A report from Mortgage Professional America. “With more than 20 years’ experience in the mortgage industry, Kirk Tatom, the president of Dallas-based Tatom Lending, started his company back in 2007. As for clients who were still determined to get the home of their choice – no matter the cost or effort – Tatom had this to say: ‘We are being very stern with our borrowers on what they can qualify for. People will try to push it as much as they can.’ He said: ‘The seller still thinks they’re in the driver’s seat, but sellers aren’t going to realize that the party’s over. I always say if it’s on the news, it’s too late.’”
From The Sentinel in Colorado. “An active summer for the Mesa County housing market has given way to what should be a calmer autumn. Active listings are lasting longer on the market now than they have the rest of the year. ‘It’s not nearly as crazy as before, meaning homes would come on the market and then, if they were anywhere close to the market price, they would just fly off the market,’ said Bray Realtor Brian Donaldson. ‘It was just a total frenzy since the beginning of the year, all the way through July even. In August, it started to slow down. The number of buyers has curtailed, at least.’”
“Donaldson partly attributes the increase in active listings to what he calls ‘buyer fatigue.’ ‘We’ve talked about it a lot of here at the office, that buyers, in many ways, had buyer fatigue,’ he said. ‘Buyers were going out there and had to battle with multiple offers. They got tired.’”
The Red Rock News in Arizona. “With the recent housing boom, there are a number of new residents moving into Sedona as current residents take advantage of the high cost of home prices, sell and move away. Many of the other properties, however, are those being purchased by younger people, especially refugees from California or elsewhere who were paying the same or more at home than the asking price to buy property in the Sedona area.”
“But once the newness of Sedona wears off and these residents begin to consider what our region can offer, it becomes questionable how long they will remain or if they will stay in the Sedona area for an extended period of time. Quite simply, there is not a whole lot to do. Other homes are being purchased specifically to use as vacation rentals. That market may reach saturation sooner than homebuyers think. One vacation rental in a neighborhood may be appealing, but if there are 10 on one street, they’re competing for the same pool of tourists.”
“Once this housing boom levels off, many of the new residents will find themselves in a small town in a small community, and trying to resell those homes to someone who does appreciate what we offer may be hard for overpriced properties. Some who moved here at the COVID- 19 pandemic have already put their houses back on the market. Right now, they can make a profit, but that won’t last forever.”
“As those who moved here to get away from major cities realize Sedona isn’t Simi Valley and Cottonwood isn’t Carmel, we might be left with a lot of unhappy folks just trying to get out without losing more than they spent.”
From Curbed New York. “For years, 432 Park was the darling of Billionaire’s Row. Unlike One57, with its garish exterior and its reputation for being little more than a safe deposit box in the sky, 432 Park was known as the building where real New Yorkers wanted to live. Not anymore. The building had been plagued by problems, including elevators that shut down during high winds, in one case trapping a resident inside for more than an hour on Halloween of 2019. And now the condo board has filed a lawsuit against the developers.”
“Everyone likes a deal. But no one wants to get stuck with a lemon. Or, God forbid, in an elevator during a windstorm. ‘Mold and leaks are one thing,’ said Donna Olshan, a Manhattan broker, ‘but the feedback I’ve gotten today is ‘Oh my God, I don’t want to be caught in an elevator for hours as the building sways.’ That’s the detail that sends shivers up your spine.’”
“Though the revelations last winter cast a pall over the building, there was a certain amount of willful disbelief that a potential buyer could maintain. It could all be chalked up to a few disgruntled buyers disappointed in how they’d spent their tens of millions and frustrated that they couldn’t offload their apartments during COVID.”
The News Tribune in Washington. “A judge entered an $11.49 million judgment against the Point Ruston project Friday as part of a lawsuit that accused the project of trying to defraud a lender. That lender, AURC, represents 132 immigrants who invested a total of $66 million in the project as part of a visa program that would allow them to get green cards. ‘It’s individual human beings that are not being repaid,’ who each invested $500,000, said Russell Knight, an attorney who represented AURC.”
“The arbitrator noted the transfers were made from entities controlled by the Cohens to entities also owned by the Cohens. Another part of the decision explained: ‘… after the transfers, the debtor’s remaining assets were unreasonably small; and the debtor reasonably should have believed it would incur debts beyond its ability to pay as they became due, since after the transfers, PR II was left with no assets from which to pay AURC.’”
“‘Point Ruston itself won’t go anywhere,’ Knight said. ‘The project will still be a public space that people can go. It will just have different owners.’”
The Irish Times. “Two years ago Dublin City University announced it was about to build ‘affordable’ accommodation for 1,240 students at its Glasnevin campus. It had full planning permission and finance in place – all that remained was for the building to start. It never did. ‘It would have almost doubled our on-campus accommodation,’ says DCU president Daire Keogh. ‘But building costs meant it was going to cost between €140,000-€150,000 per student bed. So, we’d have had to charge something like €15,000-€16,000 a year to students, even though our other on-campus accommodation is €5,500. How could we do that?’”
“‘Providing cheap loans to build accommodation isn’t a problem; it’s that we can’t rent the beds at reasonable prices,’ says one university source.”
From Business World on the Philippines. “Residential property prices in the second quarter contracted at its steepest rate since 2016, primarily due to the continued decline in prices of condominium units and single houses amid the prolonged pandemic. Nationwide, the prices of condominium units declined 14.3% year on year in the second quarter, reversing the 30.1% increase in the same period last year. This is also the steepest contraction since the 15% drop in the third quarter of 2020. It was also the fourth straight quarter of a decline in condominium prices.”
“Demand for property has been subdued, particularly in Metro Manila, said Joey Roi H. Bondoc, associate director for research at Colliers International Philippines. Home prices in Metro Manila decreased 18.3%, mainly due to the lower prices of single attached/detached houses (-22.5%), condominium units (-17.8%) and townhomes (-3.5%). He noted that only 10,000 condominium units were taken up in the pre-selling market for the first half, adding the industry is unlikely to equal the 36,000 units brought in 2020. ‘We no longer see demand from POGOs (Philippine Offshore Gaming Operators), while local end-users and investors are still on a wait and see,’ Mr. Bondoc said.”
The Guardian. “In November 2019, Evergrande’s founder, Xu Jiayin, was speaking at the launch of a car venture, one of the many side businesses spun out from China’s second-largest property group. Two years later, Xu’s empire is in ruins. ‘Xu is a colourful figure. He lived an extravagant lifestyle that is now frowned upon by Xi as he kicks off his ‘common prosperity’ campaign,’ says Dexter Roberts, senior fellow at the Washington DC-based Atlantic Council Asia Security Initiative. ‘For a long time, Evergrande’s business model, borrowing large sums of money and aggressively selling apartments that have not even been built, seemed like a smoking gun.’”
From Nikkei Asia. “As China Evergrande tries to claw its way out of financial crisis and global markets fret over its fate, the lives of the ordinary people who work for the property developer and its many contractors are on hold. On Thursday, about 10 middle-aged people gathered in front of the entrance to the group’s sales office in Taicang, a provincial city next to Shanghai. Sitting on plastic stools and laying out what appeared to be maps of a development project, they have been coming to this spot for days, protesting outstanding payments.”
“‘Evergrande may have defaulted on bond payments as the media reported,’ said the group’s leader, a man who only identified himself as Li. ‘That’s its problem. We just want what’s due to us.’ Some 70 km away at Evergrande’s Riverside Mansion construction site in Suzhou City, a man stood guard at the entrance security post. ‘No money,’ he said when asked why there were hardly any workers. ‘The contractor has not been paid by Evergrande.’”
From ABC News. “Lai Xiaomin’s once-glittering career ended not with the popping of champagne corks and glowing testimonials, but at the hands of an executioner. Once known as the God of Wealth, Lai oversaw one of China’s biggest and most important state-owned enterprises, Huarong Asset Management. But he died stripped of his enormous power and wealth on a bleak Friday morning in late January in Tianjin, most likely via a lethal concoction of drugs.”
“Accused of bribery, embezzlement and bigamy, the 58-year-old’s unseemly end followed three years of investigations and came just three weeks after the High People’s Court dismissed his appeal for clemency. Lai’s demise and the parlous state of Huarong, which was bailed out by Beijing just weeks ago after months of internal bickering and party room machinations, hangs over that other teetering monolith, property group China Evergrande.”
“Established in 1999 by Beijing in the wake of the Asian Financial Crisis, Huarong was tasked with mopping up the bad debts of incompetently run state-owned enterprises. Under Lai, a former banking regulator, it went on steroids, expanded into investment banking and shadow lending, extending credit to firms who couldn’t raise cash elsewhere. Along the way, it turned into a debt-ridden mess and a flashpoint for jittery global investors who had pumped in $US23 billion ($32b) on the understanding authorities viewed the bank as ‘too big to fail.’”
“There’s no doubt a total collapse of Evergrande would severely damage China’s economy. But a complete bailout could be equally disastrous and is looking increasingly unlikely. China’s property market is worth around $US60 trillion ($83 trillion). It represents about 20 per cent of GDP and 62 per cent of household wealth.”
“For years, we’ve been hearing of the ‘inevitable rise of China’ and the advantages of a command economy. Engineering new pathways to wealth is difficult enough. For China, it is even harder after more than a decade of costly and inefficient stimulus, directed largely at housing and infrastructure. That path is no longer affordable. But each time Beijing tries to turn off the stimulus taps, the economy tanks. Each time it has been forced to backtrack, pouring in even more stimulus to fire up a recovery.”
“This is one of those moments. Does it allow Evergrande to implode, forcing millions into poverty, hardship and unemployment? Or does it rescue wealthy local investors at the expense of global investors and risk financial isolation? Or does it merely throw its hands up, rescue Evergrande and kick the problem further down the road? There are no easy answers. Just as there is no ‘inevitable rise.’”
From Project Syndicate. “Where has all the money gone? Amid all the talk of when and how to end or reverse quantitative easing (QE), one question is almost never discussed: Why have central banks’ massive doses of bond purchases in Europe and the United States since 2009 had so little effect on the general price level? A plausible generalization is that increasing the quantity of money through QE gives a big temporary boost to the prices of housing and financial securities, thus greatly benefiting the holders of these assets. A small proportion of this increased wealth trickles through to the real economy, but most of it simply circulates within the financial system.”
“The reason why QE has had hardly any effect on the general price level may be that a large part of the new money has fueled asset speculation, thus creating financial bubbles, while prices and output as a whole remained stable. One implication of this is that QE generates its own boom-and-bust cycles. Unlike orthodox Keynesians, who believed that crises were brought on by some external shock, the economist Hyman Minsky thought that the economic system could generate shocks through its own internal dynamics. Bank lending, Minsky argued, goes through three degenerative stages, which he dubbed hedge, speculation, and Ponzi.”
“At first, the borrower’s income needs to be sufficient to repay both the principal and interest on a loan. Then, it needs to be high enough to meet only the interest payments. And in the final stage, finance simply becomes a gamble that asset prices will rise enough to cover the lending. When the inevitable reversal of asset prices produces a crash, the increase in paper wealth vanishes, dragging down the real economy in its wake.”
“Minsky would thus view QE as an example of state-created financial instability. Today, there are already clear signs of mortgage-market excesses. U.K. house prices increased by 10.2 percent in the year to March 2021, the highest rate of growth since August 2007, while indices of overvaluation in the U.S. housing market are ‘flashing bright red.’”
“In Margaret Atwood’s futuristic 2003 novel Oryx and Crake, HelthWyzer, a drug development center that manufactures premium-brand vitamin pills, inserts a virus randomly into its pills, hoping to profit from the sale of both the pills and the antidote it has developed for the virus. The best type of diseases ‘from a business point of view,’ explains Crake, a mad scientist, ‘would be those that cause lingering illness […] the patient would either get well or die just before all of his or her money runs out. It’s a fine calculation.’”
“With QE, we have invented a wonder drug that cures the macroeconomic diseases it causes. That is why questions about the timing of its withdrawal are such ‘fine calculations.’”