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It’s A Spiral, And It’s Always A Bit Of A Scurry At The End To Make Sure You Get Paid Before It All Falls Over

A report from the Globe and Mail in Canada. “Many long-time agents continue to find the unpredictability of the Greater Toronto Area market perplexing. Leslie Battle, a real estate agent with Royal LePage Real Estate Services Ltd., had two listings with two unexpected outcomes in the city’s west end recently. In one case, a former doctor’s office on busy Royal York Road sold in two days to a bully while, in the other, a quintessential family home on a quiet street around the corner sat without an offer.”

“‘It is a wonky market,’ Ms. Battle says. Ms. Battle says ‘the buyers are all out’ and listings tend to have plenty of showings. But some buyers are still wary. ‘It is still a very price-sensitive market,’ she says. ‘Sellers are becoming a little bit more realistic in their pricing.'”

“She expressed surprise that she didn’t receive an offer on the scheduled date for a two-storey detached at 32 Edgemore Dr. in the Sunnylea neighbourhood. The asking price of $1.55-million is ‘fair,’ in her opinion, for a recently renovated house with four bedrooms and two bathrooms. Ms. Battle says 32 parties booked showings during the week leading up to offer night, but no one submitted a bid.”

“Often potential buyers will wait to see if a house sells on offer night, then try to negotiate with the sellers a day or two later if a bidding war doesn’t materialize. That didn’t happen this time either. ‘Even after 48 hours, nothing,’ Ms. Battle says. ‘It’s bizarre.'”

From Business in Vancouver in Canada. “In the past few weeks, landlords have besieged Mark Goodman, a multi-family specialist with Vancouver’s Goodman Commercial Inc., wanting to list their properties for sale, including rare portfolios in Vancouver’s hottest rental neighbourhoods. ‘This is unprecedented,’ said Goodman, who has been selling rental apartment buildings for 18 years.”

“He said most of the potential sellers are local families that have held rental property for years. Now, he said, many want to get out of the market, even with Vancouver rents at historic highs and the city’s vacancy rate the lowest in Canada. Goodman contends they are fuelled by an underlying frustration with provincial legislation that caps rent increases at 2.5% this year, combined with soaring property taxes, based on assessments that are now often higher than the buildings could sell for.”

“In 2019’s second quarter, Metro Vancouver rental apartment building sales fell 66.7% to just 13 compared with the same period a year earlier. The dollar value of sales was $152 million, down a staggering 73.9% from 2018’s second quarter, according to the Real Estate Board of Greater Vancouver’s commercial division.”

The Timmins Daily Press in Canada. “Timmins has seen a steady decline in single family housing and building construction in recent years, according to a report presented at council. Mark Jensen, the city’s director of community and development services, said they have many draft-approved lots in the system, but no one has shown interest in developing them. ‘I think it’s a case of demand,’ he said. ‘If we don’t have the demand for the lots, nobody’s going to step forward and invest a whole lot of money with hopes of selling the lots.'”

From ABC News in Australia. “New figures show the housing slowdown is biting NSW hard, with the number of construction companies going under last quarter hitting its highest level in almost four years. The statistics, provided by ASIC, show 169 NSW-based construction companies went into administration, receivership or a court-ordered shutdown in the June quarter — the highest number since the September quarter in 2015. Over the whole 2018-19 financial year, 556 construction companies went under — 101 more than the previous financial year.”

“An increasing number of half-finished apartment projects are dotting the Sydney landscape, with property development giant Ralan Group — which collapsed in July owing $500 million to creditors — the most high-profile example. Association of Independent Insolvency Practitioners president Stephen Hathway said there was no doubt the industry was ‘stressed.’ Mr Hathway, who also runs his own liquidation firm, said small construction companies had been hit hardest.”

“‘These days it’s subcontractors on subcontractors,’ he said. ‘And the general feel I’m getting from talking to my fellow liquidators, is that in the building industry subbies just slow down paying the little ones [construction companies]. ‘It’s a spiral, and it’s always a bit of a scurry at the end to make sure you get paid before it all falls over.'”

The Sydney Morning Herald in Australia. “Mascot Towers owners say they were ‘absolutely gutted’ after Better Regulation Minister Kevin Anderson suggested displaced residents devised a scheme to secure taxpayers’ money. Mr Anderson told Parliament on Wednesday that the owners had ‘flip-flopped’ over their options to fund essential remediation work on the cracked building, which saw them evacuated in June. The minister said owners had the option of taking out a loan over many years but instead decided to raise special levies, only to then say they could not afford the repayments.”

“Owners in the apartment block need to start paying levies of between $5000 and $14,000 a month for the next nine months to ensure the cracked building can be stabilised before summer. At an extraordinary general meeting last month, the majority of owners voted for the levies rather than a high interest loan over 15 years. But many owners later discovered they could not manage the repayments because banks would not allow them to re-borrow any money. They are pleading for low-interest loans from the government.”

“Mr Anderson also said work that needed to be done related to problems discovered in 2017 but two Mascot Towers owners, Brian Tucker and Isaac Lean, said this was ‘totally untrue.’ Mr Lean said he had put ’15 years of wages’ into buying his unit, which left all his capital tied up in the evacuated building. He said he found Mr Anderson’s suggestion that the owners were simply trying to secure government money was ‘ludicrous.'”

“‘I couldn’t believe it would actually come out of his mouth … we had three weeks of sleepless nights before the EGM working out how to pay [for the repairs],’ he said. Mr Lean said some owners faced bankruptcy as they tried to find a way to move back into their homes.”

“Labor’s spokeswoman for building reform Yasmin Catley called on the government to consider giving owners low-interest loans so they could fund the essential repair works that are due to start next month. ‘Owners are quite rightly offended and outraged by these accusations,’ she said. ‘They are already living through the nightmare of being evicted from their homes and having what is, for most of them, their major financial asset stripped of value.'”

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This Post Has 51 Comments

  1. ‘banks would not allow them to re-borrow any money. They are pleading for low-interest loans from the government’

    Have you stamped your little feet? Cuz if you ain’t stampin’ the pleading does no good.

    1. and having what is, for most of them, their major financial asset stripped of value

      Gosh, it’s almost as if it’s… not an asset?

    2. Here’s an article related to the mass stupidity that drives the construction of such buildings as Australia’s Mascot Towers …

      EXCLUSIVE: ‘It’s the next to go’: Apartment block just 150 metres from evacuated Mascot Towers is suffering from ‘cracks and sinking foundations’ – as experts warn thousands of properties across Australia are unsafe
      https://www.msn.com/en-au/news/australia/exclusive-its-the-next-to-go-apartment-block-just-150-metres-from-evacuated-mascot-towers-is-suffering-from-cracks-and-sinking-foundations-as-experts-warn-thousands-of-properties-across-australia-are-unsafe/ar-AADpfKI

      Uh, It’s the water table, stupid.

      (snip snip snip)

      “Experts say thousands of homes with similar issues are at risk across the country.

      “Mascot Towers, a 10-storey high rise just 150 metres away, was evacuated on June 14 after engineers found multiple cracks in the building’s car park.

      “Since then, it has emerged the 132-unit building is sinking.

      “The Mascot Tower evacuation comes just months after residents at the Opal Tower in Olympic Park were forced to flee when the building cracked on Christmas Eve, leaving hundreds with nowhere to go.

      “Mr Almeida said the problem has spread ‘all over Sydney’, and affected everything from apartment towers to free-standing homes.

      “Mr Almeida said height and space restrictions when it came to large-scale development had been loosened in the past few years, and that building was taking place en masse on water tables, which increased the risk of water damage and the prospect of more devastating structural damage.”

      Water tables. The buildings are sinking because water is being removed from the water tables.

      “‘The problem isn’t just with high rises,’ he said. ‘It extends out to normal homes. It’s a widespread problem, which is even more frightening, because there are more homes being built with imported materials.’

      “He said the issues were not just structural either. With water damage, comes mould, which can result in illnesses for residents.

      “‘This is just the tip of the iceberg. The flow on effect here is going to be the devaluing of real estate across the board, everything from speculative single houses in the outer suburbs, redeveloped properties in middle suburbia… anything that is a volume builder based product, we are finding these are the issues.

      “‘It’s not just a few people affected, it’s hundreds of thousands, maybe even millions – we need a road map as to how we [are going to] do things in the future.'”

      IMO there should have been rules and regulations in place to protect …

      Oh, wait!

      “Peter Georgiev, director of Archicentre – which provides design, advice, assessment and inspection services – said building standards began slipping in the 1990s, and had been on a ‘downwards slide’ ever since.

      “‘Once, building codes were quite prescriptive,’ he said. ‘If you built in the 70s, the walls were brick, the floor was concrete. If you wanted to change that, too bad.”

      But, alas, not anymore.

      Another nation of dummies.

      1. Most modern cities have piezometer wells sprinkled throughout the geographic region that their water works measures, monitors and collects data. Subsidence (ground sinking) is bad for all subterranean infrastructure, e.g., sewer pipes, natural gas lines, buried power lines, etc., but when there’s no water…it’s time for the top hats to sell that pricey real estate to the school teacher’s retirement fund.

  2. ‘Even after 48 hours, nothing…It’s bizarre’

    I guess they was a lion when they said it was too the moon Alice! in Toronto.

    Leslie:

    Yip-yip-yip-yip-yip-yip, bmm
    Sha-na-na-na, sha-na-na-na-na, ahh-do
    Sha-na-na-na, sha-na-na-na-na, ahh-do
    Sha-na-na-na, sha-na-na-na-na, ahh-do
    Sha-na-na-na, sha-na-na-na-na
    Ahh, yip-yip-yip-yip-yip-yip-yip-yip
    Mum-mum-mum-mum-mum-mum, get a job
    Sha-na-na-na, sha-na-na-na-na

    1. Nice digs but for 1.6 mil I’d want something on the floors a bit more upscale than left over gray carpet from an apartment remodel in Santee.

      1. I don’t like the flooring or the fireplaces. The transom windows and backyard (did I mention the well?!) are pretty sweet.

        1. Yeah private well that close to civilization is hard to find. Lots of places out in the hinterlands have them. Don’t know your situation but if a well is high on your priority list, Ramona isn’t too far from Poway and lots of places have wells up there. Not as posh as those areas of Poway though.

          1. Priorities: single-story; PUSD; large and mostly level backyard for pool and trampoline. Given our current water bills for a sloped and largely unuseable 1.33 acres, a well is like an oasis in the desert to a thirsty man!

          2. Around here a well is worth about $3000. If you don’t have private septic, you’re going to have an interesting relationship with the water authority.

          3. Fairly confident in saying that it’d cost more than $3K to drill a well here if I could get a permit.

      2. It sold in 2014 and 2016. I think the sellers were trying to justify the price hikes with cheap and bad flooring choices.

    2. I always like to dig up the previous photos / records on homes that turn over this quick. I would be a bit skeptical of the so called seller upgrades. Solar looks to be added which is nice but other than paint, the rest seems the same as the previous sale. Also, when HOA’s are tied to a property it’s wise to look at the CCRs and monthly due history. Looks like it went up 25% since 2016 (although pretty low $100/mo). Overall looks like a pretty awesome place and seeing as taxes won’t be an issue and this is a trade, might be a good one for you. Big lot, well, solar, pool, and plenty of sqft. If I was in your position and wanted to live there, I would definitely consider it. Previous listing pics if you haven’t already seen them:

      https://tours.previewfirst.com/virtual_tours/21616/mls/photos#PhotoSwipe1569506994740

      1. Why not just HELOC and risk it all on a guaranteed win with today’s great Peloton (PTON) IPO! I’m tempted to add this innovative “tech” companies stawk to my flying car and fake meat portfolio. /s

  5. “In 2019’s second quarter, Metro Vancouver rental apartment building sales fell 66.7% to just 13 compared with the same period a year earlier. The dollar value of sales was $152 million, down a staggering 73.9% from 2018’s second quarter, according to the Real Estate Board of Greater Vancouver’s commercial division.”

    Don’t all rush for the exit at once….there is only one exit door.

    “He said most of the potential sellers are local families that have held rental property for years. Now, he said, many want to get out of the market, even with Vancouver rents at historic highs and the city’s vacancy rate the lowest in Canada. Goodman contends they are fuelled by an underlying frustration with provincial legislation that caps rent increases at 2.5% this year, combined with soaring property taxes, based on assessments that are now often higher than the buildings could sell for.”

    So if these people brought these shacks a long time ago and with “historic highs” rent, and they can’t generate enough positive cash flow to keep the investment shacks…HOW will the next “investor” make money?

    1. Mr Lean said he had put ’15 years of wages’ into buying his unit

      15 years of wages. I guess that’s 30 years of take home pay. Plus you’re paying interest and such on it so we’ll just call it 60 years. You probably want clothes and food and a car, so let’s just call it several centuries.

      The kind of government assistance you need is cold turkey boot camp for degenerate gamblers.

  7. An update for the post in the “lose your shirt” entry:

    https://www.zillow.com/homedetails/1281-Palmer-St-Plymouth-MI-48170/88161333_zpid/

    It sold for $700,000, lol — looks like it was a teardown that the buyer paid for upfront. Explains why there were no photos of the inside ever posted in the listing. Redfin has the correct square footage for the original at least (1,794) — looks like Zillow is posting it for the replacement (2,950).

    Assuming now that this was a home that had issues making renovation or upgrading cost prohibitive, so it was sold two weeks ago for $286K and the builder already had a buyer lined up.

    1. How would owning cratering real estate help in a recession?

      Markets
      A majority of the ultra-wealthy expect a recession by 2020 and are hunkering down, says UBS survey
      Published Tue, Sep 24 2019 9:23 AM EDT
      Updated Tue, Sep 24 2019 1:08 PM EDT
      Yun Li
      Key Points
      – UBS surveyed 360 global family offices with an average family wealth of $1.2 billion.
      – The result showed 55% of family offices see a recession by 2020.
      – To mitigate risks, 45% of them are already adjusting their portfolios, including shifting to bonds and real estate, while 42% are increasing their cash reserves.
      …

    2. Opinion: A recession is coming: How to protect your retirement
      By Dana Anspach
      Published: Sept 25, 2019 9:16 a.m. ET
      Recessions are a certainty — just make a plan
      Getty Images

      With slowing global growth, trade wars, and inverted yield curves, it seems everywhere you look someone is talking about a recession. Will we have one? When? Will it be mild or severe?

      The only question anyone can accurately answer is the first one. Yes, we will have a recession. Recessions are part of normal economic cycles. When? No one knows for sure. Mild or severe? No one knows for sure.

      But most financial professionals want to sound like they know. They study data and post charts and graphs to illustrate their view on why there will or won’t be a recession and how severe it will or won’t be. What does that data do for the average retiree? Not much.
      …

      1. “But most financial professionals want to sound like they know.”

        Q. And just why is that?

        A. Because they are paid some very big bucks by some very stupid people to give an answer to a question about the future that has an answer that is unknowable. So what do they do in answering this question about the future that is unknowable? Why, they give an answer.

        The correct answer to an unknowable question should be “I don’t know”. But these pukes are not paid big bucks for not knowing, instead they are being paid big bucks for knowing – knowing something that is unknowable.

        So what is it that we end up with? We end up with answers to unknowable questions given by professionals who do not know but pretend that they do.

        ‘They study data and post charts and graphs to illustrate their view on why there will or won’t be a recession and how severe it will or won’t be.’

        Bahahahaha … read this very closely: “why there will or won’t be a recession and how severe it will or won’t be.”

        Harry Truman wanted a one-handed economist, an economist who would not say “on the one hand you maybe will get this while on the other hand you may get something else” (or words to that effect).

        He never found this one-handed economist because there is no such economist that KNOWS what will happen but nevertheless the economic field is filled with economists who pretend that they do, and people with power and influence base their economic decisions on the pronouncements of these people who do not know but pretend that they do.

        This entire planet is filled and is run by dummys.

        1. “There are known knowns. These are things we know that we know. There are known unknowns. That is to say, there are things that we know we don’t know. But there are also unknown unknowns. There are things we don’t know we don’t know.” —Donald Rumsfeld

          1. But there are also unknown unknowns. There are things we don’t know we don’t know.” —Donald Rumsfeld

            See also: Johari Window

        2. People would rather be scammed by a dishonest adviser who pretends to know the truth with certainty, than to pay an honest adviser for advice which is admittedly uncertain.

          1. People

            It’s a very old human failing.

            “The prophets prophesy falsely, and the priests rule by their own authority; and my people love to have it so…”

            Jeremiah 5:31

    3. Negative Interest Rates Are a Big Deal And Threaten The Financial System, Says Former Fed Chair Alan Greenspan
      Written by Kevin Mwanza
      Sep 12, 2019
      Former U.S. Federal Reserve chairman Alan Greenspan says it’s ‘only a matter of time’ before negative interest rates spread to the U.S. | Image: By Autumn Keiko

      It would not be a surprise if yields on U.S. bonds turn negative, according to Former Federal Reserve chairman Alan Greenspan, but pundits say the widely-held sentiment that negative interest rates are not “that big of a deal” is wrong.

      Greenspan said “zero has no meaning” and went on to explain that low yields in the U.S. are partly an effect of international arbitrage, but “may also be due to forces having altered people’s time preferences”.

      Negative interest rates could be a warning

      The possibility of negative interest rates has been a cause for concern for investors in U.S. Treasury securities and could be a warning sign of potential problems for the economy.

      The yield curve – a trusted recession indicator through history – has been inverted for months, but some investors interviewed by Market Insider said they are more worried about the growing mountain of negative-yielding debt.

      “You’re seeing it pretty much throughout the world. It’s only a matter of time before it’s more in the United States,” Greenspan told CNBC, adding that investors should watch the 30-year treasury yield.
      …

  9. Oz’s housing market is showing signs of life through ever-improving affordability!

    The paradox making it hard to buy a home even with interest rates near zero
    By Stuart Marsh • Senior Producer
    1:53pm Sep 26, 2019
    Home loan lending on the rise

    Australia’s property market is showing signs of life after nearly two years of plummeting prices, but that doesn’t mean owners are rushing to cash in.
    New data by property research firm CoreLogic shows that while mortgage rates have reached their lowest level since the 1950s, house sales have fallen steeply too, even as values start climbing.

    Over the twelve months to August 2019, house sales fell 17 percent and are about 30 percent below the peak level of sales recorded in September 2015.

    Effectively, owners are holding off putting properties on the market despite their value rising.

    Tim Lawless, Head of Research at CoreLogic, said the low rate of sales represented a “paradox” in the market.

    “As housing values continue to recover and the seasonal rise in listing numbers gathers pace we are likely to see sales activity also trend higher,” Mr Lawless said.
    “Although credit policies have become a little looser, gaining loan approval remains a challenge for many borrowers, despite the lowest mortgage rates since the 1950s.”

    If you’re looking to enter the nation’s property market, Darwin is the cheapest capital city with a median value of $388,232.
    In the 12 months to August 31, home values in Darwin fell by 9.7 percent, the sharpest drop of any city in the country.
    …

    1. Business News
      September 22, 2019 / 9:24 AM / 4 days ago
      Acceptance of negative interest rates ‘vaguely troubling’: BIS
      Marc Jones

      LONDON (Reuters) – The growing acceptance of negative interest rates – where investors effectively pay for the privilege of lending – has reached “vaguely troubling” levels, the Bank for International Settlements said in its latest report.

      The recent switch back into support mode by top central banks including the U.S. Federal Reserve, the ECB and China’s PBOC has swollen the amount of bonds trading at negative rates to a record of more $17 trillion.

      The BIS, known as the ‘central bankers’ bank’, noted that was equivalent to roughly 20% of the world’s GDP and had brought markets to a point that wouldn’t have been thought possible even at the depths of the financial crisis a decade ago.

      Most government debt rates in Japan and Switzerland have dived into negative territory. Yields are sub-zero in Germany and the Netherlands for up to 25 years and even in countries with lingering concerns, such as Italy, short-term yields are negative.

      “There is something vaguely troubling when the unthinkable becomes routine,” said the head of the BIS’s Monetary and Economic Department, Claudio Borio.

      There was an acknowledgment too that the latest flurry of rate cuts had further depleted the already-limited firepower that some central banks had left.

      Earlier this year the BIS had appealed to policymakers to use their remaining ammunition sparingly. The slowdown in global economy since then, however, in the wake of the U.S-China trade war and other stresses, has triggered a renewed wave of easing.

      “Should a downturn materialize,” Borio added, “monetary policy will need a helping hand, not least from a wise use of fiscal policy in those countries where there is still room for maneuver”.
      …

  11. Would a Democrat win in 2020 crash the stock market?

    Survey of investors shows growing anxiety over Elizabeth Warren’s rise in presidential polls
    By Chris Matthews
    Published: Sept 26, 2019 7:03 a.m. ET
    39% of respondents see Warren getting the nod, up from 7% in June
    Sen. Elizabeth Warren making the rounds in Iowa.

    As Elizabeth Warren’s poll numbers rise, so does anxiety on Wall Street.

    That’s a according to a survey of U.S. institutional equity investors published Tuesday by RBC Capital Markets, which showed a declining share of money managers expect President Donald Trump to win reelection next year. A rising expect the Democratic nomination to go to Sen. Elizabeth Warren of Massachusetts.

    In addition, while a majority of investors say that a victory next November by former Vice President Joe Biden — who held a commanding lead in pre-primary polls until recently — would be neutral for markets, 89% of respondents said a win by a Democrat other than Biden would be “bearish or very bearish” for U.S. equities.
    …

    1. User error. The car wasn’t charged overnight, so started with a drained battery. Not that different from starting a police chase with an empty tank of gas.

      From the article:

      “Bosques told the station that Friday’s incident was the second pursuit involving the Tesla, and that “so far the car is meeting or exceeding our expectations.””

      1. Expectations in California are a joke. They can’t build shacks while new $250 million mansions sit empty for years.

      2. The car wasn’t charged overnight

        “…the pursuit didn’t begin until around 11 p.m.”

        Early in your shift,
        Give em chase.
        Late in your shift,
        Return to base.

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