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The Point Where This Housing Correction Turns Disorderly

A report from Bloomberg on Australia. “With Sydney’s property market now falling 11.1 per cent in its sharpest downturn since the 1980s – a trend mirrored nationwide – the shift toward high-rise apartments risks a further leg down in a real-estate crash that’s starting to threaten the economy.”

“Towers planned five years ago when the market was red-hot may just be taking the scaffolding down now, at a time when things are looking dicey. Making matters worse, developers of large apartment complexes inevitably hold a lot of inventory, so are strongly motivated to sell. If prices come in too low, they can wind up reducing the price of the whole block.”

“That’s reason to think worse is to come for our housing market. It’s little wonder that apartments are resold at a loss more commonly than houses in every capital city: Nearly 30 per cent of unit re-sales in Brisbane came in at a loss in the September quarter, according to CoreLogic.”

“We’re getting perilously close to the point where this housing correction turns disorderly. Fasten your seat belts.”

The Daily Telegraph. “Apartments owners in the Opal Tower looking to sell have been left in limbo as ambitious buyers submit offers as low as $1 or shun the building all together. Listing agent Du Yang of SY Realty, who also owns an apartment in the building, said selling the units had now become an almost impossible task.”

“Mr Yang receiving an offer of just $1. ‘Considering all the controversy lately how about I make you a deal? $1, take it or leave it,’ the email read. As an owner in the building, Mr Yang said the experience had left him unable to sleep. He has so far received no compensation, and like other landlords, is likely to struggle to find tenants or offload his investment for even close to what was originally paid.”

“Mr Yang said he would likely have to stump up the mortgage out of his own pocket, as well as paying a mortgage on his own home. ‘This was meant to be the Australian dream and now it has become the Australian nightmare,’ he said. ‘I won’t buy anything in Sydney ever again.'”

From ABC News. “In yet more data confirming Sydney’s much-publicised price fall, REA Group, the owner of realestate.com.au, said ‘middle priced suburbs’ in the harbour city were set to feel the rapid housing price fall the hardest this year.”

“REA Group chief economist Nerida Conisbee said although forecasts would need to be reset after the upcoming Federal election, the price pain for Sydney homeowners was set to continue in the foreseeable future. ‘We are still seeing a pretty big drop in views per listing in Sydney,’ she said. ‘Right now, middle priced suburbs are suffering the most. And that impact in sentiment doesn’t seem to be shifting.'”

“According to REA data recorded for large NSW regions and shires, ydney’s Sutherland Shire, which takes in suburbs such as Cronulla and Sylvania, has been the hardest hit, recording an 8.9 per cent price drop over the past year. The Shire’s drop was followed by Paramatta (-8 per cent), Baulkham Hills and Hawkesbury (-7 per cent) and Sydney city and inner south (-7 per cent).”

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This Post Has 105 Comments

  1. Related issue: At what point will the correction in risk asset prices turn disorderly?

    Markets
    Weakest Treasuries demand since ‘08 sends bond-market warning
    Treasury headquarters, Washington Bloomberg
    By Bloomberg · January 11, 2019 12:24 pm

    As the U.S. government kicks off its debt sales this year, here’s one potentially worrisome sign for traders to keep in mind: the steep decline in demand at its bond auctions.

    Of the $2.4 trillion of notes and bonds the Treasury Department offered last year, investors submitted bids for just 2.6 times that amount, data compiled by Bloomberg show. That’s less than any year since 2008. The bid-to-cover ratio, as it’s known, fell even as benchmark Treasury yields soared to multiyear highs in October, before falling back to their lows last month.

    Granted, it’s not as if the U.S. will have trouble borrowing as much as it needs. And there’s little in the data to suggest weak auctions lead to bond losses. Yet the drop-off is an early warning that demand for Treasuries may not keep up as the U.S. goes deeper into the red. Debt supply jumped in 2018 largely because of the Trump administration’s tax cuts. Forecasts show the deficit could soon swell past a trillion dollars and stay that way for years to come.

    The weakness “doesn’t matter until it suddenly does,” says Torsten Slok, Deutsche Bank’s chief international economist. “A declining bid-to-cover ratio increases the vulnerability and probability that investors suddenly will begin to think that a falling bid-to-cover ratio is important. Put differently, all fiscal crises begin with a declining bid-to-cover ratio.”
    …

  2. “We’re getting perilously close to the point where this housing correction turns disorderly. Fasten your seat belts.”

    Only speculators and FBs need to brace for impact. We happy renters, on the other hand, can break out the popcorn and watch the carnage play out with something close to glee.

  3. Making matters worse, developers of large apartment complexes inevitably hold a lot of inventory, so are strongly motivated to sell.

    I fear that in such a scenario, a great mass of people might learn to their distress that they overpaid.

          2. How can one predict the point where hair-of-the-dog hangover cures are no longer adequate to keep the drunkard out of the gutter?

      2. “The price-to-income ratio in cities like Beijing and Shanghai is around 23, meaning the average household would have to work for more than two decades, without spending, to buy a home. In Tokyo and New York, that ratio is much lower at about 13.”

        Sounds like the eve of an economic disaster. I’m certain denialists provided assurances that all was well in Japan in the late 1980s, just before their Everything Bubble collapsed over the span of decades.

        2. more than two decades

          And they pay interest, maintenance and real estate taxes. Make it four decades without eating.

      3. From the article headline:

        “Some analysts are predicting the economy will implode, but the country’s economic and social model and its ongoing urbanisation drive make a home price collapse unlikely.”

        Seems completely the opposite to me. I reckon that China’s state-run economic model is the exact type that is likely to create massive malinvestment, thus putting it at a very likely house price collapse. Of course they could suppress and turn the correction into a long drawn out malaise.

  5. ‘the shift toward high-rise apartments risks a further leg down in a real-estate crash that’s starting to threaten the economy’

    Ironically, this boom in high-rise airboxes is the late stage of a bubble. And they are all very expensive, from London, Vancouver/Toronto, Mumbai, Hong Kong, Dubai, China, Manhattan, Los Angeles, Miami, pretty much everywhere. Except New Zealand. I don’t think they ever caught on there.

  6. ‘the experience had left him unable to sleep. He has so far received no compensation, and like other landlords, is likely to struggle to find tenants or offload his investment for even close to what was originally paid’

    At least Du can take comfort in knowing he can write off his negative gearing (cash loss) against other income. Oh, right, they are set to yank that too. Sucks to be you, Du.

    1. He has so far received no compensation, and like other landlords, is likely to struggle to find tenants or offload his investment for even close to what was originally paid’

      Why should this asshat get any compensation? He bought into a speculative mania and now he’s getting schlonged, as he should be. He’ll struggle to find tenants because no tenant feels a need to cover his mortgage or pay his inflated rent demands. And if he can’t offload his skybox onto a greater fool, whose fault is that? He was reckless and greedy, and now he’s left holding the bag – as it should be. The only people I feel sorry for are the prudent and responsible who were priced out of the market due to Du and his ilk.

        1. The Opal Tower epitomizes everything that’s wrong with the speculative mania unleashed by the Keynesian fraudsters at the central banks with their “QE-to-Infinity.” Corrupt policymakers working hand in glove with corrupt bankers, real estate developers, and incompetent or complicit regulators and enforcers to maximize profits by cutting corners and using slipshod construction crews and standards. Now all the chickens are coming home to roost. Anyone paying attention should’ve known better than to buy such skyboxes as an “investment.”

  8. When the developers who are the most leveraged and have the largest exposure find themselves up against the wall, the fire sale will create comps which will send shockwaves throughout the condo markets. When the chain reaction begins, gravity will take hold.

      1. I can’t wait for the lawsuits to begin, especially when they start hauling developers and their accomplices in local government, as well as crooked or criminally negligent regulators, enforcers, and inspectors, in front of juries and forcing them to testify under oath.

    1. yvr Is pooched! On the bright side, the side show punters may finally realize that Realtors are the travel trunks of today’s real estate market. A quaint holdover from a bygone era… carburator repair guy, travel agent, service station attendant et al ! Finally jettisoned to lighten the payload! Replaced by an app at $29.95. Haha

    1. Dr. Copper is a much more reliable indicator of the true state of the global economy than all the permabear financial media touts and shills with their “Everything is Awesome – Buy Moar Stawks!” propaganda.

  13. “Mr Yang receiving an offer of just $1.”

    Take your kangaroo dollar and go buy two packs of ramen.

    Here in the U.S. a green dollar still buys four packs of ramen.

  14. “As an owner in the building, Mr Yang said the experience had left him unable to sleep.”

    Correction: As a BUYER of the building, Mr Yang said the experience had left him unable to sleep.

    A subtle difference in ownership can make for a big difference in sleeping habits.

    1. If Mr. Yang walks away from his “investment,” a banker might be losing sleep, at least until he can order his political hirelings to vote for another bailout.

    2. “A $ubtle difference in owner$hip can make for a big difference in sleeping habits”

      Eye think Uncle Warren $leeps well …

  15. I will be offline and/or posting sparsely for the next couple weeks as I have to travel to a wedding and then to Austin/Houston and the gulf coast. It looks like I’ll have some time to kill on the gulf, and I think I’ll catch some open houses and check out the “state of the market” in the middle of vacation/2nd home country.

      4. I’m not sure what we’re all going to do after hearing this news.

        ROFL. Same thing you were always going to be doing.

        I’m going to have some time to kill down between Jamaica Beach and Surfside Beach – literally 99% second homes and short term rentals. I’m hope to walk into a couple open houses and say “why yes, I am an affluent FB…. er out of towner, looking for a vacation home…” and see what happens and share it here. 🙂

      2. The one on Barton Springs? I used to hang with some friends there outside on the patio semi-regularly back in 2007-2008.

        1. The one on Barton Springs?

          That’s the one. Always get the fries when I go back — soo good (but make sure you sit near the AED, just in case 🙂

      1. It will be interesting to see Tesla’s numbers this quarter.

        It was pretty impressive that for 2018, for the first time in a decade, an American car, the model 3, was the best-selling premium vehicle in the US. With Detroit going all truck and SUV, all it would take to decimate the GM and Ford would be a swift uptick in gas prices like last decade.

          1. Last I checked it was GM that is closing factories and it was Ford that announced mass layoffs and restructuring this week in Europe. All of the other manufacturers had access to the same EV tax credits as Tesla, yet none of them chose to make it work. Renault-Nissan-Mitsubishi is roiled in scandal with Carlos Ghosn and whatever happened there. Toyota still thinks fuel cells are the answer even as VW of shameful “dieselgame” has now seen the light and is electrifying their entire fleet.

            Yes, Tesla buyers gets 1/2 of the tax credit in the next 6 months, and then almost nothing in July. We shall see if the long-promised $35k base model EV is a reality by then. The EV transition is just starting. With the flood of good EVs coming this year (Hyundai Kona, Kia Niro, updated Nissan Leaf, Rivian truck, Audi eTron, Porsche Taycan, etc.) things are just getting interesting.

          2. Hyperdrive
            SpaceX Layoffs Include 577 Positions at California Headquarters
            By Dana Hull
            January 13, 2019, 1:11 PM PST
            – COO Shotwell warned last year about fewer launches in 2019
            – Job-cut announcement Friday followed successful Iridium launch

            A person takes pictures of a mock up of the Crew Dragon spacecraft at SpaceX headquarters in Hawthorne, California. Photographer: Patrick T. Fallon/Bloomberg

            SpaceX is taking the ax to its headquarters in California.

            Hours after launching its first rocket of the new year on Friday morning, the Elon Musk-led company told employees that roughly 10 percent of SpaceX’s workforce would be laid off. Stunned workers were sent home early to await notification to their private email addresses about their fate.
            …

          3. yet none of them chose to make it work.

            If making a profit is part of a business “working” then it remains to be seen that Tesla makes it work either. Just watching the world of everything bubbles with lots of popcorn.

        2. It will be interesting to see Tesla’s numbers this quarter.

          Yeah, I got a call from Tesla in Fremont the other day. I was excited that maybe they were seeing the genius of hiring me to help them out in Shanghai. Unfortunately it was to try to talk me into a test drive instead. So apparently now they are starting to cold call everybody who has ever stopped into a dealership. Interesting development.

          2. Said I was waiting for $35k model.

            Told them I was disappointed in the pricing of the dual motor performance models when I could buy a $60k Audi RS3 and perform better than their fastest model. Exaggerated a little…I’d need to change the software and stop at the E85 station to outrun a P100D at the dragstrip. But definitely faster than the top Model 3 even if they add ludicrous mode.

    2. Does stock market manipulation by the Plunge Protection Team count when gauging the recession signal in stock price movements?

      Markets
      Markets Take the Lead When It Comes to Factoring in Recession
      By Liz McCormick, Sarah Ponczek, and Molly Smith
      January 12, 2019, 9:00 PM PST
      – Investors debate implications of recent moves of asset prices
      – Rebound in high-yield debt, U.S. stocks muddies deliberations

      Many financial markets are already signaling that the U.S. is more likely than not hurtling toward recession. But will they prove prescient or overly fretful?

      The prospect of a widespread yield inversion in the Treasury market, which has preceded U.S. downturns for more than half a century, has generated the most alarm and is edging even closer to fruition. When falling yields are combined with the declines since the third quarter in stocks and commodities, as well as investment-grade and junk-rated corporate debt, it suggests about a 50 percent probability of an economic contraction within a year, according to JPMorgan Chase & Co.
      …

    3. Europe has made a political decision to go into recession
      Jim Edwards
      7m
      An acrobat sets himself on fire before diving into a swimming pool as part of a show.
      REUTERS/Eliana Aponte

      Opinion banner
      – Industrial production in Italy, Spain, and Germany went negative in November, according to data published last week.
      – It looks like Europe is heading into a recession.
      – Europe adopted “austerity” measures after the 2008 crisis, cutting government fiscal stimulus spending.
      – Those cuts hurt GDP growth, leaving Europe’s economy permanently smaller, according to Oxford Economics and the IIF.
      – Europe lost an economy the size of Spain because of it.
      – “By lowering GDP permanently, fiscal consolidation increased the long-run debt burden rather than reducing it (as was the aim),” Oxford Economics analyst Rosie Colthorpe says.

      Last week, three of Europe’s biggest economies produced a horrible set of manufacturing numbers for November:

      Industrial production:
      Italy: down 1.5%
      Spain: down 1.5%
      Germany: down 1.9%

      Industrial production in Germany, Italy, France and Spain all took a simultaneous dive in November.

      It looks like Europe is heading into recession, multiple economists say. Germany and Italy may already be in “technical recession.”

      The tragedy is that the contraction is being helped along by a deliberate political choice made by Europe’s own governments: Their effort to rein in deficit spending, to cut fiscal stimulus, and to balance their budgets in the 10-year aftermath of the 2008 financial crisis. “Austerity,” as it’s known, has shrunk the potential size of the European economy and retarded its ability to grow again. And now that the manufacturing sectors of Italy, France and Germany are all stagnating or shrinking, austerity is hurting their ability to pull out of the dip.
      …

    4. Markets
      Probability of a recession rises to the highest in 7 years: WSJ Survey
      Published Thu, Jan 10 2019 • 11:55 AM EST
      Yun Li

      Key Points
      – Economists surveyed by the Wall Street Journal are seeing on average a 25 percent chance of a recession within the next 12 months.
      – It is the highest level since October 2011, up from just 13 percent last year.
      – Economists cited trade dispute with China, rising interest rates and the massive equity sell-off in December.

      The odds of a recession have grown to the highest level in seven years, according to a monthly poll by The Wall Street Journal.

      Economists surveyed by the Journal are seeing on average a 25 percent chance of a recession within the next 12 months, the highest level since October 2011 and up from just 13 percent last year.

      The heightened probability came from a slew of worries including the ongoing trade dispute with China, rising interest rates and the massive equity sell-off in December that led to stocks’ worst year since the financial crisis, the survey revealed.

      The outlook for 2020 is even dimmer with 56.6 percent of the economists foreseeing a downturn to start in the presidential election year. The Journal surveyed 73 economists from Jan. 4 to Jan. 8.
      …

      1. The Financial Times
        China Economic Slowdown
        Clouds loom over global business as Chinese economy falters
        From cars to smartphones, signs of weakening demand worry multinationals
        Softness in Chinese consumption is worrying global luxury brands © Reuters
        Lucy Hornby in Beijing and Chris Giles in London 10 hours ago

        Emma Liu has a good job in Beijing, but she has decided to forgo her normal Giorgio Armani face cream and started buying cheaper sweaters online.

        Her choices are reverberating in boardrooms around the world. A slowdown in the Chinese economy — and flagging consumer expectations — are clouding the outlook for foreign brands.

        From VW to Apple, the Chinese economy is now the world’s business. No international brand can safely ignore China’s economic prospects. On a market exchange-rate basis, China accounted for 16 per cent of the global economy in 2018.

        But for global businesses, what matters more is growth. China’s rapid development and 1.4bn consumers have helped it to account for about 30 per cent of worldwide growth for the past decade even as its domestic expansion has slowed.

        If the Chinese consumer decides to hold back, companies around the world will tremble. “I don’t feel any pressure at work,” the 20-something Ms Liu told the Financial Times. “I just feel like I need to use my money more wisely because saving would give me a greater sense of security.”
        …

    7. What are biggest risks to the global economy in 2019?
      Kenneth Rogoff

      From China to Europe and beyond it is likely to be a nerve-racking year

      Fri 11 Jan 2019 09.23 EST
      Last modified on Fri 11 Jan 2019 10.01 EST
      The central business district in Beijing, China.

      As Mark Twain never said: “It ain’t what you don’t know that gets you into trouble. It’s what you think you know for sure that just ain’t so.” Over the course of this year and next, the biggest economic risks will emerge in those areas where investors think recent patterns are unlikely to change. They will include a growth recession in China, a rise in global long-term real interest rates and a crescendo of populist economic policies that undermine the credibility of central bank independence, resulting in higher interest rates on “safe” advanced-country government bonds.

      A significant Chinese slowdown may already be unfolding. The US president Donald Trump’s trade war has shaken confidence but this is only a downward shove to an economy that was already slowing as it makes the transition from export- and investment-led growth to more sustainable domestic consumption-led growth. How much the Chinese economy will slow is an open question; but, given the inherent contradiction between an ever-more centralised Party-led political system and the need for a more decentralised consumer-led economic system, long-term growth could fall quite dramatically.
      …

    8. This time is different.

      Real Estate News
      How a recession could impact the housing market
      The fundamentals of the housing market are strong. But is it recession-proof?
      By Jeff Andrews
      Jan 10, 2019, 3:52pm EST
      …
      If a recession does hit, how would it affect a housing market that’s already starting to cool? With the scars of 2008 still fresh, it’s understandable that some would worry about another housing implosion. But most real estate professionals don’t expect a possible recession to spell doom for the housing market. Some even think it would hardly affect housing at all.
      …

    9. The trouble with debt bombs is that eventually they explode.

      The Observer
      The sub-prime timebomb is back – this time companies are lighting the fuse
      Leveraged loans are ringing alarm bells for regulators who fear a repeat of 2008’s mortgage disaster
      Kalyeena Makortoff
      Sat 12 Jan 2019 10.59 EST
      Last modified on Sun 13 Jan 2019 05.02 EST
      Clouds over Canary Wharf

      When an expert in financial risk at one of the world’s most powerful private equity outfits tells investors to scale down their exposure to a specific corner of the debt market, it is worth taking notice.

      Henry McVey, who sits on the risk committee at KKR, said last week that the leveraged loan market – a $1.3tn (£1tn) pile of risky corporate loans – had been on a “great run in recent years” but the firm was now cutting its exposure to the asset class to zero.

      McVey is not alone in his caution. A growing chorus of global leaders spent 2018 warning that the leveraged loan mountain was getting dangerously large and inviting comparisons with the financial crisis a decade ago.

      The Bank of England, Australia’s central bank, the International Monetary Fund and members of the US Federal Reserve have raised red flags over so-called leveraged loans, which are offered to companies already in debt but often come with few strings attached.
      …

      1. “a $1.3tn (£1tn) pile of risky corporate loans”

        Cockroach Theory suggests the potential damage is much larger in magnitude. Remember Ben Bernanke’s prediction that “subprime will be contained to $200 bn”, a couple of years before $4 trillion in Fed balance sheet expansion was implemented to contain subprime? I.e., the subprime mop up operation was 20 times the predicted size.

        1. Cockroach Theory suggests the potential damage is much larger in magnitude…

          I’m waiting for the NBLs (Rocket Mortgage, etc) to announce they’re screwed and their real-bank lenders to once again get pounded and bailed out. Till then, I foresee increasing fear and pain as the debt comes due for borrowers, lenders, and indebted corporations.

    11. IBM Layoffs 2019: 310 Job Cuts at Seterus Subsidiary
      by Joe Panettieri • Jan 13, 2019

      IBM is laying off 310 employees within the technology company’s Seterus mortgage servicing division in Durham, North Carolina, according to a WRAL new report.

      The imminent job cuts, scheduled for March 2019, come just as IBM sells Seterus to Mr. Cooper Group for an undisclosed sum. ChannelE2E has not independently confirmed the staff cuts.
      …

    12. Colorado Springs call center closing, 200 layoffs coming
      By: Wayne Heilman
      Jan 12, 2019
      Updated Jan 12, 2019

      WideOpenWest will close its Colorado Springs call center March 8 and lay off 200 employees as much of the Englewood-based cable television operator’s contact with customers has shifted online.

      The company notified employees Wednesday of its plans to close the center at 2025 Research Parkway.
      …

    15. FTfm Hedge funds
      GAM, Schroders and BlackRock hedge funds among worst performers in 2018
      Declines for stock markets and rising US interest rates fuel widespread difficulties
      GAM, the Swiss asset manager, issued a profit warning last July because of problems at Cantab Capital
      © Tolga Akmen/FT
      Chris Flood January 12, 2019

      Hedge funds run by GAM, Schroders and BlackRock delivered significant losses in 2018 as declines for stock markets globally and rising US interest rates led to widespread difficulties for alternative managers.

      Many large hedge funds failed to protect their clients from substantial losses, raising more questions about the performance claims made by some of the investment industry’s best-paid managers.

      Only 16 hedge funds were able to deliver positive returns before fees in 2018 from a universe of 450 monitored by HSBC’s alternative investment group.

      The 2018 wooden spoon went to Zurich-based Entrepreneur Partners’ €79m Trias L/S fund, which invests in German, Austrian and Swiss equities. It lost 26.9 per cent, its second annual loss in the past three years.
      …

      2. “Only 16 hedge funds were able to deliver positive returns …”

        (ahem)

        “… before fees …”

        😁

        “… in 2018 from a universe of 450 monitored by HSBC’s alternative investment group.”

    16. Asian markets fall as China reports slowdown in exports
      By Marketwatch and Associated Press
      Published: Jan 13, 2019 11:53 p.m. ET
      Hang Seng down 1.4%; Nikkei closed for holiday
      Bloomberg News
      Containers sit stacked next to gantry cranes at the Yangshan Deep Water Port in Shanghai, China.

      Shares were lower in Asia on Monday, extending the latest losses on Wall Street, as China reported a slowdown in exports.
      …

      1. fastFT Chinese trade
        China exports fall most in 2 years as slowdown and trade war bite
        Country’s trade surplus with US hits record as importers step up purchases before tariff deadline
        Hudson Lockett in Hong Kong and Tom Hancock in Shanghai yesterday

        China reported a sharp drop in exports for December sending stock markets across Asia lower, as a domestic slowdown and a punishing trade war with the US hit the world’s second-largest economy.

        The 4.4 per cent fall came despite China’s annual trade surplus with the US reaching a record high, as American importers front-loaded their purchases of Chinese goods ahead of an initial January 1 deadline from Washington to increase tariffs on $200bn worth of goods. That heavy buying eased off after both sides agreed to a three-month trade truce in early December, and exports to the US shrank at a slower rate of 3.5 per cent during the month.
        …

    17. Continental warns on profit as earnings fall
      By Sarah Sloat
      Published: Jan 14, 2019 2:37 a.m. ET

      German automotive supplier Continental AG said Monday that its earnings fell in the fourth quarter, and it forecast profitability would decline in the current year.

      “As feared, the decline of the automotive markets intensified significantly once again in the fourth quarter,” said Chief Executive Elmar Degenhart. “This, combined with the profound changes in our industries, is reducing our growth rate.”
      …

  19. I listened to this fascinating story on my commute (text-to-speech on iPhone is a wonderful thing):

    Golf-Home Owners Find Themselves in a Hole
    The Wall Street Journal
    January 10, 2019
    Candace Taylor

    “When Mitch Steller first moved into his house on a lush 117-acre golf course in Southern California, “this was like the Garden of Eden, having a golf course in my backyard,” he said.”

    “Today, his Poway, Calif., home overlooks dry, dead grass in place of a once-verdant fairway. The golf club closed in 2017. “The fairways are brown, the greens are gone, the buildings are being vandalized,” says Mr. Steller, a 70-year-old maritime-management consultant.”

    “When a course closes, prices for nearby homes typically fall about 25%, Mr. Plumley said. Prices can plummet 40% or 50% if a contentious legal battle arises, as potential home buyers balk at the uncertainty accompanying litigation.”

    “But golf’s popularity has declined in recent years, as younger generations haven’t taken to the game with the same level of enthusiasm as their predecessors. Golf participation peaked in 2001, when nearly 30 million people played more than 500 million rounds; in 2017, that figure dropped to nearly 24 million people playing about 450 million rounds, according to the National Golf Foundation. In 2005, there were more than 16,000 golf courses in the U.S.; in 2017 there were fewer than 15,000.”

  20. One thing that is very apparent when I perform a cursory scan of Zillow is that I see tons of houses in my area in the 300k and 400k range that are only 5-10 years old. But even in that short time it is amazing how dated some of the styles are. Tastes can change so quickly, including the appeal of being on a golf course. Theater rooms, pools, styles of cabinets, niche amenities and all end up being oddities to the next buyer, which may end up depressing the price. One man’s treasure is another man’s trash I suppose.

      1. (snip)

        “In 1986, when legendary graphic designer Deborah Sussman used granite countertops in her kitchen, the New York Times called it a “down-to-earth” choice. The next year, it was singled out as a cutting-edge material in the Los Angeles Times, but still too expensive for most people.”

        Too expensive for most people = The root cause of the attraction.

        “Throughout the ’80s, granite was still jockeying with marble for favor among California yuppies.

        “So how did granite go from niche countertop to mass fixation? American imports of granite have increased about tenfold in the past 20 years. It’s not only changing consumer tastes that caused the shift — big global market forces have a hand in the granite takeover as well.”

    2. What was the deal with having a house on a golf course anyway??? I don’t think the younger crowd cares much for golf thankfully.

      A lot of those amenities seem like things invented to justify building larger and larger floor plans (and thus more profitable for land area developed)

      One man’s treasure is another man’s trash I suppose.

      Speaking of which, have you seen the “Tidying Up with Marie Kondo” Show on Netflix – it seems to have sparked a national upturn in interest in getting rid of stuff.. Consignment shops, Goodwill, etc are reporting above average donations.

      https://www.washingtonpost.com/lifestyle/home/the-tidying-tide-marie-kondo-effect-hits-sock-drawers-and-consignment-stores/2019/01/10/234e0b62-1378-11e9-803c-4ef28312c8b9_story.html

      1. I haven’t read Marie Kondo’s book or had a chance to watch the show, but I generally ascribe to her brand of minimalism. Generally when I have less “stuff” I feel more at peace. My son has far too many toys and I’ve been trying to get my wife to teach him the value of donating and giving away so that someone else can have some joy.

        On the flip side, my wife reports that there are a ton of memes circulating about how thankful people are for Marie Kondo’s Netflix show because they can find nice expensive stuff being had on the bargain for themselves and their kids. Go figure!

      2. I think the show sucks as entertainment, but I do fold my clothes in that weird way now and it is awesome!

  22. I’ve been searching closed sales over the past month, and while they’re way down there are still dunderheads offering themselves up for a scalping. What makes people buy at the peak of a mania, especially since the news is now talking about house price declines?

    2. 1. How-much-a-month can they afford to pay?
      2. How-big-a-loan can they get, based on their monthly payment limit?

  23. Any thoughts on how much longer the “pump” phase of Wall Street’s pump-and-dump operation currently underway is going to last?

    1. Dec 31, 2018, 5:18 pm
      When The Stock Buybacks Go Bye-Bye
      Jesse Colombo, Contributor
      Markets
      Amazon and Apple stock prices are shown on an electronic screen.
      (AP Photo/Mark Lennihan)
      ASSOCIATED PRESS

      Debt-funded stock buybacks have been one of the major drivers of the U.S. stock market boom since the Great Recession. Ironically, 2018 was the most active year on record for buyback activity, yet the stock market faltered and experienced its first annual loss since 2008. If the stock market performed as poorly as it did in 2018 with record amounts of buybacks to prop it up, just imagine how much worse it would be if buybacks were to slow down significantly or grind to a halt? Well, that is the risk that I’m going to address in this piece.
      …

    2. Markets
      A $9 trillion corporate debt bomb is ‘bubbling’ in the US economy
      Published Wed, Nov 21 2018 • 7:21 AM EST Updated Wed, Nov 21 2018
      • 1:17 PM EST
      Jeff Cox

      Key Points
      – Companies are carrying a $9 trillion debt load, posing a potential threat should rates continue to rise and the economy weaken.
      – Most Wall Street bond experts think the issue is contained for the next 12 to 18 months, though one says the market’s “angst” is “not misplaced.”
      – A principal worry is over companies teetering between investment grade and junk that could cause market trouble should their standing deteriorate.

      At first glance, it looks like a $9 trillion time bomb is ready to detonate, a corporate debt load that has escalated thanks to easy borrowing terms and a seemingly endless thirst from investors.

      On Wall Street, though, hopes are fairly high that it’s a manageable problem, at least for the next year or two.

      The resolution is critical for financial markets under fire. Stocks are floundering, credit spreads are blowing out and concern is building that a combination of higher interest rates on all that debt will begin to weigh meaningfully on corporate profit margins.

      “There is angst in the marketplace. It’s not misplaced at all,” said Michael Temple, director of credit research at asset manager Amundi Pioneer. “But are we at that moment where this thing blows sky high? I would think that we’re not there yet. That’s not to say that we don’t get there at some point over the next 12 to 18 months as rates continue to move higher.”
      …

    3. Home
      Markets
      U.S. & Canada
      Market Extra
      These 5 charts warn that the U.S. corporate debt party is getting out of hand
      By Sunny Oh
      Published: Nov 30, 2018 8:45 a.m. ET
      Powell and Yellen have both highlighted the buildup of corporate debt in the U.S

      Investors, financial regulators, and now the Federal Reserve are voicing concerns about the U.S. corporate bond market.

      Recalling the 2008 crisis, worriers say excessive leverage is building among U.S. firms, many of whom took advantage of low interest rates after the financial crisis to load up on cheap debt. But with the Federal Reserve still forecast to raise rates three times next year, according to central bank’s so-called dot-plot forecast, and the global economy showing signs of losing steam, there are fears the once-favorable forces propping up corporate balance sheets are now on the wane.

      “Many of the painful lessons taught by the [global financial crisis] seem not to have had a particularly lasting effect on the U.S. corporate sector’s behavior,” said Edward Marrinan, head of North America credit strategy for HSBC, in a note.
      …

    4. I guess we’ll soon find out if hair-of-the-dog hangover cures really work.

      Opinion
      How could the global economy crash? Let us count the ways

      Andy Xie says the stock sell-off in the US and elsewhere and the sharp decline in property prices all add up to more debt trouble at a time when debt is already sky-high. A repeat of the global financial crisis of a decade ago seems certain

      Andy Xie Andy Xie UPDATED : Monday, 24 Dec 2018, 7:03AM
      11

      The US stock market has finally slid into the bear market territory, joining other major markets that have been there for some time. Valuation normalisation will drive the bear trend well into 2019. The decline of property prices in major bubble markets is likely to accelerate into the new year. These trends could trigger debt crises in the high-yield corporate debt and mortgage markets.

      While the debt increase since the 2008 global financial crisis has been driven by securities, a significant chunk of the troubled debt could be sitting on the balance sheets of major banks. A global banking crisis is also possible.

      The economic recovery since the financial crisis has been led by debt. All major economies today have higher debt relative to their gross domestic product than 10 years ago. If too much debt was the trigger of the last financial crisis, even more should trigger another.
      …

    5. What should muppets do in case of another scary stock market plunge? By all means HODL, of course!

      Personal Finance
      Safe For Now? But In The Next Stock Market Scare, What Should You Do?
      PAUL KATZEFF 1/11/2019

      Rub your lucky rabbit’s foot. Kiss your four-leaf clover. We seem to have dodged a bullet. The stock market is rebounding after its fourth-quarter sell-off. But if the volatility has not ended — or when the next stock market crash occurs — what should you do with your mutual funds? Convert them all to cash or bonds? Or stay the course?

      Going totally to cash with the long-term, diversified portion of your portfolio — your long-term mutual funds — is actually likely to inflict more damage on those investments than the market’s temporary volatility.

      So in the next stock market crash, the best advice for the long-term, diversified portion of your portfolio is to sit tight, stay the course, stay invested.
      …

    7. Companies
      Lingering US-China tensions, economic slowdown could set stage for rough first half for investors, analysts say
      – World Bank has warned that outlook for the global economy has ‘darkened’ in 2019
      – KKR’s Henry McVey turns to Macbeth as he advises investors to be cautious, but stay in the markets
      Chad Bray
      UPDATED : Monday, 14 Jan 2019, 9:33AM
      …
      In advising investors to stay in the market, but warning that it is “not business as usual”, Henry McVey, the head of global macro and asset allocation at private equity firm KKR, quoted Macbeth in his outlook for the year: “I am in blood. Stepped in so far that, should I wade no more, Returning were as tedious as go o’er”.
      …

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