thehousingbubble@gmail.com
Blog

Stuck In A Morass Of Poverty

A weekend topic starting with KSL in Utah. “Jim Wood, Ivory-Boyer Senior Fellow at the Kem C. Gardner Policy Institute, said housing prices in Salt Lake County have climbed 80 percent since 2005. ‘That (housing price increase) includes a period in which we had 16 continuous quarters of decline in housing prices,’ he said. Among the concerns surrounding such robust growth is the fact that housing prices are increasing much faster than household income, he noted.”

“‘Affordability is a really serious issue,’ Wood said. ‘It’s really difficult because our wage rates and income just hasn’t grown. We’re getting income growth of 2 percent and housing growth of 5 percent, and if we lose the advantage of low-interest rates, that makes it much more difficult for (young people) to buy.'”

“‘Wealth creation really comes from homeownership for most households’ he said. ‘The median net worth of a homeowner is about $231,000, while the net worth of a renter is about $5,000.'”

The Visalia Times Delta in California. “The average home price in Visalia is about $280,000 after accounting for new construction and ongoing developments sprawling around the city. ‘These newer homes will likely sell for between $300,000 and $380,000,’ said Mike Gutierrez, co-owner of Visalia’s largest real estate firm. ‘They target mainly upper-middle-class residents — couples who work as nurses or correctional officers, for example — who have built up enough equity in their first homes to buy something nicer.'”

“While Visalia’s more prosperous residents enjoy some of the lowest housing prices in the state, local affordable housing experts point out that the area also suffers among the highest rates of poverty in California. One in five Visalians live in poverty, according to the latest Census Bureau data, and across the county it’s closer to one in four.”

“Last week, the Kings and Tulare Homeless Alliance preliminary registered close to 400 homeless at the Anthony Community Center during their annual point-in-time count. As a Realtor and Visalia Emergency Aid Council board member, Brian Gilbert is a firsthand witness to both Tulare County’s immense poverty and relative prosperity.”

“‘It is our responsibility (as Realtors) to find ways to get people into homes — to eliminate those barriers-to-entry that keep many would-be first-time buyers away,’ he said. Gilbert acknowledges that’s easier said than done. ‘How do we get out of being one of the poorest counties in the state to become prosperous?’ Gilbert said. ‘Otherwise, we’ll be stuck in a morass of poverty.'”

The Arizona Republic. Administration of Resources and Choices, or ARC, a U.S. Department of Housing and Urban Development-certified housing counseling agency, provides free housing counseling to Arizona residents regardless of whether they are facing foreclosure or want the tools to enter the housing market as a prequalified home buyer.”

“Though the housing crisis has largely subsided, Debbie Chandler, executive director of ARC, said the need for housing counseling and foreclosure assistance is still there. ‘The demand is certainly less than it was, but the market is changing,’ Chandler said. ‘People are beginning to buy houses and the economy has recovered to some degree.'”

“She said many homeowners who are getting back into the market are buying homes barely within their means and, following the recession, have little reserves for when financial circumstances shift. ARC housing counselor Ines Huerta-Galarza said they are starting to see more homeowners late on payments who have only been in their homes for a few years.”

“‘Today, the minute something happens — someone loses their job or the car breaks down — there are no reserves to make sure they will be able to continue making payments on their homes,’ Huerta-Galarza said.”

Related Posts
This Post Has 66 Comments

  1. ‘She said many homeowners who are getting back into the market are buying homes barely within their means and, following the recession, have little reserves for when financial circumstances shift. ARC housing counselor Ines Huerta-Galarza said they are starting to see more homeowners late on payments who have only been in their homes for a few years’

    Remember a few months ago when Attom reported more foreclosure starts from the 2014 loan group (when standards started getting thrown out the window) than the “legacy” stuff from last decade? Funny how they dropped that like a hot potato. Anyway, here we go again Phoenix.

  2. ‘‘Wealth creation really comes from homeownership for most households’

    ‘housing prices in Salt Lake County have climbed 80 percent since 2005. ‘That (housing price increase) includes a period in which we had 16 continuous quarters of decline in housing prices’

    Oh, yeah that 16 month crater thing. It’s pretty hard to build wealth if prices sink like a turd in a well every ten years or so Jim.

    So let’s shoot this down once again: shacks don’t produce wealth. To cash in on a mania some other poor bashtard has to pay you, with borrowed money. Nothing was produced, no wealth created.

    Housing bubbles make you poor and then they pop.

    1. “To cash in on a mania some other poor bashtard has to pay you, with borrowed money.”

      With federally guaranteed lending, ultimately backed up by bailouts, paying for the mania is forced on those who want no part of it.

    3. I’vebeen Binging on Dave Ramsey videos. Even he says that if a poor person buys a house, it just makes them poorer. Only people within their means (and out of debt) should buy a house. Only then does it make them wealthy.

    4. You mean borrowing hundreds of thousands of dollars to buy a depreciating asset won’t make me rich? Shoot, at least I get to write off a portion of the price on my taxes each year… Wait, wut?!

    5. From the comments section under the KSL (Salt Lake) article. “Orwell” is a realtor.

      Orwell · 18 hours ago
      There’s no bubble. The housing market is supported by sound economic forces. Jobs are solid, incomes are solid, unjustified speculation is almost non existent. Non of the same factors that existed in 2008 exist today. As a realtor, all the demand in the market last year was at entry level. Expect to see more of that but with less growth than last year. Entry level inventory is increasing and will catch up by this year. Middle level and high end homes are already exhibiting the behavior of a normal healthy market (2-3% annual growth).

      1. This is my neck of the woods, so I have to comment. I run a new, market-rate apartment community in the greater Salt Lake area. 175 units in phase 1, 340 combined with phase 2. This unaffordable housing situation is great for the rental market (until people start sleeping in their cars that is). We have 3 units available right now and our 2nd phase will come online in 6 months. So we are virtually completely leased up (occupancy at 95%). I do market surveys with CBRE and all the other large complexes to bench mark almost every month. Salt Lake city “luxury” is still way lower than Denver, and I consider Denver our closest competitive market. Still, things are looking frothy. But buying is way more distorted than renting.

        The builders are not producing affordable housing, so renting is the only alternative. But I do see the trauma of people not able to make ends meet in our unit. On the one hand you have an RN making $50k and a young business analyst making $55k with no kids who can easily afford the $1085 monthly base rent. But low wage service workers in the $10-$12 range are out of luck. It is a bifurcated market. Add kids into the mix and you are running the risk of severe poverty. The tenants I worry about are those with kids.

        Utah housing will seriously dive the moment things start to get worse in California because a lot of equity locusts cash out in CA and bid up prices here.

          1. Both. Live in St. George, work in SLC. I am up north 4 days a week. Stay on site when I am there.

  4. “‘It is our responsibility (as Realtors) to find ways to get people into homes — to eliminate those barriers-to-entry that keep many would-be first-time buyers away,’ he said.

    Translation: you, the mortgage broker, and the “affordable housing advocates” all want your cut, then you’ll wash your hands of any further responsibility for putting people into houses they won’t be able to hang on to. What a scam.

    1. This reminds me of the 2006 PBS show featuring a Hispanic realtor in CA making house deals on the sidewalk. PBS had the guts to follow up on the realtor a few years later when it went bust. The FBs had come back to the realtor — after all, he was their “brother” — asking if he could “do anything” for them. Like keep them in the house a little longer? Heh. Family ties don’t don’t work at a bank. Welcome to America.

  5. “‘Today, the minute something happens — someone loses their job or the car breaks down — there are no reserves to make sure they will be able to continue making payments on their homes,’ Huerta-Galarza said.”

    Heckova job, Ben & Janet.

    1. May 25, 2018

      “In his corner of American finance, where hard selling meets hard luck, Angelo Christian is a star. Each time Christian sells a home loan, the company he works for, American Financial Network Inc., takes as much as 5 percent. Many of Christian’s customers have no savings, poor credit, or low income—sometimes all three. Some are like Joseph Taylor, a corrections officer who saw Christian’s roadside billboard touting zero-down mortgages. Taylor had recently filed for bankruptcy because of his $25,000 in credit card debt. But he just bought his first home for $120,000 with a zero-down loan from Christian’s company. Monthly debt payments now eat up half his take-home pay. ‘If he can help me, he can help anyone,’ Taylor says. ‘My credit history was just horrible.’”

      “Christian can do this kind of deal because he is, in effect, making the loan on behalf of the federal government through its most important affordable housing program. It’s a sweet deal: He gets his nearly risk-free commission. Taylor puts no money down. If things go south, the government ultimately bears the risk. Many borrowers ‘are living paycheck to paycheck and, if they lose their jobs, they go into default immediately,’ says John Burns, a housing consultant.”

      http://thehousingbubbleblog.com/?p=10443

    2. The pauperization of the middle and lower middle is the lasting legacy of Ben & Janet. But what do they care. They are out enjoying fat salaries and speaking fees.

    3. • Ken Griffin, the founder of Citadel, recently bought the most expensive house in the US, for 238 million.

      • Bernanke works for that guy.

      Quite the revolving door between the Fed and Wall Street.

      We rely on scientists and academics to tell us how nature and human systems work. If you can influence those people, you have intellectual cover for whatever you want to do. The sugar industry paid Harvard researchers to say sugar was harmless and it was fat that was harmful. Today we see “real estate” think tanks at top universities, funded I’m sure by the FIRE sector. We see a lot of justification for monetary policy redistributive actions.

      Monetary policy is the manipulation of the money supply to bring about prosperity. It is focused on purchasing power redistribution. Printing money and giving it to favored partners, inflation and interest rates (transferring purchasing power from savers to debtors). Easy to do, can be done with the stroke of a pen. It’s not the chaotic creation of businesses or intellectual property which creates the actual value which money represents.

      Monetary policy today is very trickle down – give this purchasing power to the top (Wall Street), the people who purportedly can do the most good with it, and let them make jobs and businesses and let the money and products flow through the economy.

      Elizabeth Warren (and for that matter Trump) spoke some truth about Wall Street early on. But everyone is going to do what’s best for them. Warren was speaking about one of the big three issues impacting young people today – education costs (the other two being medical insurance and housing/rental costs). She had an opportunity to cut to the core of the issue, the government pumping so much money into higher education. Did she do it? Of course, not, she’s a professor. Instead she was talking about lower student loan interest rates.

      Another thing – interest rates had been dropping since the late 80s. Coinciding with the great bull market in stocks as money sought returns. What we’re seeing, interest rates at very low levels is where politicians want to push them. They’re “maxed” at their lower bounds. High real estate prices, bolstered by government and central bank policies are loved by politicians as it yields in more tax revenue. These are getting “maxed” at their upper bounds, coinciding with Peak Debt. Trump talked about the causes of asset bubbles before winning the presidency but after winning it, he wants the low interest rate / large balance sheet (lot of money being pumped into Wall Street/the economy to maintain that balance sheet size).

      Going forward, we see that low interest rates and large Fed balance sheets are probably here to stay – it’s where all politicians want them to be, and where the FIRE sector, which is more powerful than the military industrial complex (heck, it might more powerful than the biggest companies in history, like the Dutch East India company) want it to be.

      The question then becomes, with the economy at or near peak debt (maybe it wasn’t a supercycle as Dalio conjectured – maybe it was a growth to a high and always slightly increasing plateau), what happens to the speculative component of the stock and real estate markets?

      1. Thought-provoking post. I’ve wondered too about what the implications are for stocks, bonds, and real estate in the apparent retreat of Powell to exert any monetary policy normalcy.

        1. My conclusion is:

          • Monetary policy is trickle down writ large. The money is injected at the top ends of the economy. It creates a lot of income inequality. The rationale is that the money is going to the people who can do the most good with it.

          • Money is power. You can pay people to fight wars, dig canals in Panama, pick up trash at 0500 in subzero temperatures, lay asphalt in 100 degree temperatures, fix cars, work retail, build skyscrapers, dig Panama Canals, conceive of weapon systems. Money is also freedom – it gives you options. People innately sense these things.

          • This trickle down injection of money has led to income inequality, which has stoked populism. The PTB don’t like populism.

          • Interest rates have been on a downward trajectory for 30 years, juicing the markets. They’ve hit the lower bound, but in raising them, it’s threatened to harm various financial markets.

          • Debt has been on an upward trajectory for 80 years, juicing the markets. No supercycle, no beautiful deleveraging for the commoner (there was a beautiful deleveraging for the banks – the debt was taken onto the public account by money printing), just perhaps a plateau eventually.

          • As a result of the interesting rates hitting the lower bound and debt hitting the upper bound, that might limit speculative demand due to price flattening. OTOH, as long as more money is going into a market than leaving, the market prices keeps going up. A large Fed balance sheet helps that happen.

          • As far as monetary policy normalization goes, dropping interest rates and increasing debt “juices” the dashboard indicators for prosperity, but people were under stress as far back as 2008, with the election of Obama. They elected a black guy with a foreign name over a white war hero – the electorate wanted something very different (Narrator: “They didn’t get it.”) Ditto with Trump (remember “deez nuts” did well in one of the early primaries).

          • So interest rates continuously dropping and finally bumping along the lower bound (all politicians want lower interest rates, thus it happens); a large and growing balance sheet; Peak debt plateauing higher with low interest rates (no supercycle only a ramp up to its maximum plateau) – what are the implications?

          • Speculative demand was strong in housing it seems to me, based on the frequency of flippers and very low down loans. Very low down loans lead to high monthly payments which would seem onerous and hard to sustain for owners, but for speculators, it leads to limiting one’s downside in case things go bad – you just stop paying the loan. If it’s non-recourse debt, you’re golden. If the debt is owned by a logical construct (a business), big deal then too, because the business can be dissolved and the individuals are protected and walk away with their salaries.

          • The large balance sheet sucks debt out of the system, allowing more mortgage debt to be created, which is good for speculators ONLY IF they can sell at yet higher prices to end consumers. But low interest rates and Peak Debt limit their ability to bid prices higher.

          Summary: The FIRE sector has quite clever people; politicians want higher RE and stock prices; but interest rates near zero and Peak Debt (the max level in 2008 in the context of interest rates and serviceability) has been reached or will be, which seems to limit how much higher prices can go. But note the first sentence – never count those folks out. With the intellectual cover for monetary policy’s redistribution, perhaps they can come up with new ways to keep juicing the markets. What that would be, I don’t know – think of any scheme to keep pumping money into the RE and stock markets, no matter how harebrained or how transparently it benefits the FIRE sector and politicians, and they could implement it. But the “natural” forces of dropping interest rates and rising debt are becoming constrained.

          1. “They elected a black guy with a foreign name over a white war hero – the electorate wanted something very different (Narrator: “They didn’t get it.”) Ditto with Trump”

            Obama appeared different but Obama and McCain were two sides of the same coin. If Trump weren’t different, he wouldn’t be so maligned.

          3. Excellent post connecting the dots. You’ve thought this through well I believe. I tend to think housing prices will either collapse or stagnate as inflation ratchets up wages and prices of other things while housing is subdued. Alternatively, housing could just become a luxury good.

            The big wild card in my mind is demographics in which death of baby boomers may force more inventory to the market despite the chicanery of delisting and relisting for wishing prices. Housing is binary right now (buy vs. rent) so until a viable “none of the above option” comes along (which we are seeing in Nomadism RV culture and homelessness explosions), then the rent seeking is fungible on either side. Creativity, luck, and some planning can be one way to mitigate against the distortion of the Fed, but most of the solutions to escape the madness entirely (e.g. living on a boat) are not scale-able or practical.

          4. living on a boat

            In my observation, living on a boat as I do a lot, People don’t want to do this in any number that would strain the potential scale. The numbers have been in such steady decline as to put a lot of facilities for living aboard out of business.

            People have overpaid for big houses not because of lack of practical choices.

      2. a high and always slightly increasing plateau

        This would require a complete repeal of reality. That “plateau” has an ever increasing amount of air beneath it.

      3. “Trump talked about the causes of asset bubbles before winning the presidency but after winning it, he wants the low interest rate / large balance sheet (lot of money being pumped into Wall Street/the economy to maintain that balance sheet size).”

        It’s only been two years. I think it’s too early to say this is what Trump wants. He needed a strong economy to re-negotiate trade deals. Monetary reform may come after that.

        1. All politicians want to see a high stock market, and the vast majority of state and local politicians want to see high RE prices as it yields high property tax revenue (state and local politicians influence their federal senators and house of representatives members). Trump does not want a stock market crash, or an RE market crash, on his watch, because politics. This makes them want lower interest rates. This is a political tidal force, barring a high inflation environment as in the early 80s.

          No matter how lucidly they speak of the economy (which just indicates they understand what’s going on), when they get in office, what constitutes “winning” and “a legacy” changes. So it goes back to wanting low interest rates, and the juicing of the financial markets with a large balance sheet.

  6. “‘Wealth creation really comes from homeownership for most households’ he said.”

    Sometimes this statement is true, sometimes it isn’t.

    Go here:
    https://goo.gl/images/Tk45v6

    If ignorant pukes WHO CAN GET ACCESS TO THE MONEY decide to bid up home prices then everyone who has a comp gets to enjoy a fresh shot of equity. If the home buying puke gets shut out of getting the money and the price of houses decline as a result then everyone who has a comp gets to watch his home equity experience a reduction; Some get to watch their equity go negative.

    1. U.S. society, or at least the MSM, seems to have developed a collective case of amnesia about the several years of widespread underwaterness that afflicted U.S. homeowners in the post-2008 period before the Fed rode in to the rescue with several rounds of Quantitative Easing. I remember well how bitter the FBs in my circle were at the time about their self-inflicted victimhood.

    2. “Some get to watch their equity go negative.”

      Those who buy just ahead of a mania peak are particularly likely to get stucco.

    3. Not included among the reasons renting may be better than owning: Buying a house during a real estate mania could leave you deeply underwater and owing a debt which you will never be able to repay over your future lifetime on an asset whose value has collapsed.

      Jul 14, 2018, 11:44am
      3 Reasons Why Renting A Home May Beat Buying
      Camilo Maldonado
      Contributor
      Personal Finance
      I cover the best practices for personal finance and paying down debt.

      When it comes to buying vs. renting a house, there is always a passionate debate about which makes the most financial sense. Both sides have valid points, so it can be a bit confusing. The recent changes in the tax law have also made owning a home less financially advantageous, so the buy vs. rent dispute continues to evolve.

      A common argument for buying is, ‘Why would you pay monthly rent to a landlord instead of building equity in a home for yourself?’ In reality, there are many financial reasons why renting may be more compelling. You also need to make sure you understand whether you are even in a good position to buy a house. Your finances are not your only consideration either. If your social, professional AND financial lives aren’t in order, now is probably not the right time to be buying.

      Now, let’s break down this buying vs. renting decision and some of the important factors.

      1. The true cost of homeownership is higher than many anticipate. There seems to be a widely held belief that buying a home always makes more sense than renting. That it’s a foregone conclusion. You often hear that ‘every dollar you pay in rent is a dollar you’ll never see again,’ while buying a house is a ‘great investment.’ This is misguided for a few reasons.

      Paying rent isn’t a waste of money. Yes, you won’t see your money again, but you are getting something in return: shelter for yourself and your loved ones. Even when you buy, you’ll be spending a lot of money on interest payments, taxes and other fees — money you will never see again. These payments are not helping you build equity. Owning a house isn’t just sunshine and rainbows.

      When it comes to thinking about the true cost of homeownership, you need to have a holistic view of all of the related expenses. At first glance, a mortgage payment might be less than your current monthly rent, but that mortgage is just the tip of the iceberg. For many people, the associated costs of homeownership might run as high as 50%+ of their mortgage payment. Ouch.
      …

      1. “There seems to be a widely held belief that buying a home always makes more sense than renting.”

        Put another way, there are lots of abysmally stupid people when it comes to personal finance. And our government favors programs to help protect fools from self-inflicted financial folly.

        1. Perhaps I have been overly harsh on the average prole, whose financial education came from the Real Estate Industrial Complex’s 24/7 propaganda campaign, added and abetted by their MSM toadies.

      2. “Your finances are not your only consideration either. If your social, professional AND financial lives aren’t in order, now is probably not the right time to be buying.”

        Therein lies the juggling act.

        1. Juggling while on a roller coaster is an apt analogy for trying to buy a home during these last two bubbles.

        2. A couple down the street from me just parted ways. It’s going to be a rancorous divorce. Their oldest daughter, who had just started college, will have to move back home and get a job to help her mom make ends meet. Even then, it’s going to be a stretch for them to keep up with their mortgage payments. They already had to sell their new SUV (less than a year old) for a steep loss. If the value of the house drops, they are really going to be in a bind. Add financial stress to already unstable marriages, and an awful lot of mortgages that depend on two full-time incomes (at least) are going to be non-performing.

          2. One often overlooked side effect of divorce is pressure on the housing stock. I toured a soon-to-be divorcee last Wednesday. She was renting a townhouse with her husband for $1800. She had 1 daughter and was looking for something on her own. She toured but couldn’t afford our rent. Divorce often creates two households out of one and in the aggregate this increases demand for housing and pushes up prices. And when you can’t build affordable housing for the myriad structural issues we talk about on a day-to-day basis the population gets squeezed.

          5. “Add financial stress to already unstable marriages…”

            Sounds like a recipe for a “dead bedroom.” 🙂

    4. Buying a house for wealth creation does work IF you buy a house, live in it for 30 years, pay it off, and then live in it during retirement without a mortgage. Bonus points if you bought a big house in a city, and you sell it and live in a cheaper single wide in the sticks mortgage free, pocketing your profit.

      But how often does that happen? Almost never.

      2. The real “wealth creation” i.e. rent-seeking in residential real estate is in land development, construction, mortgage lending and Real-tarding. None of those categories hold the property or have any “skin in the game” after it’s sold. It’s all about the skim.

  7. A nation of broke-assed losers.

    “She said many homeowners who are getting back into the market are buying homes barely within their means and, following the recession, have little reserves for when financial circumstances shift. ARC housing counselor Ines Huerta-Galarza said they are starting to see more homeowners late on payments who have only been in their homes for a few years.”

    “‘Today, the minute something happens — someone loses their job or the car breaks down — there are no reserves to make sure they will be able to continue making payments on their homes,’ Huerta-Galarza said.”

    My bread-and-butter.

  8. America The Beautiful, $tart your “Touri$t” vacation a$ap, … just hop on a jet plane! … (coming soon, more luxury Irvine Company apt$!)

    FED$ ALLEGE MULTI-MILLION-DOLLAR CHINE$E BIRTH TOURI$M THRIVED IN IRVINE, CA
    MATT COKER | POSTED ON FEBRUARY 1, 2019 |OC Weekly

    The trio is alleged in the indictments with running operations that advertised the benefit$ of giving birth in the U.$. as opposed to China with claims of the $tates having “the most attractive nationality;” “better air” and less pollution; “priority for job$ in U.$. government;” superior educational re$ources, including “free education from junior high school to public high school;” a more stable political situation; and the potential to “receive your senior supplement benefits when you are living overseas.”

    Li allegedly used 20 apartment$ in Irvine for her You Win U$A busine$$ that advertised of having a “100-person team” in China and the U.S. that had served more than 500 Chinese birth tourism customers. The indictment claims You Win USA charged each customer $40,000 to $80,000 and received $3 million in international wire transfers from China in just two years.

    1. “priority for job$ in U.$. government;”

      Good government jobs for new Chinese arrivals? Interesting!

      1. “Alleged operators are accused of having committed widespread immigration fraud, international money laundering and fraudulent leasing of apartments and houses used in birth tourism schemes, according to the indictments that are based on investigations by HSI, IRS Criminal Investigation and the Irvine Police and San Bernardino County Sheriff’s departments.”

        https://ocweekly.com/feds-allege-widespread-chinese-birth-tourism-operations-thrived-in-irvine/

    4. There is a birthing house around the corner from my BIL’s house in Irvine. HOA says they cant do anything, it seems.

      1. I kind of miss the old west, where an angry neighborhood mob would grab the house owner and lynch them. Nobody seems to set up another “birthing house” for illegals after that.

        1. I share your disdain for these types of shenanigans. I for one would certainly be in favor of ending birthright citizenship. But I’m sure glad sure lynching is a relic of the past.

          1. Lynching reminds me of less advanced and intolerant societies like we are seeing in Pakistan. Read up on Asia Bibi who is a Christian minority in Pakistan and the lynch mob coming after her for blasphemy against the prophet Mohamed.

        2. An anonymous tip to one the four authorities given here should suffice. HSI is probably the safest given how maligned ICE is.

  9. ‘The median net worth of a homeowner is about $231,000, while the net worth of a renter is about $5,000.’

    How’s that comparison going to shape up if the collective highly-leveraged gamble on housing ever goes south?

    I guess we’ll find out soon enough!

  11. Who knew London luxury properties had been crashing ever since 2013? And the Brexit hasn’t even happened yet!

    The Financial Times
    House & Home
    London’s cut-price mansions: expect more deep discounts
    Ken Griffin’s £95m purchase is just the start of a slew of prime property bargains, experts say
    Hugo Cox
    January 29, 2019

    When news broke that US hedge fund manager Ken Griffin paid £95m for a London mansion, it made headlines on both sides of the Atlantic. It was not the amount the billionaire founder of Citadel paid for the home that caught the attention of property pundits — he went on to make an even pricier purchase in New York several days later — but the price he did not pay.

    The 20,000 sq ft home near Buckingham Palace, remodelled by property developer Mike Spink and backed by private equity group Evans Randall, had an initial asking price of £145m and had languished on the market for two years priced at £125m.

    According to London buying agents, Griffin’s cut-price purchase last week may be just the start, as fears grow over the health of the city’s prime property market, spooking lenders and sparking an increase in heavily-discounted sales.

    Falling prices and slowing sales of homes valued above £5m — transactions of such properties in 2018 were 36 per cent lower than in 2014, according to Savills — have led to banks and other lenders routinely revaluing homes downwards, agents say, and requesting more cash from developers who are already strapped. Many must now slash prices, accept low offers or face collapse.

    “I have seen more repossessions of super-prime homes in central London in the last year than in the 10 years prior,” says Roarie Scarisbrick of Property Vision, a buying agent focused on prime central London.

    Smaller, niche developers have been hit hardest, says Henry Pryor, another buying agent based in London. “A lot of the funders of these developments are offloading their positions, turning the screw on developers,” he adds. “The hedge funders who thought that property was a doddle are getting out.”

    “It’s worse for the single house developers, especially those who bought sites in 2013 and 2014 at the high point in the market,” says Scarisbrick.
    …

  13. “Ivory-Boyer Senior Fellow at the Kem C. Gardner Policy Institute”

    Ivory Homes
    Boyer development
    Gardner Development
    KSL runs tons of realtor, developer, and mortgage lending ads.

    Totally credible. No conflict of interest. Totally trustworthy information.

  14. I was thinking about what would have to happen for current housing prices to become affordable without falling. With the recent very good job numbers, it does look like the labor market could start to exert upward pressure on wages. If, and this is a hypothetical, wage growth starts to outpace housing price growth for the next 7 years, then maybe current prices can be sustained. Of course, none of that applies to the super bubblicious coastal markets. But if you had flat home price appreciation or even a decline of 1-2% while simultaneously having wage growth hit 3-4%, then maybe the price to income ratio gets back to a sensible number. In other words, you have to have wage-price inflation while having housing price stagnation. Maybe the Fed is trying to engineer that.

    1. Maybe the Fed is trying to engineer that.

      Makes sense if we are actually trying to find a way back to something sustainable. I don’t think we are, though. We’re addicts now, we don’t think that far ahead any more.

  15. “‘Affordability is a really serious issue,’ Wood said. ‘It’s really difficult because our wage rates and income just hasn’t grown. We’re getting income growth of 2 percent and housing growth of 5 percent, and if we lose the advantage of low-interest rates, that makes it much more difficult for (young people) to buy.’”

    Nothing like waiting until the absolute pinnacle of the bubble price spike to start worrying about affordability. I’d offer to shut the barn door after the horse has gone missing, but the barn door itself is now missing, too, having been beaten to smithereens over the years by the relentless winds until it finally fell off and became part of the earth.

    And about those young people you need to “buy” at these nosebleed prices – JUST. NO. I mean, seriously, don’t make me vomit with disgust. The boomers who hold all the real estate and wealth somehow think a bunch of broke millennials are going to somehow fund their retirement with some suicide loan? Get real. You’re going to die there, blue hair. LOLZ.

Comments are closed.