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The Main Mechanism For Wealth-Building Goes Into Reverse

It’ Friday desk clearing time for this blogger. “A price chop this big might cast some doubts on the world’s tallest residential tower. Gary Barnett’s Extell Development has sold a sponsor unit at its Central Park Tower at 217 West 57th Street for nearly 50 percent below its original asking price, property records show. The unit, a four-bedroom, 7,984-square-foot condominium, was originally asking $95 million. It went into contract in June and sold for $49.7 million when the deal closed this month.”

“New housing data shows inventory hit a 2021 high in September, giving buyers more choices than they have had all year, according to Realtor.com. In September, the count of listing price reductions was more than 8 times higher than the count of listing price increases.”

“Realtors say they have been seeing fewer offers on certain homes in Metro Atlanta. Broker Cheri Benjamin said, ‘Things have cooled down, which is a good thing. So we’re not seeing everyone having to pay $50,000 over and above asking prices. I think there might be a slightly less urgency, which could be good news for buyers. I think we’re going to see more listings coming on the market and I think our market will start to stabilize in 2022.'”

“As the state ban on evictions draws to a close, tenants, landlords and elected officials in Santa Clara County are bracing for an uncertain future. Jeff Zell, is a landlord and property manager of multiple properties around the South Bay that house approximately 6,000 to 7,000 residents. By Nov. 1, landlords will be able to take tenants to small claims court to recover past rent, but Zell said he doesn’t plan on doing that. ‘If the tenants don’t have money, there’s no way to recover money,’ Zell said.”

“On September 16, the Straight reported about a forecast by the Real Estate Board of Greater Vancouver. In its analysis, the REBGV anticipates an ‘upward pressure on prices’ this fall season ‘as above-average sales volumes meet low inventory levels.’ For the story, this publication used a photo of a seven-bedroom Vancouver mansion at 1453 Laurier Avenue, which sold for $5.8 million. The choice of the photo of the Shaughnessy estate got the attention of a person who identifies on social media as Julia Longpre, and who is someone ‘obsessed with Van RE.'”

“In a Twitter post, the individual called out the Straight and pointed that it missed something about 1453 Laurier Avenue. It’s that the property sold for a loss of $80,000 seven years after it was purchased. The individual is correct. Tracking by real-estate site Zealty.ca shows that 1453 Laurier Avenue sold on September 11 for $5.8 million. Zealty’s summary notes that the sold price is 15.7 percent lower than the asking price of $6,880,000. Also, the sold price is 9.7 percent lower than the Shaughnessy property’s 2021 assessed value of $6,423,000.”

“Spring has finally sprung for the Sydney property market as the number of homeowners looking to sell begins to soar. CoreLogic latest Property Pulse report revealed the number of freshly advertised dwellings was 31 per cent higher than August.”

“Australian house prices remain red hot but the foot has slipped off the accelerator. ‘Also a near record number of homes are being built,’ said CommSec chief economist Craig James.”

“If Lehman had been an isolated case of a badly managed large firm, it could also have been resolved by other means, any of which would have been the end of the story, just as with LTCM and Enron. But Lehman wasn’t an isolated case. The problem was much more fundamental: The entire financial system was leveraged to an enormous housing bubble, and that bubble had begun to burst. Propping up the bubble itself would have been a mistake if it was even possible, but given the extent of leverage the entire financial system was at risk. The problem was systemic, and required a systemic solution.”

“Those are the important questions about Evergrande as well. Yes, it would be a very large bankruptcy — but even $300 billion in debt is relatively small in the context of a $16 trillion economy. The real danger comes from the degree to which the problems that plague Evergrande are systemic — and, if they are, how China’s government will address them.”

“There’s ample evidence that those problems are systemic — and serious. Beijing’s development model plows Chinese citizens’ extremely high rate of national savings into physical capital: power plants, roads, railways, and especially housing, to facilitate China’s transformation from a mostly-rural to an overwhelmingly urban society. When those projects no longer had a clear case for being economically viable, though, China continued to build. In consequence, they overbuilt so much that people began to speak of ‘ghost cities,’ entire municipalities without inhabitants.”

“Real estate has remained a preferred investment for Chinese families, in part because they have few other options: Bank deposits have very low yields, the stock market is viewed as corrupt, and capital controls prevent investing outside of China.”

“That describes a classic housing bubble, and Evergrande is centrally exposed to it. China may want to punish Evergrande to warn other firms to improve their financial management, but if the bubble starts to pop, then even if contagion is prevented those other firms won’t have a ready means of exit. And individual homeowners, of course, will have the least recourse of all.”

“Ultimately, the risk is to the Chinese political and economic model itself. A decade ago, the Chinese Communist Party could say that, whatever its other failures or oppressive features, it was delivering a dramatically increased standard of living, as well as certain freedoms. The scope of those freedoms has narrowed steadily in the Xi years, and economic growth has slowed as well. Beyond the short-term risk of unrest from angry bondholders, if the main mechanism for wealth-building — the value of housing — goes into reverse, what will the regime be able to point to for legitimacy?”

“And what will happen to its economic model if ordinary people wonder why they are working so hard and saving so much? Beijing may make a showy example of a few real estate moguls and corporate executives to demonstrate that they are on the people’s side, but you can’t eat schadenfreude.”

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This Post Has 63 Comments

  1. ‘If the tenants don’t have money, there’s no way to recover money’

    Jeff says he’s out 1.3 million pesos. How do those 5% cap rates look now?

    1. “Zell’s firm is trying to obtain rental assistance from the state, but some of his tenants are failing to complete applications which slows down the process. Zell said his business is owed about $1.3 million in unpaid rent, and he estimates at least half of that is from tenants who have failed to complete their applications.”

      Gotta wonder how many renters are functionally illiterate?

  2. ‘In its analysis, the REBGV anticipates an ‘upward pressure on prices’ this fall season ‘as above-average sales volumes meet low inventory levels.’ For the story, this publication used a photo of a seven-bedroom Vancouver mansion…the property sold for a loss of $80,000 seven years after it was purchased’

    Well that’s embarrassing.

  3. ‘has sold a sponsor unit at its Central Park Tower at 217 West 57th Street for nearly 50 percent below its original asking price’

    This does what to previous buyers? Jeebus this outfit is a multi-year, rolling calamity.

    1. and even worse she was attacked on her way home for reporting the massive animal abuse
      Mayoral Candidate Curtis Sliwa greets the Victim of a gang attack outside her own Property coming home from the Hospital. Curtis Sliwa has been posted up outside the home with the Guardian Angels because the Suspect is expected to be let out the system at any time.

      https://www.facebook.com/curtisliwa/videos/831492897538007

  6. Today is Friday, October 1st and Joe Biden is not the legitimately elected president of the United States, because the 2020 election was stolen.

    You can’t be a globalist and be an American at the same time, because globalism is inherently anti-American.

    1. Lockdown Lovers image file, I Was Just Following Orders Edition:

      https://ibb.co/25ktMLt

      P.S. if this image offends you, go back to Reddit, because we *WILL* be having Nuremburg Trials for all of these globalists.

      P.P.S. FJB.

      1. I should make a t-shirt for my brother-in-law, who is so terrified he gets his kids tested weekly for covid. And he’s HAD covid, and got over it easily.

        2. NYC teachers file petition with SCOTUS to block kielbasa mandate. Wouldn’t it just add another another bowling pin to the juggling act of the albino trans midget in the clown world show we’re living in if they rule “no standing”? Im not sanguine about the outcome on this one. Amy is a big pharma shill.

          2. Is it coincidence that Kavanaugh purportedly tested positive?
            Despite being vaxxed?
            I think many power mongers are pretending to get vaxxed — even when done on TV — we have no way of knowing what is being injected.
            Hopefully the turncoat was vaxxed. I’ll start the clock.

        3. Canadian provinces rolling out military to staff hospitals because of covid, ostensibly.

          https://calgary.ctvnews.ca/alberta-s-overwhelmed-icus-near-capacity-military-support-being-deployed-1.5598845

          https://toronto.ctvnews.ca/up-to-three-military-teams-to-be-deployed-in-ontario-hospitals-to-deal-with-surge-of-covid-19-patients-1.5402833

          NY governor warns of impending militarization of hospitals.

          https://www.reuters.com/world/us/new-york-may-tap-national-guard-replace-unvaccinated-healthcare-workers-2021-09-26/

          1. They must not have many ICU beds in Canaduh, as they only have new 3000 cases per day, and only a small number of them wind up in the ICU.

          3. NY governor warns of impending militarization of hospitals. Great. National Guardsmen who are qualified RNs will work positions whose previously qualified RNs were forced out by government mandate.

  8. “In September, the count of listing price reductions was more than 8 times higher than the count of listing price increases.”

    In plain English, prices are falling.

    1. than the count of listing price increases.”

      Let me get this straight, your house doesn’t attract a buyer so you raise the price? Genius.
      If they had numerous offers there would be a bidding war so???

      1. “… your house doesn’t attract a buyer so you raise the price? Genius.”

        In the world of Price equals Value it is genius … if you can pull it off.

        Rising prices translates into rising values. Rising values stimulates demand. Stimulated demand creates such things as bidding wars, and bidding wars drives prices higher.

        Such is the modern and miraculous way wealth is created.

  10. Saw a great comment on crypto yesterday on YT. Since every housing or financial video has all these pro-crypto comments from obvious bots, e.g. “most intelligent thing I ever did…”, “I used the wise services of ____”, the poster speculated that hardly anyone was actually buying bitcoin. Worse than a Ponzi scheme, no one actually actually putting cash into it as it goes up, instead just working the MSM and social media to trap unsuspecting victims into this “investment”.

        1. Point taken, but crypto is much worse. When it collapses, it’s going to generate lots of foot stamping with no bailouts to compensate.

    2. I own crypto. But what I own doubles as software, holds 5 patents and, well, blockchain and osme of the software and centralized de- platforming is the future and yes, it’s called crypto for a reason.

  11. Any thoughts on why Mr Market is so gloomy? You’d think the Sword of Damocles was hanging over Wall Street traders’ heads.

    I’m also wondering if news of the gathering storm in the U.S. housing market is on their radar screens. With all the current red hotcakes reports in the MSM on the price wars back in July, it is hard to know if the recent reports of growing inventories and price reductions are gaining traction.

    1. I am again watching the DOW.
      It bounced off short term support today.
      But it does have the configuration of rolling over rather than consolidating for another leg higher.
      At least as of today.

          2. My favorite chart in business school was the pharmaceutical pricing channel: a linear regression of cost per course of therapy vs clinical value of alternative therapies.

    2. “Any thoughts on why Mr Market is so gloomy?”

      Mom’s broker called recently, “Brace for impact.”

      I’m sure it’s the expiration of the renter’s and mortgagee moratoriums, which will lead to principal asset revaluations below par, again, and forcing Powell’s hand.

      I was just reading a thread in the San Jose subreddit about downtown being boarded-up, nothing to do, nowhere to hangout with your homies. FWIW, that’s pricey “non-performing” commercial real estate on someone’s books.

    2. But now the Chinese economy can enjoy the Keyesian economic stimulus of cleaning up massive piles of unused, unneeded housing construction rubble.

      Panglossian macroeconomists will agree that it’s all good!

        1. Yeah…it’s incredible. Gonna provide real journalists with unlimited material over the coming years…

    1. This one was recommended:

      10 Pack F*** Biden Truck Sticker
      4.9 out of 5 stars 69 ratings
      Price: $12.99

    3. I want to get some small stickers like that, but which say “FJB” that I can stealthily stick on Prius with typical progressive bumper stickers on them. I think I would need a spotter or two for my own safety.

  14. Panama warns another caravan of 60,000 Haitian migrants is headed for the US border through Mexico and says it has been sounding alarms to Biden for MONTHS

    Panamanian Foreign Minister Erika Mouynes made the remarks during a visit to DC this week

    She said that another 60,000 mostly Haitian migrants are likely headed toward the US border

    Mouynes said 85,000 migrants have passed through Panama so far this year, a huge increase

    She expressed frustration saying Panama has been warning leaders including Biden for months

    ‘We’ve engaged with every single authority that we can think o
    f,’ the exasperated Mouynes said

    By KEITH GRIFFITH FOR DAILYMAIL.COM

    PUBLISHED: 00:44 EDT, 1 October 2021 | UPDATED: 09:41 EDT, 1 October 2021

    https://www.dailymail.co.uk/news/article-10048191/Panama-warns-wave-60-000-Haitian-migrants-headed-border.html

    1. Haiti has been independent from France for over 200 years now, and what do they have to show for it?

      DJT was right, some countries are, in fact, sh*tholes…

      1. DJT was right, some countries are, in fact, sh*tholes…

        Rumor has it DJT actually got the term from his own State Department, whose staff has been using it (privately) for decades.

    1. It’s a clown world!

      Future historians (assuming there will be any) and going to have a field day with the present.

      1. Back in Stalin’s day, they had to physically re-paint the paintings and edit the photos to make the “cancelled” vanish.

        In the digital age, it will be so much easier, especially with all the tech companies and corporate media controlled by globalists.

        This is why I own paper books.

        1. I have a dystopian vision of a future in which pen and paper are banned and everything you write will have to be digital and connected to the AI global hive mind. Anyone caught with a pen or pencil will be sent to a digital re-education camp where you will be tortured by robots connected to the cloud.

          2. where you will be tortured by robots connected to the cloud

            Oppression As A Service (OAAS). Only pay for the jack booted thugs that you actually need.

  17. Good thing U.S. General Mark Milley wasn’t in charge back in 1944.

    Is General Rommel in this is U.S. General Mark Milley.

    Yes I’ll hold.

    Erwin, Mark Milley here how are things? Great glad to hear it but look Erwin you may want to postpone that trip home for your wife’s birthday on June 6.

    Under fierce Republican attack, U.S. General Milley defends calls with China

    By Phil Stewart and Patricia Zengerle
    September 28, 2021

    WASHINGTON, Sept 28 (Reuters) – U.S. General Mark Milley, chairman of the Joint Chiefs of Staff, fended off perhaps the most personal and direct attacks from lawmakers of his career on Tuesday as Republicans blasted his calls with China and his interviews for books critical of Donald Trump’s presidency.

    The book detailed supposedly “secret” calls with General Li Zuocheng of the People’s Liberation Army on Oct. 30, 2020 and again on Jan. 8, and said Milley had promised to warn China first if he were ordered to attack.

    https://www.reuters.com/world/top-us-general-milley-staunchly-defends-calls-with-china-2021-09-28/

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