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The Incredible Froth Is Settling Down

It’s Friday desk clearing time for this blogger. “Greg McBride, chief financial analyst at Bankrate.com, told Forbes home prices are rising at an ‘unsustainable pace’ but as supply and demand return to somewhat of a balance, a ‘plateauing in prices’ is more likely than an outright decline by later this year or early next year. McBride also points out that unlike the 2006-2008 period, lending standards have greatly tightened and banks are now only lending to the most creditworthy mortgage customers, suggesting a price crash is probably not in the cards.”

“But McBride warns that if lending standards loosen again and ‘we see the [excessive lending] practices we saw from 2004-2006, then all bets are off.'”

“For both homebuyers and office-seekers, one thing is true about Manhattan’s Financial District: There’s lots of space for the taking. A boom in luxury-condo construction, aimed at people wanting to live near work, has saddled the area with the most unsold inventory of any neighborhood in New York City. Some of those units haven’t even come to market yet. One project alone — Macklowe Properties’ One Wall Street — is promising 565 apartments when sales start later this year.”

“Meanwhile, lower Manhattan office life is shrinking. ‘It’s absolutely going to be a challenge to sell all those units,’ said Orest Tomaselli, chief executive officer of National Condo Advisors.”

“Mike Tyson’s old seven-bedroom mansion where he famously ‘lost’ his pet tiger has had its sale price slashed by £2million. The stunning Maryland home is now on the market for £4m after his ex-wife Monica Turner decided to sell up.”

“A wild day of Travis County foreclosure sales May 4 saw several high-profile properties owned by Nate Paul’s World Class Holdings hit the auction block, but little clarity as to what comes next after an afternoon marked by chaos. Nate Paul was bidding, as was Will Hardeman, who along with his father has been accused by Paul of perpetuating a fraudulent scheme to wrest control of World Class properties through foreclosure, with the aid of a federal judge and a court-appointed receiver.”

“Multiple observers suggested the scene was unlike anything they had ever scene at a foreclosure sale. World Class is a major owner of Austin real estate, rising to local and national prominence in recent years as Paul employed a ‘buy and hold strategy.’ But it has been hobbled since federal authorities raided its offices in August 2019. World Class has filed more than 20 bankruptcy cases in federal court in Austin, including three new cases filed May 4 to head off other foreclosures.”

“On May 4, the Fraser Valley Real Estate Board reported that the ‘influx of new listings improved supply with total active inventory reaching 6,030 in April 2021.’ The FVREB noted that April 2021 inventory was 20 per cent higher than in March 2021, and the ‘highest it’s been in six months.’ Combining the inventory levels in the Lower Mainland, Realtor Kevin wrote in his report: ‘The total number of homes currently listed for sale across all of Metro Vancouver is 16,275, the highest level since June of last year.'”

“Skipworth wrote in a report that the ‘incredible froth that has characterized the market over the past few months is settling down.’ The Dexter Realty executive noted that Greater Vancouver sales in April were down 14 percent compared to March, which was the ‘first month-over-month decline in nearly a year.’ Skipworth added: ‘Fatigued buyers will regain the opportunity to shop the market more carefully and present more normal subjects and prices when negotiating on a sale.'”

“The number of properties changing hands in Toronto declined 20 per cent in April on an annualized basis from the month before, while the average price for a home fell 3.6 per cent to $1.05 million, according to the Toronto Regional Real Estate Board. Both declines were the steepest since April 2020. ‘It makes sense that we had a pullback in market activity compared to March,’ said Lisa Patel, president of Toronto’s real estate board. ‘We’ve experienced a torrid pace of home sales since the summer of 2020 while seeing little in the way of population growth. We may be starting to exhaust the pool of potential buyers.'”

“Entrepreneur Evan Thornley is using data to turn long-held myths in Australia’s real estate industry – including where best to buy to get the most capital growth – on their head. He is puzzled that in an industry where so much comprehensive data is available, ‘weapons grade bullshit’ remains widespread. ‘The real estate industry is owned by the sales people and it’s all narrative and no numbers and that’s strange to me because there’s so much good data,’ he said. ‘It’s heartbreaking to see so many mums and dads work hard, play by the rules and put money aside to invest for a prosperous retirement and the next generation, only to be sold properties that will never deliver on that dream.'”

“He believes the large volumes of new-build property in the investment mix is a key culprit. ‘There’s these big industries of developers who want to sell new-build product, and real estate sales agents who often get double or triple the commission to sell new product than they would selling other products, who both have an incentive to sell bling and tell people this is a great investment,’ he said.”

“Apartment owners in Sydney’s Mascot Towers will vote this month on a $40 million proposal to sell their troubled apartment tower as a redevelopment site, with many resigned to losing up to 80 per cent on their property as the most realistic way to end their two-year nightmare. Strata body chairman Gary Deigan said rectification of the 10-storey tower was too costly as the strata body already had a $32 million loan facility – and had drawn down nearly half of it – and would need to raise more than owners could afford to meet the current repair estimate of $38.5 million.”

“‘It just isn’t viable to fix the building,’ he said. ‘There would have to be a levy raised against owners for $6 million that’s got to be paid up front. The numbers are horrendous. It’s about $50,000 for a two-bedroom apartment owner to come up with. That’s why we investigated the route of collective sale.'”

“An expressions of interest campaign run by the strata body yielded an offer for the building worth about $40 million. ‘What that would mean, if we get it through, would still be a 70 to 80 per cent loss of value for all the owners on their pre-evacuation values,’ Mr Deigan said.”

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This Post Has 71 Comments

    1. 331,000 new jobs in leisure and hospitality.

      No “pent-up demand” for $500,000 starter homes happening there.

        1. You are not kidding. I decided to by and HODL a bit of BTC and ETH at celsius.network because they pay actual interest. Even if you just want to hold USDC (US Dollar coin) they pay 12.65%. I had 140k in a savings account last year and I think I earned 19 bucks for the year. I have 20K or so in celsius spread across several coins and earned $24 in a week. Could these coins go to zero? Absolutely and there will be rotation and replacement technology, etc.

          Before you dump on the coinz remember the banking system has been taking a dump on your interest and purchasing power since you have been living. Some amount of money flow will go to platforms like celsius and into the coinz generally as people realize there is an alternative to earning .018% interest from the cartel. Yes these markets are speculative but so is everything in the land of the magic world of Powell and Yellen.

          For you Bach fans this is truly amazing. I believe Lazokovich was 17 or 18 when he did this https://www.youtube.com/watch?v=J7TFSsqnpHY

          1. I will go to my grave before I buy crypto. I’ve never been taken by scams and schemes.

          3. they pay 12.65%

            That’s not “interest”. It’s the cash money of the latest investor.

      2. “Mr Market loves himself a miss on the jobs number.”

        Guy on Bloomberg was just saying the jobs number gives the Fed an “I told you so” opportunity. Alert the press…the printing press.

      1. Creating virus panics has cost entire careers of very bright young guys in our firm. I can’t disclose details but every week theres another guy who just up and quits. And theyre not leaving for greener pastures. They’re just quitting and not working.

        1. “They’re just quitting and not working.”

          That’s been in Japan for years, decades.

  2. ‘World Class is a major owner of Austin real estate, rising to local and national prominence in recent years as Paul employed a ‘buy and hold strategy.’ But it has been hobbled since federal authorities raided its offices in August 2019’

    Another incident the media has completely ignored. So how does a “buy and hold” RE outfit in Austin file bankruptcy, multiple times if there’s red hotcakes? I would imagine there’s some activity that lead up to the raid that “hobbled” these guys.

  4. ‘a ‘plateauing in prices’ is more likely than an outright decline’

    Click!

    ‘McBride warns that if lending standards loosen again and ‘we see the [excessive lending] practices we saw from 2004-2006, then all bets are off.’

    Already happened Greg:

    March 26, 2020

    “As America heads into a deep recession, the $11 trillion residential-mortgage market is in crisis. Investors who buy home loans packaged into bonds are dumping even those with federal backing because of panic that millions might not make their payments. Yet one risky sector had started to show cracks long before the coronavirus pandemic sparked the worst financial meltdown in 12 years: the federal government’s largest affordable-housing program, whose lenient terms are geared toward marginal borrowers.”

    “As real estate prices soared in recent years, working-class adults everywhere have increasingly relied on mortgages backed by the Federal Housing Administration — and U.S. taxpayers. Since 2007, the FHA’s portfolio has tripled in value to more than $1.2 trillion, almost 11% of the market. While private lenders make these loans, they are packaged into Ginnie Mae bonds, common in mutual funds and pensions.”

    “Before Covid-19 started roiling China, a November FHA report found that 27% of borrowers last year spent more than half their incomes on debt, a level it describes as ‘unprecedented.’ The share of FHA loans souring in their first six months has doubled over the last three years to almost 1%.”

    “Not long ago, Alex Castillo drove his shiny black Infiniti SUV through an office park north of the San Antonio airport, along a busy seven-mile stretch of highway that loan officers call ‘Mortgage Row’ because of its abundance of small independent mortgage companies that dominate FHA lending. Castillo, who has the words ‘The Dream Starts Here’ stitched into his jacket, works for Pennsylvania-based American Residential Lending. Oddly, amid the pandemic, his business is booming. His customers locked in FHA mortgages after interest rates plunged this month — adding to federally backed mortgage debt.”

    “‘If the government tells me you’re good enough to get a loan, I have to trust and believe in the government,’ Castillo said. ‘Then we just hope and pray that the client doesn’t get foreclosed on.’”

    “In downtown San Antonio, scores of investors stood on a parched lawn beside the city’s historic granite-and-red-sandstone courthouse. It was the first Tuesday of February, the day of the foreclosure auction. Matt Badders, a San Antonio lawyer who represents lenders, auctioned off two houses. The failed mortgages remind him of the run-up to the financial crisis 12 years ago, when lending to customers with spotty credit nearly brought down the world’s financial system. ‘We’re almost back to 2007, when mortgage originators are waking people up on park benches, saying sign here,’ Badders said.”

    “At the auction, the crowd bid on 338 homes, a third with FHA mortgages, according to Roddy’s Foreclosure Listing Service. One house had dual master bedrooms, a game room and granite kitchen counters. It sold for $202,000 — $52,000 less than the homeowner borrowed only two years ago. The taxpayer-backed FHA insurance fund will take a loss.”

    “Dave Stevens, FHA commissioner under President Barack Obama and former chief executive officer of the Mortgage Bankers Association, said a recession will expose hidden risks in home lending. ‘This should be an alarm bell to policymakers,’ Stevens said. ‘Sometimes you get blinded by a good economy and suddenly look at it and see a bubble of defaults coming.’”

    “The federal government has decided it doesn’t want to pursue — and has asked a judge to dismiss — a lawsuit against Utah-based Academy Mortgage Corp. The judge refused. The suit claims the company’s staff would repeatedly feed information into an automated federal underwriting system, manipulating it until the computer gave the green light. ‘Decline is a curse word,’ Plaintiff Gwen Thrower, a former underwriter, quoted a manager as saying. ‘We don’t use it.’”

    http://housingbubble.blog/?p=3070

    1. ‘plateauing in prices’ is more likely than an outright decline by later this year or early next year…

      Oh yeah! Another “soft landing” ahead! Been waiting for this mantra to be resurrected. It’s 2005 all over again.

      “Leslie Appleton-Young is at a loss for words. The chief economist of the California Assn. of Realtors has stopped using the term “soft landing” to describe the state’s real estate market, saying she no longer feels comfortable with that mild label.”

      LA Times July 2006

      https://www.latimes.com/archives/la-xpm-2006-jul-21-fi-soft21-story.html

    1. My wife’s cousin got out of Bethesda before the bubble cratered. When we visited them there five years ago, the mania was in visible full swing. Many homes on their block were undergoing major renovations to get them spruced up for sale at a higher price point.

    2. $5.25 million in Bethesda?

      That sounds like some government contractor gravy right there.

      To paraphrase Grover Norquist, shrinking the size of government down to the size where you can STUFF YOUR POCKETS FULL OF TAXPAYER DOLLARS because you’re such a bootstrapping, rugged individualist, Job Creator™.

      1. It is absolutely government contractor gravy, or lobbyist gravy. And check out that neighborhood. $5.5 million is just a slightly above average house. For even more fun, go to the other side of the river, in Virginia. No shortage of ugly multi-million mansions there, many of them built post-2004. As you said, those are the houses the Iraq War built.

        In case you guys are wondering why there’s a revolving door from higher-level government workers into the private sector, this is why. A high-level manager in one of the boring agencies takes home at best $200K/year (salary + bonus). It sounds like a lot, but not when your counterpart across the table makes 4-5 times that. After a while, the “public good” just isn’t worth it, especially with all the flack that government workers get.

    3. “Here’s the Tyson home.”

      Now that’s a kitchen for parties.

      And that bathroom with an island jetted bath tub and a big screen on the wall looks like a great porn set.

      2. It looks like they could throw several unrelated parties at once. There’s the main kitchen. There’s an elaborate wet bar on the ground floor that leads out to the pool area, and it looks like there’s a mini-bar in the home office with the paneling. Plus another party in the massage room.

        1. Plenty of room to hide the dead bodies when the Airbnb influencer party gets out of control and people get shot.

          3. Go watch the clip of Jane Standley pre-announcing the collapse of building #7. The BBC is nothing but a propaganda arm of the 5 Eyes, just like all the rest of the MSM.

    1. Timmmmmmberrrrrr

      “The so-called stumpage fee, or what lumber companies pay to land owners for trees, for Louisiana pine sawtimber on March 31 was $22.75 per short ton, according to the latest data from price provider TimberMart-South. That’s the lowest since 2011.”

      We’re paying less now for dim lumber and ply than we did 10 years ago.

          1. The Financial Times
            Copper
            Copper hits record high with demand expected to rise sharply
            Increase fuelled by forecasts of global economic upswing and shift towards cleaner energy
            A worker operates a copper smelter in Chile
            Concerns about the long-term supply of copper due to lack of investment by large miners has also pushed up prices
            Neil Hume and Emiko Terazono
            2 hours ago

            Copper prices hit a record high on Friday in the latest leg of a broad rally across commodity markets sparked by the reopening of major economies and booming demand for minerals needed for the green energy transition.

            Copper, used in everything from electric vehicles to washing machines, rose as much as 1.4 per cent to $10.361 a tonne, surpassing its previous peak set in 2011 at the height of a previous commodities boom.

            The price has more than doubled from its pandemic lows in March last year due to voracious demand from China, the biggest consumer of the metal, and also investors looking to bet on a big uptick in the global economy and protect their portfolios against potential for rising inflation.
            …

        2. OK – this is not about housing then.

          It must be about financial contract manipulation. Has anyone checked on the price of frozen concentrate orange juice?

          1. BCOMOJ:IND is the ticker for the Bloomberg Orange Juice Subindex.

            On the five year chart juice peaked in late 2016 and is down about 33% from that high.

          2. It must be about financial contract manipulation

            This is my theory.

            In the past, the liquidity wasn’t there to financialize all these markets. But over the past 20-30 years, with all the printing, the big banks/hedge funds/investment houses now have access to enough leverage and virtual dollars to financialize everything…commodities, houses, oil, now lumber..

      2. Cryptocurrency exchange to create trading platform for lumber derivative contacts.

        https://news.bitcoin.com/crypto-derivatives-exchange-ftx-starts-offering-lumber-futures-amidst-commodities-price-boom/

        Now you can you use one bubble to invest in a second bubble and compound your profits in the FED hall of mirrors-Ponzi scheme,-Rube Goldberg device-shell game-clown world-glass menagerie-hallucinogenic casino-Nigerian inheritance-three card monte–Unicorns and Rainbows economy.

        1. All we need now is a lumber futures exchange to offer a platform for trading cryptocurrency contracts. Then we can complete the infinite loop of bubble wealth creation.

    3. There is no shortage of trees to harvest. Canada has them up the wazoo. This is an artificial shortage.

  9. “… ‘plateauing in prices’ is more likely than an outright decline by later this year or early next year.”

    Is this going to be another one of those permanently high plateaus? Or more of a souffle?

    There are so many creative ways to avoid saying CR8R.

  10. “…“Entrepreneur Evan Thornley… …is puzzled that in an industry where so much comprehensive data is available, ‘weapons grade bullshit’ remains widespread…”

    Gotta give Evan Thornley a slight tip of the keyboard, but he is a bit behind the curve.

    What Evan doesn’t realized is that the HBB and its readers have been saying the same thing for at least the last 10 years.

  12. “Mike Tyson’s old seven-bedroom mansion where he famously ‘lost’ his pet tiger has had its sale price slashed by £2million.”

    “Famously ‘lost’ his pet tiger”. Interesting. I found this on the net …

    “I did have a pet tiger, her name was Kenya and she was around 550 pounds,” Mike Tyson said. “I had a great affection for her; I kept her, I slept with her, I kept her in my room. She stayed with me; I had her for about 16 years. But she got too old and I had to get rid of her when her eyes and her head got bad. Oh, and she ripped somebody’s arm off.”

    1. “I did have a pet tiger, her name was Kenya and she was around 550 pounds,” Mike Tyson said. “I had a great affection for her; I kept her, I slept with her, I kept her in my room. She stayed with me; I had her for about 16 years. But she got too old and I had to get rid of her when her eyes and her head got bad. Oh, and she ripped somebody’s arm off.”

      Tiger Moms. Grrrrr !

  13. $750,000 starter homes in Austin blamed on lumber

    ————————

    “We pro forma-ed that this home would sell for about $675,000. Current comps are showing it to be $750,00 — and that’s just in the last four or five months,” said Smith as he stands inside a new build in its framing stage.

    One of Smith’s homes in the framing stage. The HBA said lumber prices won’t be going down anytime soon, partly because it will take more than 20 years to re-grow forests lost to wildfires last year.

    1. I read rentals in Rosemond CA going for 2K a month 1300 square feet

      Commute to Edwards was the topic no base housing . CA city another option slightly less but only one available.

      Not good

    1. The Wall Street Journal
      Heard on the Street
      If Crypto Crashes Tomorrow, It’s No Big Deal. In Five Years, It Might Be.
      Bitcoin, dogecoin, ether and other cryptocurrencies are now worth about $2 trillion. But the world of crypto is still small, and stands apart from the rest of the economy.
      By Justin Lahart
      May 7, 2021 12:00 pm ET

      “Have fun being poor!”

      That’s the classic retort to people skeptical about surging cryptocurrencies from those who got in early on the speculative frenzy. It implies, of course, that those early buyers consider themselves rich. But are they really? One way to answer that question is what would happen if their newfound wealth went “poof,” aside from sparking lots of schadenfreude that is.

      The price of bitcoin—the most established of the private, digital currencies — has risen about 260% over the past six months, but that is nothing compared with some other entrants. Ether, which is the second-largest cryptocurrency by market value, rose about 660% during that time. And dogecoin, which was started as a joke, rose about 21,000%.

      Over that six-month period, the combined value of all cryptocurrencies tracked by coinmarketcap.com—and there are thousands of them—has risen from $444 billion to $2.3 trillion. On the one hand, that is dwarfed by the over $20 trillion in equity Americans have in their homes, or the more than $50 trillion value of the U.S. stock market. On the other, it is approaching the $2.6 trillion that investors around the world have riding on gold.
      …

  16. My wife’s grandmother passed in 2009. The family sold her modest Salt Lake City home for somewhere in the mid $300s.

    And just over a decade later, with the help of some updating which I assume cost less than $600,000 to complete, it just sold for over asked price at $950,000. This is a 100 year old house on a small lot.

    1. “My wife’s grandmother passed in 2009. The family sold her modest Salt Lake City home for somewhere in the mid $300s.”

      Grandma died at the bottom after the market crashed and the Beats were screaming…

      “I’m a victim because I was Rob-signed when I cash out refied my $150k home 3 times up to $450k through no fault of my own”

      and lived mortgage free for years as they dribbled out the inventory and slowly reflated the bubble.

  17. #learn to code

    Richard Bunce, 33, was working as an executive chef in South Philadelphia when the pandemic hit. His eatery shut for six weeks, reopened for takeout, and then shut again.

    Laid off, Bunce said he “decided I needed to do something different.” He went to coding school, graduated in December and had a job offer two weeks later. He has since had a couple of offers to get back into the restaurant business. “I don’t plan on doing that,” he said.

  18. – The Fed = Captain Obvious…
    – Again, the arsonists are in charge of the fire brigade. I didn’t vote for them, but then again, they’re unelected and unaccountable, but we’re all impacted by their centrally-planned, command-and-control economic policies.
    – Tar and feathers would be too good for them.
    – If they taper, everything crashes. If they don’t taper, the Everything Bubble (which of course includes housing) keeps inflating further, which only makes the ultimate and unavoidable crash that much worse. Great options here.

    https://morningporridge.com/blog/blains-morning-porridge/what-is-everyone-smoking-when-it-comes-to-asset-bubbles/

    Blain’s Morning Porridge – May 7, 2021: What is everyone smoking when it comes to asset bubbles?

    “It was worth being a bubble, just to have held that rainbow for thirty seconds..”

    “This morning: As the Federal Reserve wakes up to “elevated relative risks” and the rest of us scream “bubble”, the real questions are about real value. Why is a Bitcoin worth as much as Renaissance Art? Why is Dogecoin the top performing asset off the year when everyone knows it’s a joke? And when are people going to drink the proverbial coffee [vs. currently drinking the cool-aid]?”

    “I am going to be sending US Federal Reserve governor and head of financial stability, Lael Brainard, her second coveted No SH*T Sherlock award. This is not an insult – she is a very erudite, clever and talented central banker, but she really could not have stated the downright bleeding obvious any clearer than we she warned yesterday that some asset valuations are “elevated relative to historical norms… [and].. maybe vulnerable to significant declines should risk appetite fall.” (Check it out in the FT: Fed warns of hidden leverage lurking in the financial system.)”

    Really?

    Who knew… ?

    “Measures of hedge fund leverage may not be capturing important risks..” or that the pandemic may “stress the financial system in emerging markets and some European countries..” Well… I am very glad someone has finally noticed… To think we all missed it.. (US Readers: sarcasm alert.)”

    “If Lael really wants something to worry about, how about stock market volumes (declining) versus crypto-trading volumes – which topped $1.7 trillion during April. Again, check out the FT: “Crypto trading volumes boom as activity cools on stock markets”. It’s like watching a teething toddler chewing on a live electric cable.. and wondering what will happen next..”

  19. “It’s about $50,000 for a two-bedroom apartment owner to come up with.”

    I’ve probably mentioned this before, but during the Bubble 1.0 crash, I looked at a condo in a building with 50 years of neglected maintenance that required a surprise 3-year total overhaul, down to the pipes, electrical, etc. The assessment on owners was around $200,000 per apartment. Many people took out another mortgage to pay it or had to sell.

    The point of the story is that people rushing to outbid each other today, driving prices up in 50-year-old high-rises, do zero due diligence about the physical and financial condition of the building. Most don’t care and expect to get out before the big bills come due. Also, most of the buildings’ boards are full of and chaired by local realtors. Their objective is to keep maintenance fees low, not to maintain the buildings. So this is not just a problem for crap new builds in Australia. The 20-year+ bubble has really screwed up the incentives for condo boards. It will be interesting to see in the next crash which “desirable” buildings are hiding a lot of expensive problems.

  22. He is puzzled that in an industry where so much comprehensive data is available, ‘weapons grade bullshit’ remains widespread.

    Two things:

    1) Realtors are liars
    2) Realtors attempting to con marks into closing go by their feelings, not the data

  23. ‘It’s heartbreaking to see so many mums and dads work hard, play by the rules and put money aside to invest for a prosperous retirement and the next generation, only to be sold properties that will never deliver on that dream.’”

    Mums and dads in Australia, Canada, the USA, etc. elected globalist Quislings. They are not victims, but accessories.

  24. ‘There’s these big industries of developers who want to sell new-build product, and real estate sales agents who often get double or triple the commission to sell new product than they would selling other products, who both have an incentive to sell bling and tell people this is a great investment,’ he said.”

    Most of those sheeple, blinded by greed, are more than willing to go along with their own fleecing. I have no sympathy.

  25. Remote work was fine for companies when employees were trapped at home. Now things are opening up the lines between work and play will soon be blurred. Not good for long term productivity.

    1. “Not good for long term productivity.”

      Lisa Hooker, from another blog, recently said: “WFH is a bit like eating. Some folks learn to manage their diet and exercise. It’s very apparent that a lot of folks slide into obesity.”

    2. Now things are opening up the lines between work and play will soon be blurred

      I’ve been WFH for 4+ years. Yeah, I don’t work a strict 8-5 schedule. My boss knows that. As long as I get the work done on my own schedule, he’s happy.

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