thehousingbubble@gmail.com
Blog

Some Investors Are Holding On By The Skin Of Their Teeth

A report from the Toronto Sun in Canada. “For the first time in a very long while, you’re hearing talk of a return to a ‘balanced market’ in which there is sufficient supply to meet demand. This isn’t something that you’re broadly seeing yet in the freehold market, though there are certainly some great houses selling for less than one would think for no discernible reason, but it’s plainly evident that the condo market has flipped. There is so much supply that it’s hard to even keep up with the flood of new listings. Lofts and condos that would have sold in a bidding war just weeks ago are now languishing on the market with only a handful of showings.”

“To see if the widely anticipated ‘mortgage cliff’ that economists warned us about would really come to pass once the payment vacations and deferral programs ended. At that point, there would surely be a rise in distress sales. Three weeks into September, it seems safe to say that there are some changes afoot. As my colleague put it, ‘the tectonic plates are shifting and you can feel it.'”

From The Guardian in the UK. “Private rents in some parts of London have tumbled by up to 20% as tenants quit the capital, the number of international students plummets and companies put relocation plans on hold. A glut of rental properties on the market means many landlords have had to slash rents in order to attract tenants. And the phenomenon is not restricted to London. Data released by estate agent Hamptons this month showed that demand from people looking to rent in city locations across Britain is down 23%.”

“Other factors helping to push down rents are corporate relocations being put on hold in the wake of the pandemic, and Airbnb investors, starved of tourists, deciding to put their flats on to the longer-term rental market.”

The New York Times on Ireland. “The coronavirus has sent a chill through Ireland’s once-frenzied housing market, particularly Airbnb listings, which have been hit by a collapse in tourism. That drop, along with an exodus of people from overseas leaving Dublin because of the pandemic, has created a surge in available rental properties in the Irish capital. In a city where lines to view rental properties have regularly trailed around the block, the new tenants could hardly believe their luck.”

“When Aoife Brannigan, 25, and her partner, Shaun Gribben, 25, began their search in earnest at the start of the year, he said, ‘I remember every day I was given around 60 properties — and once this kicked in, it literally doubled.'”

From Reuters. “Before the coronavirus pandemic hit Russia, pensioner Elena rented out her one-bedroom apartment in the Moscow suburbs to help make ends meet. The 18,000-rouble monthly rent, nearly $240 at the current exchange rate, provided her with almost as much income as her retirement benefits. But when restrictions to curb COVID-19 started taking a toll on the economy, Elena’s tenants suffered a drop in income and asked her to reduce the rent to 10,000 roubles ($132). In June, they moved out and went back to their hometown outside Moscow.”

“‘We’ve lowered the price to 16,000 roubles, we’ve been publishing the ad for three months and still can’t let this flat,’ said Elena, who is 56. ‘Potential tenants say it is still too pricey even though that’s the average price. Demand has dropped, we don’t get many calls.'”

“Like many Russians, landlords and real estate agents are finding it hard to make financial plans. ‘Many clients of mine lost their tenants after the quarantine measures: They just fled home and never came back. But those landlords who cut prices by 20-30% compared with early this year have found new tenants again,’ said 42-year-old estate agent Tatiana Shotova from Moscow.”

From Domain News in Australia. “The pain is just beginning for Melbourne’s inner-city apartment investors amid the pandemic, experts warn. The closure of international borders in March saw demand for CBD apartments drop significantly, as overseas students, new migrants and holiday makers stopped flying in. Ongoing COVID-19-related lockdowns have seen Melbourne’s property market effectively shut down. As mortgage holidays come to an end early next year, investors hit by job losses, lower or no rental income and the inability to get new tenants may sell up – likely adding to already high supply and putting downward pressure on prices, Charter Keck Cramer director Angie Zigomanis said.”

“‘There are probably investors out there who haven’t had a tenant in months,’ Mr Zigomanis said. ‘Maybe some are holding on by the skin of their teeth.'”

From Stuff New Zealand. “Harry Pearson has built up a portfolio of five properties in the Nelson region over the last 12 years, which include his own home. But property investment is ‘not a free-ride’ short-term money-maker, he said. His cashflow ‘flat lines or negatives,’ he said, having to top up the mortgages. He said, to break it down, spending $600,000 on a three-bedroom house with a three per cent interest rate would cost about $350 a week in interest only. ‘Add rates, insurance, maintenance, legal fees and property management; the total cost per week to own it is about $580. If you’ve got tenants paying less than $600, you’re not going anywhere.'”

“‘I’ve generally found that the only real upside of property investment is the capital gain, if it wasn’t for that it wouldn’t be worth doing.'”

Related Posts
This Post Has 102 Comments

  1. ‘His cashflow ‘flat lines or negatives,’ he said, having to top up the mortgages’

    It’s amazing how many of these idiots are out there. And central banks can’t see that negative cash flow rentals are a huge sign of a mania?

  2. ‘There is so much supply that it’s hard to even keep up with the flood of new listings. Lofts and condos that would have sold in a bidding war just weeks ago are now languishing on the market with only a handful of showings’

    ‘As my colleague put it, ‘the tectonic plates are shifting and you can feel it’

    Despite the REIC’s reckless FOMO campaign, this won’t hurt too bad will it? A Toronto shack or airbox costs what, 20 or 30 thousand Canadia Pesos?

    1. I’m actually seeing this is Boise within the last week. Anything under $300,000 was flying off the shelf. Now not so much.

    2. Washington Post has a article describing how housing is flying off the shelves in Woodstock and Saugerties. Refugees from NY. Bye bye small town atmosphere.

      1. The isolated rural town of Tekoa, WA is a popular hang gliding spot due to its easy access mountain road and nearby airfield with wind direction equipment. Now look at the real estate prices…$70k for a single wide, $165k for a small detached house, etc., completed detached from economic reality.

        1. $70k for a single wide, $165k for a small detached house, etc., completed detached from economic reality.

          Is that all? I’ve seen them going for up to $250k in some areas.

      2. As a kid our family spent the summer in Saugerties (‘60s). We’d always rent a bungalow in Rockaway Beach (fun) every year and my mother thought it would be nice for a change. Very pretty but two weeks in and my brother and I couldn’t wait to go home. One good thing was the ton of old Reader’s Digests the owner had there. I read every one. Oh, and our cat got run over. Good times.

        1. “Oh, and our cat got run over.”

          Yeah, cats are territorial. I almost lost mine in the desert out by Edwards AFB; found her about 1/4-mi from the campsite. She easily could’ve been a coyote’s meal.

          1. I haven’t seen one lately but coyotes do roam the streets of our little neighborhood even in the daytime and this is central Las Vegas.

  3. ‘We’ve lowered the price to 16,000 roubles, we’ve been publishing the ad for three months and still can’t let this flat,’ said Elena, who is 56. ‘Potential tenants say it is still too pricey even though that’s the average price. Demand has dropped, we don’t get many calls’

    Have you tried foot rubs Elena? With a smile?

  4. ‘I remember every day I was given around 60 properties — and once this kicked in, it literally doubled’

    Wa happened to my shortage Planet Earth?

    1. It got filled in by new inventory that came online in the past 18 months. More opened up when singles moved back home due to COVID.

  6. There is so much supply that it’s hard to even keep up with the flood of new listings.

    Hmm, I believe we non-REIC shills refer to this as “cratering.”

  7. “Private rents in some parts of London have tumbled by up to 20% as tenants quit the capital, the number of international students plummets and companies put relocation plans on hold.

    Rents are tumbling but the monthly mortgage and carrying costs stay the same?

    Oh dear….

  8. “‘We’ve lowered the price to 16,000 roubles, we’ve been publishing the ad for three months and still can’t let this flat,’ said Elena, who is 56. ‘Potential tenants say it is still too pricey even though that’s the average price. Demand has dropped, we don’t get many calls.’”

    There’s only one way to stimulate demand, Elena. You’re going to be needing some sawing and slashing implements.

  9. But those landlords who cut prices by 20-30% compared with early this year have found new tenants again,’ said 42-year-old estate agent Tatiana Shotova from Moscow.”

    Wha? You mean free-market principles work even in a former Commie country like Russia? Learn something, Democrats and greedheads.

  10. “‘I’ve generally found that the only real upside of property investment is the capital gain, if it wasn’t for that it wouldn’t be worth doing.’”

    Um…but what happens when the value of your property starts plummeting? No one is gonna believe those “Excellent investment opportunity!” pitches when every other shack has a for sale sign.

    1. At the very least Joshua James King needs gelding before being released back into society. How will Andrea Puerta vote?

    2. “Moment man, 25, viciously assaults lone female rider, 29, in unprovoked attack on Miami metro where he punched her more than 20 times, kicked her and slammed her head,’before beating two more men that same day’

      So he was mostly peaceful that day.

  15. And yet, the NZ bubble is completely off the chain in a chimp-on-meth-driving-a-mack-truck kind of way. We’re talking a million for rotting shacks in gangland when the average household income is about $80,000, and everything else from food to electricity is inflated. No idea where all this money is coming from, other than QE and recklessness. Hope it’s an extinction burst, because this is going to absolutely destroy us in the long term.

      1. Kind of, but there are loopholes. Real estate has also been brought into the anti money-laundering regime, which makes a little difference, but lots of fraud, laundering and buying via residents, companies and trusts. Central bank panic measures and total public mania have a lot to do with it. NZ boomers learned the wrong lesson from the 1987 crash and have never moved on from it. Terrified of sharemarket, but have gone on to be completely reckless and greedy in another bubble. People who just want somewhere to live and plug in the fridge have been completely eliminated from the market, so a lot of this is speculators leveraging on their portfolios and there are interest-only mortgages galore. What could possibly go wrong.

    1. Court Filing: COVID-19 Outbreak At San Diego Jail Due To Careless Handling Of Infected Inmate
      Monday, September 21, 2020
      By Max Rivlin-Nadler
      Photo by Andi Dukleth
      Above: The Metropolitan Correctional Complex (MCC), site of one of the largest COVID-19 outbreaks in the federal prison system, on Sept. 21, 2020.
      …
      In a motion filed Monday, Lechman said that her other client, Eric Selio, was taken to a local hospital for a routine medical procedure, even after the hospital told MCC the procedure could be done in its own medical unit. According to the filing, Selio contracted COVID-19 while at the hospital on Aug. 18 and then brought it back to MCC.
      …
      “He was taken back and he was just mixed with his floor as if he had never left the facility,” Lechman said. “As far as I know, no safety precautions were taken.”

      While Selio remains asymptomatic, Cruz, who contracted the virus shortly after Selio’s return, is dying.
      …

      1. Luckily there are great choices in Poway over a wide range of quality and prices. I would take my time, however. If this goes the way of the relatively mild 2007-2009 financial crisis, Poway foreclosure homes will soon be selling for a song on the courthouse steps.

  19. One slightly rough day for Megabank, Inc share prices, thanks to the emerging money laundering scandal, and the FIRE sector’s MSM mouthpieces are already talking up the prospect of a Fed bailout.

    What are they seeing that I am missing?

    1. Market Extra
      A Monday beatdown for financials is raising grim questions on Wall Street–another Fed bailout?
      Published: Sept. 21, 2020 at 4:35 p.m. ET
      By Mark DeCambre
      Agence France-Presse/Getty
      Referenced Symbols
      SP500.40 -2.49%
      XLF -2.50%
      BRK.B -2.37%
      JPM -3.09%
      MSCI +1.96%
      ALL +0.82%

      So much for taking the baton from technology to lead the next leg of the market’s nearly unceasing march higher.

      Financials on Monday joined the party, but the wrong one if you ask bullish investors, as a decline among the banking sector’s heavyweights accelerated as a part of a more pronounced tumble for the broader market.
      …

    2. Risk asset HODLers should fear the day when denial gives way to acceptance and real economic considerations once again begin to affect stock prices.

      1. The Financial Times
        Markets Briefing Equities
        Global stocks sink on fears of new Covid lockdowns
        Worries over tightening of pandemic restrictions make for gloomy start to the week
        Steep increases in coronavirus cases across Europe have prompted worries about new lockdowns
        © Alex Kraus/Bloomberg
        Colby Smith in New York, Camilla Hodgson in London and Hudson Lockett in Hong Kong
        11 hours ago

        Global stocks suffered a heavy hit on Monday, while government bonds rallied and the US dollar snapped a losing streak in a rush of nerves about the fate of the economic recovery and a potential new set of lockdowns to tackle the coronavirus pandemic.

        The S&P 500 index dropped 1.2 per cent, the fourth down-day in a row for US stocks, which have remained under pressure since the Federal Reserve’s most recent meeting on monetary policy last week.

        Investors had expressed disappointment that the US central bank did not spell out in greater detail its plans to support the economic recovery through its bond-buying programme, which it rolled out in March amid a surge in volatility.

        Beyond the Fed, Patrick Leary, chief market strategist at Incapital, flagged the upcoming US presidential election in November as well as the stand-off between Democrats and Republicans over a new relief package. Policymakers have been unable to come to a compromise over how much new stimulus to provide, jeopardising an economic recovery that began haltingly in May.

        “There is just little reason to not take profits . . . before such a volatile thing like the election,” Mr Leary said. As well, “there are enough reasons to be concerned that there may be long-term damage to the economy”.

        Declines in Europe were even more pronounced, with Germany’s Dax dropping by 4 per cent in its worst day since June.

        Renewed virus concerns dealt a blow to bank and travel shares across markets, pulling Bank of America down 4 per cent and United Airlines down 10 per cent at one point. The UK is considering tighter lockdown restrictions as a result of rising case numbers.
        …

    3. The Wall Street Journal
      World
      Fresh Surge in U.S. Coronavirus Cases Feared, as Death Toll Nears 200,000
      U.S. continues to lead world in confirmed cases and deaths weeks before elections seen as a referendum on government’s handling of virus
      By Ted Mann and Talal Ansari
      Updated Sept. 21, 2020
      7:56 pm ET

      Deaths in the U.S. attributed to the coronavirus neared 200,000 Monday amid concerns from some health experts that the country was heading for another wave of infections.

      The U.S. continues to lead the world in both total confirmed cases and deaths, according to data compiled by Johns Hopkins University, though the country doesn’t have the highest percentage of fatal cases.

      “Two hundred thousand deaths is disturbing and frustrating because in this pandemic, deaths are preventable if we utilize appropriate public-health measures,” said Thomas Russo, head of infectious disease at Jacobs School of Medicine & Biomedical Sciences at the University of Buffalo.
      …

      1. Coronavirus tally: U.S.death toll inches closer to 200,000, as new cases rise by over 50,000 in a day
        Published: Sept. 22, 2020 at 9:06 a.m. ET
        By Tomi Kilgore

        The global tally for confirmed cases of the coronavirus that causes COVID-19 climbed to 31.36 million, according to data aggregated by Johns Hopkins University, while the death toll rose to 965,675. The U.S. continued to lead the world with 6.86 million cases and 199,890 deaths. There were 54,875 new cases reported in the U.S. and at least 428 new deaths on Monday, according to New York Times data. The new case tally compares with the daily average 41,812 over the past week. Brazil has the second highest death toll at 137,272 and third highest case tally at 4.56 million. India is third with 88,935 deaths and second with 5.56 million cases. Mexico is fourth with 73,697 deaths and seventh with 700,580 cases. The U.K. has 41,877 deaths and 401,127 cases, the highest death toll in Europe and fifth-highest in the world.
        …

        2. Asia / Population
          4.463 billion

          United States / Population
          328.2 million (2019)

          4.463 billion / 328.2 million = 13.6 times more people in Asia than the U.S.

          1. I think you need to consider the relative percentage of high-risk groups in each of those populations rather than sheer numbers.

    4. Market Extra
      Monday’s stock-market selloff sets up worst September in 18 years
      Last Updated: Sept. 21, 2020 at 2:43 p.m. ET
      First Published: Sept. 21, 2020 at 12:36 p.m. ET
      By Mark DeCambre
      Agence France-Presse/Getty
      Referenced Symbols
      SPX
      -1.15%
      DJIA
      -1.84%
      COMP
      -0.13%

      September trading is living up to its billing and then some.

      Stocks on Monday were seemingly unraveling a bullish trend that now risks thrusting U.S. equity benchmarks into a bearish tilt that could set the stage for the worst September selloff in years for the major equity gauges.
      …

      1. Eighteen years ago was 2002…which was apparently even worse for the stock market than 2008, which itself was incredibly bad.

  21. Housing: “Home Equity Rises Despite The Pandemic With Homeowners Gaining Over $620 Billion In Equity In 2Q2020” [Econintersect]. “The Home Equity Report for the second quarter of 2020 shows U.S. homeowners with mortgages (which account for roughly 63% of all properties) have seen their equity increase by 6.6% year over year. This represents a collective equity gain of $620 billion, and an average gain of $9,800 per homeowner, since the second quarter of 2019.” http://econintersect.com/pages/contributors/contributor.php?post=202009210700

  23. Given sovereign bonds with nominal yields ranging from near zero to negative, would you be better off just dumping your bonds and instead HODLing currencies, which are effectively the same as a bond with a fixed nominal yield of zero?

    2. I personally don’t understand the upside to HODLing nominally negative yielding sovereign debt, unless
      1) you believe yields will eventually go even more negative,
      2) deflation in the currency makes the real yield positive,
      3) you expect currency appreciation relative to its rivals to fully offset the negative yield, or
      4) you’re temporarily HODLing bonds as a liquid safe haven while risk assets denominated in the same currency crater.

      There may be other reasons, but these are all that come to mind before coffee.

      1. “There may be other reasons, but these are all that come to mind before coffee.”

        These are logical reasons, thus they are rendered invalid due to the current climate of financial ignorance.

        (My many thanks go out to our wonderful system of education. No Child Left Behind = The Gift that keeps on giving.)

          1. I liked Mr. Hulbert’s financial literacy quiz so much that I sent it to all my close relatives who are young enough to benefit from it.
            But maybe I only liked it because I knew all the answers (lol)!

            The one ingredient that seemed missing was anything about how the role of an activist central bank can sow asset price chaos. But I’m unconvinced that even central bankers themselves understand that…

          2. I got all six right, but I don’t understand #4. I knew the answer because I learned it but I don’t know why.

            Why do bond prices fall when interest rates rise?

          3. Why do bond prices fall when interest rates rise?

            Say you have a brand new, one year bond that pays1% interest. The day after you buy it rates go up to 2%, so that’s what new bonds pay.

            So your bond will pay you $1010 when it matures. The new bonds will pay $1020, so your bond is worth $10 less than a new one. If you tried to sell it you would have to discount it to $990.

          5. A year from now…

            No, now. Why would I pay you $1000 for your 1% bond that matures in one year when I can buy one that pays 2% for $1000? If you want me to buy yours, you will need to discount it.

          6. That said, there would be a time value of money adjustment made to the $10 difference in payout, as you would be getting it now instead of having to wait a year to get it. For a one year bond in a low interest rate environment, it would be trivial. On a 15 year bond using more historic interest rates, it would be less trivial.

          7. a time value of money adjustment made to the $10 difference in payout

            That’s is all I meant, the time value being 2%. So the “now” makes it $9.80 or something like that.

    3. You would think so. If it was my own money that is at stake then that’s what I would do, but if it was somebody else’s money that I handled – and collected a hefty fee for doing so – then I would do something else.

      A clever money manager needs to convince his clients that in these uncertain times holding cash is for suckers and, he and only he, can save him. This should be a tough sell but it isn’t because most people, when it comes to understanding money, are quite stupid.

      1. I think I could successfully make a case to the average schmuck that buying a negative yield bond surpasses holding cash because a bond can profit from a capital gain whereby cash cannot. In preparing my case I would garner as many financial buzzwords as I could so as to dazzle the mark, er, my client to the max.

        I would be sure to collect my fee UP FRONT as I assured him that his profits would be waiting for him SOMETIME IN THE FUTURE.

        1. The best part is that so long as risk assets remain historically overvalued, there is a very good chance that your clients will realize sizable capital gains, making you seem like both an honest man and a financial genius in their eyes.

          1. “… making you seem like both an honest man and a financial genius in their eyes.”

            This (erroneous) perception of his would go far in my setting him up for the next scam.

    4. I should have also mentioned that the term of such “bonds” is zero, as there are no promised future cash payments.

  24. SOPHIA HALL
    SEPTEMBER 10, 2020 – 2:52 PM

    NEW YORK (WCBS 880) — A Long Island professor has been reassigned after she was caught on video allegedly urging students not to vote for President Donald Trump during a virtual lecture.

    The 45-second video was posted Wednesday to Facebook, allegedly by the parent of a student at Suffolk County Community College.

    https://wcbs880.radio.com/articles/news/li-professor-reassigned-after-video-shows-anti-trump-lecture

  26. Be funny if half of them voted for Trump.

    Mike Bloomberg raises $16 million to allow former felons to vote in Florida

    By Michael Scherer
    September 22, 2020 at 6:01 a.m. EDT

    Former New York Mayor Mike Bloomberg and his team have raised more than $16 million to pay the court fines and fees of nearly 32,000 Black and Hispanic Florida voters with felony convictions, an effort aimed at boosting turnout for Democratic presidential candidate Joe Biden.

    https://www.washingtonpost.com/politics/mike-bloomberg-raises-16-million-to-allow-former-felons-to-vote-in-florida/2020/09/21/6dda787e-fc5a-11ea-8d05-9beaaa91c71f_story.html

    1. Comments

      7 minutes ago
      Thank you Mr. Bloomberg and Mr. James! This needs to happen in every state, and you are greatly helping with the momentum!
      Likethumb_up

      12 minutes ago
      This is why Bloomberg is a billionaire and Donnie isn’t.
      Likethumb_up2

      19 minutes ago
      Thanks, Mike. Got more millions to help out McGrath in KY?
      Likethumb_up

      55 minutes ago
      Thank you LeBron & Mike! I just donated.
      Likethumb_up4

      58 minutes ago
      Best news this week, unless the state refuses to identify how much is owed by each person being denied the right to vote.

    3. Sorry, but if anyone is “deplorable” and “uneducated,” it’s a former felon. Sure they deserve a second chance, but don’t call them saints.

        1. They don’t even hide it anymore. It’s shameful. The government is backstopping the rich and their bad bets and letting small businesses and honest people go broke. Better yet, they’re FORCING small businesses to go broke by shutting them down.

      2. How far do stocks have to fall for Washington to take action? You may not like the answer

        This is pretty rich. Bernie was labeled a socialist kook by many of these guys, yet they cry for government cheese the moment their speculative bets turn south.

  29. It seems like the markets have yet to run out of stupid people flush with Powell bux to blow on dumb investing ideas.

    1. The Wall Street Journal
      Commodities
      Easy Diamond Trading Set to Be Available for First Time
      A startup is offering a coin containing diamonds to the public that could create new demand for the precious stones if widely adopted
      By Amrith Ramkumar
      Sept. 21, 2020 5:30 am ET

      A startup aims to open the diamond market to investors through standardized coins containing a carefully selected sample of the precious stones.

      Diamond Standard Co. is scheduled to sell its new coin through a $25 million offering on Sept. 28, the company said. The aim is to create the equivalent of a standard gold bar—a new benchmark for an industry that has struggled with the challenges of valuing esoteric stones in an opaque market.

      New commodity products often struggle to attract a large number of investors. But if it is widely adopted, the coin would introduce a new way of trading diamonds and another source of demand for the stones, which have tumbled in price as jewelry consumption sags during the coronavirus pandemic. It could also enhance steps taken by industry participants to modernize in an era of clearer pricing and supply-chain traceability.

      Miners like De Beers Group and Alrosa Group typically sell rough diamonds to manufacturers, who then cut and polish the diamonds before they are certified and sold by dealers to retail customers. Many factors from size to color and clarity influence the value of a diamond, so sampling enough stones to create a benchmark requires today’s technology.
      …

Comments are closed.