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Welcome To The World Of FONGO

It’s Friday desk clearing time for this blogger. “Nearly a quarter of Denver-area residents looking for a home on Redfin are conducting their searches outside the metro area. That probably would be just another number, except that metro Denver’s housing market corrected sharply in the second half of the year. ‘We are going to shift into more of a buyer’s market,’ predicted Martin Mata, a Redfin agent in Denver.”

“Area agents and home sellers say they noted a shift in market psychology as early as last summer, following 3 ½ years of a red-hot seller’s market. ‘It gets frustrating for (home sellers). It’s like you’re having a party and no one shows up,’ said Noel Palmieri, a Century 21 agent based in the San Gabriel Valley. ‘We’re not getting the showings like we were. Things aren’t flying off the shelf the way they were.'”

“It took 80 days before Century 21 agent Palmieri got an offer for one house she was selling in the city of San Gabriel. It finally sold for $130,000 below its original list price 3 ½ months after it went on the market. In April, Palmieri sold a condo in Monrovia for $620,000, or $35,000 above its $585,000 asking price. By August, she had trouble selling a similar unit in the same complex for $575,000. ‘It was tough,’ she said.”

“There is now a surfeit of luxury apartments for sale in Manhattan, many of them shrinking in scale and price. Outliers may continue to emerge, but their sales will have increasingly little to do with the market at large. While One57 set a high-water mark when sales began in 2011, recent resales have softened. An apartment on the 63rd floor that sold for $32.5 million in 2014 resold in 2018 for $23 million, a 29 percent price cut, according to StreetEasy data.”

“New home buyers finally reached their limit in Toronto last year. After years of frenzied price increases, sales of new homes in Canada’s biggest city sunk to the lowest in almost two decades in 2018 and the supply of unsold condos piled up, according to a pair of new reports. The number of unsold units in development jumped 47 percent in the fourth quarter from the year before to more than a two-year high.”

“‘The slowdown in activity last year can partly be attributed to less demand from investors, who typically represent the largest component of new condominium purchasers,’ in the Toronto region, according to Urbanation’s report.”

“Some property values across the country are falling faster than the well-documented decline in Bitcoin, according to research from Anyvan. The removal company found huge discounts being applied to property values across the UK. London was the most commonly affected, with prime central London hit the hardest.”

“A two-bedroom flat in Haringey, for example, is now 50% cheaper than it was when it was listed at the start of December last year. Another flat in Norwood Junction has seen its price drop by 47%, while a two-bed apartment in Canary Wharf has declined by more than 45% compared to its original listing price. It’s not just in the capital where property values are plummeting.”

“Homes up and down the country are being affected. Scotland, Wales, Cornwall, Birmingham, Manchester and Norfolk have all seen greater declines than the Bitcoin crash. Angus Elphinstone, the CEO says: ‘Unable to sell their home to move, they’re forced to dramatically drop their price to attract hard-to-find buyers. The last year was certainly a brutal year for the majority of Bitcoin investors, but it’s frightening to see the value of peoples homes fall by such levels in a quick period.'”

“Dubai’s homeowners will have to wait at least a couple more years for a long-running property slump to hit bottom as developers put a record number of new residences on the market this year. Dubai’s residential values have slid about 25pc from the 2014 peak, including a 10pc drop last year.”

“Falling prices pushed 262 homeowners into negative equity in the fourth quarter last year, marking the first time in two years that some property values have dropped below outstanding mortgage loans, the Hong Kong Monetary Authority said. Some small flats have lost up to 20 per cent of their value because of falling property prices.”

“Chris Leung, a lecturer in the department of finance at the Chinese University of Hong Kong, said the number of negative equity cases could exceed 1,000 in the second and third quarter figures because some factors could further dampen home prices. ‘ The failure of the commercial parcel sale at Kai Tak yesterday [Wednesday] reflected the market’s negative views,’ said Leung.”

“After 10 years investing in the property Andres Vargas has keenly felt the market’s sharp turn in the last 18 months. He sold one house near Mt Druitt for a tidy profit last year and has now decided to sell his remaining Sydney investment in Green Valley, west of Liverpool.”

“‘I got it valued at $619,000 by the bank when I was applying for my home loan a year and a half ago,’ Mr Vargas said. ‘I’ve now seen similar properties going up for sale for $540,000, so there is a clear 10 per cent drop there alone. It’s quite scary. The longer I hold onto it, the more I’m losing.'”

“Welcome to the world of FONGO (fear of not getting out) for property vendors, a market sapping phenomenon which has replaced the FOMO (fear of missing out) for buyers that had driven values upwards. Mr Vargas has a very different mindset to that which he had several years ago.”

“‘Everyone pretty much said, every seven years, seven and a half years you’d see your property doubling,’ the Sydney entrepreneur said. ‘I can’t find any good opportunities anywhere in Sydney in terms of growth.'”

“Kobi Boaron had more riding on the fate of the property market than most other buyers. Boaran bought an entire 12 unit apartment block in St Kilda East in inner Melbourne with his business partner at the height of the property market with a plan to renovate and sell.”

“But when they were ready to sell just seven months later, the market had come crashing down. ‘e had no choice but to sell,’ Mr Boaron says. ‘We were worried about the prices coming down even further. I knew it would happen; I saw all the reasons for it to happen … but what surprised me was how quick it changed and how quick it turned down,’ Mr Boaron, a mortgage broker, says.”

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This Post Has 43 Comments

  1. ‘sales of new homes in Canada’s biggest city sunk to the lowest in almost two decades in 2018 and the supply of unsold condos piled up, according to a pair of new reports. The number of unsold units in development jumped 47 percent in the fourth quarter from the year before to more than a two-year high’

    ‘The slowdown in activity last year can partly be attributed to less demand from investors, who typically represent the largest component of new condominium purchasers’

    They’ve got tens of thousands of these airboxes investors will walk away from when completed. This brings up something: remember when the Toronto REIC was saying, “oh, Vancouver already bounced back and it’ll happen here soon!”

    Well Vancouver is still sinking like a turd in a well, and the media never holds these REIC bashtards to account for their terrible calls.

    1. The thing is that most of the Toronto condo investors are losing $s every month. I get the night MLS condo rental listings for 2 bedrooms between $3000 and $4400 (this is a small subset and most are rented through craigslist etc).

      Validating against the $800K to $990K purchase price, they have to be losing $500 – $1500 every month from the mortgage, condo fees and property taxes.

      Wow – sucks that you cannot hold onto it for 2 years and make 20% appreciation

    1. “We want people kept out of prison, families kept together,”

      Are there a lot of people trippin at the PTA meetings in Denver?

      (CNN)The Mile High City might be getting a whole lot higher.

      By Mallory Hughes and Jacqueline Howard, CNN
      Wed January 9, 2019

      An advocacy group has collected nearly 9,500 signatures to get a measure on the ballot in May that would decriminalize psychedelic mushrooms in Denver.

      “We want people kept out of prison, families kept together,” said Kevin Matthews, the campaign director of Decriminalize Denver. “That was the main motivation for this.”

      It’s important to note that the measure would not legalize the use or sale of magic mushrooms in Colorado’s capital but instead would treat possession of the drug as the lowest law enforcement priority.

      https://www.cnn.com/2019/01/09/health/denver-magic-mushrooms-trnd/index.html

  3. boots

    I’ve been tracking my nabe and surrounding nabes. There is clearly a slowdown here, even in “middle class” housing ($300-350K for SFH). Wishing prices are sitting and sitting. Zestimate priced houses used to sell, but now, any house at Zestimate price won’t move unless it’s been fully reno’d. I would consider that effectively a de-facto price drop. If you need a $50K reno to sell at current prices, that’s the same as selling at $50K less than you get.

    2. If you need a $50K reno to sell at current prices, that’s the same as selling at $50K less than you get.

      In a more logical world it would sell for 50k less and people could pick their own updates. But everything is biased toward maintaining full list prices in every area.

        1. At least now. Sellers used to think that by spending $10K on paint and flooring that could ask a multiple of that in the asking price. Obvious “lipstick on a pig” is my biggest pet peeve when looking at houses.

          3. They weren’t too lucky closing on their sale pendings.

            It’s probably a nice house for a family, but it’s nothing spectacular. An average family couldn’t pay this off in their working lifetime.

          4. Haha, exactly! Pretty obvious when you go out shack browsing and spot flaws. I did a post sell fixing up to the shack I sold so it’s easy for me to spot shoty work, “holidays” in paint, unlevel flooring, cheap Home Depot trim, doors, hardware, appliances, etc. almost all the homes I see for sell have homedepot and cheap unskilled labor written over them. Can’t post to your next comment but yeah they need more 8’s, 3 isn’t enough, Mabye a price of 988,888 will sell it to the last superstitious lucky number chasing Chinese specuvestor… lots of those listings around me. I just laugh as they sit there unsold and price reduced but in a way to keep as many 8’s as possible.

          5. The lot and its location are the only things interesting about it. It’s completely unspectacular otherwise but still has a $1M asking price.

      4. Carl, that would be logical, but the buyers in my area are all end-user families. They don’t have the time or energy to renovate. And, they take out a mortgage on that $50K reno, but they can’t come up with $50K cash.

        Just want to clarify that $50K really *is* $50K. It’s not just paint and flooring. It’s paint, flooring, new kitchen, new bathroom, and a full basement reno. The basement reno usually includes installing a bathroom and possibly a small kitchen. (They all rent out the basement to family.) Even at Home Cheapo it can easily add up to $50K.

        1. They don’t have the time or energy to renovate. And, they take out a mortgage on that $50K reno, but they can’t come up with $50K cash.

          If houses were cheaper I bet they could come up with more of all 3.

        2. My apologies for the tangent. Some renovations are real and substantial. I pass on them just as easily.

  5. The last year was certainly a brutal year for the majority of Bitcoin investors, but it’s frightening to see the value of peoples homes fall by such levels in a quick period.’”

    Au contraire, Angus. It’s exhilarating to watch these shack prices tumble back towards sane, affordable valuations. I also get a grim satisfaction out of watching the buyers who made housing so unaffordable hurtle towards insolvency.

  6. Oh man, I love some of these emails realtors send me. This one kinda corresponds with this blog post title FONGO:

    Downtown San Jose looks like it’s set to eclipse many other markets. Imagine the impact if the recently purchased $284m Cityview Plaza (a huge complex of offices, shops and restaurants between West San Fernando St and Park Ave) is redeveloped. Roll that into Google’s interest in creating its downtown village near Diridon Station and we have a whole new economic beast of a boomtown. Remember the old JCPenney building at First & Santa Clara? That sold recently for $46m. And the developments keep coming: Adobe Systems is planning a major expansion of its headquarters with plans to build a fourth tower, and Boston Properties, TMG Partners and Valley Oak have collaborated to develop a 1.1 million square-foot tech campus.

    It’s hard to fathom the impact these developments will have. Can our infrastructure accommodate the prospective 50-70,000 jobs that will be created over the next decade? Bay Area traffic is brutal as it is—I gasped aloud when reading in the Boston Times that congestion on Bay Area freeways has increased by 80% since 2010. No wonder my in-laws swiftly escaped to quieter climes for their retirement. Just when they wanted to apply the breaks to their busy working lives, San Jose was gearing itself for unimaginable swells of development.

    My in-laws were early on the trend of homeowners looking to cash-out and leave the Bay Area. For 5 consecutive listings, I’ve helped clients move not just out of the Bay Area, but out of state! Most are following their kids, who moved out of state to attend college, only to find they couldn’t afford to move back home. They settled elsewhere, started families, gave their parents grandchildren. The grandparents heard the calling and followed their kids. If you find yourself in such a position, let’s hope your children moved somewhere you love! Luckily for most of my clients, once they made the decision (and found peace with paying their taxes), they heartily embraced the idea of a whole new adventure ahead of them. I love being in a position to cheer them on.

    How can I help you or someone you know today?

    1. “Bay Area traffic is brutal as it is…”

      Over a decade ago I read that some 800,000 commuters drive into the San Francisco bay area daily from as far away as Ukiah to the north and Los Banos to the southeast. It’s difficult to imagine subscribing to that lifestyle.

      1. I have to say that we’ve been spoiled (the Mrs & I ) working from home full-time the last 3 and half years. The amount of time you get back and the lack stress is something you get acclimated to quickly. The thought of going back to a long commute is just horrifying.

        1. I’ve been walking to work the past 6 months and while it means I commute, the fact I don’t have to worry about time of day, traffic, stop and go stress, etc, makes a huge difference.

          Totally agree on the lack of stress. Hard to put a price on that.

          1. I worked from my boat for a decade about. It was wonderful.

            The jealousy from HQ cubicle dwellers/commuters was strong.

          2. The most annoying is that this is GOOGLE, not a widget factory. You do not need a 1.1 million sq ft campus to house cubicles. Most of the rank and file can work from anywhere. At worst, simply split the campus into 10 campuses of 5000 workers each.

          3. Most of the rank and file can work from anywhere.

            Don’t agree with this. Yes, technically one just needs a computer and an internet connection, but even in software development, personal/face-to-face/ad-hoc interaction is important and makes a big difference.

            I’m sure there are successful teams all working remotely, but I would posit it’s incredibly rare they’re more effective/efficient than a co-located team

    2. “Most are following their kids, who moved out of state to attend college, only to find they couldn’t afford to move back home.”

      My half-brother, when he got out of the Marines four years ago, moved himself, his wife, newborn baby, dog and cat into my dad and stepmother’s 3BR/2.5BA home. He became a Texas State Trooper last year and moved there. My step-brother and his wife are living with her family here in San Diego. Plenty of homes in my neighborhood also have 3 generations under one roof because of the school district.

    1. Here’s one of the comments to that Wolfstreet article …

      “- A LOT OF australian mortgages are resetting from ‘Interest Only’ (IO) to ‘Principal & Interest’ (P&I) between 2017 and (at least) 2021. That reset means that the holders of those mortgages have to pay some 60 to 70% more in mortgage costs every year.”

      😁

      “– A LOT OF mortgage holders with a IO mortgage are already now struggling financially. So, when those mortgages reset then those households won’t be able to survive financially.”

      😁

      “– It strongly reminds me what happened here in the US after 2003 in the housing markets with the subprime mortgages.”

      Ah, yes, I yearn for a return to those days.

  8. Looking for something in Virginia?

    I hear there’s a Governor’s Mansion getting ready to hit the market.

    By Laura Vozzella ,Jim Morrison and
    Gregory S. Schneider February 1 at 8:11 PM

    RICHMOND — Virginia Gov. Ralph Northam (D) on Friday acknowledged appearing in a “clearly racist and offensive” photograph in his 1984 medical school yearbook that shows a man in blackface and another in a Ku Klux Klan robe.

    https://www.washingtonpost.com/local/virginia-politics/va-gov-northams-medical-school-yearbook-page-shows-men-in-blackface-kkk-robe/2019/02/01/517a43ee-265f-11e9-90cd-dedb0c92dc17_story.html

    1. What I read didn’t say the guy was a bad guy or just had a politically incorrect picture in the same book as him. Conviction by innuendo seems to be popular these days.

    2. Hehe… looks like Northam is going to have to build a cultural center or something, but the first thing on Monday’s agenda is to hire a minority owned Public Relations firm.

      1. No, he’ll be ousted so the more progressive lieutenant governor, who is a minority, takes his place.

        1. “No, he’ll be ousted…”

          That was a college stunt thirty-five years ago. Likely nothing deep, sort of like name-calling while driving.

  10. “Homes up and down the country are being affected. Scotland, Wales, Cornwall, Birmingham, Manchester and Norfolk have all seen greater declines than the Bitcoin crash. … The last year was certainly a brutal year for the majority of Bitcoin investors, but it’s frightening to see the value of peoples homes fall by such levels in a quick period.’”

    It’s amazing to see these speculators getting mowed down in droves, even as the central bankers try their hardest to put the brakes on punchbowl removal.

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