Tag Archives: housing market

Global Housing Markets From Hong Kong To Sydney Join Global Rout

It’s not just stocks: the global housing market is in for a rough patch, which has turned ugly for many homeowners and investors from Vancouver to London, with markets in Singapore, Hong Kong, and Australia already showing increased signs of softening.

Macro factors have triggered a global economic slowdown that is unraveling luxury marketplaces worldwide, according to Bloomberg. As a result, a turning point has been reached, with home prices globally now under pressure, and rising mortgage rates leading to depressed consumer optimism, while also triggering a housing affordability crisis, S&P Global Ratings said in a December report. To make matters worse, a simultaneous drop in house prices globally could lead to “financial and macroeconomic instability,” the IMF warned in a report last April.

While each metropolis globally has its distinct characteristics of what triggered its real estate slowdown, there are a few common denominators at play: rising borrowing costs, quantitative tightening, a crackdown on money laundering and increased government regulation, emerging market capital outflows and volatile financial markets. Bloomberg notes that there is also declining demand from Chinese buyers, who were the most powerful force in many housing markets globally over the course of this cycle.

“As China’s economy is affected by the trade war, capital outflows have become more difficult, thus weakening demand in markets including Sydney and Hong Kong,” said Patrick Wong, a real estate analyst at Bloomberg Intelligence.

One of the first dominoes to fall has been in Hong Kong, home values in the city have plummeted for 13 weeks straight since August, the longest losing streak since the 2008 financial crash, data from Centaline Property Agency show. Homeowners and investors have taken great caution due to a jump in borrowing costs, a looming vacancy tax, and the trade war that has derailed economic growth in mainland China.  

“The change in attitude can be explained by a slowing mainland economy,” said Henry Mok, JLL’s senior director of capital markets. “Throw in a simmering trade war between China and the U.S., the government has taken actions to restrict capital outflows, which in turn has increased difficulties for developers to invest overseas.”

https://www.zerohedge.com/sites/default/files/inline-images/on%20the%20turn.png?itok=3eachZYW

Home prices in Singapore, which rank among the world’s most expensive places to live, logged the first decline in six quarters in the three months ended December. Bloomberg said luxury experienced the worst declines, with values in prime areas dropping 1.5%.

Most of the slowdown was caused by government policies to cool the overinflated housing market. Cooling measures were implemented in July included higher stamp duties and tougher loan-to-value rules. The policies enacted by the government have halted the home-price recovery that only lasted for five quarters, the shortest since data became available.

“Landed home prices, being bigger ticket items, have taken a greater beating as demand softened,” said Ong Teck Hui, a senior director of research and consultancy at JLL.

https://www.zerohedge.com/sites/default/files/inline-images/singapore%20on%20sales.png?itok=oQ0T7Ney

The downturn in Sydney’s housing market is expected to continue this year as tighter lending standards and the worst plunge in values since the late 1980s has spooked buyers. Average Sydney home values had dropped 11.1% since their 2017 top, according to a recent CoreLogic Inc. report — surpassing the 9.6% peak to trough decline when Australia was on the cusp of entering its last recession.

Nationwide, home values declined 4.8% last year, marking the weakest housing market conditions since the 2008 financial crash.

“Access to finance is likely to remain the most significant barrier to an improvement in housing market conditions in 2019,” CoreLogic’s head of research Tim Lawless said. Weak consumer sentiment toward the property market is “likely to continue to dampen housing demand.”

https://www.zerohedge.com/sites/default/files/inline-images/aussies.png?itok=MsxjSfkC

Bloomberg notes that home prices in the country are still 60% higher than in 2012, if prices plunge another 10% in 2019, well, it could spark mass panic.

The Reserve Bank of Australia is terrified that an extended downturn will crimp consumption and with the main opposition Labor party pledging to curb tax perks for property investors if it wins an election expected in May, economic optimism would further deteriorate. Treasurer Josh Frydenberg on Thursday told the nation’s top banks not to tighten credit any more as the economic downturn is expected to get much worse.

But all eyes are on what is going on in arguably the most important housing markets in the world – those of Shanghai and Beijing. A government crackdown on leverage and overheating prices have damaged sales and triggered a 5% tumble in home values from their top. Rules on multiple home purchases, or how soon a property can be flipped once it is acquired, are starting to be relaxed, and the giveaways by home builders to lure buyers are starting to get absurd.

https://www.zerohedge.com/sites/default/files/inline-images/end%20of%20ever%20upward%20.png?itok=aRbU64mF

One developer in September was giving away new BMWs to new homebuyers at its townhouses in Shanghai. Down-payments have been slashed, with China Evergrande Group asking for 5% rather than the normal 30% deposit required.

“It’s not a surprise to see Beijing and Shanghai residential prices fall given the curbing policies currently on these two markets,” said Henry Chin, head of research at CBRE Group Inc.

As a whole, Bloomberg’s compilation of global housing data showing the unraveling of many housing markets is a sobering reminder that a synchronized global slowdown has started.

Source: ZeroHedge

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Vancouver Condo Sales In December Drop To 10 Year Low

https://www.zerohedge.com/sites/default/files/styles/teaser_desktop_2x/public/2019-01/Vancouver-conod-sales-December-2018.png?h=3ebc4796&itok=o24C8Hrm

 

Vancouver condo sales fell to a 10 year low in December with sales plunging 47.5% year-over-year, the sharpest annual decline since 2008…

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Home Builder Toll Brothers Shocks With 13% Plunge In Orders As California Falls A Staggering 39%

Toll Brothers announced its fourth quarter results on Tuesday, unleashing a fresh flood of concerns about the state of the housing market after it disclosed its first drop in orders since 2014. Orders were down 13% from the year prior, missing the analyst estimate of a 5% increase in dramatic fashion.

The company focuses much of its business on the California high-end home segment, which – as a result of the housing bubble in most west coast cities and rising rates, is facing an “affordability crisis” coupled with a sharp drop in overseas demand. According to the company, orders for the state were down an astounding 39%.

https://www.zerohedge.com/sites/default/files/inline-images/toll%20orders.jpg?itok=fju7d_NC

The company blamed rising rates for the drop off in buyer demand, as well as sinking stock prices. What is odd is that stock prices haven’t really “sunk” – unless the company was referring to its own stock…

https://www.zerohedge.com/sites/default/files/inline-images/toll%2012.4.jpg?itok=IMfGjqZK

... with the CEO blaming “the effect on buyer sentiment of well-publicized reports of a housing slowdown” for the plunge in orders. You see, it’s not the housing market that is slowing: it is perceptions about the market slowing, that is hitting the company.

That said, “perceptions” are correct: as we noted last week, new home sales crashed in October, suffering the biggest plunge since 2011.

https://www.zerohedge.com/sites/default/files/inline-images/2018-11-28_7-01-59.jpg

Even so, the atrocious quarter didn’t deter all analysts, who promptly defended the stock. Drew Reading, Bloomberg Intelligence analyst stated that “there are many positive factors underpinning the economy that we believe are supportive of the housing sector longer-term, and our affluent markets particularly.”

Tolls dismal results follows signs that we have been discussing for much of the past year, which have confirmed that the luxury housing market is cooling off across the country.

Recently, we profiled a mansion in Chicago that was taken off the market after being listed for $50 million and only being assessed for $19.4 million. United Automobile Insurance Chairman and CEO Richard Parrillo constructed the 25,000 sq ft Lincoln Park mansion a decade ago, after buying the property in 2005 for $12.5 million from the Infant Welfare Society.

After two years on the market, Parrillo and his wife held firm at $50 million, a record for the region, their original listing agent told the Chicago Tribune. The agent said the couple plowed more than $65 million into the estate, including land cost.

https://www.zerohedge.com/sites/default/files/inline-images/mansion_0.jpg?itok=jN4nFo9W
$50 million Lincoln Park mansion — Chicagoland’s priciest listing — taken off the market

Cook County Assessor’s Office reports shows the mansion’s $50 million asking price was hugely overinflated versus its most recent estimated market value, which stood some 60% lower, at $19.4 million. The report notes the 2018 property value is significantly higher from the assessor’s $14 million estimated market value for the mansion in 2017, due to a quick burst in high-end home sales in the last several years that had since cooled.

Source: ZeroHedge

“A Rough Decade Ahead” – ‘Math’ & The Future Of The US Housing Market

Authored by Chris Hamilton via Econimica blog,

Summary

  • New Housing is being Created at an Unprecedented 2.5x’s the pace of the Growth of the 15 to 64yr/old Population
  • Total Annual Population Growth Has Slowed 25% from Peak Growth, 2 Decades Ago
  • However, Annual Population Growth Among 15 to 64yr/olds Has Slowed Over 80% From Peak Growth & Will Continue Decelerating Through 2030
  • 15 to 64yr/olds Do Nearly all the Net Home Buying, 65+yr/olds Net Home Selling
    • 15 to 64yr/olds Have a 70% Labor Force Participation Rate vs. 27% for 65-74yr/olds, just 8% for 75+yr/olds
    • 15 to 64yr/olds Earn and Spend Double that of 65-74yr/olds & triple that of 75+yr/olds
    • 65+yr/olds Have Highest Home ownership Rate at 78% vs. Just 36% for Group with Lowest Rate, 15 to 34yr/olds
    • 15-64yr/olds are Credit Willing Relative to Credit Averse 65+yr/olds

I read an article a few days ago that got me thinking.  The article’s author claimed,

“At 5% mortgage rates and with today’s level of affordability, history shows that there is nothing in the way from having a home building boom over the next ten years to satisfy this demographic demand.”

I found the claim contrary to everything I think I know, so I thought I’d lay out the counter argument.

The chart below shows annual growth of the 15+yr/old US population (blue columns) vs. the annual growth of the 15 to 64yr/old population (red balls).  The 15+yr/old annual population growth has fallen 25% (decline of a half million annually) since the 1998 peak but more significantly, the 15 to 64yr/old annual population growth has fallen over 80% (decline of 1.8 million/yr) due to a combination of lower immigration rates and lower birth rates.

https://www.zerohedge.com/sites/default/files/inline-images/40246456-1540573727993815.png?itok=TOw6SAp-

These population growth trends will only continue to slow through 2030, according to UN and Census estimates (not really estimates, since this population is already born and simply advancing into adulthood).  The future estimates for 15 to 64yr/old population growth (presented above) include estimated immigration well above present rates.  Most, if not all (net) of the assumed 15 to 64yr/old minimal population growth is premised on ongoing immigration that continues slowing.  Thus the forward looking 15 to 64yr/old growth estimates are likely to be lower and perhaps even turning to outright annual declines.

The chart below shows average income, spending, and LFP (labor force participation) rates by age segment.  No shocker, those actively working make and spend more than those with low rates of employment.  Those who have worked longer earn more than those new to the labor force.  Elderly expenditures come into very close alignment with their (generally) fixed incomes.

https://www.zerohedge.com/sites/default/files/inline-images/40246456-15405775019409947.png?itok=pGk1ZXnO

Noteworthy is that 75+yr/olds have only an 8% LFP rate but will make up over half of the total 65+yr/old population growth through 2030.  The next largest growth segment is among 70 to 74yr/olds with a 19% LFP rate, and the smallest increase is among the 65 to 69yr/olds with a 32% LFP.   As an aside, 65+ year olds have the highest home ownership rates at 78% vs. 36% for those aged 15 to 34. So while the more affluent portion (5% to 20%?) of 65+yr/olds may be interested in a second home in the desert, the mountains, or beach…the majority already own and are eventually looking to downsize.  Simply stated, nearly all the coming growth is among those that work the least, earn the least, spend the least, already own homes, and are more likely to downsize than buy a second home.

https://www.zerohedge.com/sites/default/files/inline-images/40246456-15405820325401883.png?itok=tYwxN_9R

Putting it all together (chart below), annual 15+yr/old total population growth (blue columns), 15 to 64yr/old population growth (red line), housing starts (yellow line), and federal funds rate (black line).  Given it is the 15 to 64yr/old population that does the net home buying, (and growth among them continues decelerating…coupled with rising rates and elevated valuations versus most population growth among 75+yr/olds who are more likely to sell via downsizing and/or willing properties to their heirs) I contend the US is creating too many homes presently, not too few.  Of course, this doesn’t even factor in things like the lack of income growth among the vast majority those working, high student debt loads, slowing household formation, continued delayed family formation and the lowest birth rates in US history which were just recorded in the first quarter of 2018 (according to CDC…HERE), etc. etc.

https://www.zerohedge.com/sites/default/files/inline-images/40246456-15405930794152036.png?itok=DjqawWsJ

Contrary to the author of the article that inspired me, I contend that housing is in for another very rough decade (at the very least)… likely worse than the period during the GFC.  The math is pretty straightforward on this one.

Source: ZeroHedge

Home Price Growth Slows Most Since 2011 As Case-Shiller Rolls Over

Amid the collapse on US home sales, as mortgage rates surge above 5.00%, August’s Case-Shiller home price data plunged to its weakest annual growth since Dec 2016, dramatically missing expectations).

Against expectations of a 5.80% YoY rise, August home prices rose 5.49% (slowing from July’s 5.90% YoY) to its weakest since Dec 2016…

https://www.zerohedge.com/sites/default/files/inline-images/2018-10-30_6-02-10.jpg?itok=N0TP2Lt_

This is the biggest two-month slowdown in Case-Shiller home price growth since 2014…

https://www.zerohedge.com/sites/default/files/inline-images/2018-10-30.png?itok=k6MAWHOy

On a non-seasonally-adjusted basis, home prices rose 5.77%, down from 5.99%, the lowest since June 2017.

And judging by mortgage rates, it’s about to get a whole lot worse…

https://www.zerohedge.com/sites/default/files/inline-images/2018-10-30_6-12-59.jpg?itok=8UhvPbfH

Of course, the establishment is saying this is “contained”:

“Following reports that home sales are flat to down, price gains are beginning to moderate,” David Blitzer, chairman of the S&P index committee, said in a statement. “There are no signs that the current weakness will become a repeat of the crisis, however.”

Las Vegas had the biggest annual increase at 13.9 percent, followed by San Francisco at 10.6 percent and Seattle at 9.6 percent,

https://www.zerohedge.com/sites/default/files/inline-images/2018-10-30%20%281%29.png?itok=vPBTu7Dq

But Seattle’s price appreciation slumped MoM…the biggest drop since Feb 2011…

https://www.zerohedge.com/sites/default/files/inline-images/2018-10-30_6-23-32.jpg?itok=bTwOj3sb

Is it any surprise that home builder stocks have collapsed along with US housing data?

https://www.zerohedge.com/sites/default/files/inline-images/2018-10-30_5-58-59.jpg?itok=U2x9OqyF

Source: ZeroHedge

September YoY Home Sales Down 13.2%, Median Price Down 3.5%, S&P Down 6.5% From High

New Home Sales (SAAR) in September plunged to their lowest since Dec 2016, crashing 5.5% MoM (and revised dramatically lower in August)… Maybe Trump has a point on Fed rate hikes?

Remember this is the first month that takes the impact of the latest big spike in rates – not good!

This is a disastrous print:

August’s 629k SAAR was revised drastically lower to 585k and September printed 553k (SAAR) massively missing expectations of 625k (SAAR) – plunging to the weakest since Dec 2016…

https://www.zerohedge.com/sites/default/files/inline-images/2018-10-24_7-02-08.jpg?itok=o2oEP3n7

That is a 13.2% collapse YoY – the biggest drop since May 2011

https://www.zerohedge.com/sites/default/files/inline-images/2018-10-24.png?itok=mO5y0zJX

The median sales price decreased 3.5% YoY to $320,000…

https://www.zerohedge.com/sites/default/files/inline-images/2018-10-24%20%281%29.png?itok=hgp-Zkpa

New homes sales were down across all regions … except the midwest.

https://confoundedinterestnet.files.wordpress.com/2018/10/nhstable.png?w=621&h=447Source: Confounded Interest

As the supply of homes at current sales rate rose to 7.1 months, the highest since March 2011, from 6.5 months.

https://www.zerohedge.com/sites/default/files/inline-images/2018-10-24%20%282%29.png?itok=kft0a499

The decline in purchases was led by a 40.6 percent plunge in the Northeast to the lowest level since April 2015 and 12 percent drop in the West.

Source: ZeroHedge


70% Of S&P 500 Stocks Are Already In A Correction

Spooked by fears about peak profits, the slowing Chinese economy, Trump’s tariffs, ongoing political turmoil in the UK and Italy, and ongoing jitters among systematic, vol-targeting funds, on Tuesday the S&P tumbled as much as 2.34% in early trade – a drop which almost wiped out all gains for the year – before paring losses and closing only -0.55% lower. The drop pushed the S&P’s decline from its September highs to 6.5%, two-thirds on the way to a technical correction.

https://www.zerohedge.com/sites/default/files/inline-images/S%26P%20from%20highs.jpg?itok=qhSNB0d4

However the relatively stability at the index level has masked turmoil among individual names where some 1,256 stocks hit 52-week lows, while only 21 establishing new highs.

https://www.zerohedge.com/sites/default/files/inline-images/Blood%20on%20Wall%20St.PNG?itok=Om2dtkhx

More concerning, and a testament to the tech-heavy leadership of the market concentrated amid just a handful of stocks, is that while the broader S&P 500 index has yet to enter a correction, more than three quarters of all S&P stocks – or 353 – have already fallen more than 10% from their highs. Worse, of those, more than half 179 have already fallen by 20% or more from their highs, entering a bear market.

https://www.zerohedge.com/sites/default/files/inline-images/stocks%20reuters%201.PNG?itok=5eZQDzEv

The reason why the broader index has so far avoided a similar fate is because Apple, whose $1 trillion market value makes it by far the most heavily weighted stock within the S&P 500, has fallen only 4.6% from its October 3 record high. That has helped the S&P 500 itself stay out of correction territory.

Broken down by sector, the S&P 500 materials index – the closest proxy of Chinese economic growth – has fared the worst in October, leaving it down 19% from its 52-week highs, with the utilities index is the outperformer, down just 5 percent.

https://www.zerohedge.com/sites/default/files/inline-images/Sectors%20vs%2052-week%20highs.PNG?itok=N1dR9Xc5

At the individual level, among the bottom 10 S&P 500 performers, are names likes Wynn Resorts and Western Digital, both highly exposed to China. Nektar Therapeutics and Newell Brands are also among the S&P 500’s worst performers.

https://www.zerohedge.com/sites/default/files/inline-images/Stocks%20furthest%20from%20highs.PNG?itok=t0do72Y-

Taking a step back, despite its relative resilience, the S&P 500 is still on track for its worst month since August 2015, while most global equities are down for the year. North America is still the best performing region with 67% of the six countries having benchmark equities trading higher on the year in US dollar terms, according to Deutsche Bank. In EMEA, only 23% of countries are up, and only 6% of countries in the European Union (in USD). In South American (6 countries) and Asia (18), not a single country has a positive return in USD terms this year.

One day later, and despite widespread call for an imminent market bounce, traders remain completely ambivalent as today’s market cash open action shows:

  • Half of S&P 500 stocks rising, half falling
  • 5 of 11 S&P 500 groups rising, 6 falling
  • 15 DJIA stocks rising, 15 falling

Meanwhile, the Nasdaq has a more negative tone with decliners outpacing advancers. In other words, as Bloomberg’s Andrew Cinko writes, “there’s no follow through on either the upside or the downside after yesterday’s epic rebound. At this moment, he who hesitates isn’t lost, in fact, he’s got a lot of company as stock market pundits engage in verbal duel over where we go from here.”

Source: ZeroHedge

“The Slowing Is Widespread” – US Home Price Growth Slowest In 11 Months

The US housing market just took another hit as Case-Shiller reported that home prices (in July) rose at the slowest pace since August last year, missing expectations notably.

20-city property values index increased 5.9% y/y (est. 6.2%), least since Aug. 2017, after rising revised 6.4%.

https://www.zerohedge.com/sites/default/files/inline-images/2018-09-25_6-03-31.jpg?itok=oDRV8-Da

This was the biggest miss since May 2016

https://www.zerohedge.com/sites/default/files/inline-images/2018-09-25_6-04-43.jpg?itok=D_N-X8k-

July marked the fourth consecutive month that annual price gains in the 20-city index decelerated. That’s in sync with other reports indicating housing is stalling as buyers shy away from higher prices amid mortgage rates near the highest since 2011, in addition to a lack of choice among affordable properties. At the same time, steady hiring and elevated confidence are supporting demand.

“Rising homes prices are beginning to catch up with housing,” says David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices.

“The slowing is widespread: 15 of 20 cities saw smaller monthly increases in July 2018 than in July 2017. “

But despite slowing home price appreciation, all cities saw prices rise faster than income growth.

https://www.zerohedge.com/sites/default/files/inline-images/2018-09-25.png?itok=DX3wlGy9

Sales of existing single family homes have dropped each month for the last six months and are now at the level of July 2016. Housing starts rose in August due to strong gains in multifamily construction. The index of housing affordability has worsened substantially since the start of the year. 

This really should not be a huge surprise given the collapse in US housing macro data and home builder stocks…

https://confoundedinterestnet.files.wordpress.com/2018/09/homebldgsp.png?w=622&h=448US home building companies relative to the S&P 500 index has been falling since 2017.

https://confoundedinterestnet.files.wordpress.com/2018/09/timber.png?w=622&h=448Lumber futures, a harbinger for housing, are down solidly on the year amid weaker demand.

Probably time for some more rate-hikes…

Source: ZeroHedge

International Buyers Are Dropping Out Of US Housing

  • The dollar volume of U.S. home sales to international buyers between April 2017 to March 2018 dropped 21 percent compared with the previous 12-month period, according to the National Association of Realtors.
  • Buyers from China, Canada, India, Mexico and the United Kingdom accounted for nearly half of the dollar volume of sales to international buyers.
  • Sales to Canadian buyers fell by 45 percent.

After strong interest for several years, international buyers appear to be souring on the U.S. housing market.

The dollar volume of U.S. home sales to international buyers between April 2017 and March 2018 dropped 21 percent compared with the year-ago period, according to the National Association of Realtors.

Of the $121 billion in sales to international buyers, those currently living in the U.S purchased $67.9 billion in properties, while nonresident foreigners purchased $53 billion, both marking a drop from the previous year. Foreign buyers accounted for 8 percent of the $1.6 trillion in existing home sales, a drop from 10 percent the previous year.

While high home prices and inventory shortages are clearly playing some role in the drop. Competition from domestic buyers, whose demand is increasing sharply, may also be a deterrent. And the current political climate in the U.S. also should not be overlooked.

“The decline is partly coming off high levels of the prior year, but also surely from the strong rhetoric coming out of Washington against foreigners,” said Lawrence Yun, chief economist for the Realtors. “There has been a large drop-off in foreign students attending U.S. universities already. Chinese [buyers], in particular, purchase homes for their kids while attending college.”

China still leads the pack for international buyers, as it has for six straight years, accounting for 15 percent of international sales. Chinese buyers also purchased the most expensive homes, with a median price of $439,100.

Canada came in second, with a 10 percent share of international sales, but the Canadians’ dollar volume dropped by 45 percent compared to the previous year. Not only are Canadians buying fewer U.S. properties, they are buying cheaper U.S. properties. The median price for Canadian buyers was $292,000.

“The market here is softer, and I imagine that’s why there are perhaps less Canadian buyers,” said Elli Davis, a real estate agent based in Toronto. “That does surprise me, though, as I still know lots of people buying mostly in Florida!”

Buyers from China, Canada, India, Mexico and the United Kingdom accounted for nearly half of the dollar volume of sales to international buyers. Canadian buyers had been the market leaders by far during the U.S. recession. They dropped back significantly as U.S. home prices recovered, Chinese buying increased and U.S. investor purchases climbed.

“Inventory shortages continue to drive up prices and sustained job creation and historically low interest rates mean that foreign buyers are now competing with domestic residents for the same, limited supply of homes,” Yun said.

High prices could certainly be a deterrent for buyers in Southern California. Chinese buyers have been very strong in the single-family market there, as they plan for their children to attend area universities. Irvine, especially, saw huge demand from Chinese buyers, particularly in newly built communities, with larger, multi-generational homes that they favor.

For international investors who are looking for condominiums in large cities as an investment, the supply theory doesn’t really hold.

“I don’t think it’s the supply issue because these buyers are buying in the higher end and there is more supply there, particularly in the gateway cities like Miami and New York,” said Sam Khater, chief economist at Freddie Mac. “It could be just that their appetite for U.S. real estate is waning.”

Source: by Diana Olick | CNBC