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HCDI 1.45,I like their model , but they are not yet ready for share rise, as they are forecasting disappointment due to postponement of "things".
https://fintel.io/doc/sec-harbor-custom-development-inc-1784567-ex991-2022-august-03-19208-5783
Real estate better in NY and Cal. as salt restored, the 10K limit of tax (state, city, property) deductions raised to 89K.
I believe I agree with you..
They have said many times that no one rings a bell at the top of the real estate market... But I think this is it.
Metrospaces- MSPC has launched a beta version of its MetroCrowd platform. MetroCrowd is an innovative, proprietary real estate tokenization platform that democratizes the real-estate investing process. MetroCrowd offers a wide array of advantages and benefits over traditional real estate platforms. I think it's time to get back in MSPC before the price starts moving.
Read more: https://finance.yahoo.com/news/metrospaces-launches-beta-test-metrocrowd-130000498.html
$MSPC - MetroSpaces - It might be surprising to discover that the price of MetroSpaces, A Cutting-Edge Real Estate Tech Company, isn’t as high as you’d expect it to be right now – which means now is a great time to get in on the ground up and hold stocks while this promising company grows.
HCDI: Yes, the proof is in the pudding!
HCDI 2.80:
Possible case for HCDI investment before Jan.:
Had previously owned but always followed.
" If the real estate market conditions continue to be characterized by severe shortage of residential inventory, low interest rates and urban flight, we anticipate operating profitably on an annual basis for the foreseeable future."
https://seekingalpha.com/article/4469612-harbor-custom-development-inc-hcdi-ceo-sterling-griffin-on-q3-2021-results-earnings-call
Today they issued this PR:
https://seekingalpha.com/news/3776888-harbor-custom-development-to-buy-997-unit-master-planned-community-in-blaine-washington
This town is 33 miles from expensive Vancouver, and many commute from there to save rent.
I have not seen the place in Washington state, but $14000 average purchase of a unit is quite cheap from almost any stand point! I have followed this company which has toxic stock (dilution seems part of growth plan) , because they have grown from 20 million to 105 million rev by leveraging their stock for debt and operating expenses during their buying sprees, offset by some advantageous flipping. They seem to have maxed out all they could grab at cheap prices, scaring the heck out of shareholders, who do not know when their next dilution could hit. But they are actually masking GIGANTIC unrealized capital gains.
I could be wrong but I have almost all my investments in similar looking stuff without reviewing all of their material detailed data of their specific reasonable cash flow estimates, or net profit
projections. In brief comparing to a 7 million dollar 4% return on a 150 unit development ( I am involved with) diligently kept up to working class people standards who pay just $400-600 for a one to two bedroom apt in outskirts of Georgia, their lates purchase mentioned today seems "stolen".
So far they are still considered a low float stock, but that can end any time stock makes upward progress, advantaging a new stock selling? issuing spree. Yet, long term insiders own 24%, and think it may be eligible as a no brainer for at least a small Jan.effect buy or eventual
buy out premise?
And there is more!:
If this repurchase program last month still holds, it is even closer to being no brainer in long run? If true no dilution fear but they are not liable if they change mind?
The Board of Directors of Harbor Custom Development, Inc. (“Harbor,” “Harbor Custom Homes®,” or the “Company”), (NASDAQ: HCDI; HCDIP; HCDIW, HCDIZ) on November 3, 2021, approved a new stock repurchase program authorizing the repurchase of up to $5 million worth of shares of common stock beginning November 22, 2021, and continuing through May 22, 2022. The amount of the repurchase program represents approximately 17% of the outstanding shares of the Company’s common stock valued at the closing price on November 3, 2021.
“The Board’s decision to authorize a stock repurchase plan demonstrates their confidence in Harbor’s business and growth opportunities we see over the long term,” said Harbor President and CEO, Sterling Griffin.
The Company authorized management to enter into the trading plan with Piper Sandler in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934, as amended, to facilitate repurchases of its common stock pursuant to the above-mentioned stock repurchase program (the “Plan”). The Plan allows the Company to execute trades during periods when it would ordinarily not be permitted to do so because it may be in possession of material non-public information because of insider trading laws or self-imposed trading blackout periods. Under the Plan, Piper Sandler has the authority, under the prices, terms, and limitations set forth in the Plan, to execute repurchases of shares of common stock for the Company. All shares of common stock repurchased will be retired and returned to authorized but unissued status.
HCDI 1.67 in Oct, now 2.13, net losses are result of overleverage borrowing but this Co. can soar when all investments ripen, I still ahve not bought as waiting for real proof.
50 markets housing declined:
https://www.gobankingrates.com/investing/real-estate/housing-markets-that-are-turning-ugly/
HCDI 3.43 almost same price, guess they are buying like mad, and bottom line takes time to molt?
If true buy HCDI 3.31 right now, this minute, (I just did)!
We Have Never Seen A Home-Buying Frenzy Quite Like This
Could you imagine listing your home for sale and having nearly 100 offers in just three days? This sort of thing is actually happening in hot real estate markets all over America right now. Even though we are in the midst of the worst economic downturn since the Great Depression of the 1930s, we are witnessing a frenzy of home buying that is unlike anything that we have ever seen before. Of course one of the biggest reasons why this is happening is because of the utterly insane economic policies of our leaders. They have been creating, borrowing and spending money like there is no tomorrow, and that pushed M1 from 4 trillion dollars to 18 trillion dollars in just 12 months. All of that money had to go somewhere, and one place where it is showing up is in home prices in desirable rural and suburban locations around the country.
For example, a “fixer-upper” in a desirable suburban community outside of Washington D.C. was listed for sale on a recent Thursday for $275,000. On Sunday evening, 88 different offers had already been made on that property…
Ellen Coleman had never received so many offers on a house in her 15 years of selling real estate.
She listed a fixer-upper in suburban Washington, DC for $275,000 on a Thursday. By Sunday evening, she had 88 offers.
It eventually sold for $460,000, which was $185,000 above the listing price.
Isn’t that nuts?
The same thing is happening in lots of other parts of the nation too.
Down in the Austin, Texas area, one real estate agent says that “most homes are going for more than 20% over asking price”…
“Nearly every offer my clients make faces competition, and most homes are going for more than 20% over asking price,” said Austin-area Redfin agent April Miller.
She said she recently helped a client with an offer for a three-bedroom, two-bathroom home listed at $515,000 and pulled out all the stops. The offer was for $100,000 over the asking price, and they waived appraisal and financing contingencies, yet still came in third out of 38 offers.
In my entire lifetime, I have never seen anything like this.
Overall, the median price of a home in the United States is up a whopping 16 percent compared to this time last year…
The median price of a home has risen 16% from last year, according to the National Association of Realtors, and they have increased even more in some regions of the country like the Northeast and West, which are both up 21% from last year.
Meanwhile, inventory has continued to linger at record lows. In February, the number of available homes for sale was down nearly 30% from a year ago.
Of course prices are not going up everywhere.
In fact, home prices are actually going down in certain core urban communities.
It isn’t just that people are looking to buy homes right now. Rather, millions of Americans have been choosing to relocate due to fear of the things that have been happening in our world.
For example, the COVID pandemic has been one of the biggest reasons for the mass exodus that we have been witnessing, and our public officials continue to drum up more fear on a daily basis. On Monday, the head of the CDC actually used the term “impending doom” to describe what she believes is ahead…
The U.S. is facing “impending doom” as daily Covid-19 cases begin to rebound once again, threatening to send more people to the hospital even as vaccinations accelerate nationwide, the head of the Centers for Disease Control and Prevention said Monday.
“When I first started at CDC about two months ago I made a promise to you: I would tell you the truth even if it was not the news we wanted to hear. Now is one of those times when I have to share the truth, and I have to hope and trust you will listen,” CDC Director Dr. Rochelle Walensky said during a press briefing.
And Joe Biden is begging for mask mandates to be reinstated all over the nation…
Joe Biden pleaded on Monday with Republican governors who ended mask mandates to reinstate the requirements in their states and pause reopenings as the administration goes ahead with expanding vaccine eligibility and inoculation sites.
‘I’m reiterating my call for every governor, mayor and local leader to reinstate the mask mandate,’ Biden said during remarks on the White House coronavirus response Monday afternoon. ‘Please, this is not politics.’
As long as Americans are afraid of the COVID pandemic, we will continue to see people relocate from urban areas with a high population density to rural and suburban areas that are more spread out.
At the same time, multitudes of Americans are also relocating from core urban areas due to all of the civil unrest that we have witnessed over the past year.
Many believed that the civil unrest would end once Joe Biden entered the White House, but that has not happened.
Instead, we continue to see violence on an almost daily basis. Here is just one recent example…
Footage captured the demonstrators spraying paint across the windshield of the man’s truck and smashing the tail lights in Salem on Sunday.
The driver, who was wearing an American flag sweatshirt, stepped out of his vehicle as he engaged with the protesters, who then appeared to mace him.
The video then shows him pulling out his gun and pointing it at the anti-fascist protesters.
He could be heard shouting: ‘Get away from me’.
Sadly, the civil unrest in our land is only going to get worse.
So that means that even more people will be fleeing our core urban areas in search of greener pastures.
But now that hyperinflation is hitting housing prices, a lot of middle class and poor people will be priced out of the market.
The wealthy and the ultra-wealthy will have no problem making offers on homes that are way over market price because they have lots of money.
But the vast majority of Americans that are living paycheck to paycheck will find that their options are now greatly limited.
This is why I have always encouraged my readers to do long-term planning well in advance. When I was growing up, I often heard the phrase “you snooze, you lose”, and today that is more true than ever.
https://www.zerohedge.com/personal-finance/we-have-never-seen-home-buying-frenzy-quite
Real estate homes scarce!
Biden plan to eliminate 1031 tax benefit will make every Biden supporter who owns 1031 real estate a self-hating repentant.
Is a real estate bubble in commercial office space as in my opinion only 40% needed....yikes in NYC they pay billions in property tax and have whole ecosystem to support their motions in soon to be "old" commercial office space model , uh like restaurants, taxis, transportation, garages, maintenance, construction etc. etc. etc....if hallowed out former commercial space will all be converted to residential property at drastically reduced prices in 5-10 years. Volunteer fire and police needed to stop vigilantes who realize almost no public services survived? Virus quarantines replaced with public safety quarantines?
I little sweep for next upward keep:
https://www.wsj.com/articles/new-yorks-wealthiest-cut-losses-as-manhattan-real-estate-falters-1543508960
This will blow your mind:
https://www.bloomberg.com/graphics/2018-confessions-of-judgment/?srnd=businessweek-v2
Who are theses new players , was out of loop?:
https://therealdeal.com/2018/12/01/ibuyers-are-fueling-the-single-family-rental-craze/
Market must be fueled by new tax law which limits mortgage deductions and in coastal states limit on deductions for state income tax and real estate taxes on home ownership occupied.
Townhouse prices going down 30% in NYC, will start to post some links here as major upset in comfortable 10 year upward price market.
Yikes guess it enough time passes to remark: odd moderator deleted himself and created a firewall around all my message from ever being deleted.
Real estate doing nothing for me in the buying dept... Must mean prices will rise as except for trying to capture extreme bottoms not good at buying into surging rest stops.
No I did not delete any post, yikes keep moving to different boards which all delete me messages, think me bad poster?.
Did U delete your post on OPXS board? Just saw U and fire had a couple posts that didn't show on the regular board but when I went in as mod it showed them (looked like they may have been removed since they had red 'X' next to them).
OPXS will be fine but it will take some patience to burn thru Alpha's shares. Probably still 600K+ or so I'd guess.
All IMO only.
Nah, I'm looking at the same thing minus a few deductions going away so will likely just take standard for individuals (not incorp). I'll save a little bit on taxes but not enough to get excited about. I don't make near as much as some around here. No pass thru for me.
Does the new tax law effect you, in that some of the new pass along vehicles (LLC's) could lower the tax by 20%?
New tax policy should kill any near term real estate bubble, soon have to prepay state and real estate taxes to hold off a year of pain?
Florida post hurricane is connected to this old article about Florida the Ponzi state:
https://www.newyorker.com/magazine/a-reporter-at-large/page/21
Crashing Canadian Mortgage Lender Bailed-Out By 321,000 Retired Ontario Healthcare Workers
With Canada's housing bubble popping amid the collapse of the country's largest mortgage lender, it was no surprise that a bailout had been orchestrated, and now we know the source of the $1.5 billion 'loan' - 321,000 retired healthcare workers in Ontario.
As we noted yesterday, the stock of Home Capital Group cratered by over 60%, its biggest drop on record, after the company disclosed that it struck an emergency liquidity arrangement for a C$2 billion ($1.5 billion) credit line to counter evaporating deposits at terms that will leave the alternative mortgage lender unable to meet financial targets, and worse, may leave it insolvent in very short notice.
As part of this inevitable outcome, one which presages the company's eventual disintegration and likely liquidation, Bloomberg reported that the non-binding rescue loan with an unnamed counterparty will be secured by a portfolio of mortgage loans originated by Home Trust, the Toronto-based firm said in a statement Wednesday. Home Capital shares dropped by 61% in Toronto to the lowest since 2003, dragging down other home lenders.
And now we know the source.
As Bloomberg reports, the Healthcare of Ontario Pension Plan (HOOPP) is the lender behind Home Capital Group's C$2 billion loan ($1.5 billion) to shore up liquidity, citing people familiar with the matter.
The Toronto-based pension plan is said to have given the struggling Canadian mortgage lender the loan to shore up liquidity as it faces a run on deposits amid a probe by the provincial securities regulator. Home Capital has retained RBC Capital Markets and BMO Capital Markets to advise on “strategic options” after it secured the loan, according to a statement Thursday. Home Capital didn’t identify the lender.
HOOPP, which represents more than 321,000 healthcare workers in Ontario, was not immediately available to comment. HOOPP President and Chief Executive Officer Jim Keohane sits on Home Capital’s board and is a shareholder. Home Capital’s external spokesman Boyd Erman declined to comment.
The one-year credit line has a 10 percent interest rate on outstanding balances and a 2.5 percent rate on undrawn amounts, the Toronto-based lender said. The finalized agreement follows an announcement early Wednesday that Home Capital had reached a non-binding agreement in principle with an institutional investor for the loan.
And in case you are one of the 321,000 retirees who are nervous about your pension managers' actions, don't worry: The loan is secured by a pool of mortgages originated by Home Trust, and as everyone knows, in Canada home prices never go down.
http://www.zerohedge.com/news/2017-04-27/crashing-canadian-mortgage-lender-bailed-out-321000-retired-ontario-healthcare-worke
Fannie Introduces "Innovative Solutions" Allowing Student-Debt-Laden Millennials To Buy A Home
So what do you do when a massive student loan bubble results in crippling leverage for an entire generation of your population rendering them financially unqualified to obtain mortgage financing and their 'God-given right' to a slice of the 'American Dream'? Well, you simply change the rules to allow mortgage lenders to ignore all that pesky student debt...anything less would simply be evil and potentially racist, sexist and all sorts of other -ist words.
Luckily, Fannie Mae is right on top of the issue and has just released new rules allowing millennial borrowers to, among other things, simply exclude student loans, credit cards and auto loans that are "paid by someone else"...wink wink...when applying for a new mortgage. As an added benefit, taxpayer subsidized mortgage loans can also now be used to repay student debt...Hooray for taxpayers!
Fannie Mae announced new policies that will help more borrowers with student debt qualify for a home loan. These innovations address challenges and obstacles to homeownership due to a significant increase in student loan debt over the past decade and provide access to credit for qualified borrowers. The new solutions give homeowners the opportunity to pay down student debt with a mortgage refinance, allow borrowers to exclude non-mortgage debt paid by others as part of the loan application process, and make it more likely for borrowers with student debt to qualify for a mortgage loan by allowing lenders to accept student debt payments included on credit reports.
Student Loan Cash-Out Refinance: Offers homeowners the flexibility to pay off high interest rate student debt while potentially refinancing to a lower mortgage interest rate.
Debt Paid by Others: Widens borrower eligibility to qualify for a home loan by excluding from the borrower’s debt-to-income ratio non-mortgage debt, such as credit cards, auto loans, and student loans, paid by someone else.
Student Debt Payment Calculation: Makes it more likely for borrowers with student debt to qualify for a loan by allowing lenders to accept student loan payment information on credit reports.
“We understand the significant role that a monthly student loan
payment plays in a potential home buyer’s consideration to take on a
mortgage, and we want to be a part of the solution,” said Jonathan
Lawless, Vice President of Customer Solutions, Fannie Mae. “These new
policies provide three flexible payment solutions to future and current
homeowners and, in turn, allow lenders to serve more borrowers.”
You know, because more debt is exactly the cure for millennials suffering the financial consequences of too much debt.
But, at least this should help with inflating Housing Bubble 2.0.
http://www.zerohedge.com/news/2017-04-25/fannie-introduces-innovative-solutions-allowing-student-debt-laden-millennials-buy-h
Scary stuff if you own retail stuff:
https://www.theatlantic.com/business/archive/2017/04/retail-meltdown-of-2017/522384/ if you own retail space:
Condo Flippers In Miami-Dade Left Twisting In The Wind
Ballooning Condo Glut ensnares preconstruction speculators.
Miami-Dade’s spectacular condo flipping mania is in turmoil, with sales plunging, inventory-for-sale soaring, and new supply flooding the market. It’s not like Miami hasn’t been through this before.
In February, existing home sales of all types fell 10% year-over-year, to 1,835 homes. These sales “do not include Miami’s multi-billion dollar new construction condo market,” the Miami Association of Realtors clarified in its report on March 23.
And this new construction market that is not included has become distressed.
Sales of single-family homes fell 10% in February, to 881 houses. The report blamed the shortage of properties “in popular price points.” Prices have been rising sharply, and at the price points where people could actually buy a house – below $250,000 – few sellers were playing ball. Hence a stalling market. Sales of high-priced units rose, but they weren’t enough to pull out the totals.
Condo sales fell 10% as well, to 954 units. This time, the report didn’t blame the lack of supply. Instead: “Existing condo sales are competing with a robust new construction market.” At the same time, inventory of existing condos for sale, not including new units, rose 10% to 15,289. At the current sales rate, supply soared 29% to 14 months.
This chart by StatFunding shows the plunge in sales and the surge in condos listed for sale. I circled the last five Februaries on the sales line (red). From February 2014 to February 2017, condo sales have plunged 25%. Andrew Stearns, StatFunding’s founder and CEO, calls the resale inventory – the dark green line that has soared 90% since early 2013 – “scary”:
Even this “scary” inventory understates the total number of condos for sale. It only includes units listed for sale on the Multiple Listing Service (MLS). But developers normally don’t list their new units on the MLS, and thus they’re not included in the above chart.
This is the distressed market that preconstruction condo flippers are facing.
Preconstruction condo flippers make a highly leveraged bet. They buy the condo from the developer during the construction phase. The initial deposit is small. Additional payments are required as construction progresses. But in a booming market, lenders are eager to lend. Then, often around the time the building is completed, flippers try to unload the condo at a profit. This bet has been hot in the condo construction boom around the country. But in Miami, the bet is now collapsing.
During good times, developers sell all their units either to end-users or to flippers within a few months of completion. But now, developers are getting stuck with unsold units, which, as Stearns points out, marked the “inflection points of previous condo cycles.”
The 12 large developments completed between late 2015 and late 2016 have added 2,743 condos to the market. Developers still own 433 of them (15.8%).
In addition, preconstruction flippers are also trying to unload their units. In those 12 developments alone, 451 condos, or 16.4% of the total, have been listed for sale on the MLS.
Here is the granular detail as of March 22 per StatFunding (sources: MLS, Miami-Dade Recorder; completion date in parenthesis):
Echo Aventura, 190 units (8/2015). Developer sits on 13 units (7%) and took out a bridge loan secured by those units. 36 units have appeared on the MLS.
Crimson, 90 units (12/2015). Developer is stuck with 30 units (34%!) and has sold only 1 unit since December 2016. 12 units listed for sale on MLS.
Peloro Miami Beach, 114 units (3/2016). Developer has sold all but 2 units. This includes 3 units sold via bulk sale this year. But 38 units – 33% of the total! – are listed on the MLS for resale.
CityCenter Reach, 390 units (4/2016). Developer is stuck with 46 units (12%). Meanwhile, 47 units have appeared on the MLS for resale.
Le Parc Brickell, 128 units (6/2016). The developer has listed the 9 units that haven’t sold yet on the MLS, in addition to 23 units listed on the MLS by condo flippers, for a total of 32 units – 25% of the total!
Centro, 352 units (7/2016). Developer sits on 34 units and has not sold any in 2017. Meanwhile, 56 units (16% of total) are listed on MLS.
Bond, 328 units (8/2016). Developer still has 23 units, including 12 that an affiliate of the developer purchased in bulk in March. And 72 units (22%) have been listed for sale on MLS.
Grove Grand Bay, 98 units (8/2016). Developer owns 7 units; 31 units (32%!) have been listed on MLS.
CityCenter Rise, 390 units (9/2016). Developer still sits on 212 units (54%). According to Stearns, “developer closings have slowed to a trickle, and it appears the initial sell-through is nearly complete.” Already, 24 units are listed on MLS.
SLS Brickell, 450 units (11/2016). Developer is down to 8 units, four months after completion. “This is what a successful sell-through looks like,” Stearns says. Condo flippers have listed 55 units for sale.
Casa Brickell, 81 units (11/2016). Developer sits on 22 units (27%); 8 units (10%) have already appeared on MLS.
Porsche Design, 132 units (12/2016). Developer still has 27 units (20%). “Initial sell-through closings are slowing,” and only 4 developer units sold in March, Stearns says. But 40 units (30% of total) have been listed for resale on MLS.
This sort of data begs the question: How many people actually live in units they own in these buildings?
For developers, the equation is getting dicey. Stearns:
Stuck with unsold units, some developers have not repaid their construction loans, others have taken out bridge loans to carry unsold units. The developer is responsible for taxes, maintenance fees, and insurance for unsold units, and unsold units are probably negative carry for the developer.
Developers may resort to mark-down liquidation or bulk sales of unsold condos as the cycle progresses….
Part of the problem? The market teems with foreign buyers. But the Treasury Department’s Financial Crimes Enforcement Network has figured out that there is a large amount of money laundering in housing. It has started making noises. And cash deals are plunging in Miami-Dade. In February they were down 17.5% year-over-year to 580 condo deals, or 61% of all condos sold. Other money-laundering hotspots too are being targeted, and answers are starting to emerge.
http://www.zerohedge.com/news/2017-03-26/condo-flippers-miami-dade-left-twisting-wind
Yes SLP would have been better for my metabolism.
SLP just posted another record sales quarter yesterday
Everybody complains that the PE is too high... It's been too high for 20 years. SLP continues to go for around 30 times earnings and earnings keep going up. As long as the PE is 30 guess what that does to the price of the stock.
Fake news unlike your excellent SLP news last decade or so.
Manhattan Luxury Housing In Freefall: J.Crew CEO Slashes Tribeca Loft Price
By Over 40%
While in recent weeks we have documented various instances of sharp pullbacks in the ultra-luxury segment of New York's housing market (here, here and here), a dramatic example of just how sharp the drop in the high-end housing segment has been comes courtesy of Mansion Global which reports that J. Crew CEO Mickey Drexler has slashed a whopping $15 million from the asking price
of his Tribeca loft after it languished on the market for close
to two years, unable to find a buyer.
The 72-year-old fashion boss’s 6,226-square-foot spread has just reappeared for sale with a $19.95 million price
tag, way below the original $35 million it was first listed for in April 2015, according to listing records. Between its original listing in 2015 and today, there were several other price
cuts, with the loft last appearing on the market for $22.5 million last August. That listing was removed entirely in January, only to reappear for $2.5 million less.
Listing images reveal the five-bedroom pad’s stylish interiors designed by French architect Thierry Despont, including arched windows, original columns and industrial doors, par for the course for what one would expect from a fashion industry bigwig. The building located on Franklin Street is a boutique, 12-unit, full-service condominium with 24-hour doorman and is just down the block from Taylor Swift's Tribeca pad.
Even with the hefty haircut, Drexler stands to make a nearly $6 million profit should he find a buyer: property records show that 140 FRANKLIN STREET LLC paid $14.3 million for the apartment in 2012. PropertyShark’s records link the LLC to J. Crew’s headquarters in New York.
http://www.zerohedge.com/news/2017-03-11/manhattan-luxury-housing-freefall-jcrew-ceo-slashes-tribeca-loft-price
-over-40
NY Fed President Dudley Thinks A New Housing Bubble Is A Perfect Cure For Soft Retail Sales
In general, most people would agree that the housing collapse of 2008/2009 was a negative event in U.S. history. A combination of misinformed regulations from Washington D.C., low interest rates, poor underwriting standards that allowed for, among other things, the idiotic "cash out" mortgage, and an insatiable demand for securitizations drove one of the biggest asset bubbles in history which almost brought down the entire global financial system.
But, at least one person, namely New York Fed President Bill Dudley, thinks that a repeat of the 2008 mortgage crisis is exactly the cure for America's stagnant retail sales. Speaking at the National Retail Federation's annual convention in New York, which was undoubtedly full of perplexed retailers wondering why their store traffic remained so weak amid Obama's stunning "economic recovery", Dudley intimated that the cure for weak retail sales was a return to 2006 practices in which debt thirsty Americans repeatedly withdrew every dollar of equity in their homes to fund their trips to the mall.
“The good news is that, while the current expansion is quite old in chronological terms, it is still relatively young in terms of the health of household finances,” Dudley said in a speech to the National Retail Federation.
“Whatever the timing, a return to a reasonable pattern of home equity extraction would be a positive development for retailers, and would provide a boost to economic growth,” Dudley said.
Homeowners may have overlearned the lessons from the housing boom and bust, the New York Fed President said.
Even though home values have risen over 40% since 2012, housing debt has stayed virtually flat, he said.
“The previous behavior of using housing debt to finance other kinds of consumption seems to have completely disappeared,” and people are leaving the wealth generated by rising home prices “locked up” in their homes, he said.
Sure, just forget that the last cycle resulted in millions of personal bankruptcies, short sales and ruined personal credit scores...we're sure this time will work out much differently.
Dudley continued by noting that at the "height of the boom, annual consumption was being supplemented by around $400 billion in cash flow from debt, much of it collateralized by housing." Apparently he is convinced that levering up your personal life to such an extreme level that you couldn't possibly survive even a modest economic blip, all so you can buy just 3 more pairs UGGs from the mall on that brand new credit card with a $500 limit, is a brilliant idea.
In order to be able to assess the evolution of household finances more precisely, we worked with Equifax—a major credit bureau—to create a new database that tracks the credit files of a random sample of households over time. From this consumer credit panel data, we conclude that between 2004 and 2006, households were increasing their cash flow by over $200 billion a year by borrowing against their housing equity collateral. They supplemented that with another $185 billion through non-mortgage borrowing. So, at the height of the boom, annual consumption was being supplemented by around $400 billion in cash flow from debt, much of it collateralized by housing.
Finally, a perplexed Dudley asks "why has household behavior with respect to housing debt apparently changed so much?" Could it be that Americans actually learned a lesson from their financial ruin just 8 years ago...a lesson the Fed certainly wishes they would promptly forget? Unpossible.
http://www.zerohedge.com/news/2017-01-17/dudley-housing
15% cash on cash return is very good , even when I bought cheap I only got 4% and good part of it is because of the depreciation, which must be paid back ( or deferred) at some future date.
What city was that which gave such a good return?
You did not have some good picks, but ALL your picks were super, and that is hard to accomplish.
Looks like the 10K took a little clothing off li ve. Sad part is it was pretty obvious to anyone spending any time looking at it yet many acted as if it was on the up even when it was obvious there were myriads of questions to look at. Too bad many of the suckers/flippers/pumpers made $ on it.
Thank God for KiK on Savvy, about the only guy left on that board that has a vocal clue there on how to spot garbage these days sadly.
Happy holidays, back to lurking for me ;).
When Assets (Such As Real Estate) Become Liabilities
It will be the middle class that accepted the notion that "real estate is the foundation of family wealth" that will be stripmined by higher taxes on immobile assets such as real estate.
Correspondent Joel M. submitted an article that struck me as a harbinger of the future: In Greece, Property Is Debt:
"At law courts throughout Greece, people are lining up to file papers renouncing their inheritance. Not necessarily because some feckless uncle left them with a pile of debt at the end of his revels; they are turning their backs on what used to be a pillar of Greece’s economy and society: real estate.
Growing personal debt, declining incomes and ever higher taxes as Greece’s depression grinds on have turned property and the dream of easy money into dread of a catastrophic burden.
After many years in which only very valuable properties were taxed, many Greeks went from paying almost no taxes on real estate to not having enough money to pay.
In 2010, property taxes accounted for 0.26 percent of gross domestic product, while this year they are around 2 percent, according to state budget figures. 'Suddenly, the state treated the Greeks as if they were rich, at the precise moment that they ceased to be rich.'
Among the many disruptions of the past few years, this one shows how traditional conceptions — and a sense of security — can be shattered. With a history full of wars, bankruptcies and rampant inflation, Greeks had always seen land as a haven.
But it is private debt — at 222 billion euros last year — that may prove an even greater danger. This shows in government revenues. With the unified tax, ownership of every kind of property is now subject to taxation.
It will be very difficult for the Greeks to get out from under this mountain of debt. Delinquent loans, which at the end of June made up 31.7 percent of all housing loans, were a mere 5.3 percent of the total in 2008."
The self-reinforcing dynamics in this narrative profoundly reverse time-honored concepts of value: assets that once held or gained value now carry high costs of ownership and lose value.
1. Governments desperate for tax revenues raise property taxes, which add costs that eventually depress sales and future price appreciation.
2. High debt levels and high property taxes trigger foreclosures and forced sales that further depress the market with high inventories of unsold/unrented homes.
3. As sales decline, appreciation can no longer be counted on to enrich owners. Instead, owners fear declines in value and higher taxes. This further depresses sales.
4. High debt levels become even more burdensome as property values fall.
5. Rather than offer a means of building and protecting wealth, real estate becomes a liability that destroys wealth via payment of taxes and declines in value.
While it can be argued that Greece is a unique situation--a cumbersome, costly bureaucracy of land transfer coupled with soaring taxes--perhaps Greece is simply early to the party.
Governments everywhere are facing fast-rising pension and healthcare costs, and the need for more tax revenues will skyrocket once the global recession trims income, payroll, business and sales taxes.
Additional taxes on assets that can't flee the country--i.e. real estate--become extremely attractive.
Once an asset class shifts from being a means of wealth preservation and appreciation to a financial risk and burden, a self-reinforcing feedback loop reduces demand and increases supply, pushing prices lower--a decline that then causes more people to sell before prices drop further.
The nightmare scenario for recent buyers is a sharp tax increase that crushes the market value of their home, putting them underwater, i.e. their mortgage is greater than the value of their home. Faced with ever-increasing property taxes and further erosion of value, what's the advantage of holding onto the property?
Anecdotally, stories of owners destroying buildings to lower their property tax appraisal emerged in America's Great Depression, as owners desperate to lower their property taxes destroyed their assets (buildings on the land) as the only available means of keeping their property.
Which asset class attracts new taxes will be different from nation to nation, but we can anticipate that governments will go after assets that are currently considered safe and that can't flee to low-tax havens.
Mobile capital can flee to safer, lower tax climes, and the super-wealthy can buy legislative tax breaks on their wealth. It will be the middle class that accepted the notion that "real estate is the foundation of family wealth" that will be stripmined by higher taxes on immobile assets such as real estate.
This essay was drawn from Musings Report 45. The Musings Reports are sent exclusively to major patrons and contributors ($5/month or $50 annually) every weekend.
http://www.zerohedge.com/news/2016-12-27/when-assets-such-real-estate-become-liabilities
Yes it was...I closed on the house I was referring to (a foreclosure) on December 1, 2011. Within 1-2 months things started to improve. I got a 20.1% cash on cash return on the house in 2015 (2016 is going to end a little lower), but that doesn't include price appreciation. In the 5 years since then, I'm pretty sure I could sell the house for 50% more than I paid for it. I actually had one of our regular renters ask us a couple months ago if I'd consider selling to them. I told them no because I need the diversification from my concentrated mining portfolio and I don't think I could ever find that good of a deal again.
Since then, we bought a short sale and another foreclosure in 2014 and 2015 respectively, and both are doing quite well (both are 15+% cash on cash returns.
I've always said though that the first house that we bought was the best financial decision I ever made.
Yes that was the time!!!!
Me too I did scrape the lows.
My last rental purchase was made on Oct. 8, 2012. It was a mid to upper priced condo in an exceptionally high quality area. Every once in a while a local realtor quotes the price range in this neighborhood and I see that my purchase hit the low mark for this recent price cycle. I which I had bought more
It was the absolute bottom!
Littlefish: instead of a PM which you cannot get, kindly make nice with the object of your annoyance as over the years it brings a positive process even though it is temporary inscrutable. Thanks
all happening north of you - prices have gone up 50%+
Not where I am, working class buildings in Atlanta.
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