thehousingbubble@gmail.com
Blog

This Was Never Part Of The Plan

A weekend topic starting with Cayman Compass. “More than a year ago, during the midst of a coronavirus lockdown, hardly anyone predicted that property prices in Cayman would continue to rise. For the construction and real estate industry, forecasts turned out to be entirely incorrect. In fact, construction has been the main driver of the economy in 2020. New development projects are announced almost every week.”

“The projections for the rental market were nonetheless accurate, after initially between 5,000 and 6,000 people left the islands. Rents declined by approximately 10-15% last year, said Lou Dimitrov, real estate economist at Dart. Intuitively, the lower demand and reduced cashflow from property investments should have deflated asset prices. Yet property prices increased.”

“So, what is going on? Dimitrov explained that investment analysts separate the real estate market into the space market and the asset market. While the space market deals with physical capital in the form of actual buildings, the asset market deals with financial capital. As such, real estate is part of a broader capital market where property assets compete with stocks, bonds and other financial assets.”

“Both markets are separate but connected. Rent levels, for instance, determine the demand in the asset market, because investors buy based on the income stream, in the form of rental payments, that the asset generates. But the asset market is also affected by the cap rate – the current yield investors demand to hold real estate assets. This, in turn, is impacted by interest rates and the rates of return of other assets in the economy.”

“At the macroeconomic level, the most important measurable factor that led to higher property prices, Dimitrov said, was the expansionary monetary policy in the United States. Last year, the Federal Reserve increased the money stock by $4 trillion, an amount that was larger than all of the money that was in circulation in most of the 1990s.”

“This money, made available through credit, was largely used to buy assets and inflated prices everywhere, from stock markets to property markets.”

“Decreasing interest rates, in combination with more available money, have also changed the equation for property buyers who use debt financing. Purchasers can buy more expensive properties and get more financing for the same regular debt repayments. And investors can buy pricier assets and still receive the required capital return.”

“Fleur Peck of Blue Point Consultants said that the ‘number one’ factor for increased activity in the property market was lower interest rates. ‘Suddenly people have realised that they can afford a property, whereas two years ago they could not,’ she noted.”

“International investors have also changed their priorities and lifestyle preferences because of the pandemic, said RE/MAX broker/owner James Bovell. Some even decided to buy in Cayman without ever visiting the property. Because large multi-million-dollar property investments have the added residency incentives, luxury market sales have more than tripled in the past 12 months. The same attributes appeal to Cayman residents. Some already had property on island, but decided, for instance, to invest in a holiday home locally rather than abroad, Bovell said.”

From News 5 Cleveland in Ohio. “Across the country, homes continue to sell at record speed and for record prices, as a housing inventory shortage continues. Brian Barczyk just sold his house for double what he paid for when he first moved in back in 1998. ‘Very few houses in Brunswick sell for over $400,000; now it’s happening left and right,’ he said. ‘We had a line out the door at 7:30 in the morning for the open house. We ended up receiving 14 offers, 9 of which were 20-30% over the asking price.'”

“‘Where we live has always been an affordable market to live in,’ Sam LoFaso, a Realtor in Northeast Ohio explained. ‘What we’re seeing is we’re starting to catch up with areas like Illinois, Indiana and Pittsburgh.’ An American dream for any homeowner looking to sell.”

The Estes Park Trail Gazette in Colorado. “While the supply side new inventory held its own in May, the prolonged lack of inventory overall, coupled with extreme competition among buyers, continued through the month and pushed over-asking price contract offers to new highs. ‘While new listings have remained stable in comparison to 2020, the real culprit is the demand of buyers ready to pounce when a new property comes to market,’ said Glenwood Springs-area REALTOR® Erin Bassett.”

“‘Are we all just getting used to the ‘new normal?’ asks Boulder/Broomfield area REALTOR® Kelly Moye. ‘We aren’t using words like ‘unprecedented’ or ‘insane’ to describe our market anymore. The scramble for buyers to find a home and the prices they are willing to pay for them, are becoming the norm. The public is used to listings selling in 3 days for 10%-15% over list price and almost all conditions in the purchase contracts are now waived.'”

“In Fort Collins, REALTOR® Chris Hardy said, ‘…Fort Collins saw its highest median price on record spike 20% in May to $533,718. In spite of all the reporting of low active inventory numbers, the Fort Collins market is selling more homes each month than in each of the past two years. Nearly every home that comes on the market is sold in the same month and there isn’t much left to choose from. As I heard one mortgage lender say the other day, ‘We don’t have a supply problem, we have a demand problem.’”

The Edge Malaysia. “Lightening its debt load is not a priority for Eastern & Oriental Bhd (E&O), according to executive chairman Datuk Tee Eng Ho. ‘I am comfortable with the debt level. I don’t think it is right to keep thinking of reducing the debt, as it will end up [with us] doing nothing with no new launches. You can borrow, but make sure you have sales and launches,’ he stresses. Tee says there is no plan to raise funds for E&O at the moment. ‘Borrowings are cheaper as the banks can give us a good rate.'”

“E&O is scheduled to launch its maiden development for the STP 2A project in 1Q2022. The company plans to build two blocks of 35-storey serviced apartments with a gross development value of over RM700 million. Early this month, Kerjaya Prospek Group Bhd (KPG) accepted a letter of award worth RM28.4 million from E&O to undertake the foundation work for the property project.”

“Overall, he is of the view that the property market may start to recover by the end of this year. ‘The world is printing too much money and inflation will come back. So, we will see property prices shooting up.’ But specifically for Iskandar Malaysia, Tee thinks the development will be very slow there due to the oversupply. ‘It is not easy for property prices in Iskandar Malaysia to go back to the levels seen three years ago.'”

From Channel News Asia on Malaysia. “The Johor skyline is now dotted with empty condominium units, due to an oversupply in the market and lack of foreign buyers. When Singapore business owner Jonathan Gan purchased a 4-room condominium at Lovell Country Garden in 2018, he thought he had clinched his dream retirement home. The freehold apartment located near Johor Bahru’s city centre was twice the size of his 3-room HDB flat in Singapore, but the cost was only half of the latter when he bought it directly from the developers.”

“‘The best thing about the unit is the amazing view. You never get anything close to it at such value in Singapore,’ added the 42-year-old, who lives with his wife and two daughters. ‘It was the ideal weekend home,’ said Gan. ‘But now it’s becoming a bugbear.'”

“Just three years after he purchased it, Gan who bought the unit at around RM1 million (US$242,000) is having a hard time trying to sell it, even though the asking price is a fraction of what he paid for it. Furthermore, Gan’s business in Singapore has been affected by the pandemic, and he now needs to sell the apartment to gain some liquidity.”

“‘All this was never part of the plan. But the house is just left there, collecting dust and its value is going down by the day. We felt it is better to cut our losses and try to get rid of it,’ he told CNA. Despite being on the market for over a year, there have been no takers. He has engaged agents and even advertised the unit on various property portals but to no avail. ‘There is not much hope. Barely anyone has viewed or signalled interest,’ he said.”

“Gan is among property owners in Johor Bahru who are having issues trying to sell their properties, as the market is in the doldrums due to the prolonged effects of COVID-19. Condominium developments around Johor Bahru were built with foreign buyers in mind, but the pandemic has closed borders, leaving many of them empty. Units owned by those from China, Singapore, Hong Kong have been left unoccupied while homes that were left unsold have stayed empty. Landed property is also facing potential depreciation.”

“Property analyst Debbie Choy, who is director of Knight Frank Malaysia’s Johor branch, said the situation is particularly bad for condominiums and serviced apartments, of which there is an oversupply in the Iskandar region. ‘Many developments were targeting a large proportion of overseas buyers. With the prolonged effects of COVID-19 restricting movements, it has been challenging for developers or investors to offload either for sale or rent,’ said Choy.”

“A Singaporean who wanted to be known only as Mustaqim, who owns a 2-storey 4,000 sq ft terrace home at gated community Horizon Hills, has expressed concern that the value of his house is depreciating since he purchased it in July 2017. ‘With COVID-19, some of my neighbours who are Singaporeans have decided to sell their homes for RM1.1 million to RM1.2 million. It is spoiling the market a bit but I can understand why with the borders closed,’ said Mustaqim. ‘I am concerned that this downward trend will continue and my home’s value will be going lower and lower. I would be owning a depreciating asset,’ he added.”

“Property agents in Johor have also seen their livelihoods hit with the lower volume and value of transactions during COVID-19. An agent who wanted to be quoted only as Brian, told CNA that he has been forced to take a second mortgage on his own home as the number of transactions has dried up since the pandemic. ‘Some months I barely make any transactions, so I’ve been looking around for another job to tide through over the next few months,’ he said.”

“The agent, who specialises in selling condominiums in the central Johor Bahru area, said that most developments have the same problem – too many units on sale with ‘almost zero’ demand. ‘Some months, we have to live with zero completed transactions. So, the situation is really bad for us,’ added Brian.”

“The situation seems especially bleak for those desperate to sell their homes like Gan, who cannot find a buyer despite lowering his asking price for his 4-room apartment at Lovell Country Garden. ‘It’s a sticky situation. Although we had good times using it as a weekend home, ultimately buying it was a wrong decision we now regret,’ he said.”

Related Posts
This Post Has 79 Comments

  1. ‘What we’re seeing is we’re starting to catch up with areas like Illinois, Indiana and Pittsburgh’

    And Vancouver Sam, yer just catching up to Vancouver.

  2. ‘I am concerned that this downward trend will continue and my home’s value will be going lower and lower. I would be owning a depreciating asset’

    You do own a depreciating asset Mustaqim. Well, when you finish paying it off.

  3. ‘Last year, the Federal Reserve increased the money stock by $4 trillion, an amount that was larger than all of the money that was in circulation in most of the 1990s’

    Wait for it:

    ‘This money, made available through credit’

    Oh that!

    1. ‘This money, made available through credit’

      Bank fees! Bank fees! Lots and lots of bank fees! Think of all the bank fees generated by four TRILLION dollars of credit!

      And then there is the interest payments on this four trillion dolllars destined to be sent out to us worthy bankers each and every month for … for decades by newly minted debt-slaves caught up in bidding wars because they have COMPLETELY LOST THEIR MINDS.

      (everyone, sing along with me)

      🎼 I like it, 🎵

      🎼 I love it, 🎵

      🎼 I want a WHOLE lot more of it. 🎶

      Bahahahahahahahahahahahahahahaha.

  4. ‘We aren’t using words like ‘unprecedented’ or ‘insane’ to describe our market anymore. The scramble for buyers to find a home and the prices they are willing to pay for them, are becoming the norm. The public is used to listings selling in 3 days for 10%-15% over list price and almost all conditions in the purchase contracts are now waived’

    My name is Kelly and Ima runnin’ – with scissors!

    1. My name is Mr. Banker and I enjoy collecting all the low hanging fruit generated from other people’s madness.

      Pukes work, bankers reap. God’s Plan.

  5. ‘Very few houses in Brunswick sell for over $400,000; now it’s happening left and right’

    What could go wrong?

  6. ‘Just three years after he purchased it, Gan who bought the unit at around RM1 million (US$242,000) is having a hard time trying to sell it, even though the asking price is a fraction of what he paid for it. Furthermore, Gan’s business in Singapore has been affected by the pandemic, and he now needs to sell the apartment to gain some liquidity’

    Isn’t this always how it’s told? Everything was coming up roses for Joe and Jane, then….

    ‘All this was never part of the plan’

    Second airboxes or shacks are speculating.

    ‘But the house is just left there, collecting dust and its value is going down by the day. We felt it is better to cut our losses and try to get rid of it,’ he told CNA. Despite being on the market for over a year, there have been no takers’

    That’s some red hotcakes right there.

      1. While K-Pop is all the rage right now, a lesser-known “May-Pop” boy band just released the chart-topping local hit, “Realtors are liars.”

      2. praises of Malaysia
        I think Malaysia is going to come off of a 2 week total lock down beginning next week.
        This pandemic has been a bit hurt on Malaysia’s economy from what I have read. Especially the poorer part of the population.

  7. ‘The world is printing too much money and inflation will come back. So, we will see property prices shooting up.’ But specifically for Iskandar Malaysia, Tee thinks the development will be very slow there due to the oversupply’

    ‘construction has been the main driver of the economy in 2020. New development projects are announced almost every week’

    QE is ultimately deflationary.

    ‘The projections for the rental market were nonetheless accurate, after initially between 5,000 and 6,000 people left the islands’

  9. Business News
    June 11, 2021 9:41 AM
    Updated 20 hours ago
    Fed may opt for faster phase-out of housing-backed bond purchases
    By Ann Saphir, Dan Burns

    (Reuters) – The Federal Reserve could stop adding to its holdings of mortgage-backed securities (MBS) several months before it finishes increasing its stockpile of Treasuries, if the findings of a Reuters poll of economists are a guide.

    The expectation the U.S. central bank could reduce its MBS purchases by a relatively larger proportion than its purchases of Treasuries coincides with a growing debate about the need for any buying of housing-backed assets, given the red-hot real estate market.

    It is uncertain exactly how the Fed will go about slowing the expansion of its $8 trillion balance sheet, a stash of assets that has roughly doubled in size since it kicked off the large-scale purchases in March 2020 to stem the massive economic fallout triggered by the COVID-19 pandemic.
    …

    1. Yawn. Reuters is a joke. “Economists” are a joke. Where’s the news in this piece of garbage?

      2. If the Fed stops buying MBS, will banks lend less? AFAIU, it’s all about who carries the mortgages on their balance sheet. Banks haven’t been lending their own money for some time. Please correct me if I’m wrong.

        1. “Banks haven’t been lending their own money for some time.”

          The neat trick is for banks to NEVER loan their own money.

          1. As many of you know, I looked into a 1031 exchange last year for an irrevocable trust. I’ve had a handful of communications with an attorney who specializes in mortgages. His insights, coupled with Ben’s here on HBB, have been very helpful.

          2. The attorney’s credentials:
            J.D., M.B.A, M.S.A
            BAR #
            Real Estate Broker #
            NMLS #

        2. If my understanding is correct, tighter lending could be the pin that pops the bubble.

        3. mortgages on their balance sheet
          Many of the larger banks will keep the servicing value (servicing Portfolio) of the loans they sell to Fannie/Freddie/FHA on their books (1- 2% of the loan size). Most large banks also have some Loans either they want to keep (jumbo’s, “special clients,”) or got stuck with/not sell-able on their balance sheet.
          Also, construction loans tend to be a little bit trickier to sell, so some bank will also have them on their balance sheet.

          1. I was told, “Only the govt. can afford to loan out monies at 2.5 to 3%; 30 year fixed. It makes no sense to any financial institution.”

          2. “I was told, “Only the govt. can afford to loan out monies at 2.5 to 3%; 30 year fixed. It makes no sense to any financial institution.””

            That should be self-evident to anyone who isn’t insolvent. Would you lend money to DebtDonkeys at 3%? Maybe 30% with 20% down.

            The majority are broke and insolvent.

          3. That should be self-evident to anyone who isn’t insolvent.

            And what percentage of the population do you think that is?

    2. ‘We don’t have a supply problem, we have a demand problem.’

      Fed leaders, take note.

    1. ‘YouTube suspended Sen. Ron Johnson (R-Wis.) from posting videos on the platform for one week over his remarks touting unproven treatments for COVID-19.

      The platform said it also removed a video from Johnson in line with its policies against COVID-19 misinformation. The video had highlighted Johnson’s remarks from a hearing where he discussed experimental treatments for COVID-19 like hydroxychloroquine and ivermectin.’

      “We removed the video in accordance with our COVID-19 medical misinformation policies, which don’t allow content that encourages people to use Hydroxychloroquine or Ivermectin to treat or prevent the virus,” a YouTube spokesperson told The Hill.’

      “It always baffled me that there was such a concerted effort to deny the American public the type of robust exploration research into early treatment early in this pandemic,” Johnson said before calling ivermectin and hydroxychloroquine “incredibly safe.”

      “YouTube’s ongoing Covid censorship proves they have accumulated too much unaccountable power. Big Tech and mainstream media believe they are smarter than medical doctors who have devoted their lives to science and use their skills to save lives. They have decided there is only one medical viewpoint allowed and it is the viewpoint dictated by government agencies,” he said in a statement.’

      “How many lives will be lost as a result? How many lives could have been saved with a free exchange of medical ideas? Government-sanctioned censorship of ideas and speech should concern us all.”

      https://thehill.com/policy/technology/558056-youtube-suspends-ron-johnson-for-7-days

      1. I saw a fat chick on the back of motorcycle wearing a mask and no helmet in downtown Denver the other day.

        Clown World gonna clown.

      2. “People turned into freaked out germ freaks …”

        But have absolutely no fear of accumulating massive amounts of debt.

        “… locked downed being programmed by one narrative news, repeated over and over.”

        Dumb ’em down. And profit.

        “Its like the Dark Ages played out in modern times. In the age of information, your not allowed information.”

        Well put.

        “Turn the brainwashed into enforcers for the fake narratives.”

        Yep, dumb ’em down, and profit.

        “I have never seen anything like this, at least not in the USA.”

        Stay tuned, there is much more to come.

        Interesting times.

      3. This virus was created by FraudXi in a Chinese lab, and intentionally released upon society by Red China, infecting the world to get rid of “Orange Man Bad.” FraudXi should be in prison right now, awaiting execution on charges of treason, domestic and international terrorism, and sedition. Instead, CNN and the like are parading him around like some sort of savior while the country is under the occupation of an illegitimate, illegal Coup d’etat. A violent revolution is our only hope.

      4. My trad medicine Chinese doctor told me today she is thinking of going back to China….because the US has become too corrupt and communist.

      1. A financial system fatally undermined by allowing a criminal private banking cartel to control its money issuance.

        1. Get rates back up into the long term historic range of 12%-15% and most of these problems go away.

    3. “A mass of indebted and disarmed serfs are much more easily
      managed”

      Debt slaves!

      In the good ol’ days of slavery slaves used to be bought and sold. In these better days or debt slavery the debt owed by the debt slaves is what is bought and sold.

      The result is the same: The wealth generated by the slave or the debt slave ends up in the coffers of the owner.

      I like to think of this as a measure of progress: The old fashioned type of slave was a pain in the ass to own because one had to care and feed him, the modern debt slave is convinced he owns himself thus he willingly cares for himself and feeds himself. Either way, the owner of the slave or debt slave ends up with whatever wealth is produced.

      As I said, progress.

      😁

    4. “BlackRock, other investment firms, buying up homes, forcing rental boom”

      Heard through the local music teachers’ grapevine:

      Piano students who are losing their homes, thanks to investor-owners cashing in on the high prices, are also losing the pianos they practiced on, due to needing to downsize to a place that is too small to house a piano.

      Housing bubbles ruin lives of music students…

    5. An odd story. HUGE Corps always invest in housing. In 07-08 it was MBS which collapsed. Now just more directly with a purchase of the home, not just the paper or the servicing.

  12. I can imagine a new digital NFT investment which is originated by buying a property and videotaping its destruction. The “proof of destruction” would establish its value.

    Cities would be leveled, and investors would be happy.

  14. Could a bursting lumber bubble be a leading indicator of a bursting housing bubble?

    Lumber Prices Post Biggest–Ever Weekly Drop With Buyers Balking

    https://www.bloomberg.com/news/articles/2021-06-11/lumber-prices-post-biggest-ever-weekly-drop-with-buyers-balking?sref=ibr3A0ff

    Lumber futures posted their biggest-ever weekly loss, extending a tumble from all-time highs reached last month as sawmills ramp up output and buyers hold off on purchases.

    Prices in Chicago fell 18% this week, the biggest decline for most-active futures in records going back to 1986. Lumber has has now dropped almost 40% from the record high reached on May 10.

  15. Hehehe.

    Congresswoman Lauren Boebert Epically Trolls Kamala AGAIN in the Most Perfect Way Possible

    https://thelibertydaily.com/congresswoman-lauren-boebert-epically-trolls-kamala-again-in-the-most-perfect-way-possible/

    First-term Congresswoman Lauren Boebert, who earlier this week trolled Kamala Harris at the border with a cardboard cutout of former Democrat San Francisco Mayor Willie Brown’s lover,is not taking her foot off of the gas.

    On Friday, Boebert, who owns Shooters Grill in Colorado and gained prominence for her Second Amendment Rights activism, sent a tweet mocking “cackling Kamala” Harris for her recent statement in which she told illegal aliens, “Do not come.”

    1. “Do not come.”

      First reply to the congresswoman’s tweet: “That is not what sistergirl told Willie Brown.”

          1. There’s nothing I despise more in a woman than riding a man’s coattails and/or sleeping her way to the top. It makes it that much harder for those of us who don’t.

  16. What’s the over/under on Biden extending the eviction ban? The “Everything is Awesome!” narrative is going to take a hit if millions of deadbeats – a core Democrat-Bolshevik voting bloc, incidentally – are told to GTFO.

    Millions of Americans could face eviction as housing protection expires in June

    https://www.cnbc.com/2021/05/31/millions-of-americans-could-face-eviction-as-housing-protection-expires-in-june.html

    More than 11 million Americans are behind on their rent and many could be pushed from their homes when the national eviction ban expires in June.

    The Centers for Disease Control and Prevention’s eviction moratorium, which has been in effect since September, will lift on June 30. Although the policy has been far from perfect at keeping renters housed, it’s reduced the normal number of eviction filings over the same time period by at least a half, according to Peter Hepburn, an assistant professor of Sociology at Rutgers University-Newark and research fellow at The Eviction Lab.

  19. VP Harris promises US to be ‘safe haven’ for asylum-seekers

    EFE
    JUNE 10, 2021 4:31 PM PT

    Vice President Kamala Harris on Thursday eased back on the harsh message she sent to potential migrants during her trip earlier this week to Guatemala and Mexico, saying that she is “committed” to guaranteeing that the United States will be a “safe haven” for people seeking asylum.

    “Let me be very clear, I am committed to making sure we provide a safe haven for those seeking asylum, period,” Harris said in an exclusive telephone interview with EFE after returning from her first international trip as vice president.

    https://www.sandiegouniontribune.com/latino-coverage/story/2021-06-10/vp-harris-promises-us-to-be-safe-haven-for-asylum-seekers

    1. Translation: We still need Guats to come here to pick lettuce, frame crackerbox shacks and vote Democrat.

  21. She’s a literal communist. Like her ideological fellow travelers in our own Democrat-Bolshevik Party, it’s all about control. It doesn’t have to make sense. You will obey my authority, citizen!

  22. today it’s “masks”
    tomorrow it’s “call in the scoops”

    ** UK government adviser and former Communist Party member Susan Michie is brought to you today by Soylent Red, and Soylent Yellow. And, new, delicious, Soylent Green: The “miracle food” of high energy plankton, gathered from the oceans of the world. Due to its enormous popularity, Soylent Green is in short supply, so remember—Tuesday is Soylent Green day.

        1. I’ve been there several times for training regarding Doppler hydraulic instrumentation. I realize there are liberal people there, but for Austin’s media to kowtow to wokeness is news to me. Hope it doesn’t metastasize.

Comments are closed.