Category Archives: Retail Sales

Premium Homes Dominate Inventory For Sale

Don’t Call It A Comeback: How Rising Home Values May Be Stifling Inventory

https://dwtd9qkskt5ds.cloudfront.net/blog/wp-content/uploads/2017/03/InventoryReport2017Q1_herofinalA.png

By Ralph McLaughin | Chief Economist For Trulia

U.S. home inventory tumbled to a new low in the first quarter of 2017, falling for eight consecutive quarters. Homebuyers have now been stifled by low inventory for the last two years despite prices rising to pre-recession highs in many markets.

https://dwtd9qkskt5ds.cloudfront.net/blog/wp-content/uploads/2017/03/InventoryReport2017Q1_inline1-2.png

In this edition of Trulia’s Inventory and Price Watch, we examine how home value recovery may be limiting supply in markets that have recovered most. We find that homebuyers in markets with the biggest gains are facing the tightest supply.

The Trulia Inventory and Price Watch is an analysis of the supply and affordability of starter homes, trade-up homes, and premium homes currently on the market. Segmentation is important because home seekers need information not just about total inventory, but also about inventory in the price range they are interested in buying. For example, changes in total inventory or median affordability don’t provide first-time buyers useful information about what’s happening with the types of homes they’re likely to buy, which are predominantly starter homes.

Looking at the housing stock nationally and in the 100 largest U.S. metros from Q1 2012 to Q1 2017, we found:

  • Nationally, the number of starter and trade-up homes continues drop, falling 8.7% and 7.9% respectively, during the past year, while inventory of premium homes has fallen by just 1.7%;
  • The persistent and disproportional drop in starter and trade-up home inventory is pushing affordability further out of reach of homebuyers. Starter and trade-up homebuyers need to spend 2.9% and 1.6% more of their income than this time last year, whereas premium homebuyers only need to shell out 0.9% more of their income;
  • A strong recovery may be partly to blame for the large drop in inventory some markets have experienced over the past five years. On average, the more valuable a market’s housing is compared to pre-recession levels, the larger drop in inventory it is has seen.

https://dwtd9qkskt5ds.cloudfront.net/blog/wp-content/uploads/2017/03/InventoryReport2017Q1_inline3.png

2017 Ushers in a Dramatic Shortage of Homes

Nationally, housing inventory dropped to its lowest level on record in 2017 Q1. The number of homes on the market dropped for the eighth consecutive quarter, falling 5.1% over the past year. In addition:

  • The number of starter homes on the market dropped by 8.7%, while the share of starter homes dropped from 26.1% to 25.9%. Starter homebuyers today will need to shell out 2.9% more of their income towards a home purchase than last year;
  • The number of trade-up homes on the market decreased by 7.9%, while the share of trade-up homes dropped from 23.9% to 23%. Trade-up homebuyers today will need to pay 1.6% more of their income for a home than last year;
  • The number of premium homes on the market decreased by 1.7%, while the share of premium homes increased from 50% to 51%. Premium homebuyers today will need to spend 0.6% more of their income for a home than last year.

https://dwtd9qkskt5ds.cloudfront.net/blog/wp-content/uploads/2017/03/InventoryReport2017Q1_v04_inline3.png

https://dwtd9qkskt5ds.cloudfront.net/blog/wp-content/uploads/2017/03/InventoryReport2017Q1_inline4-2.png

How and Where a Strong Housing Market May Be Hurting Inventory

In the first edition of our report, we provided a few reasons why inventory is low: (1) investors bought up much of the foreclosure home inventory during the financial crisis and turned them into rental units, (2) price spread – that is, when prices of homes in different segments of the housing market diverge from each other – makes it difficult for existing homeowners to tradeup to the next the segment, and (3) slow home value recovery was making it difficult for some homeowners to break even on their homes. While there is evidence that investors indeed converted owner-occupied homes into rentals as well as evidence from our first report that increasing price spread is correlated with decreases in inventory, little work has examined how home value recovery affects inventory. This is perhaps due to the tricky conceptual relationship between home values and inventory: too little recovery might make it difficult for homeowners to sell their home but cheap to buy one, while too much recovery might make it easy for them to sell but difficult to buy.

https://dwtd9qkskt5ds.cloudfront.net/blog/wp-content/uploads/2017/03/inventory_bar.png

In fact, we find a negative correlation between how much a housing market has recovered and how much inventory has changed over the past five years. Using the current value of the housing market relative to the peak value as our measure of recovery, we find markets with greater home value recovery have experienced larger decreases in inventory over the past five years. The linear correlation was moderate (-0.36) and statistically significant. We also found that markets with the strongest recovery, on average, have experienced the largest decreases in inventory.

For example, the five-year average change in inventory of housing markets currently valued below their pre-recession peak (< 95% of peak value) isn’t that different from ones that have recovered to 95% – 105% of their peak. (-27.6% vs. -30.1%). However, the average change in inventory in well-recovered markets (> 105%) is 0more drastic at -45.4%.

The disparity also persists when looking at changes in inventory within each segment, although the difference is largest for starter homes. On average, markets with less than 95% recovery or 95% to 105% recovery had a 34.2% and 31.7% decrease in starter inventory, while markets with more than 105% home value recovery had a whopping 58.2% drop. These findings suggest that a moderate home value recovery doesn’t affect inventory much, but a strong recovery does and impacts inventory of starter homes the most.

Secular Trend In Rates Remain Lower: Yield Bottom Still Ahead Of Us

Donald Trump’s victory sparked a tremendous sell-off in the Treasury market from an expectation of fiscal stimulus, but more broadly, from an expectation that a unified-party government can enact business-friendly policies (protectionism, deregulation, tax cuts) which will be inflationary and economically positive. It doesn’t take too much digging to show that the reality is different. The deluge of commentaries suggesting ‘big-reflation’ are short-sighted. Just as before last Tuesday we thought the 10yr UST yield would get below 1%, we still think this now.

https://i2.wp.com/www.kesslercompanies.com/sites/default/files/media/images/10yrlong.png

Business Cycle

No matter the President, this economic expansion is seven and a half years old (since 6/2009), and is pushing against a difficult history. It is already the 4th longest expansion in the US back to the 1700’s (link is external). As Larry Summers has pointed out (link is external) after 5 years of recovery, you add roughly 20% of a recession’s probability each year thereafter. Using this, there is around a 60% chance of recession now.

History also doesn’t bode well for new Republican administrations. Certainly, the circumstances were varied, but of the five new Republican administrations replacing Democrats in the 19th and 20th centuries, four of them (Eisenhower, Nixon, Reagan, and George W. Bush) faced new recessions in their first year. The fifth, Warren Harding, started his administration within a recession.

Fiscal Stimulus 

Fiscal stimulus through infrastructure projects and tax cuts is now expected, but the Federal Reserve has been begging for more fiscal help since the financial crisis and it has been politically infeasible. The desire has not created the act. A unified-party government doesn’t make it any easier when that unified party is Republican; the party of fiscal conservatism. Many newer House of Representatives members have been elected almost wholly on platforms to reduce the Federal debt. Congress has gone to the wire several times with resistance to new budgets and debt ceilings. After all, the United States still carries a AA debt rating from S&P as a memento from this. Getting a bill through congress with a direct intention to increase debt will not be easy. As we often say, the political will to do fiscal stimulus only comes about after a big enough decrease in the stock market to get policy makers scared.

Also, fiscal stimulus doesn’t seem to generate inflation, probably because it is only used as a mitigation against recessions. After the U.S. 2009 Fiscal stimulus bill, the YoY CPI fell from 1.7% to 1% two years later. Japan has now injected 26 doses (link is external) of fiscal stimulus into its economy since 1990 and the country has a 0.0% YoY core CPI, and a 10yr Government bond at 0.0%.

Rate Sensitive World Economy

A hallmark of this economic recovery has been its reliance on debt to fuel it. The more debt outstanding, the more interest rates influence the economy’s performance. Not only does the Trump administration need low rates to try to sell fiscal stimulus to the nation, but the private sector needs it to survive. The household, business, and public sectors are all heavily reliant on the price of credit. So far, interest rates rising by 0.5% in the last two months is a drag on growth.

https://i2.wp.com/www.kesslercompanies.com/sites/default/files/media/images/debt.png

Global Mooring

Global policies favoring low rates continue to be extended, and there isn’t any economic reason to abandon them. Just about every developed economy (US, Central Europe, Japan, UK, Scandinavia) has policies in place to encourage interest rates to be lower. To the extent that the rest of the world has lower rates than in the US, this continues to exert a downward force on Treasury yields.

https://i2.wp.com/www.kesslercompanies.com/sites/default/files/media/images/germus.png

Demographics

As Japan knows and we are just getting into, aging demographics is an unmovable force against consumption, solved only with time. The percent of the population 65 and over in the United States is in the midst of its steepest climb. As older people spend less, paired with slowing immigration from the new administration, consumer demand slackens and puts downward pressure on prices.

https://i2.wp.com/www.kesslercompanies.com/sites/default/files/media/images/oldpop.png

Conclusion

We haven’t seen such a rush to judgement of boundless higher rates that we can remember. Its noise-level is correlated with its desire, not its likelihood. While we cannot call the absolute top of this movement in interest rates, it is limited by these enduring factors and thus, we think it is close to an end. In a sentence, not only will the Trump-administration policies not be enacted as imagined, but even if they were, they won’t have the net-positive effect that is hoped for.  We think that a 3.0% 30yr UST is a rare opportunity buy.

Source: ZeroHedge

Half Of US 1,100 Regional Malls Projected To Shut Down Within Ten Years

Mall Investors Are Set to Lose Billions as America’s Retail Gloom Deepens

https://s14-eu5.ixquick.com/cgi-bin/serveimage?url=http:%2F%2Fwww.craigieburncentral.com.au%2F-%2Fmedia%2Fretail%2Fau%2Fcraigieburn-central%2Fstores%2Fvalley-girl_141127_4d6c7711.ashx%3Fas%3D0%26amp;mh%3D1130%26amp;hash%3D3118AD3BE592874BE15014D2CD42EF6C8B3E9FC0&sp=4e97ff6bd750f6bb515cd65de3f4b366

The blame lies with online shopping and widespread discounting.

The dramatic shift to online shopping that has crushed U.S. department stores in recent years now threatens the investors who a decade ago funded the vast expanse of brick and mortar emporiums that many Americans no longer visit.

Weak September core retail sales, which strip out auto and gasoline sales, provide a window into the pain the holders of mall debt face in coming months as retailers with a physical presence keep discounting to stave off lagging sales.

Some $128 billion of commercial real estate loans—more than one-quarter of which went to finance malls a decade ago—are due to refinance between now and the end of 2017, according to Morningstar Credit Ratings.

 

Wells Fargo estimates that about $38 billion of these loans were taken out by retailers, bundled into commercial mortgage-backed securities (CMBS) and sold to institutional investors.

Morgan Stanley, Deutsche Bank, and other underwriters now reckon about half of all CMBS maturing in 2017 could struggle to get financing on current terms. Commercial mortgage debt often only pays off the interest and the principal must be refinanced.

The blame lies with online shopping and widespread discounting, which have shrunk profit margins and increased store closures, such as Aeropostale’s bankruptcy filing in May, making it harder for mall operators to meet their debt obligations.

 

Between the end of 2009 and this July e-commerce doubled its share of the retail pie and while overall sales have risen a cumulative 31 percent, department store sales have plunged 17 percent, according to Commerce Department data.

According to Howard Davidowitz, chairman of Davidowitz & Associates, which has provided consulting and investment banking services for the retail industry since 1981, half the 1,100 U.S. regional malls will close over the next decade.

https://s14-eu5.ixquick.com/cgi-bin/serveimage?url=http%3A%2F%2Fs.hswstatic.com%2Fgif%2Fstuffyoushouldknow-14-2014-03-abandonedmall1.jpg&sp=eee68cf6351144cdc6023e55bb0f43e5

TOO MUCH

A surplus of stores are fighting for survival as the ubiquitous discount signs attest, he said.

“When there is too much, and we have too much, then the only differentiator is price. That’s why they’re all going into bankruptcy and closing all these stores,” Davidowitz said.

The crunch in the CMBS market means holders of non-performing debt, such as pensions or hedge funds, stand to lose money.

The mall owners, mostly real estate investment trusts (REITs), have avoided major losses because they can often shed their debt through an easy foreclosure process.

“You have a lot of volume that won’t be able to refi,” said Ann Hambly founder and chief executive of 1st Service Solutions, which works with borrowers when CMBS loans need to be restructured.

Cumulative losses from mostly 10-year CMBS loans issued in 2005 through 2007 already reach $32.6 billion, a big jump from the average $1.23 billion incurred annually in the prior decade, according to Wells Fargo.

The CMBS industry is bracing for losses to spike as loan servicers struggle to extract any value from problematic malls, particularly those based in less affluent areas.

In January, for example, investors recouped just 4 percent of a $136 million CMBS loan from 2006 on the Citadel Mall in Colorado Springs, Colorado.

Investor worries about exposure to struggling malls and retailers intensified in August when Macy’s said it would close 100 stores, prompting increased hedging and widening spreads on the junk-rated bonds made up of riskier commercial mortgages.

Adding to the stress, new rules, set to be introduced on Dec. 24, will make it constlier for banks to sell CMBS debt. The rules require banks to hold at least 5 percent of each new deal they create, or find a qualified investor to assume the risk.

This has already roughly halved new CMBS issuance in 2016 and loan brokers say the packaged debt financing is now only available to the nation’s best malls. Investors too are demanding greater prudence in CMBS underwriting.

Mall owners who failed to meet debt payments in the past would just hand over the keys because the borrowers contributed little, if any, of their own money. The terms often shielded other assets from being seized as collateral to repay the debt.

Dodging the overall trend, retail rents for premier shopping centers located in affluent areas continue to rise. Vacant retail space at malls is at its lowest rate since 2010, according to research by Cushman & Wakefield.

The low vacancy rate reflects the ability of some malls to fill the void left by store closings by offering space to dollar stores and discounters.

That is, however, little consolation for investors.

“With the retail consolidation that we have ahead of us, malls have a fair amount of pain left to come,” Edward Dittmer, a CMBS analyst at Morningstar, said.

By Reuters in Fortune

Fall Might Just Be the Best Time to Buy Your Next Home

https://i1.wp.com/rdcnewscdn.realtor.com/wp-content/uploads/2016/09/autmn-houses.jpg

Spring and summer usually get all the real estate glory with lofty accolades as the best time to buy a home—and, of course, the busiest. Meanwhile, their seasonal sibling, fall, often gets tossed to the leaf pile by potential buyers who might think autumn is just about haunted houses and turkey dinners rather than house hunting.

But surprise! Fall is not only a great time to buy a home, it might also be the best season to find the perfect property (and not just because you can browse the listings while cupping a pumpkin latte).

Read on to discover the many reasons.

Reason No. 1: Lower home prices

The best month to snag a deal when buying a home? October. This isn’t just some random guess; it’s based on RealtyTrac’s analysis of more than 32 million home sales over 15 years. The resulting data showed that on average, October buyers paid 2.6% below estimated market value at the time for their homes.

For a house that would normally be $300,000, 2.6% translates into a $7,800 discount. Those savings are nothing to sneeze at, so bargain hunters should get hopping once autumn rolls around. (For an even better deal, aim for Oct. 8, when buyers get a home, on average, at 10.8% below estimated market value.)

“For buyers looking for a better deal, fall is a great time to make offers,” says New York City Realtor® Joanne R. Douglas. (In case you’re wondering, the worst month for buyers is April, when homes sell for 1.2% above estimated market value. The worst single day is Jan. 19, with an average 9.6% premium.)

Reason No. 2: Less competition

Like a beach after Labor Day, the realty market clears out as the days turn crisp. Most summer buyers have already found a home, meaning a fall buyer will have way less competition for the available houses on the market, says Bill Golden of Re/Max Metro Atlanta Cityside. And don’t worry about those buyers who didn’t close before August, either.

“Many folks will drop out of the market until after the new year,” says Golden, giving a fall buyer even greater room to roam at open houses. There may not be as many properties to choose from, but as Golden says, “a little patience and perseverance could reap big rewards.”

Reason No. 3: Worn-out home sellers

Say hello to your little friend, leverage. Sellers who have their homes on the market in the fall “are generally people who need to sell, which can make for better negotiations for the buyer,” says Golden. And if a home you have your eye on has been on the market all summer, you’re really in the driver’s seat as far as making an offer the seller can’t refuse. The longer a home sits on the market, the more negotiating power the buyer wields.

Reason No. 4: The holidays are around the corner

https://s14-eu5.ixquick.com/cgi-bin/serveimage?url=http%3A%2F%2Finteriorhomedecoration.net%2Fwp-content%2Fuploads%2F2015%2F12%2FPerfect-fall-outdoor-decorating-ideas-2015.jpg&sp=acebf30a307cae2adfda138c823ec9a4

Not only are most home sellers worn out after the summer selling season, they’re also caught between a real estate rock and a hard place in that the holidays are barreling down on them. If they want to move and settle down in time to host Thanksgiving and put up their Christmas lights, they’ll have to close, fast. So use this pre-holiday window to your advantage by offering to help them vacate fast if they cut you a deal.

Reason No. 5: Year-end tax credits

No one wants to buy a home purely to make their accountant happy. But there’s a sweet added incentive to closing on a home at the end of the fiscal year. Come the following April 15, you might be able to take some nice tax deductions, including closing costs, property tax, and mortgage interest, to offset your taxable earnings.

Reason No. 6: More quality time with your real estate team

As the year comes to an end, fewer buyers also means you should have the full attention of your real estate agent, mortgage broker, real estate lawyer, and everyone else on your house hunting team. You can take your time to ask all those questions you have about earnest money, due diligence, title transfers, and more without feeling like you’re horning in their busiest season to turn a buck.

Reason No. 7: Home improvement bargains

https://s17-us2.ixquick.com/cgi-bin/serveimage?url=http%3A%2F%2Fbeautifulkitchensblog.co.uk%2Fwp-content%2Fuploads%2F2013%2F10%2FAW13_RAYMOND-154.jpg&sp=ac44d9cc732f282dea919a15297030bf

Once you close on that home you found in the fall, you may want to upgrade your appliances. Luckily, December is when major appliances—refrigerators, stoves, washers, and dryers—are at their very cheapest, according to Consumer Reports. It’s also the best time of year to buy cookware and TVs.

So once you’re settled in (and provided you have any money left), get ready to renovate!

By Margaret Heidenry

Homes Are Selling Fast This Summer

https://martinhladyniuk.files.wordpress.com/2016/07/2ed06-serveimage.jpg?w=625

Homes are selling an average of a week faster than they did a year ago, meaning home shoppers should be prepared to move quickly in a competitive housing market, according to the June Zillow Real Estate Market Report.

Tight inventory continues to be a major factor for home shoppers. The supply of homes for sale is nearly 5 percent lower than it was a year ago, and 38 percent lower than its peak level in 2011. With fewer available options, home shoppers are moving quickly to buy homes, with the average U.S. home closing after 78 days on the market.

The 78-day average includes the time it takes to close, which is usually one or two months after the home goes under contract. This means that homes are pending within about a month of being listed.

The length of time homes stay on the market before selling has been steadily decreasing since 2010, when homes took an average of five months to sell. The average time home buyers had in Pittsburgh, Philadelphia and Charlotte, N.C. dropped by at least two weeks, the biggest change among the largest U.S. metros.

The low inventory and quick-moving market combine to create a competitive home shopping market, especially for potential buyers looking for less expensive homes. The most expensive third of the market has experienced the smallest drop in available inventory compared to the rest of the market.

“Homes are selling faster than ever as the home shopping season hits its peak,” said Zillow Chief Economist Dr. Svenja Gudell. “If you’re looking for a home, be prepared to move quickly. Adding to this difficult buying environment is low inventory—there simply aren’t many homes to choose from. And while this looks like a good time to be a seller, potential move-up buyers may hesitate to list their homes and become buyers. Until the supply increases, it will remain a tough market to find a home.”

by National Mortgage Professional

USA Today Reports Existing Home Sales Hit 9-Year High In June

https://s14-eu5.ixquick.com/cgi-bin/serveimage?url=http%3A%2F%2Fwww.botoxbeerbling.com%2Fwp-content%2Fuploads%2F2013%2F03%2Fmillion-dollar-luxury-home.jpg&sp=f67752c4d324e6c2f17de1784201a607

Bolstered by first-time home buyers, existing-home sales rose for the fourth straight month in June, reaching a nine-year high.

Sales of existing single-family homes, townhomes, condominiums and co-ops increased 1.1% to a seasonally adjusted annual rate of 5.57 million, up from May’s downwardly revised 5.51 million, the National Association of Realtors said Thursday. The June pace was the strongest since 2007.

First-time buyers made up 33% of those transactions, the biggest share in four years. That eased concerns that a shortage of affordable houses has been pushing entry-level buyers out of the market.

The median existing-home price also reached a new high as it surged 4.8% to $247,700 from a year ago, above the former peak of $238,900 in May.

June’s sales exceeded the highest forecast of economists polled by Bloomberg, 5.56 million.

Healthy job gains, record-high stock prices and near-record low mortgage rates stoked June’s positive showings, said Lawrence Yun, chief economist at the National Association of Realtors.

“The modest bump in June sales to first-time buyers can be attributed to mortgage rates near all-time lows and perhaps a hopeful indication that more affordable, lower-priced homes are beginning to make their way onto the market,” he said. “The odds of closing on a home are definitely higher right now for first-time buyers living in metro areas with tamer price growth and greater entry-level supply — particularly areas in the Midwest and parts of the South.”

The Midwest has the lowest median existing-home price among all regions, $199,900, followed by the South, at $217,400. The median price in the West climbed 7.2% from a year ago to $350,800.

Total available existing homes for sale dipped 0.9% to 2.12 million, now 5.8% below a year ago.

“Seasonally adjusted, the month’s supply of homes in June 2016 was the lowest since June 2005, indicating that inventory problems still plague home buyers,” said Ralph McLaughlin, Trulia’s chief economist.

by Athena Cao | USA Today

London Housing Bubble Melts Down

But don’t just blame Brexit.

https://s15-us2.ixquick.com/cgi-bin/serveimage?url=https:%2F%2Fwww.cable.co.uk%2Fimages%2Fnews%2F300x300xsouth-london-housing-developments-to-l-700001356.jpg.pagespeed.ic.J1wpbrftPb.jpg&sp=a702a6c51e4b528c39f961bf27de3e8a

In Central London – the 30 most central postal codes and one of the most ludicrously expensive housing markets in the world – eager home sellers are slashing their asking prices to unload their properties. But even that isn’t working.

In the 12 days after the Brexit vote, cuts to asking prices have soared by 163% compared to the 12 days before the vote, according to the Financial Times. Yet sales have plunged 18% from before the Brexit vote. Sales had already taken a big beating before then and are now down a mind-boggling 43% from where they’d been a year ago!

So Brexit did it?

Um, well, sort of. But it’s more than Brexit. Home prices on a £-per-square-foot basis had peaked in Q2 2014, according to real-estate data provider LonRes. Since then, the market in Central London has been hissing hot air. By Q1 2016, prices for homes above £5 million had dropped 8% from their 2014 peak, and prices for homes from £2 million to £5 million had plunged 10%.

Back in December 2015, we reported that luxury housing in London was getting mauled, based on the LonRes report for the third quarter, released at the time. It pointed the finger at folks who, once “awash with cash, don’t have as much to spend” [read…  It Gets Ugly in the Toniest Parts of London].

Then, in its spring review, LonRes called the prime London housing market “challenging.”

It wasn’t just the Brexit referendum and the new stamp duty – In 2014, a change in the stamp duty made buying high-end homes more costly; and in April this year, an additional duty was imposed on purchases beyond a primary residence. Now there’s a third reason, and it originates deep from the bowels of the UK economy. LonRes:

A third is now making itself known to us as it is not something that the chancellor can bury any more. This is the balance of payments which ran at 5.2% of GDP last year and was the largest annual deficit since records began in 1948.

If measures are not taken to bring this under control, then the mini experiment to deflate the London property bubble will seem small change compared to the £32.7bn deficit that exists.

The London residential market has undoubtedly slowed, and this is impacting prices. No one will disagree that London’s prime market needed the steam to be released from it. My guess is that this slower market will be here for some time.

And not just in London…

Last week, the Royal Institution of Chartered Surveyors was spreading gloom with its residential market survey of the UK, conducted after the Brexit vote, that found, as the Telegraph put it, “The number of people wanting to buy a house has fallen to the lowest level since mid-2008 amid post-referendum uncertainty.”

Lucian Cook, head of residential research at Savills, told the Telegraph:

“The current month’s figures suggest countrywide impact on sentiment which is to be expected. However previous months’ results would indicate that a slowdown in London has been on the cards for some time. It looks like the Brexit vote may be the trigger for this to materialize.”

Now all hopes are once again centered on foreigners and their money to bail out the housing bubble before it completely implodes. But this time, it’s different, as they say at the worst possible moment: it’s not the Russians or the Chinese, but people whose investments and incomes are in currencies linked to the US dollar. Over the last 12 months, the pound has lost about 14% against the dollar, most of it since the Brexit vote, which would give these folks an additional discount on UK real estate.

The Financial Times expressed those industry hopes, and its new saviors, citing Anthony Payne, managing director at LonRes:

“We have heard that quite a number of Middle Eastern buyers have been coming back into the market. A lot of them are converting from dollars, and together with any discount they get [plunging prices], the saving in the actual price is quite substantial,” said Mr. Payne. “Some people are concerned by Brexit – others see it as an opportunity.”

London isn’t the only ludicrously overpriced housing market, where prices, once helped along by foreign money, are skidding. And now the industry is hoping for more foreign money to wash ashore, just when the Chinese, by far the largest group of investors in the US housing market, are getting cold feet.

by Wolf Richter | Wolf Street