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Homeowners Are Now Finding It Wasn’t The Sure-Bet Investment They Thought

A report from the Wall Street Journal. “Thirty floors above the showroom of a Chinese developer, a 29-year-old woman stood on a small rooftop ledge, threatening to jump and declaring that her recent home purchase had ruined her life. Ms. Hou, who asked to be identified by only her surname, was one in a group of angry home buyers who had gathered at a real estate sales office in Tianjin, a port city about an hour from Beijing, on Saturday, demanding their money back for half-constructed apartments that had now dropped in price.”

“Price increases across the country have slowed and at least in some large cities, prices have even dropped. Some of those who have pooled their life savings to become homeowners are now finding it wasn’t the sure-bet investment they thought.”

“At the sales center at Sunac China Holdings Ltd. in Tianjin, over the sound of upbeat electronic pop music, buyers crowded around a customer service representative demanding to know why the company had substantially lowered sales prices. ‘You promised me the house price wouldn’t drop,’ one woman yelled. ‘I am bankrupt because of this home.’ Yu Xi, the customer-service representative, remained impassive, telling home buyers there was little he could do.”

“At a certain point, Ms. Hou lost patience and took the elevator up to the roof of an adjacent building. She climbed up on a ledge, perching herself about 8 feet above the rooftop itself. It was less dangerous than if she had threatened to jump down 30 floors to the ground, but police officers and other home buyers tried to coax her to climb down or at least sit. She refused to move until she could speak with the company manager.”

“‘You’re forcing me to die,’ Ms. Hou told the crowd, which included a Wall Street Journal reporter, as she stared off into the distance, her phone in her left hand.”

“The previous weekend, a protest erupted outside the developer’s showroom, one of several over falling home prices in recent weeks. On Saturday, a dozen police officers patrolled the parking lot. Sunac declined to comment.”

“Ms. Hou told The Wall Street Journal that she and her husband were moving there from the adjacent Hebei province to give their 4-year-old child better education opportunities, and had bought the Sunac apartment at a price of 1.5 million yuan, or $213,000. They needed a 60% down payment which they met by using around 100,000 yuan in savings and cobbling together the rest from relatives and online lending services.”

“The purchase stretched the couple to their limits financially. Together, they make around 8,000 yuan ($1,137) a month. ‘I need to pay 3,700 yuan for the mortgage, not to mention the money I borrowed from my relatives, ‘ said Ms. Hou, who works in sales at a company making work clothes. There is also the debt to the lending services, and she has taken several part-time jobs. ‘I can barely breathe,’ she said.”

“The government’s attempts to stop speculative property-buying long fell on deaf ears in a country used to steady price rises, and where wealth accumulation has come overwhelmingly from real-estate gains. In China, ‘housing is a financial product,’ said Zhang Dawei, an analyst based in Beijing for Hong Kong-based property agency Centaline. ‘The more prices rise, the more demand you get.'”

“In Tianjin, some of the angry home buyers sought help from local authorities, but said they were told the price drop was ‘free-market behavior.’ They said Sunac offered them only unsatisfactory remedies, including discounts on parking spots or to pay a steep fine to reverse their purchases.”

“After a few hours, Ms. Hou was pulled off the ledge by police officers. Unwilling to go home empty-handed, she pulled a comforter and slippers out of her car to spend the night in the sales center.”

This Post Has 54 Comments
  1. ‘In China, ‘housing is a financial product,’ said Zhang Dawei, an analyst based in Beijing for Hong Kong-based property agency Centaline. ‘The more prices rise, the more demand you get’

    Yeah you guys have invented a money tree. I’ve said for many years these Chinese are dumb as rocks. Remember that guy who (now in prison in China) went around NYC pointing to buildings and saying “I want that one, and that one”?

    1. We shouldn’t laugh – it’s a financial product here too.
      Housing prices go up — everyone wants to BUY!!!!
      Housing prices go down — a lot fewer people want to buy (and most of those think prices will go UP soon)

      1. Investing is all about helping people. When they are desperate to buy, you help them by selling. When they desperate to sell, you help them by buying.
        —John Templeton

      2. “Housing prices go down”…and the Federal Reserve rides in with quantitative easing to reflate them.

    2. ” …went around NYC pointing to buildings and saying “I want that one, and that one”?

      $ounds just like Michael Jack$on $hopping in Vega$. That didn’t end well.

    3. ‘The more prices rise, the more demand you get’

      That is pretty much the definition of a mania.

  2. ‘You promised me the house price wouldn’t drop,’ one woman yelled. ‘I am bankrupt because of this home.’

    Gosh, and here I thought promises from REIC touts and shills were as good as gold.

      1. Au contraire.

        “Thirty floors above the showroom of a Chinese developer, a 29-year-old woman stood on a small rooftop ledge, threatening to jump and declaring that her recent home purchase had ruined her life.”

        1. I liked your image of the over-taxed Chinese small business owner who leased space in a Mall, and she decided to “check out.” SPLAT. The shoppers just ambled along…minding their own business.

      1. Not an issue with me…. Besides… housing prices are cratering everywhere irrespective of rates.

        1. It’s scary to contemplate what will happen to housing prices when rates normalize.

          History has not dealt kindly with the aftermath of protracted periods of low risk premiums.

          — Alan Greenspan

      2. Team Zero % :

        “Lower the Fed$ Fund$ Rate$ to (0%) zero, now damn it!” : dtRumpsis, Mnuchin, Navarro, Kudlow, Ha$$ett, $helton, & Ro$$ Inc. llc

      3. If we had ten percent inflation, those rates would be normal. Except for a brief period under Volker when the country was fighting high inflation which started under Carter, no one living in the US has experienced those rates in the US.

          1. Revisionist history is an exercise in futility when the internet is available to fact check the bullsh!t.

            The Cato Institute
            August 16, 2011
            Commentary
            Remembering Nixon’s Wage and Price Controls
            By Gene Healy
            This article appeared in The DC Examiner on August 16, 2011.

            Remember “TARP,” “Too Big to Fail,” “Government Motors,” “pay czar,” the buzzwords of the Bush-Obama era? They reflected a disturbing trend toward presidential interference in economic life.

            Forty years ago this week, President Richard Nixon showed us just how dangerous unchecked executive power can be to the free-enterprise system.

            On Aug. 15, 1971, in a nationally televised address, Nixon announced, “I am today ordering a freeze on all prices and wages throughout the United States.”

            After a 90-day freeze, increases would have to be approved by a “Pay Board” and a “Price Commission,” with an eye toward eventually lifting controls — conveniently, after the 1972 election.

            Putting the U.S. economy “into a permanent straitjacket would … stifle the expansion of our free enterprise system,” Nixon said. As President George W. Bush put it in 2008, sometimes you have to “abandon free-market principles to save the free-market system.”

            There was no national emergency in the summer of ’71: unemployment stood at 6 percent, inflation only a point higher than it is now. Yet, after Nixon’s announcement, the markets rallied, the press swooned, and, even though his speech pre-empted the popular Western Bonanza, the people loved it, too — 75 percent backed the plan in polls.

            As Nobel Prize-winning economist Milton Friedman correctly predicted, however, Nixon’s gambit ended “in utter failure and the emergence into the open of the suppressed inflation.” The people would pay the price — but not until after he’d coasted to a landslide re-election in 1972 over Democratic Sen. George McGovern.

    1. All this with mortgage rates in the 3’s. Cant wait to see what happens when we get back to nose bleed 4% range. Just being sarcastic. But to think anything above 5% would create the biggest crash ever and that’s still cheap.

  3. “After a few hours, Ms. Hou was pulled off the ledge by police officers. Unwilling to go home empty-handed, she pulled a comforter and slippers out of her car to spend the night in the sales center.”

    I suspect Ms. Hou will shortly become an involuntary organ donor for her window-ledge antics that belied China’s “All is Well!” official narrative.

  4. Knot running, ju$t walking’ away.

    Nov 5 2019 open: Dow 27,462.11
    + 3.02
    ___________
    27,465.13 = $ell

    Bye bye Wall $treet! (No long inve$ted in equite$) all position$ $old, eyes just an American $pectator.

    ( Well eye did keep x10 $hares of BRK.B, taking my 17 year old to Omaha in 2020, All.Aboard.Amtrak! )

      1. How do you know when to walk away? I sold all my equities a couple of months ago, and now Mr Market is hitting new highs on the back of the Fed’s not-QE repo market patch.

        Seems like trees really do grow to the sky!

        1. Eye used to have a rubber band gun as a kid. You learn to modulate yer enthu$iasm once you’ve $tretched a few to far.

          Euphoria can $urprise one $udden like! $nap!!!

    1. Don’t buy things you cannot afford.

      A hard lesson to learn, especially in the land of suspended reality.

      1. “…Don’t buy things you cannot afford…”

        To many people buying things they don’t need, with money they don’t have, to impress people they don’t know.

        Seems irrational manias transcend all borders.

  5. “Seem$ irrational mania$ tran$cend all border$.”

    Zero % Fed$ Fund$ Rate$ = Death $piral for over.priced $helter.$hack$ di$guised as hou$ing.

    Definition of enabler. : one that enables another to achieve an end especially: one who enables another to per$ist in $elf-de$tructive behavior (such as substance abu$e & overpriced $helter.$hack$) by providing excuse$ or by making it possible to avoid the con$equences of such behavior$.

  6. With gold plunging and oil strong it appears a lot of people are anticipating an imminent trade deal between the US and China.

    1. There won’t be a deal. China requires mercantilism to maintain their system and Trump won’t allow that to continue. The charade is up.

      Their overcapacity is going to bite them in the ass bigly.

      1. Whatever actually transpires, Trump’s people will claim a deal was struck and will wrap a ribbon on it.

    2. “With gold plunging and oil strong”

      F – 350s don’t run on gold.

      ‘How Dare You!’

      Motor Fuels
      U.S. gasoline demand in 2018 decreased slightly to 9.31 million barrels/day, approximately 390 million gallons/day, or about 39 million fill-ups/day (based on a 10-gallon fill-up). (Source: U.S. Energy Information Administration, Short-Term Energy Outlook, February 2019)

      U.S. gasoline demand has been at record or near-record levels each of the past four years and is expected to increase 0.4% in 2019 to reach record demand of 9.35 million barrels/day and 9.36 million barrels/day in 2020. (Source: U.S. Energy Information Administration, Short-Term Energy Outlook, February 2019)

      https://www.convenience.org/Topics/Fuels/The-US-Petroleum-Industry-Statistics-Definitions

  7. They should be running on NG but Musk convinced most people that electric was the way. Thus despite NG selling for the equivalent of $18 a barrel oil, Americans really cannot take advantage of it. Meanwhile EV’s have a two percent market share and sales in this country are dropping. The money spent to prop up electric could have built a lot of fueling stations and NG is better for the environment. T Boone Pickens was right.

  8. “… as she stared off into the distance, her phone in her left hand”

    Was she streaming her tantrum live on the internet? And did she stamp her feet?

  9. New Las Vegas stats for October (report dated November):
    ninedots.net/2019/11/04/greater-las-vegas-real-estate-market-update-november-2019/
    October 2019 SFR closings were up 5.0% from last month and up 7.4% up from October 2018. The overall residential resale market (including residential, high rise, and multi-family sales) continues to improve this month and is now only 3.3% off the 2018 numbers. We are just shy of 36,000 resales closings year-to-date and on a pace to close between 42,000 and 43,000 resale units this year. Downward price pressures in this market have held year to date appreciation of Single Family Residential home to 5.0%. So – despite challenges with lending, appraisals and affordability issues, the Las Vegas real estate market is rebounding from a poor start to 2019 and is looking to finish stronger than we might have expected. We are now only 3.3% behind 2018 year-to-date.
    SFR inventory dropped to 2.7 months overall due to an increase in closings and a sharp drop in listings taken. Only 4,589 residential listings were taken in October compared to 5,165 listings taken in September. Again, there is a wide variance from community to community – ranging from 2 to 1 months of inventory – depending upon the specific community. The level of over pricing The SFR Over Pricing Index remains at 65% with 30% of all inventory having been on the market for more than 90 days without an offer.
    The median closed sales price of an SFR fell 1% from $310,000 to $307,000. Similarly, the average closed sales price of an SFR decreased 1.5% from $361,913 to $356,418.

    There’s a mixed message for ya.

    1. a mixed message

      Closings are up while being down.

      Prices are appreciating while falling.

      Unsortable.

    1. “The Colorado Department of Public Health and Environment requests those living in the Denver-Boulder metro area to limit driving when possible. Indoor burning restrictions are also in effect until at least 4 pm on Tuesday.”

      Indoor burning restrictions on logs or weed?

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