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Oversupply Is Really Across The Board

A report from the New Daily in Australia. “More than a year on from the end of the property price boom and home values continue to tumble, auction clearance rates are down, and demand for mortgages has hit a four-year low. But are Sydney and Melbourne in the middle of mild downturns, or is this the beginning of a full-blown crash? Sydney buyers who got into the market a year ago will have a ‘sick-in-the guts feeling’ looking at houses and apartments at ‘mid-2016 prices,’ said Propertyology director Simon Pressley.”

“‘You’re now sitting on something worth less than what you’re paying for it, and it’s costing you roughly $30,000 a year to pay off. You’ve got to find that each and every year, no matter what the value does,’ he said.”

The Australian Financial Review. “The housing market downturn has taken a bite out of one of Australia’s biggest privately owned real estate groups, Oliver Hume, forcing the 60-year-company to put a major Brisbane site on the market after swinging to a full-year financial loss on the back of falling sales and land write-down.”

“Annual accounts for the 2018 financial year ending June 30 show the Melbourne-based project marketer, developer and fund manager slumped to loss of $2.2 million after posting a net after tax profit of almost $10 million in the prior financial year. The accounts show an $8.4 million write-down of land held for resale, a $9.3 million financial guarantee interest expense, $3.2 million of sales commission cancellations and $720,000 spent on redundancies and restructuring.”

“The dramatic fall in the company’s fortunes come as it looks to sell one of its Brisbane development sites, which has approval for 260 apartments. The project at 32 Cribb Street in Milton was held in a fund established in March 2014, with Oliver Hume settling on the 3500 square metre block for $13.7 million in June 2015.”

“Insiders told The Australian Financial Review Oliver Hume was under pressure to return money to overseas high net worth investors who pumped tens of millions of dollars into its $5 million significant investor visa (SIV) property funds management platform that bankrolled its development business. The program invested the money in new developments, and promised an annual pre-tax return of 7.5 per cent generated from project profits.”

“Over the course of the reporting period no fewer than six Oliver Hume directors resigned.”

From Better Dwelling in Canada. “Thinking of selling detached Vancouver real estate? It might be a little rough right now. Real Estate Board of Greater Vancouver reported the price of a typical home fell to $1,524,000 in October, down 1.1% from the month before. Prices are now 5.1% lower than they were last year. The city saw even greater declines, with Vancouver East down 5.5%, and Vancouver West down 9.9% from last year.”

“Detached price movements are getting worse. This is the 8th month we’ve seen prices growth decelate, and the 5.1% decline is the largest we’ve seen since June 2013. Nearly 3.9% of the declines for detached prices were over just the past 3 months. We haven’t seen the benchmark fall much more than this outside of a recession.”

“Sales of detached real estate are still falling across Greater Vancouver. REBGV reported 634 sales in October, up 26.3% from the month before. Compared to the same month last year however, sales are down 32.11%. The monthly gain is seasonally appropriate, the annual decline is not. The decline in sales is really helping to push inventory levels higher.”

The Calgary Herald in Canada. “Prices continued to fall last month for resale homes in the city as oversupply still weighs on the real estate market. Detached, apartment and attached market segments all suffered from too much supply and not enough demand in October. ‘Oversupply is really across the board,’ says chief economist Ann-Marie Lurie with Calgary Real Estate Board.”

“‘I wish I would have something new to say, but it’s been the same trend we’ve seen in Calgary for some time,’ Lurie says, adding October marks the fifth consecutive month of falling benchmark prices.”

The Red Deer Advocate in Canada. “The slowdown is province-wide. Alberta Treasury Branch said on Friday that Alberta’s house building rate has fallen to its lowest level in 10 years. ‘The tumble in housing starts likely stems from the market’s imbalance of supply and demand,’ says ATB in its report. ‘There is a massive inventory of unsold homes on the market, particularly in Edmonton and Calgary.'”

“In Red Deer, residential permit numbers continue to trail last year’s pace. Steve Bontje, chair of Building Industry and Land Developers said the city has fared better than the big centres. ‘We’re fortunate in Red Deer we don’t have some of the inventory problems that some of the bigger cities do. Edmonton and Calgary are really seeing a lot of empty spec product on the market,’ he said.”

From Discover Moosejaw in Canada. “One of the areas of concern is the current housing inventory and months of inventory. Currently in the city, it sits at 7.5. That’s up from 6.2 last year. Including the region, it sits higher at 10.9. Rob Reynar, Manager of Operations and Member Services with Regina Realtors warns that no demand soaking up that product can lead to price reductions, which we are currently seeing.”

“The MLS® Home Price Index (HPI) reported a Residential Benchmark Price of $209,000 for Moose Jaw. That’s down $11,900 after being at $220,900 for two months straight.”

“‘After many months of prices sort of hanging in there and really flat-lining, we definitely are seeing prices drop. And I think we were watching closely to see if that will happen,’ Reynar said. ‘The Home Price Index did decline this month, and it’s really based on that high inventory and low demand.'”

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This Post Has 34 Comments

  1. ‘I wish I would have something new to say, but it’s been the same trend we’ve seen in Calgary for some time’

    Listen up California, Dallas, Denver and Seattle, etc. Ann-Marie has been getting her ass kicked for four years and counting! And that’s what you have coming.

    1. “Detached, apartment and attached market segments all suffered from too much supply and not enough demand in October. ‘Oversupply is really across the board,’ says chief economist Ann-Marie Lurie…”

      Did you ever notice how demand has a way of vanishing when prices are falling, especially when prices have attained a level where very few individuals who just need a place to live can afford to buy?

  2. ‘Rob Reynar…with Regina Realtors warns that no demand soaking up that product can lead to price reductions, which we are currently seeing. The MLS® Home Price Index (HPI) reported a Residential Benchmark Price of $209,000 for Moose Jaw. That’s down $11,900 after being at $220,900 for two months straight’

    So I guess those $500,000 mobile shacks are long gone?

    1. This is what happens when Feintein’s husband wins the contract under ‘questionable’ circumstances (and that’s being nice). I am Jack’s complete lack of surprise.

    2. “…though the entire design and route of the system has not been selected.”

      Gotta love that they’ve already started building this in the Central Valley, yet STILL haven’t settled on the route for some sections. Once the final route is announced, I’m sure there will be another flurry of NIMBY lawsuits.

      “The project has undergone a series of cost increases over the last decade from an original estimate of $33 billion to the current $77 billion.”

      To the moon, Alice!

      “…even at the current cost estimate, the project is about $50 billion short of what it needs for completion.”

      Well if we get another Dem prez, I’m sure Cali will get a grant to cover it. /sarc More likely, Cali will end up with a “bullet train to nowhere” running between two Central Valley points.

      This boondoggle is pure comedy gold. But only because I no longer live in Cali.

  5. ‘Sydney buyers who got into the market a year ago will have a ‘sick-in-the guts feeling’ looking at houses and apartments at ‘mid-2016 prices’…‘You’re now sitting on something worth less than what you’re paying for it, and it’s costing you roughly $30,000 a year to pay off. You’ve got to find that each and every year, no matter what the value does’

    I think Simon’s onto something here!

    1. 14390 Douglass Ln
      Saratoga, CA 95070
      5 beds 6 baths 7,200 sqft
      Foreclosed
      Foreclosure Estimate: $5,582,824

      Date Event Price $/sqft Source
      10/18/2018 Listing removed $4,600,000 — $639 Sereno Group
      7/20/2018 Listed for sale $4,600,000 +24.2% $639 Sereno Group
      5/23/2017 Sold $3,705,000 -30.9% $515 Public Record
      5/18/2017 Listing removed $5,360,570 +9.4% $745 Auction.com
      3/17/2017 Listed for sale — — — Auction.com
      3/16/2016 Listing removed $4,900,000 — $681 Alain Pinel Realtors – Saratoga
      1/15/2016 Price change $4,900,000 -12.5% $681 Alain Pinel Realtors – Saratoga
      9/13/2015 Listed for sale $5,600,000 +13.6% $778 Alain Pinel Realtors – Saratoga
      4/26/2015 Listing removed $4,930,000 — $685 Alain Pinel Saratoga
      2/6/2015 Price change $4,930,000 +1% $685 Alain Pinel Realtors
      11/16/2014 Listed for sale $4,880,000 +22% $678 Alain Pinel Realtors
      12/24/2008 Listing removed $4,000,000 — $556 NRT California
      11/27/2008 Listed for sale $4,000,000 +71.7% $556 NRT California
      8/5/1999 Sold $2,330,000 — $324 Public Record

      https://www.zillow.com/homedetails/14390-Douglass-Ln-Saratoga-CA-95070/19658604_zpid/

      2. Interesting! Thanks for the information. I didn’t know that Redfin doesn’t have the bankruptcy information.

      3. “Foreclosure Estimate: $5,582,824

        Date Event Price $/sqft Source
        10/18/2018 Listing removed $4,600,000”

        Can anyone who understands please explain what the ‘foreclosure estimate’ means and how it could be nearly $1 million higher than the list price for which the house wouldn’t sell?

        1. That’s what the bank estimates you should pay them for there loss. More of a “dream” price they want for there liability…

    2. by the looks of the very well maintained yard /sarc, i would assume this was used as a chinese specuvestors piggy bank for corrupt money laundering. so many of these through out the bay area its crazy. only thing not crazy about it is that these people that payed cash for all these homes found other FBs to bail them out. guess there is still greater fools hanging around waiting to buy at a margin discount from the peak thinking they can flip and make 2017 profits

    1. “Why auctions makes the housing market downturn worse”

      That’s BS. By providing a mechanism for efficient price discovery, auctions help speed the transition through the denial phase of housing bubble collapse, thereby reducing the duration of the painful market adjustment process.

      1. mechanism for efficient price discovery

        Any mechanism for improving price discovery is always seen as a terrible thing by those holding an asset that they hope to unload to a greater fool prior to price discovery.

  9. Markets
    Gundlach Says Low Foreign Demand May Help Boost Treasury Yields
    By Emily Barrett
    November 13, 2018, 3:28 PM PST
    Jeffrey Gundlach
    Photographer: Andrew Harrer/Bloomberg

    A mismatch between supply and demand in the Treasury market is likely to keep driving yields higher, DoubleLine Capital’s Jeffrey Gundlach said Tuesday on an investor webcast.

    Foreign holdings of U.S. government securities have been “shrinking pretty substantially,” the bond manager said, in part because the cost of hedging is making the trade unattractive. Domestic buyers have been stepping in to fill the gap, according to Gundlach, but he said they will keep doing so only if yields can outpace inflation.
    …

    1. “A mismatch between supply and demand…”

      Do you notice how prevalent supply and demand mismatches seem to be these days across financial markets of all stripes? There generally doesn’t seem to be enough demand out there to support price levels that were headed skyward just a short time ago.

    1. Baltic Dry Index climbs to 1703, up 27 points
      in Dry Bulk Market 30/07/2018

      Today, Monday, July 30 2018, the Baltic Dry Index climbed by 27 points, reaching 1703 points.

      Baltic Dry Index is compiled by the London-based Baltic Exchange and covers prices for transported cargo such as coal, grain and iron ore. The index is based on a daily survey of agents all over the world. Baltic Dry hit a temporary peak on May 20, 2008, when the index hit 11,793. The lowest level ever reached was on Wednesday the 10th of February 2016, when the index dropped to 290 points.

      Source: Hellenic Shipping News Worldwide

    2. CR8R

      Baltic Dry Index falls to 1064, down 61 points
      in Dry Bulk Market 13/11/2018

      Today, Tuesday, November 13 2018, the Baltic Dry Index decreased by 61 points, reaching 1064 points.

      Baltic Dry Index is compiled by the London-based Baltic Exchange and covers prices for transported cargo such as coal, grain and iron ore. The index is based on a daily survey of agents all over the world. Baltic Dry hit a temporary peak on May 20, 2008, when the index hit 11,793. The lowest level ever reached was on Wednesday the 10th of February 2016, when the index dropped to 290 points.
      Source: Hellenic Shipping News Worldwide

  12. German economy skids abruptly in third quarter
    By Nina Adam
    Published: Nov 14, 2018 2:32 a.m. ET

    FRANKFURT–Germany’s economy slammed hard on the brakes in the third quarter, as car makers struggled to adjust to a new emissions-testing protocol and tussles over trade rules undermined exports.

    Fresh data published Wednesday showed that Europe’s economic powerhouse registered its worst performance in five-and-a-half years, according to the Federal Statistical Office.

    Gross domestic product–the broadest measure of goods and services produced in an economy–shrank at a quarterly clip of 0.2% which translates to an annualized rate of minus 0.8%, according to the office. That is the lowest rate since the first quarter of 2013, falling well short of U.S. third-quarter growth of 3.5% in annualized terms.
    …

  14. (From the Australian article): “…promised an annual pre-tax return of 7.5 per cent generated from project profits.”

    Oops! Sum ting wong!

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