 months down the road when it is ready for resale.

          4. Clean up the mortgage fraud, fraudulent appraisals and these problems of “flipping” take care of themselvs.

    2. I was at a party the other night where a couple people starting bragging about their real estate gains. I wondered if they had children who were priced out of the shelter market because of their stupid ass gains.

      1. Been hearing it at every party, been hearing at work, been overhearing it in restaurants and cafes in San Diego for the last three years at least. It’s the talk of the town. It’s worse than 2006.

        Out walking and stopped at an open house in LA yesterday. 1929 tiny two bedroom cottage with additional one bedroom living space built onto the back. Front bedrooms not much bigger than walk in closets. Tiny front yard, no garage, small lot much of which was the long paved driveway. Hosting agents had full buffet spread with sandwiches and fruit plate. Mediocre neighborhood in the Occidental College vicinity. Many houses still have bars on the windows from when the place was overrun with gangs twenty years ago. Asking price 899k. People still pushing prices to the limit in SoCal. 2006 plus another level to two of insanity.

    3. “When they talk about dollar amounts they use faux hushed tones.”

      Yo dude…my indentured servitude is larger and longer than yours!

  3. ‘The Miami-Dade charges — set for trial next month — didn’t stop LeGrand from setting up shop again, this time in greater Las Vegas. LeGrand is spearheading a project that’s vastly larger than Homestead’s’

    What’s funny about this is the Las Vegas media ran with it like a dog with one of those rubber bones.

    1. “What’s funny about this is the Las Vegas media ran with it like a dog with one of those rubber bones.”

      What is an investitive reporter to do? Here’s an idea:

      “She was looking to lease office space in Las Vegas. Hauger didn’t like the looks of it. ‘That’s when I Googled her. I called police down in Florida and they told me to run, so I did,’ Hauger said.”

      1. investitive = investigative

        A reporter or anyone can Google up somebody if they choose to. We are talking about hundreds of millions of dollars at stake here. A wee bit of an inquiry can do wonders, but few people trouble themselves to take the time.

        A nation of dummies.

        1. I’m afraid the word dummies just isn’t strong enough, Mr. Banker. I don’t know if we have a word for this kind of stupidity — from a CNBC article:

          “About 63% of the houses sold last month were either under construction or yet to be built.”

          Going to be so much foot stamping. Invest in shoes.

          1. I’m not sure why people pay much attention to new shack sales. The statistical margin of error is often larger than whatever increase or decrease is reported. So you get huge revisions month after month. And I don’t see how they account for incentives. For example in Tucson, one shack builder was advertising $10,000 in giveaways like tile or a garage. Recently they said, “how bout a free pool!” So does that $30-40,000 get caught in new shack numbers? I doubt it.

          2. “Going to be so much foot stamping. Invest in shoes.”

            That’s assuming they’ll have money to buy a pair of shoes.

          3. “For example in Tucson, one shack builder was advertising $10,000 in giveaways like tile or a garage. Recently they said, “how bout a free pool!” So does that $30-40,000 get caught in new shack numbers? I doubt it.”

            Have to keeps those comps up at ANY COST! Sounds like if they just lowered the price they would have to cut by 20-25%, that would be devastating to any recent FBs and the REIC’s pocket book. Again, more evidence of deception, greed, and corruption by doing anything they can to drag this f’ing bubble out as long as they can. These people need to be jailed

  4. “A Bel Air estate dubbed Chartwell—the most expensive home on the market in the U.S.—also got far less expensive in June after cutting $50 million from its price tag, taking its asking price down to $195 million from $245 million.

    Let’s all please observe a moment of silence for those tens of millions of dear departed Yellen Bux.

    1. “…asking price down to $195 million from $245 million….”

      An inconsequential 20% discount (give or take a few hundred thousand).

      Whats $50 million among friends?

      A mere flesh wound!

  5. ‘The model of ‘If you build it, they will come’ is over…People aren’t believers now’

    This “model” was discredited last decade, only to rise, and fall, again. But the believers quote sounds like a market built on sand.

    1. The central bank increased its overnight repos to $100 billion from $75 billion, and its 14-day repos to $60 billion from $30 billion. It’s not clear if the increase to the offering sizes will apply to repo operations beyond Thursday.

      It’s a good bet the Fed is going to emulate Draghi’s “whatever it takes” in pumping printing-press liquidity into the repo system to attempt to forestall the next Lehman moment. The question is, how long will the Fed be able to increase its overnight and 14-day repos before market makers and retail investors alike decide it’s time to exit the Ponzi.

    2. Do they know what is causing the over night rate to go up ? Banks won’t loan to each other cause they have no cash ? Have to go to the FED.

      Why are banks short of cash all of a sudden ?

      2. In 2008, they refused to lend to other banks because the collateral being offered – mortgage backed securities – were toxic waste whose true worth was impossible to determine.

        But surely that’s not an issue this time around…or is it?

      3. Let’s say you run with a rough crowd. Suppose you do a lot drinking and gambling. You’ve made a lot of stupid bets with your booky and things might work out but you are worried. Now one of your peers asks you to lend him some money so he can make a similar bet. What are you gonna do?

        Good thing we have the fed to lend money to your trustworthy friend.

        I personally think that the “snap back” in long term interest rates from record lows also has something to do with it. In the repo market, bonds are put up as collateral for short term loans. When interest rates increase, the net present value of the bond, i.e. the collateral, falls. This can happen quickly and drastically. If lenders are very worried that the collateral will fall in value, they charge higher interest rates or stop lending all together. Exactly like what’s happening right now.

      4. Also, ostensibly, the September treasury auction and corporate tax payments for the quarter, combined with the Fed itself shrinking its balance sheet, drained enough liquidity from the system to spike overnight lending rates in the repo market.

        https://finance.yahoo.com/news/repo-market-rates-explainer-federal-reserve-yahoo-u-211954829.html

        However, it would seem unlikely that the central planners and their minions are going to provide the public with factual information regarding their activities in the dark recesses of the secretive financial labyrinth they’ve created for their own enrichment.

  9. Like Many US Cities, Salt Lake Finds It Can’t Built Its Way Out of Affordable Housing Shortage
    KSL
    22 September, 2019
    Katie McKellar

    “SALT LAKE CITY — Right before the housing market crashed in 2008, tumbling America into the Great Recession, the average apartment rent in Salt Lake County peaked at a little over $800. A decade later, Salt Lake County’s average rent has escalated — at over $1,150 a month and climbing — and researchers don’t see any end in sight, analysts from the University of Utah’s Kem C. Gardner Policy Institute told the Salt Lake City Council last week when reviewing the institute’s latest housing report.”

    “Since 2000, the percentage rise in rent in Salt Lake County more than doubled the rate of inflation and almost doubled the growth in renters’ median income, according to the report.”

    “Statewide, Utah is estimated to have a 50,000-unit housing shortage of all kinds, from single-family homes to apartments, according to other estimates from the institute.”

    “DJ Benway, a research analyst at the Gardner Institute, shied away from calling today’s housing market a housing “boom” because he says he doesn’t necessarily think there will be a “bust” like in 2008.”

    1. New and used housing is ridiculously expensive in Utah County and Salt Lake County. But renting is pretty much just as unaffordable and there seems to be no end in sight with increasing rents due to low vacancy. Rents are rising precipitously along with massive new building. The article above does mention the unintended consequences of the tax laws that put parts of Salt Lake City in the “opportunity zone”:

      ““I think the unforeseen cost of the opportunity zone is it’s fueling a fire of gentrification,” Eskic said, noting that as more high-priced apartments come online, they affect the overall market average, pushing rents even higher.”

      2. Not to mention that Californian expats are selling their exorbitantly overpriced shacks in CA and moving to places like St. George with piles of cash to blow on housing.

  10. “…Chinese buyers cut their spending by more than half…”

    “… Lawrence Yun, chief economist for the National Association of Realtors, called the magnitude of the decline ‘quite striking, implying less confidence in owning a property in the U.S…’”

    Thanks for the breaking news Lawrence.

    Remember we all depend on you for your in depth market insight, not to be found anywhere else!

    1. I had to laugh at one comment that suggested that whomever it was that gained entrance to the office should do so quietly and everyday change the umbrella to a different color.

  14. Los Angeles Times
    China’s EV makers plunge on fears that a government-
    backed …

    54 mins ago

    The end of the title is “bubble is bursting”.

    1. China’s EV makers plunge on fears that a government-
      backed …

      “Shares of Chinese electric-vehicle makers and suppliers fell after a worse-than-expected quarterly loss for NIO Inc., the country’s answer to Tesla Inc.”

      “NIO has accumulated about $6 billion in losses since it was founded in 2014”

      Complimentary comments.

      Could end up being a tough neighborhood for Tesla’s startup in China.

      1. Baillie Gifford owns 11% of $NIO and is the second largest shareholder in $TSLA after Elon. If Baillie Gifford needs some liquidity that could be a problem for $TSLA.

      2. Could end up being a tough neighborhood for Tesla’s startup in China.

        Nio is really a fledgling company when it comes to EVs. They are not a major player yet and if they fizzle it won’t mean much for the larger EV adoption in China. Keep in mind that EVs account for 4% of auto sales in China, but because traditional gas sales are falling so much faster than EV sales, they are now pushing about 6% of sales this last month.

        Nio is kind of like the Faraday Future: a lot of hype, but minimal output. The biggest EV companies in China are Geely and BYD (Warren Buffet has a stake in BYD).

        Tesla is going on a massive engineering hiring spree in China. If some of these upstart EVs go under, they will probably have some good talent to pick up as they localize their offering.

        I actually think the phase out of Chinese subsidies will benefit Tesla quite a bit. China is scaling back its subsidies to domestic manufacturers and Tesla wasn’t eligible for these subsidies since it isn’t a Chinese state-run company but rather an American company.

        The larger story is the fact is that sales of vehicles overall are really floundering in China. This is why GM and Ford are taking huge hits in China.

        From the article:

        “At the same time, sales of traditional cars are currently in a free fall, plunging for the 10th straight month in March as a slowing economy and trade tensions with the U.S. weigh on consumer sentiment.”

        1. Keep in mind that EVs account for 4% of auto sales in China

          Maybe so but in the trendy places like Shanghai where license plates that are normally over $10k are free for EVs you see a lot more. I have a picture of a Model S on display in front of my hotel in 2014 that was drawing quite a crowd at that time. EVs have been blowing up there since. Plus they are all used to charging their scooters and driving them with the lights off anyway :-).

          1. Plus they are all used to charging their scooters and driving them with the lights off anyway :-).

            My parents taught English in Chengdu province and they really noticed that the air quality was bad. I think there were some studies that said that life expectancy was about 6 years lower in northern China due to the coal and air pollution levels. Air quality is a hot button issue for civil unrest, which is why the CPC is committed to phasing out gas cars. China is CARB on steroids and any auto manufacturer that wants to succeed in China will have to built out a formidable EV fleet because China is not going to continue to let its citizens breath crummy air because they fear the economic repercussions and the knock-on effects of civil unrest.

          3. The beauty of EVs, less emissions downtown, a lot more emissions outside of town.

            Still not true, no matter how often you repeat it.

            Electric Cars: Are They Actually Cleaner?

            “Have a look at this MIT study confirming that even on today’s grid and with full lifetime manufacturing and disposal emissions taken into consideration EVs are still about twice as clean to create, operate and dispose of than gas vehicles.”

          5. It is very simple. EVs use more energy. A child could see this. Blindfolded.

            Really?

            To start with, an electric motor is about 85–90% efficient at turning stored energy into wheel motion. For comparison the average internal combustion engine is around 15–25% efficient, losing most of the energy in gasoline as waste heat.
            Therefore, an electric car at this stage consumes between 3 and 6 times less energy per mile driven than a gas car, which in turn incurs less pollution at the power plant. It’s worth noting here that combined cycle coal plants are around 60% efficient, a huge improvement over the paltry efficiency of an automotive engine.

          6. Chengdu is in a basin and gets temperature inversions like a lot of other smoggy cities.

            And, yes, Chinese EV’s do move pollution to the power plants: over 70 new coal power plants are planned or proposed there.

          7. Really?

            Yes.

            ICE engines have improved in the last 100 years.

            Supposedly Mercedes F1 Engine – 1,6-litre V6 Turbo > 50%.

            combined cycle coal plants are around 60% efficient

            There is no such thing as the mythical combined cycle coal plant. Coal plants operate around 35%. These things are limited by the laws of thermodynamics.

          9. Coal plants operate around 35%.

            Thanks for confirming my point. There is no such thing as a combined cycle coal plant. BTW, Accounting tricks with LHV and optimal conditions do not reflect the real world.

            Stubborn ignorance.

          10. Thanks for confirming my point.

            Didn’t confirm your point, it refuted it. I’ll try one more time:

            The efficiency of coal-fired combined-cycle powerplants

            “Conventional coal-based power generation has improved significantly in recent years. Efficiencies of around 45%, and even higher at particularly favourable locations, are nowadays achievable. Future developments will be aiming at 55%. New technologies make even greater increases possible. Concepts involving combined gas-turbine/steam-turbine power-generating plants, in which the fuel gas for the gas turbine is produced via the gasification of coal, are now extremely advanced. This technology already permits efficiencies of around 50%, a figure which will almost certainly reach 55% by the end of the decade. Current development targets view 65% as achievable. In conventional technology, efficiencies are tied to conditions, such as air and cooling-water temperatures, at the particular location. In combined-cycle powerplants, the properties of the fuel coal also play an important part. There are, in fact, coals which can be more advantageously used in a combined-cycle powerplant than in a conventional one. These differences, combined with advantageous concepts for coal-fired combined-cycle power-generating plants, are presented and analyzed. Particular attention is devoted to individual losses occurring at coal conversion, thermodynamic cycles, integration of processes and internal consumptions.”

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