A report from PB Monthly in California. “The median home price in San Diego County blew past the previous record to hit an all-time high of $634,000 in July. Rich Toscano, a partner at San Diego financial firm Pacific Capital Associates, said it’s hard to imagine a better scenario for rising home prices. He said the market now is not a bubble and, for the most part, buyers and sellers are acting rationally. However, he did say the factors pushing up prices are temporary and could change as the year goes on.”
The Los Angeles Times in California. “California’s economic recovery slowed markedly last month. California’s unemployment rate lowered to 13.3% last month, down from 14.9% in June. A year earlier, it stood at 4%. Los Angeles County’s economic picture was particularly dire, with a July jobless rate of 17.5%, down from 19.4% in June. A year earlier, it was 4.4%. ‘California’s local workforce boards and employment agencies are reporting an increase in job applicants,’ said Michael Bernick, a former Employment Development Department director. ‘But with the economic lockdowns, the jobs are not coming back in any significant numbers. In fact, the opposite is occurring. California businesses continue to announce that they are closing permanently. Any economic recovery we saw in June and early July has stalled, and a listlessness set in.’”
“Over the last three months, California has regained less than a third of the 2.6 million positions lost during March and April as the pandemic took hold. And the state’s jobless rate remains a percentage point higher than its 12.3% peak during the Great Recession.”
From Housing Wire. “The California housing market is making a slow recovery from the COVID-19 fallout as many are fleeing the state for more space inland.However, the number of homes sold in the Golden State reached its highest level in over two and a half years in July, according to the California Association of Realtors and the median home price set a new record.”
“CAR noted that the change in mix of home sales in California was a factor that made the median home price higher – sales of higher-priced properties continued to outpace sales of lower-priced homes.”
“‘Stronger sales of higher-priced properties continue to propel the statewide median home price, as those who tend to purchase more expensive homes are less impacted by the economic recession,’ said CAR Chief Economist Leslie Appleton-Young. ‘High demand in resort communities is another variable that’s fueling the increase in home prices, as a new wave of remote workers are leaving cities in search of more space and a healthier lifestyle in what used to be the second/vacation home market.’”
From KTVB in Idaho. “While many businesses and industries are struggling to stay afloat during the COVID-19 pandemic, the Treasure Valley housing market is not slowing down. In fact, new data from Boise Regional Realtors shows housing in Ada County broke several records during the month of July. Michelle Bailey, president of BRR, told KTVB the reason for the increase is simple: supply and demand.”
“‘The bottom line is, buyer demand continues to outpace the supply of homes for sale, driving up prices,’ she said. ‘It’s also the mix of sales. We have more new homes selling at higher price points and higher existing homes selling so that combination is driving prices up.’”
From Fox 10 Phoenix in Arizona. “The Phoenix area is making headlines again for a hot housing market, both in terms of home sales and home rentals. Home sales depend on the economy, which depends on the virus. ‘The biggest kind of unanswered question is what happens with all these homeowners who are in forbearance?’ said economist Jeff Tucker with Zillow. ‘It runs out the 12 months on the clock. Are they then going to be motivated sellers? Those would really throw some cold water on the housing market, possibly next summer.’”
The Real Estate News EXchange in Canada. “I’ve written before about my two neighbours who each recently sold their homes for $200,000 and $300,000 over asking after bidding wars erupted in my old Ottawa neighbourhood of Westboro. The middle-class home my wife and I purchased for what now seems a song in the mid-’80s is today a seven-figure property and its value continues to climb. Meanwhile, developers continue to break ground and file site plan applications for projects along the current and future route of Ottawa’s LRT system.”
“Take a drive 20 or 40 minutes past Ottawa’s suburbs and realtors in communities with 6,000 to 12,000 residents are talking about how an exodus of people from the city is driving up housing demand and selling prices like never before. Is some of the activity we are seeing in housing markets across the country pandemic-inspired panic buying? Undoubtedly.”
From The Record in Canada. “Canada’s housing market shattered records in July despite the economic uncertainty surrounding the COVID-19 pandemic — and with the usually busy fall real estate season drawing near, experts are divided about whether the boom will continue. Rachel Gagnon, an Ottawa-based real estate broker, said that she has seen the pressure placed on first-time homebuyers, who are trying to get into the market now while they can afford a mortgage, even if it maxes out their borrowing power.”
“And COVID-19 related travel restrictions have led to slowing immigration and less demand from property buyers seeking rental properties for tourists or students. The uncertainty means a fall slowdown is possible, said Bethany King, a team leader at Century 21 Millennium Inc. Brokerage in Brampton, Ont. While some lenders are offering cash back, lending expectations have also changed, said King. For example, some lenders consider essential workers to have better job security should a second COVID-19 wave come.”
“‘Those are the things that have investors who are regular people — not millionaires that have tons and tons of properties, and are cashing out — preparing for the worst,’ King said.”
“Kean Birch, an associate professor at York University, said he will be watching for the extension or end of mortgage payment deferrals. ‘I find it worrying that housing prices are continuing to rise. The reason being that we don’t know what’s going to happen once the mortgage payment deferral ends, and the consequences actually could be dramatic across the board. And it could be highly inequitable as well,’ said Birch.”
“Evan Siddall, chief executive of Canada Mortgage and Housing Corp., wrote a letter earlier this month that said he expects house prices to fall, ‘even in the face of recent activity, which appears to be the result of very low interest rates and a sharp reduction in new listings. Our projections always anticipated a delayed impact: weakening in late 2020 and 2021 once government income supports unwind,’ read the letter.”
The Shepherd of the Hills Gazette. “Much has been written about the economic consequences of covid-19, yet, just as in many of the analyses of the Great Depression and the 2008 crisis, the years of accumulating debt preceding the event do not attract the attention they deserve. Covid-19—or to be more precise, the lockdown—has initiated a cascading liquidation of the debt bubble that has been building for a generation.”
“When central banks set interest rates it fundamentally distorts the pricing mechanisms of credit markets, just like price setting in other parts of the economy. We are not surprised when the government setting the price of food in Venezuela leads to food shortages, so we should not be surprised that 0 percent interest rates leads to a shortage in yield for investors, leading to a $250 trillion global debt bubble.”
“With each wave of artificially low interest rates, generating ever more distortive monetary effects, bond quality has fallen concomitantly, as shown by Organisation for Economic Co-operation and Development research in 2019. We are now at the stage where low-quality debt, rather than being the exception, has metastasized through much of the economy.”
“While debt quality has fallen, we have seen a proliferation of so-called zombie companies. Research at the Bank for International Settlements showed a cyclical growth in zombie companies from 2 percent of companies in the late 1980s to 12 percent in 2016, corresponding empirically to the waves of artificially low interest rates. The ‘boost’ to the economy is the very same poison that makes it worse. Artificially low interest rates send false price signals to markets: debt goes up, savings go down, and resources are directed from productive uses to more interest rate-sensitive, debt-fueled sectors (including, of course, financial speculation).”
“When I give seminars at central banks, the OECD, and elsewhere I make the case that interest rates should be set by the market rather than central banks and that 0 percent interest rates have made things worse since 2008. One of the responses was interesting: ‘What would you expect us to do, just let the whole thing collapse?’”
From ABC News in Australia. “Top brass at Australia’s central bank have hit back at ABC reporting that exposed how the dire view of the housing market held by some Reserve Bank staff clashed with the rosy picture the bank’s representatives presented in public. Internal emails, obtained using the Freedom of Information (FOI) process, show how staff at the Reserve Bank of Australia tried to hide the names of staff in documents it had been forced to release.”
“Staff then sought ‘receptive’ journalists to tell their side of the story, using the offer of an on-the-record interview with a senior bank leader. In June, documents from inside Australia’s central bank, including many marked ‘highly restricted,’ showed Reserve Bank economists considered urging the Federal Government to shut down the real estate industry, ‘pausing’ sales of established homes to avoid perceptions of a coronavirus-inspired housing market crash.”
“‘The problem is that this will enter folklore and one day history will show we stopped publication of property prices for a while!’ wrote Reserve Bank of Australia secretary Anthony Dickman.”
“‘If you read the material, it is a discussion between economists about how to interpret housing price data. It wasn’t a policy recommendation,’ said Assistant governor (financial system) Michele Bullock. That ‘discussion between economists’ centred on fears of a crash in the price of housing so great — or the perceptions of one — an economist at the Reserve Bank considered asking private firms to stop telling Australians about slumping property prices.”