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The Buffer That This Equity Provided May Have Disappeared

It’s Friday desk clearing time for this blogger. “In the last couple of weeks the market has slowed down, according to real estate agent Jared Dunn. He says it’s not necessarily dismal, but they haven’t seen homes flying off the market in a number of days, or even hours like they had the last couple of years. Dunn says there are factors sellers should consider, like when the Chiefs’ play home games.”

“Many home sellers in the Twin Cities are feeling a fall chill. After a robust summer, home sales across the 13-county metro are slipping, and so are price gains. The situation is somewhat confounding to Ian Harrison, who has already discounted the price of his four-bedroom, 2.5-bathroom house at least four times during the two months he has been trying to sell it. Still, he has yet to receive a single offer on the house.”

“He acknowledges pricing the house higher than he expected to sell for with the expectation that a buyer would negotiate a lower price, and he is worried that’s he has missed the biggest wave of buyers.”

“The median price of new condos/ townhomes has been more or less steadily rising over the last 11 years even as the Chicago real estate market was in a decline. However, it has plateaued a bit in the last 12 months – maybe even declining somewhat. In contrast, the median price of detached homes peaked above $1.2 MM in 2009 even as the sales of these homes declined. Then prices plummeted all the way to the mid $500s in 2013, peaked again around $900 K in the 2016 timeframe and are now on the decline again. For the last 12 months the median price at which detached homes have sold has been just below $800K.”

“As the oil industry is starting to normalize so is the housing market. ‘Due to some economic perhaps uncertainties maybe some fears going on out in the market place but I think that overall we are still in a pretty healthy market it’s just not a crazy market,’ says broker Laura Sales. ‘The advantage to buyers right now in this market is that there is just a little bit more inventory. You don’t have to make a decision so quick you might have a little bit of time to think about it.'”

“Silicon Valley big shot Scott McNealy drastically slashed the price on his mega Portola Valley, Calif., mansion on over 13 serene acres. McNealy originally listed the estate, which includes a 28,000-square-foot house, for $96.8 million in June 2018. The new listing price is $54.8 million, an impressive $42 million price cut.”

“Across Greater Vancouver, bungalows experienced the largest year-over-year price declines during the third quarter. Langley, West Vancouver, Burnaby, Coquitlam and North Vancouver bungalows saw sizable decreases, with median prices down 13.5 per cent, 12.1 per cent, 10.0 per cent, 9.6 per cent and 8.4 per cent respectively. ‘Buyers are in control in the detached market. Sellers have had to embrace the new market reality to get deals done,’ said Randy Ryalls, general manager, Royal LePage Sterling Realty.”

“Retired Squadron Leader Krishan Mitroo has paid 90 percent of the cost of his house in Noida, northern India, to developer Jaypee, and the property was supposed to be handed over five years ago. However, Jaypee was forced to delay the project and went into insolvency in 2017. ‘The project has been stuck and there is no progress at all. Even the bankruptcy court has not been able to resolve the issue so far, it is just hanging in thin air,’ Mitroo said.”

“Many banks find themselves unable to recoup their money because the properties they took from the mortgagors cannot be sold for the right price. ‘Sometimes the offers are way below the reserve prices. Naturally, the banks do not accept. Even now, there are so many properties on the market, but the banks find the offers quite unacceptable. There is, for example a five-acre piece of land in Kawempe Industrial Area, but there are no buyers,’ says Mr Festus Kateregga of Quickway Auctioneers and Court Bailiffs.”

“A weakening economy, rising bank provisions and tumbling property prices are heightening fears that Dubai could face a repeat of 2009 when the government and government-owned companies restructured multibillion-dollar debts, plunging the emirate into recession. Property prices have fallen 31% from a mid-2014 peak, according to consultants ValuStrat, echoing the crash of 2009 to 2011, when prices plunged by more than half.”

“‘Banks have exposure on both sides of real estate — as providers of capital to real estate developers and as providers of mortgage financing,’ said Asad Ahmed, managing director of Alvarez & Marsal Middle East, noting that the sustained drop in property prices since 2014 means that many Dubai property buyers would have seen their equity wiped out. ‘The buffer that this equity provided to banks may also have disappeared,’ he said.”

“Some of Sydney’s most affordable suburbs are taking the biggest hit to rental prices, as increased supply and slow wages growth put downward pressure on the markets. ‘There’s been a lot of development and investor activity in western Sydney,’ said Domain research analyst Eliza Owen. ‘Those are the investor markets, they’re the big rental markets, and we’re still somewhat in that overhang period where a lot of people bought investment properties, and there wasn’t necessarily the tenants to fill them.'”

“‘There are apartments in Penrith and St Marys where no one will show up for weeks at a time,’ property manager Tom Turner said, with many properties averaging just one person per open home. ‘There’s not just competition [from properties] within your suburb, but competition with the better version of your suburb,’ he said.”

“‘I had one landlord [Monday] who was adamant she wanted a rent increase … she has got some mortgage stress and needs to recover repayments,sai property manager Lisa Wallace said.”

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This Post Has 87 Comments

  1. This is the first post I’ve done at over 30,000 feet! Flying into Dallas. I’m not sure what kind of internet I’ll have the next 5 days.

    1. not sure if you are there for a personal trip, or for research. If for research, please consider visiting Plano/Frisco etc. – i was totally fooled by Toyota, Liberty Mutual and Chase moving in – but i think that REIT overbuilt even for the amount of jobs coming in.

  3. Hoping yer travels are for positive reasons Mr. Ben!

    Perhaps this is x1 rea$on Mr. banker$ feedlot is always mostly full of ca$h producing supplier$!

    Americans spend 7,000% more time watching TV than they do on their finances

    MarketWatch |Published: Oct 18, 2019

    We won’t keep up with the Kardas$hians if we’re too busy watching ‘Keeping Up With The Kardashian$,’

    Watching TV is a lot more fun than going through your bank statements.

    But only one of them is going to help you reach your financial goals and retire on time. And it isn’t watching “Keeping Up With The Kardashians.”

    We spend on average about 70 times as much time a month watching TV as we do tending to our finances, a new study argues.

    The report, from financial site The Ascent — a site run by Motley Fool — crunches the numbers from the federal government’s own American Time Use Survey.

    Typical time spent a month on budgeting, financial planning and the like: One hour and 12 minutes. That’s about two minutes a day.

    1. “Perhaps this is x1 rea$on Mr. banker$ feedlot is always mostly full of ca$h producing supplier$!”

      I kindly give most of my thanks to the nation’s educational system and consider T.V. viewing as a form of continuing education.

    2. Typical time spent a month on budgeting, financial planning and the like: One hour and 12 minutes. That’s about two minutes a day.

      To be fair, ever since I started using Mint to aggregate all my personal finance stuff, a lot of everything from budgeting and tracking is completely automated. It is very easy to know where I stand at any given moment financially without a lot of work since all my spending is tracked, categorized, graphed, and trended against past behavior.

  4. Regarding … “Many home sellers in the Twin Cities are feeling a fall chill. After a robust summer, home sales across the 13-county metro are slipping, and so are price gains.”

    I was in downtown Milwaukee visiting Rockwell Automation (former Allen Bradley) this summer. Granted the area is super nice with the brew pubs and restaurants and everything. But oh my god the amount of luxury apartment complexes is amazing. There are only a certain amount of computer engineers in the area that can afford $3000-$4000K/month 2 bedroom apartments.

    1. Milwaukee? + $3000-$4000K/month 2 bedroom apartment$.

      Must bee on accounts of year.round awesome weather.

      local U.Haul rental lots are probably full with out.of.state plates

    2. Why are brew pubs nice? I’ll admit I’m trolling with this post, but I’ve also never understood it.

      Let’s say you get lucky and develop a truly unique and delicious beer recipe. You should scale up, reap the benefits of economies of scale, and sell this beer to millions. Your beer should out-compete the vast majority of other beers and be beloved throughout the land. You shouldn’t be running one little rinky-dink restaurant.

      Alternatively, why don’t restaurants concentrate on making good food and just get their beer from people who know what they are doing? Why as a consumer would I want to go to a restaurant wasting it’s time making beer? There’s a reason fine-dining and brew-pubs don’t overlap.

      Why do we have a million mediocre, bitter, over-hopped, expensive beers when an assortment of a dozen excellent, affordable ones would do?

      BEER BUBBLE??????

        1. craft beer . . . bubble

          Low barrier to entry industry driven by hopes of becoming the next Ballast Point to sell to Constellation Brands for $1B.

          1. The number of craft beer brands is staggering. At my favorite liquor store they have a whole wall dedicated to them. They’re all pricey too, as much as $9 for a single bottle.

          2. In my city their is an entire shop dedicated to selling versions of olive oil. Also, another store sells bath bombs. You could lump craft beer in with some of these artisinal chocolate brands. Sometimes when you have a lot of discretionary money, these things can survive. But when things get tight, it can get ugly.

        2. I would be interested to hear about the craft wine bubble. I thought that wine had to produced on a small scale by its nature. But I guess you could just throw millions of grapes into a giant bucket and walla…

          With beer, I’ve heard that the water is actually the key ingredient. This is what the Germans say at least. They claim this is why Warsteiner can pump out millions of gallons of tasty beer, despite just buying hops from whoever. Wine people try to say the grapes are actually important though.

          1. Wine people try to say the grapes are actually important though.

            I’m not an alcohol drinker but my wife likes Napa. I’ve tried the grape juice made from the wine grapes and it’s amazing how much sugar they have in them. Seems to me they’re being selected more for maximum sugar content than actual grape flavor. I’m sure it helps generate high alcohol percentages during fermentation. I should try making and running grape based E85 in my car :-).

          3. What I’ve been told is that grapes with too much sugar don’t make the best wine. BTW, the Central Valley produces much more wine by volume than the coast (Napa, Sonoma, etc), and yields are much higher, but the quality isn’t considered to be as good. (I have a friend who used to work for Beringer)

        1. The same URGE who recently closed in South Oceanside but are now concentrating in places like the oh so generic “Inland Empire/Temecula”? You can have all that generic corporate so called food,

      4. I think people want to try new beers, new flavors, comraderie, etc.

        The outlying areas of DC have craft breweries, craft wineries, and craft cideries. A couple are even “estate” — meaning that they grow the grapes, hops/barley, or apples on-site. It’s a very fashionable career, but it doesn’t pay much.

        1. “I think people want to try new beers, new flavors, comraderie, etc.”

          I’m not sure about camaraderie as I see so many at the coffee shops or pubs sitting alone or together but quietly browsing on their phones rather than interacting each other. Or maybe, hehe, I’m out of touch?

  5. Naturally, the banks do not accept. Even now, there are so many properties on the market, but the banks find the offers quite unacceptable.

    Well. If they own it and are paying the taxes and maintaining it and being good citizens I suppose they can do whatever they want with it. I would be frustrated if they were doing that using my money.

    1. The banks finds these offers quite “unacceptable” because:

      1. That is the market TODAY. And to accept it and clear these house off the books would dramatically lower a whole host of bank assets and loan ratios.

      2. That is what happens after a FB destroys the place or the place sat and rotted for a year before the bank “took” from the mortgagors.

      “Many banks find themselves unable to recoup their money because the properties they took from the mortgagors cannot be sold for the right price. ‘Sometimes the offers are way below the reserve prices. Naturally, the banks do not accept. Even now, there are so many properties on the market, but the banks find the offers quite unacceptable.”

      2. “Sometimes the offers are way below the reserve prices. Naturally, the banks do not accept. Even now, there are so many properties on the market, but the banks find the offers quite unacceptable“

        IOW: We aint gonna give it away!

  6. How do you do that when no one rents your place????

    ““I had one landlord [Monday] who was adamant she wanted a rent increase … she has got some mortgage stress and needs to recover repayments,sai property manager Lisa Wallace said.”

  7. OK. Lets look at the irony in this reporting.

    Some of “Sydney’s most affordable suburbs” might become even MORE affordbale. OMG!!!!!!! WTF!!!!!!!!! This is soooooooooo not right.

    Or

    It is only right and natural in that “Sydney’s most affordable suburbs” become more expensive and less affordable. Anything else would be Russian meddling.

    “Some of Sydney’s most affordable suburbs are taking the biggest hit to rental prices, as increased supply and slow wages growth put downward pressure on the markets.”

  9. “McNealy originally listed the estate, which includes a 28,000-square-foot house, for $96.8 million in June 2018. The new listing price is $54.8 million, an impressive $42 million price cut.”

    The price cut was less than 50 percent. ‘Tis a mere flesh wound!

    1. McNealy is allegedly worth $1B, a small fry by Silly Valley Tycoon standards, but still 1 billion. I wonder why he’s trying to unload it. Is he afraid that the homeless will someday show up at his gates with torches and pitchforks?

    2. Interestingly, Redfin estimates the price to be $14.5 million, which is ANOTHER $40 million price cut from the reduced price! So basically, the original listing price was 7 TIMES what Redfin is estimating it to be worth. Wow!!!!

  10. Made my first contribution to Tulsi Gabbard’s campaign tonight, after she drop-kicked Crooked Hillary for smearing her as a Russian agent.

    “You, the queen of warmongers, embodiment of corruption, and personification of the rot that has sickened the Democratic Party for so long, have finally come out from behind the curtain.”

    Testify, Sister Tulsi! Could I get a ‘Hallelujah!’ in the house?!!

        2. Meh. When the moderator asked the candidates if they would support free healthcare for illegals, she raised her hand.

          1. I think the snapshot of those raised hand is going to be the defining image of the 2020 election. We haven’t seen it in the ads yet, but my guess is the repubs are keep that particular keg of powder dry.

            Dems (especially the comment sections at Washpost) are still sputtering about Trump being a liar, an -ist, an -ism, a yatzee, and a p-grabber, and his voters being uneducated.* But at the end of the day, one politician just revoked those favorable e-packet postage rates from China, and the others pledged to give freebie healthcare to illegal immigrants while citizens pay through the nose.

    4. Made my first contribution to Tulsi Gabbard’s campaign tonight, after she drop-kicked Crooked Hillary for smearing her as a Russian agent.

      It had never occurred to me to donate to a D before. Or an R either now that I think about it because they are usually rich. Interesting concept. I also loved her reply to Hillary when I heard about it.

  11. The new listing price is $54.8 million, an impressive $42 million price cut.”

    Yet oddly I’m not impressed. Keep slashin’, Scotty. You’ll catch down to the market eventually.

    1. Campbell’s would be wise to aquire maruchan. Theres a ton of hungry realtors out there that eat ramen over higher priced campbells soup. The soup is more of a delicacy for them where as the ramen is mere survival food

  14. Iconic luxury department store Barneys New York is closing all of its locations, including stores in Beverly Hills and Camarillo.

    Barneys’ Madison Avenue store in New York accounts for about one-third of the company’s revenue, The New York Times reported in July. But when the annual rent on the 275,000-square-foot store increased from $16 million to $30 million, the store found itself struggling.

    1. So that landlord’s rental income will go from 16M to zero, while he will still have to pay taxes, insurance and upkeep on it. Sounds like a savvy move to me.

  16. 11 HOURS AGO
    Jeffrey Harding

    My family moved to California in 1950, part of the post-WWII westward migration. My widowed mother, tired of Boston’s dreary winters, felt the westward pull. My eldest brother, a WWII Navy veteran, had heard good things about San Diego from sailors who had been stationed there during the war. So, California, here we come.

    I would like to think those were the golden years, at least for us. California was new, bright, warm, and full of promise. The East was old and cold. And San Diego was thriving. Defense and aerospace jobs were plentiful. Land was cheap, homes were cheap. A building boom met the housing needs for optimistic migrants. You could get things done in California.

    It’s not that California anymore. We are overregulated and overtaxed and people aren’t so optimistic. People want to leave.

    https://mises.org/wire/late-great-state-california

    1. I couldn’t stand it any longer in 1995. I can’t begin to imagine what it must be like to live there now.

        1. More Californians are considering fleeing the state as they blame sky-high costs, survey finds
          Published Wed, Feb 13 2019 8:00 AM EST
          Updated Thu, Feb 14 2019 4:27 PM EST
          Jeff Daniels
          Key Points
          – A growing number of Californians are contemplating moving from the state due to the sky-high cost of living, with sentiment highest among millennials, according to a new study.
          – Fifty-three percent say they are considering fleeing, representing a jump over the 49 percent a year ago.
          – The poll conducted by Edelman Intelligence found the chief reason for dissatisfaction isn’t wildfires or earthquakes but housing cost and availability.
          …

      2. I landed the year after you left. Although I never set foot here before 1996, I suspect the land and scenery are much the same as during your time here. However, the cumulative effects of a never ending influx of new residents coupled with decades of entrenched Democratic governance and abysmally inadequate housing and transportation policy have taken their toll.

        1. Opinion
          Californians chased out of state by bad public policy
          (AP Photo/Paul Sakuma)
          By Steven Greenhut | Orange County Register
          PUBLISHED: October 4, 2019 at 5:00 pm | UPDATED: October 4, 2019 at 5:00 pm
          …
          Like others from the Midwest and East, I had long dreamed of the Golden State. By then, of course, California already ceased to be the magnet it was in earlier decades. The number of Americans who left California for other states had surpassed those from other states who moved here. Immigration rates and birth rates were still growing, however, which propelled our population from 30 million in 1990 to nearly 40 million now.

          “Nearly” is the key word. California has been inching toward the 40 million mark for some time but hasn’t reached it. Its growth rate last year of 0.47 percent is the slowest in recorded history. The exodus to other states has accelerated. International immigration has slowed. Even births are lower this year than last year. We’re a long way from the Gold Rush, when fortune-seekers from around the world tripled its population in a flash.

          Based on the latest U.S. Census data, domestic out-migration to places such as Texas, Arizona and Oregon has outstripped domestic in-migration for eight years in a row. Anecdotal stories abound. One friend, who we met shortly after moving to Fullerton, is now a successful Texas realtor who specializes in relocating Californians to Dallas.
          …

    2. Personal Finance
      Published 11 days ago
      California tax hike caused ‘significant’ out-migration of top-bracket millionaire residents, study shows
      By Brittany De Lea FOX Business

      It’s not just federal tax changes that drive residents from high- to low-income tax states – turns out hiking statewide taxes on the wealthy drives them out in droves, too.

      A new study published on Monday showed that when California raised its income tax rates it caused a “substantial one-time out-migration response” among wealthy residents, who left for lower-tax destinations.
      …

      1. Last paragraph of the article is something I’ve been saying for a while: tax property, not income. It can’t move. You could even do a progressive property tax. CA would be just fine if they did something like that.

        “But California’s political system is making it hard to respond to these pressures. Thanks to a 1978 ballot initiative called Proposition 13, California cities have stringent limits on raising revenue from local property taxes. That forces the state to provide many services, financing them with hefty income taxes. Those are inherently more unreliable than property taxes, since wealthy taxpayers can move away (while property can’t move), and since California’s income taxes fluctuate a lot because they depend so much on the profits residents earn on volatile stock prices.”

        1. “That forces the state to provide many services, financing them with hefty income taxes.”

          Can’t they live without some of these services, or are they buying votes?

    4. We are overregulated and overtaxed and people aren’t so optimistic. People want to leave.

      The people who voted directly for the propositions or politicians who increased taxes and regulation?

      Take a look in the mirror, folks. Wherever you go, your problems will follow.

  23. San Francisco Chronicle
    Cheap, convenient and almost gone: Uber, DoorDash
    and …
    Remember all of those IPOs that were supposed to bring a tsunami of tech wealth to wipe out what’s left of the Bay Area’s housing, lifestyle and culture this year?
    16 hours ago

    1. How could i forget! Every UHS handing out cookies at open houses spewed that garbage in there robot programmed tone. Havent heard much recently but my neighbor UHS insists its different here because of the proximity to sillycon valley. IPO bubble is imploding, housing bubble is leaking air, debt is out if control, stawk market manipulation is being seen more and more by the sheeple, commodities are getting more expensive, but RE always goes to the moon because realtor confirmed this. “Its different this time” happens every time over the history of downturns.

      1. Went to an open house on my block as a looky-loo with no intention of buying. The realtor started in with her confident forecast that Colorado Springs (being different and all) is expected to surpass Denver in population and shacks will go up a further 20%, at least. I listened to her spiel, then dropped my gullible sheeple act and laid out some economic data and trends of my own justifying my decision to wait until the pending bursting of the Everything Bubble before I even think about buying. Her botox perma-grin stayed fixed in place (not sure it could be otherwise) but her eyes told a different story. I don’t think most of the UHS believe the “Always Be Closing” storyline they are being fed by their corporate superiors to reel in the Greater Fools and Knife Catchers. The anxiety is palpable behind the feigned confidence.

        1. It took three weeks to sell our house in 2006. We made a good effort to make sure it showed nicely.
          A buyers’ agent who had shown the house the first week came back the third week with different clients. He said, “This place is still on the market? Why is this place still on the market?” You could hear the anxiety in his voice rising by the moment.
          A few months before, houses would sell in hours. Our place sold a few days later; soon after the market slowed and finally dropped dead. After 13 years another 5K increase in the estimate and it will be at the price they paid.

          2. I had been reading the HBB for about a year at that point, so I had very good info. I was starting to worry at the three week mark, too.
            It was interesting to see the realtor’s mask slip. As Boo said, they’re a pretty botoxed bunch. Speaking of that, we had a woman realtor arrive in a Humvee. I don’t know why no one discouraged her from choosing “Ms. Hummer” for her custom license plate.

    2. Excellent article Ben. I liked this part at the end:

      “On the one hand, it’ll be interesting to watch all of these hotshot newcomers to San Francisco who thought their lives would be fashioned around commuting in an Uber and taking regular keg breaks in their cute co-working spaces realize that they’ll have to learn how to ride Muni and set up a workspace at the public library.”

      The price for Uber/Lyft/DoorDash/GrubHub is about to get a lot more expensive. That’s when the rubber will hit the road in my opinion and we will find out if they are more like Amazon, or more like MoviePass. The clock is ticking.

      1. The price for Uber/Lyft/DoorDash/GrubHub is about to get a lot more expensive

        Good. Hopefully that means there’ll be less of their crappy drivers clogging up the roads and making a mess of traffic as they stop in the middle of a right-away, make right turns from the left-hand lane without signaling, and vice-versa.

  24. Despite the Fed’s rosy economic assessment and the corporate media’s “Everything is Awesome – Buy Moar Stawks” permabear shilling, indicators of a global economic downturn in a world saturated with un-repayable debt (heckova job, central bankers) are proliferating, with daily “worse since Lehman” indicators that the real economy, as opposed to the central bankers’ rigged markets and asset bubbles, is going into recession or already there. China’s vacant office space has hit a decade high that belies Beijing’s “all is well” official economic statistics. Brace for impact, people – the next global financial crisis is going to make 2008 look like a walk in the park.

    https://www.zerohedge.com/economics/office-vacancies-china-hit-decade-high-amid-economic-turmoil

  25. With a Brexit deal and a China trade deal in the bag, is it safe to assume that global financial turmoil is behind us, with calm waters and smooth sailing ahead?

    3. PB, in reality the China trade deal (if it happens) will have a much bigger political effect (and Wall Street effect) than it will have on trade (its trade effect will be minor).

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