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Prices Are Likely To Peak And Then Go Into Reverse, As Potential Buyers Will Be Able To Borrow Less

It’s Friday desk clearing time for this blogger. “After five months on the market, Leonardo DiCaprio has found a buyer for his Los Feliz home. The actor listed the property for $5.75 million in August, but after a series of removals and re-listings, $4.895 million is what DiCaprio has landed on. The final figure is just under the $4.91 million he paid for the home when he purchased it in 2018.”

“The site of a big affordable housing development in downtown San Jose that never got off the ground is headed for an auction and foreclosure as soon as February. The property that is headed towards foreclosure on its loan if the lender is unable to auction off the site is located at 199 Bassett St. in downtown San Jose. The proposal for the site envisioned a co-living residential development where 803 units would have sprouted in an up-and-coming neighborhood in San Jose’s urban core. Construction never got underway on the project, however, and the lender is threatening to foreclose on the loan and seize ownership of the property, which is near the corner of Bassett Street and Terraine Street.”

“Tantalizing tales of massive purchase and asset appreciation have inspired many firms, brokers and speculators trying to find a way to get in on metaverse real estate — in which pieces of digital space are turned into nonfungible tokens and transferred like a deed — despite the technology and graphics of early virtual worlds lagging behind the hype. ‘Right now in the virtual real estate space, you see a lot of people just are executing on FOMO,’ said developer Jay Gaudet, using the acronym for ‘fear of missing out.’ ‘I want to be a part of it. I don’t necessarily know what I’m going to do with it afterwards, but I want to jump into it.'”

“Back in the day — we’re talking two or three years ago — the sweet spot for Fort Collins home buyers was between $450,000 and $500,000, a point where competition thinned and escalation clauses, appraisal gap coverage and inspection waivers were unnecessary. ‘Now, for a million dollars you can have a really nice tract home,’ added Will Flowers, managing broker with The Wentworth Co.”

“Ken Smith bought a house outside Carleton Place with a big country lot last fall for $465,000. Smith, 32, is a broadcast engineer who works in downtown Ottawa. Smith learned the house had sold for less than half the price in 2018, but it fit his budget and was a 40-minute commute to work. ‘I’m just happy I’m in a house and not on the sidelines watching,’ he said. ‘It’s the wild west in the real estate market. Maybe everything will crash.'”

“A major developer behind plans for 900 homes in Salford has gone into administration. Beaumont Morgan Developments was the firm set to demolish former office buildings at Furness Quay to make way for two new apartment blocks. The original plan was to convert the buildings into housing, but this was scrapped over ‘insurmountable challenges’ which made the proposals commercially nonviable.”

“There have been falls in prices in some luxury housing markets across Spain, such as Naut Aran, where owners’ asking prices for their homes have fallen by 13.7% and remain below the 4,000 euros/m2 mark. Two Barcelona neighbourhoods (-12.5%) have also fallen compared to the prices seen in 2019. It is worth noting that two of the five most expensive areas in Spain have seen prices fall by double digits. Some of Madrid’s most expensive districts have also registered decreases in their prices, accompanying the aforementioned falls in Barcelona, a reflection of the general data for the entire housing market in both capitals.”

“At this level it becomes a serious challenge for many workers to save for a deposit from their earnings, even if they have slashed spending on travel and entertainment during two years of stop-start coronavirus restrictions, and had been knuckling down to save even earlier. A deposit on a median-priced Sydney house, for example, is now the equivalent of 14,559 plates of avocado toast.”

“Is it sustainable? Aside from the issue of potential buyers finding fewer and fewer options they can afford, interest rates are likely to rise sooner than once thought. When interest rates rise, property prices are likely to peak and then go into reverse, as potential buyers will be able to borrow less, Commonwealth Bank head of Australian economics Gareth Aird expects. ‘We’ve seen that on the way down, [as rates fell] house prices went up and to some extent the reverse will be true. When interest rates go up that will reduce credit and that will weigh on home prices,’ he said. ‘Rate rises this year are far more likely than not and the strength of the inflation data suggests they may not be too far away.'”

“Los Angeles-based Oaktree Capital Management has stormed a Hong Kong ‘castle’ valued at $1 billion. The global asset management firm has seized a 2.2 million-square-foot plot known as ‘Project Castle,’ where the chairman of China Evergrande Group hoped to construct a colossal mansion. The move to seize control of the asset this week sank a plan by Evergrande to restructure $20 billion in offshore debts. The seizure, made through a receiver, came after the struggling Chinese developer defaulted on a loan against which the $166-billion asset manager had security, according to two people familiar with the matter.”

“The project was key collateral in a planned restructuring of Evergrande’s giant offshore debt load, according to one of the people. But the plan is now in disarray after Oaktree appointed a receiver. The appointment of the receiver must be approved by a Hong Kong court, after which the asset would be removed from the general restructuring of Evergrande. Such a turn of events could complicate Evergrande’s attempts to restructure.”

“‘Evergrande has got the offshore bondholders to stop making noise on the basis there’s a restructuring process coming soon,’ said this person. ‘That land was going to be used to facilitate the restructuring.'”

“Chinese stocks extended their nearly $1.2 trillion rout this month even as mutual funds, state media and companies all intensified efforts to support the market. ‘Confidence and sentiment is dwindling as stocks fall, and when the market is so bearish, we can only count on the momentum to naturally peter out,’ said Hou Anyang, fund manager at Frontsea Asset Management. ‘The skepticism on growth is mainly due to property, there isn’t any industry that can take up its role right now.'”

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This Post Has 65 Comments

  1. Yer gonna have to get the detail from the Spanish link yerself. Their formatting is almost as bad as the NZ stuff.

  2. ‘‘Evergrande has got the offshore bondholders to stop making noise on the basis there’s a restructuring process coming soon…That land was going to be used to facilitate the restructuring’

    Oh yeah, it’s not their land, but come on man, we need this! What kind of bizarro world do these people live in?

  4. ‘The skepticism on growth is mainly due to property, there isn’t any industry that can take up its role right now’

    You mean pooh-bear doesn’t have a plan B?

    NO!

  5. ‘When interest rates rise, property prices are likely to peak and then go into reverse, as potential buyers will be able to borrow less’

    But days on market? Bidding wars? I gotta love letter dammit! Are you saying none of that matters when the gravy gets cut off?

    1. “But days on market? Bidding wars? I gotta love letter dammit! Are you saying none of that matters when the gravy gets cut off?“

      – Heh! :). At the end of the day, after the euphoric run up in house prices – just like every other asset bubble now as housing has been financialized – there’s a reconnect with reality and price discovery. No one participating in the bubble speculation wants to hear this, but bubbles always burst. There’s going to be pain, weeping and gnashing of teeth. Just like in the aftermath of housing bubble 1.0.
      – The Fed intentionally blew this bubble via the ‘wealth effect.’ This one is like dot com bubble + HB 1.0 together, only larger. It looks like the Fed is going to have to deal with the inflation. Rates will rise, the tide of liquidity will go out. They are removing the punch bowl after 13 years.
      – Insert sad panda face here.
      – BTW, there are a record number of Realtors again in the U.S. just in time for the slowdown.
      – The hangover should be a doozy this time around. All of this courtesy of your Central Bank, Wall St., and complicit government. Not to mention willing speculators. No one saw this coming either…

      1. Mortgage rates bottomed out at what? 2.6%? Waaaay below what they did in the 2000s. Even if rates return to low-normal, home values will plummet.
        $2000/month principal and interest at 2.6% = $500,000 mortgage.
        $2000/month principal and interest at 5.0% = $372,000 mortgage.
        And unlike 2004 to 2008, there will be no subprime MBS/CDO mania to extend the party.

        1. “there will be no subprime MBS/CDO mania to extend the party.”

          There’s only crime. Realtor/Appraiser/mortgage broker crime.

        2. I guess the question is what the breaking point will be for housing.

          My guess is somewhere in the range of 3.75-4% on the 30 year mortgage and housing pukes on itself like a college freshman at his first frat party.

          1. “pukes on itself”

            It wasn’t a frat party. Just some random off campus party at Football Factory State University with a DeeJay spinning records on the front porch and people dancing and drinking in the front yard…

          2. somewhere in the range of 3.75-4% on the 30 year
            Talking with a loan officer friend a few days ago and he said: I can get someone with a good credit rating and 10% down a 3.75% 90 day lock. So we are at 3.75% at least if you want a longer rate lock time period.

        3. Most amazingly, the people who understand and openly agree with your rather simple point seem to be largely limited to a handful of posters and readers of this blog.

      2. Housing and Covid, two FOMO driven phenomenon subject to mass hysteria by morons.

        People can never seem to just sit still and remain calm.

  6. WARNING: This post is not related to housing. Proceed with caution.

    Canadian ‘Freedom Convoy’ Receives First GoFundMe Payment After Temporary Halt | ZeroHedge
    https://www.zerohedge.com/geopolitical/trudeau-slams-unacceptable-views-anti-vaxxer-truckers-gofundme-blocks-access-freedom

    (snip snip)

    “The internet was in an uproar yesterday when GoFundMe blocked access to the funds that would help support the convoy of at least 50,000 truckers headed to Ottawa, Canada’s capital, on Saturday. The donations are expected to be dished out to truckers who participated in the rally, paying for their fuel, food, and hotel. GoFundMe wanted more clarification from the group on how the money would be spent.

    “A major revolt is underway in Canada as the government and corporate media downplay the movement that continues to gain steam. Truckers are up in arms about vaccine mandates that began on Jan. 15 and required unvaccinated truckers crossing back into Canada to be tested and quarantined for a week. The US enacted a similar policy on Jan. 22. These two mandates immediately took 20% of the 160,000 cross-border American and Canadian truckers off the road due to noncompliance in both countries.”

    1. ** “GoFundMe wanted more clarification from the group on how the money would be spent.”

      what bidnezz is it HOW the truckers spend the money? isn’t GoFundMe just temporary custodians, a momentary financial middleman, for the funds meant for another party? who made them the morality police?

      I would have replied: “WE, THE PEOPLE, in order to create a more perfect union, do intend to spend the funds on bad truck stop coffee & lot lizards. The rest we’ll just waste.”

      2. what bidnezz is it HOW the truckers spend the money?

        I agree with you, but consider the possibility that they try to avoid hosting scams, where the money would go in the fund organizer’s pocket. I don’t think they were asking how the truckers will spend the money, rather how the money was going to get to the truckers. I could be wrong, but it’s not obviously so.

      3. “who made them the morality police?”

        If your GoFundMe is for bail money for some “fiery but mostly peacefuls” that’s not a problem.

        Globalists gonna globe.

  7. ‘we’re talking two or three years ago — the sweet spot for Fort Collins home buyers was between $450,000 and $500,000…‘Now, for a million dollars you can have a really nice tract home’

    The last two years the central bankers have let this get out of control. By any historical measure.

    ‘Smith learned the house had sold for less than half the price in 2018’

    This K-da article is interesting. It’s one of those, ‘aw-shucks, look at the red hotness in the middle of nowhere’ things. It is gonna crash Will, right on top of you.

    1. Now, for a million dollars

      It literally is in the middle of nowhere. Paying over 10x income for a row house seems a little crazy. They are building them at breakneck speed. Rent one for 1/400 of the price.

      Broadcast Engineer? Somehow I don’t think those two words should go together.

      1. Actually blue that’s what i did for many years, someone has to keep a radio or tv station running so you can watch the shows and commercials. Back in the day everything was manual, you had to load video tapes on a machine insert commercials do the switching during the news, so the actual job name was a master control operator aka broadcast engineer, plus we had to be able to fix a problem quickly so we didn’t have to call the chief engineer at 2 am for a 5 minute fix

        1. what i did for many years

          I actually spent some time around the oldest radio station in the country. Grove City College. Vacuum tubes!

        2. Broadcast Engineer” Do you need a FCC radio telephone operators license to do that ? Just wondering I have one of those but never used it .

          1. No, it’s been several decades since you’ve needed an FCC license. When I started in radio back in 1998 they had already been unnecessary for quite awhile.

            I never did any RF, but I have done all the rest of engineering including audio and IT along with being on-air talent. For years I started at 5am and was on call 24/7. Thankfully that was my 20s and early 30s. It does take a toll and it IS a real job.

            I’m out of that side of the business now and on the other side in the music biz doing IT and some occasional AV. 7.5 hr days, 9:30-6, 1 hr lunch, no 24/7 on-call and liberal time-off.

    2. we’re talking two or three years ago — the sweet spot for Fort Collins home buyers was between $450,000 and $500,000

      Fort Collins thinks it’s Boulder Jr. But the article is right, even in more humble Loveland prices have been up, up and away.

      Saw an article about Bill Gates planning on building 4000 shacks in nearby Berthoud.

  8. “…said developer Jay Gaudet, using the acronym for ‘fear of missing out.’ ‘I want to be a part of it. I don’t necessarily know what I’m going to do with it afterwards, but I want to jump into it….”

    Jay Gaudet. Here’s what to do with it. Fold it six ways and stick it where the light can’t get to it. Oh, wait a second, its in the virtual MetaVerse.
    Jay Gaudet, you have another problem. You need to create a virtual a-hole, then you can go stick it.

    Jay Gaudet, please report back how all this works out for you.

    1. Related to this ^, is this …

      ‘The Metaflower’ NFT Sells for $650,000 USD | HYPEBEAST
      https://hypebeast.com/2021/11/the-metaflower-super-mega-yacht-nft-sells-for-a-record-650000-usd

      Keep in mind that this “yacht” does not actually exist in the physical world.

      (snip)

      “Metaverse developer Republic Realm has successfully sold The Metaflower Super Mega Yacht for 149 ETH (approximately $650,000 USD), making the digital yacht the most expensive NFT asset in The Sandbox.

      “The Sandbox is currently one of the leading metaverse games boasting collaborations with brands and personalities such as adidas, Atari, Bored Ape Yacht Club, Binance, Snoop Dogg, The Smurfs, DeadMau5 and others. Republic Realm has developed a series of ‘Fantasy Islands’ on the platform consisting of 100 private islands.”

      Some people have lost their minds.

      1. “Republic Realm has developed a series of ‘Fantasy Islands’ on the platform consisting of 100 private islands.”

        I wonder what is preventing them from turning those 100 islands into 1000, or 10,000, or??? It must be a “blockchain crypto mining” thing.

      3. “…Metaverse developer Republic Realm has successfully sold The Metaflower Super Mega Yacht for 149 ETH (approximately $650,000 USD)…”

        Sure would like to be a fly on the wall to know the actual purchaser was. I would think the purchaser must meet at least 2 criteria:

        1) Have mountains of money to burn.

        2) Be more than just a little looney.

        Of course, there is always the possibility that sale never really happened and was a staged publicity stunt to generate “buzz” in the metaverse community.

        Thinking about it, wasn’t the “buzz” around crypto such as bitcoin that started its upward trend?

        As Mr. Banker has repeatedly opined: “Because our nation is a nation composed of vast multitudes of totally dumbed-down ignorant pukes”

          1. “…if the thing never existed, the “sale” was imaginary….”

            Kinda’ like the way the Fed prints imaginary money?

  9. That Fort Collins article is exclusively talking about bidding wars and sales that happened 6-12 months ago. Gee I wonder why?

    1. I really really wonder why Yahoo NEWS(!?) would re-release this Fort Collins article now with a new date and everything? The original article is from July.

      “Source: Compiled by The Group Real Estate and provided to The Coloradoan on July 14

      This article originally appeared on Fort Collins Coloradoan: Fort Collins real estate: Even $1 million homes in high demand”

      1. “I really really wonder why Yahoo NEWS(!?) would re-release this Fort Collins article now with a new date and everything? The original article is from July.”

        Because:

        (drum roll)

        They use what works.

  10. “ Leonardo DiCaprio has found a buyer for his Los Feliz home. The actor listed the property for $5.75 million in August, but after a series of removals and re-listings, $4.895 million is what DiCaprio has landed on. The final figure is just under the $4.91 million he paid for the home when he purchased it in 2018.”

    There have been several of these high end houses in LA selling at a loss that there is clearly a trend. It’s weird though because anything that was a couple million in 2018 is selling for much higher (right now at least), but the ones that were $5 or $10 or $20 million in 2018 are struggling. I wonder if that is a Hollywood-specific issue based on COVID, or if the high end buyers are ditching LA.

    1. Remember that LA article a few months ago asking ‘why am I buying a $10M shack 100 feet from a string of homeless tents?’

    2. “…Leonardo DiCaprio has found a buyer for his Los Feliz home…”

      Yet another (in a long list) of Hollywood Show Biz types who have demonstrated almost uncanny abilities to lose money on R/E.

      1. When someone says “Tudor,” $2 million dollars of white paint isn’t what comes to mind. But there it is. I don’t understand the bedroom (?) that’s all brown wood and looks sort of like a sauna. Maybe it’s a panic room?

        The giraffe is cute.

      1. Underwhelmed. It has really nice architectural elements but too much white and incongruent modern bathroom fixtures.

      2. For that kind of money, pretty unspectacular.

        Something of a Hodge podge.

        Reminds me of owners who kept changing their mind mid-remodel.

        1. It sure doesn’t look like $7.5 million. It’s a hefty loss no matter what it looks like.

      1. aNYCdj

        IIRC you are from Norwalk, don’t know if you are old enough to remember but if not you must have heard about the section of the Mianus River Bridge falling out. I rode and drove over that bridge if not a thousand times pretty damn close to it. I remember my father saying it and when I was old enough to drive I remember feeling how the car would rock side to side crossing that bridge. That was in my old man’s case decades and my case years before the collapse so when it happened it was shocking but with a little thought not surprising.

        The pictures in the gallery accompanying this article are impressive.

        Lohud look back: Mianus River Bridge on I-95 collapses in 1983, killing 3

        Frank Becerra Jr.
        The Journal News
        Published August 15, 2019

        The roughly 90,000 vehicles that used I-95 each day were diverted to local streets, including Post Road which connects Port Chester with Greenwich.

        It was later determined that the bridge, constructed in 1958, used a pin-and-hanger system which failed after years of harsh weather conditions and a higher volume of traffic than anticipated.

        https://www.lohud.com/story/news/local/2019/08/15/lohud-look-back-mianus-river-bridge-collapse-1983/2006741001/

        1. I actually was in Charleston South Carolina working for a TV station when that happened, my brothers told me the traffic was a nightmare for a year on all the side roads US 1 exit 5 Indian field road exit 4

  14. Not today. I had a first class fcc license that’s what got me many jobs starting out. But with all the advances in electronics it was not needed anymore.

  15. It would go well beyond awesome if investors completely abandoned gambling in actual real estate and instead focused their printing press money flows on far more tantalizing opportunities in metaverse real estate investment.

    People who just need a place to live in wouldn’t have to worry about getting outbid by greedy, stupid investors, who could just as well enjoy competing with each other in buying and selling imaginary properties.

    “Tantalizing tales of massive purchase and asset appreciation have inspired many firms, brokers and speculators trying to find a way to get in on metaverse real estate — in which pieces of digital space are turned into nonfungible tokens and transferred like a deed — despite the technology and graphics of early virtual worlds lagging behind the hype.”

  16. WATCH: Standing Ovation as Widow of Slain NYPD Officer Calls Out Soros-aligned DA Alvin Bragg in Tearful Eulogy

    JOEL B. POLLAK and AMY FURR
    28 Jan 2022

    “Although you won’t be here anymore, I want you to live through me,” she said, addressing her slain husband. “The system continues to fail us. We are not safe anymore, not even the members of the service.

    “I know you were tired of these laws, especially the ones from the new DA,” she continued. “I hope he’s watching you speak through me right now.”

    The audience, including the attending clergy, burst into spontaneous applause and a standing ovation for over half a minute.

    Bragg was, in fact, in the audience, the New York Post reported.

    https://www.breitbart.com/law-and-order/2022/01/28/standing-ovation-watch-widow-of-slain-nypd-officer-calls-out-soros-aligned-da-in-emotional-eulogy-alvin-bragg/

  18. The Truckers rebellion against Mandates is great.

    It’s the common sense productive sector making a loud statement that they aren’t going to go along with the insane false science Gods responsible for a assault on the Globe .

    It’s the point where fear, fraud, and false Science is rejected by a work force of truckers that reject the insanity of the corrupted Science con job of Covid response that isn’t accepted and seen for what it is.

    Its a moment in time where the Gods of False Science are called out for their battle plan of take over by false weapons of mass destruction.

    Its apparent that Pharmaceutical Science got so hopelessly corrupted and captured that its turned into a weapon of mass destruction against humanity. Science creating disease and actually putting patents on this evil is you first clue of a sinister agenda. Fake news collusion by censorship of anything that doesn’t feed their Big Pharmacy advertisers narratives was employed.
    The narratives are absurd, and insanity breaks down when reality comes knocking.
    Thank you Truckers!

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