Tag Archives: real estate

The Global Mansion Bust Has Begun

Global real estate consultancy firm Knight Frank LLP has warned that the global synchronized decline in growth coupled with an escalating trade war has heavily weighed on luxury home prices in London, New York, and Hong Kong.

According to Knight Frank’s quarterly index of luxury homes across 46 major cities, prices expanded at an anemic 1.4% in 2Q19 YoY, could see further stagnation through 2H19.

Wealthy buyers pulled back on home buying in the quarter thanks to a global slowdown, trade war anxieties, higher taxes by governments, and restrictions on foreign purchases.

Mansion Global said Vancouver was the hottest real estate market on Knight Frank’s list when luxury home prices surged 30% in 2016, has since crashed to the bottom of the list amid increased taxes on foreign buyers. Vancouver luxury home prices plunged 13.6% in 2Q19 YoY.

Financial hubs like Manhattan and London fell last quarter to the bottom of the list as luxury home prices slid 3.7% and 4.9%, respectively.

Hong Kong recorded zero growth in the quarter thanks to a manufacturing slowdown in China, an escalating trade war, and protests across the city since late March.

However, European cities bucked the trend, recorded solid price growth in 2Q19 YoY, though the growth was muted when compared to 2017-18.

Berlin and Frankfurt were the only two cities out of the 46 to record double-digit price growth for luxury homes. Both cities benefited from a so-called catch-up trade because prices are lower compared to other European cities. Moscow is No. 3 on the list, saw luxury home prices jump 9.5% in 2Q19 YoY.

The downturn in luxury real estate worldwide comes as central banks are frantically dropping interest rates. The Federal Reserve cut rates 25bps for the first time since 2008 last month, along with Central banks in New Zealand, India and Thailand have all recently reduced rates.

The main takeaway from central banks easing points to a global downturn in growth, and resorting to sharp monetary policy action is the attempt to thwart a global recession that would ultimately correct luxury home prices.

“Sluggish economic growth explains the wave of interest rate cuts evident in the last three months as policymakers try to stimulate growth,” wrote Knight Frank in the report.

* * *

As for a composite of all global house prices, Refinitiv Datastream shows price trends started to weaken in 2018, and in some cases, completely reversed like in Australia.

House price growth for OECD countries shows the slowdown started in 2016, a similar move to the 2005 decline.

If it’s luxury real estate or less expensive homes, the trend in price has peaked and could reverse hard into the early 2020s.

Central banks are desperately lowering interest rates as the global economy turns down. Likely, the top is in, prepare for a bust cycle.

Source: ZeroHedge

How Low Will Housing Prices Go?

Now that Housing Bubble #2 Is Bursting… How Low Will It Go?

Unless the Fed is going to start buying millions of homes outright, prices are going to fall to what buyers can afford.

There are two generalities that can be applied to all asset bubbles:

1. Bubbles inflate for longer and reach higher levels than most pre-bubble analysts expected

2. All bubbles burst, despite mantra-like claims that “this time it’s different”

The bubble burst tends to follow a symmetrical reversal of very similar time durations and magnitudes as the initial rise. If the bubble took four years to inflate and rose by X, the retrace tends to take about the same length of time and tends to retrace much or all of X.

If we look at the chart of the Case-Shiller Housing Index below, this symmetry is visible in Housing Bubble #1 which skyrocketed from 2003-2007 and burst from 2008-2012.

Housing Bubble #1 wasn’t allowed to fully retrace the bubble, as the Federal Reserve lowered interest rates to near-zero in 2009 and bought $1+ trillion in sketchy mortgage-backed securities (MBS), essentially turning America’s mortgage market into a branch of the central bank and federal agency guarantors of mortgages (Fannie and Freddie, VA, FHA).

These unprecedented measures stopped the bubble decline by instantly making millions of people who previously could not qualify for a privately originated mortgage qualified buyers. This vast expansion of the pool of buyers (expanded by a flood of buyers from China and other hot-money locales) drove sales and prices higher for six years (2012-2018).

As noted on the chart below, this suggests the bubble burst will likely run from 2019-2025, give or take a few quarters.

The question is: what’s the likely magnitude of the decline? Scenario 1 (blue line) is a symmetrical repeat of Housing Bubble #2: a retrace of the majority of the bubble’s rise but not 100%, which reverses off this somewhat higher base to start Housing Bubble #3.

Since the mainstream consensus denies the possibility that Housing Bubble #2 even exists (perish the thought that real estate prices could ever–gasp–drop), they most certainly deny the possibility that prices could retrace much of the gains since 2012.

More realistic analysts would probably agree that if the current slowdown (never say recession, it might cost you your job) gathers momentum, some decline in housing prices is possible. They would likely agree with Scenario 1 that any such decline would be modest and would simply set the stage for an even grander housing bubble #3.

But there is a good case for Scenario 2, in which price plummets below the 2012 lows and keeps on going, ultimately retracing the entire housing bubble gains from 2003.

Why is Scenario 2 not just possible but likely? There are no more “saves” in the Fed’s locker. Dropping interest rates to zero and buying another trillion in MBS won’t have the same positive effects they had in 2009-2018. Those policies have run their course.


Among independent analysts, Chris Hamilton is a must-read for his integration of demographics and economics. Please read (via Zero Hedge) Demographics, Debt, & Debasement: A Picture Of American Insolvency if you want to understand why near-zero interest rates and buying mortgage-backed securities isn’t going to spark Housing Bubble #3.

Millennials are burdened with $1 trillion in student loans and most don’t earn enough to afford a home at today’s nosebleed prices. When the Fed drops the Fed Funds Rate to zero, it doesn’t follow that mortgage rates drop to zero. They drop a bit, but not enough to transform an unaffordable house into an affordable one.

Buying up $1 trillion in sketchy mortgages worked in 2009 because it bailed out everyone who was at risk of absorbing huge losses as a percentage of those mortgages defaulted. The problem now isn’t one of liquidity or iffy mortgages: it’s the generation that would like to buy homes finds they don’t earn enough, and their incomes are not secure enough, to gamble everything on an overpriced house that chains them to a local economy they might want to leave if opportunities arise elsewhere.

In other words, the economy has changed, and the sacrifices required to buy a house in hot markets at today’s prices make no sense. The picture changes, of course, in areas where 2X or 3X a typical income will buy a house, and 1X a pretty good income will buy a house.

Unless the Fed is going to start buying millions of homes outright, prices are going to fall to what buyers can afford. As China’s debt bubble implodes, the Chinese buyers with cash (probably not even cash, just money borrowed in China’s vast unregulated Shadow Banking System) who have propped up dozens of markets from France to Vancouver will vanish, leaving only the unwealthy as buyers.

The only question of any real interest is how low prices will drop by 2025. We’re so accustomed to being surprised on the upside that we’ve forgotten we can surprised on the downside as well.

Source: by Charles Hugh Smith | Of Two Minds


US Home Price Growth Weakest Since 2012


“A decline in interest rates in the fourth quarter was not enough to offset the impact of rising prices on home sales,” 



US Housing Starts Crashed In December



Year-over-year, housing starts tumbled 10.9% – the biggest drop since March 2011…



Debt Among Millennials Rockets Past $1 Trillion


“Student loans make up the majority of the $1,005,000,000,000″, a massive handicap on ability to mortgage a home purchase at today’s prices.

Realtor.com: Number of New Listings Jumps Most Since 2013

Home buyers may soon get at least a little relief. After years of steadily worsening housing shortages, more homes are finally going up for sale.

The number of new listings on realtor.com® in September shot up 8% year over year, according to a recent report from realtor.com. That’s the biggest jump since 2013, when the country was still clawing its way out of the financial crisis. And it gives eager buyers a lot more options to choose from.

“It’s a key inflection point,” says Chief Economist Danielle Hale of realtor.com. “There are still more buyers in the market than homes for sale. But in some [parts of the country], the competition is among sellers to attract buyers.”

That’s a big shift from a year ago, when bidding wars and insane offers over asking price were par for the course. But it doesn’t mean the housing shortage has suddenly dissipated.

Nationally, the total inventory of homes for sale was essentially flat compared with the year before—moving down 0.2%. Hale expects the bump in new listings to buoy that inventory.

And while the median home price, at $295,000, was up 7% in September compared with a year ago, the increase in homes hitting the market helped to slow that rise. The median home price in September 2017 was a 10% increase over the previous year.

The new inventory tended to be a little cheaper, by about $25,000, and about 200 square feet smaller than what was already on the market. That could be due to the 3% rise in condo and town home listings.

The influx of homes on the market is partly due to sellers betting that we’ve reached the peak of the market. So they’re rushing to list their homes and get top dollar while they can. But those owners are learning that their home, particularly if it’s priced high, may no longer sell immediately for that price. And homes need to be staged and in tiptop shape.

The increase in inventory is likely to slow wild price growth as well, although prices aren’t likely to fall anytime soon. It all comes back to supply and demand. Folks will pay a premium for something if there’s not enough of it to go around. So while this is fantastic news for buyers, there are bound to be some disappointed sellers who were hoping to get a little more for their abodes.

Of the 45 largest housing markets, San Jose, CA, in the heart of Silicon Valley, saw the biggest boost in new listings, according to the report. It was followed by Seattle; Jacksonville, FL; San Diego; and San Francisco. That’s a boon to buyers in these ultra expensive markets.

But make no mistake: Prices are still rising, and there aren’t enough homes to go around. Still, the uptick in homes going up for sale “will eventually shift the market from a seller’s market … to a buyer’s market,” says Hale.

Source: by Clare Trapasso | Realtor.com

China’s Building-Boom Hits A Wall As Shadow-Banking System Collapses

Beijing wants to shore up growth without inundating the economy with cheap credit.


But, as WSJ’s Walter Russell Mead pointed out previously, it’s not easy…

Chinese leaders know that their country suffers from massive over-investment in construction and manufacturing, that its real-estate market is a bubble that makes the Dutch tulip frenzy look restrained, that both conventional debt and debt in the shadow-banking system are too large and growing too rapidly.

But even as the Communist Party centralizes power and clamps down on dissent, it dithers when it comes to the costly and difficult work of shifting China’s economic development onto a sustainable track.

Chinese authorities have tried to tackle some of these problems, but often retreat when reforms start to bite and powerful interests push back.

To see how hard that will be, The Wall Street Journal’s Nathaniel Taplin takes a look at China’s roads and railways.

China is the 800-pound gorilla of global infrastructure. Its building prowess has permeated popular culture, as in the disaster movie “2012” where China constructs giant ships to help humankind escape rising seas.

Recently, however, China’s infrastructure build has all but ground to a halt.

Here’s why…

The central government last year started to crack down on unregulated, opaque – so-called ‘shadow-bank’ borrowing – alarmed at its vast scale, and potential for corruption.


For five straight months, the shadow banking system has contracted under this pressure, sucking the malinvestment lifeblood out of economic growth and construction booms as Chinese local governments, which account for the bulk of such investment, set up as so-called local-government financing vehicles (off balance sheet), or LGFVs, and have seen an unprecedented net $19 billion outflow in recent months.


As WSJ’s Talpin notes, these days Beijing prefers that local governments borrow on-the-books, through the now legal municipal bond market. The problem is that lower-rated and smaller cities are mostly shut out, even though they do most actual capital spending. As a result, investment has kept slowing even though China’s net muni bond issuance in July was three times higher than it was in March. Infrastructure investment excluding power and heat was up just 5.7% in the first seven months of 2018 compared with a year earlier, down from 19% growth in 2017.

Eventually, all the cash big cities and provinces are raising through muni bonds will start filtering down. Meanwhile, the investment drought will likely worsen, raising pressure on Beijing to ease credit conditions further – making the incipient rally in the yuan hard to sustain.


That also means China’s debt-to-GDP ratio, which fell marginally in 2017, could start rising again next year.

Simply put, as with water and wine, China’s leaders haven’t figured out how to crack down on local governments’ dubious infrastructure spending during good times without severely damaging growth – or how to loosen the reins during bad times without creating lots more bad debt.


Unless they can square that circle, it bodes ill for the nation’s long-term prospects.

Source: ZeroHedge

Housing Starts Jump On Spike In Rental Units As Permits Decline

While the single-family housing stagnation continues, multi-family, or rental, housing starts and permits jumped in the month of July according to the latest Census data.


In the latest month, housing starts rose by 2.1% from June, and were higher by 5.6% from a year ago, rising to 1.211MM, above the 1.180MM expected, driven by a 33K jump in rental unit starts, which rose to 433K, while single-family units remained largely unchanged at 770K, up 0.5% from last month’s 766K. As the chart below shows, single-family start have barely budged in the past year even as rental units appear to once again be growing at a solid pace.


On an annual basis, the rate of change continues to hug the flat line, and after last month’s modest decline, starts rose by 5.6% in the latest month.


Meanwhile, the more important building permits data series, fell modestly to 1.152MM in July from 1.160MM in June, on top of the 1.153MM expected.


While these series are notoriously volatile, if indeed multi-family housing is picking up it could provide a modest ray of hope for America’s renters who continue to suffer under record high asking rents, in part due to a lack of supply. Then again, it depends who ends up being the ultimate owner of these buildings, and if the units end up controlled by Wall Street it is likely that there will be no respite from record high rates any time soon as the “curtailing” of supply is set to continue for the indefinite future.

source: ZeroHedge


Top Ten Cocktails For Real Estate Agents

Real estate agents work very hard and deal with a wide array of emotions on a day to day basis. Sometimes, it’s an hour by hour basis!  Sometimes, we need a little something to unwind, or to perk up, or to celebrate, or to drown our sorrows in. Basically, there’s always a reason for an agent to need a drink, so here’s the top ten list of drinks for real estate agents.. Drink responsibly!


1. The Broker Blues – The time when you don’t have any pending deals. You’re feeling sorry for yourself and wondering why the hell you work in real estate.


½ oz. Blue Curaco

½ oz. Vodka

A squeeze of lime juice

Shake with ice and strain into a shot gloss.  Repeat, as necessary.

2. The New Listing Lemon Drop – When you get a new listing and you’re feeling your inner Superhero coming back, baby!


1 ½ oz. Vodka

½ oz. Triple Sec

1 tsp. sugar

1 tsp. lemon juice

Maraschino cherry

Mix Vodka,Triple Sec,sugar,and lemon juice in a cocktail shaker half-filled with ice; shake well until sugar is well blended. Pour strained liquor into sugar-rimmed martini glass and don’t forget to garnish with a cherry on top!  Note: To create a sugar-rimmed glass, take a lemon wedge and rub the rim of the glass. Dip the edge of the glass into superfine sugar.

3. The Red Hot Realtor – You’re dominating the market. You have homes flying off the streets and clients lining up wanting your help. You’re on fire! This drink is simple, because you don’t have time to make anything complicated.


1 8oz. glass of 7-up

1 shot of Fireball Cinnamon Whisky

4. The All-Nighter – You’ve had a long day. You spent hours on the phone and computer pulling comps, setting up showings and answering calls and emails. You have offers to respond to and draft, and you know you’ll be up late tonight. The All-Nighter drink has your back. It’s also simple and knows you don’t have the time to measure and bust out a ton of ingredients.


Red Bull Energy Drink

1 shot of Captain Morgan’s spiced rum

1 shot of orange juice

5. The Home Wrecker The day the inspection or appraisal kills the deal. You need something STRONG!  Also called the Long Island Iced Tea, this is one of the strongest and most alcoholic drinks ever created. It’s also delicious. It also helps take away your anger, bitterness, and extreme sorrow!


1 shot of vodka

1 shot of rum

1 shot of tequila

1 shot of gin

1 shot of triple sec

1 lemon wedge


Fill a cocktail shaker with ice and add the spirits and the juice from a squeezed lemon and shake like hell. Pour into a tall glass, add ice and slowly pour the coke on top of the ice. The less coke you add, the better you will feel.

6.  The Double Agent Dance – This is when you’re acting as both the listing agent and buyer’s agent. You know you have a lot of work ahead of you, and that it requires a delicate dance. This drink is also known as The Dancing Goldfish.


1 bottle of white wine (chardonnay or white zinfandel are best)

12 oz. of 7-Up

12 oz. Peach Schnapps

1 can of mandarin oranges

Over ice and in a large pitcher, pour in wine and peach schnapps. Stir in mandarin oranges and 7-Up.  Serve in tall glass with ice and watch the fishes dance!  Keep refilling to keep the fishes alive!

7. The Orgasm – When you’ve worked so long and so hard, and given all you can, and you finally get the satisfaction of a job well done. The build-up has been intense, and then… you get an OFFER!  You explode with relief!!  Also known as a Screaming Orgasm (if the offer was all cash or over asking)! There’s no better feeling in the world. 😉


1 oz. Bailey’s

1 oz. Kahlua

1 oz. Vodka

1 oz. Amaretto

Makes one shot.  Can be doubled for a Multiple Orgasm.  

8.  The Hail Mary – When you have a deal hanging by a thread and you need that one last burst of energy or negotiation super power to get the deal done. This is when you need your Hail Mary, also known as a Bloody Mary.  


1 ½ oz. vodka

3 oz. tomato juice

1 tbsp. lemon juice

½ tsp. worcestershire sauce

3 drops of tabasco sauce

½ tbsp. horseradish

salt, pepper

Mix everything together and pour into a tall glass.  Garnish with lemon or lime wedge, celery stalk, green onion, pickled green bean, rotisserie chicken or anything you have laying around the kitchen.

9. The Superman – It’s closing day! You did your job, did it very well, and made it look easy. You finally got your hard-earned paycheck and saved the world for your client. You feel like a Superhero, and if this isn’t your drink of choice, then a beer will never taste better than after a closing! Cheers!


1/2 oz Stoli Blueberi vodka

1/2 oz Absolut vanilla vodka

1/2 oz Bacardi white rum

1/2 oz Malibu coconut rum

1/2 oz Blue Curacao liqueur

1 1/2 oz pineapple juice

Cranberry Juice


Fill shaker with ice and add all of the alcoholic ingredients and pineapple juice and shake till frothy. Pour mixture into a tall glass, then add a quick pour of Sprite and top with a splash of cranberry juice. This will layer red, white, and blue into the glass and will rejuvenate your super-hero powers!

10. Love Potion – When your happy clients refer you to a friend or family member and you get to start all over again, and your love for the wacky world of real estate is renewed.


1 oz Grey Goose Vodka

1 oz amaretto almond liqueur

1 oz peach schnapps

1 oz orange juice

1 oz cranberry juice
Pour ingredients into a shaker with ice, shake and serve on the rocks. Now get to work and go party!

by Sarah D’Hondt | Broke Agent

Tear Downs Are On A Tear

Houston lost its locally famous Bullock-City Federation Mansion in 2014 to a developer who plans to erect townhouses on the site.

The house may not have been worthy of a place on a list of historically significant structures. But the 5,000-square-foot structure that was erected in 1906 on a 30,000-square-foot lot was the first in the sweltering Texas city to have air conditioning. And its demise was mourned by more than a few people.

“It’s a beautiful building,” Ernesto Aguilar, general manager of KPFT Radio, which sits next door, told the Houston Chronicle at the time. “It is sad to see a piece of Houston history going the same way as many others do.”

Tear downs — in which builders or private individuals purchase an aging, outmoded house, then demolish it and replace it with a modern home that will suit today’s homeowners — are currently on a tear in Houston. Permits for tear downs are up by 22% in the city this year.

And that phenomenon isn’t limited to Houston. Barry Sulphor, a real estate agent in the Los Angeles area, counts no less than 100 tear down sites in the so-called beach cities where he plies his trade: Hermosa Beach, Redonda Beach and Manhattan Beach. “And I’m sure there are just as many in Venice, Santa Monica and Beverly Hills,” Sulphor says.

According to the National Association of Home Builders’ best count, nearly 8% of all single-family housing starts in 2015 were attributable to tear down-related construction. That’s roughly 55,000 older houses gone forever, and that’s on top of the 31,800 single-family tear down starts in 2014.

In some instances, the houses that are destroyed are outmoded, functionally obsolete relics that no longer serve a useful purpose. But in other cases, they work just fine and simply lack up-to-date amenities. And some have historical significance that may or may not be worthy of saving.

Usually, the places that replace a tear down are larger, covering more of the lot and rising higher than the old place — often to the maximum height allowable under local zoning rules.

Sulphor recently sold two lots where the old houses were taken down. One was bought for $1.35 million by a builder who plans to put up a house with a nearly $4 million price tag. The other was purchased for $2.15 million by a retired couple who “love the creativity of working with architects to design luxury beach properties,” according to Sulphor. “When the new place is completed, it will fetch close to $5 million.”

Not everyone sees the benefit of tear downs. The leading opponent is the National Trust for Historic Preservation, which argues that they are an “epidemic” that is “wiping out historic neighborhoods one house at a time. As older homes are demolished and replaced with dramatically larger, out-of-scale new structures, the historic character of the existing neighborhood is changed forever.”

Richard Moe, a former president of the National Trust, said, “From 19th-century Victorian to 1920s bungalows, the architecture of America’s historic neighborhoods reflects the character of our communities. Tear downs radically change the fabric of a community. Without proper safeguards, historic neighborhoods will lose the identities that drew residents to put down roots in the first place.”

But the NAHB, which admits that tear downs “have become a significant modus operandi” for its members in some parts of the country, counters that the new houses often “breathe new life into older communities.”

Because tea rdowns are sometimes controversial, folks considering buying an older place with the idea of taking it down and putting up a new house should proceed cautiously. Often, these old homes are not advertised for sale on the open market or in the multiple listing service, so the challenge begins with finding out about one, says Sulphor. And once you do, the agent suggests making absolutely sure the condition of the current home is such that it cannot be salvaged.

Would-be buyers should also determine, before making an offer, whether what they plan to build conforms to local restrictions. Preservationists often use — or try to change — local building codes to push back against tear downs.

On the other hand, people trying to sell old properties that are tear down candidates should make sure whatever offers they receive are legit, Sulphor advises. Look for the proof that they have the funds to close the deal, especially if they say they will pay with cash and have no need of a mortgage.

Sellers should also realize that selling a property “as-is” does not insulate them from their obligation to disclose any issues that might impact value. The term “as-is” means only that the house is being offered and sold in its present condition.

by Lew Sichelman | National Mortgage News