thehousingbubble@gmail.com
Blog

Many Of Them Indulged In Unbridled Borrowing Amid A Red-Hot Market But Now Find Themselves Grappling With Sharply Weaker Demand

It’s Friday desk clearing time for this blogger. “Lenders should be better prepared to deal with home owners who are in danger of losing their home, the Consumer Financial Protection Bureau (CFPB) warned on Thursday. ‘There is a tidal wave of distressed homeowners who will need help from their mortgage servicers in the coming months. Responsible servicers should be preparing now. There is no time to waste, and no excuse for inaction. No one should be surprised by what is coming,’ said CFPB Acting Director Dave Uejio.”

“A stunning Prospect Park West mansion is now officially back on the market for $12.25 million. That’s actually less than the $12.4 million the sellers paid for it six years ago, in 2015, according to property records.”

“The New Jersey Apartment Association, which represents mostly large landlords, estimates that its members and other landlords across the state have lost around $2 billion in rent since COVID-19 began to devastate the economy. What’s more, it predicts that several rounds of federal assistance will pay for only about half of the total. ‘The small landlords are still holding on by a thread, while the large landlords are seeing greater and greater losses,’ said David Brogan, executive director. ‘It was fantastic that the federal government finally woke up and saw that this was necessary, but I think there are going to be some write-offs.'”

“A spine-tingling ghost town of mansions in Missouri, that was supposed to become a $1.6 billion resort community, went viral on social media this week. ‘Have you ever seen a subdivision full of abandoned mansions?’ she asks in the video. ‘This was supposed to be a 1.6 billion dollar resort community. But instead it turned into a ghost town when the 2008 housing crisis hit. Five people had ended up in federal prison. And 13 years later the houses just sit here.'”

“Metro Vancouver has a ‘moderate’ degree of vulnerability in its housing market largely because of too many new rental units sitting empty, said the Canadian Mortgage and Housing Corp. in a report. The excess inventory can be seen in the higher vacancy rate for newly completed apartments ‘that are asking for rents that are more than what is demanded by the market in these times,’ said Eric Bond, senior specialist at CMHC. ‘Operators of those buildings might see some financial head winds in the short term.'”

“Egypt’s housing market remains depressed, with the nationwide real estate index falling by 14.38% during 2020, far worse than the 2.28% y-o-y decline seen during 2019. House prices are being undermined by the vast amounts of new construction, for instance in the new capital.”

“Emaar the Economic City said losses widened after a tough year for the commercial real estate sector. Losses grew by more than 130 percent to reach SR1.25 billion ($333 million), the company said. ‘Due to the prevailing economic environment and delays in completing projects, the management reassessed life cycle cost estimates of residential and industrial projects and accordingly, the cost estimates were revised, resulting in increase in gross loss by SR307 million as compared to the corresponding year,’ the company said in the statement.”

“PayProp has published its latest rental index, highlighting how the Covid-19 lockdown devastated the rental market in South Africa. The second factor is that many short-term and leisure rental properties moved onto the long-term rental market in 2020, after a sharp decline in tourism. This led to an oversupply of housing – particularly in tourism hotspots like Kwa-Zulu Natal and the Western Cape, putting further downward pressure on rental prices.”

“A Queenstown resident whose former development company is in hock to creditors for $1 million is selling luxury apartments through a new company. Lachlan Francis’ company was to build a 16-unit apartment complex, Freshwater, on the corner of Hallenstein and York streets. His company, CSF Trustees Ltd, was placed in liquidation on May 4 last year at the request of an out-of-pocket contractor, Amalgamated Builders Ltd.”

“One of the creditors, Queenstown Earthworks Ltd owner Craig Harper, says he’s owed about $50,000, including about $30,000 he shelled out for his own subcontractors. ‘We bent over backwards to help [Francis],’ he says. ‘It’s absolute bulls***.'”

“Tasmania has chalked up some of the country’s most stunning property price growth, with two suburbs achieving price rises of over 90 per cent in the past five years. Tasmania’s results contrast sharply with all the other states, bar Queensland. Sydney, for example, has a number of areas where prices fell over the past five years – houses in Austral by 78 per cent, Hillsdale units by over 30 per cent and Sydney Olympic Park units by 19.8 per cent being the clearest examples. In Melbourne, units in Carlton dropped in price by 37.1 per cent, and in Docklands by 12.5 per cent.”

“In Darwin, units in the city centre suffered a 30.7 per cent price drop over the last five years, units in Campbell in Canberra Central fell by 18.1 per cent, while houses in Balga in Perth sank by 24.2 per cent. In South Australia, Kadina on the Yorke Peninsula was the worst performer with a price fall of 9.9 per cent.”

“In Zhuozhou, a small city in China’s north, Zhu has stopped making mortgage payments on her apartment after its developer did not build a promised rail line that would have allowed residents to commute to Beijing for work. The accountant is one of some 1,000 home owners in the housing project who ceased payments in anger last year, according to Zhu and two other buyers campaigning for compensation who spoke with Reuters. ‘I didn’t do anything wrong, so why do I have to bear all the consequences?’ said Zhu.”

“In the picturesque city of Dali in the southwest, Li, a small business owner, is still waiting to move into an apartment that was meant to be handed over more than two years ago. Li and another buyer in the project said they had been told by the developer it could not hand over the keys to the apartments because it doesn’t have the money to pay its contractors. ‘The developer has postponed delivery four times since the end of 2018. We have completely lost trust in them’ said Li, who is currently squeezing his family into a small rental apartment with his parents.”

“The plight of Zhu and Li, who asked that only their surnames be used for fear of harassment, underscores the growing debt woes of developers active in smaller cities. Many of them indulged in unbridled borrowing amid a red-hot market between 2016 and 2018 but now find themselves grappling with too much debt, sharply weaker demand and tighter regulations.”

“Bond defaults by property developers quadrupled last year to 26.6 billion yuan ($4.1 billion) and as of mid-March this year, developers, led by China Fortune Land, had already defaulted on 8.7 billion yuan of bonds, according to data from the National Institution of Finance & Development. Onshore and offshore bonds from developers maturing this year are set to jump 42% to a record 900 billion yuan ($138 billion), the data also shows.”

“‘Some real estate companies with high leverage and weak capital turnover are facing a relatively high amount of pressure on short-term debt repayments,’ economists with Beijing-based Zhixin Investment Research Institute said in a report. ‘The tightening financing environment may lead to a cash crunch, and there is a possibility of cross defaults among developers, trusts and third-party wealth institutions.'”

“Zhu, who still lives and works in Beijing, is hoping the lack of mortgage payments will bring China Fortune Land to the negotiating table after she and other buyers engaged in fruitless rounds of petitions and protests. ‘I came from the countryside hoping through hard work to earn my own home in a city, but now I am back being rural again with an apartment in the middle of nowhere,’ she said.”

Related Posts
This Post Has 91 Comments

  1. ‘he’s owed about $50,000, including about $30,000 he shelled out for his own subcontractors. ‘We bent over backwards to help [Francis],’ he says. ‘It’s absolute bulls***’

    New Zealand is red-hotcakes according to UHS. Recently I posted an article with Auckland rents down as much as 40%. Come on man…

  2. ‘I came from the countryside hoping through hard work to earn my own home in a city, but now I am back being rural again with an apartment in the middle of nowhere’

    Well it was cheaper than renting Zhu. Oh wait, you are renting and took an a$$ pounding anyway. Never mind.

  3. ‘landlords across the state have lost around $2 billion in rent’

    Is that a lot?

    ‘The small landlords are still holding on by a thread, while the large landlords are seeing greater and greater losses’

    You know, me confused. I read how fantastic the shack biz is. But we see people selling for less than they paid all over the country, sometimes having bought years ago. It’s almost like the REIC just makes sh$t up.

    1. ‘There is a tidal wave of distressed homeowners who will need help from their mortgage servicers in the coming months. Responsible servicers should be preparing now. There is no time to waste, and no excuse for inaction. No one should be surprised by what is coming’

      This is a good example. I thought nobody had to pay anything back – we’re all in this together? Why do we have all this little feet stamping about foreclosures? Just forgive the loan and send the FBs a check guberment. It couldn’t be that the guberment doesn’t have any money, could it?

      1. I wrote a post on this in yesterday’s thread. Main points:

        1. Modification might have worked in 2009 on ARMs and neg-ams, but aren’t today’s loans fixed low-interest rate? There’s no slack to modify into.
        2. Most of the loans are FHA/VA/USDA or owned by the Fed. Not sure the CFPB has any teeth against them.
        3. Banks allowed mods and squatters in 2009-2012 because house prices were dropping. Keeping the FB in the house was better than selling into the bust and damaging the balance sheet. But this time, foreclosures are going to happen months before any significant drop in prices. Non-paying FBs might be sitting on sweet equity, and banks will go after that.
        4. If these poor FBs lost their job to COVID, then they should have been getting $2400/mo on top of unemployment. Add in a little savings, and why did anyone skip a payment at all? ( LLs with deadbeat renters are screwed)
        5. The only “mod” I can see is to tack the owed amount onto the back of the mortgage instead of demand pay up front. Not sure how much that will help.

        1. “Add in a little savings, and why did anyone skip a payment at all?”

          Needed $$$ to buy stonks?

          “( LLs with deadbeat renters are screwed)”

          Seems like it. Can’t squeeze blood out of a former tenant with m-t pockets.

          ‘The only “mod” I can see is to tack the owed amount onto the back of the mortgage instead of demand pay up front. Not sure how much that will help.’

          Lender’s balance sheet gets made whole and owner just has to endure a few more years of debt servitude, but doesn’t even notice the difference because of no change in monthly payment.

          Win-win.

      2. tidal wave of distressed homeowners
        Just texted with a friend from a TBTF bank who is in mortgage loss mitigation. Not busy yet.
        Only foreclosures they are getting are vacant properties.

      3. There is a tidal wave of distressed homeowners who will need help from their mortgage servicers in the coming months. Responsible servicers should be preparing now.

        Could this be why some homes are taking longer than 30 days to close? Are lenders tightening the purse strings?

        1. Higher interest rates reduce the amount an income-constrained buyer can borrow, reducing housing purchase budget limits for all buyers except the superrich (e.g. trust fund babies who can make a cash purchase without denting their wealth HODLings).

          The resulting drop in demand implies a lower equilibrium housing price, although it hasn’t shown up yet in official data.

          1. I’m seeing 4 houses in the $1.3-2.0M range, some bid up, still pending 30+ days.

  4. ‘London-based amateur trader Amy Lee wasn’t sure whether to buy shares in Deliveroo’s stock market debut but decided eventually to take the leap, swayed by ad campaigns on the food delivery company’s app. ”I took a gamble,” she said. ”It was my own fault, but I think I was swayed by the thought ’surely Deliveroo wouldn’t advertise a bad product to their customers through their app. That would be stupid right?’”

    ‘Lee and others like her who were allocated shares worth a total of 50 million pounds (USD 69 million) are nursing paper losses after Deliveroo shares plunged as much as 30 percent on their London Stock Exchange debut on Wednesday.’

    ‘The fall, slicing 2 billion pounds off initial valuations, is a blow to Britain’s ambitions of attracting fast-growing tech companies to London.’

    ‘It may also raise questions about retail traders’ appetite for future investments, especially in initial public offerings (IPO) – this was the first time individuals in Britain were given a chance to get in on the first-day action.’

    ‘Since buying 250 pounds worth of stock, Lee has done more research and now says she is ”gutted” to have given her money to ”what seems to be another greedy tech company lacking social value or drive to things differently”.

    ‘But she can’t sell until April 7, because of rules around ”conditional trading” – a practice customary in London IPOs until the shares ”settle”, usually lasting a week.’

    https://www.cnbctv18.com/market/stocks/deliveroo-ipo-debacle-leaves-small-investors-with-bad-taste-8799251.htm

    1. ‘a blow to Britain’s ambitions of attracting fast-growing tech companies’

      “They’re renting f*****g desks!”

      1. So when I worked for a restaurant 20+ years ago that you could call on the telephone and have a pizza delivered, I was working in the “telecom” industry, right?

      2. A bunch of guys riding around on bikes delivering Chicken Vindaloo and Pizzas in London.

      3. The 2 square miles around Kendall Square in Cambridge MA has more startups than the entire European Union. And lots of them as some pretty darn impactful real science startups.

        1. around Kendall Square in Cambridge MA

          Being the key phrase. Proximity to Harvard and MIT.

    3. “fast-growing tech companies” = dude on a bike delivering food.

      But…but…he has an app!

      1. If it was an autonomous drone delivering the food, then maybe there is some tech involved. But no, they have a bunch of losers who can’t get a real job, because they have no skills, delivering food on bicycles. Must be a hoot when it rains, which it does a lot in London.

        1. When we had our restaurant, I used to joke that we were going to put out a calendar featuring our 🚲 delivery guys and call it “Buns of Steel”.

        2. Correction: Remember Honest Work is Honest Work and very commendable in my book.

          1. Good for you. A day without virtual signaling is a day without sunshine at this point. I’m embracing the suck.

            I had the greatest respect for them. It is a very dangerous job. Any customer who called saying they needed change for a $100 was immediately added to the “no soup for you” list.

      1. In a physical sense, probably not. All these stars have bodyguards and security out the wazoo. Mentally, probably. Simmons was always an outlier with strong opinions. I doubt he fell for the woke garbage like the rest of them did.

        1. The Beverly Hills PD mostly kept them out last summer. Still, I’ll bet that they got awfully close, and every time Gene went out in the Rolls/Benz/etc., he saw them.

        2. He also said the “taxes there are also much more appealing,” explaining that California has become “inhabitable” due to its tax rates.

          So who’s gonna support the po’ folks?

  6. ‘Bond defaults by property developers quadrupled last year to 26.6 billion yuan ($4.1 billion) and as of mid-March this year, developers, led by China Fortune Land, had already defaulted on 8.7 billion yuan of bonds, according to data from the National Institution of Finance & Development. Onshore and offshore bonds from developers maturing this year are set to jump 42% to a record 900 billion yuan ($138 billion)’

    One upon a time, long ago, the mighty commies wouldn’t allow a bond default we were told. Not one. Save the A shares. So now airboxes are down double digits in 8% of the country. No biggie right? How many people live in China, a few hundred thousand?

    1. Your grandparents died and your parents lost their jobs, you’ve been locked down for over a year, can’t go on a holiday and everything local to do is closed. You’ve been permanently scarred.

      A true blessing. /sarc

      1. I think she is correct as it involves the implementation of a Great Reset scenerio.

        A huge crisis is a terrible thing to waste. If a huge crisis is not available then create one.

  8. Many of them indulged in unbridled borrowing amid a red-hot market between 2016 and 2018 but now find themselves grappling with too much debt, sharply weaker demand and tighter regulations.”

    No one could’ve seen this coming, policymakers and globalist media outlets will bleat in unison.

  10. Wall Street Journal — The Mortgage Market Is Roaring, But Lots of People Can’t Get a Loan (4/2/2021):

    “Mortgage credit availability, a measure of lenders’ willingness to issue mortgages, is near its lowest level since 2014, according to the Mortgage Bankers Association, or MBA.

    The tight lending environment illustrates a growing cleavage in the mortgage market: More home loans are being made than almost ever before, but they are going almost exclusively to borrowers with pristine credit histories and sizable down payments. Borrowers with credit qualifications that fall just outside the stellar category are finding fewer lenders willing to approve their applications. A segment of borrowers who would have qualified for a home loan early last year are now out of luck, deemed too much of a credit risk.

    “Because mortgage credit is more difficult to obtain, it is a more competitive environment overall,” said Dr. Lawrence Yun, chief economist at the National Association of Realtors.

    https://archive.fo/eEggE

    LMFAO@ the licensure requirement to cut hair or do peoples’ nails is more strict than that required to become a REALTOR.

    1. Dr. Lawrence Yun is not a Realtor. From Wiki:

      “In 1987, Yun earned a bachelor of science degree in Mechanical Engineering from Purdue University. In 1995, Yun earned a PhD degree in economics from University of Maryland, College Park.”

      Hmmm, those are not pussyfoot schools. How did he get into the real estate shill business? Seems somewhat like marrying down. But I bet it pays a lot more.

      1. You answered your own question. With the right connections, shilling can be very profitable.

      2. “How did he get into the real estate shill business?”

        With his mathematical background it’s either Real Estate or Wall Street to make serious money. Otherwise, it’s both a belt and suspenders to go with a “hen-pecked” tenure at some University.

    1. Sir Richard Branson of Virgin Group

      He isn’t bankrupt yet? His airline’s main hub is London, and they’re locked down tighter than a drum.

      1. He probably makes a killing on telecom and media, enough to make up for the losses in travel and leisure.

        2. thanks to the soaring price of Virgin Galactic stock

          A company with no customers and no income. Even Musk has paying customers for his Falcon-9 rockets

    2. in NoMad

      I lived on 24th & 6th and frequented Madison Square Park almost daily with my JRT. I don’t recall ever hearing this area called NoMad.

  14. “‘There is a tidal wave of distressed homeowners who will need help from their mortgage servicers in the coming months. Responsible servicers should be preparing now. There is no time to waste, and no excuse for inaction. No one should be surprised by what is coming,’ said CFPB Acting Director Dave Uejio.”

    In the interest of surprise avoidance, how long from now do you expect Democratic party leaders to announce their Save Our Homes bailouts?

    1. distressed homeowners who will need help

      They already got almost a year of forbearance, 2-3 stimulus checks, and $2400/mo unemployment. Shall we peel them a grape too?

      1. “…need help from their mortgage servicers…”

        You know ‘yer phuc’d when you help from a financier. 🙂

      2. Sometimes you annoy the shit outta me, oxy, but sometimes I think we’d be good friends if we worked together. Ima choose friends.

        1. Heh, good thing you weren’t on HBB 5-6 years ago. I was quite the lib until until 2015. Right after the victory for gay marriage (IMO that was a good thing), the libs went completely nuts with the woke. Meanwhile, The Working Man, the original Dem voting blok, was left behind… far behind. Instead all we got was march and protest for the trans community (all 26 of them). I redpilled on election day in 2016. It’s been an uphill battle since then. Until somebody, anybody, cares about The Working Man again, I’m politically homeless.

    2. The homeowners just serve as a conduit to funnel more money to the banks. It’s the perfect cover. Appear to be helping the beleaguered homeowner who just serves an intermediary to hand over the money to the bank.

    3. In the interest of surprise avoidance, how long from now do you expect Democratic party leaders to announce their Save Our Homes bailouts?

      FWIW, last time few were bailed out. The cram downs never came,

      Banks get bailed out, not Joe 6 Pack.

  15. ‘This was supposed to be a 1.6 billion dollar resort community. But instead it turned into a ghost town when the 2008 housing crisis hit. Five people had ended up in federal prison. And 13 years later the houses just sit here.’

    Bernake bux toe tag homes…

  16. Anybody else alarmed by the price of groceries? The fish I buy at the Asian market went from 3.99 to 4.99/lb. The small frozen scallops went from 5.99 to 6.99/lb. My favorite vegetable went from 1.99 to 2.49/lb. Barley I use to make soup went from 0.99 to 1.29/lb. Bulk sunflower seeds went from 2.99 to 3.99/lb. I’d estimate my grocery bill has gone up by 20% in the last six months. I am routinely seeing 20-30% price jumps in the cost of produce.

    Anybody out there familiar with the southern region of Kentucky around Bowling Green? The land is still relatively cheap and fertile and the weather doesn’t look too bad. Would appreciate any perspective on the area. Thanks.

    2. I’m seeing rising prices at the supermarket too. Prices at Sam’s Club seem more stable.

    3. John G, the Fed says inflation is below 2%. Therefore the price hikes you claim to be seeing in your local market are un-possible.

    4. Anybody out there familiar with the southern region of Kentucky around Bowling Green?

      Not too familiar, but considered it (well, closer to Lexington) and also outside of Nashville/middle TN. We ended up in TN — no income tax is a nice plus, and while KY is gorgeous, the rural areas felt more run down, vs just…rural.

      There is a Chuy’s in Bowling Green though, so you can have queso and creamy jalapeno ranch to dip your chips in!

  17. Capitol car-ramming and attempted stabbing assailant (now dead) identified as Noah Green.

    Please stay tuned and do not adjust your TeeVee set as this is a Narrative in progress…

    1. Perp has been identified as a black man, Noah X, a Nation of Islam member. The news cycle on this one is going to be very short.

      1. As I said, it’s a Narrative in progress.

        New York Times, Washington Post, CNN are all tripping over themselves to script this as Orange Man Bad.

        It’s like putting a coin in a jukebox that only plays one song.

        1. New York Times, Washington Post, CNN are all tripping over themselves to script this as Orange Man Bad.

          I would think that the perp would have been ecstatic and not angry, since the orange man no longer resides at the White House.

        2. As I said, it’s a Narrative in progress.

          They’re going to have to work hard on this one.

          He didn’t have a gun.
          He was black.
          He was Muslim.
          He was shot by the police.

          So, when does the Burning, Looting and Murdering start?

          2. when does the Burning, Looting and Murdering start? When the Chauvin trial ends. It doesn’t matter how it ends, or if there’s a verdict, or whatever the verdict turns out to be, massive racis, fascist, and red violence is guaranteed. Don’t need to be a weatherman to foresee the coming storm in this case.

        3. tripping over themselves to script this as Orange Man Bad

          Pointing to the January 6th insurrection/riots/storming of Capitol Hill.

    1. April 3rd? Did somebody say it’s April 3rd?

      Why yes, today is April 3rd, and Joe Biden is not the legitimately elected president of the United States.

Comments are closed.