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After Years Of Speculative Buying And Hoarding, Investors Have Found Themselves Stuck

It’s Friday desk clearing time for this blogger. “A moratorium on evictions is forcing small landlords on Long Island to run up credit card balances, take out loans and default on their own bills. ‘They keep extending the court date, keep extending the court date. You know what?’ said landlord Syed Hassan, who used a loan and credit card to pay his landlord $11,500. ‘I ran out of money. I have no money.'”

“Boston hotels were decimated by the coronavirus pandemic last year. Average room rates declined 40% to $168.97 in Seaport and South Boston-area ZIP codes, according to STR, while average RevPAR dipped to $55.45, a 76% drop-off from 2019. ‘I’ve never seen anything drop that much in my 16 years in Boston,’ said Michael Jorgensen, managing director of the yet-to-open Omni Boston Hotel at the Seaport. ‘Even in ‘09 and ‘10, it didn’t drop that much.'”

“For all the talk of workers fleeing pricey coastal cities such as New York and San Francisco, one of the most troubled spots in the U.S. commercial real estate market is deep in the heart of Texas. Houston ended last year with a 24% office-vacancy rate, the highest of any major U.S. city, according to Jones Lang LaSalle Inc. After years of construction to accommodate an oil boom that’s now gone bust, buildings are sitting empty, values are plunging and mortgage defaults are piling up.”

“‘Houston unfortunately has been hit by a double Black Swan event,’ said Russell Ingrum, senior partner of the Texas capital markets group at CBRE Group Inc. Two Westlake Park, a two-tower campus in the area, that was valued at $124 million in 2014 sold in December for $19.25 million — an 84% drop in value.”

“The plunge in oil prices in 2014 and again in 2020 upended a speculative construction boom in Houston, said Patrick Jankowski, senior vice president for research at the Greater Houston Partnership. ‘It was a bit of a bubble in 2014,’ Jankowski said. ‘As the energy sector let go of space, it was hard to offset that loss.'”

“Even though 2020 was not a disaster for condo owners in Metro, a record number of units are now for sale. Condos in the ghostly downtown of Vancouver have struggled the most, with the benchmark price now at $641,000, down more than 11 per cent in three years.The state of limbo is also hanging over Greater Toronto. The typical condo price, $579,000, is down $21,000 from its peak at the beginning of COVID-19. The current state of uncertainty has many Canadian condo owners stretched to their financial limit.”

“Metro Vancouver owners are paying 54 per cent more to own than rent, says real estate analyst Stephen Punwasi. Condo owners in Toronto pay an even bigger premium; 86 per cent. Since Punwasi believes condo markets in Greater Vancouver and Toronto are inflated in a worrying way, he warns the cost gap reveals ‘what kind of premiums people are paying for a lottery ticket.'”

“The chickens have come home to roost for property owners in Kiambu County. After years of speculative buying and hoarding, investors have found themselves stuck with vast parcels but no buyers to match their exaggerated prices. The speculation was driven by insurance companies, savings and credit societies (Saccos), land buying companies and other investors who now find themselves stuck with high volumes of un-serviced and subdivided plots that they cannot offload in the current property market.”

“‘We have seen the Kilimani and Kileleshwa markets move from steep price growth, in all ways a price boom, until it reached levels that buyers could no longer reach, with the roadblocks in mortgage finance and reduced liquidity from a global pandemic,’ said HassConsult Head of Development Consulting and Research Sakina Hassanali. ‘Against this backdrop, the loading of extra costs onto developers, as soaring land prices and sky high finance costs, has served in shifting developers to create smaller apartments with lower price tags to allow buyers to continue to access their products at a price that works for both buyer and seller. This shift in supply has led to suburb wide apartment repricing.'”

“Landlords of Hong Kong’s ‘Ginza-style’high-rises are struggling to retain tenants as restaurants and bars – normally their bread and butter – battle to stay afloat during the pandemic. Four such buildings were largely empty when the Post visited on Tuesday. ‘Eateries can only open until 6pm and can only do business in the lunch hour, but since many people are working from home now, lunch-hour sales have been greatly affected,’ said Jeannette Chan Wing-wai, senior director of retail at JLL in Hong Kong. ‘You can’t replace those sales with takeaways.'”

“One stat that has changed is the number of New Zealanders who now own more than one home and share their time between them. As a boomer, I look across my peers and many of them own several homes. They are not putting their unoccupied dwellings into the letting pool. They are just enjoying their nomadic lifestyle as they migrate from one residence to the next, empty-nesters building a legacy of empty homes.”

“According to the last census, there are more unoccupied dwellings in Auckland today than in London, a city with five times the population. In Queenstown nearly a third of dwellings lie unoccupied. The small return they might make in rental income is immediately brushed aside in the expectation that the property will return two to three times tax-free capital gain over the ensuing 10 years. It’s the same thinking that drives a ponzi scheme.”

“Moreover, the easily acquired wealth for this generation spills over to their offspring. Making money is simple, parents assert, passing on their wisdom. Just climb aboard the same guaranteed wealth gravy train. Even prices that fall under the hammer at auction are not a true reflection of market value. There’s a compelling argument that the banks set the prices for entry level houses by how much they’re prepared to lend a first-home buyer more anxious to secure a set of keys than worry about the quantum obligation they have just taken on.”

“There are many highly developed places in the world where house prices seldom exceed general inflation, where security of tenure can be obtained with realistic rentals that don’t require taking on gargantuan personal debt, relying on price growth to make any sense. Begs the question — are we buying to put a roof over our heads or have we become blindingly besotted with a highly leveraged gamble?”

“Of course, artificially low interest rates have encouraged the ponzi scheme. Covid may have been the trigger for the recent plunge in rates but with lots of cash sloshing around, no-one should be surprised where it might head. We’ve even allowed it to inculcate our language, using terms like ‘property ladder,’ as though this is a fail-safe form of investment, regardless of what size mortgage you take on. And while we’re on language, isn’t home ownership a misnomer? It’s the bank who is the true owner. Try missing a few repayments and see who really owns the property.”

“As long as Government is expanding the money supply, there’s a cogent argument for salting money into hard assets. But as a society we have to realise we can’t play monopoly with one of life’s essential pyramidal needs. There’s no free lunch. Government has to be bold enough to unravel the threats of runaway demand, and not just seek an answer in more housing supply. If it doesn’t act to curb demand, the risk is the market will make the call. In which case, shelter could go the way of Dutch tulips and all ponzi schemes.”

Related Posts

If Home Buying Were Honest

https://www.youtube.com/watch?v=xWqiE5GY4LI https://www.youtube.com/watch?v=mgODew-Iwog https://www.youtube.com/watch?v=Y-i7cawhw8s

This Post Has 82 Comments

  1. FYI I am driving most of the day and will be traveling on business this weekend. Moderation will be slower as a result.

  2. ‘After years of construction to accommodate an oil boom that’s now gone bust, buildings are sitting empty, values are plunging and mortgage defaults are piling up…‘Houston unfortunately has been hit by a double Black Swan event’

    But UHS are saying red-hotcakes.

    3. “‘Houston unfortunately has been hit by a double Black Swan event,’

      Bubbles and rampant speculation are not black swans. The term has been so overused and distorted it’s lost it’s meaning. A black swan is an unpredictable event that is normally not expected of a situation. Oil booms/busts and RE boom/busts have been occurring forever, Russell.

      1. lost it’s meaning

        The word still means the same thing. It’s the “reporter” that has lost his meaning.

  3. ‘Metro Vancouver owners are paying 54 per cent more to own than rent, says real estate analyst Stephen Punwasi. Condo owners in Toronto pay an even bigger premium; 86 per cent. he warns the cost gap reveals ‘what kind of premiums people are paying for a lottery ticket’

    No biggie, what does a Canadia lottery ticket cost, a few pesos?

    1. Housing as a lottery due to insane governmental cheap and easy monetary policy.

      Younger socialist voting marxists can’t understand that renting used to be more expensive than renting at one time…

      As housing was cheap and had risks.

  4. ‘There’s a compelling argument that the banks set the prices for entry level houses by how much they’re prepared to lend’

    Cut off the guberment loan guarantee, crater. Think about this the next time you hear somebody going on about lack of affordable shacks.

    1. “‘There’s a compelling argument that the banks set the prices for entry level houses by how much they’re prepared to lend’”.

      Buffett said something about combining ignorance and borrowed money will produce interesting results.

      Interesting results = Higher prices. Higher prices magically creates wealth. This magically created wealth can support a seventy-percent consumer-based economy.

      Cutting to the chase: Combining ignorance and borrowed money supports our stupid consumer-based economy.

      Back to this observation and revelation: “There’s a compelling argument that the banks set the prices for entry level houses by how much they’re prepared to lend”. A nation populated by totally dumbed-down down ignorant pukes will and do look at this strange phenomenon as a wondrous and miraculous thing that should be extended through time all the way to the end of eternity.

      I personally think it to be a shame for such ignorance and stupidity to not be exploited to the max which is why I get to hang out at the beach every day while enjoying being supported by those pukes who are willing to toil for decades at jobs the hate so as to send to me each and every month huge chunks of their paychecks. Their borrowing “creates” wealth and my spending distributes it. They work, I reap.

      Like it, love it, want more of it. My sincere thanks goes out to our public school system and such ignorance-generating policies as No Child Left Behind.

      Bahahahahahahahahahahahahahahahaha.

    2. “Affordable lending policy” = rig the game so homes are only affordable to the masses through the provision of government-provided, federally guaranteed loans.

    3. “There’s a compelling argument that the banks set the prices for entry level houses by how much they’re prepared to lend a first-home buyer more anxious to secure a set of keys than worry about the quantum obligation they have just taken on.”

      Funny how this gravitates from a singular, “first-home buyer,” to the plural, “the quantum obligation they have just taken on.”

    4. “Cut off the guberment loan guarantee, crater.”

      That’s it in a nutshell. Fraudulent lending, taxpayers on the hook!

  6. “Boston hotels were decimated by the coronavirus pandemic last year. Average room rates declined 40% to $168.97 in Seaport and South Boston-area ZIP codes, according to STR, while average RevPAR dipped to $55.45, a 76% drop-off from 2019.

    Is that a lot?

  7. Reminds me of Long Island City new kondozes back in 2007 they proudly advertised it was $3200 to own and $2300 to rent 1 bedrooms……and whoa…you can rent for a year then use the years rent as your down payment and buy.

    Metro Vancouver owners are paying 54 per cent more to own than rent,

  10. Today is Friday, February 5th, and economists and health experts unanimously agree that the exaggerated overreaction to COVID-19 has destroyed the lives and erased the future for hundreds of millions of people for no reason all under the guise of protecting you from a disease with a 99.98% survival rate.

    2. Today’s fear porn narrative, top headline on the Huffington Post (in all caps):

      RIGHT-WING GROUPS FUELING NATIONAL ANTI-LOCKDOWN BLITZ

      Which when clicked through loads an article titled:

      Major Conservative Groups Are Fueling A State-Level Push To Hamper COVID-19 Restrictions

      “Prominent groups that fomented anti-lockdown protests are now pushing bills to curb the powers governors have used to fight the coronavirus pandemic.”

      No link provided, as there is not one yet available on the archive website.

      BTW I didn’t wear a mask when I went to 7-Eleven this morning, had to step over at least a dozen dead bodies walking from the parking lot and back.

      We can end this non-scientific medical tyranny through individual actions, because we are the leaderless resistance.

      1. The Narrative-purveyors are going all-out to craft pretexts for re-educating “white people in the thrall of stereotypes, lies, and conspiracy theories” [as determined by the globalists, of course]. Not hard to see where they’re headed with this.

        Analysis: A Race War Evident Long Before the Capital Siege

        https://apnews.com/article/donald-trump-us-news-race-and-ethnicity-conspiracy-theories-philanthropy-f8f793b94b0dd7e8ec62957dcbeb53d8

        A war rages on in America, and it didn’t begin with Donald Trump or the assault on the Capitol.

        It started with slavery and never ended, through lynchings and voter suppression, the snarling attack dogs of Bull Connor and the insidious accounting of redlining.

        Today’s battles in the race war are waged by legions of white people in the thrall of stereotypes, lies and conspiracy theories that don’t just exist for recluses on some dark corner of the internet.

    3. “…has destroyed the lives and erased the future for hundreds of millions of people…”

      It was costly in terms of collateral damage to rid the oval office and the country of the Orange man.

  11. Don’t hate the players, hate the game.

    And all those younger folks…who do they vote for? Socialists who want to keep the game going on steroids.

    Stupid should hurt.

    You want to reduce “wealth inequality” and make housing affordable?

    8% interest rates, 20% down, no government guarantees of mortgages and cut immigration by 90%.

    “Of course, artificially low interest rates have encouraged the ponzi scheme. Covid may have been the trigger for the recent plunge in rates but with lots of cash sloshing around, no-one should be surprised where it might head.”

    1. Stupid should hurt.

      It does. The problem is, they think the solution is even more game: higher taxes, higher prices, everything higher (except their paychecks). And of course, when the $15/hr minimum wage decimates menial jobs, they’ll blame it on the previous admin. Or they might just fudge the job numbers and say that everything is great, while homeless camps pop up everywhere like mushrooms after a rain.

  15. 2020 Presidential Election Lawsuits Related to Election Integrity

    2020 Presidential Election Lawsuits — the Facts:

    To begin with our list shows that there have been eighty-one (81) lawsuits filed that are relevant to the 2020 Presidential election. (Note 1: we are counting an original filing,
    plus additional appeals as one single case. Note 2: other lawsuits are possibly undiscovered.)

    The results to date are:
    a) Eleven cases have been withdrawn or consolidated. (These are not wins or losses to either side.)
    b) Twenty-three cases have been stopped from proceeding (dismissed) due to legal technicalities (standing, timing, jurisdiction, etc.). These have nothing to do with the merits of the case and should also not be considered wins or losses for either side.
    That more than a third of the lawsuits were not allowed to proceed to an evidentiary hearing is more of an indictment that many judges appear to be afraid of opening this pandora’s box. Considering the importance of election integrity to our country, it’s a shame for them to hide behind subjective legal technicalities. How is that in the interest of the citizens in our country?

    In any case, this leaves us with forty-seven (47) lawsuits relevant to the 2020 Presidential election where a judge has ruled (or hopefully will rule) on the merits. The results so far are:
    c) Twenty-two cases are completed (adjudicated). These are where the court heard arguments, considered evidence (where applicable), and then formally ruled on statutory issues (e.g. the legality of a state’s election process), etc. Of these:
    i) Fifteen cases were WON by Trump, et al, and
    ii) Seven cases were lost by Trump, et al.
    d) Twenty-five cases are still active and have not yet been decided — so the ultimate winner and loser of these cases has not been determined.

    1. @Redpilled Redhead: What a list! The fake news keeps repeating “all cases were laughed out of court” which to me seems like an odd way for a legal proceeding to occur, but I’m no lawyer and maybe court cases are decided by chuckles.

    3. The fencing around the U.S. Capitol building is being made permanent because they know that the 2020 election was, in fact, stolen, and that the President Asterisk administration is an illegal occupation government.

      There’s over seventy-five million of us.

      Tread lightly, globalist filth…

    4. That first link is awesome… the chart of all the cases. Looks like only 1-2 of the cases had anything to do with the voting machines. Is the Kraken in there somewhere?

      The most important cases might be the libel cases from Dominion and against Fox News.

      2. libel cases from Dominion

        These cases are meant to temporarily silence and financially harm defendants. Dominion is going to have a hard time showing that statements were false.

      1. Same as MB’s Bitchute link: Mike Lindell, Mary Fanning, and Brannon Howse Present the Docu-movie : “Absolute Proof”

      2. “Haven’t watched this yet. A bit burned out on the whole thing.”

        I’m waiting until Sunday and watching it instead of the Super Bowl.

        Big Super Bowl advertisers bow out amid struggle with tone

        By Alexandra Steigrad
        January 24, 2021

        A startling number of brands known for showcasing new commercials during the big football season finale are bowing out Super Bowl LV this year as advertisers struggle to hit the right note in a country plagued by the coronavirus pandemic, social and political unrest and record unemployment. Those that stay in the game are largely expected to play it safe, experts say.

        But ad space as of early January hadn’t yet been sold out, according to sources with knowledge of the situation. In 2019, by contrast, Fox Sports sold out its inventory by Thanksgiving.

        https://nypost.com/2021/01/24/many-super-bowl-advertisers-wont-have-commercials-this-year/

  17. Breaking news — N.Y. to expand COVID vaccine eligibility to people with underlying health conditions:

    “New York will open COVID vaccinations to people with underlying health conditions including cancer, heart conditions and asthma starting Feb. 15, Gov. Cuomo announced Friday.

    The move, which will greatly expand the number of people eligible to be immunized in the state, comes as hospitals have inoculated roughly 75% of health care workers against the deadly virus.”

    https://www.nydailynews.com/coronavirus/ny-cuomo-covid-vaccination-eligibility-expansion-comorbidities-20210205-ydxv3zr5svfj5djekepk6gmm5a-story.html

    Time to open up the economy and let people go back to work.

    1. https://twitter.com/uTobian/status/1357779080721014784:

      New VAERS numbers are out. The CDC is trying to hide them but
      @the_Arkivist went in & retrieved them. It’s carnage. Remember, multiply these numbers by 100 to get the actual totals (per Kessler 1993, Scott 1987, Lazarus 2011). The coronavirus vaccine campaign must be halted NOW.

      https://twitter.com/the_Arkivist/status/1357773786393677832:

      We have updated the Covid Data through 1.29.2021. For some reason the interface for VAERS is not updated, but the data is available. So here it is: 172 new deaths last week and 2k more reports. @AlexBerenson

      https://openvaers.com/covid-data

      501 total deaths reported in US. See @AlexBerenson for ex-US data.

        1. Kessler

          Commissioner of the Food and Drug Administration (FDA) from November 8, 1990 to February 28, 1997.

  19. Following on from my link the other day about Nordstrom reducing their office space in Seattle by 42%…

    Warning sign for downtown? Seattle sees biggest drop in demand for office space

    In downtown Seattle, crews are putting the finishing touches on a striking new skyscraper. Standing roughly 850 feet tall, the Rainier Square Tower has already redrawn the city’s skyline as its second-tallest building.

    But there’s a lingering question for this — and any — new Seattle office space: Will it ever be filled with workers?

    Nice little graph in there showing that employment in other cities like DC, Chicago, LA, NYC, etc had dropped only a little – from 2 to 8 percent – the demand for office space has dropped 34 to 75 percent in those cities.

    Gotta ask the investors in all those new office buildings if they want fries with that…

      1. Told here years ago.

        A man walks into a bar with an alligator on a leash and asks the bartender….

        Do you serve Realtors here?

        The bartender replies…

        Yes, we serve Realtors here.

        The man says….

        Good, I’ll have a beer and give me a Realtor for my alligator.

  22. “Of course, artificially low interest rates have encouraged the ponzi scheme. Covid may have been the trigger for the recent plunge in rates but with lots of cash sloshing around, no-one should be surprised where it might head. We’ve even allowed it to inculcate our language, using terms like ‘property ladder,’ as though this is a fail-safe form of investment, regardless of what size mortgage you take on. And while we’re on language, isn’t home ownership a misnomer? It’s the bank who is the true owner. Try missing a few repayments and see who really owns the property.”

    With MSM writers openly discuwsong out the moving parts of the underlying Ponzi finance scheme, it won’t be much longer now till Housing Bubble 2.0 collapses into the financial equivalent of a pile of rubble.

    1. Speaking of cash sloshing around, only a fraction of the 1.9T boondoggle will go to unemployment and stim checks. I wonder where the rest will go? LGBTQ+ programs in countries with Sharia Law?

      2. I had to go to TheHill (ugh) to see what’s in this bill, and was rather surprised. IIUC, they pass the $1.9T first, and then send “instructions” to committees to write the actual legislation to spend the $1.9T. Talk about a blank check! It also means that there’s going to be weeks of bickering over pork.

        Yous guys are gonna get the vaccine before you get a check.

        1. Since the pharmaceutical companies have zero liability, those stimulus checks may be the only compensation for injury resulting from those experimental “vaccines.”

      1. Looked him up. STEM educated, engineer and scientist, successful career in the environmental sciences. Methodical, but wound-up tighter than a snare drum. A laser pointer would have made an excellent Christmas gift.

        1. “Looked him up. STEM educated, engineer and scientist, successful career in the environmental sciences”

          Perhaps the lack of “Global Warming” combined with the snow shoveling pushed him over the edge.

          2. I used to repo cars for a living, and I was always cognizant of debtors having compound difficulties. You just never know what (or who) will be the catalyst.

    1. The Financial Times
      Runaway Markets
      US equities
      ‘Moment of weakness’: Amateur investors left counting GameStop losses
      Some short-term traders left out of pocket as popular stocks fall after frenzy
      Many r/WallStreetBets users rallied to convince others to hang on to the falling shares — either to make money or to send a message
      © FT montage; Bloomberg
      Madison Darbyshire in London, Robin Wigglesworth in Oslo, Alice Kantor in Paris and Aziza Kasumov in New York
      7 hours ago

      Retail investors who piggybacked on a rally in a clutch of stocks including GameStop are nursing heavy losses as shares have come crashing back to earth.

      What began as a planned so-called ‘short squeeze’ on the consoles retailer, orchestrated by traders on the Reddit message board r/WallStreetBets, quickly spiralled into a frenzied rally in a number of shares that stung hedge funds betting on declines. Billionaires such as Chamath Palihapitiya, Mark Cuban and Elon Musk all weighed in on the fervour.

      But by the end of Thursday, more than $36bn has been wiped from the valuations of the five main companies whose shares rocketed higher at the end of January. The fallout from one of the wilder trading episodes of the past decade underscores the risks faced by inexperienced traders armed with no-fee trading and slick brokerage apps.
      …

  25. more than $36bn has been wiped

    But the hedge funds lost even more than that — I heard upwards of $70bn — while those $36bn losses were spread over millions of people. And I suspect that the “send a message” motivation was a bigger driver than Wall Street wants to admit. Especially for a stock like GME, in the sense of “You’re raping my childhood, how dare you.” The little guys won this one.

    1. those $36bn losses

      Losses of unrealized gains? Perhaps in terms of purchase price they didn’t lose so much.

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